Malta High Income Fund Accumulator

The Fund aims to maximise the total level of return through investment, primarily in debt securities and money market instruments issued by the Government of Malta, and equities and corporate bonds issued and listed on the MSE.

The Investment Manager may also invest directly or indirectly up to 15% of its assets in “Non- Maltese Assets”. The Investment Manager will maintain an exposure to local debt securities of at least 55% of the value of the Net Assets of the Fund.

The Fund is actively managed, not managed by reference to any index

The Investment Manager of the CC High Income Bond Funds – EUR and USD has the duty to ensure that the underlying investments of the funds are well diversified. According to the prospectus, the investment manager has to abide by a number of investment restrictions to safeguard the value of the assets

• The Investment Manager may invest up to 10% of the net assets of the Sub-Fund in un-listed Maltese and/or Non-Maltese Assets. As far as the “Non-Maltese Assets” segment of the Sub-Fund is concerned, the Investment Manager will not be targeting any international debt securities of any particular duration or coupon. However, the Sub-Fund is generally not expected to hold investments that, at the time of investment, are rated below “B3” by Moody’s or below “B-“ by S&P or in bonds determined to be of comparable quality by the Investment Manager.
• The Investment Manager will not be targeting any local debt securities (debt securities and money market instruments issued or guaranteed by the Government of Malta and/or local corporate bonds issued and listed on the Malta Stock Exchange) of any particular duration or coupon.
• The Investment Manager will, at all times, maintain a direct exposure to local debt securities (debt securities and money market instruments issued or guaranteed by the Government of Malta and/or issued and listed on the Malta Stock Exchange) of at least 55% of the value of the Net Assets of the Sub-Fund.
• The Sub-Fund may also invest in term deposits held with credit institutions regulated in Malta and other EU, EEA and OECD Member States.
• This Sub-Fund shall not invest, in the aggregate, more than 10% of the Net Assets of the Sub-Fund in units or shares of other UCITS or other CISs.

May 2026

Introduction

Malta’s economy expanded by 3.9% year-on-year in the first quarter of 2026, slowing from an upwardly revised 6.5% in the previous quarter. Despite this moderation, growth continued to significantly outperform the Eurozone, where GDP rose by just 0.8% year-on-year. The region’s largest economy, Germany, grew by 0.3%, down from 0.4% in the prior period, while growth also slowed in France, Italy, the Netherlands, and Belgium. Among major economies, growth accelerated in Spain and Portugal.

Meanwhile, Malta’s annual inflation rate rose to 3.2% in May from 3.0% in the previous month, marking the highest level since September 2023. The increase was driven by supply constraints linked to the Middle East conflict. Prices also accelerated in services and non-energy industrial goods, while inflation eased for food, alcohol, and tobacco.

Market environment and performance

In the Eurozone, economic activity weakened amid spillover effects from Middle East tensions. Q1 2026 growth slowed to its weakest pace since Q2 2024, while the S&P Global Eurozone Composite PMI fell into contraction territory. Forward-looking indicators also pointed to a weakening outlook, with the S&P Global Eurozone Composite PMI declining to 47.5 in May from 48.8, marking the sharpest contraction in private-sector activity since October 2023. The decline was driven by services, which fell at their fastest rate in over five years, while manufacturing remained relatively resilient despite slowing. Input costs rose at the fastest pace in three years, prompting firms to raise prices, eroding purchasing power. As a result, employment fell for a fifth consecutive month and business sentiment weakened further.

Consumer price inflation rose to 3.2% in May, up from 3.0% in April and matching market expectations, according to a preliminary estimate. This marked the highest reading since September 2023 and the third consecutive month in which inflation has exceeded the ECB’s 2% target, as energy costs soared 10.9%.

On the policy front, a number of ECB members viewed the April decision to keep rates unchanged as a close call and indicated they would have supported a rate hike had it been proposed, according to the latest ECB meeting minutes. Policymakers cautioned that the energy-led supply shock was proving more persistent than initially anticipated, heightening the risk of broader and more entrenched inflationary pressures. At the same time, the conflict in the Middle East was identified as a significant source of uncertainty for both inflation and growth. Members also highlighted the increasingly difficult policy trade-off, with slowing economic activity and weakening confidence occurring alongside elevated inflation risks.

Fund performance

In May, the Malta High Income Fund posted a gain of 1.14%.

Throughout the year, the portfolio manager maintained a proactive approach, in line with the fund’s mandate to enhance income generation. This was achieved by further reducing the fund’s exposure to local equities and low-coupon bonds. On the buy side, we continued to capitalize on opportunities as they arose, particularly in the IPO space across both local and international markets.

Market and investment outlook

Benchmark yields were in recent months driven by developments in the Middle East, alongside economic data releases and central bank policy signals. Inflation accelerated notably, while leading indicators pointed to a sustained contraction in business activity, reflecting the impact of higher energy costs and ongoing supply disruptions on the real economy.

However, cautious optimism surrounding a potential U.S.-Iran agreement helped alleviate inflation concerns and supported demand for government bonds in May. As a result, European sovereign yields generally moved lower, with the German 10-year Bund ending the month at 2.94%, down 10bps from previous month-end. Yields in France, Italy, Spain, and Portugal also declined, with the tightening exceeding that observed in Germany.

Looking ahead, the outlook remains uncertain. While diplomatic efforts have gained momentum, energy prices – although off their recent highs – remain volatile and elevated relative to pre-conflict levels, as energy flows through the Strait of Hormuz continue to face constraints. The broader economic impact will depend largely on the duration and evolution of the conflict. A return to normalised energy markets remains particularly important for Europe, given its reliance on imported energy. Persistently elevated energy prices could continue to fuel inflationary pressures and weigh on consumer spending and broader economic activity.

Locally, Malta’s economy is expected to remain resilient through 2026, supported by relatively contained inflation (as energy prices remain subsidised by the government), recently announced tax cuts taking effect as of January, and a robust tourism sector. These factors should continue to underpin domestic demand and overall economic growth.

With respect to the fund’s composition, we will continue to adjust the portfolio’s allocations as needed, with the goal of enhancing income yield through higher coupon bonds. This will also involve utilizing the allowed 15% allocation for non-Maltese assets.