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.

August 2026

Introduction

Malta’s economy continued to show strong momentum in the second quarter of 2026, supported by resilient domestic demand, robust tourism activity and sustained consumer confidence. GDP expanded by 4.5% year-on-year, accelerating from an upwardly revised 4.2% growth in Q1. On a quarter-on-quarter basis, the economy grew by 1.1%.

Domestic demand remained a key driver of growth, accelerating to 4.2% from 3.2% in Q1, supported by increases in both government and household consumption. The strength of domestic activity was also underpinned by relatively contained inflation, which has helped sustain consumer confidence. Inflation edged up marginally to 2.1% in July, following a one-year low of 2.0% previously.

The continued government subsidies on energy prices have played an important role in containing inflation by keeping fuel and electricity prices stable, thereby shielding households from the direct impact of higher international energy costs amid ongoing geopolitical tensions. This has provided further support to domestic consumption and overall economic resilience.

In contrast, net trade was a drag on growth during the quarter, with imports increasing by 4.7% and outpacing the 4.0% rise in exports.

Market environment and performance

In the euro area, economic activity showed further signs of improvement. Business surveys reinforced the improving outlook, with the S&P Global Eurozone Composite PMI rising to 52.1 in August from an upwardly revised 52.0 in July, reaching nine-month high and exceeding expectations of 51.7. Growth was supported by a stronger manufacturing performance. Germany was a major contributor, recording its strongest manufacturing expansion since January 2022.

Eurozone inflation edged higher to 3.3% in August from 2.9%, in line with market expectations and remaining well above the European Central Bank’s 2.0% target. The increase was primarily driven by a renewed rise in energy prices following the resumption of hostilities in the Middle East, reinforcing the view that disinflation may prove uneven in the near term.

Fund performance

In August, the Malta High Income Fund posted a gain of 0.82%.

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

In August, ongoing tensions in the Middle East and Eastern Europe contributed to higher commodity prices, reinforcing concerns around inflation and its impact on consumer purchasing power. The US Treasury’s announcement to increase the pace of longer-dated government bond buybacks also revived discussion around the so-called “debasement trade”, contributing to broader commodity strength and further weighing on the US dollar.

Government bond markets were generally weaker, with US yields more stable than those in continental Europe.

In the US, front-end Treasury yields moved higher following comments from Fed Chair Warsh that recent inflation data had not shown meaningful improvement. At the long end, the 30-year Treasury yield reached its highest level since 2007, prompting the US Treasury to announce that it would at least double the size of its buyback operations for longer-dated Treasuries. European sovereign bonds underperformed, as market participants continued to price a rate hike at the ECB’s September meeting. Policymakers too maintained a hawkish tone. The benchmark 10-year German Bund yield rose 12bps from the previous month-end, reaching a high of 3.32%, while French government bonds underperformed the broader European market amid growing focus on the country’s 2027 budget discussions.

Against this backdrop, maintaining a vigilant and flexible approach at fund level will remain essential. Close monitoring of geopolitical developments, their impact on Europe’s economic outlook, and forthcoming ECB policy decisions will be critical in determining the appropriate duration positioning within the portfolio. Nevertheless, we intend to maintain exposure to European sovereign bonds, utilising the permitted 15% allocation. This allocation also provides an important source of enhanced liquidity, which is less readily available in the local market.