Malta High Income Fund Distributor

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 will, at all times, maintain a direct exposure to local debt securities (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 Fund.
• The Investment Manager may invest up to 10% of the net assets of the Fund in un-listed Maltese and/or Non-Maltese Assets rated B- or higher or in bonds determined to be of comparable quality by the Investment Manager
• The Fund may also invest in term deposits held with Banks regulated in Malta and other EU, EEA and OECD Member States
• This Fund shall not invest, in the aggregate, more than 10% of the Net Assets of the Fund in units or shares of other UCITS or other CISs

April 2026

Introduction

Malta’s economy grew by 2.1% YoY in the fourth and final quarter of 2025, slowing modestly from 3.0% in Q3. Growth continued to significantly outperform the Eurozone, where GDP expanded by just 0.2% which came in below earlier estimates of 0.3%. The region’s largest economy, Germany, expanded by 0.3% in the same quarter, confirming preliminary estimates and marking a clear rebound from the stagnation recorded in the previous quarter.

Meanwhile, Malta’s annual inflation rate stood at 2.3% in March, unchanged from the previous two months. It remained the lowest reading since March 2025, as prices were steady for health, while costs increased for housing and utilities, furnishings and household equipment, recreation and culture, and restaurants and hotels.

Market environment and performance

In the Eurozone, economic momentum showed clear signs of softening, partly reflecting the spillover effects of tensions in the Middle East. Growth in Q1 2026 undershot expectations, marking the slowest pace of expansion since Q2 2022. Forward-looking indicators also pointed to a weakening outlook, with the S&P Global Eurozone Composite PMI declining to 48.6 in April from 50.7 in March, well below expectations of 50.2 and signaling the sharpest contraction in private-sector activity since November 2024. The drop indicated a somewhat delayed impact on the services sector from the war in Iran, as higher energy costs weighed on consumer demand. In turn, the manufacturing sector continued to expand (52.2 vs. 52.0), despite ongoing challenges in sourcing input goods.

Consumer price inflation rose to 3.0% in April, up from 2.6% in March and slightly above market expectations of 2.9%, according to a preliminary estimate. This marked the highest reading since September 2023 and the second consecutive month in which inflation has exceeded the ECB’s 2% target, as energy costs soared 10.9%.

On the policy front, the European Central Bank (ECB) kept interest rates unchanged at its April 2026 meeting, maintaining a cautious approach amid elevated uncertainty stemming from developments in the Middle East. ECB President Christine Lagarde stressed that longer-term inflation expectations remain broadly anchored, even as shorter-term expectations have risen significantly. She also noted that, although policymakers considered a range of alternatives – including a possible rate hike – the decision to hold rates was unanimous, reflecting the ECB’s view that conditions are moving away from its baseline scenario.

Fund performance

In April, the Malta High Income Fund posted a loss of 0.34%.

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 April, benchmark yields continued to be driven by developments in the Middle East, alongside economic data releases and central bank policy signals. On the economic front, inflation accelerated notably, while leading indicators pointed to a contraction in business activity, underscoring the negative impact of higher energy costs and ongoing supply disruptions on the real economy. Against this backdrop, the European Central Bank (ECB) kept interest rates unchanged but adopted a cautious tone with an increasingly hawkish bias, particularly if near-term inflationary pressures prove persistent. Policymakers also acknowledged that economic conditions are gradually diverging from the ECB’s baseline expectations.

Government bond markets were mixed over the month, with German Bunds underperforming relative to other European sovereigns. Core euro area yields moved modestly higher, particularly at the longer end of the curve, as investors scaled back expectations for ECB rate cuts and, in some cases, began pricing in the possibility of further tightening. Peripheral spreads, however, remained relatively stable, supported by resilient risk appetite and continued demand for carry.

Looking ahead, the outlook remains highly uncertain. Although there have been intermittent signs of de-escalation in the Middle East conflict, these have so far proven short-lived, with tensions continuing to persist. Ongoing disruption to energy flows through the Strait of Hormuz – a critical global energy chokepoint – may therefore continue to shape the trajectory of European sovereign yield curves. The broader economic consequences will depend largely on the duration and intensity of the conflict. For Europe in particular, the implications could be meaningful given the region’s dependence on imported energy. Persistently elevated energy prices are likely to continue feeding through to inflation and ultimately weighing 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.