Malta Government Bond Fund

The Fund aims to maximise the total level of return for investors through investment, primarily, in debt securities and money market instruments issued by the Government of Malta. The Investment Manager may also invest directly or indirectly via eligible ETFs and/or eligible CISs) up to 15% of its assets in “Non-Maltese Assets” in debt securities and/or money market instruments issued or guaranteed by Governments of EU, EEA and OECD Member States other than Malta. The Investment Manager will not be targeting debt securities of any particular duration, coupon or credit rating.

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

January 2026

Introduction

Malta’s economy grew by 3.0% YoY in the third quarter of 2025, accelerating modestly from 2.8% in Q2 but remaining close to its slowest pace in more than two years. Growth continued to significantly outperform the Eurozone, where GDP expanded by just 0.3% following a slight upward revision, while the region’s largest economy, Germany, remained stagnant over the quarter. Household consumption rose 3.2% (from 3.1% in Q2), supported by increased spending on restaurants and accommodation, transport services, and information and communication activities. Net trade added 1.5% to GDP, with exports rising 3.9% while imports grew at a slower 3.1%.

Malta’s annual inflation rate slowed to 2.4% in December, from 2.5% in the previous month. This also marked the lowest reading since September, mainly driven by ongoing costs deflation for clothing and footwear. Prices also declined further for communication, while inflation softened for restaurants and hotels. In contrast, costs continued to increase for food and non-alcoholic beverages, furnishings, household equipment and maintenance, and transport.

Market environment and performance

In the euro area, the economy grew by 0.3% QoQ in Q4 2025, matching the pace of the previous quarter and slightly above market expectations of 0.2%, according to a flash estimate. Among the bloc’s largest economies, Spain outperformed with growth of 0.8% QoQ, while the Netherlands expanded by 0.5%. Germany and Italy each grew by 0.3%, both beating forecasts, while France grew 0.2%, as expected, and marking its weakest quarterly pace since Q1 2025.

Building on the expansion seen in the second half of 2025, January continued to reflect steady business activity. The flash Eurozone Composite PMI stood at 51.5, unchanged from December and slightly below market expectations of 51.8, indicating a temporary stabilization in private-sector growth. The overall expansion was supported by the services sector (51.9 vs. 52.4 in December), which moderated but remained in growth territory, while manufacturing returned to growth (50.2 vs. 48.9), signalling a rebound in production.

Consumer price inflation eased to 1.9% in December 2025, down from 2.1% in November and below preliminary estimates of 2.0%. The reading marked the first time since May that inflation has come in below the ECB’s 2.0% target.

On the political front, France’s budget process moved forward after months of political deadlock, with the government resuming formal debate following the adoption of a temporary funding law at the end of 2025. Prime Minister Sébastien Lecornu repeatedly invoked Article 49.3 of the Constitution to advance the 2026 budget without a parliamentary vote, successfully surviving several no-confidence motions. While political tensions remained elevated throughout the month, these developments kept the budget on track, paving the way for its formal adoption in early February and restoring fiscal continuity.

Fund performance

The CC Malta Government Bond Fund saw a 0.55% gain in the month of January.

Market and investment outlook

In Europe, sovereign bonds outperformed their U.S. counterparts as economic conditions remained broadly resilient despite elevated geopolitical risks. President Trump’s threat to impose 25% tariffs on European allies in pursuit of Greenland (later rescinded) added uncertainty to the outlook but did not derail performance. French government bonds led the move, with spreads versus Germany tightening to mid-2024 levels as investors welcomed signs of improved political stability.

Looking ahead, the direction of European yields will be driven primarily by economic developments and policy decisions, particularly those of the Federal Reserve, whose anticipated rate cuts may influence European sovereign markets given the close correlation between U.S. and European rates. In addition, movements in the EUR/USD exchange rate will remain an important factor; continued U.S. dollar weakness could weigh on export competitiveness, notably for Europe’s largest economies.

From a macroeconomic perspective, Malta’s economy is expected to remain resilient through 2026, supported by relatively contained inflation, 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.

At the fund level, we will continue to adjust duration as conditions evolve and maintain exposure to European sovereigns, utilizing the permitted 15% allocation.