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

October 2025

Introduction

Malta’s economy grew by 2.7% year-on-year in Q2 2025, slowing from 3.0% in the previous quarter. This marked the weakest growth rate since the economic contraction in Q4 2020, driven largely by sharp slowdowns in household consumption (2.2% vs. 5.1%) and government spending (2.2% vs. 9.8%). On the trade front, imports of goods and services jumped, while exports also gained momentum.

Inflation moderated to 2.4%, down from 2.7% in the prior month, reaching its lowest level since March. Prices eased for food and non-alcoholic beverages, alcoholic beverages and tobacco, restaurants and hotels, and transport, offsetting increases noted in miscellaneous goods and services.

Market environment and performance

In the euro area, the economy expanded by 0.2% QoQ in Q3 2025, up from 0.1% in Q2 and slightly above market expectations of 0.1%, according to a flash estimate. France grew 0.5%, exceeding expectations of 0.2%, driven by a sharp rise in exports, while Spain remained the best performer among the bloc’s largest economies. Meanwhile, Germany stagnated due to a decline in exports, and Italy stalled.

Business activity continued to strengthen through the year, with leading composite PMI indicators pointing to solid expansion across Q3 and into the start of Q4. The HCOB Eurozone Composite PMI rose to 52.2 in October 2025 from 51.2 in September, surpassing market expectations of 51 and marking the fastest pace of growth since May 2024. The expansion was driven primarily by the services sector, which climbed to 52.6 from 51.3 (its highest level in a year) while the manufacturing sector unexpectedly managed to avoid contraction.

Consumer price inflation retraced last month’s increase, declining to 2.1% and edging closer to the European Central Bank’s 2% target.

On the policy front, the ECB left its interest rates unchanged for a third consecutive meeting in October, signalling confidence in a resilient eurozone economy and easing inflation pressures.

Fund performance

The CC Malta Government Bond Fund saw a 0.68% gain in the month of October.

Market and investment outlook

In 2025, European sovereign bonds delivered modest returns aided by easing inflation expectations and an improved macroeconomic tone. Yields on 10-year bonds in major euro-area economies such as Italy and Spain were notable stand outs, with 10-year bond yields falling 15bps and 12bps, respectively. Late in the month, euro-area yields began to drift higher following hawkish signals from the Fed and a subdued ECB meeting.

Looking ahead, Malta’s economy is projected to remain strong through 2025, supported by low inflation, tax cuts, and an increase in tourist arrivals. These factors are likely to sustain domestic consumption and overall economic growth.

At fund level, we will continue adjusting the portfolio’s duration as appropriate and maintain exposure to European sovereigns, utilizing the allowable 15% allocation.