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

December 2025

Introduction

Malta’s economy grew by 3.0% year-on-year 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 steadied at 2.5% in November, unchanged from the previous month reading. Prices increased at a faster pace for food and non-alcoholic beverages, housing and utilities, alcoholic beverages and tobacco, health, restaurants and hotels, and recreation and culture. Meanwhile, prices softened for clothing and footwear.

Market environment and performance

In the euro area, Eurozone economic growth in Q3 2025 was revised modestly higher to 0.3%, up from the preliminary estimate of 0.2% and improving on the 0.1% expansion recorded in the previous quarter. Among the largest economies, Spain and France led growth with quarterly increases of 0.6% and 0.5%, respectively. The Netherlands followed with growth of 0.4%, while Italy expanded marginally by 0.1%. In contrast, Germany’s economy remained stagnant during the quarter.

Business activity strengthened over the course of the year, with composite PMI indicators signaling expansion through Q3 and Q4. Although the HCOB Eurozone Composite PMI edged lower to 51.9 in December – its lowest level in three months due to softer services momentum and further weakness in manufacturing – it remained firmly in expansionary territory. New order growth eased, reflecting a sharper contraction in foreign demand, yet firms continued to increase headcount for a third consecutive month. On the price front, both input cost inflation and output price pressures strengthened.

On the monetary front, the European Central Bank left policy rates unchanged for a fourth consecutive meeting, in line with expectations, while reiterating its data-dependent, meeting-by-meeting approach.

Fund performance

The CC Malta Government Bond Fund saw a 0.87% loss in the month of December.

Market and investment outlook

In December, European sovereign bonds generally advanced across the curve as the European Central Bank (ECB) upgraded its growth and core inflation forecasts. Policy rates were left unchanged, in line with expectations. 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 set to take effect in 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.