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

September 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 rose to 2.7% from 2.5% in the previous month, primarily driven by higher prices for food and non-alcoholic beverages, furnishings and household equipment, recreation and culture, and restaurants and hotels – likely supported by stronger tourism demand during the summer season. Additionally, prices for clothing and footwear rebounded during the month.

Market environment and performance

In the euro area, business activity strengthened steadily throughout the year, with the leading composite PMI indicators signaling solid expansion in the current quarter. The HCOB Eurozone Composite PMI edged up to 51.2 in September from 51.0 in August, broadly in line with expectations and marking the fastest pace of private-sector growth in 16 months. The expansion was driven primarily by the services sector, which posted its highest reading of the year and offset an unexpected contraction in manufacturing.

Consumer price inflation in the Eurozone stood at 2.0% in August 2025, slightly below a preliminary estimate of 2.1%, as energy costs declined more than initially thought. Headline inflation has now matched the European Central Bank’s 2% target for a third straight month, reinforcing expectations that monetary policy will remain steady for some time.

On the policy front, the ECB left its three key interest rates unchanged, keeping the main refinancing rate at 2.15%, in line with expectations. The Governing Council reiterated its commitment to maintaining inflation at 2% over the medium term, emphasizing a cautious, data-driven approach on a meeting-by-meeting basis.

Fund performance

The CC Malta Government Bond Fund saw a 0.16% loss in the month of September.

Market and investment outlook

In 2025, European sovereign bonds delivered modest returns amid a backdrop of stable inflation, cautious ECB policy, and evolving fiscal developments. Core markets like Germany saw yields rise slightly due to increased issuance and debt-related reforms, while peripheral markets such as Spain benefited from credit rating upgrades and strong investor demand. Political uncertainty in France weighed on sentiment, and overall performance varied across regions and credit quality.

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.