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 2026

Introduction
Malta’s economy continued to show strong momentum in the second quarter of 2026, supported by resilient domestic demand, robust tourism activity and sustained consumer confidence. Gross Domestic Product (“GDP”) expanded by 4.5% year-on-year, accelerating from an upwardly revised 4.2% growth in Q1. On a quarter-on-quarter basis, the economy grew by 1.1%.

Domestic demand remained a key driver of growth, accelerating to 4.2% from 3.2% in Q1, supported by increases in both government and household consumption. The strength of domestic activity was also underpinned by relatively contained inflation, which has helped sustain consumer confidence. Inflation edged lower marginally to 2.0% in August from 2.1% in the previous month, as prices increased at a softer pace for food and non-alcoholic beverages, and insurance and financial services.

The continued government subsidies on energy prices have played an important role in containing inflation by keeping fuel and electricity prices stable, thereby shielding households from the direct impact of higher international energy costs amid ongoing geopolitical tensions. This has provided further support to domestic consumption and overall economic resilience.

Market environment and performance
In the euro area, Q2 growth was revised up to 0.6% from 0.4%, marking the strongest quarterly expansion since Q2 2022, largely driven by a sharp upward revision to Ireland’s GDP. Germany’s growth was also revised higher to 0.3%, while France’s was revised down to 0.0%. Spain led the bloc’s larger economies with 0.7% growth, while Italy expanded 0.2%. Business surveys reinforced the improving outlook, with the S&P Global Eurozone Composite Purchasing Managers’ Index (“PMI”) rising to 53.1 in September 2026 from 52 in August, matching the flash estimate and reaching its highest level in nearly three and a half years. The latest reading pointed to a solid acceleration in private-sector activity, with both manufacturing and services recording stronger growth as the third quarter ended.

Eurozone inflation edged higher to 3.8% in September from 3.2% in the previous month, exceeding market expectations. The rate reached its highest level since September 2023 and remained well above the European Central Bank’s (“ECB”) 2.0% target, driven largely by a surge in energy prices amid continued hostilities in the Middle East.

Fund performance
The CC Malta Government Bond Fund saw a 1.72% loss in the month of September, a performance which largely reflects the widening observed amongst European sovereign bonds.

Market and investment outlook
In September, inflationary pressures remained elevated as geopolitical tensions in the Middle East and Eastern Europe kept energy prices elevated. Oil rose above USD 100 per barrel, while European gas prices remained above EUR 70 per megawatt-hour for most of September, putting renewed upward pressure on headline inflation, while core inflation remained relatively contained. In response, the Federal Reserve and European Central Bank each raised policy rates by 25 basis points (“bps”) during the month and maintained a tightening bias, with markets pricing in a further 25bps increase from both central banks by year-end.

Against this backdrop, government bond yields rose sharply. The benchmark 10-year Treasury yield rose 76bps over Q3, with 47bps of the increase occurring in September alone, bringing the yield to 5.22% at quarter-end. European sovereign markets faced similar pressure. The 10-year German Bund yield rose 26bps in September from the previous month-end, reaching a high of 3.64%. French sovereign bonds continued to underperform amid heightened scrutiny of the country’s 2027 budget discussions. The 10-year France-Germany spread widened to nearly 130bps, approaching levels last seen during the euro-area sovereign-debt crisis.

Against this backdrop, maintaining a vigilant and flexible approach will be essential at fund level. Close monitoring of geopolitical developments, their implications for Europe’s economic outlook, and the ECB’s forthcoming policy decisions will be key in determining the appropriate duration positioning within the portfolio. In addition, we intend to retain exposure to European sovereign bonds, making use of the permitted 15% allocation.