Short-Term Government Fund

Overview

Objective

Seeks current income consistent with preservation of principal.

Strategy

Invests primarily in U.S. Government securities and government mortgage-backed securities.

Fund Manager

Scott Colbert, CFA
  • Joined Commerce in 1993
  • 30 years of experience
  • Fund manager since Fund inception

Risk/Return

LOW - • - - - - - HIGH

In general, greater returns
are associated with greater risks.
The Short-Term Government Fund's net asset value and yield are not guaranteed by the U.S. Government or by its agencies, instrumentalities or sponsored enterprises.

Fund Statistics

Inception Date 12/12/94
Ticker Symbol CFSTX
Cusip 200626109
Minimum Initial Investment $1,000

Commentary

The U.S. economy grew at 2.1% in the third quarter of 2019, holding steady from the second quarter. Economists forecast Gross Domestic Product (GDP) of 2.5% for the fourth quarter of 2019 and flat growth of 1.8% for 2020. Consumer spending remains strong and the unemployment rate is a low 3.5%. Trade tensions with China are easing. Global growth is slow but improving modestly. We believe that recent events in the Middle East may hinder economic growth.

The Federal Reserve (Fed) cut the federal funds rate 25 basis points (bps) to a target range of 1.50% - 1.75% at its October 2019 meeting and left the rate unchanged in December. Recession fears eased, and the short end of the yield curve steepened significantly over the fourth quarter.

U.S. Treasury rates moved higher over the fourth quarter. The 5 Year Treasury rose to 1.69% from 1.54% at the beginning of the quarter. Positive returns were achieved by all government related bond sectors.

For the fourth quarter, The Commerce Short Term Government Fund’s return of 0.18% underperformed the Bloomberg Barclays 1-5 Year Government Index of 0.33%. The Fund’s maturity structure and relative overweight to mortgage-backed securities detracted from performance. The Fund’s shorter duration relative to the benchmark added to performance.

While low inflation and strong consumer spending continue to help grow the economy, we believe that slow global growth and Middle East tensions are reasons for caution in 2020.

Total Fund Assets as of 12/31/2019 $58,442,109
Net Asset Value1 $17.04
Effective Duration2 2.32 Yrs.
Footnotes:
1. The Net Asset Value represents the assets of the fund (ex dividend) by the total number of shares.
2. Duration is the method determining a bond's price sensitivity, given changes in interest rates.
3. The composition of the portfolio is subject to change in the future.

Portfolio Holdings

Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. When interest rates rise, the prices of bonds and therefore the value of fixed income mutual fund shares can decrease and an investor can lose principal value. The guarantee on U.S. government securities applies only to the underlying securities of the Fund if held to maturity and not to the value of the Fund's shares. Mortgage-backed securities are subject to prepayment risks. These risks may result in greater share price volatility.

Holdings and allocations shown are unaudited, and may not be representative of current or future investments. Holdings and allocations may not include the Fund's entire investment portfolio, which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities.

Commerce Short-Term Government Holdings

November 2019*
December 2019*
January 2020*

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