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 3.1% in the frst quarter of 2019, up from a 2.2% growth rate in the fourth quarter 2018. Consumer spending grew at its slowest rate in a year, but business investment was surprisingly strong. Economists are forecasting Gross Domestic Product (GDP) to slow to 1.8% in the second quarter. Recent trade talks with China notwithstanding, we believe the trade war is weakening capital spending and manufacturing employment.

The Federal Reserve (Fed) continued its accommodative stance on interest rates in the second quarter. The federal funds rate was left unchanged at its 2.25%-2.50% target at the June meeting, and the market is forecasting a cut of at least 25 basis points (bps) at the July meeting.

U.S. Treasury rates moved dramatically lower over the second quarter. The 5 year Treasury declined to 1.76% from 2.32% at the beginning of the quarter. Returns were positive for all government bond sectors for the quarter.

For the second quarter, the Commerce Short Term Government Fund’s return of 1.54% under-performed the Bloomberg Barclays 1-5 Year Government Index of 1.85%. The Fund’s shorter duration relative to the benchmark detracted from performance. The Fund’s overweight to asset-backed and non-agency mortgage-backed bonds added to performance.

Employment remains strong, inflation is tracking below the Federal Reserve’s target, and the economy continues to grow. However, continued consumer weakness and trade tensions may lead to slower growth in the second half of 2019.

Total Fund Assets as of 6/30/2019 $69,416,753
Net Asset Value1 $17.12
Effective Duration2 1.95 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

June 2019*
July 2019*
August 2019*

A prospectus for the Commerce Funds containing more complete information may be obtained by calling 1-800-995-6365 or by downloading it from this website. Please consider a Fund's objectives, risks, and charges and expenses, and read the prospectus carefully before investing. The prospectus contains this and other information about the Fund.

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