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

U.S. economic growth started to pick up some momentum in the second quarter, with Gross Domestic Product (GDP) growth reported at 3.1%, the highest since 2015. Consumer spending and business investment contributed to the improvement. We believe that hurricane disruptions will distort third quarter economic growth, with early estimates at 2.4%. We feel the near-term effects on economic data following Hurricanes Harvey, Irma and Maria are not expected to have a lasting impact.

In September, the Federal Reserve (Fed) officially announced the start of its balance-sheet unwinding plans. Fed Chair Janet Yellen continued to indicate her expectations for a gradual increase in the fed funds rate. No change to the fed funds rate was made at the September Federal Open Market Committee (FOMC) meeting. However, we believe as long as inflation remains stable or rising a December rate hike is likely.

Treasury yields were higher across the short-end of the yield curve for the third quarter. The 5-year Treasury yield finished at 1.94%, after starting the quarter at 1.89%. Returns were positive for all the government sectors in the third quarter.

The Short-Term Government Fund 0.31% exceeded the performance of the Citigroup 1-5 Year Treasury/Government Index 0.29% for the third quarter. The portfolio’s lower duration relative to its benchmark contributed to performance. Lowering the portfolio’s mortgage-backed securities exposure detracted from performance.

We believe economic data will feel the impact of the Hurricanes in the third and fourth quarter. Obtaining a correct read on economic growth will be challenging, but we believe any dip in GDP growth is expected to be followed by a rebound.

Total Fund Assets as of 09/30/2017 $98,006,586
Net Asset Value1 $17.13
Effective Duration2 2.33Yrs.

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 Fund Holdings

August, 2017*
September, 2017*
October, 2017*

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