Missouri Tax-Free Intermediate Bond Fund

Overview

Objective

Seeks current income exempt from federal and, to the extent possible, from Missouri income taxes, as is consistent with the preservation of capital.

Strategy

Focuses primarily on investing in municipal obligations issued by the State of Missouri and its political subdivisions.

Fund Manager

Brian P. Musielak, CFA

  • Joined Commerce in 1995
  • 20 years of experience
  • Fund manager since Fund inception

Risk/Return

LOW - - • - - - - HIGH

In general, greater returns are associated with greater risks.

Fund Statistics

Inception Date 02/21/95
Ticker Symbol CFMOX
Cusip 200626802
Minimum Initial Investment $1,000

Commentary

Domestic equities charged forward leading all other stock indices globally to close out the year. We believe the US election results in November have increased growth and particularly inflation expectations domestically. The administration is proposing a combination of major tax reductions, less regulation, and major increases in defense and infrastructure spending. The fourth quarter also saw Federal Reserve (Fed) action in the form of another rate increase of 25 basis points (bps); in-line with market expectations. The 10-year Treasury yield increased 85bps from 1.60% to 2.45% while the 10-year municipal (muni) yield raised 80bps from 1.51% to 2.31%. That decreased the 10-year muni/treasury ratio slightly from 95% to 94%. Longer bonds underperformed shorter bonds and General Obligation (GO) bonds outpaced revenues by 20bps for the quarter. The Muni curve steepened the most in the 1-to-10 year segment during the quarter, while the 30-year muni added over 70bps. High quality bonds beat lower quality counterparts. Bloomberg Barclay's high yield muni index lagged their investment grade index by over 120bps for the quarter.

For the fourth quarter, the Fund's return of -3.03% underperformed the Bloomberg Barclays' 3-15 Year Blend benchmark of -3.41%. The Fund's exposures to the pre-refunded, transportation and power sectors supported returns, while longer-duration, lower-quality issues hindered performance.

Total Fund Assets as of 12/31/2016 $327,925,160
Net Asset Value1 $19.14
Effective Duration2 5.77 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.
4. The Fund's investments may subject shareholders to federal alternative minimum tax. The investment income from this Fund may be subject to state income taxes.

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 Fund is non-diversified. Due to the small number of bonds generally held in the portfolio, the Fund may be subject to greater risks than a more diversified fund. A change in the value of any single holding may affect the overall value more than it would affect a diversified fund that holds more investments. In addition, the Fund's investments may subject shareholders to federal alternative minimum tax. The investment income from this Fund may be subject to state income taxes.

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 Missouri Tax-Free Intermediate Bond Fund Holdings

January, 2017*
Febuary, 2017*
March, 2017*

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.

The mutual funds referred to in this Web site are offered and sold only to persons residing in the United States and are offered by prospectus only. The prospectus contains more complete information about the funds, including charges and expenses, and should be read carefully before investing.