Kansas Tax-Free Intermediate Bond Fund

Overview

Objective

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

Strategy

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

Fund Manager

Brian P. Musielak, CFA
  • Joined Commerce in 1995
  • 26 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 12/26/00
Ticker Symbol KTXIX
Cusip 200626786
Minimum Initial Investment $1,000

Commentary

Both the US Treasury and municipal curves finished flatter, as the Federal Reserve (the Fed) left rates unchanged. The Fed signaled potential rate hikes in 2023 and tapering of bond purchases entered discussions. Revising their Gross Domestic Product (GDP) and inflation forecasts higher encouraged short-term rates upward and pressured longer rates lower. The economy added jobs but below expectations. Unemployment declined below 6%. Employers struggled to fill job openings. As unemployment benefits expire, as vaccinations progress and as school resumes, job openings will likely come off historic highs. An infrastructure deal of nearly $580 billion was reached, however, negotiations will linger. Muni investor demand remained strong and new issuance supply increased 6% year-over-year at almost $224 billion. Municipal bond funds have experienced inflows of $59.5 billion year-to-date, according to JP Morgan. Taxable municipal new issuance comprised 25% of total new issuance and refunding deals made up one third of new supply. Municipal bonds underperformed US Treasuries. The 10-year Treasury yield decreased 27 bps (basis points) from 1.74% to 1.47% while the 10-year municipal yield decreased 13 bps from 1.12% to 0.99% during the quarter. The 10-year muni/treasury ratio increased to 67%. Credit spreads ended the quarter tighter. Bloomberg Barclay’s High Yield Muni Index outperformed their Investment Grade Index by 251 bps for the quarter. Longer bonds outperformed shorter bonds while GO (General Obligation) bonds underperformed revenue sectors. Lower quality bonds outperformed their higher quality counterparts.

For the second quarter, The Commerce Kansas Tax-Free Fund’s return of 0.72% underperformed the Bloomberg Barclays’ 3-15 Year Blend benchmark of 0.99%. Longer maturities were the most additive. Limited tax and lease sectors performed the best. The Fund’s exposures to the pre-refunded and housing sectors lagged.

Total Fund Assets as of 6/30/2021 $182,161,130
Net Asset Value1 $20.14
Effective Duration2 4.283Yrs
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.

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 smaller 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 Kansas Tax-Free Intermediate Bond Holdings

July 2021*
August 2021*
September 2021*

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.

The method of calculation of the 30-Day Standardized Subsidized Yield is mandated by the Securities and Exchange Commission and is determined by dividing the net investment income per share earned during the last 30 days of the period by the maximum public offering price (“POP”) per share on the last day of the period. This number is then annualized. The 30-Day Standardized Subsidized Yield reflects fee waivers and/or expense reimbursements recorded by the Fund during the period. Without waivers and/or reimbursements, yields would be reduced. This yield does not necessarily reflect income actually earned and distributed by the Fund and, therefore, may not be correlated with the dividends or other distributions paid to shareholders. The 30-Day Standardized Unsubsidized Yield does not adjust for any fee waivers and/ or expense reimbursements in effect. If the Fund does not incur any fee waivers and/or expense reimbursements during the period, the 30-Day Standard Subsidized Yield and 30-Day Standardized Unsubsidized Yield will be identical.