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
  • 22 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

As the global COVID-19 pandemic worsened, the Federal Reserve (Fed) made two emergency rate cuts in March bringing the fed funds rate back to zero. The Fed also announced massive asset purchases, expanding its balance sheet to its largest ever,in order to provide liquidity to markets facing unprecedented challenges. In order to reassure markets, the Fed has expressed a willingness to do more if necessary, and Congress has taken massive fiscal measures to alleviate the economic woes facing all sectors and industries domestically. Given these extraordinary conditions and “shelter-in-place” orders across the country,a flight to safety ensued as risk appetites vanished. The 10-year Treasury yield decreased 125 basis points (bps) from 1.92% to 0.67% while the 10-year municipal yield decreased 11 bps from 1.44% to 1.33% during the quarter. The 10-year muni/treasury ratio increased to 198%. Credit spreads widened dramatically during the quarter. Bloomberg Barclay’s high yield muni index underperformed their investment grade index by 325 bps for the quarter. Longer bonds underperformed shorter bonds while General Obligation (GO) bonds outperformed revenue sectors during the quarter. Lower quality bonds underperformed their higher quality counterparts as safe-haven assets were in favor.

For the first quarter, The Commerce Kansas Tax-Free Fund’s return of 0.79% outperformed the Bloomberg Barclays’ 3-15 Year Blend benchmark of -0.55%. Maturities 8 years and longer were the most additive. Limited tax and general obligation sectors performed the best. Te Fund’s exposures to the transportation and housing sectors lagged.

Total Fund Assets as of 3/31/2020 $167,329,000
Net Asset Value1 $19.82
Effective Duration2 4.63 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.

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

April 2020*
May 2020*
June 2020*

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