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
  • 22 years of experience
  • Fund manager since 1999

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

The quarter began with the Illinois House voting to override Gov. Bruce Rauner’s vetoes of a budget package, giving the state its first spending blueprint in more than two years and ending the nation’s longest fiscal stalemate since at least the Great Depression. Stocks continued to climb during the third quarter amid escalating tensions with North Korea. Markets appeared to shrug off three major hurricanes making landfall during the final month of the quarter as well. The Federal Reserve announced that it would begin to normalize its balance sheet and investors drew their focus to the prospect of lower corporate tax rates. Municipal Bonds (Munis) continued their strong performance for the quarter. The 10-year Treasury yield increased 3bps from 2.30% to 2.33% while the 10-year municipal yield increased 4bps from 1.96% to 2.00%. The 10-year muni/treasury ratio rose slightly to 86%, supported by the backdrop of lower supply and healthy fund flows. Longer bonds outperformed shorter bonds and general obligation bonds outpaced revenue bonds by 4bps during the quarter. Lower quality bonds beat higher quality counterparts.

For the third quarter, the Fund underperformed its benchmark and its peer category. The Fund’s exposures to the higher education, lease, and housing sectors hampered returns as did the higher-quality issues. Maturities greater than 12 years detracted while the hospital and power sectors were additive.

Total Fund Assets as of 09/30/2017 $344,157,474
Net Asset Value1 $19.49
Effective Duration2 5.48 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

August, 2017*
September, 2017*
October, 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.

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