National Tax-Free Intermediate Bond Fund

Overview

Objective

Seeks current income exempt from federal income tax consistent with the preservation of capital.

Strategy

Focuses on a broad range of investment-grade municipal securities, typically issued by or on behalf of the states, territories and possessions of the United States, the District of Columbia, and their respective authorities, agencies, instrumentalities and 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 CFNLX
Cusip 200626703
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 $337,055,141
Net Asset Value1 $19.59
Effective Duration2 5.91Yrs.

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, and investment income 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 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 National Tax-Free Intermediate Fund Holdings

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

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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.