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
  • 26 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

Historic inflation levels once viewed as transitory, defined a turbulent year for markets. Consumer prices peaked at over 9%, up from the modest level of 1.4%, year-over-year. The Federal Reserve (The Fed) embarked on aggressive monetary policy not seen since the 1970s. By year end, The Fed had increased its benchmark interest rate seven times which totaled 425 bps (basis points). The invasion of Ukraine by Russia and China’s zero-Covid mandate further strained global markets and intensified inflation causing higher food and energy prices abroad. Yields moved higher and fixed income markets responded accordingly with negative total returns and record redemptions from bond funds. The US Treasury curve and the municipal curve flattened, while yields increased notably in the front-end for Treasuries and munis experienced decreases across the curve during the quarter. New issuance supply decreased almost 23% year-over-year, ending the year at just over $384 billion. Refunding deals made up just 12% of new supply, down 58% from 2021, while taxable supply decreased 56%. Municipal bonds outperformed US Treasuries in 4Q. The 10-year Treasury yield increased 5 bps from 3.83% to 3.88% while the 10-year municipal yield decreased 67 bps from 3.30% to 2.63% during the quarter. The 10-year muni/treasury ratio decreased to 68%. Credit spreads ended the quarter slightly tighter. Lower quality bonds underperformed their higher quality counterparts. Bloomberg Barclay’s high yield muni index underperformed their investment grade index by 62 bps for the quarter. Longer bonds outperformed shorter bonds while GO (General Obligation) bonds underperformed revenue sectors.

For the fourth quarter, The Commerce National Tax-Free Fund’s return of 3.88% outperformed the Bloomberg 3-15 Year Blend benchmark of 3.85%. Longer maturities were the most additive. Lease, water/sewer and limited tax sectors performed the best as did higher-grade issues. The Fund’s exposures to the pre-refunded, housing and student loan sectors detracted.

Total Fund Assets as of 12/31/2022 $375,137,739
Net Asset Value1 $18.39
Effective Duration2 5.6 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, 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 Bond Holdings

October 2022*
November 2022*
December 2022*

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.