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

With the projection of no rate hikes in the coming year, the first quarter of 2019 witnessed a dovish pivot from The Federal Reserve (Fed). Continuing the trend that began late in 2018, lower expectations for global growth have taken hold, as yields have decreased substantially through the end of the first quarter. The 10-year Treasury yield decreased 27 basis points (bps) from 2.68% to 2.41% while the 10-year municipal (muni) yield decreased 39bps from 2.28% to 1.89% during the quarter. Credit spreads have tightened over the last quarter as the Bloomberg Barclay’s High Yield Muni Index outperformed their investment grade index by 93bps for the quarter. Longer bonds outperformed shorter bonds while General Obligation (GO) bonds underperformed revenue sectors during the quarter. Lower quality bonds beat their higher quality counterparts as risk appetites returned alongside the record demand for municipal bonds.

For the first quarter, the Fund’s return of 2.31% underperformed the Bloomberg Barclays’ 3-15 Year Blend benchmark of 2.68%. Maturities 6 years and longer were additive as were the housing, GO, and limited tax sectors. The Fund’s exposures to the pre-refunded, higher education and transportation sectors hampered returns.

Total Fund Assets as of 3/31/2019 $152,223,719
Net Asset Value1 $19.45
Effective Duration2 5.01 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

March 2019*
April 2019*
May 2019*

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