Drinker Biddle & Reath LLP
One Logan Square, Suite 2000
Philadelphia, PA 19103-6996
Tel: (215)988-1146
Fax: (215)988-2757
April 2, 2019
VIA EDGAR
United States Securities and Exchange Commission
100 F Street, N.E.
Washington, D.C. 20549
Attention: Kenneth Ellington
| Re: | The Commerce Funds (the “Registrant”); Registration Nos.33-80966 and811-8598 |
Dear Mr. Ellington:
This letter is in response to the comments you provided to me on March 11, 2019 with regard to the Registrant’s annual report for the fiscal year ended October 31, 2018 (the “Annual Report”) and filing on FormN-CEN for the period ended October 31, 2018 (the “FormN-CEN Filing”). I have summarized the staff’s comments and the Registrant’s responses below.
| 1. | Comment: With respect to the Commerce Bond Fund and Commerce KansasTax-Free Intermediate Bond Fund (each a “Fund”), please identify any security listed in the Schedule of Investments for the Fund included in the Annual Report that was purchased on a when-issued or forward commitment basis and was not delivered to the Fund as of October 31, 2018. |
Response: The Schedule of Investments for the Commerce Bond Fund included in the Annual Report contained the following security purchased on a when-issued or forward commitment basis, which was not settled as of October 31, 2018:
Security Name | Principal Amount | Interest Rate | Maturity Date | Value | ||||||||||||
FNMA Pool BK9890 | $ | 4,987,099 | 5.000 | % | 08/01/48 | $ | 5,254,768 | |||||||||
The Schedule of Investments for the Commerce KansasTax-Free Intermediate Bond Fund included in the Annual Report contained the following security purchased on a when-issued or forward commitment basis, which was not settled as of October 31, 2018:
Security Name | Principal Amount | Interest Rate | Maturity Date | Value | ||||||||||||
Arlington TX Higher Education Finance Corp. Revenue Bonds (KIPP Texas, Inc.) Series 2018(PSF-GTD) (AAA/NR) | $ | 1,000,000 | 4.000 | % | 08/15/32 | $ | 1,029,370 | |||||||||
The Registrant confirms that it will indicate through a footnote in the Schedules of Investments included in the Registrant’s future Form N-CSR filings any security purchased on a when-issued or forward commitment basis that was not settled as of the end of the period covered by the filing.
| 2. | Comment: With respect to the Commerce KansasTax-Free Intermediate Bond Fund, please explain what the $1,752,165 payable listed as “Due to the custodian” in the Statements of Assets and Liabilities included in the Annual Report was owed for. |
Response: The $1,752,165 payable was owed to the custodian because the Commerce KansasTax-Free Intermediate Bond Fund was overdrawn. The Commerce KansasTax-Free Intermediate Bond Fund sold a U.S. Treasury security on October 31, 2018 to cover the overdraft, which sale is identified in the Statements of Assets and Liabilities for the Fund by the line item “Receivables: Investments sold.”
| 3. | Comment: Please amend the Registrant’s FormN-CEN Filing to include a Legal Entity Identifier number for the Registrant in Item of B.2. |
Response: The Registrant so amended the FormN-CEN Filing on March 18, 2019.
| 4. | Comment: The independent public accountant’s report on internal controls (“Independent Accountant’s Report”) attached to the FormN-CEN Filing does not include a signature. Please confirm that the Registrant maintains a signed copy of this document in its records and include a signature on each Independent Accountant’s Report filed by Registrant in future FormN-CEN filings. |
Response: The Registrant confirms that it maintains a signed copy of the Independent Accountant’s Report for the FormN-CEN Filing and will endeavor to include a signed Independent Accountant’s Report in its future FormN-CEN filings. An amended FormN-CEN Filing containing the Independent Accountant’s conformed signature was filed on March 18, 2019.
If you have any questions, please do not hesitate to call me at (215)988-1146.
| Sincerely, |
/s/ Diana E. McCarthy |
| Diana E. McCarthy |
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