<PAGE>
THE COMMERCE FUNDS
LETTER TO SHAREHOLDERS
Dear Shareholders:
We are pleased to provide you this inaugural annual report for The Commerce
Funds family. The months since the December 12, 1994 inception for most of the
funds have provided excellent financial market returns compared with other such
periods this century. Realization, among market participants, that inflation
remains in check around the world provided the spark to ignite an increased
appetite for financial assets.
Our longer term outlook remains positive and, in large measure, is more
hopeful than a year ago. The renewed focus of our government on the key themes
of incentives for saving and enhanced productivity, while assuring fairness for
future generations, bodes well for the years ahead.
Each of The Commerce Funds is highlighted in the pages that follow. We
welcome your consideration and comment. We are most pleased to have you as a
shareholder.
Short-Term Government Fund
This fund had a total return since inception (December 12, 1994) through
October 31, 1995 of 10.72% based on net asset value ("NAV") versus the Lipper
Short U.S. Government Funds Index return of 9.72% and the Salomon Brothers 1-5
Year Treasury/Government Sponsored Index return of 10.82%. The fund distributed
$1.06 per share from net investment income during the period. A longer average
maturity and duration than its peers enabled the fund to produce its favorable
investment performance.
In January 1995, the average maturity structure of this portfolio was
lengthened to take advantage of the Commerce Investment Management Group's
projection of a declining interest rate environment. As short-term rates
approached 8%, the economy did indeed slow relative to its torrid fourth-quarter
1994 pace. This slowdown reduced investor inflationary expectations, which
resulted in a dramatic bond rally as the year progressed. The fund remains well
positioned to take advantage of further potential declines in interest rates.
Investments have been concentrated primarily in various U.S. Government Agency
debentures that offer slightly higher yields than Treasury Bonds.
Bond Fund
This fund had a total return since inception (December 12, 1994) through
October 31, 1995 of 15.59% based on NAV versus the Lipper Intermediate
Investment Grade Debt Funds Index return of 13.64% and the Lehman Brothers
Aggregate Bond Index return of 15.42%. The fund distributed $1.12 per share
from net investment income during the period. The fund's positive relative
return was largely attributable to its longer average maturity and duration
relative to its peers.
In January 1995, the average maturity structure of this portfolio was
lengthened by buying long-maturity U.S. Treasury securities to take advantage of
the Commerce Investment Management Group's projection of a declining interest
rate environment. In addition, investments were made in seasoned U.S. Government
Agency Pass-Through securities that have outperformed the mortgage component of
the Lehman Brothers Aggregate Bond Index. As the year progressed, duration and
maturity were maintained, despite the fall in rates, with purchases concentrated
in the 10-year sector of the yield curve. We've also upgraded the portfolio's
overall weighted average quality from high AA to a solid AAA to protect against
what appears to be the end of a long expansion and the beginning of a modest
decline in corporate credit quality. Going forward, the fund remains well
positioned to take advantage of a continued bond market rally.
Balanced Fund
This fund had a total return since inception (December 12, 1994) through
October 31, 1995, based on NAV, of 26.14% versus the Lipper Balanced Funds Index
return of 21.39% and a return of 25.77% based on a composite of the S&P 500
Index with Income ("S&P 500") (weighted at 60%) and the Lehman Brothers
Aggregate Bond Index (weighted at 40%). The fund was able to combine the
successful investment strategies of fixed income securities and aggressive
growth and growth stocks to create a well-constructed portfolio. The fund made
two asset allocation shifts in the year, both increasing the equity allocation.
The equity allocation target increased from 42% to 48% in March, from 48% to
60% in April and from 60% to 66% in November.
1
<PAGE>
THE COMMERCE FUNDS
LETTER TO SHAREHOLDERS--(Continued)
Growth Fund
This fund had a total return based on NAV of 38.06% from inception (December
12, 1994) through October 31, 1995. This compares with a 33.06% return for the
S&P 500 and a 32.69% return for the Lipper Growth Funds Index.
Since the fund's inception, the market has achieved one new high after another
with only minor corrections along the way. We attribute much of the market's
success to a strong corporate earnings environment, declining interest rates and
heavy cash inflows into stock mutual funds.
The favorable earnings environment was most evident in the technology sector.
Technology stocks surpassed even optimistic earnings assumptions quarter after
quarter. Positive earnings surprises translated into superior performance, as
many technology issues increased over 50% and some over 100%. The fund has
overweighted the technology sector all year, but did trim some positions late in
the summer.
Financial issues also posted strong gains this year. Falling interest rates,
a consolidating banking sector, increased credit card spending and investment
flows into mutual fund companies accounted for the outperformance. The fund's
strongest issues were Green Tree Financial Corp. and Clayton Homes, Inc.
Growth stocks, in general, posted a solid performance year in 1995. The fund
ended the year with a balanced and diversified portfolio roughly comparable with
the major economic sectors of the S&P 500.
Aggressive Growth Fund
From the inception date of December 12, 1994, through October 31, 1995, this
fund gained a total return of 40.56% based on NAV. This compares with a return
of 31.16% for the S&P Mid Cap 400 Index with Income and a 35.58% return for the
Lipper Mid Cap Funds Index.
The financial markets have been driven higher this year by a powerful
combination of declining interest rates, strong corporate earnings and positive
mutual fund cash flows. The best performing sectors of the equity markets were
those that benefit most from the strong capital spending cycle (technology,
business services and certain equipment manufacturers). Conspicuously lagging
in performance were sectors tied to discretionary spending by consumers
(restaurant and retail outlets).
The better relative performance of this fund versus the benchmark was due
primarily to our investment strategy of focusing research efforts on only those
companies exhibiting significant improvements in their economic fortunes. This
discipline led our analysts to recommend companies in the strongest performing
sectors of the market. These included computer software (American Management
Systems, Inc. and Parametric Technology Corp.), medical device suppliers (Cordis
Corp. and Invacare Corp.), telecom equipment suppliers (ADC Telecommunications,
Inc. and ECI Telecommunications Ltd.) and financial services companies (Synovus
Financial Corp. and Fair Isaac & Co., Inc.)
Little has changed on the economic landscape to alter our long-term view,
first mentioned in our semiannual report, that focuses on the productive side of
the economy over the consumptive side. Slowing corporate profit growth will most
likely steer investor preference to companies whose economic fortunes are
somewhat self-determined. With a clear focus on growth companies, we believe we
are well positioned to benefit from this shift.
International Equity Fund
Based on NAV, this fund provided a total return of 3.73% from inception
(December 12, 1994) through October 31, 1995. This compares with a return of
7.10% for the Lipper International Funds Index for the same time period. For
the period January 1, 1995 to October 31, 1995 (return available only monthly),
the Morgan Stanley Gross EAFE Index had a return of 4.28%.
With few exceptions, international markets performed reasonably well over the
past six months. Performance was best in the United Kingdom and the European
markets, with the exception of France and Italy. The emerging market areas were
more mixed, both for the Far East and Latin America. Japan showed modest
improvement following actions to increase liquidity and stimulate economic
activity. For dollar based investors, however, the strength of the currency had
the effect of offsetting much of the price appreciation. This was particularly
true with regard to Japan, which accounts for most of the weak showing of the
EAFE Index.
2
<PAGE>
THE COMMERCE FUNDS
LETTER TO SHAREHOLDERS--(Continued)
Many markets were buffeted by problems late in the period. Currency turmoil
relating to the proposed European Monetary Union resulted in sharp declines in
many European markets in October. Renewed concerns about the future of the
Mexican economy roiled the Latin American markets as well. On the other hand,
the prospect for lower interest rates around the world and continued economic
growth in 1996 suggest a positive backdrop for the coming six to twelve months.
The Commerce International Equity Fund has doubled its assets under management
over the past six months and is now fully diversified. The absolute commitment
to the United Kingdom and Europe remains high at approximately 50%. Japan
continues to be the largest single country commitment, but at 22% remains
underweighted by approximately half its representation within the EAFE Index.
The fund has effectively "hedged" its yen exposure by concentrating on export-
sensitive companies that benefit from a weaker yen. Emerging markets, which are
not represented in the EAFE Index, account for about 7% of the fund. Consumer
goods and services remains the largest sector commitment in the portfolio.
Going forward, assets will be reallocated away from Europe toward markets in the
Far East and Latin America.
Tax-Exempt Market
Low inflation and a moderate growth environment overcame tax reform and
municipal finance concerns to produce good tax-exempt market returns in the
period ending October 31, 1995. Early in 1995, there was fear that the
leveraging practices that led to the Orange County, California bankruptcy and
default may have been widespread. This concern proved to be unfounded except in
a few instances that were quickly identified and worked out without major
incident. In the sense that the default highlighted just how conservatively
most public entities invest their funds, it may actually have had a positive
impact. The question of tax reform remains. It seems to have had its largest
effect on the market over the summer months, but we expect that the upcoming
presidential campaign will again focus attention on the issue of a "flat tax."
By positioning the portfolios' average maturity at six to seven years, well
short of the industry norm, we have taken steps to protect shareholder value
should the debate impact tax-exempt bond prices. Meanwhile, the economic growth
of the past year has resulted in increased revenues to state, county and city
governments. This has improved their fiscal condition such that tax rates have
been reduced in a number of states. The rating agencies have recognized this
trend and responded with upgrades far exceeding downgrades in both number and
dollars outstanding.
National Tax-Free Bond Fund
Since the fund's inception on February 21, 1995, its NAV increased 3.0% to its
October 31, 1995 value of $18.54. Distributions from inception to October 31 of
$0.54 per share brought the total return based on NAV to 6.06%, while the Lipper
General Municipal Debt Funds Index and the Merrill Lynch Municipal Intermediate
Index had returns of 7.83% and 7.65%, respectively. The lack of supply that was
a factor earlier in the year has abated somewhat since July. We continue to
emphasize high quality issuers in regions with favorable long-term trends.
Missouri Tax-Free Bond Fund
This fund's increase in NAV to $18.40, coupled with the per share distribution
of $0.57, resulted in a total return based on NAV of 5.45% from inception
(February 21, 1995) to October 31, 1995. The Lipper General Municipal Debt
Funds Index and the Merrill Lynch Municipal Intermediate Index earned returns of
7.83% and 7.65%, respectively, for the same time period. A new program that
intercepts state aid to school districts and routes it directly to the bond
paying agent promises to improve the supply of investment quality bonds in
Missouri. This may improve yields and allow greater diversification of
holdings.
In conclusion, we appreciate your support and look forward to helping you meet
your investment objectives.
Sincerely,
/s/Peter F. Mackie
Peter F. Mackie
Executive Vice President
Commerce Bank, N.A.
December 1, 1995
Total return figures include expense waivers and reimbursements. Without such
waivers and reimbursements, total return would be reduced.
3
<PAGE>
THE COMMERCE FUNDS
PERFORMANCE COMPARISON
In accordance with the requirements of the Securities and Exchange Commission,
the following data is supplied for the periods ended October 31, 1995. Each of
the following Commerce Fund's performance, based on an initial investment of
$10,000 (assuming both the maximum sales charge of 3.50% and no sales charge) is
compared to the following:
<TABLE>
<CAPTION>
Fund Compare to:
- -------------------------------------------------------------- ------------------------------------------------------------
<S> <C>
Short-Term Government Fund ("ST Gov't"): The Salomon Brothers 1-5 Year Treasury/Government Spon-
sored Index ("Salomon Bros. Treas./Gov't") and the Lipper
Short US Government ("Gov't") Funds Index.
Bond Fund ("Bond"): The Lehman Brothers Aggregate Bond Index ("Lehman Agg Bond
Index") and the Lipper Intermediate Investment Grade Debt
Funds Index ("Lipper Interm Debt Funds Index").
Balanced Fund ("Balanced"): The composite of the Standard & Poor's 500 Index with
Income (weighted at 60%) and the Lehman Brothers Aggregate
Bond Index (weighted at 40%) ("Combined S&P 500 and Lehman
Bond Index") and the Lipper Balanced Funds Index.
Growth Fund ("Growth"): The S&P 500 with Income ("S&P 500") and the Lipper Growth
Funds Index.
Aggressive Growth Fund ("Agg Growth"): The S&P Mid Cap 400 Index with Income ("S&P Mid Cap 400")
and the Lipper Mid Cap Funds Index.
International Equity Fund ("Int'l Equity"): The Morgan Stanley Gross Europe Asia Far East Index
("Morgan Stanley Gross EAFE") and the Lipper International
("Int'l") Funds Index.
National Tax-Free Bond Fund ("Nat'l Tax-Free"): The Merrill Lynch Municipal Intermediate Index ("Merrill
Lynch Muni Interm Index") and the Lipper General Municipal
Debt Funds Index ("Lipper General Muni Debt Funds Index").
Missouri Tax-Free Bond Fund ("Missouri Tax-Free"): The Merrill Lynch Muni Interm Index and the Lipper General
Muni Debt Funds Index.
</TABLE>
All performance data shown represents past performance and should not be
considered indicative of future performance which will fluctuate as market
conditions change. The investment return and principal value of an investment
will fluctuate with changes in market conditions so that an investor's shares,
when redeemed, may be worth more or less than their original cost.
4
<PAGE>
THE COMMERCE FUNDS
PERFORMANCE COMPARISON--(Continued)
[SHORT-TERM GOVERNMENT FUND GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Short-Term Government Fund
- --------------------------
ST Gov't ST Gov't Salomon Bros. Lipper Short US
(no sales charge) (w/sales charge) Treas/Gov't Gov't Funds Index
----------------- ---------------- ------------- ------------------
<S> <C> <C> <C> <C>
12/12/94 $10,000 $9,650 $10,000 $10,000
10/31/95 $11,072 $10,684 $11,082 $10,972
<CAPTION>
Aggregate Total Return
Since Inception (a)
----------------------
<S> <C>
ST Gov't (no sales charge) 10.72%
ST Gov't (w/sales charge) 6.86%
</TABLE>
[BALANCED FUND GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Balanced Fund
- -------------
Balanced Balanced Combined S&P 500 Lipper Balanced
(no sales charge) (w/sales charge) and Lehman Bond Index Funds Index
----------------- ---------------- --------------------- ---------------
<S> <C> <C> <C> <C>
12/12/94 $10,000 $9,650 $10,000 $10,000
10/31/95 $12,614 $12,173 $12,577 $12,139
<CAPTION>
Aggregate Total Return
Since Inception (a)
----------------------
<S> <C>
Balanced (no sales charge) 26.14%
Balanced (w/sales charge) 21.74%
</TABLE>
[BOND FUND GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Bond Fund
- ---------
Bond Bond Lehman Agg Lipper Interm
(no sales charge) (w/sales charge) Bond Index Debt Funds Index
----------------- ---------------- ---------- ----------------
<S> <C> <C> <C> <C>
12/12/94 $10,000 $9,650 $10,000 $10,000
10/31/95 $11,559 $11,154 $11,542 $11,364
<CAPTION>
Aggregate Total Return
Since Inception (a)
----------------------
<S> <C>
Bond (no sales charge) 15.59%
Bond (w/sales charge) 11.56%
</TABLE>
[GROWTH FUND GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Growth Fund
- -----------
Growth Growth Lipper Growth
(no sales charge) (w/sales charge) S&P 500 Funds Index
----------------- ---------------- ------- -------------
<S> <C> <C> <C> <C>
12/12/94 $10,000 $9,650 $10,000 $10,000
10/31/95 $13,806 $13,323 $13,306 $13,269
<CAPTION>
Aggregate Total Return
Since Inception (a)
----------------------
<S> <C>
Growth (no sales charge) 38.06%
Growth (w/sales charge) 33.25%
</TABLE>
Past performance is not predictive of future performance.
5
<PAGE>
THE COMMERCE FUNDS
PERFORMANCE COMPARISON--(Continued)
[AGGRESSIVE GROWTH FUND GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Aggressive Growth Fund
- ----------------------
Agg Growth Agg Growth Lipper Mid Cap
(no sales charge) (w/sales charge) S&P Mid Cap 400 Funds Index
----------------- ---------------- --------------- --------------
<S> <C> <C> <C> <C>
12/12/94 $10,000 $9,650 $10,000 $10,000
10/31/95 $14,056 $13,564 $13,116 $13,558
<CAPTION>
Aggregate Total Return
Since Inception (a)
----------------------
<S> <C>
Agg Growth (no sales charge) 40.56%
Agg Growth (w/sales charge) 35.66%
</TABLE>
[NATIONAL TAX-FREE BOND FUND APPEARS HERE]
<TABLE>
<CAPTION>
National Tax-Free Bond Fund
- ---------------------------
Nat'l Tax-Free Nat'l Tax-Free Merrill Lynch Muni Lipper General Muni
(no sales charge) (w/sales charge) Interm Index Debt Funds Index
----------------- ---------------- ------------------ -------------------
<S> <C> <C> <C> <C>
2/21/95 $10,000 $9,650 $10,000 $10,000
10/31/95 $10,606 $10,235 $10,765 $10,783
<CAPTION>
Aggregate Total Return
Since Inception (c)
----------------------
<S> <C>
Nat'l Tax-Free (no sales charge) 6.06%
Nat'l Tax-Free (w/sales charge) 2.37%
</TABLE>
[INTERNATIONAL EQUITY FUND GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
International Equity Fund
- -------------------------
Int'l Equity Int'l Equity Morgan Stanley Lipper Int'l
(no sales charge) (w/sales charge) Gross EAFE Funds Index
----------------- ---------------- -------------- ------------
<S> <C> <C> <C> <C>
1/1/95(b) $10,000 $9,650 $10,000 $10,000
10/31/95 $10,264 $9,905 $10,428 $10,584
<CAPTION>
Aggregate Total Return
Since Inception (a)
----------------------
<S> <C>
Int'l Equity (no sales charge) 3.73%
Int'l Equity (w/sales charge) 0.11%
</TABLE>
[MISSOURI TAX-FREE BOND FUND GRAPH APPEARS HERE]
<TABLE>
<CAPTION>
Missouri Tax-Free Bond Fund
- ---------------------------
Missouri Tax-Free Missouri Tax-Free Merrill Lynch Muni Lipper General Muni
(no sales charge) (w/sales charge) Interm Index Debt Funds Index
----------------- ---------------- ------------------ -------------------
<S> <C> <C> <C> <C>
2/21/95 $10,000 $9,650 $10,000 $10,000
10/31/95 $10,545 $10,176 $10,765 $10,783
<CAPTION>
Aggregate Total Return
Since Inception (c)
----------------------
<S> <C>
Missouri Tax-Free (no sales charge) 5.45%
Missouri Tax-Free (w/sales charge) 1.77%
</TABLE>
(a) Commencement of operations was on December 12, 1994.
(b) For comparative purposes, initial investments are assumed to be made on the
first day of the month following the International Equity Fund's inception.
(c) Commencement of operations was on February 21, 1995.
6
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Trustees and Shareholders of
The Commerce Funds
We have audited the accompanying statements of assets and liabilities of Short-
Term Government Fund, Bond Fund, Balanced Fund, Growth Fund, Aggressive Growth
Fund, International Equity Fund, National Tax-Free Bond Fund and Missouri Tax-
Free Bond Fund, portfolios of The Commerce Funds, (collectively The Commerce
Funds) including the statements of investments, as of October 31, 1995, the
related statements of operations, statements of changes in net assets and
financial highlights for the period from December 12, 1994, commencement of
operations, to October 31, 1995 (period from February 21, 1995, commencement of
operations, to October 31, 1995 for National Tax-Free Bond Fund and Missouri
Tax-Free Bond Fund). These financial statements and financial highlights are
the responsibility of The Commerce Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights based
on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
October 31, 1995 by correspondence with the custodian and brokers. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Commerce Funds as of October 31, 1995, the results of their operations, the
changes in their net assets and the financial highlights for the periods
specified in the first paragraph above, in conformity with generally accepted
accounting principles.
KPMG Peat Marwick LLP
Kansas City, Missouri
December 8, 1995
7
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
SHORT-TERM GOVERNMENT FUND
October 31, 1995
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ---------- ---------- ---------- -----------
<S> <C> <C> <C>
U.S. Government Agency Obligations--71.4%
Federal Agriculture Mortgage Corp.
$ 500,000 6.69% 02/10/00 $ 512,340
Federal Farm Credit Bank
1,000,000 7.17 04/03/00 1,042,720
Federal Home Loan Bank
530,000 7.13 03/27/00 553,023
1,000,000 6.63 08/28/01 1,028,230
965,000 7.56 02/27/02 1,035,715
Federal Home Loan Mortgage Corp.
1,000,000 7.93 01/20/98 1,043,590
1,000,000 7.82 01/27/98 1,041,410
1,000,000 6.52 08/25/00 1,019,690
Federal Land Bank
1,000,000 7.35 01/20/97 1,018,280
Federal National Mortgage Assn.
1,000,000 9.20 09/11/00 1,132,340
Israel Aid Series 5A
2,000,000 7.75 11/15/99 2,125,500
Tennessee Valley Authority 1989,
Series D
2,000,000 8.38 10/01/99 2,164,680
U.S. Department of Housing & Urban
Development Series 1995-A
650,000 8.15 08/01/00 705,478
-----------
Total U.S. Government
Agency Obligations
(cost $13,891,127)........ $14,422,996
-----------
U.S. Treasury Obligations--12.4%
United States Treasury Notes
$1,000,000 7.25% 11/30/96 $ 1,016,560
1,000,000 4.75 02/15/97 988,750
500,000 5.63 08/31/97 499,920
-----------
Total U.S. Treasury
Obligations
(cost $2,504,375)........ $ 2,505,230
-----------
Repurchase Agreements--12.4%
State Street Bank & Trust Company,
dated 10/31/95, repurchase price
$2,509,383 (U.S. Treasury Note:
$2,562,320, 7.13%, 02/29/00)
$2,509,000 5.50% 11/01/95 $ 2,509,000
-----------
Total Repurchase
Agreements
(cost $2,509,000)........ $ 2,509,000
-----------
Total Investments
(cost $18,904,502/(a)/).. $19,437,226
===========
- ---------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for
investments in which value
exceeds cost..................... $ 535,945
Gross unrealized loss for
investments in which cost
exceeds value.................... (3,221)
-----------
Net unrealized gain.................. $ 532,724
===========
- ---------------------------------------------------
</TABLE>
/(a)/The cost stated also represents aggregate
cost for income tax purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
BOND FUND
October 31, 1995
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ---------- ---------- ---------- -----------
<S> <C> <C> <C>
Asset-Backed Securities--28.3%
CREDIT CARD--13.6%
American Express Master Trust
Series 1994-3, Class A
$2,000,000 7.85% 08/15/05 $ 2,161,860
Choice Credit Card Master Trust
Series 1992, Class 2B
2,000,000 7.20 04/15/99 2,054,800
Discover Card Master Trust Series
1993-3, Class A
2,000,000 6.20 11/15/03 1,961,240
MBNA Master Credit Card Trust
Series 1995-C, Class A
2,000,000 6.45 02/15/08 2,001,240
Standard Credit Card Master Trust
Series 1993-2, Class A
2,000,000 5.95 10/07/04 1,926,200
Standard Credit Card Master Trust
Series 1995-1, Class A
2,000,000 8.25 01/07/07 2,213,260
Standard Credit Card Master Trust
Series 1995-1, Class B
1,000,000 8.45 01/07/07 1,110,730
-----------
$13,429,330
-----------
HOME EQUITY--4.4%
Advanta Mortgage Loan Trust
Series 1994-4, Class A2
$4,000,000 8.92% 01/25/26 $ 4,275,040
-----------
MANUFACTURED HOUSING--10.3%
Green Tree Financial Corp.
Series 1993-4, Class A4
$2,000,000 6.60% 01/15/19 $ 1,991,240
Green Tree Financial Corp.
Series 1993-4, Class A5
4,000,000 7.05 01/15/19 3,961,240
Green Tree Financial Corp.
Series 1994-2, Class A
4,000,000 7.90% 05/15/19 4,231,240
-----------
$10,183,720
-----------
Total Asset-Backed
Securities
(cost $26,082,884)... $27,888,090
-----------
Corporate Obligations--21.9%
FINANCIAL--15.1%
Bankamerica Corp.
$2,000,000 6.88% 06/01/03 $ 2,022,320
Chemical Bank
2,000,000 6.70 08/15/08 1,963,820
Chubb Capital Corp.
2,000,000 6.00 02/01/98 1,996,760
CIT Group Holdings, Inc.
1,000,000 5.63 04/01/98 987,580
General Motors Acceptance Corp.
2,000,000 6.63 10/15/05 1,973,900
Morgan Stanley Group, Inc.
2,000,000 6.75 03/04/03 1,998,180
PNC Funding Corp.
2,000,000 6.13 09/01/03 1,899,840
Smith Barney Holdings, Inc.
2,000,000 6.63 06/01/00 2,012,320
-----------
$14,854,720
-----------
INDUSTRIAL--3.7%
Pepsico, Inc.
$1,000,000 7.75% 10/01/98 $ 1,041,090
Phillip Morris Companies, Inc.
500,000 9.45 11/19/97 530,575
Shell Oil Co.
1,000,000 6.95 12/15/98 1,026,060
Union Pacific Railroad Corp.
1,000,000 6.44 01/15/98 1,006,320
-----------
$ 3,604,045
-----------
UTILITIES--3.1%
Duke Power Corp.
$1,000,000 7.37% 02/02/04 $ 1,053,610
</TABLE>
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
BOND FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- ---------- ---------- ---------- ----------
<S> <C> <C> <C>
Corporate Obligations--Continued
UTILITIES--CONTINUED
Union Electric Co.
$1,000,000 6.75% 10/15/99 $ 1,008,770
Wisconsin Electric Power Co.
1,000,000 5.88 10/01/97 998,910
-----------
$ 3,061,290
-----------
Total Corporate
Obligations
(cost $19,956,799)... $21,520,055
-----------
Foreign Bonds--1.1%
Hydro Quebec Note
$1,073,290 7.96% 12/17/01 $ 1,073,290
-----------
Total Foreign Bonds
(cost $971,660)...... $ 1,073,290
-----------
Mortgage-Backed Pass-Through Obligations--26.4%
Federal Home Loan Mortgage Corp.
$3,337,696 8.50% 02/01/19 $ 3,487,726
3,702,519 8.50 03/01/21 3,866,615
Federal National Mortgage Assn.
2,732,620 9.00 11/01/21 2,883,051
Government National Mortgage Assn.
5,036,795 8.00 02/15/22 5,183,164
5,589,441 7.00 09/15/23 5,550,985
4,989,753 7.50 08/20/25 5,027,126
-----------
Total Mortgage-Backed
Pass-Through
Obligations
(cost $24,573,554)... $25,998,667
-----------
U.S. Government Agency Obligations--2.0%
Federal Home Loan Bank
$1,000,000 6.32% 02/01/00 $ 1,013,090
Federal Home Loan Mortgage Corp.
1,000,000 6.20 04/15/03 996,870
-----------
Total U.S. Government
Agency Obligations
(cost $1,863,696).... $ 2,009,960
-----------
U.S. Treasury Obligations--19.5%
United States Treasury Bonds
$4,000,000 7.25% 05/15/16 $ 4,378,760
4,000,000 7.50 11/15/16 4,499,360
United States Treasury Notes
5,000,000 5.75 08/15/03 4,932,050
5,000,000 7.25 08/15/04 5,414,050
-----------
Total U.S. Treasury
Obligations
(cost $18,337,578)... $19,224,220
-----------
Repurchase Agreements--1.6%
State Street Bank & Trust Company,
dated 10/31/95, repurchase price
$1,578,241 (U.S. Treasury Note:
$1,612,723, 7.13%, 02/29/00)
$1,578,000 5.50% 11/01/95 $ 1,578,000
-----------
Total Repurchase
Agreements
(cost $1,578,000).... $ 1,578,000
-----------
Total Investments (cost
$93,364,171/(a)/).... $99,292,282
===========
- ------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for
investments in which value
exceeds cost.................... $ 5,940,309
Gross unrealized loss for
investments in which cost
exceeds value................... (12,198)
-----------
Net unrealized gain.............. $ 5,928,111
- ------------------------------------------------
/(a)/The cost stated also represents aggregate
cost for income tax purposes.
The percentage shown for each investment category
reflects the value of investments in that category
as a percentage of total net assets.
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
BALANCED FUND
October 31, 1995
<TABLE>
<CAPTION>
Shares Description Value
- ------ ----------- ------------
<S> <C> <C>
Common Stocks--53.2%
AEROSPACE/DEFENSE--0.9%
6,200 Lockheed Martin Corp. $ 422,375
------------
AUTOMOBILES & AUTOMOBILE PARTS--1.2%
6,000 Echlin, Inc./(a)/ $ 214,500
2,600 Genuine Parts Co./(a)/ 103,025
10,600 Harley Davidson, Inc./(a)/ 283,550
------------
$ 601,075
------------
BASIC INDUSTRIES--0.8%
7,700 Aluminum Company of
America/(a)/ $ 392,700
------------
BROADCAST MEDIA--0.5%
2,100 Capital Cities/ABC, Inc./(a)/ $ 249,113
------------
BUILDING MATERIALS & CONSTRUCTION--1.5%
18,700 Clayton Homes, Inc. $ 490,875
5,800 Sherwin Williams Co./(a)/ 218,225
------------
$ 709,100
------------
BUSINESS SERVICES--3.3%
5,400 Automatic Data Processing, Inc. $ 386,100
11,100 Equifax, Inc. 432,900
6,200 Fiserv, Inc./(b)/ 159,650
2,800 Omnicom Group 178,850
12,000 Reynolds & Reynolds Co. 427,500
------------
$ 1,585,000
------------
CHEMICAL PRODUCTS--0.3%
4,000 Bio-Rad Laboratories, Inc./(b)/ $ 152,000
------------
COMMUNICATIONS--1.1%
9,300 SBC Communications, Inc. $ 519,638
------------
COMPUTER SERVICES/SOFTWARE--4.0%
2,000 Adobe Systems, Inc. $ 114,000
8,000 Cerner Corp./(b)/ 212,000
6,500 Computer Sciences Corp./(a)//(b)/ 434,688
6,000 Medic Computer Systems, Inc./(b)/ 319,500
1,200 Microsoft Corp./(b)/ 120,000
4,200 Network General Corp./(b)/ 174,300
3,200 Parametric Technology Corp./(b)/ 214,400
13,000 Verifone, Inc./(b)/ 351,000
------------
$ 1,939,888
------------
ELECTRICAL SERVICES--1.5%
18,000 Union Electric Co. $ 702,000
------------
ELECTRONICS & OTHER ELECTRICAL
EQUIPMENT--8.6%
8,000 Adaptec, Inc./(b)/ $ 356,000
6,600 ADC Telecommunications, Inc./(b)/ 264,000
9,000 Belden, Inc. 217,125
7,000 DSC Communications Corp./(b)/ 259,000
4,100 Emerson Electric Co./(a)/ 292,125
12,200 General Electric Co. 771,650
4,000 Harman International Industries, Inc. 184,500
8,000 Intel Corp. 559,000
2,000 KLA Instruments Corp./(a)//(b)/ 85,500
7,200 Linear Technology Corp. 315,000
11,000 Oak Industries, Inc. 229,625
12,800 Pioneer Standard Electronics, Inc. 177,600
8,000 Symbol Technologies, Inc./(b)/ 279,000
2,700 Texas Instruments, Inc. 184,275
-----------
$ 4,174,400
-----------
FINANCIAL SERVICES--5.7%
12,000 Fair Isaac & Co., Inc. 324,000
5,500 Federal National Mortgage Assn. 576,813
7,300 Franklin Resources, Inc. 370,475
13,400 Green Tree Financial Corp. 356,775
15,000 Norwest Corp. 442,500
7,500 SunAmerica, Inc. 466,875
8,900 Synovus Financial Corp. 223,613
-----------
$ 2,761,051
-----------
FOOD & BEVERAGES--1.7%
3,000 Coca Cola Co. $ 215,625
6,100 CPC International, Inc. 404,887
4,000 Pepsico, Inc. 211,000
-----------
$ 831,512
-----------
HEALTH & MEDICAL SERVICES--5.8%
9,000 Abbott Laboratories $ 357,750
8,100 Amgen, Inc./(b)/ 388,800
11,600 Healthcare Compare Corp./(b)/ 429,200
10,600 Invacare Corp. 267,650
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
BALANCED FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
Common Stocks--Continued
HEALTH & MEDICAL SERVICES--CONTINUED
6,600 Johnson & Johnson $ 537,900
8,200 Nellcor Puritan Bennett, Inc./(b)/ 471,500
1,900 Pacificare Health Systems, Inc./(b)/ 133,950
4,600 Stryker Corp. 207,575
------------
$ 2,794,325
------------
HOTELS & RESTAURANTS--1.0%
12,100 McDonalds Corp. $ 496,100
------------
Household Durables--0.7%
14,800 Leggett & Platt, Inc. $ 355,200
------------
HOUSEHOLD PRODUCTS--1.2%
3,200 Colgate Palmolive Co. $ 221,600
7,400 Gillette Co. 357,975
------------
$ 579,575
------------
INDUSTRIAL MACHINERY--0.3%
6,200 Duriron Co., Inc. $ 165,850
------------
INSURANCE SERVICES--0.6%
6,500 Orion Capital Corp./(a)/ $ 266,500
------------
MACHINERY--3.9%
11,000 Dover Corp./(a)/ $ 434,500
26,800 Federal Signal Corp. 599,650
14,200 Illinois Tool Works, Inc. 825,375
------------
$ 1,859,525
------------
MANUFACTURING--0.6%
6,000 Lydall, Inc./(b)/ $ 136,500
4,000 Millipore Corp. 141,500
------------
$ 278,000
------------
MISCELLANEOUS - CONSUMER--0.6%
8,000 Lancaster Colony Corp./(a)/ $ 266,000
------------
OFFICE & BUSINESS EQUIPMENT--1.4%
4,300 Cabletron Systems, Inc./(b)/ $ 338,087
4,500 Sun Microsystems, Inc./(b)/ 351,000
------------
$ 689,087
------------
OIL & GAS--1.8%
8,500 Mobil Corp./(a)/ $ 856,375
------------
PAPER & FOREST PRODUCTS--0.6%
10,000 Chesapeake Corp./(a)/ $ 306,250
------------
PRINTING & PUBLISHING--0.3%
2,800 Banta Corp. $ 121,100
------------
RECREATIONAL SERVICES--0.8%
13,500 Mattel, Inc. $ 388,125
------------
RETAIL TRADE--2.0%
8,000 Dollar General Corp. $ 196,000
5,000 Global Directmail Corp./(b)/ 136,250
15,000 Walgreen Co./(a)/ 427,500
8,500 Walmart Stores, Inc. 183,812
------------
$ 943,562
------------
TEXTILES--0.2%
2,800 Cintas Corp. $ 117,600
------------
TRANSPORTATION/STORAGE--0.3%
8,000 Air Express International Corp. $ 166,000
------------
Total Common Stocks
(cost $20,482,124)...... $ 25,689,026
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date
- ----------- ---------- ----------
<S> <C> <C> <C>
Asset-Backed Securities--12.7%
CREDIT CARD--6.3%
American Express Master Trust
Series 1994-3, Class A
$ 500,000 7.85% 08/15/05 $ 540,465
Choice Credit Card Master Trust
Series 1992, Class 2B
500,000 7.20 04/15/99 513,700
Discover Card Master Trust Series
1993-3, Class A
500,000 6.20 11/15/03 490,310
J.C. Penney Master Credit Card Trust
Series B, Class A
500,000 8.95 10/15/01 548,510
MBNA Master Credit Card Trust
Series 1995-C, Class A
500,000 6.45 02/15/08 500,310
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
BALANCED FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- ---------- ---------- -----------
<S> <C> <C> <C>
Asset-Backed Securities--Continued
CREDIT CARD--CONTINUED
Standard Credit Card Master Trust
Series 1993-2, Class A
$ 500,000 5.95% 10/07/04 $ 481,550
-----------
$ 3,074,845
-----------
HOME EQUITY--1.1%
Advanta Mortgage Loan Trust Series
1994-4, Class A2
$ 500,000 8.92% 01/25/26 $ 534,380
-----------
MANUFACTURED HOUSING--5.3%
Green Tree Financial Corp. Series
1993-4, Class A4
$ 500,000 6.60% 01/15/19 $ 497,810
Green Tree Financial Corp. Series
1993-4, Class A5
1,000,000 7.05 01/15/19 990,310
Green Tree Financial Corp. Series
1994-2, Class A4
1,000,000 7.90 05/15/19 1,057,810
-----------
$ 2,545,930
-----------
Total Asset-Backed
Securities
(cost $5,757,393)....... $ 6,155,155
-----------
Corporate Obligations--10.7%
FINANCIAL--7.5%
Bankamerica Corp.
$ 500,000 6.88% 06/01/03 $ 505,580
Chemical Bank
500,000 6.70 08/15/08 490,955
General Electric Capital Corp.
1,000,000 8.30 09/20/09 1,142,080
Morgan Stanley Group, Inc.
500,000 6.75 03/04/03 499,545
PNC Funding Corp.
500,000 6.13 09/01/03 474,960
Smith Barney Holdings, Inc.
500,000 6.63 06/01/00 503,080
-----------
$ 3,616,200
-----------
INDUSTRIAL--1.0%
Gannett, Inc.
$ 500,000 5.25% 03/01/98 $ 492,210
-----------
UTILITIES--2.2%
AT + T Corp.
$1,000,000 7.13% 01/15/02 $ 1,039,850
-----------
Total Corporate
Obligations
(cost $4,632,981)....... $ 5,148,260
-----------
Mortgage-Backed Pass-Through Obligations--9.6%
Government National Mortgage Assn.
$1,259,199 8.00% 02/15/22 $ 1,295,791
1,836,125 7.00 09/15/23 1,823,492
1,496,926 7.50 08/20/25 1,508,138
-----------
Total Mortgage-Backed
Pass-Through
Obligations
(cost $4,353,592)....... $ 4,627,421
-----------
U.S. Government Agency Obligations--1.6%
Federal Home Loan Bank
$ 750,000 6.63% 08/28/01 $ 771,172
-----------
Total U.S. Government
Agency Obligations
(cost $695,325)......... $ 771,172
-----------
U.S. Treasury Obligations--4.4%
United States Treasury Bonds
$ 500,000 7.25% 05/15/16 $ 547,345
500,000 7.50 11/15/16 562,420
United States Treasury Notes
500,000 5.75 08/15/03 493,205
500,000 7.25 08/15/04 541,405
-----------
Total U.S. Treasury
Obligations
(cost $2,117,422)....... $ 2,144,375
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
BALANCED FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- ---------- ---------- -----------
<S> <C> <C> <C>
Repurchase Agreements--7.8%
State Street Bank & Trust Company,
dated 10/31/95, repurchase price
$3,768,576 (U.S.Treasury Note:
$3,846,133, 7.13%, 02/29/00)
$3,768,000 5.50% 11/01/95 $ 3,768,000
Total Repurchase
Agreements
(cost $3,768,000).......... $ 3,768,000
-----------
Total Investments
(cost $41,806,837/(c)/).... $48,303,409
===========
Federal Income Tax Information:
Gross unrealized gain for
investments in which value
exceeds cost..................... $ 6,787,613
Gross unrealized loss for
investments in which cost
exceeds value.................... (291,041)
-----------
Net unrealized gain............... $ 6,496,572
===========
- --------------------------------------------------
</TABLE>
/(a)/There are common stock rights attached to these securities.
/(b)/Non-income producing security.
/(c)/The cost stated also represents aggregate cost for income tax purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
GROWTH FUND
October 31, 1995
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
Common Stocks--92.2%
AEROSPACE/DEFENSE--2.0%
41,300 Lockheed Martin Corp. $ 2,813,563
------------
AUTOMOBILES & AUTOMOBILE PARTS--1.9%
18,000 Genuine Parts Co./(a)/ $ 713,250
75,500 Harley Davidson, Inc./(a)/ 2,019,625
------------
$ 2,732,875
------------
BASIC INDUSTRIES--1.9%
53,800 Aluminum Company of America/(a)/ $ 2,743,800
------------
BROADCAST MEDIA--1.2%
14,000 Capital Cities/ABC, Inc./(a)/ $ 1,660,750
------------
BUILDING MATERIALS & CONSTRUCTION--3.4%
125,000 Clayton Homes, Inc. $ 3,281,250
40,500 Sherwin Williams Co./(a)/ 1,523,813
------------
$ 4,805,063
------------
BUSINESS SERVICES--5.9%
34,600 Automatic Data Processing, Inc. $ 2,473,900
72,800 Equifax, Inc. 2,839,200
87,000 Reynolds & Reynolds Co. 3,099,375
------------
$ 8,412,475
------------
COMMUNICATIONS--2.8%
70,000 SBC Communications, Inc. $ 3,911,250
------------
COMPUTER SERVICES/SOFTWARE--4.3%
40,800 Cerner Corp./(b)/ $ 1,081,200
42,700 Computer Sciences Corp./(a)//(b)/ 2,855,562
7,500 Microsoft Corp./(b)/ 750,000
21,400 Parametric Technology Corp./(b)/ 1,433,800
------------
$ 6,120,562
------------
ELECTRICAL SERVICES--3.2%
117,600 Union Electric Co. $ 4,586,400
------------
ELECTRONICS & OTHER ELECTRICAL EQUIPMENT--13.2%
55,000 Adaptec, Inc./(b)/ $ 2,447,500
47,000 DSC Communications Corp./(b)/ 1,739,000
29,100 Emerson Electric Co./(a)/ 2,073,375
80,000 General Electric Co. 5,060,000
53,500 Intel Corp. 3,738,313
47,800 Linear Technology Corp. 2,091,250
22,200 Texas Instruments, Inc. 1,515,150
------------
$ 18,664,588
------------
FINANCIAL SERVICES--9.6%
34,100 Federal National Mortgage Assn. $ 3,576,237
50,000 Franklin Resources, Inc. 2,537,500
91,400 Green Tree Financial Corp. 2,433,525
106,000 Norwest Corp. 3,127,000
32,000 SunAmerica, Inc. 1,992,000
------------
$ 13,666,262
------------
FOOD & BEVERAGES--4.1%
20,700 Coca Cola Co. $ 1,487,812
44,400 CPC International, Inc. 2,947,050
25,600 Pepsico, Inc. 1,350,400
------------
$ 5,785,262
------------
HEALTH & MEDICAL SERVICES--10.0%
61,400 Abbott Laboratories $ 2,440,650
58,000 Amgen, Inc./(b)/ 2,784,000
70,000 Healthcare Compare Corp./(b)/ 2,590,000
42,000 Johnson & Johnson 3,423,000
51,500 Nellcor Puritan Bennett, Inc./(b)/ 2,961,250
------------
$ 14,198,900
------------
HOTELS & RESTAURANTS--2.4%
84,000 McDonalds Corp. $ 3,444,000
------------
HOUSEHOLD PRODUCTS--1.9%
21,000 Colgate Palmolive Co. $ 1,454,250
25,600 Gillette Co. 1,238,400
------------
$ 2,692,650
------------
MACHINERY--8.7%
74,000 Dover Corp./(a)/ $ 2,923,000
182,000 Federal Signal Corp. 4,072,250
92,000 Illinois Tool Works, Inc. 5,347,500
------------
$ 12,342,750
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
GROWTH FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
Common Stocks--Continued
MISCELLANEOUS - CONSUMER--1.8%
76,000 Lancaster Colony Corp./(a)/ $ 2,527,000
------------
OFFICE & BUSINESS EQUIPMENT--3.2%
28,000 Cabletron Systems, Inc./(b)/ $ 2,201,500
29,500 Sun Microsystems, Inc./(b)/ 2,301,000
------------
$ 4,502,500
------------
OIL & GAS--4.1%
57,000 Mobil Corp./(a)/ $ 5,742,750
------------
PAPER & FOREST PRODUCTS--1.4%
66,900 Chesapeake Corp./(a)/ $ 2,048,812
------------
RECREATIONAL SERVICES--2.2%
92,050 Mattel, Inc. $ 2,646,438
8,000 Walt Disney, Co. 461,000
------------
$ 3,107,438
------------
RETAIL TRADE--3.0%
109,000 Walgreen Co./(a)/ $ 3,106,500
50,000 Walmart Stores, Inc. 1,081,250
------------
$ 4,187,750
------------
Total Common Stocks
(cost $100,597,883).......... $130,697,400
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- ---------- ---------- ----------
<S> <C> <C> <C>
Repurchase Agreements--8.5%
State Street Bank & Trust Company,
dated 10/31/95, repurchase price
$12,060,842 (U.S. Treasury Note:
$12,302,321, 7.13%, 02/29/00)
$12,059,000 5.50% 11/01/95 $ 12,059,000
------------
Total Repurchase
Agreements
(cost $12,059,000).... $ 12,059,000
------------
Total Investments
(cost $112,656,883/(c)/) $142,756,400
============
- --------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for
investments in which value
exceeds cost..................... $ 30,687,765
Gross unrealized loss for
investments in which cost
exceeds value.................... (588,248)
------------
Net unrealized gain............... $ 30,099,517
============
- --------------------------------------------------
</TABLE>
/(a)/There are common stock rights attached to these securities.
/(b)/Non-income producing security.
/(c)/The cost stated also represents aggregate cost for income tax purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
AGGRESSIVE GROWTH FUND
October 31, 1995
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
Common Stocks--93.5%
AEROSPACE/DEFENSE--1.1%
10,000 Watkins-Johnson Co. $ 481,250
------------
AUTOMOBILES & AUTOMOBILE PARTS--2.1%
24,000 Echlin, Inc./(a)/ $ 860,175
------------
BUILDING MATERIALS & CONSTRUCTION--1.9%
30,718 Clayton Homes, Inc. $ 806,347
------------
BUSINESS SERVICES--9.4%
25,000 Devry, Inc./(b)/ $ 556,250
17,500 Equifax, Inc. 682,500
19,100 Fiserv, Inc./(b)/ 491,825
9,800 Omnicom Group 625,975
17,400 Paychex, Inc. 754,725
23,000 Reynolds & Reynolds Co. 819,375
------------
$ 3,930,650
------------
CHEMICAL PRODUCTS--4.6%
18,000 Bio-Rad Laboratories, Inc./(b)/ $ 684,000
13,500 Cabot Corp. 641,250
20,500 OM Group, Inc. 594,500
------------
$ 1,919,750
------------
COMPUTER SERVICES/SOFTWARE--13.7%
14,000 Adobe Systems, Inc. $ 798,000
30,000 American Management Systems, Inc./(b)/ 866,250
12,800 Autodesk, Inc. 435,200
16,000 Davidson & Associates, Inc./(b)/ 568,000
15,000 Medic Computer Systems, Inc./(b)/ 798,750
18,200 Network General Corp./(b)/ 755,300
11,000 Parametric Technology Corp./(b)/ 737,000
27,000 Verifone, Inc./(b)/ 730,800
------------
$ 5,689,300
------------
ELECTRICAL SERVICES--1.3%
21,000 Scana Corp. $ 532,875
------------
ELECTRONICS & OTHER ELECTRICAL EQUIPMENT--18.7%
15,400 ADC Telecommunications, Inc./(b)/ $ 616,000
10,000 Arrow Electronics, Inc./(b)/ 507,500
27,500 Belden, Inc. 663,437
28,000 ECI Telecommunications Ltd. 532,000
16,400 Harman International Industries, Inc. 756,450
17,800 KLA Instruments Corp./(a)//(b)/ 760,950
16,000 Linear Technology Corp. 700,000
18,000 Littlefuse, Inc./(b)/ 585,000
10,000 Novellus Systems, Inc./(b)/ 688,750
44,875 Pioneer Standard Electronics, Inc. 622,641
24,000 Symbol Technologies, Inc./(b)/ 837,000
21,900 VLSI Technology, Inc./(b)/ 514,650
------------
$ 7,784,378
------------
FINANCIAL SERVICES--7.6%
32,000 A. G. Edwards, Inc. $ 816,000
26,000 Fair Isaac & Co., Inc. 702,000
14,000 SunAmerica, Inc. 871,500
31,200 Synovus Financial Corp. 783,900
------------
$ 3,173,400
------------
HEALTH & MEDICAL SERVICES--12.6%
10,500 Cardinal Health, Inc. $ 539,438
9,000 Cordis Corp./(b)/ 994,500
19,000 Idexx Laboratories, Inc./(b)/ 774,250
33,000 Invacare Corp. 833,250
8,000 MediSense, Inc./(b)/ 173,000
15,600 Nellcor Puritan Bennett, Inc./(b)/ 897,000
12,500 Rotech Medical Corp./(b)/ 284,375
16,800 Stryker Corp. 758,100
------------
$ 5,253,913
------------
HOUSEHOLD DURABLES--1.7%
30,000 Leggett & Platt, Inc. $ 720,000
------------
INDUSTRIAL MACHINERY--3.2%
24,000 Duriron Co., Inc. $ 642,000
18,500 Idex Corp. 698,375
------------
$ 1,340,375
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
AGGRESSIVE GROWTH FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
Common Stocks--Continued
INSURANCE SERVICES--3.4%
16,875 Orion Capital Corp./(a)/ $ 691,875
25,000 Protective Life Corp./(a)/ 712,500
------------
$ 1,404,375
------------
MANUFACTURING--4.6%
20,200 Danaher Corp. $ 626,200
26,000 Lydall, Inc./(b)/ 591,500
20,000 Millipore Corp. 707,500
------------
$ 1,925,200
------------
PRINTING & PUBLISHING--2.0%
19,000 Banta Corp. $ 821,750
------------
RETAIL TRADE--2.7%
18,656 Dollar General Corp. $ 457,078
25,000 Global Directmail Corp./(b)/ 681,250
------------
$ 1,138,328
------------
TEXTILES--1.8%
33,000 G & K Services, Inc. $ 734,250
------------
TRANSPORTATION/STORAGE--1.1%
21,500 Air Express International Corp. $ 446,125
------------
Total Common Stocks
(cost $32,970,816)........ $ 38,962,441
============
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- ---------- ---------- ----------
<S> <C> <C> <C>
Repurchase Agreements--6.9%
State Street Bank & Trust Company,
dated 10/31/95, repurchase price
$2,886,441 (U.S. Treasury Note:
$2,944,281, 7.13%, 02/29/00)
$2,886,000 5.50% 11/01/95 $ 2,886,000
-----------
Total Repurchase
Agreements
(cost $2,886,000)........ $ 2,886,000
-----------
Total Investments (cost
$35,856,816/(c)/)........ $41,848,441
===========
- -------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for
investments in which value
exceeds cost..................... $ 6,337,890
Gross unrealized loss for
investments in which cost
exceeds value.................... (346,265)
-----------
Net unrealized gain................ $ 5,991,625
===========
- --------------------------------------------------------------------------------
</TABLE>
/(a)/There are common stock rights attached to these securities.
/(b)/Non-income producing security.
/(c)/The cost stated also represents aggregate cost for income tax purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND
October 31, 1995
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
Common Stocks--89.9%
ARGENTINE PESO--0.1%
1,750 Comercial de Plata (Oil & Gas) $ 3,535
4,060 Naviera Perez Compano (Oil & Gas) 17,903
820 Telecom Argentina (Utilities) 3,157
------------
$ 24,595
------------
AUSTRALIAN DOLLAR--1.8%
3,000 Amcor Limited (Paper & Forest Products) $ 22,486
13,150 Australian Gas Light Co. (Utilities) 45,576
4,233 Broken Hill Proprietary Co. (Mining -
Metals/Minerals) 57,330
9,000 Burns Philp & Co., Ltd. (Wholesale Trade) 20,155
3,500 Coca-Cola Amatil (Beverages/Tobacco) 27,087
2,006 Lend Lease Corp. (Building Materials & Construction) 27,902
4,000 Mayne Nickless, Ltd. (Transportation/Storage) 18,099
7,011 News Corp. (Broadcast Media) 35,354
4,000 Publishing & Broadcasting, Ltd. (Broadcast Media) 12,736
9,000 Tab Corp Holdings, Ltd. (Mining -
Metals/Minerals) 25,023
3,500 Western Mining Corp. Holdings, Ltd.
(Mining - Metals/Minerals) 22,448
8,000 Westpac Banking Corp. (Financial Services) 32,846
7,000 Woodside Petroleum, Ltd. (Oil & Gas) 33,539
------------
$ 380,581
------------
AUSTRIAN SCHILLING--0.1%
170 Flughafen Wien AG (Transportation/Storage) $ 10,920
170 Oesterreichische Elektrizitats (Utilities) 10,387
------------
$ 21,307
------------
BELGIAN FRANC--1.1%
120 Fortis AG (Insurance Services) $ 12,870
145 Generale Banque (Financial Services) 46,878
380 Kredietbank (Financial Services) 95,291
64 UCB (Chemical Products) 73,005
------------
$ 228,044
------------
BRITISH POUND STERLING--15.3%
16,000 Abbey National (Financial Services) $ 135,441
10,000 Argos (Retail Trade) 80,778
15,000 Argyll Group (Retail Trade) 76,233
44,000 Asda Group (Retail Trade) 71,293
3,000 BAA (Transportation/Storage) 23,332
10,000 British Gas (Oil & Gas) 38,097
7,000 British Petroleum (Oil & Gas) 51,454
16,000 Cable & Wireless (Utilities) 104,458
13,744 Cadbury Schweppes (Food/Grocery Products) 113,520
21,000 Caradon (Building Materials & Construction) 65,729
10,000 Clyde Petroleum (Oil & Gas) 8,141
8,000 Coats Viyella (Textiles) 23,649
7,000 Compass Group (Recreational Services) 47,582
6,600 East Midlands Electricity (Utilities) 90,612
2,000 GKN (Automobiles & Automobile Parts) 25,514
10,000 Glaxo Wellcome (Health/Personal Care) 134,840
18,000 Grand Metropolitan (Beverages/Tobacco) 124,628
15,000 Guinness (Beverages/Tobacco) 120,218
2,000 Heath & Co. (Insurance Services) 5,122
</TABLE>
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
Common Stocks--Continued
BRITISH POUND STERLING--CONTINUED
4,000 Heywood Williams Group (Building
Materials & Construction) $ 13,184
8,000 Hillsdown Holdings (Food/Grocery Products) 21,182
15,000 Kingfisher (Retail Trade) 112,749
11,000 Ladbroke Group (Recreational Services) 28,865
11,000 Laing (John) (Building Materials & Construction) 39,298
9,000 London Electricity (Utilities) 128,327
26,400 National Westminster Bank (Financial Services) 263,541
13,500 Rank Organisation (Recreational Services) 89,843
16,000 Reed International (Broadcast Media) 243,313
8,000 Rolls-Royce (Aerospace/Defense) 19,475
7,000 RTZ Corp. (Mining - Metals/Minerals) 96,933
6,000 Sears Holdings (Retail Trade) 9,627
13,500 Shell Transport & Trading Co. (Oil & Gas) 157,920
6,000 Smith (David S.) Holdings (Textiles) 54,632
26,000 SmithKline Beecham/S'Kline Beckman
(Health/Personal Care) 266,330
15,000 T & N (Automobiles & Automobile Parts) 34,026
12,000 Tesco (Retail Trade) 56,908
32,500 Tomkins (Diversified Industrial Manufacturing) 128,181
13,000 United News & Media (Broadcast Media) 106,655
------------
$ 3,211,630
------------
CANADIAN DOLLAR--0.4%
1,630 Alcan Aluminum, Ltd. (Mining - Metals/Minerals) 51,858
740 Macmillan Bloedel, Ltd. (Paper & Forest Products) 9,735
490 Royal Bank of Canada (Financial Services) 11,018
------------
$ 72,611
------------
DANISH KRONE--0.3%
375 Den Danske Bank AB (Financial Services) $ 24,845
170 Teledanmark (Utilities) 8,867
410 Unidanmark (Financial Services) 18,834
------------
$ 52,546
------------
DEUTSCHEMARK--4.3%
60 Allianz AG Holdings (Insurance Services) $ 111,040
10 Allianz AG Holdings - Warrants/(a)/ (Insurance Services) 9,697
40 Altana (Health/Personal Care) 23,260
20 AVA Allgemeine Handels-Der Vebr AG (Retail Trade) 7,587
330 Bayer AG (Chemical Products) 87,775
70 Bilfinger & Berger Bauag (Building
Materials & Construction) 25,760
52 Buderus AG (Industrial Machinery) 22,313
1,210 Deutsche Bank AG (Financial Services) 54,732
154 Fielmann AG (Health/Personal Care) 8,479
250 Gehe AG (Health/Personal Care) 122,727
37 Gehe AG - Rights (Health/Personal Care) 17,585
84 Hoechst AG (Chemical Products) 22,062
</TABLE>
The accompanying notes are an integral part of these financial statements.
20
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
Common Stocks--Continued
DEUTSCHEMARK--CONTINUED
200 Hornback Baumarkt (Retail Trade) $ 10,088
282 Mannesmann AG (Industrial Machinery) 92,818
263 Praktiker Bau Und Heimwerker Markte/(a)/
(Retail Trade) 8,315
610 Rhoen-Klinikum AG (Health/Personal Care) 57,204
610 Rhoen-Klinikum AG - Stock Rights
(Health/Personal Care) 10,834
1,060 Schering AG (Chemical Products) 73,950
2,000 Veba AG(a) (Financial Services) 82,111
130 Veba International Finance (Financial Services) 18,517
120 Volkswagen AG (Automobiles & Automobile Parts) 37,809
------------
$ 904,663
------------
FINNISH MARKKA--0.2%
800 Nokia (AB) Oy (Electronics & Other Electrical Equipment) $ 45,772
------------
FRENCH FRANC--7.3%
655 Accor (Recreational Services) $ 77,822
670 Assurances Generales de France (Insurance Services) 19,319
270 Carrefour (Retail Trade) 158,574
118 Castorama Dubois Investissment (Retail Trade) 19,135
275 Chargeurs (Diversified Industrial Manufacturing) 56,574
208 Credit Local de France (Financial Services) 16,465
2,070 Eaux (Cie Generale Des) (Utilities) 192,392
450 Ecco Ste (Business Services) 69,753
920 Elf Aquitaine (Energy) 62,649
300 GTM Entrepose (Building Materials & Construction) 19,448
70 Guilbert SA (Business Services) 8,403
90 L'Oreal (Health/Personal Care) 21,993
715 Lafarge SA (Building Materials & Construction) 47,388
600 Lapeyre (Building Materials & Construction) 30,134
280 Legrand (Electronics & Other Electrical Equipment) 46,837
510 LVMH Moet-Hennessy Louis Vuitton
(Beverages/Tobacco) 101,476
125 Peugeot (Automobiles & Automobile Parts) 16,283
360 Pinault Printemps Redoute (Retail Trade) 78,035
500 Poliet (Building Materials & Construction) 39,263
275 Primagaz (Cie Des Gaz Petrole) (Oil & Gas) 21,358
25 Primagaz - Warrants (Cie Des Gaz Petrole) /(a)/ (Oil & Gas) 199
150 Rexel (Retail Trade) 24,233
960 Saint Gobain (Chemical Products) 114,452
362 Sanofi (Health/Personal Care) 23,089
130 Societe Generale (Financial Services) 14,887
110 Sodexho (Food/Grocery Products) 28,500
1,140 Television Francaise (Broadcast Media) 117,728
1,090 Total (Oil & Gas) 67,360
890 Valeo (Automobiles & Automobile Parts) 40,204
------------
$ 1,533,953
------------
HONG KONG DOLLAR--3.4%
78,295 First Pacific Co. (Financial Services) $ 90,126
68,000 Guangdong Investments, Ltd. (Real Estate) 40,017
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
Common Stocks--Continued
HONG KONG DOLLAR--CONTINUED
224,000 Guangzhou Investments (Real Estate) $ 46,065
16,000 Guoco Group (Financial Services) 74,085
30,000 Hutchison Whampoa (Diversified Holding Companies) 165,294
80,000 Maanshan Iron & Steel (Mining - Metals/Minerals) 14,589
103,000 Shanghai Petrochemical (Chemical Products) 29,641
11,000 Swire Pacific Co. (Diversified Holding Companies) 82,517
42,000 Wharf Holdings (Diversified Holding Companies) 141,780
88,000 Yizheng Chemical Fibre (Chemical Products) 25,609
------------
$ 709,723
------------
ITALIAN LIRA--1.8%
1,466 Arnoldo Mondadori Editore Spa (Broadcast Media) $ 10,853
3,100 Assicurazioni Generali Spa (Insurance Services) 72,256
12,000 Banca Fideuram (Financial Services) 12,799
2,000 Danieli & Co. (Building Materials & Construction) 5,521
2,000 IMI Spa (Financial Services) 10,930
7,000 Instituto National Assicurazioni (Insurance Services) 9,201
7,000 Italgas (Societa Italiana Il Gas) Spa (Utilities) 18,622
1,000 RAS (Insurance Services) 10,039
3,000 Rinascente (Retail Trade) 17,787
2,447 Sasib (Building Materials & Construction) 10,839
6,000 Sasib (Di Risp Shares) (Building Materials & Construction) 14,870
2,526 SME (Meridonale di Finanziaria) (Food/Grocery Products) 5,555
17,000 STET (Utilities) 48,157
9,000 STET (Di Risp Shares) (Utilities) 19,622
31,613 Telecom Italia (Utilities) 47,999
10,000 Telecom Italia (Di Risp Shares) (Utilities) 11,795
24,000 Telecom Italia Mobile/(a)/ (Utilities) 40,280
1,000 Unicem (Union-CEM-March Emil) Spa (Chemical Products) 6,274
------------
$ 373,399
------------
JAPANESE YEN--21.8%
1,000 Advantest (Electronics & Other Electrical Equipment) $ 56,726
4,000 Alps Electric Co. (Electronics & Other
Electrical Equipment) 41,078
8,000 Amada Co, Ltd. (Industrial Machinery) 79,808
8,000 Canon, Inc. (Electronics & Other Electrical Equipment) 136,926
4,000 Citizen Watch Co. (Electronics & Other
Electrical Equipment) 27,424
6,000 Dai Nippon Screen Manufacturing (Electronics & Other
Electrical Equipment) 53,636
2,000 Daifuku Co., Ltd. (Industrial Machinery) 23,864
7,000 Daiichi Pharmaceutical Co. (Health/Personal Care) 97,902
8,000 Daiwa House Industry Co. (Building
Materials & Construction) 119,712
5 DDI Corp (Computers/Communication) 40,540
18 East Japan Railway (Transportation/Storage) 85,031
2,000 Fanuc Co., Ltd. (Electronics & Other
Electrical Equipment) 86,655
</TABLE>
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
Common Stocks--Continued
JAPANESE YEN--CONTINUED
11,000 Hitachi (Electronics & Other Electrical Equipment) $ 112,964
12,000 Hitachi Zosen Corp. (Heavy Engineering) 59,035
2,000 Honda Motor Co., Ltd. (Automobiles & Automobile Parts) 34,818
4,000 Inax Corp. (Building Materials & Construction) 36,070
4,000 Ishihara Sangyo Kaisha (Chemical Products) 11,893
2,000 Ito-Yokado Co. (Retail Trade) 109,345
1,000 Kawada Kogyo (Mining - Metals/Minerals) 8,313
3,000 Kokuyo Co., Ltd. (Computers/Communication) 64,551
9,000 Komatsu, Ltd. (Industrial Machinery) 70,419
3,000 Komori Corp. (Industrial Machinery) 71,006
7,000 Kumagai Gumi Co. (Building Materials & Construction) 26,838
6,000 Kuraray Co. (Chemical Products) 59,269
2,000 Kyocera Corp. (Electronics & Other Electrical Equipment) 163,920
5,000 Makita Corp. (Industrial Machinery) 77,754
6,000 Marui Co., Ltd. (Retail Trade) 103,868
8,000 Matsushita Electric Industrial Co. (Household Durables) 113,453
5,000 Mitsubishi Corp. (Wholesale Trade) 55,259
20,000 Mitsubishi Heavy Industries, Ltd. (Heavy Engineering) 154,335
6,000 Mitsubishi Paper Mills, Ltd. (Paper & Forest Products) 36,501
12,000 Mitsui Fudosan Co. (Real Estate) 137,317
3,000 Mitsui Petrochemical Industries (Oil & Gas) 23,796
2,000 Murata Manufacturing Co. (Electronics & Other
Electrical Equipment) 70,223
2,000 National House Industrial (Building Materials
& Construction) 34,036
10,000 NEC Corp. (Electronics & Other Electrical Equipment) 132,036
2,000 Nippon Hodo (Building Materials & Construction) 31,102
41,000 Nippon Steel Corp. (Mining - Metals/Minerals) 135,938
6 Nippon Telephone & Telegraph Corp. (Computers/Communication) 49,235
8,000 Nippondenso Co. (Transportation/Storage) 146,315
7,000 Nomura Securities Co., Ltd. (Financial Services) 128,026
4,000 Pioneer Electronic Corp. (Household Durables) 61,421
2,000 Sangetsu Co., Ltd. (Building Materials & Construction) 45,381
4,000 Sankyo Co. (Health/Personal Care) 88,024
1,000 Sega Enterprises (Diversified Industrial Manufacturing) 53,010
9,000 Sekisui Chemical Co., Ltd. (Building Materials
& Construction) 117,072
6,000 Sekisui House (Building Materials & Construction) 69,245
1,000 Seven Eleven Japan Co., Ltd. (Retail Trade) 66,703
8,000 Sharp Corp. (Household Durables) 111,106
3,000 Shinetsu Chemical Co., Ltd. (Chemical Products) 61,323
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
Common Stocks--Continued
JAPANESE YEN--CONTINUED
2,000 Sony Corp. (Household Durables) $ 89,980
12,000 Sumitomo Corp. (Wholesale Trade) 109,150
12,000 Sumitomo Electric Industries, Ltd. (Mining -
Metals/Minerals) 138,491
4,000 Sumitomo Forestry Co., Ltd. (Paper & Forest Products) 56,335
2,000 TDK Corp. (Household Durables) 103,086
13,000 Teijin (Chemical Products) 59,631
4,000 Tokio Marine & Fire Insurance Co. (Insurance Services) 41,078
1,000 Tokyo Electron (Electronics & Other Electrical Equipment) 43,425
3,000 Tokyo Steel Manufacturing (Mining - Metals/Minerals) 55,748
3,000 Toppan Printing Co. (Broadcast Media) 39,611
3,100 Yurtec Corp. (Building Materials & Construction) 56,394
------------
$ 4,573,151
------------
MALAYSIAN RINGGIT--2.9%
54,000 Affin Holdings Berhad (Financial Services) $ 102,007
10,000 Affin Holdings Berhad - Warrants/(a)/
(Financial Services) 6,336
12,000 Aokam Perdana Berhad (Paper & Forest Products) 20,118
19,000 Berjaya Sports Toto Berhad (Business Services) 39,630
8,000 Commerce Asset-Holdings Berhad/(a)/ (Financial Services) 21,724
27,000 MBF Capital Berhad (Financial Services) 25,502
43,000 Multi-Purpose Holding (Financial Services) 57,536
38,000 Renong Berhad (Diversified Industrial Manufacturing) 58,024
45,000 Technology Resources Industries (Business Services) 114,227
26,000 United Engineers Berhad (Industrial Machinery) 161,669
------------
$ 606,773
------------
MEXICAN PESO--0.7%
4,820 Cemex SA (Building Materials & Construction) $ 14,910
8,232 Fomento Economico Mexicano SA (Food/Grocery Products) 17,084
9,878 Groupo Financiero Banamex-Accivl ("B" Shares)
(Financial Services) 16,945
81 Groupo Financiero Banamex-Accivl ("L" Shares)
(Financial Services) 133
3,610 Gruma SA (Diversified Holding Companies) 10,659
16,687 Grupo Embotellador de Mexico (Paper & Forest Products) 30,267
17,860 Grupo Industrial Maseca SA (Household Durables) 11,150
1,288 Grupo Modelo SA (Beverages/Tobacco) 4,908
4,200 Grupo Sidek SA (Diversified Industrial Manufacturing) 1,996
1,341 Kimberly Clark de Mexico (Household Durables) 17,536
8,160 Tolmex SA (Building Materials & Construction) 30,692
------------
$ 156,280
------------
NETHERLANDS GUILDER--9.0%
1,410 ABN AMRO Holdings NV (Financial Services) $ 59,223
1,150 Ahold NV (Retail Trade) 43,567
208 Akzo Nobel NV (Chemical Products) 23,679
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
Common Stocks--Continued
NETHERLANDS GUILDER--CONTINUED
2,240 CSM CVA (Food/Grocery Products) $ 93,375
29,050 Elsevier NV (Broadcast Media) 375,432
850 Fortis AMEV NV (Insurance Services) 53,364
430 Hagemeyer (Wholesale Trade) 21,411
2,020 Internationale Nederlanden Groep (Financial Services) 120,419
1,456 Koninklijke Ptt Nederland (Utilities) 51,193
360 Nutricia Verenigde Bedrijven (Food/Grocery Products) 27,938
2,557 Polygram (Recreational Services) 159,559
2,280 Royal Dutch Petroleum Co. (Oil & Gas) 282,960
780 Unilever NV (Food/Grocery Products) 102,139
5,316 Wolters Kluwer (Broadcast Media) 483,610
------------
$ 1,897,869
------------
NEW ZEALAND DOLLAR--0.8%
9,000 Air New Zealand, Ltd. (Transportation/Storage) $ 31,012
10,000 Carter Holt Harvey (Paper & Forest Products) 23,896
5,000 Fernz Corp. (Chemical Products) 14,786
7,000 Fletcher Challenge (Paper & Forest Products) 18,529
13,709 Fletcher Challenge Forest Division (Paper &
Forest Products) 18,913
14,000 New Zealand Telecom (Utilities) 58,129
------------
$ 165,265
------------
NORWEGIAN KRONE--1.4%
660 Bergesen D-Y AS (Transportation/Storage) $ 13,672
670 Kvaerner Industrier (Industrial Machinery) 28,188
3,500 Norsk Hydro (Energy) 139,382
2,140 Orkla AS (Diversified Industrial Manufacturing) 110,651
880 Saga Petroleum (Oil & Gas) 10,598
------------
$ 302,491
------------
PORTUGUESE ESCUDO--0.3%
1,190 Jeronimo Martins SGPS (Food/Grocery Products) $ 63,328
------------
Singapore Dollar--2.4%
13,000 DBS Land (Real Estate) $ 38,457
3,000 Development Bank of Singapore (Financial Services) 34,395
5,000 Far East-Levingston Shipbuliding (Heavy Engineering) 21,585
4,000 Jurong Shipyard (Industrial Machinery) 26,610
3,000 Keppel Corp. (Transportation/Storage) 24,628
13,000 Neptune Orient Lines (Transportation/Storage) 14,260
7,000 Overseas Union Bank (Financial Services) 43,595
4,000 Overseas Union Enterprises (Real Estate) 21,231
6,000 Sembawang Corp. (Industrial Machinery) 29,087
4,000 Singapore Airlines (Transportation/Storage) 37,084
12,000 Singapore Land (Real Estate) 67,091
2,200 Singapore Press Holdings (Broadcast Media) 34,409
19,000 United Industrial Corp. (Real Estate) 16,943
8,800 United Overseas Bank (Financial Services) 77,226
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
Common Stocks--Continued
SINGAPORE DOLLAR--CONTINUED
3,200 United Overseas Bank - Warrants/(a)/
(Financial Services) $ 12,003
------------
$ 498,604
------------
SPANISH PESETA--2.2%
1,080 Banco de Santander SA (Financial Services) $ 47,074
210 Banco Popular Espanol (Financial Services) 33,361
3,190 Centros Comerciales Pryca (Retail Trade) 67,953
2,150 Empresa Nacional de Endesa (Utilities) 106,923
340 Fomento de Construcciones Y Constra (Utilities) 24,012
500 Gas Natural Sdg SA (Utilities) 68,576
5,320 Iberdrola SA (Utilities) 40,100
2,081 Repsol SA (Oil & Gas) 62,146
3,056 Sevillana de Electricidad (Utilities) 20,181
------------
$ 470,326
------------
SWEDISH KRONA--2.2%
470 Asea AB (Electronics & Other Electrical Equipment) $ 47,059
4,640 Astra AB (Health/Personal Care) 167,670
2,620 Atlas Copco AB (Industrial Machinery) 39,646
1,590 Electrolux Co. (Household Durables) 67,990
670 Esselte (Broadcast Media) 9,836
580 Hennes & Mauritz AB (Retail Trade) 37,901
490 Sandvik AB ("A" Shares) (Industrial Machinery) 9,185
2,660 Sandvik AB ("B" Shares) (Industrial Machinery) 50,063
660 Scribona AB (Broadcast Media) 6,509
2,000 Stora Kopparbergs Bergsl AB (Paper & Forest Products) 24,241
------------
$ 460,100
------------
SWISS FRANC--4.1%
181 BBC AG Brown, Boveri & Cie (Electronics & Other
Electrical Equipment) $ 209,968
60 Ciba Geigy AG (Chemical Products) 51,951
410 CS Holdings (Financial Services) 41,892
155 Nestle SA (Food/Grocery Products) 162,468
23 Roche Holdings AG (Health/Personal Care) 167,136
120 Sandoz AG (Health/Personal Care) 99,040
58 Schweizerischer Bankgesellsch (Financial Services) 62,838
170 Schweizerischer Bankverein (Financial Services) 69,779
------------
$ 865,072
------------
THAI BAHT--1.0%
2,400 Advanced Information Services (Computers/Communication) $ 38,148
3,800 Bangkok Bank (Financial Services) 39,261
4,400 Bank of Ayudhya (Financial Services) 25,353
600 Land & House Public Co. (Real Estate) 9,680
400 Siam Cement Public Co. (Building Materials & Construction) 21,808
3,200 Siam Commercial Bank Public Co. (Financial Services) 37,385
3,200 Thai Farmers Bank Public (Financial Services) 26,449
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
Common Stocks--Continued
THAI BAHT--CONTINUED
1,100 United Communication Industries (Computers/
Communication) $ 13,900
------------
$ 211,984
------------
UNITED STATES DOLLAR--5.0%
123 AFP Providia ADR (Financial Services) $ 3,014
163 Baesa (Buenos Aires Embotelladora) ADR
(Beverages/Tobacco) 3,729
710 Banco de Galicia Buenos Aires SA ADR (Financial Services) 13,579
430 Banco Frances del Rio de La Plata ADR
(Financial Services) 9,406
3,200 Brazil Fund, Inc. (Financial Services) 74,800
340 Cervecerias Unidas (CCU) ADR (Beverages/Tobacco) 7,863
330 Cesp-Cia Energetica de Sao Paolo ADR/(a)/ (Utilities) 3,462
1,580 Chile Fund, Inc. (Financial Services) 35,945
390 Chilectra SA ADR (Utilities) 16,272
499 Chilgener SA ADR (Utilities) 11,976
50,080 Cifra SA de Cv (Retail) 53,836
221 Companhia de Telecomunicaciones Chile ADR (Utilities) 15,912
770 Companhia Energetica de Minas/(a)/ (Energy) 16,940
370 Companhia Energetica de Sao Paolo/(a)/ (Energy) 3,785
1,780 Electrobas-Centrais Eletricas Brasileiras (Utilities) 25,262
1,680 Electrobas-Centrais Eletricas Brasileiras ADR
("B" Shares) (Utilities) 23,930
970 Empresa Nacional de Electricidad SA ADR (Utilities) 20,855
480 Enersis SA ADR (Utilities) 12,060
190 Enron Global Power & Pipelines, LLC. (Energy) 4,584
11,110 Five Arrows Chile Investment Trust (Financial Services) 32,219
1,160 Genesis Chile Fund (Financial Services) 44,950
1,360 Grupo Televisa (Broadcast Media) 23,290
69,687 Hong Kong Land Holdings (Real Estate) 125,437
3,900 Huaneng Power International, Inc. ADR (Energy) 64,838
950 Panamerica Beverages ADR (Beverages/Tobacco) 26,006
70 Repsol SA ADR (Oil & Gas) 2,074
12 Samsung Electronics Co. (Voting Shares)
(Electronics & Other Electrical Equipment) 1,421
600 Samsung Electronics Co. (Non-Voting Shares)
(Electronics & Other Electrical Equipment) 39,150
130 Sociedad Comercial del Plata ADR (Oil & Gas) 2,600
170 Telecom Argentina ADR (Utilities) 6,524
3,300 Telecomunicacoes Brasileiras (Utilities) 132,413
1,700 Telefonica de Argentina ADR (Utilities) 35,275
3,081 Telefonos de Mexico SA ADR (Utilities) 84,728
1,000 Total Access Communication (Computers/Communication) 6,050
400 Transportadora de Gas del Sur ADR (Utilities) 4,100
</TABLE>
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Shares Description Value
------ ----------- -----
<S> <C> <C>
Common Stocks--Continued
UNITED STATES DOLLAR--CONTINUED
4,470 Uniao Sid Minas Gerais-Usiminas
(Mining - Metals/Minerals) $ 42,733
1,460 YPF Sociedad Anonima ADR (Oil & Gas) 25,003
------------
$ 1,056,021
------------
Total Common Stocks
(cost $18,486,249)..................... $ 18,886,088
------------
Preferred Stocks--0.5%
AUSTRALIAN DOLLAR--0.1%
10,000 Sydney Harbour Casino/(a)/ (Recreational Services) $ 12,340
11,000 TNT, Ltd. (Transportation/Storage) 16,591
------------
$ 28,931
------------
AUSTRIAN SCHILLING--0.1%
200 Creditanstalt Bankverein (Financial Services) $ 9,978
------------
DEUTSCHEMARK--0.3%
40 Hornbach (Retail Trade) $ 40,210
60 Krones AG (Industrial Machinery) 21,483
------------
$ 61,693
------------
Total Preferred Stocks
(cost $111,734)........................ $ 100,602
------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- ---------- ---------- -----------
<S> <C> <C> <C>
Corporate Obligations--0.0%
BELGIAN FRANC--0.0%
Kredietbank
$ 2,694 5.75% 11/30/03 $ 2,694
-----------
Total Corporate
Obligations
(cost $2,557)............ $ 2,694
-----------
Repurchase Agreements--8.6%
State Street Bank & Trust Company,
dated 10/31/95, repurchase price
$1,814,277 (U.S. Treasury Note:
$1,851,449, 7.13%, 02/29/00)
$1,814,000 5.50% 11/01/95 $ 1,814,000
-----------
Total Repurchase
Agreements
(cost $1,814,000)......... $ 1,814,000
-----------
Total Investments
(cost $20,414,540/(b)/)... $20,803,384
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
- --------------------------------------------------------------------------------
Common and Preferred Stock Industry Concentrations
- --------------------------------------------------------------------------------
<S> <C>
Financial Services 11.1%
Utilities 7.4%
Broadcast Media 7.1%
Electronics & Other Electrical Equipment 6.3%
Health/Personal Care 6.2%
Retail Trade 6.0%
Building Materials & Construction 4.5%
Oil & Gas 3.8%
Industrial Machinery 3.8%
Chemical Products 3.4%
Mining - Metals/Minerals 3.1%
Food/Grocery Products 3.0%
Household Durables 2.7%
Real Estate 2.4%
Transportation/Storage 2.0%
Recreational Services 2.0%
Beverages/Tobacco 2.0%
Diversified Industrial Manufacturing 1.9%
Diversified Holding Companies 1.9%
Insurance Services 1.6%
Energy 1.4%
Paper & Forest Products 1.2%
Heavy Engineering 1.1%
Business Services 1.1%
Computers/Communication 1.0%
Wholesale Trade 1.0%
Automobiles & Automobile Parts 0.9%
Textiles 0.4%
Aerospace/Defense 0.1%
- --------------------------------------------------------------------------------
Total Common and Preferred Stocks 90.4%
- --------------------------------------------------------------------------------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for
investments in which value
exceeds cost.................................. $ 1,187,287
Gross unrealized loss for investments
in which cost exceeds value................... (818,213)
------------
Net unrealized gain............................ $ 369,074
============
- --------------------------------------------------------------------------------
</TABLE>
/(a)/Non-income producing security.
/(b)/The aggregate cost for federal income tax purposes is $20,434,310.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
NATIONAL TAX-FREE BOND FUND
October 31, 1995
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- ---------- ---------- ----------
<S> <C> <C> <C>
Municipal Bond Obligations--90.9%
COLORADO--1.9%
Regional Transportation Special
Passenger Fare Revenue Bonds
Series A (Banque Nationale de
Paris LOC, Mitsui Trust & Banking
LOC) (A+/A-1/NR)
$200,000 4.05%/(a)/ 06/01/99 $ 200,000
----------
FLORIDA--3.8%
Broward County Multifamily
Housing Revenue Bonds (Society
National LOC) (A/A-1/NR)
$200,000 4.00%/(a)/ 12/01/10 $ 200,000
Florida State Board of Education
Capital Outlay GO Bonds
Series A (AA/Aa)
200,000 5.25 01/01/04 207,370
----------
$ 407,370
----------
GEORGIA--1.9%
Georgia State GO Bonds Series D
(AA+/Aaa)
$200,000 5.40% 11/01/10 $ 203,918
----------
ILLINOIS--4.3%
Evanston GO Bonds (NR/Aaa)
$250,000 5.30% 12/01/99 $ 260,198
Illinois Health Facilities Authority
Revenue Bonds (American
National Bank & Trust LOC)
(A+/A-1/NR)
200,000 4.00/(a)/ 02/15/19 200,000
----------
$ 460,198
----------
IOWA--7.1%
Bettendorf GO Bonds Series A
(AMBAC) (NR/Aaa)
$250,000 4.70% 06/01/03 $ 252,690
Iowa City Sewer Revenue Bonds
(AMBAC) (AAA/Aaa)
250,000 6.00 07/01/08 258,418
Polk County GO Bonds (FGIC) (AAA/Aaa)
$250,000 5.50% 12/01/10 $ 250,642
----------
$ 761,750
----------
KENTUCKY--1.9%
Louisville Water Works Board Water
System Revenue Bonds (Aa/Aa)
$200,000 5.63% 11/15/06 $ 207,810
----------
MARYLAND--2.4%
Maryland State GO Bonds (AAA/Aaa)
$250,000 4.80% 04/15/01 $ 255,277
----------
MICHIGAN--1.9%
Greenville Public Schools GO
Bonds (MBIA) (AAA/Aaa)
$200,000 5.75% 05/01/07 $ 209,750
----------
MINNESOTA--3.8%
St. Paul Independent School District
#625 GO Bonds Series C (AA/Aa)
$400,000 5.20% 02/01/07 $ 404,356
----------
NEBRASKA--6.7%
Douglas County Juvenile Detention
Facility GO Bonds (AA+/Aa)
$250,000 4.80% 07/01/02 $ 253,828
Nebraska Public Power District
Revenue Bonds Series A (A+/A1)
250,000 5.10 01/01/06 251,252
200,000 6.00 01/01/06 212,562
----------
$ 717,642
----------
NEVADA--1.9%
Clark County School District GO
Bonds Series B (FGIC) (AAA/Aaa)
$200,000 5.30% 05/01/04 $ 207,330
----------
NEW MEXICO--1.9%
Albuquerque Gross Receipts
Series A Revenue Bonds
(Canadian Imperial Bank LOC)
(AA/A-1+/Aa3/VMIG 1)
$200,000 3.95%/(a)/ 07/01/22 $ 200,000
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
NATIONAL TAX-FREE BOND FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- ---------- ---------- ----------
<S> <C> <C> <C>
Municipal Bond Obligations--Continued
NORTH CAROLINA--1.9%
Winston-Salem Water & Sewer
System Revenue Bonds
(Wachovia Bank SPA)
(AA+/A-1+/Aa/VMIG1)
$200,000 3.85%/(a)/ 06/01/14 $ 200,000
----------
OHIO--3.9%
Euclid GO Bonds (NR/Aa)
$415,000 4.40% 12/01/01 $ 414,328
----------
SOUTH CAROLINA--2.4%
South Carolina State Capital
Improvement GO Bonds Series A
(AA+/Aaa)
$250,000 5.00% 03/01/05 $ 255,782
----------
TEXAS--17.8%
Channelview Independent School
District GO Bonds (PSFG) (NR/Aaa)
$250,000 4.75% 08/15/05 $ 245,950
Collin County GO Bonds (AA-/Aa)
400,000 5.40 02/15/09 400,492
Houston Independent School
District GO Bonds (AA+/Aa)
250,000 4.40 07/15/01 248,988
San Antonio GO Bonds (AA/Aa)
200,000 5.20 08/01/02 207,110
Tarrant County GO Bonds (AA+/Aa1)
400,000 4.80 07/15/06 393,404
Texas A&M University Revenue
Bonds (AA/Aa)
200,000 5.55 05/15/01 211,284
Texas State GO Bonds Series A
(AA/Aa)
200,000 5.65 10/01/08 205,272
----------
$1,912,500
----------
UTAH--4.9%
Alpine School District GO Bonds
(FGIC-TCRS) (AAA/Aaa)
$250,000 5.40% 03/15/05 $ 256,200
Salt Lake City School District
Revenue Bonds Series A (NR/Aaa)
$250,000 5.80% 03/01/07 $ 266,857
----------
$ 523,057
----------
VIRGINIA--1.9%
Virginia Beach GO Bonds (AA/Aa)
$200,000 5.20% 07/15/06 $ 203,268
----------
WASHINGTON--14.6%
King County School District #412
GO Bonds (MBIA) (AAA/Aaa)
$250,000 5.75% 06/01/08 $ 259,683
Pierce County Sewer Improvements
Revenue Bonds (A+/A1)
290,000 5.45 02/01/08 292,216
Seattle Municipal Light & Power
Revenue Bonds Series A (AA/Aa)
250,000 5.75 08/01/09 257,590
Snohomish County GO Bonds
(MBIA) (AAA/Aaa)
250,000 5.75 12/01/10 252,980
Vancouver Water & Sewer Revenue
Bonds (FGIC) (AAA/Aaa)
250,000 4.70 06/01/01 252,555
Washington State GO Bonds Series
DD-12 & CC-9 (AA/Aa)
250,000 5.38 03/01/08 253,697
----------
$1,568,721
----------
WISCONSIN--4.0%
Milwaukee GO Bonds Series C
(AA+/Aa1)
$220,000 5.60% 06/15/10 $ 223,751
Wisconsin State GO Bonds Series 3
(AA/Aa)
200,000 5.25 11/01/02 208,062
----------
$ 431,813
----------
Total Municipal Bond
Obligations
(cost $9,543,266).... $9,744,870
----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
NATIONAL TAX-FREE BOND FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- ---------- ---------- -----------
<S> <C> <C> <C>
Repurchase Agreements--3.3%
State Street Bank & Trust Company,
dated 10/31/95, repurchase price
$352,054 (U.S. Treasury Note:
$360,741, 7.13%, 02/29/00)
$352,000 5.50% 11/01/95 $ 352,000
-----------
Total Repurchase
Agreements
(cost $352,000)......... $ 352,000
-----------
Total Investments
(cost $9,895,266/(b)/).. $10,096,870
===========
- -------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for
investments in which value
exceeds cost..................... $ 203,361
Gross unrealized loss
for investments in which cost
exceeds value.................... (1,757)
-----------
Net unrealized gain................. $ 201,604
===========
- -------------------------------------------------
</TABLE>
/(a)/Variable rate security. Coupon rate disclosed is that which is in effect at
October 31, 1995.
/(b)/The cost stated also represents aggregate cost for income tax purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
- --------------------------------------------------
Investment Abbreviations:
AMBAC - Insured by American Municipal Bond
Assurance Corporation
FGIC - Insured by Financial Guaranty Insurance
Company
GO - General Obligation
LOC - Letter of Credit
MBIA - Insured by Municipal Bond Investors
Assurance Corporation
NR - Not Rated
PSFG - Permanent School Fund Guaranteed
SPA - Standby Purchase Agreement
TCRS - Transferable Custodial Receipts
- -------------------------------------------------
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
MISSOURI TAX-FREE BOND FUND
October 31, 1995
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- ---------- ---------- ----------
<S> <C> <C> <C>
Missouri Municipal Bond Obligations--96.0%
Belton School District #124 GO
Bonds (NR/A)
$300,000 5.60% 03/01/10 $ 302,034
Benton County School District GO
Bonds (AA/NR)
300,000 4.90 03/01/04 301,077
Cass County School District GO
Bonds (AA/NR)
400,000 4.75 03/01/03 398,992
Clay County School District #40 GO
Bonds (CGIC) (AAA/Aaa)
150,000 6.00 03/01/14 154,942
Columbia School District GO
Bonds (NR/Aa)
200,000 5.50 03/01/11 201,946
Columbia Water & Electricity
Revenue Bonds Series A (AA/A1)
300,000 5.40 10/01/02 316,236
Hazelwood School District GO
Bonds (NR/Aa)
150,000 5.15 03/01/04 155,014
Jackson County School District GO
Bonds (NR/A1)
250,000 5.60 03/01/08 257,850
Joplin School District GO Bonds
(FGIC) (AAA/Aaa)
150,000 5.63 03/01/13 150,976
Kansas City GO Bonds (AA/Aa)
200,000 4.50 06/01/04 196,226
150,000 5.75 10/01/09 154,204
Lafayette County School District GO
Bonds (AA/NR)
350,000 5.20 03/01/07 348,785
Missouri State Economic
Development Export &
Infrastructure Board Revenue
Bonds (A/NR)
200,000 5.38/(a)/ 05/01/03 201,544
Missouri State Environmental
Improvement & Energy
Resources Authority Water
Pollution Control Revenue Bonds
Series A (NR/Aa)
$150,000 5.25% 07/01/02 $ 156,930
Missouri State Environmental
Improvement & Energy
Resources Authority Water
Pollution Control Revenue Bonds
Series C (NR/Aa)
205,000 4.75 01/01/01 209,313
500,000 4.90 01/01/02 512,250
Missouri State GO Bonds (AAA/Aaa)
205,000 5.70 11/01/02 218,573
Missouri State GO Bonds Series A
(AAA/Aaa)
300,000 6.00 04/01/99 316,980
300,000 6.00 04/01/00 320,280
500,000 4.50 08/01/02 500,545
Missouri State Health & Educational
Facility Revenue Bonds (Barnes-
Jewish, Inc.) (AA/Aa)
150,000 6.00 05/15/11 157,761
Missouri State Health & Educational
Facility Revenue Bonds
(prerefunded to 06/01/01) (MBIA)
(AAA/Aaa)
300,000 6.63 06/01/11 336,597
Missouri State Health & Educational
Facility Revenue Bonds Series B
(Health Midwest) (MBIA)
(AAA/Aaa)
150,000 6.10 06/01/11 156,404
Missouri State Office Building
Special Obligation Revenue
Bonds (AA/Aa)
150,000 5.50 12/01/98 156,449
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
MISSOURI TAX-FREE BOND FUND--(Continued)
October 31, 1995
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
- --------- -------- -------- ----------
<S> <C> <C> <C>
Missouri Municipal Bond Obligations--Continued
Sikeston Electric Revenue Bonds
(MBIA)(AAA/Aaa)
$150,000 5.00% 06/01/96 $ 151,160
Springfield GO Bonds (NR/Aa)
220,000 4.30 03/01/00 219,815
Springfield Public Utilities COP
(AMBAC)(AAA/Aaa)
150,000 5.20 12/15/03 150,407
Springfield School District GO
Bonds Series A (MBIA) (AAA/Aaa)
150,000 5.25 03/01/11 146,289
St. Charles School District GO
Bonds Series A (AMBAC) (AAA/Aaa)
150,000 5.75 03/01/11 152,528
St. Francois County School District GO
Bonds (CGIC) (AAA/Aaa)
280,000 4.80 03/01/04 281,873
St. Louis County GO Bonds
Series B (NR/Aa1)
200,000 5.25 02/01/07 202,022
St. Louis County School District GO
Bonds Kirkwood (AA/Aa)
150,000 5.38 02/15/10 151,200
St. Louis County School District GO
Bonds Lindbergh (NR/Aa)
200,000 5.40 02/15/10 202,310
St. Louis County School District GO
Bonds Parkway (NR/Aa)
300,000 7.00 02/01/00 330,360
St. Louis School District GO
Bonds (FGIC) (AAA/Aaa)
200,000 5.40 04/01/03 209,430
St. Peters GO Bonds (NR/A1)
150,000 5.80 01/01/10 154,304
----------
Total Missouri Municipal
Bond Obligations
(cost $8,410,037).............. $8,533,606
----------
Repurchase Agreements--1.2%
State Street Bank & Trust Company,
dated 10/31/95, repurchase price
$103,016 (Treasury Note:
$106,100, 7.13%, 02/29/00)
$103,000 5.50% 11/01/95 $ 103,000
----------
Total Repurchase
Agreements
(cost $103,000)................ $ 103,000
----------
Total Investments
(cost $8,513,037(b)) $8,636,606
==========
- --------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for
investments in which value exceeds
cost............................... $ 129,502
Gross unrealized loss for
investments in which cost exceeds
value.............................. (5,933)
----------
Net unrealized gain................... $ 123,569
==========
- --------------------------------------------------
</TABLE>
/(a)/Variable rate security. Coupon rate disclosed
is that which is in effect at October 31, 1995.
/(b)/The cost stated also represents aggregate cost
for income tax purposes.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
MISSOURI TAX-FREE BOND FUND--(Continued)
October 31, 1995
=========================================================
Investment Abbreviations:
AMBAC - Insured by American Municipal Bond
Assurance Corporation
CGIC - Insured by Capital Guaranty Insurance
Corporation
COP - Certificates of Participation
FGIC - Insured by Financial Guaranty Insurance
Company
GO - General Obligation
MBIA - Insured by Municipal Bond Investors Assurance
Corporation
NR - Not Rated
=========================================================
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
THE COMMERCE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
October 31, 1995
<TABLE>
<CAPTION>
Short-Term
Government Bond
Fund Fund
------------ -----------
<S> <C> <C>
ASSETS:
Investments in securities, at value
(cost $18,904,502, $93,364,171, $41,806,837,
$112,656,883, $35,856,816, $20,414,540, $9,895,266,
and $8,513,037, respectively)............................................. $19,437,226 $ 99,292,282
Cash........................................................................ 334 857
Receivables:
Investment securities sold................................................ -- --
Interest.................................................................. 273,667 1,252,097
Dividends................................................................. -- --
Fund shares sold.......................................................... 801,129 192,962
Deferred organization expenses, net......................................... 40,962 43,466
Other....................................................................... 12,901 13,896
----------- ------------
Total assets............................................................. 20,566,219 100,795,560
----------- ------------
LIABILITIES:
Payables:
Investment securities purchased........................................... -- 1,980,525
Fund shares redeemed...................................................... 305,301 107,874
Dividends and distributions............................................... 18,804 31,493
Advisory fees............................................................. 4,806 40,763
Administration fees....................................................... 2,403 12,229
Accrued expenses and other liabilities...................................... 23,594 118,398
----------- ------------
Total liabilities........................................................ 354,908 2,291,282
----------- ------------
NET ASSETS:
Paid-in capital............................................................. 19,432,565 91,184,423
Accumulated undistributed net investment income............................. -- --
Accumulated net realized gain (loss) on investment transactions............. 246,022 1,391,744
Accumulated net realized gain on foreign currency related transactions...... -- --
Net unrealized gain on investments.......................................... 532,724 5,928,111
Net unrealized loss on translation of assets and
liabilities denominated in foreign currencies............................. -- --
----------- ------------
Net assets............................................................... $20,211,311 $ 98,504,278
=========== ============
Net asset value and redemption price per share (net assets/shares
outstanding)............................................................. $ 18.83 $ 19.61
=========== ============
Maximum public offering price per share (NAV per share X 1.0363).......... $ 19.51 $ 20.32
=========== ============
SHARES OUTSTANDING:
Total shares outstanding, no par value (unlimited number of shares
authorized)............................................................. 1,073,509 5,024,288
=========== ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
<TABLE>
<CAPTION>
Aggressive International National Missouri
Balanced Growth Growth Equity Tax-Free Tax-Free
Fund Fund Fund Fund Bond Fund Bond Fund
- ----------- ------------ ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$48,303,409 $142,756,400 $41,848,441 $20,803,384 $10,096,870 $8,636,606
261 338 64 611 676 80
-- -- 934,538 -- -- --
223,400 1,842 441 278 146,974 106,388
15,059 95,659 6,738 34,805 -- --
149,595 446,646 150,463 291,236 482,000 142,608
41,866 44,391 40,716 40,441 46,065 45,965
14,104 19,544 12,701 73,162 13,009 13,003
- ----------- ------------ ----------- ----------- ----------- ----------
48,747,694 143,364,820 42,994,102 21,243,917 10,785,594 8,944,650
- ----------- ------------ ----------- ----------- ----------- ----------
237,839 1,167,087 1,124,800 129,499 -- --
94,454 229,915 142,547 33,331 -- --
-- -- -- -- 31,544 26,512
30,280 89,297 25,814 15,502 4,219 2,168
6,056 17,859 5,163 2,584 1,266 1,083
50,373 125,526 31,092 49,229 27,246 25,749
- ----------- ------------ ----------- ----------- ----------- ----------
419,002 1,629,684 1,329,416 230,145 64,275 55,512
- ----------- ------------ ----------- ----------- ----------- ----------
40,275,787 104,984,884 34,408,088 20,493,670 10,514,161 8,770,716
94,794 23,409 -- 64,814 -- --
1,461,539 6,627,326 1,264,973 48,937 5,554 (5,147)
-- -- -- 17,130 -- --
6,496,572 30,099,517 5,991,625 735,689 201,604 123,569
-- -- -- (346,468) -- --
- ----------- ------------ ----------- ----------- ----------- ----------
48,328,692 141,735,136 41,664,686 21,013,772 10,721,319 8,889,138
=========== ============ =========== =========== =========== ==========
$ 22.10 $ 24.68 $ 25.30 $ 18.64 $ 18.54 $ 18.40
=========== ============ =========== =========== =========== ==========
$ 22.90 $ 25.58 $ 26.22 $ 19.32 $ 19.21 $ 19.07
=========== ============ =========== =========== =========== ==========
2,186,454 5,742,595 1,647,083 1,127,182 578,220 483,038
=========== ============ =========== =========== =========== ===========
</TABLE>
37
<PAGE>
THE COMMERCE FUNDS
STATEMENTS OF OPERATIONS
For the Period Ended October 31,1995/(a)/
<TABLE>
<CAPTION>
Short-Term
Government Bond
Fund Fund
------------ -----------
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................................. $1,107,676 $ 5,805,924
Dividends/(b)/....................................................... -- --
---------- -----------
Total income....................................................... 1,107,676 5,805,924
---------- -----------
EXPENSES:
Advisory fees........................................................ 78,485 386,076
Administration fees.................................................. 23,546 115,823
Transfer agent fees.................................................. 16,900 20,900
Custodian fees....................................................... 24,500 26,600
Professional fees.................................................... 9,700 45,400
Trustee fees......................................................... 1,100 5,300
Registration fees.................................................... 9,800 37,400
Amortization of deferred organization expenses....................... 8,900 9,400
Other................................................................ 5,800 32,900
---------- -----------
Total expenses..................................................... 178,731 679,799
Less -- Investment advisory fees waived and expense reimbursements... (71,991) (305)
---------- -----------
Net expenses....................................................... 106,740 679,494
---------- -----------
Net investment income (loss)....................................... 1,000,936 5,126,430
---------- -----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENT AND FOREIGN
CURRENCY TRANSACTIONS:
Net realized gain (loss) on investment transactions................. 246,022 1,391,744
Net realized loss on foreign currency related transactions.......... -- --
Net change in unrealized gain on investments........................ 532,724 5,928,111
Net change in unrealized loss on translation of
assets and liabilities denominated in foreign currencies.......... -- --
---------- -----------
Net realized and unrealized gain on investments and foreign
currency transactions......................................... 778,746 7,319,855
---------- -----------
Net increase in net assets resulting from operations............ $1,779,682 $12,446,285
---------- -----------
</TABLE>
/(a)/ The Short-Term Government, Bond, Balanced, Growth, Aggressive Growth and
International Equity Funds commenced operations on December 12, 1994; the
National Tax-Free Bond Fund and the Missouri Tax-Free Bond Fund commenced
operations on February 21, 1995.
/(b)/ For the Aggressive Growth and International Equity Funds, amount is net
of $145 and $29,647 in foreign withholding taxes, respectively.
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
<TABLE>
<CAPTION>
Aggressive International National Missouri
Balanced Growth Growth Equity Tax-Free Tax-Free
Fund Fund Fund Fund Bond Fund Bond Fund
- ---------- ----------- ---------- ------------- --------- ---------
<S> <C> <C> <C> <C> <C>
$1,348,091 $ 437,788 $ 80,099 $ 98,700 $ 242,328 $ 196,710
247,295 1,598,013 148,009 196,344 -- --
- ---------- ----------- ---------- ------------- --------- ---------
1,595,386 2,035,801 228,108 295,044 242,328 196,710
- ---------- ----------- ---------- ------------- --------- ---------
361,935 799,203 166,159 154,287 24,040 19,423
54,291 159,840 33,231 15,429 7,212 5,826
14,500 23,300 18,200 16,400 11,400 12,200
31,900 29,400 31,500 146,000 20,600 19,900
19,500 58,400 9,700 4,900 8,100 6,500
2,300 6,800 1,100 600 900 800
19,900 54,200 17,600 10,200 7,200 6,500
9,000 9,600 8,900 8,800 7,400 7,500
10,700 36,900 6,200 3,800 4,300 3,800
- ---------- ----------- ---------- ------------- --------- ---------
524,026 1,177,643 292,590 360,416 91,152 82,449
(115,039) -- -- (174,246) (50,284) (57,200)
- ---------- ----------- ---------- ------------- --------- ---------
408,987 1,177,643 292,590 186,170 40,868 25,249
- ---------- ----------- ---------- ------------- --------- ---------
1,186,399 858,158 (64,482) 108,874 201,460 171,461
- ---------- ----------- ---------- ------------- --------- ---------
1,461,539 6,627,326 1,264,973 48,937 5,554 (5,147)
-- -- -- (19,098) -- --
6,496,572 30,099,517 5,991,625 735,689 201,604 123,569
-- -- -- (346,468) -- --
- ---------- ----------- ---------- ------------- --------- ---------
7,958,111 36,726,843 7,256,598 419,060 207,158 118,422
- ---------- ----------- ---------- ------------- --------- ---------
$9,144,510 $37,585,001 $7,192,116 $ 527,934 $ 408,618 $ 289,883
========== =========== ========== ============= ========= =========
</TABLE>
39
<PAGE>
THE COMMERCE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
For the Period Ended October 31, 1995/(a)/
<TABLE>
<CAPTION>
Short-Term
Government Bond
Fund Fund
------------ ------------
<S> <C> <C>
INCREASE IN NET ASSETS:
FROM OPERATIONS:
Net investment income (loss).............................................. $ 1,000,936 $ 5,126,430
Net realized gain (loss) on investment transactions....................... 246,022 1,391,744
Net realized loss on foreign currency related transactions................ -- --
Net change in unrealized gain on investments.............................. 532,724 5,928,111
Net change in unrealized loss on translation of assets and liabilities
denominated in foreign currencies....................................... -- --
------------ ------------
Net increase in net assets resulting from operations.................. 1,779,682 12,446,285
------------ ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income................................................ (1,000,936) (5,126,430)
------------ ------------
Total distributions to shareholders................................... (1,000,936) (5,126,430)
------------ ------------
FROM SHARE TRANSACTIONS:
Net proceeds from sale of shares.......................................... 29,493,841 109,057,120
Reinvestment of dividends and distributions............................... 916,748 4,978,504
Cost of shares redeemed................................................... (10,978,024) (22,851,201)
------------ ------------
Net increase in net assets resulting from share transactions.......... 19,432,565 91,184,423
------------ ------------
Total increase........................................................ 20,211,311 98,504,278
NET ASSETS:
Beginning of period....................................................... -- --
------------ ------------
End of period............................................................. $ 20,211,311 $ 98,504,278
============ ============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME.............................. -- --
============ ============
SUMMARY OF SHARE TRANSACTIONS:
Sold...................................................................... 1,615,040 5,978,187
Issued on reinvestment of dividends and distributions..................... 49,473 263,196
Redeemed.................................................................. (591,004) (1,217,095)
------------ ------------
Increase in shares outstanding............................................ 1,073,509 5,024,288
============ ============
</TABLE>
- -----------
/(a)/ The Short-Term Government, Bond, Balanced, Growth, Aggressive Growth, and
International Equity Funds commenced operations on December 12, 1994; the
National Tax-Free Bond and the Missouri Tax-Free Bond Funds commenced
operations on February 21, 1995.
The accompaying notes are an integral part of these financial statements.
40
<PAGE>
<TABLE>
<CAPTION>
Aggressive International National Missouri
Balanced Growth Growth Equity Tax-Free Tax-Free
Fund Fund Fund Fund Bond Fund Bond Fund
- ------------ ------------ ----------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 1,186,399 $ 858,158 $ (64,482) $ 108,874 $ 201,460 $ 171,461
1,461,539 6,627,326 1,264,973 48,937 5,554 (5,147)
-- -- -- (19,098) -- --
6,496,572 30,099,517 5,991,625 735,689 201,604 123,569
-- -- -- (346,468) -- --
- ------------ ------------ ----------- ------------- ----------- -----------
9,144,510 37,585,001 7,192,116 527,934 408,618 289,883
- ------------ ------------ ----------- ------------- ----------- -----------
(1,091,605) (834,749) -- (7,832) (201,460) (171,461)
- ------------ ------------ ----------- ------------- ----------- -----------
(1,091,605) (834,749) -- (7,832) (201,460) (171,461)
- ------------ ------------ ----------- ------------- ----------- -----------
51,759,622 134,640,655 38,077,462 23,593,942 11,045,591 9,349,674
1,089,482 821,867 -- 7,832 8,485 17,030
(12,573,317) (30,477,638) (3,604,892) (3,108,104) (539,915) (595,988)
- ------------ ------------ ----------- ------------- ----------- -----------
40,275,787 104,984,884 34,472,570 20,493,670 10,514,161 8,770,716
- ------------ ------------ ----------- ------------- ----------- -----------
48,328,692 141,735,136 41,664,686 21,013,772 10,721,319 8,889,138
-- -- -- -- -- --
- ------------ ------------ ----------- ------------- ----------- -----------
$ 48,328,692 $141,735,136 $41,664,686 $ 21,013,772 $10,721,319 $ 8,889,138
- ------------ ------------ ----------- ------------- ----------- -----------
$ 94,794 $ 23,409 -- $ 64,814 -- --
============ ============ =========== ============= =========== ===========
2,769,352 7,111,443 1,805,561 1,301,494 607,436 514,879
53,465 37,669 -- 435 463 933
(636,363) (1,406,517) (158,478) (174,747) (29,679) (32,774)
- ------------ ------------ ----------- ------------- ----------- -----------
2,186,454 5,742,595 1,647,083 1,127,182 578,220 483,038
============ ============ =========== ============= =========== ===========
</TABLE>
41
<PAGE>
THE COMMERCE FUNDS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIOD ENDED OCTOBER 31, 1995/(a)/
<TABLE>
<CAPTION>
Income from Distributions to
investment operations shareholders
--------------------------- ------------------------------
Net
realized Net
and Net asset
Net asset unrealized increase value,
value, Net gain on From net From net in net end
beginning investment invest- investment realized gain asset of Total
of period Income ments/(b)/ income on investments value period return/(c)/
------------- ------------ ------------ ----------- ---------------- -------- -------- ------------
SHORT-TERM GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period ended: 10/31/95 $18.00 $1.06 $0.83 ($1.06) -- $0.83 $18.83 10.72%
BOND FUND
- -----------------------------------------------------------------------------------------------------------------------------------
Perid ended: 10/31/95 18.00 1.12 1.61 (1.12) -- 1.61 19.61 15.59
BALANCED FUND
- -----------------------------------------------------------------------------------------------------------------------------------
Period ended: 10/31/95 18.00 0.59 4.06 (0.55) -- 4.10 22.10 26.14
</TABLE>
<TABLE>
<CAPTION>
Ratios assuming
no waiver of
fees or expense
reimbursements
------------------------------
Ratio Ratio
Ratio of net Ratio of net
of net investment Net of investment
expenses income assets at expenses income to
to average to average Portfolio end to average average
net net turnover of period net net
assets/(d)/ assets/(d)/ rate (in 000's) assets/(d)/ assets/(d)/
----------- ------------ ---------- ------------ ------------- -------------
SHORT-TERM GOVERNMENT FUND
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Period ended: 10/31/95 0.68% 6.38% 158% $20,211 1.14% 5.92%
BOND FUND
- ------------------------------------------------------------------------------------------------------------------------
Period ended: 10/31/95 0.88 6.64 58 98,504 0.88 6.64
BALANCED FUND
- ------------------------------------------------------------------------------------------------------------------------
Period ended: 10/31/95 1.13 3.28 59 48,329 1.45 2.96
</TABLE>
- ---------------
/(a)/ For the period from commencement of operations (December 12, 1994) to
October 31, 1995.
/(b)/ Includes the balancing effect of calculating per share amounts.
/(c)/ Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. Total return would be reduced if sales charges were taken
into account.
/(d)/ Annualized.
The accompanying notes are an intergral part of these financial statements.
42
<PAGE>
THE COMMERCE FUNDS
FINANCIAL HIGHLIGHTS--(Continued)
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIOD ENDED OCTOBER 31, 1995/(a)/
<TABLE>
<CAPTION>
Income from Distributions to
investment operations shareholders
-------------------------------------------- ----------------------------
Net
realized and
Net unrealized
realized loss on Net
and foreign Net asset
Net asset Net unrealized currency increase value,
value, investment gain on related From net From net in net end
beginning Income invest- trans- investment realized gain asset of
of period (loss) ments/(b)/ actions/(b)/ income on investments value period
------------- ------------ ------------ -------------- ----------- --------------- ------- --------
GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period ended: 10/31/95 $18.00 $ 0.15 $6.68 -- ($0.15) -- $6.68 $24.68
AGGRESSIVE GROWTH FUND
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 10/31/95 18.00 (0.04) 7.34 -- -- -- 7.30 25.30
INTERNATIONAL EQUITY FUND
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 10/31/95 18.00 0.12 0.95 (0.40) (0.03) -- 0.64 18.64
</TABLE>
<TABLE>
<CAPTION>
Ratios assuming
no waiver of
fees or expense
reimbursements
-------------------------------
Ratio Ratio
of net of net
Ratio investment Ratio investment
of net income Net of income
expenses (loss) assets at expenses (loss) to
to average to average Portfolio end to average average
Total net net turnover of period net net
return/(c)/ assets/(d)/ assets/(d)/ rate (in 000's) assets/(d)/ assets/(d)/
------------ ----------- ------------ ---------- ------------ ------------- -------------
GROWTH FUND
- ----------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Period ended: 10/31/95 38.06% 1.11% 0.81% 33% $141,735 1.11% 0.81%
AGGRESIVE GROWTH FUND
- ----------------------------------------------------------------------------------------------------------------------------------
Period ended: 10/31/95 40.56 1.32 (0.29) 59 41,665 1.32 (0.29)
INTERNATIONAL EQUITY FUND
- ----------------------------------------------------------------------------------------------------------------------------------
Period ended: 10/31/95 3.73 1.81 1.06 25 21,014 3.50 (0.63)
</TABLE>
- --------------
/(a)/ For the period from commencement of operations (December 12, 1995) to
October 31, 1995.
/(b)/ Includes the balancing effect of calculating per share amounts.
/(c)/ Assumes investment of the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. Total return would be reduced if a sales charge were taken
into account.
/(d)/ Annualized.
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
THE COMMERCE FUNDS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING FOR THE PERIOD ENDED OCTOBER 31, 1995/(a)/
<TABLE>
<CAPTION>
Income from Distributions to
investment operations shareholders
--------------------------- ------------------------------
Net
realized Net
and Net asset
Net asset unrealized increase value,
value, Net gain on From net From net in net end
beginning investment invest- investment realized gain asset of Total
of period Income ments/(b)/ income(e) on investments value period return/(c)/
------------- ------------ ------------ ----------- ---------------- -------- -------- ------------
NATIONAL TAX-FREE BOND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Period ended: 10/31/95 $18.00 $0.54 $0.54 ($0.54) -- $0.54 $18.54 6.06%
MISSOURI TAX-FREE BOND FUND
- ------------------------------------------------------------------------------------------------------------------------------------
Period ended: 10/31/95 18.00 0.57 0.40 (0.57) -- 0.40 18.40 5.45
</TABLE>
<TABLE>
<CAPTION>
Ratios assuming
no waiver of
fees or expense
reimbursements
----------------------------
Ratio Ratio
Ratio of net Ratio of net
of net investment Net of investment
expenses income assets at expenses income to
to average to average Portfolio end to average average
net net turnover of period net net
assets/(d)/ assets/(d)/ rate (in 000's) assets/(d)/ assets/(d)/
----------- ------------ ---------- ------------ ------------- -------------
NATIONAL TAX-FREE BOND FUND
- ------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Period ended: 10/31/95 0.85% 4.19% 19% $10,721 1.90% 3.14%
MISSOURI TAX-FREE BOND FUND
- ------------------------------------------------------------------------------------------------------------------------
Period ended: 10/31/95 0.65 4.41 52 8,889 2.12 2.94
</TABLE>
- ------------
/(a)/ For the period from commencement of operations (February 21, 1995) to
October 31, 1995.
/(b)/ Includes the balancing effect of calculating per share amounts.
/(c)/ Assumes investment at the beginning of the period, reinvestment of all
dividends and distributions, a complete redemption of the investment at
the net asset value at the end of the period and no sales charges. Total
return would be reduced if a sales charge were taken into account.
/(d)/ Annualized.
/(e)/ Includes taxable dividends of $0.05 and $0.06 for the National Tax-Free
Bond Fund and the Missouri Tax-Free Bond Fund, respectively.
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
THE COMMERCE FUNDS
NOTES TO FINANCIAL STATEMENTS--(Continued)
October 31, 1995
1. ORGANIZATION
The Commerce Funds (the "Trust") is a Delaware business trust registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end, management investment company. The Trust consists of eight portfolios
(individually, a "Fund" and collectively, the "Funds"): Short-Term Government
Fund, Bond Fund, Balanced Fund, Growth Fund, Aggressive Growth Fund,
International Equity Fund, National Tax-Free Bond Fund and Missouri Tax-Free
Bond Fund. Each Fund is classified as a diversified management investment
company under the 1940 Act, other than the Missouri Tax-Free Bond Fund, which
is classified as non-diversified under the 1940 Act. The National Tax-Free Bond
Fund and the Missouri Tax-Free Bond Fund commenced investment operations on
February 21, 1995. All other Funds commenced investment operations on December
12, 1994.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds which are in conformity with those generally accepted in
the investment company industry.
A. Investment Valuation
Investments in securities traded on a U.S. exchange or the NASDAQ system
are valued at their last sale or closing price on the principal exchange on
which they are traded or NASDAQ, on the valuation day; if no sale occurs,
securities traded on a U.S. exchange or NASDAQ are valued at the mean between
the closing bid and asked prices. The value of a Fund's portfolio securities
that are traded on stock exchanges outside the U.S. are based upon the price on
the exchange as of the close of business of the exchange immediately preceding
the time of valuation, except when an occurrence subsequent to the time a value
was so established is likely to have changed such value; then the fair value of
those securities will be determined through consideration of other factors by
or under the direction of the Board of Trustees. Unlisted equity and debt
securities for which market quotations are available are valued at the mean
between the most recent bid and asked prices. Fixed-income securities are
valued at prices supplied by an independent pricing service, which reflect
broker/dealer-supplied valuations and matrix pricing systems. Short-term debt
obligations maturing in sixty days or less are valued at amortized cost.
Restricted securities, and other securities for which quotations are not
available, are valued at fair value using methods approved by the Board of
Trustees.
B. Securities Transactions and Investment Income
Securities transactions are recorded on the trade date. Realized gains and
losses on sales of investments are calculated on the identified cost basis.
Dividend income is recorded on the ex-dividend date and interest income is
recorded on the accrual basis.
C. Premiums and Discounts on Debt Securities Owned
The National Tax-Free Bond and the Missouri Tax-Free Bond Funds amortize
premiums on debt securities on the effective yield basis, and do not accrete
market discounts on debt securities. The Growth, Aggressive Growth and
International Equity Funds accrete market discounts and amortize premiums on a
yield to maturity basis. The Short-Term Government, Bond and Balanced Funds do
not accrete market discounts or amortize premiums on long-term debt securities.
The Short-Term Government, Bond and Balanced Funds invest in mortgage-backed
securities. Certain mortgage security paydown gains and losses are taxable as
ordinary income. Such paydown gains and losses increase or decrease taxable
ordinary income available for distributions and are included in interest income
in the accompanying Statements of Operations. For all Funds, original issue
discount on debt securities is amortized to interest income over the life of
the security with a corresponding increase in the cost basis of that security.
45
<PAGE>
THE COMMERCE FUNDS
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. SIGNIFICANT ACCOUNTING POLICIES--(Continued)
D. Foreign Currency Translations
The books and records of the Funds are maintained in U.S. dollars. Amounts
denominated in foreign currencies are translated into U.S. dollars on the
following basis: (i) investment valuations, other assets and liabilities
initially expressed in foreign currencies are converted each business day into
U.S. dollars based on current exchange rates; and (ii) purchases and sales of
foreign investments, income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
Net realized gain (loss) on foreign currency transactions will represent:
(i) foreign exchange gains and losses from the sale of foreign currencies and
investments; (ii) foreign exchange gains and losses between trade date and
settlement date on investment securities transactions and foreign exchange
contracts; and (iii) foreign exchange gains and losses from the difference
between amounts of dividends and interest recorded and the amounts actually
received. Net unrealized gain (loss) on translation of assets denomiated in
foreign currencies arises from changes in the value of assets and liabilities,
including investments in securities, resulting from changes in the exchange
rate.
E. Forward Foreign Currency Exchange Contracts
The International Equity Fund is authorized to enter into forward foreign
currency exchange contracts for the purchase of a specific foreign currency at
a fixed price on a future date as a hedge or cross-hedge against either
specific transactions or portfolio positions as a means to manage its foreign
exchange rate risk. The aggregate principal amounts of the contracts for which
delivery is anticipated are reflected in the Fund's accounts, while the
aggregate principal amounts are reflected in the accompanying Statements of
Assets and Liabilities if the Fund intends to settle the contract prior to
delivery. All commitments are "marked-to-market" daily at the applicable
exchange rates and any resulting unrealized gains or losses are recorded in the
Fund's financial statements. The Fund records realized gains and losses at the
time the forward contract is offset by entry into a closing transaction or
extinguished by delivery of the currency. Risks may arise upon entering these
contracts as a result of the potential inability of counterparties to meet the
terms of their contracts and unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
F. Federal Taxes
Each Fund intends to comply with the requirements of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment companies and to
distribute each year substantially all of its investment company taxable and
tax-exempt income to its shareholders. Accordingly, no federal income tax
provisions are required. The characterization of distributions to shareholders
for financial reporting purposes is determined in accordance with income tax
rules.
As of the Trust's most recent tax year-end, the following Fund had
approximately the following amount of capital loss carry forward for U.S.
federal income tax purposes:
<TABLE>
<CAPTION>
Fund Amount Year of Expiration
-------------------------------- -------------------------------- --------------------------------
<S> <C> <C>
Missouri Tax-Free Bond Fund..... $5,000 2003
</TABLE>
This amount is available to be carried forward to offset future capital
gains of the Fund to the extent permitted by applicable laws or regulations.
46
<PAGE>
THE COMMERCE FUNDS
NOTES TO FINANCIAL STATEMENTS--(Continued)
2. SIGNIFICANT ACCOUNTING POLICIES--Continued)
G. Deferred Organization Expenses
Organization-related costs are being amortized on a straight-line basis
over a period of five years beginning with the commencement of each of the
Fund's operations. If any or all of the shares held by Goldman, Sachs & Co.
representing initial capital of the Funds are redeemed during the amortization
period, the redemption proceeds will be reduced by the pro rata portion of the
unamortized organizational cost balance.
H. Expenses
Expenses incurred by the Funds which do not specifically relate to an
individual Fund are allocated to the Funds based on each Fund's relative
average net assets for the period.
I. Repurchase Agreements
During the term of a repurchase agreement, the market value of the
underlying collateral, including accrued interest, is required to equal or
exceed the value of the repurchase agreement. The underlying collateral for all
repurchase agreements is held in safekeeping in the customer-only account of
State Street Bank & Trust Company, the Funds' custodian, or at sub-custodians.
The market value of the underlying collateral is monitored by daily pricing.
In connection with transactions in repurchase agreements, if the seller
defaults and the value of the security declines, or if the seller enters an
insolvency proceeding, realization of the collateral by the Trust may be
delayed or limited.
J. Dividends and Distributions to Shareholders
Dividends from net investment income are declared daily and paid monthly by
the Short-Term Government, Bond, National Tax-Free Bond and Missouri Tax-Free
Bond Funds; declared and paid quarterly by the Balanced and Growth Funds; and
declared and paid annually by the Aggressive Growth and International Equity
Funds. Each Fund's net realized capital gains (including net short-term capital
gains), if any, are declared and distributed at least annually. Distributions
to shareholders are recorded on the ex-dividend date.
3. AGREEMENTS
The Funds have entered into an Advisory Agreement with Commerce Bank, N.A.
(St. Louis) and Commerce Bank, N.A. (Kansas City) (the "Advisor"). Pursuant to
the terms of the Advisory Agreement, the Advisor is responsible for managing
the investments and making investment decisions for each of the Funds. For
these services and for assuming related expenses, the Advisor is entitled to a
fee, computed daily and payable monthly, at the following annual rate of the
corresponding Fund's average daily net assets:
<TABLE>
<S> <C>
Short-Term Government Fund............................................. .50%
Bond Fund.............................................................. .50%
Balanced Fund.......................................................... 1.00%
Growth Fund............................................................ .75%
Aggressive Growth Fund................................................. .75%
International Equity Fund.............................................. 1.50%
National Tax-Free Bond Fund............................................ .50%
Missouri Tax-Free Bond Fund............................................ .50%
</TABLE>
47
<PAGE>
THE COMMERCE FUNDS
NOTES TO FINANCIAL STATEMENTS--(Continued)
3. AGREEMENTS--(Continued)
As authorized by the Advisory Agreement, the Advisor has entered into a
Sub-Advisory Agreement with Rowe-Price Fleming International, Inc. (the "Sub-
Advisor") whereby the Sub-Advisor manages the investment assets of the
International Equity Fund. As compensation for services rendered under the Sub-
Advisory Agreement, the Sub-Advisor is entitled to a fee from the Advisor at
the following annual rate:
<TABLE>
<CAPTION>
Average Daily Net Assets Annual Rate
------------------------ -----------
<S> <C>
First $20 million................................. .75%
Next $30 million.................................. .60%
Over $50 million.................................. .50%
</TABLE>
For the period ended October 31, 1995, the Advisor has voluntarily agreed
to waive a portion of its advisory fee for certain portfolios. The resulting
advisory fees are .30% for the Short-Term Government Fund, .75% for the
Balanced Fund, .90% for the International Equity Fund and .30% for the Missouri
Tax-Free Bond Fund. The effect of these waivers by the Advisor for the period
ended October 31, 1995 was to reduce advisory fees by $31,394, $90,484, $61,711
and $7,769 for the Short-Term Government, Balanced, International Equity and
Missouri Tax-Free Bond Funds, respectively.
In addition, for the period ended October 31, 1995, the Advisor has
voluntarily agreed to reimburse expenses (excluding interest, taxes, and
extraordinary expenses) to the extent that such expenses exceed, on an
annualized basis, .68%, .88%, 1.13%, 1.13%, .85% and .65% of average net assets
for the Short-Term Government, Bond, Balanced, Growth, National Tax-Free Bond
and Missouri Tax-Free Bond Funds, respectively. For the International Equity
Fund, the Advisor has reimbursed the Fund's expenses at varying amounts. The
effect of these reimbursements by the Advisor for the period ended October 31,
1995 was to reduce expenses by $40,597, $305, $24,555, $112,535, $50,284 and
$49,431 for the Short-Term Government, Bond, Balanced, International Equity,
National Tax-Free Bond and Missouri Tax-Free Bond Funds, respectively. The
amount reimbursable to the International Equity Fund at October 31, 1995 was
approximately $24,800 and is reflected in "Other Assets" in the accompanying
Statements of Assets and Liabilities. Included in "Accrued expenses and other
liabilities" in the accompanying Statements of Assets and Liabilities of the
Short-Term Government, Bond, Balanced, Growth, National Tax-Free Bond and
Missouri Tax-Free Bond Funds are approximately $2,300, $34,400, $11,300,
$16,000, $9,600 and $9,600, respectively, related to excess reimbursements
payable to the Advisor.
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co., serves as the Trust's administrator, pursuant to an
Administration Agreement. Under the Administration Agreement, GSAM administers
the Trust's business affairs. As compensation for the services rendered under
the Administration Agreement and its assumption of related expenses, GSAM is
entitled to a fee, computed daily and payable monthly, at an annual rate of
.15% of the average daily net assets of each Fund.
Goldman, Sachs & Co. serves as Distributor of shares of the Funds pursuant
to a Distribution Agreement and may receive a portion of the sales load imposed
on the sale of shares of the Funds. Goldman Sachs has advised the Trust that it
has retained approximately $19,000 for the period ended October 31, 1995.
Pursuant to a Shareholder Administrative Services Plan adopted by its Board
of Trustees, the Funds may enter into agreements with service organizations
such as banks and financial institutions, which may include the Advisor and its
affiliates ("Service Organizations"), under which they will render shareholder
administration support services. For these services, the Service Organizations
are entitled to receive fees from a Fund at an annual rate of up to .25% of the
average daily net asset value of Fund shares beneficially owned by clients of
such Service Organizations. There were no Service Organization agreements in
effect as of October 31, 1995.
48
<PAGE>
THE COMMERCE FUNDS
NOTES TO FINANCIAL STATEMENTS--(Continued)
4. INVESTMENT TRANSACTIONS
Purchases and proceeds of sales or maturities of long-term securities for
the Short-Term Government, Bond, Balanced, Growth, Aggressive Growth and
International Equity Funds for the period December 12, 1994 to October 31,
1995, and for the National Tax-Free Bond and Missouri Tax-Free Bond Funds for
the period February 21, 1995 to October 31, 1995, were as follows:
<TABLE>
<CAPTION>
Short-Term Government Fund /(a)/
<S> <C>
Purchases (excluding U.S. Government securities)............... $ --
Sales (excluding U.S. Government securities)................... --
Purchases of U.S. Government securities........................ 41,707,127
Sales of U.S. Government securities............................ 25,557,647
Bond Fund/(a)/
Purchases (excluding U.S. Government securities)............... $ 64,833,053
Sales (excluding U.S. Government securities)................... 20,274,215
Purchases of U.S. Government securities........................ 73,444,502
Sales of U.S. Government securities............................ 27,806,862
Balanced Fund/(a)/
Purchases (excluding U.S. Government securities)............... $ 43,297,564
Sales (excluding U.S. Government securities)................... 15,258,815
Purchases of U.S. Government securities........................ 15,289,172
Sales of U.S. Government securities............................ 6,813,340
Growth Fund/(a)/
Purchases (excluding U.S. Government securities)............... $ 130,587,339
Sales (excluding U.S. Government securities)................... 36,616,782
Purchases of U.S. Government securities........................ --
Sales of U.S. Government securities............................ --
Aggressive Growth Fund/(a)/
Purchases (excluding U.S. Government securities)............... $ 45,447,866
Sales (excluding U.S. Government securities)................... 13,742,023
Purchases of U.S. Government securities........................ --
Sales of U.S. Government securities............................ --
International Equity Fund
Purchases (excluding U.S. Government securities)............... $ 20,975,827
Sales (excluding U.S. Government securities)................... 2,441,354
Purchases of U.S. Government securities........................ --
Sales of U.S. Government securities............................ --
National Tax-Free Bond Fund
Purchases (excluding U.S. Government securities)............... $ 10,654,108
Sales (excluding U.S. Government securities)................... 1,114,889
Purchases of U.S. Government securities........................ --
Sales of U.S. Government securities............................ --
Missouri Tax-Free Bond Fund
Purchases (excluding U.S. Government securities)............... $ 10,993,370
Sales (excluding U.S. Government securities)................... 2,570,550
Purchases of U.S. Government securities........................ --
Sales of U.S. Government securities............................ --
</TABLE>
- -------
/(a)/ Purchases include the market value of securities on commencement date
transferred from existing collective funds managed by the Advisor.
49
<PAGE>
THE COMMERCE FUNDS
NOTES TO FINANCIAL STATEMENTS--(Continued)
5. CONCENTRATION OF CREDIT RISK
The Missouri Tax-Free Bond Fund invests substantially all of its assets in
debt obligations of issuers located in the state of Missouri. The issuers'
abilities to meet their obligations may be affected by Missouri economic or
political developments.
6. CERTAIN RECLASSIFICATIONS
In accordance with Statement of Position 93-2, the Aggressive Growth Fund
has reclassified $64,482 of accumulated net investment loss to paid-in capital
and the International Equity Fund has reclassified $36,228 of accumulated net
realized loss on foreign currency related transactions to accumulated
undistributed net investment income. These reclassifications have no impact on
the net asset value of the Funds and are designed to present the Funds' capital
accounts on a tax basis.
-------------------------------------------------------------------------------
The Commerce Funds
During the period ended October 31, 1995, 90.04% and 89.69% of the
distributions paid by the National Tax-Free Bond Fund and the Missouri Tax-Free
Bond Fund respectively, were exempt-interest dividends and as such, are not
subject to U.S. federal income tax. The remaining distributions were taxable
ordinary income dividends.
During the period ended October 31, 1995, 22.65%, 100.00% and 51.20% of the
dividends paid from net investment income by the Balanced Fund, Growth Fund and
International Equity Fund respectively, qualify for the dividends received
deduction available to corporations.
-------------------------------------------------------------------------------
50
<PAGE>
The Commerce Funds
------------------
Trustees
J. Eric Helsing, Chairman
Randall D. Barron
David L. Bodde
John J. Holland
P.V. Miller
Officers
P.V. Miller
President
Scott M. Gilman
Vice President
Paul Klug
Vice President
Nancy L. Mucker
Vice President
Pauline Taylor
Vice President
Randall D. Barron
Treasurer
W. Bruce McConnel, III
Secretary
Michael J. Richman
Assistant Secretary
Howard B. Surloff
Assistant Secretary
This Annual Report is authorized for distribution to prospective investors
only when preceded or accompanied by The Commerce Funds Prospectus which
contains facts concerning The Commerce Funds' objectives and policies,
management, expenses and other information. Shares of the Funds are not deposits
or obligations of, or guaranteed, endorsed or otherwise supported by, Commerce
Bank, N.A. (St. Louis), Commerce Bank, N.A. (Kansas City), their parent or
affiliates, and the shares are not Federally insured or guaranteed by the U.S.
Government, the Federal Deposit Insurance Corporation, the Federal Reserve Board
or any other governmental agency. An investment in the Funds involves investment
risks, including possible loss of principal.
<PAGE>
THE COMMERCE FUNDS
922 Walnut Street
Kansas City, Missouri 64106
INVESTMENT ADVISORS
Commerce Bank N.A.
922 Walnut Street
Kansas City, Missouri 64106
Commerce Bank N.A.
8000 Forsyth Boulevard
St. Louis, Missouri 63105
INVESTMENT SUB-ADVISOR
Rowe-Price Fleming International, Inc.
25 Copthall Avenue
London, England EC2R 7DR
DISTRIBUTOR
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
ADMINISTRATOR
Goldman Sachs Asset Management
One New York Plaza
New York, New York 10004
CUSTODIAN
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
National Financial Data Services, Inc.
1004 Baltimore Street
Kansas City, Missouri 64105
INDEPENDENT ACCOUNTANTS
KPMG Peat Marwick LLP
1000 Walnut Street
Kansas City, Missouri 64106
LEGAL COUNSEL
Drinker Biddle & Reath
1345 Chestnut Street
Philadelphia, Pennsylvania 19107
COM-ANN95
[LOGO OF COMMERCE FUNDS(TM) APPEARS HERE]
The Short-Term Government Fund
The Bond Fund
The Balanced Fund
The Growth Fund
The Aggressive Growth Fund
The International Equity Fund
The National Tax-Free Bond Fund
The Missouri Tax-Free Bond Fund
Annual Report
October 31, 1995
