COMMERCE FUNDS, 485BPOS, 1997-02-26

COMMERCE FUNDS
485BPOS, 1997-02-26

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<PAGE>

As filed with the Securities and Exchange Commission on February 26, 1997
Securities Act File No. 33-80966
Investment Company Act File No. 811-8598
================================================================================

SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549

FORM N-1A

REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [x]
Pre-Effective Amendment No. [ ]
------

Post-Effective Amendment No. 5 [x]
---

and

REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940 [x]
Amendment No. 6 [x]
----

____________________________

The Commerce Funds
(Exact Name of Registrant as Specified in Charter)

4900 Sears Tower
Chicago, IL 60606
(Address of Principal Executive Offices)

Registrant's Telephone Number:
800-621-2550

W. Bruce McConnel, III
Drinker Biddle & Reath
1100 Philadelphia National Bank Building
1345 Chestnut Street
Philadelphia, Pennsylvania 19107-3496
(Name and Address of Agent for Service)

It is proposed that this filing will become effective (check appropriate box)

[x] immediately upon filing pursuant to paragraph (b)

[ ] on (date) pursuant to paragraph (b)

[ ] 60 days after filing pursuant to paragraph (a)(1)

[ ] on (date) pursuant to paragraph (a)(1)

[ ] 75 days after filing pursuant to paragraph (a)(2)

[ ] on (date) pursuant to paragraph (a)(2) of Rule 485.

If appropriate, check the following box:

[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment.
<PAGE>

THIS POST-EFFECTIVE AMENDMENT IS BEING FILED IN ORDER TO UPDATE CERTAIN
FINANCIAL INFORMATION AND TO COMPLETE THE DISCLOSURE CONTAINED IN POST-EFFECTIVE
AMENDMENT NO. 4, WHICH WAS FILED PURSUANT TO RULE 485(A)(II) ON DECEMBER 13,
1996.

REGISTRANT HAS PREVIOUSLY FILED A DECLARATION OF INFINITE REGISTRATION OF ITS
SHARES OF BENEFICIAL INTEREST, PURSUANT TO RULE 24F-2 UNDER THE INVESTMENT
COMPANY ACT OF 1940, AS AMENDED. REGISTRANT'S RULE 24F-2 NOTICE WITH RESPECT TO
THE COMMERCE 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 FOR THE FISCAL YEAR ENDED OCTOBER 31, 1996 WAS
FILED ON DECEMBER 17, 1996.
<PAGE>

THE COMMERCE FUNDS

SERVICE SHARES OF THE
SHORT-TERM GOVERNMENT FUND
BOND FUND
BALANCED FUND
GROWTH FUND
MIDCAP FUND
GROWTH AND INCOME FUND
INTERNATIONAL EQUITY FUND

CROSS REFERENCE SHEET
---------------------

Pursuant to Rule 495(a)
under the Securities Act of 1933

<TABLE>
<CAPTION>
Form N-1A Part A Item Number Prospectus Caption
- ---------------------------- ------------------
<S> <C> <C>
1. Cover Page............................................. Cover Page

2. Synopsis............................................... Summary of Expenses

3. Condensed Financial Information........................ Financial Highlights

4. General Description of Registrant...................... Cover Page; Investment
Objectives and Policies; The
Business of The Commerce Funds

5. Management of the Fund................................. The Business of The Commerce Funds;
How to Buy Shares; How to Sell
Shares
5A. Management's Discussion of Fund Performance............ Not Applicable

6. Capital Stock and Other Securities..................... How to Buy Shares; How to Sell
Shares; Dividend and Distribution
Policies; Tax Information; How Are
Shares Priced?

7. Purchase of Securities Being Offered................... How to Buy Shares; How to Sell Shares

8. Redemption or Repurchase............................... How to Sell Shares

9. Pending Legal Proceedings.............................. Not Applicable
</TABLE>
<PAGE>

CROSS REFERENCE SHEET
---------------------

SERVICE SHARES OF THE
SHORT-TERM GOVERNMENT FUND
BOND FUND
BALANCED FUND
GROWTH FUND
MIDCAP FUND
GROWTH AND INCOME FUND
INTERNATIONAL EQUITY FUND

<TABLE>
<CAPTION>
Statement of Additional
Form N-1A Part B Item Information Caption
- --------------------- -----------------------
<S> <C> <C>

10. Cover Page.......................................... Cover Page

11. Table of Contents................................... Table of Contents

12. General Information and History..................... Description of Shares

13. Investment Objectives and Policies.................. Investment Objectives, Policies and Risk Factors

14. Management of the Fund.............................. Management of The Commerce Funds

15. Control Persons and Principal....................... Description of Shares
Holders of Securities

16. Investment Advisory and Other Services.............. Management of The Commerce Funds

17. Brokerage Allocation and other Practices............ Investment Objectives, Policies and Risk Factors

18. Capital Stock and Other Securities.................. Net Asset Value; Additional
Purchase and Redemption Information; Description of Shares

19. Purchase, Redemption and Pricing.................... Net Asset Value;
of Securities Being Offered......................... Additional Purchase and
Redemption Information

20. Tax Status.......................................... Additional Information Concerning Taxes

21. Underwriters........................................ Not Applicable

22. Calculation of Performance Data..................... Additional Information on Performance

23. Financial Statements................................ Report of Independent Auditors Financial Statements
</TABLE>
<PAGE>

THE COMMERCE FUNDS

INSTITUTIONAL SHARES OF THE
SHORT-TERM GOVERNMENT FUND
BOND FUND
BALANCED FUND
GROWTH FUND
MIDCAP FUND
GROWTH AND INCOME FUND
INTERNATIONAL EQUITY FUND

CROSS REFERENCE SHEET
---------------------

Pursuant to Rule 495(a)
under the Securities Act of 1933

Form N-1A Part A Item Number Prospectus Caption
- ---------------------------- ------------------
<S> <C> <C>
1. Cover Page................................................ Cover Page

2. Synopsis.................................................. Summary of Expenses

3. Condensed Financial Information........................... Financial Highlights

4. General Description of Registrant......................... Cover Page; Investment
Objectives and Policies; The
Business of The Commerce Funds

5. Management of the Fund.................................... The Business of The Commerce Funds;
How to Buy Shares; How to Sell
Shares

5A. Management's Discussion of Fund Performance............... Not Applicable

6. Capital Stock and Other Securities........................ How to Buy Shares; How to Sell
Shares; Dividend and Distribution
Policies; Tax Information; How Are
Shares Priced?

7. Purchase of Securities Being Offered...................... How to Buy Shares; How to Sell Shares

8. Redemption or Repurchase.................................. How to Sell Shares

9. Pending Legal Proceedings................................. Not Applicable
</TABLE>
<PAGE>

THE COMMERCE FUNDS

NATIONAL TAX-FREE BOND FUND
MISSOURI TAX-FREE BOND FUND

CROSS REFERENCE SHEET
---------------------

Pursuant to Rule 495(a)
under the Securities Act of 1933

Form N-1A Part A Item Number Prospectus Caption
- ---------------------------- ------------------
<S> <C> <C>
1. Cover Page...................................... Cover Page

2. Synopsis........................................ Summary of Expenses

3. Condensed Financial Information................. Financial Highlights

4. General Description of Registrant............... Cover Page; Investment Objectives and Policies;
The Business of The Commerce Funds; Other Information

5. Management of the Fund.......................... The Business of The Commerce Funds;
How to Buy Shares; How to Sell Shares

5A. Management's Discussion of Fund Performance..... Not Applicable

6. Capital Stock and Other Securities.............. How to Buy Shares; How to Sell Shares;
Dividend and Distribution Policies;
Tax Information; How Are Shares Priced?

7. Purchase of Securities Being Offered............ How to Buy Shares; How to Sell Shares

8. Redemption or Repurchase........................ How to Sell Shares

9. Pending Legal Proceedings....................... Not Applicable
</TABLE>
<PAGE>

CROSS REFERENCE SHEET
---------------------

INSTITUTIONAL SHARES
OF THE
SHORT-TERM GOVERNMENT FUND
BOND FUND
BALANCED FUND
GROWTH FUND
MIDCAP FUND
GROWTH AND INCOME FUND
INTERNATIONAL EQUITY FUND
NATIONAL TAX-FREE BOND FUND
MISSOURI TAX-FREE BOND FUND

<TABLE>
<CAPTION>
Statement of Additional
Form N-1A Part B Item Information Caption
- --------------------- -----------------------
<S> <C> <C>
10. Cover Page......................................... Cover Page

11. Table of Contents.................................. Table of Contents

12. General Information and History.................... Description of Shares

13. Investment Objectives and Policies................. Investment Objectives, Policies and Risk Factors

14. Management of the Fund............................. Management of The Commerce Funds

15. Control Persons and Principal...................... Description of Shares
Holders of Securities

16. Investment Advisory and Other Services............. Management of The Commerce Funds

17. Brokerage Allocation and other Practices........... Investment Objectives, Policies and Risk Factors

18. Capital Stock and Other Securities................. Net Asset Value; Additional Purchase and Redemption
Information; Description of Shares

19. Purchase, Redemption and Pricing................... Net Asset Value;
of Securities Being Offered........................ Additional Purchase and
Redemption Information

20. Tax Status......................................... Additional Information Concerning Taxes

21. Underwriters....................................... Not Applicable

22. Calculation of Performance Data.................... Additional Information on Performance

23. Financial Statements............................... Report of Independent Auditors Financial Statements
</TABLE>
<PAGE>

[LOGO OF COMMERCE FUNDS(TM)]

THE SHORT-TERM GOVERNMENT FUND
THE BOND FUND
THE BALANCED FUND
THE GROWTH AND INCOME FUND
THE GROWTH FUND

THE MIDCAP FUND
THE INTERNATIONAL EQUITY FUND

March 1, 1997
Service Shares
<PAGE>

HOW CAN I CONTACT THE COMMERCE FUNDS?

To authorize the special features described in this prospectus or to obtain
additional information about The Commerce Funds, you may:

. Write to The Commerce Funds at:

The Commerce Funds
P.O. Box 16931
St. Louis, MO 63105; or

. Call The Commerce Funds transfer agent directly at 1-800-995-6365; or

. Call The Commerce Funds Shareowner Services at 1-800-305-2140; or

. Contact a registered investment representative at selected Commerce
Bank branches; or

. Contact your plan sponsor or account administrator for specific
information regarding your 401(k) or Investment Management Group
account.
<PAGE>

THE COMMERCE FUNDS

The Commerce Funds is an open-end, management investment company registered
under the Investment Company Act of 1940 (the "1940 Act"). The Commerce Funds
currently consists of nine investment portfolios, each of which has a separate
pool of assets with separate investment objectives and policies. However, this
Prospectus relates only to the offering of the Service Shares of the Short-
Term Government, Bond, Balanced, Growth and Income, Growth, MidCap and
International Equity Funds (individually, a "Fund" and collectively, the
"Funds"). Each Fund is classified as a diversified investment portfolio under
the 1940 Act.

THE SHORT-TERM GOVERNMENT FUND seeks current income consistent with
preservation of principal. The Fund pursues this objective through investment
in short-term obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities.

THE BOND FUND seeks total return through current income and, secondarily,
capital appreciation. The Fund pursues this objective through investment in a
diversified portfolio of investment grade corporate debt obligations and
obligations issued or guaranteed by the U.S. Government, its agencies or
instrumentalities.

THE BALANCED FUND seeks total return through a balance of capital
appreciation and current income consistent with preservation of capital. The
Fund pursues this objective through investment in a diversified portfolio of
equity and fixed income securities.

THE GROWTH AND INCOME FUND seeks both capital appreciation and current
income. The Fund pursues this objective through investment in a diversified
portfolio of equity securities of companies which represent excellent value
relative to their current price and provide, on average, a current yield in
excess of the S&P 500 Stock Index.

THE GROWTH FUND seeks capital appreciation and secondarily, current income
and dividend growth potential. The Fund pursues this objective through
investment in a diversified portfolio of equity securities of companies with
the potential for above average growth in earnings and dividends.

THE MIDCAP FUND (formerly the Aggressive Growth Fund) seeks long-term
capital appreciation. The Fund pursues this objective through investment in a
diversified portfolio of equity securities of companies with medium-sized
market capitalizations and the potential for above average earnings growth.

THE INTERNATIONAL EQUITY FUND seeks total return with an emphasis on growth
of capital. The Fund pursues this objective through investment in a
diversified portfolio of common stocks of established foreign companies.

This Prospectus contains information you should know about the Funds before
you invest. Please read it carefully and keep it for your future reference. It
contains your Shareowner Guide and a description of shareowner features. A
Statement of Additional Information (dated March 1, 1997) contains additional
information about the Funds. The Statement of Additional Information has been
filed with the Securities and Exchange Commission and is incorporated by
reference into this Prospectus. The Statement of Additional Information is
available without charge by writing to The Commerce Funds at P.O. Box 16931,
St. Louis, MO 63105 or by calling 1-800-305-2140.

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.

THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION, NOR HAS THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS
A CRIMINAL OFFENSE.

MARCH 1, 1997
<PAGE>

Commerce Bank, N.A. (St. Louis) and Commerce Bank, N.A. (Kansas City) serve
as investment advisors to the Funds (together, the "Advisor"). Rowe Price-
Fleming International, Inc. serves as sub-investment advisor to the
International Equity Fund (the "Sub-Advisor").

This Prospectus describes Service Shares in each Fund. Service Shares are
offered primarily to individuals, corporations or other entities, purchasing
either for their own accounts or for the accounts of others, and to qualified
banks, savings and loan associations, and broker/dealers on behalf of their
customers.

The Commerce Funds is also authorized to issue an additional class of
shares, Institutional Shares, in each of the Short-Term Government Fund, Bond
Fund, Balanced Fund, Growth and Income Fund, Growth Fund, MidCap Fund and
International Equity Fund. Institutional Shares are offered through a separate
prospectus primarily to (i) investors maintaining qualified accounts at bank
and trust institutions, including institutions affiliated with Commerce
Bancshares, Inc. and its subsidiaries, (ii) participants in employer-sponsored
defined contribution plans, (iii) any investor who was a shareholder in The
Commerce Funds prior to January 1, 1997 and (iv) employees, directors,
advisory directors, officers and retirees (as well as their spouses and legal
dependents) of Commerce Bancshares, Inc., Goldman, Sachs & Co., State Street
Bank and Trust Company and National Financial Data Services, Inc. or their
subsidiaries or affiliates.

2
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
SUMMARY OF EXPENSES......................................................... 4
FINANCIAL HIGHLIGHTS........................................................ 6
INVESTMENT OBJECTIVES AND POLICIES.......................................... 8
Short-Term Government Fund................................................ 8
Bond Fund................................................................. 9
Balanced Fund............................................................. 11
Growth and Income Fund.................................................... 13
Growth Fund............................................................... 14
MidCap Fund............................................................... 15
International Equity Fund................................................. 16
ADDITIONAL RISK CONSIDERATIONS.............................................. 18
OTHER INVESTMENT PRACTICES.................................................. 19
INVESTMENT RESTRICTIONS..................................................... 30
SHAREOWNER GUIDE............................................................ 31
HOW CAN I CONTACT THE COMMERCE FUNDS?..................................... 31
HOW TO BUY SERVICE SHARES................................................. 31
What Is The Minimum Investment For Each Fund?........................... 31
How Are Service Shares Priced?.......................................... 32
How Do I Buy Service Shares?............................................ 36
What Price Will I Receive When I Buy Service Shares?.................... 37
What Else Should I Know About Buying Service Shares?.................... 37
HOW TO SELL SERVICE SHARES................................................ 37
How Do I Sell My Service Shares?........................................ 37
What Price Will I Receive For Service Shares I Want To Sell?............ 39
How Quickly Can I Receive Proceeds From A Sale?......................... 39
What If I Want To Reinvest Sales Proceeds?.............................. 40
DIVIDEND AND DISTRIBUTION POLICIES........................................ 40
SHAREOWNER FEATURES AND PRIVILEGES........................................ 41
Can I Use The Funds In My Retirement Plan?.............................. 41
What Is Dollar Cost Averaging And How Can I Implement It?............... 42
Can I Exchange My Investment From One Commerce Fund To Another?......... 42
Can I Have Exchanges Made Automatically?................................ 43
Can I Reinvest Dividends From One Commerce Fund In Another?............. 43
How Do I Obtain Other Information About My Account?..................... 44
Can I Make Transactions By Telephone?................................... 44
Can I Arrange Automatic Withdrawals?.................................... 44
THE BUSINESS OF THE COMMERCE FUNDS.......................................... 45
Board of Trustees......................................................... 45
Service Providers......................................................... 45
Distribution Plan......................................................... 49
Shareholder Administrative Services Plan.................................. 49
Expenses.................................................................. 50
TAX INFORMATION............................................................. 50
HOW PERFORMANCE IS MEASURED................................................. 51
OTHER INFORMATION........................................................... 53
About The Commerce Funds.................................................. 53
Voting Rights............................................................. 53
Shareowner Reports........................................................ 54
Inquiries................................................................. 54
ACCOUNT APPLICATION FORM
</TABLE>

3
<PAGE>

SUMMARY OF EXPENSES
SERVICE SHARES

Expenses are one of several factors to consider when investing in a Fund.
SHAREOWNER TRANSACTION EXPENSES are charges you pay when buying or selling
shares. ANNUAL FUND OPERATING EXPENSES are paid out of a Fund's assets and
include fees for portfolio management, maintenance of shareowner accounts,
general Fund administration, accounting, custody and other services. Examples
based on the summary are also shown.

<TABLE>
<CAPTION>
SHORT-TERM
GOVERNMENT BOND BALANCED GROWTH AND GROWTH MIDCAP INTERNATIONAL
FUND FUND FUND INCOME FUND FUND FUND(1) EQUITY FUND
---------- ---- -------- ----------- ------ ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREOWNER TRANSACTION
EXPENSES
Maximum Sales Charge
Imposed on Purchases
(as a percentage of
offering price)(2).... 2.00% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50%
Maximum Sales Charge
Imposed on Reinvested
Distributions......... None None None None None None None
Deferred Sales Charge
Imposed on
Redemptions........... None None None None None None None
Redemption Fees........ None None None None None None None
Exchange Fees(3)....... None None None None None None None
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of
average daily net
assets)
Management Fees (after
fee waivers)(4)....... 0.30% 0.50% 0.75% 0.75% 0.75% 0.75% 0.83%
Rule 12b-1 Fees........ 0.25% 0.25% 0.25% 0.25% 0.25% 0.25% 0.25%
Other Expenses (after
expense
reimbursements)(5).... 0.38% 0.34% 0.38% 0.45% 0.33% 0.47% 0.89%
---- ---- ---- ---- ---- ---- ----
Total Fund Operating
Expenses (after fee
waivers and expense
reimbursements)(6).... 0.93% 1.09% 1.38% 1.45% 1.33% 1.47% 1.97%
==== ==== ==== ==== ==== ==== ====
EXAMPLE: Assume a Fund's
annual return is 5% and
its expenses are the
same as those stated
above. For every $1,000
you invest, here's how
much you would pay in
total expenses if you
closed your account
after the number of
years indicated,
assuming deduction at
the time of purchase of
the maximum applicable
sales load and
redemption at the end
of each time period:
One Year............... $ 29 $ 46 $ 49 $ 49 $ 48 $ 49 $ 54
Three Years............ $ 49 $ 68 $ 77 $ 79 $ 76 $ 80 $ 95
Five Years............. $ 70 $ 93 $108 $111 $105 $112 $138
Ten Years.............. $132 $163 $195 $202 $190 $205 $257
</TABLE>
- --------

(1) Formerly the Aggressive Growth Fund.

(2) Certain investors may not be charged a sales charge. See "Shareowner
Guide--When There is No Sales Charge."

4
<PAGE>

(3) No charge is imposed on exchanges through the Automatic Exchange Feature
or for up to five exchanges made within a twelve month period. Additional
exchanges may be subject to a $5.00 fee.

(4) Without fee waivers by the Advisor, "Management Fees" would be charged at
an annual rate of .50%, 1.00% and 1.50%, respectively, of the average
daily net assets of the Short-Term Government, Balanced and International
Equity Funds, respectively. The Advisor reserves the right to reduce or
discontinue these fee waivers at any time. In the event that the "Total
Fund Operating Expenses" of the International Equity Fund fall below 1.97%
of average daily net assets, the Advisor will reduce its waiver of
investment advisory fees by the difference between the actual "Total Fund
Operating Expenses" and 1.97%.

(5) In addition to the fee waivers referred to in note 4, the Advisor intends
to voluntarily reimburse expenses during the current fiscal year to the
extent necessary for the Short-Term Government, Bond, Balanced, Growth and
Income, Growth and International Equity Funds to maintain an annual
expense ratio of not more than 0.93%, 1.13%, 1.38%, 1.45%, 1.38% and
1.97%, respectively, excluding interest, taxes and extraordinary expenses.
The Commerce Funds has adopted a Shareholder Administrative Services Plan
pursuant to which it may enter into agreements with institutions under
which they will render shareowner administrative support services for
their customers who beneficially own Service Shares of the Funds in return
for a fee of up to 0.25% per annum of the value of such shares.

(6) Without such fee waivers and expense reimbursements described above, Other
Expenses (including Shareowner Servicing Fees) would be 0.61%, 0.45%,
1.13% and 1.14% and "Total Fund Operating Expenses" would be 1.36%, 1.70%,
2.13% and 2.89% of the average daily net assets of the Short-Term
Government, Balanced, Growth and Income and International Equity Funds,
respectively.

The above expense information is provided to help you understand the
expenses you would pay either directly (i.e., transaction expenses) or
indirectly (i.e., annual operating expenses) as a shareowner in the Service
Shares of the Funds. The information with respect to the Funds reflects the
expenses the Funds expect to incur during the current fiscal year. The expense
information included in the table and the hypothetical example above relates
only to Service Shares (the class being offered by this Prospectus) and should
not be considered as representative of past or future expenses. Investors
should be aware that, due to the distribution fees, a long-term shareowner in
a Fund may pay over time more than the economic equivalent of the maximum
front-end sales charge permitted under the rules of the National Association
of Securities Dealers, Inc. The Commerce Funds also offer Institutional
Shares, which are subject to different fees and expenses (which affect
performance). Information regarding Institutional Shares may be obtained from
The Commerce Funds by calling 1-800-305-2140. In addition, Service
Organizations may charge their clients account fees for providing account
services in connection with their clients' investments in Service Shares of
The Commerce Funds, which are included in "Other Expenses." You should note
that any fees that are charged by The Commerce Funds' Advisor, their
affiliates or any other institutions directly to their customer accounts for
services related to an investment in the Funds are in addition to and not
reflected in the fees and expenses described above. If you purchase or redeem
Service Shares directly from The Commerce Funds Shareowner Services or an
account representative at a Commerce Bank branch, you may avoid these fees by
following the procedures described under "How To Buy Service Shares" on page
31 of this Prospectus.

For more information about shareowner transaction expenses and The Commerce
Funds' operating expenses, see "Shareowner Guide" and "The Business of The
Commerce Funds."

- -------------------------------------------------------------------------------

THE EXAMPLES SHOWN ABOVE SHOULD NOT BE CONSIDERED REPRESENTATIONS OF FUTURE
INVESTMENT RETURN OR OPERATING EXPENSES. ACTUAL OPERATING EXPENSES AND
INVESTMENT RETURN MAY BE GREATER OR LESSER THAN THOSE INDICATED. INFORMATION
ABOUT THE ACTUAL PERFORMANCE OF THE FUNDS IS CONTAINED IN THE COMMERCE FUNDS'
ANNUAL REPORT, WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING THE COMMERCE
FUNDS AT THE ADDRESS OR TELEPHONE NUMBER INDICATED ON THE COVER
PAGE OF THIS PROSPECTUS.

- -------------------------------------------------------------------------------

5
<PAGE>

FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
INSTITUTIONAL SHARES

The financial highlights presented below set forth certain information
concerning the investment results for the Institutional Shares (of the Fund
specified) of each Fund outstanding during the periods indicated. Prior to
January 2, 1997, the Funds offered only one class of shares. On that date, the
Funds began offering Institutional Shares to institutional investors as
described in a separate Prospectus and Service Shares to retail investors as
described in this Prospectus. The information for the fiscal years ended
October 31, 1996 and 1995 has been audited by KPMG Peat Marwick LLP,
independent accountants for the Funds, whose report thereon is contained in
The Commerce Funds' Annual Report. This information should be read in
conjunction with the financial statements and related notes incorporated by
reference and attached to the Statement of Additional Information. These
reports also contain performance information and may be obtained free of
charge by contacting The Commerce Funds at the address or telephone number on
page 31 of this Prospectus. During the periods shown, the Funds did not offer
Service Shares and the Growth and Income Fund. Accordingly, there are no
financial highlights for Service Shares or for the Growth and Income Fund.
Actual investment results of the Service Shares will be different than the
results shown below.

<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
--------------------- -------------------------
NET
REALIZED
AND NET
UNREALIZED ASSET
NET ASSET GAIN VALUE,
VALUE, NET (LOSS) ON FROM NET FROM NET END
BEGINNING INVESTMENT INVEST- INVESTMENT REALIZED GAIN OF TOTAL
OF PERIOD INCOME MENTS(b) INCOME ON INVESTMENTS PERIOD RETURN(c)
--------- ---------- ---------- ---------- -------------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C>
SHORT-TERM GOVERNMENT FUND
- -------------------------------------------------------------------------------------------
Year ended:
10/31/96....... $18.83 $1.09 $(0.18) $(1.09) $(0.22) $18.43 5.02%
12/12/94(a) to
10/31/95....... 18.00 1.06 0.83 (1.06) -- 18.83 10.72
BOND FUND
- -------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 19.61 1.16 (0.28) (1.16) (0.26) 19.07 4.71
12/12/94(a) to
10/31/95....... 18.00 1.12 1.61 (1.12) -- 19.61 15.59
BALANCED FUND
- -------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 22.10 0.54 2.56 (0.54) (0.66) 24.00 14.45
12/12/94(a) to
10/31/95....... 18.00 0.59 4.06 (0.55) -- 22.10 26.14
</TABLE>

<TABLE>
<CAPTION>
RATIOS ASSUMING
NO WAIVER OF
INVESTMENT ADVISORY
FEES OR EXPENSE
REIMBURSEMENTS
--------------------------
RATIO RATIO
RATIO OF NET RATIO OF NET
OF NET INVESTMENT NET OF INVESTMENT
EXPENSES INCOME AVERAGE ASSETS AT EXPENSES INCOME TO
TO AVERAGE TO AVERAGE PORTFOLIO COMMIS- END TO AVERAGE AVERAGE
NET NET TURNOVER SION OF PERIOD NET NET
ASSETS ASSETS RATE RATE(e) (IN 000'S) ASSETS ASSETS
---------- ---------- --------- -------- ---------- ---------- ---------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHORT-TERM GOVERNMENT FUND
- -----------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 0.68% 5.90% 12% -- $33,839 1.11% 5.47%
12/12/94(a) to
10/31/95....... 0.68(d) 6.38(d) 158 -- 20,211 1.14(d) 5.92(d)
BOND FUND
- -----------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 0.84 6.10 31 -- 151,205 0.84 6.10
12/12/94(a) to
10/31/95....... 0.88(d) 6.64(d) 58 -- 98,504 0.88(d) 6.64(d)
BALANCED FUND
- -----------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 1.13 2.47 58 $0.07640 69,880 1.45 2.15
12/12/94(a) to
10/31/95....... 1.13(d) 3.28(d) 59 -- 48,329 1.45(d) 2.96(d)
- ------
</TABLE>

(a) Commencement of operations.

(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.

(e) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security transactions
on which commissions are charged.This rate may vary due to various types of
transactions and number of security trades executed.

6
<PAGE>

<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
---------------------------------- -------------------------
NET
REALIZED AND
NET UNREALIZED
REALIZED LOSS ON NET
AND FOREIGN ASSET
NET ASSET NET UNREALIZED CURRENCY VALUE,
VALUE, INVESTMENT GAIN ON RELATED FROM NET FROM NET END
BEGINNING INCOME INVEST- TRANS- INVESTMENT REALIZED GAIN OF
OF PERIOD (LOSS) MENTS (b) ACTIONS (b) INCOME ON INVESTMENTS PERIOD
--------- ---------- ---------- ------------ ---------- -------------- ------
<S> <C> <C> <C> <C> <C> <C> <C>
GROWTH FUND
- ----------------------------------------------------------------------------------------------
Year ended:
10/31/96....... $24.68 $0.19 $5.40 -- $(0.19) $(1.13) $28.95
12/12/94(a) to
10/31/95....... 18.00 0.15 6.68 -- (0.15) -- 24.68
MIDCAP FUND(F)
- ----------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 25.30 (0.07) 3.51 -- -- (0.68) 28.06
12/12/94(a) to
10/31/95....... 18.00 (0.04) 7.34 -- -- -- 25.30
INTERNATIONAL EQUITY FUND
- ----------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 18.64 0.11 3.02 (0.67) (0.07) (0.07) 20.96
12/12/94(a) to
10/31/95....... 18.00 0.12 0.95 (0.40) (0.03) -- 18.64
</TABLE>

<TABLE>
<CAPTION>
RATIOS ASSUMING
NO WAIVER OF
INVESTMENT ADVISORY
FEES OR EXPENSE
REIMBURSEMENTS
-----------------------
RATIO RATIO
RATIO OF NET RATIO OF NET
OF NET INVESTMENT NET OF INVESTMENT
EXPENSES INCOME AVERAGE ASSETS AT EXPENSES INCOME
TO AVERAGE (LOSS) PORTFOLIO COMMISS- END TO AVERAGE (LOSS) TO
TOTAL NET TO AVERAGE TURNOVER ION OF PERIOD NET AVERAGE
RETURN(c) ASSETS NET ASSETS RATE RATE(e) (IN 000'S) ASSETS NET ASSETS
--------- ---------- ---------- --------- -------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH FUND
- -------------------------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 23.43% 1.08% 0.72% 36% $0.0654 $208,908 1.08% 0.72%
12/12/94(a) to
10/31/95....... 38.06 1.11(d) 0.81 (d) 33 -- 141,735 1.11 (d) 0.81 (d)
MIDCAP FUND(F)
- --------------------------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 13.78 1.22 (0.37) 71 0.0692 74,641 1.22 (0.37)
12/12/94(a) to
10/31/95....... 40.56 1.32 (d) (0.29)(d) 59 -- 41,665 1.32 (d) (0.29)(d)
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 13.25 1.72 0.74 21 0.0147 51,589 2.64 (0.18)
12/12/94(a) to
10/31/95....... 3.73 1.81 (d) 1.06 (d) 25 -- 21,014 3.50 (d) (0.63)(d)
</TABLE>
- ------

(a) Commencement of operations.

(b) Includes the balancing effect of calculating per share amounts.

(d) Annualized.

(e) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security transactions
on which commissions are charged. This rate may vary due to various types
of transactions and number of security trades executed.

(f) Formerly the Aggressive Growth Fund.

<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

The investment objective and policies of each of the Funds are described
below. There is no assurance that any Fund will achieve its investment
objective. No Fund, by itself, constitutes a complete investment program.
Additional information regarding the investment objective, policies and
restrictions of each Fund are described in the Statement of Additional
Information.

The investment objective of a Fund may not be changed without the
affirmative vote of the holders of at least a majority of outstanding shares
of such Fund (as defined under "Other Information"). Except as noted below
under "Investment Limitations," a Fund's investment policies may be changed
without a vote of shareowners.

SHORT-TERM GOVERNMENT FUND

INVESTMENT OBJECTIVE

THE INVESTMENT OBJECTIVE OF THE SHORT-TERM GOVERNMENT FUND IS TO SEEK
CURRENT INCOME CONSISTENT WITH PRESERVATION OF PRINCIPAL. THE FUND PURSUES
THIS OBJECTIVE THROUGH INVESTMENT IN SHORT-TERM OBLIGATIONS ISSUED OR
GUARANTEED BY THE U.S. GOVERNMENT, ITS AGENCIES OR INSTRUMENTALITIES.

INVESTMENT STRATEGY

In pursuing its investment objective, the Fund will invest at least 65% of
its total assets in obligations issued or guaranteed by the U.S. Government,
its agencies or instrumentalities, including U.S. Treasury bills, notes and
bonds ("U.S. Government Obligations"), with remaining maturities of five years
or less, and repurchase agreements with respect to such obligations.

The Fund may also purchase mortgage-backed securities which represent pools
of mortgage loans assembled for sale to investors by various governmental
agencies as well as private issuers. The average life of mortgage-backed
securities varies with the maturities of the underlying mortgage instruments.
The average life is likely to be substantially less than the original maturity
of the mortgage pools underlying the securities as the result of mortgage
prepayments. The rate of such prepayments, and accordingly the life of the
certificates, will be a function of current market rates and current
conditions in the relevant housing markets. Estimated average life will be
determined by the Advisor, and such securities may be purchased by the Fund if
the estimated average life is determined to be five years or less. See "Other
Investment Practices--Mortgage-Related Securities" below.

The Fund's dollar-weighted average maturity will not exceed three years. The
Fund may purchase U.S. Government Obligations and mortgage-backed securities
with maturities of average lives in excess of five years in an amount not to
exceed 25% of its total assets. In addition, U.S. Government Obligations with
nominal maturities in excess of five years that have variable or floating
interest rates or put features may be deemed to have remaining maturities of
five years or less and therefore to be permissible investments for the Fund.

See "Other Investment Practices" below for a description of other types of
securities in which the Fund may invest.

RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND

U.S. Government Obligations have historically involved little risk of loss
of principal if held to maturity. The Fund, however, will not necessarily hold
its securities to maturity. Generally, the market value of securities not held
to maturity can be expected to vary inversely to changes in prevailing
interest

8
<PAGE>

rates. See "Additional Risk Considerations--Risks Associated With Fixed Income
Investments." In addition, neither the U.S. Government, nor any agency or
instrumentality thereof, has guaranteed, sponsored or approved the Fund or its
shares.

Mortgage-backed securities may be subject to risks including price
volatility, liquidity and interest rate risk. The prices of such securities
may be inversely affected by changes in interest rates and prepayment of the
underlying mortgage collateral may result in a decreased rate of return. See
"Other Investment Practices--Mortgage-Related Securities" below.

BOND FUND

INVESTMENT OBJECTIVE

THE INVESTMENT OBJECTIVE OF THE BOND FUND IS TO SEEK TOTAL RETURN THROUGH
CURRENT INCOME AND SECONDARILY, CAPITAL APPRECIATION. THE FUND PURSUES THIS
OBJECTIVE THROUGH INVESTMENT IN A DIVERSIFIED PORTFOLIO OF INVESTMENT-GRADE
CORPORATE DEBT OBLIGATIONS AND OBLIGATIONS ISSUED OR GUARANTEED BY THE U.S.
GOVERNMENT, ITS AGENCIES OR INSTRUMENTALITIES.

INVESTMENT STRATEGY

In pursuing its investment objective, the Fund will invest, during normal
market conditions, at least 65% of its total assets in fixed income debt
securities rated at the time of purchase A- or better by Standard & Poor's
Ratings Group ("S&P") or Moody's Investors Service, Inc. ("Moody's") or, if
unrated, deemed by the Advisor to be comparable to instruments that are so
rated, including corporate debt obligations such as fixed and variable-rate
bonds, zero coupon bonds and debentures, obligations issued or guaranteed by
the U.S. Government, its agencies or instrumentalities and money market
instruments. All of the fixed income securities acquired by the Fund other
than those subject to the 65% requirement described above will be rated
investment-grade at the time of purchase. For purposes of this investment
policy, investment-grade obligations are those rated at the time of purchase
AAA, AA, A or BBB by S&P, Aaa, Aa, A or Baa by Moody's or which are similarly
rated by another nationally recognized statistical rating organization
("NRSRO") (including Fitch Investors Service, Inc., Duff & Phelps, Thomson
BankWatch and IBCA) or are unrated but deemed by the Advisor to be comparable
in quality to instruments that are so rated. Except for temporary defensive
periods, the Fund's market weighted average credit rating will be at least AA-
/Aa3 as rated by S&P or Moody's, respectively, or the equivalent rating of
another NRSRO. Obligations rated BBB by S&P, Baa by Moody's or the equivalent
rating of another NRSRO are considered to have speculative characteristics and
are subject to greater credit and market risk than securities rated in the top
three investment-grade categories. Subsequent to their purchase by the Fund,
up to 5% of its portfolio securities may represent securities downgraded below
investment-grade or may be deemed by the Advisor to be no longer comparable to
investment-grade securities. The Advisor will consider such an event in
determining whether the Fund should continue to hold the security. See
Appendix A to the Statement of Additional Information for a description of
applicable debt ratings.

The Fund may invest up to 65% of its total assets in certain mortgage-backed
and asset-backed securities. Mortgage-backed securities represent pools of
mortgage loans assembled for sale to investors by various governmental
agencies as well as by private issuers. See "Other Investment Practices--
Mortgage-Related Securities" below. Asset-backed securities represent a
participation in, or are secured

9
<PAGE>

by or payable from, a stream of payments governed by particular assets. Such
securities may include motor vehicle installment purchase obligations, credit
card receivables and home equity loans. See "Other Investment Practices--
Asset-Backed Securities" below. The Fund may also invest in "stripped" and
convertible securities. See "Other Investment Practices--Stripped Securities"
and "Other Investment Practices--Convertible Securities" below.

Additionally, up to 20% of the total assets of the Fund may be invested
directly in debt obligations of foreign issuers. These obligations may include
obligations of foreign corporations as well as investments in obligations of
foreign governments and their political sub-divisions (which will be limited
to direct government obligations and government-guaranteed securities). The
Fund is also permitted to invest up to 20% of its total assets in obligations
issued by or on behalf of states, territories and possessions of the United
States, the District of Columbia and their authorities, agencies,
instrumentalities and political subdivisions ("Municipal Obligations"). The
purchase of Municipal Obligations may be advantageous when, as a result of
prevailing economic, regulatory or other circumstances, the yield of such
securities, on a pre-tax basis, is comparable to that of corporate obligations
or U.S. Government Obligations. See "Other Investment Practices--Municipal
Obligations" below.

In acquiring particular portfolio securities, the Advisor will consider,
among other things, historical yield relationships between corporate and
government bonds, intermarket yield relationships among various industry
sectors, current economic cycles and the creditworthiness of particular
issuers.

The Fund seeks to equal or exceed the return of the Lehman Brothers
Aggregate Bond Index (the "Aggregate Bond Index"). The Aggregate Bond Index is
a broad market-weighted index which encompasses three major classes of
investment-grade fixed income securities with maturities greater than one
year, including: U.S. Treasury securities, corporate bonds and mortgage-backed
securities. Although the Fund seeks to equal or exceed the return of the
Aggregate Bond Index, the Fund may invest a substantial portion of its assets
in securities that are not included in its benchmark index. The Fund is not,
therefore, an "index" fund, which typically holds only securities that are
included in the index it attempts to replicate.

Although the Fund has no restriction as to the maximum or minimum duration
of any individual security held by it, the Fund's average effective duration
will be within [PLUS/MINUS] 30% of the duration of the Aggregate Bond Index.
"Duration" is a term used by investment managers to express the average time to
receipt of expected cash flows (discounted to their present value) on a
particular fixed income instrument or a portfolio of instruments. Duration
takes into account the pattern of a security's cash flow over time, including
how cash flow is affected by prepayments and changes in interest rates. For
example, the duration of a five-year zero coupon bond which pays no interest or
principal until the maturity of the bond is five years. This is because a zero
coupon bond produces no cash flow until the maturity date. On the other hand, a
coupon bond that pays interest semi-annually and matures in five years will
have a duration of less than five years, which reflects the semi-annual cash
flows resulting from coupon payments. Duration also generally defines the
effect of interest rate changes on bond prices. Generally, if interest rates
increase by one percent, the value of a security having an effective duration
of five years would decrease in value by five percent.

See "Other Investment Practices" below for a description of other types of
securities in which the Fund may invest.

10
<PAGE>

RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND

Generally, the market value of fixed income securities is subject to
interest rate fluctuation and can be expected to vary inversely to changes in
the prevailing interest rates. Fixed income securities with longer maturities,
which tend to produce higher yields, are subject to potentially greater
capital appreciation and depreciation than obligations with shorter
maturities.

Investments in asset-backed securities may be subject to risks in addition
to those presented by mortgage-backed securities. Asset-backed securities are
dependent upon payment of the underlying loan or receivable and are generally
unsecured. Additional risks may include the prepayment of the underlying
collateral, liquidity and valuation. See "Other Investment Practices--Asset-
Backed Securities."

Because the Fund may invest in securities issued by foreign issuers, the
Fund may be subject to additional investment risks for those securities that
are different in some respects from those incurred by a Fund which invests
solely in securities of domestic U.S. issuers. Such risks include foreign
taxation, changes in currency rates or currency brokerage, currency exchange
costs and differences between domestic and foreign legal, auditing, brokerage
and economic standards. See "Additional Risk Considerations--Risks Associated
with Foreign Securities and Currencies."

See "Short-Term Government Fund--Risks Associated with an Investment in the
Fund" above for risks associated with investments in mortgage-backed
securities.

See "Additional Risk Considerations--Risks Associated with Fixed Income
Investments" below.

BALANCED FUND

INVESTMENT OBJECTIVE

THE INVESTMENT OBJECTIVE OF THE BALANCED FUND IS TO SEEK TOTAL RETURN
THROUGH A BALANCE OF CAPITAL APPRECIATION AND CURRENT INCOME CONSISTENT WITH
PRESERVATION OF CAPITAL. THE FUND PURSUES THIS OBJECTIVE THROUGH INVESTMENT IN
A DIVERSIFIED PORTFOLIO OF EQUITY SECURITIES, FIXED INCOME SECURITIES AND CASH
EQUIVALENTS.

INVESTMENT STRATEGY

Equity securities in which the Fund normally invests are common stocks,
preferred stocks, securities or bonds which are convertible into common or
preferred stocks and warrants. The Fund may also participate in rights
offerings. The Fund seeks to acquire equity securities of companies with
market capitalizations of over $200 million. (For further information
regarding equity securities in which the Fund may invest and the Fund's
policies regarding the selection of equity securities, see "Growth Fund--
Investment Strategy" below.)

Fixed income securities in which the Fund may invest include corporate debt
obligations such as fixed and variable-rate bonds, zero coupon bonds and
debentures, obligations issued or guaranteed by the U.S. Government, its
agencies or instrumentalities, "stripped" securities, convertible securities
and money market instruments. All of the fixed income securities acquired by
the Balanced Fund will be rated investment-grade at the time of purchase by
S&P, Moody's or another NRSRO or will be unrated but deemed by the Advisor to
be comparable in quality to instruments that are so rated. Obligations rated

11
<PAGE>

BBB by S&P, Baa by Moody's or the equivalent rating of another NRSRO are
considered to have speculative characteristics and are subject to greater
credit and market risk than securities rated in the top three investment-grade
categories. Except for temporary defensive periods, the Fund's market-weighted
average credit rating will be at least AA-/Aa3 as rated by S&P, Moody's or the
equivalent rating of another NRSRO. Subsequent to their purchase by the Fund,
up to 5% of the fixed income portion of its portfolio securities may represent
securities downgraded below investment-grade or may be deemed by the Advisor
to be no longer comparable to investment-grade securities. The Advisor will
consider such an event in determining whether the Fund should continue to hold
the security. (For further information regarding fixed income securities in
which the Fund may invest and the Fund's policies regarding the selection of
fixed income securities, see "Bond Fund--Investment Strategy" and "Bond Fund--
Risks Associated with an Investment in the Fund" above.)

The Fund may invest up to 65% of the fixed income portion of its portfolio
in certain mortgage-backed and asset-backed securities and is also permitted
to invest up to 20% of the fixed income portion of its portfolio in Municipal
Obligations.

Up to 20% of the fixed income portion of the Fund's portfolio may be
invested directly in debt obligations of foreign issuers. These obligations
may include obligations of foreign corporations as well as investments in
obligations of foreign governments and their political sub-divisions (which
will be limited to direct government obligations and government-guaranteed
securities).

Although equity securities acquired by the Balanced Fund will generally be
issued by U.S. issuers, the Fund may also invest up to 10% of the equity
portion of its portfolio in securities issued by foreign issuers either
directly or indirectly through investments in sponsored and unsponsored
American Depository Receipts ("ADRs"). ADRs are receipts issued by an American
bank or trust company evidencing ownership of underlying securities issued by
a foreign issuer. ADR prices are denominated in United States dollars while
the securities underlying an ADR are normally denominated in a foreign
currency.

The actual percentage of assets invested in equity and fixed income
securities will vary from time to time, depending on the judgment of the
Advisor. The Advisor will attempt to take advantage of changing economic
conditions by increasing or decreasing the ratio of equity securities to fixed
income securities or cash equivalents in the Fund. At least 25% of the Fund's
total assets will be invested in fixed income senior securities (including
cash equivalents, long-term debt securities and convertible debt securities
and convertible preferred stock to the extent their value is attributable to
their fixed income characteristics).

See "Other Investment Practices" below for a description of other types of
securities in which the Fund below may invest.

RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND

Because the Fund may invest in securities issued by foreign issuers, the
Fund may be subject to additional investment risks that are different in some
respects from those incurred by a Fund which invests solely in securities of
U.S. domestic issuers. Such risks include foreign taxation, changes in
currency rates or currency brokerage, currency exchange costs and differences
between domestic and foreign legal, auditing, brokerage and economic
standards. See "Additional Risk Considerations--Risks Associated with Foreign
Securities and Currencies" below.

12
<PAGE>

See "Short-Term Government Fund--Risks Associated with an Investment in the
Fund" above for risks associated with investments in mortgage-backed
securities.

See "Bond Fund--Risks Associated with an Investment in the Fund" above for
risks associated with investments in asset-backed and fixed income securities.

See "Additional Risk Considerations--Risks Associated with Fixed Income
Investments" below for information concerning other pertinent risks.

GROWTH AND INCOME FUND

INVESTMENT OBJECTIVE

THE INVESTMENT OBJECTIVE OF THE GROWTH AND INCOME FUND IS TO SEEK BOTH
CAPITAL APPRECIATION AND CURRENT INCOME. THE FUND PURSUES THIS OBJECTIVE
THROUGH INVESTMENT IN A DIVERSIFIED PORTFOLIO OF EQUITY SECURITIES OF
COMPANIES WHICH REPRESENT EXCELLENT VALUE RELATIVE TO THEIR CURRENT PRICE AND
PROVIDE, ON AVERAGE, A CURRENT YIELD IN EXCESS OF THE S&P 500 STOCK INDEX.

INVESTMENT STRATEGY

In pursuing its investment objective the Fund will invest, under normal
market conditions, at least 65% of its total assets in equity securities,
including common stocks, preferred stocks and securities convertible into
common stocks. The Advisor will seek to acquire stocks of companies that
represent excellent value relative to their current price in that such
companies, in the aggregate, sell at a lower price-to-book value, a lower
price-to-earnings ratio, and a higher yield than the average of the companies
comprising the Standard & Poor's Composite Stock Price Index (the "S&P 500
Index"), an unmanaged Index which emphasizes large capitalization companies.
The Fund uses the S&P 500 Index as a benchmark for comparison because it
represents roughly two-thirds of the market value of all publicly traded
common stocks in the United States and is a widely accepted measure of common
stock investment returns. Although the Fund seeks to exceed the return of the
S&P 500 Index, the Fund may invest its assets in securities that are not
included in this Index. The Fund is not, therefore, an "index" fund, which
typically holds only securities that are included in the index it attempts to
replicate. The Fund will generally acquire equity securities of companies with
market capitalizations over $500 million. The Advisor anticipates that from
time to time certain industry sectors will not be represented in the Fund
while other sectors will represent a significant portion of invested assets.

In selecting stocks for the Fund, the Advisor employs a "bottom-up" security
analysis. "Bottom-up" security analysis refers to an analytical approach to
securities selection which first focuses on the company and company-related
matters as contrasted to a "top-down" analysis which first focuses on the
industry or the economy. The Advisor believes that a "bottom-up" approach is
more likely to identify attractive companies which might otherwise be
neglected or overlooked.

While emphasis will be placed on investments in equity securities, primarily
common stocks, the Fund may also invest in other types of equity securities,
including warrants and securities which are convertible into common or
preferred stocks and may participate in rights offerings. The Fund may also
invest, either directly or through investments in sponsored and unsponsored
ADRs, up to 10% of its total assets in the securities of foreign issuers. See
"Balanced Fund--Investment Strategy" above for a description of ADRs.

13
<PAGE>

See "Other Investment Practices" below for a description of other types of
securities in which the Fund below may invest.

RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND

Because the Fund may invest in securities issued by foreign issuers, it may
be subject to additional investment risks that are different in some respects
from those incurred by a fund which invests solely in securities of U.S.
domestic issuers. Such risks include foreign taxation, changes in currency
rates or currency brokerage, currency exchange costs and differences between
domestic and foreign legal, auditing, brokerage and economic standards. See
"Additional Risk Considerations--Risks Associated with Foreign Securities and
Currencies" below.

GROWTH FUND

INVESTMENT OBJECTIVE

THE INVESTMENT OBJECTIVE OF THE GROWTH FUND IS TO SEEK CAPITAL APPRECIATION
AND, SECONDARILY, CURRENT INCOME AND DIVIDEND GROWTH POTENTIAL. THE FUND
PURSUES THIS OBJECTIVE THROUGH INVESTMENT IN A DIVERSIFIED PORTFOLIO OF EQUITY
SECURITIES OF COMPANIES WITH THE POTENTIAL FOR ABOVE AVERAGE GROWTH IN
EARNINGS AND DIVIDENDS.

INVESTMENT STRATEGY

In pursuing its investment objective the Fund will invest, under normal
market conditions, at least 65% of its total assets in equity securities,
including common stocks, preferred stocks and securities convertible into
common stocks. The Advisor will seek to acquire stocks of companies that, in
the aggregate, will experience growth in sales, dividends or earnings per
share greater than the average of the companies comprising the S&P 500 Index,
an unmanaged Index which emphasizes large capitalization companies. The Fund
uses the S&P 500 Index as a benchmark for comparison because it represents
roughly two-thirds of the market value of all publicly traded common stocks in
the United States and is a widely accepted measure of common stock investment
returns. Although the Fund seeks to exceed the return of the S&P 500 Index,
the Fund may invest its assets in securities that are not included in this
Index. The Fund is not, therefore, an "index" fund, which typically holds only
securities that are included in the index it attempts to replicate. The Fund
will generally acquire equity securities of companies with market
capitalizations over $500 million. The Advisor anticipates that from time to
time certain industry sectors will not be represented in the Fund while other
sectors will represent a significant portion of invested assets.

In selecting stocks for the Fund, the Advisor employs a "bottom-up" security
analysis, as described under "Growth and Income Fund--Investment Strategy"
above.

14
<PAGE>

See "Other Investment Practices" below for a description of other types of
securities in which the Fund may invest.

RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND

MIDCAP FUND

INVESTMENT OBJECTIVE

THE INVESTMENT OBJECTIVE OF THE MIDCAP FUND IS TO SEEK LONG-TERM CAPITAL
APPRECIATION. THE FUND PURSUES THIS OBJECTIVE THROUGH INVESTMENT IN A
DIVERSIFIED PORTFOLIO OF EQUITY SECURITIES OF COMPANIES WITH MEDIUM-SIZED
MARKET CAPITALIZATIONS AND THE POTENTIAL FOR ABOVE AVERAGE EARNINGS GROWTH.

INVESTMENT STRATEGY

In pursuing its investment objective the Fund will, under normal market
conditions, invest at least 65% of its total assets in equity securities,
including common stocks, warrants and securities convertible into common or
preferred stock. The Fund may also participate in rights offerings. The Fund
will generally acquire equity securities of companies with market
capitalizations less than that of the largest company in the S&P 400 Mid-Cap
Index. The Advisor believes that the companies in which the Fund may invest
offer greater opportunity for growth of capital than larger, more mature
companies.

The Advisor selects common stocks of companies which, in its opinion, have
attractive fundamental financial characteristics. Such characteristics
include, as compared to the Standard & Poor's 400 Mid-Cap Index ("S&P Mid-Cap
Index"), market liquidity as measured by average daily trading volume,
profitability as measured by above average return on equity, and operating
consistency, as measured by above average earnings growth. The Advisor intends
to purchase securities of companies which, in its opinion, are the most
attractive in light of their expected earnings growth and relative valuation.
The S&P Mid-Cap Index is a capitalization-weighted index that measures the
performance of the mid-range sector of the U.S. stock market.

In selecting stocks for the MidCap Fund, the Advisor employs a "bottom-up"
security analysis, as described under "Growth and Income Fund--Investment
Strategy" above.

The Fund may also invest up to 10% of its total assets in the securities of
foreign issuers either directly or through investments in sponsored and
unsponsored ADRs. See "Balanced Fund--Investment Strategy" above for a
description of ADRs.

15
<PAGE>

See "Other Investment Practices" below for a description of other types of
securities in which the Fund may invest.

RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND

The securities of smaller companies may be subject to more abrupt or erratic
market movements than larger, more established companies, both because such
securities are typically traded in lower volume and because the issuers
typically are subject to a greater degree to changes in earnings and
prospects. The Fund's net asset value per share may be subject to rapid and
substantial changes. Additionally, such securities may not be traded every day
or in the volume typical of trading on a national securities exchange. As a
result, the disposition by the Fund of portfolio securities, to meet
redemptions or otherwise, may require the Fund to sell these securities at a
discount from market prices, to sell during periods when such disposition is
not desirable, or to make many small sales over a lengthy period of time.

See "Additional Risk Considerations--Risks Associated with Foreign
Securities and Currencies" below for information concerning other pertinent
risks.

INTERNATIONAL EQUITY FUND

INVESTMENT OBJECTIVE

THE INVESTMENT OBJECTIVE OF THE INTERNATIONAL EQUITY FUND IS TO SEEK TOTAL
RETURN WITH AN EMPHASIS ON GROWTH OF CAPITAL. THE FUND PURSUES THIS OBJECTIVE
THROUGH INVESTMENT IN A DIVERSIFIED PORTFOLIO OF COMMON STOCKS OF ESTABLISHED
FOREIGN COMPANIES.

INVESTMENT STRATEGY

In pursuing its investment objective, the Fund will, under normal market
conditions, invest at least 65% of its total assets in common stocks of
established companies that conduct their principal activities or are domiciled
outside the United States or whose securities are traded on a foreign
exchange. The Fund may also invest in other types of securities, including
securities convertible into common stocks or preferred stocks, warrants and
bonds, notes and other debt securities of U.S. and foreign corporations and
governmental issuers. Under normal market conditions, the Fund will invest in
equity securities of companies in at least three different foreign countries.
Countries in which the Fund may invest include, but are not limited to:
Argentina, Australia, Austria, Bangladesh, Belgium, Botswana, Brazil, Canada,
Chile, China, Czech Republic, Denmark, Finland, France, Germany, Hong Kong,
Hungary, India, Israel, Italy, Japan, Jordan, Korea, Malaysia, Mexico, the
Netherlands, New Zealand, Norway, Portugal, Singapore, South Africa, Spain,
Sweden, Switzerland, Thailand and the United Kingdom. The Fund may invest in
developed as well as developing countries. The domicile or the location of the
principal activities of a company will be the country under whose laws the
company is organized, in which the principal trading market for the equity
securities issued by the company is located, or in which the company has over
half of its assets or derives over half of its revenues or profits.

The International Equity Fund may invest without limitation in securities of
foreign issuers in the form of sponsored and unsponsored ADRs and European
Depository Receipts ("EDRs"). EDRs are receipts issued by European financial
institutions evidencing the ownership of underlying securities issued by a
foreign issuer. EDR prices are generally denominated in foreign currencies as
are the securities underlying an EDR. See "Balanced Fund--Investment Strategy"
above for a description of ADRs.

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The International Equity Fund may also invest up to 10% of its total assets
in hybrid investments. These instruments, which are derivatives, combine the
characteristics of securities, futures and options. Generally, a hybrid
instrument will be a debt security, preferred stock, depository share, trust
certificate, certificate of deposit or other evidence of indebtedness on which
a portion of or all interest payments and/or the principal or stated amount
payable at maturity, redemption or retirement, is determined by reference to
prices or differences between prices of securities, currencies, intangibles,
goods, articles or commodities or by another objective index, economic factor
or other measure such as interest rates, currency exchange rates or other
indices. For example, the principal amount, redemption or conversion terms of
a security could be related to the market price of some commodity, currency or
securities index. Such securities may bear interest or pay dividends at below
market (or even relatively nominal) rates. Under certain conditions, the
redemption value of such an investment could be zero. Hybrids can have
volatile prices and limited liquidity and, accordingly, their use by the Fund
may not enhance investment return.

See "Other Investment Practices" below for a description of other types of
securities in which the Fund may invest.

RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND

Although investment in any mutual fund has certain inherent risks, an
investment in the International Equity Fund may have even greater risks than
investments in most other types of mutual funds. The International Equity Fund
may not be appropriate for an investor if the investor cannot bear financially
the loss of at least a significant portion of the investment. Investors should
understand that in addition to the International Equity Fund's volatile net
asset value per share, the expense ratios of the Fund can be expected to be
higher than those of Funds investing primarily in domestic securities. The
costs attributable to investing abroad are usually higher for several reasons,
such as the higher cost of investment research, higher cost of custody of
foreign securities, higher commissions paid on comparable transactions on
foreign markets and additional costs arising from delays in settlements of
transactions involving foreign securities.

The International Equity Fund may invest its assets in countries with
emerging economies or securities markets. These countries are located in the
Asia-Pacific region, Eastern Europe, Latin and South America and Africa.
Political and economic structures in many of such countries may be undergoing
significant evolution and rapid development, and such countries may lack the
social, political and economic stability characteristic of more developed
countries. Some of these countries may have failed in the past to recognize
private property rights and at times have nationalized or expropriated the
assets of private companies. As a result, the risks described above, including
the risks of nationalization or expropriation of assets, may be heightened. In
addition, unanticipated political or social developments may affect the value
of a Fund's investments in those countries and the availability of additional
investments in those countries. The small size and inexperience of the
securities markets in certain countries and the limited volume of trading in
securities in those countries may make the Fund's investments in such
countries illiquid and more volatile than investments in Japan or most Western
European countries. The Fund may also be required to establish special
custodial or other arrangements before making certain investments in those
countries. There may be little financial or accounting information available
with respect to issuers located in certain of such countries, and it may be
difficult as a result to assess the value or prospects of an investment in
such issuers.

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ADDITIONAL RISK CONSIDERATIONS

RISKS ASSOCIATED WITH FIXED INCOME INVESTMENTS

Generally, the market value of fixed income securities in the Funds can be
expected to vary inversely to changes in prevailing interest rates. Investors
should also recognize that, in periods of declining interest rates, the yields
of investment funds composed primarily of fixed income securities will tend to
be higher than prevailing market rates and, in periods of rising interest
rates, yields will tend to be somewhat lower. Zero coupon bonds are subject to
greater market fluctuations from changing interest rates than debt obligations
of comparable maturities which make current distributions of interest. Debt
securities with longer maturities, which tend to produce higher yields, are
subject to potentially greater capital appreciation and depreciation than
obligations with shorter maturities. Changes in the financial strength of an
issuer or changes in the ratings of any particular security may also affect
the value of these investments. Fluctuations in the market value of fixed
income securities subsequent to their acquisition will not affect cash income
from such securities but will be reflected in a Fund's net asset value.

RISKS ASSOCIATED WITH FOREIGN SECURITIES AND CURRENCIES

The International Equity Fund intends to invest primarily in the securities
of foreign issuers. In addition, as described above, the Bond, Balanced,
Growth and Income, Growth and MidCap Funds also may invest a portion of their
assets in the securities of foreign issuers.

Investment in foreign securities involves special risks including market
risk, foreign currency risk, interest rate risk and the risks of investing in
securities of foreign issuers and of companies whose securities are
principally traded outside the United States. Market risk involves the
possibility that stock prices will decline over short or extended periods.
Stock markets tend to be cyclical, with alternate periods of generally rising
and generally declining prices. In addition, the performance of investments in
securities denominated in a foreign currency will depend on the strength of
the foreign currency against the U.S. dollar and the interest rate environment
in the country issuing the currency. Absent other events which could otherwise
affect the value of a foreign security (such as a change in the political
climate or an issuer's credit quality), appreciation in the value of the
foreign currency generally can be expected to increase the value of a foreign
currency-denominated security in terms of U.S. dollars. An increase in foreign
interest rates or a decline in the value of the foreign currency relative to
the U.S. dollar generally can be expected to depress the value of a foreign
currency-denominated security.

There are other risks and costs involved in investing in foreign securities
which are in addition to the usual risks inherent in domestic investments.
Investment in foreign securities involves higher costs than investment in U.S.
securities, including higher transaction and custody costs as well as the
imposition of additional taxes by foreign governments. Foreign investments
also involve risks associated with the level of currency exchange rates, less
complete financial information about the issuers, less market liquidity, more
market volatility and political instability. Future political and economic
developments, the possible imposition of withholding taxes, the possible
seizure or nationalization of foreign holdings, the possible establishment of
exchange controls, or the adoption of other governmental restrictions might
adversely affect an investment in foreign securities. Additionally, foreign
banks and foreign branches of domestic banks are subject to less stringent
reserve requirements, and to different accounting, auditing and recordkeeping
requirements.

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The Bond and Balanced Funds may invest in foreign debt or in the securities
of foreign governments. The risks of such investments include the risk that
foreign governments may default on their obligations, may not respect the
integrity of such debt, may attempt to renegotiate the debt at a lower rate
and may not honor investments by United States entities or citizens.

The Balanced, Growth and Income, Growth, MidCap and International Equity
Funds may invest in ADRs, some of which may not be sponsored by the issuing
institution. A non-sponsored depository may not be required to disclose
material information that a sponsored depository would be required to provide
under its contractual relationship with the issuer. Accordingly, there may not
be a correlation between such information and the market value of such
securities.

Although a Fund may invest in securities denominated in foreign currencies,
its portfolio securities and other assets are valued in U.S. dollars. Currency
exchange rates may fluctuate significantly over short periods of time causing,
together with other factors, a Fund's net asset value to fluctuate as well.
Currency exchange rates generally are determined by the forces of supply and
demand in the foreign exchange markets and the relative merits of investments
in different countries, actual or anticipated changes in interest rates and
other complex factors, as seen from an international perspective. Currency
exchange rates also may be affected unpredictably by the intervention or the
failure to intervene by U.S. or foreign governments or central banks, or by
currency controls or political developments in the U.S. or abroad. To the
extent that a Fund's total assets, adjusted to reflect the Fund's net position
after giving effect to currency transactions, are denominated in the
currencies of foreign countries, the Fund will be more susceptible to the risk
of adverse economic and political developments within those countries. In
addition, the respective net currency positions of the International Equity
Fund may expose it to risks independent of its securities positions. Although
the net long and short foreign currency exposure of the International Equity
Fund will not exceed its total asset value, to the extent that the Fund is
fully invested in foreign securities while also maintaining currency
positions, it may be exposed to greater risk than it would have if it did not
maintain the currency positions. The Funds investing in foreign securities are
also subject to the possible imposition of exchange control regulations or
freezes on convertibility of currency.

Dividends, capital gains and interest payable on a Fund's foreign portfolio
securities may be subject to foreign withholding taxes. To the extent such
taxes are not offset by credits or deductions allowed to investors under U.S.
federal income tax law, they may reduce the net return to the shareowners.

OTHER INVESTMENT PRACTICES

ZERO COUPON BONDS

Each Fund may acquire zero coupon bonds. Such obligations will not result in
the payment of interest until maturity and typically have greater price
volatility than coupon obligations. A Fund will accrue income on such
investments for tax and accounting purposes, as required, which is
distributable to shareowners and which, because no cash is received at the
time of accrual, may require the liquidation of other portfolio securities to
satisfy the Fund's distribution obligations. These actions may occur under
disadvantageous circumstances and may reduce a Fund's assets, thereby
increasing its expense ratio and decreasing its rate of return. Zero coupon
bonds are subject to greater market fluctuations from changing interest rates
than debt obligations of comparable maturities which make current
distributions of interest.

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U.S. GOVERNMENT OBLIGATIONS

Each Fund may invest in U.S. Government Obligations. Examples of the types
of U.S. Government Obligations which may be held by the Funds include, in
addition to U.S. Treasury bonds, notes and bills, the obligations of Federal
Home Loan Banks, Federal Farm Credit Banks, Federal Land Banks, the Federal
Housing Administration, Farmers Home Administration, Export-Import Bank of the
United States, Small Business Administration, Government National Mortgage
Association, Federal National Mortgage Association, General Services
Administration, Student Loan Marketing Association, Central Bank for
Cooperatives, Federal Home Loan Mortgage Corporation, Federal Intermediate
Credit Banks and Maritime Administration. Obligations of certain agencies and
instrumentalities of the U.S. Government, such as those of the Government
National Mortgage Association, are supported by the right of the issuer to
borrow from the Treasury; others, such as those of the Federal National
Mortgage Association, are supported by the discretionary authority of the U.S.
Government to purchase the agency's obligations; still others, such as those
of the Student Loan Marketing Association, are supported only by the credit of
the instrumentality. No assurance can be given that the U.S. Government would
provide financial support to U.S. Government-sponsored instrumentalities if it
is not obligated to do so by law.

WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS

Each Fund may purchase securities on a "when-issued" basis and may purchase
or sell securities on a "forward commitment" basis. These transactions, which
involve a commitment by a Fund to purchase or sell particular securities with
payment and delivery taking place at a future date (perhaps one or two months
later), permit the Fund to lock in a price or yield on a security it owns or
intends to purchase, regardless of future changes in interest rates. When-
issued and forward commitment transactions involve the risk, however, that the
yield obtained in a transaction (and therefore the value of the security) may
be less favorable than the yield (and therefore the value of the security)
available in the market when the securities delivery takes place. A Fund is
required to hold and maintain in a segregated account until the settlement
date cash, U.S. Government securities or liquid assets, as permitted by
applicable law, in an amount sufficient to meet the purchase price. No Fund
intends to engage in when-issued purchases and forward commitments for
speculative purposes.

INTEREST RATE SWAPS, MORTGAGE SWAPS, CAPS AND FLOORS

In order to hedge against fluctuations in interest rates, the Short-Term
Government, Bond and Balanced Funds may enter into interest rate swaps,
mortgage swaps and other types of swap agreements such as caps and floors.
Interest rate swaps involve the exchange by a Fund with another party of their
respective commitments to pay or receive interest, such as an exchange of
fixed rate payments for floating rate payments. Mortgage swaps are similar to
interest rate swaps in that they represent commitments to pay and receive
interest. The notional principal amount, however, is tied to a reference pool
or pools of mortgages. In a typical cap or floor agreement, one party agrees
to make payments only under specified circumstances, usually in return for
payment of a fee by the other party. For example, the buyer of an interest
rate cap obtains the right to receive payment to the extent that a specified
interest rate exceeds an agreed-upon level, while the seller of an interest
rate floor is obligated to make payments to the extent that a specified
interest rate falls below an agreed-upon level. Since interest rate swaps,
mortgage swaps, caps and floors are individually negotiated, a Fund expects to
achieve an acceptable degree of correlation between its portfolio investments
and its swap, cap and floor positions.

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A Fund will enter into interest rate and mortgage swaps only on a net basis,
which means that the two payment streams are netted out, with the Fund
receiving or paying, as the case may be, only the net amount of the two
payments. A Fund will maintain cash, U.S. Government securities and liquid
assets, as permitted by applicable law, equal to the net amount, if any, of
the excess of the Fund's obligations over its entitlements with respect to
swap transactions in a segregated account with its custodian. Interest rate
and mortgage swaps do not involve the delivery of securities, other underlying
assets or principal. Accordingly, the risk of loss with respect to interest
rate and mortgage swaps is limited to the net amount of interest payments that
a Fund is contractually obligated to make. If the other party to an interest
rate or mortgage swap defaults, a Fund's risk of loss consists of the net
amount of interest payments that the Fund is contractually entitled to
receive. To the extent that the net amount of an interest rate or mortgage
swap is held in a segregated account consisting of cash, U.S. Government
securities and liquid assets, as permitted by applicable law, the Funds and
the Advisor believe that such swaps will not constitute senior securities
under the 1940 Act and, accordingly, will not treat them as being subject to
the Funds' borrowing restriction.

The use of interest rate swaps, mortgage swaps, caps and floors is a highly
specialized activity which involves investment techniques and risks different
from those associated with ordinary portfolio securities transactions. If the
Advisor is incorrect in its forecasts of market values and interest rates, the
investment performance of a Fund would be less favorable than it would have
been if these investment techniques were not used. The staff of the Securities
and Exchange Commission ("SEC") currently takes the position that swaps, caps
and floors are illiquid for purposes of a Fund's limitation on illiquid
securities.

MORTGAGE-RELATED SECURITIES

The Short-Term Government, Bond and Balanced Funds may invest in mortgage-
related securities. Purchasable mortgage-related securities are represented by
pools of mortgage loans assembled for sale to investors by various
governmental agencies such as the Government National Mortgage Association and
government-related organizations such as the Federal National Mortgage
Association ("FNMA") and the Federal Home Loan Mortgage Corporation ("FHLMC"),
as well as by private issuers such as commercial banks, savings and loan
institutions, mortgage bankers and private mortgage insurance companies.
Although certain mortgage-related securities are guaranteed by a third party
or are otherwise similarly secured, the market value of the security, which
may fluctuate, is not so secured. If a Fund purchases a mortgage-related
security at a premium, that portion may be lost if there is a decline in the
market value of the security whether resulting from increases in interest
rates or prepayment of the underlying mortgage collateral. As with other
interest-bearing securities, the prices of such securities are inversely
affected by changes in interest rates. However, though the value of a
mortgage-related security may decline when interest rates rise, the converse
is not necessarily true because mortgages underlying securities are prone to
prepayment in periods of declining interest rates. For this and other reasons,
a mortgage-related security's maturity may be shortened by unscheduled
prepayments on underlying mortgages and, therefore, it is not possible to
accurately predict the security's return to a Fund. Mortgage-related
securities provide regular payments consisting of interest and principal. No
assurance can be given as to the return a Fund will receive when these amounts
are reinvested.

Mortgage-related securities acquired by a Fund may include collateralized
mortgage obligations ("CMOs"), a type of derivative, issued by FNMA, FHLMC or
other U.S. Government agencies or instrumentalities, as well as by private
issuers. CMOs provide an investor with a specified interest in the

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cash flow of a pool of underlying mortgages or other mortgage-related
securities. Issuers of CMOs frequently elect to be taxed as pass-through
entities known as real estate mortgage investment conduits ("REMICs"). CMOs
are issued in multiple classes, each with a specified fixed or floating
interest rate and a final distribution date. The relative payment rights of
the various CMO classes may be structured in many ways. Generally, payments of
principal are applied to the CMO classes in the order of their respective
stated maturities, so that no principal payments will be made on a CMO class
until all other classes having an earlier stated maturity date are paid in
full. Sometimes, however, CMO classes are "parallel pay," i.e. payments of
principal are made to two or more classes concurrently.

CMOs may involve additional risks other than those found in other types of
mortgage-related obligations. CMOs may exhibit more price volatility and
interest rate risk than other types of mortgage-related obligations. During
periods of rising interest rates, CMOs may lose their liquidity as CMO market
makers may choose not to repurchase, or may offer prices, based on current
market conditions, which are unacceptable to a Fund based on the Fund's
analysis of the market value of the security.

ASSET-BACKED SECURITIES

The Bond and Balanced Funds may purchase asset-backed securities issued by
either governmental or non-governmental entities which represent a
participation in, or are secured by and payable from, a stream of payments
generated by particular assets, most often a pool of assets similar to one
another. Primarily, these securities do not have the benefit of the same
security interest in the underlying collateral. Payment on asset-backed
securities of private issues is typically supported by some form of credit
enhancement, such as a letter of credit, surety bond, limited guaranty, or
subordination. Assets generating such payments will consist of such
instruments as motor vehicle installment purchase obligations, credit card
receivables and home equity loans. Each of these Funds may also invest in
other types of asset-backed securities that may be available in the future.

The yield characteristics of asset-backed securities differ from traditional
debt securities. A major difference is that the principal amount of the
obligations may be prepaid at any time because the underlying assets (i.e.,
loans) generally may be prepaid at any time. As a result, if an asset-backed
security is purchased at a premium, a prepayment rate that is faster than
expected will reduce yield to maturity, while a prepayment rate that is slower
than expected will have the opposite effect of increasing yield to maturity.
Conversely, if an asset-backed security is purchased at a discount, faster
than expected payments will increase, while slower than expected prepayments
will decrease, yield to maturity. In calculating the average weighted maturity
of a Fund, the maturity of asset-backed securities will be based on estimates
of average life.

Prepayments on asset-backed securities generally increase with falling
interest rates and decrease with rising interest rates. Furthermore,
prepayment rates are influenced by a variety of economic and social factors.
In general, the collateral supporting non-mortgage asset-backed securities is
of a shorter maturity than mortgage loans and is less likely to experience
substantial prepayments. Like other fixed income securities, when interest
rates rise the value of an asset-backed security generally will decline;
however, when interest rates decline, the value of an asset-backed security
with prepayment features may not increase as much as that of other fixed
income securities.

Asset-backed securities may involve certain risks that are not presented by
mortgage-backed securities arising primarily from the nature of the underlying
assets (e.g., credit card and automobile loan receivables as opposed to real
estate mortgages). Ultimately, asset-backed securities are dependent upon

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payment of the consumer loans or receivables by individuals, and the
certificate holder frequently has no recourse against the entity that
originated the loans or receivables. Credit card receivables are generally
unsecured and the debtors are entitled to the protection of a number of state
and federal consumer credit laws, many of which have given debtors the right
to set off certain amounts owed on the credit cards, thereby reducing the
balance due. In addition, default may require repossession of the personal
property of the debtor which may be difficult or impossible in some cases.
Most issuers of automobile receivables permit the servicers to return
possession of the underlying obligations. If the servicers were to sell these
obligations to another party, there is a risk that the purchaser would acquire
an interest superior to that of the holders of the related automobile
receivables. In addition, because of the number of vehicles involved in a
typical issuance and technical requirements under state law, the trustee for
the automobile receivables may not have an effective security interest in all
of the obligations backing such receivables. Therefore, there is a possibility
that recoveries of repossessed collateral may not, in some cases, be able to
support payments on these securities.

Asset-backed securities may be subject to greater risk of default during
periods of economic downturn than other instruments. Also, the secondary
market for certain asset-backed securities may not be as liquid as the market
for other types of securities, which could result in a Fund's experiencing
difficulty in valuing or liquidating such securities. In certain
circumstances, asset-backed securities may be considered illiquid securities
subject to the percentage limitations described below under "Illiquid
Securities."

MORTGAGE DOLLAR ROLLS

The Short-Term Government, Bond and Balanced Funds may enter into mortgage
"dollar rolls" in which a Fund sells securities for delivery in the current
month and simultaneously contracts with the same counterparty to repurchase
similar (same type, coupon and maturity) but not identical securities on a
specified future date. A Fund gives up the right to receive principal and
interest paid on the securities sold. However, a Fund would benefit to the
extent of any difference between the price received for the securities sold
and the lower forward price for the future purchase (often referred to as the
"drop") or fee income plus the interest earned on the cash proceeds of the
securities sold until the settlement date of the forward purchase. Unless such
benefits exceed the income, capital appreciation, and gain or loss due to
mortgage prepayments that would have been realized on the securities sold as
part of the mortgage dollar roll, the use of this technique will diminish the
investment performance of a Fund. A Fund will hold and maintain in a
segregated account until the settlement date cash or liquid assets, as
permitted by applicable law, in an amount equal to the forward purchase price.
The benefits derived from the use of mortgage dollar rolls may depend upon the
Advisor's ability to correctly predict mortgage prepayments and interest
rates. There is no assurance that mortgage dollar rolls can be successfully
employed.

For financial reporting and tax purposes, each Fund proposes to treat
mortgage dollar rolls as two separate transactions; one transaction involving
the purchase of a security and a separate transaction involving a sale. No
Fund currently intends to enter into mortgage dollar rolls that are accounted
for as a financing.

STRIPPED SECURITIES

The Bond and Balanced Funds may invest in instruments known as "stripped"
securities. These instruments include U.S. Treasury bonds and notes and
federal agency obligations on which the

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<PAGE>

unmatured interest coupons have been separated from the underlying obligation.
Such obligations are usually issued at a discount to their "face value," and
because of the manner in which principal and interest are returned may exhibit
greater price volatility than more conventional debt securities. The Funds may
invest in "interest only" stripped securities that have been issued by a
federal instrumentality known as the Resolution Funding Corporation and other
stripped securities issued or guaranteed by the U.S. Government, where the
principal and interest components are traded independently under the Separate
Trading of Registered Interest and Principal Securities program ("STRIPS").
Under STRIPS, the principal and interest components are individually numbered
and separately issued by the U.S. Treasury at the request of depository
financial institutions, which then trade the component parts independently.
Each of these Funds may also invest in instruments that have been stripped by
their holder, typically a custodian bank or investment brokerage firm, and
then resold in a custodian receipt program under names such as TIGRs and CATS.

Although stripped securities do not pay interest to their holders before
they mature, federal income tax rules require a Fund each year to recognize a
part of the discount attributable to a security as interest income. This
income must be distributed along with the other income a Fund earns. To the
extent shareowners request that they receive their dividends in cash rather
than reinvesting them, the money necessary to pay those dividends must come
from the assets of a Fund or from other sources such as proceeds from sales of
Fund shares and/or sales of portfolio securities. The cash so used would not
be available to purchase additional income-producing securities, and a Fund's
current income could ultimately be reduced as a result.

In addition, the Bond and Balanced Funds may purchase stripped mortgage-
backed securities ("SMBS") issued by the U.S. Government (or a U.S. Government
agency or instrumentality) or by private issuers such as banks and other
institutions. SMBS, in particular, may exhibit greater price volatility than
ordinary debt securities because of the manner in which their principal and
interest are returned to investors. If the underlying obligations experience
greater than anticipated prepayments of principal, a Fund may fail to fully
recoup its initial investment. The market value of the class consisting
entirely of principal payments can be extremely volatile in response to
changes in interest rates. The yields on a class of SMBS that receives all or
most of the interest are generally higher than prevailing market yields on
other mortgage-backed obligations because their cash flow patterns are also
volatile and there is a greater risk that the initial investment will not be
fully recouped. SMBS issued by the U.S. Government (or a U.S. Government
agency or instrumentality) may be considered liquid under guidelines
established by the Board of Trustees if they can be disposed of promptly in
the ordinary course of business at a value reasonably close to that used in
the calculation of a Fund's per share net asset value.

REPURCHASE AGREEMENTS

Each Fund may enter into repurchase agreements under which it buys a
security and obtains a simultaneous commitment from the seller to repurchase
the security at a specified time and price. The seller must maintain with a
Fund's custodian collateral equal to at least 100% of the repurchase price
including accrued interest as monitored daily by the Advisor. If the seller
under the repurchase agreement defaults, a Fund may incur a loss if the value
of the collateral securing the repurchase agreement has declined and may incur
disposition costs in connection with liquidating the collateral. If bankruptcy
proceedings are commenced with respect to the seller, liquidation of the
collateral by a Fund may be delayed or limited.

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REVERSE REPURCHASE AGREEMENTS

Each Fund may borrow money for temporary purposes by entering into
transactions called reverse repurchase agreements. Under these agreements a
Fund sells portfolio securities to a financial institution (such as a bank or
broker-dealer) and agrees to buy them back later at an agreed upon time and
price. When a Fund enters into a reverse repurchase agreement, it places in a
separate custodial account liquid assets, as permitted by applicable law, that
have a value equal to or greater than the repurchase price. The account is
then continuously monitored by the Advisor to make sure that an appropriate
value is maintained. Reverse repurchase agreements involve the risk that the
value of portfolio securities a Fund relinquishes may decline below the price
the Fund must pay on the repurchase date. A Fund will only enter into reverse
repurchase agreements to avoid the need to sell its securities to meet
redemption requests during unfavorable market conditions. As reverse
repurchase agreements are deemed to be borrowings by the SEC, each Fund is
required to maintain continuous asset coverage of 300%. Should the value of a
Fund's assets decline below 300% of borrowings, a Fund may be required to sell
portfolio securities within three days to reduce the Fund's debt and restore
300% asset coverage.

VARIABLE AND FLOATING RATE INSTRUMENTS

Instruments purchased by the Funds may include variable and floating rate
demand instruments issued by corporations, industrial development authorities
and governmental entities. Although variable and floating rate demand
instruments are frequently not rated by credit rating agencies, unrated
instruments purchased by a Fund will be determined to be of comparable quality
to rated instruments that may be purchased by the Fund. While there may be no
active secondary market with respect to a particular variable or floating rate
instrument purchased by a Fund, the Fund may, from time to time as specified
in the instrument, demand payment in full of the principal of the instrument
or may resell the instrument to a third party. The absence of such an active
secondary market, however, could make it difficult for a Fund to dispose of a
variable or floating rate demand instrument if the issuer defaulted on its
payment obligations or during periods that the Fund is not entitled to
exercise its demand rights, and the Fund could, for these or other reasons,
suffer a loss. Variable and floating rate instruments with no active secondary
market and with notice/termination dates in excess of seven days will be
included in the calculation of a Fund's illiquid assets.

SECURITIES ISSUED BY OTHER INVESTMENT COMPANIES

Each Fund may invest in securities issued by other investment companies
within the limits prescribed by the 1940 Act. Each Fund currently intends to
limit its investments so that, as determined immediately after a purchase is
made: (a) not more than 5% of the value of its total assets will be invested
in the securities of any one investment company; (b) not more than 10% of the
value of its total assets will be invested in the aggregate in securities of
investment companies as a group; (c) not more than 3% of the outstanding
voting stock of any one investment company will be owned by the Fund; and (d)
not more than 10% of the outstanding voting stock of any one investment
company will be owned in the aggregate by the Fund and other investment
companies advised by the Advisor, or any affiliate of Commerce Bancshares,
Inc. As a shareowner of another investment company, a Fund would bear, along
with other shareowners, its pro rata portion of the expenses of such other
investment company, including advisory fees. These expenses would be in
addition to the advisory and other expenses that a Fund bears directly in
connection with its own operations and may represent a duplication of fees to
shareowners of the Fund.

25
<PAGE>

ILLIQUID SECURITIES

Each Fund may invest up to 15% of the value of its net assets in illiquid
securities, including securities having legal or contractual restrictions on
resale or no readily available market (including repurchase agreements,
variable and floating rate instruments and time deposits with
notice/termination dates in excess of seven days, SMBS issued by private
issuers, interest rate and currency swaps and certain securities which are
subject to trading restrictions because they are not registered under the
Securities Act of 1933 (the "1933 Act")).

If otherwise consistent with its investment objective and policies, each
Fund may purchase commercial paper issued pursuant to Section 4(2) of the 1933
Act and securities that are not registered under the 1933 Act but can be sold
to "qualified institutional buyers" in accordance with Rule 144A under the
1933 Act. These securities will not be considered illiquid so long as the
Advisor determines, under guidelines approved by the Board of Trustees, that
an adequate trading market exists. A Fund's investment in Rule 144A securities
could increase the level of illiquidity during any period that qualified
institutional buyers become uninterested in purchasing these securities.

SECURITIES LENDING

To increase return on portfolio securities, each Fund may lend its
securities to broker/dealers and other institutional investors pursuant to
agreements requiring that the loans be continuously secured by collateral
equal in value at all times to at least the market value of the securities
loaned. Such loans will not be made if, as a result, the aggregate of all
outstanding loans exceeds 33 1/3% of the value of a Fund's total assets. There
may be risks of delay in receiving additional collateral or in recovering the
securities loaned or even a loss of rights in the collateral should the
borrower of the securities fail financially. However, loans are made only to
borrowers deemed by the Advisor to be of good standing and when, in its
judgment, the income to be earned from the loan justifies the attendant risks.

OPTIONS AND FUTURES CONTRACTS

Each Fund may purchase put and call options and may write covered call and
secured put options which will be listed on a national securities exchange and
issued by the Options Clearing Corporation. Such options may relate to
particular securities, and various stock indexes or currencies. The Bond,
Balanced, Growth and Income, Growth, MidCap and International Equity Funds may
also invest in futures contracts and options on futures, index futures
contracts or interest rate futures contracts, as applicable for hedging
purposes or to seek to increase total return. The International Equity Fund
may also invest in currency futures contracts. A Fund may not purchase or sell
futures contracts or options on futures contracts to increase total return
unless immediately after any such transaction the aggregate amount of premiums
paid for put options and the amount of margin deposits on its existing futures
positions do not exceed 5% of the total assets of the Fund. Purchasing options
is a specialized investment technique that may entail the risk of a complete
loss of the amounts paid as premiums to the writer of the option.

26
<PAGE>

Government securities in an amount not less than the exercise price of the
option at all times during the option period. In order to close out these
types of option positions, a Fund will be required to enter into a "closing
purchase transaction"--the purchase of a call or put option (depending upon
the position being closed out) on the same security with the same exercise
price and expiration date as the option that it previously wrote. The
aggregate value of securities subject to options written by the Bond, Balanced
and International Equity Funds will not exceed 5% of the respective Fund's
total assets. The aggregate value of securities subject to options written by
the Growth and Income, Growth and MidCap Funds will not exceed 25% of the
respective Fund's total assets.

By writing a covered call option, a Fund forgoes the opportunity to profit
from an increase in the market price of the underlying security above its
exercise price except insofar as the premium represents such a profit, and it
is not able to sell the underlying security until the option expires or is
exercised or a Fund effects a closing purchase transaction by purchasing an
option of the same series. If a Fund writes a secured put option, it assumes
the risk of loss should the market value of the underlying security decline
below the exercise price of the option. The use of covered call and secured
put options will not be a primary investment technique of any Fund, and they
are expected to be used infrequently. If the Advisor is incorrect in its
forecast for the underlying security or other factors when writing the
foregoing options, a Fund would be in a worse position than it would have been
had the foregoing investment techniques not been used.

In contrast to an option on a particular security, an option on an index
provides the holder with the right to make or receive a cash settlement upon
exercise of the option. The amount of this settlement will be equal to the
difference between the closing price of the index at the time of exercise and
the exercise price of the option expressed in dollars, times a specified
multiple.

To enter into a futures contract, a Fund must make a deposit of initial
margin with its custodian in a segregated account in the name of its futures
broker. Subsequent payments to or from the broker, called variation margin,
will be made on a daily basis as the price of the underlying security or index
fluctuates, making the long and short positions in the futures contracts more
or less valuable.

The risks related to the use of options and futures contracts include: (i)
the correlation between movements in the market price of the portfolio
investments (held or intended for purchase) being hedged and in the price of
the futures contract or option may be imperfect; (ii) possible lack of a
liquid secondary market for closing out options or futures positions; (iii)
the need for additional fund management skills and techniques; and (iv) losses
due to unanticipated market movements. Successful use of options and futures
by a Fund is subject to the Advisor's ability to correctly predict movements
in the direction of stock prices, interest rates and other economic factors.
For example, if a Fund uses futures contracts as a hedge against the
possibility of a decline in the market adversely affecting securities held by
it and securities prices increase instead, the Fund will lose part or all of
the benefit of the increased value of its securities which it has hedged
because it will have approximately equal offsetting losses in its futures
positions. The risk of loss in trading futures contracts in some strategies
can be substantial and is potentially unlimited, due both to the low margin
deposits required, and the extremely high degree of leverage involved in
futures pricing. As a result, a relatively small price movement in a futures
contract may result in immediate and substantial loss or gain to a Fund. Thus,
a purchase or sale of a futures contract may result in losses or gains in
excess of the amount invested in the contract.

For additional information and a description of the risks relating to option
and futures contract trading practices, see the Statement of Additional
Information.

27
<PAGE>

FORWARD CURRENCY EXCHANGE CONTRACTS

The International Equity Fund may enter into forward currency exchange
contracts in an effort to hedge all or any portion of its portfolio positions.
Specifically, foreign currency contracts may be used for this purpose to
reduce the level of volatility caused by changes in foreign currency exchange
rates or when such transactions are economically appropriate for the reduction
of risks in the ongoing management of the Fund. The Fund may also enter into
foreign currency exchange contracts to seek to increase total return when the
Advisor anticipates that a foreign currency will appreciate or depreciate in
value, but securities denominated in that currency do not present attractive
investment opportunities and are not held by the Fund. In addition, the
International Equity Fund may engage in cross-hedging by using forward
contracts in one currency to hedge against fluctuations in the value of
securities denominated in a different currency if the Advisor believes that
there is a pattern of correlation between the two currencies. A forward
currency exchange contract is an obligation to purchase or sell a specific
currency at a future date, which may be any fixed number of days from the date
of the contract agreed upon by the parties, at a price set at the time of
contract. Although the contracts may be used to minimize the risk of loss due
to a decline in the value of the hedged currency, at the same time they tend
to limit any potential gain that might be realized should the value of such
currency increase. In connection with its forward currency exchange contracts,
the Fund will create a segregated account of liquid assets, such as cash, U.S.
Government securities or other liquid assets, as permitted by applicable law,
or will otherwise cover its position in accordance with applicable
requirements of the SEC.

CONVERTIBLE SECURITIES

The Bond, Balanced, Growth and Income, Growth, MidCap and International
Equity Funds may invest in convertible securities, including bonds, notes and
preferred stock, that may be converted into common stock either at a stated
price or within a specified period of time. With investment in convertible
securities, a Fund may be looking for the opportunity, through the conversion
feature, to participate in the capital appreciation of the common stock into
which the securities are convertible, while earning higher current income than
is available from alternative investments.

MUNICIPAL OBLIGATIONS

The Bond and Balanced Funds may invest in Municipal Obligations from time to
time when the yield spread between taxable corporate and municipal obligations
is deemed by the Advisor to be advantageous. The two principal classifications
of Municipal Obligations which may be held by the Funds are "general
obligation" securities and "revenue" securities. General obligation securities
are secured by the issuer's pledge of its full faith, credit and taxing power
for the payment of principal and interest. Revenue securities are payable only
from the revenues derived from a particular facility or class of facilities
or, in some cases, from the proceeds of a special excise tax or other specific
revenue source such as the issuer of the facility being financed. Private
activity bonds (e.g., bonds issued by industrial development authorities) that
are issued by or on behalf of public authorities to finance various privately-
operated facilities are included within the term "Municipal Obligations" if
the interest paid thereon is exempt from regular federal income tax. Private
activity bonds are in most cases revenue securities and are not payable from
the unrestricted revenues of the issuer. The credit quality of such bonds is
usually directly related to the credit standing of the corporate user of the
facility involved.

28
<PAGE>

Each of these Funds may also hold "moral obligation" securities, which are
normally issued by special purpose public authorities. If the issuer of moral
obligation securities is unable to meet its debt service obligations from
current revenues, it may draw on a reserve fund, the restoration of which is a
moral commitment but not a legal obligation of the state or municipality which
created the issuer.

Further, each of these Funds may purchase Municipal Obligations known as
"certificates of participation" which represent undivided proportional
interests in lease payments by a governmental or non-profit entity. The lease
payments and other rights under the lease provide for and secure the payments
on the certificates. Lease obligations may be limited by applicable municipal
charter provisions or the nature of the appropriation for the lease. In
particular, lease obligations may be subject to periodic appropriation. If the
entity does not appropriate funds for future lease payments, the entity cannot
be compelled to make such payments. Furthermore, a lease may or may not
provide that the certificate trustee can accelerate lease obligations upon
default. If the trustee could not accelerate lease obligations upon default,
the trustee would only be able to enforce lease payments as they became due.
In the event of a default or failure of appropriation, it is unlikely that the
trustee would be able to obtain an acceptable substitute source of payment.
Certificates of participation are generally subject to redemption by the
issuing municipal entity under specified circumstances. If a specified event
occurs, a certificate is callable at par either at any interest payment date
or, in some cases, at any time. As a result, certificates of participation are
not as liquid or marketable as other types of Municipal Obligations.

TEMPORARY INVESTMENTS

Each Fund may assume a temporary defensive position at times when the
Advisor believes such a position is warranted by uncertain or unusual market
conditions. Such a position would allow a Fund to deviate from its fundamental
and non-fundamental policies. Each Fund may invest for temporary defensive
purposes up to 100% of its total assets in cash or cash equivalent short-term
obligations including "money market instruments," a term which includes, among
other things, bank obligations, commercial paper and notes, U.S. Government
Obligations, foreign government securities (if permitted) and repurchase
agreements.

The International Equity Fund may also hold foreign or domestic money market
instruments and debt securities rated at the time of purchase in one of the
three highest investment-grade categories by Moody's, S&P or another NRSRO.
The Fund does not intend to purchase unrated debt obligations. In the event
that the rating of any security held by the Fund falls below the required
rating, the Sub-Advisor will dispose of the security unless it appears this
would be disadvantageous to the Fund.

PORTFOLIO TURNOVER

Each Fund may sell a portfolio investment soon after its acquisition if the
Advisor believes that such a disposition is consistent with attaining the
Fund's investment objective. Portfolio investments may be sold for a variety
of reasons, such as a more favorable investment opportunity or other
circumstances bearing on the desirability of continuing to hold such
investments.

29
<PAGE>

A high rate of portfolio turnover (100% or more) involves correspondingly
greater brokerage commission expenses and other transaction costs, which must
be borne directly by a Fund and ultimately by its shareowners. The Trust
expects that the Portfolio turnover rate will not exceed 100% for the Growth
and Income Fund for the current fiscal year. See "Financial Highlights" above
or "Portfolio Transactions" in the Statement of Additional Information for
historical portfolio turnover information for the other portfolios. Portfolio
turnover may result in the realization of short-term capital gains which are
taxable to shareowners as ordinary income.

OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS

Investment methods described in this prospectus are among those which one or
more of the Funds have the power to utilize. Some may be employed on a regular
basis; others may not be used at all. Accordingly, reference to any particular
method or technique carries no implication that it will be utilized or, if it
is, that it will be successful.

INVESTMENT RESTRICTIONS

The Funds are subject to certain investment restrictions which, as described
in more detail in the Statement of Additional Information, are fundamental
policies that cannot be changed without the affirmative vote of a majority of
the outstanding shares of a Fund (as defined under "Other Information"). Each
Fund will limit its investments so that, with respect to 75% of a Fund's total
assets: (i) not more than 5% of a Fund's total assets will be invested in the
securities of any one issuer; (ii) not more than 25% of a Fund's total assets
will be invested in the securities of issuers in any one industry; and (iii)
not more than 10% of the outstanding voting securities of any one issuer will
be held by a Fund. Securities issued or guaranteed by the U.S. Government, its
agencies or instrumentalities and repurchase agreements fully collateralized
by such securities are excepted from these limitations. Each Fund may borrow
money from banks for temporary or emergency purposes or to meet redemption
requests and may enter into reverse repurchase agreements, provided that the
Fund maintains asset coverage of at least 300% for all such borrowings.

30
<PAGE>

SHAREOWNER GUIDE

THE FOLLOWING SECTION WILL PROVIDE YOU WITH
ANSWERS TO SOME OF THE MOST OFTEN-ASKED QUESTIONS
ABOUT BUYING AND SELLING A FUND'S SHARES AND
ABOUT A FUND'S DIVIDENDS AND DISTRIBUTIONS

HOW CAN I CONTACT THE COMMERCE FUNDS?

To authorize the special features described below or to obtain additional
information about The Commerce Funds, you may:

. Call The Commerce Funds Shareowner Services at 1-800-305-2140; or

. Write to The Commerce Funds at:

The Commerce Funds
P.O. Box 16931
St. Louis, MO 63105; or

. Call the transfer agent, State Street Bank and Trust Company,
directly at 1-800-995-6365; or

. Contact a registered investment representative at selected Commerce
Bank branches; or

. For specific information regarding your 401(k) or investment
management group account, contact your plan sponsor or account
administrator.

HOW TO BUY SERVICE SHARES

WHAT IS THE MINIMUM INVESTMENT FOR EACH FUND?

Generally, the minimum investment requirement is $1,000 for initial
purchases and $250 for subsequent purchases, although it may differ in certain
circumstances as shown below.

INVESTMENT MINIMUMS FOR SPECIFIC TYPES OF ACCOUNTS

<TABLE>
<CAPTION>
INITIAL SUBSEQUENT
INVESTMENT INVESTMENT
---------- -----------
<S> <C> <C>
Regular Account......................................... $1,000 $250
Automatic Investment Feature............................ $1,000 $75/Quarter
Individual Retirement Accounts (including SEP-IRAs),
Keogh Plans, corporate retirement plans, public
employer deferred plans, profit sharing plans and
401(k) plans........................................... $1,000 $250
</TABLE>

The minimum initial investment requirement is $250 for initial purchases and
$100 for subsequent purchases for employees, directors, officers and retirees
(as well as their spouses and legal dependents) of Commerce Bancshares, Inc.,
Goldman Sachs & Co. and their subsidiaries or affiliates, although it may
differ in certain circumstances as shown below.

<TABLE>
<CAPTION>
INITIAL SUBSEQUENT
INVESTMENT INVESTMENT
---------- ----------
<S> <C> <C>
Regular Account.......................................... $250 $100
Automatic Investment Feature............................. $100 $25*
Individual Retirement Accounts (including SEP-IRAs),
Keogh Plans.............................................. $100 $25*
</TABLE>
- --------
*Minimum of six bi-monthly investments within first year of Fund ownership.

31
<PAGE>

HOW ARE SERVICE SHARES PRICED?

SERVICE SHARES OF THE FUNDS ARE PURCHASED AT THEIR PUBLIC OFFERING PRICE,
WHICH IS A FUND'S NET ASSET VALUE PER SHARE PLUS A FRONT-END SALES CHARGE. A
CLASS CALCULATES ITS NET ASSET VALUE PER SHARE ("NAV") AS FOLLOWS:

NAV= (VALUE OF ASSETS ATTRIBUTABLE TO THE CLASS)--(LIABILITIES ATTRIBUTABLE TO
THE CLASS)
- --------------------------------------------------------------------------------

NUMBER OF OUTSTANDING SHARES OF THE CLASS

The net asset value is determined as of the close of regular trading hours
on the New York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern
Time) on days the Exchange is open (a "Business Day"). On those Business Days
on which the Exchange closes prior to the close of its regular trading hours
("Early Closing Time"), the net asset value of each class of a Fund will be
determined and its shares will be priced as of such Early Closing Time.

A Fund's investments are valued at market value or, where market quotations
are not readily available, at fair value as determined in good faith by or
under the supervision of the Board of Trustees. Certain short-term securities
may be valued at amortized cost, which approximates fair value.

Trading in foreign securities is generally completed prior to the end of
regular trading on the Exchange and may occur on Saturdays and U.S. holidays
and at other times when the Exchange is closed. As a result, there may be
delays in reflecting changes in the market values of foreign securities in the
calculation of the net asset value for each class of the International Equity
Fund. There may be variations in the net asset value per share of each class
the Fund on days when net asset value is not calculated and on which
shareowners of the Fund cannot redeem their shares due to changes in values of
securities traded in foreign markets. For more information about valuing
securities, see the Statement of Additional Information.

SALES CHARGE. The maximum front-end sales charge is 3.50% for each Fund
(except the Short-Term Government Fund which is 2.00%) and may be less based
on the amount you invest, as shown in the following chart:

ALL FUNDS EXCEPT THE SHORT-TERM GOVERNMENT FUND:

<TABLE>
<CAPTION>
MAXIMUM
DEALER'S
AS A % OF AS A % OF REALLOWANCE AS
OFFERING NET ASSET A % OF
PRICE VALUE OFFERING PRICE
AMOUNT OF PURCHASE PER SHARE PER SHARE PER SHARE*
- ------------------ --------- --------- --------------
<S> <C> <C> <C>
Less than $100,000........................... 3.50 3.63 3.15
$100,000 but less than $250,000.............. 2.50 2.56 2.25
$250,000 but less than $500,000.............. 1.50 1.52 1.35
$500,000 but less than $1,000,000............ 1.00 1.01 0.90
$1,000,000 or more........................... 0.00 0.00 0.00
</TABLE>
- --------
*Dealer's reallowance may be changed periodically.

32
<PAGE>

SHORT-TERM GOVERNMENT FUND:

<TABLE>
<CAPTION>
MAXIMUM
DEALER'S
AS A % OF AS A % OF REALLOWANCE AS
OFFERING NET ASSET A % OF
PRICE VALUE OFFERING PRICE
AMOUNT OF PURCHASE PER SHARE PER SHARE PER SHARE*
- ------------------ --------- --------- --------------
<S> <C> <C> <C>
Less than $500,000........................... 2.00% 2.04% 1.80%
$500,001 but less than $1,000,000............ 1.00% 1.01% 0.90%
$1,000,001 or more........................... 0.00% 0.00% 0.00%
</TABLE>
- --------

*Dealer's reallowance may be changed periodically.

Goldman, Sachs & Co. (the "Distributor") may, out of its administration fee
or other resources, pay a fee or additional incentives to dealers who initiate
and are responsible for purchases of shares of The Commerce Funds. In
addition, at its expense, the Distributor will provide additional compensation
and promotional incentives to dealers in connection with the sales of shares
of the Funds. Compensation may include promotional and other merchandise,
sales and training programs and other special events sponsored by dealers.
Compensation may also include payment for reasonable expenses incurred in
connection with trips taken by invited registered representatives for meetings
or seminars of a business nature.

WHEN THERE IS NO SALES CHARGE. There is no sales charge on Service Shares
purchased by the following types of investors or transactions:

. automatic reinvestments (and cross-reinvestments) of dividends and
capital gain distributions by existing shareowners;

. the Exchange Privilege described below on page 42;

. the Redemption Reinvestment Privilege described on page 40;

. non-profit organizations, foundations and endowments qualified under
Section 501(c)(3) of the Code;

. current and retired members of the Board of Trustees of The Commerce
Funds;

. any state, county or city, or any instrumentality, department, authority
or agency thereof, prohibited by applicable laws from paying a sales
charge for the purchase of Fund shares;

. employees, directors, advisory directors, officers and retirees (as well
as their spouses and legal dependents) of Commerce Bancshares, Inc.,
Goldman, Sachs & Co., State Street Bank and Trust Company and National
Financial Data Services, Inc. or their subsidiaries or affiliates;

. employees, directors, advisory directors, officers and retirees (as well
as their spouses and legal dependents) of banks that have signed a
definitive agreement to become affiliated with Commerce Bancshares, Inc.;

. shares purchased for and held in a trust, management agency, asset
allocation, custodial or other account maintained by an Investment
Management Group (Trust Department) within a bank affiliated, or within
banks that have signed a definitive agreement to become affiliated with
Commerce Bancshares, Inc. (including shares purchased with distributions
from such accounts);

33
<PAGE>

. shares purchased for and held in a trust for which a bank affiliated with
Commerce Bancshares, Inc., is named as successor trustee or co-trustee
immediately after the current trustee ceases to serve, and shares
purchased for and held by individuals who have named a bank affiliated
with Commerce Bancshares, Inc., as their primary personal representative
or co-personal representative under will;

. plans qualified under Section 401 of the Internal Revenue Code of 1986,
as amended (the "Code") (including corporate retirement plans, Keogh
plans, and Section 401(k) plans), custodial accounts treated as tax-
sheltered annuities under Section 403(b) of the Code, and deferred
compensation plans for public, religious and other tax-exempt employers
(including plans described in Section 457 of the Code) maintained by an
Investment Management Group (Trust Department) within a bank affiliated,
or with banks that have signed a definitive agreement to become
affiliated, with Commerce Bancshares, Inc. (including shares purchased
with distributions from such accounts); and

. registered representatives of dealers who have entered into dealer
agreements with Goldman, Sachs & Co. to the extent permitted by such
firms.

The Distributor may periodically waive all or a portion of the sales charge
for all investors with respect to the sales of shares of the Funds. The
Distributor may also offer special concessions to enable investors to purchase
Service Shares of the Funds at net asset value, without payment of a sales
charge. To qualify for this special net asset value purchase when applicable,
the investor must pay for such purchase with the proceeds from the redemption
of shares of a non-affiliated mutual fund or unit investment trust on which a
sales charge was paid. A qualifying purchase of Service Shares in a Fund must
occur within five Business Days of the prior redemption and must be evidenced
by a confirmation of the redemption transaction. At the time of purchase, The
Commerce Funds must be notified that the purchase qualifies for a purchase
without a sales charge. Proceeds from the redemption of shares on which no
sales charges or commissions were paid would not qualify for the special net
asset value purchase program.

These sales charge exemptions are based on the type of investor and/or the
reduced sales effort that will be needed in obtaining Fund investments. In
order to take advantage of these exemptions, you must certify eligibility on
your account application.

RIGHTS OF ACCUMULATION. When you buy Service Shares in The Commerce Funds,
your current total investment determines the sales charge that you pay. Since
larger investments receive a discounted sales charge, the sales charge you pay
may subsequently be reduced as you build your investment.

Over time, as your current total investment in shares accumulates to
$100,000 or beyond, the sales charge on subsequent investments is decreased.
Your current total investment is the combination of your immediate investment
along with the shares that you own in any investment portfolio of The Commerce
Funds on which you paid a sales charge (including shares of the Goldman
Sachs--Institutional Liquid Assets Prime Obligations Portfolio that carry no
sales charge but were obtained through an exchange and can be traced back to
shares that were acquired with a sales charge). Shares purchased without a
sales charge may not be aggregated with shares purchased subject to a sales
charge.

To buy Service Shares at a reduced sales charge under Rights of
Accumulation, you must indicate at the time of purchase that a quantity
discount is applicable. A reduction in sales charge is subject to a check of
appropriate records, after which you will receive the lowest applicable sales
charge.

34
<PAGE>

Example: Suppose you own Service Shares with a total current value of
$90,000 that can be traced back to the purchase of shares with a sales
charge. If you subsequently invest $10,000 in any Fund within The Commerce
Funds family (except the Short-Term Government Fund), you will pay a
reduced sales charge of 2.50% of the public offering price on the
additional purchase.

LETTER OF INTENT. You may also buy Service Shares at a reduced sales charge
under a written Letter of Intent, a non-binding commitment to invest a total
of at least $100,000 in one or more Funds of The Commerce Funds within a
period of 13 months and under the terms and conditions of the Letter of
Intent. Service Shares you buy under a Letter of Intent will be eligible for
the same sales charge discount that would have been available had all of your
Service Share purchases been made at once. To use this feature, complete the
Letter of Intent section on your account application. A Letter of Intent must
be filed with The Commerce Funds within 90 days of the first investment under
the Letter of Intent provision.

While submitting a Letter of Intent does not bind you to buy, or The
Commerce Funds to sell, the full amount at the sales charge indicated in the
Letter of Intent, you must complete the intended purchase to obtain the
reduced sales charge. When you sign a Letter of Intent, The Commerce Funds
holds in escrow a sufficient number of shares of the relevant class which can
be sold to make up any difference in the sales charge on the amount actually
invested. After you fulfill the terms of the Letter of Intent, the shares in
escrow will be released.

If your aggregate investment exceeds that indicated in your Letter of
Intent, you will receive an adjustment which reflects the further reduced
sales charge applicable to your excess investment. It will be in the form of
additional Service Shares credited to your account at the then current
offering price applicable to a single purchase of the total amount of the
total purchase. You must inform The Commerce Funds that the Letter of Intent
is in effect each time you buy Service Shares.

You may include the value of all Service Shares on which a sales charge had
previously been paid as a credit toward fulfillment of the Letter of Intent,
but no price adjustment will be made on Service Shares previously purchased.

You may combine purchases that are made by members of your immediate family,
or the total investments of a trustee or custodian of any qualified pension or
profit-sharing plan or IRA established for your benefit or the benefit of any
member of your immediate family, for the purpose of obtaining reduced sales
charges by means of a written Letter of Intent or Right of Accumulation. You
must indicate on the account application the accounts that are to be combined
for this purpose.

35
<PAGE>

HOW DO I BUY SERVICE SHARES?

You may purchase Service Shares of a Fund through The Commerce Funds
Shareowner Services or an investment representative at a Commerce Bank branch.
The following chart describes ways to invest directly in The Commerce Funds:

<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
------------------------------------ ------------------------------------
<S> <C> <C>
By Mail Send a completed account application Send a check with your Fund account
with a check (payable to The number printed on it, along with the
Commerce Funds) directly to the stub from the previous confirmation
address set forth in "How Can I directly to the address set forth in
Contact The Commerce Funds?" on page "How Can I Contact The Commerce
31. Funds?" on page 31.
In Person Whether opening or adding to an account, you are welcome to stop into a
Commerce Bank branch office location. A registered investment
representative can assist you.
By Wire After an account application is Contact your bank to request that
completed and an account is opened, funds be wired to your existing Fund
instruct your bank to wire funds to: account. Follow instructions at
left. Be sure to include your name
and your Fund account number.
Commerce Bank, N.A.
(Kansas City)
Kansas City, MO
ABA #1010-00019
Account #2800255
Be sure to have your bank indicate
your name, address, tax
identification number, the name of
the Fund and class of shares and
your new account number.
Ask your bank for specific information about making federal wires,
including associated charges.
By Telephone Subsequent purchases of Fund shares
Via Electronic may be made by electronic funds
Funds Transfer transfer from your bank, checking or
money market account.
You can authorize this feature and
provide necessary bank information
on your account application. Then,
when you wish to make a subsequent
purchase, you can do so by
contacting The Commerce Funds at the
telephone number set forth in "How
Can I Contact The Commerce Funds?"
on page 31.
</TABLE>

36
<PAGE>

Other investment features, including exchanges and automatic investments,
are also available. Additional information pertaining to investments in the
Funds is included in the following pages or can be obtained by contacting The
Commerce Funds Shareowner Services.

WHAT PRICE WILL I RECEIVE WHEN I BUY SERVICE SHARES?

Your Service Shares will be purchased at a Fund's public offering price
calculated at the next close of regular trading on the Exchange (currently
4:00 p.m. Eastern Time) after your purchase order is received in proper form
by The Commerce Funds' transfer agent, State Street Bank and Trust Company
(the "Transfer Agent"), at its Kansas City office.

WHAT ELSE SHOULD I KNOW ABOUT BUYING SERVICE SHARES?

Federal regulations require you to provide a certified Taxpayer
Identification Number upon opening or reopening an account.

If your check used for investment does not clear, a fee may be imposed by
the Transfer Agent. All payments by check must be in U.S. dollars and be drawn
only on U.S. banks. The Commerce Funds reserves the right to reject any
specific purchase order (including exchanges) or to restrict purchases or
exchanges by a particular purchaser (or group of related purchasers). The
Commerce Funds may reject or restrict purchases or exchanges of shares by a
particular purchaser or group, for example, when a pattern of frequent
purchases and sales or exchanges of shares of a Fund is evident, or if the
purchase and sale or exchange orders are, or a subsequent abrupt redemption
might be, of a size that would disrupt the management of a Fund.

The Commerce Funds will not issue share certificates. The Transfer Agent
will maintain a complete record of your account and will issue you a statement
at least quarterly. You will also be sent confirmations showing purchases and
redemptions.

HOW TO SELL SERVICE SHARES

HOW DO I SELL MY SERVICE SHARES?

The Commerce Funds makes it easy to sell, or "redeem," all or part of your
Service Shares. The Commerce Funds does not charge you to sell Service Shares.
However, the value of the Service Shares you sell may be more or less than
your cost, depending on a Fund's current net asset value. The following chart
describes ways to sell your Service Shares of The Commerce Funds:

37
<PAGE>

HOW TO SELL SERVICE SHARES:

Through The Commerce Funds Shareowner Services or an investment
representative at a Commerce Bank branch.

By Mail
Send a written request signed by each owner,
including each joint owner, to the address set
forth in "How Can I Contact The Commerce
Funds?" on page 31.

Proper written authority is required to execute
redemption requests on behalf of corporations,
partnerships, trusts, and/or fiduciary
accounts. Redemption requests require SIGNATURE
GUARANTEES as described on page 39 with the
exception of redemptions sent to a shareowner
name/address of record in effect for no less
than 30 days.

In Person You are welcome to deliver your written request
signed by each owner, including each joint
owner, to a Commerce Bank branch office
location. A registered investment
representative can assist you.

By Telephone
You may redeem Service Shares (to a shareowner)
by telephone and request to receive proceeds by
check (to a shareowner name/address of record
in effect for no less than 30 days), federal
wire (for amounts exceeding $1,000) or
electronic funds transfer. In order to request
a federal wire or electronic funds transfer,
appropriate information regarding your bank,
checking or money market account must be
previously established on your account. This
information may be provided on the account
application or in a SIGNATURE GUARANTEED letter
of instruction (see description of SIGNATURE
GUARANTEES on page 39).

Redemption requests may be placed by contacting
The Commerce Funds at the telephone number set
forth in "How Can I Contact The Commerce
Funds?" on page 31. Additional information
pertaining to Fund share redemptions is
included in the following pages or can be
obtained by contacting The Commerce Funds
Shareowner Services.

Other redemption features, including exchanges
and automatic withdrawals, are also available.
Please refer to the Shareowner Features and
Privileges section in this prospectus for
additional information about telephone
redemption features.

Written requests to sell Service Shares must be signed by each shareowner,
including each joint owner.

38
<PAGE>

Certain types of redemption requests will need to include a SIGNATURE
GUARANTEE. You may obtain a SIGNATURE GUARANTEE from:

(1)a bank which is a member of the FDIC;
(2)a securities broker or dealer;
(3)a credit union having the authority to issue SIGNATURE GUARANTEES;
(4)a savings and loan association;
(5)a building and loan association;
(6)a cooperative bank;
(7)a federal savings bank or association;
(8)a national securities exchange; or
(9)a registered securities association or a clearing agency.

Guarantees must be signed by an authorized signatory of the guarantor
institution and be accompanied by the words "SIGNATURE GUARANTEED." Guarantees
from notaries public will not be accepted.

Redemptions can be suspended and the payment of redemption proceeds delayed
when the Exchange is closed (other than for customary weekend and holiday
closings), during periods when trading on the Exchange is restricted as
determined by the SEC, during any emergency as determined by the SEC which
makes it impracticable for a Fund to sell its securities or value its assets
or during any other period permitted by order of the SEC for the protection of
investors.

Other redemption features, including exchanges and automatic withdrawals,
are also available. Please refer to Shareowner Features and Privileges for
more information.

WHAT PRICE WILL I RECEIVE FOR SERVICE SHARES I WANT TO SELL?

The price you will receive when you sell your Service Shares is the net
asset value per share (as described on page 32) determined after receipt of an
order in proper form by the Transfer Agent.

The Commerce Funds reserves the right to redeem accounts involuntarily if,
after sixty days' written notice to the shareowner, the account's net asset
value remains below a $500 minimum balance. Involuntary redemptions will not
be implemented if the value of your account falls below the minimum balance as
a result of market conditions.

HOW QUICKLY CAN I RECEIVE PROCEEDS FROM A SALE?

Ordinarily, redemption proceeds will be disbursed the next Business Day
following receipt of an order in proper form by the Transfer Agent. Payment
must be made within seven calendar days following redemption.

You can have your proceeds sent by federal wire to your bank checking or
money market account. Proceeds will normally be wired the Business Day after
your request to redeem shares is received in good order by the Transfer Agent.
Wiring of sales proceeds may be delayed one additional day if the Federal
Reserve Bank is not open on the day your wire is to be made. Your request to
wire proceeds is subject to the bank's wire charges.

39
<PAGE>

Fund shares must be paid in full in order for you to redeem them and receive
proceeds. If the shares you wish to sell were a recent purchase by check or
telephone, The Commerce Funds can delay the subsequent payment of sales
proceeds up to 15 days after the check or telephone payment is received. This
does not apply if Fund shares were purchased by federal wire.

WHAT IF I WANT TO REINVEST SALES PROCEEDS?

You may reinvest all or any portion of your redemption proceeds in shares of
any Fund within 60 days of your redemption without a sales charge. Service
Shares will be purchased at a price equal to the net asset value per share
next determined after the Transfer Agent receives a reinvestment order and
payment in proper form.

If you wish to use the Redemption Reinvestment Privilege, you must submit a
written reinvestment request to the Transfer Agent stating that you are
eligible to use the feature.

Generally, using the Redemption Reinvestment Privilege will not affect any
gain or loss realized on redemptions for federal income tax purposes. However,
if a redemption results in a loss, the reinvestment may result in the loss
being disallowed under Internal Revenue Service "wash sale" rules.

DIVIDEND AND DISTRIBUTION POLICIES

AS A FUND SHAREOWNER, YOU ARE ENTITLED TO ANY DIVIDENDS AND DISTRIBUTIONS
ARISING
FROM NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS.

The Short-Term Government and Bond Funds declare dividends daily and
distribute dividends on or about the last Business Day of the current month.
The Balanced, Growth and Income and Growth Funds declare and distribute
dividends quarterly. The MidCap and International Equity Funds declare and
distribute dividends annually. Each Fund declares and distributes net realized
capital gains annually.

For purchases by check, shares of the Short-Term Government and Bond Funds
begin earning dividends and distributions on the next day after payment for
the shares is received by the Transfer Agent. In the case of the Balanced,
Growth and Income, Growth, MidCap and International Equity Funds, if you are a
shareowner of record on the record date, you are eligible to receive such
dividend or distribution.

YOU CAN CHOOSE A DISTRIBUTION OPTION FOR DIVIDENDS AND CAPITAL GAINS:

(1) reinvest all dividend and capital gain distributions in additional
Service Shares without a sales charge;

(2) receive dividend distributions in cash and reinvest capital gain
distributions in additional Service Shares without a sales charge;

(3) receive all dividend and capital gain distributions in cash; or

(4) have all dividend and capital gain distributions deposited directly
into a designated checking account.

40
<PAGE>

If you do not select an option when you open an account, all distributions
will automatically be reinvested in additional Service Shares of the same Fund
without a sales charge. For your protection, if you elect to have
distributions mailed to you which cannot be delivered, they will be reinvested
in additional Service Shares of the same Fund without a sales charge.

You may invest dividend or capital gain distributions from one Fund in
shares of the corresponding class of another Fund of The Commerce Funds or the
National Tax-Free Bond or Missouri Tax-Free Bond Fund. There is no sales
charge on purchases made through the Cross Reinvestment Privilege; however,
both Fund accounts must be established at the minimum initial investment
requirement and have identical account registration. Cross Reinvestment
Privileges do not apply to the Goldman Sachs--Institutional Liquid Assets
Prime Obligations Portfolio ("Money Market Fund") described below under "Can I
Exchange My Investment From One Commerce Fund To Another." Goldman Sachs Asset
Management, a separate operating division of Goldman, Sachs & Co., serves as
investment advisor for the Money Market Fund.

Your election to reinvest the distributions paid by a Fund in additional
Service Shares of the Fund or any other Fund of The Commerce Funds will not
affect the tax treatment of such dividends and distributions, which will be
treated as received by the shareowner and then used to purchase shares of the
Fund or another Fund of The Commerce Funds.

To change your distribution option, contact The Commerce Funds at the
address or telephone number set forth in "How Can I Contact The Commerce
Funds?" on page 31.

The change will become effective after it is received and processed by the
Transfer Agent.

SHAREOWNER FEATURES AND PRIVILEGES

THE COMMERCE FUNDS PROVIDES A VARIETY OF WAYS TO
MAKE MANAGING YOUR INVESTMENTS MORE CONVENIENT.

Some or all of the following features as well as others described in this
Prospectus may have different conditions imposed on them in addition to those
described in this Prospectus. Consult your investment representative or
contact The Commerce Funds as described in "How Can I Contact The Commerce
Funds?" on page 31 for more information.

CAN I USE THE FUNDS IN MY RETIREMENT PLAN?

The Commerce Funds makes available: (1) individual retirement accounts
("IRAs"), including IRAs set up under a Simplified Employee Pension Plan
("SEP-IRAs"); (2) Keogh plans; (3) corporate retirement plans; (4) public
employer deferred compensation plans; and (5) profit sharing plans (including
401(k) plans) and money-purchase plans.

YOUR INVESTMENTS GROW TAX DEFERRED UNTIL WITHDRAWAL AT RETIREMENT, AND IN
MANY CASES THE INITIAL INVESTMENT IS TAX DEDUCTIBLE.

Information concerning these plans is available through The Commerce Funds
Shareowner Services or your investment representative.

41
<PAGE>

WHAT IS DOLLAR COST AVERAGING AND HOW CAN I IMPLEMENT IT?

DOLLAR COST AVERAGING INVOLVES INVESTING A FIXED DOLLAR AMOUNT AT REGULAR
INTERVALS. BECAUSE MORE SHARES ARE PURCHASED DURING PERIODS WITH LOWER SHARE
PRICES AND FEWER SHARES ARE PURCHASED WHEN THE PRICE IS HIGHER, YOUR AVERAGE
COST PER SHARE MAY BE REDUCED.

In order to be effective, Dollar Cost Averaging should be followed on a
regular basis. You should be aware, however, that shares bought using Dollar
Cost Averaging are made without regard to their price on the day of investment
or to market trends. In addition, while you may find Dollar Cost Averaging to
be beneficial, it will not prevent a loss if you ultimately redeem your shares
at a price that is lower than their purchase price. Dollar cost averaging does
not assure a profit or protect against a loss in a declining market. Since
dollar cost averaging involves investment in securities regardless of
fluctuating price levels, you should consider your financial ability to
continue to purchase through periods of low price levels. You can invest
through Dollar Cost Averaging on your own or through the Automatic Investment
feature described above.

The Automatic Investment feature lets you transfer money from your checking
account into your Fund account automatically on the date you specify in any
month you choose. The Automatic Investment Feature is one way to use Dollar
Cost Averaging to invest (see below). Only checking accounts at U.S. financial
institutions which permit automatic withdrawals through the Automated Clearing
House are eligible. Check with your bank or financial institution to determine
eligibility.

To establish an Automatic Investment account that uses the Dollar Cost
Averaging method, check the appropriate box and supply the necessary
information on the account application or send a subsequent written request
with an appropriate SIGNATURE GUARANTEE.

You may change the amount of purchase or cancel this feature at any time by
mailing written notification to The Commerce Funds at the address set forth in
"How Can I Contact The Commerce Funds?" on page 31.

Notification will be effective three Business Days following receipt. The
Commerce Funds may modify or terminate this feature at any time or charge a
service fee, although no such fee is currently contemplated.

CAN I EXCHANGE MY INVESTMENT FROM ONE COMMERCE FUND TO ANOTHER?

As a shareowner, you have the privilege of exchanging your Service Shares
for Service Shares of another Fund of The Commerce Funds that offers Service
Shares. Exchanges may also be made to or from the National Tax-Free Bond Fund,
the Missouri Tax-Free Bond Fund and the Goldman Sachs--Institutional Liquid
Assets Prime Obligations Portfolio. NO ADDITIONAL SALES CHARGE IS IMPOSED WHEN
EXCHANGING SERVICE SHARES OF A FUND FOR SERVICE SHARES OF ANOTHER FUND OFFERED
BY THE COMMERCE FUNDS.

You can exchange Service Shares of one Fund for Service Shares in another
Fund within The Commerce Funds family that may be legally sold in your state
of residence by writing or calling The Commerce Funds as described under "How
To Sell Service Shares" on page 38. The Exchange Privilege is automatic for
all shareowners unless declined on an account application. All telephone
exchanges must be registered in the same name(s) and with the same address as
are registered in the Fund from which the exchange is made. See the section
below regarding telephone transactions for a description of The Commerce
Funds' policy regarding responsibility for telephone instructions. Shares
purchased by check may not be exchanged until the check has cleared.

42
<PAGE>

Fund shares being exchanged are subject to the minimum initial and
subsequent investment requirements as described on page 31. Before using this
feature, you should consider carefully the investment objective, policies,
risks and expenses of the acquired Fund, as described in such Fund's
prospectus. You can request a current Prospectus from your investment
representative or by contacting The Commerce Funds at the address or telephone
number set forth in "How Can I Contact The Commerce Funds?" on page 31.

In addition to free automatic exchanges pursuant to the Automatic Exchange
feature discussed below, five free exchanges are permitted in each twelve-
month period. Additional exchanges may be subject to a $5 exchange fee.

The Commerce Funds reserve the right to reject any exchange request, and the
Exchange Privilege may be modified or terminated at any time. At least 60
days' notice of any material modification or termination of the Exchange
Privilege will be given to shareowners except where notice is not required
under the regulations of the SEC.

An exchange may result in a taxable gain or loss. Any sales charge paid on
the original purchase cannot be taken into account in determining such gain or
loss if the exchange occurs within ninety (90) days after the original
purchase of shares and no sales charge is imposed on such exchange.

CAN I HAVE EXCHANGES MADE AUTOMATICALLY?

You may request on your account application that a specified dollar amount
of Service Shares at net asset value be automatically exchanged for Service
Shares of any other Fund of The Commerce Funds that offers Service Shares. No
sales charge is imposed on exchanges. These automatic exchanges may be made on
any one day of each month and are subject to the following conditions: The
minimum dollar amount for automatic exchanges must be at least $250 per month.
In addition, the value of the account in the acquired Fund must equal or
exceed the acquired Fund's minimum initial investment requirement. The names,
addresses and taxpayer identification number for the shareowner accounts of
the exchanged and acquired Funds must be identical. You should consider the
investment objective, policies, risks and expenses of the acquired Fund, as
described in such Fund's prospectus, before establishing an automatic exchange
into that Fund.

CAN I REINVEST DIVIDENDS FROM ONE COMMERCE FUND IN ANOTHER?

YOU MAY ELECT TO HAVE YOUR DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS, OR BOTH
RECEIVED FROM A NON-RETIREMENT FUND ACCOUNT AUTOMATICALLY INVESTED IN
ADDITIONAL SERVICE SHARES OF ANY OTHER INVESTMENT PORTFOLIO OF THE COMMERCE
FUNDS THAT OFFERS SERVICE SHARES IN WHICH YOU CURRENTLY MAINTAIN AN OPEN NON-
RETIREMENT ACCOUNT. To participate in this program, check the appropriate box
and supply the necessary information on the account application or in a
subsequent written request.

Dividend reinvestments will be made at a price equal to the net asset value
of the purchased shares next determined after receipt of the distribution
proceeds by the Transfer Agent.

The distribution must exceed $50 in order to use this feature. You should
consider carefully the investment objective, policies and applicable fees of
the acquired Fund before using this feature.

43
<PAGE>

HOW DO I OBTAIN OTHER INFORMATION ABOUT MY ACCOUNT?

Contact The Commerce Funds Shareowner Services or your investment
representative for account information such as current balance, account
transactions, distributions, and other applicable information.

CAN I MAKE TRANSACTIONS BY TELEPHONE?

YOU MAY AUTHORIZE ELECTRONIC TRANSFERS OF MONEY TO MAKE ADDITIONAL
INVESTMENTS IN OR REDEEM SHARES FROM AN ESTABLISHED ACCOUNT IF THIS FEATURE
WAS SELECTED ON THE ACCOUNT APPLICATION OR IN A SUBSEQUENT WRITTEN REQUEST.
THE SERVICE MAY BE USED LIKE AN "ELECTRONIC CHECK" TO MOVE MONEY TO OR FROM
YOUR CHECKING OR MONEY MARKET ACCOUNT AND YOUR FUND ACCOUNT BY CALLING THE
COMMERCE FUNDS SHAREOWNER SERVICES AT THE TELEPHONE NUMBER SET FORTH IN "HOW
CAN I CONTACT THE COMMERCE FUNDS?" ON PAGE 31.

Telephone purchases will be effected at the public offering price next
determined after the Transfer Agent receives payment for the transaction.
Proceeds from sales of Service Shares will be deposited into your Commerce
checking or money market account generally two business days after the
redemption request is received. You may also request receipt of your
redemption proceeds by check, which will only be sent to the registered owner
of your account and only to the address of record. If you should experience
difficulty in redeeming shares by telephone (e.g., because of unusual market
activity), you are urged to consider redeeming your Service Shares by mail or
in person.

You should note that the Transfer Agent may act upon a telephone purchase or
redemption request from any person representing himself or herself to be you
and reasonably believed by the Transfer Agent to be genuine. Neither The
Commerce Funds nor any of its service contractors will be liable for any loss
or expense in acting upon telephone instructions that are reasonably believed
to be genuine. In attempting to confirm that telephone instructions are
genuine, The Commerce Funds will use such procedures as are considered
reasonable, including recording those instructions and requesting information
as to account registration (such as the name in which the account is
registered, the account number, recent transactions in the account, or the
account holder's tax identification number, address or bank). To the extent
that The Commerce Funds fails to use reasonable procedures as a basis for its
belief, it and/or its service contractors may be liable for instructions that
prove to be fraudulent or unauthorized.

The Commerce Funds may modify this feature at any time or charge a service
fee upon notice to shareowners. No such fee is currently contemplated.

CAN I ARRANGE AUTOMATIC WITHDRAWALS?

IF YOU ARE A SHAREOWNER WITH AN ACCOUNT VALUED AT $5,000 OR MORE, YOU MAY
WITHDRAW AMOUNTS IN MULTIPLES OF $100 OR MORE FROM YOUR ACCOUNT ON A MONTHLY,
QUARTERLY, SEMI-ANNUAL OR ANNUAL BASIS THROUGH THE AUTOMATIC WITHDRAWAL
FEATURE.

At your option, monthly withdrawals may be made on either the first or
fifteenth day of the month and quarterly, semi-annual and annual withdrawals
will be made on either the first or fifteenth day of the month(s) selected. To
participate in this feature, check the appropriate box and supply the
necessary information on the account application or in a subsequent written
request. Purchases of additional shares concurrently with withdrawals are
ordinarily not advantageous because of the sales charge imposed on the Funds.
This feature may be suspended should the value of your account fall below
$500.

44
<PAGE>

THE BUSINESS OF THE COMMERCE FUNDS

BOARD OF TRUSTEES

The business affairs of The Commerce Funds are managed under the general
supervision of the Board of Trustees. Information about the Trustees and
officers of The Commerce Funds is included in the Statement of Additional
Information.

SERVICE PROVIDERS

----------------

INVESTMENT ADVISOR
COMMERCE BANK, N.A. (ST. LOUIS) AND
COMMERCE BANK, N.A. (KANSAS CITY)
(THE "ADVISOR")

Commerce Bank, N.A. (St. Louis) and Commerce Bank, N.A. (Kansas City) serve
as Advisor for the Funds, selecting investments and making purchases and sale
orders for securities in each Fund's portfolio.

SUB-ADVISOR
ROWE PRICE-FLEMING INTERNATIONAL, INC.
("PRICE-FLEMING" OR THE "SUB-ADVISOR")

Price-Fleming serves as Sub-Advisor to the International Equity Fund. Price-
Fleming's U.S. office is located at 100 East Pratt Street, Baltimore, Maryland
21202.

ADMINISTRATOR
GOLDMAN SACHS ASSET MANAGEMENT
("GSAM" OR THE "ADMINISTRATOR")

GSAM serves as Administrator of each of the Funds. GSAM is located at One
New York Plaza, New York, New York 10004.

DISTRIBUTOR
GOLDMAN, SACHS & CO.
("GOLDMAN" OR THE "DISTRIBUTOR")

Shares of each Fund are sold on a continuous basis by Goldman as
Distributor. Goldman, is located at 85 Broad Street, New York, New York 10004.

TRANSFER AGENT
STATE STREET BANK AND TRUST COMPANY
(THE "TRANSFER AGENT")

State Street Bank and Trust Company ("State Street Bank") has delegated its
responsibilities as Transfer Agent to its indirect subsidiary, National
Financial Data Services, Inc. ("NFDS"), which maintains the account records of
all shareowners in the Funds and administers the distribution of income earned
as a result of investing in the Funds. State Street Bank is located at 225
Franklin Street, Boston, Massachusetts 02110. NFDS is located at 1004
Baltimore Street, Kansas City, Missouri 64105.

CUSTODIAN
STATE STREET BANK AND TRUST COMPANY
(THE "CUSTODIAN")

State Street Bank and Trust Company also serves as the Custodian of each of
the Funds.

45
<PAGE>

MORE ABOUT THE ADVISOR

Commerce Bank, N.A. (St. Louis) and Commerce Bank, N.A. (Kansas City), each
a subsidiary of Commerce Bancshares, Inc., a registered multi-bank holding
company, serve as the investment advisor to each Fund. Commerce Bank, N.A.
(St. Louis) is located at 8000 Forsyth Boulevard, St. Louis, Missouri 63105
and Commerce Bank, N.A. (Kansas City) is located at 922 Walnut Street, Kansas
City, Missouri 64106. Commerce Bank, N.A. (St. Louis) and Commerce Bank, N.A.
(Kansas City), each (or its predecessor organizations) have provided
investment management services to The Commerce Funds since 1994, to private
and public pension funds, endowments and foundations since 1946 and to
individuals since 1906. As of December 31, 1996, the Advisor provided
investment management and advisory services for assets aggregating
approximately $5.4 billion. As of the same date, Commerce Bank, N.A. (St.
Louis), Commerce Bank, N.A. (Kansas City) and their affiliates had in the
aggregate $6.5 billion in assets under management.

<TABLE>
<CAPTION>
STATED
ANNUAL RATE
-----------
<S> <C>
Short-Term Government Fund.......................................... 0.50%
Bond Fund........................................................... 0.50%
Balanced Fund....................................................... 1.00%
Growth Fund......................................................... 0.75%
Growth and Income Fund.............................................. 0.75%
MidCap Fund......................................................... 0.75%
International Equity Fund........................................... 1.50%
</TABLE>

The Advisor may agree to voluntarily waive its fees in whole or in part with
respect to any particular Fund. The Advisor has voluntarily agreed to waive a
portion of the investment advisory fees otherwise payable by the Short-Term
Government and Balanced Funds during the current fiscal year so that the
advisory fees payable by such Funds will not exceed 0.30% and 0.75% of the
average daily net assets of each respective Fund. The Advisor has voluntarily
agreed to waive a portion of the investment advisory fees otherwise payable by
the International Equity Fund during the current fiscal year so that advisory
fees payable by the Fund will not exceed an annual rate of 0.90% of the first
$20 million of average daily net assets, 0.75% of the next $30 million of
average daily net assets and 0.65% of average daily net assets

46
<PAGE>

over $50 million. However, should total fund expenses of the International
Equity Fund fall below 1.97% of average daily net assets, the Advisor will
reduce its waiver of investment advisory fees by the difference between the
actual total fund operating expenses and 1.97%. For the fiscal year ended
October 31, 1996, the Advisor received advisory fees (after fee waivers) at
the following effective annual rates:

<TABLE>
<S> <C>
Short-Term Government Fund................................................ .30%
Bond Fund................................................................. .50%
Balanced Fund............................................................. .75%
Growth and Income Fund (a)................................................ n/a
Growth Fund............................................................... .75%
MidCap Fund............................................................... .75%
International Equity Fund................................................. .83%
</TABLE>
- --------
(a) Fund not operational as of October 31, 1996.

Scott M. Colbert, CFA and Vice President, is the person primarily
responsible for the day-to-day management of the Short-Term Government and
Bond Funds. Mr. Colbert joined the Investment Management Group of Commerce
Bank, N.A. (St. Louis) in 1993. He served as a portfolio manager for Armco
Investment Management, Inc. from 1987-1993, managing fixed-income investments
for employee benefit, insurance and endowment funds.

John Bartlett, CFA and Vice President and Senior Portfolio Manager, is the
person primarily responsible for the day-to-day management of the Growth and
Income Fund's investments. Mr. Bartlett joined Commerce Bank, N.A. (St. Louis)
in 1991. Prior to that time, Mr. Bartlett was Institutional Portfolio Manager
and Vice President of Boatmens' Trust Company in St. Louis, Missouri.

Joseph C. Williams III, CFA and Vice President, is the person primarily
responsible for the day-to-day management of the Growth Fund's investments.
Mr. Williams joined Commerce Bank, N.A. (Kansas City) in 1975 and became a
member of its Investment Management Group in 1977.

Joseph C. Williams III and Scott M. Colbert are the persons primarily
responsible for the day-to-day management of the equity and fixed-income
portions, respectively, of the Balanced Fund's investments.

Paul D. Cox, CFA, CIC and Vice President, is the person primarily
responsible for the day-to-day management of the MidCap Fund. Mr. Cox joined
the Investment Management Group of Commerce Bank, N.A. (St. Louis) in 1989.
Mr. Cox came to Commerce Bank from Robert Murray Partners, Inc. where he was a
securities analyst and portfolio manager.

The Advisory Agreement authorizes the Advisor to engage a sub-advisor to
assist it in the performance of its services. Pursuant to such authorization,
the Advisor has appointed Rowe Price-Fleming International, Inc. as Sub-
Advisor to the International Equity Fund.

MORE ABOUT ROWE PRICE-FLEMING INTERNATIONAL, INC.

Price-Fleming, as sub-advisor, manages the investment assets of the
International Equity Fund. Price-Fleming was incorporated in Maryland in 1979
as a joint venture between T. Rowe Price Associates, Inc. ("T. Rowe Price")
and Robert Fleming Holdings Limited ("Flemings").

47
<PAGE>

T. Rowe Price was incorporated in Maryland in 1947 as successor of the
investment counseling business founded by the late Thomas Rowe Price, Jr. in
1937. Flemings was incorporated in 1974 in the United Kingdom as successor to
the business founded by Robert Fleming in 1873. Flemings is a diversified
investment organization which participates in a global network of regional
investment offices in New York, London, Zurich, Geneva, Johannesburg, Bangkok,
Bombay, Jakarta, Singapore, Tokyo, Hong Kong, Manila, Kuala Lumpur, Seoul, and
Taipei. As of December 31, 1996, T. Rowe Price and its affiliates managed more
than $95 billion of assets and Flemings managed the U.S. equivalent of
approximately $25 billion of assets.

The common stock of Price-Fleming is 50% owned by a wholly-owned subsidiary
of T. Rowe Price, 25% by a subsidiary of Flemings and 25% by Jardine Fleming
Group Limited ("Jardine Fleming"). (Half of Jardine Fleming is owned by
Flemings and half by Jardine Matheson Holdings Limited.) T. Rowe Price has the
right to elect a majority of the Board of Directors of Price-Fleming, and
Flemings has the right to elect the remaining directors, one of whom will be
nominated by Jardine Fleming.

The International Equity Fund is managed by an investment advisory group
that has day-to-day responsibility for managing the International Equity Fund
and developing and executing the Fund's investment program. The Fund's
advisory group is composed of the following members: Martin G. Wade,
Christopher D. Alderson, Peter B. Askew, Mark J. T. Edwards, John R. Ford,
James B. M. Seddon, Benedict R. F. Thomas and David J. L. Warren.

Martin Wade joined Price-Fleming in 1979 and has 28 years of experience with
Fleming Group (Fleming Group includes Flemings and/or Jardine Fleming) in
research, client service and investment management. Peter Askew joined Price-
Fleming in 1988 and has 22 years of experience managing multicurrency fixed
income portfolios.

Christopher Alderson joined Price-Fleming in 1988 and has ten years of
experience with the Fleming Group in research and portfolio management. Mark
Edwards joined Price-Fleming in 1986 and has 16 years of experience in
financial analysis. John Ford joined Price-Fleming in 1982 and has 17 years of
experience with Fleming Group in research and portfolio management. James
Seddon joined Price-Fleming in 1987 and has nine years of experience in
investment management. Benedict Thomas joined Price-Fleming in 1988 and has
eight years of portfolio management experience. David Warren joined Price-
Fleming in 1984 and has 17 years of experience in equity research, fixed
income research and portfolio management.

The Board of Trustees of The Commerce Funds has authorized Price-Fleming to
utilize affiliates of Flemings and Jardine Fleming in the capacity of broker
in connection with the execution of the Fund's portfolio transactions if
Price-Fleming believes that doing so would result in an economic advantage (in
the form of lower execution costs or otherwise) being obtained by the Fund.

For the services provided and expenses assumed under the Sub-Advisory
Agreement, the Advisor will pay the Sub-Advisor a monthly management fee at an
annual rate of 0.75% of the first $20 million of the Fund's average daily net
assets; 0.60% of the next $30 million of average daily net assets; and 0.50%
of average daily net assets above $50 million. For the fiscal year ended
October 31, 1996, Price-Fleming received advisory fees at the effective annual
rate of 0.68% of the International Equity Fund's average daily net assets.

48
<PAGE>

MORE ABOUT THE ADMINISTRATOR

Goldman Sachs Asset Management is the Administrator for the Funds. GSAM is a
separate operating division of Goldman, Sachs & Co., the Distributor of the
Funds. Under the Administration Agreement with The Commerce Funds, GSAM
administers the business affairs of The Commerce Funds, subject to the
supervision of the Board of Trustees, and in connection therewith, furnishes
The Commerce Funds with office facilities and is responsible for ordinary
clerical, recordkeeping and bookkeeping services required to be maintained by
The Commerce Funds (excluding those maintained by The Commerce Funds'
Custodian, Transfer Agent, Advisor and any Sub-Advisor), preparation and
filing of documents required to comply with federal and state securities laws,
supervising the activities of the Custodian and Transfer Agent, providing
assistance in connection with meetings of the Board of Trustees and
shareowners and other administrative services necessary to conduct the
business of The Commerce Funds. For these services and facilities, GSAM is
entitled to receive a monthly fee from each Fund at an annual rate of 0.15% of
its average daily net assets. For the fiscal year ended October 31, 1996, GSAM
received administration fees at the annual rate of 0.15% of the average daily
net assets of each Fund (except the Growth and Income Fund, which was not
operational during the fiscal year).

DISTRIBUTION PLAN

Under the Distribution Plan, the Funds may pay the Distributor for
distribution expenses primarily intended to result in the sale of a Fund's
Service Shares. Such distribution expenses include expenses incurred in
connection with advertising and marketing a Fund's Service Shares; payments to
securities dealers, brokers, financial institutions or other industry
professionals such as investment advisors, accountants and estate planning
firms ("Distribution Organizations") for assistance in connection with the
distribution of Service Shares; and expenses incurred in connection with
preparing, printing and distributing prospectuses for the Fund (except those
used for regulatory purposes, for solicitation or distribution to existing or
Institutional shareholders, or for distribution to existing Service
shareholders of the Fund, and in implementing and operating the Distribution
Plan).

Under the Distribution Plan, payments by the Fund for distribution expenses
may not exceed 0.25% (annualized), of the average daily net assets of a Fund's
Service Shares. This amount may be reduced pursuant to undertakings by the
Distributor. If the fee received by the Distributor exceeds its expenses, the
Distributor may realize a profit from these arrangements. The Plan will be
reviewed and is subject to approval annually by the Board of Trustees. The
aggregate compensation that may be received under the Plan for distribution
services, together with sales charges paid by shareowners, may not exceed the
limitations imposed by the Rules of Fair Practice of the NASD. Payments for
distribution expenses under the Distribution Plan are subject to Rule 12b-1
under the 1940 Act. During the fiscal year ended October 31, 1996, no Service
Shares were offered by the Trust.

SHAREHOLDER ADMINISTRATIVE SERVICES PLAN

Under the Administrative Services Plan, the Funds may enter into agreements
("Servicing Agreements") with securities dealers, financial institutions and
other industry professionals ("Service Organizations") that are shareholders
or dealers of record or which have a servicing relationship with the
beneficial owners of Service Shares of the Funds. Such Servicing Agreements
shall require the Servicing Organizations to provide support services to their
clients who beneficially own Shares in one or more of

49
<PAGE>

the Funds in consideration for a fee, computed daily and paid monthly in the
manner set forth in the Servicing Agreements, at the annual rate of up to
0.25% of the average daily net asset value of Service Shares of the Funds
beneficially owned by such clients. Administrative support services expenses
under the Shareholder Administrative Services Plan include, but are not
limited to, expenses incurred in connection with shareholder services provided
by the Distributor and payments to Service Organizations for the provision of
support services with respect to the beneficial owners of Service Shares, such
as assisting clients in processing exchange and redemption requests and in
changing dividend options and account descriptions; responding to client
inquiries concerning their investments; establishing and maintaining accounts
and records relating to their clients who invest in Service Shares, providing
information to the Funds necessary for accounting or sub-accounting, and
providing statements periodically to clients showing their position in Service
Shares.

For the fiscal year ended October 31, 1996, the Trust on behalf of
Institutional Shares of the Short-Term Government Fund, Bond Fund, Balanced
Fund, Growth Fund, MidCap Fund and International Equity Fund paid fees at the
annual rates of .02%, .01%, .01%, .02%, .01% and .01%, respectively, of each
Fund's average daily net assets attributable to Institutional Shares of the
Funds, to Service Organizations. For the fiscal year ended October 31, 1996,
no fees were paid on behalf of Institutional Shares of the Growth and Income
Fund to Service Organizations.

EXPENSES

Except as noted in this Prospectus and the Statement of Additional
Information, the Funds' service providers bear all expenses in connection with
the performance of their services and the Funds bear the expenses incurred in
their operations.

As stated in the "Summary of Expenses," the Advisor intends to voluntarily
waive a portion of the advisory fees and/or reimburse expenses for the Short-
Term Government, Bond, Balanced, Growth and Income, Growth and International
Equity Funds during the current fiscal year. The result of such fee waivers
and expense reimbursements, which may be reduced or discontinued at any time,
will be to increase the performance of such Funds during the periods for which
they are made.

TAX INFORMATION

AS WITH ANY INVESTMENT YOU SHOULD CONSIDER THE TAX IMPLICATIONS OF AN
INVESTMENT IN A FUND. YOU
SHOULD CONSULT YOUR TAX ADVISOR WITH SPECIFIC REFERENCE TO YOUR OWN TAX
SITUATION.

The following is only a short summary of the important tax considerations
generally affecting the Funds and their shareowners. Each Fund will send
written notices to shareowners annually regarding the tax status of
distributions made by the Fund. You should save your regular account
statements because they contain information you will need to calculate your
capital gains or losses upon your sale or exchange of shares in a Fund.

Federal Taxes. Each Fund intends to qualify as a "regulated investment
company" under the Internal Revenue Code (the "Code"), with the result that to
the extent a Fund's earnings are distributed to shareowners as required by the
Code, the Fund itself generally is not required to pay federal income taxes.

To satisfy various requirements in the Code, each Fund expects to distribute
virtually all its net income each year. Dividends derived from Fund income
other than net capital gains (the excess, if any, of net long-term capital
gains over net short-term capital losses) will be taxable to you as ordinary
income, whether the dividends are paid in cash or reinvested in Fund shares.

50
<PAGE>

Dividends derived from Fund net capital gains ("capital gain dividends")
will be taxable to you as a long-term capital gain regardless of how long you
hold Fund shares, whether such gains were recognized by the Fund before you
acquired shares of the Fund, and whether the capital gain dividends are paid
in cash or reinvested in Fund shares.

If you are considering buying shares of a Fund on or just before the record
date of a dividend, you should be aware that the amount of the forthcoming
dividend payment, although in effect a return of capital, will be taxable to
you.

Any dividends declared in October, November or December with a record date
before the end of the year will be deemed for tax purposes to have been paid
by the Fund and received by you in that year, so long as the dividends are
actually paid on or before January 31 of the following year.

You will recognize a taxable capital gain or loss when redeeming or
exchanging your shares (or in using the Automatic Withdrawal feature to direct
reinvestments), to the extent of any difference between the price at which the
shares are sold or exchanged and the price or prices at which the shares were
originally purchased for cash or under the dividend reinvestment plan. If you
hold shares for six months or less and during that time receive a capital gain
dividend on those shares, any loss realized on the sale or exchange of those
shares will be treated as a long-term capital loss to the extent of the
capital gain dividend.

Dividends and certain interest income earned by the International Equity
Fund from foreign securities may be subject to foreign withholding taxes or
other income taxes. The International Equity Fund may elect, for U.S. federal
income tax purposes, to treat certain foreign taxes paid by it as paid by its
shareowners. Should the Fund make that election, a pro rata portion of such
foreign taxes paid by the Fund will constitute income to you (in addition to
taxable dividends actually received by you), and you may be entitled to claim
an offsetting tax credit or itemized deduction for that amount of foreign
taxes.

Each Fund will be required in certain cases to withhold and remit to the
U.S. Treasury 31% of the dividends paid to any investor (i) who has provided
an incorrect Social Security Number or Taxpayer Identification Number or no
number at all, (ii) who is subject to withholding by the Internal Revenue
Service for failure to properly include on his return payments of interest or
dividends, or (iii) who has failed to certify to the Fund, when required to do
so, that he is not subject to backup withholding or that he is an "exempt
recipient."

Other State and Local Taxes. You should consult your tax advisor regarding
state and local tax consequences which may differ from the federal tax
consequences described above.

HOW PERFORMANCE IS MEASURED

A FUND'S PERFORMANCE MAY BE QUOTED IN TERMS OF AVERAGE ANNUAL TOTAL RETURN,
AGGREGATE TOTAL RETURN AND YIELD AS DISCUSSED BELOW. PERFORMANCE INFORMATION
IS
HISTORICAL AND IS NOT INTENDED TO INDICATE FUTURE RESULTS.

From time to time, each Fund's total return, aggregate total return and
yield may be quoted in advertisements. The performance of each Fund may be
compared to those of other mutual funds with

51
<PAGE>

similar investment objectives and to stock, bond and other relevant indices or
to rankings prepared by independent services or other financial or industry
publications that monitor the performance of mutual funds. For example, the
performance of a Fund may be compared to data prepared by Lipper Analytical
Services, Inc., Mutual Fund Forecaster, Wiesenberger Investment Companies
Services, Morningstar or CDA Investment Technologies, Inc., as well as to
indices such as the Dow Jones Industrial Average, various indices of Standard
& Poor's, Lipper, Merrill Lynch, Salomon Brothers, Lehman Brothers, Wilshire,
Morgan Stanley and the Consumer Price Index. Performance data as reported in
national financial publications such as Money Magazine, Forbes, Barron's,
Morningstar, The Wall Street Journal and The New York Times, or in
publications of a local or regional nature, may also be used in comparing the
performance of a Fund.

Performance is based on historical earnings and is not intended to indicate
future performance. The investment return and principal value of an investment
in a Fund will fluctuate so that shares, when redeemed, may be worth more or
less than their original cost. Performance data may not provide a basis for
comparison with bank deposits and other investments which provide a fixed
yield for a stated period of time. Changes in the net asset value should be
considered in ascertaining the total return to shareowners for a given period.
Total return data should also be considered in light of the risks associated
with a Fund's composition, quality, operating expenses and market conditions.
Any fees charged by The Commerce Funds directly to its customers in connection
with investments in the Funds will not be included in the Funds' calculations
of performance data. The methods used to compute the Fund's yield and total
return are described in more detail in the Statement of Additional
information.

The Funds calculate their total return on an "average annual total return"
basis for various periods from the date a Fund commences investment operations
and for other periods as permitted under SEC rules. Average annual total
return reflects the average annual percentage change in value of an investment
over the measuring period. Total return may also be calculated on an aggregate
total return basis for various periods. Aggregate total return reflects the
total percentage change in value over the measuring period. Both methods of
calculating total return reflect the sales charge imposed by the Funds and
changes in the price of a Fund's shares and assume that dividend and capital
gain distributions are reinvested. When considering average total return
figures for periods longer than one year, you should note that the annual
total return for any one year may be more or less than the average for the
entire period. A Fund may also advertise its total return on an aggregate,
year-by-year or other basis for various specified periods through charts,
graphs, schedules or quotations. The Funds may also advertise quotations of
total return that do not reflect the sales charge imposed on the purchase of
Fund shares. Quotations which do not reflect sales charges will, of course, be
higher than quotations which do reflect sales charges.

The yield of the Short-Term Government and Bond Funds are computed based on
the Fund's net income during a specified 30-day period. More specifically, a
Fund's yield is computed by dividing its per share net income during the
relevant period by the per share maximum public offering price on the last day
of the period and annualizing the result on a semi-annual basis.

Each Fund's total return and yield will be calculated separately for each
class of shares in existence. Because each class of shares may be subject to
different expenses, the total return and yield calculations with respect to
each class of shares for the same period will differ.

52
<PAGE>

OTHER INFORMATION

THE COMMERCE FUNDS IS A DELAWARE BUSINESS TRUST
THAT WAS ORGANIZED ON FEBRUARY 7, 1994.

ABOUT THE COMMERCE FUNDS

THE COMMERCE FUNDS' TRUST INSTRUMENT AUTHORIZES THE BOARD OF TRUSTEES TO
ISSUE AN UNLIMITED NUMBER OF FULL AND FRACTIONAL SHARES OF BENEFICIAL
INTEREST, WITHOUT PAR VALUE, OF ONE OR MORE SERIES OF SHARES (OR CLASSES
THEREOF) AS THE TRUSTEES MAY FROM TIME TO TIME CREATE AND ESTABLISH. PURSUANT
TO SUCH AUTHORITY, THE BOARD OF TRUSTEES HAS AUTHORIZED THE ISSUANCE OF AN
UNLIMITED NUMBER OF SHARES IN EACH SERIES, REPRESENTING INTERESTS IN NINE
DIFFERENT FUNDS: THE SHORT-TERM GOVERNMENT, BOND, BALANCED, GROWTH AND INCOME,
GROWTH, MIDCAP, INTERNATIONAL EQUITY, NATIONAL TAX-FREE BOND AND MISSOURI TAX-
FREE BOND FUNDS. EACH OF THE FOREGOING FUNDS, EXCEPT THE NATIONAL TAX-FREE
BOND AND MISSOURI TAX-FREE BOND FUNDS, OFFERS TWO CLASSES OF SHARES:
INSTITUTIONAL SHARES AND SERVICE SHARES. THE NATIONAL TAX-FREE BOND AND
MISSOURI TAX-FREE BOND FUNDS OFFER ONLY ONE CLASS OF SHARES. FOR INFORMATION
REGARDING THE FUNDS' INSTITUTIONAL SHARES AND THE NATIONAL TAX-FREE BOND AND
MISSOURI TAX-FREE BOND FUNDS, WHICH ARE OFFERED IN SEPARATE PROSPECTUSES,
CONTACT THE COMMERCE FUNDS AT 1-800-305-2140.

Shares of each class of a Fund bear their pro rata portion of all operating
expenses paid by the Fund except that Service Shares bear the payments made
under the Distribution Plan and Shareholder Administrative Services Plan
applicable only to Service Shares at annual rates not to exceed 0.25% and
0.25%, respectively, of the average daily net asset value of Service Shares of
the Short-Term Government, Bond, Balanced, Growth and Income, Growth, MidCap,
and International Equity Funds, and that Institutional Shares bear the
payments made under the Shareholder Administrative Services Plan applicable
only to Institutional Shares, at an annual rate not to exceed 0.25% of average
daily net assets of Institutional Shares of the Short-Term Government, Bond,
Balanced, Growth and Income, Growth, MidCap and International Equity Funds.
Institutional Shares are offered in separate prospectuses, primarily to
investors maintaining qualified accounts in the trust departments of
affiliates and correspondent banks of Commerce Bancshares, Inc., to
participants in employer-sponsored defined contribution plans administered by
Commerce Bancshares, Inc. and to shareholders who have existing accounts in
Institutional Shares on the date of this Prospectus. Service Shares are
offered primarily to retail investors. The differences in expenses paid by the
respective classes will affect their performance.

Fund shares have no preemptive rights and only such conversion and exchange
rights as the Board of Trustees may grant in its discretion. All shares issued
as described in this Prospectus will be fully paid and non-assessable.

Each share of a series shall represent an equal beneficial interest in the
net assets of such series. Each holder of shares of a series shall be entitled
to receive distributions of income and capital gains, if any, which are made
with respect to such series and which are attributable to such shares. Upon
redemption of shares, such shareowner shall be paid solely out of the funds
and property of such series of The Commerce Funds.

VOTING RIGHTS

SHAREOWNERS ARE ENTITLED TO ONE VOTE FOR EACH FULL SHARE HELD AND FRACTIONAL
VOTES FOR FRACTIONAL SHARES HELD. Additionally, except when required by the
1940 Act or when the Board of Trustees has

53
<PAGE>

determined a matter effects the interests of more than one series, all shares
shall be voted separately by individual series. The Board of Trustees may also
determine that a matter affects only the interests of one or more classes of a
series in which case any such matter shall be voted on by such class or
classes.

The Commerce Funds does not presently intend to hold annual meetings of
shareowners to elect Trustees or for other business. Shareowner meetings will
be held when required by the 1940 Act or other applicable law.

Under certain circumstances, shareowners have the right to call a shareowner
meeting. Such meetings will be held when requested by the shareowners of 10%
or more of The Commerce Funds' outstanding shares of beneficial interest. The
Commerce Funds will assist in shareowner communications in such matters to the
extent required by law and The Commerce Funds' undertaking with the Securities
and Exchange Commission. Voting rights are not cumulative, and accordingly the
owners of more than 50% of the aggregate shares of The Commerce Funds may
elect all of the Trustees irrespective of the vote of the other shareowners.

As of February 7, 1997, the Advisor and their affiliates possessed, on
behalf of their underlying customer accounts, voting or investment power with
respect to 90%, 86%, 77%, 79%, 83% and 92% of the outstanding shares of the
Short-Term Government, Bond, Balanced, Growth, MidCap and International Equity
Funds, respectively, and therefore may be deemed to be a controlling person of
The Commerce Funds for purposes of the 1940 Act.

As used in this Prospectus, a "vote of the holders of a majority of the
outstanding shares" of The Commerce Funds or of a particular Fund means, with
respect to the approval of an investment advisory agreement, a distribution
plan or a change in a fundamental investment policy, the affirmative vote of
the holders of the lesser of (a) more than 50% of the outstanding shares of
The Commerce Funds or such Fund, or (b) 67% or more of the shares of The
Commerce Funds or such Fund present at a meeting if more than 50% of the
outstanding shares of The Commerce Funds or such Fund are represented at a
meeting in person or by proxy.

SHAREOWNER REPORTS

Shareowners of record will be provided each year with a semi-annual report
showing each Fund's investments and other information as of April 30 and,
after the close of The Commerce Funds' fiscal year on October 31, with an
annual report containing audited financial statements.

INQUIRIES

We welcome any inquiries you may have regarding The Commerce Funds. Please
consult your investment representative or call our toll-free service and
information number indicated on page 31.

NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS NOT CONTAINED IN THIS PROSPECTUS OR IN THE STATEMENT OF
ADDITIONAL INFORMATION IN CONNECTION WITH THE OFFERING MADE BY THIS PROSPECTUS
AND, IF GIVEN OR MADE, SUCH INFORMATION OR REPRESENTATIONS MUST NOT BE RELIED
UPON AS HAVING BEEN AUTHORIZED BY THE COMMERCE FUNDS OR THE DISTRIBUTOR. THIS
PROSPECTUS DOES NOT CONSTITUTE AN OFFERING BY THE COMMERCE FUNDS OR BY THE
DISTRIBUTOR IN ANY JURISDICTION IN WHICH SUCH OFFERING MAY NOT LAWFULLY BE
MADE.

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<PAGE>

Not to be used for Individual Retirement Accounts-- For an IRA application,
call Shareowner Services at 1-800-305-2140 or call the Transfer Agent at 1-800-
995-6365
Account # ______________________________
Order # ________________________________

ACCOUNT APPLICATION FORM [LOGO OF COMMERCE FUNDS(TM)]
- --------------------------------------------------------------------------------
THIS ACCOUNT The Commerce Funds c/o Shareowner Services P.O. Box
APPLICATION FORM 16931 St. Louis, MO 63105
SHOULD BE FORWARDED For additional information call 1-800-305-2140
PROMPTLY TO: Date: __________

- --------------------------------------------------------------------------------
1. ACCOUNT Please Print
REGISTRATION
INDIVIDUAL

---------------------------------------------------------
First Name Initial Last Name (Birthdate)

--------------
SS# or Tax ID#

JOINT TENANTS
The account will be registered as "Joint Tenants with
Right of Survivorship" unless otherwise specified.

---------------------------------------------------------
First Name Initial Last Name (Birthdate)

--------------
SS# or Tax ID#

---------------------------------------------------------
First Name Initial Last Name (Birthdate)

TRANSFER ON DEATH

------------------------ ------------- --------------
Name Date of Birth SS#

GIFT TO MINORS

--------------------------------------------------------
Custodian's Name (Only one can be named)

---------------------------------------- --------------
Minor's Name (Only one) SS#

Under the _________ (State of Residence) Uniform Gift to
Minors Act

ADDITIONAL
DOCUMENTATION CORPORATION, TRUST, OR OTHER ENTITY
MAY BE REQUIRED
---------------------------------------- --------------
Name of Corporation, Trust or other Tax ID#
Non-Person Entity

--------------------------------------------------------
Attention

--------------------------------------------------------
Date of Trust Instrument: Name of Beneficiary
(If to be included
in the registration)

--------------------------------------------------------
Name(s) of Trustee(s) (If to be included in the
registration)

- --------------------------------------------------------------------------------
2. MAILING ADDRESS ( )
------------------------------------ ------------------
Street Daytime Phone

--------------------------------------------------------
City State Zip Code
<PAGE>

<TABLE>
<S> <C>
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3. TO PURCHASE SERVICE Check appropriate boxes:
SHARES
[_] Short Term $_______ [_] Growth and $_______
$1000 MINIMUM PER Government Amount Income Amount
FUND ($250 MINIMUM #336 #
FOR SUBSEQUENT [_] Bond $_______ [_] MidCap $_______
INVESTMENTS) #333 Amount #339 Amount
[_] Balanced $_______ [_] International $_______
#338 Amount Equity Amount
[_] Growth $_______ #340
#337 Amount
[_] A check (payable to "The Commerce Funds") for $___ is
enclosed.
[_] I/we certify that I/we am/are an entity exempt from
the sales charge according to the "How To Buy Shares"
section in the Prospectus and I/we am/are, therefore,
entitled to purchase Fund shares at net asset value.
By checking this box, the undersigned agrees that
I/we will notify Commerce Funds Shareowner Services
at or prior to purchase if I/we am/are no longer in
one of the categories of eligible investors.
Reason for exemption ________________________________.

- ----------------------------------------------------------------------------------
4. DIVIDEND AND See "Dividend and Distribution Policies" in the
DISTRIBUTION Prospectus
OPTIONS Choose how you wish to receive dividends. If no boxes
are checked, Option A will be assigned.

A. [_] Reinvest all dividends and capital gains.
B. [_] Receive dividends in cash and reinvest capital
gains (Complete cash dividend section below.)
C. [_] Receive all dividends and capital gains in cash
(Complete cash dividend section below.)
D. [_] All dividends and capital gains reinvested in
another Commerce Fund account. (See Prospectus
regarding limitations on this privilege.)

Fund Name _________________ Account Number ____________
Please send cash dividends to:
[_] Account registration address. [_] Deposit to bank
(attach voided
check/deposit
slip)

[_] Check to special payee as follows: (SIGNATURE
GUARANTEE required. See Section 13 of this Form.)
Name of Payee ________________ Account No. (if
applicable) __________
Street Address _________________________________________
City _____________________________ State ____ Zip ______

- --------------------------------------------------------------------------------
5. RIGHT OF See "How To Buy Service Shares" in the Prospectus
ACCUMULATION
Cumulative quantity discounts are applicable if a
shareowner's current value of existing shares of a Fund
alone or in combination with shares of any other Fund
described in the Prospectus on which a sales charge was
paid, total the requisite amount for receiving a
discount ($100,000 minimum) as described in the
accompanying Prospectus. Below are listed all the
accounts (account name, Fund and number) which should
be aggregated for a right of accumulation.

Name _____________ Name _____________ Name _____________
Fund _____________ Fund _____________ Fund _____________
Acct No. _________ Acct No. _________ Acct No. _________

- --------------------------------------------------------------------------------
6. LETTER OF INTENT See "How To Buy Service Shares" in the Prospectus

Although not obligated to do so, it is the
undersigned's intention to invest, over a 13-month
period from this date, in Service Shares of a Fund
alone or in combination with shares of any other Fund,
on which a sales charge was paid, described in the
Prospectus which qualify for a quantity discount as
described in the accompanying Prospectus, in an amount
that will equal or exceed:
[_] $100,000 [_] $250,000 [_] $500,000 [_] $1,000,000
I/we agree to the Letter of Intent and Escrow Agreement
described in the accompanying Prospectus under "How to
Buy Shares--Letter of Intent" and incorporated by
reference herein.
</TABLE>
<PAGE>

<TABLE>
<S> <C>
- --------------------------------------------------------------------------------
7. AUTOMATIC See "What is Dollar Cost Averaging and How Can I
INVESTMENT PLAN Implement It?" in the Prospectus

Beginning on the day of these months: J F M A M J
J A S O N D (circle all months that apply), I/We
authorize State Street Bank (the custodian for a Fund)
to debit the amount requested below from my/our bank
account for investment in a Fund. I/We understand that
my/our participation in the Automatic Investment Plan
is subject to the terms and conditions of such plan as
amended from time to time.

--------------------------------------------------------
Amount of each monthly investment (minimum $75/Quarter)

--------------------------------------------------------
Name of Fund

--------------------------------------------------------
Amount of each monthly investment (minimum $75/Quarter)

--------------------------------------------------------
Name of Fund

--------------------------------------------------------
Authorized Signature (as shown on bank records)

--------------------------------------------------------
Authorized Signature (if joint bank account both sign)
- --------------------------------------------------------------------------------

8. FOR TELEPHONE See "How To Buy Service Shares" or "How To Sell Service
PURCHASE/ Shares" in the Prospectus
REDEMPTION,
SECTION MUST [_] The Commerce Funds and its agent is hereby authorized
BE COMPLETED to honor telephone, telegraphic, or other
instructions, without SIGNATURE GUARANTEE, from any
person is the shareowner of record or authorized to
account, without an obligation on behalf of The
Commerce Funds or its agent, to verify that such
person for the redemption of shares for the above
give purchase/redemption instructions, provided
proceeds are sent by federal wire (minimum $1,000) or
electronic funds transfer to/from the bank account
indicated on your voided check or deposit slip or
mailed to the account registration address. Neither a
Fund nor its agent shall be liable for telephone
purchases or redemptions or for payments made to any
unauthorized account for instructions reasonably
believed to be genuine. The Commerce Funds will
employ reasonable procedures to confirm that such
instructions given are genuine.

- --------------------------------------------------------------------------------

9. TELEPHONE EXCHANGE See "Can I Exchange My Investment From One Commerce
Fund To Another?" in the Prospectus

Exchange Privilege (you will have this privilege
unless declined)

[_] I/We DO NOT wish to authorize telephone exchanges.

- --------------------------------------------------------------------------------

10. AUTOMATIC See "Can I Have Exchanges Made Automatically?" in the
EXCHANGES (ATTACH Prospectus
VOIDED CHECK OR
DEPOSIT SLIP) The originating Fund's balance must be at least
$1,000 after the exchange and the receiving Fund's
minimum investment must be met. Exchanges will take
place each month after such exchanges commence until
terminated.

I/We hereby authorize automatic exchanges of $___
(exact dollars--$250 minimum) into my/our
identically registered account:

Exchange from ___________________________________ (Name of Fund)
to ___________________________________ (Name of Fund)
Account No. (if known) __________________________

Please make exchanges on the day beginning the month
of _____________________________________________________.

-------------------------- --------------------------
Bank Name Account Number

--------------------------------------------------------
Bank Street Address City State Zip Code

-------------------------- --------------------------
ABA Routing Number Name on Account

- --------------------------------------------------------------------------------

11. DUPLICATE [_] Check the box if you would like duplicate
MAILINGS confirmations/statements sent to another address:

--------------------------------------------------
Name

--------------------------------------------------
Street Address City State Zip
</TABLE>
<PAGE>

<TABLE>
<S> <C>
- -------------------------------------------------------------------------------
12. AUTOMATIC Minimum account balance must be $5,000. Withdrawal
WITHDRAWAL PLAN minimum is $100.

Check One: [_] Monthly [_] Quarterly [_] Semi-Annual [_] Annual

Please make payments via (check one) [_] check [_] ACH
(Bank must be ACH affiliated. Attach voided check).
Payments made via check are withdrawn from your account
on or about the 1st or 15th of a month for monthly
withdrawals or the 15th of the month for
quarterly/semi-annual/annual withdrawals. (I understand
that I may change the date of redemption, via ACH, or
the amount at any time in writing to the Fund at the
address stated above.)

If withdrawal payments are to be made via ACH (attach
voided check/deposit slip)

Please withdraw $_______ from my account on the
of the month.

Complete this section ONLY if check is to be made
payable to person(s) other than the registered owner.
SIGNATURE GUARANTEE required. (See Section 13 of this
Form.)

--------------------------------------------------------
Name of check recipient Address City State Zip

- -------------------------------------------------------------------------------
13. TAXPAYER ID 1) The number shown on this Account Application Form is
CERTIFICATION AND my/our correct Taxpayer Identification number, and 2)
SIGNATURE I/we am/are not subject to backup withholding because
AUTHORIZATION (a) I/we am/are exempt from backup withholding, or (b)
I/we have not been notified by the Internal Revenue
Service (IRS) that I/we am/are subject to backup
withholding as a result of a failure to report all
interest or dividends, or (c) the IRS has notified
me/us that I/we am/are no longer subject to backup
withholding.

You must cross out item (2) above if you have been
notified by the IRS that you are currently subject to
federal backup withholding because of under reporting
interest or dividends on your federal tax return or if
you have not been notified by the IRS that you are no
longer subject to backup withholding.

I/we further certify that I/we am/are neither a citizen
nor a resident of the United States for the purpose of
the Internal Revenue Code. I/we am/are a resident of ___

NOTE: FAILURE TO COMPLETE THIS SECTION MAY RESULT IN
BACKUP WITHHOLDING OF 31% OF ANY PAYMENTS MADE TO
YOU.

By checking only the appropriate box and signing below,
I/we certify under penalties of perjury that:
[_] I/we do not have a taxpayer identification
number, but I/we have applied for or intend to
apply for one. I/we understand that the required
31% withholding may apply before I/we provide such
number and certifications, which should be provided
within 60 days.
or [_] I/we am/are an exempt recipient.
or [_] I/we am/are neither a citizen nor a resident of
the United States for the purpose of the Internal
Revenue Code. I/we am/are a resident of ________ .

Permanent Foreign Address:______________________________
________________________________________________________
________________________________________________________

---------------------------------------------------------

SIGNATURE By the execution of this Account Application Form, the
AUTHORIZATION undersigned represents and warrants that it has the
full right, power and authority to make the investment
applied for pursuant to this Form and is acting for
itself or in some fiduciary capacity in making such
investment.

THE UNDERSIGNED AFFIRMS THAT I/WE HAVE RECEIVED A
CURRENT PROSPECTUS FOR THE FUND AND HAS REVIEWED THE
SAME.

Sign Here:

--------------------------------------------------------

Signature Name (print) and Title

--------------------------------------------------------
Signature Name (print) and Title

SIGNATURE GUARANTEE REQUIRED ONLY IF A SPECIAL
PAYEE/ADDRESS IS DESIGNATED UNDER ITEM #'S 4 AND 12.
SEE "HOW TO SELL SHARES" IN THE PROSPECTUS.

--------------------------------------------------------
SIGNATURE GUARANTEE SIGNATURE GUARANTEE (IF REQUIRED)
</TABLE>
<PAGE>

--------------------------------------------------------
Branch Office Location Branch Number/Branch Phone

--------------------------------------------------------
Reg. Rep. Number Reg. Rep.'s Name

--------------------------------------------------------
Authorized Signature State Zip

THE COMMERCE FUNDS DISCLOSURE STATEMENT (YOU MUST SIGN)

The account owner acknowledges that the account owner has read this disclosure
statement and has been told and understands that:

. shares of the Funds are not bank 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 company or its affiliates, or any
other bank

. are not federally insured or guaranteed by the U.S. Government, Federal
Deposit Insurance Corporation (FDIC), the Federal Reserve Board, or any
other government agency

. investment in the Funds involves investment risks, including possible loss
of the principal amount invested

. Commerce Bank, N.A. (St. Louis) and Commerce Bank, N.A. (Kansas City) serve
as the investment advisor to the Funds and receive compensation for such
services as disclosed in the current prospectus

. sales charges may apply.

Dated: _________________ --------------------------
Signature

--------------------------
Signature
<PAGE>

[LOGO OF COMMERCE FUNDS(TM)]
<PAGE>

[LOGO] COMMERCE FUNDS(TM)

THE SHORT-TERM GOVERNMENT FUND
THE BOND FUND
THE BALANCED FUND
THE GROWTH AND INCOME FUND
THE GROWTH FUND

THE MIDCAP FUND
THE INTERNATIONAL EQUITY FUND

March 1, 1997
Institutional Shares
<PAGE>

HOW CAN I CONTACT THE COMMERCE FUNDS?

To authorize the special features described in this prospectus or to obtain
additional information about The Commerce Funds, you may:

. Write to The Commerce Funds at:

The Commerce Funds
P.O. Box 16931
St. Louis, MO 63105; or

. Call The Commerce Funds transfer agent directly at 1-800-995-6365; or

. Call The Commerce Funds Shareowner Services at 1-800-305-2140; or

. Contact a registered investment representative at selected Commerce
Bank branches; or

. Contact your plan sponsor or account administrator for specific
information regarding your 401(k) or Investment Management Group
account.
<PAGE>

THE COMMERCE FUNDS

The Commerce Funds is an open-end, management investment company registered
under the Investment Company Act of 1940 (the "1940 Act"). The Commerce Funds
currently consists of nine investment portfolios, each of which has a separate
pool of assets with separate investment objectives and policies. However, this
Prospectus relates only to the offering of the Institutional Shares of the
Short-Term Government, Bond, Balanced, Growth and Income, Growth, MidCap and
International Equity Funds (individually, a "Fund" and collectively, the
"Funds"). Each Fund is classified as a diversified investment portfolio under
the 1940 Act.

THE GROWTH AND INCOME FUND seeks both capital appreciation and current
income. The Fund pursues these objectives through investment in a diversified
portfolio of equity securities of companies which represent excellent value
relative to their current price and provide, on average, a current yield in
excess of the S&P 500 Stock Index.

MARCH 1, 1997
<PAGE>

This Prospectus describes the Institutional Shares in each Fund.
Institutional Shares are offered primarily to (i) investors maintaining
qualified accounts at bank and trust institutions, including institutions
affiliated with Commerce Bancshares, Inc. and its subsidiaries, (ii)
participants in employer-sponsored defined contribution plans, (iii) any
investor who was a shareholder in The Commerce Funds prior to January 1, 1997
and (iv) employees, directors, advisory directors, officers and retirees (as
well as their spouses and legal dependents) of Commerce Bancshares, Inc.,
Goldman, Sachs & Co., State Street Bank and Trust Company and National
Financial Data Services, Inc. or their subsidiaries or affiliates.

The Commerce Funds is also authorized to issue an additional class of
shares, Service Shares, in each of the Short-Term Government Fund, Bond Fund,
Balanced Fund, Growth and Income Fund, Growth Fund, MidCap Fund and
International Equity Fund. Service Shares are offered under a separate
prospectus primarily to individuals, corporations or other entities,
purchasing either for their own accounts or for the accounts of others, and to
qualified banks, savings and loan associations, and broker/dealers on behalf
of their customers.

2
<PAGE>

TABLE OF CONTENTS

<TABLE>
<S> <C>
SUMMARY OF EXPENSES......................................................... 4
FINANCIAL HIGHLIGHTS........................................................ 6
INVESTMENT OBJECTIVES AND POLICIES.......................................... 8
Short-Term Government Fund................................................ 8
Bond Fund................................................................. 9
Balanced Fund............................................................. 11
Growth and Income Fund.................................................... 13
Growth Fund............................................................... 14
MidCap Fund............................................................... 15
International Equity Fund................................................. 16
ADDITIONAL RISK CONSIDERATIONS.............................................. 18
OTHER INVESTMENT PRACTICES.................................................. 19
INVESTMENT RESTRICTIONS..................................................... 30
SHAREOWNER GUIDE............................................................ 31
HOW CAN I CONTACT THE COMMERCE FUNDS?..................................... 31
HOW TO BUY INSTITUTIONAL SHARES........................................... 31
What Is The Minimum Investment For Each Fund?........................... 31
How Are Institutional Shares Priced?.................................... 32
How Do I Buy Institutional Shares?...................................... 36
What Price Will I Receive When I Buy Institutional Shares?.............. 37
What Else Should I Know About Buying Institutional Shares?.............. 37
HOW TO SELL INSTITUTIONAL SHARES.......................................... 37
How Do I Sell My Institutional Shares?.................................. 37
What Price Will I Receive For Institutional Shares I Want To Sell?...... 39
How Quickly Can I Receive Proceeds From A Sale?......................... 39
What If I Want To Reinvest Sales Proceeds?.............................. 40
DIVIDEND AND DISTRIBUTION POLICIES........................................ 40
SHAREOWNER FEATURES AND PRIVILEGES........................................ 41
Can I Use The Funds In My Retirement Plan?.............................. 41
What Is Dollar Cost Averaging And How Can I Implement It?............... 42
Can I Exchange My Investment From One Commerce Fund To Another?......... 42
Can I Have Exchanges Made Automatically?................................ 43
Can I Reinvest Dividends From One Commerce Fund In Another?............. 43
How Do I Obtain Other Information About My Account?..................... 44
Can I Make Transactions By Telephone?................................... 44
Can I Arrange Automatic Withdrawals?.................................... 44
THE BUSINESS OF THE COMMERCE FUNDS.......................................... 45
Board of Trustees......................................................... 45
Service Providers......................................................... 45
Shareholder Administrative Services Plan.................................. 49
Expenses.................................................................. 50
TAX INFORMATION............................................................. 50
HOW PERFORMANCE IS MEASURED................................................. 51
OTHER INFORMATION........................................................... 52
About The Commerce Funds.................................................. 52
Voting Rights............................................................. 53
Shareowner Reports........................................................ 54
Inquiries................................................................. 54
ACCOUNT APPLICATION FORM
</TABLE>

3
<PAGE>

SUMMARY OF EXPENSES INSTITUTIONAL SHARES

<TABLE>
<CAPTION>
SHORT-TERM
GOVERNMENT BOND BALANCED GROWTH AND GROWTH MIDCAP INTERNATIONAL
FUND FUND FUND INCOME FUND FUND FUND(1) EQUITY FUND
---------- ---- -------- ----------- ------ ------- -------------
<S> <C> <C> <C> <C> <C> <C> <C>
SHAREOWNER TRANSACTION
EXPENSES
Maximum Sales Charge
Imposed on Purchases
(as a percentage of
offering price)(2).... 2.00% 3.50% 3.50% 3.50% 3.50% 3.50% 3.50%
Maximum Sales Charge
Imposed on Reinvested
Distributions......... None None None None None None None
Deferred Sales Charge
Imposed on
Redemptions........... None None None None None None None
Redemption Fees........ None None None None None None None
Exchange Fees(3)....... None None None None None None None
ANNUAL FUND OPERATING
EXPENSES
(as a percentage of
average daily net
assets)
Management Fees (after
fee waivers)(4)....... 0.30% 0.50% 0.75% 0.75% 0.75% 0.75% 0.83%
Other Expenses (after
fee waivers and
expense
reimbursements)(5).... 0.38% 0.34% 0.38% 0.45% 0.33% 0.47% 0.89%
---- ---- ---- ---- ---- ---- ----
Total Fund Operating
Expenses (after fee
waivers and expense
reimbursements)(6).... 0.68% 0.84% 1.13% 1.20% 1.08% 1.22% 1.72%
==== ==== ==== ==== ==== ==== ====
EXAMPLE: Assume a Fund's
annual return is 5% and
its expenses are the
same as those stated
above. For every $1,000
you invest, here's how
much you would pay in
total expenses if you
closed your account
after the number of
years indicated,
assuming deduction at
the time of purchase of
the maximum applicable
sales load and
redemption at the end
of each time period:
One Year............... $ 27 $ 43 $ 46 $ 47 $ 46 $ 47 $ 52
Three Years............ $ 41 $ 61 $ 70 $ 72 $ 68 $ 72 $ 87
Five Years............. $ 57 $ 80 $ 95 $ 99 $ 92 $100 $125
Ten Years.............. $102 $135 $168 $175 $162 $178 $231
</TABLE>
- --------

(1) Formerly the Aggressive Growth Fund.

(2) Certain investors may not be charged a sales charge. See "Shareowner
Guide--When There is No Sales Charge."

(3) No charge is imposed on exchanges through the Automatic Exchange feature
or for up to five exchanges made within a twelve month period. Additional
exchanges may be subject to a $5.00 fee.

4
<PAGE>

(4) Without fee waivers by the Advisor, "Management Fees" would be charged at
an annual rate of .50%, 1.00% and 1.50%, respectively, of the average
daily net assets of the Short-Term Government, Balanced and International
Equity Funds, respectively. The Advisor reserves the right to reduce or
discontinue fee waivers at any time. In the event that the "Total Fund
Operating Expenses" of the International Equity Fund fall below 1.72%, the
Advisor will reduce its waiver of investment advisory fees by the
difference between actual "Total Fund Operating Expenses" and 1.72%.

(5) In addition to the advisory fee waivers referred to in note 4, during the
last fiscal year the Advisor voluntarily reimbursed expenses to the extent
necessary for the Short-Term Government, Balanced and International Equity
Funds to maintain annual expense ratios of not more than 0.68%, 1.13% and
1.72%, respectively, excluding interest, taxes and extraordinary expenses,
and the Advisor intends to voluntarily reimburse such expenses during the
current year to the extent necessary for the Short-Term Government, Bond,
Balanced, Growth and Income, Growth and International Equity Funds to
maintain an annual expense ratio of not more than 0.68%, 0.88%, 1.13%,
1.20%, 1.13% and 1.72%, respectively. No expense reimbursements or waivers
were necessary in the last fiscal year with respect to the Bond and Growth
Funds. The Commerce Funds has adopted a Shareholder Administrative
Services Plan pursuant to which it may enter into agreements with
institutions under which they will render shareowner administrative
support services for their customers who beneficially own shares of the
Funds in return for a fee of up to 0.25% per annum of the value of such
shares.

(6) Without the fee waivers and expense reimbursements described above, "Other
Expenses" (including Shareowner Servicing Fees) would be 0.61%, 0.45%,
1.13%, and 1.14% and "Total Fund Operating Expenses" would be 1.11%,
1.45%, 1.88%, and 2.64% of the average daily net assets of the Short-Term
Government, Balanced, Growth and Income and International Equity Funds,
respectively.

The above expense information is provided to help you understand the
expenses you would pay either directly (i.e., transaction expenses) or
indirectly (i.e., annual operating expenses) as a shareowner in the Funds. The
information with respect to the Short-Term Government, Bond, Balanced, Growth,
MidCap and International Equity Funds is based on the expenses incurred by
those Funds during the last fiscal year. The information presented for the
Growth and Income Fund is based on expenses expected to be incurred in the
current fiscal year. The expense information included in the table and
hypothetical example above relates only to Institutional Shares (the class
being offered by this Prospectus) and should not be considered as
representative of past or future expenses, except as described above. The
Commerce Funds also offer Service Shares, which are subject to different fees
and expenses (which affect performance). Information regarding Service Shares
may be obtained from The Commerce Funds by calling 1-800-305-2140. In
addition, Service Organizations may charge their clients account fees for
providing account services in connection with their clients' investments in
shares of The Commerce Funds, which are included in "Other Expenses." You
should note that any fees that are charged by The Commerce Funds' Advisor,
their affiliates or any other institutions directly to their customer accounts
for services related to an investment in the Funds are in addition to and not
reflected in the fees and expenses described above. If you purchase or redeem
shares directly from The Commerce Funds Shareowner Services or an account
representative at a Commerce Bank branch, you may avoid these fees by
following the procedures described under "How To Buy Institutional Shares" on
page 31 of this Prospectus.

For more information about shareowner transaction expenses and The Commerce
Funds' operating expenses, see "Shareowner Guide" and "The Business of The
Commerce Funds."

- -------------------------------------------------------------------------------

THE EXAMPLES SHOWN ABOVE SHOULD NOT BE CONSIDERED REPRESENTATIONS OF FUTURE
INVESTMENT RETURN OR OPERATING EXPENSES. ACTUAL OPERATING EXPENSES AND
INVESTMENT RETURN MAY BE GREATER OR LESSER THAN THOSE INDICATED. INFORMATION
ABOUT THE ACTUAL PERFORMANCE OF THE FUNDS OR IS CONTAINED IN THE COMMERCE
FUNDS' ANNUAL REPORT, WHICH MAY BE OBTAINED WITHOUT CHARGE BY CONTACTING THE
COMMERCE FUNDS AT THE ADDRESS OR TELEPHONE NUMBER INDICATED ON THE COVER
PAGE OF THIS PROSPECTUS.

- -------------------------------------------------------------------------------

5
<PAGE>

FINANCIAL HIGHLIGHTS

The financial highlights presented below set forth certain information
concerning the investment results for the Institutional Shares (of the Fund
specified) of each Fund outstanding during the periods indicated. Prior to
January 2, 1997, the Fund offered only one class of shares. On that date, the
Funds began offering Institutional Shares to institutional investors as
described in this Prospectus and Service Shares to retail investors as
described in a separate Prospectus. The information for the fiscal years ended
October 31, 1996 and 1995 has been audited by KPMG Peat Marwick LLP,
independent accountants for the Funds, whose report thereon is contained in
The Commerce Funds' Annual Report. This information should be read in
conjunction with the financial statements and related notes incorporated by
reference and attached to the Statement of Additional Information. These
reports also contain performance information and may be obtained free of
charge by contacting The Commerce Funds at the address or telephone number on
page 31 of this Prospectus. During the periods shown, the Growth and Income
Fund had not commenced operations. Accordingly, there are no financial
highlights for this Fund.

<TABLE>
<CAPTION>
RATIOS ASSUMING
NO WAIVER OF
INVESTMENT ADVISORY
FEES OR EXPENSE
REIMBURSEMENTS
---------------------
RATIO RATIO
RATIO OF NET RATIO OF NET
OF NET INVESTMENT NET OF INVESTMENT
EXPENSES INCOME AVERAGE ASSETS AT EXPENSES INCOME TO
TO AVERAGE TO AVERAGE PORTFOLIO COMMIS- END TO AVERAGE AVERAGE
NET NET TURNOVER SION OF PERIOD NET NET
ASSETS ASSETS RATE RATE(e) (IN 000'S) ASSETS ASSETS
---------- ---------- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
SHORT-TERM GOVERNMENT FUND
- ------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 0.68% 5.90% 12% -- $33,839 1.11% 5.47%
12/12/94(a) to
10/31/95....... 0.68(d) 6.38(d) 158 -- 20,211 1.14(d) 5.92(d)
BOND FUND
- ------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 0.84 6.10 31 -- 151,205 0.84 6.10
12/12/94(a) to
10/31/95....... 0.88(d) 6.64(d) 58 -- 98,504 0.88(d) 6.64(d)
BALANCED FUND
- ------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 1.13 2.47 58 $0.07640 69,880 1.45 2.15
12/12/94(a) to
10/31/95....... 1.13(d) 3.28(d) 59 -- 48,329 1.45(d) 2.96(d)
</TABLE>
- ------

(a) Commencement of operations.

(b) Includes the balancing effect of calculating per share amounts.

(d) Annualized.

(e) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security transactions
on which commissions are charged. This rate may vary due to various types
of transactions and number of security trades executed.

<PAGE>

<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
---------------------------------- -------------------------
NET
REALIZED AND
NET UNREALIZED
REALIZED LOSS ON NET
AND FOREIGN ASSET
NET ASSET NET UNREALIZED CURRENCY VALUE,
VALUE, INVESTMENT GAIN ON RELATED FROM NET FROM NET END
BEGINNING INCOME INVEST- TRANS- INVESTMENT REALIZED GAIN OF TOTAL
OF PERIOD (LOSS) MENTS(b) ACTIONS(b) INCOME ON INVESTMENTS PERIOD RETURN(c)
--------- ---------- ---------- ------------ ---------- -------------- ------ ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
GROWTH FUND
- --------------------------------------------------------------------------------------------------------
Year ended:
10/31/96....... $24.68 $0.19 $5.40 -- $(0.19) $(1.13) $28.95 23.43%
12/12/94(a) to
10/31/95....... 18.00 0.15 6.68 -- (0.15) -- 24.68 38.06
MIDCAP FUND(F)
- --------------------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 25.30 (0.07) 3.51 -- -- (0.68) 28.06 13.78
12/12/94(a) to
10/31/95....... 18.00 (0.04) 7.34 -- -- -- 25.30 40.56
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 18.64 0.11 3.02 (0.67) (0.07) (0.07) 20.96 13.25
12/12/94(a) to
10/31/95....... 18.00 0.12 0.95 (0.40) (0.03) -- 18.64 3.73
</TABLE>

<TABLE>
<CAPTION>
RATIOS ASSUMING
NO WAIVER OF
INVESTMENT ADVISORY
FEES OR EXPENSE
REIMBURSEMENTS
---------------------
RATIO RATIO
RATIO OF NET RATIO OF NET
OF NET INVESTMENT NET OF INVESTMENT
EXPENSES INCOME AVERAGE ASSETS AT EXPENSES INCOME
TO AVERAGE (LOSS) PORTFOLIO COMMISS- END TO AVERAGE (LOSS) TO
NET TO AVERAGE TURNOVER ION OF PERIOD NET AVERAGE
ASSETS NET ASSETS RATE RATE(e) (IN 000'S) ASSETS NET ASSETS
---------- ---------- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C>
GROWTH FUND
- --------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 1.08% 0.72% 36% $0.0654 $208,908 1.08% 0.72%
12/12/94(a) to
10/31/95....... 1.11(d) 0.81(d) 33 -- 141,735 1.11(d) 0.81(d)
MIDCAP FUND(F)
- --------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 1.22 (0.37) 71 0.0692 74,641 1.22 (0.37)
12/12/94(a) to
10/31/95....... 1.32(d) (0.29)(d) 59 -- 41,665 1.32(d) (0.29)(d)
INTERNATIONAL EQUITY FUND
- --------------------------------------------------------------------------------------------
Year ended:
10/31/96....... 1.72 0.74 21 0.0147 51,589 2.64 (0.18)
12/12/94(a) to
10/31/95....... 1.81(d) 1.06(d) 25 -- 21,014 3.50(d) (0.63)(d)
</TABLE>
- ------

(a) Commencement of operations.

(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.
(e) For fiscal years beginning on or after September 1, 1995, a fund is
required to disclose its average commission rate on security transactions
on which commissions are charged. This rate may vary due to various types
of transactions and number of security trades executed.

(f) Formerly the Aggressive Growth Fund.

7
<PAGE>

INVESTMENT OBJECTIVES AND POLICIES

SHORT-TERM GOVERNMENT FUND

INVESTMENT OBJECTIVE

INVESTMENT STRATEGY

See "Other Investment Practices" below for a description of other types of
securities in which the Fund may invest.

RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND

8
<PAGE>

BOND FUND

INVESTMENT OBJECTIVE

INVESTMENT STRATEGY

9
<PAGE>

See "Other Investment Practices" below for a description of other types of
securities in which the Fund may invest.

10
<PAGE>

RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND

See "Short-Term Government Fund--Risks Associated with an Investment in the
Fund" above for risks associated with investments in mortgage-backed
securities.

See "Additional Risk Considerations--Risks Associated with Fixed Income
Investments" below.

BALANCED FUND

INVESTMENT OBJECTIVE

INVESTMENT STRATEGY

11
<PAGE>

See "Other Investment Practices" below for a description of other types of
securities in which the Fund below may invest.

RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND

12
<PAGE>

See "Short-Term Government Fund--Risks Associated with an Investment in the
Fund" above for risks associated with investments in mortgage-backed
securities.

See "Bond Fund--Risks Associated with an Investment in the Fund" above for
risks associated with investments in asset-backed and fixed income securities.

See "Additional Risk Considerations--Risks Associated with Fixed Income
Investments" below for information concerning other pertinent risks.

GROWTH AND INCOME FUND

INVESTMENT OBJECTIVE

INVESTMENT STRATEGY

In pursuing its investment objective the Fund will invest, under normal
market conditions, at least 65% of its total assets in equity securities,
including common stocks, preferred stocks and securities convertible into
common stocks. The Advisor will seek to acquire stocks of companies that
represent excellent value relative to their current price in that such
companies, in the aggregate, sell at a lower price-to-book value, a lower
price-to-earnings ratio, and a higher yield than the average of the companies
comprising the Standard & Poor's Composite Stock Price Index (the "S&P 500
Index"), an unmanaged Index which emphasizes large capitalization companies.
The Fund uses the S&P 500 Index as a benchmark for comparison because it
represents roughly two-thirds of the market value of all publicly traded
common stocks in the United States and is a widely accepted measure of common
stock investment returns. Although the Fund seeks to exceed the return of the
S&P 500 Index, the Fund may invest its assets in securities that are not
included in this Index. The Fund is not, therefore, an index fund, which
typically holds only securities that are included in the index it attempts to
replicate. The Fund will generally acquire equity securities of companies with
market capitalizations over $500 million. The Advisor anticipates that from
time to time certain industry sectors will not be represented in the Fund
while other sectors will represent a significant portion of invested assets.

While emphasis will be placed on investment in equity securities, primarily
common stocks, the Fund may also invest in other types of equity securities,
including warrants and securities which are convertible into common or
preferred stocks and may participate in rights offerings. The Fund may also
invest, either directly or through investments in sponsored and unsponsored
ADRs, up to 10% of its total assets in the securities of foreign issuers. See
"Balanced Fund--Investment Strategy" above for a description of ADRs.

13
<PAGE>

See "Other Investment Practices" below for a description of other types of
securities in which the Fund may invest.

RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND

GROWTH FUND

INVESTMENT OBJECTIVE

INVESTMENT STRATEGY

In pursuing its investment objective the Fund will invest, under normal
market conditions, at least 65% of its total assets in equity securities,
including common stocks, preferred stocks and securities convertible into
common stocks. The Advisor will seek to acquire stocks of companies that, in
the aggregate, will experience growth in sales, dividends or earnings per
share greater than the average of the companies comprising the S&P 500 Index,
an unmanaged Index which emphasizes large capitalization companies. The Fund
uses the S&P 500 Index as a benchmark for comparison because it represents
roughly two-thirds of the market value of all publicly traded common stocks in
the United States and is a widely accepted measure of common stock investment
returns. Although the Fund seeks to exceed the return of the S&P 500 Index,
the Fund may invest its assets in securities that are not included in this
Index. The Fund is not, therefore, an index fund, which typically holds only
securities that are included in the index it attempts to replicate. The Fund
will generally acquire equity securities of companies with market
capitalizations over $500 million. The Advisor anticipates that from time to
time certain industry sectors will not be represented in the Fund while other
sectors will represent a significant portion of invested assets.

In selecting stocks for the Fund, the Advisor employs a "bottom-up" security
analysis, as described under "Growth and Income Fund--Investment Strategy"
above.

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<PAGE>

See "Other Investment Practices" below for a description of other types of
securities in which the Fund may invest.

RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND

MIDCAP FUND

INVESTMENT OBJECTIVE

INVESTMENT STRATEGY

In selecting stocks for the MidCap Fund, the Advisor employs a "bottom-up"
security analysis, as described under "Growth and Income Fund--Investment
Strategy" above.

See "Other Investment Practices" below for a description of other types of
securities in which the Fund may invest.

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<PAGE>

RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND

See "Additional Risk Considerations--Risks Associated with Foreign
Securities and Currencies" below for information concerning other pertinent
risks.

INTERNATIONAL EQUITY FUND

INVESTMENT OBJECTIVE

INVESTMENT STRATEGY

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<PAGE>

Generally, a hybrid instrument will be a debt security, preferred stock,
depository share, trust certificate, certificate of deposit or other evidence
of indebtedness on which a portion of or all interest payments and/or the
principal or stated amount payable at maturity, redemption or retirement, is
determined by reference to prices or differences between prices of securities,
currencies, intangibles, goods, articles or commodities or by another
objective index, economic factor or other measure such as interest rates,
currency exchange rates or other indices. For example, the principal amount,
redemption or conversion terms of a security could be related to the market
price of some commodity, currency or securities index. Such securities may
bear interest or pay dividends at below market (or even relatively nominal)
rates. Under certain conditions, the redemption value of such an investment
could be zero. Hybrids can have volatile prices and limited liquidity and,
accordingly, their use by the Fund may not enhance investment return.

See "Other Investment Practices" below for a description of other types of
securities in which the Fund may invest.

RISKS ASSOCIATED WITH AN INVESTMENT IN THE FUND

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ADDITIONAL RISK CONSIDERATIONS

RISKS ASSOCIATED WITH FIXED INCOME INVESTMENTS

RISKS ASSOCIATED WITH FOREIGN SECURITIES AND CURRENCIES

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OTHER INVESTMENT PRACTICES

ZERO COUPON BONDS

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<PAGE>

U.S. GOVERNMENT OBLIGATIONS

WHEN-ISSUED PURCHASES AND FORWARD COMMITMENTS

INTEREST RATE SWAPS, MORTGAGE SWAPS, CAPS AND FLOORS

20
<PAGE>

MORTGAGE-RELATED SECURITIES

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<PAGE>

ASSET-BACKED SECURITIES

22
<PAGE>

MORTGAGE DOLLAR ROLLS

STRIPPED SECURITIES

The Bond and Balanced Funds may invest in instruments known as "stripped"
securities. These instruments include U.S. Treasury bonds and notes and
federal agency obligations on which the

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<PAGE>

REPURCHASE AGREEMENTS

24
<PAGE>

REVERSE REPURCHASE AGREEMENTS

VARIABLE AND FLOATING RATE INSTRUMENTS

SECURITIES ISSUED BY OTHER INVESTMENT COMPANIES

25
<PAGE>

ILLIQUID SECURITIES

SECURITIES LENDING

OPTIONS AND FUTURES CONTRACTS

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<PAGE>

For additional information and a description of the risks relating to option
and futures contract trading practices, see the Statement of Additional
Information.

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<PAGE>

FORWARD CURRENCY EXCHANGE CONTRACTS

CONVERTIBLE SECURITIES

MUNICIPAL OBLIGATIONS

28
<PAGE>

TEMPORARY INVESTMENTS

PORTFOLIO TURNOVER

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<PAGE>

OTHER INVESTMENT POLICIES AND RISK CONSIDERATIONS

Investment methods described in this Prospectus are among those which one or
more of the Funds have the power to utilize. Some may be employed on a regular
basis; others may not be used at all. Accordingly, reference to any particular
method or technique carries no implication that it will be utilized or, if it
is, that it will be successful.

INVESTMENT RESTRICTIONS

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<PAGE>

SHAREOWNER GUIDE

THE FOLLOWING SECTION WILL PROVIDE YOU WITH
ANSWERS TO SOME OF THE MOST OFTEN-ASKED QUESTIONS
ABOUT BUYING AND SELLING A FUND'S SHARES AND
ABOUT A FUND'S DIVIDENDS AND DISTRIBUTIONS

HOW CAN I CONTACT THE COMMERCE FUNDS?

To authorize the special features described below or to obtain additional
information about The Commerce Funds, you may:

. Call The Commerce Funds Shareowner Services at 1-800-305-2140; or

. Write to The Commerce Funds at:

The Commerce Funds
P.O. Box 16931
St. Louis, MO 63105; or

. Call the transfer agent, State Street Bank and Trust Company,
directly at 1-800-995-6365; or

. Contact a registered investment representative at selected Commerce
Bank branches; or

. For specific information regarding your 401(k) or investment
management group account, contact your plan sponsor or account
administrator.

HOW TO BUY INSTITUTIONAL SHARES

WHAT IS THE MINIMUM INVESTMENT FOR EACH FUND?

Generally, the minimum investment requirement is $1,000 for initial
purchases and $250 for subsequent purchases, although it may differ in certain
circumstances as shown below.

INVESTMENT MINIMUMS FOR SPECIFIC TYPES OF ACCOUNTS

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<PAGE>

HOW ARE INSTITUTIONAL SHARES PRICED?

INSTITUTIONAL SHARES OF THE FUNDS ARE PURCHASED AT THEIR PUBLIC OFFERING
PRICE, WHICH IS A FUND'S NET ASSET VALUE PER SHARE PLUS A FRONT-END SALES
CHARGE. A CLASS CALCULATES ITS NET ASSET VALUE PER SHARE ("NAV") AS FOLLOWS:

NAV= (VALUE OF ASSETS ATTRIBUTABLE TO THE CLASS)--(LIABILITIES ATTRIBUTABLE TO
THE CLASS)
- --------------------------------------------------------------------------------

NUMBER OF OUTSTANDING SHARES OF THE CLASS

The net asset value is determined as of the close of regular trading hours
on the New York Stock Exchange (the "Exchange") (currently 4:00 p.m. Eastern
Time) on days the Exchange is open (a "Business Day"). On those Business Days
on which the Exchange closes prior to the close of its regular trading hours
("Early Closing Time"), the net asset value of each Class of a Fund will be
determined and its shares will be priced as of such Early Closing Time.

Trading in foreign securities is generally completed prior to the end of
regular trading on the Exchange and may occur on Saturdays and U.S. holidays
and at other times when the Exchange is closed. As a result, there may be
delays in reflecting changes in the market values of foreign securities in the
calculation of the net asset value for each Class of the International Equity
Fund. There may be variations in the net asset value per share of each Class
the Fund on days when net asset value is not calculated and on which
shareowners of the Fund cannot redeem their shares due to changes in values of
securities traded in foreign markets. For more information about valuing
securities, see the Statement of Additional Information.

SALES CHARGE. The maximum front-end sales charge is 3.50% for each Fund
(except the Short-Term Government Fund, which is 2.00%) and may be less based
on the amount you invest, as shown in the following chart:

ALL FUNDS EXCEPT THE SHORT-TERM GOVERNMENT FUND:

- --------
*Dealer's reallowance may be changed periodically.

SHORT-TERM GOVERNMENT FUND:

<TABLE>
<CAPTION>
MAXIMUM
DEALER'S
AS A % OF AS A % OF REALLOWANCE AS
OFFERING NET ASSET A % OF
PRICE VALUE OFFERING PRICE
AMOUNT OF PURCHASE PER SHARE PER SHARE PER SHARE*
- ------------------ --------- --------- --------------
<S> <C> <C> <C>
Less than $500,000........................... 2.00 2.04 1.80
$500,001 but less than $1,000,000............ 1.00 1.01 0.90
$1,000,001 or more........................... 0.00 0.00 0.00
</TABLE>
- --------

*Dealer's reallowance may be changed periodically.

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<PAGE>

Goldman, Sachs & Co. (the "Distributor") may, out of its administration fee
or other resources, pay a fee of up to 0.25% of the amount invested or
additional incentives to dealers who initiate and are responsible for
purchases of shares of The Commerce Funds. In addition, at its expense, the
Distributor will provide additional compensation and promotional incentives to
dealers in connection with the sales of shares of the Funds. Compensation may
include promotional and other merchandise, sales and training programs and
other special events sponsored by dealers. Compensation may also include
payment for reasonable expenses incurred in connection with trips taken by
invited registered representatives for meetings or seminars of a business
nature.

WHEN THERE IS NO SALES CHARGE. There is no sales charge on Institutional
shares purchased by the following types of investors or transactions:

. automatic reinvestments (and cross-reinvestments) of dividends and
capital gain distributions by existing shareowners;

. the Exchange Privilege described below on page 42;

. the Redemption Reinvestment Privilege described on page 40;

. non-profit organizations, foundations and endowments qualified under
Section 501(c)(3) of the Code;

. current and retired members of the Board of Trustees of The Commerce
Funds;

. any state, county or city, or any instrumentality, department, authority
or agency thereof, prohibited by applicable laws from paying a sales
charge for the purchase of Fund shares;

. registered representatives of dealers who have entered into dealer
agreements with Goldman, Sachs & Co. to the extent permitted by such
firms.

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<PAGE>

The Distributor may periodically waive all or a portion of the sales charge
for all investors with respect to the sales of shares of the Funds. The
Distributor may also offer special concessions to enable investors to purchase
Institutional Shares of the Funds at net asset value, without payment of a
sales charge. To qualify for this special net asset value purchase when
applicable, the investor must pay for such purchase with the proceeds from the
redemption of shares of a non-affiliated mutual fund or unit investment trust
on which a sales charge was paid. A qualifying purchase of Institutional
Shares in a Fund must occur within five Business Days of the prior redemption
and must be evidenced by a confirmation of the redemption transaction. At the
time of purchase, The Commerce Funds must be notified that the purchase
qualifies for a purchase without a sales charge. Proceeds from the redemption
of shares on which no sales charges or commissions were paid would not qualify
for the special net asset value purchase program.

RIGHTS OF ACCUMULATION. When you buy Institutional Shares in The Commerce
Funds, your current total investment determines the sales charge that you pay.
Since larger investments receive a discounted sales charge, the sales charge
you pay may subsequently be reduced as you build your investment.

To buy Institutional Shares at a reduced sales charge under Rights of
Accumulation, you must indicate at the time of purchase that a quantity
discount is applicable. A reduction in sales charge is subject to a check of
appropriate records, after which you will receive the lowest applicable sales
charge.

Example: Suppose you own Institutional Shares with a total current value
of $90,000 that can be traced back to the purchase of shares with a sales
charge. If you subsequently invest $10,000 in any Fund within The Commerce
Funds family (except the Short-Term Government Fund), you will pay a
reduced sales charge of 2.50% of the public offering price on the
additional purchase.

LETTER OF INTENT. You may also buy Institutional Shares at a reduced sales
charge under a written Letter of Intent, a non-binding commitment to invest a
total of at least $100,000 in one or more Funds of The Commerce Funds within a
period of 13 months and under the terms and conditions of the Letter of
Intent. Institutional Shares you buy under a Letter of Intent will be eligible
for the same sales charge discount that would have been available had all of
your Institutional Share purchases been made at once. To use this feature,
complete the Letter of Intent section on your account application. A Letter of
Intent must be filed with The Commerce Funds within 90 days of the first
investment under the Letter of Intent provision.

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<PAGE>

to obtain the reduced sales charge. When you sign a Letter of Intent, The
Commerce Funds holds in escrow a sufficient number of shares of the relevant
Class which can be sold to make up any difference in the sales charge on the
amount actually invested. After you fulfill the terms of the Letter of Intent,
the shares in escrow will be released.

If your aggregate investment exceeds that indicated in your Letter of
Intent, you will receive an adjustment which reflects the further reduced
sales charge applicable to your excess investment. It will be in the form of
additional Institutional Shares credited to your account at the then current
offering price applicable to a single purchase of the total amount of the
total purchase. You must inform The Commerce Funds that the Letter of Intent
is in effect each time you buy Institutional Shares.

You may include the value of all Institutional Shares on which a sales
charge had previously been paid as a credit toward fulfillment of the Letter
of Intent, but no price adjustment will be made on Institutional Shares
previously purchased.

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<PAGE>

HOW DO I BUY INSTITUTIONAL SHARES?

You may purchase Institutional Shares of a Fund through The Commerce Funds
Shareowner Services or an investment representative at a Commerce Bank branch.
The following chart describes ways to invest directly in The Commerce Funds:

<TABLE>
<CAPTION>
OPENING AN ACCOUNT ADDING TO AN ACCOUNT
------------------------------------ ------------------------------------
<S> <C> <C>
By Mail Send a completed account application Send a check with your Fund account
with a check (payable to The number printed on it, along with the
Commerce Funds) directly to the stub from the previous confirmation
address set forth in "How Can I directly to the address set forth in
Contact The Commerce Funds?" on page "How Can I Contact The Commerce
31. Funds?" on page 31.
In Person Whether opening or adding to an account, you are welcome to stop into a
Commerce Bank branch office location. A registered investment
representative can assist you.
By Wire After an account application is Contact your bank to request that
completed and an account is opened, funds be wired to your existing Fund
instruct your bank to wire funds to: account. Follow instructions at
left. Be sure to include your name
and your Fund account number.
Commerce Bank, N.A.
(Kansas City)
Kansas City, MO
ABA #1010-00019
Account #2800255
Be sure to have your bank indicate
your name, address, tax
identification number, the name of
the Fund and Class of shares and
your new account number.
Ask your bank for specific information about making federal wires,
including associated charges.
By Telephone Subsequent purchases of Fund shares
Via Electronic may be made by electronic funds
Funds Transfer transfer from your bank, checking or
money market account.
You can authorize this feature and
provide necessary bank information
on your account application. Then,
when you wish to make a subsequent
purchase, you can do so by
contacting The Commerce Funds at the
telephone number set forth in "How
Can I Contact The Commerce Funds?"
on page 31.
</TABLE>

Other investment features, including exchanges and automatic investments, are
also available. Additional information pertaining to investments in the Funds
is included in the following pages or can be obtained by contacting The
Commerce Funds Shareowner Services.

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<PAGE>

WHAT PRICE WILL I RECEIVE WHEN I BUY INSTITUTIONAL SHARES?

Your Institutional Shares will be purchased at a Fund's public offering
price calculated at the next close of regular trading on the Exchange
(currently 4:00 p.m. Eastern Time) after your purchase order is received in
proper form by The Commerce Funds' transfer agent, State Street Bank and Trust
Company (the "Transfer Agent"), at its Kansas City office.

WHAT ELSE SHOULD I KNOW ABOUT BUYING INSTITUTIONAL SHARES?

Federal regulations require you to provide a certified Taxpayer
Identification Number upon opening or reopening an account.

HOW TO SELL INSTITUTIONAL SHARES

HOW DO I SELL MY INSTITUTIONAL SHARES?

The Commerce Funds makes it easy to sell, or "redeem," all or part of your
Institutional Shares. The Commerce Funds does not charge you to sell
Institutional Shares. However, the value of the Institutional Shares you sell
may be more or less than your cost, depending on a Fund's current net asset
value. The following chart describes ways to sell your Institutional Shares of
The Commerce Funds:

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<PAGE>

HOW TO SELL INSTITUTIONAL SHARES:

Through The Commerce Funds Shareowner Services or an investment
representative at a Commerce Bank branch.

By Mail
Send a written request signed by each owner,
including each joint owner, to the address set
forth in "How Can I Contact The Commerce
Funds?" on page 31.

By Telephone
You may redeem Institutional Shares (to a
shareowner) by telephone and request to receive
proceeds by check (to a shareowner name/address
of record in effect for no less than 30 days),
federal wire (for amounts exceeding $1,000) or
electronic funds transfer. In order to request
a federal wire or electronic funds transfer,
appropriate information regarding your bank,
checking or money market account must be
previously established on your account. This
information may be provided on the account
application or in a SIGNATURE GUARANTEED letter
of instruction (see description of SIGNATURE
GUARANTEES on page 39).

Written requests to sell Institutional Shares must be signed by each
shareowner, including each joint owner.

38
<PAGE>

Certain types of redemption requests will need to include a SIGNATURE
GUARANTEE. You may obtain a SIGNATURE GUARANTEE from:

Guarantees must be signed by an authorized signatory of the guarantor
institution and be accompanied by the words "SIGNATURE GUARANTEED." Guarantees
from notaries public will not be accepted.

Share redemptions can be suspended and the payment of redemption proceeds
delayed when the Exchange is closed (other than for customary weekend and
holiday closings), during periods when trading on the Exchange is restricted
as determined by the SEC, during any emergency as determined by the SEC which
makes it impracticable for a Fund to sell its securities or value its assets
or during any other period permitted by order of the SEC for the protection of
investors.

Other redemption features, including exchanges and automatic withdrawals,
are also available. Please refer to Shareowner Features and Privileges for
more information.

WHAT PRICE WILL I RECEIVE FOR INSTITUTIONAL SHARES I WANT TO SELL?

The price you will receive when you sell your Institutional Shares is the
net asset value per share (as described on page 32) determined after receipt
of an order in proper form by the Transfer Agent.

HOW QUICKLY CAN I RECEIVE PROCEEDS FROM A SALE?

39
<PAGE>

WHAT IF I WANT TO REINVEST SALES PROCEEDS?

You may reinvest all or any portion of your redemption proceeds in shares of
any Fund within 60 days of your redemption without a sales charge.
Institutional Shares will be purchased at a price equal to the net asset value
per share next determined after the Transfer Agent receives a reinvestment
order and payment in proper form.

If you wish to use the Redemption Reinvestment Privilege, you must submit a
written reinvestment request to the Transfer Agent stating that you are
eligible to use the feature.

DIVIDEND AND DISTRIBUTION POLICIES

AS A FUND SHAREOWNER, YOU ARE ENTITLED TO ANY DIVIDENDS AND DISTRIBUTIONS
ARISING
FROM NET INVESTMENT INCOME AND NET REALIZED CAPITAL GAINS.

YOU CAN CHOOSE A DISTRIBUTION OPTION FOR DIVIDENDS AND CAPITAL GAINS:

(1) reinvest all dividend and capital gain distributions in additional
Fund Institutional Shares without a sales charge;

(2) receive dividend distributions in cash and reinvest capital gain
distributions in additional Institutional Shares without a sales charge;

(3) receive all dividend and capital gain distributions in cash; or

(4) have all dividend and capital gain distributions deposited directly
into a designated checking account.

40
<PAGE>

If you do not select an option when you open an account, all distributions
will automatically be reinvested in additional Institutional Shares of the
same Fund without a sales charge. For your protection, if you elect to have
distributions mailed to you which cannot be delivered, they will be reinvested
in additional Institutional Shares of the same Fund without a sales charge.

You may invest dividend or capital gain distributions from one Fund in
Shares of the corresponding class of another Fund of The Commerce Funds or in
the National Tax-Free Bond or Missouri Tax-Free Funds. There is no sales
charge on purchases made through the Cross Reinvestment Privilege; however,
both Fund accounts must be established at the minimum initial investment
requirement and have identical account registration. Cross Reinvestment
Privileges do not apply to the Goldman Sachs--Institutional Liquid Assets
Prime Obligations Portfolio ("Money Market Fund") described below under "Can I
Exchange My Investment From One Commerce Fund To Another." Goldman Sachs Asset
Management, a separate operating division of Goldman, Sachs & Co., serves as
investment advisor for the Money Market Fund.

Your election to reinvest the distributions paid by a Fund in additional
Institutional Shares of the Fund or any other Fund of The Commerce Funds will
not affect the tax treatment of such dividends and distributions, which will
be treated as received by the shareowner and then used to purchase shares of
the Fund or another Fund of The Commerce Funds.

To change your distribution option, contact The Commerce Funds at the
address or telephone number set forth in "How Can I Contact The Commerce
Funds?" on page 31.

The change will become effective after it is received and processed by the
Transfer Agent.

SHAREOWNER FEATURES AND PRIVILEGES

THE COMMERCE FUNDS PROVIDES A VARIETY OF WAYS TO
MAKE MANAGING YOUR INVESTMENTS MORE CONVENIENT.

CAN I USE THE FUNDS IN MY RETIREMENT PLAN?

YOUR INVESTMENTS GROW TAX DEFERRED UNTIL WITHDRAWAL AT RETIREMENT, AND IN
MANY CASES THE INITIAL INVESTMENT IS TAX DEDUCTIBLE.

Information concerning these plans is available through The Commerce Funds
Shareowner Services or your investment representative.

41
<PAGE>

WHAT IS DOLLAR COST AVERAGING AND HOW CAN I IMPLEMENT IT?

CAN I EXCHANGE MY INVESTMENT FROM ONE COMMERCE FUND TO ANOTHER?

As a shareowner, you have the privilege of exchanging your shares for
Institutional Shares of another Fund of The Commerce Funds that offers
Institutional Shares. Exchanges may also be made to or from the National Tax-
Free Bond Fund, the Missouri Tax-Free Bond Fund and the Goldman Sachs--
Institutional Liquid Assets Prime Obligations Portfolio. NO ADDITIONAL SALES
CHARGE IS IMPOSED WHEN EXCHANGING INSTITUTIONAL SHARES OF A FUND FOR
INSTITUTIONAL SHARES OF ANOTHER FUND OFFERED BY THE COMMERCE FUNDS.

You can exchange Institutional Shares of one Fund for Institutional Shares
in another Fund within The Commerce Funds family that may be legally sold in
your state of residence by writing or calling The Commerce Funds as described
under "How To Sell Institutional Shares" on page 38. The Exchange Privilege is
automatic for all shareowners unless declined on an account application. All
telephone exchanges must be registered in the same name(s) and with the same
address as are registered in the Fund from which the exchange is made. See the
section below regarding telephone transactions for a description of The
Commerce Funds' policy regarding responsibility for telephone instructions.
Institutional Shares purchased by check may not be exchanged until the check
has cleared.

42
<PAGE>

Institutional Shares being exchanged are subject to the minimum initial and
subsequent investment requirements as described on page 31. Before using this
feature, you should consider carefully the investment objective, policies,
risks and expenses of the acquired Fund, as described in such Fund's
prospectus. You can request a current Prospectus from your investment
representative or by contacting The Commerce Funds at the address or telephone
number set forth in "How Can I Contact The Commerce Funds?" on page 31.

The Commerce Funds reserve the right to reject any exchange request and the
Exchange Privilege may be modified or terminated at any time. At least 60
days' notice of any material modification or termination of the Exchange
Privilege will be given to shareowners except where notice is not required
under the regulations of the SEC.

CAN I HAVE EXCHANGES MADE AUTOMATICALLY?

You may request on your account application that a specified dollar amount
of Institutional Shares at net asset value be automatically exchanged for
Institutional Shares of any other Fund of The Commerce Funds that offers
Institutional Shares. No sales charge is imposed on exchanges. These automatic
exchanges may be made on any one day of each month and are subject to the
following conditions: The minimum dollar amount for automatic exchanges must
be at least $250 per month. In addition, the value of the account in the
acquired Fund must equal or exceed the acquired Fund's minimum initial
investment requirement. The names, addresses and taxpayer identification
number for the shareowner accounts of the exchanged and acquired Funds must be
identical. You should consider the investment objective, policies, risks and
expenses of the acquired Fund, as described in such Fund's prospectus, before
establishing an automatic exchange into that Fund.

CAN I REINVEST DIVIDENDS FROM ONE COMMERCE FUND IN ANOTHER?

YOU MAY ELECT TO HAVE YOUR DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS, OR BOTH
RECEIVED FROM A NON-RETIREMENT FUND ACCOUNT AUTOMATICALLY INVESTED IN
ADDITIONAL INSTITUTIONAL SHARES OF ANY OTHER INVESTMENT PORTFOLIO OF THE
COMMERCE FUNDS THAT OFFERS INSTITUTIONAL SHARES IN WHICH YOU CURRENTLY
MAINTAIN AN OPEN NON-RETIREMENT ACCOUNT. To participate in this program, check
the appropriate box and supply the necessary information on the account
application or in a subsequent written request.

Dividend reinvestments will be made at a price equal to the net asset value
of the purchased shares next determined after receipt of the distribution
proceeds by the Transfer Agent.

The distribution must exceed $50 in order to use this feature. You should
consider carefully the investment objective, policies and applicable fees of
the acquired Fund before using this feature.

43
<PAGE>

HOW DO I OBTAIN OTHER INFORMATION ABOUT MY ACCOUNT?

CAN I MAKE TRANSACTIONS BY TELEPHONE?

Telephone purchases will be effected at the public offering price next
determined after the Transfer Agent receives payment for the transaction.
Proceeds from sales of Institutional Shares will be deposited into your
Commerce checking or money market account generally two business days after
the redemption request is received. You may also request receipt of your
redemption proceeds by check, which will only be sent to the registered owner
of your account and only to the address of record. If you should experience
difficulty in redeeming shares by telephone (e.g., because of unusual market
activity), you are urged to consider redeeming your Institutional Shares by
mail or in person.