<PAGE>
THE COMMERCE FUNDS
LETTER TO SHAREHOLDERS
DEAR SHAREHOLDERS:
We are pleased to provide you this semiannual report for the Commerce Funds
family.
EQUITY MARKET COMMENTARY
The collapsing Asian markets put a damper on the bull market from November
until early January. In October, the market experienced its first 10%
correction since 1990. Investors tried to sort out the effects of slumping
Asian economies on future sales and earnings growth rates of American
companies. In January, when fourth quarter earnings reports were released,
investors were pleasantly surprised. With a backdrop of low interest rates, a
strong U.S. economy, and a confident consumer / investor, the Dow Jones
Industrial average soared 1600 points in fifteen weeks.
FIXED-INCOME MARKET COMMENTARY
Yields have continued to decline modestly over the last six months. Looking
at the beginning and end points, however, masks the volatility in rates. The
long end of the market made historic lows in rates early this year as fear
spread that problems in Asia would spread to the rest of the world. When Asian
markets began to recover, yields started to rise as the bond market began to
focus on the strength of the domestic economy. Credit spreads contracted again
as the crisis mentality of late 1997 began to fade. The market began to fear a
tightening in credit by the Federal Reserve as economic growth was stronger in
the first quarter than most market participants anticipated. Inflation,
however, continued to be benign. The bond market was hostage to two dynamics,
strong growth and low inflation. Ultimately the Fed kept rates unchanged, but
the rhetoric from various Fed members were unfriendly for the market and have
kept the market skittish for most of the year.
TAX-EXEMPT MARKET COMMENTARY
The story in the municipal market has been supply, and lots of it. Long-term
new issue volume from October 1997 through April 1998 totaled $154.2 billion.
That is up more than 38% over the same time period last year. Several factors
have contributed to the surge including lower interest rates, tightening
credit spreads, and voter willingness to approve public debt-financed
projects. As measured by the yield on the triple-A 10 year general obligation
bond, interest rates declined 70 basis points from March 1997 to January 1998.
This provided a golden opportunity for issuers to refund or refinance existing
higher coupon debt. Complementing the decline in overall interest rates,
credit spreads continued to slide inward. This has allowed for greater savings
for lower quality issuers as their existing debt could be refinanced at
spreads 20 to 30 basis points tighter to the triple-A curve. Lastly, the
strong economy has produced a more tranquil taxpayer. New bond issues,
particularly for local school construction, continue to meet little resistance
from voters.
With all this supply, investor demand has had a tough time keeping pace. As
a result, municipal bonds have become increasingly cheap compared to
Treasuries. At the end of October 1997, the yield on the generic triple-A 10
year general obligation bond traded at 77% of the 10 year Treasury. This ratio
increased to over 80% at the end of April 1998. The last time this ratio
exceeded 80% was during the flat tax scare of 1995. If supply tapers off in
June as expected, municipals are in a good position to outperform Treasuries
over the near term.
Each of the Commerce Funds is highlighted in the pages that follow. We are
most pleased to have you as a Commerce Funds shareholder.
SHORT-TERM GOVERNMENT FUND
The Institutional Shares had a total return for the six month period ending
April 30, 1998 of 2.81% based on net asset value ("NAV"). The Service Shares
had a total return for the same period based on NAV of 2.69%. This compares to
the Lipper Short-Term U.S. Government Funds Index return of 2.41% and the
Salomon Brothers 1-5 Year Treasury/Government Sponsored Index return of 2.99%.
The Institutional and Service Shares distributed $.56 and $.54 per share,
respectively, from net investment income during the period.
The Short-Term Government Fund was positioned with a positive duration
target versus its benchmark over the second half of 1997. We are maintaining
that duration position and look to add value to our shareholders by investing
in higher yielding securities, including mortgage backed securities with
short, stable average lives. We expect that well structured mortgage
securities will continue to provide good risk adjusted incremental returns.
BOND FUND
The Institutional Shares had a total return for the six month period ending
April 30, 1998 of 3.25% based on
1
<PAGE>
THE COMMERCE FUNDS
LETTER TO SHAREHOLDERS--(CONTINUED)
NAV. The Service Shares had a total return for the period ending April 30,
1998 of 3.12% based on NAV. This compares to the Lipper Intermediate
Investment Grade Debt Funds Index return of 3.08% and the Lehman Brothers
Aggregate Bond Index return of 3.59%. The Institutional and Service Shares
distributed $.58 and $.55 per share, respectively, from net investment income
during the period.
The Bond Fund was positioned slightly long versus its duration benchmark for
the second half of 1997. We continue to run our duration slightly longer than
our benchmark as inflation adjusted yields are attractive, especially with
inflation continuing to fall. We do not expect that rates will decline
dramatically unless the economy weakens, or the crisis in Asia rears up again.
We look to add value to our shareholders by investing in higher yielding
securities including mortgage and asset backed securities. Going forward we
expect to maintain our positive duration bias while maintaining our exposure
to higher yielding securities. We took advantage of the widening in credit
spreads to increase the Fund's exposure to asset backed and corporate
securities. Our mortgage exposure decreased through run off and the proceeds
were reinvested in the aforementioned sectors. The Fund continues to maintain
exceptional credit quality, with an average quality rating of AAA.
BALANCED FUND
The Institutional Shares had a total return based on NAV for the six months
ended April 30, 1998 of 14.42%. The Service Shares had a total return based on
NAV for the last six months of 14.26%. By comparison, the Lipper Balanced
Funds Index returned 12.27% and the 60% S&P 40% / Lehman Brothers Aggregate
Bond Index 14.67%.
The fixed-income portion of the Fund was positioned slightly long versus its
duration benchmark for the second half of 1997. We continue to run our
duration slightly longer than our benchmark as inflation adjusted yields are
attractive, especially with inflation continuing to fall. We do not expect
that rates will decline dramatically unless the economy weakens, or the crisis
in Asia rears up again. We look to add value to our shareholders by investing
in higher yielding securities, including mortgage and asset backed securities.
Going forward we expect to maintain our positive duration bias while
maintaining our exposure to higher yielding securities. The fund took
advantage of the widening in credit spreads to increase the Fund's exposure to
asset backed and corporate securities. Our mortgage exposure decreased through
run off and we invested the proceeds in the aforementioned sectors. The fixed
income portion of the Fund continues to maintain exceptional credit quality,
with an average quality rating of AAA.
The financial sector, which includes banks and insurance industries, has
long been one of our heaviest weighted sectors in the equity portion of the
Fund. Enthusiasm for financial stocks reached a peak in mid-April when a
series of large banks and brokerage firms decided to merge. Travelers Group,
Inc. and BankAmerica, Corp., which were both held by the Fund, were involved
in these mega mergers. Recently, we have begun to reduce our financial
weighting but still remain overweighted compared to the S&P 500 Index. Morgan
Stanley, Dean Witter, Discover and Co. was our best performing issue, rising
60% over the last six months.
GROWTH AND INCOME FUND
The Commerce Growth and Income Fund had a sound start as evidenced from the
results for the six month period. The Institutional Shares had a total return
of 16.36% for the six months ended April 30, 1998 based on NAV. The Service
Shares had a total return of 16.24% for the six months ended April 30, 1998
based on NAV. By comparison, the S&P 500 Index ("S&P 500") gained 22.49%, and
the Lipper Growth & Income Funds Index gained 17.07%.
Over the course of the last six months, the Commerce Growth and Income Fund
has roughly doubled in total net assets. During this period, the Fund
struggled to keep up with the sharp rise in the equity market as measured by
the S&P 500 stock Index. Results relative to the Russell 1000 Value Index were
somewhat better, although lower than that Index which returned 19.63%.
The shortfall in performance is accounted for primarily by several specific
issues. The first is that our relatively high weighting in the utility sector
has been a major drag thus far in 1998. The utility sector which includes oil
& gas-production distribution accounted for approximately 15% of the
portfolio, and provided strong returns in the latter part of 1997 as interest
rates declined and concern increased over Asia's impact on the U.S. economy.
This
2
<PAGE>
THE COMMERCE FUNDS
LETTER TO SHAREHOLDERS--(CONTINUED)
began to sharply reverse in early 1998 as Asian concerns regarding Asia waned
and interest rates began to increase modestly. It is important to note that
this sector also provided yield benefits for the portfolio.
Stock selection also hurt results, particularly in the capital goods,
energy, and technology sectors. Problems stemming from weakness in the Asian
economics had a profoundly negative impact on the semiconductor companies
resulting in declines of 25% and greater. The Justice Department's blocking of
the Northrop/Lockheed merger plan took 30% off our Northrop Grumman Corp.
position. On the other hand, our over weight and stock selection in the
financial services sector, which includes banks and insurance, have both made
a positive contribution. This is particularly true in the banking and
brokerage industry where earnings have continued to be strong and merger
activities high.
We have initiated several changes to the portfolio of investments over the
course of the last several months. The technology sector position has been
reduced given the continued near term earnings pressures. While we are
modestly trimming our overall weight in the finance sector, we continue to add
to the Fund's insurance stocks where valuations continue to look attractive.
In addition, we have increased the average capitalization of the companies
held by the Fund. While the average market capitalization of the Fund was $9.6
billion as of the last report, it is now closer to $16 billion. Thus, the Fund
has less of a midcap bias, but it is nowhere near that of the S&P 500 which
has an average market capitalization of 64 billion. We continue to find better
relative value in the more moderate size companies.
GROWTH FUND
The Institutional Shares of the Fund had a total return of 21.60% based on
NAV for the six months ending April 30,1998. The Service Shares recorded a
total return of 21.49% based on NAV for the six month period. This compares
with a 22.49% return for the S&P 500 and a 18.06% return for the Lipper Growth
Funds Index.
The financial sector has long been one of our heaviest weighted sectors in
the Fund. At the end of April, the Fund had a 24.0% representation of
financial industry stocks (including banking, financial services and insurance
sectors). Enthusiasm for financial stocks reached a peak in mid-April when a
series of large banks and brokerage firms decided to merge. Travelers Group,
Inc. and BankAmerica, Corp., which were both held by the Fund, were involved
in these mega mergers. We have begun to reduce our financial sector weighting
but still remain overweighted relative to the S&P 500 Index. Morgan Stanley,
Dean Witter, Discover and Co. was our best performing issue, rising 60% over
the last six months.
With consumer confidence levels at record highs and rising consumer
disposable income, retailing stock prices also came to life. Both Gap, Inc.
and TJX Companies, Inc. rose 45% during the six month period.
The Fund has reduced its technology stock positions because of the negative
implications stemming from the collapse of Asian economies are hurting many of
these companies. We also dramatically reduced the Fund's exposure to
semiconductor manufacturers.
MIDCAP FUND
For the period ended April 30, 1998, the Institutional Shares had a total
return of 22.79% based on NAV. For the six month period, the Service Shares
had a total return of 22.59%, based on NAV. By comparison, the S&P Mid Cap 400
Index gained 19.16%, and the Lipper Mid Cap Funds Index gained 14.24% for the
same time period.
The bull market in stocks continues. Most major market indices set new highs
this year. The influx of foreign capital into U.S. companies helped propel
stock prices higher and drive interest rates lower. To date, the Asian
meltdown has had little impact on either U.S. jobs or consumer confidence. Low
interest rates have kept housing demand high, driving many consumer oriented
sectors of the economy.
Not surprisingly, the consumer cyclical sector of the stock market recorded
robust returns during this period. Companies selling apparel, furnishings,
appliances and other goods reaped the benefit of the strongest economy in
years. While superior performance has been concentrated in the market's
largest companies, the gains are starting to broaden. The Fund's performance
has profited from participating in "growth" sectors of the market. These
include computer software, healthcare and
3
<PAGE>
THE COMMERCE FUNDS
LETTER TO SHAREHOLDERS--(CONTINUED)
retailers. Valuation differentials between the supercap stocks and the midcap
sector remain very wide. We detect a slowing in corporate sales this year,
more so in larger multinational companies than smaller domestically oriented
ones. At some point, this valuation gap will narrow considerably. The
differences are so great that the process will take years to complete. We look
forward to participating in several years of strong performance. In the
meantime, we continue to search for reasonably valued investments in growing
companies.
INTERNATIONAL EQUITY FUND
The Institutional Shares produced a total return of 14.11% for the six month
period ending April 30, 1998, based on NAV. The Service Shares had a total
return of 13.97% for the six month period based on NAV. These returns lagged
the return of the Morgan Stanley Capital International Europe, Australia and
Far East (EAFE) Index for the same time period, which was 15.59%. The Lipper
International Equity Funds Index return was 16.61% for the six month period.
On an inception to date basis, the International Equity Fund's Institutional
Share's annualized total return of 11.29% based on NAV is ahead of the EAFE
Index which had a return of 10.65%.
Unlike 1997, calendar year to date 1998 has been a strong one for
investments in non-US equity markets. Local market investors in most European
countries have experienced attractive double digit returns. Both the developed
and emerging markets of Asia have continued to experience tremendous weakness
in 1998, and this, together with the strength of the US dollar, lead to
negative local market returns. The Asian economies and markets are expected to
take several more years to recover fully.
The Fund has remained underweighted in Japan (at approximately 16% of the
portfolio versus 22% of the EAFE Index) which has added value. Country
allocation overall has been a negative year-to-date, while stock selection
also has not added value. Our growth orientation has not worked well in
certain areas such as Europe, where the large, cyclical companies which are
viewed as "turnaround stories" have performed well. In addition, the managed
exposure to the emerging markets of Latin America has worked against
performance year to date.
The outlook is seen as increasingly positive for the Continental European
markets, with corporate earnings likely to be strong due to corporate
restructuring and better than expected economic growth. The outlook for Asia
is not encouraging. The Japanese economy is expected to slip back into
recession in 1998. The portfolio is positioned to take advantage of the
continued strength in the European equity markets.
NATIONAL TAX-FREE INTERMEDIATE BOND FUND
The Fund's NAV was unchanged at $18.85 for the period ending April 30, 1998.
Distributions totaled $.37 per share, bringing the total return to 1.95%. The
Lipper General Municipal Debt Funds Index and the Merrill Lynch Municipal
Intermediate Index had returns of 2.50% and 2.40%, respectively. We continue
to focus on adding value by increasing the Fund's exposure to higher yielding
sectors including healthcare, housing, higher education and transportation.
Despite the tighter spreads, bonds in these sectors can provide incremental
yields of 10 to 20 basis points over General Obligation bonds. More recently,
we have looked to improve the overall structure of the Fund by reducing call
risk. This has been accomplished, in part, by selling high coupon bonds
callable in 2 to 5 years and replacing them with noncallable current coupon
bonds. Duration has been extended and is expected to remain in a range of
5.25-5.50 years. This falls slightly short of the Lipper General Municipal
Debt Funds Index 5.6 years and slightly long compared to the Merrill Lynch
Municipal Intermediate Index 5.0 years.
MISSOURI TAX-FREE INTERMEDIATE BOND FUND
For the six month period the NAV of the Fund increased 0.16% to $18.64 from
$18.61, reflecting the lower yields. The total return was 2.24%, which
combines the NAV increase with the per share distribution of $.37. The Lipper
General Municipal Debt Funds Index and the Merrill Lynch Municipal
Intermediate Index had returns of 2.50% and 2.40%, respectively. We continue
to focus on adding value by increasing the Fund's exposure to higher yielding
sectors including healthcare, housing, higher education, and transportation.
Despite the tighter spreads, bonds in these sectors provided incremental
yields of 10 to 20 basis points over General Obligation bonds. More recently,
we have looked to improve the overall structure
4
<PAGE>
THE COMMERCE FUNDS
LETTER TO SHAREHOLDERS--(CONTINUED)
of the Fund by reducing call risk. This has been accomplished in part by
selling high coupon bonds callable in 2 to 5 years and replacing them with non-
callable current coupons bonds. Duration has been extended and is expected to
remain in a range of 5.25-5.50 years. This falls slightly short of the Lipper
General Municipal Debt Funds Index 5.6 years and slightly long compared to the
Merrill Lynch Municipal Intermediate Index 5.0 years.
In conclusion, since our last report to you, effective May 31, 1998, the
Commerce Funds Board of Trustees has authorized the removal of the sales load
from the Institutional Class of the Short-Term Government, Bond, Balanced,
Growth and Income, Growth, MidCap, and International Equity Funds. In addition,
you may now access information about the Commerce Funds, including daily
pricing for both the Institutional and Service Share Classes, by visiting our
website at www.commercefunds.com.
We appreciate your support and look forward to helping you meet your
investment objectives.
Sincerely,
/s/ Peter F. Mackie
Peter F. Mackie
Executive Vice President
Commerce Bank, N.A.
April 30, 1998
5
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
SHORT-TERM GOVERNMENT FUND
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- ----------- -------- -------- -----------
<S> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS--41.0%
CMC Securities Corp. REMIC Series 1993-B, Class B4
$ 2,000,000 6.85% 04/25/23 $ 2,005,660
Federal Home Loan Mortgage Corp. REMIC PAC Series
1205, Class G
250,000 7.00 03/15/07 254,607
Federal Home Loan Mortgage Corp. REMIC PAC Series
1360, Class PE
210,000 3.50 12/15/17 198,055
Federal Home Loan Mortgage Corp. REMIC PAC Series
1619, Class EC
500,000 5.60 11/15/23 491,560
Federal Home Loan Mortgage Corp. REMIC Series 14,
Class A
157,000 6.00 06/25/23 150,313
Federal Home Loan Mortgage Corp. REMIC Series
1112, Class F
103,261 8.40 01/15/21 104,681
Federal Home Loan Mortgage Corp. REMIC Series
1574, Class P
235,741 6.50 07/15/23 235,593
Federal Home Loan Mortgage Corp. REMIC Series
1617, Class C
149,000 6.50 02/15/23 149,046
Federal Home Loan Mortgage Corp. REMIC Series
1727, Class E
660,000 6.50 04/15/18 665,359
Federal Home Loan Mortgage Corp. Series 180, Class
G
661,329 8.00 09/15/21 671,863
Federal Home Loan Mortgage Corp. Series 1255,
Class G
401,074 7.50 07/15/21 408,718
Federal National Mortgage Assn. REMIC PAC Series
G92-35, Class D
210,000 4.50 08/25/21 199,368
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- -----------
<S> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS--CONTINUED
Federal National Mortgage Assn. REMIC PAC Series
1991-118, Class K
$ 405,000 7.00% 08/25/21 $ 408,669
Federal National Mortgage Assn. REMIC PAC Series
1992-129, Class G
432,000 4.00 06/25/18 417,014
Federal National Mortgage Assn. REMIC PAC Series
1992-58, Class H
509,454 6.50 05/25/16 508,180
Federal National Mortgage Assn. REMIC PAC Series
1993-208, Class L
63,365 6.50 03/25/23 63,286
Federal National Mortgage Assn. REMIC PAC Series
1996-28, Class PE
281,000 6.50 03/25/20 284,071
Federal National Mortgage Assn. REMIC Series X-
130A, Class H
510,000 6.30 09/25/18 512,071
Federal National Mortgage Assn. REMIC Series X-
225C, Class G
630,334 6.50 11/25/22 605,121
Federal National Mortgage Assn. REMIC Series X-
225C, Class NB
1,993,663 6.50 12/25/22 1,984,313
Federal National Mortgage Assn. REMIC Series X-
225C, Class NC
3,229,000 6.50 03/25/23 3,167,423
Federal National Mortgage Assn. REMIC Series G94-
9, Class C
250,000 6.25 04/17/10 247,030
Federal National Mortgage Assn. REMIC Series
1992-1, Class E
500,000 7.50 01/25/07 511,560
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
SHORT-TERM GOVERNMENT FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- -----------
<S> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS--CONTINUED
Federal National Mortgage Assn. REMIC Series
1993-29, Class FA
$ 250,634 6.27%(a) 03/25/23 $ 249,614
Federal National Mortgage Assn. REMIC Series
1993-76, Class A
357,532 6.00 06/25/08 349,488
Federal National Mortgage Assn. REMIC Series
1993-225C, Class NE
1,750,390 6.50 12/25/22 1,676,541
Federal National Mortgage Assn. REMIC Series
1993-245, Class N
200,000 6.50 12/25/23 200,312
Federal National Mortgage Assn. REMIC Series
1994-23, Class A
158,679 6.00 12/25/22 157,687
Federal National Mortgage Assn. Series 1993-139,
Class KB
1,000,000 7.00 11/25/00 1,009,370
Federal National Mortgage Assn. Series 1993-140,
Class D
444,610 5.50 08/25/07 443,237
Federal National Mortgage Assn. Series 1995-19E,
Class L
1,187,783 6.25 08/25/08 1,183,697
GE Capital Mortgage Services, Inc. Series 1993-
16, Class A4
61,316 6.25 12/25/23 61,125
Independent National Mortgage Corp. REMIC
Series 1995-M, Class A1
540,796 7.50 09/25/25 544,002
Prudential Home Mortgage Securities Series 1993-
43, Class A1
593,393 5.40 10/25/23 589,126
Residential Funding Mortgage Securities I REMIC
PAC Series 1994-S1, Class A7
295,000 6.57 01/25/24 294,767
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- -----------
<S> <C> <C> <C>
COLLATERALIZED MORTGAGE OBLIGATIONS--CONTINUED
Residential Funding Mortgage Securities Series
1993-S49, Class A2
$ 847,071 6.00% 12/25/08 $ 845,741
Securitized Asset Sales, Inc. Series 1993-7,
Class T
470,000 6.25 12/25/23 455,312
Westam Mortgage Financial Corp. Series 7, Class F
622,225 9.30 10/01/15 623,389
-----------
Total Collateralized Mortgage Obligations
(cost $22,705,522).......................... $22,926,969
-----------
MORTGAGE-BACKED PASS-THROUGH OBLIGATIONS--6.0%
Federal Home Loan Mortgage Corp.
$ 25,247 8.75% 02/01/01 $ 25,567
43,602 8.75 04/01/01 46,027
268,458 8.25 08/01/01 272,399
135,729 7.75 09/01/07 139,177
898,708 7.00 05/01/26 909,942
Federal National Mortgage Assn.
403,261 8.00 12/01/07 420,012
445,962 6.50 02/01/12 447,705
270,595 9.00 07/01/24 291,116
Government National Mortgage Assn.
294,804 8.00 10/15/16 310,464
473,118 8.00 07/15/17 497,512
-----------
Total Mortgage-Backed Pass-Through
Obligations
(cost $3,262,321)........................... $ 3,359,921
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
SHORT-TERM GOVERNMENT FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- -----------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--39.7%
Federal Agriculture Mortgage Corp.
$ 500,000 6.69% 02/10/00 $ 507,850
Federal Farm Credit Bank
1,000,000 7.17 04/03/00 1,025,620
1,000,000 6.10 11/19/01 1,008,590
Federal Home Loan Bank
530,000 7.13 03/27/00 543,165
1,000,000 7.44 08/10/01 1,046,410
1,000,000 6.53 08/28/01 1,021,250
1,000,000 6.63 08/28/01 1,024,360
965,000 7.56 02/27/02 1,021,086
1,630,000 6.89 04/06/04 1,707,686
Federal Home Loan Mortgage Corp.
500,000 7.90 01/27/00 517,735
1,000,000 6.52 08/25/00 1,016,090
500,000 6.70 07/25/01 512,810
Federal National Mortgage Assn.
1,500,000 6.36 08/16/00 1,519,920
1,000,000 9.20 09/11/00 1,075,310
250,000 6.18 03/15/01 252,265
500,000 6.63 04/18/01 512,030
700,000 6.38 08/14/01 711,046
625,000 7.40 07/01/04 672,463
215,000 7.88 02/24/05 237,541
Israel Aid Series 5A
2,000,000 7.75 11/15/99 2,056,960
Student Loan Marketing Assn.
180,000 6.05 09/14/00 180,900
Tennessee Valley Authority 1989, Series D
2,000,000 8.38 10/01/99 2,068,740
575,000 6.00 11/01/00 577,248
U.S. Department of Housing & Urban Development
Series 1994-A
100,000 6.44 08/01/02 100,934
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- -----------
<S> <C> <C> <C>
U.S. GOVERNMENT AGENCY OBLIGATIONS--CONTINUED
U.S. Department of Housing & Urban Development
Series 1995-A
$1,250,000 8.15% 08/01/00 $ 1,307,575
-----------
Total U.S. Government Agency Obligations
(cost $22,029,721).......................... $22,225,584
-----------
U.S. TREASURY OBLIGATIONS--4.9%
United States Treasury Notes
$1,750,000 6.38% 04/30/99 $ 1,763,668
1,000,000 5.88 08/31/99 1,003,750
-----------
Total U.S. Treasury Obligations
(cost $2,754,727)........................... $ 2,767,418
-----------
SHORT-TERM OBLIGATIONS--6.2%
Federal National Mortgage Assn. Discount Notes
$1,500,000 5.49%(b) 05/04/98 $ 1,499,318
2,000,000 5.45(b) 05/18/98 1,994,872
-----------
Total Short-Term Obligations
(cost $3,494,190)........................... $ 3,494,190
-----------
REPURCHASE AGREEMENT--1.5%
State Street Bank & Trust Company, dated
04/30/98, repurchase price $840,121 (U.S.
Treasury Note: $857,027, 11.25%, 02/15/15)
$ 840,000 5.18% 05/01/98 $ 840,000
-----------
Total Repurchase Agreement (cost $840,000)... $ 840,000
-----------
Total Investments (cost $55,086,481(c))...... $55,614,082
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
8
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
SHORT-TERM GOVERNMENT FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
- -------------------------
<S> <C> <C> <C>
Federal Income
Tax
Information:
Gross
unrealized
gain for
investments
in which
value
exceeds
cost........ $ 704,488
Gross
unrealized
loss for
investments
in which
cost exceeds
value....... (176,887)
---------
Net
unrealized
gain........ $ 527,601
=========
- -------------------------
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
(a)Variable rate security. Coupon rate disclosed is that which is in effect at
April 30, 1998.
(b)The interest rate disclosed for these securities represents effective yields
to maturity.
(c)The cost stated also represents aggregate cost for federal income tax
purposes.
- --------------------------------------------------------------------------------
INVESTMENT ABBREVIATIONS:
<TABLE>
<C> <S>
PAC --Planned Amortization Class
REMIC --Real Estate Mortgage Investment Conduit
</TABLE>
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
9
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
BOND FUND
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- ----------- -------- -------- ------------
<S> <C> <C> <C>
ASSET-BACKED SECURITIES--33.9%
AUTO--3.2%
Fifth Third Bank Auto Grantor Trust Series 1996-A,
Class A
$ 3,846,326 6.20% 09/15/01 $ 3,858,326
NationsBank Auto Owner Trust Series 1996-A, Class
A4
4,500,000 6.63 12/15/00 4,542,165
------------
$ 8,400,491
------------
CREDIT CARD--12.0%
American Express Credit Account Master Trust
Series 1996-1, Class B
$ 2,000,000 6.95% 12/15/03 $ 2,040,000
American Express Master Trust Series 1994-3, Class
A
2,000,000 7.85 08/15/05 2,167,500
Chemical Master Credit Card Trust I Series 1995-3,
Class A
2,000,000 6.23 04/15/05 2,014,360
Chemical Master Credit Card Trust I Series 1996-1,
Class B
1,000,000 5.71 09/15/03 986,870
Chemical Master Credit Card Trust I Series 1996-2,
Class A
2,500,000 5.98 09/15/08 2,457,800
Chemical Master Credit Card Trust I Series 1996-2,
Class B
2,500,000 6.16 09/15/08 2,451,550
Citibank Credit Card Master Trust I Series 1997-6,
Class B
2,000,000 7.83(a) 08/15/06 1,230,787
Discover Card Master Trust I Series 1993-3, Class
A
2,000,000 6.20 05/16/06 2,006,240
Discover Card Trust Series 1991-F, Class B
7,350,000 8.35 11/21/00 7,432,688
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- ----------- -------- -------- ------------
<S> <C> <C> <C>
ASSET-BACKED SECURITIES--CONTINUED
CREDIT CARD--CONTINUED
MBNA Master Credit Card Trust Series 1995-C, Class
A
$ 2,000,000 6.45% 02/15/08 $ 2,034,360
Standard Credit Card Master Trust Series 1993-2,
Class A
2,000,000 5.95 10/07/04 1,988,580
Standard Credit Card Master Trust Series 1995-1,
Class A
2,000,000 8.25 01/07/07 2,229,400
Standard Credit Card Master Trust Series 1995-1,
Class B
2,000,000 8.45 01/07/07 2,231,140
------------
$ 31,271,275
------------
EQUIPMENT--0.4%
Green Tree Recreational, Equipment & Consumer
Trust 1996-A, Class A1
$ 920,819 5.55% 02/15/18 $ 917,679
------------
HOME EQUITY--8.0%
Access Financial Mortgage Loan Trust Series 1996-
2, Class A4
$ 1,500,000 7.63% 09/18/21 $ 1,566,766
Advanta Mortgage Loan Trust Series 1994-4, Class
A2
4,000,000 8.92 01/25/26 4,313,800
American Business Financial Services, Inc. 1996-1,
Class A
5,269,866 7.95 09/15/26 5,374,440
Corestates Home Equity Trust Series 1993-2, Class
A
527,501 5.10 03/15/09 519,161
GE Capital Mortgage Services, Inc. Series 1997-
HE1, Class B1
1,250,000 7.50 03/25/07 1,275,195
GE Capital Mortgage Services, Inc. Series 1997-
HE1, Class M
1,955,928 7.50 03/25/27 2,040,431
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
BOND FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- ----------- -------- -------- ------------
<S> <C> <C> <C>
ASSET-BACKED SECURITIES--CONTINUED
HOME EQUITY--CONTINUED
GE Capital Mortgage Services, Inc. Series 1997-
HE4, Class B1
$ 3,982,906 7.33% 12/25/28 $ 3,892,892
GE Capital Mortgage Services, Inc. Series 1997-
HE4, Class M
1,988,044 7.14 12/25/28 2,006,711
------------
$ 20,989,396
------------
MANUFACTURED HOUSING--9.8%
Associates Manufactured Housing Series 1996-1,
Class A5
$ 5,000,000 7.60% 03/15/27 $ 5,298,684
Green Tree Financial Corp. Series 1993-4, Class A4
2,000,000 6.60 01/15/19 2,026,080
Green Tree Financial Corp. Series 1993-4, Class A5
4,000,000 7.05 01/15/19 4,106,640
Green Tree Financial Corp. Series 1994-2, Class A4
4,000,000 7.90 05/15/19 4,223,221
Green Tree Financial Corp. Series 1996-4, Class A7
4,000,000 7.90 06/15/27 4,291,316
Green Tree Financial Corp. Series 1996-8, Class M1
2,000,000 7.85 10/15/27 2,100,341
Indymac Manufactured Housing Contract (Credit
Suisse First Boston) Series 1997-1, Class M
2,000,000 7.11 02/25/28 2,100,613
Oakwood Mortgage Investors, Inc. Series 1997-A,
Class A5
1,500,000 7.12 05/15/27 1,543,905
------------
$ 25,690,800
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- ----------- -------- -------- ------------
<S> <C> <C> <C>
ASSET-BACKED SECURITIES--CONTINUED
UTILITIES--0.5%
California Infrastructure PG&E I Series 1997-1,
Class A6
$ 1,250,000 6.32% 09/25/05 $ 1,266,475
------------
Total Asset-Backed Securities
(cost $86,119,870)........................... $ 88,536,116
------------
COLLATERALIZED MORTGAGE OBLIGATIONS--4.4%
Countrywide Mortgage Backed Securities, Inc. REMIC
PAC Series 1993-B, Class A5
$ 1,333,571 6.75% 11/25/23 $ 1,329,039
Federal Home Loan Mortgage REMIC PAC Series 1579,
Class PM
1,235,000 6.70 09/15/23 1,236,149
Federal National Mortgage Assn. REMIC Series X-
130A, Class H
1,500,000 6.30 09/25/18 1,506,090
Federal National Mortgage Assn. REMIC Series 1992-
1, Class E
2,500,000 7.50 01/25/07 2,557,800
Indymac Manufactured Housing Contract (Credit
Suisse First Boston) Series 1997-1, Class A3
3,000,000 6.61 02/25/28 3,026,730
PNC Mortgage Securities Corp. REMIC Series 1996-1,
Class A10
1,817,991 7.50 09/25/09 1,900,927
------------
Total Collateralized Mortgage Obligations
(cost $11,360,879)........................... $ 11,556,735
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
BOND FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- ----------- -------- -------- ------------
<S> <C> <C> <C>
CORPORATE OBLIGATIONS--11.9%
FINANCIAL--9.0%
American Express Credit Corp.
$ 2,000,000 6.13% 11/15/01 $ 2,000,700
BankAmerica Corp.
3,500,000 6.88 06/01/03 3,585,120
Chemical Bank
2,000,000 6.70 08/15/08 2,017,520
Ford Motor Company Credit Corp.
2,000,000 6.63 06/30/03 2,032,780
General Motors Acceptance Corp.
2,000,000 5.88 01/22/03 1,974,280
2,000,000 6.63 10/15/05 2,025,940
Morgan Stanley Group, Inc.
2,000,000 6.75 03/04/03 2,037,940
NationsBank Corp.
1,000,000 7.75 08/15/15 1,098,090
1,000,000 7.80 09/15/16 1,106,370
PNC Bank, N.A.
2,000,000 7.88 04/15/05 2,156,960
Salomon Smith Barney, Inc.
3,500,000 6.63 06/01/00 3,529,890
------------
$ 23,565,590
------------
INDUSTRIAL--2.1%
Service Master Co.
$ 3,000,000 7.10% 03/01/18 $ 2,982,180
TRW, Inc.
2,500,000 6.05 01/15/05 2,460,125
------------
$ 5,442,305
------------
UTILITIES--0.8%
Duke Power Corp.
$ 1,000,000 7.37% 02/02/04 $ 1,052,210
Union Electric Co.
1,000,000 6.75 10/15/99 1,009,030
------------
$ 2,061,240
------------
Total Corporate Obligations
(cost $29,782,739)........................... $ 31,069,135
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- ----------- -------- -------- ------------
<S> <C> <C> <C>
FOREIGN BONDS--1.1%
Hanson Overseas BV
$ 2,000,000 6.75% 09/15/05 $ 2,030,820
Hydro Quebec
1,000,000 7.96 12/17/01 1,057,790
------------
Total Foreign Bonds (cost $2,965,820)......... $ 3,088,610
------------
MORTGAGE-BACKED PASS-THROUGH OBLIGATIONS--20.9%
Federal Home Loan Mortgage Corp.
$ 1,780,427 6.00% 12/01/13 $ 1,759,275
1,859,644 8.50 02/01/19 1,963,914
2,145,944 8.50 03/01/21 2,266,632
10,784,497 7.00 05/01/26 10,919,303
Federal National Mortgage Assn.
1,172,796 7.19 07/01/06 1,245,959
3,992,101 5.50 01/01/09 3,845,431
3,171,128 7.00 07/01/09 3,235,534
891,923 6.50 02/01/12 895,411
1,795,661 6.00 12/01/13 1,754,881
1,492,887 6.50 07/01/14 1,490,543
1,551,131 9.00 11/01/21 1,661,634
719,531 9.00 02/01/25 772,589
3,537,494 6.50 03/01/26 3,508,734
Government National Mortgage Assn.
3,965,619 8.00 02/15/22 4,134,158
4,402,643 7.00 09/15/23 4,464,545
1,910,532 7.50 08/20/25 1,958,296
8,486,853 7.50 07/20/26 8,693,677
------------
Total Mortgage-Backed Pass-Through
Obligations (cost $52,006,191)............... $ 54,570,516
------------
U.S. GOVERNMENT AGENCY OBLIGATIONS--0.8%
Federal Home Loan Bank
$1,000,000 6.32% 02/01/00 $ 1,009,410
Federal Home Loan Mortgage Corp.
1,000,000 6.20 04/15/03 1,013,590
------------
Total U.S. Government Agency Obligations
(cost $1,863,696)............................ $ 2,023,000
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
BOND FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- ----------- -------- -------- ------------
<S> <C> <C> <C>
U.S. TREASURY OBLIGATIONS--26.0%
United States Treasury Bonds
$ 9,500,000 7.25% 05/15/16 $ 10,794,375
8,000,000 7.50 11/15/16 9,311,280
8,000,000 7.88 02/15/21 9,762,500
United States Treasury Notes
11,500,000 5.88 11/15/05 11,579,005
10,000,000 7.00 07/15/06 10,790,600
15,000,000 6.50 10/15/06 15,717,150
------------
Total U.S. Treasury Obligations
(cost $65,550,077)......................... $ 67,954,910
------------
COMMERCIAL PAPER--1.9%
Merrill Lynch & Co.
$ 5,000,000 5.09%(a) 05/11/98 $ 4,992,333
------------
Total Commercial Paper (cost $4,992,333).... $ 4,992,333
------------
REPURCHASE AGREEMENT--1.6%
State Street Bank & Trust Company, dated
04/30/98, repurchase price $4,157,598 (U.S.
Treasury Note: $4,242,375, 6.63%, 06/30/01)
$ 4,157,000 5.18% 05/01/98 $ 4,157,000
Total Repurchase Agreement
(cost $4,157,000).......................... $ 4,157,000
------------
Total Investments (cost $258,798,605(b)).... $267,948,355
============
</TABLE>
<TABLE>
- --------------------------
<S> <C> <C> <C>
Federal Income
Tax Informa-
tion:
Gross
unrealized
gain for
investments
in which
value
exceeds
cost........ $9,634,677
Gross
unrealized
loss for
investments
in which
cost exceeds
value....... (484,927)
----------
Net
unrealized
gain........ $9,149,750
==========
- --------------------------
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
(a)The interest rate disclosed for these securities represents effective
yields to maturity.
(b)The cost stated also represents aggregate cost for federal income tax
purposes.
<TABLE>
- ------------------------------------------------------
<S> <C> <C>
INVESTMENT ABBREVIATIONS:
PAC --Planned Amortization Class
REMIC --Real Estate Mortgage Investment Conduit
- ------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
BALANCED FUND
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
--------- ----------- ------------
<C> <S> <C>
COMMON STOCKS--63.2%
ADVERTISING--0.8%
15,200 Omnicom Group, Inc. $ 720,100
5,000 WPP Group PLC ADR 321,875
------------
$ 1,041,975
------------
AEROSPACE/DEFENSE--1.3%
20,000 General Dynamics Corp. $ 845,000
8,500 Lockheed Martin Corp. 946,688
------------
$ 1,791,688
------------
AIRLINES--0.3%
15,000 Southwest Airlines Co. $ 411,562
------------
AUTO/VEHICLE--1.4%
25,500 Chrysler Corp. $ 1,024,781
18,000 Ford Motor Co. 824,625
------------
$ 1,849,406
------------
BANKS--3.9%
6,800 BankAmerica Corp. $ 578,000
10,000 Bankers Trust Corp. 1,291,250
10,000 Chase Manhattan Corp. 1,385,625
10,400 Northern Trust Corp. 759,200
18,700 Norwest Corp. 742,156
13,775 Synovus Financial Corp. 484,708
------------
$ 5,240,939
------------
BUSINESS SERVICES--1.7%
12,000 Paychex, Inc. $ 651,750
26,000 Personnel Group of America, Inc.* 516,750
10,000 Remedytemp, Inc. (Class A)* 317,500
10,000 Robert Half International, Inc. 541,250
5,000 World Access, Inc.* 193,125
------------
$ 2,220,375
------------
CHEMICAL PRODUCTS--2.6%
22,000 A. Schulman, Inc. $ 492,250
15,000 BF Goodrich Co. 807,188
22,000 Crompton & Knowles Corp. 658,625
20,000 Dexter Corp. 826,250
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
--------- ----------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
CHEMICAL PRODUCTS--CONTINUED
4,000 H.B. Fuller Co. $ 251,000
10,500 OM Group, Inc. 465,281
------------
$ 3,500,594
------------
COMPUTERS/COMPUTER PERIPHERALS & SOFTWARE--3.5%
5,000 Avid Technology, Inc.* $ 216,875
14,000 Cadence Design Systems, Inc.* 508,375
38,000 Compaq Computer Corp. 1,066,375
15,000 Compuware Corp.* 733,125
4,800 Microsoft Corp.* 432,600
4,000 Peoplesoft, Inc.* 186,000
25,000 Symantec Corp.* 725,000
18,000 Symbol Technologies, Inc. 693,000
3,000 Visio Corp.* 148,500
------------
$ 4,709,850
------------
CONSUMER GOODS--0.3%
4,500 Clorox Co. $ 377,437
------------
DIVERSIFIED MANUFACTURING--3.1%
21,500 Allied Signal, Inc. $ 941,969
16,200 Dover Corp. 639,900
17,500 General Electric Co. 1,489,688
15,000 Parker Hannifin Corp. 669,375
6,500 Precision Castparts Corp.(a) 403,813
------------
$ 4,144,745
------------
FINANCIAL SERVICES--7.9%
15,000 A. G. Edwards, Inc. $ 675,000
4,717 Associates First Capital Corp. Class A 352,596
25,000 Bear Stearns Companies, Inc. 1,426,562
14,000 DST Systems, Inc.* 771,750
14,000 Federal National Mortgage Association 838,250
21,200 Franklin Resources, Inc. 1,134,200
20,000 Lehman Brothers Holdings, Inc. 1,421,250
10,000 Merrill Lynch & Co., Inc. 877,500
</TABLE>
The accompanying notes are an integral part of these financial statements.
14
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
BALANCED FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
--------- ----------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
FINANCIAL SERVICES--CONTINUED
9,700 Morgan Stanley, Dean Witter, Discover and Co. $ 765,087
22,000 SLM Holding Corp. 939,125
10,000 TCF Financial Corp. 325,625
18,000 Travelers Group, Inc. 1,101,375
------------
$ 10,628,320
------------
HEALTH & MEDICAL SERVICES--2.5%
3,000 Cardinal Health, Inc. $ 288,750
14,700 Depuy, Inc. 455,700
6,000 HBO & Co. 358,875
15,200 Lincare Holdings, Inc.* 1,233,100
7,200 McKesson Corp. 508,950
12,000 Sybron International Corp.* 318,000
10,000 Transition Systems, Inc.* 225,000
------------
$ 3,388,375
------------
HEALTH/PERSONAL CARE--0.4%
5,200 Gillette Co. $ 600,275
------------
HOUSEHOLD DURABLES--1.0%
7,000 Ethan Allen Interiors, Inc. $ 356,563
19,000 Leggett & Platt, Inc. 986,813
------------
$ 1,343,376
------------
INDUSTRIAL MACHINERY--3.5%
20,000 Caterpillar, Inc. $ 1,138,750
8,400 Deere & Co. 490,875
24,400 Illinois Tool Works, Inc. 1,720,200
15,000 Ingersoll-Rand Co. 690,938
9,600 Sealed Air Corp. 601,800
------------
$ 4,642,563
------------
INSURANCE SERVICES--4.2%
12,750 Allied Group, Inc. $ 380,906
2,500 Cigna Corp. 517,344
16,800 Conseco, Inc. 833,700
16,000 Financial Security Assurance Holdings, Ltd. 958,000
10,000 Ohio Cas Corp. 483,750
13,000 Orion Capital Corp. 724,750
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
--------- ----------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
INSURANCE SERVICES--CONTINUED
10,000 Protective Life Corp. $ 371,250
18,400 SunAmerica, Inc. 918,850
5,000 Transatlantic Holdings, Inc. 384,063
------------
$ 5,572,613
------------
INTEGRATED OIL--2.5%
8,000 Chevron Corp. $ 661,500
10,000 Exxon Corp. 729,375
7,600 Mobil Corp. 600,400
10,000 Texaco, Inc. 615,000
20,000 YPF Sociedad Anonima ADR 697,500
------------
$ 3,303,775
------------
MEDICAL/BIOTECHNOLOGY--1.4%
12,200 Dentsply International, Inc. $ 401,075
6,000 Elan Corp. PLC ADR* 372,750
5,000 Guidant Corp. 334,375
10,000 PSS World Medical, Inc. 224,375
5,000 Quintiles Transnational Corp.* 247,500
5,000 Waters Corp.* 267,500
------------
$ 1,847,575
------------
METALS-DIVERSIFIED--1.0%
30,000 AK Steel Holding Corp. $ 630,000
50,000 LTV Corp. 650,000
------------
$ 1,280,000
------------
OFFICE EQUIPMENT AND SUPPLIES--1.5%
12,000 Lexmark International Group, Inc. (Class A)* $ 694,500
10,400 Miller Herman Inc. 313,950
9,000 Xerox Corp. 1,021,500
------------
$ 2,029,950
------------
OIL & GAS-PRODUCTION/DISTRIBUTION--1.5%
10,000 National Fuel Gas Co. $ 460,000
20,000 Newpark Resources, Inc.* 481,250
12,000 Peoples Energy Corp. 435,000
10,700 Royal Dutch Petroleum ADR 605,219
------------
$ 1,981,469
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
15
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
BALANCED FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
--------- ----------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
OIL WELL EQUIPMENT & SERVICES--1.8%
14,000 BJ Services Co.* $ 525,000
12,000 Ensco International, Inc. 339,000
25,000 Helmerich & Payne, Inc. 762,500
12,500 Seacor Smit, Inc.* 732,813
------------
$ 2,359,313
------------
PHARMACEUTICALS--1.8%
8,300 Abbott Laboratories $ 606,937
8,000 Johnson & Johnson 571,000
12,000 Schering Plough Corp. 961,500
6,000 Watson Pharmaceuticals, Inc.* 258,000
------------
$ 2,397,437
------------
PUBLISHING--0.6%
12,000 New York Times Co. (Class A) $ 851,250
------------
RETAIL TRADE--5.4%
14,000 Central Garden & Pet Co.* $ 479,500
20,031 Consolidated Stores Corp.* 801,240
7,159 CVS Corp. 527,976
20,000 Gap, Inc. 1,028,750
7,000 Linens-n-Things, Inc.* 421,750
20,000 Office Depot, Inc.* 662,500
10,000 Pacific Sunwear of California, Inc.* 441,250
10,000 Payless Shoesource, Inc.* 715,000
15,000 Stein Mart, Inc.* 528,750
27,000 TJX Companies, Inc. 1,194,750
12,000 Walgreen Co. 414,000
------------
$ 7,215,466
------------
SEMICONDUCTORS & ELECTRONICS--1.7%
10,000 Linear Technology Corp. $ 805,000
25,000 National Semiconductor Corp.* 550,000
14,000 Texas Instruments, Inc. 896,875
------------
$ 2,251,875
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
--------- ----------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
TELECOMMUNICATIONS--0.5%
15,000 Century Telephone Enterprises, Inc. $ 638,437
------------
TEXTILES--1.1%
12,500 Jones Apparel Group, Inc.* $ 747,656
15,000 VF Corp. 780,000
------------
$ 1,527,656
------------
TOBACCO--0.6%
20,000 Universal Corp. $ 748,750
------------
TRANSPORTATION/STORAGE--0.9%
15,000 Air Express International Corp. $ 393,750
14,000 Airbourne Freight Corp. 554,750
6,500 Tidewater, Inc.(a) 257,563
------------
$ 1,206,063
------------
UTILITIES--2.5%
25,000 DQE Inc. $ 859,375
13,000 FPL Group, Inc. 806,812
15,000 GPU, Inc. 594,375
12,500 New Century Energies, Inc. 593,750
10,000 Northern States Power Co. of Minnesota 563,750
------------
$ 3,418,062
------------
Total Common Stocks
(cost $62,928,347).................... $ 84,521,171
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE
---------- -------- --------
<C> <S> <C> <C>
FIXED INCOME--33.5%
ASSET-BACKED SECURITIES--10.3%
AUTO--0.5%
Chevy Chase Auto Receivables Trust Series 1995-1,
Class A
$ 230,098 6.00% 12/15/01 $ 230,386
NationsBank Auto Owner Trust Series 1996-A, Class
A4
500,000 6.63 12/15/00 504,685
------------
$ 735,071
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
BALANCED FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- ------------
<C> <S> <C> <C>
ASSET-BACKED SECURITIES--CONTINUED
CREDIT CARD--3.1%
American Express Credit Account Master Trust
Series 1996-1, Class B
$ 500,000 6.95% 12/15/03 $ 510,000
American Express Master Trust Series 1994-3, Class
A
500,000 7.85 08/15/05 541,875
Discover Card Master Trust I Series 1993-3, Class
A
500,000 6.20 05/16/06 501,560
J.C. Penney Master Credit Card Trust Series B,
Class A
500,000 8.95 10/15/01 529,535
MBNA Master Credit Card Trust Series 1995-C, Class
A
500,000 6.45 02/15/08 508,590
Standard Credit Card Master Trust Series 1991-6,
Class B
500,000 8.35 01/07/99 506,415
Standard Credit Card Master Trust Series 1993-2,
Class A
500,000 5.95 10/07/04 497,145
Standard Credit Card Master Trust Series 1995-1,
Class B
500,000 8.45 01/07/07 557,785
------------
$ 4,152,905
------------
HOME EQUITY--3.1%
Access Financial Mortgage Loan Trust Series 1996-
2, Class A4
$ 500,000 7.63% 09/18/21 $ 522,255
Advanta Mortgage Loan Trust Series 1994-4, Class
A2
500,000 8.92 01/25/26 539,225
American Business Financial Services, Inc. 1996-1,
Class A
526,987 7.95 09/15/26 537,444
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- ------------
<C> <S> <C> <C>
ASSET-BACKED SECURITIES--CONTINUED
HOME EQUITY--CONTINUED
Corestates Home Equity Trust Series 1993-2, Class
A
$ 527,501 5.10% 03/15/09 $ 519,161
First Plus Home Loan Trust Series 1997-3, Class A5
500,000 6.86 10/10/13 506,930
GE Capital Mortgage Services, Inc. Series 1997-
HE1, Class B1
500,000 7.50 03/25/07 510,078
GE Capital Mortgage Services, Inc. Series 1997-
HE1, Class M
488,982 7.50 03/25/27 510,108
GE Capital Mortgage Services, Inc. Series 1997-
HE4, Class M
497,011 7.14 12/25/28 501,678
------------
$ 4,146,879
------------
MANUFACTURED HOUSING--3.6%
Associates Manufactured Housing Series 1996-1,
Class A5
$ 500,000 7.60% 03/15/27 $ 529,868
Green Tree Financial Corp. Series 1993-4, Class A4
500,000 6.60 01/15/19 506,520
Green Tree Financial Corp. Series 1993-4, Class A5
500,000 7.05 01/15/19 513,330
Green Tree Financial Corp. Series 1994-2, Class A4
500,000 7.90 05/15/19 527,903
Green Tree Financial Corp. Series 1996-3, Class A4
500,000 7.10 05/15/27 515,351
Green Tree Financial Corp. Series 1996-4, Class A7
500,000 7.90 06/15/27 536,414
Green Tree Financial Corp. Series 1996-5, Class A6
500,000 7.75 07/15/27 532,269
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
BALANCED FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- ------------
<C> <S> <C> <C>
ASSET-BACKED SECURITIES--CONTINUED
MANUFACTURED HOUSING--CONTINUED
Oakwood Mortgage Investors, Inc. Series 1995-B,
Class A3
$ 600,000 6.90% 01/15/21 $ 610,068
Oakwood Mortgage Investors, Inc. Series 1997-A,
Class A5
500,000 7.12 05/15/27 514,635
------------
$ 4,786,358
------------
Total Asset-Backed Securities
(cost $13,409,872)...................... $ 13,821,213
------------
COLLATERALIZED MORTGAGE OBLIGATIONS--2.3%
Federal Home Loan Mortgage Corp. REMIC PAC Series
159, Class H
$1,233,000 4.50% 09/15/21 $ 1,131,080
Federal National Mortgage Assn. REMIC Series X-
225C, Class NB
922,992 6.50 12/25/22 918,663
Residential Asset Securitization REMIC Trust
Series 1997-A5, Class A13
500,000 7.75 07/25/27 513,697
Residential Funding Mortgage Securities Corp.
Series 1995, Class A4
500,000 8.00 04/25/10 521,875
------------
Total Collateralized Mortgage Obligations
(cost $2,968,595) $ 3,085,315
------------
CORPORATE OBLIGATIONS--3.9%
FINANCIAL--3.1%
BankAmerica Corp.
$ 500,000 6.88% 06/01/03 $ 512,160
Chemical Bank
500,000 6.70 08/15/08 504,380
Ford Motor Company Credit Corp.
500,000 6.63 06/30/03 508,195
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- ------------
<S> <C> <C> <C>
CORPORATE OBLIGATIONS--CONTINUED
FINANCIAL--CONTINUED
General Electric Capital Corp.
$ 500,000 8.30% 09/20/09 $ 580,305
Morgan Stanley Group, Inc.
500,000 6.75 03/04/03 509,485
NationsBank Corp.
500,000 7.80 09/15/16 553,185
PNC Bank, N.A.
500,000 7.88 04/15/05 539,240
Salomon Smith Barney, Inc.
500,000 6.63 06/01/00 504,270
------------
$ 4,211,220
------------
INDUSTRIAL--0.4%
Service Master Co.
$ 500,000 7.10% 03/01/18 $ 497,030
------------
UTILITIES--0.4%
AT&T Corp.
$ 500,000 7.12% 01/15/02 $ 517,455
------------
Total Corporate Obligations
(cost $4,809,553) $ 5,225,705
------------
FOREIGN BOND--0.4%
Hanson Overseas BV
$ 500,000 6.75% 09/15/05 $ 507,705
------------
Total Foreign Bond
(cost $498,540) $ 507,705
------------
MORTGAGE-BACKED PASS-THROUGH OBLIGATIONS--6.7%
Federal Home Loan Mortgage Corp.
$ 712,171 6.00% 12/01/13 $ 703,710
1,797,416 7.00 05/01/26 1,819,884
Federal National Mortgage Assn.
1,268,451 7.00 07/01/09 1,294,214
445,962 6.50 02/01/12 447,705
718,264 6.00 12/01/13 701,953
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
BALANCED FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- --------------- -------- ----------- --------------
<S> <C> <C> <C>
MORTGAGE-BACKED PASS-THROUGH OBLIGATIONS--CONTINUED
Government National Mortgage Assn.
$ 1,446,263 7.00% 09/15/23 $ 1,466,598
764,213 7.50 08/20/25 783,318
1,697,371 7.50 07/20/26 1,738,735
--------------
Total Mortgage-Backed Pass-Through Obligations
(cost $8,518,452) $ 8,956,117
--------------
U.S. GOVERNMENT AGENCY OBLIGATION--0.6%
Federal Home Loan Bank
$ 750,000 6.63% 08/28/01 $ 768,270
--------------
Total U.S. Government Agency Obligation (cost
$695,325) $ 768,270
--------------
U.S. TREASURY OBLIGATIONS--9.3%
United States Treasury Bonds
$ 1,500,000 7.25% 05/15/16 $ 1,704,375
2,000,000 7.50 11/15/16 2,327,820
500,000 7.88 02/15/21 610,156
United States Treasury Notes
3,000,000 6.50 08/31/01 3,075,480
4,500,000 6.50 10/15/06 4,715,145
--------------
Total U.S. Treasury Obligations
(cost $12,252,085) $ 12,432,976
--------------
Total Fixed Income (cost $43,152,422) $ 44,797,301
--------------
REPURCHASE AGREEMENT--3.2%
State Street Bank & Trust Company, dated 04/30/98,
repurchase price $4,300,619 (U.S. Treasury Note:
$4,388,925, 6.63%, 07/31/01)
$ 4,300,000 5.18% 05/01/98 $ 4,300,000
--------------
Total Repurchase Agreement (cost $4,300,000) $ 4,300,000
--------------
Total Investments (cost $110,380,769(b)) $ 133,618,472
--------------
</TABLE>
<TABLE>
<CAPTION>
- ------------------------------
<S> <C> <C> <C>
Federal Income
Tax Information:
Gross unrealized
gain for
investments in
which value
exceeds cost.... $23,784,998
Gross unrealized
loss for
investments in
which cost
exceeds value... (547,295)
-----------
Net unrealized
gain............ $23,237,703
===========
- ------------------------------
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
* Non-income producing security.
(a)There are common stock rights attached to these securities.
(b)The cost stated also represents aggregate cost for federal income tax
purposes.
- --------------------------------------------------------------------------------
INVESTMENT ABBREVIATIONS:
ADR--American Depository Receipt
PAC--Planned Amortization Class
REMIC--Real Estate Mortgage Investment Conduit
- --------------------------------------------------------------------------------
19
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
GROWTH AND INCOME FUND
APRIL 30, 1998
(UNAUDITED)
The accompanying notes are an integral part of these financial statements.
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- -----------
<C> <S> <C>
COMMON STOCKS--98.1%
AEROSPACE/DEFENSE--3.2%
40,000 General Dynamics Corp. $ 1,690,000
12,000 Northrop Grumman Corp. 1,268,250
-----------
$ 2,958,250
-----------
AIRLINES--1.3%
10,000 Delta Air Lines, Inc. $ 1,163,223
-----------
AUTO PARTS-ORIGINAL EQUIPMENT--1.0%
14,000 Borg Warner Automotive, Inc. $ 870,625
-----------
AUTO/VEHICLE--2.7%
26,300 Ford Motor Co. $ 1,204,869
18,000 General Motors Corp. 1,212,750
-----------
$ 2,417,619
-----------
BANKS--6.2%
20,000 BankAmerica Corp. $ 1,700,000
13,400 Bankers Trust Corp. 1,730,275
16,200 Chase Manhattan Corp. 2,244,713
-----------
$ 5,674,988
-----------
BUILDING MATERIALS & CONSTRUCTION--1.7%
45,000 Centex Corp. $ 1,563,750
-----------
CHEMICAL PRODUCTS--4.3%
65,000 A. Schulman, Inc. $1,456,875
26,000 BF Goodrich Co. 1,399,125
25,200 Dexter Corp. 1,041,075
-----------
$ 3,897,075
-----------
COMPUTER SERVICES/SOFTWARE--1.7%
60,000 Sterling Software, Inc.* $ 1,586,250
-----------
DIVERSIFIED MANUFACTURING--1.7%
34,000 Parker Hannifin Corp. $ 1,517,250
-----------
FINANCIAL SERVICES--14.0%
20,000 A. G. Edwards, Inc. $ 900,000
45,450 Bear Stearns Companies, Inc. 2,593,491
35,000 Equitable Companies, Inc. 2,148,125
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
FINANCIAL SERVICES--CONTINUED
26,900 Lehman Brothers Holdings, Inc. $ 1,911,581
22,000 Merrill Lynch & Co., Inc. 1,930,500
22,000 Morgan Stanley, Dean Witter, Discover and Co. 1,735,250
24,640 Travelers Group, Inc. 1,507,660
-----------
$12,726,607
-----------
HEALTH & MEDICAL SERVICES--1.0%
25,000 Manor Care, Inc. $ 876,563
-----------
INDUSTRIAL MACHINERY--5.4%
32,750 Deere & Co. $ 1,913,828
44,350 Ingersoll-Rand Co. 2,042,872
17,000 Springs Industries, Inc. 936,063
-----------
$ 4,892,763
-----------
INSURANCE SERVICES--16.4%
34,950 Ace, Ltd. $ 1,323,731
15,000 AMBAC Financial Group, Inc. 850,312
10,000 American International Group, Inc. 1,315,625
7,000 Cigna Corp. 1,448,562
55,150 Conseco, Inc. 2,736,819
25,000 Financial Securities Assurance Holdings, Ltd. 1,496,875
10,000 Lincoln National Corp. 888,125
12,000 MBIA, Inc. 895,500
20,000 Ohio Cas Corp. 967,500
30,000 Old Republic International Corp. 1,357,500
24,000 Orion Capital Corp. 1,338,000
3,800 St. Paul Companies, Inc. 319,426
-----------
$14,937,975
-----------
INTEGRATED OIL--7.7%
18,000 Chevron Corp. $ 1,488,375
13,000 Exxon Corp. 948,187
22,000 Imperial Oil, Ltd. 1,218,314
20,000 Murphy Oil Corp. 1,028,750
</TABLE>
20
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
GROWTH AND INCOME FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
INTEGRATED OIL--CONTINUED
18,000 Texaco, Inc. $ 1,107,000
35,000 YPF Sociedad Anonima ADR 1,219,362
-----------
$ 7,009,988
-----------
METALS-DIVERSIFIED--2.1%
45,000 AK Steel Holding Corp. $ 945,000
75,000 LTV Corp. 975,000
-----------
$ 1,920,000
-----------
OIL & GAS-PRODUCTION/DISTRIBUTION--3.8%
26,000 Devon Energy Corp. $ 1,036,750
15,000 National Fuel Gas Co. 690,000
25,000 Peoples Energy Corp. 906,250
30,000 Washington Gas Light Co. 815,625
-----------
$ 3,448,625
-----------
OIL WELL EQUIPMENT & SERVICES--2.7%
50,000 Helmerich & Payne, Inc. $ 1,526,550
16,000 Seacor Smit, Inc.* 938,000
-----------
$ 2,464,550
-----------
PUBLISHING--1.4%
17,800 New York Times Co. $ 1,262,687
-----------
RETAIL TRADE--4.1%
50,000 K Mart Corp.* $ 871,875
65,000 Officemax, Inc.* 1,223,738
23,000 Payless Shoesource, Inc.* 1,644,500
-----------
$ 3,740,113
-----------
SEMICONDUCTORS & ELECTRONICS--0.8%
32,300 National Semiconductor Corp. $ 710,600
-----------
TEXTILES--2.0%
35,100 VF Corp. $ 1,825,200
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
TOBACCO--1.9%
45,000 Universal Corp. $ 1,685,458
-----------
UTILITIES--11.0%
20,450 Ameren Corp. $ 810,331
20,000 Consolidated Edison, Inc. 905,000
35,000 DQE Inc. 1,203,125
15,000 Duke Energy Co. 868,125
18,000 FPL Group, Inc. 1,117,125
22,000 GPU, Inc. 871,750
20,000 Ipalco Enterprises, Inc.(a) 871,250
19,000 New Century Energies, Inc. 902,500
18,000 Northern States Power Co. of Minnesota 1,014,750
25,000 Telefonos de Mexico SA ADR 1,415,625
-----------
$ 9,979,581
-----------
Total Common Stocks (cost $76,730,080)
$89,129,740
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE
--------- -------- --------
<S> <C> <C> <C>
REPURCHASE AGREEMENT--3.1%
State Street Bank & Trust Company, dated 04/30/98,
repurchase price $2,823,406 (U.S. Treasury Note:
$2,884,705, 9.88%, 11/15/15)
$2,823,000 5.18% 05/01/98 $ 2,823,000
-----------
Total Repurchase Agreement (cost $2,823,000)
$ 2,823,000
-----------
Total Investments (cost $79,553,080(b))
$91,952,740
===========
</TABLE>
The accompanying notes are an integral part of these financial statements.
21
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
GROWTH AND INCOME FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value exceeds
cost............................................................ $13,029,365
Gross unrealized loss for investments in which cost exceeds
value........................................................... (629,705)
-----------
Net unrealized gain.............................................. $12,399,660
===========
- -------------------------------------------------------------------------------
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
* Non-income producing security.
(a) There are common stock rights attached to these securities.
(b) The cost stated also represents aggregate cost for federal income tax
purposes.
- --------------------------------------------------------------------------------
INVESTMENT ABBREVIATIONS:
ADR--American Depository Receipt
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
GROWTH FUND
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------- ----------- ------------
<C> <S> <C>
COMMON STOCKS--93.7%
ADVERTISING--2.1%
187,000 Omnicom Group, Inc. $ 8,859,125
------------
AEROSPACE/DEFENSE--2.3%
90,000 Lockheed Martin Corp. $ 10,023,750
------------
AUTO/VEHICLE--4.1%
251,000 Chrysler Corp. $ 10,087,062
168,000 Ford Motor Co. 7,696,500
------------
$ 17,783,562
------------
BANKING--5.2%
75,000 BankAmerica Corp. $ 6,375,000
111,000 Northern Trust Corp. 8,103,000
205,000 Norwest Corp. 8,135,938
------------
$ 22,613,938
------------
BUSINESS SERVICES--2.0%
156,000 Robert Half International, Inc. $ 8,443,500
------------
COMPUTERS/COMPUTER PERIPHERALS & SOFTWARE--6.6%
410,000 Compaq Computer Corp. $ 11,505,625
91,000 Compuware Corp.* 4,447,625
54,000 Microsoft Corp.* 4,866,750
156,000 Tech Data Corp.* 7,780,500
------------
$ 28,600,500
------------
CONSUMER GOODS--2.3%
120,000 Clorox Co. $ 10,065,000
------------
DIVERSIFIED MANUFACTURING--8.6%
233,000 Allied Signal, Inc. $ 10,208,312
84,000 Danaher Corp. 6,037,500
174,000 Dover Corp. 6,873,000
166,700 General Electric Co. 14,190,337
------------
$ 37,309,149
------------
FINANCIAL SERVICES--14.2%
44,030 Associates First Capital Corp. $ 3,291,243
142,800 Federal National Mortgage Association 8,550,150
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------- ----------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
FINANCIAL SERVICES--CONTINUED
218,000 Franklin Resources, Inc. $ 11,663,000
108,000 Merrill Lynch & Co., Inc. 9,477,000
104,000 Morgan Stanley, Dean Witter, Discover and Co. 8,203,000
182,500 SLM Holding Corp. 7,790,469
198,000 Travelers Group, Inc. 12,115,125
------------
$ 61,089,987
------------
HEALTH & MEDICAL SERVICES--2.6%
139,000 Lincare Holdings, Inc.* $ 11,276,375
------------
HEALTH/PERSONAL CARE--1.0%
36,000 Gillette Co. $ 4,155,750
------------
HOUSEHOLD DURABLES--3.1%
57,840 Ethan Allen Interiors, Inc. $ 2,946,225
205,000 Leggett & Platt, Inc. 10,647,188
------------
$ 13,593,413
------------
INDUSTRIAL MACHINERY--7.9%
170,000 Caterpillar, Inc. $ 9,679,375
107,800 Deere & Co. 6,299,562
255,000 Illinois Tool Works, Inc. 17,977,500
------------
$ 33,956,437
------------
INSURANCE SERVICES--4.3%
185,000 Conseco, Inc. $ 9,180,625
190,000 SunAmerica, Inc. 9,488,125
------------
$ 18,668,750
------------
INTEGRATED OIL--1.5%
82,000 Mobil Corp. $ 6,478,000
------------
OFFICE EQUIPMENT AND SUPPLIES--2.6%
99,000 Xerox Corp. $ 11,236,500
------------
OIL & GAS-PRODUCTION/DISTRIBUTION--1.5%
117,000 Royal Dutch Petroleum ADR $ 6,617,813
------------
PHARMACEUTICALS--5.9%
83,000 Abbott Laboratories $ 6,069,375
122,000 Johnson & Johnson 8,707,750
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
GROWTH FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------- ----------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
PHARMACEUTICALS--CONTINUED
136,000 Schering Plough Corp. $ 10,897,000
------------
$ 25,674,125
------------
PUBLISHING--1.3%
140,000 Equifax, Inc. $ 5,416,250
------------
RETAIL TRADE--7.6%
153,000 Consolidated Stores Corp.* $ 6,120,000
210,000 Gap, Inc. 10,801,875
275,000 TJX Companies, Inc. 12,168,750
107,600 Walgreen Co. 3,712,200
------------
$ 32,802,825
------------
SEMICONDUCTORS & ELECTRONICS--3.3%
120,000 Linear Technology Corp. $ 9,660,000
73,000 Texas Instruments, Inc. 4,676,563
------------
$ 14,336,563
------------
TELECOMMUNICATIONS--1.2%
120,000 Century Telephone Enterprises, Inc. $ 5,107,500
------------
TEXTILES--2.5%
180,000 Jones Apparel Group, Inc.* $ 10,766,250
------------
Total Common Stocks (cost $264,985,866)....
$404,875,062
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
--------- -------- -------- ------------
<S> <C> <C> <C>
REPURCHASE AGREEMENT--6.1%
State Street Bank & Trust Company, dated 04/30/98,
repurchase price $26,295,785 (U.S. Treasury Note:
$26,820,587, 7.13%, 09/30/99)
$26,292,000 5.18% 05/01/98 $ 26,292,000
------------
Total Repurchase Agreement
(cost $26,292,000)...........................
$ 26,292,000
------------
Total Investments (cost $291,277,866(a))......
$431,167,062
============
- --------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value exceeds
cost........................................................... $139,954,752
Gross unrealized loss for investments in which cost exceeds
value.......................................................... (65,556)
------------
Net unrealized gain............................................. $139,889,196
============
- -------------------------------------------------------------------------------
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
* Non-income producing security.
(a) The cost stated also represents aggregate cost for federal income tax
purposes.
- -------------------------------------------------------------------------------
INVESTMENT ABBREVIATIONS:
<TABLE>
<C> <S>
ADR --American Depository Receipt
- ----------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
MIDCAP FUND
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- ------------
<C> <S> <C>
COMMON STOCKS--98.1%
ADVERTISING--2.7%
40,200 Omnicom Group, Inc. $ 1,904,475
32,100 WPP Group PLC ADR 2,066,437
------------
$ 3,970,912
------------
AIRLINES--0.9%
51,400 Southwest Airlines Co. $ 1,410,287
------------
BANKS--3.3%
25,000 Northern Trust Corp. $ 1,825,000
29,700 Star Banc Corp. 1,876,669
33,300 Synovus Financial Corp. 1,171,744
------------
$ 4,873,413
------------
BUILDING MATERIALS & CONSTRUCTION--2.7%
30,700 Crossmann Communities, Inc.* $ 836,575
22,800 Hughes Supply, Inc. 883,500
31,700 Southdown, Inc. 2,242,775
------------
$ 3,962,850
------------
BUSINESS SERVICES--6.8%
28,500 Ikon Office Solutions, Inc. $ 689,344
25,250 Paychex, Inc. 1,371,391
76,200 Personnel Group of America, Inc.* 1,514,475
40,300 Quintiles Transnational Corp.* 1,994,850
52,800 Remedytemp, Inc.* 1,676,400
65,200 Transition Systems, Inc.* 1,467,000
36,200 World Access, Inc.* 1,398,225
------------
$ 10,111,685
------------
CHEMICAL PRODUCTS--3.7%
68,000 Crompton & Knowles Corp. $ 2,035,750
23,500 H.B. Fuller Co. 1,474,625
44,250 OM Group, Inc. 1,960,828
------------
$ 5,471,203
------------
COMPUTERS/COMPUTER PERIPHERALS & SOFTWARE--9.4%
19,200 BMC Software, Inc.* $ 1,796,400
56,000 Cadence Design Systems, Inc.* 2,033,500
36,000 Compuware Corp.* 1,759,500
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- ------------
<C> <S> <C>
COMMON STOCKS--99.6%
COMPUTERS/COMPUTER PERIPHERALS & SOFTWARE--CONTINUED
26,500 Hyperion Software, Inc.* $ 1,148,588
26,900 Peoplesoft, Inc.* 1,250,850
20,540 SunGard Data Systems, Inc.* 731,737
61,600 Symantec Corp.* 1,786,400
52,050 Symbol Technologies, Inc. 2,003,925
30,800 Visio Corp.* 1,524,600
------------
$ 14,035,500
------------
DIVERSIFIED MANUFACTURING--2.6%
27,500 Danaher Corp. $ 1,976,563
30,000 Precision Castparts Corp.(a) 1,863,750
------------
$ 3,840,313
------------
ELECTRONICS & OTHER ELECTRICAL EQUIPMENT--1.0%
35,800 Avid Technology, Inc.* $ 1,552,825
------------
FINANCIAL SERVICES--7.9%
48,600 A. G. Edwards, Inc. $ 2,187,000
28,900 Bear Stearns Companies, Inc. 1,649,106
43,500 DST Systems, Inc.* 2,397,937
34,100 Franklin Resources, Inc. 1,824,350
24,600 Lehman Brothers Holdings, Inc. 1,748,137
58,500 TCF Financial Corp. 1,904,906
------------
$ 11,711,436
------------
HEALTH & MEDICAL SERVICES--7.5%
20,300 Cardinal Health, Inc. $ 1,953,875
26,300 HBO & Co. 1,573,069
60,900 Health Management Association, Inc.* 1,918,350
30,000 Lincare Holdings, Inc.* 2,433,750
28,200 McKesson Corp. 1,993,388
29,600 Pediatrix Medical Group, Inc.* 1,248,750
------------
$ 11,121,182
------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
MIDCAP FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
HOTELS & RESTAURANTS--1.2%
38,800 Promus Hotel Corp.* $ 1,753,275
------------
HOUSEHOLD DURABLES--1.4%
69,800 Furniture Brands International, Inc.* $ 2,050,375
------------
INDUSTRIAL MACHINERY--1.1%
27,000 Sealed Air Corp.* $ 1,692,562
------------
INSURANCE SERVICES--7.0%
62,700 Allied Group, Inc. $ 1,873,162
40,950 Orion Capital Corp. 2,282,962
54,000 Protective Life Corp. 2,004,750
46,000 SunAmerica, Inc. 2,297,125
25,300 Transatlantic Holdings, Inc. 1,943,356
------------
$ 10,401,355
------------
MEDICAL/BIOTECHNOLOGY--10.5%
64,000 Dentsply International, Inc. $ 2,104,000
44,600 Depuy, Inc. 1,382,950
36,200 Elan Corp. PLC ADR* 2,248,925
25,400 Guidant Corp. 1,698,925
75,900 PSS World Medical, Inc.* 1,703,006
39,600 Safeskin Corp.* 1,410,750
66,800 Sybron International Corp.* 1,770,200
88,900 Trex Med Corp.* 1,689,250
29,300 Waters Corp.* 1,567,550
------------
$ 15,575,556
------------
OFFICE EQUIPMENT AND SUPPLIES--3.1%
41,000 Lexmark International Group, Inc. (Class A)* $ 2,372,875
71,800 Miller Herman Inc. 2,167,463
------------
$ 4,540,338
------------
OIL & GAS-PRODUCTION/DISTRIBUTION--1.5%
91,000 Newpark Resources, Inc.* 2,189,688
------------
OIL WELL EQUIPMENT & SERVICES--2.8%
62,400 BJ Services Co.* $ 2,340,000
65,600 Ensco International, Inc. 1,859,572
------------
$ 4,199,572
------------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- ------------
<C> <S> <C>
COMMON STOCKS--CONTINUED
PHARMACEUTICALS--0.9%
30,800 Watson Pharmaceuticals, Inc.* $ 1,324,400
------------
PUBLISHING--1.4%
30,000 New York Times Co. $ 2,128,125
------------
RETAIL TRADE--12.5%
32,200 Bed Bath & Beyond, Inc.* $ 1,585,850
53,100 Central Garden & Pet Co.* 1,818,675
21,542 CVS Corp. 1,588,723
13,200 Express Scripts, Inc.* 1,054,050
40,200 Family DLR Stores, Inc. 1,366,800
50,400 Garden Ridge Corp.* 963,900
19,400 Linens-n-Things, Inc.* 1,168,850
67,300 Office Depot, Inc.* 2,229,313
91,600 Officemax, Inc.* 1,729,425
34,700 Pacific Sunwear of California, Inc.* 1,531,138
45,800 Stein Mart, Inc.* 1,614,450
41,800 TJX Companies, Inc. 1,849,650
------------
$ 18,500,824
------------
SEMICONDUCTORS & ELECTRONICS--2.6%
27,100 C&D Technologies, Inc. $ 1,497,275
28,400 Level One Communications, Inc.* 883,950
38,600 Maxim Integrated Products, Inc.* 1,558,475
------------
$ 3,939,700
------------
TEXTILES--1.5%
37,700 Jones Apparel Group, Inc.* $ 2,254,931
------------
TRANSPORTATION/STORAGE--2.1%
27,450 Air Express International Corp. $ 720,562
48,500 Airbourne Freight Corp. 1,921,812
10,900 Tidewater, Inc.(a) 413,912
------------
$ 3,074,286
------------
Total Common Stocks (cost $103,719,190)
$145,686,594
============
</TABLE>
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
MIDCAP FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- ------------
<S> <C> <C> <C>
REPURCHASE AGREEMENT--1.9%
State Street Bank & Trust Company, dated
04/30/98, repurchase price $2,816,405 (U.S.
Treasury Note: $2,876,088, 5.88%, 08/31/99)
$2,816,000 5.18% 05/01/98 $ 2,816,000
------------
Total Repurchase Agreement (cost $2,816,000) $ 2,816,000
------------
Total Investments (cost $106,535,190(b)) $148,502,594
============
</TABLE>
- --------------------------------------------------------------------------------
<TABLE>
<S> <C>
Federal Income Tax
Information:
Gross unrealized gain
for investments in
which value exceeds
cost.................. $ 42,487,970
Gross unrealized loss
for investments in
which cost exceeds
value................. (817,935)
----------------------------------------------------------------------------------
Net unrealized gain.... $ 41,670,035
==================================================================================
----------------------------------------------------------------------------------
- ------------------------------------------------------------------------------------------------------------
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
* Non-income producing security.
(a) There are common stock rights attached to these securities.
(b) The cost for federal income tax purposes is $106,832,559.
- --------------------------------------------------------------------------------
INVESTMENT ABBREVIATIONS:
ADR--American Depository Receipt
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- -----------
<C> <S> <C>
COMMON STOCKS--93.6%
ARGENTINE PESO--0.9%
3,429 Banco de Galicia Buenos Aires SA ADR (Financial Services) $ 84,011
2,614 Banco Frances del Rio de la Plata ADR (Financial Services) 75,969
20,767 Perez Compac SA (Diversified Industrial Manufacturing) 124,828
4,760 Telefonica de Argentina ADR (Utilities) 183,558
12,487 YPF Sociedad Anonima ADR (Oil & Gas) 435,484
-----------
$ 903,850
-----------
AUSTRALIAN DOLLAR--1.9%
25,564 Australian Gas Light Co. (Utilities) $ 190,285
5,000 Brambles Industries, Ltd. (Transportation/Storage) 103,088
20,800 Broken Hill Proprietary Co. (Mining--Metals/Minerals) 203,502
17,662 Commonwealth Bank of Australia (Financial Services) 212,084
23,000 Fosters Brewing Group (Beverages/Tobacco) 50,106
38,000 Goodman Fielder Wattie, Ltd. (Food/Grocery Products) 58,990
48,000 John Fairfax Holdings (Publishing) 87,662
7,208 Lend Lease Corp. (Building Materials & Construction) 165,490
7,371 National Australia Bank (Financial Services) 104,809
26,502 News Corp., Ltd. (Broadcast Media) 177,699
24,000 Publishing & Broadcasting, Ltd. (Broadcast Media) 114,744
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
--------- ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
AUSTRALIAN DOLLAR--CONTINUED
19,000 Tab Corp. Holdings, Ltd. (Recreational
Services) $ 103,479
50,765 Telstra Corp. (Utilities) 119,201
25,000 Westpac Banking Corp. (Financial Services) 167,954
19,000 Woodside Petroleum, Ltd. (Oil & Gas) 124,299
-----------
$ 1,983,392
-----------
BELGIAN FRANC--1.6%
585 Dexia* (Financial Services) $ 80,165
678 Generale Banque (Financial Services) 391,704
33 Generale De Banque (Financial Services) 6
1,650 Kredietbank (Financial Services) 930,962
39 UCB (Chemical Products) 186,472
-----------
$ 1,589,309
-----------
BRAZILIAN REAL--2.0%
500 Cemig--CIA Energetica Minas Gerais ADR (Utilities) $ 24,038
4,947 Cemig--CIA Energetica Minas Gerais ADR (Non-
Voting) (Utilities)+ 231,891
2,070 Companhia Brasileira (Utilities) 55,114
4,285 Electrobas-Centrais Eletricas Brasileiras ADR
(Utilities) 88,957
1,610,000 Electrobras-Centrais Eletr Bras (Electrical
Services) 66,165
11,103 Telecomunicacoes Brasileiras ADR (Utilities) 1,352,484
2,000 Unibanco-Uniao De Bancos Brasileirs GDR
(Financial Services) 79,500
1,350,000 Unibanco-Uniao De Bancos Brasileris (Financial
Services) 103,890
</TABLE>
The accompanying notes are an integral part of these financial statements.
28
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------- ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
BRAZILIAN REAL--CONTINUED
8,530 Usinas Siderurgicas de Minas ADR (Building Materials
& Construction) $ 58,903
11,587 White Martins SA (Chemical Products) 16,818
-----------
$ 2,077,760
-----------
BRITISH POUND STERLING--19.2%
32,000 Abbey National (Financial Services) $ 601,101
32,800 Argos (Retail Trade) 356,620
104,000 Asda Group (Retail Trade) 348,356
30,000 BG (Energy) 160,328
29,000 British Petroleum (Oil & Gas) 458,403
66,000 Cable & Wireless (Utilities) 756,227
46,744 Cadbury Schweppes (Food/Grocery Products) 681,805
83,600 Caradon (Building Materials & Construction) 270,586
19,000 Centrica* (Energy) 32,973
23,000 Compass Group (Recreational Services) 398,186
128,776 Diageo (Beverages/Tobacco) 1,533,673
26,000 Electrocomponents (Electronics & Other Electrical
Equipment) 252,895
5,000 GKN (Automobiles & Automobile Parts) 144,521
51,000 Glaxo Wellcome (Health/Personal Care) 1,441,700
4,000 Heywood Williams Group (Building Materials &
Construction) 17,128
15,000 Hillsdown Holdings (Food/Grocery Products) 44,912
72,000 Kingfisher (Retail Trade) 1,307,917
50,000 Ladbroke Group (Recreational Services) 274,950
11,000 Laing (John) (Building Materials & Construction) 65,871
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------- ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
BRITISH POUND STERLING--CONTINUED
134,400 National Westminster Bank (Financial Services) $ 2,690,985
50,500 Rank Organisation (Recreational Services) 326,904
132,000 Reed International (Publishing) 1,166,909
27,000 Rolls-Royce (Aerospace/Defense) 126,004
35,000 RTZ Corp. (Mining--Metals/Minerals) 502,604
63,000 Safeway (Retail Trade) 375,680
177,500 Shell Transport & Trading Co. (Oil & Gas) 1,321,224
35,000 Smith (David S.) Holdings (Textiles) 134,652
159,800 Smithkline Beecham (Medical Products and Supplies) 1,905,830
55,000 Tesco (Retail Trade) 515,191
138,500 Tomkins (Diversified Industrial Manufacturing) 815,474
51,000 United News & Media (Broadcast Media) 691,845
-----------
$19,721,454
-----------
CANADIAN DOLLAR--0.3%
4,570 Alcan Aluminum, Ltd. (Mining--Metals/Minerals) $ 148,291
1,950 Royal Bank of Canada (Financial Services) 116,731
-----------
$ 265,022
-----------
CHILEAN PESO--0.2%
590 Cervecerias Unidas (CCU) ADR (Beverages/Tobacco) $ 16,299
2,440 Chilectra SA ADR (Utilities)+ 66,180
2,225 Enersis SA ADR (Utilities) 65,498
1,160 Genesis Chile Fund (Financial Services) 42,050
383 Santa Isabel ADR (Retail Trade) 6,311
-----------
$ 196,338
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
CHINESE YUAN--0.3%
12,900 Huaneng Power International, Inc. ADR* (Energy) $ 283,800
-----------
CZECH KORUNA--0.0%
190 SPT Telecom (Utilities) $ 27,633
-----------
DANISH KRONE--0.3%
1,105 Den Danske Bank AB (Financial Services) $ 134,025
290 Teledanmark (Utilities) 24,367
1,250 Unidanmark (Financial Services) 105,032
-----------
$ 263,424
-----------
DEUTSCHEMARK--5.4%
1,490 Allianz AG Holdings (Insurance Services) $ 458,321
8,669 Bayer AG (Chemical Products) 385,493
6,208 Bayerische Hypo Und Wechsel Bank (Financial Services) 354,239
5,119 Bayerische Vereinsbank (Financial Services) 389,370
1,500 Bilfinger & Berger Bauag (Building Materials &
Construction) 50,570
102 Buderus AG (Industrial Machinery) 47,915
2,330 Commerzbank AG (Financial Services) 89,848
7,266 Deutsche Bank AG (Financial Services) 559,157
13,711 Deutsche Telekom AG (Utilities) 347,517
6,478 Dresdner Bank AG (Financial Services) 350,513
8,751 Gehe AG (Health/Personal Care) 453,508
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
DEUTSCHEMARK--CONTINUED
2,560 Hoechst AG (Chemical Products) $ 103,267
200 Hornbach Baumarkt (Retail Trade) 9,139
352 Mannesmann AG (Engineering) 279,317
1,322 Rhoen-Klinikum AG (Health/Personal Care) 138,127
1,320 Sap AG (Computer Services/Software) 625,226
2,712 Siemens AG (Electronics & Other Electrical Equipment) 158,680
9,968 Veba AG (Utilities) 658,775
178 Volkswagen AG (Automobiles & Automobile Parts) 141,741
-----------
$ 5,600,723
-----------
FINNISH MARKKA--0.4%
6,160 Nokia (AB) OY (Telecommunications) $ 413,939
-----------
FRENCH FRANC--9.1%
635 Accor (Recreational Services) $ 173,143
2,680 Alcatel Alsthom (Cie Gen El) (Electronics & Other
Electrical Equipment) 497,122
4,837 Axa (Diversified Holding Companies) 568,112
860 Canal Plus (Broadcast Media) 149,509
459 Carrefour (Retail Trade) 263,060
580 CLF Dexia France (Financial Services) 70,245
1,645 Credit Commercial de France (Financial Services) 131,359
455 Credit Local de France (Financial Services) 55,106
268 Credit Local de France (Financial Services) 32,458
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------- ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
FRENCH FRANC--CONTINUED
1,460 Danone (Food/Grocery Products) $ 344,901
6,720 Eaux (Cie Generale Des) (Utilities) 1,249,869
2,920 Elf Aquitaine (Energy) 383,277
490 GTM Entrepose (Building Materials & Construction) 38,639
325 L'Oreal (Health/Personal Care) 155,174
1,340 Lafarge SA* (Building Materials & Construction) 126,621
111 Lafarge SA* (Building Materials & Construction) 10,193
1,790 Lapeyre (Building Materials & Construction) 136,089
665 Legrand (Electronics & Other Electrical Equipment) 175,903
327 LVMH Moet-Hennessy Louis Vuitton (Beverages/Tobacco) 67,348
360 Pathe (Broadcast Media) 78,336
1,376 Pinault Printemps Redoute (Retail Trade) 1,025,075
780 Primagaz (Cie Des Gaz Petrole) (Oil & Gas) 67,347
2,930 Saint Gobain (Chemical Products) 488,415
4,417 Sanofi (Health/Personal Care) 535,683
6,964 Schneider SA (Electronics & Other Electrical
Equipment) 521,344
1,704 Societe Generale (Financial Services) 354,917
3,128 Sodexho (Food/Grocery Products) 572,938
1,410 Television Francaise (Broadcast Media) 198,212
7,784 Total (Oil & Gas) 925,896
-----------
$ 9,396,291
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------- ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
HONG KONG DOLLAR--2.0%
17,000 Cheung Kong Holdings, Ltd. (Real Estate) $ 113,026
37,000 CLP Holdings (Miscellaneous--Consumer) 177,692
55,000 Dao Heng Bank Group (Financial Services) 162,600
15,000 Hang Seng Bank (Financial Services) 126,356
38,000 Henderson Land Development Co. (Recreational
Services) 169,739
72,600 Hong Kong & China Gas Co. (Utilities) 98,881
38,380 Hong Kong Land Holdings (Real Estate) 54,116
3,200 HSBC Holdings (Commercial Banks) 91,299
74,000 Hutchison Whampoa (Diversified Holding Companies) 457,604
58,693 New World Development Co. (Real Estate) 167,077
29,000 Sun Hung Kai Properties Co. (Real Estate) 172,218
46,000 Swire Pacific Ltd. A Shares (Transportation/Storage) 229,822
-----------
$ 2,020,430
-----------
ITALIAN LIRA--5.1%
13,600 Assicurazioni Generali Spa (Insurance Services) $ 409,225
23,000 Banca Commercial Italiana (Financial Services) 116,341
189,000 Banca Di Roma (Financial Services) 348,370
141,094 Credito Italiano Spa (Financial Services) 741,573
95,309 Ente Nazionale Idrocarburi (Oil & Gas) 640,021
</TABLE>
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
ITALIAN LIRA--CONTINUED
2,372 Gucci Group NV (Textiles) $ 110,446
15,840 IMI Spa (Financial Services) 259,328
3,226 Industrie Natuzzi Spa ADR (Household Durables) 82,868
37,000 Instituto National Assicurazioni (Insurance Services) 110,602
23,000 Italgas (Societa Italiana Il Gas) Spa (Utilities) 106,472
8,605 Mediolanum (Insurance Services) 257,953
7,000 Rinascente (Retail Trade) 70,144
160,443 Telecom Italia Mobile (Telecommunications) 914,824
140,340 Telecom Italia Spa (Utilities) 1,049,767
-----------
$ 5,217,934
-----------
JAPANESE YEN--15.4%
1,331 Advantest (Electronics & Other Electrical Equipment) $ 89,511
12,000 Alps Electric Co. (Electronics & Other Electrical
Equipment) 125,132
21,000 Amada Co, Ltd. (Industrial Machinery) 84,895
43,000 Canon, Inc. (Electronics & Other Electrical
Equipment) 1,017,002
10,000 Citizen Watch Co. (Electronics & Other Electrical
Equipment) 67,251
18,000 Dai Nippon Screen Manufacturing (Electronics & Other
Electrical Equipment) 83,648
3,000 Daifuku Co., Ltd. (Industrial Machinery) 11,856
27,000 Daiichi Pharmaceutical Co. (Health/Personal Care) 387,434
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
------ ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
JAPANESE YEN--CONTINUED
20,000 Daiwa House Industry Co. (Building Materials &
Construction) $ 161,705
39 DDI Corp. (Utilities) 98,723
67 East Japan Railway
(Transportation/Storage) 334,139
4,300 Fanuc Co., Ltd. (Electronics & Other Electrical
Equipment) 158,561
47,000 Hitachi (Electronics & Other Electrical Equipment) 337,033
2,000 Honda Motor Co., Ltd. (Automobiles & Automobile
Parts) 72,540
7,000 Inax Corp. (Building Materials & Construction) 25,918
11,000 Ito-Yokado Co. (Retail Trade) 569,367
21,000 Kao Corp. (Cosmetics) 308,637
10,000 Kokuyo Co., Ltd. (Computers/Communication) 171,528
21,000 Komatsu, Ltd. (Industrial Machinery) 95,209
11,000 Komori Corp. (Industrial Machinery) 187,018
24,000 Kuraray Co. (Chemical Products) 202,751
10,000 Kyocera Corp. (Electronics & Other Electrical
Equipment) 524,407
17,000 Makita Corp. (Industrial Machinery) 184,978
27,000 Marui Co., Ltd. (Retail Trade) 426,402
41,000 Matsushita Electric Industrial Co. (Electronics &
Other Electrical Equipment) 656,793
27,000 Mitsubishi Corp. (Wholesale Trade) 204,020
116,000 Mitsubishi Heavy Industries Ltd. (Industrial
Machinery) 429,500
</TABLE>
The accompanying notes are an integral part of these financial statements.
32
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------- ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
JAPANESE YEN--CONTINUED
56,000 Mitsui Fudosan Co. (Real Estate) $ 511,168
11,000 Murata Manufacturing Co. (Electronics & Other
Electrical Equipment) 322,503
4,000 National House Industrial (Building Materials
& Construction) 32,492
75,000 NEC Corp. (Electronics & Other Electrical
Equipment) 844,416
32 Nippon Telephone & Telegraph Corp. (Utilities) 280,490
37,000 Nippondenso Co. (Transportation/Storage) 636,051
40,000 Nomura Securities Co., Ltd. (Financial
Services) 488,137
15,000 Pioneer Electronic Corp. (Household Durables) 245,957
2,000 Sangetsu Co., Ltd. (Building Materials &
Construction) 25,540
28,000 Sankyo Co. (Health/Personal Care) 693,970
2,700 SEGA Enterprises (Diversified Industrial
Manufacturing) 44,884
30,000 Sekisui Chemical Co., Ltd. (Building Materials
& Construction) 164,803
22,000 Sekisui House (Building Materials &
Construction) 171,891
3,000 Seven Eleven Japan Co., Ltd. (Retail Trade) 200,620
14,000 Sharp Corp. (Household Durables) 110,020
20,000 Shinetsu Chemical Co., Ltd. (Chemical Products) 389,905
14,000 Shiseido Co. (Health/Personal Care) 184,600
9,800 Sony Corp. (Household Durables) 815,309
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------- ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
JAPANESE YEN--CONTINUED
48,000 Sumitomo Corp. (Wholesale Trade) $ 275,654
58,000 Sumitomo Electric Industries, Ltd. (Electronics &
Other Electrical Equipment) 691,144
13,000 Sumitomo Forestry Co., Ltd. (Paper & Forest Products) 76,130
10,000 TDK Corp. (Household Durables) 790,388
18,000 Teijin (Chemical Products) 51,413
11,000 Tokio Marine & Fire Insurance Co. (Insurance
Services) 119,692
5,300 Tokyo Electron (Electronics & Other Electrical
Equipment) 208,251
8,000 Tokyo Steel Manufacturing (Mining--Metals/Minerals) 35,243
22,000 Toppan Printing Co. (Broadcast Media) 261,493
10,000 Uny Co. (Retail Trade) 160,949
3,000 Yurtec Corp. (Building Materials & Construction) 15,982
-----------
$15,865,053
-----------
KOREAN WON--0.1%
1,718 Samsung Electronics* (Electronics & Other Electrical
Equipment) $ 95,123
-----------
MALAYSIAN RINGGIT--0.0%
21,000 Berjaya Sports Toto Berhad (Real Estate) $ 49,826
-----------
MEXICAN PESO--1.7%
9,860 Cemex SA (B Shares) (Building Materials &
Construction) $ 59,300
15,860 Cemex SA ADS (Building Materials & Construction) 157,674
1,044 Cifra SA de CV ADR* (Retail Trade) 17,879
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------- ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
MEXICAN PESO--CONTINUED
18,752 Fomento Economico Mexicano SA*
(Beverages/Tobacco) $ 138,871
30,158 Groupo Financiero Banamex-Accivl (B Shares)
(Financial Services) 94,244
499 Groupo Financiero Banamex-Accivl (L Shares)
(Financial Services) 1,277
16,650 Gruma SA* (Diversified Holding Companies) 38,248
3,554 Gruma SA ADS (Diversified Holding Companies)+ 32,653
37,450 Grupo Industrial Maseca SA (Household
Durables) 27,028
11,058 Grupo Modelo SA (Beverages/Tobacco) 104,582
2,722 Grupo Televisa GDR (Broadcast Media) 111,602
33,739 Kimberly Clark de Mexico (Health/Personal
Care) 165,711
6,040 Panamerica Beverages ADR (Beverages/Tobacco) 240,845
9,145 Telefonos de Mexico SA ADS (Utilities) 517,836
4,800 TV Azteca ADS (Broadcast Media) 89,400
-----------
$ 1,797,150
-----------
NETHERLANDS GUILDER--10.3%
21,446 ABN AMRO Holdings NV (Financial Services) 525,507
8,816 Ahold (Koninklijke) NV (Food-Retailer) 274,941
498 Akzo Nobel NV (Chemical Products) 101,197
1,020 ASM Lithography Holding NV (Electronics-
Semiconductors) 92,553
5,018 Baan Co. NV (Computer Services/Software) 219,837
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------- ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
NETHERLANDS GUILDER--CONTINUED
4,000 Baan Co. NVF (Computer Services/Software) $ 177,500
7,663 CSM CVA (Food/Grocery Products) 417,271
49,130 Elsevier NV (Broadcast Media) 741,778
9,875 Fortis AMEV NV (Insurance Services) 577,806
25,732 ING Groep NV (Financial Services) 1,672,497
5,620 Koninklijke Numico NV (Food/Grocery Products) 186,675
2,598 Koninklijke Ptt Nederland (Utilities) 134,266
950 Otra NV (Electronics & Other Electrical Equipment) 17,400
2,730 Philips Electronics (Electronics) 240,552
10,907 Polygram (Recreational Services) 448,137
39,630 Royal Dutch Petroleum Co. (Energy) 2,187,389
12,880 Unilever NV (Diversified Manufacturing) 916,858
12,936 Wolters Kluwer (Publishing) 1,693,764
-----------
$10,625,928
-----------
NEW ZEALAND DOLLAR--0.3%
26,357 Fletcher Challenge Building (Building Materials &
Construction) $ 53,294
18,074 Fletcher Challenge Energy (Oil & Gas) 61,646
24,000 New Zealand Telecom (Telecommunications) 113,989
11,000 Telecom Corp. of New Zealand (Utilities) 29,514
-----------
$ 258,443
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------- ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
NORWEGIAN KRONE--1.9%
1,170 Bergesen D-Y ASA (Transportation/Storage) $ 25,262
14,840 Norsk Hydro (Energy) 740,353
9,690 Orkla AS (Diversified Industrial Manufacturing) 1,148,783
2,690 Saga Petroleum (Oil & Gas) 47,981
-----------
$ 1,962,379
-----------
PANAMANIAN BALBOA--0.0%
567 Banco Latino Americano De Export 'E' (Financial
Services) $ 20,270
-----------
PERUVIAN SOL--0.1%
1,452 Credicorp, Ltd. (Financial Services) $ 24,321
2,876 Telefonica del Peru SA ADS (Utilities) 63,632
-----------
$ 87,953
-----------
PORTUGUESE ESCUDO--0.5%
10,147 Jeronimo Martins SGPS (Food/Grocery Products) $ 474,391
-----------
RUSSIAN RUBLE--0.1%
540 Lukoil Holding Co. ADR
(Oil & Gas) $ 37,395
3,560 Rao Gazprom ADS (Energy) 65,682
-----------
$ 103,077
-----------
SINGAPORE DOLLAR--0.4%
17,000 Overseas Union Bank--Foreign (Financial Services) $ 64,455
20,671 Singapore Press Holdings (Broadcast Media) 228,589
42,000 Singapore Telecommunications (Telecommunications) 72,190
16,800 United Overseas Bank (Financial Services) 79,621
-----------
$ 444,855
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------- ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
SPANISH PESETA--2.7%
2,109 Argentaria (Financial Services) $ 175,865
4,030 Banco Bilbao Vizcaya SA (Financial Services) 207,454
11,439 Banco de Santander SA (Financial Services) 604,622
2,705 Banco Popular Espanol (Financial Services) 222,012
15,056 Endesa SA (Electrical Services) 365,773
2,979 Gas Natural Sdg SA (Utilities) 190,906
16,080 Iberdrola SA (Utilities) 258,674
3,847 Repsol SA (Oil & Gas) 210,916
12,765 Telefonica de Espana (Utilities) 533,062
-----------
$ 2,769,284
-----------
SWEDISH KRONA--3.6%
18,810 ABB AB (Electronics & Other Electrical Equipment) $ 304,915
47,440 Astra AB (Health & Medical Services) 943,653
9,060 Atlas Copco AB (Industrial Machinery) 266,815
5,650 Electrolux Co. (Household Durables) 525,446
2,530 Esselte (Broadcast Media) 57,842
1,855 Granges AB (Mining--Metals/Minerals) 33,784
12,540 Hennes & Mauritz AB (Retail Trade) 652,754
80,060 Nordbanken Holding AB (Financial Services) 589,437
2,050 Sandvik AB (Industrial Machinery) 59,180
8,840 Sandvik AB (B Shares) (Industrial Machinery) 254,627
660 Scribona AB (Broadcast Media) 8,440
-----------
$ 3,696,893
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------- ----------- -----------
<C> <S> <C>
COMMON STOCKS--CONTINUED
SWISS FRANC--7.5%
320 ABB AG (Electronics & Other Electrical Equipment) $ 524,625
1,319 Adia SA (Commercial Services) 575,771
2,680 CS Holdings (Financial Services) 589,404
875 Nestle SA (Food/Grocery Products) 1,696,934
1,188 Novartis AG (Chemical Products) 1,963,506
133 Roche Holdings AG (Health/Personal Care) 1,347,727
1,440 Schweizerischer Bankverein (Financial Services) 499,993
340 Union Bank of Switzerland (Financial Services) 547,444
-----------
$ 7,745,404
-----------
THAI BAHT--0.2%
68,000 Thai Farmers Bank Public--Alien Market (Financial
Services) $ 155,705
-----------
VENEZUELAN BOLIVAR--0.1%
2,370 Cia Anonima Nacional Tele Venezuela ADS (Utilities) $ 79,395
-----------
Total Common Stocks
(cost $78,659,154)................................... $96,192,428
-----------
PREFERRED STOCKS--1.6%
AUSTRALIAN DOLLAR--0.1%
12,969 News Corporation, Ltd. (Broadcast Media) $ 73,086
75,200 Sydney Harbour Casino (Recreational Services) 53,464
-----------
$ 126,550
-----------
</TABLE>
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------- ----------- -----------
<C> <S> <C>
PREFERRED STOCKS--CONTINUED
BRAZILIAN REAL--1.1%
13,550,488 Banco Bradesco SA
(Financial Services) 124,409
135,623 Brahma (Food/Grocery Products) $ 88,348
130,400 Brasmotor SA (Automobiles & Automobile Parts) 18,072
2,092,000 Cemig--CIA Energetica Minas Gerais (Electrical
Services) 101,522
118,176 Cimento Portland Itau (Building
Materials/Construction) 26,867
94,000 Coteminas (Textiles) 23,014
94,000 Emp Nac Com Redito (Encorpar)* (Diversified
Manufacturing) 257
137,000 Itaubanco (Financial Services) 92,240
1,005,463 Petroleo Brasileiros--Petrobras (Oil & Gas) 254,959
310,959 Telecom de Rio de Janeiro Telerj (Utilities) 48,942
307,770 Telemig--Telec de Minas Gerais SA* (Utilities) 47,498
982,766 Telesp (Utilities) 334,277
9,813 Uniao Siderurgicas de Minas Gerais-Usiminas
(Financial Services) 64
-----------
$ 1,160,469
-----------
DEUTSCHEMARK--0.4%
464 Fielmann AG (Health/Personal Care) $ 12,993
420 Fresenius AG (Health & Medical Services) 100,755
1,210 Hornbach Holdings AG (Retail Trade) 117,322
310 SAP AG (Non Voting) (Computer Services/Software) $ 154,607
-----------
385,677
-----------
Total Preferred Stocks
(cost $1,556,419)................................. $ 1,672,696
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHARES DESCRIPTION VALUE
---------- ----------- ------------
<C> <S> <C>
RIGHTS AND WARRANTS--0.2%
DEUTSCHEMARK--0.1%
4,883 Dresdner Bank AG* Warrants (Financial Services) $ 122,446
HONG KONG DOLLAR--0.0%
3,300 Hong Kong & China Gas Co.* Warrants (Utilities) 32
NETHERLANDS GUILDER--0.1%
5,924 ING Groep NV* Warrants (Financial Services) 107,331
SPANISH PESETA--0.0%
12,765 Telefonica de Espana CIA* Rights (Utilities) 10,058
THAI BAHT--0.0%
1 Thai Farmers Bank Public-Alien Market* Warrants
(Financial Services) 0
------------
Total Rights and Warrants (cost $117,392).......... $ 239,867
------------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
--------- -------- -------- ------------
<C> <C> <S> <C>
REPURCHASE AGREEMENT--4.9%
State Street Bank & Trust Company, dated 04/30/98,
repurchase price $5,002,720 (U.S. Treasury Note:
$5,104,043, 5.88%, 08/31/99)
$5,002,000 5.18% 05/01/98 $ 5,002,000
------------
Total Repurchase Agreement (cost
$5,002,000).............................
$ 5,002,000
------------
Total Investments (identified cost
$85,334,965(a)).........................
$103,106,991
============
</TABLE>
<TABLE>
- -------------------------------------------------------------------------------
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value exceeds
cost............................................................ $23,345,481
Gross unrealized loss for investments in which cost exceeds
value........................................................... (5,648,976)
-----------
Net unrealized gain.............................................. $17,696,505
===========
- -------------------------------------------------------------------------------
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets. Investment
categories less than one tenth of one percent of net assets are disclosed as
0.0%.
*Non-income producing security.
+Securities that may be resold to "Qualified Institutional Buyers" under Rule
144A or securities offered pursuant to Section 4(2) of the Securities Act of
1933, as amended. These securities have been determined to be liquid under
guidelines established by the Board of Trustees.
(a) The aggregate cost for federal income tax purposes is $85,410,486.
- -------------------------------------------------------------------------------
<TABLE>
<C> <S> <C>
INVESTMENT ABBREVIATIONS:
ADR --American Depository Receipt
ADS --American Depository Shares
GDR --Global Depository Receipt
- ----------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
INTERNATIONAL EQUITY FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
- --------------------------------------------------------------------------------
COMMON AND PREFERRED STOCK INDUSTRY CONCENTRATIONS+
<TABLE>
- -----------------------------------------------
<S> <C>
Financial Services 16.3%
Utilities 9.0%
Electronics & Other Electrical Equipment 7.4%
Retail Trade 6.1%
Health/Personal Care 5.4%
Oil & Gas 4.5%
Food/Grocery Products 4.4%
Chemical Products 3.8%
Energy 3.7%
Broadcast Media 2.9%
Publishing 2.9%
Household Durables 2.5%
Beverages/Tobacco 2.1%
Diversified Industrial Manufacturing 2.1%
Recreational Services 1.9%
Insurance Services 1.9%
Medical Products and Supplies 1.9%
Building Materials & Construction 1.8%
Industrial Machinery 1.6%
Telecommunications 1.5%
Transportation/Storage 1.3%
Computer Services/Software 1.1%
Diversified Holding Companies 1.1%
Real Estate 1.0%
Health & Medical Services 1.0%
Mining--Metals/Minerals 0.9%
Diversified Manufacturing 0.9%
Commercial Services 0.6%
Electrical Services 0.5%
Wholesale Trade 0.5%
Automobiles & Automobile Parts 0.4%
Cosmetics 0.3%
Engineering 0.3%
Food-Retailer 0.3%
Textiles 0.3%
Electronics 0.2%
Miscellaneous--Consumer 0.2%
Computers/Communication 0.2%
Aerospace/Defense 0.1%
Electronics-Semiconductors 0.1%
Commercial Banks 0.1%
Paper & Forest Products 0.1%
- -----------------------------------------------
TOTAL COMMON AND PREFERRED STOCKS 95.2%
- -----------------------------------------------
</TABLE>
+ Industry concentrations greater than one tenth of one percent of net assets
are disclosed.
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
NATIONAL TAX-FREE INTERMEDIATE BOND FUND
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
--------- -------- -------- -----------
<S> <C> <C> <C>
MUNICIPAL BOND OBLIGATIONS--99.7%
ARIZONA--1.8%
Salt River Project Arizona Agricultural
Improvements Revenue Bonds Series C (AA/Aa)
$500,000 4.50% 01/01/04 $ 505,695
-----------
CALIFORNIA--2.1%
Los Angeles Regional Airport Improvement
Corporate Lease Revenue Bonds Class B (Wachovia
Bank of Georgia; Expire: 12/15/97, 100%)
$300,000 4.25%(a) 12/01/24 $ 300,000
Los Angeles Regional Airport Improvement
Corporate Lease Revenue Bonds Class D (Wachovia
Bank of Georgia LOC; Expire 12/15/97, 100%)
(NR/Aa2/P-1)
300,000 4.25(a) 12/01/24 300,000
-----------
$ 600,000
-----------
FLORIDA--1.6%
Florida State Board of Education Capital Outlay
GO Bonds Series A (AA+/Aa2)
$200,000 5.25% 01/01/04 $ 207,808
Florida State Board of Education Capital Outlay
GO Bonds Series D (AA+/Aa2)
250,000 5.00 06/01/12 249,740
-----------
$ 457,548
-----------
GEORGIA--0.7%
Georgia State GO Bonds Series D (AA+/Aaa)
$200,000 5.40% 11/01/10 $ 211,366
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
--------- -------- -------- -----------
<S> <C> <C> <C>
MUNICIPAL BOND OBLIGATIONS--CONTINUED
ILLINOIS--4.4%
Chicago Metropolitan Water Reclamation GO Bonds
(AA/Aa)
$500,000 4.90% 12/01/01 $ 512,650
$450,000 5.60% 12/01/09 481,248
Evanston GO Bonds (NR/Aaa)
250,000 5.30 12/01/99 255,893
-----------
$ 1,249,791
-----------
IOWA--2.8%
Bettendorf GO Bonds Series A (AMBAC) (NR/Aaa)
$250,000 4.70% 06/01/03 $ 253,255
Iowa City Sewer Revenue Bonds (AMBAC) (AAA/Aaa)
250,000 6.00 07/01/08 262,793
Polk County GO Bonds (FGIC) (AAA/Aaa)
250,000 5.50 12/01/10 268,255
-----------
$ 784,303
-----------
KENTUCKY--2.5%
Kentucky Infrastructure Authority Revenue Bonds
(A/A2)
$485,000 5.13% 06/01/11 $ 487,595
Louisville Water Works Board Water System Revenue
Bonds (AA/Aa)
200,000 5.63 11/15/06 209,380
-----------
$ 696,975
-----------
LOUISIANA--0.9%
Louisiana State GO Bonds (AMBAC) (AAA/Aaa)
$250,000 5.00% 04/15/02 $ 255,915
-----------
MARYLAND--1.8%
Washington Suburban Sanitation District GO Revenue
Bonds (AA/Aa1)
$500,000 4.75% 06/01/02 $ 508,680
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
39
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
NATIONAL TAX-FREE INTERMEDIATE BOND FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
--------- -------- -------- -----------
<S> <C> <C> <C>
MUNICIPAL BOND OBLIGATIONS--CONTINUED
MICHIGAN--2.5%
Greenville Public Schools GO Bonds (MBIA)
(AAA/Aaa)
$200,000 5.75% 05/01/07 $ 213,334
Waterford Township School District Bonds (Q-SBLF)
(AA/Aa2)
500,000 4.85 06/01/10 498,170
-----------
$ 711,504
-----------
MINNESOTA--6.1%
Minneapolis GO Bonds (AAA/Aaa)
$500,000 5.30% 10/01/98 $ 503,300
Minnesota State Housing and Finance Agency Series
D (AA+/Aa)
390,000 5.35 01/01/05 408,856
Shakopee Independent School District #720
435,000 4.50 02/01/11 419,423
St. Paul Independent School District #625 GO Bonds
Series C (AA/Aa)
400,000 5.20 02/01/07 412,336
-----------
$ 1,743,915
-----------
NEBRASKA--3.5%
Nebraska Public Power District Revenue Bonds
Series A (A+/A1)
$250,000 5.10% 01/01/06 $ 256,792
200,000 6.00 01/01/06 213,954
Omaha Public Power Revenue Bonds Series A (AA/Aa)
500,000 5.00 02/01/01 511,905
-----------
$ 982,651
-----------
NEVADA--2.6%
Clark County School District GO Bonds Series B
(FGIC) (AAA/Aaa)
$200,000 5.30% 05/01/04 $ 208,210
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
--------- -------- -------- -----------
<S> <C> <C> <C>
MUNICIPAL BOND OBLIGATIONS--CONTINUED
NEVADA--CONTINUED
Nevada State GO Bonds Series A-2 (AA/Aa2)
$500,000 5.25% 05/15/05 $ 520,230
-----------
$ 728,440
-----------
NEW JERSEY--1.7%
Morris County GO Bonds (AAA/Aaa)
$500,000 4.63% 08/15/10 $ 491,005
-----------
NEW MEXICO--1.8%
Albuquerque Joint Water & Sewer System Revenue
Bonds (AA/Aa3)
$500,000 4.75% 07/01/04 $ 509,315
-----------
NORTH CAROLINA--0.9%
Gaston County GO Bonds (FGIC) (AAA/Aaa)
$250,000 4.90% 03/01/12 $ 246,038
-----------
OHIO--2.9%
Columbus GO Bonds Series A (AAA/Aaa)
$250,000 4.50% 07/01/01 $ 253,585
Euclid GO Bonds (NR/Aa)
415,000 4.40 12/01/01 419,084
Ohio State Infrastructure Improvement GO Bonds
(AA+/Aa1)
150,000 5.20 08/01/10 155,164
-----------
$ 827,833
-----------
OREGON--1.8%
Oregon State Housing & Community Services
Department Revenue Bonds Series D (NR/Aa)
$500,000 5.55% 07/01/06 $ 524,680
-----------
PENNSYLVANIA--1.8%
Pennsylvania State GO Bonds
(AA-/A1)
$500,000 5.25% 06/15/06 $ 520,570
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
40
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
NATIONAL TAX-FREE INTERMEDIATE BOND FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
--------- -------- -------- -----------
<S> <C> <C> <C>
MUNICIPAL BOND OBLIGATIONS--CONTINUED
SOUTH CAROLINA--4.7%
Brookland Cayce School District #2 GO Bonds
(SCSDE) (AA/Aa1)
$500,000 4.70% 03/01/05 $ 507,255
South Carolina State Capital Improvement GO Bonds
Series A (AA+/Aaa)
250,000 5.00 03/01/05 257,405
York County School District #1 GO Bonds Series A
(MBIA SCSDE) (AAA/AA/Aaa/Aa1)
500,000 7.00 07/01/03 562,775
-----------
$ 1,327,435
-----------
SOUTH DAKOTA--2.9%
South Dakota Health & Educational Revenue Bonds
(MBIA) (AAA/Aaa)
$500,000 5.00% 09/01/04 $ 511,380
South Dakota Housing Development Authority Revenue
Bonds (AAA/Aa1)
315,000 4.65 05/01/06 313,564
-----------
$ 824,944
-----------
TENNESSEE--1.9%
Shelby County GO Bonds Series A (AA+/Aa)
$500,000 5.63% 06/01/08 $ 531,785
-----------
TEXAS--12.3%
Channelview Independent School District GO Bonds
(PSFG) (NR/Aaa)
$250,000 4.75% 08/15/05 $ 252,823
Collin County GO Bonds (AA-/Aa)
400,000 5.40 02/15/09 409,116
Dallas Waterworks & Sewer System Revenue Bonds
(AA/Aa2)
500,000 4.90 04/01/05 509,795
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
--------- -------- -------- -----------
<S> <C> <C> <C>
MUNICIPAL BOND OBLIGATIONS--CONTINUED
TEXAS--CONTINUED
Grapevine Industrial Development Revenue Bonds
(Morgan Guarantee Trust Co. LOC) (NR/Aa1/P-1)
$500,000 4.25%(a) 12/01/24 $ 500,000
Grapevine Industrial Development Revenue Bonds
(Morgan Guarantee Trust Co. LOC) (NR/Aa1/P-1)
100,000 4.25(a) 12/01/24 100,000
Houston Independent School District GO Bonds
(AA+/Aa)
250,000 4.40 07/15/01 251,540
North Central Texas Health Facilities
Development Corp. Revenue Bonds (NationsBank of
Texas SPA) (MBIA) (AAA/A-1/Aaa/VMIG1)
300,000 4.25(a) 12/01/15 300,000
San Antonio GO Bonds (AA/Aa)
200,000 5.20 08/01/02 207,206
Tarrant County GO Bonds (AA+/Aa1)
400,000 4.80 07/15/06 403,384
Tarrant County Water Control & Improvement
Revenue Bonds (AAA/Aaa)
140,000 5.00 03/01/09 142,085
Texas A&M University Revenue Bonds (AA/Aa)
200,000 5.55 05/15/01 207,540
Texas State GO Bonds Series A (AA/Aa)
200,000 5.65 10/01/08 210,240
-----------
$ 3,493,729
-----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
NATIONAL TAX-FREE INTERMEDIATE BOND FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
--------- -------- -------- -----------
<S> <C> <C> <C>
MUNICIPAL BOND OBLIGATIONS--CONTINUED
UTAH--2.8%
Alpine School District GO Bonds (FGIC-TCRS)
(AAA/Aaa)
$250,000 5.40% 03/15/05 $ 256,985
Intermountain Power Agency Revenue Bonds (A+/A1)
250,000 5.10 07/01/03 257,630
Salt Lake City School District Revenue Bonds
Series A (NR/Aaa)
250,000 5.80 03/01/07 268,132
-----------
$ 782,747
-----------
VIRGINIA--2.5%
Virginia Beach GO Bonds (AA/Aa)
$200,000 5.20% 07/15/06 $ 208,656
Virginia State Public School Authority Revenue
Bonds (AA/Aa)
500,000 4.50 01/01/00 503,700
-----------
$ 712,356
-----------
WASHINGTON--15.4%
King & Snohomish Counties School District (AA-/Aa)
$280,000 5.20% 06/15/08 $ 288,764
King County GO Bonds Series D (AA+/Aa1)
500,000 6.20 12/01/00 525,865
King County School District #414 GO Bonds (AA/Aa)
430,000 5.10 12/01/06 444,990
Pierce County Sewer Improvements Revenue Bonds
(A+/A1)
290,000 5.45 02/01/08 298,625
Port Seattle Revenue Bonds Series A (AMBAC)
(AAA/Aaa)
500,000 6.00 02/01/99 507,500
Port Tacoma Washington Bonds Series B (AMBAC)
(AAA/Aaa)
500,000 4.35 12/01/03 499,985
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
--------- -------- -------- -----------
<S> <C> <C> <C>
MUNICIPAL BOND OBLIGATIONS--CONTINUED
WASHINGTON--CONTINUED
Seattle GO Bonds Series A (AA+/Aa1)
$150,000 5.30% 08/01/13 $ 152,617
Seattle Municipal Light & Power Revenue Bonds
Series A (AA/Aa)
250,000 5.75 08/01/09 264,862
Spokane County School District #354 GO Bonds
(A+/A)
370,000 5.20 12/01/06 382,132
Vancouver Water & Sewer Revenue Bonds (FGIC)
(AAA/Aaa)
250,000 4.70 06/01/01 252,912
Washington Higher Educational Facility University
of Puget Sound Revenue Bonds (A+/A2)
500,000 5.00 10/01/06 506,480
Washington State GO Bonds Series DD-12 & CC-9
(AA/Aa)
250,000 5.38 03/01/08 262,132
-----------
$ 4,386,864
-----------
WISCONSIN--13.0%
Appleton Wisconsin Area School District GO Bonds
(NR/Aa)
$500,000 5.00% 04/01/11 $ 503,905
Eau Claire GO Bonds Series A (AA/Aa2)
470,000 5.00 04/01/08 484,044
Green Bay Public School District GO Bonds (NR/Aa)
500,000 4.90 04/01/05 512,930
Green Bay Public School District GO Bonds (NR/Aa2)
200,000 4.63 04/01/11 192,552
Milwaukee GO Bonds Series E (AA+/Aa1)
250,000 5.50 06/15/10 261,627
</TABLE>
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
NATIONAL TAX-FREE INTERMEDIATE BOND FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
--------- -------- -------- -----------
<S> <C> <C> <C>
MUNICIPAL BOND OBLIGATIONS--CONTINUED
WISCONSIN--CONTINUED
Waukesha County GO Bonds (NR/Aaa)
$500,000 4.40% 12/01/98 $ 502,120
Winnebago County GO Bonds (NR/Aa2)
500,000 4.40 04/01/03 500,415
Wisconsin State Clean Water Revenue Bonds Series 1
(AA+/Aa2)
500,000 5.25 06/01/10 518,230
Wisconsin State GO Bonds Series 3 (AA/Aa)
200,000 5.25 11/01/02 207,432
-----------
$ 3,683,255
-----------
Total Municipal Bond Obligations
(cost $27,734,562)........................... $28,299,339
-----------
Total Investments
(cost $27,734,562(b))........................ $28,299,339
-----------
</TABLE>
<TABLE>
- --------------------------------------------------------------------------------
<S> <C>
Federal Income Tax Information:
Gross unrealized gain for investments in which value exceeds cost.... $598,793
Gross unrealized loss for investments in which cost exceeds value.... (34,016)
--------
Net unrealized gain.................................................. $564,777
========
- --------------------------------------------------------------------------------
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
(a) Variable rate security. Coupon rate disclosed is that which is in effect
at April 30, 1998.
(b) The cost stated also represents aggregate cost for federal income tax
purposes.
- -------------------------------------------------------------------------------
INVESTMENT ABBREVIATIONS:
<TABLE>
<C> <S>
AMBAC --Insured by American Municipal Bond Assurance Corporation
FGIC --Insured by Financial Guaranty Insurance Company
GO --General Obligation
LOC --Letter of Credit
MBIA --Insured by Municipal Bond Investors Assurance Corporation
NR --Not Rated
PSFG --Permanent School Fund Guaranteed
Q-SBLF --Qualified--School Bond Loan Fund
SCSDE --South Carolina School District Credit Enhancement
TCRS --Transferable Custodial Receipts
- -------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
MISSOURI TAX-FREE INTERMEDIATE BOND FUND
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- -----------
<S> <C> <C> <C>
MISSOURI MUNICIPAL BOND OBLIGATIONS--99.0%
Belton Cap Improvement Sales Tax Revenue Bonds
(MBIA) (NR/Aaa)
$ 200,000 5.00% 03/01/05 $ 206,042
200,000 5.00 03/01/06 206,120
Benton County School District GO Bonds (AA/NR)
300,000 4.90 03/01/04 304,611
Cass County School District #R-2 GO Bonds (AA/NR)
725,000 4.80 03/01/02 734,686
Cass County School District #R-9 GO Bonds (NR/A)
200,000 6.25 03/01/00 202,972
Cass County School District GO Bonds (AA/NR)
400,000 4.75 03/01/03 405,652
Chesterfield GO Bonds (NR/Aa2)
500,000 5.20 02/15/12 510,555
Clayton Missouri Revenue Bond (A+/NR)
355,000 4.50 12/01/03 357,773
Clayton School District GO Bonds
(FSA Student Aid Direct Deposit) (AA/Aaa)
250,000 4.38 02/01/09 244,222
Clayton School District GO Bonds
(Student Aid Direct Deposit) (AA/Aa2)
750,000 4.80 03/01/10 750,532
250,000 4.80 03/01/11 249,272
Columbia Water & Electricity Revenue Bonds Series
A (AA/A1)
300,000 5.40 10/01/02 316,425
Fort Zumwalt School District (AA/NR)
100,000 5.25 03/01/11 103,635
Hazelwood School District GO Bonds (NR/Aa)
150,000 5.15 03/01/04 156,103
Jackson County Reorganized School District #7
500,000 4.50 03/01/05 495,635
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- -----------
<S> <C> <C> <C>
MISSOURI MUNICIPAL BOND OBLIGATIONS--CONTINUED
Jackson County Reorganized School District #7 COP
Bonds (AMBAC) (NR/Aaa)
$ 265,000 4.50% 03/01/04 $ 265,927
Jackson County Reorganized School District #7 Lees
Summit Lease Partnership Revenue Bond (AMBAC)
(NR/Aaa)
310,000 4.15 03/01/05 303,134
Jackson County School District GO Bonds (NR/A1)
250,000 5.60 03/01/08 260,135
Jasper County School District #R-9 GO Bonds
(AA/NR)
500,000 5.00 09/01/03 517,180
Kansas City Chouteau Bridge Project Series B
(AA/Aa3)
380,000 5.00 05/01/11 386,878
Kansas City GO Bonds (AA/Aa)
200,000 4.50 06/01/04 201,696
Kansas City Sewer Special Assessment GO Bonds
Series A (AA/Aa)
410,000 7.40 05/15/99 424,522
Kansas City Water Revenue Bonds Series A (AA/Aa)
750,000 4.85 12/01/06 768,473
Lafayette County School District GO Bonds (AA/NR)
350,000 5.20 03/01/07 359,695
Lees Summit GO Bonds Series B (AMBAC) (AAA/Aaa)
400,000 4.20 04/01/04 393,212
Missouri State Economic Development Export &
Infrastructure Board Revenue Bonds Series PJ-B
(A/NR)
200,000 5.38(a) 05/01/03 204,000
</TABLE>
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
MISSOURI TAX-FREE INTERMEDIATE BOND FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- -----------
<S> <C> <C> <C>
MISSOURI MUNICIPAL BOND OBLIGATIONS--CONTINUED
Missouri State Environmental Improvement & Energy
Resources Authority Pollution Control Revenue
Bonds (AA/A1)
$ 250,000 4.25% 12/01/98 $ 250,708
250,000 5.50 12/01/04 267,155
Missouri State Environmental Improvement & Energy
Resources Authority Water Pollution Control
Revenue Bonds (AA/A1)
500,000 5.50 12/01/06 539,275
Missouri State Environmental Improvement & Energy
Resources Authority Water Pollution Control
Revenue Bonds Series A (AA/NR)
150,000 5.25 07/01/02 156,987
Missouri State Environmental Improvement & Energy
Resources Authority Water Pollution Control
Revenue Bonds Series C (NR/Aa)
205,000 4.75 01/01/01 209,500
500,000 4.90 01/01/02 514,790
Missouri State Environmental Improvement & Energy
Resources Authority Water Pollution Control
Revenue Bonds Series D (NR/Aa)
400,000 5.50 01/01/08 426,340
Missouri State Environmental Improvement & Energy
Resources Authority Water Pollution Control
Revenue Bonds Series E (NR/Aa)
390,000 4.38 07/01/00 393,452
Missouri State Fourth State Building GO Bonds
Series A (AAA/Aaa)
150,000 5.30 08/01/08 157,226
500,000 5.40 08/01/09 523,990
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- -----------
<S> <C> <C> <C>
MISSOURI MUNICIPAL BOND OBLIGATIONS--CONTINUED
Missouri State GO Bonds Series A (AAA/Aaa)
$ 500,000 4.50% 08/01/02 $ 504,575
Missouri State Health & Educational Facility
Revenue Bond (Drury College) Series A (Chase
Manhattan Bank LOC; Expire: 8/12/01, 100%)
(NR/aA2/VMIG1)
100,000 4.30(a) 08/15/21 100,000
Missouri State Health & Educational Facility
Revenue Bonds (Barnes-Jewish, Inc.) (AA/Aa)
150,000 6.00 05/15/11 163,779
Missouri State Health & Educational Facility
Revenue Bonds (Barnes-Jewish, Inc.) (AMBAC-TRCS)
(AAA/Aaa)
1,000,000 5.15 05/15/10 1,029,840
Missouri State Health & Educational
Facility Revenue Bonds (prerefunded
to 06/01/01) (MBIA) (AAA/Aaa)
300,000 6.63 06/01/11 326,031
Missouri State Health & Educational
Facility Revenue Bonds Series B
(Health Midwest) (MBIA) (AAA/Aaa)
150,000 6.10 06/01/11 163,238
Missouri State Health & Educational Facility St.
Francis Medical Center Revenue Bonds Series A
(Credit Local de France LOC; Expire: 6/19/03,
100%) (AA+/A-1+/NR)
700,000 4.25(a) 06/01/26 700,000
Missouri State Health & Educational
Facility Washington University
Revenue Bonds Series A (NR/Aa1)
800,000 4.75 08/15/05 814,232
</TABLE>
The accompanying notes are an integral part of these financial statements.
45
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
MISSOURI TAX-FREE INTERMEDIATE BOND FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- -----------
<S> <C> <C> <C>
MISSOURI MUNICIPAL BOND OBLIGATIONS--CONTINUED
Missouri State Housing Development Community
Mortgage Revenue Bond (GNMA/FNMA) (AAA/NR)
$ 380,000 4.55% 03/01/04 $ 380,748
Missouri State Housing Development Community
Mortgage Revenue Bonds (GNMA/FNMA) (AAA/Aaa)
200,000 5.40 03/01/06 208,794
Missouri State Housing Development Community
Mortgage Revenue Bonds Series B-2 (GNMA/FNMA)
(AAA/NR)
395,000 5.20 03/01/08 408,481
Missouri State Housing Development Community
Mortgage Revenue Bonds Series C-2
(GNMA/FNMA)(AAA/NR)
250,000 4.90 03/01/07 252,480
Missouri State Housing Development
Community Revenue Bonds
Series B (GNMA/FNMA) (AAA/NR)
225,000 5.50 03/01/06 237,103
Missouri State Housing Development
Community Revenue Bonds
Series C (GNMA/FNMA) (AAA/NR)
230,000 4.80 09/01/01 235,083
Missouri State Water Pollution Control GO Bonds
Series A (AAA/Aaa)
300,000 5.60 08/01/10 316,356
Missouri State Water Pollution Control GO Bonds
Series B (AAA/Aaa)
295,000 5.00 08/01/00 300,859
New Liberty Hospital District Revenue Bonds
(MBIA) (NR/Aaa)
375,000 4.25 12/01/02 372,986
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- -----------
<S> <C> <C> <C>
MISSOURI MUNICIPAL BOND OBLIGATIONS--CONTINUED
Platte County Missouri School
District Park Hill GO Bond (Student
Aid Direct Deposit) (AA/Aa2)
$ 500,000 5.20% 03/01/09 $ 517,120
Platte County School District #R-3 GO Bonds
(AA/NR)
265,000 4.90 03/01/05 268,816
Polk County Reorganized School District #1 GO
Bonds (Student
Aid Direct Deposit) (AA/NR)
205,000 5.00 03/01/06 210,457
Richmond Heights CTFS Partnership Capital
Improvement Projects Series A Certificate
Participation (MBIA) (AAA/Aaa)
575,000 4.70 02/15/06 579,433
Richmond Heights CTFS Partnership Captial
Improvement Projects Series A Certificate
Participation (MBIA) (AAA/Aaa)
550,000 4.60 02/15/05 552,189
Ritenour Cons School District GO Bonds (Student
Aid Direct Deposit) (AA/NR)
630,000 4.88 03/01/09 635,128
Springfield GO Bonds (NR/Aa)
220,000 4.30 03/01/00 221,021
Springfield Public Building Corp. Leasehold
Revenue Bond (AMBAC) (AAA/NR)
225,000 4.50 03/01/08 221,825
250,000 4.85 03/01/10 249,315
St. Charles County Francis Howell School District
GO Bonds (FGIC) (AAA/Aaa)
700,000 4.60 03/01/04 707,497
St. Charles County Francis Howell
School District GO Bonds (Student
Aid Direct Deposit) (AA/NR)
485,000 4.50 03/01/04 487,687
</TABLE>
The accompanying notes are an integral part of these financial statements.
46
<PAGE>
THE COMMERCE FUNDS
STATEMENT OF INVESTMENTS
MISSOURI TAX-FREE INTERMEDIATE BOND FUND--(CONTINUED)
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
---------- -------- -------- -----------
<S> <C> <C> <C>
MISSOURI MUNICIPAL BOND OBLIGATIONS--CONTINUED
St. Charles School District GO Bonds
Series A (AMBAC) (AAA/Aaa)
$ 150,000 5.75% 03/01/11 $ 156,612
St. Francois County School District GO Bonds
(CGIC) (AAA/Aaa)
280,000 4.80 03/01/04 285,776
St. Louis Board of Education GO Bonds Series A
(FGIC State Aid Direct Deposit) (AAA/Aaa)
500,000 4.40 04/01/07 493,815
St. Louis County GO Bonds Series B (NR/Aa1)
200,000 5.25 02/01/07 205,892
750,000 5.30 02/01/08 772,388
St. Louis County Rockwood School District #R-6 GO
Bonds (NR/Aaa)
300,000 5.80 02/01/99 304,419
St. Louis County School District GO Bonds
Lindbergh (NR/Aa)
715,000 6.60 02/15/03 785,606
200,000 5.40 02/15/10 210,400
St. Louis County School District GO Bonds Parkway
(NR/Aa)
300,000 7.00 02/01/00 315,309
St. Louis School District GO Bonds (FGIC)
(AAA/Aaa)
200,000 5.40 04/01/03 210,530
St. Peters GO Bonds (NR/A1)
150,000 5.80 01/01/10 157,038
University Missouri Health Facilities Revenue
Bonds Series A (AMBAC) (AAA/Aaa)
150,000 5.20 11/01/10 154,524
University of Missouri Systems
Facilities Revenue Bonds (AA+/Aa2)
250,000 4.60 11/01/00 253,163
-----------
</TABLE>
<TABLE>
<CAPTION>
PRINCIPAL INTEREST MATURITY
AMOUNT RATE DATE VALUE
- ------------- ------------ -------- -----------
<S> <C> <C> <C>
MISSOURI MUNICIPAL BOND OBLIGATIONS--CONTINUED
Total Missouri Municipal Bond Obligations
(cost $27,749,478).............................
$28,239,055
-----------
Total Investments
(cost $27,749,478(b)).......................... $28,239,055
===========
- ----------------------------------------------------------------------------------------
Federal Income Tax Information:
Gross unrealized gain for investments in which
value exceeds cost............................... 517,945
Gross unrealized loss for investments in which
cost exceeds value............................... (28,368)
-----------
Net unrealized gain............................... $ 489,577
===========
- ----------------------------------------------------------------------------------------
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
(a) Variable rate security. Coupon rate disclosed is that which is in effect
at April 30, 1998.
(b) The cost stated also represents aggregate cost for federal income tax
purposes.
- -------------------------------------------------------------------------------
INVESTMENT ABBREVIATIONS:
<TABLE>
<C> <S>
AMBAC --Insured by American Municipal Bond Assurance Corporation
CGIC --Insured by Capital Guaranty Insurance Corporation
COP --Certificate of Participation
FGIC --Insured by Financial Guaranty Insurance Company
FNMA --Federal National Mortgage Association
GNMA --Government National Mortgage Association
GO --General Obligation
LOC --Letter of Credit
MBIA --Insured by Municipal Bond Investors Assurance Corporation
NR --Not Rated
TRCS --Transferable Custodial Receipts
</TABLE>
- -------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
47
<PAGE>
THE COMMERCE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHORT-TERM
GOVERNMENT BOND
FUND FUND
----------- ------------
<S> <C> <C>
ASSETS:
Investments in securities, at value (cost
$55,086,481, $258,798,605, $110,380,769,
$79,553,080, $291,277,866, $106,535,190,
$85,334,965, $27,734,562 and $27,749,478,
respectively)...................................... $55,614,082 $267,948,355
Cash and Foreign Currency........................... 680 620
Receivables:
Investment securities sold......................... -- --
Interest........................................... 505,840 3,049,706
Dividends.......................................... -- --
Fund shares sold................................... 25,768 814,963
Deferred organization expenses, net................. 16,055 17,037
Other............................................... 15,013 1,862
----------- ------------
Total assets....................................... 56,177,438 271,832,543
----------- ------------
LIABILITIES:
Payables:
Investment securities purchased.................... -- 9,893,025
Fund shares redeemed............................... 3,099 70,193
Dividends and distributions........................ 149,167 350,565
Advisory fees...................................... 13,561 105,358
Administrative fees................................ 6,780 31,608
Shareowner servicing fees.......................... 4,246 23,081
Distribution fees.................................. 601 1,004
Accrued expenses and other liabilities.............. 17,932 29,868
----------- ------------
Total liabilities.................................. 195,386 10,504,702
----------- ------------
NET ASSETS:
Paid-in capital..................................... 55,620,233 251,785,362
Accumulated undistributed net investment income
(loss)............................................. 6,670 106,819
Accumulated net realized gain (loss) on investment
transactions....................................... (172,452) 285,910
Accumulated net realized loss on currency related
transactions....................................... -- --
Net unrealized gain on investments.................. 527,601 9,149,750
Net unrealized loss on translation of assets and
liabilities denominated in foreign currency........ -- --
----------- ------------
Net assets......................................... $55,982,052 $261,327,841
=========== ============
SHARES OUTSTANDING:
Total shares outstanding, no par value (unlimited
number of shares authorized):
Institutional Shares............................... 3,005,546 13,373,547
=========== ============
Service Shares..................................... 32,941 42,460
=========== ============
Institutional Shares: Net asset value per share (net
assets/shares outstanding)......................... $ 18.42 $ 19.48
=========== ============
Maximum public offering price per share(a)......... $ 18.80 $ 20.19
=========== ============
Service Shares: Net asset value per share (net
assets/shares outstanding)......................... $ 18.43 $ 19.48
=========== ============
Maximum public offering price per share(a)......... $ 18.81 $ 20.19
=========== ============
</TABLE>
- -------
(a) For the Short-Term Government Fund, the maximum public offering price per
share is calculated as (NAV per share x 1.02040). For all other Funds, the
maximum public offering price per share is calculated as (NAV per share x
1.03627).
(b) Formerly known as the National Tax-Free Bond Fund and the Missouri Tax-
Free Bond Fund.
The accompanying notes are an integral part of these financial statements.
48
<PAGE>
<TABLE>
<CAPTION>
NATIONAL MISSOURI
TAX-FREE TAX-FREE
GROWTH AND INTERNATIONAL INTERMEDIATE INTERMEDIATE
BALANCED INCOME GROWTH MIDCAP EQUITY BOND BOND
FUND FUND FUND FUND FUND FUND(B) FUND(B)
-------- ----------- ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$133,618,472 $91,952,740 $431,167,062 $148,502,594 $103,106,991 $28,299,339 $28,239,055
825 351 201 343 869,258 26,006 40,015
163,384 796,309 641,259 2,254,184 907,176 -- 385,214
443,711 406 3,783 405 -- 404,658 334,300
63,858 102,996 311,716 11,166 477,541 -- --
180,243 224,949 474,432 212,965 209,673 24,500 113,500
16,412 15,353 17,405 15,965 15,854 19,361 19,316
1,251 637 5,087 1,027 3,271 5,211 4,200
- ------------ ----------- ------------ ------------ ------------ ----------- -----------
134,488,156 93,093,741 432,620,945 150,998,649 105,589,764 28,779,075 29,135,600
- ------------ ----------- ------------ ------------ ------------ ----------- -----------
618,314 1,820,129 -- 2,322,584 2,624,335 258,615 497,763
11,277 232,665 37,414 24,384 8,142 32,890 --
-- -- -- -- -- 75,818 74,567
69,199 55,656 264,646 89,904 80,882 8,094 7,050
16,476 11,132 53,302 17,981 12,518 3,468 3,524
23,938 8,423 54,141 13,656 8,781 -- --
2,202 1,544 8,853 934 344 -- --
51,138 61,883 85,848 28,975 73,644 17,722 14,176
- ------------ ----------- ------------ ------------ ------------ ----------- -----------
792,544 2,191,432 504,204 2,498,418 2,808,646 396,607 597,080
- ------------ ----------- ------------ ------------ ------------ ----------- -----------
100,951,074 77,617,291 264,452,729 100,064,738 86,815,784 27,755,652 28,029,928
241,403 74,036 (12,604) (403,796) 55,623 15,303 16,564
9,265,432 811,322 27,787,420 6,871,885 (1,076,410) 46,736 2,451
-- -- -- -- (734,283) -- --
23,237,703 12,399,660 139,889,196 41,967,404 17,772,026 564,777 489,577
-- -- -- -- (51,622) -- --
- ------------ ----------- ------------ ------------ ------------ ----------- -----------
$133,695,612 $90,902,309 $432,116,741 $148,500,231 $102,781,118 $28,382,468 $28,538,520
============ =========== ============ ============ ============ =========== ===========
4,554,277 3,536,314 10,756,186 3,833,752 4,183,867 1,505,917 1,530,882
============ =========== ============ ============ ============ =========== ===========
86,950 64,280 210,820 27,038 12,850
============ =========== ============ ============ ============
$28.81 $ 25.25 $ 39.40 $ 38.47 $ 24.49 $ 18.85 $ 18.64
============ =========== ============ ============ ============ =========== ===========
$29.85 $ 26.17 $ 40.83 $ 39.87 $ 25.38 $ 19.53 $ 19.32
============ =========== ============ ============ ============ =========== ===========
$28.79 $ 25.26 $ 39.36 $ 38.31 $ 24.44
============ =========== ============ ============ ============
$29.83 $ 26.18 $ 40.79 $ 39.70 $ 25.33
============ =========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
49
<PAGE>
THE COMMERCE FUNDS
STATEMENTS OF OPERATIONS
FOR THE SIX MONTHS ENDED APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHORT-TERM
GOVERNMENT BOND
FUND FUND
---------- ----------
<S> <C> <C>
INVESTMENT INCOME:
Interest............................................... $1,720,051 $8,062,119
Dividends(a)........................................... -- --
---------- ----------
Total income.......................................... 1,720,051 8,062,119
---------- ----------
EXPENSES:
Advisory fees.......................................... 129,832 595,589
Administration fees.................................... 38,950 178,677
Shareowner servicing fees.............................. 13,209 69,279
Transfer agent fees.................................... 33,449 30,489
Custodian fees......................................... 31,787 32,570
Professional fees...................................... 7,805 24,774
Registration fees...................................... 14,519 17,848
Trustee fees........................................... 807 2,615
Amortization of deferred organization expenses......... 4,943 5,245
Other.................................................. 2,262 27,177
---------- ----------
Total expenses........................................ 277,563 984,263
Less--Investment advisory fees waived and expense
reimbursements......................................... (100,991) --
---------- ----------
Net expenses........................................... 176,572 984,263
Distribution fees--Service Shares...................... 621 967
---------- ----------
Total expenses and distribution fees................... 177,193 985,230
---------- ----------
Net investment income (loss)........................... 1,542,858 7,076,889
---------- ----------
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS AND
FOREIGN CURRENCY TRANSACTIONS:
Net realized gain (loss) on investment transactions.... 7,506 502,746
Net realized gain on currency related transactions..... -- --
Net change in unrealized gain (loss) on investments.... (100,332) 23,781
Net change in unrealized loss on translation of assets
and liabilities denominated in foreign currencies..... -- --
---------- ----------
Net realized and unrealized gain (loss) on investments
and foreign currency transactions.................... (92,826) 526,527
---------- ----------
Net increase in net assets resulting from operations.. $1,450,032 $7,603,416
========== ==========
</TABLE>
- -------
(a) For the Growth and Income Fund and International Equity Fund amount is net
of $1,119 and $74,012 respectively, in withholding taxes.
(b) The National Tax-Free Intermediate Bond and Missouri Tax-Free Intermediate
Bond Funds (formerly known as the National Tax-Free Bond Fund and the
Missouri Tax-Free Bond Fund).
The accompanying notes are an integral part of these financial statements.
50
<PAGE>
<TABLE>
<CAPTION>
NATIONAL MISSOURI
TAX-FREE TAX-FREE
GROWTH AND INTERNATIONAL INTERMEDIATE INTERMEDIATE
BALANCED INCOME GROWTH MIDCAP EQUITY BOND BOND
FUND FUND FUND FUND FUND FUND(b) FUND(b)
-------- ----------- ----------- ----------- ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,399,521 $ 53,233 $ 419,818 $ 63,517 $ 164,068 $620,316 $618,353
495,946 660,830 2,132,272 261,705 651,661 -- --
- ----------- ----------- ----------- ----------- ----------- -------- --------
1,895,467 714,063 2,552,090 325,222 815,729 620,316 618,353
- ----------- ----------- ----------- ----------- ----------- -------- --------
606,668 260,434 1,444,202 469,639 650,070 66,242 66,548
91,000 52,087 288,840 93,928 65,007 19,864 19,964
68,680 22,563 142,697 35,915 21,181 -- --
25,977 8,233 58,362 40,214 30,461 14,924 14,352
39,615 24,623 40,718 31,252 124,083 23,205 22,252
18,039 5,675 38,957 16,790 11,529 3,536 2,355
17,299 26,553 26,557 12,945 13,696 5,716 4,431
1,825 1,129 5,216 1,825 1,176 373 250
5,052 1,984 5,356 4,912 4,880 5,300 5,289
20,772 4,573 55,166 20,616 7,634 4,178 3,628
- ----------- ----------- ----------- ----------- ----------- -------- --------
894,927 407,854 2,106,071 728,036 929,717 143,338 139,069
(209,392) -- -- -- (218,727) (40,275) (52,557)
- ----------- ----------- ----------- ----------- ----------- -------- --------
685,535 407,854 2,106,071 728,036 710,990 103,063 86,512
2,237 2,091 8,454 982 326 -- --
- ----------- ----------- ----------- ----------- ----------- -------- --------
687,772 409,945 2,114,525 729,018 711,316 103,063 86,512
- ----------- ----------- ----------- ----------- ----------- -------- --------
1,207,695 304,118 437,565 (403,796) 104,413 517,253 531,841
- ----------- ----------- ----------- ----------- ----------- -------- --------
9,315,945 811,287 27,787,739 6,871,777 (1,746,367) 46,868 2,540
-- -- -- -- 22,220 -- --
6,113,132 9,524,013 48,951,005 19,719,969 13,421,189 (69,356) 35,325
-- -- -- -- (27,748) -- --
- ----------- ----------- ----------- ----------- ----------- -------- --------
15,429,077 10,335,300 76,738,744 26,591,746 11,669,294 (22,488) 37,865
- ----------- ----------- ----------- ----------- ----------- -------- --------
$16,636,772 $10,639,418 $77,176,309 $26,187,950 $11,773,707 $494,765 $569,706
=========== =========== =========== =========== =========== ======== ========
</TABLE>
51
<PAGE>
THE COMMERCE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX MONTHS ENDED APRIL 30, 1998
(UNAUDITED)
<TABLE>
<CAPTION>
SHORT-TERM
GOVERNMENT BOND
FUND FUND
----------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS:
Net investment income (loss)...................... $ 1,542,858 $ 7,076,889
Net realized gain (loss) on investment
transactions..................................... 7,506 502,746
Net realized gain from foreign currency related
transactions..................................... -- --
Net change in unrealized gain (loss) on
investments...................................... (100,332) 23,781
Net change in unrealized loss on translation of
assets and liabilities denominated in foreign
currencies....................................... -- --
----------- ------------
Net increase in net assets resulting from
operations....................................... 1,450,032 7,603,416
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Institutional Shares.............................. (1,580,758) (7,051,999)
Service Shares.................................... (14,574) (21,765)
From net realized gain on investment transactions
Institutional Shares.............................. -- --
Service Shares.................................... -- --
----------- ------------
Total distributions to shareholders............... (1,595,332) (7,073,764)
----------- ------------
FROM SHARE TRANSACTIONS:
Net proceeds from sale of shares
Institutional Shares.............................. 12,350,424 61,657,052
Service Shares.................................... 150,385 105,346
Reinvestment of dividends and distributions
Institutional Shares.............................. 976,054 5,019,040
Service Shares.................................... 11,509 20,745
Cost of shares redeemed
Institutional Shares.............................. (6,647,694) (24,505,388)
Service Shares.................................... (3,375) (40,223)
----------- ------------
Net increase in net assets resulting from share
transactions..................................... 6,837,303 42,256,572
----------- ------------
Total increase.................................... 6,692,003 42,786,224
----------- ------------
NET ASSETS:
Beginning of period................................ 49,290,049 218,541,617
----------- ------------
End of period...................................... $55,982,052 $261,327,841
=========== ============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME
(LOSS)............................................. $ 6,670 $ 106,819
=========== ============
SUMMARY OF SHARE TRANSACTIONS:
Institutional Shares
Sold.............................................. 668,778 3,160,096
Issued on reinvestment of dividends and
distributions.................................... 52,916 257,268
Redeemed.......................................... (359,960) (1,251,083)
----------- ------------
Increase in shares outstanding.................... 361,734 2,166,281
----------- ------------
Service Shares
Sold.............................................. 8,141 5,412
Issued on reinvestment of dividends and
distributions.................................... 624 1,064
Redeemed.......................................... (183) (2,063)
----------- ------------
Increase (decrease) in shares outstanding......... 8,582 4,413
=========== ============
</TABLE>
- -------
(a) The National Tax-Free Intermediate Bond and Missouri Tax-Free Intermediate
Bond Funds (formerly known as the National Tax-Free Bond Fund and the
Missouri Tax-Free Bond Fund).
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
<TABLE>
<CAPTION>
NATIONAL MISSOURI
TAX-FREE TAX-FREE
GROWTH AND INTERNATIONAL INTERMEDIATE INTERMEDIATE
BALANCED INCOME GROWTH MIDCAP EQUITY BOND BOND
FUND FUND FUND FUND FUND FUND(A) FUND(A)
- ------------ ----------- ------------ ------------ ------------- ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
$ 1,207,695 $ 304,118 $ 437,565 $ (403,796) $ 104,413 $ 517,253 $ 531,841
9,315,945 811,287 27,787,739 6,871,777 (1,746,367) 46,868 2,540
-- -- -- -- 22,220 -- --
6,113,132 9,524,013 48,951,005 19,719,969 13,421,189 (69,356) 35,325
-- -- -- -- (27,748) -- --
- ------------ ----------- ------------ ------------ ------------ ----------- -----------
16,636,772 10,639,418 77,176,309 26,187,950 11,773,707 494,765 569,706
- ------------ ----------- ------------ ------------ ------------ ----------- -----------
(1,159,991) (256,457) (489,502) -- (284,323) (517,253) (531,649)
(15,514) (2,424) (1,362) -- (616) -- --
(5,448,631) (96,153) (22,597,342) (6,316,543) (2,052,413) -- (18,974)
(66,436) (4,883) (384,441) (36,686) (6,198) -- --
- ------------ ----------- ------------ ------------ ------------ ----------- -----------
(6,690,572) (359,917) (23,472,647) (6,353,229) (2,343,550) (517,253) (550,623)
- ------------ ----------- ------------ ------------ ------------ ----------- -----------
23,376,915 40,815,323 46,552,025 27,892,508 20,333,147 4,409,850 5,866,534
1,068,952 601,919 1,568,634 262,504 69,026 -- --
6,547,360 255,523 20,251,342 4,554,809 1,653,449 74,306 100,245
78,844 4,299 381,743 36,633 6,737 -- --
(14,297,585) (6,998,300) (39,495,837) (17,131,997) (7,195,365) (1,360,006) (1,881,012)
(25,935) (1,817,399) (376,238) (49,415) (19,951) -- --
- ------------ ----------- ------------ ------------ ------------ ----------- -----------
16,748,551 32,861,365 28,881,669 15,565,042 14,847,043 3,124,150 4,085,767
- ------------ ----------- ------------ ------------ ------------ ----------- -----------
26,694,751 43,140,866 82,585,331 35,399,763 24,277,200 3,101,662 4,104,850
- ------------ ----------- ------------ ------------ ------------ ----------- -----------
107,000,861 47,761,443 349,531,410 113,100,468 78,503,918 25,280,806 24,433,670
- ------------ ----------- ------------ ------------ ------------ ----------- -----------
$133,695,612 $90,902,309 $432,116,741 $148,500,231 $102,781,118 $28,382,468 $28,538,520
============ =========== ============ ============ ============ =========== ===========
$ 241,403 $ 74,036 $ (12,604) $ (403,796) $ 55,623 $ 15,303 $ 16,564
============ =========== ============ ============ ============ =========== ===========
862,379 1,749,497 1,310,436 808,489 886,200 232,486 313,119
246,628 10,833 584,297 136,494 75,865 3,917 5,348
(521,012) (294,805) (1,092,488) (516,187) (319,313) (71,601) (100,270)
- ------------ ----------- ------------ ------------ ------------ ----------- -----------
587,995 1,465,525 802,245 428,796 642,752 164,802 218,197
- ------------ ----------- ------------ ------------ ------------ ----------- -----------
39,222 25,351 43,402 7,344 3,013
2,968 182 11,026 1,101 309
(957) (79,920) (10,488) (1,387) (921)
- ------------ ----------- ------------ ------------ ------------
41,233 (54,387) 43,940 7,058 2,401
============ =========== ============ ============ ============
</TABLE>
The accompanying notes are an integral part of these financial statements.
53
<PAGE>
THE COMMERCE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE YEAR ENDED OCTOBER 31, 1997
<TABLE>
<CAPTION>
SHORT-TERM
GOVERNMENT BOND
FUND FUND
----------- ------------
<S> <C> <C>
INCREASE (DECREASE) IN NET ASSETS:
OPERATIONS
Net investment income (loss)...................... $ 2,399,327 $ 10,655,550
Net realized gain (loss) on investment
transactions..................................... (133,888) (143,004)
Net realized loss from foreign currency related
transactions..................................... -- --
Net change in unrealized gain (loss) on
investments...................................... 314,447 4,412,106
Net change in unrealized loss on translation of
assets and liabilities denominated in foreign
currencies....................................... -- --
----------- ------------
Increase in net assets resulting from
operations...................................... 2,579,886 14,924,652
----------- ------------
DISTRIBUTIONS TO SHAREHOLDERS:
From net investment income
Institutional Shares.............................. (2,392,682) (10,693,018)
Service Shares.................................... (6,645) (15,032)
From net realized gain on investment transactions
Institutional Shares.............................. -- (184,700)
Service Shares.................................... -- --
----------- ------------
Total distributions to shareholders.............. (2,399,327) (10,892,750)
----------- ------------
FROM SHARE TRANSACTIONS
Net proceeds from sale of shares
Institutional Shares.............................. 31,421,375 96,052,292
Service Shares.................................... 447,777 711,647
Reinvestment of dividends and distributions
Institutional Shares.............................. 1,434,765 8,300,085
Service Shares.................................... 5,599 13,229
Cost of shares redeemed
Institutional Shares.............................. (18,031,858) (41,772,254)
Service Shares.................................... (6,679) --
----------- ------------
Net increase in net assets resulting from share
transactions.................................... 15,270,979 63,304,999
----------- ------------
Total increase................................... 15,451,538 67,336,901
----------- ------------
NET ASSETS:
Beginning of year.................................. 33,838,511 151,204,716
----------- ------------
End of year........................................ $49,290,049 $218,541,617
=========== ============
ACCUMULATED UNDISTRIBUTED NET INVESTMENT INCOME..... $ 59,144 $ 103,694
=========== ============
SUMMARY OF SHARE TRANSACTIONS:
Institutional Shares
Sold.............................................. 1,714,904 5,037,764
Issued on reinvestment of dividends and
distributions.................................... 78,311 436,023
Redeemed.......................................... (985,134) (2,196,219)
----------- ------------
Increase in shares outstanding.................... 808,081 3,277,568
----------- ------------
Service Shares
Sold.............................................. 24,418 37,357
Issued on reinvestment of dividends and
distributions.................................... 304 690
Redeemed.......................................... (363) --
----------- ------------
Increase in shares outstanding.................... 24,359 38,047
=========== ============
</TABLE>
- -------
(a)The Growth and Income Fund commenced operations on March 3, 1997.
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
<TABLE>
<CAPTION>
GROWTH AND INTERNATIONAL NATIONAL MISSOURI
BALANCED INCOME EQUITY TAX-FREE TAX-FREE
FUND FUND(a) GROWTH FUND MIDCAP FUND FUND FUND FUND
- ------------ ----------- ------------ ------------ ------------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C>
$ 2,113,788 $ 184,289 $ 1,685,496 $ (538,557) $ 238,210 $ 809,481 $ 806,516
5,557,357 101,071 22,981,707 6,551,956 2,787,057 5,845 18,879
-- -- -- -- (731,732) -- --
7,648,745 2,875,647 40,425,005 9,385,946 3,011,877 458,468 385,392
-- -- -- -- (2,299,560) -- --
- ------------ ----------- ------------ ------------ ----------- ----------- -----------
15,319,890 3,161,007 65,092,208 15,399,345 3,005,852 1,273,794 1,210,787
- ------------ ----------- ------------ ------------ ----------- ----------- -----------
(2,044,522) (152,431) (1,656,440) -- (268,546) (809,481) (806,516)
(10,379) (3,059) (10,547) -- -- -- --
(3,708,475) -- (14,172,190) (781,830) (598,118) -- (14,681)
-- -- -- -- -- -- --
- ------------ ----------- ------------ ------------ ----------- ----------- -----------
(5,763,376) (155,490) (15,839,177) (781,830) (866,664) (809,481) (821,197)
- ------------ ----------- ------------ ------------ ----------- ----------- -----------
44,216,003 44,109,295 135,701,270 44,321,047 38,848,968 10,977,557 10,099,731
1,166,221 2,586,874 5,567,088 3,397,877 240,846 -- --
5,674,564 117,222 14,235,374 679,188 679,366 127,490 133,039
10,147 2,980 10,529 -- -- -- --
(23,479,903) (2,058,993 (64,005,148) (21,768,366) (14,993,427) (3,901,839) (3,223,104)
(22,933) (1,452) (138,519) (2,788,233) (49) -- --
- ------------ ----------- ------------ ------------ ----------- ----------- -----------
27,564,099 44,755,926 91,370,594 23,841,513 24,775,704 7,203,208 7,009,666
- ------------ ----------- ------------ ------------ ----------- ----------- -----------
37,120,613 47,761,443 140,623,625 38,459,028 26,914,892 7,667,521 7,399,256
- ------------ ----------- ------------ ------------ ----------- ----------- -----------
69,880,248 -- 208,907,785 74,641,440 51,589,026 17,613,285 17,034,414
- ------------ ----------- ------------ ------------ ----------- ----------- -----------
$107,000,861 $47,761,443 $349,531,410 $113,110,468 $78,503,918 $25,280,806 $24,433,670
============ =========== ============ ============ =========== =========== ===========
$ 209,213 $ 28,799 $ 40,965 $ -- $ 236,149 $ 15,303 $ 16,372
============ =========== ============ ============ =========== =========== ===========
1,767,694 2,164,150 4,256,557 1,462,199 1,709,863 589,481 548,660
236,855 5,534 495,397 23,891 31,992 6,483 7,233
(949,694) (98,895) (2,015,211) (741,233) (662,113) (209,410) (175,860)
- ------------ ----------- ------------ ------------ ----------- ----------- -----------
1,054,855 2,070,789 2,736,743 744,857 1,079,742 386,914 380,033
- ------------ ----------- ------------ ------------ ----------- ----------- -----------
46,192 118,593 170,508 111,102 10,451
392 142 309 -- --
(867) (68) (3,937) (91,122) (2)
- ------------ ----------- ------------ ------------ -----------
45,717 118,667 166,880 19,980 10,449
============ =========== ============ ============ ===========
</TABLE>
55
<PAGE>
THE COMMERCE FUNDS
SHORT-TERM GOVERNMENT FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
--------------------- ----------------------
NET
REALIZED
AND
UNREALIZED
NET ASSET GAIN FROM NET
VALUE, NET (LOSS) ON FROM NET REALIZED
BEGINNING INVESTMENT INVEST- INVESTMENT GAIN ON
OF PERIOD INCOME MENTS(B) INCOME INVESTMENTS
--------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
For the Six Months Ended April 30, 1998 (unaudited)
Institutional
Shares $18.47 $0.55 $(0.04) $(0.56) --
Service Shares 18.47 0.53 (0.03) (0.54) --
For the Year Ended October 31, 1997
Institutional
Shares 18.43 1.11 0.04 (1.11) --
Service
Shares(a) 18.37 0.92 0.10 (0.92) --
For the Year Ended October 31, 1996
Institutional
Shares 18.83 1.09 (0.18) (1.09) (0.22)
For the Period December 12, 1994 (commencement of operations) through
October 31, 1995
Institutional
Shares 18.00 1.06 0.83 (1.06) --
<CAPTION>
RATIOS ASSUMING
NO WAIVER OF
INVESTMENT ADVISORY
FEES OR EXPENSE
REIMBURSEMENTS
-----------------------
RATIO
NET RATIO OF NET RATIO
ASSET OF NET INVESTMENT NET RATIO OF NET
VALUE, EXPENSES INCOME TO ASSETS AT OF INVESTMENT
END TO AVERAGE AVERAGE PORTFOLIO END EXPENSES INCOME TO
OF TOTAL NET NET TURNOVER OF PERIOD TO AVERAGE AVERAGE
PERIOD RETURN(C) ASSETS ASSETS RATE (IN 000'S) NET ASSETS NET ASSETS
------ --------- ----------- ----------- --------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30, 1998 (unaudited)
Institutional
Shares $18.42 2.81% 0.68%(d) 5.94%(d) 17% $55,375 1.07%(d) 5.55%(d)
Service Shares 18.43 2.69 0.93(d) 5.67(d) 17 607 1.32(d) 5.28(d)
For the Year Ended October 31, 1997
Institutional
Shares 18.47 6.45 0.68 6.04 36 48,840 1.11 5.61
Service
Shares(a) 18.47 5.81 0.93(d) 5.64(d) 36 450 1.36(d) 5.21(d)
For the Year Ended October 31, 1996
Institutional
Shares 18.43 5.02 0.68 5.90 12 33,839 1.11 5.47
For the Period December 12, 1994 (commencement of operations) through
October 31, 1995
Institutional
Shares 18.83 10.72 0.68(d) 6.38(d) 158 20,211 1.14(d) 5.92(d)
</TABLE>
- ----
(a) Service share activity commenced on January 2, 1997.
(b) Includes the balancing effect of calculating per share amounts.
(c) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. Total return would be reduced if sales charges were taken
into account.
(d) Annualized.
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
THE COMMERCE FUNDS
BOND FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
------------------------- -------------------------
NET RATIO
REALIZED NET RATIO OF NET
AND ASSET OF NET INVESTMENT
NET ASSET UNREALIZED VALUE, EXPENSES INCOME
VALUE, NET GAIN FROM NET FROM NET END TO AVERAGE TO AVERAGE PORTFOLIO
BEGINNING INVESTMENT (LOSS) ON INVESTMENT REALIZED GAIN OF TOTAL NET NET TURNOVER
OF PERIOD INCOME INVESTMENTS(B) INCOME ON INVESTMENTS PERIOD RETURN(C) ASSETS ASSETS RATE
--------- ---------- -------------- ---------- -------------- ------ --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended
April 30, 1998 (unaudited)
Institutional
Shares $19.43 $0.58 $ 0.05 $(0.58) -- $19.48 3.25% 0.83%(d) 5.94%(d) 10%
Service Shares 19.43 0.55 0.05 (0.55) -- 19.48 3.12 1.08(d) 5.66(d) 10
For the Year Ended October
31, 1997
Institutional
Shares 19.07 1.17 0.39 (1.18) (0.02) 19.43 8.50 0.85 6.14 19
Service
Shares(a) 19.00 0.94 0.43 (0.94) -- 19.43 7.48 1.10(d) 5.67(d) 19
For the Year Ended October
31, 1996
Institutional
Shares 19.61 1.16 (0.28) (1.16) (0.26) 19.07 4.71 0.84 6.10 31
For the Period December 12, 1994 (commencement of operations) through October 31, 1995
Institutional
Shares 18.00 1.12 1.61 (1.12) -- 19.61 15.59 0.88(d) 6.64(d) 58
<CAPTION>
NET
ASSETS AT
END
OF PERIOD
(IN 000'S)
----------
<S> <C>
For the Six Months Ended
April 30, 1998 (unaudited)
Institutional
Shares $260,501
Service Shares 827
For the Year Ended October
31, 1997
Institutional
Shares 217,803
Service
Shares(a) 739
For the Year Ended October
31, 1996
Institutional
Shares 151,205
For the Period December 12, 1994 (commencement of operations) through October 31, 1995
Institutional
Shares 98,504
</TABLE>
- ----
(a) Service share activity commenced on January 2, 1997.
(b) Includes the balancing effect of calculating per share amounts.
(c) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. Total return would be reduced if sales charges were taken
into account.
(d) Annualized.
The accompanying notes are an integral part of these financial statements.
57
<PAGE>
THE COMMERCE FUNDS
BALANCED FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
------------------------- ----------------------
RATIO
NET RATIO OF NET
REALIZED NET OF NET INVESTMENT
NET ASSET AND FROM NET ASSET EXPENSES INCOME
VALUE, NET UNREALIZED FROM NET REALIZED VALUE, TO AVERAGE TO AVERAGE PORTFOLIO
BEGINNING INVESTMENT GAIN ON INVESTMENT GAIN ON END OF TOTAL NET NET TURNOVER
OF PERIOD INCOME INVESTMENTS(B) INCOME INVESTMENTS PERIOD RETURN(C) ASSETS ASSETS RATE
--------- ---------- -------------- ---------- ----------- ------ --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30, 1998 (unaudited)
Institutional
Shares $26.67 $0.26 $3.44 $(0.26) $(1.30) $28.81 14.42% 1.13%(d) 1.99%(d) 32%
Service Shares 26.66 0.24 3.42 (0.23) (1.30) 28.79 14.26 1.38(d) 1.74(d) 32
For the Year Ended October 31, 1997
Institutional
Shares 24.00 0.59 3.93 (0.59) (1.26) 26.67 19.92 1.13 2.44 31
Service
Shares(a) 23.25 0.40 3.42 (0.41) -- 26.66 16.53 1.38(d) 2.13(d) 31
For the Year Ended October 31, 1996
Institutional
Shares 22.10 0.54 2.56 (0.54) (0.66) 24.00 14.45 1.13 2.47 58
For the Period December 12, 1994 (commencement of operations) through October 31, 1995
Institutional
Shares 18.00 0.59 4.06 (0.55) -- 22.10 26.14 1.13(d) 3.28(d) 59
<CAPTION>
RATIOS ASSUMING
NO WAIVER OF
INVESTMENT ADVISORY
FEES OR EXPENSE
REIMBURSEMENTS
-----------------------
RATIO
OF NET
NET RATIO OF INVESTMENT
ASSETS EXPENSES INCOME
AVERAGE AT END TO AVERAGE TO AVERAGE
COMMISSION OF PERIOD NET NET
RATE (IN 000'S) ASSETS ASSETS
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
For the Six Months Ended April 30, 1998 (unaudited)
Institutional
Shares $0.0624 $131,193 1.48%(d) 1.64%(d)
Service Shares 0.0624 2,503 1.73(d) 1.39(d)
For the Year Ended October 31, 1997
Institutional
Shares 0.0604 105,782 1.53 2.04
Service
Shares(a) 0.0604 1,219 1.78(d) 1.73(d)
For the Year Ended October 31, 1996
Institutional
Shares 0.0764 69,880 1.45 2.15
For the Period December 12, 1994 (commencement of operations) through October 31, 1995
Institutional
Shares -- 48,329 1.45(d) 2.96(D)
</TABLE>
- ----
(a) Service share activity commenced on January 2, 1997.
(b) Includes the balancing effect of calculating per share amounts.
(c) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. Total return would be reduced if sales charges were taken
into account.
(d) Annualized.
The accompanying notes are an integral part of these financial statements.
58
<PAGE>
THE COMMERCE FUNDS
GROWTH AND INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
--------------------- ----------------------
NET
REALIZED
AND
NET ASSET UNREALIZED FROM NET
VALUE, NET GAIN ON FROM NET REALIZED
BEGINNING INVESTMENT INVEST- INVESTMENT GAIN ON
OF PERIOD INCOME MENTS(B) INCOME INVESTMENTS
--------- ---------- ---------- ---------- -----------
<S> <C> <C> <C> <C> <C>
For the Six Months Ended April 30, 1998 (unaudited)
Institutional
Shares $21.82 $0.10 $3.46 $(0.09) (0.04)
Service Shares 21.81 0.10 3.44 (0.05) (0.04)
For the Period March 3, 1997(a) through October 31, 1997
Institutional
Shares 18.00 0.15 3.80 (0.13) --
Service Shares 18.00 0.12 3.80 (0.11) --
<CAPTION>
RATIOS ASSUMING
NO EXPENSE
REIMBURSEMENTS
-----------------------
RATIO
NET RATIO OF NET RATIO RATIO
ASSET OF NET INVESTMENT NET OF NET OF NET
VALUE, EXPENSES INCOME TO AVERAGE ASSETS AT EXPENSES INVESTMENT
END TO AVERAGE AVERAGE PORTFOLIO COMMIS- END TO AVERAGE INCOME TO
OF TOTAL NET NET TURNOVER SION OF PERIOD NET AVERAGE
PERIOD RETURN(C) ASSETS ASSETS RATE RATE (IN 000'S) ASSETS NET ASSETS
------ --------- ----------- ----------- --------- ------- ---------- ----------- -----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30, 1998 (unaudited)
Institutional
Shares $25.25 16.36% 1.17%(d) 0.88%(d) 24% $0.0652 $89,279 1.17%(d) 0.88%(d)
Service Shares 25.26 16.24 1.42(d) 0.66(d) 24 0.0652 1,623 1.42(d) 0.66(d)
For the Period March 3, 1997(a) through October 31, 1997
Institutional
Shares 21.82 22.00 1.20(d) 1.30(d) 5 0.0774 45,173 2.02(d) 0.48(d)
Service Shares 21.81 21.81 1.45(d) 1.02(d) 5 0.0774 2,588 2.27(d) 0.20(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.
The accompanying notes are an integral part of these financial statements.
59
<PAGE>
THE COMMERCE FUNDS
GROWTH FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
------------------------- -------------------------
RATIO
OF NET
NET NET RATIO INVESTMENT
REALIZED ASSET OF NET INCOME
NET ASSET NET AND VALUE, EXPENSES (LOSS)
VALUE, INVESTMENT UNREALIZED FROM NET FROM NET END TO AVERAGE TO AVERAGE PORTFOLIO
BEGINNING INCOME GAIN ON INVESTMENT REALIZED GAIN OF TOTAL NET NET TURNOVER
OF PERIOD (LOSS) INVESTMENTS(B) INCOME ON INVESTMENTS PERIOD RETURN(C) ASSETS ASSETS RATE
--------- ---------- -------------- ---------- -------------- ------ --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30, 1998 (unaudited)
Institutuional
Shares $34.54 $0.04 $7.11 $(0.05) $(2.24) $39.40 21.60% 1.09%(d) 0.23%(d) 27%
Service Shares 34.50 0.00 7.11 (0.01) (2.24) 39.36 21.49 1.35(d) (0.02)(d) 27
For the Year Ended October
31, 1997
Institutional
Shares 28.95 0.19 7.51 (0.19) (1.92) 34.54 28.12 1.11 0.60 32
Service
Shares(a) 28.26 0.09 6.25 (0.10) -- 34.50 22.47 1.36(d) 0.35(d) 32
For the Year Ended October
31, 1996
Institutional
Shares 24.68 0.19 5.40 (0.19) (1.13) 28.95 23.43 1.08 0.72 36
For the Period December 12, 1994 (commencement of operations) through October 31, 1995
Institutional
Shares 18.00 0.15 6.68 (0.15) -- 24.68 38.06 1.11(d) 0.81(d) 33
<CAPTION>
NET
ASSETS AT
AVERAGE END
COMMISSION OF PERIOD
RATE (IN 000'S)
---------- ----------
<S> <C> <C>
For the Six Months Ended April 30, 1998 (unaudited)
Institutuional
Shares $0.0554 $423,820
Service Shares 0.0554 8,297
For the Year Ended October
31, 1997
Institutional
Shares 0.0556 343,773
Service
Shares(a) 0.0556 5,758
For the Year Ended October
31, 1996
Institutional
Shares 0.0654 208,908
For the Period December 12, 1994 (commencement of operations) through October 31, 1995
Institutional
Shares -- 141,735
</TABLE>
- ----
(a) Service share activity commenced on January 2, 1997.
(b) Includes the balancing effect of calculating per share amounts.
(c) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. Total return would be reduced if sales charges were taken
into account.
(d) Annualized.
The accompanying notes are an integral part of these financial statements.
60
<PAGE>
THE COMMERCE FUNDS
MIDCAP FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
------------------------- ----------------
RATIO
NET NET RATIO OF NET
REALIZED ASSET OF NET INVESTMENT
NET ASSET AND VALUE, EXPENSES LOSS
VALUE, NET UNREALIZED FROM NET END TO AVERAGE TO AVERAGE PORTFOLIO
BEGINNING INVESTMENT GAIN ON REALIZED GAIN OF TOTAL NET NET TURNOVER
OF PERIOD LOSS INVESTMENTS(B) ON INVESTMENTS PERIOD RETURN(C) ASSETS ASSETS RATE
--------- ---------- -------------- ---------------- ------ --------- ---------- ---------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended
April 30, 1998 (unaudited)
Institutional
Shares $33.02 $(0.08) $7.33 $(1.80) $38.47 22.79% 1.16%(d) (0.64)%(d) 40%
Service Shares 32.94 (0.10) 7.27 (1.80) 38.31 22.59 1.41(d) (0.90)(d) 40
For the Year Ended October
31, 1997
Institutional
Shares 28.06 (0.13) 5.38 (0.29) 33.02 18.88 1.23 (0.61) 89
Service
Shares(a) 28.64 (0.11) 4.41 -- 32.94 15.01 1.48(d) (0.95)(d) 89
For the Year Ended October
31, 1996
Institutional
Shares 25.30 (0.07) 3.51 (0.68) 28.06 13.78 1.22 (0.37) 71
For the Period December 12, 1994 (commencement of operations) through October 31, 1995
Institutional
Shares 18.00 (0.04) 7.34 -- 25.30 40.56 1.32(d) (0.29)(d) 59
<CAPTION>
NET
ASSETS AT
AVERAGE END
COMMISSION OF PERIOD
RATE (IN 000'S)
---------- ----------
<S> <C> <C>
For the Six Months Ended
April 30, 1998 (unaudited)
Institutional
Shares $0.0606 $147,464
Service Shares 0.0606 1,036
For the Year Ended October
31, 1997
Institutional
Shares 0.0608 112,442
Service
Shares(a) 0.0608 658
For the Year Ended October
31, 1996
Institutional
Shares 0.0692 74,641
For the Period December 12, 1994 (commencement of operations) through October 31, 1995
Institutional
Shares -- 41,665
</TABLE>
- ----
(a) Service share activity commenced on January 2, 1997.
(b) Includes the balancing effect of calculating per share amounts.
(c) Assumes investment at the net asset value at the beginning of the period,
reinvestment of all dividends and distributions, a complete redemption of
the investment at the net asset value at the end of the period and no
sales charges. Total return would be reduced if sales charges were taken
into account.
(d) Annualized.
The accompanying notes are an integral part of these financial statements.
61
<PAGE>
THE COMMERCE FUNDS
INTERNATIONAL EQUITY FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
-------------------------------- ----------------------
NET
REALIZED
NET AND
REALIZED UNREALIZED RATIO
AND LOSS ON NET RATIO OF NET
UNREALIZED FOREIGN ASSET OF NET INVESTMENT
NET ASSET GAIN CURRENCY FROM NET VALUE, EXPENSES INCOME TO
VALUE, NET (LOSS) ON RELATED FROM NET REALIZED END TO AVERAGE AVERAGE
BEGINNING INVESTMENT INVEST- TRANS- INVESTMENT GAIN ON OF TOTAL NET NET
OF PERIOD INCOME MENTS(B) ACTIONS(B) INCOME INVESTMENTS PERIOD RETURN(C) ASSETS ASSETS
--------- ---------- ---------- ---------- ---------- ----------- ------- --------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
For the Six Months Ended April 30, 1998 (unaudited)
Institutional
Shares $ 22.10 $ 0.02 $ 3.06 $ (0.04) $ (0.08) $(0.57) $ 24.49 14.11% 1.64%(d) 0.24%(d)
Service Shares 22.06 0.02 3.02 (0.04) (0.05) (0.57) 24.44 13.97 1.89(d) 0.02(d)
For the Year Ended October 31, 1997
Institutional
Shares 20.96 0.06 2.07 (0.65) (0.10) (0.24) 22.10 7.15 1.72 0.35
Service
Shares(a) 21.70 0.01 0.51 (0.16) -- -- 22.06 1.66 1.97(d) 0.14(d)
For the Year Ended October 31, 1996
Institutional
Shares 18.64 0.11 3.02 (0.67) (0.07) (0.07) 20.96 13.25 1.72 0.74
For the Period December 12, 1994 (commencement of operations) through October 31, 1995
Institutional
Shares 18.00 0.12 0.95 (0.40) (0.03) -- 18.64 3.73 1.81(d) 1.06(d)
<CAPTION>
RATIOS ASSUMING
NO WAIVER OF
INVESTMENT ADVISORY
FEES OR EXPENSE
REIMBURSEMENTS
-------------------------
RATIO
OF NET
NET RATIO INVESTMENT
AVERAGE ASSETS AT OF INCOME
PORTFOLIO COMMIS- END EXPENSES (LOSS) TO
TURNOVER SION OF PERIOD TO AVERAGE AVERAGE
RATE RATE (IN 000'S) NET ASSETS NET ASSETS
--------- -------- ---------- ----------- -------------
<S> <C> <C> <C> <C> <C>
For the Six Months Ended April 30, 1998 (unaudited)
Institutional
Shares 10% $ 0.0074 $102,467 2.14%(d) (0.26)%(d)
Service Shares 10 0.0074 314 2.39(d) (0.48)(d)
For the Year Ended October 31, 1997
Institutional
Shares 22 0.0007 78,273 2.23 (0.16)
Service
Shares(a) 22 0.0007 231 2.48(d) (0.37)(d)
For the Year Ended October 31, 1996
Institutional
Shares 21 0.0147 51,589 2.64 (0.18)
For the Period December 12, 1994 (commencement of operations) through October 31, 1995
Institutional
Shares 25 -- 21,014 3.50(d) (0.63)(d)
</TABLE>
- ----
(a) Service share activity commenced on January 2, 1997.
(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 sales charges were taken
into account.
(d) Annualized.
The accompanying notes are an integral part of these financial statements.
62
<PAGE>
THE COMMERCE FUNDS
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT EACH PERIOD
<TABLE>
<CAPTION>
INCOME FROM DISTRIBUTIONS TO
INVESTMENT OPERATIONS SHAREHOLDERS
--------------------- ----------------------
NET
REALIZED
<CAPTION> AND
UNREALIZED RATIOS ASSUMING
NET ASSET GAIN FROM NET NO WAIVER OF
VALUE, NET (LOSS) ON FROM NET REALIZED INVESTMENT ADVISORY
BEGINNING INVESTMENT INVEST- INVESTMENT GAIN ON FEES AND EXPENSE
OF PERIOD INCOME MENTS(B) INCOME INVESTMENTS REIMBURSEMENTS
--------- ---------- ---------- ---------- ----------- -----------------------
RATIO
NET RATIO OF NET RATIO
ASSET OF NET INVESTMENT NET RATIO OF NET
VALUE, EXPENSES INCOME TO ASSETS AT OF INVESTMENT
END TO AVERAGE AVERAGE PORTFOLIO END EXPENSES INCOME TO
OF TOTAL NET NET TURNOVER OF PERIOD TO AVERAGE AVERAGE
PERIOD RETURN(C) ASSETS ASSETS RATE (IN 000'S) NET ASSETS NET ASSETS
------ --------- ----------- ----------- --------- ---------- ----------- -----------
NATIONAL TAX-FREE INTERMEDIATE BOND FUND
<S> <C> <C> <C> <C> <C>
For the Six
Months Ended
April 30, 1998
(unaudited) $18.85 $0.37 -- $(0.37) --
For the Year
Ended October
31, 1997 18.46 0.72 0.39 (0.72) --
For the Year
Ended October
31, 1996 18.54 0.73 (0.07) (0.73) (0.01)
For the Period
February 21,
1995(a)
through October
<S>31, 1995 <C> 18<C>.00 <C>0.54 <C>0.54 <C>(0.54) <C> -- <C> <C>
For the Six
Months Ended
April 30, 1998
(unaudited) $18.85 1.95% 0.78%(d) 3.90%(d) 1% $28,382 1.08%(d) 3.60%(d)
For the Year
Ended October
31, 1997 18.85 6.16 0.85 3.89 6 25,281 1.15 3.59
For the Year
Ended October
31, 1996 18.46 3.60 0.85 3.93 34 17,613 1.55 3.23
For the Period
February 21,
1995(a)
through October
31, 1995 18.54 6.06 0.85(d) 4.19(d) 19 10,721 1.90(d) 3.14(d)
MISSOURI TAX-FREE INTERMEDIATE BOND FUND
For the Six
Months Ended
April 30, 1998
(unaudited) $18.61 $0.37 $ 0.04 $(0.37) $(0.01)
For the Year
Ended October
31, 1997 18.26 0.76 0.37 (0.76) (0.02)
For the Year
Ended October
31, 1996 18.40 0.76 (0.14) (0.76) --
For the Period
February 21,
1995(a)
through October
31, 1995 18.00 0.57 0.40 (0.57) --
For the Six
Months Ended
April 30, 1998
(unaudited) $18.64 2.24% 0.65%(d) 4.00%(d) 11% $28,539 1.04%(d) 3.61%(d)
For the Year
Ended October
31, 1997 18.61 6.31 0.65 4.14 13 24,434 1.21 3.58
For the Year
Ended October
31, 1996 18.26 3.43 0.65 4.14 49 17,034 1.58 3.21
For the Period
February 21,
1995(a)
through October
31, 1995 18.40 5.45 0.65(d) 4.41(d) 52 8,889 2.12(d) 2.94(d)
</TABLE>
- ----
(a) Commencement of operations.
(b) Includes the balancing effect of calculating per share amounts.
(c) Assumes investment at the beginning of the period, reinvestment of all
dividends and distributions, a complete redemption of the investment at
the net asset value at the end of the period and no sales charges. Total
return would be reduced if a sales charge were taken into account.
(d) Annualized.
The accompanying notes are an integral part of these financial statements.
63
<PAGE>
THE COMMERCE FUNDS
NOTES TO FINANCIAL STATEMENTS
APRIL 30, 1998
(UNAUDITED)
1. ORGANIZATION
The Commerce Funds (the "Trust") is a Delaware business trust registered
under the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end, management investment company. The Trust consists of nine portfolios
(individually, a "Fund" and collectively, the "Funds"): Short-Term Government
Fund, Bond Fund, Balanced Fund, Growth and Income Fund, Growth Fund, MidCap
Fund, International Equity Fund, National Tax-Free Intermediate Bond Fund and
Missouri Tax-Free Intermediate Bond Fund (formerly National Tax-Free Bond Fund
and Missouri Tax-Free Bond Fund, respectively). Each of the Funds (except
National Tax-Free Intermediate Bond Fund and Missouri Tax-Free Intermediate
Bond Fund which only offer Institutional Shares) offer two classes of shares,
Institutional Shares and Service Shares. Each Fund is registered as a
diversified management investment company under the 1940 Act, other than the
Missouri Tax-Free Intermediate Bond Fund, which is registered as non-
diversified under the 1940 Act.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by the Funds which are in conformity with those generally accepted in
the investment company industry.
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that may affect the reported amounts.
A. Investment Valuation
Investments in securities traded on a U.S. exchange or the NASDAQ system are
valued at their last sale or closing price on the principal exchange on which
they are traded or NASDAQ, on the valuation day; if no sale occurs, securities
traded on a U.S. exchange or NASDAQ are valued at the mean between the closing
bid and asked prices. The value of a Fund's portfolio securities that are
traded on stock exchanges outside the U.S. are based upon the price on that
exchange as of the close of business of the exchange immediately preceding the
time of valuation. Unlisted equity and debt securities for which market
quotations are available are valued at the mean between the most recent bid
and asked prices. Fixed-income securities are valued at prices supplied by an
independent pricing service, which reflect broker/dealer-supplied valuations
and matrix pricing systems. Short-term debt obligations maturing in sixty days
or less are valued at amortized cost. Restricted securities, and other
securities for which quotations are not available, are valued at fair value
using methods approved by the Board of Trustees.
B. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains
and losses on sales of investments are calculated on the identified cost
basis. Dividend income is recorded on the ex-dividend date and interest income
is recorded on the accrual basis.
C. Premiums and Discounts on Debt Securities Owned
The National Tax-Free Intermediate Bond and the Missouri Tax-Free
Intermediate Bond Funds amortize premiums on debt securities on the effective
yield basis, and do not accrete market discounts on debt
64
<PAGE>
THE COMMERCE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
securities. The Growth, MidCap and International Equity Funds accrete market
discounts and amortize premiums on a yield to maturity basis. The Short-Term
Government, Bond, Balanced and Growth and Income Funds do not accrete market
discounts or amortize premiums on long-term debt securities. The Short-Term
Government, Bond and Balanced Funds invest in mortgage-backed securities.
Certain mortgage security paydown gains and losses increase or decrease
ordinary taxable income available for distributions and are included in
interest income in the accompanying Statements of Operations. For all Funds,
original issue discount on debt securities is amortized to interest income
over the life of the security with a corresponding increase in the cost basis
of that security.
D. Foreign Currency Translations
The books and records of the Funds are maintained in U.S. dollars. Amounts
denominated in foreign currencies are translated into U.S. dollars on the
following basis: (i) investment valuations, other assets and liabilities
initially expressed in foreign currencies are converted each business day into
U.S. dollars based on current exchange rates; and (ii) purchases and sales of
foreign investments, income and expenses are converted into U.S. dollars based
upon currency exchange rates prevailing on the respective dates of such
transactions.
Net realized gain (loss) on foreign currency transactions represent: (i)
foreign exchange gains and losses from the sale of foreign currencies and
investments; (ii) foreign exchange gains and losses between trade date and
settlement date on investment securities transactions and foreign exchange
contracts; and (iii) foreign exchange gains and losses from the difference
between amounts of dividends and interest recorded and the amounts actually
received. Net unrealized gain (loss) on translation of assets and liabilities
denominated in foreign currencies arises from changes in the value of assets
and liabilities.
E. Forward Foreign Currency Exchange Contracts
The International Equity Fund is authorized to enter into forward foreign
currency exchange contracts for the purchase of a specific foreign currency at
a fixed price on a future date as a hedge or cross-hedge against either
specific transactions or portfolio positions as a means to manage its foreign
exchange rate risk. All commitments are "marked-to-market" daily at the
applicable exchange rates and any resulting unrealized gains or losses are
recorded in the Fund's financial statements. The Fund records realized gains
and losses at the time the forward contract is offset by entry into a closing
transaction or extinguished by delivery of the currency. Risks may arise upon
entering these contracts as a result of the potential inability of
counterparties to meet the terms of their contracts and unanticipated
movements in the value of a foreign currency relative to the U.S. dollar.
F. Federal Taxes
Each Fund intends to comply with the requirements of the Internal Revenue
Code of 1986, as amended, applicable to regulated investment companies and to
distribute each year substantially all of its investment company taxable and
tax-exempt income to its shareholders. Accordingly, no federal income tax
provisions are required. The characterization of distributions to shareholders
for financial reporting purposes is determined in accordance with income tax
rules.
65
<PAGE>
THE COMMERCE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
2. SIGNIFICANT ACCOUNTING POLICIES--(CONTINUED)
As of the Trust's most recent tax year-end, the following Funds had capital
loss carryforwards for U.S. federal income tax purposes:
<TABLE>
<CAPTION>
FUND AMOUNT YEAR OF EXPIRATION
---------------------------- ------------------ --------------------------
<S> <C> <C>
Short-Term Government Fund $179,958 2004-2005
Bond Fund 216,767 2005
National Tax-Free Intermedi-
ate Bond Fund 115 2004
</TABLE>
These amounts are available to be carried forward to offset future capital
gains of the Funds to the extent permitted by applicable laws or regulations.
G. Deferred Organization Expenses
Organization costs are being amortized on a straight-line basis over a
period of five years beginning with the commencement of each of the Fund's
operations. If any or all of the shares held by The Goldman Sachs Group, L.P.
representing initial capital of the Funds are redeemed during the amortization
period, the redemption proceeds will be reduced by the pro rata portion of the
unamortized organization expense.
H. Expenses
Expenses incurred by the Funds which do not specifically relate to an
individual Fund are allocated to the Funds based on each Fund's relative
average daily net assets for the period. Service Class shareholders bear all
expenses and fees relating to the Distribution Plan.
I. Repurchase Agreements
During the term of a repurchase agreement, the market value of the
underlying collateral, including accrued interest, is required to equal or
exceed the value of the repurchase agreement. The underlying collateral for
all repurchase agreements is held in safekeeping in the customer-only account
of State Street Bank & Trust Company, the Funds' custodian, or at sub-
custodians. The market value of the underlying collateral is monitored by
daily pricing.
In connection with transactions in repurchase agreements, if the seller
defaults and the value of the security declines, or if the seller enters an
insolvency proceeding, realization of the collateral by the Trust may be
delayed or limited.
J. Dividends and Distributions to Shareholders
Dividends from net investment income are declared daily and paid monthly by
the Short-Term Government, Bond, National Tax-Free Intermediate Bond and
Missouri Tax-Free Intermediate Bond Funds; declared and paid quarterly by the
Balanced, Growth and Income and Growth Funds; and declared and paid annually
by the MidCap and International Equity Funds. Each Fund's net realized capital
gains (including net short-term capital gains), if any, are declared and
distributed at least annually. Distributions to shareholders are recorded on
the ex-dividend date.
66
<PAGE>
THE COMMERCE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. AGREEMENTS
The Funds have entered into an Advisory Agreement with Commerce Bank, N.A.
(the "Advisor"). Pursuant to the terms of the Advisory Agreement, the Advisor
is responsible for managing the investments and making investment decisions
for each of the Funds. For these services and for assuming related expenses,
the Advisor is entitled to a fee, computed daily and payable monthly, at the
following annual rate of the corresponding Fund's average daily net assets:
<TABLE>
<S> <C>
Short-Term Government Fund............................................. .50%
Bond Fund.............................................................. .50%
Balanced Fund.......................................................... 1.00%
Growth and Income Fund................................................. .75%
Growth Fund............................................................ .75%
MidCap Fund............................................................ .75%
International Equity Fund.............................................. 1.50%
National Tax-Free Intermediate Bond Fund............................... .50%
Missouri Tax-Free Intermediate Bond Fund............................... .50%
</TABLE>
As authorized by the Advisory Agreement, the Advisor has entered into a Sub-
Advisory Agreement with Rowe Price-Fleming International, Inc. (the "Sub-
Advisor") whereby the Sub-Advisor manages the investment assets of the
International Equity Fund. As compensation for services rendered under the
Sub-Advisory Agreement, the Sub-Advisor is entitled to a fee from the Advisor
at the following annual rate:
<TABLE>
<CAPTION>
AVERAGE DAILY NET ASSETS ANNUAL RATE
------------------------ -----------
<S> <C>
First $20 million.............................................. .75%
Next $30 million............................................... .60%
Over $50 million............................................... .50%
</TABLE>
In addition, the sub-advisor has voluntarily agreed to waive a portion of
its sub-advised fees on the International Equity Portfolio. The resulting
would be 0.50% of the average daily net assets of the Fund when Fund assets
exceed $200 million.
For the period ended April 30, 1998, the Advisor has voluntarily agreed to
waive a portion of its advisory fee for certain portfolios. The resulting
advisory fees are .30% for the Short-Term Government Fund, .69% for the
Balanced Fund, 1.00% for the International Equity Fund, .43% for the National
Tax-Free Intermediate Bond Fund and .30% for the Missouri Tax-Free
Intermediate Bond Fund. The effect of these waivers by the Advisor for the
period ended April 30, 1998 was to reduce advisory fees by $51,933, $187,852,
$218,727, $9,529 and $26,619 for the Short-Term Government, Balanced,
International Equity, National Tax-Free Intermediate Bond and Missouri Tax-
Free Intermediate Bond Funds, respectively.
In addition, for the period ended April 30, 1998, the Advisor has
voluntarily agreed to reimburse expenses (excluding interest, taxes,
distribution expenses and extraordinary expenses) to the extent that such
expenses exceed, on an annualized basis, .68%, .88%, 1.13%, 1.20%, 1.13%,
1.72% and .65% of average net assets of the Short-Term Government, Bond,
Balanced, Growth and Income, Growth, International Equity and Missouri Tax-
Free Intermediate Bond Funds, respectively. Effective February 6, 1998, the
Advisor has voluntarily agreed to reimburse expenses (excluding interest,
taxes, distribution expenses and extraordinary expenses) for the National Tax-
Free Intermediate Bond Fund to the extent that such expenses exceed, on an
annualized basis .70% of average net assets. Prior thereto, the expense
limitation was .85% of average net assets. The
67
<PAGE>
THE COMMERCE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
3. AGREEMENTS--(CONTINUED)
effect of these reimbursements by the Advisor for the period ended April 30,
1998 was to reduce expenses by $49,058, $21,540, $0, $30,746 and $25,938 for
the Short-Term Government, Balanced, Growth and Income, National Tax-Free
Intermediate Bond and Missouri Tax-Free Intermediate Bond Funds, respectively.
The amount reimbursable to the Short-Term Government, National Tax-Free
Intermediate Bond and Missouri Tax-Free Intermediate Bond Funds at April 30,
1998 was approximately $15,000, $5,000 and 4,000, respectively, and are
reflected in "Other Assets" in the accompanying Statements of Assets and
Liabilities. Included in "Accrued expenses and other liabilities" in the
accompanying Statements of Assets and Liabilities of the Balanced and Growth
and Income Funds was approximately $12,000 and $17,000 related to excess
reimbursements payable to Advisor.
Goldman Sachs Asset Management ("GSAM"), a separate operating division of
Goldman, Sachs & Co., serves as the Trust's administrator, pursuant to an
Administration Agreement. Under the Administration Agreement, GSAM administers
the Trust's business affairs. As compensation for the services rendered under
the Administration Agreement and its assumption of related expenses, GSAM is
entitled to a fee, computed daily and payable monthly, at an annual rate of
.15% of the average daily net assets of each Fund.
Goldman, Sachs & Co. serves as Distributor of shares of the Funds pursuant
to a Distribution Agreement and may receive a portion of the sales load
imposed on the sale of shares of the Funds. The maximum sales load imposed on
sale of shares of the Short-Term Government Fund is 2.00%; for all other
Funds, the maximum sales load imposed on the sale of shares of the Funds is
3.50%. Goldman Sachs has advised the Trust that it has retained approximately
$8,127 for the six months ended April 30, 1998.
The Trust, on behalf of each Fund (except National Tax-Free Intermediate
Bond Fund and Missouri Tax-Free Intermediate Bond Fund), has adopted a
Distribution Plan for the Service Shares pursuant to Rule 12b-1. Under the
distribution plan, payments by each Fund for distribution expenses may not
exceed .25% (annualized) of the average daily net assets of the Fund's Service
Shares.
Pursuant to a Shareholder Administrative Services Plan adopted by its Board
of Trustees, the Funds may enter into agreements with service organizations
such as banks and financial institutions, which may include the Advisor and
its affiliates ("Service Organizations"), under which they will render
shareholder administration support services. For these services, the Service
Organizations are entitled to receive fees from a Fund at an annual rate of up
to .25% of the average daily net asset value of Fund shares beneficially owned
by clients of such Service Organizations
4. INVESTMENT TRANSACTIONS
Purchases and proceeds from sales or maturities of long-term securities for
the six months ended April 30, 1998 were as follows:
<TABLE>
<S> <C>
SHORT-TERM GOVERNMENT FUND
Purchases (excluding U.S. Government securities).................... $2,004,063
Sales (excluding U.S. Government securities)........................ 1,074,282
Purchases of U.S. Government securities............................. 11,573,597
Sales of U.S. Government securities................................. 7,069,658
</TABLE>
68
<PAGE>
THE COMMERCE FUNDS
NOTES TO FINANCIAL STATEMENTS--(CONTINUED)
4. INVESTMENT TRANSACTIONS--(CONTINUED)
<TABLE>
<S> <C>
BOND FUND
Purchases (excluding U.S. Government securities)................... $39,422,904
Sales (excluding U.S. Government securities)....................... 8,933,308
Purchases of U.S. Government securities............................ 29,388,881
Sales of U.S. Government securities................................ 14,180,136
BALANCED FUND
Purchases (excluding U.S. Government securities)................... $37,459,201
Sales (excluding U.S. Government securities)....................... 29,389,785
Purchases of U.S. Government securities............................ 12,107,148
Sales of U.S. Government securities................................ 8,988,342
GROWTH AND INCOME FUND
Purchases (excluding U.S. Government securities)................... $50,734,111
Sales (excluding U.S. Government securities)....................... 16,597,902
Purchases of U.S. Government securities............................ --
Sales of U.S. Government securities................................ --
GROWTH FUND
Purchases (excluding U.S. Government securities)................... $99,763,532
Sales (excluding U.S. Government securities)....................... 99,934,889
Purchases of U.S. Government securities............................ --
Sales of U.S. Government securities................................ --
MIDCAP FUND
Purchases (excluding U.S. Government securities)................... $57,219,574
Sales (excluding U.S. Government securities)....................... 49,821,039
Purchases of U.S. Government securities............................ --
Sales of U.S. Government securities................................ --
INTERNATIONAL EQUITY FUND
Purchases (excluding U.S. Government securities)................... $20,363,770
Sales (excluding U.S. Government securities)....................... 8,181,598
Purchases of U.S. Government securities............................ --
Sales of U.S. Government securities................................ --
NATIONAL TAX-FREE INTERMEDIATE BOND FUND
Purchases (excluding U.S. Government securities)................... $ 2,294,865
Sales (excluding U.S. Government securities)....................... 285,568
Purchases of U.S. Government securities............................ --
Sales of U.S. Government securities................................ --
MISSOURI TAX-FREE INTERMEDIATE BOND FUND
Purchases (excluding U.S. Government securities)................... $ 4,866,505
Sales (excluding U.S. Government securities)....................... 2,774,245
Purchases of U.S. Government securities............................ --
Sales of U.S. Government securities................................ --
</TABLE>
5. CONCENTRATION OF CREDIT RISK
The Missouri Tax-Free Intermediate Bond Fund invests substantially all of
its assets in debt obligations of issuers located in the State of Missouri.
The National Tax-Free Intermediate Bond Fund may invest significant amounts in
selected states. The issuers' abilities to meet their obligations may be
affected by the states' economic or political developments.
69
<PAGE>
THE COMMERCE FUNDS
- -----------------------------
TRUSTEES
J. Eric Helsing, Chairman
Randall D. Barron
David L. Bodde
John J. Holland
Warren Weaver
OFFICERS
Warren Weaver
President
Scott M. Gilman
Vice President
Gordon F. Linke
Vice President
Nancy L. Mucker
Vice President
John M. Perlowski
Vice President
Randall D. Barron
Treasurer
W. Bruce McConnel, III
Secretary
Michael J. Richman
Assistant Secretary
Howard B. Surloff
Assistant Secretary
This Semiannual Report is authorized for distribution to prospective
investors only when preceded or accompanied by a Commerce Funds Prospectus
which contains facts concerning The Commerce Funds' objectives and policies,
management, expenses and other information. Shares of the Funds are not
deposits or obligations of, or guaranteed, endorsed or otherwise supported by,
Commerce Bank, N.A., its parent or affiliates, and the shares are not
federally insured or guaranteed by the U.S. Government, the Federal Deposit
Insurance Corporation, the Federal Reserve Board or any other governmental
agency. An investment in the Funds involves investment risks, including
possible loss of principal.
<PAGE>
THE COMMERCE FUNDS
922 Walnut Street
Kansas City, Missouri 64106
INVESTMENT ADVISOR
Commerce Bank, N.A.
922 Walnut Street
Kansas City, Missouri 64106
and
8000 Forsyth Boulevard
St. Louis, Missouri 63105
INVESTMENT SUB-ADVISOR
Rowe Price-Fleming International, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
DISTRIBUTOR
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
ADMINISTRATOR
Goldman Sachs Asset Management
One New York Plaza
New York, New York 10004
CUSTODIAN
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
State Street Bank & Trust Company
1004 Baltimore Street
Kansas City, Missouri 64105
INDEPENDENT AUDITORS
KPMG Peat Marwick LLP
1000 Walnut Street
Kansas City, Missouri 64106
LEGAL COUNSEL
Drinker Biddle & Reath LLP
1345 Chestnut Street
Philadelphia, Pennsylvania 19107
COM-SEMI98
LOGO COMMERCE FUNDS
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
The National Tax-Free Intermediate Bond Fund
The Missouri Tax-Free Intermediate Bond Fund
Semiannual Report
April 30, 1998
