<PAGE>
[GRAPHIC]
THE COMMERCE FUNDS
Annual Report - October 31, 1999
-------------------
commerce funds \TM\
-------------------
<PAGE>
Building on Your Values
The value of a shared perspective
At The Commerce Funds, we have a simple, straightforward mission: to build
relationships that have lasting value to our clients.
We achieve our mission by keeping our focus squarely on what matters most: the
financial success and well-being of the customers we serve. At The Commerce
Funds, looking at the world through our customers' eyes has helped us to create
a family of mutual funds designed to assist you in meeting the financial
challenges that lie ahead.
The power of professional commitment
Behind each of The Commerce Funds is a consistent, long-term investment
philosophy and a commitment to the highest investment standards. Our success in
helping investors like you reach their financial goals has proven the wisdom of
this careful, disciplined approach to investing.
Your relationship with The Commerce Funds is built on a foundation of shared
values and many years of investment experience. Working from this solid
foundation, we're equipped to help our customers meet the challenge of investing
for a lifetime.
Strength, insight, and service: good reasons to invest with
The Commerce Funds.
The Commerce Funds
RISK
International Equity
MidCap
Growth
Growth and Income
Balanced
Missouri Tax-Free
Intermediate Bond
National Tax-Free
Intermediate Bond
Bond
Short-Term Government
POTENTIAL RETURN
In general, greater returns are associated with greater risks.
<PAGE>
COMMERCE FUNDS
Shareholder Letter
Dear Shareholder:
We are pleased to provide you with the Annual Report on The Commerce Funds.
In this report, you will find performance and financial information on the
nine Commerce Funds. The portfolio management team of each Fund also provides
a review of the factors that have affected performance. To help you put that
information in context, we offer the following economic and financial market
update.
Economic and Market Update
In our letter to shareholders a year ago, we discussed the
possible impact the Asian economic crisis would have on the
U.S. economy. While an increase in market volatility was
anticipated, we did not believe it would trigger a domestic
recession. This scenario has occurred, as the financial
markets fluctuated, but economic growth in the United
States continued to be robust. In fact, growth rates have
been so strong that they have triggered fears of an in-
crease in inflation. Rising commodity prices, a booming
housing market and wage pressures were the culprits --
prompting the Federal Reserve Board to raise interest
rates on three occasions thus far in 1999.
Turning to the U.S. stock market, it has been a year of
shifting investor sentiment, rising volatility and, ulti-
mately, strong returns. The stock market rose during the
latter part of 1998 and the first quarter of 1999, but the
rally was deceiving. The strong returns generated by a few
very large growth and technology companies accounted for
most of the market's gains. This masked lackluster returns
from the majority of stocks.
The trend temporarily changed course during April 1999.
Continued strong economic growth led the market to briefly
favor economically sensitive, smaller capitalization, and
more value-oriented stocks. With investors seeking a wider
universe of stocks for their portfolios, more companies
were able to participate in the market's ascent. Since
April, the tides have shifted again. Uncertainty over the
strength of the economy, the inflation outlook, corporate
profits and interest rates caused the stock market to spi-
ral downward during the third quarter. But, as it has so
many times in the last ten years, the market proved its re-
siliency again --rallying some 700 points to close out Oc-
tober 1999. All told, for the one year period ending
October 31, 1999, the Standard & Poor's 500 Index rose to
25.66%.
Good news for the economy was generally bad news for the
fixed-income market. With steady economic growth, infla-
tionary pressures and the subsequent rise in interest
rates, fixed-income prices have fallen throughout much of
1999 -- especially for securities on the long end of the
yield curve.
Overseas, most international markets have performed well
this year. A surprisingly fast rebound in Asia unfolded af-
ter last year's currency crisis. In Japan, the market has
generated very strong returns, due to unexpected gains in
the country's domestic economy and meaningful economic re-
forms. Europe was relatively disappointing, with lackluster
economic growth muting returns.
Looking ahead, many investors have expressed relief to have
moved beyond the historically weak September/October period
relatively unscathed. Money flowing into equities is on an
1
<PAGE>
COMMERCE FUNDS
upward climb, and barring any major year 2000 (Y2K) disrup-
tions, investors may be inclined to move assets that are
being held on the sidelines back into the market. This
could lead to a broadening of the market's rally -- helping
a wider group of stocks to perform better.
Of course, no investment is entirely without risk. There-
fore, we would encourage investors to maintain a long-term
outlook and a broadly diversified portfolio. As this year's
market shifts have shown, it is prudent to spread your as-
sets among a variety of asset classes. The Commerce Funds
offer a variety of investment choices.
Before I conclude, I would like to spend a moment updating
you on our preparations for Y2K. During the last year, we
have taken several initiatives aimed at limiting potential
disruptions related to this issue. These have included ex-
tensive testing of our computer systems, working with our
vendors regarding their readiness, and developing contin-
gency plans should any problems occur. While there can be
no guarantees with an event such as this, we do not antici-
pate that the transition into the year 2000 will have a ma-
terial impact on the Funds.
As always, we appreciate your investment and we look for-
ward to being a part of your investment future for years to
come.
Sincerely,
Gary D. Campbell
Chief Investment Officer
Investment Management Group
Commerce Bank, N.A.
2
<PAGE>
COMMERCE SHORT-TERM GOVERNMENT FUND
Shareholder Letter
Dear Shareholder:
We are pleased to report on the performance of the Commerce Short-Term Gov-
ernment Fund for the year ended October 31, 1999.
Performance Review
For the year ended October 31, 1999, the Institutional
Shares of the Fund had a total return of 1.83%, based on
Net Asset Value (NAV) (assumes fee waivers and expense re-
imbursements). The Service Shares had a total return, with-
out sales charge, of 1.57% for the same period based on NAV
(assumes fee waivers and expense reimbursements). This com-
pared to the Lipper Short-Term Government Funds Index 12-
month return of 2.30% and Salomon Brothers 1-5 Year
Treasury/Government Sponsored Index 12-month return of
2.01%. Past performance is no guarantee of future results.
(The Fund's NAV and yield are not guaranteed by the FDIC or
U.S. government or by its agencies, instrumentalities, or
sponsored enterprises.)
Portfolio Highlights
. This has been a challenging year for the overall fixed-in-
come market. With the ongoing strength of the economy and
signs of a possible increase in inflation, interest rates
have risen throughout 1999. We have seen yields on short-
term securities rise more than their longer-term counter-
parts, which has resulted in a relatively flat yield curve.
. To protect principal in the rising interest rate environ-
ment, we've built up an increasingly large cash position
for the Fund. This strategy has proved to be beneficial,
and we will reinvest these assets when we feel interest
rates have stopped their ascent.
. Looking ahead, we believe the Fund's portfolio is well po-
sitioned relative to its benchmark in terms of yield. And
we feel that the Fund will benefit when mortgage spreads
begin to compress relative to Treasuries.
We thank you for your investment and look forward to your
continued confidence.
Sincerely,
Fixed-Income Funds Team
Investment Management Group
Commerce Bank, N.A.
November 22, 1999
3
<PAGE>
COMMERCE SHORT-TERM GOVERNMENT FUND
Performance Summary (Unaudited)
October 31, 1999
The following graph shows the value, as of October 31, 1999, of a $10,000 in-
vestment made on December 12, 1994 in the Institutional Shares. For compara-
tive purposes, the performance of the Fund's benchmarks (the Salomon Brothers
1-5 Year Treasury/Government Sponsored Index ("Salomon Bros. Treas./Gov't")
and the Lipper Short US Government ("Gov't") Funds Index) are shown. This
performance data represents past performance and should not be considered in-
dicative of future performance which will fluctuate with changes in market
conditions. These performance fluctuations will cause an investor's shares,
when redeemed, to be worth more or less than their original cost. Performance
of the Service Shares will vary from the Institutional Shares due to differ-
ences in fees and loads.
Short-Term Government Fund's-Institutional Shares Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested December 12, 1994 to
October 31, 1999.
[CHART]
Institutional Salomon Brothers Lipper Short US
Shares Treas/Gov't Gov't Funds Index
12/12/94 10,000 10,000 10,000
10/31/95 11,072 11,082 10,930
10/31/96 11,629 11,736 11,520
10/31/97 12,379 12,533 12,248
10/31/98 13,362 13,613 13,090
10/31/99 13,606 13,887 13,391
<TABLE>
<S> <C> <C>
Average Annual Total Return through October 31,
1999 Since Inception One Year
Institutional Shares (commenced December 12,
1994) 6.50% 1.83 %
-----------------------------------------------------------------------------
Service Shares (commenced January 2, 1997)
Excluding sales charges 5.29% 1.57 %
Including sales charges (maximum sales charge
2.00%) 4.55% (0.44)%
-----------------------------------------------------------------------------
</TABLE>
4
<PAGE>
COMMERCE SHORT-TERM GOVERNMENT FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Collateralized Mortgage Obligations - 31.2%
Bear Stearns Mortgage Securities, Inc. Series 1998-1, Class A17
$ 250,000 5.00% 03/25/2028 $ 197,847
Countrywide Home Loans, Inc. Series 1997-4, Class A
354,987 8.00 07/25/2027 358,834
Federal Home Loan Mortgage Corp. REMIC PAC Series 1127, Class F
226,981 8.50 03/15/2006 227,122
Federal Home Loan Mortgage Corp. REMIC PAC Series 1205, Class G
205,654 7.00 03/15/2007 206,232
Federal Home Loan Mortgage Corp. REMIC PAC Series 1407, Class PH
295,043 6.75 05/15/2018 294,674
Federal Home Loan Mortgage Corp. REMIC PAC Series 1526, Class N
708,959 6.50 12/15/2022 707,846
Federal Home Loan Mortgage Corp. REMIC PAC Series 1619, Class EC
256,302 5.60 11/15/2023 253,498
Federal Home Loan Mortgage Corp. REMIC PAC Series 1621, Class K
187,000 6.50 11/15/2023 173,616
Federal Home Loan Mortgage Corp. REMIC PAC Series 1624, Class EA
527,308 5.50 01/15/2007 524,834
Federal Home Loan Mortgage Corp. REMIC PAC Series 2047, Class A
374,970 6.75 05/15/2027 371,336
Federal Home Loan Mortgage Corp. REMIC PAC Series 2103, Class TE
625,000 6.00 12/15/2028 553,125
Federal Home Loan Mortgage Corp. REMIC PAC Series 2109, Class PE
700,000 6.00 12/15/2028 615,776
Federal Home Loan Mortgage Corp. REMIC Series 1574,
Class P
21,790 6.50 07/15/2023 21,735
Federal Home Loan Mortgage Corp. REMIC Series 1617,
Class C
149,000 6.50 02/15/2023 144,017
Federal Home Loan Mortgage Corp. REMIC Series 1632,
Class B
200,000 6.00 11/15/2023 183,686
Federal Home Loan Mortgage Corp. REMIC Series 1727,
Class E
495,528 6.50 04/15/2018 496,147
Federal Home Loan Mortgage Corp. Series 1255, Class G
109,320 7.50 07/15/2021 110,105
Federal Home Loan Mortgage Corp. Series 1650, Class K
880,000 6.50 01/15/2024 822,865
Federal Home Loan Mortgage Corp. Series 1652, Class PJ
500,000 6.60 08/15/2022 497,340
-----------------------------------------------------------------------------
</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
$ 132,078 7.00% 08/25/2021 $ 132,366
Federal National Mortgage Assn. REMIC PAC Series 1993-208, Class L
11,708 6.50 03/25/2023 11,675
Federal National Mortgage Assn. REMIC PAC Series 1993-209, Class E
396,968 5.75 07/25/2005 395,106
Federal National Mortgage Assn. REMIC PAC Series 1994-76, Class E
750,847 5.00 02/25/2022 742,633
Federal National Mortgage Assn. REMIC PAC Series 1996-28, Class PE
281,000 6.50 03/25/2020 280,208
Federal National Mortgage Assn. REMIC PAC Series G92-35, Class D
170,232 4.50 08/25/2021 165,496
Federal National Mortgage Assn. REMIC PAC Series G93-16, Class H
360,000 4.59 04/25/2021 322,535
Federal National Mortgage Assn. REMIC Series 1992-1,
Class E
312,377 7.50 01/25/2007 316,085
Federal National Mortgage Assn. REMIC Series 1993-130, Class H
510,000 6.30 09/25/2018 507,766
Federal National Mortgage Assn. REMIC Series 1993-225, Class NB
527,204 6.50 12/25/2022 524,568
Federal National Mortgage Assn. REMIC Series 1993-225, Class NE
1,750,390 6.50 12/25/2022 1,611,987
Federal National Mortgage Assn. REMIC Series 1993-245, Class N
200,000 6.50 12/25/2023 194,062
Federal National Mortgage Assn. REMIC Series 1994-23,
Class A
36,321 6.00 12/25/2022 36,162
Federal National Mortgage Assn. REMIC Series G94-9,
Class C
81,139 6.25 04/17/2010 80,632
Federal National Mortgage Assn. REMIC Series X-225, Class G
630,334 6.50 11/25/2022 582,726
Federal National Mortgage Assn. REMIC Series X-225, Class NC
3,229,000 6.50 03/25/2023 3,142,204
Federal National Mortgage Assn. Series 1993-109, Class TC
1,516,071 7.00 01/25/2011 1,516,541
Federal National Mortgage Assn. Series 1993-139, Class KB
424,867 7.00 11/25/2000 425,262
--------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
5
<PAGE>
COMMERCE SHORT-TERM GOVERNMENT FUND
Statement of Investments (continued)
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Collateralized Mortgage Obligations - (continued)
Federal National Mortgage Assn. Series 1993-183, Class K
$ 500,000 6.50% 07/25/2023 $ 469,685
Federal National Mortgage Assn. Series 1993-76, Class A
284,299 6.00 06/25/2008 281,900
Federal National Mortgage Assn. Series 1995-19, Class L
173,010 6.25 08/25/2008 163,332
Federal National Mortgage Assn. Series 1997-58, Class G
1,691,129 6.50 03/20/2023 1,684,246
Federal National Mortgage Assn. Series 1998-63, Class PL
530,000 6.00 11/25/2027 474,180
GE Capital Mortgage Services, Inc. REMIC
Series 1997-8, Class A11
1,500,000 7.25 10/25/2027 1,392,810
GE Capital Mortgage Services, Inc. Series 1993-16, Class A4
18,290 6.25 12/25/2023 18,192
GE Capital Mortgage Services, Inc. Series 1997-9, Class 2A7
1,011,361 7.00 10/25/2027 1,011,038
Prudential Home Mortgage Securities Co. REMIC PAC
Series 1993-3, Class A6
3,020,955 7.40 02/25/2008 3,033,220
Prudential Home Mortgage Securities Co. Series 1993-28, Class M
1,199,636 7.38 08/25/2023 1,187,772
Prudential Home Mortgage Securities Co. Series 1993-43, Class A1
83,505 5.40 10/25/2023 83,087
Residential Accredit Loans, Inc. Series 1997-QS7, Class A4
2,000,000 7.50 07/25/2027 1,995,000
Residential Accredit Loans, Inc. Series 1997-QS8, Class A6
1,300,000 7.25 08/25/2027 1,297,153
Residential Accredit Loans, Inc. Series 1997-QS12, Class A3
622,773 7.00 11/25/2027 620,631
Residential Accredit Loans, Inc. Series 1999-QS2, Class A5
1,000,000 6.50 02/25/2029 866,250
Residential Asset Securitization Trust Series 1997-A7, Class A5
1,865,300 7.50 09/25/2027 1,873,451
Residential Funding Mortgage Securities Series 1993-S49, Class A2
332,737 6.00 12/25/2008 330,448
Residential Funding Mortgage Securities I, Inc. REMIC
Series 1995-S12, Class A2
912,644 7.25 08/25/2010 908,364
Residential Funding Mortgage Securities I, Inc. REMIC
Series 1997-S3, Class A3
250,000 7.30 03/25/2007 250,635
Saxon Mortgage Securities Corp. REMIC
Series 1993-8A, Class 1A5
500,000 7.38 09/25/2023 483,395
Securitized Asset Sales, Inc. Series 1993-7, Class TA6
470,000 6.25 12/25/2023 440,329
-----------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE
OBLIGATIONS
(cost $37,323,330) $ 36,613,767
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Mortgage-Backed Pass-Through Obligations - 5.0%
Federal Home Loan Mortgage Corporation (FHLMC)
$ 11,545 8.75% 02/01/2001 $ 11,624
17,013 8.75 04/01/2001 17,682
105,189 8.25 08/01/2001 105,090
74,807 7.75 09/01/2007 75,138
Federal National Mortgage Association (FNMA)
260,463 8.00 12/01/2007 266,365
264,770 6.50 02/01/2012 260,280
115,967 9.00 07/01/2024 121,921
861,533 7.50 10/01/2027 863,411
994,312 7.00 04/01/2028 976,285
1,105,155 7.00 05/01/2028 1,085,119
928,908 5.82 12/01/2028 898,143
646,919 7.00 12/01/2028 635,190
Government National Mortgage Association (GNMA)
200,660 8.00 10/15/2016 206,477
291,453 8.00 07/15/2017 299,739
-----------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED PASS-THROUGH
OBLIGATIONS
(cost $5,941,966) $ 5,822,464
-----------------------------------------------------------------------------------------------
U.S. Government Agency Obligations - 60.2%
Detroit MI U.S. Government Guarantee Note Series A
$ 100,000 6.44% 08/01/2002 $ 100,028
Federal Agricultural Mortgage Corporation
500,000 6.69 02/10/2000 501,334
Federal Farm Credit Bank
1,000,000 7.17 04/03/2000 1,005,160
1,000,000 6.10 11/19/2001 996,560
Federal Home Loan Bank
2,000,000 6.32 02/01/2000 2,001,560
530,000 7.13 03/27/2000 532,486
3,000,000 5.63 03/19/2001 2,982,660
1,250,000 7.44 08/10/2001 1,274,800
3,000,000 5.88 08/15/2001 2,985,930
1,000,000 6.53 08/28/2001 1,004,840
1,750,000 6.63 08/28/2001 1,763,752
965,000 7.56 02/27/2002 990,929
4,000,000 7.17 07/22/2002 4,080,640
2,000,000 5.13 09/15/2003 1,915,320
1,630,000 6.89 04/06/2004 1,651,141
1,700,000 5.43 09/24/2008 1,541,424
Federal Home Loan Mortgage Corporation
7,000,000 5.61 01/10/2000 6,925,003
6,000,000 5.65 01/19/2000 5,927,188
4,000,000 5.59 01/27/2000 3,947,317
500,000 7.90 01/27/2000 502,265
1,000,000 6.52 08/25/2000 1,003,590
500,000 6.70 07/25/2001 503,750
2,000,000 5.00 01/15/2004 1,893,440
200,000 5.75 04/15/2008 187,532
1,000,000 5.75 03/15/2009 930,620
Federal National Mortgage Association
2,220,000 5.19 11/02/1999 2,219,681
750,000 8.35 11/10/1999 750,465
-----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
6
<PAGE>
COMMERCE SHORT-TERM GOVERNMENT FUND
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
U.S. Government Agency Obligations - (continued)
Federal National Mortgage Association - (continued)
$5,000,000 5.68% 02/07/2000 $ 4,924,186
1,000,000 9.20 09/11/2000 1,026,090
3,500,000 5.72 01/09/2001 3,480,855
250,000 6.18 03/15/2001 249,922
500,000 6.63 04/18/2001 502,890
700,000 6.38 08/14/2001 701,638
500,000 7.50 02/11/2002 512,580
3,300,000 5.75 04/15/2003 3,241,227
330,000 6.05 05/29/2003 322,628
625,000 7.40 07/01/2004 646,681
215,000 7.88 02/24/2005 226,926
500,000 7.65 03/10/2005 522,970
Israel Aid Series 5A
2,000,000 7.75 11/15/1999 2,001,680
Student Loan Marketing Association
180,000 6.05 09/14/2000 180,000
Tennessee Valley Authority 1989 Series D
575,000 6.00 11/01/2000 574,011
U.S. Department of Housing & Urban Development Section 108 Series 1995-A
1,250,000 8.15 08/01/2000 1,267,725
-----------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY
OBLIGATIONS
(cost $71,756,880) $ 70,501,424
-----------------------------------------------------------------------------------------------
U.S. Treasury Obligation - 0.5%
United States Treasury Note
$ 600,000 5.75% 08/15/2003 $ 595,500
-----------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATION
(cost $612,516) $ 595,500
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Repurchase Agreement - 2.5%
State Street Bank & Trust Co.
$2,994,000 5.07% 11/01/1999 $ 2,994,000
-----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(cost $2,994,000) $ 2,994,000
-----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(cost $118,628,692) $116,527,155
-----------------------------------------------------------------------------------------------
</TABLE>
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
------------------------------------------------------------------------------
Investment Abbreviations:
PAC --Planned Amortization Class
REMIC --Real Estate Mortgage Investment Conduit
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
7
<PAGE>
COMMERCE BOND FUND
Shareholder Letter
Dear Shareholder:
We are pleased to report on the performance of the Commerce Bond Fund for the
year ended October 31, 1999.
Performance Review
For the year ended October 31, 1999, the Institutional
Shares of the Fund had a total return of 0.59%, based on
Net Asset Value (NAV). The Service Shares had a total re-
turn, without sales charge, of 0.29% for the same period
based on NAV. This compared to the Lipper Intermediate In-
vestment Grade Debt Funds Index 12-month return of 0.08%
and the Lehman Aggregate Bond Index 12-month return of
0.54%. Past performance is no guarantee of future results.
(The Fund's NAV and yield are not guaranteed by the FDIC or
U.S. government or by its agencies, instrumentalities, or
sponsored enterprises.)
Portfolio Highlights
. In general, it has been a difficult year for the bond mar-
ket. Bond yields have increased dramatically during 1999,
largely in response to the robust economy and fears of ris-
ing inflation. Of particular note, auto and housing sales
have been very strong, and export growth has rebounded af-
ter the fallout from last year's Asian currency crisis.
. Against this backdrop, the Federal Reserve Board raised
overnight interest rates three times this year, and the
yield on the 30-year Treasury has risen from 5.10% to
6.16%. This has caused the 30-year bond to experience a net
price decline of roughly 9.5% through the end of October.
. The Fund's returns over the last year have been roughly in
line with those of its benchmarks. Earlier in the year, the
Fund posted relatively strong results, as its portfolio was
well positioned to take advantage of the rally that took
place in the non-Treasury market. However, credit spreads
began to widen during the summer -- hampering Fund perfor-
mance. The reversal in spreads can be partially attributed
to the expected increase in fixed-income issuance before
year-end, as well as liquidity concerns surrounding Y2K. As
a result, mortgages and corporate bonds underperformed an
already weak Treasury market. However, based on their cur-
rent levels, we believe many corporate and asset-backed
bonds present compelling values. As a result, we remain
overweighted in these sectors.
We thank you for your investment and look forward to your
continued confidence.
Sincerely,
Fixed-Income Funds Team
Investment Management Group
Commerce Bank, N.A.
November 22, 1999
8
<PAGE>
COMMERCE BOND FUND
Performance Summary (Unaudited)
October 31, 1999
The following graph shows the value, as of October 31, 1999, of a $10,000 in-
vestment made on December 12, 1994 in the Institutional Shares. For compara-
tive purposes, the performance of the Fund's benchmarks (the Lehman Brothers
Aggregate Bond Index ("Lehman Agg Bond Index") and the Lipper Intermediate
Investment Grade Debt Funds Index ("Lipper Interm Debt Funds Index")) are
shown. This performance data represents past performance and should not be
considered indicative of future performance which will fluctuate with changes
in market conditions. These performance fluctuations will cause an investor's
shares, when redeemed, to be worth more or less than their original cost.
Performance of the Service Shares will vary from the Institutional Shares due
to differences in fees and loads.
Bond Fund's-Institutional Shares Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested December 12, 1994 to
October 31, 1999.
[CHART]
Institutional Lehman Agg Lipper Interm
Shares Bond Index Debt Funds Index
12/12/94 10,000 10,000 10,000
10/31/95 11,559 11,542 11,402
10/31/96 12,106 12,216 12,030
10/31/97 13,135 13,302 13,038
10/31/98 14,221 14,544 14,078
10/31/99 14,305 14,623 14,089
<TABLE>
<S> <C> <C>
Average Annual Total Return through October 31,
1999 Since Inception One Year
Institutional Shares (commenced December 12,
1994) 7.60% 0.59%
-----------------------------------------------------------------------------
Service Shares (commenced January 2, 1997)
Excluding sales charges 5.54% 0.29%
Including sales charges (maximum sales charge
3.50%) 4.21% (3.22)%
-----------------------------------------------------------------------------
</TABLE>
9
<PAGE>
COMMERCE BOND FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Asset-Backed Securities - 30.1%
Auto - 0.5%
Fifth Third Bank Auto Grantor Trust Series 1996-A, Class A
$ 767,004 6.20% 09/15/2001 $ 766,521
NationsBank Auto Owner Trust Series 1996-A, Class A4
1,035,158 6.63 12/15/2000 1,035,479
------------
1,802,000
-----------------------------------------------------------------------------------------------
Commercial - 1.5%
Asset Securitization Corp. Series 1997-MD7, Class A2 #
1,250,000 7.48 01/13/2030 1,261,787
Commercial Mortgage Asset Trust Series 1999-C1, Class B
2,250,000 7.23 07/17/2013 2,152,890
First Union-Lehman Brothers-Bank of America Series 1998-C2, Class B
2,500,000 6.64 03/18/2011 2,317,350
------------
5,732,027
-----------------------------------------------------------------------------------------------
Credit Card - 9.9%
American Express Credit Account Master Trust Series 1994-3, Class A
2,000,000 7.85 08/15/2005 2,072,500
American Express Credit Account Master Trust Series 1996-1, Class B
2,000,000 6.95 12/15/2003 2,006,240
Chemical Master Credit Card Trust I Series 1995-3, Class A
2,000,000 6.23 04/15/2005 1,986,240
Chemical Master Credit Card Trust I Series 1996-1, Class B
1,000,000 5.71 09/15/2003 988,120
Chemical Master Credit Card Trust I Series 1996-2, Class A
2,500,000 5.98 09/15/2008 2,373,425
Chemical Master Credit Card Trust I Series 1996-2, Class B
2,500,000 6.16 09/15/2008 2,359,375
Citibank Credit Card Master Trust I Series 1997-6, Class B @
2,000,000 7.26 08/15/2006 1,427,500
Discover Card Master Trust I Series 1993-3, Class A
2,000,000 6.20 05/16/2006 1,957,500
First USA Credit Card Master Trust Series 1997-6, Class B
2,200,000 6.58 03/17/2005 2,194,698
First USA Credit Card Master Trust Series 1998-2, Class C+
3,000,000 6.80 02/18/2011 2,812,031
First USA Credit Card Master Trust Series 1999-1, Class C+
3,500,000 6.42 10/19/2006 3,352,344
MBNA Master Credit Card Trust Series 1995-C, Class A
2,000,000 6.45 02/15/2008 1,971,240
MBNA Master Credit Card Trust Series 1999-D, Class C+
2,000,000 6.95 11/17/2008 1,921,250
Metris Master Trust Series 1997-1, Class A
2,500,000 6.87 10/20/2005 2,500,000
Metris Master Trust Series 1997-1, Class B
1,000,000 7.11 10/20/2005 998,750
Standard Credit Card Master Trust Series 1993-2, Class A
2,000,000 5.95 10/07/2004 1,943,452
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Asset-Backed Securities - (continued)
Credit Card - (continued)
Standard Credit Card Master Trust Series 1995-1, Class A
$2,000,000 8.25% 01/07/2007 $ 2,114,563
Standard Credit Card Master Trust Series 1995-1, Class B
2,000,000 8.45 01/07/2007 2,102,448
------------
37,081,676
-----------------------------------------------------------------------------------------------
Equipment - 0.1%
Green Tree Recreational, Equipment & Consumer Trust Series 1996-A, Class
A1
371,691 5.55 02/15/2018 363,934
-----------------------------------------------------------------------------------------------
Home Equity - 6.4%
Access Financial Mortgage Loan Trust Series 1996-2, Class A4
1,500,000 7.63 09/18/2021 1,514,700
Advanta Mortgage Loan Trust Series 1994-4, Class A2
2,605,176 8.92 01/25/2026 2,784,947
American Business Financial Services, Inc. Series 1996-1, Class A
3,357,990 7.95 09/15/2026 3,352,743
Contimortgage Home Equity Loan Trust Series 1999-3, Class A6
2,500,000 7.68 12/25/2029 2,435,925
Corestates Home Equity Trust Series 1993-2, Class A
200,017 5.10 03/15/2009 198,455
GE Capital Mortgage Services, Inc. Series 1997-HE1, Class B1
1,181,114 7.50 03/25/2007 1,105,747
GE Capital Mortgage Services, Inc. Series 1997-HE1, Class M
1,889,782 7.50 03/25/2027 1,839,585
GE Capital Mortgage Services, Inc. Series 1997-HE4, Class B1
3,862,297 7.33 12/25/2028 3,566,589
GE Capital Mortgage Services, Inc. Series 1997-HE4, Class M
1,931,148 7.14 12/25/2028 1,841,350
Merrill Lynch Mortgage Investors, Inc. Series 1991-H1, Class M1
2,000,000 7.36 11/20/2029 1,914,360
Merrill Lynch Mortgage Investors, Inc. Series 1999-H1, Class A3
3,500,000 6.76 09/20/2026 3,401,545
------------
23,955,946
-----------------------------------------------------------------------------------------------
Manufactured Housing - 11.4%
Associates Manufactured Housing Pass-Through Series 1996-1, Class A5
5,000,000 7.60 03/15/2027 4,988,050
Green Tree Financial Corp. Series 1993-4, Class A4
2,000,000 6.60 01/15/2019 1,992,760
Green Tree Financial Corp. Series 1993-4, Class A5
4,000,000 7.05 01/15/2019 3,894,400
Green Tree Financial Corp. Series 1994-2, Class A4
4,000,000 7.90 05/15/2019 4,081,560
Green Tree Financial Corp. Series 1995-1, Class B1
200,000 9.00 06/15/2025 205,210
Green Tree Financial Corp. Series 1995-5, Class B1
2,000,000 7.30 09/15/2026 1,932,360
-----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
10
<PAGE>
COMMERCE BOND FUND
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Asset-Backed Securities - (continued)
Manufactured Housing - (continued)
Green Tree Financial Corp. Series 1995-8, Class B1
$ 200,000 7.30% 12/15/2026 $ 198,288
Green Tree Financial Corp. Series 1996-3, Class A4
1,000,000 7.10 05/15/2027 1,006,030
Green Tree Financial Corp. Series 1996-4, Class A7
4,000,000 7.90 06/15/2027 3,987,160
Green Tree Financial Corp. Series 1996-8, Class M1
2,000,000 7.85 10/15/2027 1,984,660
Green Tree Financial Corp. Series 1997-3, Class B1
1,500,000 7.51 07/15/2028 1,387,605
Green Tree Financial Corp. Series 1997-3, Class M1
3,250,000 7.53 07/15/2028 3,210,090
Green Tree Financial Corp. Series 1997-6, Class M1
2,500,000 7.21 06/15/2027 2,318,750
Green Tree Financial Corp. Series 1998-3, Class A6
800,000 6.76 03/01/2030 744,496
Green Tree Financial Corp. Series 1999-1, Class M1
1,750,000 6.56 11/01/2028 1,564,605
Green Tree Financial Corp. Series 1999-1, Class M2
750,000 7.34 11/01/2028 667,500
Green Tree Home Improvement Loan Trust Series 1997-E, Class HEM1
2,500,000 7.28 01/15/2029 2,441,400
Indymac Manufactured Housing Contract (Credit Suisse First Boston) Series
1997-1, Class A3
2,767,861 6.61 02/25/2028 2,746,576
Indymac Manufactured Housing Contract (Credit Suisse First Boston) Series
1997-1, Class M
2,000,000 7.11 02/25/2028 1,875,380
Oakwood Mortgage Investors, Inc. Series 1997-A, Class A5
1,500,000 7.13 05/15/2027 1,482,810
------------
42,709,690
-----------------------------------------------------------------------------------------------
Utilities - 0.3%
California Infrastructure PG&E-1 (Pacific Gas and Electric) Series 1997-
1, Class A6
1,250,000 6.32 09/25/2005 1,238,225
-----------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(cost $115,390,240) $112,883,498
-----------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations - 9.5%
Asset Securitization Corp. Series 1995-MD4, Class A1
$5,094,852 7.10% 08/13/2029 $ 5,074,116
Asset Securitization Corp. Series 1997-D4, Class A1E
2,500,000 7.53 04/14/2029 2,510,700
Bear Stearns Mortgage Securities, Inc. Series 1998-1, Class A17
1,000,000 5.00 03/25/2028 791,389
Countrywide Mortgage Backed Securities, Inc. REMIC PAC Series 1993-B,
Class A5
1,239,768 6.75 11/25/2023 1,190,177
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Collateralized Mortgage Obligations - (continued)
Federal Home Loan Mortgage Corp. REMIC PAC Series 1579, Class PM
$1,235,000 6.70% 09/15/2023 $ 1,174,016
Federal Home Loan Mortgage Corp. Series 1652, Class PJ
3,000,000 6.60 08/15/2022 2,984,040
Federal National Mortgage Assn. REMIC Series 1992-1,
Class E
1,561,887 7.50 01/25/2007 1,580,427
Federal National Mortgage Assn. REMIC Series 1993-130, Class H
1,500,000 6.30 09/25/2018 1,493,430
LB Commercial Conduit Mortgage Trust Series 1998-C4,
Class A1B
4,500,000 6.21 10/15/2008 4,218,255
Mortgage Capital Funding, Inc. Series 1996-MC1, Class A2A
2,665,781 7.35 07/15/2005 2,701,555
Norwest Asset Securities Corp. Series 1998-21, Class B1
1,239,178 6.50 09/25/2013 1,176,550
PNC Mortgage Securities Corp. REMIC Series 1996-1,
Class A10
1,656,157 7.50 09/25/2009 1,654,086
Prudential Home Mortgage Securities Co. Series 1993-28, Class M
2,399,272 7.38 08/25/2023 2,375,543
Residential Asset Securitization REMIC Trust Series 1997-A1, Class A7
3,000,000 7.38 03/25/2027 2,937,090
Residential Funding Mortgage Securities Corp. Series 1999-S20, Class A1
3,960,165 6.50 09/25/2014 3,843,835
-----------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(cost $36,807,501) $ 35,705,209
-----------------------------------------------------------------------------------------------
Corporate Obligations - 31.5%
Energy - 0.8%
Phillips Petroleum Co.
$3,000,000 7.00% 03/30/2029 $ 2,770,020
-----------------------------------------------------------------------------------------------
Financial - 18.9%
Allstate Corp.
814,000 6.75 05/15/2018 726,308
American Express Credit Corp.
2,000,000 6.13 11/15/2001 1,984,980
American Financial Group, Inc.
1,500,000 7.13 04/15/2009 1,366,140
Apache Finance Property Ltd.
2,250,000 7.00 03/15/2009 2,181,645
Associates Corp. N.A.
1,900,000 6.95 11/01/2018 1,804,221
Bank of America Corp.
3,500,000 6.88 06/01/2003 3,489,185
Case Corp.
2,500,000 6.25 12/01/2003 2,428,242
-----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
COMMERCE BOND FUND
Statement of Investments (continued)
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Corporate Obligations - (continued)
Financial - (continued)
Chemical Bank
$2,000,000 6.70% 08/15/2008 $ 1,927,200
Donaldson Lufkin & Jenrette, Inc.
1,250,000 6.00 12/01/2001 1,228,863
EOP Operating LP
3,200,000 7.25 02/15/2018 2,854,656
Equitable Life Assurance Society of the United States+
6,000,000 7.70 12/01/2015 5,993,400
Fleet Boston Corp.
1,775,000 6.38 04/15/2008 1,668,695
Ford Motor Company Credit Corp.
2,000,000 6.63 06/30/2003 1,985,620
General Motors Acceptance Corp.
2,000,000 5.88 01/22/2003 1,945,680
2,000,000 6.63 10/15/2005 1,941,904
Hanson Overseas BV
2,000,000 6.75 09/15/2005 1,950,680
Household Financial Corp.
1,500,000 6.50 11/15/2008 1,414,965
Merrill Lynch & Co., Inc.
1,900,000 5.71 01/15/2002 1,866,446
Metropolitan Life Insurance Co.+
4,000,000 7.70 11/01/2015 3,981,840
Morgan Stanley Group, Inc.
2,000,000 6.75 03/04/2003 1,992,800
NationsBank Corp.
1,000,000 7.75 08/15/2015 1,014,770
1,000,000 7.80 09/15/2016 1,020,040
PNC Bank, N.A.
2,000,000 7.88 04/15/2005 2,064,240
Salomon Smith Barney, Inc.
8,500,000 6.63 06/01/2000 8,520,400
Sanwa Finance Aruba AEC
3,000,000 8.35 07/15/2009 3,034,770
Simon Debartolo Group LP
2,000,000 6.75 06/15/2005 1,872,540
Swiss Bank Corp.
4,000,000 7.38 06/15/2017 3,905,880
5,000,000 7.50 07/15/2025 4,884,020
------------
71,050,130
-----------------------------------------------------------------------------------------------
Industrial - 9.7%
Conoco, Inc.
1,500,000 6.35 04/15/2009 1,425,630
2,500,000 6.95 04/15/2029 2,326,150
Ford Motor Co.
5,000,000 6.50 08/01/2018 4,489,050
General Motors Acceptance Corp.
2,000,000 6.15 04/05/2007 1,867,920
Lafarge Corp.
3,500,000 6.88 07/15/2013 3,299,317
Receipts on Corporate Securities Trust CHR-1998-1
5,054,984 6.50 08/01/2018 4,706,094
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Corporate Obligations - (continued)
Industrial - (continued)
Receipts on Corporate Securities Trust NSC-1998-1
$4,075,196 6.38% 05/15/2017 $ 3,704,655
Ryder System, Inc.
4,000,000 6.60 11/15/2005 3,736,160
Service Master Co.
3,000,000 7.10 03/01/2018 2,547,360
St. Paul Companies, Inc.
4,000,000 6.38 12/15/2008 3,791,776
TRW, Inc.
2,500,000 6.05 01/15/2005 2,340,825
Union Oil Co.
1,000,000 7.62 03/21/2002 1,017,150
1,000,000 7.70 04/05/2002 1,019,010
------------
36,271,097
-----------------------------------------------------------------------------------------------
Utilities - 2.1%
AT&T Corp.
1,500,000 6.50 03/15/2029 1,326,900
GTE Corp.
6,000,000 6.84 04/15/2018 5,656,020
Hydro Quebec
1,000,000 7.96 12/17/2001 1,023,237
------------
8,006,157
-----------------------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(cost $123,512,009) $118,097,404
-----------------------------------------------------------------------------------------------
Mortgage-Backed Pass-Through Obligations - 16.1%
Federal Home Loan Mortgage Corporation (FHLMC)
$1,389,242 6.00% 12/01/2013 $ 1,317,626
1,072,047 8.50 02/01/2019 1,114,253
1,149,183 8.50 03/01/2021 1,194,611
8,410,789 7.00 05/01/2026 8,274,114
Federal National Mortgage Association (FNMA)
3,045,751 5.50 01/01/2009 2,920,174
2,023,528 7.00 07/01/2009 2,022,253
529,541 6.50 02/01/2012 520,560
1,341,645 6.00 12/01/2013 1,272,040
1,088,243 6.50 07/01/2014 1,055,595
867,088 9.00 11/01/2021 908,813
1,047,733 6.50 04/01/2024 1,012,697
964,170 6.00 05/01/2024 908,431
1,041,362 6.50 05/01/2024 1,006,539
1,126,681 6.50 07/01/2024 1,089,005
1,227,076 6.50 07/01/2024 1,186,042
691,359 6.00 09/01/2024 651,392
1,592,189 6.50 09/01/2024 1,538,946
402,037 9.00 02/01/2025 421,636
2,499,660 6.50 03/01/2026 2,408,248
1,892,882 8.00 07/01/2028 1,932,519
1,358,226 7.00 08/01/2028 1,333,601
1,193,464 7.00 09/01/2028 1,171,827
1,854,460 7.00 10/01/2028 1,820,839
3,924,637 5.82 12/01/2028 3,794,653
3,803,466 6.50 12/01/2028 3,644,176
-----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
12
<PAGE>
COMMERCE BOND FUND
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Mortgage-Backed Pass-Through Obligations - (continued)
Federal National Mortgage Association - (continued)
$ 1,068,445 7.00% 12/01/2028 $ 1,049,074
2,336,853 6.50 01/01/2029 2,238,985
Government National Mortgage Association (GNMA)
2,356,731 8.00 02/15/2022 2,412,680
3,238,465 7.00 09/15/2023 3,197,984
1,053,017 7.50 08/20/2025 1,051,701
5,887,231 7.50 07/20/2026 5,879,872
------------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED PASS-THROUGH OBLIGATIONS
(cost $60,324,911) $ 60,350,886
------------------------------------------------------------------------------------------------
U.S. Government Agency Obligations - 2.6%
Federal Home Loan Bank
$ 1,000,000 6.32% 02/01/2000 $ 1,000,780
Federal Home Loan Mortgage Corporation
1,000,000 6.20 04/15/2003 993,750
Federal National Mortgage Association
8,000,000 5.75 04/15/2003 7,857,520
------------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(cost $9,907,134) $ 9,852,050
------------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 6.8%
United States Treasury Bond
$15,000,000 7.88% 02/15/2021 $ 17,348,400
United States Treasury Notes
151,000 7.25 08/15/2004 158,526
8,000,000 6.50 10/15/2006 8,141,280
------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(cost $26,688,770) $ 25,648,206
------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Commercial Paper - 2.4%
Georgia Power Co.
$ 6,000,000 5.85% 02/01/2000 $ 5,912,447
The Bank of New York Co., Inc.
3,000,000 5.90 02/24/2000 2,944,896
------------------------------------------------------------------------------------------------
TOTAL COMMERCIAL PAPER
(cost $8,857,343) $ 8,857,343
------------------------------------------------------------------------------------------------
Repurchase Agreement - 0.3%
State Street Bank & Trust Co.
$ 1,096,000 5.07% 11/01/1999 $ 1,096,000
------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(cost $1,096,000) $ 1,096,000
------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(cost $382,583,908) $372,490,596
------------------------------------------------------------------------------------------------
</TABLE>
# Variable rate security. Coupon rate disclosed is that which is in effect at
October 31, 1999.
@ This security is issued with a zero-coupon. The interest rate disclosed for
this security represents effective yield to maturity.
+ 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.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
13
<PAGE>
COMMERCE BALANCED FUND
Shareholder Letter
Dear Shareholder:
We are pleased to report on the performance of the Commerce Balanced Fund for
the year ended October 31, 1999.
Performance Review
For the year ended October 31, 1999, the Institutional
Shares of the Fund had a total return of 7.60%, based on
Net Asset Value (NAV) (assumes fee waivers). The Service
Shares had a total return, without sales charge, of 7.38%
for the same period based on NAV (assumes fee waivers).
This compared to the Lipper Balanced Funds Index 12-month
return of 12.57%, the composite of 60% of the Standard and
Poor's 500 Index with Income and 40% of the Lehman Brothers
Aggregate Bond Index 12-month return of 15.19%, the S&P 500
Stock Index 12-month return of 25.66% and the Lehman Broth-
ers Aggregate Bond Index 12-month return of 0.54%. Past
performance is no guarantee of future results. (The Fund's
NAV is not guaranteed by the FDIC or U.S. government or by
its agencies, instrumentalities, or sponsored enterprises.)
Portfolio Highlights
. Since April, we have been cautious on the prospects for
the overall market. With high valuation levels and rising
interest rates we believed the market had little upside po-
tential. The indicators we use to measure the future re-
turns of stocks versus bonds pointed in favor of bonds on a
risk/reward basis. Therefore, from April until mid-October
the equity portion of the Fund's portfolio fell as low as
41% -- well below our 60% long-term target.
. Unfortunately, the Fund's overweight position in bonds
produced mixed results. Earlier in the year, the Fund's
bond holdings posted relatively strong results, as we were
well positioned to take advantage of the rally that took
place in the non-Treasury market. However, as credit
spreads began to widen during the summer, the Fund's per-
formance suffered. The reversal in spreads can be partially
attributed to the expected increase in fixed-income issu-
ance before year-end, as well as liquidity concerns sur-
rounding Y2K.
. Another deterrent to the Fund's performance was the indi-
vidual performance of some stocks in the portfolio. As a
whole, value issues performed poorly during the last six
months, and roughly 40% of the Fund's equity allocation was
concentrated in these securities. The Fund's underweight
position in a strong performing technology sector was also
a drag on returns. We have recently increased the Fund's
exposure in technology to bring it in line with the index
weighting.
. By mid-October our indicators had an improved outlook for
stocks, and we have since increased our equity exposure to
50%. Looking forward in the bond market, we believe many
corporate and asset-backed bonds now present compelling
values. As a result, we remain overweighted in these sec-
tors.
We thank you for your investment and look forward to your
continued confidence.
Sincerely,
Balanced Fund Team
Investment Management Group
Commerce Bank, N.A.
November 22, 1999
14
<PAGE>
COMMERCE BALANCED FUND
Performance Summary (Unaudited)
October 31, 1999
The following graph shows the value, as of October 31, 1999, of a $10,000 in-
vestment made on December 12, 1994 in the Institutional Shares. For compara-
tive purposes, the performance of the Fund's benchmarks (the composite of the
Standard & Poor's 500 Index with Income ("S&P 500") (weighted at 60%) and the
Lehman Brothers Aggregate Bond Index (weighted at 40%) ("Combined S&P 500 and
Lehman Bond Index") and the Lipper Balanced Funds Index) are shown. This per-
formance data represents past performance and should not be considered indic-
ative of future performance which will fluctuate with changes in market
conditions. These performance fluctuations will cause an investor's shares,
when redeemed, to be worth more or less than their original cost. Performance
of the Service Shares will vary from the Institutional Shares due to differ-
ences in fees and loads.
Balanced Fund's-Institutional Shares Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested December 12, 1994 to
October 31, 1999.
[CHART]
Institutional Combined S&P 500 Lipper Balanced
Shares and Lehman Bond Index Funds Index
12/12/94 10,000 10,000 10,000
10/31/95 12,614 12,577 12,139
10/31/96 14,442 14,658 13,900
10/31/97 17,319 17,971 16,717
10/31/98 18,822 21,107 18,510
10/31/99 20,252 24,314 20,837
<TABLE>
<S> <C> <C>
Average Annual Total Return through October 31,
1999 Since Inception One Year
Institutional Shares (commenced December 12,
1994) 15.52% 7.60%
---------------------------------------------------------------------------
Service Shares (commenced January 2, 1997)
Excluding sales charges 11.36% 7.38%
Including sales charges (maximum sales charge
3.50%) 9.97% 3.62%
---------------------------------------------------------------------------
</TABLE>
15
<PAGE>
COMMERCE BALANCED FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - 48.9%
Commercial Services - 1.5%
15,000 Dendrite International, Inc. * $ 470,625
3,000 Maximus, Inc. * 69,563
9,600 Omnicom Group, Inc. 844,800
7,100 Paychex, Inc. 279,562
2,000 WPP Group PLC ADR 219,750
------------
1,884,300
-------------------------------------------------------------
Consumer Durables - 3.6%
34,450 D.R. Horton, Inc. 406,941
3,000 Electronic Arts, Inc. * 242,438
22,500 Ethan Allen Interiors, Inc. 800,156
28,500 Ford Motor Co. 1,563,937
9,000 Furniture Brands International, Inc. * 174,375
38,000 Leggett & Platt, Inc. 843,125
12,000 Maytag Corp. 480,750
------------
4,511,722
-------------------------------------------------------------
Consumer Non-Durables - 1.5%
4,500 Anheuser-Busch Cos., Inc. 323,156
20,000 Jones Apparel Group, Inc. * 632,500
10,000 The Clorox Co. 409,375
18,700 Tommy Hilfiger Corp. * 528,275
------------
1,893,306
-------------------------------------------------------------
Electronic Technology - 8.1%
6,000 Altera Corp. * 291,750
5,000 Black Box Corp. * 253,750
9,800 Cisco Systems, Inc. * 725,200
3,500 Comverse Technology, Inc. * 397,250
12,500 Electronics for Imaging, Inc. * 503,906
13,000 EMC Corp. * 949,000
11,500 General Dynamics Corp. 637,531
8,600 International Business Machines Corp. 846,025
7,000 Jabil Circuit, Inc. * 365,750
10,000 Linear Technology Corp. 699,375
7,000 Litton Industries, Inc. * 328,562
4,000 LSI Logic Corp. * 210,606
6,500 Motorola, Inc. 633,344
5,000 MTI Technology Corp. * 84,688
1,500 Nokia OYJ ADR 173,344
17,500 PerkinElmer, Inc. 714,219
1,000 QLogic Corp. * 104,125
3,000 Sanmina Corp. * 270,187
1,500 Sun Microsystems, Inc. * 158,719
9,600 Symbol Technologies, Inc. 381,600
13,200 Tellabs, Inc. * 834,900
8,000 United Technologies Corp. 484,000
6,000 Vitesse Semiconductor Corp. * 275,250
------------
10,323,081
-------------------------------------------------------------
Energy Minerals - 2.8%
8,000 Chevron Corp. 730,500
15,000 Conoco, Inc. 411,563
15,000 Exxon Corp. 1,110,937
10,500 Royal Dutch Petroleum Co. ADR 629,344
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Energy Minerals - (continued)
10,000 Texaco, Inc. $ 613,750
------------
3,496,094
------------------------------------------------------------------
Finance - 7.9%
18,000 Ace Ltd. 349,875
14,000 Ambac Financial Group, Inc. 836,500
5,500 American International Group, Inc. 566,156
12,000 Aon Corp. 426,000
9,000 Bank of America Corp. 579,375
2,000 Capital One Financial Corp. 106,000
13,500 Citigroup, Inc. 730,687
8,000 Comerica, Inc. 475,500
5,000 DST Systems, Inc. * 318,438
6,900 Federal National Mortgage Association 488,175
12,000 Financial Security Assurance Holdings Ltd. 676,500
7,600 Franklin Resources, Inc. 266,000
10,000 Lincoln National Corp. 461,250
10,200 Morgan Stanley Dean Witter & Co. 1,125,187
4,000 National Commerce Bancorp. 100,000
10,400 Northern Trust Corp. 1,004,250
6,000 Protective Life Corp. 217,125
10,000 The Bank of New York Co., Inc. 418,750
3,200 The Chase Manhattan Corp. 279,600
11,500 Wells Fargo Co. 550,563
------------
9,975,931
------------------------------------------------------------------
Health Services - 0.7%
30,400 Lincare Holdings, Inc. * 855,000
------------------------------------------------------------------
Health Technology - 3.7%
11,300 Abbott Laboratories 456,237
2,000 Allergan, Inc. 214,750
2,000 ArthroCare Corp. * 145,000
4,000 Biogen, Inc. * 296,500
13,500 Biomet, Inc. 406,688
5,000 Guidant Corp. 246,875
6,600 Johnson & Johnson 691,350
14,200 Medtronic, Inc. 491,675
8,000 Pharmacia & Upjohn, Inc. 431,500
24,000 Schering-Plough Corp. 1,188,000
5,000 Techne Corp. * 196,875
------------
4,765,450
------------------------------------------------------------------
Industrial Services - 1.1%
33,675 Helmerich & Payne, Inc. 801,886
22,000 Transocean Offshore, Inc. 598,125
------------
1,400,011
------------------------------------------------------------------
Non-Energy Minerals - 1.0%
30,000 AK Steel Holding Corp. 519,375
8,995 Louisiana-Pacific Corp. 114,124
25,000 USX-U.S. Steel Group, Inc. 639,062
------------
1,272,561
------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
16
<PAGE>
COMMERCE BALANCED FUND
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Process Industries - 3.0%
10,000 Air Products & Chemicals, Inc. $ 275,000
12,000 Boise Cascade Corp. 427,500
6,000 E.I. du Pont de Nemours & Co. 386,625
10,800 General Electric Co. 1,464,075
13,000 International Paper Co. 684,125
4,000 Tyco International Ltd. 159,750
10,000 Willamette Industries, Inc. 415,625
-----------
3,812,700
------------------------------------------------------------
Producer Manufacturing - 2.3%
10,700 Danaher Corp. 516,944
18,000 Herman Miller, Inc. 390,375
12,000 Illinois Tool Works, Inc. 879,000
9,000 Ingersoll-Rand Co. 470,250
4,000 Johnson Controls, Inc. 243,000
6,000 Lexmark International Group, Inc. * 468,375
-----------
2,967,944
------------------------------------------------------------
Retail Trade - 3.8%
8,000 Abercrombie & Fitch Co. * 218,000
4,000 American Eagle Outfitters, Inc. * 171,250
4,000 Bed Bath & Beyond, Inc. * 133,250
5,000 Best Buy Co., Inc. * 277,812
3,000 Circuit City Stores-Circuit City Group 128,063
5,318 CVS Corp. 231,001
11,400 Dayton Hudson Corp. 736,725
5,000 Express Scripts, Inc. * 245,625
5,000 Linens 'n Things, Inc. * 198,750
16,500 Lowe's Cos., Inc. 907,500
4,000 Tandy Corp. 251,750
17,700 The Gap, Inc. 657,112
27,000 The TJX Cos., Inc. 732,375
-----------
4,889,213
------------------------------------------------------------
Technology Services - 3.3%
9,000 Affiliated Computer Services, Inc. * 342,000
7,800 BMC Software, Inc. * 500,663
24,000 Compuware Corp. * 667,500
9,400 Microsoft Corp. * 870,087
18,750 Oracle Corp. * 891,797
3,000 QRS Corp. * 166,875
35,000 Sterling Software, Inc. * 767,812
-----------
4,206,734
------------------------------------------------------------
Transportation - 0.9%
10,000 Delta Air Lines, Inc. 544,375
36,450 Southwest Airlines Co. 612,816
-----------
1,157,191
------------------------------------------------------------
Utilities - 3.7%
12,750 AT&T Corp. 596,063
13,500 CenturyTel, Inc. 545,906
8,500 Consolidated Edison, Inc. 324,594
14,000 Duke Energy Corp. 791,000
10,000 Equitable Resources, Inc. 365,000
13,000 FPL Group, Inc. 654,062
------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Utilities - (continued)
8,000 GTE Corp. $ 600,000
12,000 SBC Communications, Inc. 611,250
2,000 United States Cellular Corp. * 177,000
-----------
4,664,875
----------------------------------------------------
TOTAL COMMON STOCKS
(cost $48,873,756) $62,076,113
----------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Fixed Income - 50.2%
Asset-Backed Securities - 16.0%
Auto - 0.1%
NationsBank Auto Owner Trust Series 1996-A, Class A4
$ 115,018 6.63% 12/15/2000 $ 115,053
----------------------------------------------------------------------------------------------
Commercial - 1.1%
Commercial Mortgage Asset Trust Series 1999-C1, Class B
500,000 7.23 07/17/2013 478,420
First Union-Lehman Brothers-Bank of America Series 1998-C2, Class B
500,000 6.64 03/18/2011 463,470
LB Commercial Conduit Mortgage Trust Series 1999-C1, Class A1
493,267 6.41 08/15/2007 479,983
-----------
1,421,873
----------------------------------------------------------------------------------------------
Credit Card - 4.6%
American Express Credit Account Master Trust Series 1994-3, Class A
500,000 7.85 08/15/2005 518,125
American Express Credit Account Master Trust Series 1996-1, Class B
500,000 6.95 12/15/2003 501,560
Discover Card Master Trust I Series 1993-3, Class A
1,250,000 6.20 05/16/2006 1,223,437
First USA Credit Card Master Trust Series 1998-2, Class C+
500,000 6.80 02/18/2011 468,672
First USA Credit Card Master Trust Series 1999-1, Class C+
500,000 6.42 10/19/2006 478,906
J.C. Penney Master Credit Card Trust Series B, Class A
180,978 8.95 10/15/2001 188,742
MBNA Master Credit Card Trust Series 1995-C, Class A
500,000 6.45 02/15/2008 492,810
MBNA Master Credit Card Trust Series 1999-D, Class C+
500,000 6.95 11/17/2008 480,313
Metris Master Trust Series 1997-1, Class B
500,000 7.11 10/20/2005 499,375
Standard Credit Card Master Trust Series 1993-2, Class A
500,000 5.95 10/07/2004 485,863
Standard Credit Card Master Trust Series 1995-1, Class B
500,000 8.45 01/07/2007 525,612
-----------
5,863,415
----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
COMMERCE BALANCED FUND
Statement of Investments (continued)
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Asset-Backed Securities - (continued)
Home Equity - 4.5%
Access Financial Mortgage Loan Trust Series 1996-2, Class A4
$ 500,000 7.63% 09/18/2021 $ 504,900
Advanta Mortgage Loan Trust Series 1994-4, Class A2
325,647 8.92 01/25/2026 348,118
American Business Financial Services, Inc. Series 1996-1, Class A
331,110 7.95 09/15/2026 330,592
Contimortgage Home Equity Loan Trust Series 1999-3, Class A6
1,000,000 7.68 12/25/2029 974,370
Corestates Home Equity Trust Series 1993-2, Class A
200,017 5.10 03/15/2009 198,455
First Plus Home Loan Trust Series 1997-3, Class A5
500,000 6.86 10/10/2013 500,185
GE Capital Mortgage Services, Inc. Series 1997-HE1, Class B1
472,502 7.50 03/25/2007 442,352
GE Capital Mortgage Services, Inc. Series 1997-HE1, Class M
472,445 7.50 03/25/2027 459,896
GE Capital Mortgage Services, Inc. Series 1997-HE4, Class M
482,731 7.14 12/25/2028 460,284
Merrill Lynch Mortgage Investors, Inc. Series 1999-H1, Class A3
1,500,000 6.76 09/20/2026 1,457,805
----------
5,676,957
----------------------------------------------------------------------------------------------
Manufactured Housing - 5.7%
Associates Manufactured Housing Pass-Through
Series 1996-1, Class A5
500,000 7.60 03/15/2027 498,805
Green Tree Financial Corp. Series 1993-4, Class A4
500,000 6.60 01/15/2019 498,190
Green Tree Financial Corp. Series 1993-4, Class A5
500,000 7.05 01/15/2019 486,800
Green Tree Financial Corp. Series 1994-2, Class A4
500,000 7.90 05/15/2019 510,195
Green Tree Financial Corp. Series 1996-3, Class A4
1,000,000 7.10 05/15/2027 1,006,030
Green Tree Financial Corp. Series 1996-4, Class A7
500,000 7.90 06/15/2027 498,395
Green Tree Financial Corp. Series 1996-5, Class A6
1,000,000 7.75 07/15/2027 1,021,990
Green Tree Financial Corp. Series 1997-3, Class M1
1,000,000 7.53 07/15/2028 987,720
Green Tree Financial Corp. Series 1999-1, Class M1
250,000 6.56 11/01/2028 223,515
Green Tree Home Improvement Loan Trust
Series 1997-E, Class HEM1
500,000 7.28 01/15/2029 488,280
Oakwood Mortgage Investors, Inc. Series 1995-B, Class A3
600,000 6.90 01/15/2021 593,022
Oakwood Mortgage Investors, Inc. Series 1997-A, Class A5
500,000 7.13 05/15/2027 494,270
----------
7,307,212
----------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(cost $20,783,722) $20,384,510
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Collateralized Mortgage Obligations - 4.5%
Asset Securitization Corp. 1995-MD4, Class A1
$ 467,503 7.10% 08/13/2029 $ 465,601
Federal Home Loan Mortgage Corp. REMIC PAC
Series 159, Class H
958,326 4.50 09/15/2021 894,410
Federal National Mortgage Assn. REMIC
Series 1993-225, Class NB
244,076 6.50 12/25/2022 242,856
Federal National Mortgage Assn. Series 1996-68, Class VC
1,500,000 6.50 09/18/2010 1,437,180
Mortgage Capital Funding, Inc. Series 1996-MC1, Class A2A
333,223 7.35 07/15/2005 337,694
Prudential Home Mortgage Securities Co.
Series 1993-28, Class M
399,879 7.38 08/25/2023 395,924
Residential Asset Securitization REMIC Trust
Series 1997-A1, Class A7
500,000 7.38 03/25/2027 489,515
Residential Asset Securitization REMIC Trust
Series 1997-A5, Class A13
500,000 7.75 07/25/2027 504,575
Residential Funding Mortgage Securities Corp.
Series 1995-S4, Class A4
415,852 8.00 04/25/2010 420,010
Residential Funding Mortgage Securities Corp.
Series 1999-S20, Class A1
495,021 6.50 09/25/2014 480,479
--------------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(cost $5,747,607) $5,668,244
--------------------------------------------------------------------------------------------------
Corporate Obligations - 16.7%
Energy - 0.3%
Phillips Petroleum Co.
$ 500,000 7.00% 03/30/2029 $ 461,670
--------------------------------------------------------------------------------------------------
Financial - 10.4%
Apache Finance Property Ltd.
500,000 7.00 03/15/2009 484,810
Bank of America Corp.
500,000 6.88 06/01/2003 498,455
Chemical Bank
500,000 6.70 08/15/2008 481,800
Citicorp
500,000 6.38 11/15/2008 470,860
Donaldson, Lufkin and Jenrette, Inc.
750,000 6.11 05/15/2001 743,888
EOP Operating LP
500,000 7.25 02/15/2018 446,040
Equitable Life Assurance Society of the United States+
2,000,000 7.70 12/01/2015 1,997,800
Ford Motor Company Credit Corp.
500,000 6.63 06/30/2003 496,405
General Electric Capital Corp.
500,000 8.30 09/20/2009 545,635
Hanson Overseas BV
500,000 6.75 09/15/2005 487,670
--------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
18
<PAGE>
COMMERCE BALANCED FUND
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Corporate Obligations - (continued)
Financial - (continued)
Lehman Brothers Holdings, Inc.
$ 750,000 6.63% 04/01/2004 $ 731,940
Merrill Lynch & Co., Inc.
500,000 5.71 01/15/2002 491,170
Metropolitan Life Insurance Co.+
1,000,000 7.70 11/01/2015 995,460
Morgan Stanley Group, Inc.
500,000 6.75 03/04/2003 498,200
NationsBank Corp.
500,000 7.80 09/15/2016 510,020
PNC Bank, N.A.
500,000 7.88 04/15/2005 516,060
Salomon Smith Barney, Inc.
500,000 6.63 06/01/2000 501,200
Sanwa Finance Aruba AEC
750,000 8.35 07/15/2009 758,692
Simon Debartolo Group LP
500,000 6.75 06/15/2005 468,135
Swiss Bank Corp.
1,145,000 7.38 06/15/2017 1,118,058
------------
13,242,298
-----------------------------------------------------------------------------------------------
Industrial - 4.5%
Conoco, Inc.
500,000 6.35 04/15/2009 475,210
500,000 6.95 04/15/2029 465,230
General Motors Acceptance Corp.
1,250,000 6.15 04/05/2007 1,167,450
Lafarge Corp.
500,000 6.88 07/15/2013 471,331
Receipts on Corporate Securities Trust CHR-1998-1
722,141 6.50 08/01/2018 672,299
Receipts on Corporate Securities Trust NSC-1998-1 Class 14+
1,153,266 6.38 05/15/2017 1,048,405
Service Master Co.
500,000 7.10 03/01/2018 424,560
St. Paul Companies, Inc.
1,000,000 6.38 12/15/2008 947,944
------------
5,672,429
-----------------------------------------------------------------------------------------------
Utilities - 1.5%
AT&T Corp.
500,000 7.12 01/15/2002 506,900
500,000 6.00 03/15/2009 462,210
500,000 6.50 03/15/2029 442,300
GTE Corp.
500,000 6.84 04/15/2018 471,335
------------
1,882,745
-----------------------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(cost $22,036,921) $ 21,259,142
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Mortgage-Backed Pass-Through Obligations - 10.3%
Federal Home Loan Mortgage Corporation (FHLMC)
$ 555,697 6.00% 12/01/2013 $ 527,050
1,293,968 7.00 05/01/2026 1,272,941
Federal National Mortgage Association (FNMA)
809,411 7.00 07/01/2009 808,901
264,770 6.50 02/01/2012 260,280
536,658 6.00 12/01/2013 508,816
935,328 6.50 03/01/2024 904,051
815,848 6.50 04/01/2024 788,566
1,375,285 6.50 04/01/2024 1,329,295
1,090,480 7.00 07/01/2028 1,070,710
1,427,909 6.50 11/01/2028 1,368,108
928,908 5.82 12/01/2028 898,142
990,948 6.00 01/01/2029 923,742
Government National Mortgage Association (GNMA)
1,063,832 7.00 09/15/2023 1,050,534
421,207 7.50 08/20/2025 420,680
905,728 7.50 07/20/2026 904,596
-----------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED PASS-THROUGH OBLIGATIONS
(cost $13,150,335) $ 13,036,412
-----------------------------------------------------------------------------------------------
U.S. Treasury Obligation - 2.7%
United States Treasury Bond
$3,000,000 7.88% 02/15/2021 $ 3,469,680
-----------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATION
(cost $3,553,125) $ 3,469,680
-----------------------------------------------------------------------------------------------
TOTAL FIXED INCOME
(cost $65,271,710) $ 63,817,988
-----------------------------------------------------------------------------------------------
Repurchase Agreement - 1.5%
State Street Bank & Trust Co.
$1,874,000 5.07% 11/01/1999 $ 1,874,000
-----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(cost $1,874,000) $ 1,874,000
-----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(cost $116,019,466) $127,768,101
-----------------------------------------------------------------------------------------------
</TABLE>
* 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.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
------------------------------------------------------------------------------
Investment Abbreviations:
ADR--American Depository Receipt
PAC--Planned Amortization Class
REMIC--Real Estate Mortgage Investment Conduit
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
19
<PAGE>
COMMERCE GROWTH AND INCOME FUND
Shareholder Letter
Dear Shareholder:
We are pleased to report on the performance of the Commerce Growth and Income
Fund for the year ended October 31, 1999.
Performance Review
For the year ended October 31, 1999, the Institutional
Shares of the Fund had a total return of 0.29%, based on
Net Asset Value (NAV). The Service Shares had a total re-
turn, without sales charge, of 0.02% for the same period
based on NAV. This compared to the Lipper Growth and Income
Funds Index 12-month return of 16.03% and the Russell 1000
Value Index 12-month return of 16.52%. Past performance is
no guarantee of future results. (The Fund's NAV is not
guaranteed by the FDIC or U.S. government or by its agen-
cies, instrumentalities, or sponsored enterprises.)
Portfolio Highlights
. In our last report to shareholders, we pointed out that
investor sentiment appeared to be shifting, as value stocks
were starting to outperform their growth counterparts. How-
ever, this trend was short lived, as value stocks renewed
their underperformance relative to growth stocks over the
past six months. In addition, a narrowing of the market's
rally continued over this period. This hampered the perfor-
mance of more diversified mutual funds such as the Growth
and Income Fund.
. The Fund's results relative to the Russell 1000 Value In-
dex improved somewhat over the past six months, although
its total return failed to match that of the Index. We at-
tribute these results to some of the changes implemented in
the early part of 1999. Those included a focus on somewhat
larger capitalization companies and concentrating on firms
with better near-term prospects. These changes have in no
way compromised our commitment to our value mandate.
. Taking a closer look at the Fund's portfolio, its over-
weight position in the energy sector generated mixed re-
sults. After a strong start in 1999, the energy sector has
languished most recently, despite higher oil and gas pric-
es. We remain overweight in this important group, and an-
ticipate better results going forward should investors
realize that energy prices will likely hold up at current
levels. On the other hand, we reduced our overweight posi-
tion in the financial sector. This proved beneficial, as
financial stocks significantly underperformed the value in-
dex over the past six months. We are now in the process of
searching for selective bargains in this area.
. Looking ahead, we expect to see a continuation of strong
economic growth in the United States and increasing rates
of growth in the rest of the world. We believe this could
continue to support solid earnings in many of the more eco-
nomically sensitive sectors held by the Fund. These would
include the energy, metal, and paper sectors.
We thank you for your investment and look forward to your
continued confidence.
Sincerely,
Growth and Income Fund Team
Investment Management Group
Commerce Bank, N.A.
November 22, 1999
20
<PAGE>
COMMERCE GROWTH AND INCOME FUND
Performance Summary (Unaudited)
October 31, 1999
The following graph shows the value, as of October 31, 1999, of a $10,000 in-
vestment made on March 3, 1997 in the Institutional Shares and the Service
Shares (with the maximum sales charge of 3.50%). For comparative purposes,
the performance of the Fund's benchmarks (the Standard & Poor's 500 Index
with Income ("S&P 500"), the Russell 1000 Value Index ("Russell 1000") and
the Lipper Growth & Income Funds Index) are shown. This performance data rep-
resents past performance and should not be considered indicative of future
performance which will fluctuate with changes in market conditions. These
performance fluctuations will cause an investor's shares, when redeemed, to
be worth more or less than their original cost.
Growth and Income Fund's Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested March 3, 1997 to
October 31, 1999.
[CHART]
Institutional S&P 500 Lipper Growth Service w/ Russell
Shares & Income Index sales Charge 1000
3/3/97 10,000 10,000 10,000 9,650 10,000
10/31/97 12,200 11,760 11,529 11,755 11,760
10/31/98 12,265 14,276 12,618 11,790 13,504
10/31/99 12,300 17,940 14,641 11,378 15,735
<TABLE>
<CAPTION>
Average Annual Total Return through October
31, 1999 Since Inception One Year
<S> <C> <C>
Institutional Shares (commenced March 3, 1997) 8.07% 0.29 %
---------------------------------------------------------------------------
Service Shares (commenced March 3, 1997)
Excluding sales charges 7.81% 0.02 %
Including sales charges (maximum sales charge
3.50%) 6.39% (3.49)%
---------------------------------------------------------------------------
</TABLE>
21
<PAGE>
COMMERCE GROWTH AND INCOME FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - 98.5%
Consumer Durables - 3.4%
23,000 Ford Motor Co. $ 1,262,125
18,000 General Motors Corp. 1,264,500
-----------
2,526,625
------------------------------------------------------------------
Consumer Non-Durables - 1.4%
15,000 Anheuser-Busch Cos., Inc. 1,077,187
------------------------------------------------------------------
Electronic Technology - 11.4%
33,500 General Dynamics Corp. 1,857,156
14,000 International Business Machines Corp. 1,377,250
25,000 Litton Industries, Inc.* 1,173,438
20,250 Motorola, Inc. 1,973,109
55,000 PerkinElmer, Inc. 2,244,688
-----------
8,625,641
------------------------------------------------------------------
Energy Minerals - 12.6%
18,500 Chevron Corp. 1,689,281
51,000 Conoco, Inc. 1,399,313
43,850 Devon Energy Corp. 1,704,669
20,600 Exxon Corp. 1,525,687
70,000 Imperial Oil Ltd. 1,636,250
25,250 Texaco, Inc. 1,549,719
-----------
9,504,919
------------------------------------------------------------------
Finance - 23.4%
58,000 Ace Ltd. 1,127,375
42,000 Ambac Financial Group, Inc. 2,509,500
16,000 American International Group, Inc. 1,647,000
32,000 Aon Corp. 1,136,000
26,987 Bank of America Corp. 1,737,288
37,000 Citigroup, Inc. 2,002,625
14,000 Comerica, Inc. 832,125
20,300 Federal National Mortgage Association 1,436,225
34,500 Financial Security Assurance Holdings Ltd. 1,944,938
25,000 Lincoln National Corp. 1,153,125
30,000 The Bank of New York Co., Inc. 1,256,250
10,000 The Chase Manhattan Corp. 873,750
-----------
17,656,201
------------------------------------------------------------------
Health Technology - 2.0%
28,000 Pharmacia & Upjohn, Inc. 1,510,250
------------------------------------------------------------------
Industrial Services - 4.3%
65,000 Helmerich & Payne, Inc. 1,547,813
63,000 Transocean Offshore, Inc. 1,712,812
-----------
3,260,625
------------------------------------------------------------------
Non-Energy Minerals - 4.0%
50,000 AK Steel Holding Corp. 865,625
26,890 Louisiana-Pacific Corp. 341,167
69,800 USX-U.S. Steel Group, Inc. 1,784,262
-----------
2,991,054
------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Process Industries - 9.7%
31,000 Air Products & Chemicals, Inc. $ 852,500
40,000 Boise Cascade Corp. 1,425,000
21,500 E.I. du Pont de Nemours & Co. 1,385,406
45,000 International Paper Co. 2,368,125
32,000 Willamette Industries, Inc. 1,330,000
-----------
7,361,031
-------------------------------------------------------
Producer Manufacturing - 2.9%
26,000 Ingersoll-Rand Co. 1,358,500
14,100 Johnson Controls, Inc. 856,575
-----------
2,215,075
-------------------------------------------------------
Technology Services - 2.9%
100,000 Sterling Software, Inc. * 2,193,750
-------------------------------------------------------
Transportation - 1.2%
17,000 Delta Air Lines, Inc. 925,438
-------------------------------------------------------
Utilities - 19.3%
34,000 AT&T Corp. 1,589,500
33,000 BellSouth Corp. 1,485,000
31,000 CenturyTel, Inc. 1,253,563
28,700 Consolidated Edison, Inc. 1,095,981
37,500 Duke Energy Corp. 2,118,750
28,000 Equitable Resources, Inc. 1,022,000
42,000 FPL Group, Inc. 2,113,125
28,000 GTE Corp. 2,100,000
35,000 SBC Communications, Inc. 1,782,812
-----------
14,560,731
-------------------------------------------------------
TOTAL COMMON STOCKS
(cost $71,449,312) $74,408,527
-------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Repurchase Agreement - 1.5%
State Street Bank and Trust Co.
$1,158,000 5.07% 11/01/1999 $ 1,158,000
----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(cost $1,158,000) $ 1,158,000
----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(cost $72,607,312) $75,566,527
----------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
The accompanying notes are an integral part of these financial statements.
22
<PAGE>
COMMERCE GROWTH FUND
Shareholder Letter
Dear Shareholder:
We are pleased to report on the performance of the Commerce Growth Fund for
the year ended October 31, 1999.
Performance Review
For the year ended October 31, 1999, the Institutional
Shares of the Fund had a total return of 18.24%, based on
Net Asset Value (NAV). The Service Shares had a total re-
turn, without sales charge, of 17.97% for the same period
based on NAV. This compared to the Lipper Growth Funds In-
dex 12-month return of 29.32% and the Standard & Poor's 500
Index 12-month return of 25.66%. Past performance is no
guarantee of future results. (The Fund's NAV is not guaran-
teed by the FDIC or U.S. government or by its agencies, in-
strumentalities, or sponsored enterprises.)
Portfolio Highlights
. While the Fund generated strong absolute returns during
the last 12 months, its performance lagged the returns of
its benchmarks. This can be largely attributed to several
strategic allocations employed during the last six months.
. For example, in the spring we began to reduce our technol-
ogy weighting below that of the Standard & Poor's 500 In-
dex. With high overall valuation levels and rising interest
rates we believed the stock market had little upside poten-
tial. In particular, we felt technology stock prices had
moved ahead of their strong fundamental outlook and were
vulnerable to a decline. However, while stock prices in
general experienced declines over the summer, technology
stocks continued to move higher. In October, we increased
our technology weighting by adding several new companies to
the Fund's portfolio. Currently, approximately 25% of Fund
assets are invested in technology related stocks.
. In the retail and consumer durable sectors, we expected to
see a continuation of strong results. Historically, consum-
ers have been the driving force behind sustainable economic
growth, and this activity typically benefits the retail and
consumer durable sectors. As a result, we targeted compa-
nies with reasonable valuation levels that exhibited above-
average growth prospects. In early August, investors
anticipated that the Federal Reserve would raise interest
rates high enough to dramatically slow consumer spending.
Several issues held in the Fund declined sharply in a mat-
ter of weeks, based on a change in perception, not deterio-
rating fundamentals.
. Our slight overweighting in the health sector also nega-
tively affected Fund performance, as we saw negative polit-
ical intervention in the healthcare industry send
healthcare stock prices downward. We have recently seen a
reversal of fortune in this sector, thanks in part to the
interest in Warner Lambert by several suitors. This poten-
tial merger and acquisition activity helped to send the
stocks of many healthcare companies upward.
. Looking ahead, we believe the Fund is well positioned to
provide the potential for strong long-term results. The
Fund's portfolio is currently well diversified in a group
of companies whose earnings are growing far in excess of
the Standard & Poor's 500 Index average.
We thank you for your investment and look forward to your
continued confidence.
Sincerely,
Growth Fund Team
Investment Management Group
Commerce Bank, N.A.
November 22, 1999
23
<PAGE>
COMMERCE GROWTH FUND
Performance Summary (Unaudited)
October 31, 1999
The following graph shows the value, as of October 31, 1999, of a $10,000 in-
vestment made on December 12, 1994 in the Institutional Shares. For compara-
tive purposes, the performance of the Fund's benchmarks (the Standard &
Poor's 500 Index with Income ("S&P 500") and the Lipper Growth Funds Index)
are shown. This performance data represents past performance and should not
be considered indicative of future performance which will fluctuate with
changes in market conditions. These performance fluctuations will cause an
investor's shares, when redeemed, to be worth more or less than their origi-
nal cost. Performance of the Service Shares will vary from the Institutional
Shares due to differences in fees and loads.
Growth Fund's-Institutional Shares Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested December 12, 1994 to
October 31, 1999.
[CHART]
Institutional S&P 500 Lipper Growth
Shares Funds Funds Index
12/12/94 10,000 10,000 10,000
10/31/95 13,806 13,306 13,269
10/31/96 17,050 16,511 15,522
10/31/97 21,845 21,815 19,927
10/31/98 25,205 26,612 22,693
10/31/99 29,802 33,441 29,347
<TABLE>
<S> <C> <C>
Average Annual Total Return through October 31,
1999 Since Inception One Year
Institutional Shares (commenced December 12, 1994) 25.02% 18.24%
-----------------------------------------------------------------------------
Service Shares (commenced January 2, 1997)
Excluding sales charges 19.69% 17.97%
Including sales charges (maximum sales charge
3.50%) 18.20% 13.85%
-----------------------------------------------------------------------------
</TABLE>
24
<PAGE>
COMMERCE GROWTH FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - 95.1%
Commercial Services - 2.5%
132,000 Omnicom Group, Inc. $ 11,616,000
-----------------------------------------------------------------
Consumer Durables - 9.7%
455,800 D.R. Horton, Inc. 5,384,138
294,900 Ethan Allen Interiors, Inc. 10,487,381
175,900 Ford Motor Co. 9,652,513
546,200 Leggett & Platt, Inc. 12,118,812
175,700 Maytag Corp. 7,038,981
------------
44,681,825
-----------------------------------------------------------------
Consumer Non-Durables - 4.6%
208,600 Jones Apparel Group, Inc.* 6,596,975
193,800 The Clorox Co. 7,933,687
239,300 Tommy Hilfiger Corp.* 6,760,225
------------
21,290,887
-----------------------------------------------------------------
Electronic Technology - 15.1%
128,600 Cisco Systems, Inc.* 9,516,400
25,000 Comverse Technology, Inc.* 2,837,500
116,200 Electronics for Imaging, Inc.* 4,684,312
169,800 EMC Corp.* 12,395,400
55,000 International Business Machines Corp. 5,410,625
63,700 Jabil Circuit, Inc.* 3,328,325
122,900 Linear Technology Corp. 8,595,319
23,000 Nokia OYJ ADR 2,657,938
22,800 Sun Microsystems, Inc.* 2,412,525
172,500 Tellabs, Inc.* 10,910,625
113,100 United Technologies Corp. 6,842,550
------------
69,591,519
-----------------------------------------------------------------
Energy Minerals - 4.8%
145,500 Exxon Corp. 10,776,094
189,000 Royal Dutch Petroleum Co. ADR 11,328,187
------------
22,104,281
-----------------------------------------------------------------
Finance - 10.3%
105,900 American International Group, Inc. 10,901,081
131,900 Federal National Mortgage Association 9,331,925
136,000 Franklin Resources, Inc. 4,760,000
78,300 Morgan Stanley Dean Witter & Co. 8,637,469
84,000 Northern Trust Corp. 8,111,250
115,800 Wells Fargo Co. 5,543,925
------------
47,285,650
-----------------------------------------------------------------
Health Services - 3.7%
167,900 Cardinal Health, Inc. 7,240,688
345,000 Lincare Holdings, Inc.* 9,703,125
------------
16,943,813
-----------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Health Technology - 9.7%
169,100 Abbott Laboratories $ 6,827,412
212,500 Biomet, Inc. 6,401,563
91,700 Johnson & Johnson 9,605,575
255,800 Medtronic, Inc. 8,857,075
261,000 Schering-Plough Corp. 12,919,500
------------
44,611,125
-----------------------------------------------------
Process Industries - 5.3%
166,000 General Electric Co. 22,503,375
51,000 Tyco International Ltd. 2,036,812
------------
24,540,187
-----------------------------------------------------
Producer Manufacturing - 9.4%
173,100 Danaher Corp. 8,362,894
389,600 Herman Miller, Inc. 8,449,450
155,400 Illinois Tool Works, Inc. 11,383,050
164,400 Ingersoll-Rand Co. 8,589,900
103,700 Johnson Controls, Inc. 6,299,775
------------
43,085,069
-----------------------------------------------------
Retail Trade - 7.6%
148,400 Dayton Hudson Corp. 9,590,350
179,000 Lowe's Cos., Inc. 9,845,000
209,800 The Gap, Inc. 7,788,825
293,900 The TJX Cos., Inc. 7,972,037
------------
35,196,212
-----------------------------------------------------
Technology Services - 8.1%
72,800 BMC Software, Inc.* 4,672,850
318,900 Compuware Corp.* 8,869,406
122,100 Microsoft Corp.* 11,301,881
260,800 Oracle Corp.* 12,404,300
------------
37,248,437
-----------------------------------------------------
Transportation - 1.4%
385,650 Southwest Airlines Co. 6,483,741
-----------------------------------------------------
Utilities - 2.9%
131,500 AT&T Corp. 6,147,625
173,400 CenturyTel, Inc. 7,011,863
------------
13,159,488
-----------------------------------------------------
TOTAL COMMON STOCKS
(cost $324,440,999) $437,838,234
-----------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
25
<PAGE>
COMMERCE GROWTH FUND
Statement of Investments (continued)
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Repurchase Agreement - 5.6%
State Street Bank & Trust Co.
$25,595,000 5.07% 11/01/1999 $ 25,595,000
--------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(cost $25,595,000) $ 25,595,000
--------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(cost $350,035,999) $463,433,234
--------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
------------------------------------------------------------------------------
Investment Abbreviations:
ADR--American Depository Receipt
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
26
<PAGE>
COMMERCE MIDCAP FUND
Shareholder Letter
Dear Shareholder:
We are pleased to report on the performance of the Commerce MidCap Fund for
the year ended October 31, 1999.
Performance Review
For the year ended October 31, 1999, the Institutional
Shares of the Fund had a total return of 28.96%, based on
Net Asset Value (NAV). The Service Shares had a total re-
turn, without sales charge, of 28.63% for the same period
based on NAV. This compared to the Lipper Mid-Cap Funds In-
dex 12-month return of 35.88% and the Standard & Poor's Mid
Cap 400 Index with Income 12-month return of 21.08%. Past
performance is no guarantee of future results. (The Fund's
NAV is not guaranteed by the FDIC or U.S. government or by
its agencies, instrumentalities, or sponsored enterprises.)
Portfolio Highlights
. For much of the last year, investors focused their atten-
tion, and dollars, on larger- capitalization growth stocks.
However, during part of the second quarter of 1999 the mar-
ket's rally broadened, and small- and mid-cap stocks
outperformed their larger-cap counterparts. Unfortunately,
this trend was short lived, and during the fiscal year
ended October 31, 1999, mid-cap issues underperformed larg-
er-cap stocks. Yet, we were encouraged to see that the dis-
parity in returns between mid- and large-cap issues was
less than we experienced in recent years.
. In the rising interest rate environment that we've been
subject to in recent months, few sectors of the stock mar-
ket have generated strong results. Two notable exceptions
were energy and technology stocks. The Fund benefited from
its exposure to several technology companies that posted
outstanding returns.
. Despite the strong absolute returns from mid-cap stocks
over the last year, these securities continue to present
very attractive relative valuations versus their larger-cap
counterparts. Now that the market appears to have dis-
counted the rise in interest rates, we believe that in-
vestor preference may again broaden and focus on small- to
mid-sized companies.
We thank you for your investment and look forward to your
continued confidence.
Sincerely,
MidCap Fund Team
Investment Management Group
Commerce Bank, N.A.
November 22, 1999
27
<PAGE>
COMMERCE MIDCAP FUND
Performance Summary (Unaudited)
October 31, 1999
The following graph shows the value, as of October 31, 1999, of a $10,000 in-
vestment made on December 12, 1994 in the Institutional Shares. For compara-
tive purposes, the performance of the Fund's benchmarks (the Standard &
Poor's Mid Cap 400 Index with Income ("S&P Mid Cap 400") and the Lipper Mid
Cap Funds Index) are shown. This performance data represents past performance
and should not be considered indicative of future performance which will
fluctuate with changes in market conditions. These performance fluctuations
will cause an investor's shares, when redeemed, to be worth more or less than
their original cost. Performance of the Service Shares will vary from the In-
stitutional Shares due to the differences in fees and loads.
MidCap Fund's-Institutional Shares Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested December 12, 1994 to
October 31, 1999.
[CHART]
Institutional S&P Mid Cap 400 Lipper Mid Cap
Shares Funds Index
12/12/94 10,000 10,000 10,000
Oct/95 14,056 13,116 13,535
Oct/96 15,999 15,392 15,890
Oct/97 19,019 20,423 19,181
Oct/98 19,772 21,791 18,623
Oct/99 25,498 26,385 25,305
<TABLE>
<S> <C> <C>
Average Annual Total Return through October 31,
1999 Since Inception One Year
Institutional Shares (commenced December 12, 1994) 21.09% 28.96%
-----------------------------------------------------------------------------
Service Shares (commenced January 2, 1997)
Excluding sales charges 16.32% 28.63%
Including sales charges (maximum sales charge
3.50%) 14.86% 24.11%
-----------------------------------------------------------------------------
</TABLE>
28
<PAGE>
COMMERCE MIDCAP FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - 97.3%
Commercial Services - 9.6%
54,600 Concord EFS, Inc.* $ 1,477,613
75,600 Dendrite International, Inc.* 2,371,950
65,800 Maximus, Inc.* 1,525,737
50,700 Navigant Consulting, Inc.* 1,448,119
23,500 Omnicom Group, Inc. 2,068,000
28,112 Paychex, Inc. 1,106,910
60,750 The Profit Recovery Group International* 2,502,141
14,700 WPP Group PLC ADR 1,615,162
------------
14,115,632
---------------------------------------------------------------
Consumer Durables - 2.6%
18,500 Electronic Arts, Inc.* 1,495,031
48,600 Furniture Brands International, Inc.* 941,625
35,300 JAKKS Pacific, Inc.* 1,447,300
------------
3,883,956
---------------------------------------------------------------
Consumer Non-Durables - 1.0%
47,800 Jones Apparel Group, Inc.* 1,511,675
---------------------------------------------------------------
Consumer Services - 3.1%
58,800 Brinker International, Inc.* 1,370,775
50,200 CEC Entertainment, Inc.* 1,609,538
38,000 The New York Times Co. 1,529,500
------------
4,509,813
---------------------------------------------------------------
Electronic Technology - 22.2%
46,300 ADC Telecommunications, Inc.* 2,207,931
44,000 Altera Corp.* 2,139,500
26,300 ANTEC Corp.* 1,275,550
27,500 Black Box Corp.* 1,395,625
16,500 Comverse Technology, Inc.* 1,872,750
39,300 Cymer, Inc.* 1,451,644
40,300 Electronics for Imaging, Inc.* 1,624,594
23,600 KLA-Tencor Corp.* 1,868,825
26,100 Lam Research Corp.* 2,203,819
30,900 LSI Logic Corp.* 1,643,494
14,600 Maxim Integrated Products, Inc.* 1,152,488
83,100 MTI Technology Corp.* 1,407,506
56,900 PerkinElmer, Inc. 2,322,231
7,100 QLogic Corp.* 739,288
9,200 QUALCOMM, Inc.* 2,049,300
17,300 Sanmina Corp.* 1,558,081
15,000 SDL, Inc.* 1,849,687
56,175 Symbol Technologies, Inc. 2,232,956
38,200 Vitesse Semiconductor Corp.* 1,752,425
------------
32,747,694
---------------------------------------------------------------
Energy Minerals - 1.6%
20,700 Amerada Hess Corp. 1,187,663
31,500 Apache Corp. 1,228,500
------------
2,416,163
---------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Finance - 8.7%
33,500 Capital One Financial Corp. $ 1,775,500
20,100 DST Systems, Inc.* 1,280,119
73,900 Federated Investors, Inc. Class B 1,274,775
64,300 Firstar Corp. 1,888,812
34,500 Hartford Life, Inc. 1,802,625
82,800 National Commerce Bancorp. 2,070,000
21,000 Northern Trust Corp. 2,027,812
18,600 Protective Life Corp. 673,088
------------
12,792,731
-------------------------------------------------------------
Health Services - 1.5%
19,050 Cardinal Health, Inc. 821,531
38,400 Syncor International Corp.* 1,406,400
------------
2,227,931
-------------------------------------------------------------
Health Technology - 8.4%
21,000 Allergan, Inc. 2,254,875
28,900 ArthroCare Corp.* 2,095,250
29,500 Biogen, Inc.* 2,186,687
24,500 Guidant Corp. 1,209,688
12,600 IDEC Pharmaceuticals Corp.* 1,463,963
13,600 MedImmune, Inc.* 1,523,200
39,500 Techne Corp.* 1,555,312
------------
12,288,975
-------------------------------------------------------------
Industrial Services - 3.7%
29,000 Jacobs Engineering Group, Inc.* 1,029,500
68,100 Nabors Industries, Inc.* 1,545,019
94,400 Tetra Tech, Inc.* 1,498,600
51,700 Transocean Offshore, Inc. 1,405,594
------------
5,478,713
-------------------------------------------------------------
Process Industries - 1.2%
56,100 Anixter International, Inc.* 1,171,087
20,500 Millipore Corp. 653,438
------------
1,824,525
-------------------------------------------------------------
Producer Manufacturing - 5.6%
29,875 Astec Industries, Inc.* 700,195
32,800 Danaher Corp. 1,584,650
29,000 Ingersoll-Rand Co. 1,515,250
20,800 Lexmark International Group, Inc.* 1,623,700
39,200 Navistar International Corp.* 1,634,150
35,700 SPS Technologies, Inc.* 1,106,700
------------
8,164,645
-------------------------------------------------------------
Retail Trade - 11.5%
52,900 Abercrombie & Fitch Co.* 1,441,525
43,700 American Eagle Outfitters, Inc.* 1,870,906
47,500 Bed Bath & Beyond, Inc.* 1,582,344
37,000 Best Buy Co., Inc.* 2,055,812
34,700 Circuit City Stores-Circuit City Group 1,481,256
-------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
29
<PAGE>
COMMERCE MIDCAP FUND
Statement of Investments (continued)
October 31, 1999
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Retail Trade - (continued)
36,012 Cost Plus, Inc.* $ 1,314,438
31,384 CVS Corp. 1,363,243
36,350 Dollar Tree Stores, Inc.* 1,583,497
34,200 Express Scripts, Inc.* 1,680,075
28,300 Linens 'n Things, Inc.* 1,124,925
23,200 Tandy Corp. 1,460,150
------------
16,958,171
-------------------------------------------------------------------
Technology Services - 15.1%
44,000 Adobe Systems, Inc. 3,077,250
39,600 Affiliated Computer Services, Inc.* 1,504,800
34,500 BMC Software, Inc.* 2,214,469
32,100 Check Point Software Technologies Ltd.* 3,713,569
39,800 Citrix Systems, Inc.* 2,552,175
22,400 Compuware Corp.* 623,000
84,200 Harbinger Corp.* 1,341,937
43,200 Jack Henry & Associates, Inc. 1,571,400
45,000 Legato Systems, Inc.* 2,418,750
39,600 QRS Corp.* 2,202,750
15,300 Verity, Inc.* 1,053,787
------------
22,273,887
-------------------------------------------------------------------
Utilities - 1.5%
24,500 United States Cellular Corp.* 2,168,250
-------------------------------------------------------------------
TOTAL COMMON STOCKS
(cost $109,883,633) $143,362,761
-------------------------------------------------------------------
Other - 2.7%
52,000 Mid-Cap Standard & Poor's Depository Receipt $ 3,916,250
-------------------------------------------------------------------
TOTAL OTHER
(cost $3,916,250) $ 3,916,250
-------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<C> <S> <C> <C>
Repurchase Agreement - 2.3%
State Street Bank & Trust Co.
$3,361,000 5.07% 11/01/1999 $ 3,361,000
----------------------------------------------
TOTAL REPURCHASE AGREEMENT
(cost $3,361,000) $ 3,361,000
----------------------------------------------
TOTAL INVESTMENTS
(cost $117,017,181) $150,640,011
----------------------------------------------
</TABLE>
*Non-income producing security.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
------------------------------------------------------------------------------
Investment Abbreviations:
ADR--American Depository Receipt
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
COMMERCE INTERNATIONAL EQUITY FUND
Shareholder Letter
Dear Shareholder:
We are pleased to report on the performance of the Commerce International
Equity Fund for the year ended October 31, 1999.
Performance Review
For the year ended October 31, 1999, the Institutional
Shares of the Fund had a total return of 19.58%, based on
Net Asset Value (NAV) (assumes expense waivers). The Serv-
ice Shares had a total return, without sales charge, of
19.39% for the same period based on NAV (assumes expense
waivers). This compared to the Lipper International Equity
Funds Index 12-month return of 23.04% and Morgan Stanley
Capital International Europe, Australia, and Far East Index
("EAFE") 12-month return of 23.37%. Past performance is no
guarantee of future results. (The Fund's NAV is not guaran-
teed by the FDIC or U.S. government or by its agencies, in-
strumentalities, or sponsored enterprises.)
Portfolio Highlights
. Many international stock markets have generated strong re-
turns thus far in 1999, following last year's Asian cur-
rency crisis. For example, Asian markets have rebounded
dramatically, aided by meaningful banking reforms, corpo-
rate restructuring and a positive interest rate environ-
ment. In Japan, the unexpected strength of its domestic
economy has led to outstanding returns. And despite
Brazil's currency devaluation in January, most Latin Ameri-
can markets have performed admirably. However, after a
strong start to the year, most European markets have fal-
tered. Lackluster economic growth, the war in Bosnia and
rising U.S. interest rates were some of the culprits.
. The Fund's relative performance during the past year suf-
fered from country weightings. For example, the Fund's un-
derweight position in Japan relative to the EAFE Index, and
its small exposure to the emerging markets of Latin Ameri-
ca, detracted from performance. In addition, the Fund's ap-
proximately 65% weighting in Europe, including the United
Kingdom, has been a drag on returns. Finally, while indi-
vidual issue selection has added value, our "Growth at a
Reasonable Price" style has been somewhat out of favor, as
the cyclical stocks in the European markets have been the
strongest performers this year.
. Looking ahead, many European economies have begun to show
signs of strength, and we expect that further economic
growth will help European markets and the euro to gain
strength as we move into next year. Outside of Europe, we
believe that many other international economies are poised
for further improvement, which could lead to overall
strengthening in international equity markets. Addition-
ally, the combination of a regional and an international
approach to the portfolio should allow us to add value, as
cross-border merger and acquisition activity accelerates on
a global basis.
We thank you for your investment and look forward to your
continued confidence.
Sincerely,
International Equity Fund Team
Investment Management Group
Commerce Bank, N.A.
November 22, 1999
Sincerely,
International Equity Fund Team
Rowe Price-Fleming International, Inc.
31
<PAGE>
COMMERCE INTERNATIONAL EQUITY FUND
Performance Summary (Unaudited)
October 31, 1999
The following graph shows the value, as of October 31, 1999, of a $10,000 in-
vestment made on January 1, 1995 in the Institutional Shares. For comparative
purposes, the performance of the Fund's benchmarks (the Morgan Stanley Capi-
tal International Europe, Australia and Far East Index ("Morgan Stanley
EAFE") and the Lipper International ("Int'l") Funds Index) are shown. This
performance data represents past performance and should not be considered in-
dicative of future performance which will fluctuate with changes in market
conditions. These performance fluctuations will cause an investor's shares,
when redeemed, to be worth more or less than their original cost. Performance
of the Service Shares will vary from the Institutional Shares due to the dif-
ferences in fees and loads.
International Equity Fund's-Institutional Shares Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested January 1, 1995(a)
to October 31, 1999.
[GRAPH]
Institutional Morgan Stanley Lipper Int'l
Shares EAFE Funds Index
1/1/95 10,000 10,000 10,000
10/31/95 10,264 10,428 10,584
10/31/96 11,628 11,551 11,920
10/31/97 12,459 12,118 13,513
10/31/98 13,352 13,324 14,140
10/31/99 15,966 16,438 17,398
<TABLE>
<S> <C> <C>
Average Annual Total Return through October 31,
1999 Since Inception One Year
Institutional Shares (commenced December 12, 1994) 10.28% 19.58%
-----------------------------------------------------------------------------
Service Shares (commenced January 2, 1997)
Excluding sales charges 9.63% 19.39%
Including sales charges (maximum sales charge
3.50%) 8.25% 15.21%
-----------------------------------------------------------------------------
</TABLE>
(a) For comparative purposes, initial investments are assumed to be made on
the first day of the month following the Fund's inception.
32
<PAGE>
COMMERCE INTERNATIONAL EQUITY FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - 92.3%
Argentine Peso - 0.2%
3,737 Banco de Galicia y Buenos Aires SA de CV ADR Class B
(Banks) $ 78,944
3,794 Banco Frances SA ADR (Financial Services) 82,994
5,310 Telefonica de Argentina SA ADR Class B (Utilities) 136,069
------------
298,007
-------------------------------------------------------------------------------
Australian Dollar - 1.9%
7,000 Brambles Industries Ltd. (Transportation/Storage) 196,858
14,219 Broken Hill Proprietary Co. Ltd. (Mining-
Metals/Minerals) 146,956
76,820 Colonial Ltd. (Financial Services) 282,661
21,028 Commonwealth Bank of Australia (Financial Services) 344,626
12,416 Lend Lease Corp. Ltd. (Financial Services) 142,859
37,000 Publishing & Broadcasting Ltd. (Media) 219,433
26,000 TABCORP Holdings Ltd. (Recreational Services) 164,807
74,765 Telstra Corp. Ltd. (Utilities) 380,324
19,000 Telstra Corp. Ltd.* (Utilities) 60,945
30,539 The News Corp. Ltd. (Media) 220,843
51,302 Westpac Banking Corp. (Banks) 329,181
------------
2,489,493
-------------------------------------------------------------------------------
Brazilian Real - 1.2%
6,351 Companhia Brasileira de Distribuicao Grupo Pao de
Acucar ADR (Utilities) 138,928
7,053 Companhia Energetica de Minas Gerais ADR (Non-Voting)
(Utilities) 100,806
611 Companhia Energetica de Minas Gerais ADR+ (Utilities) 8,733
14,977 Telecomunicacoes Brasileiras SA ADR
(Telecommunications) 1,166,334
14,845 Telecomunicacoes Brasileiras SA (Residual Value) ADR
(Telecommunications) 696
4,700 Uniao de Bancos Brasileiros SA GDR (Financial Services) 108,688
------------
1,524,185
-------------------------------------------------------------------------------
British Pound Sterling - 16.7%
36,000 Abbey National PLC (Insurance) 702,763
38,000 BG PLC (Gas Distribution & Pipeline) 211,052
66,000 BP Amoco PLC (Oil & Gas) 640,946
74,000 Cable & Wireless PLC (Telecommunications) 863,337
129,488 Cadbury Schweppes PLC (Food Products) 842,587
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
British Pound Sterling - (continued)
36,600 Caradon PLC (Building Materials & Construction) $ 85,316
32,400 Centrica PLC (Energy) 94,101
97,000 Compass Group PLC (Food Products) 1,036,037
35,000 David S. Smith Holdings PLC (Paper & Forest
Products) 109,848
143,776 Diageo PLC (Beverages/Tobacco) 1,462,403
26,000 Electrocomponents PLC (Electronics) 232,841
10,000 GKN PLC (Industrial Machinery) 160,869
61,000 Glaxo Wellcome PLC (Pharmaceuticals) 1,800,223
21,000 Hays PLC (Diversified Holding Companies) 238,790
50,000 Hilton Group PLC (Recreational Services) 152,817
11,000 John Laing PLC (Non-Voting) (Household Durables) 52,057
140,000 Kingfisher PLC (Retail Trade) 1,532,119
129,400 National Westminster Bank PLC (Banks) 2,921,536
25,500 Rank Group PLC (Commercial Services) 79,403
158,045 Reed International PLC (Publishing) 927,127
40,000 Rio Tinto PLC (Mining-Metals/Minerals) 682,914
38,000 Safeway PLC (Retail Trade) 119,888
269,500 Shell Transport & Trading Co. PLC (Oil & Gas) 2,063,644
148,800 SmithKline Beecham PLC (Health & Medical Services) 1,919,388
203,000 Tesco PLC (Food Products) 602,927
103,980 Tomkins PLC (Diversified Holding Companies) 351,869
63,571 Unilever PLC (Consumer Products) 590,198
44,000 United News & Media PLC (Publishing) 421,875
114,500 Vodafone AirTouch PLC (Telecommunications) 533,395
------------
21,432,270
--------------------------------------------------------------------------
Canadian Dollar - 0.3%
5,410 Alcan Aluminum Ltd. (Mining-Metals/Minerals) 177,344
2,260 Nortel Networks Corp. (Telecommunications) 139,033
1,950 Royal Bank of Canada (Financial Services) 84,060
------------
400,437
--------------------------------------------------------------------------
Chilean Peso - 0.0%
2,440 Chilectra SA ADR+ (Utilities) 43,390
--------------------------------------------------------------------------
Chinese Yuan - 0.1%
12,900 Huaneng Power International, Inc. ADR (Energy) 156,412
--------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
33
<PAGE>
COMMERCE INTERNATIONAL EQUITY FUND
Statement of Investments (continued)
October 31, 1999
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Danish Krone - 0.4%
1,525 Den Danske Bank Group (Financial Services) $ 173,731
3,040 Tele Danmark AS (Telecommunications) 184,562
1,250 Unidanmark AS (Financial Services) 97,293
-----------
455,586
------------------------------------------------------------------------
Euro - 35.4%
Belgium - 1.1%
945 Dexia Belgium (Financial Services) 138,464
15,498 Fortis Belgium (Insurance) 523,280
12,610 KBC Bancassurance Holding NV (Financial Services) 649,928
1,750 UCB SA (Chemical Products) 65,254
-----------
1,376,926
------------------------------------------------------------------------
Finland - 1.6%
18,210 Nokia OYJ (Telecommunications) 2,084,167
------------------------------------------------------------------------
France - 11.3%
3,660 Alcatel (Computers/Office) 571,691
7,017 Axa (Insurance) 989,769
7,580 Banque Nationale de Paris (Banks) 665,747
2,410 Cap Gemini SA (Computer Services/Software) 365,034
8,334 Carrefour SA (Retail Trade) 1,542,837
2,480 Compagnie de Saint Gobain (Chemical Products) 430,417
1,215 Credit Commercial de France (Financial Services) 139,941
390 Danone (Food Products) 99,479
848 Dexia France (Financial Services) 119,524
10 Elf Aquitaine SA (Oil & Gas) 1,473
2,030 Hermes International (Retail Trade) 222,066
395 L'Oreal SA (Health/Personal Care) 263,622
1,781 Lafarge SA (Building Materials & Construction) 171,411
2,605 Legrand SA (Electronics) 623,366
2,500 Pinault-Printemps-Redoute SA (Retail Trade) 476,751
20,228 Sanofi-Synthelabo SA * (Health/Personal Care) 892,563
10,194 Schneider Electric SA (Electronics) 702,327
2,344 Societe Generale (Financial Services) 510,366
2,900 Societe Television Francaise 1 (Media) 909,009
4,528 Sodexho Alliance SA (Food Products) 742,993
9,616 STMicroelectronics NV
(Electronics-Semiconductors) 844,568
13,494 Total Fina SA (B Shares) (Oil & Gas) 1,823,886
19,437 Vivendi (Utilities) 1,473,048
-----------
14,581,888
------------------------------------------------------------------------
Germany - 5.9%
2,010 Allianz AG (Insurance) 612,066
10,529 Bayer AG (Chemical Products) 430,815
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Euro - (continued)
Germany - (continued)
191 Celanese AG* (Chemical Products) $ 3,014
10,290 Deutsche Bank AG (Financial Services) 738,165
12,844 Deutsche Telekom AG (Telecommunications) 590,385
11,508 Dresdner Bank AG (Financial Services) 591,919
14,931 Gehe AG (Health/Personal Care) 521,412
3,470 Hoechst AG (Chemical Products) 152,749
14,742 HypoVereinsbank (Financial Services) 967,598
8,990 Mannesmann AG (Industrial Machinery) 1,413,691
5,496 Rhoen-Klinikum AG (Health/Personal Care) 222,567
1,460 SAP AG (Computer Services/Software) 542,410
2,972 Siemens AG (Electronics & Other Electrical
Equipment) 266,812
9,248 Veba AG (Utilities) 499,994
-----------
7,553,597
----------------------------------------------------------------------
Ireland - 0.1%
8,677 CBT Group PLC ADR* (Computer Services/Software) 178,963
----------------------------------------------------------------------
Italy - 4.3%
12,600 Assicurazioni Generali (Insurance) 404,226
62,000 Banca di Roma (Financial Services) 83,475
14,000 Banca Popolare Di Brescia (Financial Services) 592,717
119,309 ENI SPA (Oil & Gas) 697,753
107,000 Istituto Nazionale delle Assicurazioni SPA
(Insurance) 324,701
23,000 Italgas SPA (Utilities) 95,077
36,025 Mediolanum SPA (Insurance) 292,912
35,362 San Paolo-IMI SPA (Financial Services) 458,249
63,000 Tecnost SPA (Financial Services) 121,268
207,443 Telecom Italia Mobile SPA (Utilities) 1,296,101
76,340 Telecom Italia SPA (Telecommunications) 659,248
96,094 UniCredito Italiano SPA (Financial Services) 449,790
-----------
5,475,517
----------------------------------------------------------------------
Luxembourg - 0.1%
600 Societe Europeenne des Satellites (Media) 74,944
----------------------------------------------------------------------
Netherlands - 7.7%
23,176 ABN AMRO Holding NV (Banks) 560,443
1,992 Akzo Nobel NV (Chemical Products) 85,781
14,860 ASM Lithography Holding NV* (Electronics-
Semiconductors) 1,048,806
7,783 CSM NV (Food Products) 358,980
19,480 Elsevier NV (Media) 185,025
2,340 Equant NV* (Computer Services/Software) 227,673
22,810 Fortis NV (Insurance) 785,281
----------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
34
<PAGE>
COMMERCE INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Euro - (continued)
Netherlands - (continued)
3,855 Gucci Group NV (Textiles) $ 311,291
31,592 ING Groep NV (Financial Services) 1,863,541
10,755 Koninklijke (Royal) Philips Electronics NV (Electronics) 1,102,983
2,598 KPN NV (Utilities) 133,329
14,360 Royal Dutch Petroleum Co. (Energy) 858,392
2,598 TNT Post Group NV (Financial Services) 66,131
4,767 Unilever NV (Consumer Products) 315,893
1,850 United Pan-Europe Communications NV*
(Telecommunications) 140,457
7,810 VNU NV (Publishing) 264,110
48,934 Wolters Kluwer NV (Media) 1,635,241
-----------
9,943,357
-------------------------------------------------------------------------------
Portugal - 0.4%
19,251 Jeronimo Martins SGPS SA
(Food Products) 537,413
-------------------------------------------------------------------------------
Spain - 2.9%
11,216 Argentaria SA (Banks) 248,928
12,090 Banco Bilbao Vizcaya SA (Financial Services) 162,522
1,840 Banco Popular Espanol SA (Banks) 123,866
53,730 Banco Santander Central Hispano SA (Banks) 557,812
18,676 Endesa SA (Electrical Services) 373,832
8,937 Gas Natural SDG SA (Utilities) 197,408
30,650 Iberdrola SA (Utilities) 446,835
16,201 Repsol-YPF SA (Oil & Gas) 334,004
74,708 Telefonica SA* (Telecommunications) 1,229,016
-----------
3,674,223
-------------------------------------------------------------------------------
Total Euro 45,480,995
-------------------------------------------------------------------------------
Hong Kong Dollar - 2.5%
93,600 Cable & Wireless HKT Ltd. (Telecommunications) 213,864
34,000 Cheung Kong Holdings Ltd. (Real Estate) 309,648
144,000 China Telecom Ltd.* (Telecommunications) 492,141
54,000 CLP Holdings Ltd. (Utilities) 248,156
24,000 Dao Heng Bank Group Ltd. (Banks) 109,056
47,000 Henderson Land Development Co. Ltd. (Recreational
Services) 213,567
34,800 HSBC Holdings PLC (Financial Services) 418,845
76,000 Hutchison Whampoa Ltd. (Diversified Holding Companies) 763,082
43,000 New World Development Co. Ltd. (Real Estate) 81,367
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Hong Kong Dollar - (continued)
138,000 Pacific Century CyberWorks Ltd.*
(Telecommunications) $ 104,808
25,000 Sun Hung Kai Properties Ltd. (Real Estate) 202,742
-----------
3,157,276
-------------------------------------------------------------------------
Indian Rupee - 0.2%
15,025 ICICI Ltd. ADR* (Financial Services) 165,275
7,000 Mahanagar Telephone Nigam Ltd. GDR
(Telecommunications) 58,275
-----------
223,550
-------------------------------------------------------------------------
Japanese Yen - 19.9%
8,000 Bridgestone Corp. (Automobiles & Automobile Parts) 220,198
38,000 Canon, Inc. (Electronics & Other Electrical
Equipment) 1,075,094
10,000 Citizen Watch Co. (Electronics & Other Electrical
Equipment) 70,682
7,000 Daiichi Pharmaceutical Co. Ltd. (Health/Personal
Care) 100,364
20,000 Daiwa House Industry Co. Ltd.
(Building Materials & Construction) 182,987
41 DDI Corp. (Utilities) 448,259
33,000 Denso Corp. (Transportation/Storage) 705,764
57 East Japan Railway Co. (Railroads) 349,314
5,200 FANUC Ltd. (Electronics) 403,951
26,000 Fujitsu Ltd. (Computers/Office) 782,967
33,000 Hitachi Ltd. (Electronics) 356,680
2,000 Honda Motor Co. Ltd. (Automobiles & Automobile
Parts) 84,396
7,000 Ito-Yokado Co. Ltd. (Retail Trade) 559,893
21,000 Kao Corp. (Cosmetics) 640,453
13,000 Kokuyo Co. Ltd. (Computer Services/Software) 236,012
11,000 KOMORI Corp. (Industrial Machinery) 238,947
31,000 Kuraray Co. Ltd (Chemical Products) 416,227
11,000 Kyocera Corp. (Electronics &
Other Electrical Equipment) 1,054,953
17,000 Makita Corp. (Industrial Machinery) 163,201
29,000 Marui Co. Ltd. (Retail Trade) 547,905
46,000 Matsushita Electric Industrial Co. Ltd.
(Electronics) 968,351
26,000 Mitsubishi Corp. (Wholesale Trade) 187,015
125,000 Mitsubishi Heavy Industries Ltd. (Industrial
Machinery) 490,314
57,000 Mitsui Fudosan Co. Ltd. (Real Estate) 425,846
14,000 Murata Manufacturing Co. Ltd. (Electronics) 1,799,175
62,000 NEC Corp. (Electronics) 1,254,627
-------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
COMMERCE INTERNATIONAL EQUITY FUND
Statement of Investments (continued)
October 31, 1999
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Japanese Yen - (continued)
102 Nippon Telegraph & Telephone Corp. (Utilities) $ 1,565,167
46,000 Nomura Securities Co. Ltd. (Financial Services) 759,240
51 NTT Mobile Communications
Network, Inc. (Telecommunications) 1,354,848
31,000 Sankyo Co. Ltd. (Financial Services) 882,996
35,000 Sekisui Chemical Co. Ltd. (Building Materials &
Construction) 172,197
27,000 Sekisui House Ltd. (Building Materials & Construction) 292,347
3,000 Seven-Eleven Japan Co. Ltd. (Retail Trade) 274,767
11,000 Shin-Etsu Chemical Co. Ltd. (Chemical Products) 453,630
13,000 Shiseido Co. Ltd.
(Health/ Personal Care) 198,235
200 SOFTBANK Corp.
(Computer Services/Software) 83,054
10,100 SONY Corp. (Household Durables) 1,575,007
51,000 Sumitomo Corp. (Wholesale Trade) 372,705
47,000 Sumitomo Electric Industries (Electronics & Other
Electrical Equipment) 631,505
10,000 TDK Corp. (Household Durables) 979,189
32,000 The Sumitomo Bank Ltd. (Banks) 514,971
13,000 Tokio Marine & Fire Insurance Co. Ltd. (Insurance) 170,183
2,300 Tokyo Electron Ltd. (Electronics & Other Electrical
Equipment) 191,023
20,000 Toppan Printing Co. Ltd. (Media) 245,325
80,000 TOSHIBA Corp. (Electronics) 503,309
11,000 Uny Co. Ltd. (Retail Trade) 142,419
10,000 Yamanouchi Pharmaceutical Co. Ltd. (Pharmaceuticals) 453,630
-----------
25,579,322
------------------------------------------------------------------------------
Korean Won - 0.6%
7,000 Korea Telecom Corp. ADR* (Telecommunications) 246,750
3,327 Samsung Electronics (Electronics) 554,731
-----------
801,481
------------------------------------------------------------------------------
Mexican Peso - 1.5%
6,344 Cemex SA de CV ADR* (Building Materials & Construction) 142,740
18,860 Cemex SA de CV (B Shares) (Building Materials &
Construction) 85,353
46,500 Fomento Economico Mexico SA de CV (Diversified Holding
Companies) 150,936
17,210 Gruma SA (Diversified Holding Companies) 22,488
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Mexican Peso - (continued)
68,450 Grupo Industrial Maseca SA de CV (Household Durables) $ 34,182
59,232 Grupo Modelo SA de CV (Beverages/Tobacco) 144,814
5,222 Grupo Televisa SA GDR * (Media) 221,935
46,739 Kimberly-Clark de Mexico SA de CV (Health/Personal Care) 149,767
11,145 Telefonos de Mexico SA ADR (Financial Services) 952,898
4,800 TV Azteca SA de CV ADR (Media) 19,500
----------
1,924,613
-----------------------------------------------------------------------------
New Zealand Dollar - 0.2%
62,000 Telecom Corp. of New Zealand Ltd. IR (Utilities) 249,537
-----------------------------------------------------------------------------
Norwegian Krone - 0.5%
3,370 Norsk Hydro ASA (Energy) 134,396
34,540 Orkla ASA (Food Products) 481,892
----------
616,288
-----------------------------------------------------------------------------
Singapore Dollar - 0.5%
12,503 Singapore Press Holdings Ltd. (Media) 214,234
48,000 Singapore Telecommunications Ltd. (Telecommunications) 91,192
51,000 United Overseas Bank Ltd. (Banks) 386,341
----------
691,767
-----------------------------------------------------------------------------
Swedish Krona - 3.6%
3,008 ABB Ltd. * (Electronics) 299,557
25,338 AstraZeneca Group PLC (Pharmaceuticals) 1,144,585
6,500 Atlas Copco AB (Industrial Machinery) 169,139
34,740 Electrolux AB (Appliance Manufacturer) 692,772
2,530 Esselte AB (Media) 16,920
47,840 Hennes & Mauritz AB (Retail Trade) 1,271,041
93,980 Nordbanken Holding AB (Financial Services) 548,521
10,210 Sandvik AB (B Shares) (Industrial Machinery) 264,437
7,762 Securitas AB (Commercial Services) 115,146
3,650 Telefonaktiebolaget LM Ericsson AB (Telecommunications) 151,788
----------
4,673,906
-----------------------------------------------------------------------------
Swiss Franc - 6.4%
5,323 ABB Ltd. * (Electronics) 536,037
1,839 Adecco SA (Business Services) 1,114,765
2,840 Credit Suisse Group (Financial Services) 545,903
1,045 Nestle SA (Food Products) 2,015,548
988 Novartis AG (Chemical Products) 1,477,819
103 Roche Holding AG
(Health/Personal Care) 1,236,568
480 Swisscom AG (Telecommunications) 146,270
-----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
36
<PAGE>
COMMERCE INTERNATIONAL EQUITY FUND
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Swiss Franc - (continued)
4,130 UBS AG (Banks) $ 1,201,637
------------
8,274,547
---------------------------------------------------------------------------
Taiwan Dollar - 0.2%
12,671 Hon Hai Precision Industry Co. Ltd. GDR*+
(Electronics) 205,587
---------------------------------------------------------------------------
TOTAL COMMON STOCKS
(cost $96,553,461) $118,678,649
---------------------------------------------------------------------------
Preferred Stocks - 0.9%
Australian Dollar - 0.1%
26,215 The News Corp. Ltd. (Media) $ 177,487
---------------------------------------------------------------------------
Brazilian Real - 0.5%
13,550,488 Banco Bradesco SA (Banks) 66,295
1,370,000 Banco Itau SA (Financial Services) 78,606
2,560,126 Companhia Energetica de Minas Gerais (Utilities) 36,461
1,774,463 Petroleo Brasileiro SA (Oil & Gas) 282,260
1,028,953 Telecomunicacoes de Sao Paulo SA
(Telecommunications) 96,728
982,766 Telesp Celular SA (Telecommunications) 51,354
------------
611,704
---------------------------------------------------------------------------
Euro - 0.3%
Germany - 0.3%
420 Fresenius AG (Non-Voting) (Health & Medical
Services) 68,696
766 SAP AG (Non-Voting) (Computer Services/Software) 337,596
------------
406,292
---------------------------------------------------------------------------
Total Euro 406,292
---------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(cost $1,435,648) $ 1,195,483
---------------------------------------------------------------------------
Rights - 0.1%
Norwegian Krone - 0.1%
34,540 Orkla ASA+ (Food Products) $ 64,912
---------------------------------------------------------------------------
TOTAL RIGHTS
(cost $0) $ 64,912
---------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Repurchase Agreement - 9.0%
State Street Bank & Trust Co.
$11,515,000 5.07% 11/01/1999 $ 11,515,000
------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(cost $11,515,000) $ 11,515,000
------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(cost $109,504,109) $131,454,044
------------------------------------------------------------------------------------------------
</TABLE>
* 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.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
------------------------------------------------------------------------------
Investment Abbreviations:
ADR--American Depository Receipt
GDR--Global Depository Receipt
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
COMMERCE INTERNATIONAL EQUITY FUND
Statement of Investments (continued)
October 31, 1999
<TABLE>
<CAPTION>
As a % of
Total Net Assets
Common and Preferred Stock Industry Classifications
<S> <C>
Appliance Manufacturer 0.5%
Automobiles & Automobile Parts 0.2
Banks 6.0
Beverages/Tobacco 1.2
Building Materials & Construction 0.9
Business Services 0.9
Chemical Products 2.7
Commercial Services 0.2
Computer Services/Software 1.5
Computers/Office 1.1
Consumer Products 0.7
Cosmetics 0.5
Diversified Holding Companies 1.2
Electrical Services 0.3
Electronics 7.4
Electronics & Other Electrical Equipment 2.6
Electronics-Semiconductors 1.5
Energy 1.0
Financial Services 10.4
Food Products 5.2
Gas Distribution & Pipeline 0.2
Health & Medical Services 1.5
Health/Personal Care 2.8
Household Durables 2.1
Industrial Machinery 2.3
Insurance 3.7
Media 3.2
Mining-Metals/Minerals 0.8
Oil & Gas 4.5
Paper & Forest Products 0.1
Pharmaceuticals 2.6
Publishing 1.3
Railroads 0.3
Real Estate 0.8
Recreational Services 0.4
Retail Trade 5.2
Telecommunications 8.2
Textiles 0.2
Transportation/Storage 0.7
Utilities 5.9
Wholesale Trade 0.4
--------------------------------------------------------------------------
TOTAL COMMON AND PREFERRED STOCK 93.2%
--------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
COMMERCE NATIONAL TAX-FREE INTERMEDIATE BOND FUND
Shareholder Letter
Dear Shareholder:
We are pleased to report on the performance of the Commerce National Tax-Free
Intermediate Bond Fund for the year ended October 31, 1999.
Performance Review
For the year ended October 31, 1999, the Institutional
Shares of the Fund had a total return of -1.08%, based on
Net Asset Value (NAV) (assumes fee waivers and expense re-
imbursements). This compared to the Merrill Lynch Municipal
Intermediate Index 12-month return of -0.03% and Lipper In-
termediate Municipal Funds Index 12-month return of -1.30%.
Past performance is no guarantee of future results. (The
Fund's NAV and yield are not guaranteed by the FDIC or U.S.
government or by its agencies, instrumentalities, or spon-
sored enterprises.)
Portfolio Highlights
. The last year has been a challenging period for the munic-
ipal bond market. Over the last 12 months, municipal bond
yields have risen substantially -- jumping from 4.10% at
the end of October 1998 to 5.05% at the end of October
1999. This was the largest rolling 12-month increase in
over five years. Rising yields were primarily due to con-
cern over an increase in inflation. The strong domestic
economy, rising commodity prices and wage pressures have
led the Federal Reserve Board to increase short term inter-
est rates three times thus far in 1999.
. In addition to the interest rate environment, the munici-
pal market was hampered by a fall in demand on the institu-
tional level. Municipal bond mutual funds experienced net
redemptions during the last six months, as an increase in
interest rates diminished their appeal. And an industry-
wide profitability squeeze motivated property and casualty
insurers to reduce their purchases of municipals in favor
of taxable fixed-income securities. During this period in-
dividual investors provided the only consistent source of
liquidity.
. Our main focus for the Fund continues to be improving its
relative yield. To accomplish this, the Fund's duration has
remained stable, and we have concentrated on higher yield-
ing sectors such as housing, higher education, and trans-
portation. One exception has been the healthcare sector,
where we started to cut back the Fund's exposure in August
1999. We've seen that even the most profitable hospitals
are having a difficult time adjusting to the reduction in
Medicare reimbursement laid out in the 1997 Balanced Budget
Act.
. As we've seen in recent years, municipal bonds have con-
tinued to underperform U.S. Treasury securities. In fact,
since 1996, municipal yields have risen an average of 20
basis points, whereas Treasury bond yields have declined by
an average of 30 basis points. When yields rise, the value
of existing bonds fall. Because of this trend, we believe
municipal bonds now offer investors very attractive yields
relative to U.S. Treasury bonds.
We thank you for your investment and look forward to your
continued confidence.
Sincerely,
Fixed-Income Funds Team
Investment Management Group
Commerce Bank, N.A.
November 22, 1999
39
<PAGE>
COMMERCE NATIONAL TAX-FREE INTERMEDIATE BOND FUND
Performance Summary (Unaudited)
October 31, 1999
The following graph shows the value, as of October 31, 1999, of a $10,000 in-
vestment made on February 21, 1995 in the Institutional Shares. For compara-
tive purposes, the performance of the Fund's benchmarks (the Merrill Lynch
Municipal Intermediate Index ("Merrill Muni Index") and the Lipper Intermedi-
ate Municipal Funds Index ("Lipper Muni Index")) are shown. The performance
data represents past performance and should not be considered indicative of
future performance which will fluctuate with changes in market conditions.
These performance fluctuations will cause an investor's shares, when re-
deemed, to be worth more or less than their original cost.
National Tax-Free Intermediate Bond Fund's Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested February 21, 1995 to
October 31, 1999.
[GRAPH]
Nat'l Tax-Free Merrill Lynch Muni Lipper Muni
Intermediate Bonds Index Index
2/21/95 10,000 10,000 10,000
10/31/95 10,606 10,765 10,733
10/31/96 10,989 11,387 11,214
10/31/97 11,666 12,191 11,989
10/31/98 12,435 13,098 12,804
10/31/99 12,300 13,094 12,637
<TABLE>
<S> <C> <C>
Average Annual Total Return through October 31,
1999 Since Inception One Year
Institutional Shares (commenced February 21, 1995) 4.51% (1.08)%
-----------------------------------------------------------------------------
</TABLE>
40
<PAGE>
COMMERCE NATIONAL TAX-FREE INTERMEDIATE BOND FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - 94.3%
California - 1.1%
Los Angeles California Unified School District GO Bonds Series C (MBIA)
(AAA/Aaa)
$ 500,000 5.00% 07/01/2018 $ 446,860
----------------------------------------------------------------------------------------------
Colorado - 1.3%
Colorado Springs Sales Tax Revenue Bonds (AA/A1)
255,000 4.40 12/01/2008 242,505
Larimer County Courthouse and Jail Facilities Certificate Participation
(FSA) (AAA/Aaa)
300,000 4.65 12/15/2008 288,336
-----------
530,841
----------------------------------------------------------------------------------------------
Florida - 1.7%
Florida State Board of Education Capital Outlay GO Bonds Series A
(AA+/Aa2)
200,000 5.25 01/01/2004 204,784
Florida State Board of Education Capital Outlay GO Bonds Series D
(AA+/Aa2)
500,000 5.75 06/01/2022 478,670
-----------
683,454
----------------------------------------------------------------------------------------------
Georgia - 1.4%
Georgia Private Colleges & University Revenue Bonds Series A (NR/A3)
500,000 5.25 10/01/2020 449,585
Georgia State GO Bonds Series D (AAA/Aaa)
100,000 5.40 11/01/2010 101,910
-----------
551,495
----------------------------------------------------------------------------------------------
Hawaii - 0.8%
Honolulu HI City and County Revenue Bonds Series A (AA-/Aa3)
300,000 7.25 07/01/2002 320,760
----------------------------------------------------------------------------------------------
Illinois - 6.3%
Chicago IL Metropolitan Water Reclamation GO Bonds (AA/Aa1)
500,000 4.90 12/01/2001 506,580
450,000 5.60 12/01/2009 462,182
Chicago IL Pub Bldg Community Building Revenue Bonds Series C (FGIC)
(AAA/Aaa)
500,000 5.50 02/01/2006 515,930
Evanston GO Bonds (NR/Aaa)
250,000 5.30 12/01/1999 250,315
Illinois ST GO Bonds (AAA/Aaa)
300,000 5.00 03/01/2017 266,445
Illinois ST Sales Tax Revenue Bonds (AAA/Aa2)
300,000 6.50 06/15/2022 316,875
Kankakee River Met Agency IL Sewer Treatment Facilities Revenue Bonds
(AAA/Aaa)
265,000 5.00 05/01/2022 227,844
-----------
2,546,171
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - (continued)
Indiana - 5.7%
Beech Grove IN Sch Bldg Revenue Bonds (MBIA) (AAA/Aaa)
$ 400,000 5.63% 07/05/2024 $ 384,256
Elkhart County IN Hospital Authority Revenue Bonds (NR/A1)
700,000 5.25 08/15/2018 621,768
Merrillville IN Multi Sch Bldg Revenue Bonds (AAA/Aaa)
500,000 6.65 07/01/2006 549,175
Plymouth IN Multi Sch Bldg Revenue Bonds (AAA/Aaa)
700,000 5.75 07/01/2006 731,801
-----------
2,287,000
----------------------------------------------------------------------------------------------
Iowa - 1.2%
Bettendorf GO Bonds Series A (AMBAC) (AAA/Aaa)
250,000 4.70 06/01/2003 250,890
Iowa City Sewer Revenue Bonds (AMBAC) (AAA/Aaa)
250,000 6.00 07/01/2008 255,763
-----------
506,653
----------------------------------------------------------------------------------------------
Kansas - 5.0%
Kansas State Development Financial Authority Revenue Bonds Department of
Corrections Series A-1 (MBIA) (AAA/Aaa)
275,000 5.00 02/01/2012 263,552
Kansas State Development Financial Authority Revenue Bonds Public Water
Supply (AA-/A2)
500,000 5.00 04/01/2016 455,525
Kansas State Development Financial Authority Revenue Bonds Water
Pollution Control (AA+/Aa1)
250,000 5.25 11/01/2009 250,577
Olathe KS Certificate Participation Series A (NR/A-)
250,000 4.80 09/01/2007 242,478
Ottawa Kansas Educational Facilities Revenue Bonds (Ottawa University
Project) (NR/NR)
350,000 5.60 10/01/2018 315,973
Sedgwick County GO Bonds Series A (AA/Aa1)
500,000 4.25 08/01/2004 491,335
-----------
2,019,440
----------------------------------------------------------------------------------------------
Louisiana - 3.2%
Louisiana Public Facilities Authority Hospital Revenue Bonds (AAA/Aaa)
500,000 5.00 07/01/2004 503,475
Louisiana State GO Bonds (AMBAC) (AAA/Aaa)
250,000 5.00 04/15/2002 253,790
Orleans Parish LA Parishwide School District Revenue Bonds (NR/Aaa)
500,000 7.00 09/01/2003 541,815
-----------
1,299,080
----------------------------------------------------------------------------------------------
Maine - 0.8%
Regional Waste System ME Solid Waste Revenue Bonds (AA/NR)
300,000 5.25 07/01/2004 306,186
----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
41
<PAGE>
COMMERCE NATIONAL TAX-FREE INTERMEDIATE BOND FUND
Statement of Investments (continued)
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - (continued)
Massachusetts - 2.6%
Massachusetts State GO Bonds Series A (AAA/Aaa)
$ 700,000 5.60% 02/01/2007 $ 725,165
Massachusetts State Water Resources Authority Revenue Bonds Series D
(MBIA) (AAA/Aaa)
400,000 5.00 08/01/2024 340,076
-----------
1,065,241
----------------------------------------------------------------------------------------------
Michigan - 6.7%
Detroit Michigan Sewage Disposal Revenue Bonds (AAA/Aaa)
300,000 6.00 07/01/2004 315,747
Greenville Public Schools GO Bonds (MBIA) (AAA/Aaa)
200,000 5.75 05/01/2007 210,290
Michigan State Hospital Finance Authority Revenue Bonds (BBB+/Baa1)
150,000 5.45 11/15/2009 142,975
Michigan State Hospital Finance Authority Revenue Bonds Series A
(AA/Aa2)
1,100,000 6.13 11/15/2026 1,066,802
Michigan State Housing Development Authority Revenue Bonds Series B
(AAA/Aaa)
500,000 4.80 12/01/2010 466,505
Waterford Township School District Revenue Bonds (Q-SBLF) (AA+/Aa2)
500,000 4.85 06/01/2010 481,940
-----------
2,684,259
----------------------------------------------------------------------------------------------
Minnesota - 2.6%
Minnesota State Housing and Finance Agency Revenue Bonds Series D
(AA+/Aa2)
335,000 5.35 01/01/2005 341,318
Rochester Minnesota Health Care Facilities Revenue Bonds Series I
(AA+/NR)
300,000 5.80 11/15/2007 313,695
St. Paul Independent School District #625 GO Bonds Series C (AA/Aa3)
400,000 5.20 02/01/2007 403,436
-----------
1,058,449
----------------------------------------------------------------------------------------------
Missouri - 9.1%
Belton MO Certificate Participation (NR/Aaa)
535,000 4.70 03/01/2012 495,201
Howard Bend Missouri Levee District Special Tax Revenue Bonds (NR/NR)
670,000 5.30 03/01/2008 652,372
Independence MO School District GO Bonds (AA+/A3)
550,000 5.00 03/01/2017 495,583
Missouri State Health & Educational Facility Revenue Bonds (Freeman
Health Systems Project) (BBB+/NR)
500,000 4.75 02/15/2005 479,430
Osage Beach MO Waterworks and Sewer System Revenue Bonds (NR/NR)
280,000 4.75 12/01/2011 256,326
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - (continued)
Missouri - (continued)
Perry County MO Hospital Revenue Bonds (NR/NR)
$ 105,000 4.30% 06/01/2001 $ 103,489
100,000 4.45 06/01/2002 97,715
110,000 4.90 06/01/2006 104,299
St. Charles County MO Industrial Development Revenue Bonds (Housing
Vanderbilt Apts) (NR/NR)
250,000 5.00 02/01/2029 238,228
St. Peters GO Bonds (NR/Aaa)
290,000 7.20 01/01/2009 332,502
St. Peters GO Bonds (FGIC) (NR/Aaa)
345,000 7.20 01/01/2008 394,577
-----------
3,649,722
----------------------------------------------------------------------------------------------
Montana - 0.5%
Montana State Higher Education Student Assistance Corp. Student Loan
Revenue Bonds Series B (NR/Aaa)
200,000 5.20 12/01/2002 202,712
----------------------------------------------------------------------------------------------
Nebraska - 2.1%
Nebraska Public Power District Revenue Bonds Series A (AAA/A1)
250,000 5.10 01/01/2006 258,403
Nebraska Public Power District Revenue Bonds Series A (MBIA-IBC)
(AAA/Aaa)
95,000 4.50 01/01/2000 95,105
Omaha Public Power Revenue Bonds Series A (AA/Aa2)
500,000 5.00 02/01/2001 503,985
-----------
857,493
----------------------------------------------------------------------------------------------
Nevada - 1.1%
Clark County School District GO Bonds Series B (AAA/Aaa)
200,000 5.30 05/01/2004 204,566
Nevada Housing Division Single Family Revenue Bonds Series A-2 (AMT)
(FHA) (NR/Aaa)
250,000 4.10 10/01/2004 239,670
-----------
444,236
----------------------------------------------------------------------------------------------
New York - 7.7%
New York Dormitory Authority Revenue Bonds (MBIA-IBC) (AAA/Aaa)
500,000 4.50 07/01/2006 489,555
New York GO Bonds Series A (A-/A3)
500,000 5.25 08/01/2007 503,755
New York GO Bonds Series A (AMBAC-TCRS) (AAA/Aaa)
250,000 7.00 08/01/2004 272,842
New York GO Bonds Series J (A-/A3)
500,000 5.25 08/01/2011 484,205
New York ST Energy Resh and Development Revenue Bonds Series A (A-/Ba1)
250,000 7.15 12/01/2020 269,518
New York State Dorm Authority Revenue Bonds Series B (A/A2)
540,000 5.00 05/15/2008 531,166
----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
42
<PAGE>
COMMERCE NATIONAL TAX-FREE INTERMEDIATE BOND FUND
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - (continued)
New York - (continued)
New York State Urban Development Corp. Revenue Bonds (BBB+/Baa1)
$ 500,000 6.25% 01/01/2007 $ 532,860
-----------
3,083,901
----------------------------------------------------------------------------------------------
Ohio - 0.4%
Ohio State Infrastructure Improvement GO Bonds (AA+/Aa1)
150,000 5.20 08/01/2010 150,197
----------------------------------------------------------------------------------------------
Oregon - 1.3%
Oregon State Housing & Community Services Department Revenue Bonds
Series D (NR/Aa2)
500,000 5.55 07/01/2006 508,020
----------------------------------------------------------------------------------------------
Pennsylvania - 2.6%
Pennsylvania State GO Bonds (AA/Aa3)
500,000 5.25 06/15/2006 510,610
Pennsylvania State Industrial Development Authority Revenue Bonds
(AAA/Aaa)
500,000 6.00 07/01/2008 528,640
-----------
1,039,250
----------------------------------------------------------------------------------------------
South Carolina - 1.3%
York County School District #1 GO Bonds Series A (MBIA SCSDE) (AAA/Aaa)
500,000 7.00 07/01/2003 539,270
----------------------------------------------------------------------------------------------
South Dakota - 5.1%
South Dakota Building Authority Revenue Bonds (A+/A1)
300,000 6.00 09/01/2003 314,136
South Dakota Housing Development Authority Revenue Bonds (AAA/Aa1)
660,000 4.60 05/01/2005 642,820
315,000 4.65 05/01/2006 308,779
South Dakota ST Health & Educational Revenue Bonds (BBB+/Baa2)
250,000 7.25 04/01/2022 275,045
South Dakota ST Health & Educational Revenue Bonds (MBIA) (AAA/Aaa)
500,000 5.00 09/01/2004 506,165
-----------
2,046,945
----------------------------------------------------------------------------------------------
Tennessee - 2.2%
Metro Government Nashville & Davidson County Industrial Development
Board Revenue Bonds Series B (AAA/Aaa)
300,000 7.50 11/15/2010 354,879
Shelby County GO Bonds Series A (AA+/Aa3)
500,000 5.63 06/01/2008 519,585
-----------
874,464
----------------------------------------------------------------------------------------------
Texas - 3.8%
Guadalupe County TX Revenue Bonds (NR/Aaa)
340,000 5.60 02/01/2005 352,770
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - (continued)
Texas - (continued)
Houston Texas Independent School District Revenue Bonds Series A
(AAA/Aaa)
$ 300,000 5.00% 02/15/2019 $ 264,093
Katy Texas Independent School District GO Bonds Series A (AAA/Aaa)
200,000 4.75 02/15/2027 162,050
San Antonio GO Bonds (AA+/Aa2)
200,000 5.20 08/01/2002 204,184
Tarrant County Water Control & Improvement Revenue Bonds (AAA/Aaa)
140,000 5.00 03/01/2009 137,637
Texas A&M University Revenue Bonds (AA+/Aa2)
200,000 5.55 05/15/2001 204,174
Texas State GO Bonds Series A (AA/Aa1)
200,000 5.65 10/01/2008 206,182
-----------
1,531,090
----------------------------------------------------------------------------------------------
Utah - 3.4%
Alpine School District GO Bonds (FGIC-TCRS) (AAA/Aaa)
250,000 5.40 03/15/2005 253,358
Intermountain Power Agency Revenue Bonds Series A (AAA/Aaa)
800,000 6.00 07/01/2008 848,688
Intermountain Power Agency Revenue Bonds Series B (A+/A1)
250,000 5.10 07/01/2003 253,227
-----------
1,355,273
----------------------------------------------------------------------------------------------
Virginia - 0.5%
Virginia Beach GO Bonds (AA/Aa2)
200,000 5.20 07/15/2006 204,408
----------------------------------------------------------------------------------------------
Washington - 9.9%
King County GO Bonds Series D (AA+/Aa1)
500,000 6.20 12/01/2000 511,260
Kitsap County School District No 400 Revenue Bonds (NR/A1)
680,000 6.05 12/01/2000 694,028
Metro Washington DC Airports Authority Revenue Bonds Series B (AAA/Aaa)
500,000 5.25 10/01/2009 495,410
500,000 5.25 10/01/2012 483,595
Pierce County Sewer Improvements Revenue Bonds (A+/A1)
290,000 5.45 02/01/2008 292,114
Seattle GO Bonds Series A (AA+/Aa1)
150,000 5.30 08/01/2013 145,014
Spokane County School District #354 GO Bonds (A+/A2)
370,000 5.20 12/01/2006 373,049
Vancouver Water & Sewer Revenue Bonds (FGIC) (AAA/Aaa)
250,000 4.70 06/01/2001 251,693
Washington Higher Educational Facility University of Puget Sound Revenue
Bonds (A+/A2)
500,000 5.00 10/01/2006 495,090
Washington State GO Bonds Series DD-12 & CC-9 (AA+/Aa1)
250,000 5.38 03/01/2008 254,597
-----------
3,995,850
----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
43
<PAGE>
COMMERCE NATIONAL TAX-FREE INTERMEDIATE BOND FUND
Statement of Investments (continued)
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - (continued)
Wisconsin - 2.4%
Milwaukee GO Bonds Series E (AA+/Aa1)
$ 250,000 5.50% 06/15/2010 $ 252,882
Wisconsin State Clean Water Revenue Bonds Series 1 (AA+/Aa2)
500,000 5.25 06/01/2010 498,375
Wisconsin State GO Bonds Series 3 (AA/Aa2)
200,000 5.25 11/01/2002 204,834
-----------
956,091
----------------------------------------------------------------------------------------------
Wyoming - 0.5%
Wyoming Community Development Authority Housing Revenue Bonds Series 5
(AA/Aa2)
200,000 4.80 06/01/2009 188,964
----------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BOND OBLIGATIONS
(cost $38,861,397) $37,933,775
----------------------------------------------------------------------------------------------
Short-Term Obligations # - 8.7%
Missouri - 1.3%
Missouri State Health & Educational Facility Revenue Bonds (Drury
College) Series A (Chase Manhattan Bank LOC; Expire 8/21/01, Direct Pay
100%) (NR/Aaa)
$ 300,000 3.55% 11/01/1999 $ 300,000
Missouri State Health & Educational Facility Revenue Bonds (St. Francis
Medical Center) Series A (Credit Local de France LOC; Expire 6/19/03,
Direct Pay 100%) (A1+/NR)
200,000 3.50 11/01/1999 200,000
-----------
500,000
----------------------------------------------------------------------------------------------
North Dakota - 1.2%
Grand Forks ND Health Care Facilities (Lasalle National Bank LOC; Expire
2/21/01, Direct pay 100%) (NR/VMIG1)
500,000 3.65 11/01/1999 500,000
----------------------------------------------------------------------------------------------
Texas - 6.2%
Grapevine Industrial Development Corp. American Airlines-A1 (Morgan
Guaranty Trust LOC; Expire 12/31/99, Direct pay 100%) (NR/P1)
200,000 3.65 11/12/1999 200,000
Grapevine Industrial Development Corp. American Airlines-B1 (Morgan
Guaranty Trust LOC; Expire 12/31/99, Direct pay 100%) (NR/P1)
300,000 3.65 11/12/1999 300,000
Grapevine Industrial Development Corp. American Airlines-B3 (Morgan
Guaranty Trust LOC, Expire 12/31/99, Direct pay 100%) (NR/P1)
300,000 3.65 11/12/1999 300,000
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Short-Term Obligations # - ( continued)
Texas - (continued)
Harris County Health Facilities Development Corp. Revenue Bonds St.
Luke's Episcopal Hospital Series 1997 A (A1+/NR)
$ 700,000 3.65% 11/12/1999 $ 700,000
Harris County Health Facilities Development Corp. Revenue Bonds St.
Luke's Episcopal Hospital Series 1997 B (A1+/NR)
1,000,000 3.65 11/12/1999 1,000,000
-----------
2,500,000
----------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(cost $3,500,000) $ 3,500,000
----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(cost $42,361,397) $41,433,775
----------------------------------------------------------------------------------------------
</TABLE>
# Variable rate security. Coupon rate disclosed is that which is in effect at
October 31, 1999.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
------------------------------------------------------------------------------
Investment Abbreviations:
AMBAC--Insured by American Municipal Bond Assurance Corp.
AMT--Alternative Minimum Tax
FGIC--Insured by Financial Guaranty Insurance Co.
FHA--Insured by Federal Housing Administration
FSA--Insured by Financial Security Assurance Co.
GO--General Obligation
LOC--Letter of Credit
MBIA--Insured by Municipal Bond Investors Assurance
NR--Not Rated
Q-SBLF--Qualified-School Bond Loan Fund
TCRS--Transferable Custodial Receipts
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
44
<PAGE>
COMMERCE MISSOURI TAX-FREE INTERMEDIATE BOND FUND
Shareholder Letter
Dear Shareholder:
We are pleased to report on the performance of the Commerce Missouri Tax-Free
Intermediate Bond Fund for the year ended October 31, 1999.
Performance Review
For the year ended October 31, 1999, the Institutional
Shares of the Fund had a total return of -0.95%, based on
Net Asset Value (NAV) (assumes fee waivers and expense re-
imbursements). This compared to the Lipper Intermediate Mu-
nicipal Funds Index 12-month return of -1.30% and Merrill
Lynch Municipal Intermediate Index 12-month return of -
0.03%. Past performance is no guarantee of future results.
(The Fund's NAV and yield are not guaranteed by the FDIC or
U.S. government or by its agencies, instrumentalities, or
sponsored enterprises.)
Portfolio Highlights
. The last year has been a challenging period for the munic-
ipal bond market. Over the last 12 months, municipal bond
yields have risen substantially - jumping from 4.10% at the
end of October 1998 to 5.05% at the end of October 1999.
This was the largest rolling 12-month increase in over five
years. Rising yields were primarily due to concern over an
increase in inflation. The strong domestic economy, rising
commodity prices and wage pressures have led the Federal
Reserve Board to increase short term interest rates three
times thus far in 1999.
. In addition to the interest rate environment, the munici-
pal market was hampered by a fall in demand on the institu-
tional level. Municipal bond mutual funds experienced net
redemptions during the last six months, as an increase in
interest rates diminished their appeal. And an industry-
wide profitability squeeze motivated property and casualty
insurers to reduce their purchases of municipals in favor
of taxable fixed income securities. During this period in-
dividual investors provided the only consistent source of
liquidity.
. Our main focus for the Fund continues to be improving its
relative yield. To accomplish this, the Fund's duration has
remained stable, and we have concentrated on higher yield-
ing sectors such as housing, higher education, and trans-
portation. One exception has been the healthcare sector,
where we started to cut back the Fund's exposure in August
1999. We've seen that even the most profitable hospitals
are having a difficult time adjusting to the reduction in
Medicare reimbursement laid out in the 1997 Balanced Budget
Act.
. As we've seen in recent years, municipal bonds have con-
tinued to underperform U.S. Treasury securities. In fact,
since 1996, municipal yields have risen an average of 20
basis points, whereas Treasury bond yields have declined by
an average of 30 basis points. When yields rise, the value
of existing bonds fall. Because of this trend, we believe
municipal bonds now offer investors very attractive yields
relative to U.S. Treasury bonds.
We thank you for your investment and look forward to your
continued confidence.
Sincerely,
Fixed-Income Funds Team
Investment Management Group
Commerce Bank, N.A.
November 22, 1999
45
<PAGE>
COMMERCE MISSOURI TAX-FREE INTERMEDIATE BOND FUND
Performance Summary (Unaudited)
October 31, 1999
The following graph shows the values as of October 31, 1999, of a $10,000 in-
vestment made on February 21, 1995 in the Institutional Shares. For compara-
tive purposes, the performance of the Fund's benchmarks (the Merrill Lynch
Municipal Intermediate Index ("Merrill Muni Index") and the Lipper Intermedi-
ate Municipal Funds Index ("Lipper Muni Index")) are shown. The performance
data represents past performance and should not be considered indicative of
future performance which will fluctuate with changes in market conditions.
These performance fluctuations will cause an investor's shares, when re-
deemed, to be worth more or less than their original cost.
Missouri Tax-Free Intermediate Bond Fund's Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested February 21, 1995 to
October 31, 1999.
[CHART]
Missouri Tax-Free Merrill Lynch Muni Lipper
Intermediate Bonds Index Index
2/21/95 10,000 10,000 10,000
10/31/95 10,545 10,765 10,733
10/31/96 10,907 11,387 11,214
10/31/97 11,595 12,191 11,989
10/31/98 12,366 13,098 12,804
10/31/99 12,248 13,094 12,637
<TABLE>
<S> <C> <C>
Average Annual Total Return through October 31,
1999 Since Inception One Year
Institutional Shares (commenced February 21, 1995) 4.41% (0.95)%
-----------------------------------------------------------------------------
</TABLE>
46
<PAGE>
COMMERCE MISSOURI TAX-FREE INTERMEDIATE BOND FUND
Statement of Investments
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - 93.0%
Michigan - 2.3%
Michigan State Hospital Finance Authority Revenue Bonds Series A
(AAA/Aaa)
$ 500,000 5.50% 11/15/2010 $ 498,070
500,000 6.13 11/15/2026 484,910
-----------
982,980
----------------------------------------------------------------------------------------------
Missouri - 90.7%
Belton Cap Improvement Sales Tax Revenue Bonds (MBIA) (AAA/Aaa)
200,000 5.00 03/01/2005 201,660
200,000 5.00 03/01/2006 200,848
Belton MO Certificate Participation (NR/Aaa)
500,000 4.75 03/01/2013 452,985
Branson MO Reorganized School District Revenue Bonds (AAA/Aaa)
300,000 5.50 03/01/2014 297,921
Chesterfield GO Bonds (NR/Aa1)
500,000 5.20 02/15/2012 490,185
200,000 4.90 02/15/2019 171,568
Clay County Public Building Authority Leasehold Revenue Bonds Series A
(FSA) (AAA/Aaa)
665,000 5.00 05/15/2009 652,644
Clay County Public Building Authority Leasehold Revenue Bonds Series C
(FSA) (AAA/Aaa)
40,000 5.00 05/15/2009 39,257
Columbia Water & Electricity Revenue Bonds Series A (AA/A1)
300,000 5.40 10/01/2002 307,605
Fort Zumwalt School District Revenue Bonds (AA+/NR)
100,000 5.25 03/01/2011 99,151
Hazelwood School District GO Bonds (NR/Aa3)
150,000 5.15 03/01/2004 153,491
Howard Bend Missouri Levee District Special Tax Revenue Bonds (NR/NR)
635,000 5.25 03/01/2007 622,484
Independence MO School District GO Bonds (AA+/A3)
230,000 5.25 03/01/2013 223,965
700,000 5.00 03/01/2017 630,742
540,000 5.00 03/01/2018 480,962
Jackson County MO Leasehold Revenue Bonds (AMBAC) (AAA/Aaa)
300,000 4.00 12/01/2004 290,076
Jackson County MO School District #7 Lees Summit GO Bonds (NR/Aa3)
250,000 5.60 03/01/2008 255,217
Jackson County Reorganized School District #7 Lee's Summit GO Bonds (Ref
& Impt Direct Deposit) (AA+/Aa1)
500,000 4.50 03/01/2005 495,075
Jackson County Reorganized School District #7 Lee's Summit Lease
Partnership COP Bonds (AMBAC) (AAA/Aaa)
265,000 4.50 03/01/2004 263,034
Jasper County School District #R-9 GO Bonds (AA+/NR)
500,000 5.00 09/01/2003 508,495
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - (continued)
Missouri - (continued)
Kansas City Chouteau Bridge Project Revenue Bonds Series B (AA/Aa3)
$ 380,000 5.00% 05/01/2011 $ 368,687
Kansas City MO GO Bonds (AA/Aa3)
200,000 4.50 06/01/2004 199,014
Kansas City MO Water Revenue Bonds (AA/Aa3)
270,000 5.60 12/01/2001 277,706
Missouri High Ed Student Loan Revenue Bonds (NR/Aaa)
500,000 4.50 02/15/2010 465,555
Missouri State Certificate Participation (AAA/Aaa)
500,000 5.13 06/01/2017 455,385
Missouri State Environmental Improvement & Energy Resources Authority
Pollution Control Revenue Bonds (Elec Coop Thomas Hill) (AA/A1)
250,000 5.50 12/01/2004 256,547
500,000 5.50 12/01/2006 512,930
Missouri State Environmental Improvement & Energy Resources Authority
Pollution Control Revenue Bonds (Tri-County Water Authority Project)
(AA/NR)
500,000 6.00 04/01/2022 483,250
Missouri State Environmental Improvement & Energy Resources Authority
Pollution Control Revenue Bonds Series A (NR/Aa1)
150,000 5.25 07/01/2002 153,311
Missouri State Environmental Improvement & Energy Resources Authority
Pollution Control Revenue Bonds Series C (NR/Aa1)
205,000 4.75 01/01/2001 206,369
500,000 4.90 01/01/2002 505,485
Missouri State Environmental Improvement & Energy Resources Authority
Pollution Control Revenue Bonds Series D (NR/Aa1)
365,000 5.25 01/01/2006 372,475
400,000 5.50 01/01/2008 411,080
Missouri State Environmental Improvement & Energy Resources Authority
Pollution Control Revenue Bonds Series E (NR/Aa1)
390,000 4.38 07/01/2000 391,408
Missouri State Fourth State Building GO Bonds Series A (AAA/Aaa)
500,000 7.00 04/01/2004 547,805
150,000 5.30 08/01/2008 152,794
500,000 5.40 08/01/2009 512,440
Missouri State GO Bonds Series A (AAA/Aaa)
500,000 4.50 08/01/2002 502,660
500,000 6.50 08/01/2014 518,940
Missouri State Health & Educational Facility Revenue Bonds (Barnes-
Jewish, Inc.) (AA/Aa2)
400,000 6.00 05/15/2007 419,472
150,000 6.00 05/15/2011 155,689
Missouri State Health & Educational Facility Revenue Bonds (Barnes-
Jewish, Inc.) (AMBAC-TRCS) (AAA/Aaa)
500,000 5.15 05/15/2010 490,440
----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
47
<PAGE>
COMMERCE MISSOURI TAX-FREE INTERMEDIATE BOND FUND
Statement of Investments (continued)
October 31, 1999
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - (continued)
Missouri - (continued)
Missouri State Health & Educational Facility Revenue Bonds (Central
Institute for the Deaf) (AA/NR)
$ 500,000 5.85% 01/01/2022 $ 477,285
Missouri State Health & Educational Facility Revenue Bonds (Children
Mercy Hosp.) (A+/NR)
750,000 5.25 05/15/2018 673,650
Missouri State Health & Educational Facility Revenue Bonds (Freeman
Health Systems Project) (BBB+/NR)
500,000 4.75 02/15/2005 479,430
Missouri State Health & Educational Facility Revenue Bonds (prerefunded
to 06/01/01) (MBIA) (AAA/Aaa)
300,000 6.63 06/01/2011 316,743
Missouri State Health & Educational Facility Revenue Bonds (The Barstow
School) (NR/NR)
405,000 4.75 10/01/2010 369,113
Missouri State Health & Educational Facility Revenue Bonds Series B
(Health Midwest) (MBIA) (AAA/Aaa)
150,000 6.10 06/01/2011 156,500
Missouri State Health & Educational Facility Washington University
Revenue Bonds Series A (NR/Aa1)
800,000 4.75 08/15/2005 799,944
Missouri State Housing Development Community Mortgage Revenue Bonds
(AMT-Singlefam-Homeowner Loan A-2) (GNMA/FNMA) (AAA/NR)
190,000 5.40 03/01/2006 192,421
Missouri State Housing Development Community Mortgage Revenue Bonds
(AMT-Singlefam-Homeowner Loan B-2) (GNMA/FNMA) (AAA/NR)
365,000 4.55 03/01/2004 359,770
360,000 5.20 03/01/2008 356,857
Missouri State Housing Development Community Mortgage Revenue Bonds
(Single Family Homeownership-B) (GNMA/FNMA) (AAA/NR)
165,000 5.50 03/01/2006 167,983
Missouri State Housing Development Community Mortgage Revenue Bonds
Series C (GNMA/FNMA) (AAA/NR)
190,000 4.80 09/01/2001 190,944
Missouri State Housing Development Community Mortgage Revenue Bonds
Series C-2 (GNMA/FNMA) (AAA/NR)
225,000 4.90 03/01/2007 219,445
Missouri State Regal Convention & Sports Complex Authority Revenue Bonds
(A+/Aa3)
640,000 4.75 08/15/2004 638,605
500,000 5.20 08/15/2007 501,195
Missouri State Water Pollution Control GO Bonds Series A (AAA/Aaa)
300,000 5.60 08/01/2010 309,306
New Liberty Hospital District Revenue Bonds (MBIA) (NR/Aaa)
375,000 4.25 12/01/2002 372,533
515,000 5.00 12/01/2010 498,386
380,000 5.13 12/01/2012 365,446
O'Fallon MO Certificate Participation (AMBAC) (AAA/NR)
300,000 5.75 12/01/2004 313,521
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - (continued)
Missouri - (continued)
Osage Beach MO Waterworks and Sewer System Revenue Bonds (NR/NR)
$ 220,000 4.75% 12/01/2011 $ 201,399
575,000 4.95 12/01/2013 533,088
Perry County Hospital Revenue Bonds (NR/NR)
420,000 5.40 06/01/2011 387,290
Platte County Missouri School District Park Hill GO Bonds (Student Aid
Direct Deposit) (AA+/Aa1)
500,000 5.20 03/01/2009 502,380
Richmond Heights CTFS Partnership Capital Improvement Projects Series A
Certificate Participation (MBIA) (AAA/Aaa)
550,000 4.60 02/15/2005 543,120
575,000 4.70 02/15/2006 565,150
Rolla MO Recreational Center GO Bonds (AMBAC) (AAA/Aaa)
500,000 4.80 03/01/2007 495,100
Springfield GO Bonds (NR/Aa2)
220,000 4.30 03/01/2000 220,328
Springfield MO School Dist #12 Revenue Bonds Series B (FGIC) (AAA/Aaa)
620,000 9.50 03/01/2007 790,661
Springfield Public Building Corp. Leasehold Revenue Bonds (AAA/NR)
225,000 4.50 03/01/2008 215,770
250,000 4.85 03/01/2010 239,395
St. Charles County Francis Howell School District GO Bonds (FGIC)
(AAA/Aaa)
700,000 4.60 03/01/2004 700,602
St. Charles County MO Community College GO Bonds (FGIC) (NR/Aaa)
890,000 5.00 02/15/2016 813,798
St. Charles County MO Industrial Development Revenue Bonds (Housing
Vanderbilt Apts) (NR/NR)
350,000 5.00 02/01/2029 333,518
St. Charles County MO School District (AAA/Aaa)
400,000 5.05 03/01/2019 358,520
St. Charles County MO School District GO Bonds Series A (AMBAC)
(AAA/Aaa)
150,000 5.75 03/01/2011 153,423
St. Francois County MO School District R-III GO Bonds (AA+/NR)
285,000 4.95 03/01/2016 257,121
St. Louis Board of Education GO Bonds Series A (FGIC State Aid Direct
Deposit) (AAA/Aaa)
500,000 4.40 04/01/2007 483,995
St. Louis Board of Education GO Bonds Series B (FGIC) (AAA/Aaa)
905,000 5.50 04/01/2010 922,023
St. Louis County MO Certificate Partnership (AA/Aa2)
500,000 4.40 05/15/2011 456,075
St. Louis County MO GO Bonds Series B (NR/Aaa)
200,000 5.25 02/01/2007 202,718
750,000 5.30 02/01/2008 761,310
----------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
48
<PAGE>
COMMERCE MISSOURI TAX-FREE INTERMEDIATE BOND FUND
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - (continued)
Missouri - (continued)
St. Louis County MO Regal Convention & Sports Complex Authority Revenue
Bonds Series C (NR/Aaa)
$ 530,000 7.90% 08/15/2021 $ 591,210
St. Louis County MO Rockwood School District Revenue Bonds (AA/Aa1)
240,000 4.63 02/01/2006 237,612
800,000 5.13 02/01/2007 812,264
St. Louis County MO School District GO Bonds (FGIC) (AAA/Aaa)
200,000 5.40 04/01/2003 205,688
St. Louis County MO School District GO Bonds Lindbergh (NR/Aa2)
715,000 6.60 02/15/2003 760,746
200,000 5.40 02/15/2010 205,338
St. Louis County School District GO Bonds Parkway (NR/Aa3)
300,000 7.00 02/01/2000 302,277
St. Louis MO Airport Revenue Bonds (Lambert St. Louis International)
Series B AMT (FGIC) (AAA/Aaa)
395,000 6.00 07/01/2009 414,142
St. Peters GO Bonds (NR/Aaa)
500,000 7.20 01/01/2009 573,280
150,000 5.80 01/01/2010 156,942
St. Peters GO Bonds (FGIC) (NR/Aaa)
350,000 7.20 01/01/2008 400,295
University Missouri Development Foundation Power Leasehold Revenue Bonds
(AAA/NR)
500,000 5.75 05/01/2013 527,060
University Missouri Health Facilities Revenue Bonds Series A (AMBAC)
(AAA/Aaa)
150,000 5.20 11/01/2010 147,659
University of Missouri Systems Facilities Revenue Bonds (AA+/Aa2)
250,000 4.60 11/01/2000 251,835
-----------
38,679,016
----------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BOND OBLIGATIONS
(cost $40,732,687) $39,661,996
----------------------------------------------------------------------------------------------
Short-Term Obligations # - 7.3%
Missouri - 7.3%
Kansas City MO Ind Dev Auth Revenue Bonds (A1+/NR)
$ 800,000 3.55% 04/01/2027 $ 800,000
Missouri State Health & Educational Facility Revenue Bonds (A1+/VMIG1)
800,000 3.00 06/01/2015 800,000
Missouri State Health & Educational Facility Revenue Bonds (Drury
College) Series A (Chase Manhattan Bank LOC; Expire 8/21/01, Direct Pay
100%) (NR/Aaa)
300,000 3.55 08/15/2021 300,000
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Short-Term Obligations # - (continued)
Missouri - (continued)
Missouri State Health & Educational Facility Revenue Bonds (St. Francis
Medical Center) Series A (Credit Local de France LOC; Expire 6/19/03,
Direct Pay 100%) (A1+/NR)
$1,100,000 3.50% 06/01/2026 $ 1,100,000
Missouri State Health & Educational Facility Revenue Bonds (St. Louis
University) Series B (Bank of America SPA; Expire 7/01/04) (A1+/VMIG1)
100,000 3.55 10/01/2024 100,000
----------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS
(cost $3,100,000) $ 3,100,000
----------------------------------------------------------------------------------------------
Repurchase Agreement - 0.5%
State Street Bank and Trust Co.
$ 223,000 5.07% 11/01/1999 $ 223,000
----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(cost $223,000) $ 223,000
----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(cost $44,055,687) $42,984,996
----------------------------------------------------------------------------------------------
</TABLE>
# Variable rate security. Coupon rate disclosed is that which is in effect at
October 31, 1999.
The percentage shown for each investment category reflects the value of
investments in that category as a percentage of total net assets.
------------------------------------------------------------------------------
Investment Abbreviations:
<TABLE>
<C> <S>
AMBAC --Insured by American Municipal Bond Assurance Corp.
AMT --Alternative Minimum Tax
COP --Certificate of Participation
CTFS --Certificates
FGIC --Insured by Financial Guaranty Insurance Co.
FMNA --Insured by Federal National Mortgage Association
FSA --Insured by Financial Security Assurance Co.
GNMA --Insured by Government National Mortgage Association
GO --General Obligation
LOC --Letter of Credit
MBIA --Insured by Municipal Bond Investors Assurance
NR --Not Rated
TCRS --Transferable Custodial Receipts
------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
49
<PAGE>
COMMERCE FUNDS
Statements of Assets and Liabilities
October 31, 1999
<TABLE>
<CAPTION>
Short-Term
Government Balanced
Fund Bond Fund Fund
Assets:
<S> <C> <C> <C>
Investments in securities, at value
(cost $118,628,692, $382,583,908,
$116,019,466, $72,607,312,
$350,035,999, $117,017,181,
$109,504,109, $42,361,397 and
$44,055,687, respectively) $116,527,155 $372,490,596 $127,768,101
Cash, at value 381 583 957
Receivables:
Investment securities sold, at
value 19,176 23,497 3,275,223
Dividends and interest, at value 938,447 3,954,279 763,609
Fund shares sold 326,428 665,529 89,659
Deferred organization expenses, net 1,062 1,126 1,089
Other 243 1,071 433
-------------------------------------------------------------------------------
Total assets 117,812,892 377,136,681 131,899,071
-------------------------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased, at
value -- -- 4,469,734
Fund shares redeemed 253,812 796,609 260,318
Dividends and distributions 259,069 646,540 --
Advisory fees 24,149 162,016 65,093
Administration fees 15,235 48,599 15,922
Shareowner servicing fees 9,455 49,153 37,695
Distribution fees-service shares 1,029 1,350 4,722
Accrued expenses and other liabili-
ties 65,216 131,319 65,297
-------------------------------------------------------------------------------
Total liabilities 627,965 1,835,586 4,918,781
-------------------------------------------------------------------------------
Net Assets:
Paid-in capital 119,238,277 384,081,398 110,190,937
Accumulated undistributed net in-
vestment income 55,419 447,732 476,360
Accumulated net realized gain (loss)
on investment transactions and
foreign currency transactions (7,232) 865,277 4,564,358
Net unrealized gain (loss) on in-
vestments and translation of assets
and liabilities denominated in for-
eign currency (2,101,537) (10,093,312) 11,748,635
-------------------------------------------------------------------------------
NET ASSETS $117,184,927 $375,301,095 $126,980,290
-------------------------------------------------------------------------------
Shares Outstanding:
Total shares outstanding, no par
value (unlimited number of shares
authorized):
Institutional Shares 6,431,860 20,151,163 4,913,263
Service Shares 56,577 63,571 108,256
Institutional Shares: Net asset
value and maximum public offering
price per share (net assets/shares
outstanding) $ 18.06 $ 18.57 $ 25.29
Service Shares: Net asset value per
share (net assets/shares outstand-
ing) $ 18.07 $ 18.57 $ 25.27
Maximum public offering price per
share(a) $ 18.44 $ 19.24 $ 26.19
-------------------------------------------------------------------------------
</TABLE>
(a) For the Short-Term Government Fund, the maximum public offering price per
share is calculated as (NAV per share x 1.0204). For all other Funds (ex-
cluding National Tax-Free Intermediate Bond Fund and Missouri Tax-Free
Intermediate Bond Fund), the maximum public offering price per share is
calculated as (NAV per share x 1.0363).
The accompanying notes are an integral part of these financial statements.
50
<PAGE>
COMMERCE FUNDS
<TABLE>
<CAPTION>
National Missouri
Tax-Free Tax-Free
Growth and MidCap International Intermediate Intermediate
Income Fund Growth Fund Fund Equity Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C> <C>
$75,566,527 $463,433,234 $150,640,011 $131,454,044 $41,433,775 $42,984,996
279 340 937 477,909 -- 376
1,252,651 -- 682,087 838,497 101,515 179,827
103,193 234,506 19,549 158,625 627,249 586,694
76,310 2,145,773 364,921 825,810 44,000 28,000
9,336 1,160 1,064 1,052 3,287 3,274
337 1,574 273 99,594 156 134
----------------------------------------------------------------------------------
77,008,633 465,816,587 151,708,842 133,855,531 42,209,982 43,783,301
----------------------------------------------------------------------------------
1,167,814 4,295,243 4,084,933 4,939,219 1,553,329 985,490
127,247 551,887 160,890 157,599 141,956 10,000
-- -- -- -- 92,643 103,365
44,719 280,394 89,949 97,384 11,341 14,821
8,947 56,079 17,997 15,265 5,193 5,502
10,464 93,402 16,480 9,850 -- --
1,299 15,141 2,807 740 -- --
68,363 133,244 59,596 118,542 162,988 22,775
----------------------------------------------------------------------------------
1,428,853 5,425,390 4,432,652 5,338,599 1,967,450 1,141,953
----------------------------------------------------------------------------------
76,417,277 298,650,428 90,406,577 99,664,857 41,121,987 43,679,034
26,391 -- -- 279,028 26,798 27,935
(3,823,103) 48,343,534 23,246,783 6,630,089 21,369 5,070
2,959,215 113,397,235 33,622,830 21,942,958 (927,622) (1,070,691)
----------------------------------------------------------------------------------
$75,579,780 $460,391,197 $147,276,190 $128,516,932 $40,242,532 $42,641,348
----------------------------------------------------------------------------------
3,485,571 11,661,074 3,590,812 4,673,700 2,205,663 2,360,087
46,182 380,056 85,130 18,285 -- --
$ 21.40 $ 38.24 $ 40.07 $ 27.39 $ 18.24 $ 18.07
$ 21.41 $ 38.07 $ 39.75 $ 27.30 -- --
$ 22.19 $ 39.45 $ 41.19 $ 28.29 -- --
----------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
COMMERCE FUNDS
Statements of Operations
For the Year Ended October 31, 1999
<TABLE>
<CAPTION>
Short-Term
Government Balanced
Fund Bond Fund Fund
<S> <C> <C> <C>
Investment Income:
Interest $ 6,264,104 $ 24,256,627 $4,337,078
Dividends(a) -- -- 763,828
-------------------------------------------------------------------------------
Total income 6,264,104 24,256,627 5,100,906
-------------------------------------------------------------------------------
Expenses:
Advisory fees 494,601 1,769,193 1,327,241
Administration fees 148,379 530,758 199,089
Shareowner servicing fees 45,189 197,609 172,534
Transfer agent fees 63,796 77,078 86,534
Custodian fees 65,646 85,466 83,238
Professional fees 16,928 62,768 23,921
Registration fees 43,110 62,111 41,530
Trustee fees 1,797 6,951 2,702
Distribution fees-Service Shares 2,576 2,825 7,178
Amortization of deferred organization
expenses. 9,968 10,578 10,187
Other 16,732 62,639 19,736
-------------------------------------------------------------------------------
Total expenses 908,722 2,867,976 1,973,890
-------------------------------------------------------------------------------
Less -- expenses reimbursed and fees
waived (233,497) -- (466,903)
-------------------------------------------------------------------------------
Net expenses 675,225 2,867,976 1,506,987
-------------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 5,588,879 21,388,651 3,593,919
-------------------------------------------------------------------------------
Realized and unrealized gain (loss) on
investment and foreign currency trans-
actions:
Net realized gain (loss) from:
Investment transactions (7,178) 1,193,228 4,617,346
Foreign currency related transactions -- -- --
Net change in unrealized gain (loss)
on:
Investments (3,616,622) (21,271,439) 1,416,483
Translation of assets and liabilities
denominated in foreign currencies -- -- --
-------------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions (3,623,800) (20,078,211) 6,033,829
-------------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS $ 1,965,079 $ 1,310,440 $9,627,748
-------------------------------------------------------------------------------
</TABLE>
(a) Amount is net of $2,558, $5,979, $37,618, $2,116 and $223,385 respective-
ly, for the Balanced, Growth and Income, Growth, MidCap and International
Equity Fund in withholding taxes.
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
COMMERCE FUNDS
<TABLE>
<CAPTION>
National Missouri
International Tax-Free Tax-Free
Growth and Growth MidCap Equity Intermediate Intermediate
Income Fund Fund Fund Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C> <C>
$ 31,438 $ 1,203,681 $ 308,956 $ 186,044 $ 1,780,850 $ 1,823,448
1,550,409 3,361,784 442,044 1,911,730 -- --
------------------------------------------------------------------------------------
1,581,847 4,565,465 751,000 2,097,774 1,780,850 1,823,448
------------------------------------------------------------------------------------
653,007 3,583,753 1,106,384 1,628,135 193,766 200,106
130,601 716,750 221,277 162,812 58,129 60,031
52,213 406,422 99,266 50,117 -- --
60,882 137,652 100,472 74,523 27,955 26,058
44,385 80,682 56,401 242,103 48,680 46,660
20,753 87,646 26,621 21,749 8,288 7,779
23,852 40,659 36,542 34,971 3,897 7,819
2,098 9,300 3,000 2,399 901 900
2,947 33,139 6,160 1,257 -- --
-- 10,800 9,906 9,840 10,687 10,665
14,997 69,648 21,756 18,103 6,762 6,784
------------------------------------------------------------------------------------
1,005,735 5,176,451 1,687,785 2,246,009 359,065 366,802
------------------------------------------------------------------------------------
-- -- -- (582,116) (87,793) (106,669)
------------------------------------------------------------------------------------
1,005,735 5,176,451 1,687,785 1,663,893 271,272 260,133
------------------------------------------------------------------------------------
576,112 (610,986) (936,785) 433,881 1,509,578 1,563,315
------------------------------------------------------------------------------------
(3,794,493) 48,947,726 23,720,190 8,312,780 21,369 5,120
-- -- -- (116,538) -- --
4,583,016 30,096,197 14,562,053 11,141,964 (2,046,587) (2,061,534)
-- -- -- (19,364) -- --
------------------------------------------------------------------------------------
788,523 79,043,923 38,282,243 19,318,842 (2,025,218) (2,056,414)
------------------------------------------------------------------------------------
$ 1,364,635 $78,432,937 $37,345,458 $19,752,723 $ (515,640) $ (493,099)
------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
COMMERCE FUNDS
Statements of Changes in Net Assets
For the Year Ended October 31, 1999
<TABLE>
<CAPTION>
Short-Term
Government Balanced
Fund Bond Fund Fund
<S> <C> <C> <C>
From operations:
Net investment income (loss) $ 5,588,879 $ 21,388,651 $ 3,593,919
Net realized gain (loss) on
investments and foreign currency
related transactions (7,178) 1,193,228 4,617,346
Net change in unrealized gain
(loss) on investments and
translation of assets and
liabilities denominated in foreign
currencies (3,616,622) (21,271,439) 1,416,483
------------------------------------------------------------------------------
Net Increase (decrease) in net
assets resulting from operations 1,965,079 1,310,440 9,627,748
------------------------------------------------------------------------------
Distributions to Shareholders:
From net investment income
Institutional Shares (5,506,354) (21,322,484) (3,446,941)
Service Shares (55,661) (65,548) (69,451)
From net realized gain on
investment transactions
Institutional Shares (47,999) (3,616,243) (13,708,760)
Service Shares (693) (12,411) (298,062)
------------------------------------------------------------------------------
Total distributions to
shareholders (5,610,707) (25,016,686) (17,523,214)
------------------------------------------------------------------------------
From share transactions:
Proceeds from sale of shares 99,593,163 163,869,981 33,364,727
Reinvestment of dividends and
distributions 3,659,370 16,796,721 17,475,887
Cost of shares redeemed (52,927,680) (88,113,992) (42,276,072)
------------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from share
transactions 50,324,853 92,552,710 8,564,542
------------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) 46,679,225 68,846,464 669,076
------------------------------------------------------------------------------
Net assets:
Beginning of year 70,505,702 306,454,631 126,311,214
------------------------------------------------------------------------------
End of year $117,184,927 $375,301,095 $126,980,290
------------------------------------------------------------------------------
Accumulated undistributed net
investment income $ 55,419 $ 447,732 $ 476,360
------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
COMMERCE FUNDS
<TABLE>
<CAPTION>
National Missouri
Tax-Free Tax-Free
Growth and MidCap International Intermediate Intermediate
Income Fund Growth Fund Fund Equity Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C> <C>
$ 576,112 $ (610,986) $ (936,785) $ 433,881 $ 1,509,578 $ 1,563,315
(3,794,493) 48,947,726 23,720,190 8,196,242 21,369 5,120
4,583,016 30,096,197 14,562,053 11,122,600 (2,046,587) (2,061,534)
-----------------------------------------------------------------------------------------
1,364,635 78,432,937 37,345,458 19,752,723 (515,640) (493,099)
-----------------------------------------------------------------------------------------
(573,720) (151,250) -- (447,364) (1,509,578) (1,563,355)
(4,883) -- -- (952) -- --
(1,000,492) (60,788,010) (7,035,654) -- (282,626) (185,341)
(14,161) (1,370,831) (63,725) -- -- --
-----------------------------------------------------------------------------------------
(1,593,256) (62,310,091) (7,099,379) (448,316) (1,792,204) (1,748,696)
-----------------------------------------------------------------------------------------
31,324,695 164,584,725 42,483,286 48,107,117 16,441,369 21,667,860
1,053,891 53,058,451 5,038,648 303,849 316,392 355,572
(50,560,491) (192,136,802) (70,763,234) (40,738,397) (7,735,169) (11,191,281)
-----------------------------------------------------------------------------------------
(18,181,905) 25,506,374 (23,241,300) 7,672,569 9,022,592 10,832,151
-----------------------------------------------------------------------------------------
(18,410,526) 41,629,220 7,004,779 26,976,976 6,714,748 8,590,356
-----------------------------------------------------------------------------------------
93,990,306 418,761,977 140,271,411 101,539,956 33,527,784 34,050,992
-----------------------------------------------------------------------------------------
$ 75,579,780 $ 460,391,197 $147,276,190 $128,516,932 $40,242,532 $ 42,641,348
-----------------------------------------------------------------------------------------
$ 26,391 $ -- $ -- $ 279,028 $ 26,798 $ 27,935
-----------------------------------------------------------------------------------------
</TABLE>
55
<PAGE>
COMMERCE FUNDS
Statements of Changes in Net Assets
For the Year Ended October 31, 1998
<TABLE>
<CAPTION>
Short-Term
Government Balanced
Fund Bond Fund Fund
<S> <C> <C> <C>
From operations:
Net investment income (loss) $ 3,383,938 $ 15,691,122 $ 2,750,156
Net realized gain (loss) on
investments and foreign currency
transactions 228,646 3,849,016 14,126,371
Net change in unrealized gain
(loss) on investments and
translation of assets and
liabilities denominated in foreign
currencies 887,152 2,052,158 (6,792,419)
------------------------------------------------------------------------------
Net Increase (decrease) in net
assets resulting from operations 4,499,736 21,592,296 10,084,108
------------------------------------------------------------------------------
Distributions to Shareholders:
From net investment income:
Institutional Shares (3,391,516) (15,642,257) (2,649,664)
Service Shares (33,839) (48,371) (43,961)
From net realized gain on
investment transactions:
Institutional Shares -- -- (5,448,631)
Service Shares -- -- (66,436)
------------------------------------------------------------------------------
Total distributions to
shareholders (3,425,355) (15,690,628) (8,208,692)
------------------------------------------------------------------------------
From share transactions:
Proceeds from sale of shares 35,857,008 124,804,997 38,746,251
Reinvestment of dividends and
distributions 2,152,678 10,910,976 8,137,190
Cost of shares redeemed (17,868,414) (53,704,627) (29,448,504)
------------------------------------------------------------------------------
Net increase in net assets
resulting from share transactions 20,141,272 82,011,346 17,434,937
------------------------------------------------------------------------------
TOTAL INCREASE 21,215,653 87,913,014 19,310,353
------------------------------------------------------------------------------
Net assets:
Beginning of year 49,290,049 218,541,617 107,000,861
------------------------------------------------------------------------------
End of year $ 70,505,702 $306,454,631 $126,311,214
------------------------------------------------------------------------------
Accumulated undistributed net
investment income $ 22,304 $ 109,912 $ 271,260
------------------------------------------------------------------------------
</TABLE>
(a) The National Tax-Free Intermediate Bond and Missouri Tax-Free
Intermediate Bond Funds were formerly known as the National Tax-Free Bond
Fund and the Missouri Tax-Free Bond Fund, respectively.
The accompanying notes are an integral part of these financial statements.
56
<PAGE>
COMMERCE FUNDS
<TABLE>
<CAPTION>
National Missouri
Tax-Free Tax-Free
Growth and MidCap International Intermediate Intermediate
Income Fund Growth Fund Fund Equity Fund Bond Fund(a) Bond Fund(a)
<S> <C> <C> <C> <C> <C>
$ 660,152 $ 779,020 $ (770,517) $ 426,296 $ 1,124,055 $ 1,135,027
986,021 62,159,771 6,782,606 (1,583,499) 282,675 185,385
(4,499,448) (7,637,153) (3,186,658) 6,493,395 484,832 536,591
----------------------------------------------------------------------------------------
(2,853,275) 55,301,638 2,825,431 5,336,192 1,891,562 1,857,003
----------------------------------------------------------------------------------------
(649,065) (672,603) -- (284,322) (1,124,055) (1,135,027)
(7,017) (1,362) -- (617) -- --
(96,153) (22,597,342) (6,316,543) (2,052,413) -- (18,974)
(4,884) (384,442) (36,686) (6,198) -- --
----------------------------------------------------------------------------------------
(757,119) (23,655,749) (6,353,229) (2,343,550) (1,124,055) (1,154,001)
----------------------------------------------------------------------------------------
67,766,474 104,822,029 54,499,447 38,959,432 11,904,162 13,626,116
524,039 20,792,178 4,591,678 1,660,206 149,809 193,371
(18,451,256) (88,029,529) (28,392,384) (20,576,242) (4,574,500) (4,905,167)
----------------------------------------------------------------------------------------
49,839,257 37,584,678 30,698,741 20,043,396 7,479,471 8,914,320
----------------------------------------------------------------------------------------
46,228,863 69,230,567 27,170,943 23,036,038 8,246,978 9,617,322
----------------------------------------------------------------------------------------
47,761,443 349,531,410 113,100,468 78,503,918 25,280,806 24,433,670
----------------------------------------------------------------------------------------
$ 93,990,306 $418,761,977 $140,271,411 $101,539,956 $33,527,784 $34,050,992
----------------------------------------------------------------------------------------
$ 32,869 $ 151,592 $ -- $ 347,428 $ 21,096 $ 22,171
----------------------------------------------------------------------------------------
</TABLE>
57
<PAGE>
COMMERCE FUNDS
Notes to Financial Statements
October 31, 1999
1. ORGANIZATION
The Commerce Funds (the "Trust") is a Delaware business trust registered un-
der the Investment Company Act of 1940, as amended (the "1940 Act"), as an
open-end, management investment company. The Trust consists of nine portfo-
lios (individually, a "Fund" and collectively, the "Funds"): Short-Term Gov-
ernment 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
offers two classes of shares, Institutional Shares and Service Shares (except
National Tax-Free Intermediate Bond Fund and Missouri Tax-Free Intermediate
Bond Fund which only offer Institutional Shares). Each Fund is registered as
a diversified management investment company, 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. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make es-
timates and assumptions that may affect the reported amounts.
A. Investment Valuation -- Investments in securities traded on a U.S. or for-
eign securities exchange or the NASDAQ system are valued daily at their last
sale or closing price on the principal exchange on which they are traded. If
no sale occurs, securities are valued at the last bid price. Debt securities
are valued at prices supplied by an independent pricing service, broker /
dealer-supplied valuations or matrix pricing systems. Unlisted equity and
debt securities for which market quotations are available are valued at the
last sale price on valuation date, or if no sale occurs, at the last bid
price. Short-term debt obligations maturing in sixty days or less are valued
at amortized cost. Securities for which quotations are not readily available
are valued at fair value using methods approved by the Trust's Board of
Trustees.
Investing in emerging markets may involve special risks and considerations
not typically associated with investing in the United States. These risks in-
clude revaluation of currencies, high rates of inflation, repatriation re-
strictions on income and capital, and adverse political and economic
developments. Moreover, securities issued in these markets may be less liq-
uid, subject to government ownership controls, delayed settlements, and their
prices more volatile than those of comparable securities in the United
States.
B. Security Transactions and Dividend Income -- Security transactions are re-
corded as of the trade date. Realized gains and losses on sales of portfolio
securities are calculated using the identified-cost basis. Dividend income is
recorded on the ex-dividend date. Dividends for which a Fund has the choice
to receive either cash or stock are recognized as investment income in an
amount equal to the cash dividend.
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 securities. The Growth, MidCap and International Eq-
uity Funds accrete market discounts and amortize premiums on a yield to matu-
rity 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 are
taxable as ordinary income. Such paydown gains and losses increase or de-
crease taxable ordinary income available for distribution and are classified
as interest income in the accompanying Statements of Operations. For all
Funds, original issue discounts ("OID") on debt securities are amortized to
interest income over the life of the security with a corresponding increase
in the cost basis of that security. OID amortization on mortgage backed REMIC
58
<PAGE>
COMMERCE FUNDS
securities is initially recorded based on estimates of principal paydowns us-
ing the most recent OID factors available from the issuer. Recorded amortiza-
tion amounts are adjusted when actual OID factors are received.
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 valua-
tions, foreign currency and 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 invest-
ments, income and expenses are converted into U.S. dollars based upon cur-
rency 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; (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 div-
idends 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 liabili-
ties.
E. Forward Foreign Currency Exchange Contracts -- The International Equity
Fund may enter into forward foreign currency exchange contracts for the pur-
chase 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 posi-
tions. The Fund may also purchase and sell forward contracts to seek to in-
crease total return. All commitments are "marked-to-market" daily at the
applicable translation rates. The Fund realizes gains or losses at the time a
forward contract is offset by entry into a closing transaction or extin-
guished by delivery of the currency. Risks may arise upon entering into these
contracts from the potential inability of counterparties to meet the terms of
their contracts and from unanticipated movements in the value of a foreign
currency relative to the U.S. dollar.
F. Segregation Transactions -- The Funds may enter into certain derivative
transactions to seek to increase total return. Forward foreign currency ex-
change contracts, futures contracts, written options, when-issued securities
and forward commitments represent examples of such transactions. As a result
of entering into these transactions, the Funds are required to segregate liq-
uid assets on the accounting records equal to or greater than the market
value of the corresponding transactions.
G. Repurchase Agreements -- During the term of a repurchase agreement, the
value of the underlying securities, including accrued interest, is required
to equal or exceed the value of the repurchase agreement. The underlying se-
curities for all repurchase agreements are held in safekeeping in the custom-
er-only account, at the Funds' custodian, or at sub-custodians.
H. Dividend 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 Interna-
tional Equity Funds. Each Fund's net realized capital gains (including net
short-term capital gains), if any, are declared and distributed at least an-
nually. Distributions to shareholders are recorded on the ex-dividend date.
I. Deferred Organization Expenses -- Organization costs are being amortized
on a straight-line basis over a period of five years beginning with the com-
mencement of each Fund's operations.
J. Expenses -- Expenses incurred by the Trust that do not specifically relate
to an individual Fund of the Trust are allocated to the Funds based on each
Fund's relative average daily net assets for the period. Service Class share-
holders bear all expenses and fees relating to the Distribution Plan.
K. Federal Taxes -- It is each Fund's policy to comply with the requirements
of the Internal Revenue Code applicable to regulated investment companies and
to distribute each year substantially all of its investment company tax-ex-
empt and taxable income and capital gains to its shareholders. Accordingly,
no federal tax provisions are required.
59
<PAGE>
COMMERCE FUNDS
Notes to Financial Statements (continued)
October 31, 1999
The characterization of distributions to shareholders for financial report-
ing purposes is determined in accordance with income tax rules. Therefore,
the source of a portfolio's distributions may be shown in the accompanying
financial statements as either from or in excess of net investment income or
net realized gain on investment transactions, or from paid-in capital, de-
pending on the type of book/tax differences that may exist as well as timing
differences associated with having different book and tax year ends.
As of the Trust's most recent tax year-end, the Short-Term Government and
Growth and Income Funds had capital loss carryforwards for U.S. federal in-
come tax purposes. These amounts are available to be carried forward to off-
set future capital gains of the Funds to the extent permitted by applicable
laws or regulations.
<TABLE>
<CAPTION>
Fund Amount Year of Expiration
----------------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Government $ 7,232 2007
----------------------------------------------------------------------------------------
Growth and Income 3,823,103 2007
----------------------------------------------------------------------------------------
</TABLE>
At October 31, 1999, the Fund's aggregate cost of portfolio securities,
gross unrealized gain on investments and gross unrealized loss on investments
for federal income tax purposes are as follows:
<TABLE>
<CAPTION>
Net
Gross Gross Unrealized
Fund Tax Cost Unrealized Gain Unrealized Loss Gain (Loss)
--------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Government $118,628,692 $ 167,113 $ (2,268,650) $ (2,101,537)
--------------------------------------------------------------------------------------
Bond 382,583,908 3,142,511 (13,235,823) (10,093,312)
--------------------------------------------------------------------------------------
Balanced 116,019,466 15,573,586 (3,824,951) 11,748,635
--------------------------------------------------------------------------------------
Growth and Income 72,607,312 6,354,159 (3,394,944) 2,959,215
--------------------------------------------------------------------------------------
Growth 350,035,999 133,825,513 (20,428,278) 113,397,235
--------------------------------------------------------------------------------------
MidCap 117,079,359 36,608,183 (3,047,531) 33,560,652
--------------------------------------------------------------------------------------
International Equity 109,638,280 26,149,708 (4,333,944) 21,815,764
--------------------------------------------------------------------------------------
National Tax-Free Inter-
mediate Bond 42,361,397 156,218 (1,083,840) (927,622)
--------------------------------------------------------------------------------------
Missouri Tax-Free Inter-
mediate Bond 44,055,687 136,868 (1,207,559) (1,070,691)
--------------------------------------------------------------------------------------
</TABLE>
60
<PAGE>
COMMERCE FUNDS
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
contractual annual rate of the corresponding Fund's average daily net assets.
For the year ended October 31, 1999, the advisor has voluntarily agreed to
waive a portion of its advisory fee for certain portfolios. The contractual
annual rate, actual annual rate and waiver amount are listed below.
<TABLE>
<CAPTION>
Waiver
Contractual Actual --------------
Fund Annual Rate Annual Rate Rate Amount
----------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Government 0.50% 0.30% 0.20% $197,844
----------------------------------------------------------------------------
Bond 0.50 0.50 -- --
----------------------------------------------------------------------------
Balanced 1.00 0.66 0.34 444,964
----------------------------------------------------------------------------
Growth and Income 0.75 0.75 -- --
----------------------------------------------------------------------------
Growth 0.75 0.75 -- --
----------------------------------------------------------------------------
MidCap 0.75 0.75 -- --
----------------------------------------------------------------------------
International Equity 1.50 0.96 0.54 582,116
----------------------------------------------------------------------------
National Tax-Free Intermediate Bond 0.50 0.35 0.15 58,130
----------------------------------------------------------------------------
Missouri Tax-Free Intermediate Bond 0.50 0.30 0.20 80,043
----------------------------------------------------------------------------
</TABLE>
Effective May 1, 1999, the Advisor reduced its waiver to .30% of average
daily net assets of the Balanced Fund. Prior thereto, the waived portion of
its advisory fee was .37% of average daily net assets.
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 Inter-
national 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, when the International Equity Fund's average net assets reach
$200 million, the Sub-Advisor has agreed to waive fees in excess of 0.50% of
the average daily net assets of the Fund.
In addition, for the year ended October 31, 1999, the Advisor has voluntar-
ily agreed to reimburse expenses (excluding interest, taxes, service share
distribution expenses and extraordinary expenses) to the extent that such ex-
penses 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 Inter-
mediate Bond Funds, respectively. Effective February 6, 1998, the Advisor has
voluntarily agreed to reimburse expenses (excluding interest, taxes, service
share 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 limi-
tation was .85% of average net assets. The effect of these reimbursements by
the Advisor for the year ended October 31, 1999 was to reduce
61
<PAGE>
COMMERCE FUNDS
Notes to Financial Statements (continued)
October 31, 1999
expenses by $35,653, $21,939, $29,663 and $26,626 for the Short-Term Govern-
ment, Balanced, National Tax-Free Intermediate Bond and Missouri Tax-Free In-
termediate Bond Funds, respectively. The amount reimbursable to the Short-
Term Government, Balanced and National Tax-Free Intermediate Bond Funds at
October 31, 1999, was $6,318, $9,204 and $775, respectively, and are netted
in "Advisory fees payable" in the accompanying Statements of Assets and Lia-
bilities.
As of September 1, 1999, Goldman, Sachs & Co. established a new operating
division named the Investment Management Division. This newly created entity
includes Goldman Sachs Asset Management ("GSAM"). GSAM serves as the Trust's
administrator, pursuant to an Administration Agreement. Under the Administra-
tion Agreement, GSAM administers the Trust's business affairs. As compensa-
tion 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 serves as Distributor of shares of the Funds pursuant to a
Distribution Agreement and may receive a portion of the sales charge imposed
on the sale of shares of the Funds. The maximum sales charge imposed on the
sale of Service Shares of the Short-Term Government Fund is 2.00%; for all
other Funds' Service Shares, the maximum sales charge is 3.50%. Effective No-
vember 1, 1998, the 3.50% sales charge was removed from Institutional Shares
of the National Tax-Free Intermediate Bond and the Missouri Tax-Free Interme-
diate Bond Funds. Goldman Sachs has advised the Trust that it has retained
approximately $18,000 on the sale of shares of the Funds for the year ended
October 31, 1999.
The Trust, on behalf of each Fund (except the National Tax-Free Intermedi-
ate 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
1940 Act. 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 share-
holder administration support services. For these services, the Service Orga-
nizations 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 of sales or maturities of long-term securities for the
year ended October 31, 1999, were as follows:
<TABLE>
<CAPTION>
Purchases Sales or
Purchase of (excluding maturities of Sales or maturities
U.S. Government U.S. Government U.S. Government (excluding
and agency and agency and agency U.S. Government and
obligations obligations) obligations agency obligations)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Government $37,608,876 $10,703,258 $14,538,242 $ 7,123,481
----------------------------------------------------------------------------------------------
Bond Fund 71,766,683 84,851,791 44,486,142 32,771,525
----------------------------------------------------------------------------------------------
Balanced Fund 19,430,402 55,537,121 14,383,571 62,648,889
----------------------------------------------------------------------------------------------
Growth and Income Fund -- 55,582,297 -- 74,355,408
----------------------------------------------------------------------------------------------
Growth Fund -- 158,012,388 -- 194,499,640
----------------------------------------------------------------------------------------------
MidCap Fund -- 138,093,603 -- 164,056,224
----------------------------------------------------------------------------------------------
International Equity
Fund -- 36,664,171 -- 33,648,162
----------------------------------------------------------------------------------------------
National Tax-Free Inter-
mediate Bond Fund -- 20,719,560 -- 13,124,173
----------------------------------------------------------------------------------------------
Missouri Tax-Free Inter-
mediate Bond Fund -- 16,508,440 -- 7,719,810
----------------------------------------------------------------------------------------------
</TABLE>
62
<PAGE>
COMMERCE FUNDS
5. CONCENTRATION OF RISK
Under normal conditions, the Missouri Tax-Free Intermediate Bond and National
Tax-Free Intermediate Bond Funds will invest at least 80% of their net assets
in tax-exempt securities. Although they do not expect to do so, the Funds may
invest up to 20% of their net assets in private activity bonds that may sub-
ject certain investors to the federal alternative minimum tax.
In addition, 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 invests
substantially in debt securities issued by or on behalf of states,
territories and possessions of the U.S. The issuers' abilities to meet their
obligations may be affected by the states' economic and political
developments.
Emerging markets securities are volatile. They are subject to substantial
currency fluctuations and sudden economic and political developments. At
times the securities held by the International Equity Fund may be subject to
abrupt and severe price declines.
6. CERTAIN RECLASSIFICATIONS
In accordance with Statement of Position 93-2, the Short-Term Government Fund
reclassified $6,201 from paid-in capital and $50 from accumulated net real-
ized gain on investment to accumulated undistributed net investment income.
Bond Fund reclassified $5,724 from paid-in capital and $331,477 from accumu-
lated net realized gain on investment to accumulated undistributed net in-
vestment income. Balanced Fund reclassified $5,549 from paid-in capital and
$122,024 from accumulated net realized gain on investment to accumulated un-
distributed net investment income. Growth and Income Fund reclassified $3,987
and $12 from accumulated undistributed net investment income and accumulated
net realized gain on investment to paid-in capital. Growth Fund reclassified
$5,842 from paid-in capital and $604,802 from accumulated net realized gain
on investment to accumulated undistributed net investment income. MidCap Fund
reclassified $780,043 from paid-in capital and $156,742 from accumulated net
realized gain on investment to accumulated undistributed net investment in-
come. International Equity Fund reclassified $53,965 from accumulated net in-
vestment income and $14,531 from paid-in capital to accumulated net
investment gain. National Tax-Free Intermediate Bond Fund reclassified $5,785
from paid-in capital to accumulated net realized gain on investment of $83
and $5,702 of accumulated undistributed net investment income. Missouri Tax-
Free Intermediate Bond Fund reclassified $5,799 from paid-in capital and $5
from accumulated net realized gain on investment to accumulated undistributed
net investment income.
These reclassifications have no impact on the net asset value of the Funds
and are designed to present the Funds' capital accounts on a tax basis.
63
<PAGE>
COMMERCE FUNDS
Notes to Financial Statements (continued)
October 31, 1999
7. SUMMARY OF SHARE TRANSACTIONS
Share activity is as follows:
<TABLE>
<CAPTION>
Short-
Term Government Fund Bond Fund
------------------------ ------------------------
Shares Dollars Shares Dollars
For the Year Ended October 31, 1999
<S> <C> <C> <C> <C>
Institutional Shares
Shares sold 5,324,843 $ 97,584,178 8,522,605 $163,524,792
Reinvestment of dividends
and distributions 198,345 3,625,923 873,736 16,727,317
Shares repurchased (2,793,935) (50,976,935) (4,634,455) (87,897,150)
-----------------------------------------------
2,729,253 50,233,166 4,761,886 92,354,959
------------------------------------------------------------------------------
Service Shares
Shares sold 108,982 2,008,985 18,010 345,189
Reinvestment of dividends
and distributions 1,825 33,447 3,621 69,404
Shares repurchased (105,731) (1,950,745) (11,402) (216,842)
-----------------------------------------------
5,076 91,687 10,229 197,751
------------------------------------------------------------------------------
NET INCREASE (DECREASE) 2,734,329 $ 50,324,853 4,772,115 $ 92,552,710
------------------------------------------------------------------------------
</TABLE>
For the Year Ended October 31, 1998
<TABLE>
<S> <C> <C> <C> <C>
Institutional Shares
Shares sold 1,903,333 $ 35,298,819 6,349,549 $124,463,979
Reinvestment of dividends
and distributions 114,766 2,127,602 552,687 10,866,284
Shares repurchased (959,304) (17,791,072) (2,720,225) (53,619,651)
----------------------------------------------
1,058,795 19,635,349 4,182,011 81,710,612
-----------------------------------------------------------------------------
Service Shares
Shares sold 29,958 558,189 17,372 341,018
Reinvestment of dividends
and distributions 1,352 25,076 2,273 44,692
Shares repurchased (4,168) (77,342) (4,350) (84,976)
----------------------------------------------
27,142 505,923 15,295 300,734
-----------------------------------------------------------------------------
NET INCREASE 1,085,937 $ 20,141,272 4,197,306 $ 82,011,346
-----------------------------------------------------------------------------
</TABLE>
64
<PAGE>
COMMERCE FUNDS
<TABLE>
<CAPTION>
Balanced Fund Growth and Income Fund Growth Fund
- ------------------------- ------------------------ -------------------------
Shares Dollars Shares Dollars Shares Dollars
<S> <C> <C> <C> <C> <C>
1,256,913 $ 32,435,728 1,413,116 $ 31,187,726 4,120,844 $ 158,670,973
686,412 17,127,136 48,213 1,035,320 1,466,203 51,701,347
(1,605,963) (41,312,525) (2,239,584) (50,030,942) (4,893,060) (190,127,841)
- -------------------------------------------------------------------------------
337,362 8,250,339 (778,255) (17,807,896) 693,987 20,244,479
- -------------------------------------------------------------------------------
35,703 928,999 6,081 136,969 153,499 5,913,752
13,993 348,751 865 18,571 38,598 1,357,104
(37,465) (963,547) (23,575) (529,549) (52,465) (2,008,961)
- -------------------------------------------------------------------------------
12,231 314,203 (16,629) (374,009) 139,632 5,261,895
- -------------------------------------------------------------------------------
349,593 $ 8,564,542 (794,884) $(18,181,905) 833,619 $ 25,506,374
- -------------------------------------------------------------------------------
1,363,665 $ 37,176,250 2,886,337 $ 66,921,460 2,754,076 $ 101,540,731
300,769 8,031,502 22,352 515,244 588,450 20,410,434
(1,054,815) (29,167,152) (715,652) (16,381,268) (2,329,380) (87,122,002)
- -------------------------------------------------------------------------------
609,619 16,040,600 2,193,037 51,055,436 1,013,146 34,829,163
- -------------------------------------------------------------------------------
57,190 1,570,001 35,269 845,014 87,121 3,281,298
3,950 105,688 379 8,795 11,026 381,744
(10,832) (281,352) (91,504) (2,069,988) (24,603) (907,527)
- -------------------------------------------------------------------------------
50,308 1,394,337 (55,856) (1,216,179) 73,544 2,755,515
- -------------------------------------------------------------------------------
659,927 $ 17,434,937 2,137,181 $ 49,839,257 1,086,690 $ 37,584,678
- -------------------------------------------------------------------------------
</TABLE>
65
<PAGE>
COMMERCE FUNDS
Notes to Financial Statements (continued)
October 31, 1999
7. SUMMARY OF SHARE TRANSACTIONS (continued)
<TABLE>
<CAPTION>
MidCap Fund
-------------------------
Shares Dollars
For the year ended October 31, 1999
<S> <C> <C>
Institutional Shares
Shares sold 1,126,851 $ 40,683,097
Reinvestment of dividends and distributions 148,906 4,974,933
Shares repurchased (1,953,751) (70,571,822)
-------------------------
(677,994) (24,913,792)
----------------------------------------------------------------------
Service Shares
Shares sold 50,321 1,800,189
Reinvestment of dividends and distributions 1,918 63,715
Shares repurchased (5,267) (191,412)
-------------------------
46,972 1,672,492
----------------------------------------------------------------------
NET INCREASE (DECREASE) (631,022) $(23,241,300)
----------------------------------------------------------------------
For the year ended October 31, 1998
Institutional Shares
Shares sold 1,567,306 $ 53,751,656
Reinvestment of dividends and distributions 136,501 4,555,044
Shares repurchased (839,957) (28,264,874)
-------------------------
863,850 30,041,826
----------------------------------------------------------------------
Service Shares
Shares sold 20,737 747,791
Reinvestment of dividends and distributions 1,101 36,634
Shares repurchased (3,660) (127,510)
-------------------------
18,178 656,915
----------------------------------------------------------------------
NET INCREASE 882,028 $ 30,698,741
----------------------------------------------------------------------
</TABLE>
66
<PAGE>
COMMERCE FUNDS
<TABLE>
<CAPTION>
National Tax-Free Missouri Tax-Free
International Equity Fund Intermediate Bond Fund Intermediate Bond Fund
- ---------------------------- ----------------------- -----------------------
Shares Dollars Shares Dollars Shares Dollars
<S> <C> <C> <C> <C> <C>
1,820,690 $ 46,399,339 867,967 $ 16,441,369 1,155,718 $ 21,667,860
12,621 302,904 16,862 316,392 19,118 355,572
(1,558,848) (39,065,251) (413,480) (7,735,169) (600,753) (11,191,281)
- -------------------------------------------------------------------------------
274,463 7,636,992 471,349 9,022,592 574,083 10,832,151
- -------------------------------------------------------------------------------
68,876 1,707,778 -- -- -- --
39 945 -- -- -- --
(67,189) (1,673,146) -- -- -- --
- -------------------------------------------------------------------------------
1,726 35,577 -- -- -- --
- -------------------------------------------------------------------------------
276,189 $ 7,672,569 471,349 $ 9,022,592 574,083 $ 10,832,151
- -------------------------------------------------------------------------------
1,685,123 $ 38,758,637 624,858 $ 11,904,162 723,684 $ 13,626,116
75,866 1,653,469 7,857 149,809 10,270 193,971
(902,867) (20,520,621) (239,516) (4,574,500) (260,635) (4,905,167)
- -------------------------------------------------------------------------------
858,122 19,891,485 393,199 7,479,471 473,319 8,914,920
- -------------------------------------------------------------------------------
8,322 200,795 -- -- -- --
309 6,737 -- -- -- --
(2,521) (55,621) -- -- -- --
- -------------------------------------------------------------------------------
6,110 151,911 -- -- -- --
- -------------------------------------------------------------------------------
864,232 $ 20,043,396 393,199 $ 7,479,471 473,319 $ 8,914,920
- -------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
COMMERCE FUNDS
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income from Distributions
investment operations(a) to shareholders
------------------------- ------------------
Net asset
value, Net Net realized From net From net
beginning investment and unrealized investment realized
of period income gain (loss) income gains
SHORT-TERM GOVERNMENT FUND
<S> <C> <C> <C> <C> <C>
For the Year Ended Octo-
ber 31, 1999
Institutional Shares $18.78 $1.04 $(0.71) $(1.04) $(0.01)
Service Shares 18.79 1.00 (0.72) (0.99) (0.01)
----------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1998
Institutional Shares 18.47 1.10 0.32 (1.11) --
Service Shares 18.48 1.06 0.31 (1.06) --
----------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1997
Institutional Shares 18.43 1.11 0.04 (1.11) --
Service Shares (com-
menced January 2, 1997) 18.37 0.92 0.11 (0.92) --
----------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1996
Institutional Shares 18.83 1.09 (0.18) (1.09) (0.22)
----------------------------------------------------------------------------------
For the Period Ended
October 31, 1995
Institutional Shares
(commenced December 12,
1994) 18.00 1.06 0.83 (1.06) --
BOND FUND
For the Year Ended Octo-
ber 31, 1999
Institutional Shares $19.84 $1.16 $(1.04) $(1.16) $(0.23)
Service Shares 19.85 1.11 (1.05) (1.11) (0.23)
----------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1998
Institutional Shares 19.43 1.15 0.41 (1.15) --
Service Shares 19.43 1.11 0.42 (1.11) --
----------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1997
Institutional Shares 19.07 1.17 0.39 (1.18) (0.02)
Service Shares (com-
menced January 2, 1997) 19.00 0.94 0.43 (0.94) --
----------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1996
Institutional Shares 19.61 1.16 (0.28) (1.16) (0.26)
----------------------------------------------------------------------------------
For the Period Ended
October 31, 1995
Institutional Shares
(commenced December 12,
1994) 18.00 1.12 1.61 (1.12) --
----------------------------------------------------------------------------------
</TABLE>
(a) Includes the balancing effect of calculating per share amounts.
(b) 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.
(c) Annualized.
The accompanying notes are an integral part of these financial statements.
68
<PAGE>
COMMERCE FUNDS
<TABLE>
<CAPTION>
Ratios assuming no voluntary
waiver of fees or expense limitations
-------------------------------------
Net assets Ratio of Ratio of
Net asset at end of Ratio of net investment Ratio of net investment Portfolio
value, end Total period net expenses to income to expenses to income to turnover
of period return(b) (in 000s) average net assets average net assets average net assets average net assets rate
<S> <C> <C> <C> <C> <C> <C> <C>
$18.06 1.83% $116,163 0.68% 5.65% 0.92% 5.41% 10%
18.07 1.57 1,022 0.93 5.46 1.17 5.22 10
- ---------------------------------------------------------------------------------------------------------------------------
18.78 7.94 69,538 0.68 5.90 1.04 5.55 48
18.79 7.67 968 0.93 5.63 1.29 5.28 48
- ---------------------------------------------------------------------------------------------------------------------------
18.47 6.45 48,840 0.68 6.04 1.11 5.61 36
18.48 5.81 450 0.93(c) 5.64(c) 1.36(c) 5.21(c) 36
- ---------------------------------------------------------------------------------------------------------------------------
18.43 5.02 33,839 0.68 5.90 1.11 5.47 12
- ---------------------------------------------------------------------------------------------------------------------------
18.83 10.72 20,211 0.68(c) 6.38(c) 1.14(c) 5.92(c) 158
$18.57 0.59% $374,121 0.81% 6.05% 0.81% 6.05% 16%
18.57 0.29 1,180 1.06 5.80 1.06 5.80 16
- ---------------------------------------------------------------------------------------------------------------------------
19.84 8.27 305,396 0.83 5.86 0.83 5.86 30
19.85 8.05 1,059 1.08 5.59 1.08 5.59 30
- ---------------------------------------------------------------------------------------------------------------------------
19.43 8.50 217,803 0.85 6.14 0.85 6.14 19
19.43 7.48 739 1.10(c) 5.67(c) 1.10(c) 5.67(c) 19
- ---------------------------------------------------------------------------------------------------------------------------
19.07 4.71 151,205 0.84 6.10 0.84 6.10 31
- ---------------------------------------------------------------------------------------------------------------------------
19.61 15.59 98,504 0.88(c) 6.64(c) 0.88(c) 6.64(c) 58
- ---------------------------------------------------------------------------------------------------------------------------
</TABLE>
69
<PAGE>
COMMERCE FUNDS
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income from Distributions
investment operations(a) to shareholders
------------------------- -------------------
Net asset
value, Net Net realized From net From net
beginning investment and unrealized investment realized
of period income gain (loss) income gains
BALANCED FUND
<S> <C> <C> <C> <C> <C>
For the Year Ended Octo-
ber 31, 1999
Institutional Shares $27.04 $0.70 $ 1.22 $(0.69) $(2.98)
Service Shares 27.01 0.64 1.22 (0.62) (2.98)
----------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1998
Institutional Shares 26.67 0.59 1.67 (0.59) (1.30)
Service Shares 26.66 0.53 1.65 (0.53) (1.30)
----------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1997
Institutional Shares 24.00 0.59 3.93 (0.59) (1.26)
Service Shares (com-
menced January 2, 1997) 23.25 0.40 3.42 (0.41) --
----------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1996
Institutional Shares 22.10 0.54 2.56 (0.54) (0.66)
----------------------------------------------------------------------------------
For the Period Ended Oc-
tober 31, 1995
Institutional Shares
(commenced December 12,
1994) 18.00 0.59 4.06 (0.55) --
GROWTH AND INCOME FUND
For the Year Ended Octo-
ber 31, 1999
Institutional Shares $21.72 $0.15 $(0.09) $(0.15) $(0.23)
Service Shares 21.73 0.11 (0.11) (0.09) (0.23)
----------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1998
Institutional Shares 21.82 0.18 (0.05) (0.19) (0.04)
Service Shares 21.81 0.16 (0.09) (0.11) (0.04)
----------------------------------------------------------------------------------
For the Period Ended Oc-
tober 31, 1997
Institutional Shares
(commenced March 3,
1997) 18.00 0.15 3.80 (0.13) --
Service Shares (com-
menced March 3, 1997) 18.00 0.12 3.80 (0.11) --
----------------------------------------------------------------------------------
</TABLE>
(a) Includes the balancing effect of calculating per share amounts.
(b) 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.
(c) Annualized.
The accompanying notes are an integral part of these financial statements.
70
<PAGE>
COMMERCE FUNDS
<TABLE>
<CAPTION>
Ratios assuming no voluntary
waiver of fees or expense limitations
-------------------------------------
Net
assets
at end
of Ratio of Ratio of
Net asset period Ratio of net investment Ratio of net investment Portfolio
value, end Total (in net expenses to income to expenses to income to turnover
of period return(b) 000's) average net assets average net assets average net assets average net assets rate
<S> <C> <C> <C> <C> <C> <C> <C>
$25.29 7.60% $124,245 1.13% 2.71% 1.49% 2.35% 11%
25.27 7.38 2,735 1.38 2.47 1.74 2.11 11
- -----------------------------------------------------------------------------------------------------------------------
27.04 8.68 123,717 1.13 2.20 1.49 1.84 68
27.01 8.36 2,594 1.38 1.99 1.74 1.63 68
- -----------------------------------------------------------------------------------------------------------------------
26.67 19.92 105,782 1.13 2.44 1.53 2.04 31
26.66 16.53 1,219 1.38(c) 2.13(c) 1.78(c) 1.73(c) 31
- -----------------------------------------------------------------------------------------------------------------------
24.00 14.45 69,880 1.13 2.47 1.45 2.15 58
- -----------------------------------------------------------------------------------------------------------------------
22.10 26.14 48,329 1.13(c) 3.28(c) 1.45(c) 2.96(c) 59
$21.40 0.29% $ 74,591 1.15% 0.67% 1.15% 0.67% 64%
21.41 0.02 989 1.40 0.42 1.40 0.42 64
- -----------------------------------------------------------------------------------------------------------------------
21.72 0.53 92,625 1.16 0.82 1.16 0.82 55
21.73 0.30 1,365 1.41 0.60 1.41 0.60 55
- -----------------------------------------------------------------------------------------------------------------------
21.82 22.00 45,173 1.20(c) 1.30(c) 2.02(c) 0.48(c) 5
21.81 21.81 2,588 1.45(c) 1.02(c) 2.27(c) 0.20(c) 5
- -----------------------------------------------------------------------------------------------------------------------
</TABLE>
71
<PAGE>
COMMERCE FUNDS
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income from Distributions
investment operations(a) to shareholders
--------------------------- --------------------
Net asset Net
value, investment Net realized From net From net
beginning income and unrealized investment realized
of period (loss) gain income gains
GROWTH FUND
<S> <C> <C> <C> <C> <C>
For the Year Ended Octo-
ber 31, 1999
Institutional Shares $37.37 $(0.05) $6.40 $(0.01) $(5.47)
Service Shares 37.29 (0.12) 6.37 -- (5.47)
------------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1998
Institutional Shares 34.54 0.07 5.06 (0.06) (2.24)
Service Shares 34.50 (0.01) 5.05 (0.01) (2.24)
------------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1997
Institutional Shares 28.95 0.19 7.51 (0.19) (1.92)
Service Shares (com-
menced January 2, 1997) 28.26 0.09 6.25 (0.10) --
------------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1996
Institutional Shares 24.68 0.19 5.40 (0.19) (1.13)
------------------------------------------------------------------------------------
For the Period Ended
October 31, 1995
Institutional Shares
(commenced December 12,
1994) 18.00 0.15 6.68 (0.15) --
MIDCAP FUND
For the Year Ended Octo-
ber 31, 1999
Institutional Shares $32.57 $(0.23)(d) $9.34(d) $ -- $(1.61)
Service Shares 32.40 (0.31)(d) 9.27(d) -- (1.61)
------------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1998
Institutional Shares 33.02 (0.13) 1.48 -- (1.80)
Service Shares 32.94 (0.16) 1.42 -- (1.80)
------------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1997
Institutional Shares 28.06 (0.13) 5.38 -- (0.29)
Service Shares (com-
menced January 2, 1997) 28.64 (0.11) 4.41 -- --
------------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1996
Institutional Shares 25.30 (0.07) 3.51 -- (0.68)
------------------------------------------------------------------------------------
For the Period Ended
October 31, 1995
Institutional Shares
(commenced December 12,
1994) 18.00 (0.04) 7.34 -- --
------------------------------------------------------------------------------------
</TABLE>
(a) Includes the balancing effect of calculating per share amounts.
(b) 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.
(c) Annualized.
(d) Calculated based on average shares outstanding methodology.
The accompanying notes are an integral part of these financial statements.
72
<PAGE>
COMMERCE FUNDS
<TABLE>
<CAPTION>
Net
assets
at end
of Ratio of
Net asset period Ratio of net investment Portfolio
value, end Total (in net expenses to income (loss) to turnover
of period return(b) 000's) average net assets average net assets rate
<S> <C> <C> <C> <C> <C>
$38.24 18.24% $445,923 1.08% (0.12)% 35%
38.07 17.97 14,468 1.33 (0.36) 35
- ---------------------------------------------------------------------------------
37.37 15.38 409,797 1.08 0.20 53
37.29 15.10 8,965 1.33 (0.06) 53
- ---------------------------------------------------------------------------------
34.54 28.12 343,773 1.11 0.60 32
34.50 22.47 5,758 1.36(c) 0.35(c) 32
- ---------------------------------------------------------------------------------
28.95 23.43 208,908 1.08 0.72 36
- ---------------------------------------------------------------------------------
24.68 38.06 141,735 1.11(c) 0.81(c) 33
$40.07 28.96% $143,892 1.14% (0.63)% 98%
39.75 28.63 3,384 1.39 (0.86) 98
- ---------------------------------------------------------------------------------
32.57 3.96 139,035 1.16 (0.58) 76
32.40 3.68 1,236 1.41 (0.82) 76
- ---------------------------------------------------------------------------------
33.02 18.88 112,442 1.23 (0.61) 89
32.94 15.01 658 1.48(c) (0.95)(c) 89
- ---------------------------------------------------------------------------------
28.06 13.78 74,641 1.22 (0.37) 71
- ---------------------------------------------------------------------------------
25.30 40.56 41,665 1.32(c) (0.29)(c) 59
- ---------------------------------------------------------------------------------
</TABLE>
73
<PAGE>
COMMERCE FUNDS
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income from Distributions
investment operations(a) to shareholders
------------------------- -------------------
Net asset
value, Net Net realized From net From net
beginning investment and unrealized investment realized
of period Income gain income gains
INTERNATIONAL EQUITY FUND
<S> <C> <C> <C> <C> <C>
For the Year Ended Octo-
ber 31, 1999
Institutional Shares $23.00 $0.09 $4.40 $(0.10) $ --
Service Shares 22.92 0.10 4.34 (0.06) --
----------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1998
Institutional Shares 22.10 0.10 1.45 (0.08) (0.57)
Service Shares 22.06 0.05 1.44 (0.06) (0.57)
----------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1997
Institutional Shares 20.96 0.06 1.42 (0.10) (0.24)
Service Shares (com-
menced January 2, 1997) 21.70 0.01 0.35 -- --
----------------------------------------------------------------------------------
For the Year Ended Octo-
ber 31, 1996
Institutional Shares 18.64 0.11 2.35 (0.07) (0.07)
----------------------------------------------------------------------------------
For the Period Ended
October 31, 1995
Institutional Shares
(commenced December 12,
1994) 18.00 0.12 0.55 (0.03) --
----------------------------------------------------------------------------------
</TABLE>
(a) Includes the balancing effect of calculating per share amounts.
(b) 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.
(c) Annualized.
The accompanying notes are an integral part of these financial statements.
74
<PAGE>
COMMERCE FUNDS
<TABLE>
<CAPTION>
Ratios assuming no voluntary waiver
of fees or expense limitations
-------------------------------------
Net assets Ratio of Ratio of
Net asset at end of Ratio of net investment Ratio of net investment Portfolio
value, end Total period net expenses to Income to expenses to income (loss) to turnover
of period return(b) (in 000's) average net assets average net assets average net assets average net assets rate
<S> <C> <C> <C> <C> <C> <C> <C>
$27.39 19.58% $128,018 1.53% 0.40% 2.07% (0.14)% 32%
27.30 19.39 499 1.78 0.33 2.32 (0.21) 32
- -------------------------------------------------------------------------------------------------------------------------
23.00 7.16 101,161 1.62 0.46 2.14 (0.06) 22
22.92 6.88 379 1.87 0.19 2.39 (0.33) 22
- -------------------------------------------------------------------------------------------------------------------------
22.10 7.15 78,273 1.72 0.35 2.23 (0.16) 22
22.06 1.66 231 1.97(c) 0.14(c) 2.48(c) (0.37)(c) 22
- -------------------------------------------------------------------------------------------------------------------------
20.96 13.25 51,589 1.72 0.74 2.64 (0.18) 21
- -------------------------------------------------------------------------------------------------------------------------
18.64 3.73 21,014 1.81(c) 1.06(c) 3.50(c) (0.63)(c) 25
- -------------------------------------------------------------------------------------------------------------------------
</TABLE>
75
<PAGE>
COMMERCE FUNDS
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income from Distributions
investment operations(a) to shareholders
------------------------- ---------------------
Net asset
value, Net Net realized From net From net
beginning investment and unrealized investment realized
of period income gain (loss) income gains
NATIONAL TAX-FREE INTERMEDIATE BOND FUND
<S> <C> <C> <C> <C> <C>
For the Year Ended
October 31, 1999 $19.33 $0.74 $(0.93) $(0.74) $(0.16)
October 31, 1998 18.85 0.74 0.48 (0.74) --
October 31, 1997 18.46 0.72 0.39 (0.72) --
October 31, 1996 18.54 0.73 (0.07) (0.73) (0.01)
For the Period Ended Oc-
tober 31, 1995 (com-
menced February 21,
1995) 18.00 0.54 0.54 (0.54) --
MISSOURI TAX-FREE INTERMEDIATE BOND FUND
For the Year Ended
October 31, 1999 $19.07 $0.73 $(0.90) $(0.73) $(0.10)
October 31, 1998 18.61 0.74 0.47 (0.74) (0.01)
October 31, 1997 18.26 0.76 0.37 (0.76) (0.02)
October 31, 1996 18.40 0.76 (0.14) (0.76) --
For the Period Ended Oc-
tober 31, 1995 (com-
menced February 21,
1995) 18.00 0.57 0.40 (0.57) --
-----------------------------------------------------------------------------------
</TABLE>
(a) Includes the balancing effect of calculating per share amounts.
(b) 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 a sales charge were taken
into account.
(c) Annualized.
The accompanying notes are an integral part of these financial statements.
76
<PAGE>
COMMERCE FUNDS
<TABLE>
<CAPTION>
Ratios assuming no voluntary waiver of
fees or expense limitations
--------------------------------------
Net assets Ratio of Ratio of
Net asset at end of Ratio of net investment Ratio of net investment Portfolio
value, end Total period, net expenses to income to expenses to income to turnover
of period return(b) (in 000's) average net assets average net assets average net assets average net assets rate
<S> <C> <C> <C> <C> <C> <C> <C>
$18.24 (1.08)% $40,243 0.70% 3.90% 0.93% 3.67% 35%
19.33 6.59 33,528 0.74 3.87 1.04 3.57 41
18.85 6.16 25,281 0.85 3.89 1.15 3.59 6
18.46 3.60 17,613 0.85 3.93 1.55 3.23 34
18.54 6.06 10,721 0.85(c) 4.19(c) 1.90(c) 3.14(c) 19
$18.07 (0.95)% $42,641 0.65% 3.91% 0.92 3.64% 21%
19.07 6.65 34,051 0.65 3.93 1.03 3.55 34
18.61 6.31 24,434 0.65 4.14 1.21 3.58 13
18.26 3.43 17,034 0.65 4.14 1.58 3.21 49
18.40 5.45 8,889 0.65(c) 4.41(c) 2.12(c) 2.94(c) 52
- --------------------------------------------------------------------------------------------------------------------------
</TABLE>
The Commerce Funds (unaudited)
During the year ended October 31, 1999, 96.46% and 94.71%, of
the distributions paid by the National Tax-Free Intermediate
Bond Fund and the Missouri Tax-Free Intermediate Bond Fund, re-
spectively, were exempt-interest dividends and as such, are not
subject to U.S. federal income tax. The remaining distributions
were taxable ordinary income dividends.
During the year ended October 31, 1999, 2.63%, and 1.22% of the
exempt-interest dividends paid by the National Tax-Free Interme-
diate Bond Fund and the Missouri Tax-Free Intermediate Bond
Fund, respectively, were derived from Private Activity Bonds or
Alternative Minimum Tax Bonds ("AMT Bonds").
During the year ended October 31, 1999, 21.57%, 100% and 99.17%
of the dividends paid from net investment income by the Balanced
Fund, Growth and Income Fund and Growth Fund, respectively,
qualify for the dividends received deduction available to corpo-
rations.
77
<PAGE>
COMMERCE FUNDS
Independent Auditors' Report
To the Board of Trustees and Shareholders of
The Commerce Funds:
We have audited the accompanying statements of assets and liabilities of 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, and The Missouri Tax-Free In-
termediate Bond Fund, portfolios of The Commerce Funds, (collectively, The
Commerce Funds), including statements of investments as of October 31, 1999
and the related statements of operations for the year ended October 31, 1999,
the statements of changes in net assets for each of the years in the two-year
period ended October 31, 1999 and financial highlights for each of the years
or periods in the five-year period ended October 31, 1999. These financial
statements and financial highlights are the responsibility of The Commerce
Funds' management. Our responsibility is to express an opinion on these fi-
nancial statements and financial highlights based on our audits.
We conducted our audits in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial
highlights are free of material misstatement. An audit includes examining, on
a test basis, evidence supporting the amounts and disclosures in the finan-
cial statements and financial highlights. Our procedures included confirma-
tion of securities owned as of October 31, 1999 by correspondence with the
custodian and brokers. An audit also includes assessing the accounting prin-
ciples used and significant estimates made by management, as well as evaluat-
ing the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Commerce Funds as of October 31, 1999, and the results of their operations,
changes in their net assets and financial highlights for each of the years or
periods specified in the first paragraph above in conformity with generally
accepted accounting principles.
KPMG LLP
Kansas City, Missouri
December 16, 1999
78
<PAGE>
The Commerce Funds
Trustees
J. Eric Helsing, Chairman
Randall D. Barron
David L. Bodde
John J. Holland
Warren Weaver
Officers
Warren Weaver, President
James A. McNamara, Vice President
Nancy L. Mucker, Vice President
John M. Perlowski, Vice President
Randall D. Barron, Treasurer
Philip V. Giuca Jr., Assistant Treasurer
W. Bruce McConnel, III, Secretary
Michael J. Richman, Assistant Secretary
Howard B. Surloff, Assistant Secretary
This Annual Report contains facts concerning The Commerce Funds' objectives and
policies, management, expenses, and other information. For more complete
information about The Commerce Funds, a prospectus may be obtained by calling 1-
800-995-6365. An investor should read the prospectus carefully before investing
or sending money.
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 the possible loss of the principal amount invested. The Commerce Funds
are advised by Commerce Bank, N.A., which receives a fee for its services. The
Commerce Funds are distributed by Goldman, Sachs & Co.
<PAGE>
INVESTMENT ADVISER
Commerce Bank, N.A.
INVESTMENT SUB-ADVISER,
INTERNATIONAL EQUITY FUND
Rowe Price-Fleming International, Inc.
100 East Pratt Street
Baltimore, Maryland 21202
CUSTODIAN
State Street Bank & Trust Company
225 Franklin Street
Boston, Massachusetts 02110
TRANSFER AGENT
National Financial Data Services, Inc.
330 W. 9th
4th Floor
Kansas City, Missouri 64105
DISTRIBUTOR
Goldman, Sachs & Co.
85 Broad Street
New York, New York 10004
ADMINISTRATOR
Goldman Sachs Asset Management
32 Old Slip
New York, New York 10005
INDEPENDENT AUDITORS
KPMG LLP
1000 Walnut Street
Kansas City, Missouri 64106
LEGAL COUNSEL
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, Pennsylvania 19103-6996
[LOGO OF COMMERCE FUNDS]
8000 Forsyth Boulevard
Suite 606
St. Louis, Missouri 63105
1000 Walnut Street
Eighth Floor
Kansas City, Missouri 64106
www.commercefunds.com
CB 5041
1-800-995-6365 Date of first use: 12/23/99
