<PAGE>
Commerce Funds
[GRAPHIC]
Annual Report - October 31, 2000
[LOGO OF COMMERCE FUNDS]
<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
International Equity
MidCap Growth (formerly
The MidCap Fund)
Growth
Value (formerly The
Growth and Income Fund)
RISK Balanced POTENTIAL RETURN
Missouri Tax-Free
Intermediate Bond
National Tax-Free
Intermediate Bond
Bond
Short-Term Government
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 of The Commerce Funds.
In this report, you will find performance and financial information for the
nine Commerce Funds. The portfolio manager of each Fund also provides a re-
view of the factors that have affected performance in the last year. To help
you put that information in context, we offer the following economic and fi-
nancial market review.
Economic and Market Update
In our semi-annual report to shareholders six months ago we
expressed the belief that, after raising interest rates on
several occasions, the Federal Reserve Board would be ap-
proaching the end of its tightening monetary stance. This
belief was based on our assumption that economic growth in
the United States soon would begin to moderate.
Since that time, we have seen that much of this has come to
pass. After a series of six short-term interest rate hikes,
the economy's torrid growth rate finally showed signs of
slowing during the summer. As such, the Federal Reserve
moved to a more neutral stance--leaving interest rates un-
changed at their June, August and October meetings. On each
occasion the Federal Reserve made it a point to emphasize
that it will continue to monitor inflation vigilantly, es-
pecially in light of rising energy prices and the extremely
tight labor market.
Turning to the financial markets, we have seen decidedly
mixed results. For the one-year period ended October 31,
2000 the stock market, as measured by the Standard & Poor's
500 Index, rose 6.09%. During the same period the bond mar-
ket, as measured by the Lehman Brothers Aggregate Bond In-
dex, generated a 7.30% return. In both cases, these
positive returns masked the volatility in the markets.
The 12-month reporting period began on a positive note for
the U.S. equity market. The lengthy bull market continued
through February, with the vast majority of the gains being
generated by large-cap growth and technology-related
stocks. Then, in mid-March, the markets abruptly corrected.
Continued strong economic growth, inflationary pressures
and rising interest rates were the main culprits. While
other types of stocks were dragged down during the correc-
tion, technology issues experienced the brunt of the de-
cline. Within a few short weeks the technology-laden Nasdaq
composite was down 37% from its peak. While the correction
was not unexpected, the pace and severity of the decline
shook the confidence of many investors.
The equity market then abruptly changed course and staged
an impressive rally late in the summer. This rebound was
driven by the prospects for an end to interest rate hikes
by the Federal Reserve. However, market sentiment shifted
yet again, as uncertainty arose regarding the state of cor-
porate profits in the face of an economic slowdown and high
energy prices. All told, by the end of the reporting period
the Standard & Poor's 500 and the Nasdaq were down 7% and
46%, respectively, from their March 2000 peaks.
1
<PAGE>
COMMERCE FUNDS
The international equity markets were not immune from the
market's gyrations. Once again, the technology sector was
the most volatile area. By the end of the reporting period
most developed markets in Europe, Japan, and Asia, as well
as many emerging equity markets, registered negative re-
turns.
As we would expect, the bond markets did not experience the
same level of volatility as their equity counterparts. How-
ever, there were periods of unrest. Early in the reporting
period most sectors of the U.S. bond market faltered, due
to rising interest rates. However, when the Federal Reserve
moved to a more neutral monetary policy, the U.S. fixed-in-
come market subsequently rebounded. One noteworthy excep-
tion was the performance of high yield bonds. Rising
default rates, lackluster demand, and moderating economic
growth caused these issues to perform poorly during much of
the period.
In summary, we believe this year's financial market perfor-
mance exemplifies the importance of maintaining a diversi-
fied investment portfolio and taking a long-term approach.
In addition, we do not expect to see the 20-30% gains in
the stock market that we have experienced in the past few
years. As such, we believe it's important for investors to
maintain realistic expectations about their investment re-
turns.
Before I conclude, I would like to spend a moment updating
you on some changes to our Fund Family. In recent months
the Commerce Growth and Income Fund was renamed the Com-
merce Value Fund, and the Commerce MidCap Fund was renamed
the Commerce MidCap Growth Fund. In addition, a shareholder
meeting was held on November 20, 2000, at which sharehold-
ers approved a number of issues related to The Commerce
Funds. These issues included approval of a new investment
advisory agreement for the International Equity Fund and
changes to the investment objectives of the MidCap Growth,
Growth and Value Funds. Finally, I am pleased to report
that we plan to expand your investment options shortly by
introducing two new Funds to our family, the Commerce Core
Equity Fund and the Commerce Kansas Tax-Free Intermediate
Bond Fund.
As always, we appreciate your investment and we look for-
ward to being a part of your investment future in the years
to come.
Sincerely,
Gary D. Campbell
Chief Investment Officer
Investment Management Group
Commerce Bank, N.A.
November 22, 2000
The prospectus for the Core Equity and Kansas Tax-Free In-
termediate Bond Funds is not complete and may be changed.
We may not sell these securities until the registration
statement filed with the Securities and Exchange Commission
is effective. This report is not an offer to sell these se-
curities and is not soliciting an offer to buy these secu-
rities. For more complete information on these two Commerce
Funds, please contact us at 1-800-995-6365 to request a Fi-
nal prospectus. Please read the prospectus carefully before
investing.
2
<PAGE>
COMMERCE SHORT-TERM GOVERNMENT FUND
Short-Term Government Fund Overview
Dear Shareholder:
We are pleased to report on the performance of the Commerce Short-Term Gov-
ernment Fund (the "Fund") for the year ended October 31, 2000.
Performance Review
For the year ended October 31, 2000, the Institutional
Shares of the Fund had a cumulative total return of 6.15%,
based on Net Asset Value (NAV) (assumes fee waivers and ex-
pense reimbursements). The Service Shares had a cumulative
total return, without sales charge, of 5.89% for the same
period based on NAV (assumes fee waivers and expense reim-
bursements). This compares to the Lipper Short-Term Govern-
ment Funds Index 12-month cumulative return of 6.12% and
Salomon Brothers 1-5 Year Treasury/Government Sponsored In-
dex 12-month cumulative return of 6.48%. Past performance
is no guarantee of future results. (The Fund's NAV and
yield are not guaranteed by the FDIC or the U.S. Government
or by its agencies, instrumentalities, or sponsored enter-
prises.)
Portfolio Highlights
.Over the course of the reporting period we positioned the
Fund at the long end of its average maturity range of
three years. This strategy was employed in order to take
advantage of our outlook for falling government interest
rates.
.The Fund has emphasized high-quality AAA and government-
backed mortgage securities with short, stable average ma-
turities. These securities tend to provide higher yields
than typical agency debentures.
.We also continued to stress agency credits, particularly
the new "benchmark" agency bonds that provide liquidity
similar to that of Treasuries, but with yields that are 45
to 75 basis points higher than Treasuries.
.Looking ahead, we expect to see short-term interest rates
decline. Given this outlook, we will emphasize yield and
structure in order to maximize return potential over the
coming year.
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, 2000
3
<PAGE>
COMMERCE SHORT-TERM GOVERNMENT FUND
Performance Summary
October 31, 2000
The following graph shows the value, as of October 31, 2000, of a $10,000 in-
vestment made on December 12, 1994 (commencement of operations) in the Insti-
tutional Shares. For comparative purposes, the performance of the Fund's
benchmark (the Salomon Brothers 1-5 Year Treasury/Government Sponsored Index
with income reinvested ("Salomon Bros. Treas./Gov't")) is shown. The Fund's
performance versus the Lipper Short US Government Funds Index(a) ("Lipper
Short US Gov't Funds Index") with income reinvested is also shown. The per-
formance data represent past performance and should not be considered indica-
tive 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 sales loads.
Short-Term Government Fund Institutional Shares Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested December 12, 1994 to
October 31, 2000.
[GRAPH]
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
10/31/00 14,443 14,786 14,210
<TABLE>
<CAPTION>
Average Annual Total Return through
October 31, 2000 Since Inception Five Years One Year
<S> <C> <C> <C>
Institutional Shares (commenced
December 12, 1994) 6.44% 5.45% 6.15%
----------------------------------------------------------------------------
Service Shares (commenced January 2,
1997)
Excluding sales charges 5.44% n/a 5.89%
Including sales charges (maximum sales
charge 2.00%) 4.90% n/a 3.76%
----------------------------------------------------------------------------
</TABLE>
(a) The Lipper Short U.S. Government Funds Index is an unmanaged index con-
sisting of funds that invest at least 65% of their assets in securities
issued or guaranteed by the U.S. Government with dollar-weighted average
maturities of less than three years. The Index figures do not reflect
any fees or expenses.
4
<PAGE>
COMMERCE SHORT-TERM GOVERNMENT FUND
Statement of Investments
October 31, 2000
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Collateralized Mortgage Obligations - 35.5%
Bear Stearns Mortgage Securities, Inc. Series 1998-1, Class A17
$ 250,000 5.00% 03/25/2028 $ 192,276
Chase Mortgage Finance Corp. Series 1999-S1, Class A17
320,000 6.75 02/25/2029 288,099
Countrywide Home Loans, Inc. Series 1997-4, Class A
305,068 8.00 07/25/2027 307,478
Federal Home Loan Mortgage Corp. REMIC PAC Series 1205, Class G
157,636 7.00 03/15/2007 157,783
Federal Home Loan Mortgage Corp. REMIC PAC Series 1255, Class G
65,379 7.50 07/15/2021 65,297
Federal Home Loan Mortgage Corp. REMIC PAC Series 1526, Class N
279,174 6.50 12/15/2022 277,080
Federal Home Loan Mortgage Corp. REMIC PAC Series 1619, Class EC
370,428 5.60 11/15/2023 365,912
Federal Home Loan Mortgage Corp. REMIC PAC Series 1621, Class K
230,000 6.50 11/15/2023 214,834
Federal Home Loan Mortgage Corp. REMIC PAC Series 1624, Class EA
92,425 5.50 01/15/2007 92,079
Federal Home Loan Mortgage Corp. REMIC PAC Series 1727, Class KA
384,813 6.50 05/15/2024 383,128
Federal Home Loan Mortgage Corp. REMIC PAC Series 2047, Class A
52,140 6.75 05/15/2027 51,680
Federal Home Loan Mortgage Corp. REMIC PAC Series 2103, Class TE
625,000 6.00 12/15/2028 550,000
Federal Home Loan Mortgage Corp. REMIC PAC Series 2109, Class PE
700,000 6.00 12/15/2028 616,651
Federal Home Loan Mortgage Corp. REMIC PAC Series 44, Class E
338,890 9.00 11/15/2019 341,008
Federal Home Loan Mortgage Corp. REMIC Series 1574, Class P
16,273 6.50 07/15/2023 16,090
Federal Home Loan Mortgage Corp. REMIC Series 1617, Class C
149,000 6.50 02/15/2023 143,040
Federal Home Loan Mortgage Corp. REMIC Series 1632, Class B
200,000 6.00 11/15/2023 180,500
Federal Home Loan Mortgage Corp. REMIC Series 1727, Class E
200,039 6.50 04/15/2018 199,224
--------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Collateralized Mortgage Obligations - (continued)
Federal Home Loan Mortgage Corp. Series 1650, Class K
$ 880,000 6.50% 01/15/2024 $ 828,194
Federal Home Loan Mortgage Corp. Series 1652, Class PJ
500,000 6.60 08/15/2022 496,250
Federal National Mortgage Assn. REMIC PAC Series 1991-118, Class K
81,502 7.00 08/25/2021 80,890
Federal National Mortgage Assn. REMIC PAC Series 1991-94, Class E
1,249,741 Zero Coupon 07/25/2021 991,582
Federal National Mortgage Assn. REMIC PAC Series 1993-19, Class J
535,000 5.00 04/25/2022 484,507
Federal National Mortgage Assn. REMIC PAC Series 1993-208, Class L
1,375 6.50 03/25/2023 1,368
Federal National Mortgage Assn. REMIC PAC Series 1994-76, Class E
227,965 5.00 02/25/2022 225,970
Federal National Mortgage Assn. REMIC PAC Series 1996-28, Class PE
281,000 6.50 03/25/2020 278,893
Federal National Mortgage Assn. REMIC PAC Series G92-35, Class D
102,321 4.50 08/25/2021 99,411
Federal National Mortgage Assn. REMIC PAC Series G93-16, Class H
360,000 4.59 04/25/2021 329,850
Federal National Mortgage Assn. REMIC Series 1992-1, Class E
239,674 7.50 01/25/2007 241,846
Federal National Mortgage Assn. REMIC Series 1993-130, Class H
418,446 6.30 09/25/2018 414,391
Federal National Mortgage Assn. REMIC Series 1993-225, Class G
630,334 6.50 11/25/2022 593,342
Federal National Mortgage Assn. REMIC Series 1993-225, Class NC
3,229,000 6.50 03/25/2023 3,111,949
Federal National Mortgage Assn. REMIC Series 1993-245, Class N
200,000 6.50 12/25/2023 193,500
Federal National Mortgage Assn. REMIC Series 1994-23, Class A
8,152 6.00 12/25/2022 8,114
Federal National Mortgage Assn. REMIC Series 1993-225, Class NB
414,852 6.50 12/25/2022 408,887
Federal National Mortgage Assn. Series 1993-109, Class TC
391,849 7.00 01/25/2011 390,012
Federal National Mortgage Assn. Series 1993-139, Class KB
2,880 7.00 11/25/2000 2,866
-----------------------------------------------------------------------------------------
</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, 2000
<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 $ 468,750
Federal National Mortgage Assn. Series 1993-76, Class A
284,299 6.00 06/25/2008 278,613
Federal National Mortgage Assn. Series 1995-19, Class L
171,021 6.25 08/25/2008 161,935
Federal National Mortgage Assn. Series 1997-58, Class DC
700,000 7.00 01/20/2013 688,184
Federal National Mortgage Assn. Series 1997-58, Class G
921,891 6.50 03/20/2023 914,977
Federal National Mortgage Assn. Series 1998-63, Class PL
530,000 6.00 11/25/2027 475,341
First Nationwide Trust Series 1998-3, Class 1PPA
97,616 6.50 09/19/2028 92,780
GE Capital Mortgage Services, Inc. Series 1993-16, Class A4
3,258 6.25 12/25/2023 3,241
GE Capital Mortgage Services, Inc. Series 1997-9, Class 2A7
946,650 7.00 10/25/2027 940,137
Independent National Mortgage Corp. Series 1994-L, Class A6
870,868 8.00 08/25/2024 878,488
Prudential Home Mortgage Securities Co. REMIC PAC Series 1993-3, Class
A6
2,179,509 7.40 02/25/2008 2,172,687
Prudential Home Mortgage Securities Co. Series 1993-28, Class M
1,123,564 7.38 08/25/2023 1,103,317
Residential Accredit Loans, Inc. Series 1997-QS7, Class A4
2,000,000 7.50 07/25/2027 1,993,120
Residential Accredit Loans, Inc. Series 1999-QS2, Class A5
1,000,000 6.50 02/25/2029 853,750
Residential Asset Securitization Trust Series 1997-A7, Class A5
1,865,300 7.50 09/25/2027 1,857,708
Residential Funding Mortgage Securities Series 1993-S49, Class A2
154,454 6.00 12/25/2008 152,667
Residential Funding Mortgage Securities I, Inc. REMIC Series 1995-S12,
Class A2
742,628 7.25 08/25/2010 736,360
Residential Funding Mortgage Securities I, Inc. REMIC Series 1997-S3,
Class A3
159,164 7.30 03/25/2007 158,348
Residential Funding Mortgage Securities I, Inc. Series 1998-S13, Class
A14
938,000 6.75 06/25/2028 843,018
Saxon Mortgage Securities Corp. REMIC Series 1993-8A, Class 1A5
500,000 7.38 09/25/2023 480,255
Securitized Asset Sales, Inc. Series 1993-7, Class TA6
470,000 6.25 12/25/2023 441,358
----------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $29,808,652) $29,319,015
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Mortgage-Backed Pass-Through Obligations - 2.9%
Federal Home Loan Mortgage Corporation (FHLMC)
$ 5,900 8.75% 02/01/2001 $ 5,932
10,169 8.75 04/01/2001 10,168
57,552 8.25 08/01/2001 58,181
55,390 7.75 09/01/2007 55,901
Federal National Mortgage Association (FNMA)
555,380 6.50 04/01/2003 550,220
207,466 8.00 12/01/2007 210,439
229,689 6.50 02/01/2012 226,606
91,462 9.00 07/01/2024 95,613
809,972 5.82 12/01/2028 765,934
Government National Mortgage Association (GNMA)
147,699 8.00 10/15/2016 151,160
251,024 8.00 07/15/2017 256,905
----------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED PASS-THROUGH OBLIGATIONS
(Cost $2,405,224) $ 2,387,059
----------------------------------------------------------------------------------------------
U.S. Government Agency Obligations - 58.1%
Detroit MI U.S. Government Guarantee Note Series A11
$ 100,000 6.44% 08/01/2002 $ 99,251
Federal Farm Credit Bank
1,000,000 6.10 11/19/2001 995,620
Federal Home Loan Bank
3,000,000 5.63 03/19/2001 2,986,410
1,250,000 7.44 08/10/2001 1,256,837
3,000,000 5.88 08/15/2001 2,983,590
1,000,000 6.53 08/28/2001 998,750
1,750,000 6.63 08/28/2001 1,750,898
965,000 7.56 02/27/2002 977,661
4,000,000 7.17 07/22/2002 4,042,480
2,000,000 5.13 09/15/2003 1,930,320
1,630,000 6.89 04/06/2004 1,646,039
Federal Home Loan Mortgage Corporation
500,000 6.70 07/25/2001 500,080
2,000,000 5.00 01/15/2004 1,913,440
200,000 5.75 04/15/2008 189,156
Federal National Mortgage Association
3,500,000 5.72 01/09/2001 3,490,690
250,000 6.18 03/15/2001 249,415
500,000 6.63 04/18/2001 500,155
700,000 6.38 08/14/2001 698,362
500,000 7.50 02/11/2002 505,935
7,500,000 5.25 01/15/2003 7,318,350
10,000,000 5.75 04/15/2003 9,843,700
330,000 6.05 05/29/2003 324,017
625,000 7.40 07/01/2004 641,600
750,000 6.50 08/15/2004 749,528
215,000 7.88 02/24/2005 225,380
500,000 7.65 03/10/2005 519,920
Tennessee Valley Authority 1989 Series D
575,000 6.00 11/01/2000 575,000
----------------------------------------------------------------------------------------------
TOTAL U.S. GOVERNMENT AGENCY OBLIGATIONS
(Cost $48,384,361) $47,912,584
----------------------------------------------------------------------------------------------
</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>
Repurchase Agreement - 3.3%
State Street Bank & Trust Co./\
$2,689,000 6.40% 11/01/2000 $ 2,689,000
----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $2,689,000) $ 2,689,000
----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $83,287,237) $82,307,658
----------------------------------------------------------------------------------------------
</TABLE>
/\Repurchase agreement was entered into on October 31, 2000 and the maturity
value is $2,689,478.
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
Bond Fund Overview
Dear Shareholder:
We are pleased to report on the performance of the Commerce Bond Fund (the
"Fund") for the year ended October 31, 2000.
Performance Review
.For the year ended October 31, 2000, the Institutional
Shares of the Fund had a cumulative total return of 5.59%,
based on Net Asset Value (NAV) (assumes fee waivers). The
Service Shares had a cumulative total return, without
sales charge, of 5.44% for the same period based on NAV
(assumes fee waivers). This compares to the Lipper Inter-
mediate Investment Grade Debt Funds Index 12-month cumula-
tive return of 6.33% and the Lehman Brothers Aggregate
Bond Index 12-month cumulative return of 7.30%. Past per-
formance is no guarantee of future results. (The Fund's
NAV and yield are not guaranteed by the FDIC or the U.S.
Government or by its agencies, instrumentalities, or spon-
sored enterprises.)
Portfolio Highlights
.During the first half of the reporting period the Fund was
positioned slightly short of its benchmark in terms of ma-
turity. However, its maturity is now in line with its
benchmark, as we have become more optimistic on the out-
look for falling corporate interest rates.
.For most of the fiscal year we emphasized corporate and
asset-backed securities over Treasuries in an effort to
maximize credit-adjusted yields. This strategy was not re-
warded, as the combination of a growing budget surplus
coupled with Treasury buybacks, a slowdown in the overall
economy, and a tightening in credit conditions, caused
credit spreads of corporate and asset-backed securities to
widen versus Treasury bonds.
.With credit spreads for many securities at recession-like
levels we have focused on high-quality corporate bonds and
longer-term asset-backed securities that offer yields of
approximately 1.5% higher than Treasuries.
.While we are reasonably optimistic that the economy will
not fall into a recession, we have eliminated some of our
BBB credit exposure as a defensive measure and have added
Inflation Indexed Treasury securities to the portfolio.
These bonds compound at the rate of inflation, plus pay a
coupon. In addition, they have been offering investors a
higher yield than fixed coupon Treasuries. We also believe
Inflation Indexed Treasuries should benefit as long-term
Treasuries become more scarce.
.Looking ahead, we expect credit spreads to contract and
the yield curve to steepen modestly as the Federal Reserve
eventually begins to lower its Fed Funds target some time
in the spring of 2001.
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, 2000
8
<PAGE>
COMMERCE BOND FUND
Performance Summary
October 31, 2000
The following graph shows the value, as of October 31, 2000, of a $10,000 in-
vestment made on December 12, 1994 (commencement of operations) in the Insti-
tutional Shares. For comparative purposes, the performance of the Fund's
benchmark (the Lehman Brothers Aggregate Bond Index with income reinvested
("Lehman Agg Bond Index")) is shown. The Fund's performance versus the Lipper
Intermediate Investment Grade Debt Funds Index(a) with income reinvested
("Lipper Interm Debt Funds Index") is also shown. The performance data repre-
sent past performance and should not be considered indicative of future per-
formance 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
sales loads.
Bond Fund Institutional Shares Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested December 12, 1994 to
October 31, 2000.
[GRAPH]
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
10/31/00 15,105 15,690 14,981
<TABLE>
<CAPTION>
Average Annual Total Return through
October 31, 2000 Since Inception Five Years One Year
<S> <C> <C> <C>
Institutional Shares (commenced
December 12, 1994) 7.25% 5.49% 5.59%
----------------------------------------------------------------------------
Service Shares (commenced January 2,
1997)
Excluding sales charges 5.51% n/a 5.44%
Including sales charges (maximum sales
charge 3.50%) 4.53% n/a 1.77%
----------------------------------------------------------------------------
</TABLE>
(a) The Lipper Intermediate Investment Grade Debt Funds Index is an unman-
aged index consisting of funds that invest at least 65% of their assets
in investment grade debt issues with dollar-weighted average maturities
of five to ten years. The Index figures do not reflect any fees or ex-
penses.
9
<PAGE>
COMMERCE BOND FUND
Statement of Investments
October 31, 2000
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Asset-Backed Securities - 30.8%
Automotive- 0.0%
Fifth Third Bank Auto Grantor Trust Series 1996-A, Class A
$ 84,084 6.20% 09/15/2001 $ 83,926
-----------------------------------------------------------------------------------------------
Commercial - 1.5%
Commercial Mortgage Asset Trust Series 1999-C1, Class B
2,250,000 7.23 07/17/2013 2,219,330
First Union-Lehman Brothers-Bank of America Series 1998-C2, Class B
2,750,000 6.64 03/18/2011 2,636,206
------------
4,855,536
-----------------------------------------------------------------------------------------------
Credit Card - 9.5%
American Express Credit Account Master Trust Series 1994-3, Class A
2,000,000 7.85 08/15/2005 2,070,000
American Express Credit Account Master Trust Series 1996-1, Class B
4,000,000 6.95 12/15/2003 3,998,720
Chemical Master Credit Card Trust I Series 1995-3, Class A
2,000,000 6.23 04/15/2005 1,983,120
Chemical Master Credit Card Trust I Series 1996-1, Class B
1,000,000 5.71 09/15/2003 995,930
Chemical Master Credit Card Trust I Series 1996-2, Class A
2,500,000 5.98 09/15/2008 2,409,375
Citibank Credit Card Master Trust I Series 1997-6, Class B
2,000,000 6.47 08/15/2006 1,542,187
Citibank Credit Card Master Trust I Series 1999-2, Class B
2,170,000 6.15 03/10/2011 2,040,473
Discover Card Master Trust I Series 1993-3, Class A
2,000,000 6.20 11/15/2003 1,968,740
First USA Credit Card Master Trust Series 1997-6, Class B
2,450,000 6.58 03/17/2005 2,437,872
MBNA Master Credit Card Trust Series 1995-C, Class A
2,000,000 6.45 02/15/2008 1,982,500
MBNA Master Credit Card Trust Series 1999-B, Class B
2,000,000 6.20 08/15/2011 1,880,560
Metris Master Trust Series 1997-1, Class A
2,500,000 6.87 10/20/2005 2,497,650
Metris Master Trust Series 1997-1, Class B
1,000,000 7.11 10/20/2005 997,810
Standard Credit Card Master Trust Series 1995-1, Class A
2,000,000 8.25 01/07/2007 2,101,000
Standard Credit Card Master Trust Series 1995-1, Class B
2,000,000 8.45 01/07/2007 2,092,295
------------
30,998,232
-----------------------------------------------------------------------------------------------
Home Equity - 7.4%
Access Financial Mortgage Loan Trust Series 1996-2, Class A4
1,500,000 7.63 09/18/2021 1,504,590
Advanta Mortgage Loan Trust Series 1994-4, Class A2
2,063,158 8.92 01/25/2026 2,089,422
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Asset-Backed Securities - (continued)
Home Equity - (continued)
American Business Financial Services, Inc. Series 1996-1, Class A
$1,921,393 7.95% 09/15/2026 $ 1,921,393
Contimortgage Home Equity Loan Trust Series 1999-3, Class A6
2,500,000 7.68 12/25/2029 2,452,344
Corestates Home Equity Trust Series 1993-2, Class A
103,200 5.10 03/15/2009 102,566
GE Capital Mortgage Services, Inc. Series 1997-8, Class A11
1,750,000 7.25 10/25/2027 1,634,063
GE Capital Mortgage Services, Inc. Series 1997-HE1, Class M
1,842,520 7.50 03/25/2027 1,786,237
GE Capital Mortgage Services, Inc. Series 1997-HE4, Class M
1,889,767 7.14 12/25/2028 1,799,134
GE Capital Mortgage Services, Inc. Series 1999-13, Class A12
6,000,000 6.50 08/25/2029 5,578,080
Merrill Lynch Mortgage Investors, Inc. Series 1991-H1, Class M1
2,000,000 7.36 07/15/2011 1,902,500
Merrill Lynch Mortgage Investors, Inc. Series 1999-H1, Class A3
3,500,000 6.76 09/20/2026 3,423,420
------------
24,193,749
-----------------------------------------------------------------------------------------------
Manufactured Housing - 12.0%
Associates Manufactured Housing Pass-Through Series 1996-1, Class A5
5,000,000 7.60 03/15/2027 4,978,350
Green Tree Financial Corp. Series 1993-4, Class A4
1,504,132 6.60 01/15/2019 1,494,716
Green Tree Financial Corp. Series 1993-4, Class A5
4,000,000 7.05 01/15/2019 3,855,040
Green Tree Financial Corp. Series 1994-2, Class A4
3,105,756 7.90 05/15/2019 3,134,764
Green Tree Financial Corp. Series 1995-1, Class B1
2,387,504 9.00 06/15/2025 2,402,808
Green Tree Financial Corp. Series 1995-5, Class B1
1,792,871 7.30 09/15/2026 1,696,434
Green Tree Financial Corp. Series 1995-8, Class B1
1,185,233 7.30 12/15/2026 1,112,472
Green Tree Financial Corp. Series 1996-3, Class A4
943,623 7.10 05/15/2027 943,755
Green Tree Financial Corp. Series 1996-4, Class A7
3,982,241 7.90 06/15/2027 3,862,057
Green Tree Financial Corp. Series 1996-8, Class M1
2,000,000 7.85 10/15/2027 1,958,100
Green Tree Financial Corp. Series 1997-3, Class B1
1,500,000 7.51 07/15/2028 1,404,495
Green Tree Financial Corp. Series 1997-3, Class M1
3,250,000 7.53 07/15/2028 3,164,180
-----------------------------------------------------------------------------------------------
</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 1997-6, Class M1
$2,500,000 7.21% 06/15/2027 $ 2,376,250
Green Tree Financial Corp. Series 1998-3, Class A6
800,000 6.76 03/01/2030 733,320
Green Tree Financial Corp. Series 1999-1, Class M1
1,750,000 6.56 03/01/2020 1,530,988
Green Tree Financial Corp. Series 1999-1, Class M2
750,000 7.34 11/01/2028 676,230
Green Tree Home Improvement Loan Trust Series 1997-E, Class HEM1
2,500,000 7.28 01/15/2029 2,427,660
Oakwood Mortgage Investors, Inc. Series 1997-A, Class A5
1,500,000 7.13 05/15/2027 1,467,165
------------
39,218,784
-----------------------------------------------------------------------------------------------
Utilities - 0.4%
California Infrastructure PG&E-1 (Pacific Gas and Electric) Series 1997-
1, Class A6
1,250,000 6.32 09/25/2005 1,240,225
-----------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $101,700,202) $100,590,452
-----------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations - 12.6%
Asset Securitization Corp. Series 1995-MD4, Class A1
$6,807,375 7.10% 08/13/2029 $ 6,832,834
Asset Securitization Corp. Series 1997-D4, Class 4IE
2,500,000 7.53 04/14/2029 2,542,310
Bear Stearns Mortgage Securities, Inc. Series 1998-1, Class A17
1,000,000 5.00 03/25/2028 769,103
Countrywide Mortgage Backed Securities, Inc. REMIC PAC Series 1993-B,
Class A5
1,196,697 6.75 11/25/2023 1,167,893
Federal Home Loan Mortgage Corp. REMIC PAC Series 1579, Class PM
1,235,000 6.70 09/15/2023 1,175,177
Federal Home Loan Mortgage Corp. Series 1652, Class PJ
3,000,000 6.60 08/15/2022 2,977,500
Federal National Mortgage Assn. REMIC Series 1992-1, Class E
1,198,370 7.50 01/25/2007 1,209,228
Federal National Mortgage Assn. REMIC Series 1993-130, Class H
1,230,723 6.30 09/25/2018 1,218,797
GE Capital Mortgage Services, Inc. Series 1997-12, Class A5
2,750,000 7.00 12/25/2027 2,560,057
LB Commercial Conduit Mortgage Trust Series 1998-C4, Class A1B
4,500,000 6.21 10/15/2008 4,254,840
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest
Amount Rate Maturity Date Value
<S> <C> <C> <C>
Collateralized Mortgage Obligations - (continued)
Mortgage Capital Funding, Inc. Series 1996-MC1, Class A2A
$ 2,221,593 7.35% 07/15/2005 $ 2,243,098
Norwest Asset Securities Corp. Series 1998-21, Class B1
1,180,929 6.50 09/25/2013 1,117,454
PNC Mortgage Securities Corp. REMIC Series 1996-1, Class A10
1,537,754 7.50 09/25/2009 1,543,521
Prudential Home Mortgage Securities Co. Series 1993-28, Class M
2,247,128 7.38 08/25/2023 2,206,635
Residential Asset Securitization REMIC Trust Series 1997-A1, Class A7
3,000,000 7.38 03/25/2027 2,935,710
Residential Funding Mortgage Securities Corp. Series 1999-S14 Class
IIA1
3,292,985 6.50 06/25/2029 3,095,406
Residential Funding Mortgage Securities Corp. Series 1999-S20, Class
A1
3,543,069 6.50 09/25/2014 3,472,207
------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $42,255,975) $ 41,321,770
------------------------------------------------------------------------------------
Corporate Obligations - 28.3%
Energy - 0.9%
Phillips Petroleum Co.
$3,200,000 7.00% 03/30/2029 $ 2,916,896
------------------------------------------------------------------------------------
Financial - 13.4%
Allstate Corp.
814,000 6.75 05/15/2018 731,892
American Express Credit Corp.
2,000,000 6.13 11/15/2001 1,983,860
Apache Finance Property Ltd.
2,250,000 7.00 03/15/2009 2,200,399
Bank of America Corp.
1,500,000 6.88 06/01/2003 1,494,180
Case Corp.
2,500,000 6.25 12/01/2003 2,359,265
Donaldson Lufkin & Jenrette, Inc.
1,500,000 6.00 12/01/2001 1,477,635
Equitable Life Assurance Society of the United States+
6,000,000 7.70 12/01/2015 5,799,660
Ford Motor Company Credit Corp.
2,000,000 6.63 06/30/2003 1,972,120
General Motors Acceptance Corp.
2,000,000 5.88 01/22/2003 1,956,060
2,000,000 6.63 10/15/2005 1,934,230
Hanson Overseas BV
2,000,000 6.75 09/15/2005 1,896,280
Household Financial Corp.
1,500,000 6.50 11/15/2008 1,399,080
------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
11
<PAGE>
COMMERCE BOND FUND
Statement of Investments (continued)
October 31, 2000
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Corporate Obligations - (continued)
Financial - (continued)
Merrill Lynch & Co., Inc.
$1,900,000 5.71% 01/15/2002 $ 1,868,897
Metropolitan Life Insurance Co.+
4,000,000 7.70 11/01/2015 3,925,040
Morgan Stanley Group, Inc.
2,000,000 6.75 03/04/2003 1,992,340
National Bank of Canada
3,000,000 7.75 11/01/2009 2,974,980
PNC Bank, N.A.
2,000,000 7.88 04/15/2005 2,041,080
Simon Debartolo Group LP
2,000,000 6.75 06/15/2005 1,899,880
Swiss Bank Corp.
4,000,000 7.38 06/15/2017 3,836,920
------------
43,743,798
-----------------------------------------------------------------------------------------------
Industrial - 11.1%
Conoco, Inc.
1,500,000 6.35 04/15/2009 1,426,515
2,500,000 6.95 04/15/2029 2,315,450
Ford Motor Co.
3,450,000 6.50 08/01/2018 2,922,426
General Motors Acceptance Corp.
3,250,000 6.15 04/05/2007 3,012,035
Lafarge Corp.
3,500,000 6.88 07/15/2013 3,062,650
Receipts on Corporate Securities Trust CHR-1998-1
4,914,181 6.50 08/01/2018 4,332,239
Receipts on Corporate Securities Trust NSC-1998-1+
5,807,614 6.38 05/15/2017 5,131,480
Ryder System, Inc.
4,000,000 6.60 11/15/2005 3,823,720
Service Master Co.
3,000,000 7.10 03/01/2018 2,331,090
St. Paul Companies, Inc.
4,000,000 6.38 12/15/2008 3,700,912
TRW, Inc.
2,500,000 6.05 01/15/2005 2,327,350
Union Oil Co.
1,000,000 7.62 03/21/2002 1,008,810
1,000,000 7.70 04/05/2002 1,010,280
------------
36,404,957
-----------------------------------------------------------------------------------------------
Real Estate - 0.9%
Archstone Communities Trust
3,000,000 8.20 07/03/2005 3,018,900
-----------------------------------------------------------------------------------------------
Utilities - 2.0%
GTE Corp.
6,000,000 6.84 04/15/2018 5,510,940
-----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Corporate Obligations - (continued)
Utilities - (continued)
Hydro Quebec
$1,000,000 7.96% 12/17/2001 $ 1,011,235
------------
6,522,175
-----------------------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $99,006,530) $ 92,606,726
-----------------------------------------------------------------------------------------------
Mortgage-Backed Pass-Through Obligations - 15.7%
Federal Home Loan Mortgage Corporation (FHLMC)
$1,233,673 6.00% 12/01/2013 $ 1,174,284
894,997 8.50 02/01/2019 919,448
966,878 8.50 03/01/2021 992,616
7,463,820 7.00 05/01/2026 7,337,905
Federal National Mortgage Association (FNMA)
2,782,756 5.50 01/01/2009 2,672,308
1,707,169 7.00 07/01/2009 1,703,960
459,378 6.50 02/01/2012 453,213
1,599,420 6.00 12/01/2013 1,558,139
958,643 6.50 07/01/2014 925,982
717,220 9.00 11/01/2021 740,745
932,554 6.50 04/01/2024 900,782
998,613 6.50 05/01/2024 964,590
729,658 6.50 07/01/2024 704,798
1,197,292 6.50 07/01/2024 1,156,500
1,525,048 6.50 09/01/2024 1,473,090
322,207 9.00 02/01/2025 332,743
2,463,295 6.50 03/01/2026 2,373,212
1,445,582 8.00 07/01/2028 1,469,521
1,334,996 7.00 08/01/2028 1,308,296
800,039 7.00 09/01/2028 784,038
1,829,851 7.00 10/01/2028 1,793,254
3,422,131 5.82 12/01/2028 3,236,070
3,752,899 6.50 12/01/2028 3,608,637
1,049,479 7.00 12/01/2028 1,028,490
2,305,689 6.50 01/01/2029 2,217,059
1,546,488 6.00 07/01/2029 1,449,832
Government National Mortgage Association (GNMA)
2,033,637 8.00 02/15/2022 2,073,028
914,343 7.50 08/20/2025 915,202
4,974,130 7.50 07/20/2026 4,977,264
-----------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED PASS-THROUGH OBLIGATIONS
(Cost $51,511,089) $ 51,245,006
-----------------------------------------------------------------------------------------------
U.S. Treasury Obligations - 11.2%
United States Treasury Bonds
$8,500,000 7.88% 02/15/2021 $ 10,342,120
5,252,550 3.88 04/15/2029 5,272,247
-----------------------------------------------------------------------------------------------
</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>
U.S. Treasury Obligations - (continued)
United States Treasury Notes
$14,500,000 5.63% 05/15/2008 $ 14,296,130
4,000,000 6.00 08/15/2009 4,040,000
2,566,150 4.25 01/15/2010 2,643,930
------------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATIONS
(Cost $36,130,547) $ 36,594,427
------------------------------------------------------------------------------------------------
Repurchase Agreement - 0.6%
State Street Bank & Trust Co./\
$ 1,896,000 6.40% 11/01/2000 $ 1,896,000
------------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $1,896,000) $ 1,896,000
------------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $332,500,343) $324,254,381
------------------------------------------------------------------------------------------------
</TABLE>
# Variable rate security. Coupon rate disclosed is that which is in effect at
October 31, 2000.
+ 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.
/\Repurchase agreement was entered into on October 31, 2000 and the maturity
value is $1,896,337.
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.
13
<PAGE>
COMMERCE BALANCED FUND
Balanced Fund Overview
Dear Shareholder:
We are pleased to report on the performance of the Commerce Balanced Fund
(the "Fund") for the year ended October 31, 2000.
Performance Review
For the year ended October 31, 2000, the Institutional
Shares of the Fund had a cumulative total return of 8.93%,
based on Net Asset Value (NAV) (assumes fee waivers and ex-
pense reimbursements). The Service Shares had a cumulative
total return, without sales charge, of 8.67% for the same
period based on NAV (assumes fee waivers and expense reim-
bursements). This compares to the Lipper Balanced Funds In-
dex 12-month cumulative return of 7.91%, 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
cumulative return of 6.85%, the S&P 500 Stock Index 12-
month cumulative return of 6.09% and the Lehman Brothers
Aggregate Bond Index 12-month cumulative return of 7.30%.
Past performance is no guarantee of future results. (The
Fund's NAV is not guaranteed by the FDIC or the U.S. Gov-
ernment or by its agencies, instrumentalities, or sponsored
enterprises.)
Portfolio Highlights
.For the majority of the reporting period the Fund was in-
vested in accordance with its long-term asset mix of 60%
in equities and 40% in fixed-income securities. In August,
the equity portion was increased to 69%, reflecting our
positive outlook for stocks. Following a strong August and
weak September and October, equities have slightly
underperformed fixed-income securities since the change.
.The equity portion of the Fund uses a blend of large-cap
growth and value companies. The large-cap companies are
complemented with mid-cap growth issues as well. The com-
bination of these different styles leads to a well diver-
sified portfolio. The equity portion is currently
overweight in the technology and energy sectors, and un-
derweight in consumer durables and non-durables versus the
Standard & Poor's 500 Index.
.In the bond portion of the Fund we emphasized corporate
and asset-backed securities over Treasuries in an effort
to maximize credit-adjusted yields. This strategy was not
rewarded, as the combination of a growing budget surplus
coupled with Treasury buybacks, a slowdown in the overall
economy, and a tightening in credit conditions, caused
credit spreads of corporate and asset-backed securities to
widen versus Treasury bonds.
.With credit spreads for many securities at recession-like
levels we have also focused on high-quality corporate
bonds and longer-term asset-backed securities that offer
yields 1.5% higher than Treasuries.
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, 2000
14
<PAGE>
COMMERCE BALANCED FUND
Performance Summary
October 31, 2000
The following graph shows the value, as of October 31, 2000, of a $10,000 in-
vestment made on December 12, 1994 (commencement of operations) in the Insti-
tutional Shares. For comparative purposes, the performance of the Fund's
benchmarks (the composite of the Standard & Poor's 500 Index with income and
dividends reinvested ("S&P 500") (weighted at 60%) and the Lehman Brothers
Aggregate Bond Index with income reinvested (weighted at 40%) ("Combined S&P
500 and Lehman Bond Index"), the S&P 500 Index and the Lehman Brothers Aggre-
gate Bond Index) are shown. The Fund's performance versus the Lipper Balanced
Funds Index(a) with dividends reinvested is also shown. The performance data
represent 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
sales loads.
Balanced Fund Institutional Shares Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested December 12, 1994 to
October 31, 2000.
[GRAPH]
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
10/31/00 22,061 25,979 22,485
<TABLE>
<CAPTION>
Average Annual Total Return through
October 31, 2000 Since Inception Five Years One Year
<S> <C> <C> <C>
Institutional Shares (commenced
December 12, 1994) 14.37% 11.82% 8.93%
----------------------------------------------------------------------------
Service Shares (commenced January 2, 1997)
Excluding sales charges 10.64% n/a 8.67%
Including sales charges (maximum sales
charge 3.50%) 9.62% n/a 4.85%
----------------------------------------------------------------------------
</TABLE>
(a) The Lipper Balanced Funds Index is an unmanaged index consisting of
funds that maintain a balanced portfolio of both stocks and bonds rang-
ing around 60%/40% at all times. The Index figures do not reflect any
fees or expenses.
15
<PAGE>
COMMERCE BALANCED FUND
Statement of Investments
October 31, 2000
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - 69.0%
Commercial Services - 2.0%
15,000 Dendrite International, Inc.* $ 326,250
11,000 Omnicom Group, Inc. 1,014,750
10,650 Paychex, Inc. 603,722
----------
1,944,722
--------------------------------------------------------
Communication Services - 0.7%
12,000 SBC Communications, Inc. 692,250
--------------------------------------------------------
Consumer Services - 0.4%
22,000 USA Networks, Inc.* 445,500
--------------------------------------------------------
Electronic Technology - 20.2%
12,000 ADC Telecommunications, Inc.* 256,500
64,000 Altera Corp.* 2,620,000
4,000 Amdocs Ltd.* 259,250
12,000 Analog Devices, Inc.* 780,000
25,000 Cisco Systems, Inc.* 1,346,875
10,600 Comverse Technology, Inc.* 1,184,550
15,600 EMC Corp.* 1,389,375
12,000 General Dynamics Corp. 858,750
28,400 Intel Corp. 1,278,000
7,300 Jabil Circuit, Inc.* 416,556
19,600 Linear Technology Corp. 1,265,425
9,000 LSI Logic Corp.* 295,875
46,175 Microchip Technology, Inc.* 1,460,284
21,000 Nokia Corp. ADR 897,750
10,000 Polycom, Inc.* 650,000
6,000 Rainbow Technologies, Inc.* 149,250
8,000 Sanmina Corp.* 914,500
7,000 Scientific-Atlanta, Inc. 479,063
8,600 Sun Microsystems, Inc.* 953,525
10,400 Symbol Technologies, Inc. 472,550
30,000 Teradyne, Inc.* 937,500
14,000 Xilinx, Inc.* 1,014,125
----------
19,879,703
--------------------------------------------------------
Energy Minerals - 3.7%
17,800 Apache Corp. 984,562
14,700 Exxon Mobil Corp. 1,311,056
22,050 Royal Dutch Petroleum Co. 1,309,219
----------
3,604,837
--------------------------------------------------------
Finance - 12.9%
17,850 Ambac Financial Group, Inc. 1,424,653
17,300 American International Group, Inc. 1,695,400
39,333 Citigroup, Inc. 2,069,899
35,750 FleetBoston Financial Corp. 1,358,500
20,000 Merrill Lynch & Co., Inc. 1,400,000
19,000 Morgan Stanley Dean Witter & Co. 1,525,936
7,800 Northern Trust Corp. 665,925
15,000 The Bank of New York Co., Inc. 863,438
12,000 The Chase Manhattan Corp. 546,000
25,000 Wells Fargo & Co. 1,157,813
----------
12,707,564
--------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Health Services - 0.8%
8,000 Cardinal Health, Inc. $ 758,000
-------------------------------------------------------------
Health Technology - 7.3%
4,000 Allergan, Inc. 336,250
10,000 Amgen, Inc.* 579,375
2,000 IDEC Pharmaceuticals Corp.* 392,250
9,000 Johnson & Johnson 829,125
4,000 MedImmune, Inc.* 261,500
17,700 Medtronic, Inc. 961,331
3,000 MiniMed, Inc.* 218,813
6,200 PE Corp-PE Biosystems Group 725,400
24,000 Pfizer, Inc. 1,036,500
20,000 Schering-Plough Corp. 1,033,750
5,000 Techne Corp.* 563,750
4,000 Watson Pharmaceuticals, Inc.* 250,250
----------
7,188,294
-------------------------------------------------------------
Industrial Services - 3.8%
40,000 Global Marine, Inc.* 1,060,000
33,000 Halliburton Co. 1,223,062
5,000 Nabors Industries, Inc.* 254,500
22,000 Transocean Sedco Forex, Inc. 1,166,000
----------
3,703,562
-------------------------------------------------------------
Producer Manufacturing - 3.7%
10,700 Danaher Corp. 675,437
15,000 Dover Corp. 636,563
42,000 General Electric Co. 2,302,125
----------
3,614,125
-------------------------------------------------------------
Retail Trade - 3.5%
8,000 Best Buy Co., Inc.* 401,500
14,500 Lowe's Cos., Inc. 662,469
8,000 RadioShack Corp. 477,000
35,000 Target Corp. 966,875
20,000 Wal-Mart Stores, Inc. 907,500
----------
3,415,344
-------------------------------------------------------------
Technology Services - 6.4%
2,000 Adobe Systems, Inc. 152,125
1,000 Ariba, Inc.* 126,375
6,000 BEA Systems, Inc.* 430,500
4,000 Check Point Software Technologies Ltd.* 633,500
26,000 First Data Corp. 1,303,250
10,000 Jack Henry & Associates, Inc. 550,000
20,000 Microsoft Corp.* 1,377,500
30,000 Oracle Corp.* 990,000
12,000 Rational Software Corp.* 716,250
----------
6,279,500
-------------------------------------------------------------
Telecommunications - 0.9%
20,000 Nortel Networks Corp. 910,000
-------------------------------------------------------------
</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)
Utilities - 2.7%
23,800 Duke Energy Corp. $ 2,057,213
10,000 Equitable Resources, Inc. 580,000
-----------
2,637,213
------------------------------------------------
TOTAL COMMON STOCKS
(Cost $52,124,414) $67,780,614
------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Fixed Income - 29.7%
Asset-Backed Securities - 8.8%
Commercial - 1.0%
Commercial Mortgage Asset Trust Series 1999-C1, Class B
$ 500,000 7.23% 07/17/2013 $ 493,185
LB Commercial Conduit Mortgage Trust Series 1999-C1, Class A1
472,002 6.41 10/15/2030 462,994
----------
956,179
--------------------------------------------------------------------------------------------------
Credit Card - 1.0%
American Express Credit Account Master Trust Series 1994-3, Class A
500,000 7.85 08/15/2005 517,500
Metris Master Trust Series 1997-1, Class B
500,000 7.11 10/20/2005 498,905
----------
1,016,405
--------------------------------------------------------------------------------------------------
Home Equity - 2.7%
Access Financial Mortgage Loan Trust Series 1996-2, Class A4
500,000 7.63 09/18/2021 501,530
Advanta Mortgage Loan Trust Series 1994-4, Class A2
257,895 8.92 01/25/2026 261,178
American Business Financial Services, Inc. Series 1996-1, Class A
192,139 7.95 09/15/2026 192,139
Corestates Home Equity Trust Series 1993-2, Class A
103,200 5.10 03/15/2009 102,565
First Plus Home Loan Trust Series 1997-3, Class A5
212,830 6.86 10/10/2012 212,407
GE Capital Mortgage Services, Inc. Series 1997-HE1, Class M
460,630 7.50 03/25/2027 446,559
GE Capital Mortgage Services, Inc. Series 1997-HE4, Class M
472,442 7.14 12/25/2028 449,784
Merrill Lynch Mortgage Investors, Inc. Series 1999-H1, Class A3
500,000 6.76 09/20/2026 489,060
----------
2,655,222
--------------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Asset-Backed Securities - (continued)
Manufactured Housing - 4.1%
Associates Manufactured Housing Pass-Through Series 1996-1, Class A5
$ 500,000 7.60% 03/15/2027 $ 497,835
Green Tree Financial Corp. Series 1993-4, Class A4
376,033 6.60 01/15/2019 373,679
Green Tree Financial Corp. Series 1993-4, Class A5
500,000 7.05 01/15/2019 481,880
Green Tree Financial Corp. Series 1994-2, Class A4
388,220 7.90 05/15/2019 391,846
Green Tree Financial Corp. Series 1996-4, Class A7
497,780 7.90 06/15/2027 482,757
Green Tree Financial Corp. Series 1997-3, Class M1
500,000 7.53 07/15/2028 486,797
Green Tree Financial Corp. Series 1999-1, Class M1
250,000 6.56 03/01/2020 218,712
Green Tree Home Improvement Loan Trust Series 1997-E, Class HEM1
500,000 7.28 01/15/2029 485,532
Oakwood Mortgage Investors, Inc. Series 1995-B, Class A3
600,000 6.90 01/15/2021 587,244
----------
4,006,282
--------------------------------------------------------------------------------------------------
TOTAL ASSET-BACKED SECURITIES
(Cost $8,784,329) $8,634,088
--------------------------------------------------------------------------------------------------
Collateralized Mortgage Obligations - 5.2%
Asset Securitization Corp. Series 1995-MD4, Class A1
$ 456,932 7.10% 08/13/2029 $ 458,641
Federal Home Loan Mortgage Corp. REMIC PAC Series 159, Class H
742,797 4.50 09/15/2021 696,841
Federal National Mortgage Assn. REMIC Series 1993-225,
Class NB
192,061 6.50 12/25/2022 189,300
Federal National Mortgage Association Series 1996-68, Class VC
1,500,000 6.50 09/18/2010 1,434,375
Mortgage Capital Funding, Inc. Series 1996-MC1, Class A2A
277,699 7.35 07/15/2005 280,387
Prudential Home Mortgage Securities Co. Series 1993-28, Class M
374,521 7.38 08/25/2023 367,773
Residential Asset Securitization REMIC Trust Series 1997-A1, Class A7
500,000 7.38 03/25/2027 489,285
Residential Asset Securitization REMIC Trust Series 1997-A5, Class A13
500,000 7.75 07/25/2027 501,170
--------------------------------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
17
<PAGE>
COMMERCE BALANCED FUND
Statement of Investments (continued)
October 31, 2000
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Collateralized Mortgage Obligations - (continued)
Residential Funding Mortgage Securities Corp. Series 1995-S4, Class A4
$ 279,555 8.00% 04/25/2010 $ 281,388
Residential Funding Mortgage Securities Corp. Series 1999-S20, Class A1
442,884 6.50 09/25/2014 434,026
----------------------------------------------------------------------------------------------
TOTAL COLLATERALIZED MORTGAGE OBLIGATIONS
(Cost $5,228,902) $ 5,133,186
----------------------------------------------------------------------------------------------
Corporate Obligations - 10.2%
Financial - 4.6%
Equitable Life Assurance Society of the United States+
$1,000,000 7.70% 12/01/2015 $ 966,610
Ford Motor Company Credit Corp.
500,000 6.63 06/30/2003 493,030
Hanson Overseas BV
500,000 6.75 09/15/2005 474,070
Metropolitan Life Insurance Co.+
500,000 7.70 11/01/2015 490,630
Morgan Stanley Group, Inc.
500,000 6.75 03/04/2003 498,085
PNC Bank, N.A.
500,000 7.88 04/15/2005 510,270
Simon Debartolo Group LP
500,000 6.75 06/15/2005 474,970
Swiss Bank Corp.
645,000 7.38 06/15/2017 618,704
-----------
4,526,369
----------------------------------------------------------------------------------------------
Industrial - 4.4%
Conoco, Inc.
500,000 6.35 04/15/2009 475,505
500,000 6.95 04/15/2029 463,090
Lafarge Corp.
500,000 6.88 07/15/2013 437,521
Receipts on Corporate Securities Trust CHR-1998-1
702,026 6.50 08/01/2018 618,891
Receipts on Corporate Securities Trust NSC-1998-1+
1,117,603 6.38 05/15/2017 987,490
Service Master Co.
500,000 7.10 03/01/2018 388,515
St. Paul Companies, Inc.
1,000,000 6.38 12/15/2008 925,228
-----------
4,296,240
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Corporate Obligations - (continued)
Utilities - 1.2%
AT&T Corp.
$ 500,000 7.13% 01/15/2002 $ 497,975
200,000 6.00 03/15/2009 175,794
GTE Corp.
500,000 6.84 04/15/2018 459,245
-----------
1,133,014
----------------------------------------------------------------------------------------------
TOTAL CORPORATE OBLIGATIONS
(Cost $10,739,725) $ 9,955,623
----------------------------------------------------------------------------------------------
Mortgage-Backed Pass-Through Obligations - 5.5%
Federal Home Loan Mortgage Corporation (FHLMC)
$ 493,469 6.00% 12/01/2013 $ 469,713
Federal National Mortgage Association (FNMA)
682,868 7.00 07/01/2009 681,584
229,689 6.50 02/01/2012 226,606
484,673 6.00 12/01/2013 472,163
849,622 6.50 03/01/2024 820,676
883,813 6.50 04/01/2024 853,701
809,972 5.83 12/01/2028 765,934
Government National Mortgage Association (GNMA)
365,737 7.50 08/20/2025 366,081
765,251 7.50 07/20/2026 765,733
----------------------------------------------------------------------------------------------
TOTAL MORTGAGE-BACKED PASS-THROUGH OBLIGATIONS
(Cost $5,483,978) $ 5,422,191
----------------------------------------------------------------------------------------------
TOTAL FIXED INCOME
(Cost $30,236,934) $29,145,088
----------------------------------------------------------------------------------------------
U.S. Treasury Obligation - 0.5%
United States Treasury Note
$ 500,000 5.63% 05/15/2008 $ 492,970
----------------------------------------------------------------------------------------------
TOTAL U.S. TREASURY OBLIGATION
(Cost $498,438) $ 492,970
----------------------------------------------------------------------------------------------
</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>
Repurchase Agreement - 0.2%
Repurchase Agreement - 0.2%
State Street Bank & Trust Co./\
$235,000 6.40% 11/01/2000 $ 235,000
----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $235,000) $ 235,000
----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $83,094,786) $97,653,672
----------------------------------------------------------------------------------------------
</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.
/\Repurchase agreement was entered into on October 31, 2000 and the maturity
value is $235,042.
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--Amercian 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 VALUE FUND
Value Fund Overview
Dear Shareholder:
We are pleased to report on the performance of the Commerce Value Fund (the
"Fund") (formerly the Growth and Income Fund) for the year ended October 31,
2000.
Performance Review
For the year ended October 31, 2000, the Institutional
Shares of the Fund had a cumulative total return of 17.06%,
based on Net Asset Value (NAV) (assumes fee waivers). The
Service Shares had a total return, without sales charge, of
16.72% for the same period based on NAV (assumes fee waiv-
ers). This compares to the Lipper Multi-Cap Value Index 12-
month cumulative return of 9.86%, the Russell 1000 Value
Index 12-month cumulative return of 5.51%, and the Standard
& Poor's 500 Index with Income 12-month cumulative return
of 6.09%. Past performance is no guarantee of future re-
sults. (The Fund's NAV is not guaranteed by the FDIC or the
U.S. Government or by its agencies, instrumentalities, or
sponsored enterprises.)
Portfolio Highlights
.The reporting period was marked by a period of increased
volatility and sector rotation. As the year began, invest-
ors chose to ignore rising interest rates and bid up com-
panies with exceptional earnings growth, with no regard to
their valuations. In March, a market correction occurred
and we experienced a clear shift to value stocks. Although
it was not enough to allow value stocks to outperform
growth stocks for the reporting period, the performance
gap was the narrowest it has been in five years.
.The Fund's outperformance relative to its benchmark was
largely due to solid stock selection and sector-weighting
decisions. We entered the year with overweight positions
in the energy, technology, and basic materials sectors.
However, it quickly became apparent that commodity-depen-
dent cyclical companies would not be able to increase
prices to the extent originally forecasted. As such, we
reduced the Fund's exposure to these areas before their
stocks faltered. After experiencing a run-up in prices for
technology stocks in March and energy stocks in June, the
Fund began to take profits and filtered money into more
attractive areas--namely financials and utilities. These
adjustments were quite beneficial, as the financial and
utility sectors generated superior returns versus their
technology and energy counterparts.
.During the summer, we changed the Fund's benchmark to be
the Russell 1000 Value Index only; the Fund is no longer
using one of its previous benchmarks, the S&P 500 Index.
We made this change because the Russell 1000 Value Index
contains securities that are more comparable to those held
in the Fund's portfolio than the S&P 500 Index.
.Looking ahead, we envision a moderating economy in the
United States in the beginning of the year, with a gradual
acceleration in the latter part of the year. From a sector
standpoint, we are currently emphasizing utility compa-
nies. For years, utilities were correctly priced to re-
flect a slow growth, highly regulated environment that
constrained profitability.
20
<PAGE>
COMMERCE VALUE FUND
Today, with the advent of deregulation, several companies
are dramatically increasing earnings by improving their
sales mix, reducing costs and overhead, and acquiring
weaker competition. We foresee a true opportunity to capi-
talize on undervalued utility stocks as investors realize
that the recent earnings growth is not a mere abnormality
caused by higher oil prices, but a true shift to higher,
and potentially sustainable profitability.
We thank you for your investment and look forward to your
continued confidence.
Sincerely,
Value Fund Team
Investment Management Group
Commerce Bank, N.A.
November 22, 2000
21
<PAGE>
COMMERCE VALUE FUND
Performance Summary
October 31, 2000
The following graph shows the value, as of October 31, 2000, of a $10,000 in-
vestment made on March 3, 1997 (commencement of operations) in the Institu-
tional Shares of the Commerce Value Fund (formerly known as Commerce Growth
and Income Fund). For comparative purposes, the performance of the Fund's
benchmarks (the Standard & Poor's 500 Index(a) with income and dividends re-
invested ("S&P 500") and the Russell 1000 Value Index(a) with income and div-
idends reinvested ("Russell 1000 Value") are shown. The Fund's performance
versus the Lipper Multi-Cap Value Index(b) with dividends reinvested is also
shown. The performance data represent past performance and should not be con-
sidered 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 Service Shares will vary from Institutional Shares due to dif-
ferences in fees and sales loads.
Value Fund(c) Institutional Shares Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested March 3, 1997 to
October 31, 2000.
[GRAPH]
Institutional Russell 1000 Lipper Multi-Cap
Shares S&P 500 Value Value Index
3/3/97 10,000 10,000 10,000 10,000
10/31/97 12,200 11,760 11,760 11,584
10/31/98 12,265 14,276 13,504 12,141
10/31/99 12,300 17,940 15,735 13,342
10/31/00 14,399 19,032 16,602 14,657
<TABLE>
<CAPTION>
Average Annual Total Return through October
31, 2000 Since Inception One Year
<S> <C> <C>
Institutional Shares (commenced March 3, 1997) 10.45% 17.06%
-------------------------------------------------------------------------
Service Shares (commenced March 3, 1997)
Excluding sales charges 10.16% 16.72%
Including sales charges (maximum sales charge
3.50%) 9.10% 12.61%
-------------------------------------------------------------------------
</TABLE>
(a) Effective August 14, 2000, the Fund no longer uses the S&P 500 Index as
one of its benchmarks. The Fund made this change because the Russell
1000 Value Index contains securities that are more comparable to those
held in the Fund's portfolio than the S&P 500 Index.
(b) The Lipper Multi-Cap Value Index replaced the Lipper Growth and Income
Funds Index during the year. The Lipper Multi-Cap Value Funds Index is
an unmanaged index consisting of funds that invest in companies that are
considered to be undervalued. The Index figures do not reflect any fees
or expenses.
(c) Effective August 14, 2000, the name changed from the Growth and Income
Fund to the Value Fund.
22
<PAGE>
COMMERCE VALUE FUND
Statement of Investments
October 31, 2000
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - 97.9%
Commercial Services - 0.6%
11,700 SYSCO Corp. $ 610,594
--------------------------------------------------------------
Communication Services - 10.0%
96,000 AT&T Corp. 2,226,000
6,900 BellSouth Corp. 333,356
30,000 CenturyTel, Inc. 1,155,000
35,600 SBC Communications, Inc. 2,053,675
25,000 Sprint Corp. 637,500
7,300 Telefonos de Mexico SA de CV ADR 393,744
30,500 Verizon Communications 1,763,281
48,500 WorldCom, Inc.* 1,151,875
----------
9,714,431
--------------------------------------------------------------
Consumer Durables - 2.7%
43,704 Ford Motor Co. 1,141,767
23,700 General Motors Corp. 1,472,362
----------
2,614,129
--------------------------------------------------------------
Consumer Non-Durables - 3.1%
30,000 Anheuser-Busch Cos., Inc. 1,372,500
28,800 PepsiCo, Inc. 1,395,000
3,500 The Proctor & Gamble Co. 250,031
----------
3,017,531
--------------------------------------------------------------
Consumer Services - 2.1%
22,400 Cendant Corp.* 268,800
9,200 Gannett Co., Inc. 533,600
11,200 Starwood Hotels & Resorts Worldwide, Inc. 331,800
24,500 The Walt Disney Co. 877,406
----------
2,011,606
--------------------------------------------------------------
Electronic Technology - 7.4%
16,600 Apple Computer, Inc.* 324,738
20,900 General Dynamics Corp. 1,495,656
14,800 Hewlett-Packard Co. 687,275
19,750 International Business Machines Corp. 1,945,375
21,900 Kulicke and Soffa Industries, Inc.* 321,656
18,300 Motorola, Inc. 456,356
8,100 PerkinElmer, Inc. 967,950
7,000 Textron, Inc. 353,063
9,200 The Boeing Co. 623,875
----------
7,175,944
--------------------------------------------------------------
Energy Minerals - 8.3%
15,000 Chevron Corp. 1,231,875
51,000 Conoco, Inc. 1,316,438
4,500 Devon Energy Corp. 226,800
32,000 Exxon Mobil Corp. 2,854,000
26,400 Noble Affiliates, Inc. 968,550
53,000 Ultramar Diamond Shamrock Corp. 1,391,250
----------
7,988,913
--------------------------------------------------------------
Finance - 30.7%
6,600 Ambac Financial Group, Inc. 526,763
18,600 American Express Co. 1,116,000
--------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Finance - (continued)
26,700 American International Group, Inc. $2,616,600
55,287 Bank of America Corp. 2,657,231
81,366 Citigroup, Inc. 4,281,886
10,600 Comerica, Inc. 639,312
4,100 DST Systems, Inc.* 252,663
27,500 Federal National Mortgage Association 2,117,500
43,000 FleetBoston Financial Corp. 1,634,000
5,200 J.P. Morgan & Co., Inc. 860,600
4,900 Jefferson-Pilot Corp. 336,875
8,300 Lehman Brothers Holdings, Inc. 535,350
18,100 Lincoln National Corp. 875,587
1,700 Marsh & McLennan Cos., Inc. 222,275
9,400 MBNA Corp. 353,088
13,500 Merrill Lynch & Co., Inc. 945,000
22,900 Morgan Stanley Dean Witter & Co. 1,839,156
20,400 SunTrust Banks, Inc. 995,775
34,000 The Bank of New York Co., Inc. 1,957,125
18,200 The Bear Stearns Co., Inc. 1,103,375
45,200 The Chase Manhattan Corp. 2,056,600
39,900 Wells Fargo & Co. 1,847,869
----------
29,770,630
-----------------------------------------------------------
Health Services - 2.9%
9,200 Aetna, Inc. 531,875
14,600 CIGNA Corp. 1,780,470
4,400 UnitedHealth Group, Inc. 481,250
----------
2,793,595
-----------------------------------------------------------
Health Technology - 2.2%
13,000 Johnson & Johnson 1,197,625
3,500 Merck & Co., Inc. 314,781
10,900 Pharmacia Corp. 599,500
----------
2,111,906
-----------------------------------------------------------
Industrial Services - 2.3%
3,600 Calpine Corp.* 284,175
53,200 Helmerich & Payne, Inc. 1,672,475
5,300 Transocean Sedco Forex, Inc. 280,900
----------
2,237,550
-----------------------------------------------------------
Process Industries - 1.9%
20,900 Air Products & Chemicals, Inc. 779,831
28,400 Willamette Industries, Inc. 1,031,275
----------
1,811,106
-----------------------------------------------------------
Producer Manufacturing - 2.5%
30,000 Dover Corp. 1,273,125
14,000 General Electric Co. 767,375
3,500 Minnesota Mining and Manufacturing Co. 338,188
3,273 Visteon Corp. 57,891
----------
2,436,579
-----------------------------------------------------------
Retail Trade - 0.8%
24,000 Zale Corp.* 813,000
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
23
<PAGE>
COMMERCE VALUE FUND
Statement of Investments (continued)
October 31, 2000
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Technology Services - 3.2%
21,600 Automatic Data Processing, Inc. $ 1,410,750
8,700 Cadence Design Systems, Inc.* 223,481
28,500 First Data Corp. 1,428,563
-----------
3,062,794
------------------------------------------------------------------------
Utilities - 17.2%
19,000 Conectiv 340,813
28,700 Consolidated Edison, Inc. 1,009,881
23,600 CP&L, Energy, Inc. 951,375
16,500 Duke Energy Corp. 1,426,219
5,100 Dynegy, Inc. 236,194
23,000 Edison International 549,125
85,400 Empresa Nacional de Electricidad SA ADR 1,425,112
14,900 Energy East Corp. 300,794
6,300 Enron Corp. 516,994
42,700 Equitable Resources, Inc. 2,476,600
24,063 Exelon Corp. 1,446,758
69,200 FirstEnergy Corp. 1,790,550
17,400 PG&E Corp. 468,712
23,500 Public Service Enterprise Group, Inc. 975,250
10,300 Reliant Energy, Inc. 425,519
8,800 The Williams Cos., Inc. 367,950
52,600 TXU Corp. 1,949,487
-----------
16,657,333
------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $88,073,166) $94,827,641
------------------------------------------------------------------------
Other - 1.2%
8,000 Standard & Poor's Depository Receipts ADR Series 1 $ 1,143,625
------------------------------------------------------------------------
TOTAL OTHER
(Cost $1,134,078) $ 1,143,625
------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Repurchase Agreement - 2.5%
State Street Bank & Trust Co./\
$2,434,000 6.40% 11/01/2000 $ 2,434,000
----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $2,434,000) $ 2,434,000
----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $91,641,244) $98,405,266
----------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
/\Repurchase agreement was entered into on October 31, 2000 and the maturity
value is $2,434,433.
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 Depositary Receipt
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
24
<PAGE>
COMMERCE GROWTH FUND
Growth Fund Overview
Dear Shareholder:
We are pleased to report on the performance of the Commerce Growth Fund (the
"Fund") for the year ended October 31, 2000.
Performance Review
.For the year ended October 31, 2000, the Institutional
Shares of the Fund had a cumulative total return of
10.88%, based on Net Asset Value (NAV) (assumes fee waiv-
ers). The Service Shares had a cumulative total return,
without sales charge, of 10.59% for the same period based
on NAV (assumes fee waivers). This compares to the Lipper
Multi-Cap Core Index 12-month cumulative return of 14.64%,
the Russell 1000 Growth Index 12-month cumulative return
of 9.32%, and the Standard & Poor's 500 Index with Income
12-month cumulative return of 6.09%. Past performance is
no guarantee of future results. (The Fund's NAV is not
guaranteed by the FDIC or the U.S. Government or by its
agencies, instrumentalities, or sponsored enterprises.)
Portfolio Highlights
.Growth stocks outperformed early in the reporting period,
led by the explosive move in technology stocks. Technology
issues led the market higher until March, when investors
questioned the valuation levels of Internet stocks, to
which the Fund had minimal exposure. The technology sector
as a whole slumped until late May, when semi-conductor and
telecom equipment related issues led a rebound. This re-
bound continued until early September when the slowing
economy both in the United States and internationally be-
gan to take a toll on the sector. As money came out of
technology stocks late in the reporting period, healthcare
and consumer staple stocks moved higher.
.Throughout most of the period the Fund maintained a tech-
nology weighting between 40% and 45% of its total portfo-
lio. We have increased our exposure in healthcare and
energy while substantially reducing our consumer cyclical
and capital goods exposure.
.During the summer the Fund's benchmark changed from the
Standard & Poor's 500 Index to the Russell 1000 Growth In-
dex. The Fund made this change because the sector diversi-
fication in the Russell 1000 Growth Index is more
comparable to that of the Fund. While large capitalization
stocks outperformed during the first three months of the
fiscal year, they have lagged mid-cap stocks for the last
nine months. This has hurt the Fund compared to the Lipper
Multi-Cap Index.
.Technology stock valuations have fallen dramatically over
the last several months. Since we believe the economy is
not entering a recession, it's our opinion that investors
have overreacted to the slowdown in technology spending.
With much more reasonable valuation levels, we feel the
outlook for growth stocks appears favorable in the coming
year.
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, 2000
25
<PAGE>
COMMERCE GROWTH FUND
Performance Summary
October 31, 2000
The following graph shows the value, as of October 31, 2000, of a $10,000 in-
vestment made on December 12, 1994 (commencement of operations) in the Insti-
tutional Shares. For comparative purposes, the performance of the Fund's
benchmark (the Russell 1000 Growth Index with dividends reinvested) is shown.
The Fund's performance versus the Standard & Poor's 500 Index(a) with divi-
dends reinvested ("S&P 500") and the Lipper Multi-Cap Core Index(b) with div-
idends reinvested is also shown. The performance data represent 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 sales loads.
Growth Fund Institutional Shares Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested December 12, 1994 to
October 31, 2000.
[GRAPH]
Institutional Russell 1000 Lipper Multi Cap
Shares S&P 500 Growth Index Core Index
12/12/94 10,000 10,000 10,000 10,000
10/31/95 13,806 13,306 13,655 12,687
10/31/96 17,050 16,511 16,666 15,377
10/31/97 21,845 21,815 21,744 19,801
10/31/98 25,205 26,612 27,104 21,539
10/31/99 29,802 33,441 36,387 26,398
10/31/00 33,045 35,447 39,778 30,263
<TABLE>
<CAPTION>
Average Annual Total Return through
October 31, 2000 Since Inception Five Years One Year
<S> <C> <C> <C>
Institutional Shares (commenced Decem-
ber 12, 1994) 22.49% 19.05% 10.88%
----------------------------------------------------------------------------
Service Shares (commenced January 2,
1997)
Excluding sales charges 17.23% n/a 10.59%
Including sales charges (maximum sales
charge 3.50%) 16.15% n/a 6.72%
----------------------------------------------------------------------------
</TABLE>
(a) Effective August 14, 2000, the Russell 1000 Growth Index replaced the
S&P 500 Index as the Fund's benchmark. The Fund made this change because
the sector diversification in the Russell 1000 Growth Index is more com-
parable to that of the Fund.
(b) The Lipper Multi-Cap Core Index has replaced the Lipper Growth Funds In-
dex during the year. The Lipper Multi-Cap Core Funds Index is an unman-
aged index consisting of funds that invest generally in companies with
market capitalizations (on a three-year weighted basis) above 300% of
the dollar-weighted median market capitalization of the S&P Mid-Cap 400
Index. The Index figures do not reflect any fees or expenses.
26
<PAGE>
COMMERCE GROWTH FUND
Statement of Investments
October 31, 2000
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - 98.1%
Commercial Services - 2.4%
105,000 Omnicom Group, Inc. $ 9,686,250
-------------------------------------------------------------
Consumer Durables - 2.4%
200,000 D.R. Horton, Inc. 3,700,000
359,000 Leggett & Platt, Inc. 5,878,625
------------
9,578,625
-------------------------------------------------------------
Electronic Technology - 36.2%
234,200 ADC Telecommunications, Inc. * 5,006,025
109,400 Altera Corp. * 4,478,563
102,500 Applied Materials, Inc. * 5,445,313
259,000 Cisco Systems, Inc. * 13,953,625
95,000 Comverse Technology, Inc. * 10,616,250
64,200 Corning, Inc. 4,911,300
40,400 Digital Lightwave, Inc. * 2,047,775
140,500 EMC Corp. * 12,513,281
474,100 Intel Corp. 21,334,500
73,600 International Business Machines Corp. 7,249,600
98,600 Jabil Circuit, Inc. * 5,626,363
30,300 JDS Uniphase Corp. * 2,465,663
126,600 Linear Technology Corp. 8,173,612
221,700 Microchip Technology, Inc. * 7,011,262
80,000 Micron Technology, Inc. * 2,780,000
171,600 Nokia Corp. ADR 7,335,900
100,400 SCI Systems, Inc. * 4,317,200
33,800 Scientific-Atlanta, Inc. 2,313,188
86,700 Sun Microsystems, Inc. * 9,612,862
152,000 Texas Instruments, Inc. 7,457,500
------------
144,649,782
-------------------------------------------------------------
Energy Minerals - 7.0%
194,200 Apache Corp. 10,741,688
100,000 Exxon Mobil Corp. 8,918,750
143,800 Royal Dutch Petroleum Co. 8,538,125
------------
28,198,563
-------------------------------------------------------------
Finance - 6.7%
92,250 American International Group, Inc. 9,040,500
101,300 Morgan Stanley Dean Witter & Co. 8,135,656
57,000 Northern Trust Corp. 4,866,375
98,800 Wells Fargo & Co. 4,575,675
------------
26,618,206
-------------------------------------------------------------
Health Services - 1.9%
81,400 Cardinal Health, Inc. 7,712,650
-------------------------------------------------------------
Health Technology - 12.3%
50,700 Allergan, Inc. 4,261,969
137,600 Amgen, Inc. * 7,972,200
89,000 Johnson & Johnson 8,199,125
166,700 Medtronic, Inc. 9,053,894
207,600 Pfizer, Inc. 8,965,725
206,500 Schering-Plough Corp. 10,673,468
------------
49,126,381
-------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Industrial Services - 1.9%
90,900 Noble Drilling Corp. * $ 3,778,031
73,100 Transocean Sedco Forex, Inc. 3,874,300
------------
7,652,331
-------------------------------------------------------
Producer Manufacturing - 9.4%
100,000 Danaher Corp. 6,312,500
420,000 General Electric Co. 23,021,250
72,100 Illinois Tool Works, Inc. 4,006,056
70,000 Johnson Controls, Inc. 4,173,750
------------
37,513,556
-------------------------------------------------------
Retail Trade - 7.4%
32,200 CDW Computer Centers, Inc. * 2,074,888
151,500 Lowe's Cos., Inc. 6,921,656
308,500 Target Corp. 8,522,312
266,900 The TJX Cos., Inc. 7,273,025
102,600 Wal-Mart Stores, Inc. 4,655,475
------------
29,447,356
-------------------------------------------------------
Technology Services - 8.3%
80,200 Adobe Systems, Inc. 6,100,212
44,500 Automatic Data Processing, Inc. 2,896,340
56,200 BEA Systems, Inc. * 4,032,350
124,600 Microsoft Corp. * 8,581,825
354,000 Oracle Corp. * 11,682,000
------------
33,292,727
-------------------------------------------------------
Telecommunications - 1.0%
84,800 Nortel Networks Corp. 3,858,400
-------------------------------------------------------
Transportation - 1.2%
163,900 Southwest Airlines Co. 4,671,150
-------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $298,345,906) $392,005,977
-------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Repurchase Agreement - 1.4%
State Street Bank & Trust Co./\
$5,391,000 6.40% 11/01/2000 $ 5,391,000
-----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $5,391,000) $ 5,391,000
-----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $303,736,906) $397,396,977
-----------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
/\Repurchase agreement was entered into on October 31, 2000 and the maturity
value is $5,391,958.
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 Depositary Receipt
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
27
<PAGE>
COMMERCE MIDCAP GROWTH FUND
MidCap Growth Fund Overview
Dear Shareholder:
We are pleased to report on the performance of the Commerce MidCap Growth
Fund (the "Fund") (formerly the MidCap Fund) for the year ended October 31,
2000.
Performance Review
.For the year ended October 31, 2000, the Institutional
Shares of the Fund had a cumulative total return of
26.19%, based on Net Asset Value (NAV) (assumes fee waiv-
ers). The Service Shares had a cumulative total return,
without sales charge, of 25.88% for the same period based
on NAV (assumes fee waivers). This compares to the Lipper
Mid-Cap Core Index 12-month cumulative return of 34.61%,
Russell Midcap Growth Index 12-month cumulative return of
38.68% and the Standard & Poor's Midcap 400 Index 12-month
cumulative return of 31.65%. Past performance is no guar-
antee of future results. (The Fund's NAV is not guaranteed
by the FDIC or the U.S. Government or by its agencies, in-
strumentalities, or sponsored enterprises.)
Portfolio Highlights
.During the reporting period financial market volatility
increased significantly. This was due to a variety of fac-
tors, including the uncertainty surrounding the Presiden-
tial elections, slower economic growth leading to
unrealistic corporate profit expectations, turmoil in the
Middle East, and less technology spending by telecom com-
panies. This last issue was the most damaging to technol-
ogy stocks, as slowing rates of growth converged with high
valuation levels. The result has been a severe correction
in the prices of many technology stocks since March.
.Over the summer the Fund changed its index benchmark to
the Russell Midcap Growth Index. The Fund made this change
because the Russell MidCap Growth Index contains securi-
ties that are more comparable to those held in the Fund's
portfolio.
.We believe the Federal Reserve is most likely finished
with its tightening monetary policy. While we expect to
see slower economic growth, we do not expect to lapse into
a recession. In terms of the financial markets, after the
current correction in the technology sector, most economic
sectors appear reasonably attractively valued. As such, we
anticipate strong growth in biotechnology, healthcare di-
agnostics, oilfield service, financial services, and cer-
tain technology issues.
We thank you for your investment and look forward to your
continued confidence.
Sincerely,
MidCap Growth Fund Team
Investment Management Group
Commerce Bank, N.A.
November 22, 2000
28
<PAGE>
COMMERCE MIDCAP GROWTH FUND
Performance Summary
October 31, 2000
The following graph shows the value, as of October 31, 2000, of a $10,000 in-
vestment made on December 12, 1994 (commencement of operations) in the Insti-
tutional Shares. For comparative purposes, the performance of the Fund's
benchmark (the Russell MidCap Growth Index with dividends reinvested) is
shown. The Fund's performance versus the Standard & Poor's MidCap 400
Index(a) with dividends reinvested ("S&P MidCap 400") and the Lipper MidCap
Core Index(b) with dividends reinvested is also shown. The performance data
represent 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 the differences in fees
and sales loads.
MidCap Growth Fund(c) Institutional Shares Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested December 12, 1994 to
October 31, 2000.
[GRAPH]
Institutional S&P Mid Russell Mid Cap Lipper Mid-Cap
Shares Cap 400 Growth Index Core Index
12/12/94 10,000 10,000 10,000 10,000
10/95 14,056 13,116 12,997 12,456
10/96 15,999 15,392 15,330 14,628
10/97 19,019 20,423 19,103 18,512
10/98 19,772 21,791 19,567 17,511
10/99 25,498 26,385 26,936 21,265
10/31/00 32,176 34,736 37,354 28,625
<TABLE>
<CAPTION>
Average Annual Total Return through
October 31, 2000 Since Inception Five Years One Year
<S> <C> <C> <C>
Institutional Shares (commenced Decem-
ber 12, 1994) 21.93% 17.99% 26.19%
----------------------------------------------------------------------------
Service Shares (commenced January 2,
1997)
Excluding sales charges 18.73% n/a 25.88%
Including sales charges (maximum sales
charge 3.50%) 17.63% n/a 21.48%
----------------------------------------------------------------------------
</TABLE>
(a) Effective August 14, 2000, the Russell MidCap Growth Index replaced the
S&P Mid-Cap 400 Index as the Fund's benchmark.
(b) The Lipper Mid-Cap Core Index has replaced the Lipper Mid Cap Funds Index
during the year. The Lipper Mid-Cap Core Funds Index is an unmanaged index
consisting of funds that invest generally in companies with market capital-
izations (on a three-year weighted basis) of less than 300% of the dollar-
weighted median market capitalization of the S&P Mid-Cap 400 Index. The
Index figures do not reflect any fees or expenses.
(c) Effective August 14, 2000, the name changed from the MidCap Fund to the
MidCap Growth Fund.
29
<PAGE>
COMMERCE MIDCAP GROWTH FUND
Statement of Investments
October 31, 2000
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - 97.7%
Commercial Services - 7.7%
95,900 Concord EFS, Inc.* $ 3,961,869
75,600 Dendrite International, Inc.* 1,644,300
33,100 Omnicom Group, Inc. 3,053,475
59,468 Paychex, Inc. 3,371,092
30,500 SEI Investments Co. 2,767,875
------------
14,798,611
------------------------------------------------------------
Consumer Services - 2.8%
39,300 Anixter International, Inc.* 953,025
19,500 Brinker International, Inc.* 765,375
40,100 CEC Entertainment, Inc.* 1,278,187
117,300 USA Networks, Inc.* 2,375,325
------------
5,371,912
------------------------------------------------------------
Electronics - 0.6%
29,600 Flextronics International Ltd.* 1,124,800
------------------------------------------------------------
Electronic Technology - 33.8%
63,800 ADC Telecommunications, Inc.* 1,363,725
45,600 Advanced Fibre Communications, Inc.* 1,484,850
49,800 Altera Corp.* 2,038,688
43,600 Amdocs Ltd.* 2,825,825
28,700 Analog Devices, Inc.* 1,865,500
126,400 Atmel Corp.* 1,888,100
102,800 Cirrus Logic, Inc.* 4,433,250
29,100 Comverse Technology, Inc.* 3,251,925
77,500 Cymer, Inc.* 1,937,500
5,700 Elantec Semiconductor, Inc.* 561,199
57,000 KEMET Corp.* 1,588,875
47,200 KLA-Tencor Corp.* 1,595,950
71,600 Lam Research Corp.* 1,387,250
103,500 Lattice Semiconductor Corp.* 3,020,906
51,200 LSI Logic Corp.* 1,683,200
28,200 Maxim Integrated Products, Inc.* 1,870,013
71,900 Microchip Technology, Inc.* 2,273,837
20,700 Molex, Inc. 1,117,800
73,100 Oak Technology, Inc.* 2,051,369
29,600 PerkinElmer, Inc. 3,537,200
67,600 Polycom, Inc.* 4,394,000
18,700 RadiSys Corp.* 495,550
95,500 Rainbow Technologies, Inc.* 2,375,562
27,300 Sanmina Corp.* 3,120,731
30,000 Scientific-Atlanta, Inc. 2,053,125
8,300 SDL, Inc.* 2,151,775
90,500 Silicon Storage Technology, Inc.* 2,058,875
55,762 Symbol Technologies, Inc. 2,533,686
23,500 TranSwitch Corp.* 1,357,125
31,500 Waters Corp.* 2,285,719
------------
64,603,110
------------------------------------------------------------
Energy Minerals - 1.4%
48,300 Apache Corp. 2,671,594
------------------------------------------------------------
Finance - 7.7%
39,900 AXA Financial, Inc. 2,157,094
25,000 City National Corp. 859,375
------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Finance - (continued)
19,700 DST Systems, Inc.* $ 1,214,013
120,700 Federated Investors, Inc. Class B 3,515,387
23,600 Lehman Brothers Holdings, Inc. 1,522,200
23,500 Northern Trust Corp. 2,006,312
26,800 T. Rowe Price Associates, Inc. 1,254,575
37,400 The Bear Stearns Co., Inc. 2,267,375
------------
14,796,331
---------------------------------------------------------------
Health Services - 2.4%
31,650 Cardinal Health, Inc. 2,998,837
16,300 Quest Diagnostics, Inc.* 1,568,875
------------
4,567,712
---------------------------------------------------------------
Health Technology - 18.5%
36,000 Allergan, Inc. 3,026,250
59,500 Biovail Corp.* 2,502,719
37,700 Elan Corp. PLC ADR* 1,958,044
16,300 Genzyme Corp.* 1,157,300
19,800 IDEC Pharmaceuticals Corp.* 3,883,275
38,600 Incyte Genomics, Inc.* 1,413,725
48,100 King Pharmaceuticals, Inc.* 2,155,481
38,700 Medicis Pharmaceutical Corp.* 2,849,288
40,400 MedImmune, Inc.* 2,641,150
29,675 MiniMed, Inc.* 2,164,420
29,600 PE Corp-PE Biosystems Group 3,463,200
52,400 Stryker Corp. 2,469,350
20,800 Techne Corp.* 2,345,200
52,100 Watson Pharmaceuticals, Inc.* 3,259,506
------------
35,288,908
---------------------------------------------------------------
Industrial Services - 4.3%
35,000 Dycom Industries, Inc.* 1,316,875
52,800 Nabors Industries, Inc.* 2,687,520
66,100 Rowan Co., Inc.* 1,664,894
49,200 Transocean Sedco Forex, Inc. 2,607,600
------------
8,276,889
---------------------------------------------------------------
Producer Manufacturing - 1.4%
42,600 Danaher Corp. 2,689,125
---------------------------------------------------------------
Retail Trade - 2.8%
46,700 Best Buy Co., Inc.* 2,343,756
51,100 RadioShack Corp. 3,046,838
------------
5,390,594
---------------------------------------------------------------
Technology Services - 13.1%
47,000 Adobe Systems, Inc. 3,574,938
21,800 Ariba, Inc.* 2,754,975
50,500 BEA Systems, Inc.* 3,623,375
29,600 Check Point Software Technologies Ltd.* 4,687,900
33,500 Fiserv, Inc.* 1,756,656
63,600 Jack Henry & Associates, Inc. 3,498,000
14,400 Macromedia, Inc.* 1,109,700
68,200 Rational Software Corp.* 4,070,688
------------
25,076,232
---------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
30
<PAGE>
COMMERCE MIDCAP GROWTH FUND
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Utilities - 1.2%
49,900 Dynegy, Inc. $ 2,310,994
------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $130,735,983) $186,966,812
------------------------------------------------------------------------------
Other - 1.8%
37,000 Mid-Cap Standard & Poor's Depository Receipt ADR Series
1 3,515,000
------------------------------------------------------------------------------
TOTAL OTHER
(Cost $3,385,361) $ 3,515,000
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Repurchase Agreement - 2.1%
State Street Bank & Trust Co./\
$4,018,000 6.40% 11/01/2000 $ 4,018,000
-----------------------------------------------------------------------------------------------
TOTAL REPURCHASE AGREEMENT
(Cost $4,018,000) $ 4,018,000
-----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $138,139,344) $194,499,812
-----------------------------------------------------------------------------------------------
</TABLE>
* Non-income producing security.
/\Repurchase agreement was entered into on October 31, 2000 and the maturity
value is $4,018,714.
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 Depositary Receipt
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
31
<PAGE>
COMMERCE INTERNATIONAL EQUITY FUND
International Equity Fund Overview
Dear Shareholder:
We are pleased to report on the performance of the Commerce International Eq-
uity Fund (the "Fund") for the year ended October 31, 2000.
Performance Review
.For the year ended October 31, 2000, the Institutional
Shares of the Fund had a cumulative total return of 1.24%,
based on Net Asset Value (NAV) (assumes fee waivers). The
Service Shares had a cumulative total return, without
sales charge, of 1.03% for the same period based on NAV
(assumes fee waivers). This compares to the Lipper Inter-
national Equity Funds Index 12-month cumulative return of
3.45% and Morgan Stanley Capital International Europe,
Australia, and Far East Index ("EAFE") 12-month cumulative
return of -2.64%. Past performance is no guarantee of fu-
ture results. (The Fund's NAV is not guaranteed by the
FDIC or the U.S. Government or by its agencies, instrumen-
talities, or sponsored enterprises.)
Portfolio Highlights
.During the reporting period international equities gener-
ated lackluster results. Broader concerns weighing on the
markets included slower economic growth, high oil prices,
and weakness in the euro currency. International economic
data suggested that global growth had peaked, but remained
healthy.
.During the first half of the reporting period the poten-
tial of Internet-related developments drove "new economy'
telecom, media and technology (TMT) stocks sharply higher.
However, as the period progressed, sector leadership re-
versed, as the TMT sectors gave back some of their earlier
gains and "old economy' sectors such as consumer staples,
pharmaceuticals, and banks outperformed relative to the
TMT sectors.
.Over the entire twelve-month period, overweighting the TMT
sectors added considerable value to the Fund, due to its
early, dramatic ascent. However, in recent months the
Fund's emphasis on growth stocks, such as those in the TMT
sectors, detracted from results, as did its underweight
position in value and cyclical sectors.
.By the end of the period, the Fund was underweight in Eu-
rope and Japan, relative to the MSCI EAFE Index, and over-
weight in the Pacific ex-Japan and Latin America. The
increase in European exposure and decrease in other re-
gions resulted from differences in regional performance,
as well as reductions to stocks that had risen very
sharply and, we felt, were unlikely to make further gains.
.Internationally, economies are moderating and look likely
to continue slowing in the short term before recovering in
the second half of 2001. Technology sector earnings growth
is likely to ease from recent peaks, but should remain
significantly above that of other sectors. Due to short-
term uncertainty about growth, oil prices and technology
trends, the markets may be weak or volatile in the near
term. Risks to our outlook would be continued oil price
increases, euro weakness/dollar strength, and inflationary
pressure. However, given our cautious optimism about these
factors, we are hopeful that returns will rise again in
the year ahead.
We thank you for your investment and look forward to your
continued confidence.
Sincerely,
International Equity Fund Team
International Equity Team
Investment Management Group
T. Rowe Price International, Inc.
Commerce Bank, N.A.
November 22, 2000
32
<PAGE>
COMMERCE INTERNATIONAL EQUITY FUND
Performance Summary
October 31, 2000
The following graph shows the value, as of October 31, 2000, of a $10,000 in-
vestment made on January 1, 1995 in the Institutional Shares. For comparative
purposes, the performance of the Fund's benchmark (the Morgan Stanley Capital
International Europe, Australia and Far East Index with dividends reinvested
("Morgan Stanley EAFE")) is shown. The Fund's performance versus the Lipper
International Funds Index(a) ("Lipper Int'l Funds Index") with dividends re-
invested is also shown. The performance data represent past performance and
should not be considered indicative of future performance which will fluctu-
ate 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 sales loads.
International Equity Fund Institutional Shares Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested January 1, 1995(b)
to October 31, 2000.
[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
10/31/00 16,146 15,999 17,999
<TABLE>
<CAPTION>
Average Annual Total Return through
October 31, 2000 Since Inception Five Years One Year
<S> <C> <C> <C>
Institutional Shares (commenced Decem-
ber 12, 1994) 8.68% 9.50% 1.24%
----------------------------------------------------------------------------
Service Shares (commenced January 2,
1997)
Excluding sales charges 7.31% n/a 1.03%
Including sales charges (maximum sales
charge 3.50%) 6.31% n/a -2.51%
----------------------------------------------------------------------------
</TABLE>
(a) The Lipper International Funds Index is an unmanaged index consisting of
funds that invest their assets in securities with primary trading mar-
kets outside of the United States. The Index figures do not reflect any
fees or expenses.
(b) For comparative purposes, initial investments are assumed to be made on
the first day of the month following the Fund's inception.
33
<PAGE>
COMMERCE INTERNATIONAL EQUITY FUND
Statement of Investments
October 31, 2000
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - 96.2%
Australian Dollar - 0.9%
16,000 Brambles Industries Ltd. (Transportation/Storage) $ 414,838
17,028 Commonwealth Bank of Australia (Financial Services) 253,399
72,000 Publishing & Broadcasting Ltd. (Media) 491,520
107,765 Telstra Corp. Ltd. (Utilities) 351,695
------------
1,511,452
------------------------------------------------------------------------------
Brazilian Real - 0.8%
12,200 Petroleo Brasileiro SA ADR * (Oil & Gas) 354,563
11,597 Telecomunicacoes Brasileiras SA ADR
(Telecommunications) 849,480
4,700 Uniao de Bancos Brasileiros SA GDR (Financial
Services) 118,675
------------
1,322,718
------------------------------------------------------------------------------
British Pound Sterling - 23.3%
21,000 Abbey National PLC (Insurance) 289,769
34,338 AstraZeneca Group PLC (Diversified Holding Companies) 1,608,277
18,000 Baltimore Technologies PLC * (Computer
Services/Software) 138,551
20,777 BG Group PLC (Oil & Gas) 83,204
92,000 BP Amoco PLC (Oil & Gas) 780,233
55,000 British Telecommunications PLC (Telecommunications) 644,802
149,800 Cable & Wireless PLC (Telecommunications) 2,119,184
74,888 Cadbury Schweppes PLC (Food Products) 462,886
25,000 Celltech Group PLC * (Pharmaceuticals) 496,950
32,400 Centrica PLC (Energy) 111,416
31,000 David S. Smith Holdings PLC (Paper & Forest Products) 68,369
113,876 Diageo PLC (Beverages/Tobacco) 1,074,810
16,500 Dimension Data Holdings PLC * (Computer
Services/Software) 144,602
25,000 Electrocomponents PLC (Electronics) 249,563
6,000 GKN PLC (Industrial Machinery) 68,775
123,200 Glaxo Wellcome PLC (Pharmaceuticals) 3,546,538
238,070 Granada Compass PLC * (Diversified Holding Companies) 2,051,839
13,714 Granada Media PLC * (Media) 79,792
116,800 Hays PLC (Diversified Holding Companies) 637,634
33,000 Hilton Group PLC (Recreational Services) 91,693
71,000 Kingfisher PLC (Retail Trade) 424,432
20,777 Lattice Group PLC * (Diversified Holding Companies) 44,315
83,100 Marconi PLC (Telecommunications) 1,048,993
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
British Pound Sterling - (continued)
14,000 Reckitt Benckiser PLC (Consumer Non-Durables) $ 184,038
276,045 Reed International PLC (Publishing) 2,551,359
66,000 Rio Tinto PLC (Mining-Metals/Minerals) 1,067,754
196,488 Royal Bank of Scotland Group PLC (Financial Services) 4,410,406
354,500 Shell Transport & Trading Co. PLC (Oil & Gas) 2,852,134
162,700 SmithKline Beecham PLC (Health & Medical Services) 2,101,018
60,000 Standard Chartered PLC (Financial Services) 865,346
167,500 Tesco PLC (Food Products) 638,572
170,980 Tomkins PLC (Diversified Holding Companies) 406,857
79,571 Unilever PLC (Consumer Products) 538,302
26,900 United News & Media PLC (Publishing) 336,638
1,212,765 Vodafone AirTouch PLC (Telecommunications) 5,045,826
115,000 WPP Group PLC (Commercial Services) 1,543,447
------------
38,808,324
-------------------------------------------------------------------------------
Canadian Dollar - 0.4%
12,470 Alcan Aluminum Ltd. (Mining-Metals/Minerals) 392,264
5,660 Royal Bank of Canada (Financial Services) 178,971
------------
571,235
-------------------------------------------------------------------------------
Danish Krone - 0.1%
2,070 Tele Danmark AS (Telecommunications) 97,959
-------------------------------------------------------------------------------
Euro - 34.6%
Belgium - 0.7%
3,064 Dexia Belgium (Financial Services) 460,480
20,948 Fortis Belgium (Insurance) 641,731
1,750 UCB SA (Chemical Products) 62,372
------------
1,164,583
-------------------------------------------------------------------------------
Finland - 2.2%
88,725 Nokia Oyj (Telecommunications) 3,650,912
-------------------------------------------------------------------------------
France - 12.4%
24,470 Alcatel (Computers/Office) 1,493,021
1,320 Altran Technologies SA (Commercial Services) 269,845
30,008 Aventis SA (Pharmaceuticals) 2,160,737
14,978 Axa (Insurance) 1,982,812
20,730 Banque Nationale de Paris (Banks) 1,787,295
5,930 Bouygues SA (Building Materials & Construction) 301,932
930 Canal Plus (Media) 134,558
-------------------------------------------------------------------------------
</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)
France - (continued)
2,710 Cap Gemini SA (Computer Services/Software) $ 432,345
4,470 Compagnie de Saint Gobain (Chemical Products) 591,367
2,550 Equant NV * (Computer Services/Software) 85,367
1,290 Groupe Danone (Food Products) 180,406
2,140 Hermes International (Retail Trade) 288,745
2,910 L'Oreal SA (Health/Personal Care) 222,248
986 Lafarge SA (Building Materials & Construction) 72,795
3,165 Legrand SA (Electronics) 510,306
2,605 LVMH (Louis Vuitton Moet Hennessy) (Consumer Non-
Durables) 190,112
22,228 Sanofi-Synthelabo SA (Health/Personal Care) 1,169,487
2,974 Schneider Electric SA (Electronics) 193,697
5,256 Societe Generale (Financial Services) 298,390
25,950 Societe Television Francaise 1 (Media) 1,415,962
1,274 Sodexho Alliance SA (Food Products) 199,466
16,648 STMicroelectronics NV (Electronics-Semiconductors) 839,880
23,024 Total Fina SA (Oil & Gas) 3,294,135
35,797 Vivendi (Utilities) 2,572,961
------------
20,687,869
------------------------------------------------------------------------------
Germany - 4.0%
3,100 Allianz AG (Insurance) 1,051,081
5,369 Bayer AG (Chemical Products) 233,046
19,450 Deutsche Bank AG (Financial Services) 1,592,429
3,944 Deutsche Telekom AG (Telecommunications) 148,099
9,431 Gehe AG (Health/Personal Care) 343,335
17,992 HypoVereinsbank (Financial Services) 988,604
2,936 Rhoen-Klinikum AG (Health/Personal Care) 160,078
8,120 SAP AG (Computer Services/Software) 1,329,204
1,982 Siemens AG (Electronics & Other Electrical Equipment) 252,373
12,478 E. ON AG (Utilities) 634,060
------------
6,732,309
------------------------------------------------------------------------------
Italy - 5.7%
62,000 Alleanza Assicurazioni (Insurance) 822,345
5,000 Assicurazioni Generali (Insurance) 164,417
510,878 Banca Intesa SPA (Banks) 2,119,968
83,000 Bipop-Carire SPA (Banks) 656,443
146,309 ENI SPA (Oil & Gas) 792,127
13,000 Mediaset SPA (Media) 188,092
41,025 Mediolanum SPA (Insurance) 601,235
251,462 Olivetti SPA (Telecommunications) 761,805
7,362 San Paolo-IMI SPA (Financial Services) 119,325
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Italy - (continued)
84,000 Tecnost SPA * (Financial Services) $ 282,991
149,443 Telecom Italia Mobile SPA (Utilities) 1,270,710
42,820 Telecom Italia SPA (Telecommunications) 496,001
232,094 UniCredito Italiano SPA (Financial Services) 1,181,730
------------
9,457,189
------------------------------------------------------------------------
Luxembourg - 0.1%
966 Societe Europeenne des Satellites (Media) 128,701
------------------------------------------------------------------------
Netherlands - 6.7%
8,236 ABN AMRO Holding NV (Banks) 190,802
1,992 Akzo Nobel NV (Chemical Products) 90,690
33,960 ASM Lithography Holdings NV * (Electronics-
Semiconductors) 928,243
9,076 CSM NV (Food Products) 207,181
29,090 Fortis NV (Insurance) 888,688
35,752 ING Groep NV (Financial Services) 2,455,045
11,113 Koninklijke (Royal) KPN NV (Utilities) 225,106
61,926 Koninklijke (Royal) Philips Electronics NV
(Electronics) 2,433,610
22,380 Royal Dutch Petroleum Co. (Energy) 1,327,328
3,220 United Pan-Europe Communications NV * (Media) 56,426
41,530 VNU NV (Publishing) 1,955,952
21,559 Wolters Kluwer NV (Media) 485,183
------------
11,244,254
------------------------------------------------------------------------
Portugal - 0.1%
11,631 Jeronimo Martins SGPS SA (Food Products) 112,124
------------------------------------------------------------------------
Spain - 2.7%
88,196 Banco Bilbao Vizcaya SA (Financial Services) 1,175,038
103,658 Banco Santander Central Hispano SA (Banks) 1,004,551
44,546 Endesa SA (Electrical Services) 725,794
28,331 Repsol-YPF SA (Oil & Gas) 450,060
44,542 Telefonica SA * (Telecommunications) 849,329
6,303 Telefonica SA ADR (Telecommunications) 365,180
------------
4,569,952
------------------------------------------------------------------------
Total Euro 57,747,893
------------------------------------------------------------------------
Hong Kong Dollar - 2.9%
88,000 Cheung Kong Holdings Ltd. (Real Estate) 973,202
200,000 China Telecom Ltd. * (Telecommunications) 1,282,216
------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
35
<PAGE>
COMMERCE INTERNATIONAL EQUITY FUND
Statement of Investments (continued)
October 31, 2000
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Hong Kong Dollar - (continued)
77,000 China Unicom Ltd. * (Telecommunications) $ 154,513
51,500 Dao Heng Bank Group Ltd. (Banks) 260,174
28,000 Henderson Land Development Co. Ltd. (Recreational
Services) 120,631
39,600 HSBC Holdings PLC (Financial Services) 550,917
96,100 Hutchison Whampoa Ltd. (Diversified Holding Companies) 1,195,243
354,911 Pacific Century CyberWorks Ltd. * (Telecommunications) 273,043
------------
4,809,939
------------------------------------------------------------------------------
Indian Rupee - 0.6%
19,000 Global Tele-Systems Ltd. (Telecommunications) 429,097
97,958 Hindustan Lever Ltd. (Consumer Non-Durables) 371,695
26,025 ICICI Ltd. ADR (Financial Services) 245,611
------------
1,046,403
------------------------------------------------------------------------------
Japanese Yen - 18.8%
57,000 Canon, Inc. (Electronics & Other Electrical Equipment) 2,261,926
29 DDI Corp. (Utilities) 136,077
36 East Japan Railway Co. (Railroads) 206,864
8,000 FANUC Ltd. (Electronics) 718,508
69 Fuji Television Network, Inc. (Media) 758,832
37,000 Fujitsu Ltd. (Computers/Office) 659,194
22,000 Hitachi Ltd. (Electronics) 235,898
6,000 Ito-Yokado Co. Ltd. (Retail Trade) 271,090
10,000 Kao Corp. (Cosmetics) 299,684
13,000 Kokuyo Co. Ltd. (Computer
Services/Software) 200,156
13,300 Kyocera Corp. (Electronics & Other Electrical
Equipment) 1,730,835
17,000 Makita Corp. (Industrial Machinery) 123,860
40,000 Marui Co. Ltd. (Retail Trade) 590,203
2,100 Matsushita Communication Industrial Co., Ltd.
(Telecommunications) 275,214
58,000 Matsushita Electric Industrial Co. Ltd. (Electronics) 1,685,011
108,000 Mitsui Fudosan Co. Ltd. (Real Estate) 1,308,491
193 Mizuho Holdings Inc. * (Financial Services) 1,484,003
14,100 Murata Manufacturing Co. Ltd. (Electronics) 1,687,632
71,000 NEC Corp. (Electronics) 1,353,435
200 Nippon Telegraph & Telephone Corp. (Utilities) 1,820,098
69,000 Nomura Securities Co. Ltd. (Financial Services) 1,463,914
49 NTT Docomo, Inc. (Telecommunications) 1,207,992
23,000 Sankyo Co. Ltd. (Financial Services) 506,942
12,000 Seven-Eleven Japan Co. Ltd. (Retail Trade) 780,828
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Common Stocks - (continued)
Japanese Yen - (continued)
13,000 Shin-Etsu Chemical Co. Ltd. (Chemical Products) $ 533,749
27,000 Shiseido Co. Ltd. (Health/Personal Care) 348,898
4,500 SOFTBANK Corp. (Computer Services/Software) 270,128
34,700 SONY Corp. (Household Durables) 2,773,074
46,000 Sumitomo Corp. (Wholesale Trade) 404,711
5,000 TDK Corp. (Household Durables) 504,055
13,000 The Furukawa Electric Co. Ltd. (Electronics & Other
Electrical Equipment) 341,933
105,000 The Sumitomo Bank Ltd. (Banks) 1,275,031
8,300 Tokyo Electron Ltd. (Electronics & Other Electrical
Equipment) 649,608
178,000 TOSHIBA Corp. (Electronics) 1,272,419
27,000 Yamanouchi Pharmaceutical Co. Ltd. (Pharmaceuticals) 1,222,380
------------
31,362,673
------------------------------------------------------------------------------
Korean Won - 0.6%
13,900 Korea Telecom Corp. ADR (Telecommunications) 512,562
4,277 Samsung Electronics (Electronics) 535,800
------------
1,048,362
------------------------------------------------------------------------------
Mexican Peso - 2.1%
128,500 Fomento Economico Mexico SA de CV (Diversified Holding
Companies) 489,140
13,000 Grupo Iusacell SA de CV (V Shares) ADR *
(Telecommunications) 169,000
28,922 Grupo Televisa SA GDR * (Media) 1,565,403
23,730 Telefonos de Mexico SA de CV ADR (Communication
Services) 1,279,937
------------
3,503,480
------------------------------------------------------------------------------
New Zealand Dollar - 0.1%
91,000 Telecom Corp. of New Zealand Ltd. IR (Utilities) 201,386
------------------------------------------------------------------------------
Norwegian Krone - 0.2%
20,360 Orkla ASA (Food Products) 367,529
------------------------------------------------------------------------------
Singapore Dollar - 0.7%
15,000 DBS Group Holdings Ltd. (Financial Services) 176,792
112,000 Singapore Telecommunications Ltd. (Telecommunications) 185,572
113,696 United Overseas Bank Ltd. (Banks) 841,569
------------
1,203,933
------------------------------------------------------------------------------
Swedish Krona - 4.5%
8,401 ABB Ltd. (Electronics) 746,584
4,570 Atlas Copco AB (Industrial Machinery) 94,443
18,720 Electrolux AB (Appliance Manufacturer) 236,054
33,120 Hennes & Mauritz AB (Retail Trade) 619,821
173,480 Nordbanken Holding AB (Financial Services) 1,302,103
------------------------------------------------------------------------------
</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)
Swedish Krona - (continued)
5,530 Sandvik AB (Industrial Machinery) $ 122,030
88,932 Securitas AB (Commercial Services) 1,895,711
186,350 Telefonaktiebolaget LM Ericsson AB (B Shares)
(Telecommunications) 2,480,365
------------
7,497,111
-------------------------------------------------------------------------------
Swiss Franc - 3.5%
1,149 Adecco SA (Business Services) 794,508
3,970 Credit Suisse Group (Financial Services) 744,265
1,015 Nestle SA (Food Products) 2,103,290
84 Roche Holding AG (Health/Personal Care) 767,290
10,680 UBS AG (Banks) 1,479,373
------------
5,888,726
-------------------------------------------------------------------------------
Taiwan Dollar - 0.6%
16,472 Hon Hai Precision Industry Co. Ltd. GDR + (Electronics) 186,134
41,000 Hon Hai Precision Industry Co. Ltd. (Electronics) 214,520
217,000 Taiwan Semiconductor Manufacturing Co. Ltd.
(Electronics-Semiconductors) 658,390
------------
1,059,044
-------------------------------------------------------------------------------
United States Dollar - 1.5%
17,615 Celestica, Inc. * (Commercial Services) 1,266,078
3,100 Nortel Networks Corp. (Telecommunications) 141,050
6,080 Nortel Networks Corp. (Telecommunications) 275,043
9,200 Flextronics International Ltd.* (Electronics) 349,600
4,329 Pohang Iron & Steel Ltd. ADR (Steel) 68,452
7,817 SmartForce PLC ADR* (Computer Services/Software) 393,415
------------
2,493,638
-------------------------------------------------------------------------------
TOTAL COMMON STOCKS
(Cost $155,085,539) $160,541,804
-------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Shares Description Value
<C> <S> <C>
Preferred Stocks - 1.3%
Australian Dollar - 0.6%
117,215 The News Corp. Ltd. (Media) $ 1,051,120
------------------------------------------------------------------------------
Brazilian Real - 0.7%
39,614 Petroleo Brasileiro SA (Oil & Gas) 1,050,217
4,755,900 Telesp Celular Participacoes SA (Telecommunications) 56,254
------------
1,106,471
------------------------------------------------------------------------------
TOTAL PREFERRED STOCKS
(Cost $2,214,409) $ 2,157,591
------------------------------------------------------------------------------
Rights - 0.0%
Australian Dollar - 0.0%
19,000 Telstra Corp. Ltd. * (Utilities) $ 31,969
------------------------------------------------------------------------------
TOTAL RIGHTS
(Cost $57,450) $ 31,969
------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Short-Term Obligation - 1.3%
State Street Bank & Trust Euro - Time Deposit
$2,500,000 4.75% 11/01/2000 $ 2,121,501
-----------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATION
(Cost $2,121,501) $ 2,121,501
-----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $159,478,899) $164,852,865
-----------------------------------------------------------------------------------------------
</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 Depositary Receipt
GDR--Global Depositary Receipt
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
37
<PAGE>
COMMERCE INTERNATIONAL EQUITY FUND
Statement of Investments (continued)
October 31, 2000
<TABLE>
<CAPTION>
As a % of
total net assets
<S> <C>
Common and Preferred Stock Industry Classifications
Appliance Manufacturer 0.1%
Banks 5.8
Beverages/Tobacco 0.6
Building Materials & Construction 0.2
Business Services 0.5
Chemical Products 0.9
Commercial Services 3.0
Communication Services 0.8
Computer Services/Software 1.8
Computers/Office 1.3
Consumer Non-Durables 0.4
Consumer Products 0.3
Cosmetics 0.2
Diversified Holding Companies 3.9
Electrical Services 0.4
Electronics 7.4
Electronics & Other Electrical Equipment 3.1
Electronics-Semiconductors 1.5
Energy 0.9
Financial Services 12.5
Food Products 2.6
Health & Medical Services 1.3
Health/Personal Care 1.8
Household Durables 2.0
Industrial Machinery 0.2
Insurance 3.9
Media 3.8
Mining-Metals/Minerals 0.9
Oil & Gas 5.8
Paper & Forest Products 0.0
Pharmaceuticals 4.5
Publishing 2.9
Railroads 0.1
Real Estate 1.4
Recreational Services 0.1
Retail Trade 1.8
Steel 0.0
Telecommunications 14.1
Transportation/Storage 0.2
Utilities 4.3
Wholesale Trade 0.2
-----------------------------------------------------------
TOTAL COMMON AND PREFERRED STOCK 97.5%
-----------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
38
<PAGE>
COMMERCE NATIONAL TAX-FREE INTERMEDIATE BOND FUND
National Tax-Free Intermediate Bond Fund Overview
Dear Shareholder:
We are pleased to report on the performance of the Commerce National Tax-Free
Intermediate Bond Fund (the "Fund") for the year ended October 31, 2000.
Performance Review
For the year ended October 31, 2000, the Institutional
Shares of the Fund had a cumulative total return of 7.17%,
based on Net Asset Value (NAV) (assumes fee waivers and ex-
pense reimbursements). This compares to the Lipper Interme-
diate Municipal Funds Index 12-month cumulative return of
6.45% and Merrill Lynch Municipal Intermediate Index
12-month cumulative return of 7.36%. Past performance is no
guarantee of future results. (The Fund's NAV and yield are
not guaranteed by the FDIC or the U.S. Government or by its
agencies, instrumentalities, or sponsored enterprises.)
Portfolio Highlights
.During the reporting period, demand for municipal bonds
was mixed, as institutions largely stayed on the sidelines
due to negative fund flows, while retail, or individual
investors picked up the slack and now play a much more
prominent role in both the primary and secondary markets.
Credit spreads, or the difference in yield between BBB-
rated bonds and AAA-rated bonds, widened by 80 basis
points.
.Evidence of slowing economic growth has eased inflationary
fears. As such, the Federal Reserve has been on hold since
May 2000. This, in part, has helped municipal bond yields
to recoup roughly half their losses posted in 1999.
.During the period the Fund's returns were enhanced by a
duration that was slightly longer than that of its bench-
mark. Maintaining a higher overall credit quality and
timely state and sector rotation based on supply/demand
conditions also aided returns.
.Looking ahead, we do not currently anticipate making any
material changes in the Fund's portfolio structure. Our
overall market outlook is flat to slightly positive, as
economic growth should continue to be moderate, and we do
not foresee any disturbing news on the inflation front.
From a sector standpoint, we may see renewed interest in
the healthcare sector, as its credit problems seem to be
bottoming.
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, 2000
39
<PAGE>
COMMERCE NATIONAL TAX-FREE INTERMEDIATE BOND FUND
Performance Summary
October 31, 2000
The following graph shows the value, as of October 31, 2000, of a $10,000 in-
vestment made on February 21, 1995 (commencement of operations) in the Insti-
tutional Shares. For comparative purposes, the performance of the Fund's
benchmark (the Merrill Lynch Municipal Intermediate Index with income rein-
vested ("Merrill Muni Index")) is shown. The Fund's performance versus the
Lipper Intermediate Municipal Funds Index(a) with income reinvested ("Lipper
Muni Index") is also shown. The performance data represent 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.
National Tax-Free Intermediate Bond Fund's Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested February 21, 1995 to
October 31, 2000.
[GRAPH]
Nat'l Tax-Free Merrill Lipper
Intermediate Bond Muni Index Muni 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
10/31/00 13,182 14,058 13,453
<TABLE>
<CAPTION>
Average Annual Total Return
through October 31, 2000 Since Inception Five Years One Year
<S> <C> <C> <C>
Institutional Shares (commenced
February 21, 1995) 4.97% 4.44% 7.17%
---------------------------------------------------------------------
</TABLE>
(a) The Lipper Intermediate Municipal Funds Index is an unmanaged index con-
sisting of funds that invest in municipal debt issues with dollar-
weighted average maturities of five to ten years. The Index figures do
not reflect any fees or expenses.
40
<PAGE>
COMMERCE NATIONAL TAX-FREE INTERMEDIATE BOND FUND
Statement of Investments
October 31, 2000
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - 95.8%
Colorado - 1.3%
Colorado Housing Finance Authority Revenue Bonds (Single Family Program)
Series D-3 (AA/Aa2)
$ 500,000 5.15% 04/01/2011 $ 507,630
----------------------------------------------------------------------------------------------
District of Columbia - 1.4%
District of Columbia Revenue Bonds (World Wildlife Fund) Series A
(AMBAC) (AAA/Aaa)
555,000 5.75 07/01/2011 588,089
----------------------------------------------------------------------------------------------
Georgia - 2.7%
George L Smith II GA World Congress Control Revenue Bonds (Domed Stadium
Project) (MBIA) (AAA/Aaa)
500,000 6.00 07/01/2011 537,465
Georgia Private Colleges & University Revenue Bonds Series A (NR/A3)
500,000 5.25 10/01/2020 472,255
Georgia State GO Bonds Series D (AAA/Aaa)
100,000 5.40 11/01/2010 105,287
-----------
1,115,007
----------------------------------------------------------------------------------------------
Hawaii - 0.8%
Honolulu HI City and County Revenue Bonds Series A (AA-/Aa3)
300,000 7.25 07/01/2002 313,527
----------------------------------------------------------------------------------------------
Illinois - 4.5%
Chicago IL GO Bonds Series A (FGIC) (AAA/Aaa)
500,000 6.00 01/01/2019 521,560
Chicago IL Metropolitan Water Reclamation GO Bonds (AA/Aa1)
500,000 4.90 12/01/2001 502,375
Chicago IL Public Building Community Building Revenue Bonds Series C
(FGIC) (AAA/Aaa)
500,000 5.50 02/01/2006 520,010
Illinois State GO Bonds (AAA/Aaa)
300,000 5.00 03/01/2017 279,855
-----------
1,823,800
----------------------------------------------------------------------------------------------
Indiana - 5.7%
Beech Grove IN School Building Revenue Bonds (MBIA) (AAA/Aaa)
400,000 5.63 07/05/2024 404,948
Elkhart County IN Hospital Authority Revenue Bonds (NR/A1)
700,000 5.25 08/15/2018 636,776
Merrillville IN Multi. School Building Revenue Bonds (AAA/Aaa)
500,000 6.65 07/01/2006 549,495
Plymouth IN Multi. School Building Revenue Bonds (AAA/Aaa)
700,000 5.75 07/01/2006 737,835
-----------
2,329,054
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - (continued)
Iowa - 1.9%
Iowa City Sewer Revenue Bonds (AMBAC) (AAA/Aaa)
$ 250,000 6.00% 07/01/2008 $ 254,955
Iowa Student Loan Liquidity Corp. Revenue Bonds Series E (NR/Aaa)
500,000 5.70 06/01/2009 512,580
-----------
767,535
----------------------------------------------------------------------------------------------
Kansas - 0.6%
Olathe KS Certificate Participation Series A (A-/A1)
250,000 4.80 09/01/2007 251,285
----------------------------------------------------------------------------------------------
Kentucky - 3.1%
Boone County KY School Building Revenue Bonds (NR/Aa3)
285,000 5.70 02/01/2016 296,500
Jefferson County KY GO Bonds Series C (AA/Aa2)
465,000 5.38 05/15/2007 476,690
460,000 5.45 05/15/2008 473,432
-----------
1,246,622
----------------------------------------------------------------------------------------------
Louisiana - 2.0%
Caddo Parish LA Parishwide School District GO Bonds (MBIA) (AAA/Aaa)
265,000 6.25 03/01/2005 282,283
Orleans Parish LA Parishwide School District Revenue Bonds (NR/Aaa)
500,000 7.00 09/01/2003 533,210
-----------
815,493
----------------------------------------------------------------------------------------------
Maine - 1.5%
Regional Waste System ME Solid Waste Revenue Bonds Series P (AA/NR)
300,000 5.25 07/01/2004 307,701
300,000 5.38 07/01/2005 310,653
-----------
618,354
----------------------------------------------------------------------------------------------
Massachusetts - 1.8%
Massachusetts State GO Bonds Series A (AAA/Aaa)
700,000 5.60 02/01/2007 732,431
----------------------------------------------------------------------------------------------
Michigan - 11.2%
Detroit Michigan Sewage Disposal Revenue Bonds Series A (AAA/Aaa)
300,000 6.00 07/01/2004 315,012
Forest Hills Michigan Public Schools GO Bonds (AA/Aa2)
500,000 4.25 05/01/2010 468,220
Genesee County Michigan Sewage Disposal Systems Revenue Bonds
(Interceptors & Treatment Facilities) (FGIC) (AAA/Aaa)
550,000 4.00 05/01/2014 484,605
Greenville Public Schools GO Bonds (MBIA) (AAA/Aaa)
200,000 5.75 05/01/2007 209,712
Grosse Isle Township Michigan Building Authority Revenue Bonds (MBIA)
(AAA/Aaa)
325,000 5.45 04/01/2016 329,394
----------------------------------------------------------------------------------------------
</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, 2000
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - (continued)
Michigan - (continued)
Michigan State Building Authority Revenue Bonds Series 1 (AA+/Aa1)
$ 700,000 5.13% 10/15/2015 $ 686,735
Michigan State Hospital Finance Authority Revenue Bonds (BBB+/Baa1)
150,000 5.45 11/15/2009 139,305
Michigan State Hospital Finance Authority Revenue Bonds Series A
(AA/Aa2)
750,000 6.13 11/15/2026 751,373
Michigan State Housing Development Authority Revenue Bonds Series B
(AAA/Aaa)
500,000 4.80 12/01/2010 488,660
Stockbridge Michigan Community Schools GO Bonds (Q-SBLF) (AAA/Aaa)
665,000 5.10 05/01/2012 669,974
-----------
4,542,990
----------------------------------------------------------------------------------------------
Minnesota - 1.4%
Minnesota State Housing and Finance Agency Revenue Bonds Series D
(AA+/Aa1)
315,000 5.35 01/01/2005 324,195
Plainview MN Independent School District #810 GO Bonds Series A (NR/Aa1)
250,000 5.63 02/01/2018 253,665
-----------
577,860
----------------------------------------------------------------------------------------------
Missouri - 12.5%
Boone County MO Reorganized School District #R-6 Direct Deposit Program
GO Bonds (AA+/NR)
325,000 5.95 03/01/2017 341,094
Howard Bend MO Levee District Special Tax Revenue Bonds (NR/NR)
670,000 5.30 03/01/2008 674,395
Lebanon MO Reorganized School District #R-3 Direct Deposit Program GO
Bonds (AA+/NR)
450,000 5.45 03/01/2014 457,533
Missouri State Development Finance Board Infrastructure Facilities
Revenue Bonds (Eastland Centre PJ-A) (A-/NR)
395,000 5.75 04/01/2012 407,660
Missouri State Health & Educational Facility Revenue Bonds (Freeman
Health Systems Project) (BBB+/NR)
500,000 4.75 02/15/2005 479,525
Missouri State Health & Educational Facility Revenue Bonds (St.
Anthony's Medical Center) (A/A2)
420,000 6.25 12/01/2012 436,657
Osage Beach MO Waterworks and Sewer System Revenue Bonds (NR/NR)
195,000 4.85 12/01/2006 194,688
280,000 4.75 12/01/2011 265,572
225,000 5.50 12/01/2014 225,162
290,000 5.60 12/01/2015 290,206
St. Charles County MO Industrial Development Revenue Bonds (Housing
Vanderbilt Apts) (A-/NR)
250,000 5.00 02/01/2029 248,150
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - (continued)
Missouri - (continued)
St. Louis MO Airport Revenue Bonds (BBB-/Baa3)
$ 325,000 6.25% 01/01/2002 $ 328,549
St. Peters GO Bonds (NR/Aaa)
290,000 7.20 01/01/2009 338,433
Wright County MO Reorganized School District #R-4 Direct Deposit Program
GO Bonds (AA+/NR)
400,000 5.85 03/01/2020 411,248
-----------
5,098,872
----------------------------------------------------------------------------------------------
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 202,108
----------------------------------------------------------------------------------------------
Nebraska - 1.9%
Nebraska Public Power District Revenue Bonds Series A (AAA/Aaa)
250,000 5.10 01/01/2006 257,635
Omaha Public Power Revenue Bonds Series A (AA/Aa2)
500,000 5.00 02/01/2001 500,835
-----------
758,470
----------------------------------------------------------------------------------------------
Nevada - 0.6%
Nevada Housing Division Single Family Revenue Bonds Series A-2 (AMT)
(FHA) (NR/Aaa)
245,000 4.10 10/01/2004 238,250
----------------------------------------------------------------------------------------------
New Jersey - 1.6%
Morris County NJ GO Bonds (AAA/Aaa)
660,000 4.75 09/15/2011 654,991
----------------------------------------------------------------------------------------------
New York - 9.0%
New York Dormitory Authority Revenue Bonds (MBIA-IBC) (AAA/Aaa)
500,000 4.50 07/01/2006 499,480
New York GO Bonds Series A (A/A2)
500,000 5.25 08/01/2007 514,825
New York GO Bonds Series A (AMBAC-TCRS) (AAA/Aaa)
250,000 7.00 08/01/2004 271,205
New York GO Bonds Series J (A/A2)
500,000 5.25 08/01/2011 507,965
New York New York City Transitional Finance Revenue Bonds Series B
(AA/Aa2)
500,000 6.00 11/15/2013 540,660
New York State Dorm Authority Revenue Bonds Series B (A/A3)
540,000 5.00 05/15/2008 545,729
New York State Energy Research and Development Revenue Bonds Series A
(A-/Baa3)
250,000 7.15 12/01/2020 264,613
New York State Urban Development Corp. Revenue Bonds (A/Baa1)
500,000 6.25 01/01/2007 538,785
-----------
3,683,262
----------------------------------------------------------------------------------------------
</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)
North Dakota - 1.0%
North Dakota State Municipal Bond Bank Revenue Bonds (State Revolving
Funding Program) Series A (NR/Aa2)
$ 400,000 6.00% 10/01/2020 $ 413,248
----------------------------------------------------------------------------------------------
Ohio - 2.3%
Buckeye OH Local School District GO Bonds (FGIC) (NR/Aaa)
445,000 5.30 12/01/2016 444,978
Canton OH City School District GO Bonds Series A (MBIA) (AAA/Aaa)
340,000 5.10 12/01/2012 342,920
Cuyahoga County OH GO Bonds (AA+/Aa1)
165,000 5.55 12/01/2020 165,117
-----------
953,015
----------------------------------------------------------------------------------------------
Oregon - 1.2%
Oregon State Housing & Community Services Department Revenue Bonds
Series D (NR/Aa2)
485,000 5.55 07/01/2006 501,597
----------------------------------------------------------------------------------------------
Rhode Island - 1.7%
Rhode Island State Student Loan Revenue Bonds Series 3 (AMBAC) (NR/Aaa)
180,000 5.70 12/01/2012 182,749
190,000 5.75 12/01/2013 192,747
205,000 5.80 12/01/2014 207,798
125,000 5.90 12/01/2015 127,081
-----------
710,375
----------------------------------------------------------------------------------------------
South Carolina - 2.7%
Orangeburg County Consolidated School District #5 GO Bonds (SCSDE)
(AA+/Aa1)
570,000 5.00 03/01/2011 577,171
York County School District #1 GO Bonds Series A (MBIA SCSDE) (AAA/Aaa)
500,000 7.00 07/01/2003 531,110
-----------
1,108,281
----------------------------------------------------------------------------------------------
South Dakota - 5.4%
Hot Springs SD School District #023-2 GO Bonds (FSA) (AAA/Aaa)
120,000 4.75 09/01/2009 119,909
South Dakota Building Authority Revenue Bonds (AA-/A1)
300,000 6.00 09/01/2003 311,076
South Dakota Housing Development Authority Revenue Bonds (AAA/Aa1)
660,000 4.60 05/01/2005 656,826
315,000 4.65 05/01/2006 316,515
South Dakota State Health & Educational Revenue Bonds (BBB+/NR)
250,000 7.25 04/01/2022 269,482
South Dakota State Health & Educational Revenue Bonds (MBIA) (AAA/Aaa)
500,000 5.00 09/01/2004 506,915
-----------
2,180,723
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - (continued)
Texas - 4.6%
Bexar County GO Bonds (AA/Aa2)
$ 505,000 5.63% 06/15/2012 $ 527,266
Katy TX Independent School District GO Bonds Series A (AAA/Aaa)
200,000 4.75 02/15/2027 170,006
North Harris Montgomery Community College District Revenue Bonds (FGIC)
(AAA/Aaa)
420,000 5.75 02/15/2018 428,740
San Antonio GO Bonds (AA+/Aa2)
200,000 5.20 08/01/2002 202,510
Tarrant County Water Control & Improvement Revenue Bonds (AAA/Aaa)
140,000 5.00 03/01/2009 140,662
Texas A&M University Revenue Bonds (AA+/Aa2)
200,000 5.55 05/15/2001 201,326
Texas State GO Bonds Series A (AA/Aa1)
200,000 5.65 10/01/2008 207,562
-----------
1,878,072
----------------------------------------------------------------------------------------------
Utah - 0.6%
Intermountain Power Agency Revenue Bonds Series B (A+/A1)
250,000 5.10 07/01/2003 253,529
----------------------------------------------------------------------------------------------
Virginia - 1.3%
Metro. Washington DC Airports Authority Revenue Bonds Series B (AAA/Aaa)
500,000 5.25 10/01/2012 508,090
----------------------------------------------------------------------------------------------
Washington - 7.4%
King County GO Bonds Series D (AA+/Aa1)
500,000 6.20 12/01/2000 500,715
Kitsap County School District #400 Revenue Bonds (NR/A1)
680,000 6.05 12/01/2000 680,816
Pierce County Sewer Improvements Revenue Bonds (A+/A1)
290,000 5.45 02/01/2008 293,697
Seattle GO Bonds Series A (AA+/Aa1)
150,000 5.30 08/01/2013 151,511
Spokane County School District #354 GO Bonds (A+/A2)
120,000 5.20 12/01/2006 122,460
Vancouver Water & Sewer Revenue Bonds (FGIC) (AAA/Aaa)
250,000 4.70 06/01/2001 250,527
Washington Higher Educational Facility University of Puget Sound Revenue
Bonds (A+/A2)
500,000 5.00 10/01/2006 505,330
Washington State Certificates Participation (Convention & Trade Center)
(MBIA) (AAA/Aaa)
500,000 5.25 07/01/2014 500,305
-----------
3,005,361
----------------------------------------------------------------------------------------------
</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, 2000
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - (continued)
Wisconsin - 1.1%
Milwaukee GO Bonds Series E (AA+/Aa2)
$ 250,000 5.50% 06/15/2010 $ 258,512
Wisconsin State GO Bonds Series 3 (AA/Aa2)
200,000 5.25 11/01/2002 203,136
-----------
461,648
----------------------------------------------------------------------------------------------
Wyoming - 0.5%
Wyoming Community Development Authority Housing Revenue Bonds Series 5
(AA/Aa2)
200,000 4.80 06/01/2009 197,230
----------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BOND OBLIGATIONS
(Cost $38,804,370) $39,036,799
----------------------------------------------------------------------------------------------
Short-Term Obligations # - 4.4%
Texas - 4.4%
Grapevine Texas Industrial Development Corp. Revenue Bonds American
Airlines-A2 (Bayerische Landsbank LOC Expire 12/31/02) (NR/P1)
$ 700,000 4.65% 11/01/2000 $ 700,000
Grapevine Texas Industrial Development Corp. Revenue Bonds American
Airlines-A4 (Bayerische Landsbank LOC Expire 12/31/02) (NR/P1)
200,000 4.65 11/01/2000 200,000
Grapevine Texas Industrial Development Corp. Revenue Bonds American
Airlines-B1 (Bayerische Landsbank LOC Expire 12/31/02) (NR/P1)
500,000 4.65 11/01/2000 500,000
----------------------------------------------------------------------------------------------
</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 B (A1+/NR)
$ 400,000 4.65% 11/01/2000 $ 400,000
----------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBILIGATIONS
(Cost $1,800,000) $ 1,800,000
----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $40,604,370) $40,836,799
----------------------------------------------------------------------------------------------
</TABLE>
# Variable rate security. Coupon rate disclosed is that which is in effect at
October 31, 2000.
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
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
Missouri Tax-Free Intermediate Bond Fund Overview
Dear Shareholder:
We are pleased to report on the performance of the Commerce Missouri Tax-Free
Intermediate Bond Fund (the "Fund") for the year ended October 31, 2000.
Performance Review
For the year ended October 31, 2000, the Institutional
Shares of the Fund had a cumulative total return of 7.05%,
based on Net Asset Value (NAV) (assumes fee waivers and ex-
pense reimbursements). This compares to the Lipper Interme-
diate Municipal Funds Index 12-month cumulative return of
6.45% and Merrill Lynch Municipal Intermediate Index
12-month cumulative return of 7.36%. Past performance is no
guarantee of future results. (The Fund's NAV and yield are
not guaranteed by the FDIC or the U.S. Government or by its
agencies, instrumentalities, or sponsored enterprises.)
Portfolio Highlights
.During the reporting period, demand for municipal bonds
was mixed, as institutions largely stayed on the sidelines
due to negative fund flows, while retail, or individual
investors, picked up the slack and now play a much more
prominent role in both the primary and secondary markets.
Credit spreads, or the difference in yield between BBB-
rated bonds and AAA-rated bonds, widened by 80 basis
points.
.Evidence of slowing economic growth has eased inflationary
fears. As such, the Federal Reserve has been on hold since
May 2000. This, in part, has helped municipal bond yields
to recoup roughly half their losses posted in 1999.
.During the period, the Fund's returns were enhanced by a
duration that was slightly longer than that of its bench-
marks. Maintaining a higher overall credit quality and
timely state and sector rotation based on supply/demand
conditions also aided returns.
.Looking ahead, we do not currently anticipate making any
material changes in the Fund's portfolio structure. Our
overall market outlook is flat to slightly positive, as
economic growth should continue to be moderate, and we do
not foresee any disturbing news on the inflation front.
From a sector standpoint, we may see renewed interest in
the healthcare sector, as its credit problems seem to be
bottoming.
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, 2000
45
<PAGE>
COMMERCE MISSOURI TAX-FREE INTERMEDIATE BOND FUND
Performance Summary
October 31, 2000
The following graph shows the values as of October 31, 2000, of a $10,000 in-
vestment made on February 21, 1995 (commencement of operations) in the Insti-
tutional Shares. For comparative purposes, the performance of the Fund's
benchmark (the Merrill Lynch Municipal Intermediate Index with income rein-
vested ("Merrill Muni Index")) is shown. The Fund's performance versus the
Lipper Intermediate Municipal Funds Index(a) with income reinvested ("Lipper
Muni Index") is also shown. The performance data represent 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.
Missouri Tax-Free Intermediate Bond Fund's Lifetime Performance
Growth of a $10,000 Investment, Distributions Reinvested February 21, 1995 to
October 31, 2000.
[GRAPH]
Missouri Tax-Free Merrill Lipper Muni
Intermediate Bond Muni 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
10/31/00 13,112 14,058 13,453
<TABLE>
<CAPTION>
Average Annual Total Return
through October 31, 2000 Since Inception Five Years One Year
<S> <C> <C> <C>
Institutional Shares (commenced
February 21, 1995) 4.87% 4.45% 7.05%
---------------------------------------------------------------------
</TABLE>
(a) The Lipper Intermediate Municipal Funds Index is an unmanaged index con-
sisting of funds that invest in municipal debt issues with dollar-
weighted average maturities of five to ten years. The Index figures do
not reflect any fees or expenses.
46
<PAGE>
COMMERCE MISSOURI TAX-FREE INTERMEDIATE BOND FUND
Statement of Investments
October 31, 2000
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - 91.3%
Michigan - 2.6%
Michigan State Hospital Finance Authority Revenue Bonds Series A
(AAA/Aaa)
$ 500,000 5.50% 11/15/2010 $ 518,725
500,000 6.13 11/15/2026 500,915
-----------
1,019,640
----------------------------------------------------------------------------------------------
Missouri - 85.3%
American National Fish & Wildlife Museum District Revenue Bonds (NR/NR)
500,000 5.70 09/01/2005 498,705
Belton Capital Improvement Sales Tax Revenue Bonds (MBIA) (NR/Aaa)
200,000 5.00 03/01/2005 203,644
200,000 5.00 03/01/2006 203,162
Belton MO Certificate Participation Series B (NR/Aaa)
500,000 4.75 03/01/2013 484,985
Branson MO Reorganized School District Revenue Bonds (AAA/Aaa)
300,000 5.50 03/01/2014 313,848
Chesterfield GO Bonds (NR/Aa1)
200,000 4.90 02/15/2019 182,598
Clay County Public Building Authority Leasehold Revenue Bonds Series C
(FSA) (AAA/Aaa)
40,000 5.00 05/15/2009 40,702
Cole County MO Reorganized School District #2 Direct Deposit Program GO
Bonds (AA+/NR)
610,000 6.00 03/01/2020 636,035
Columbia Water & Electricity Revenue Bonds Series A (AA/A1)
300,000 5.40 10/01/2002 305,208
O Fallon MO Certificate Participation (AMBAC) (AAA/Aaa)
300,000 5.75 12/01/2004 313,590
Howard Bend MO Levee District Special Tax Revenue Bonds (NR/NR)
635,000 5.25 03/01/2007 639,369
Independence MO School District GO Bonds (AA+/Aa1)
230,000 5.25 03/01/2013 232,923
540,000 5.00 03/01/2018 505,235
Jackson County MO Leasehold Revenue Bonds (AMBAC) (AAA/Aaa)
300,000 4.00 12/01/2004 289,791
Jackson County MO School District #7 Lee's Summit GO Bonds (NR/Aa3)
250,000 5.60 03/01/2008 254,117
Kansas City MO Water Revenue Bonds Series A (AA/Aa3)
735,000 5.80 12/01/2018 759,314
Kansas City MO Water Revenue Bonds Series B (AA/Aa3)
270,000 5.60 12/01/2001 273,278
Lebanon MO Reorganized School District #R-3 Direct Deposit Program GO
Bonds (AA+/NR)
270,000 5.45 03/01/2014 274,520
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Municipal Bond Obligations - (continued)
Missouri - (continued)
Missouri Higher Education Student Loan Revenue Bonds Series EE (NR/Aaa)
$ 500,000 4.50% 02/15/2010 $ 467,960
Missouri Higher Education Student Loan Revenue Bonds Series RR (NR/A2)
500,000 5.85 07/15/2010 511,840
Missouri State Certificate Participation (AAA/Aaa)
500,000 5.13 06/01/2017 483,980
Missouri State Development Finance Board Infrastructure Facilities
(Hartman Heritage Centre PJ-A) (AMBAC) (NR/Aaa)
500,000 5.55 04/01/2012 517,280
Missouri State Environmental Improvement & Energy Resources Authority
Pollution Control Revenue Bonds (Elec Coop Thomas Hill) (AA/A1)
250,000 5.50 12/01/2004 256,030
500,000 5.50 12/01/2006 514,525
Missouri State Environmental Improvement & Energy Resources Authority
Pollution Control Revenue Bonds (Tri-County Water Authority Project)
(AA/NR)
445,000 5.60 04/01/2011 467,495
500,000 6.00 04/01/2022 506,885
Missouri State Environmental Improvement & Energy Resources Authority
Pollution Control Revenue Bonds Series A (NR/Aaa)
150,000 5.25 07/01/2002 152,155
Missouri State Environmental Improvement & Energy Resources Authority
Pollution Control Revenue Bonds Series B (State Revolving Funds Program)
(NR/Aaa)
400,000 5.75 07/01/2020 408,588
Missouri State Environmental Improvement & Energy Resources Authority
Pollution Control Revenue Bonds Series C (NR/Aaa)
205,000 4.75 01/01/2001 205,148
300,000 4.90 01/01/2002 301,866
Missouri State Fourth State Building GO Bonds Series A (AAA/Aaa)
500,000 7.00 04/01/2004 539,255
Missouri State GO Bonds Series A (AAA/Aaa)
500,000 4.50 08/01/2002 501,050
500,000 6.50 08/01/2014 507,930
Missouri State Health & Educational Facility Revenue Bonds (Barnes-
Jewish, Inc.) (AA/Aa3)
150,000 6.00 05/15/2011 159,260
Missouri State Health & Educational Facility Revenue Bonds (Central
Institute for the Deaf) (AA/NR)
500,000 5.85 01/01/2022 501,010
Missouri State Health & Educational Facility Revenue Bonds (Children
Mercy Hosp.) (A+/NR)
750,000 5.25 05/15/2018 703,485
Missouri State Health & Educational Facility Revenue Bonds (Freeman
Health Systems Project) (BBB+/NR)
500,000 4.75 02/15/2005 479,525
----------------------------------------------------------------------------------------------
</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, 2000
<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 (Maryville
University of St. Louis PJ) (NR/Baa1)
$ 350,000 6.50% 06/15/2022 $ 369,260
Missouri State Health & Educational Facility Revenue Bonds (prerefunded
to 06/01/01) (MBIA) (AAA/Aaa)
300,000 6.63 06/01/2011 309,780
Missouri State Health & Educational Facility Revenue Bonds (St.
Anthony's Medical Center) (A/A2)
300,000 5.75 12/01/2002 304,908
300,000 6.25 12/01/2011 313,149
Missouri State Health & Educational Facility Revenue Bonds (The Barstow
School) (NR/NR)
405,000 4.75 10/01/2010 388,521
Missouri State Housing Development Community Mortgage Revenue Bonds
(AMT-Singlefam-Homeowner Loan A-1) (GNMA/FNMA) (AAA/NR)
640,000 5.90 09/01/2012 661,728
Missouri State Housing Development Community Mortgage Revenue Bonds
(AMT-Singlefam-Homeowner Loan A-2) (GNMA/FNMA) (AAA/NR)
175,000 5.40 03/01/2006 180,121
Missouri State Housing Development Community Mortgage Revenue Bonds
(AMT-Singlefam-Homeowner Loan B-2) (GNMA/FNMA) (AAA/NR)
345,000 4.55 03/01/2004 344,241
350,000 5.20 03/01/2008 354,868
Missouri State Housing Development Community Mortgage Revenue Bonds
(Single Family Homeownership-B) (GNMA/FNMA) (AAA/NR) #
120,000 5.50 03/01/2006 124,070
Missouri State Housing Development Community Mortgage Revenue Bonds
Series C (GNMA/FNMA) (AAA/NR) #
180,000 4.80 09/01/2001 180,382
Missouri State Housing Development Community Mortgage Revenue Bonds
Series C-2 (GNMA/FNMA) (AAA/NR)
200,000 4.90 03/01/2007 200,310
Missouri State Regional Convention & Sports Complex Authority Revenue
Bonds (A+/Aa3)
640,000 4.75 08/15/2004 645,914
500,000 5.20 08/15/2007 512,500
New Liberty Hospital District Revenue Bonds (MBIA) (NR/Aaa)
375,000 4.25 12/01/2002 373,369
515,000 5.00 12/01/2010 518,723
380,000 5.13 12/01/2012 382,356
North Kansas City MO School District Direct Deposit Program GO Bonds
(AA+/Aa1)
300,000 4.75 03/01/2007 300,795
355,000 5.05 03/01/2011 356,700
----------------------------------------------------------------------------------------------
</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 $ 208,663
250,000 5.30 12/01/2012 249,328
575,000 4.95 12/01/2013 541,201
190,000 5.65 12/01/2016 190,135
Polk County MO School District R-1 Direct Deposit Program GO Bonds
(AA+/NR)
375,000 5.70 03/01/2020 379,564
Poplar Bluff MO GO Bonds (AMBAC) (AAA/NR)
275,000 5.30 08/01/2014 278,317
220,000 5.35 08/01/2015 222,312
Richmond Heights CTFS Partnership Capital Improvement Projects Series A
Certificate Participation (MBIA) (AAA/Aaa)
575,000 4.70 02/15/2006 575,494
Springfield MO School District #12 Revenue Bonds Series B (FGIC)
(AAA/Aaa)
620,000 9.50 03/01/2007 784,691
St. Charles County MO Community College GO Bonds (FGIC) (NR/Aaa)
890,000 5.00 02/15/2016 862,196
St. Charles County MO Industrial Development Revenue Bonds (Housing
Vanderbilt Apts) (A-/NR)
350,000 5.00 02/01/2029 347,410
St. Charles County MO School District Series A (AA+/Aa1)
400,000 5.05 03/01/2019 382,016
St. Charles County MO School District GO Bonds Series A (AMBAC)
(AAA/Aaa)
150,000 5.75 03/01/2011 151,878
St. Francois County MO School District R-III GO Bonds (AA+/NR)
285,000 4.95 03/01/2016 266,868
St. Louis Board of Education GO Bonds Series A (FGIC State Aid Direct
Deposit) (AAA/Aaa)
500,000 4.40 04/01/2007 495,030
St. Louis County MO Certificate Partnership (AA/Aa2)
500,000 4.40 05/15/2011 474,165
St. Louis County MO GO Bonds Series B (NR/Aaa)
200,000 5.25 02/01/2007 202,174
St. Louis County MO Regional Convention & Sports Complex Authority
Revenue Bonds Series C (AAA/NR)
530,000 7.90 08/15/2021 576,741
St. Louis County MO School District GO Bonds Lindbergh (NR/Aa2)
715,000 6.60 02/15/2003 748,441
200,000 5.40 02/15/2010 205,984
St. Louis MO Airport Revenue Bonds (BBB-/Baa3)
325,000 6.25 01/01/2002 328,549
St. Louis MO Airport Revenue Bonds (Lambert St. Louis International)
Series B AMT (FGIC) (AAA/Aaa)
395,000 6.00 07/01/2009 425,917
----------------------------------------------------------------------------------------------
</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. Peters GO Bonds (NR/Aaa)
$ 500,000 7.20% 01/01/2009 $ 583,505
150,000 5.80 01/01/2010 155,177
St. Peters GO Bonds (FGIC) (NR/Aaa)
695,000 7.20 01/01/2008 801,835
University of Missouri Development Foundation Power Leasehold Revenue
Bonds (AAA/NR)
500,000 5.75 05/01/2013 523,055
University of Missouri Health Facilities Revenue Bonds Series A (AMBAC)
(AAA/Aaa)
150,000 5.20 11/01/2010 153,046
University of Missouri Systems Facilities Revenue Bonds (AA+/Aa2)
250,000 4.60 11/01/2000 250,000
-----------
32,781,678
----------------------------------------------------------------------------------------------
Puerto Rico - 3.4%
Puerto Rico Commonwealth GO Bonds (FSA-CR) (AAA/Aaa)
500,000 5.38 07/01/2025 494,240
Puerto Rico Commonwealth GO Bonds (MBIA) (AAA/Aaa)
350,000 5.38 07/01/2021 348,460
Puerto Rico Municipal Finance Agency GO Bonds (Refunding Series B) (FSA)
(AAA/Aaa)
455,000 5.50 08/01/2018 464,209
-----------
1,306,909
----------------------------------------------------------------------------------------------
TOTAL MUNICIPAL BOND OBLIGATIONS
(Cost $35,134,506) $35,108,227
----------------------------------------------------------------------------------------------
</TABLE>
<TABLE>
<CAPTION>
Principal Interest Maturity
Amount Rate Date Value
<S> <C> <C> <C>
Short-Term Obligations # - 7.6%
Missouri - 7.6%
Missouri State Health & Educational Facility Revenue Bonds (Rockhurst
College Project) (AIB Group LOC, Expire 11/01/2025) (NR/Aa3)
$ 500,000 4.35% 11/01/2000 $ 500,000
Missouri State Health & Educational Facility Revenue Bonds (St. Louis
University) (FGIC) (Bank of America NA SPA, Expire 12/01/2005) (A-
1+/VMIG1)
400,000 4.65 11/01/2000 400,000
Missouri State Health & Educational Facility Revenue Bonds (St. Louis
University) Series B (Bank of America NA SPA, Expire 07/01/2004) (A-
1+/VMIG1)
500,000 4.65 10/01/2024 500,000
Missouri State Health & Educational Facility Revenue Bonds (The
Washington University) Series C (A-1+/VMIG1)
1,500,000 4.60 11/01/2000 1,500,000
----------------------------------------------------------------------------------------------
TOTAL SHORT-TERM OBLIGATIONS#
(Cost $2,900,000) $ 2,900,000
----------------------------------------------------------------------------------------------
TOTAL INVESTMENTS
(Cost $38,034,506) $38,008,227
----------------------------------------------------------------------------------------------
</TABLE>
# Variable rate security. Coupon rate disclosed is that which is in effect at
October 31, 2000.
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
CR--Custodial Receipts
CTFS--Certificates
FGIC--Insured by Financial Guaranty Insurance Co.
FNMA--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
------------------------------------------------------------------------------
The accompanying notes are an integral part of these financial statements.
49
<PAGE>
COMMERCE FUNDS
Statements of Assets and Liabilities
October 31, 2000
<TABLE>
<CAPTION>
Short-Term
Government Balanced
Fund Bond Fund Fund
<S> <C> <C> <C>
Assets:
Investments in securities, at value
(cost $83,287,237, $332,500,343,
$83,094,786, $91,641,244,
$303,736,906, $138,139,344,
$159,478,899, $40,604,370 and
$38,034,506 respectively) $82,307,658 $324,254,381 $97,653,672
Cash, at value 746 144 25
Receivables:
Investment securities sold, at value -- 177 783,891
Dividends and interest, at value 764,557 3,769,257 336,542
Fund shares sold 60,388 221,390 60,509
Other 11,604 36,772 373
------------------------------------------------------------------------------
Total assets 83,144,953 328,282,121 98,835,012
------------------------------------------------------------------------------
Liabilities:
Payables:
Investment securities purchased, at
value -- -- 376,989
Fund shares redeemed 341,851 345,594 105,271
Dividends and distributions 207,710 713,998 --
Advisory fees 12,250 138,923 53,742
Administrative fees 9,134 36,120 10,656
Accrued expenses and other
liabilities 46,456 134,089 59,012
------------------------------------------------------------------------------
Total liabilities 617,401 1,368,724 605,670
------------------------------------------------------------------------------
Net Assets:
Paid-in capital 84,725,570 340,200,459 78,319,916
Accumulated undistributed net
investment income (loss) 64,032 647,275 268,975
Accumulated net realized gain (loss)
on investment and foreign currency
related transactions (1,282,471) (5,688,375) 5,081,565
Net unrealized gain (loss) on
investments and translation of assets
and liabilities denominated in
foreign currencies (979,579) (8,245,962) 14,558,886
------------------------------------------------------------------------------
NET ASSETS $82,527,552 $326,913,397 $98,229,342
------------------------------------------------------------------------------
Shares Outstanding:
Total shares outstanding, no par
value (unlimited number of shares
authorized):
Institutional Shares 4,501,596 17,767,433 3,690,109
Service Shares 57,637 64,400 106,917
Institutional Shares: Net asset value
and maximum public offering price per
share (net assets/shares outstanding) $ 18.10 $ 18.33 $ 25.87
Service Shares: Net asset value per
share (net assets/shares outstanding) $ 18.11 $ 18.35 $ 25.85
Maximum public offering price per
share(a) $ 18.48 $ 19.02 $ 26.79
------------------------------------------------------------------------------
</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
MidCap International Intermediate Intermediate
Value Fund Growth Fund Growth Fund Equity Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C> <C>
$ 98,405,266 $397,396,977 $194,499,812 $164,852,865 $40,836,799 $38,008,227
633 298 633 460,687 85,131 28,464
6,217,381 8,048,470 3,503,361 422,202 -- --
114,551 7,987 10,210 147,268 620,031 523,313
321,078 339,726 253,006 1,517,926 3,610 21,500
9,488 726 1,472 144,108 50 67
-------------------------------------------------------------------------------------
105,068,397 405,794,184 198,268,494 167,545,056 41,545,621 38,581,571
-------------------------------------------------------------------------------------
8,111,810 5,721,984 6,586,289 85,539 663,931 --
5,823 255,778 70,164 407,258 -- --
-- -- -- -- 99,609 105,873
57,983 249,176 116,700 131,838 3,573 1,891
10,054 43,191 20,235 18,264 4,466 4,200
50,446 101,016 64,824 70,964 21,039 21,589
-------------------------------------------------------------------------------------
8,236,116 6,371,145 6,858,212 713,863 792,618 133,553
-------------------------------------------------------------------------------------
86,347,223 230,355,090 115,622,318 145,451,789 40,558,501 38,562,113
96,905 -- -- (4,204) 31,062 29,926
3,624,131 75,407,878 19,427,496 16,036,964 (68,989) (117,742)
6,764,022 93,660,071 56,360,468 5,346,644 232,429 (26,279)
-------------------------------------------------------------------------------------
$ 96,832,281 $399,423,039 $191,410,282 $166,831,193 $40,753,003 $38,448,018
-------------------------------------------------------------------------------------
3,849,677 10,062,938 4,289,054 6,276,528 2,175,432 2,075,208
42,867 361,412 100,670 29,135 -- --
$ 24.88 $ 38.33 $ 43.62 $ 26.46 $ 18.73 $ 18.53
$ 24.88 $ 38.04 $ 43.11 $ 26.37 -- --
$ 25.78 $ 39.42 $ 44.67 $ 27.33 $ -- $ --
-------------------------------------------------------------------------------------
</TABLE>
51
<PAGE>
COMMERCE FUNDS
Statements of Operations
For the Year Ended October 31, 2000
<TABLE>
<CAPTION>
Short-Term
Government Balanced
Fund Bond Fund Fund
<S> <C> <C> <C>
Investment Income:
Interest $ 6,299,024 $24,667,456 $ 3,383,690
Dividends(a) -- -- 645,892
--------------------------------------------------------------------------
Total income 6,299,024 24,667,456 4,029,582
--------------------------------------------------------------------------
Expenses:
Advisory fees 492,232 1,718,422 1,172,717
Administration fees 147,670 515,527 175,908
Shareowner servicing fees 37,936 181,497 168,170
Transfer Agent fees 67,474 90,650 81,415
Custodian fees 65,618 95,678 73,908
Registration fees 31,280 28,646 27,104
Professional fees 31,155 74,398 21,990
Trustee fees 2,821 7,421 3,217
Distribution fees -- Service
Shares 2,582 2,907 7,000
Organization expenses 1,065 1,129 1,088
Other 26,029 57,440 22,811
--------------------------------------------------------------------------
Total expenses 905,862 2,773,715 1,755,328
--------------------------------------------------------------------------
Less -- expense reductions(b) (233,840) (35,721) (536,304)
--------------------------------------------------------------------------
Net expenses 672,022 2,737,994 1,219,024
--------------------------------------------------------------------------
NET INVESTMENT INCOME (LOSS) 5,627,002 21,929,462 2,810,558
--------------------------------------------------------------------------
Realized and unrealized gain (loss) on investment and
foreign currency transactions:
Net realized gain (loss) from:
Investment transactions (1,227,456) (5,056,809) 5,237,028
Foreign currency related
transactions -- -- --
Net change in unrealized gain
(loss) on:
Investments 1,121,958 1,847,350 2,810,251
Translation of assets and
liabilities denominated in
foreign currencies -- -- --
--------------------------------------------------------------------------
Net realized and unrealized gain
(loss) on investments and foreign
currency transactions (105,498) (3,209,459) 8,047,279
--------------------------------------------------------------------------
NET INCREASE (DECREASE) IN NET
ASSETS RESULTING FROM OPERATIONS $ 5,521,504 $18,720,003 $10,857,837
--------------------------------------------------------------------------
</TABLE>
(a) Amount is net of $3,716, $1,327, $38,118, $506 and $283,395 respectively,
for the Balanced, Value, Growth, MidCap Growth and International Equity
Fund in foreign withholding taxes.
(b) Expense reductions includes waivers, custody credits and reimbursements.
The accompanying notes are an integral part of these financial statements.
52
<PAGE>
COMMERCE FUNDS
<TABLE>
<CAPTION>
National Missouri
Tax-Free Tax-Free
MidCap International Intermediate Intermediate
Value Fund Growth Fund Growth Fund Equity Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C> <C>
$ 96,768 $ 495,565 $ 190,711 $ 435,239 $1,958,730 $1,903,901
1,315,780 2,778,242 360,393 1,904,559 -- --
-------------------------------------------------------------------------------------
1,412,548 3,273,807 551,104 2,339,798 1,958,530 1,903,901
-------------------------------------------------------------------------------------
555,868 3,549,548 1,415,072 2,618,226 198,630 192,673
111,174 709,910 283,014 261,823 59,589 57,802
33,757 396,493 129,089 66,024 -- --
36,393 160,950 119,107 85,894 28,591 29,617
50,302 78,535 56,866 324,697 49,728 47,173
24,020 40,006 30,684 31,095 7,750 6,835
16,486 44,666 23,190 24,194 17,501 17,507
2,325 10,623 3,584 3,406 1,132 1,304
2,373 36,915 10,057 1,903 -- --
-- 1,153 1,058 1,050 3,280 3,273
17,991 57,401 25,066 21,291 10,156 10,230
-------------------------------------------------------------------------------------
850,689 5,086,200 2,096,787 3,439,603 376,357 366,414
-------------------------------------------------------------------------------------
(10,200) (46,216) (19,604) (1,007,674) (98,275) (115,939)
-------------------------------------------------------------------------------------
840,489 5,039,984 2,077,183 2,431,929 278,082 250,475
-------------------------------------------------------------------------------------
572,059 (1,766,177) (1,526,079) (92,131) 1,680,648 1,653,426
-------------------------------------------------------------------------------------
7,447,234 75,409,687 19,489,894 16,238,112 (66,622) (117,742)
-- -- -- (302,961) -- --
3,804,807 (19,737,164) 22,737,638 (16,603,291) 1,160,051 1,044,412
-- -- -- 6,977 -- --
-------------------------------------------------------------------------------------
11,252,041 55,672,523 42,227,532 (661,163) 1,093,429 926,670
-------------------------------------------------------------------------------------
$11,824,100 $ 53,906,346 $40,701,453 $ (753,294) $2,774,077 $2,580,096
-------------------------------------------------------------------------------------
</TABLE>
53
<PAGE>
COMMERCE FUNDS
Statements of Changes in Net Assets
For the Year Ended October 31, 2000
<TABLE>
<CAPTION>
Short-Term
Government Balanced
Fund Bond Fund Fund
<S> <C> <C> <C>
From Operations:
Net investment income (loss) $ 5,627,002 $ 21,929,462 $ 2,810,558
Net realized gain (loss) on
investments and foreign currency
related transactions (1,227,456) (5,056,809) 5,237,028
Net change in unrealized gain
(loss) on investments and
translation of assets and
liabilities denominated in
foreign currencies 1,121,958 1,847,350 2,810,251
-----------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from operations 5,521,504 18,720,003 10,857,837
-----------------------------------------------------------------------------
Distributions to Shareholders:
From net investment income
Institutional Shares (5,610,012) (22,287,262) (3,086,972)
Service Shares (56,843) (72,249) (67,845)
From net realized gain on
investment transactions
Institutional Shares -- (865,117) (4,484,147)
Service Shares -- (2,859) (99,499)
-----------------------------------------------------------------------------
Total distributions to
shareholders (5,666,855) (23,227,487) (7,738,463)
-----------------------------------------------------------------------------
From share transactions:
Proceeds from sale of shares 39,421,882 96,152,612 24,876,803
Reinvestment of dividends and
distributions 3,397,113 14,419,859 7,649,664
Cost of shares redeemed (77,331,019) (154,452,685) (64,396,789)
-----------------------------------------------------------------------------
Net increase (decrease) in net
assets resulting from share
transactions (34,512,024) (43,880,214) (31,870,322)
-----------------------------------------------------------------------------
TOTAL INCREASE (DECREASE) (34,657,375) (48,387,698) (28,750,948)
-----------------------------------------------------------------------------
Net Assets:
Beginning of year 117,184,927 375,301,095 126,980,290
-----------------------------------------------------------------------------
End of year $ 82,527,552 $ 326,913,397 $ 98,229,342
-----------------------------------------------------------------------------
Accumulated undistributed net
investment income (loss) $ 64,032 $ 647,275 $ 268,975
-----------------------------------------------------------------------------
</TABLE>
The accompanying notes are an integral part of these financial statements.
54
<PAGE>
COMMERCE FUNDS
<TABLE>
<CAPTION>
National Missouri
Tax-Free Tax-Free
MidCap International Intermediate Intermediate
Value Fund Growth Fund Growth Fund Equity Fund Bond Fund Bond Fund
<S> <C> <C> <C> <C> <C>
$ 572,059 $ (1,766,177) $ (1,526,079) $ (92,131) $ 1,680,648 $ 1,653,426
7,447,234 75,409,687 19,489,894 15,935,151 (66,622) (117,742)
3,804,807 (19,737,164) 22,737,638 (16,596,314) 1,160,051 1,044,412
---------------------------------------------------------------------------------------
11,824,100 53,906,346 40,701,453 (753,294) 2,774,077 2,580,096
---------------------------------------------------------------------------------------
(493,450) -- -- (356,026) (1,680,648) (1,653,426)
(4,095) -- -- -- -- --
-- (46,852,787) (22,788,341) (6,663,122) (21,523) (5,122)
-- (1,491,604) (520,840) (24,299) -- --
---------------------------------------------------------------------------------------
(497,545) (48,344,391) (23,309,181) (7,043,447) (1,702,171) (1,658,548)
---------------------------------------------------------------------------------------
51,231,909 150,885,692 97,614,735 143,672,161 11,059,114 9,402,653
317,189 41,902,140 17,643,636 5,221,807 491,168 392,946
(41,623,152) (259,317,945) (88,516,551) (102,782,966) (12,111,717) (14,910,477)
---------------------------------------------------------------------------------------
9,925,946 (66,530,113) 26,741,820 46,111,002 (561,435) (5,114,878)
---------------------------------------------------------------------------------------
21,252,501 (60,968,158) 44,134,092 38,314,261 510,471 (4,193,330)
---------------------------------------------------------------------------------------
75,579,780 460,391,197 147,276,190 128,516,932 40,242,532 42,641,348
---------------------------------------------------------------------------------------
$ 96,832,281 $ 399,423,039 $191,410,282 $ 166,831,193 $ 40,753,003 $ 38,448,018
---------------------------------------------------------------------------------------
$ 96,905 $ -- $ -- $ (4,204) $ 31,062 $ 29,926
---------------------------------------------------------------------------------------
</TABLE>
55
<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.
56
<PAGE>
COMMERCE FUNDS
<TABLE>
<CAPTION>
National Missouri
Tax-Free Tax-Free
MidCap International Intermediate Intermediate
Value Fund Growth Fund Growth 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>
57
<PAGE>
COMMERCE FUNDS
Notes to Financial Statements
October 31, 2000
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, Value Fund (formerly Growth and
Income Fund), Growth Fund, MidCap Growth Fund (formerly MidCap Fund), Inter-
national Equity Fund, National Tax-Free Intermediate Bond Fund and Missouri
Tax-Free Intermediate Bond Fund. Each of the Funds offers two classes of
shares, Institutional Shares and Service Shares (except National Tax-Free In-
termediate Bond Fund and Missouri Tax-Free Intermediate Bond Fund which only
offered Institutional Shares during the periods shown). Each Fund is regis-
tered 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. Actual results
could differ from those estimates.
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 price on the principal exchange on which they are traded. If no sale oc-
curs, securities are valued at the last bid price. Debt securities are valued
at prices supplied by independent pricing services, 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,
which approximates market value. 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, may be subject to government ownership controls and delayed settlements,
and their prices may be 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, net of foreign withholding taxes where ap-
plicable. 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 div-
idend. Interest income is recorded on the basis of interest accrued, premium
amortized and discount earned.
Net investment income (other than class specific expenses) and unrealized
and realized gains or losses are allocated daily to each class of shares of
the Funds based upon the relative proportion of net assets of each class.
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 Growth and Interna-
tional Equity Funds accrete market discounts and amortize premiums on a yield
to maturity basis. The Short-Term Government, Bond, Balanced and Value Funds
do not accrete market discounts or amortize premiums on long-term debt secu-
rities.
58
<PAGE>
COMMERCE FUNDS
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
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
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.
In November 2000 the American Institute of Certified Public Accountants
(AICPA) issued a revised version of the AICPA Audit and Accounting Guide for
Investment Companies (the Guide). The revised version of the Guide is effec-
tive November 1, 2001 for the Funds and will require the Funds to
amortize/accrete all premiums and discounts on debt securities. The Funds
currently do not amortize/accrete all such premiums and discounts. Upon adop-
tion, the Funds will be required to record the cumulative effect of this
change. The cumulative effect will impact net investment income and realized
and unrealized gains and losses but will not impact net assets. At this time,
the Funds have not completed their analysis of the impact of this accounting
change.
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 and unrealized gain (loss) on foreign currency transactions
will represent: (i) foreign exchange gains and losses from the sale and hold-
ings of foreign currencies; (ii) currency gains and losses between trade date
and settlement date on investment securities transactions and foreign ex-
change contracts; and (iii) gains and losses from the difference between
amounts of dividends and interest recorded and the amounts actually received.
Net unrealized gain (loss) on translation of assets and liabilities denomi-
nated in foreign currencies arises from changes in the value of assets and
liabilities.
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 -- Repurchase agreements involve the purchase of se-
curities subject to the seller's agreement to repurchase them at a mutually
agreed upon date and price.
During the term of a repurchase agreement, the value of the underlying se-
curities, including accrued interest, is required to equal or exceed the
value of the repurchase agreement. The underlying securities for all repur-
chase agreements are held in safekeeping in the customer-only account, at the
Funds' custodian, or at sub-custodians.
59
<PAGE>
COMMERCE FUNDS
Notes to Financial Statements (continued)
October 31, 2000
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
H. Dividend Distributions to Shareholders -- Distributions to shareholders
are recorded on the ex-dividend date. Income and Capital Gains distributions,
if any, are declared and paid according to the following schedule:
<TABLE>
<CAPTION>
Capital Gains
Income Distribution Distribution
------------------------- -----------------------
Fund Declared Paid Declared Paid
------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Government Daily Monthly Annually Annually
------------------------------------------------------------------------------------
Bond Daily Monthly Annually Annually
------------------------------------------------------------------------------------
Balanced Quarterly Quarterly Annually Annually
------------------------------------------------------------------------------------
Value (formerly Growth and
Income) Quarterly Quarterly Annually Annually
------------------------------------------------------------------------------------
Growth Annually Annually Annually Annually
------------------------------------------------------------------------------------
MidCap Growth (formerly
MidCap) Annually Annually Annually Annually
------------------------------------------------------------------------------------
International Equity Annually Annually Annually Annually
------------------------------------------------------------------------------------
National Tax-Free
Intermediate Bond Daily Monthly Annually Annually
------------------------------------------------------------------------------------
Missouri Tax-Free
Intermediate Bond Daily Monthly Annually Annually
------------------------------------------------------------------------------------
</TABLE>
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.
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,
Bond, National Tax-Free Intermediate Bond and Missouri Tax-Free Intermediate
Bond Funds had capital loss carryforwards for U.S. federal income tax purpos-
es. These amounts are available to be carried forward to offset future capi-
tal gains of the Funds to the extent permitted by applicable laws or
regulations.
<TABLE>
<CAPTION>
Fund Amount Years of Expiration
--------------------------------------------------------------------------------
<S> <C> <C>
Short-Term Government $1,282,471 2007 & 2008
--------------------------------------------------------------------------------
Bond 5,688,375 2008
--------------------------------------------------------------------------------
National Tax-Free Intermediate Bond 68,989 2008
--------------------------------------------------------------------------------
Missouri Tax-Free Intermediate Bond 117,742 2008
--------------------------------------------------------------------------------
</TABLE>
60
<PAGE>
COMMERCE FUNDS
2. SIGNIFICANT ACCOUNTING POLICIES (continued)
At October 31, 2000, 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 $ 83,287,237 $ 480,115 $ (1,459,694) $ (979,579)
----------------------------------------------------------------------------------------
Bond 332,500,343 3,005,381 (11,251,343) (8,245,962)
----------------------------------------------------------------------------------------
Balanced 83,094,786 18,827,459 (4,268,573) 14,558,886
----------------------------------------------------------------------------------------
Value (formerly Growth and
Income) 91,678,795 11,684,087 (4,957,616) 6,726,471
----------------------------------------------------------------------------------------
Growth 303,736,906 117,426,395 (23,766,324) 93,660,071
----------------------------------------------------------------------------------------
MidCap Growth (formerly
MidCap) 138,322,890 63,420,114 (7,243,192) 56,176,922
----------------------------------------------------------------------------------------
International Equity 159,684,519 17,612,542 (12,444,196) 5,168,346
----------------------------------------------------------------------------------------
National Tax-Free
Intermediate Bond 40,604,370 486,225 (253,796) 232,429
----------------------------------------------------------------------------------------
Missouri Tax-Free
Intermediate Bond 38,034,506 388,161 (414,440) (26,279)
----------------------------------------------------------------------------------------
</TABLE>
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, 2000, the Advisor had contractually agreed to
waive a portion of its advisory fee for certain portfolios. The contractual
annual rate, actual annual rate, waiver rate and amount are listed in a table
on page 63.
As authorized by the Advisory Agreement, the Advisor has entered into a
Sub-Advisory Agreement with T. Rowe Price International, Inc. (the "Sub-Advi-
sor") whereby the Sub-Advisor manages the investment assets of the Interna-
tional Equity Fund. A new sub-investment advisory agreement for the Fund was
approved by the shareholders of the International Equity Fund on November 20,
2000.
61
<PAGE>
COMMERCE FUNDS
Notes to Financial Statements (continued)
October 31, 2000
3. AGREEMENTS (continued)
T. Rowe Price International, Inc. ("Price International" or the "Sub-Advis-
er") (formerly known as Rowe-Price Fleming International, Inc.) has been the
sub-advisor to the Fund since its inception in 1994. Prior to August 8, 2000,
Price International was 50% owned by Robert Fleming Holdings Limited and 50%
owned by T. Rowe Price Associates, Inc. ("T. Rowe Price"). On August 8, 2000,
T. Rowe Price became the sole owner of Price International. At the same time,
T. Rowe Price changed the name of the Sub-Advisor from Rowe-Price Fleming In-
ternational, Inc. to T. Rowe Price International, Inc. The August 8, 2000
purchase caused the sub-investment advisory agreement in effect as of that
date ("Old Agreement") between Commerce Bank, N.A. (the "Advisor") and Price
International to terminate automatically. The Board of Trustees approved a
new continuing sub-investment advisory agreement between Commerce Bank, N.A.
(the "Advisor") and Price International ("Sub-Advisory Agreement"). The
shareholders of the Fund approved the new Sub-Advisory Agreement at a share-
holder meeting on November 20, 2000. 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 exceed
$200 million, the Sub-Advisor has agreed to reset fees to 0.50% of the aver-
age daily net assets of the Fund with a transitional credit provided on as-
sets between $184 million and $200 million; and when average daily net assets
of the Fund exceed $500 million, the fees will be reset to 0.45% of all Fund
assets.
For the year ended October 31, 2000, the Advisor agreed to waive fees
and/or reimburse expenses (excluding interest, taxes, service share distribu-
tion expenses and extraordinary expenses) to the extent that such expenses
exceeded, on an annualized basis, .68%, .88%, 1.20%, 1.13%, 1.72%, .70% and
.65% of average net assets of the Institutional Shares of the Short-Term Gov-
ernment, Bond, Value, Growth, International Equity, National Tax-Free Inter-
mediate Bond Fund and Missouri Tax-Free Intermediate Bond Funds,
respectively. Effective March 1, 2000, the Advisor agreed to waive fees
and/or reimburse expenses (excluding interest, taxes, service share distribu-
tion expenses and extraordinary expenses) for the Balanced Fund to the extent
that such expenses exceed, on an annualized basis .98% of average net assets
of the Institutional Shares. Prior thereto, the expense limitation was 1.13%
of average net assets. The effect of these reimbursements by the Advisor for
the year ended October 31, 2000, was to reduce expenses by amounts detailed
in a table on the following page.
62
<PAGE>
COMMERCE FUNDS
3. AGREEMENTS (continued)
Goldman Sachs Asset Management ("GSAM") serves as the Trust's administra-
tor, pursuant to an Administration Agreement. Under the Administration Agree-
ment, GSAM administers the Trust's business affairs. As compensation for the
services rendered under the Administration Agreement and its assumption of
related expenses, GSAM is entitled to a fee, computed daily and payable
monthly, at an annual rate of .15% of the average daily net assets of each
Fund. Effective May 1, 2000, GSAM has agreed to waive the administration fee
to a rate of .13% of the average daily net assets of each Fund. In addition,
the Funds have entered into certain offset arrangements with the custodian
resulting in a reduction in the Funds' expenses. For the year ended October
31, 2000, the custody fees for each fund was reduced by the following amount:
<TABLE>
<CAPTION>
Administration
Advisory Fees Fees
-------------------------------------- ---------------
Waiver Waiver Total
Contractual Actual -------------- --------------- Expense Custody Expense
Fund Annual Rate Annual Rate Rate Amount Rate Amount Reimbursements Credits Reduction
----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Short-Term Government 0.50% 0.30% 0.20% $196,891 0.02% $ 8,749 $28,032 $ 168 $ 233,840
----------------------------------------------------------------------------------------------------------------------
Bond 0.50 0.50 -- -- 0.02 33,745 -- 1,976 35,721
----------------------------------------------------------------------------------------------------------------------
Balanced 1.00 0.70 0.30 351,815 0.02 10,934 173,435 120 536,304
----------------------------------------------------------------------------------------------------------------------
Value (formerly Growth and
Income) 0.75 0.75 -- -- 0.02 8,274 -- 1,926 10,200
----------------------------------------------------------------------------------------------------------------------
Growth 0.75 0.75 -- -- 0.02 45,345 -- 871 46,216
----------------------------------------------------------------------------------------------------------------------
MidCap Growth (formerly
MidCap) 0.75 0.75 -- -- 0.02 19,480 -- 124 19,604
----------------------------------------------------------------------------------------------------------------------
International Equity 1.50 0.94 0.56 989,751 0.02 17,599 -- 324 1,007,674
----------------------------------------------------------------------------------------------------------------------
National Tax-Free
Intermediate Bond 0.50 0.35 0.15 59,589 0.02 4,057 33,526 1,103 98,275
----------------------------------------------------------------------------------------------------------------------
Missouri Tax-Free
Intermediate Bond 0.50 0.30 0.20 77,069 0.02 3,800 34,256 814 115,939
----------------------------------------------------------------------------------------------------------------------
</TABLE>
Goldman, Sachs & Co. serves as Distributor of shares of the Funds pursuant
to a Distribution Agreement and may receive a portion of the sales charge im-
posed 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%. Goldman,
Sachs & Co. has advised the Trust that it has retained approximately $10,000
on the sale of shares of the Funds for the year ended October 31, 2000.
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 Service Shares pursuant to Rule 12b-1 under the 1940
Act. Under the Distribution Plan, payments by each Fund for distribution ex-
penses 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.
63
<PAGE>
COMMERCE FUNDS
Notes to Financial Statements (continued)
October 31, 2000
4. INVESTMENT TRANSACTIONS
The cost of purchases and proceeds of sales and maturities of long-term secu-
rities for the year ended October 31, 2000, were as follows:
<TABLE>
<CAPTION>
Sales
Purchases Sales and and maturities
Purchase of (excluding maturities of (excluding
U.S. Government U.S. Government U.S. Government U.S. Government
and agency and agency and agency and agency
Fund obligations obligations) obligations obligations)
----------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Short-Term Government $25,107,506 $ 9,816,634 $30,417,389 $15,595,374
----------------------------------------------------------------------------------------------
Bond 48,897,606 37,891,141 58,416,490 70,488,174
----------------------------------------------------------------------------------------------
Balanced 6,301,204 54,405,821 17,069,301 75,282,776
----------------------------------------------------------------------------------------------
Value (formerly Growth and
Income Fund) -- 74,739,527 -- 64,428,829
----------------------------------------------------------------------------------------------
Growth -- 228,119,421 -- 329,624,201
----------------------------------------------------------------------------------------------
MidCap Growth (formerly
MidCap Fund) -- 208,065,303 -- 207,090,035
----------------------------------------------------------------------------------------------
International Equity -- 120,164,365 -- 76,768,638
----------------------------------------------------------------------------------------------
National Tax-Free
Intermediate Bond -- 21,419,192 -- 21,240,783
----------------------------------------------------------------------------------------------
Missouri Tax-Free
Intermediate Bond -- 10,403,516 -- 15,735,741
----------------------------------------------------------------------------------------------
</TABLE>
For the year ended October 31, 2000, Goldman, Sachs & Co. earned $158,
$531, $670, $425, $5,146, $2,635 and $761 of brokerage commissions from port-
folio transactions, including futures transactions executed on behalf of the
Short-Term Government, Bond, Balanced, Value, Growth, MidCap Growth and the
International Equity Funds, respectively.
5. CONCENTRATION OF RISK
Under normal conditions, the Missouri Tax-Free Intermediate Bond and Na-
tional 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 subject certain investors to the federal alternative minimum tax.
In addition, the Missouri Tax-Free Intermediate Bond Fund invests at least
65% of its assets in debt obligations of issuers located in the State of Mis-
souri. The National Tax-Free Intermediate Bond Fund invests substantially all
of its assets in debt securities issued by or on behalf of states, territo-
ries and possessions of the U.S. The issuers' abilities to meet their obliga-
tions may be affected by the states' economic and political developments.
The International Equity Fund invests a portion of its assets in emerging
markets. Emerging markets securities are volatile. They are subject to sub-
stantial currency fluctuations and sudden economic and political develop-
ments. At times, the securities held by the International Equity Fund may be
subject to abrupt and severe price declines.
64
<PAGE>
COMMERCE FUNDS
6. CERTAIN RECLASSIFICATIONS
In accordance with AICPA Statement of Position 93-2, certain reclassifica-
tions have been recorded to the Fund's accounts. 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. Reclassifications result primarily
from the difference in the tax treatment of foreign currency, net operating
losses and organization costs.
<TABLE>
<CAPTION>
Accumulated Accumulated
net undistributed
realized net investment
Fund Paid-In Capital gain (loss) income (loss)
------------------------------------------------------------------------------
<S> <C> <C> <C>
Short-Term Government $ (683) $ (47,783) $ 48,466
------------------------------------------------------------------------------
Bond (725) (628,867) 629,592
------------------------------------------------------------------------------
Balanced (699) (136,175) 136,874
------------------------------------------------------------------------------
Value (formerly Growth and
Income) 4,000 -- (4,000)
------------------------------------------------------------------------------
Growth (1,765,225) (952) 1,766,177
------------------------------------------------------------------------------
MidCap Growth (formerly
MidCap) (1,526,079) -- 1,526,079
------------------------------------------------------------------------------
International Equity (324,070) 159,145 164,925
------------------------------------------------------------------------------
National Tax-Free
Intermediate Bond (2,051) (2,213) 4,264
------------------------------------------------------------------------------
Missouri Tax-Free
Intermediate Bond (2,043) 52 1,991
------------------------------------------------------------------------------
</TABLE>
The Commerce Funds (unaudited)
During the year ended October 31, 2000, 99.63% and 99.60%, of the distribu-
tions paid by the National Tax-Free Intermediate Bond Fund and the Missouri
Tax-Free Intermediate Bond Fund, respectively, were exempt-interest dividends
and as such, are not subject to U.S. federal income tax. The remaining dis-
tributions were taxable ordinary income dividends.
Pursuant to Section 852 of the Internal Revenue Code, National Tax-Free,
Balanced, International Equity, Bond, MidCap Growth, and Growth Funds desig-
nate $21,369, $4,583,646, $6,687,533, $477,818, $23,309,181, and $43,043,260
respectively, as capital gain dividends paid during the year ended October
31, 2000.
From distributions paid during the year ended October 31, 2000, the total
amount of income received by the International Equity Fund from foreign
sources was $0.2823 per share, all of which was attributable to qualified
passive income. The total amount of foreign taxes paid by the Fund on this
income was $0.0392 per share. A separate notice containing the country-by-
country components of these totals has been previously mailed to sharehold-
ers.
During the year ended October 31, 2000, 20.83%, 100% and 59.83% of the div-
idends paid from net investment income by the Balanced Fund, Value Fund (for-
merly Growth and Income) and Growth Fund, respectively, qualify for the
dividends received deduction available to corporations.
65
<PAGE>
COMMERCE FUNDS
Notes to Financial Statements (continued)
October 31, 2000
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, 2000
<S> <C> <C> <C> <C>
Institutional Shares
Shares sold 2,185,295 $ 39,254,503 5,263,318 $ 95,935,028
Reinvestment of
dividends and
distributions 187,633 3,364,656 787,382 14,352,775
Shares repurchased (4,303,192) (77,150,227) (8,434,430) (154,181,169)
-------------------------------------------------
(1,930,264) (34,531,068) (2,383,730) (43,893,366)
--------------------------------------------------------------------------------
Service Shares
Shares sold 9,326 167,379 12,029 217,584
Reinvestment of
dividends and
distributions 1,809 32,457 3,679 67,084
Shares repurchased (10,075) (180,792) (14,879) (271,516)
-------------------------------------------------
1,060 19,044 829 13,152
--------------------------------------------------------------------------------
NET INCREASE (DECREASE) (1,929,204) $(34,512,024) (2,382,901) $ (43,880,214)
--------------------------------------------------------------------------------
For the Year Ended October 31, 1999
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>
(a) As of August 14, 2000, the Fund's name changed from the Growth and Income
Fund to the Value Fund.
66
<PAGE>
COMMERCE FUNDS
<TABLE>
<CAPTION>
Balanced Fund Value Fund(a) Growth Fund
-----------------------------------------------------------------------------------
Shares Dollars Shares Dollars Shares Dollars
<S> <C> <C> <C> <C> <C>
955,389 $ 24,553,849 2,233,088 $ 51,079,026 3,823,408 $ 149,133,620
295,726 7,489,493 13,898 313,283 1,091,276 40,442,987
(2,474,269) (63,875,687) (1,882,880) (41,403,727) (6,512,820) (255,363,582)
-----------------------------------------------------------------------------------
(1,223,154) (31,832,345) 364,106 9,988,582 (1,598,136) (65,786,975)
-----------------------------------------------------------------------------------
12,659 322,954 6,519 152,883 45,426 1,752,072
6,329 160,171 174 3,906 39,592 1,459,153
(20,327) (521,102) (10,008) (219,425) (103,662) (3,954,363)
-----------------------------------------------------------------------------------
(1,339) (37,977) (3,315) (62,636) (18,644) (743,138)
-----------------------------------------------------------------------------------
(1,224,493) $(31,870,322) 360,791 $ 9,925,946 (1,616,780) $ (66,530,113)
-----------------------------------------------------------------------------------
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
-----------------------------------------------------------------------------------
</TABLE>
67
<PAGE>
COMMERCE FUNDS
Notes to Financial Statements (continued)
October 31, 2000
7. SUMMARY OF SHARE TRANSACTIONS (continued)
<TABLE>
<CAPTION>
MidCap Growth Fund(a)
------------------------
Shares Dollars
<S> <C> <C>
For the Year Ended October 31, 2000
Institutional Shares
Shares sold 2,305,178 $ 96,393,030
Reinvestment of dividends and distributions 455,291 17,132,636
Shares repurchased (2,062,227) (87,415,731)
------------------
698,242 26,109,935
-----------------------------------------------------------------------
Service Shares
Shares sold 29,138 1,221,705
Reinvestment of dividends and distributions 13,711 511,000
Shares repurchased (27,309) (1,100,820)
------------------
15,540 631,885
-----------------------------------------------------------------------
NET INCREASE (DECREASE) 713,782 $ 26,741,820
-----------------------------------------------------------------------
For the Year Ended October 31, 1999
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)
-----------------------------------------------------------------------
</TABLE>
(a) As of August 14, 2000, the Fund's name changed from the MidCap Fund to
the MidCap Growth Fund.
68
<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>
4,976,117 $ 142,850,262 604,365 $ 11,059,114 517,208 $ 9,402,653
183,329 5,198,056 26,777 491,168 21,649 392,946
(3,556,619) (102,258,311) (661,373) (12,111,717) (823,736) (14,910,477)
-------------------------------------------------------------------------------
1,602,827 45,790,007 (30,231) (561,435) (284,879) (5,114,878)
-------------------------------------------------------------------------------
27,344 821,899 -- -- -- --
842 23,751 -- -- -- --
(17,337) (524,655) -- -- -- --
-------------------------------------------------------------------------------
10,849 320,995 -- -- -- --
-------------------------------------------------------------------------------
1,613,676 $ 46,111,002 (30,231) $ (561,435) (284,879) $ (5,114,878)
-------------------------------------------------------------------------------
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
-------------------------------------------------------------------------------
</TABLE>
69
<PAGE>
COMMERCE FUNDS
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income from Distributions
investment operations to shareholders
--------------------------------------- ---------------------------------
Net asset Total income
value, Net Net realized from From net From net
beginning investment and unrealized investment investment realized Total
of period income gain (loss) operations income gains distributions
<S> <C> <C> <C> <C> <C> <C> <C>
SHORT-TERM GOVERNMENT FUND
For the Year Ended
October 31, 2000
Institutional Shares $18.06 $1.03(c) $ 0.04 $1.07 $(1.03) $ -- $(1.03)
Service Shares 18.07 0.98(c) 0.05 1.03 (0.99) -- (0.99)
-----------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1999
Institutional Shares 18.78 1.04 (0.71) 0.33 (1.04) (0.01) (1.05)
Service Shares 18.79 1.00 (0.72) 0.28 (0.99) (0.01) (1.00)
-----------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1998
Institutional Shares 18.47 1.10 0.32 1.42 (1.11) -- (1.11)
Service Shares 18.48 1.06 0.31 1.37 (1.06) -- (1.06)
-----------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1997
Institutional Shares 18.43 1.11 0.04 1.15 (1.11) -- (1.11)
Service Shares
(commenced January 2,
1997) 18.37 0.92 0.11 1.03 (0.92) -- (0.92)
-----------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1996
Institutional Shares 18.83 1.09 (0.18) 0.91 (1.09) (0.22) (1.31)
BOND FUND
For the Year Ended
October 31, 2000
Institutional Shares $18.57 $1.16(c) $(0.17) $0.99 $(1.19) $(0.04) $(1.23)
Service Shares 18.57 1.11(c) (0.15) 0.96 (1.14) (0.04) (1.18)
-----------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1999
Institutional Shares 19.84 1.16 (1.04) 0.12 (1.16) (0.23) (1.39)
Service Shares 19.85 1.11 (1.05) 0.06 (1.11) (0.23) (1.34)
-----------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1998
Institutional Shares 19.43 1.15 0.41 1.56 (1.15) -- (1.15)
Service Shares 19.43 1.11 0.42 1.53 (1.11) -- (1.11)
-----------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1997
Institutional Shares 19.07 1.17 0.39 1.56 (1.18) (0.02) (1.20)
Service Shares
(commenced January 2,
1997) 19.00 0.94 0.43 1.37 (0.94) -- (0.94)
-----------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1996
Institutional Shares 19.61 1.16 (0.28) 0.88 (1.16) (0.26) (1.42)
-----------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at the net asset value at the beginning of the pe-
riod, reinvestment of all dividends and distributions, a complete re-
demption 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. Total returns for periods less than
one full year are not annualized.
(b) Annualized.
(c) Calculated based on the average shares outstanding methodology.
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 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(a) (in 000s) average net assets average net assets average net assets average net assets rate
<S> <C> <C> <C> <C> <C> <C> <C>
$18.10 6.15% $ 81,484 0.68% 5.72% 0.92% 5.48% 39%
18.11 5.89 1,043 0.93 5.47 1.17 5.23 39
--------------------------------------------------------------------------------------------------------------------------
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/(b)/ 5.64/(b)/ 1.36/(b)/ 5.21/(b)/ 36
--------------------------------------------------------------------------------------------------------------------------
18.43 5.02 33,839 0.68 5.90 1.11 5.47 12
$18.33 5.59% $325,732 0.81% 6.38% 0.81% 6.38% 26%
18.35 5.44 1,181 1.06 6.10 1.06 6.10 26
--------------------------------------------------------------------------------------------------------------------------
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/(b)/ 5.67/(b)/ 1.10/(b)/ 5.67/(b)/ 19
--------------------------------------------------------------------------------------------------------------------------
19.07 4.71 151,205 0.84 6.10 0.84 6.10 31
--------------------------------------------------------------------------------------------------------------------------
</TABLE>
71
<PAGE>
COMMERCE FUNDS
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income from Distributions
investment operations to shareholders
-------------------------------------- ---------------------------------
Net asset Total
value, Net Net realized income from From net From net
beginning investment and unrealized investment investment realized Total
of period income gain (loss) operations income gains distributions
<S> <C> <C> <C> <C> <C> <C> <C>
BALANCED FUND
For the Year Ended
October 31, 2000
Institutional Shares $25.29 $0.62(c) $ 1.57 $2.19 $(0.69) $(0.92) $ (1.61)
Service Shares 25.27 0.55(c) 1.57 2.12 (0.62) (0.92) (1.54)
----------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1999
Institutional Shares 27.04 0.70 1.22 1.92 (0.69) (2.98) (3.67)
Service Shares 27.01 0.64 1.22 1.86 (0.62) (2.98) (3.60)
----------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1998
Institutional Shares 26.67 0.59 1.67 2.26 (0.59) (1.30) (1.89)
Service Shares 26.66 0.53 1.65 2.18 (0.53) (1.30) (1.83)
----------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1997
Institutional Shares 24.00 0.59 3.93 4.52 (0.59) (1.26) (1.85)
Service Shares
(commenced January 2,
1997) 23.25 0.40 3.42 3.82 (0.41) -- (0.41)
----------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1996
Institutional Shares 22.10 0.54 2.56 3.10 (0.54) (0.66) (1.20)
VALUE FUND(d)
For the Year Ended
October 31, 2000
Institutional Shares $21.40 $0.18(c) $ 3.45 $3.63 $(0.15) $ -- $ (0.15)
Service Shares 21.41 0.12(c) 3.45 3.57 (0.10) -- (0.10)
----------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1999
Institutional Shares 21.72 0.15 (0.09) 0.06 (0.15) (0.23) (0.38)
Service Shares 21.73 0.11 (0.11) -- (0.09) (0.23) (0.32)
----------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1998
Institutional Shares 21.82 0.18 (0.05) 0.13 (0.19) (0.04) (0.23)
Service Shares 21.81 0.16 (0.09) 0.07 (0.11) (0.04) (0.15)
----------------------------------------------------------------------------------------------------------
For the Period Ended
October 31, 1997
Institutional Shares
(commenced March 3,
1997) 18.00 0.15 3.80 3.95 (0.13) -- (0.13)
Service Shares
(commenced March 3,
1997) 18.00 0.12 3.80 3.92 (0.11) -- (0.11)
----------------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at the net asset value at the beginning of the pe-
riod, reinvestment of all dividends and distributions, a complete re-
demption 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. Total returns for periods less than
one full year are not annualized.
(b) Annualized.
(c) Calculated based on the average shares outstanding methodology.
(d) As of August 14, 2000 the Fund's name changed from the Growth and In-
come Fund to the Value Fund.
The accompanying notes are an integral part of these financial statements.
72
<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(a) (in 000's) average net assets average net assets average net assets average net assets rate
<S> <C> <C> <C> <C> <C> <C> <C>
$25.87 8.93% $95,466 1.03% 2.40% 1.49% 1.94% 53%
25.85 8.67 2,763 1.28 2.13 1.74 1.67 53
------------------------------------------------------------------------------------------------------------------------
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(b) 2.13(b) 1.78(b) 1.73(b) 31
------------------------------------------------------------------------------------------------------------------------
24.00 14.45 69,880 1.13 2.47 1.45 2.15 58
$24.88 17.06% $95,765 1.13% 0.78% 1.14% 0.77% 88%
24.88 16.72 1,067 1.38 0.52 1.40 0.51 88
------------------------------------------------------------------------------------------------------------------------
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(b) 1.30(b) 2.02(b) 0.48(b) 5
21.81 21.81 2,588 1.45(b) 1.02(b) 2.27(b) 0.20(b) 5
------------------------------------------------------------------------------------------------------------------------
</TABLE>
73
<PAGE>
COMMERCE FUNDS
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income from Distributions
investment operations to shareholders
---------------------------------------- ---------------------------------
Net asset Net Total income
value, investment Net realized from From net From net
beginning income and unrealized investment investment realized Total
of period (loss) gain operations income gains distributions
<S> <C> <C> <C> <C> <C> <C> <C>
GROWTH FUND
For the Year Ended
October 31, 2000
Institutional Shares $38.24 $(0.14)/(c)/ $4.17 $4.03 $ -- $(3.94) $(3.94)
Service Shares 38.07 (0.24)/(c)/ 4.15 3.91 -- (3.94) (3.94)
------------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1999
Institutional Shares 37.37 (0.05) 6.40 6.35 (0.01) (5.47) (5.48)
Service Shares 37.29 (0.12) 6.37 6.25 -- (5.47) (5.47)
------------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1998
Institutional Shares 34.54 0.07 5.06 5.13 (0.06) (2.24) (2.30)
Service Shares 34.50 (0.01) 5.05 5.04 (0.01) (2.24) (2.25)
------------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1997
Institutional Shares 28.95 0.19 7.51 7.70 (0.19) (1.92) (2.11)
Service Shares
(commenced January 2,
1997) 28.26 0.09 6.25 6.34 (0.10) -- (0.10)
------------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1996
Institutional Shares 24.68 0.19 5.40 5.59 (0.19) (1.13) (1.32)
MIDCAP GROWTH FUND(d)
For the Year Ended
October 31, 2000
Institutional Shares $40.07 $(0.34)/(c)/ $9.91 $9.57 -- $(6.02) $(6.02)
Service Shares 39.75 (0.44)/(c)/ 9.82 9.38 -- (6.02) (6.02)
------------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1999
Institutional Shares 32.57 (0.23)/(c)/ 9.34(c) 9.11 -- (1.61) (1.61)
Service Shares 32.40 (0.31)/(c)/ 9.27(c) 8.96 -- (1.61) (1.61)
------------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1998
Institutional Shares 33.02 (0.13) 1.48 1.35 -- (1.80) (1.80)
Service Shares 32.94 (0.16) 1.42 1.26 -- (1.80) (1.80)
------------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1997
Institutional Shares 28.06 (0.13) 5.38 5.25 -- (0.29) (0.29)
Service Shares
(commenced January 2,
1997) 28.64 (0.11) 4.41 4.30 -- -- --
------------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1996
Institutional Shares 25.30 (0.07) 3.51 3.44 -- (0.68) (0.68)
------------------------------------------------------------------------------------------------------------
</TABLE>
(a) 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. Total re-
turns for periods less than one full year are not annualized.
(b) Annualized.
(c) Calculated based on average shares outstanding methodology.
(d) As of August 14, 2000 the Fund's name changed from the MidCap
Fund to the MidCap Growth Fund.
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 Ratio of net
Net asset at end Ratio of net investment expenses to investment income Portfolio
value, end Total of period net expenses to income (loss) to average net (loss) to average turnover
of period return(a) (in 000's) average net assets average net assets assets net assets rate
<S> <C> <C> <C> <C> <C> <C> <C>
$38.33 10.88% $385,676 1.06% (0.37)% 1.07% (0.36)% 50%
38.04 10.59 13,747 1.31 (0.62) 1.32 (0.61) 50
----------------------------------------------------------------------------------------------------------------
38.24 18.24 445,923 1.08 (0.12) 1.08 (0.12) 35
38.07 17.97 14,468 1.33 (0.36) 1.33 (0.36) 35
----------------------------------------------------------------------------------------------------------------
37.37 15.38 409,797 1.08 0.20 1.08 0.20 53
37.29 15.10 8,965 1.33 (0.06) 1.33 (0.06) 53
----------------------------------------------------------------------------------------------------------------
34.54 28.12 343,773 1.11 0.60 1.11 0.60 32
34.50 22.47 5,758 1.36/(b)/ 0.35/(b)/ 1.36/(b)/ 0.35/(b)/ 32
----------------------------------------------------------------------------------------------------------------
28.95 23.43 208,908 1.08 0.72 1.08 0.72 36
$43.62 26.19% $187,070 1.14% (0.80)% 1.15% (0.79)% 112%
43.11 25.88 4,340 1.39 (1.05) 1.40 (1.04) 112
----------------------------------------------------------------------------------------------------------------
40.07 28.96 143,892 1.14 (0.63) 1.14 (0.63) 98
39.75 28.63 3,384 1.39 (0.86) 1.39 (0.86) 98
----------------------------------------------------------------------------------------------------------------
32.57 3.96 139,035 1.16 (0.58) 1.16 (0.58) 76
32.40 3.68 1,236 1.41 (0.82) 1.41 (0.82) 76
----------------------------------------------------------------------------------------------------------------
33.02 18.88 112,442 1.23 (0.61) 1.23 (0.61) 89
32.94 15.01 658 1.48/(b)/ (0.95)/(b)/ 1.48/(b)/ (0.95)/(b)/ 89
----------------------------------------------------------------------------------------------------------------
28.06 13.78 74,641 1.22 (0.37) 1.22 (0.37) 71
----------------------------------------------------------------------------------------------------------------
</TABLE>
75
<PAGE>
COMMERCE FUNDS
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income from Distributions
investment operations to shareholders
---------------------------------------- ----------------------------------
Net asset Total income
value, Net Net realized from From net From net
beginning investment and unrealized investment investment realized Total
of period Income gain operations income gains distributions
<S> <C> <C> <C> <C> <C> <C> <C>
INTERNATIONAL EQUITY FUND
For the Year Ended
October 31, 2000
Institutional Shares $27.39 $(.01)/(c)/ $0.43 $0.42 $(0.06) $(1.29) $(1.35)
Service Shares 27.30 (.08)/(c)/ 0.44 0.36 -- (1.29) (1.29)
--------------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1999
Institutional Shares 23.00 0.09 4.40 4.49 (0.10) -- (0.10)
Service Shares 22.92 0.10 4.34 4.44 (0.06) -- (0.06)
--------------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1998
Institutional Shares 22.10 0.10 1.45 1.55 (0.08) (0.57) (0.65)
Service Shares 22.06 0.05 1.44 1.49 (0.06) (0.57) (0.63)
--------------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1997
Institutional Shares 20.96 0.06 1.42 1.48 (0.10) (0.24) (0.34)
Service Shares
(commenced January 2,
1997) 21.70 0.01 0.35 0.36 -- -- --
--------------------------------------------------------------------------------------------------------------
For the Year Ended
October 31, 1996
Institutional Shares 18.64 0.11 2.35 2.46 (0.07) (0.07) (0.14)
--------------------------------------------------------------------------------------------------------------
</TABLE>
(a) 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. Total re-
turns for periods less than one full year are not annualized.
(b) Annualized.
(c) Calculated based on the average shares outstanding methodology.
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 (loss) to turnover
of period return(a) (in 000's) average net assets average net assets average net assets average net assets rate
<S> <C> <C> <C> <C> <C> <C> <C>
$26.46 1.24% $166,063 1.35% (.05)% 1.92% (0.60)% 47%
26.37 1.03 768 1.60 (.29) 2.17 (0.84) 47
------------------------------------------------------------------------------------------------------------------------
27.39 19.58 128,018 1.53 0.40 2.08 (0.13) 32
27.30 19.39 499 1.78 0.33 2.33 (0.20) 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/(b)/ 0.14/(b)/ 2.48/(b)/ (0.37)/(b)/ 22
------------------------------------------------------------------------------------------------------------------------
20.96 13.25 51,589 1.72 0.74 2.64 (0.18) 21
------------------------------------------------------------------------------------------------------------------------
</TABLE>
77
<PAGE>
COMMERCE FUNDS
Financial Highlights
Selected Data for a Share Outstanding Throughout Each Period
<TABLE>
<CAPTION>
Income from investment operations Distributions to shareholders
------------------------------------- --------------------------------
Total
income
Net asset (loss)
value, Net Net realized from From net From net
beginning investment and unrealized investment investment realized Total
of period income gain (loss) operations income gains distribution
<S> <C> <C> <C> <C> <C> <C> <C>
NATIONAL TAX-FREE INTERMEDIATE BOND FUND
For the Year Ended
October 31, 2000 $18.24 $0.78(b) $ 0.51 $ 1.29 $(0.79) $(0.01) $(0.80)
October 31, 1999 19.33 0.74 (0.93) (0.19) (0.74) (0.16) (0.90)
October 31, 1998 18.85 0.74 0.48 1.22 (0.74) -- (0.74)
October 31, 1997 18.46 0.72 0.39 1.11 (0.72) -- (0.72)
October 31, 1996 18.54 0.73 (0.07) 0.66 (0.73) (0.01) (0.74)
MISSOURI TAX-FREE INTERMEDIATE BOND FUND
For the Year Ended
October 31, 2000 $18.07 $0.78(b) $ 0.46 $ 1.24 $(0.78) $ -- $(0.78)
October 31, 1999 19.07 0.73 (0.90) (0.17) (0.73) (0.10) (0.83)
October 31, 1998 18.61 0.74 0.47 1.21 (0.74) (0.01) (0.75)
October 31, 1997 18.26 0.76 0.37 1.13 (0.76) (0.02) (0.78)
October 31, 1996 18.40 0.76 (0.14) 0.62 (0.76) -- (0.76)
-----------------------------------------------------------------------------------------------------
</TABLE>
(a) Assumes investment at the net asset value at the beginning of the peri-
od, reinvestment of all dividends and distributions, a complete redemp-
tion 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. Total returns for periods less than one full
year are not annualized.
(b) Calculated based on the average shares outstanding methodology.
The accompanying notes are an integral part of these financial statements.
78
<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>
$18.73 7.17% $40,753 0.70% 4.23% 0.94% 3.99% 56%
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
$18.53 7.05% $38,448 0.65% 4.29% 0.95% 4.09% 29%
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
-------------------------------------------------------------------------------------------------------------------------
</TABLE>
79
<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
Short-Term Government Fund, Bond Fund, Balanced Fund, Value Fund (formerly
Growth and Income Fund), Growth Fund, MidCap Growth Fund (formerly MidCap
Fund), International Equity Fund, National Tax-Free Intermediate Bond Fund,
and Missouri Tax-Free Intermediate Bond Fund, portfolios of The Commerce
Funds, (collectively, The Commerce Funds), including statements of invest-
ments as of October 31, 2000 and the related statements of operations for the
year ended October 31, 2000, the statements of changes in net assets for each
of the years in the two-year period ended October 31, 2000 and financial
highlights for each of the years or periods in the five-year period ended Oc-
tober 31, 2000. These financial statements and financial highlights are the
responsibility of The Commerce Funds' management. Our responsibility is to
express an opinion on these financial statements and financial highlights
based on our audits.
We conducted our audits in accordance with auditing standards generally ac-
cepted in the United States of America. Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the finan-
cial statements and financial highlights are free of material misstatement.
An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements and financial highlights. Our
procedures included confirmation of securities owned as of October 31, 2000
by correspondence with the custodian and brokers. An audit also includes as-
sessing the accounting principles used and significant estimates made by man-
agement, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of The
Commerce Funds as of October 31, 2000, 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 accounting
principles generally accepted in the United States of America.
/s/ KPMG LLP
Boston, Massachusetts
December 15, 2000
80
<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
Larry Franklin, Vice President
William Schuetter, Vice President
John M. Perlowski, Vice President
Randall D. Barron, Treasurer
Peter W. Fortner, Assistant Treasurer
Philip V. Giuca Jr., Assistant Treasurer
W. Bruce McConnel, III, Secretary
Diana E. McCarthy, Assistant Secretary
Amy Belanger, 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
T.Rowe Price 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 Service 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 Ship
New York, New York 10005
INDEPENDENT AUDITORS
KPMG LLP
99 High Street
Boston, Massachusetts 02110
LEGAL COUNSEL
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, Pennsylvania 19103-6996
[LOGO OF COMMERECE 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: 12/29/00
