Commerce Short Term Government Fund

Overview Objective Seeks current income consistent with preservation of principal. Strategy Invests primarily in U.S. Government securities and government mortgage-backed securities. Commentary Portfolio Fund Holdings Portfolio Composition Fund Manager - Scott M. Colbert, CFA Joined Commerce in 1993 Fund Manager since Fund inception 21 years of experience Risk/Return In general, greater returns are associated with greater risks. The Short-Term Government Fund's net asset value and yield are not guaranteed by the U.S. Government or by its agencies, instrumentalities or sponsored enterprises. Fund Statistics: Institutional Shares Inception Date 12/12/94 Ticker Symbol CFSTX Cusip 200626109 Minimum Initial Investment $1,000 Commentary for Institutional Shares as of 6/30/2008 The second quarter was a reversal of fortune for most sectors of the bond market.  Sectors that performed well in the first quarter (i.e., Treasuries) were the poorest performers in the second quarter.  Mortgage-backed securities were able to outperform Treasuries over the last three months, but weren’t able to post positive returns for the period due to rising interest rates. The U.S. economy continues to be lethargic.  Cash from the tax rebates helped consumer spending in the second quarter.  However, we believe, soft labor markets, tight credit conditions, and the housing slump are likely to keep economic growth weak during the remaining six months of 2008. In the second quarter the Federal Reserve (the “Fed”) started to shift its focus from reviving the economy to worrying about inflation.  After lowering rates by 2.00% in the first quarter, the Fed Funds target rate was moved down just 0.25% in the last three months.  At its recent meeting on June 25th, the Fed kept rates unchanged at 2.00%, amid speculation that it would consider future interest-rate increases to curb inflation. The change in course by the Fed resulted in higher rates which left the Short-Term Government Fund’s performance down for the second quarter.  However, the Fund did outperform the Citigroup 1-5 Year Treasury/Government Index for the period.  The Fund’s short maturity position and overweight in non-Treasury holdings added to its quarterly performance.  Agency mortgage-backed securities also helped, but exposure to non-agency mortgage-backed issues detracted from performance.  Going forward, we expect subtle upward pressure on interest rates as inflation concerns grow.   Performance Report Institutional Shares Total Fund Assets as of 6/30/2008 $79,201,908.31 Net Asset Value, Institutional Shares1 $17.71    Effective Duration 2 2.16 years    Average Coupon 4.92%

Portfolio Composition as of 6/30/083 By Security Type By Credit Rating Footnotes: 1. The Net Asset Value represents the assets of the fund (ex dividend) by the total number of shares. 2. Duration is the method determining a bond's price sensitivity, given changes in interest rates. 3. The composition of the portfolio is subject to change in the future.

Portfolio Holdings Investments in fixed income securities are subject to the risks associated with debt securities including credit and interest rate risk. When interest rates rise, the prices of bonds and therefore the value of fixed income mutual fund shares can decrease and an investor can lose principal value. The guarantee on U.S. government securities applies only to the underlying securities of the Fund if held to maturity and not to the value of the Fund's shares. Mortgage-backed securities are subject to prepayment risks. These risks may result in greater share price volatility. Holdings and allocations shown are unaudited, and may not be representative of current or future investments. Holdings and allocations may not include the Fund's entire investment portfolio, which may change at any time. Fund holdings should not be relied on in making investment decisions and should not be construed as research or investment advice regarding particular securities. COMMERCE SHORT-TERM GOVERNMENT FUND HOLDINGS June, 2008* July, 2008* August, 2008*   *Adobe Acrobat 6.0® or above required. Download now for free.

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