Commerce Bond Fund

Overview Objective Seeks total return through current income and, secondarily, capital appreciation. Strategy Invests primarily in a broad range of government and investment-grade corporate bonds and other fixed-income securities. Commentary Portfolio Fund Holdings Portfolio Composition Fund Manager - Scott M. Colbert, CFA Joined Commerce in 1993 Fund Manager since Fund inception 24 years of experience Risk/Return In general, greater returns are associated with greater risks. Fund Statistics: Inception Date 12/12/94 Ticker Symbol CFBNX Cusip 200626208 Minimum Initial Investment $1,000 Commentary as of 12/31/2011 During the past quarter investment markets calmed down and domestic economic activity appeared to be expanding at a moderate rate in the midst of some apparent slowing in global economic growth. Recent gains in manufacturing and consumer sentiment suggest that so far the U.S. is withstanding the economic crisis in Europe. Employment conditions continue to improve with the unemployment rate dropping to the lowest level in almost three years. After both of the Federal Open Market Committee (FOMC) meetings in the fourth quarter, the Federal Reserve (Fed) kept the federal funds rate near zero. Inflation has moderated in recent months, and is expected to continue to ease. The Fed reiterated their plan to keep short term rates low at least through mid 2013. Treasury yields were mostly range bound for the period, finishing just slightly lower, with most parts of the yield curve being virtually unchanged. Minimal change in spread levels (i.e., risk premium over Treasuries) left most fixed income sectors providing coupon-like returns. The Bond Fund’s performance slightly lagged the Barclays Capital U.S. Aggregate Bond index in the fourth quarter. An overweight position in Agency debentures relative to its benchmark, along with specific mortgage-backed positions, hindered performance. The portfolio’s municipal bond exposure and an underweight in Treasuries contributed positively to performance. In our opinion the pace of economic activity is expected to pick up slowly in 2012, supported by accommodative monetary policy and improvements in business and consumer sentiment. However, we believe the events of the Eurozone will continue to dominate the markets during the first quarter of 2012. Performance Report Total Fund Assets as of 12/31/2011 $733,780,896 Net Asset Value1 $20.35    Effective Duration 2 5.00 years

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, which may result in greater share price volatility. Asset-backed securities may be less liquid than other securities and therefore more difficult to value and liquidate, if necessary. Foreign investments may be more volatile than investment in U.S. securities and will be subject to the risks of currency fluctuations and political developments. 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 BOND FUND HOLDINGS November, 2011* December, 2011* January, 2012* *Adobe Acrobat 6.0® or above required. Download now for free.

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