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 23 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 3/31/2010 A difficult job market, ongoing weakness in housing, and a fragile consumer confidence have put some bumps in the road, constraining the economic recovery.  However, positive momentum is growing as conditions begin to improve.  Modest gains in employment and increases in capital spending are helping smooth the path to recovery. After both of the Federal Open Market Committee meetings in the first quarter the Federal Reserve (the “Fed”) kept the federal funds rate near zero.  Comments from its last meeting still contained its “extended period” language (in regard to how long it will be before the Fed raises rates).  This suggests that the Fed is inclined to keep the Fed funds rate near zero as long as inflation expectations are contained and economic growth is subdued. After moving up and down in a range, interest rates finished the quarter within about 10 basis points of where they started the quarter.  The treasury yield curve steepened, with the difference between 2 and 10 year treasury yields reaching 281 basis points at the end of the period.  Treasury performance lagged the other fixed income sectors as spreads tightened and liquidity continued to improve for the non-government sectors. The Bond Fund’s return for the first quarter exceeded the Barclays Aggregate Bond Index.  The portfolio’s underweight in treasuries, along with a corresponding overweight in corporate bonds and asset backed securities, helped performance.  The Fund’s slightly shorter duration relative to its benchmark hindered performance.  For the coming quarter we expect rates to rise modestly as a new higher range for interest rates develops.      Performance Report Total Fund Assets as of 3/31/2010 $599,648,961 Net Asset Value1 $19.36    Effective Duration 2 4.49 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 April, 2010* May, 2010* June, 2010*   *Adobe Acrobat 6.0® or above required. Download now for free.

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