Commerce Kansas Tax-Free Intermediate Bond Fund

Overview Objective Seeks current income exempt from federal and, to the extent possible, from Kansas income taxes, as is consistent with the preservation of capital. Strategy Focuses primarily on investing in municipal obligations issued by the State of Kansas and its political subdivisions. Commentary Portfolio Fund Holdings Portfolio Composition Fund Manager - Brian P. Musielak, CFA Joined Commerce in 1995 Fund Manager since January, 1999 14 years of experience Risk/Return In general, greater returns are associated with greater risks. Fund Statistics: Inception Date 12/26/00 Ticker Symbol KTXIX Cusip 200626786 Minimum Initial Investment $1,000 Commentary as of 12/31/2009 After rallying the previous three quarters, the municipal market experienced a bit of a pull back in the fourth quarter of 2009.  Intermediate and long bond yields were higher by 0.20% to 0.40% for the quarter. While this pushed AAA General Obligation yields in the 25 to 30 year maturity range back above 4.00%, it is still well below historical averages.  Build America Bonds (BABs) continued to be a popular program for municipalities issuing new debt.  This federal program, which encourages municipalities to issue taxable municipal bonds by subsidizing their interest cost, has made a dramatic impact on tax-free municipal bond yields by siphoning away the supply of traditional tax-exempt issuance.  BABs accounted for 20% of the overall issuance in 2009 and over one-third the issuance in the fourth quarter. Credit spreads have been tightening off their highs for most of the year.  Despite this move, the extra yield earned by investing in A-rated credits versus AAA credits is still more than twice historical averages.   Our general trading theme heading into 2010 will be to reduce duration or market risk while selectively adding credit risk or lower rated bonds.  We do feel there will be pressure on the highest quality bond yields such as US Government debt and high quality corporate and municipal bonds. For the fourth quarter, the Fund performed in line with its benchmark, the Barclays Capital 3-15 Year Blend Index, and outperformed its peers as measured by the Lipper Other States Intermediate Municipal Debt Funds Category 2nd Quartile Total Return Ranking. Our holdings in lower rated long bonds were a drag on performance, while a concentration in AAA rated, shorter maturity, and refunded bonds helped to offset.  As additional yield offered on lower-rated credits presents itself, we will look for opportunities to increase our exposure in that space.  It is also notable that Kansas has seen a drastic decrease in supply of paper, especially relative to other states.        Performance Report Total Fund Assets as of 12/31/2009 $79,405,092 Net Asset Value1 $19.04    Effective Duration 2 5.53 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 of determining a bond's price sensitivity, given changes in interest rates. 3. The composition of the portfolio is subject to change in the future. 4. The Fund's investments may subject shareholders to federal alternative minimum tax.

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 Fund is non-diversified. Due to the smaller number of bonds generally held in the portfolio, the Fund may be subject to greater risks than a more diversified fund. A change in the value of any single holding may affect the overall value more than it would affect a diversified fund that holds more investments. In addition, the Fund's investments may subject shareholders to federal alternative minimum tax. The investment income from this Fund may be subject to state income taxes. 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 KANSAS TAX-FREE INTERMEDIATE BOND FUND HOLDINGS December, 2009* January, 2010* February, 2010*   *Adobe Acrobat 6.0® or above required. Download now for free.

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