<PAGE>
SCHEDULE 14A
(Rule 14a-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of the Securities
Exchange Act of 1934
Filed by the Registrant [X]
Filed by a Party other than the Registrant [_]
Check the appropriate box:
[_] Preliminary Proxy Statement [_] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive Proxy Statement
[_] Definitive Additional Materials
[_] Soliciting Material Pursuant to Rule 14a-11(c) or Rule 14a-12
MERCANTILE MUTUAL FUNDS, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified In Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of Filing Fee (Check the appropriate box):
[X] No fee required
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
<PAGE>
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Form or Schedule and the date of its filing.
(1) Amount Previously Paid:
- --------------------------------------------------------------------------------
(2) Form, Schedule or Registration Statement No.:
- --------------------------------------------------------------------------------
(3) Filing Party:
- --------------------------------------------------------------------------------
(4) Date Filed:
- --------------------------------------------------------------------------------
-2-
<PAGE>
CONNING MONEY MARKET PORTFOLIO
OF
MERCANTILE MUTUAL FUNDS, INC.
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF THE CONNING MONEY MARKET PORTFOLIO
----------------
December 10, 1999
To the Shareholders of the
Conning Money Market Portfolio of
Mercantile Mutual Funds, Inc.
A Special Meeting of Shareholders of the Conning Money Market Portfolio (the
"Portfolio") of Mercantile Mutual Funds, Inc. (the "Fund") will be held on
January 21, 2000, at 10:00 a.m. Eastern Time, at the offices of the Fund's
administrator and transfer agent, BISYS Fund Services Ohio, Inc., 3435 Stelzer
Road, Columbus, Ohio 43219, for the purpose of considering and voting upon:
(1) A proposal to approve a new sub-advisory agreement between
Mississippi Valley Advisors Inc. ("MVA") and Conning Asset Management
Company ("Conning") with respect to the Portfolio, the terms of which are
substantially identical to the terms of the current sub-advisory agreement
between MVA and Conning with respect to the Portfolio, and which will
become effective on the date that Conning becomes an indirect subsidiary of
Metropolitan Life Insurance Company; and
(2) The transaction of such other business as may properly come before
the meeting or any adjournment thereof.
The proposal referred to above is discussed in the Proxy Statement attached
to this Notice. Each shareholder is invited to attend the Special Meeting of
Shareholders in person. Shareholders of record of the Portfolio at the close
of business on November 19, 1999 have the right to vote at the meeting. If you
cannot be present at the meeting, we urge you to fill in, sign and promptly
return the enclosed proxy in order that the meeting can be held and a maximum
number of shares may be voted.
W. BRUCE McCONNEL, III
Secretary
WE NEED YOUR PROXY VOTE IMMEDIATELY
A SHAREHOLDER MAY THINK HIS OR HER VOTE IS NOT IMPORTANT, BUT IT IS VITAL. BY
LAW, THE SPECIAL MEETING OF SHAREHOLDERS OF THE FUND'S CONNING MONEY MARKET
PORTFOLIO SCHEDULED FOR JANUARY 21, 2000 WILL HAVE TO BE ADJOURNED WITHOUT
CONDUCTING ANY BUSINESS IF LESS THAN A MAJORITY OF THE SHARES ELIGIBLE TO VOTE
ARE REPRESENTED. IN THAT EVENT, THE FUND WOULD CONTINUE TO SOLICIT VOTES IN AN
ATTEMPT TO ACHIEVE A QUORUM. CLEARLY, YOUR VOTE COULD BE CRITICAL IN ALLOWING
THE FUND TO HOLD THE MEETING AS SCHEDULED, SO PLEASE RETURN YOUR PROXY CARD
IMMEDIATELY.
<PAGE>
CONNING MONEY MARKET PORTFOLIO
OF
MERCANTILE MUTUAL FUNDS, INC.
3435 Stelzer Road
Columbus, Ohio 43219
----------------
PROXY STATEMENT
----------------
This Proxy Statement is furnished in connection with the solicitation of
proxies by the Board of Directors of Mercantile Mutual Funds, Inc. (the
"Fund") for use at a Special Meeting of Shareholders of the Fund's Conning
Money Market Portfolio (the "Portfolio") to be held at the offices of the
Fund's administrator and transfer agent, BISYS Fund Services Ohio, Inc., 3435
Stelzer Road, Columbus, Ohio 43219, on January 21, 2000, at 10:00 a.m. Eastern
Time (such meeting and any adjournments thereof referred to as the "Meeting").
It is expected that the solicitation of proxies will be primarily by mail.
In connection with the solicitation, the Fund's service contractors have
retained Automatic Data Processing to assist in the solicitation of proxies by
mail and to tabulate votes returned at a cost of approximately $19,000. The
Fund's officers and service contractors may also solicit proxies by telephone,
facsimile or personal interview. Conning Asset Management Company ("Conning"),
the proposed sub-adviser for the Portfolio as discussed in this Proxy
Statement, or an entity controlling, controlled by, or under common control
with Conning, will bear all proxy solicitation costs.
Any shareholder giving a proxy may revoke it at any time before it is
exercised by submitting to the Fund a written notice of revocation or a
subsequently executed proxy or by attending the Meeting and electing to vote
in person. This Proxy Statement and the enclosed Proxy are expected to be
distributed to shareholders on or about December 15, 1999.
A proxy is enclosed with respect to the shares you own in the Portfolio. If
the proxy is executed properly and returned, the shares represented by it will
be voted at the Meeting in accordance with the instructions thereon. Each full
share is entitled to one vote and each fractional share to a proportionate
fractional vote. If you do not expect to be present at the Meeting and wish
your shares to be voted, please complete the enclosed proxy and mail it in the
enclosed reply envelope.
INTRODUCTION
Mississippi Valley Advisors Inc. ("MVA"), the investment adviser for the
Portfolio, appointed Conning as sub-adviser to the Portfolio pursuant to a
sub-advisory agreement dated as of February 12, 1999 (the "Current
Agreement"). Conning is an indirect subsidiary of GenAmerica Corporation
("GenAmerica"), which in turn is a wholly-owned subsidiary of General American
Mutual Holding Company ("GAMHC").
On August 10, 1999, following a request by General American Life Insurance
Company ("GAL"), a Missouri stock life insurance company wholly owned by
GenAmerica, the Missouri Department of Insurance (the "Department") placed GAL
under administrative supervision. The immediate cause of the supervision order
was GAL's inability to satisfy approximately $4 billion in surrenders by the
holders of certain funding
1
<PAGE>
agreements. The effect of administrative supervision is that GAL began to
operate under the Department's supervision in order to preserve GAL's assets
against large immediate cash demands and to protect the interests of GAL's
approximately 300,000 policyholders.
The Department worked closely with GAL to explore possible solutions to this
liquidity issue. A reorganization plan (the "Reorganization Plan") was
developed involving the sale by GAMHC of all of the outstanding common stock
of GenAmerica (and, accordingly, indirect ownership and control of all of
GenAmerica's subsidiaries, including Conning) to Metropolitan Life Insurance
Company ("MetLife") (the "MetLife Transaction") pursuant to a Stock Purchase
Agreement dated as of August 26, 1999, as modified or amended from time to
time. As a result of the MetLife Transaction, Conning will become an indirect
subsidiary of MetLife. Consummation of the MetLife Transaction is subject to
the satisfaction of a number of conditions. It is currently expected that the
MetLife Transaction will be effected during December 1999 or during the first
quarter of 2000. The MetLife Transaction will constitute an "assignment" of,
and automatically terminate, the Current Agreement under the Investment
Company Act of 1940, as amended (the "1940 Act").
At a regular meeting of the Board of Directors of the Fund held on October
19, 1999, MVA recommended that Conning be reappointed as sub-adviser to the
Portfolio. At that meeting, a new sub-advisory agreement (the "New Agreement")
between MVA and Conning was approved by a majority of the members of the Board
of Directors, as well as by a majority of those members of the Board of
Directors who are not "interested persons" (as that term is defined in the
1940 Act) of any party to the New Agreement.
To ensure that the automatic termination of the Current Agreement will not
disrupt the sub-advisory services provided to the Portfolio, on November 5,
1999 Conning filed an application with the Securities and Exchange Commission
("SEC") seeking an exemptive order (the "Order") permitting Conning to
continue to act as sub-adviser to the Portfolio under the New Agreement after
the termination of the Current Agreement until approval of the New Agreement
by shareholders of the Portfolio at a meeting to be held within 150 days after
the later of (1) the date of the MetLife Transaction, or (2) the date on which
the SEC grants the requested Order (the "Interim Period"). As a condition to
the requested Order, during the Interim Period all sub-advisory fees payable
under the New Agreement will be held in an interest-bearing escrow account.
Such escrowed fees (plus interest) will be paid to Conning only if the New
Agreement is approved by shareholders of the Portfolio. Although the Fund
believes that the SEC will grant the requested Order, there is no assurance
that the SEC will do so, even if the proposal presented to the Meeting is
approved by shareholders of the Portfolio. In such an event, the Fund would
consider what action would be appropriate in light of the SEC's response to
the application for the Order.
The Board of Directors of the Fund is proposing that shareholders of the
Portfolio approve the New Agreement, which will become effective on the date
of the MetLife Transaction. A copy of the New Agreement is attached to this
Proxy Statement as Exhibit A. The description of the New Agreement that
follows is qualified in its entirety by Exhibit A.
DESCRIPTION OF THE NEW AGREEMENT
Terms and Fees. The terms and conditions of the New Agreement with Conning
are substantially identical to those in the Current Agreement, except that the
New Agreement will be dated as of the date of the MetLife Transaction and will
have a different termination date than the Current Agreement.
As investment adviser, MVA has agreed, subject to the general supervision of
the Fund's Board of Directors and in accordance with the Portfolio's
investment objective and policies, either directly or through a sub-adviser,
2
<PAGE>
to manage the Portfolio's assets, and to provide investment research and to be
responsible for, make decisions with respect to and place orders for all
purchases and sales of portfolio securities.
The New Agreement provides that, subject to the supervision of the Fund's
Board of Directors, Conning will assist MVA in providing a continuous
investment program for the Portfolio, including research and management with
respect to all securities, investments and cash equivalents. Pursuant to the
New Agreement, Conning: (i) will determine from time to time in consultation
with MVA what securities and other investments will be purchased, retained or
sold for the Portfolio; (ii) will place orders pursuant to its investment
determinations for the Portfolio either directly with the issuer or with any
broker or dealer; (iii) will manage the Portfolio's overall cash position;
(iv) will attend regular business and investment-related meetings with the
Fund's Board of Directors and MVA if requested to do so by the Fund and/or
MVA; and (v) will maintain books and records with respect to the securities
transactions for the Portfolio, furnish to MVA and the Fund's Board of
Directors such periodic and special reports as they may request with respect
to the Portfolio, and provide in advance to MVA all reports to the Board of
Directors for examination and review within a reasonable time prior to the
Fund's Board meetings.
The maximum advisory fees payable by the Portfolio to MVA and the maximum
sub-advisory fees payable by MVA to Conning will not change as a result of
approval of the New Agreement. The maximum annual advisory fee rate payable by
the Portfolio to MVA is .40% of the first $1.5 billion of the Portfolio's
average daily net assets, .35% of the next $1.0 billion of net assets and .25%
of net assets in excess of $2.5 billion, computed daily and payable monthly.
Under both the Current Agreement and the New Agreement, the maximum annual
sub-advisory fee rate payable by MVA to Conning is .30% of the first $1.5
billion of the Portfolio's average daily net assets, .25% of the next $1.0
billion of net assets and .15% of net assets in excess of $2.5 billion,
computed daily and payable monthly. The sub-advisory fees payable by MVA to
Conning under both the Current Agreement and the New Agreement are the
responsibility of MVA and do not represent an additional charge to the
Portfolio.
The aggregate investment advisory fees (net of waivers) and sub-advisory
fees (net of waivers) paid with respect to the Portfolio for the period
February 16, 1999 (date of commencement of operations) through November 30,
1999 were $151,272.81 and $106,141.97, respectively, and the corresponding
effective rates of the advisory fees (net of waivers) and sub-advisory fees
(net of waivers) paid with respect to the Portfolio during the period February
16, 1999 (date of commencement of operations) through November 30, 1999 were
.17% and .12%, respectively, of the Portfolio's average daily net assets. MVA
and Conning have advised the Fund that they expect to continue to waive
advisory and sub-advisory fees so that such fees (after waivers) will not
exceed the annual rates of .17% and .12%, respectively of the Portfolio's
average daily net assets. These fee waivers by MVA and Conning are voluntary
and may be terminated at any time.
The New Agreement provides that Conning will pay all expenses incurred by it
in connection with its activities under the New Agreement other than the cost
of securities, commodities and other investments (including brokerage
commissions and other transaction charges, if any) purchased for the
Portfolio. The New Agreement also provides that Conning will exercise due care
and diligence and use the same skill and care in providing services under the
New Agreement as it uses in providing services to other investment companies,
but that Conning shall not be liable for any action taken by it in the absence
of bad faith, willful misconduct, gross negligence or reckless disregard of
its duties.
The New Agreement provides that Conning will bear a proportionate share of
any expense reimbursements made by MVA under its advisory agreement with
respect to the Portfolio, by waiving fees otherwise payable to
3
<PAGE>
it under the New Agreement, in the event that the Portfolio's aggregate
expenses exceed the expense limitations of any state having jurisdiction over
the Portfolio.
Under the New Agreement, Conning agrees that it will place orders for the
purchase and sale of portfolio securities and will solicit broker-dealers to
execute transactions in accordance with the Portfolio's policies and
restrictions regarding brokerage allocations. In executing portfolio
transactions and selecting brokers or dealers, Conning will use its reasonable
best efforts to seek the most favorable execution of orders, after taking into
consideration all factors that Conning deems relevant, including the breadth
of the market in the security, the price of the security, the financial
condition and execution capability of the broker or dealer, and the
reasonableness of the commission, if any, both for the specific transaction
and on a continuing basis. Consistent with this obligation, Conning may, to
the extent permitted by law, purchase and sell portfolio securities to and
from brokers and dealers that provide brokerage and research services. These
brokerage and research services might consist of reports and statistics on
specific companies or industries, general summaries of groups of stocks and
bonds and their comparative earnings and yields, or broad overviews of the
securities markets and the economy. Commissions paid to brokers or dealers
providing these services may be higher than those which other qualified
brokers or dealers would charge for effecting the same transactions, provided
that Conning determines in good faith that such commissions are reasonable in
relation to the value of the brokerage and research services provided by such
broker or dealer, viewed in terms of either a particular transaction or
Conning's overall responsibility to the Portfolio and to the Fund.
Supplementary research information so received is in addition to, and not in
lieu of, services required to be performed by MVA and Conning and does not
reduce the advisory fees payable to MVA by the Portfolio. It is possible that
certain of the supplementary research or other services received will
primarily benefit one or more other investment companies or other accounts for
which MVA or Conning exercises investment discretion. Conversely, the
Portfolio may be the primary beneficiary of the research or services received
as a result of portfolio transactions effected for such other investment
companies or accounts.
Investment decisions for the Portfolio and other investment accounts managed
by MVA and Conning will be made independently of each other in light of
differing conditions. However, the same investment decision may be made for
two or more such accounts. In such cases, simultaneous transactions are
inevitable. Purchases or sales are then allocated in a manner believed by MVA
or Conning to be equitable to each such account. While in some cases this
practice could have a detrimental effect on the price or value of the security
as far as the Portfolio is concerned, in other cases it may be beneficial to
the Portfolio. To the extent permitted by law, Conning may aggregate the
securities to be sold or purchased for the Portfolio with those to be sold or
purchased for other investment companies or accounts in executing
transactions. Portfolio securities will not be purchased from or sold to MVA,
Conning, the Fund's principal underwriter, or any affiliated person thereof,
except as permitted by law.
The New Agreement will become effective on the date of the consummation of
the MetLife Transaction, and will thereafter continue in effect until January
31, 2001. Thereafter, if not terminated, the New Agreement would continue in
effect for successive twelve-month periods, provided that such continuance is
approved at least annually (i) by the vote of a majority of those members of
the Board of Directors who are not parties to the New Agreement or "interested
persons" (as that term is defined in the 1940 Act) of any such party, cast in
person at a meeting called for the purpose of voting on such approval, and
(ii) by the Board of Directors or by the vote of a majority of the outstanding
shares of the Portfolio.
The New Agreement provides that it will terminate automatically in the event
of its "assignment" (as that term is defined in the 1940 Act). Under the 1940
Act, an "assignment" generally will occur if either party to the New Agreement
assigns its rights and duties thereunder to another party or if there is a
change in control of
4
<PAGE>
either party to the New Agreement. The New Agreement also provides that it is
terminable without penalty, by the Portfolio (by vote of the Board of
Directors of the Fund or by vote of a majority of the outstanding shares of
the Portfolio) or by MVA or Conning on 60 days' written notice.
Evaluation by the Fund's Directors. At a meeting held on October 19, 1999,
the New Agreement was approved by a majority of the members of the Fund's
Board of Directors, including a majority of those members of the Board of
Directors who are not "interested persons" (as that term is defined in the
1940 Act) of any party to the New Agreement. As previously stated, the New
Agreement will become effective on the date of the MetLife Transaction,
subject to approval by the Portfolio's shareholders.
In considering whether to approve the New Agreement and to submit the New
Agreement to shareholders of the Portfolio for their approval, the Board of
Directors considered the following factors: (a) Conning's representations that
it would provide investment advisory and other services to the Portfolio of a
scope and quality at least equivalent, in the Board's judgment, to the scope
and quality of services currently provided to the Portfolio; (b) the
performance of the Portfolio since the commencement of operations; (c) the
terms and conditions contained in the New Agreement, that are substantially
identical to those in the Current Agreement; and (d) Conning's representation
that it expected that the persons currently responsible for the investment
policies of Conning would be the same persons who would direct Conning's
investment policies following the MetLife Transaction. Based on the foregoing
factors, each of which was considered material by the Fund's Board of
Directors, the Directors concluded that approval of the New Agreement was in
the best interests of the Portfolio and its shareholders.
Ronald D. Winney, a member of the Board of Directors and Treasurer of the
Fund, owns shares of Firstar Corporation, MVA's ultimate parent. Mr. Winney's
wife owns a life insurance policy issued by GAL. Robert M. Cox, a member of
the Board of Directors of the Fund, also owns life insurance policies issued
by GAL.
Voting Procedures. The approval of the New Agreement requires the
affirmative vote of the holders of a "majority of the outstanding shares" of
the Portfolio (as defined by the 1940 Act), which means the lesser of (i) the
holders of 67% or more of the shares of the Portfolio present at the Meeting
if the holders of more than 50% of the outstanding shares of the Portfolio are
present in person or by proxy or (ii) more than 50% of the outstanding shares
of the Portfolio.
If the New Agreement is approved by shareholders at the Meeting, MVA, which
has principal offices located at One Mercantile Center, Seventh & Washington
Streets, St. Louis, Missouri 63101, will continue to serve as the Portfolio's
adviser under its existing advisory agreement dated as of April 1, 1991 and
Conning will continue to serve as the Portfolio's sub-adviser under the New
Agreement. If the New Agreement is not approved by the shareholders of the
Portfolio, (1) MVA will consider other alternatives, including the possible
recommendation of another sub-adviser, and (2) except for an amount equal to
the actual out-of-pocket costs incurred by Conning for providing sub-advisory
services to the Fund during the Interim Period (which amount will be paid to
Conning), the sub-advisory fees payable by MVA during the Interim Period (plus
any interest earned thereon) will be returned to the Portfolio.
THE FUND'S BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE NEW AGREEMENT
VOTING INFORMATION
Record Date. Only shareholders of record of the Portfolio at the close of
business on November 19, 1999 will be entitled to vote at the Meeting. On that
date, there were 230,726,288.280 Class T shares of common stock, representing
interests in the Portfolio, outstanding and entitled to be voted at the
Meeting.
5
<PAGE>
Quorum. A quorum is constituted with respect to the Portfolio by the
presence in person or by proxy of the holders of more than 50% of the
outstanding shares of the Portfolio entitled to vote at the Meeting. For
purposes of determining the presence of a quorum for transacting business at
the Meeting, abstentions and broker "non-votes" (that is, proxies from brokers
or nominees indicating that such persons have not received instructions from
the beneficial owners or other persons entitled to vote shares on a particular
matter with respect to which the brokers or nominees do not have discretionary
power), will be treated as shares that are present at the Meeting but which
have not been voted. Abstentions and broker "non-votes" will have the effect
of a "no" vote for purposes of obtaining the requisite approval of the New
Agreement.
In the event that a quorum is not present at the Meeting, or in the event
that a quorum is present at the Meeting but sufficient votes to approve the
proposal are not received, the persons named as proxies, or their substitutes,
may proposed one or more adjournments of the Meeting to permit the further
solicitation of proxies. Any such adjournment will require the affirmative
vote of a majority of those shares affected by the adjournment that are
represented at the Meeting in person or by proxy. If a quorum is present, the
persons named as proxies will vote those proxies which they are entitled to
vote FOR the proposal in favor of such adjournment, and will vote those
proxies required to be voted AGAINST the proposal against any adjournment.
Other Shareholder Information. At the record date for the Meeting, Donaldson
Lufkin & Jenrette Securities, Pershing Division, One Pershing Plaza, Jersey
City, New Jersey 07399-0002, held of record 97.76% of the Portfolio's
outstanding shares as agent for its customers but did not possess voting or
investment power with respect to such shares. To the Fund's knowledge, at the
record date, no person possessed sole or shared voting or investment power
with respect to 5% or more of the Portfolio's outstanding shares.
As of the record date, the Directors and officers of the Fund as a group,
owned less than 1% of the outstanding shares of the Portfolio.
ADDITIONAL INFORMATION
Conning. Conning, a Missouri corporation, is registered with the Securities
and Exchange Commission as an investment adviser under the Investment Advisers
Act of 1940, as amended. As of September 30, 1999, Conning had approximately
$34 billion in assets under management.
Conning is a wholly-owned subsidiary of Conning & Co., a Connecticut
corporation, which in turn is a wholly-owned subsidiary of Conning, Inc., a
Delaware corporation, which in turn is a wholly-owned subsidiary of Conning
Corporation, a publicly-traded company (Nasdaq National Market, symbol "CNNG")
and a Missouri corporation. Approximately 61% of the issued and outstanding
voting securities of Conning Corporation are owned by GAL, a Missouri stock
life insurance company, which in turn is a wholly-owned subsidiary of
GenAmerica, a Missouri corporation, which in turn is a wholly-owned subsidiary
of GAMHC, a Missouri corporation. As a result of the MetLife Transaction,
MetLife will acquire all of the issued and outstanding common stock of
GenAmerica and Conning will become an indirect subsidiary of MetLife. To the
Fund's knowledge, as of November 19, 1999, no person owned beneficially or of
record 10% or more of any class of issued and outstanding voting securities of
MetLife.
The principal offices of Conning, Conning & Co., Conning, Inc., Conning
Corporation, General American Life Insurance Company, GenAmerica and GAMHC are
located at 700 Market Street, St. Louis, Missouri 63101. MetLife's principal
offices are located at One Madison Avenue, New York, New York 10010-3690.
6
<PAGE>
The name and principal occupation of the principal executive officers and
each director of Conning as of November 19, 1999 were as follows:
<TABLE>
<CAPTION>
Name* Position with Conning Principal Occupation
- ----- --------------------- --------------------
<S> <C> <C>
John B. Clinton......... Executive Vice President Executive Vice President of Conning
Corporation; Executive Vice President of
Conning & Company
Michael D. McLellan..... Executive Vice President Executive Vice President of Conning
Corporation; Director and President of
Red Oak Realty and White Oak Realty
Company; Director of Conning Mortgage
Investment Trust, Inc.
Donald L. McDonald...... Director, Executive Vice Executive Vice President of Conning
President and Chief Corporation and Conning & Company
Investment Officer
Thomas D. Sargent....... Executive Vice President Executive Vice President of Conning
Corporation; Executive Vice President of
Conning & Company
Fred M. Schpero......... Director, Senior Vice Senior Vice President and Chief
President and Chief Financial Officer of Conning
Financial Officer Corporation; Senior Vice President,
Secretary, Chief Financial Officer, and
Director of Conning, Inc., and Conning &
Company; Director of Conning Mortgage
Investment Trust, Inc.
</TABLE>
- --------
* The address of Messrs. McLellan and Schpero is 700 Market Street, St. Louis,
MO 63101. The address of Messrs. Clinton, McDonald, and Sargent is CityPlace
II, 185 Asylum St., Hartford, CT 06103.
Conning also serves as adviser or sub-adviser to the following registered
investment companies, which have investment objectives similar to the
Portfolio:
<TABLE>
<CAPTION>
Approximate
Name of Net Assets at Annual Rate
Investment Company September 30, 1999 of Compensation
- ------------------ ------------------ ---------------
<S> <C> <C>
General American Capital Company
Money Market Fund (advisory relationship).............. $311 million 0.125% of average daily net assets
Sage Life Investment Trust
Money Market Fund (sub-advisory relationship).......... $ 35 million 0.15% of average daily net assets
</TABLE>
Conning currently does not have any arrangements with General American
Capital Company or Sage Life Investment Trust to waive any portion of such
fees.
Section 15(f) of the 1940 Act provides that when a change in control of an
investment adviser occurs, the investment adviser or any of its affiliated
persons may receive any amount or benefit in connection therewith as long as
two conditions are satisfied. First, an "unfair burden" must not be imposed on
the investment company as a result of the transaction relating to the change
in control, or any express or implied terms, conditions or understandings
applicable there. The term "unfair burden," as defined in the 1940 Act,
includes any arrangement
7
<PAGE>
during the two-year period after the change in control whereby the investment
adviser (or predecessor or successor adviser), or any interested person of
such adviser, receives or is entitled to receive any compensation, directly or
indirectly, from the investment company or its shareholders (other than fees
for bona fide investment advisory and other services). To avoid any "unfair
burden" being imposed on the Fund, certain extraordinary expenses incurred by
the Fund on account of the MetLife Transaction, such as proxy expenses, will
be paid directly by either Conning or one of its affiliates. The second
conditions is that, during the three-year period immediately following
consummation of the transaction, at least 75% of the investment company's
board of directors must not be "interested persons" of the investment adviser
or predecessor investment adviser within the meaning of the 1940 Act. No
interested person of Conning or MetLife or any of their affiliates within the
meaning of the 1940 Act is a director of the Fund, and no such person will
serve on the Fund's Board of Directors during such period if such service
would cause this condition to be violated.
Payments to Affiliates. Mercantile Trust Company National Association
("Mercantile Trust"), an indirect wholly-owned subsidiary of Firstar
Corporation, serves as the custodian of the Portfolio's assets. The Fund pays
Mercantile an annual fee for its custodial services equal to $.20 for each
$1,000 of the Portfolio's average daily net assets, calculated daily and paid
monthly. For the period February 16, 1999 (commencement of operations) through
November 30, 1999, the Portfolio paid Mercantile Trust custody fees of
$18,067.74.
Affiliates of Conning are entitled to receive fees ("Plan Fees") under the
Shareholder Services Plan ("Plan") adopted by the Fund with respect to the
Portfolio. Plan Fees may not exceed the annual rates of .25% and .50% of the
average daily net assets of the Portfolio for shareholder liaison services
and/or administrative support services, respectively. The Fund expects to
limit the Portfolio's payments for shareholder liaison and administrative
support services under the Plan to an aggregate fee of not more than .67% (on
an annualized basis) of the Portfolio's average daily net assets during the
current fiscal year. This limitation may be revised or discontinued at any
time. For the period February 16, 1999 (commencement of operations) through
November 30, 1999, Plan Fees paid by the Portfolio to affiliates of Conning
totalled $587,179.46 (net of waivers).
It is expected that the entities named above will continue to provide the
services described to the Portfolio after the Meeting.
Current Agreement. The Current Agreement was approved by the Fund's Board of
Directors on October 20, 1998, was approved by the sole shareholder of the
Portfolio on February 11, 1999, and was last approved by the Fund's Board of
Directors on October 19, 1999.
Administrator and Distributor. BISYS Fund Services Ohio, Inc. (the
"Administrator") serves as the Fund's administrator. BISYS Fund Services (the
"Distributor") serves as the exclusive distributor of the shares of the Fund.
The Administrator and Distributor are both subsidiaries of The BISYS Group,
Inc. The Administrator and Distributor's principal offices are located at 3435
Stelzer Road, Columbus, Ohio 43219.
It is expected that on or before January 1, 2000, Firstar Mutual Fund
Services, LLC ("FMFS"), an affiliate of MVA, will be appointed as co-
administrator of the Fund. The principal offices of FMFS are located at 615 E.
Michigan Street, Milwaukee, Wisconsin 53202.
OTHER MATTERS
The Fund does not intend to hold Annual Meetings of Shareholders except to
the extent that such meetings may be required under the 1940 Act or state law.
Shareholders who wish to submit proposals for inclusion in the Proxy Statement
for a subsequent shareholder meeting should send their written proposals to
the Fund at its principal office within a reasonable time before such meeting.
8
<PAGE>
No business other than the matter described above is expected to come before
the Meeting, but should any other matter requiring a vote of shareholders
arise, including any question as to an adjournment of the Meeting, the persons
named in the enclosed Proxy will vote thereon according to their best judgment
in the interests of the Portfolio.
Dated: December 10, 1999
SHAREHOLDERS WHO DO NOT EXPECT TO BE PRESENT AT THE MEETING AND WHO WISH TO
HAVE THEIR SHARES VOTED ARE REQUESTED TO COMPLETE THE ENCLOSED PROXY AND
RETURN IT IN THE ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED IF MAILED IN THE
UNITED STATES.
THE FUND WILL FURNISH, WITHOUT CHARGE, COPIES OF THE FUND'S ANNUAL AND SEMI-
ANNUAL REPORTS TO SHAREHOLDERS TO ANY SHAREHOLDER UPON REQUEST. THE FUND'S
ANNUAL AND SEMI-ANNUAL REPORTS TO SHAREHOLDERS MAY BE OBTAINED FROM THE FUND
BY WRITING TO THE FUND C/O CONNING MONEY MARKET PORTFOLIO, ATTN: TRANSFER
AGENCY, 3435 STELZER ROAD, SUITE 1000, COLUMBUS, OH 43219, OR BY CALLING
1-800-232-9091.
9
<PAGE>
EXHIBIT A
SUB-ADVISORY AGREEMENT
(Conning Money Market Portfolio)
AGREEMENT made as of [date], between Mississippi Valley Advisors Inc., a
Missouri corporation (the "Adviser"), and Conning Asset Management Company, a
Missouri corporation ("Sub-Adviser").
WHEREAS, Mercantile Mutual Funds, Inc. (the "Fund") is registered as an
open-end, management investment company under the Investment Company Act of
1940, as amended (the "1940 Act");
WHEREAS, the Adviser has been appointed investment adviser to the Fund's
Conning Money Market Portfolio (the "Portfolio");
WHEREAS, the Adviser previously has retained Sub-Adviser to assist it in the
provision of a continuous investment program for the Portfolio and Sub-Adviser
currently is providing such assistance pursuant to a Sub-Advisory Agreement
dated as of February 12, 1999;
WHEREAS, Metropolitan Life Insurance Company is this day acquiring
GenAmerica Corporation, which owns a controlling interest in Sub-Adviser (the
"Transaction");
WHEREAS, the Adviser desires to retain the Sub-Adviser to assist in the
provision of a continuous investment program for the Portfolio following the
Transaction and Sub-Adviser is willing to do so; and
WHEREAS, the Board of Directors of the Fund has approved this Agreement,
subject to approval by the shareholders of the Portfolio, and Sub-Adviser is
willing to furnish such services upon the terms and conditions herein set
forth;
NOW, THEREFORE, in consideration of the premises and mutual covenants herein
contained, it is agreed between the parties hereto as follows:
1. Appointment. The Adviser hereby appoints Sub-Adviser to act as sub-
adviser to the Portfolio as permitted by the Adviser's Advisory Agreement with
the Fund pertaining to the Portfolio. Intending to be legally bound, Sub-
Adviser accepts such appointment and agrees to render the services herein set
forth for the compensation herein provided.
2. Sub-Advisory Services. Subject to the supervision of the Fund's Board of
Directors, Sub-Adviser will assist the Adviser in providing a continuous
investment program for the Portfolio, including investment research and
management with respect to all securities and investments and cash equivalents
in the Portfolio. Sub-Adviser will provide services under this Agreement in
accordance with the Portfolio's investment objective, policies and
restrictions as stated in the Portfolio's prospectus and resolutions of the
Fund's Board of Directors applicable to the Portfolio.
Without limiting the generality of the foregoing, Sub-Adviser further agrees
that it:
(a) will determine from time to time in consultation with the Adviser
what securities and other investments will be purchased, retained or sold
for the Portfolio;
(b) will place orders pursuant to its investment determinations for the
Portfolio either directly with the issuer or with any broker or dealer;
A-1
<PAGE>
(c) will manage the Portfolio's overall cash position;
(d) will attend regular business and investment-related meetings with the
Fund's Board of Directors and the Adviser if requested to do so by the Fund
and/or the Adviser; and
(e) will maintain books and records with respect to the securities
transactions for the Portfolio, furnish to the Adviser and the Fund's Board
of Directors such periodic and special reports as they may request with
respect to the Portfolio, and provide in advance to the Adviser all reports
to the Board of Directors for examination and review within a reasonable
time prior to the Fund's Board meetings.
3. Covenants by Sub-Adviser. Sub-Adviser agrees with respect to the services
provided to the Portfolio that it:
(a) will conform with all Rules and Regulations of the Securities and
Exchange Commission;
(b) will telecopy trade information to the Adviser on the first business
day following the day of the trade and cause broker confirmations to be
sent directly to the Adviser; and
(c) will treat confidentially and as proprietary information of the Fund
all records and other information relative to the Fund and prior, present
or potential shareholders, and will not use such records and information
for any purpose other than performance of its responsibilities and duties
hereunder (except after prior notification to and approval in writing by
the Fund, which approval shall not be unreasonably withheld and may not be
withheld and will be deemed granted where Sub-Adviser may be exposed to
civil or criminal contempt proceedings for failure to comply, when
requested to divulge such information by duly constituted authorities, or
when so requested by the Fund).
4. Services Not Exclusive. The services furnished by Sub-Adviser hereunder
are deemed not to be exclusive, and nothing in this Agreement shall (i)
prevent Sub-Adviser or any affiliated person (as defined in the 1940 Act) of
Sub-Adviser from acting as investment adviser or manager for any other person
or persons, including other management investment companies with investment
objectives and policies the same as or similar to those of the Portfolio or
(ii) limit or restrict Sub-Adviser or any such affiliated person from buying,
selling or trading any securities or other investments (including any
securities or other investments which the Portfolio is eligible to buy) for
its or their own accounts or for the accounts of others for whom it or they
may be acting; provided, however, that Sub-Adviser agrees that it will not
undertake any activities which, in its reasonable judgment, will adversely
affect the performance of its obligations to the Portfolio under this
Agreement.
5. Portfolio Transactions. Investment decisions for the Portfolio shall be
made by Sub-Adviser independently from those for any other investment
companies and accounts advised or managed by Sub-Adviser. The Portfolio and
such investment companies and accounts may, however, invest in the same
securities. When a purchase or sale of the same security is made at
substantially the same time on behalf of the Portfolio and/or another
investment company or account, the transaction will be averaged as to price,
and available investments allocated as to amount, in a manner which Sub-
Adviser believes to be equitable to the Portfolio and such other investment
company or account. In some instances, this investment procedure may adversely
affect the price paid or received by the Portfolio or the size of the position
obtained or sold by the Portfolio. To the extent permitted by law, Sub-Adviser
may aggregate the securities to be sold or purchased for the Portfolio with
those to be sold or purchased for other investment companies or accounts in
order to obtain best execution.
Sub-Adviser shall place orders for the purchase and sale of portfolio
securities and will solicit broker-dealers to execute transactions in
accordance with the Portfolio's policies and restrictions regarding brokerage
A-2
<PAGE>
allocations. Sub-Adviser shall place orders pursuant to its investment
determinations for the Portfolio either directly with the issuer or with any
broker or dealer selected by Sub-Adviser. In executing portfolio transactions
and selecting brokers or dealers, Sub-Adviser shall use its reasonable best
efforts to seek the most favorable execution of orders, after taking into
account all factors Sub-Adviser deems relevant, including the breadth of the
market in the security, the price of the security, the financial condition and
execution capability of the broker or dealer, and the reasonableness of the
commission, if any, both for the specific transaction and on a continuing
basis. Consistent with this obligation, Sub-Adviser may, to the extent
permitted by law, purchase and sell portfolio securities to and from brokers
and dealers who provide brokerage and research services (within the meaning of
Section 28(e) of the Securities Exchange Act of 1934) to or for the benefit of
the Portfolio and/or other accounts over which Sub-Adviser or any of its
affiliates exercises investment discretion. Sub- Adviser is authorized to pay
to a broker or dealer who provides such brokerage and research services a
commission for executing a portfolio transaction for the Portfolio which is in
excess of the amount of commission another broker or dealer would have charged
for effecting that transaction if Sub-Adviser determines in good faith that
such commission was reasonable in relation to the value of the brokerage and
research services provided by such broker or dealer, viewed in terms of either
that particular transaction or Sub-Adviser's overall responsibilities to the
Portfolio and to the Fund. In no instance will portfolio securities be
purchased from or sold to the Adviser, Sub-Adviser, or the Portfolio's
principal underwriter, or any affiliated person thereof except as permitted by
the Securities and Exchange Commission.
6. Books and Records. In compliance with the requirements of Rule 31a-3
under the 1940 Act, Sub-Adviser hereby agrees that all records which it
maintains for the Fund are the property of the Fund and further agrees to
surrender promptly to the Fund any of such records upon the Fund's request.
Sub-Adviser further agrees to preserve for the periods prescribed by Rule 31a-
2 under the 1940 Act the records required to be maintained by Rule 31a-1 under
the 1940 Act.
7. Expenses. During the term of this Agreement, Sub-Adviser will pay all
expenses incurred by it in connection with its activities under this Agreement
other than the cost of securities, commodities and other investments
(including brokerage commissions and other transaction charges, if any)
purchased for the Portfolio.
8. Compensation.
(a) For the services provided and the expenses assumed with respect to the
Portfolio pursuant to this Agreement, Sub-Adviser will be entitled to a fee,
computed daily and payable monthly, from the Adviser, calculated at the annual
rate of .30% of the first $1.5 billion of the Portfolio's average daily net
assets, plus .25% of the next $1 billion of average daily net assets, plus
.15% of average daily net assets in excess of $2.5 billion.
(b) If the Adviser reimburses the Fund, pursuant to Section 8(b) of the
Advisory Agreement, with respect to the Portfolio, the Sub-Adviser will bear
its share of the amount of such reimbursement by waiving fees otherwise
payable to it hereunder on a proportionate basis to be determined by comparing
the aggregate fees otherwise payable to it hereunder with respect to the
Portfolio to the aggregate fees otherwise payable by the Fund to the Adviser
under the Advisory Agreement with respect to the Portfolio.
9. Standard of Care; Limitation of Liability. Sub-Adviser shall exercise due
care and diligence and use the same skill and care in providing its services
hereunder as it uses in providing services to other investment companies, but
shall not be liable for any action taken or omitted by Sub- Adviser in the
absence of bad faith, willful misconduct, gross negligence or reckless
disregard of its duties.
A-3
<PAGE>
10. Reference to Sub-Adviser. Neither the Adviser nor any affiliate or agent
of it shall make reference to or use the name of Sub-Adviser or any of its
affiliates, or any of their clients, except references concerning the identity
of and services provided by Sub-Adviser to the Portfolio, which references
shall not differ in substance from those included in the current registration
statement pertaining to the Portfolio, this Agreement and the Advisory
Agreement between the Adviser and the Fund with respect to the Portfolio, in
any advertising or promotional materials without the prior approval of Sub-
Adviser, which approval shall not be unreasonably withheld or delayed. The
Adviser hereby agrees to make all reasonable efforts to cause the Fund and any
affiliate thereof to satisfy the foregoing obligation.
11. Duration and Termination. This Agreement shall become effective on the
date of the consummation of the Transaction. Unless sooner terminated as
provided herein, this Agreement shall continue until January 31, 2001, and
thereafter shall continue automatically for successive annual periods,
provided such continuance is specifically approved at least annually by the
Fund's Board of Directors or vote of the lesser of (a) 67% of the shares of
the Portfolio represented at a meeting if holders of more than 50% of the
outstanding shares of the Portfolio are present in person or by proxy or (b)
more than 50% of the outstanding shares of the Portfolio, provided that in
either event its continuance also is approved by a majority of the Fund's
Directors who are not "interested persons" (as defined in the 1940 Act) of any
party to this Agreement, by vote cast in person at a meeting called for the
purpose of voting on such approval. This Agreement is terminable at any time
without penalty, on 60 days' notice, by Adviser, Sub-Adviser or by the Fund's
Board of Directors or by vote of the lesser of (a) 67% of the shares of the
Portfolio represented at a meeting if holders of more than 50% of the
outstanding shares of the Portfolio are present in person or by proxy or (b)
more than 50% of the outstanding shares of the Portfolio. This Agreement will
terminate automatically in the event of its assignment (as defined in the 1940
Act).
12. Amendment of this Agreement. No provision of this Agreement may be
changed, waived, discharged or terminated orally, but only by an instrument in
writing signed by the party against which enforcement of the change, waiver,
discharge or termination is sought. No amendment of this Agreement shall be
effective with respect to the Portfolio until approved in accordance with the
1940 Act.
13. Notice. Any notice, advice or report to be given pursuant to this
Agreement shall be delivered or mailed:
To the Sub-Adviser at:
700 Market Street
St. Louis, MO 63101
To the Adviser at:
One Mercantile Center
7th and Washington Streets
Suite 2100
St. Louis, MO 63101
To the Fund at:
c/o W. Bruce McConnel, III, Esq.
Drinker Biddle & Reath LLP
One Logan Square
18th & Cherry Streets
Philadelphia, PA 19103-6996
A-4
<PAGE>
14. Miscellaneous. The captions in this Agreement are included for
convenience of reference only and in no way define or delimit any of the
provisions hereof or otherwise affect their construction or effect. If any
provision of this Agreement shall be held or made invalid by a court decision,
statute, rule or otherwise, the remainder of this Agreement shall not be
affected thereby.
This Agreement shall be binding upon and shall inure to the benefit of the
parties hereto and their respective successors and shall be governed by
Missouri law.
15. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this instrument to be
executed by their officers designated below as of the day and year first above
written.
[SIGNATURE LINES OMITTED]
A-5
<PAGE>
CONNING MONEY MARKET PORTFOLIO
OF
MERCANTILE MUTUAL FUNDS, INC.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS OF MERCANTILE MUTUAL
FUNDS, INC. (THE "FUND") FOR USE AT A SPECIAL MEETING OF SHAREHOLDERS OF THE
CONNING MONEY MARKET PORTFOLIO (THE "PORTFOLIO") TO BE HELD ON JANUARY 21, 2000,
AT 10:00 A.M. EASTERN TIME, AT THE OFFICES OF BISYS FUND SERVICES OHIO, INC.,
3435 STELZER ROAD, COLUMBUS, OHIO 43219.
THE UNDERSIGNED HEREBY APPOINTS R. JEFFREY YOUNG, BRECKE E. SWEETING AND
SUE A. WALTERS, AND EACH OF THEM, WITH FULL POWER OF SUBSTITUTION, AS PROXIES OF
THE UNDERSIGNED TO VOTE AT THE ABOVE-STATED SPECIAL MEETING, AND AT ALL
ADJOURNMENTS OR POSTPONEMENTS THEREOF, ALL SHARES OF CLASS T COMMON STOCK
REPRESENTING INTERESTS IN THE PORTFOLIO HELD OF RECORD BY THE UNDERSIGNED ON
NOVEMBER 19, 1999, THE RECORD DATE FOR THE MEETING, UPON THE FOLLOWING MATTER
AND UPON ANY OTHER MATTER THAT MAY COME BEFORE THE MEETING, IN THEIR DISCRETION:
(1) Proposal to approve a new sub-advisory agreement between Mississippi Valley
Advisors Inc. ("MVA") and Conning Asset Management Company ("Conning") with
respect to the Portfolio, the terms of which are substantially identical to
the terms of the current sub-advisory agreement between MVA and Conning
with respect to the Portfolio, and which will become effective on the date
that Conning becomes an indirect subsidiary of Metropolitan Life Insurance
Company.
[_] For [_] Against [_] Abstain
(2) In their discretion, the proxies are authorized to vote upon such other
business as may properly come before the Meeting.
PLEASE SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED
ENVELOPE. EVERY PROPERLY SIGNED PROXY WILL BE VOTED IN THE MANNER SPECIFIED
HEREON AND, IN THE ABSENCE OF SPECIFICATION, WILL BE TREATED AS GRANTING
AUTHORITY TO VOTE "FOR" THE PROPOSAL.
PLEASE SIGN EXACTLY AS NAME APPEARS HEREON. WHEN SHARES ARE HELD BY JOINT
TENANTS, BOTH SHOULD SIGN. WHEN SIGNING AS ATTORNEY OR EXECUTOR, ADMINISTRATOR,
DIRECTOR OR GUARDIAN, PLEASE GIVE FULL TITLE AS SUCH. IF A CORPORATION, PLEASE
SIGN IN FULL CORPORATE NAME BY PRESIDENT OR OTHER AUTHORIZED OFFICER. IF A
PARTNERSHIP, PLEASE SIGN IN PARTNERSHIP NAME BY AUTHORIZED PERSON.
__________________________ _____________________________________
SIGNATURE DATE SIGNATURE (JOINT OWNERS) (DATE)
