<PAGE>
CONNING MONEY MARKET PORTFOLIO Schedule of Portfolio Investments
May 31, 1999 (Unaudited)
Commercial Paper (94.0%)
Principal Amortized
Amount Cost
--------- ---------
Asset Backed (4.9%)
MPF Limited, 4.85%*, 7/14/99............................. $250,000 $ 248,552
---------
Banking - Foreign (18.2%)
Banca Credit Financial Corp., 4.84%*, 6/30/99............ 170,000 169,337
Bavaria Global Corp., 4.85%*, 6/21/99.................... 250,000 249,326
Kitty Hawk Funding Corp., 4.81%*, 6/14/99................ 250,000 249,567
Moat Funding LLC, 4.90%*, 6/23/99........................ 250,000 249,251
---------
917,481
---------
Business Credit Institution (9.9%)
Allomon Funding, 4.83%*, 7/12/99......................... 250,000 248,625
Fairway Finance Corp., 4.83%*, 7/15/99................... 250,000 248,524
---------
497,149
---------
Financial Services (23.9%)
Duff & Phelps Utilities Income, Inc., 4.90%*, 8/2/99..... 215,000 213,186
Hitachi Credit America, 4.90%*, 7/28/99.................. 250,000 248,060
Thunder Bay Funding Corp., 4.85%*, 6/11/99............... 250,000 249,663
Triple A-1 Funding Corp., 4.83%*, 6/11/99................ 250,000 249,666
Windmill Funding Corp., 4.81%*, 6/11/99.................. 250,000 249,666
---------
1,210,241
---------
Miscellaneous Business Credit (14.8%)
Eaglefunding Capital Corp., 4.97%*, 8/9/99............... 250,000 247,676
Lexington Parker Capital, 5.02%*, 6/18/99................ 250,000 249,431
Thames Asset Global, 4.89%*, 8/11/99..................... 250,000 247,589
---------
744,696
---------
Mortgage Bank (5.0%)
Cooper River Funding, 4.86%*, 6/4/99..................... 250,000 249,899
---------
Oil & Exploration, Production & Services (4.9%)
Explorer Pipeline Co., 4.98%*, 6/25/99.................. $250,000 $ 249,211
----------
Personal Credit Institution (9.9%)
Check Point Charlie, 4.84%*, 7/15/99.................... 250,000 248,521
World Omni Vehicles Leasing, Inc., 4.83%*, 6/4/99....... 250,000 249,899
----------
498,420
----------
Utilities (2.5%)
South Carolina Electric & Gas Co., 4.83%*, 6/28/99...... 125,000 124,547
----------
TOTAL COMMERCIAL PAPER 4,740,196
----------
Extendible Commercial Notes (4.9%)
Toys (4.9%)
Hasbro, Inc., 5.22%*, 7/27/99........................... 250,000 248,056
----------
TOTAL EXTENDIBLE COMMERCIAL NOTES 248,056
----------
U.S. Government Agencies (1.5%)
Federal Home Loan Mortgage Corp. (1.5%)
4.76%*, 7/15/99......................................... 40,000 39,768
4.70%*, 7/16/99......................................... 35,000 34,794
----------
TOTAL U.S. GOVERNMENT AGENCIES 74,562
----------
TOTAL INVESTMENTS
(Cost $5,062,814)(a) 100.4%...................................... 5,062,814
Liabilities in excess of other assets (0.4)%...................... (22,218)
----------
TOTAL NET ASSETS 100.0%........................................... $5,040,596
==========
- ------
* Variable rate investment. The rate presented on the Schedule of Portfolio
Investments is the rate in effect at May 31, 1999. The date presented
reflects the next rate change date.
(a) Cost for federal income tax and financial reporting purposes are the same.
See notes to financial statements
1
<PAGE>
CONNING MONEY MARKET PORTFOLIO
Statement of Assets and Liabilities
May 31, 1999 (Unaudited)
Assets:
Investments, at value (cost $5,062,814)................... $5,062,814
Cash...................................................... 3,726
----------
Total Assets............................................. 5,066,540
Liabilities:
Dividends payable......................................... $17,215
Accrued expenses and other payables:
Investment advisory fees................................. 214
Administration fees...................................... 35
Custodian fees........................................... 86
Other liabilities........................................ 8,394
-------
Total Liabilities........................................ 25,944
----------
Net Assets:
Capital................................................... 5,040,608
Accumulated net realized losses from investment
transactions............................................. (12)
----------
Net Assets................................................ $5,040,596
==========
Net Assets............................................... $5,040,596
Shares................................................... 5,040,609
Offering and redemption price per share.................. $1.00
=====
Statement of Operations
For the period ended May 31, 1999 (a) (Unaudited)
Investment Income:
Interest income........................................... $71,695
-------
Total Income............................................. 71,695
Expenses:
Investment advisory fees.................................. $5,777
Administration fees....................................... 2,889
Shareholder services fees................................. 10,833
Accounting fees........................................... 276
Custodian fees............................................ 324
Transfer agent fees....................................... 2,850
Audit fees................................................ 2,244
Legal fees................................................ 4,115
State registration fees................................... 1,769
Other..................................................... 859
------
Total expenses before voluntary fee reductions........... 31,936
Expenses voluntarily reduced............................. (18,055)
-------
Net Expenses............................................. 13,881
-------
Net investment income.................................... 57,814
-------
Realized Losses from Investments:
Net realized losses from investment transactions......... (12)
-------
Change in net assets resulting from operations........... $57,802
=======
- ------
(a) For the period from February 16, 1999 (commencement of operations) through
May 31, 1999.
See notes to financial statements
2
<PAGE>
CONNING MONEY MARKET PORTFOLIO
Statement of Changes in Net Assets
<TABLE>
<CAPTION>
February 16, 1999
to
May 31, 1999 (a)
(Unaudited)
-----------------
<S> <C>
From Investment Activities:
Operations:
Net investment income........................................ $ 57,814
Net realized losses from investment transactions............. (12)
----------
Change in net assets resulting from operations................ 57,802
----------
Distributions to Shareholders:
From net investment income................................... (57,814)
----------
Change in net assets from shareholder distributions........... (57,814)
----------
Change in net assets from capital transactions................ 5,040,608
----------
Change in net assets.......................................... 5,040,596
Net Assets:
Beginning of period.......................................... --
----------
End of period................................................ $5,040,596
==========
</TABLE>
- ------
(a) Period from commencement of operations.
See notes to financial statements
3
<PAGE>
CONNING MONEY MARKET PORTFOLIO
Financial Highlights
<TABLE>
<CAPTION>
February 16, 1999
to
May 31, 1999(a)
(Unaudited)
-----------------
<S> <C>
Net Asset Value, Beginning of Period.......................... $ 1.00
------
Investment Activities
Net investment income........................................ 0.012
Net realized losses from investment transactions............. -- (b)
------
Total from Investment Activities............................. 0.012
------
Distributions
Net investment income........................................ (0.012)
------
Total Distributions.......................................... (0.012)
------
Net Asset Value, End of Period................................ $ 1.00
======
Total Return.................................................. 1.16 %(c)
Ratios/Supplementary Data:
Net Assets at end of period (000)............................. $5,041
Ratio of expenses to average net assets....................... 0.96 %(d)
Ratio of net investment income to average net assets.......... 4.00 %(d)
Ratio of expenses to average net assets*...................... 2.21 %(d)
</TABLE>
* During the period, certain fees were voluntarily reduced. If such voluntary
fee reductions had not occurred, the ratio would have been as indicated. (a)
Period from commencement of operations. (b) Net realized loss per share was
less than $0.005. (c) Not annualized. (d) Annualized.
4
<PAGE>
CONNING MONEY MARKET PORTFOLIO
Notes to Financial Statements
May 31, 1999
(Unaudited)
1.Organization
The Conning Money Market Portfolio (the "Portfolio"), is a Portfolio of the
Mercantile Mutual Funds, Inc. (formerly known as The ARCH Fund, Inc.)(the
"Fund"), is registered under the Investment Company Act of 1940, as amended
(the "1940 Act"), as an open-end management investment company. The Fund
was organized on September 9, 1982 as a Maryland corporation and as of May
31, 1999, the Fund offered nineteen investment portfolios. The accompanying
financial statements and financial highlights are those of the Portfolio
only.
The Portfolio's investment objective is to seek current income with
liquidity and stability of principal. In pursuing its investment objective,
the Portfolio invests substantially all of its assets in a broad range of
money market instruments.
2.Significant Accounting Policies
The following is a summary of significant accounting policies followed by
the Fund in the preparation of its financial statements. The policies are
in conformity with generally accepted accounting principles. The
preparation of financial statements requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities
at the date of the financial statements and the reported amounts of income
and expenses for the period. Actual results could differ from these
estimates.
Securities valuation:
The securities of the Portfolio are valued at amortized cost. Amortized
cost valuation involves valuing an instrument at its cost initially and,
thereafter, assuming a constant amortization to maturity of any discount or
premium, regardless of the effect of fluctuating interest rates on the
market value of the instrument.
Repurchase agreements:
The Portfolio may engage in repurchase agreement transactions. Under the
terms of a typical repurchase agreement, the Portfolio takes possession of
collateral subject to an obligation of the seller to repurchase, and the
Portfolio to resell, the obligation at an agreed upon price and time,
thereby determining the yield during the Portfolio's holding period. This
arrangement results in a fixed rate of return that is not subject to market
fluctuations during the Portfolio's holding period. The value of the
collateral exceeds at all times the total amount of the repurchase
obligation, including accrued interest. In the event of counterparty
default, the Portfolio has the right to use the collateral to offset losses
incurred. There is potential for loss to the Portfolio in the event the
Portfolio is delayed or prevented from exercising its rights to dispose of
the collateral securities, including the risk of a possible decline in the
value of the underlying securities during the period while the Portfolio
seeks to assert its rights. The Portfolio's investment adviser (or sub-
investment adviser), acting under the supervision of the Board of
Directors, reviews the value of the collateral and the creditworthiness of
those banks and dealers with which the Portfolio enters into repurchase
agreements to evaluate potential risks.
Securities transactions and investment income:
Securities transactions are recorded on the trade date. Realized gains and
losses on investments sold are recorded on the identified cost basis.
Interest income, including accretion of discount and amortization of
premium on investments (where applicable), is accrued on a daily basis.
Dividend income is recorded on the ex-dividend date.
Continued
5
<PAGE>
CONNING MONEY MARKET PORTFOLIO
Notes to Financial Statements, Continued
May 31, 1999
(Unaudited)
Securities lending:
To increase return, the Portfolio may, from time to time, lend portfolio
securities to broker-dealers, banks or institutional borrowers of
securities pursuant to agreements requiring that the loans be continuously
secured by collateral equal in value to at least the market value of the
securities loaned. Collateral for such loans may include cash, securities
of the U.S. Government, or its agencies or instrumentalities, irrevocable
letters of credit, or any combination thereof. The collateral must be
valued daily and, should the market value of the loaned securities
increase, the borrower must furnish additional collateral to the Portfolio.
By lending its securities, the Portfolio can increase its income by
continuing to receive interest or dividends on the loaned securities as
well as either investing the cash collateral in short-term instruments or
obtaining yield in the form of interest paid by the borrower when non-cash
collateral, such as U.S. Government securities, are held by the Portfolio.
Loans are subject to termination by the Portfolio or the borrower at any
time. The risks to the Portfolio of lending securities are that the
borrower may fail to provide additional collateral when required, or fail
to return the borrowed securities when due. In addition, if cash collateral
invested by the Portfolio is less than the amount required to be returned
to the borrower as a result of a decrease in the value of the cash
collateral investments, the Portfolio must compensate the borrower for the
deficiency.
Dividends and distributions to shareholders:
The Portfolio declares dividends daily from net investment income and pays
such dividends monthly, no later than five business days after the end of
each month. Net realized capital gains are distributed at least annually.
Additional distributions of net investment income and capital gains may be
made at the discretion of the Board of Directors in order to comply with
certain distribution requirements of the Internal Revenue Code.
Distributions from net investment income and from net realized capital
gains are determined in accordance with federal income tax regulations
which may differ from generally accepted accounting principles. These
"book/tax" differences are either considered temporary or permanent in
nature. To the extent these differences are permanent in nature, such
amounts are reclassified within the composition of net assets based on
their federal tax-basis treatment; temporary differences do not require
reclassification. Distributions to shareholders which exceed net investment
income and net realized capital gains for financial reporting purposes but
not for tax purposes are reported as distributions in excess of net
investment income or net realized gains. To the extent they exceed net
investment income and net realized gains for tax purposes, they are
reported as distributions of capital.
Federal income taxes:
The Portfolio intends to qualify as a regulated investment company by
complying with the provisions available to registered investment companies,
as defined in applicable sections of the Internal Revenue Code, and to make
distributions of net investment income and net realized capital gains
sufficient to relieve it from all, or substantially all, federal income
taxes.
Other:
Operating expenses of the Fund not directly attributable to the Portfolio
are prorated among the portfolios of the Fund based on the relative net
assets of each portfolio or another appropriate basis. Operating expenses
directly attributable to the Portfolio are charged directly to the
Portfolio's operations.
Continued
6
<PAGE>
CONNING MONEY MARKET PORTFOLIO
Notes to Financial Statements, Continued
May 31, 1999
(Unaudited)
3.Capital Share Transactions
As of May 31, 1999, the Fund's Articles of Incorporation authorize the
Board of Directors, in its discretion, to issue up to twenty billion full
and fractional shares of capital stock, $.001 par value per share, and to
classify or reclassify any unissued shares of the Fund into one or more
additional classes. The Fund's shares are currently classified into twenty
classes of shares consisting of one or more series, including Class T
shares, which represent interest in the Conning Money Market Portfolio.
Transactions in shares of the Portfolio were as follows:
<TABLE>
<CAPTION>
For the
period ended
May 31, 1999 (a)
(Unaudited)
----------------
<S> <C>
CAPITAL TRANSACTIONS:
Proceeds from shares issued................................ $5,000,009
Dividends reinvested....................................... 40,599
----------
Total net increase from capital transactions................ $5,040,608
==========
SHARE TRANSACTIONS:
Issued..................................................... 5,000,009
Reinvested................................................. 40,599
----------
Total net increase from share transactions.................. 5,040,608
==========
</TABLE>
------
(a) For the period from February 16, 1999 (commencement of operations)
through May 31, 1999.
4.Related Party Transactions
Investment advisory services are provided to the Fund by Mississippi Valley
Advisors Inc. ("MVA"), a wholly-owned subsidiary of Mercantile Bank
National Association ("Mercantile"), which in turn is a wholly-owned
subsidiary of Mercantile Bancorporation Inc. Under the terms of its
investment advisory agreement with the Fund, MVA is entitled to receive
fees from the Portfolio at an annual rate of 0.40% of the average daily net
assets of the Portfolio. Conning Asset Management Company ("Conning"), an
indirect subsidiary of GenAmerica Corporation, serves as sub-adviser to the
Portfolio. Under the terms of its sub-advisory agreement with MVA, Conning
is entitled to receive fees from MVA based on a percentage of the average
daily net assets of the Portfolio. Mercantile serves as custodian for the
Fund. Under the terms of the custodian agreement, Mercantile receives fees
computed on the average daily net assets of the Portfolio at an annual rate
of 0.02%.
BISYS Fund Services Limited Partnership d/b/a BISYS Fund Services is an
Ohio limited partnership. BISYS Fund Services Ohio, Inc. ("BISYS Ohio") is
a subsidiary of The BISYS Group, Inc. BISYS Ohio, with whom certain
officers of the Fund are affiliated, serves the Portfolio as administrator.
Such officers are paid no fees directly by the Portfolio for serving as
officers of the Fund. Under the terms of the administration agreement,
BISYS Ohio receives fees computed at an annual rate of 0.20% of the average
daily net assets of the Portfolio. BISYS Ohio also serves as transfer agent
to the Portfolio.
The Fund has adopted a Shareholder Services Plan (the "Plan") with respect
to the Portfolio. Pursuant to the Plan, the Portfolio may pay (i) broker-
dealers and other institutions ("Service Organizations") for
Continued
7
<PAGE>
CONNING MONEY MARKET PORTFOLIO
Notes to Financial Statements, Continued
May 31, 1999
(Unaudited)
shareholder liaison services and (ii) Service Organizations for
administrative support services. The fees paid for shareholder liaison
services and/or administrative support services may not exceed the annual
rates of 0.25% and 0.50%, respectively, of the Portfolio's average daily
net assets attributable to the Portfolio's outstanding shares which are
owned of record or beneficially by customers of Service Organizations. The
Fund is currently limiting the Portfolio's payments under the Plan to an
aggregate of not more than an annual rate of 0.67% of the average daily
assets attributable to the Portfolio's outstanding shares owned of record
or beneficially by customers of Service Organizations.
Fees may be voluntarily reduced to assist the Portfolio in maintaining a
competitive expense ratio. Information regarding fee reduction transactions
is as follows for the period ended May 31, 1999:
<TABLE>
<CAPTION>
Shareholder
Investment Advisory Administration Servicing
Fees Fees Fees
--------------------- -------------- -----------
Annual
fee before
voluntary Voluntary Voluntary Voluntary
fee Fee fee fee
reductions Reductions reductions reductions
---------- ---------- -------------- -----------
<S> <C> <C> <C> <C>
Conning Money Market
Portfolio............... 0.40% $5,055 $2,167 $10,833
</TABLE>
Continued
8
<PAGE>
INVESTMENT ADVISER
Mississippi Valley Advisors Inc.
One Mercantile Center
Seventh & Washington Streets
St. Louis, Missouri 63101
SUB-INVESTMENT ADVISER
Conning Asset Management Co.
700 Market Street
St. Louis, Missouri 63101
DISTRIBUTOR
BISYS Fund Services
3435 Stelzer Road
Columbus, Ohio 43219-3035
AUDITORS
KPMG LLP
Two Nationwide Plaza
Columbus, Ohio 43215
LEGAL COUNSEL
Drinker Biddle & Reath LLP
One Logan Square
18th & Cherry Streets
Philadelphia, Pennsylvania 19103-6996
TRANSFER AGENT
BISYS Fund Services Ohio, Inc.
3435 Stelzer Road
Columbus, Ohio 43219-3035
This report is submitted for the general information of the shareholders of the
Conning Money Market Portfolio. It is not authorized for distribution to pro-
spective investors unless accompanied or preceded by a current prospectus for
the Portfolio, which contains information concerning the Portfolio's investment
policies and expenses as well as other pertinent information. An investment in
the Portfolio is NOT INSURED BY THE FDIC or any other governmental agency, is
not a deposit or obligation of, or endorsed or guaranteed by, any bank, the
distributor or any of their affiliates. Although the Portfolio seeks to pre-
serve the value of your investment at $1.00 per share, it is possible to lose
money by investing in the Portfolio.
7/99
CONNING MONEY MARKET PORTFOLIO
[LOGO APPEARS HERE]
SEMI-ANNUAL REPORT
May 31, 1999
