<PAGE>
CONNING MONEY MARKET PORTFOLIO Schedule of Portfolio Investments
November 30, 1999
<TABLE>
<CAPTION>
Time Deposit (3.0%)
Principal Amortized
Amount Cost
---------- -----------
<S> <C> <C>
Banking (3.0%):
Banco Espirito Santo Euro, 5.72%, 7/19/00.............. $1,000,000 $ 1,000,000
Banco Espirito Santo Euro, 5.88%, 1/10/00.............. 4,000,000 4,000,000
Banco Espirito Santo Euro, 6.00%, 5/10/00.............. 2,000,000 2,000,000
-----------
TOTAL TIME DEPOSIT 7,000,000
-----------
Commercial Paper (96.1%)
Asset-Backed (13.1%):
Grand Funding, 5.98%, 1/7/00 (b)....................... 2,500,000 2,484,635
MPF Limited, 5.66%, 12/3/99 (b)........................ 3,000,000 2,999,058
MPF Limited, 6.22%, 1/6/00 (b)......................... 2,000,000 1,987,700
MPF Limited, 6.10%, 1/10/00 (b)........................ 5,000,000 4,966,111
Pegasus Two Ltd., 6.18%, 1/13/00 (b)................... 2,000,000 1,985,380
Pegasus Two Ltd., 6.10%, 1/21/00 (b)................... 5,000,000 4,956,792
Triple-A Funding Corp., 5.31%, 12/30/99 (b)............ 10,825,00 10,778,374
-----------
30,158,050
-----------
Banking (11.4%):
Moat Funding, 5.40%, 12/15/99 (b)...................... 500,000 498,950
Moat Funding, 5.45%, 12/17/99 (b)...................... 8,000,000 7,980,622
Moat Funding, 6.03%, 1/12/00 (b)....................... 566,000 562,018
Moat Funding, 6.09%, 1/14/00 (b)....................... 600,000 595,578
Moat Funding, 6.15%, 1/19/00 (b)....................... 1,800,000 1,785,104
Fayette Funding, 5.57%, 12/22/99....................... 7,000,000 6,977,256
Zions Bancorporation, 6.21%, 1/18/00................... 4,000,000 3,967,200
Zions Bancorporation, 6.21%, 1/20/00................... 4,000,000 3,965,889
-----------
26,332,617
-----------
Bond Insurance (1.8%):
Cooperative Associates of Trac A, 6.01%, 1/7/00........ 1,800,000 1,788,993
</TABLE>
<TABLE>
<CAPTION>
Commercial Paper, continued
Principal Amortized
Amount Cost
----------- -----------
<S> <C> <C>
Cooperative Associates of Trac B, 5.39%, 12/6/99....... $ 2,450,000 $ 2,448,172
-----------
4,237,165
-----------
Business Credit Institution (6.4%):
Fairway Finance, 5.15%, 12/16/99 (b)................... 10,904,000 10,878,960
Wood Street Funding, 5.33%, 12/29/99 (b)............... 4,000,000 3,982,609
-----------
14,861,569
-----------
Financial Services (4.3%):
Hitachi Credit America Corp., 5.63%, 1/21/00........... 5,000,000 4,960,121
Hitachi Credit America Corp., 6.15%, 1/26/00........... 5,000,000 4,952,167
-----------
9,912,288
-----------
Install Sales Financial (0.7%):
Sheffield Receivables, 5.39%, 12/8/99 (b).............. 1,700,000 1,698,225
-----------
Miscellaneous Business Credit (19.2%):
Barton Capital Corp., 5.62%, 12/6/99 (b)............... 753,000 752,414
Barton Capital Corp., 6.06%, 1/19/00 (b)............... 1,710,000 1,696,035
Compass Securitization, 5.42%, 12/10/99 (b)............ 8,839,000 8,827,023
Compass Securitization, 6.09%, 1/21/00 (b)............. 2,500,000 2,478,679
Eaglefunding Capital Corp., 5.44%, 12/6/99 (b)......... 5,000,000 4,996,250
Eureka Securitization, 5.62%, 12/13/99 (b)............. 500,000 499,067
Lexington Parker Capital, 5.34%, 12/1/99 (b)........... 10,000,000 10,000,001
Thames Asset Global Sec, 6.09%, 1/18/00 (b)............ 2,000,000 1,983,920
Thames Asset Global Sec, 6.27%, 1/24/00 (b)............ 1,500,000 1,485,893
Tulip Funding Corp., 5.92%, 1/14/00 (b)................ 5,000,000 4,963,822
Windmill Funding Corp., 5.41%, 12/6/99 (b)............. 1,500,000 1,498,879
Windmill Funding Corp., 5.94%, 1/7/00 (b).............. 1,500,000 1,490,843
Windmill Funding Corp., 5.91%, 1/13/99 (b)............. 3,500,000 3,475,293
-----------
44,148,119
-----------
</TABLE>
See notes to financial statements
1
<PAGE>
CONNING MONEY MARKET PORTFOLIO Schedule of Portfolio Investments
November 30, 1999
<TABLE>
<CAPTION>
Commercial Paper, continued
Principal Amortized
Amount Cost
----------- -----------
<S> <C> <C>
Miscellaneous Personal Credit (9.9%):
Clipper Receivables, 5.38%, 12/15/99 (b)............ $ 3,250,000 $ 3,243,238
Old Line Funding, 5.38%, 12/1/99 (b)................ 4,522,000 4,522,000
Old Line Funding, 5.37%, 12/3/99 (b)................ 3,000,000 2,999,108
Thunder Bay Funding, Inc., 5.56%, 12/10/99 (b)...... 9,500,000 9,486,843
Thunder Bay Funding, Inc., 6.08%, 1/11/00 (b)....... 2,500,000 2,482,233
-----------
22,733,422
-----------
Mortgage Bank (3.5%):
Cooper River Funding, 5.40%, 12/9/99................ 8,000,000 7,990,333
-----------
Oil & Exploration, Production & Services (4.1%):
Centennial Energy Holdings, 5.42%, 12/1/99 (b)...... 3,005,000 3,005,000
Centennial Energy Holdings, 5.42%, 12/8/99 (b)...... 4,000,000 3,995,799
Centennial Energy Holdings, 5.48%, 12/21/99 (b)..... 1,000,000 996,956
Centennial Energy Holdings, 6.18%, 1/21/00 (b)...... 1,540,000 1,526,692
-----------
9,524,447
-----------
Personal Credit Institution (16.2%):
Check Point Charlie, 5.47%, 12/8/99 (b)............. 1,627,000 1,625,270
Check Point Charlie, 5.45%, 12/10/99 (b)............ 618,000 617,158
Check Point Charlie, 6.18%, 1/14/00 (b)............. 5,000,000 4,961,378
Delaware Funding Corp., 5.33%, 12/7/99 (b).......... 8,000,000 7,992,893
Edison Asset Securitization, 5.59%, 12/9/99 (b)..... 2,175,000 2,172,308
Seven Hills Funding Corp., 6.05%, 1/21/00 (b)....... 10,000,000 9,914,291
</TABLE>
<TABLE>
<CAPTION>
Commercial Paper, continued
Shares or
Principal Amortized
Amount Cost
---------- ------------
<S> <C> <C>
World Omni, 5.44%, 12/1/99 (b)....................... $5,000,000 $ 5,000,000
World Omni, 5.40%, 12/16/99 (b)...................... 5,000,000 4,988,750
------------
37,272,048
------------
Pharmaceuticals (2.9%):
Allergan, Inc., 5.42%, 12/22/99...................... 1,665,000 1,659,736
Allergan, Inc., 5.92%, 1/18/99....................... 5,000,000 4,960,533
------------
6,620,269
------------
Utilities (2.6%):
Progress Capital Holdings, 6.05%, 1/11/00............ 6,000,000 5,958,658
------------
TOTAL COMMERCIAL PAPER 221,447,210
------------
Investment Companies (1.3%)
SEI Prime Obligation Money Market.................... 3,104,800 3,104,800
------------
TOTAL INVESTMENT COMPANIES 3,104,800
------------
TOTAL INVESTMENTS
(Amortized Cost $231,552,010)(a)--
100.4%......................................................... 231,552,010
------------
Liabilities in excess of other assets--(0.4%) (971,692)
------------
TOTAL NET ASSETS--100.0% $230,580,318
============
</TABLE>
- --------
Percentages indicated are based on net assets of $230,580,318.
(a) Cost for federal income tax and financial reporting purposes are the same.
(b) Rule 144A, Section 4(2) or other security which is restricted as to resale
to institutional investors. The Portfolio's sub-adviser has determined
these securities to be liquid.
See notes to financial statements
2
<PAGE>
CONNING MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
Statement of Assets and Liabilities
November 30, 1999
<S> <C> <C>
Assets:
Investments, at value (cost $231,552,010)................. $231,552,010
Cash...................................................... 37
Interest and dividends receivable......................... 98,329
------------
Total Assets............................................. 231,650,376
Liabilities:
Dividends payable......................................... $860,900
Accrued expenses and other liabilities:
Investment advisory fees................................. 31,935
Administrative fees...................................... 2,870
Shareholder liason and administrative services fees...... 124,737
Custodian fees........................................... 3,653
Other liabilities........................................ 45,963
--------
Total Liabilities........................................ 1,070,058
------------
Net Assets:
Capital................................................... 230,578,355
Undistributed net investment income....................... 1,963
------------
Net Assets................................................ $230,580,318
============
Net Assets............................................... $230,580,318
Shares................................................... 230,580,187
Offering and redemption price per share.................. $1.00
=====
</TABLE>
<TABLE>
<CAPTION>
Statement of Operations
For the period ended November 30, 1999(a)
<S> <C> <C>
Investment Income:
Interest income............................................ $4,912,748
Dividend income............................................ 20,365
----------
Total Investment Income................................... 4,933,113
Expenses:
Investment advisory fees................................... $361,387
Administration fees........................................ 180,695
Shareholder liason and administrative services fees........ 677,703
Accounting fees............................................ 1,190
Custodian fees............................................. 18,132
Transfer agent fees........................................ 7,349
Other...................................................... 81,372
--------
Total expenses before voluntary fee reductions............ 1,327,828
Expenses voluntarily reduced.............................. (436,159)
----------
Net Expenses.............................................. 891,669
----------
Net Investment Income..................................... 4,041,444
----------
Realized Gains from Investments:
Net realized gains from investment transactions........... 131
----------
Change in net assets resulting from operations............ $4,041,575
==========
</TABLE>
- --------
(a) For the period from February 16, 1999 (initial public investment) through
November 30, 1999.
See notes to financial statements
3
<PAGE>
CONNING MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
Statement of Changes in Net Assets
For the
period ended
November 30,
1999(a)
------------
<S> <C>
From Investment Activities:
Operations:
Net investment income............................................ $ 4,041,444
Net realized gains from investment transactions.................. 131
------------
Change in net assets resulting from operations.................... 4,041,575
------------
Distributions to Shareholders:
From net investment income....................................... (4,041,444)
------------
Change in net assets from shareholder distributions............... (4,041,444)
------------
Change in net assets from capital transactions.................... 230,580,187
------------
Change in net assets.............................................. 230,580,318
Net Assets:
Beginning of period.............................................. --
------------
End of period.................................................... $230,580,318
============
</TABLE>
- --------
(a) For the period from February 16, 1999 (initial public investment) through
November 30, 1999.
See notes to financial statements
4
<PAGE>
CONNING MONEY MARKET PORTFOLIO
<TABLE>
<CAPTION>
Financial Highlights
February 16,
1999
to
November 30,
1999(a)
------------
<S> <C>
Net Asset Value, Beginning of Period............................. $ 1.00
--------
Investment Activities
Net investment income........................................... 0.034
--------
Total from Investment Activities................................ 0.034
--------
Distributions
Net investment income........................................... (0.034)
--------
Total Distributions............................................. (0.034)
--------
Net Asset Value, End of Period................................... $ 1.00
========
Total Return..................................................... 3.41%(b)
Ratios/Supplementary Data:
Net Assets at end of period (000)................................ $230,580
Ratio of expenses to average net assets.......................... 0.99%(c)
Ratio of net investment income to average net assets............. 4.47%(c)
Ratio of expenses to average net assets*......................... 1.47%(c)
</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 initial public investment.
(b) Not annualized.
(c) Annualized.
See notes to financial statements
5
<PAGE>
CONNING MONEY MARKET PORTFOLIO
Notes to Financial Statements
November 30, 1999
1.Organization
Mercantile Mutual Funds, Inc. (the "Fund") is registered under the
Investment Company Act of 1940, as amended (the "1940 Act"), as an open-end
management investment company. As of November 30, 1999, the Fund offered
nineteen investment portfolios. The accompanying financial statements and
financial highlights are those of the Conning Money Market Portfolio (the
"Portfolio") only. The Fund, which was formerly known as The ARCH Fund,
Inc., was organized on September 9, 1982 as a Maryland corporation.
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 (but not less than 80%) of its
total 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.
Section 4(2) paper:
Commercial paper in which the Portfolio invests may include securities
issued by corporations without registration under the Securities Act of
1933, as amended (the "1933 Act"), in reliance on the so-called private
placement exemption in Section 4(2) of the 1933 Act ("Section 4(2) paper").
Section 4(2) paper is restricted as to disposition under the federal
securities laws in that any resale must be similarly made in an exempt
transaction. Section 4(2) paper is normally resold to other institutional
investors through or with the assistance of investment dealers who make a
market in Section 4(2) paper. Investment by the Portfolio in Section 4(2)
paper could have the effect of increasing the illiquidity of the Portfolio
during any period in which institutional investors were not longer
interested in purchasing these securities. Section 4(2) paper will not be
considered illiquid, however, if the Portfolio's sub-adviser has
determined, that a liquid trading market exists for such securities. At
November 30, 1999, Section 4(2) paper amounted to $171,818,152 or 74.5%, of
the Portfolio's net assets. The Portfolio's sub-adviser has determined
these securities to be liquid.
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
Continued
6
<PAGE>
CONNING MONEY MARKET PORTFOLIO
Notes to Financial Statements, Continued
November 30, 1999
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, is accrued on a daily basis. Dividend income is
recorded on the ex-dividend date.
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 exceed
collateral value, 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. The Portfolio did not engage in any securities lending
transactions during the period.
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.
Continued
7
<PAGE>
CONNING MONEY MARKET PORTFOLIO
Notes to Financial Statements, Continued
November 30, 1999
As of November 30, 1999, the following reclassifications have been made to
increase (decrease) such accounts with offsetting adjustments made to
capital:
<TABLE>
<CAPTION>
Accumulated
Undistributed Net Realized
Net Investment Gain/(Loss)
Income On Investments
-------------- --------------
<S> <C> <C>
Conning Money Market Portfolio................. $1,963 $(131)
</TABLE>
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.
3. Capital Share Transactions
As of November 30, 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
classes and to divide and classify shares of any class into one or more
series of such class. The Fund's shares are currently classified into
twenty classes of shares consisting of one or more series.
Shareholder transactions in the Portfolio were as follows:
<TABLE>
<CAPTION>
Conning Money
Market Portfolio
----------------
For the
period ended
November 30,
1999(a)
----------------
<S> <C>
CAPITAL TRANSACTIONS:
Proceeds from shares issued............................. $ 555,184,789
Dividends reinvested.................................... 3,180,519
Cost of shares redeemed................................. (327,785,121)
-------------
Total net increase from capital transactions............. $ 230,580,187
=============
SHARE TRANSACTIONS:
Issued.................................................. 555,184,789
Reinvested.............................................. 3,180,519
Redeemed................................................ (327,785,121)
-------------
Total net increase from share transactions............... 230,580,187
=============
</TABLE>
--------
(a) For the period from February 16, 1999 (initial public investment)
through November 30, 1999.
Continued
8
<PAGE>
CONNING MONEY MARKET PORTFOLIO
Notes to Financial Statements, Continued
November 30, 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 Trust
Company National Association ("Mercantile"), and formerly an indirect
wholly-owned subsidiary of Mercantile Bancorporation, Inc. On September 20,
1999, Mercantile Bancorporation, Inc. was merged into Firstar Corporation.
As a result of this merger, MVA is now an indirect wholly-owned subsidiary
of Firstar Corporation. 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 first $1.5 billion of average daily net
assets of the Portfolio, 0.35% of the next $1.0 billion of average daily
net assets and 0.25% of average daily net assets in excess of $2.5 billion.
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 a 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 shareholder
liason services and (ii) Service Organizations for administrative support
services. The fees paid for shareholder liason 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
more competitive expense ratio. Information regarding fee reduction
transactions are as follows for the period ended November 30, 1999:
<TABLE>
<CAPTION>
Administrative
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% $210,114 $135,521 $90,524
</TABLE>
Continued
9
<PAGE>
CONNING MONEY MARKET PORTFOLIO
Notes to Financial Statements, Continued
November 30, 1999
5. Subsequent Event--Line of Credit (Unaudited)
The Portfolio and other affiliated funds participate in a $140 million
unsecured line of credit provided by a syndicate of banks pursuant to a
credit agreement dated as of December 29, 1999. Borrowings may be made
under the credit agreement only for temporary or emergency purposes, such
as the repurchase or redemption of shares of the Portfolio. Interest is
charged to the Portfolio, based on its borrowings, at a rate per annum
equal to the Federal Funds Rate (as defined in the credit agreement) plus
0.50%. In addition, a commitment fee at the rate of 0.10% per annum, based
on the average daily unused portion of the line of credit, is allocated
among the Portfolio and the other participating funds at the end of each
calendar quarter.
6. Subsequent Event--Change in Certain Service Providers (Unaudited)
Effective January 1, 2000, BISYS Ohio and Firstar Mutual Fund Services, LLC
("FMFS"), an affiliate of Firstar Corporation, serve the Portfolio as co-
administrators. Under the terms of the co-administration agreement, BISYS
Ohio and FMFS jointly receive fees computed at an annual rate of 0.20% of
the average daily net assets of the Portfolio. In addition, at a meeting
held on January 18, 2000, the Board of Directors of the Fund approved an
agreement whereby FMFS would replace BISYS Ohio as the Portfolio's transfer
agent. This change in transfer agent is expected to occur on or about March
20, 2000.
7. Subsequent Event--Change in Control of Conning (Unaudited)
On January 6, 2000, Metropolitan Life Insurance Company ("MetLife")
acquired all of the outstanding stock of GenAmerica Corporation, which owns
a controlling interest in Conning. As a result of this transaction, Conning
is now an indirect subsidiary of MetLife. This transaction also resulted in
the assignment of the existing sub-advisory agreement between MVA and
Conning with respect to the Portfolio, which automatically terminated the
agreement. On January 6, 2000, MVA and Conning entered into a new sub-
advisory with respect to the Portfolio subject to shareholder approval, as
permitted by the terms of an exemptive order which the Securities and
Exchange Commission had issued to Conning. At a special meeting of
shareholders held on January 21, 2000, shareholders of the Portfolio
approved the new sub-advisory agreement.
10
<PAGE>
Independent Auditors' Report
The Shareholders and Board of Directors of Mercantile Mutual Funds, Inc.--
Conning Money Market Portfolio:
We have audited the accompanying statement of assets and liabilities of
Mercantile Mutual Funds, Inc.--Conning Money Market Portfolio, including the
schedule of portfolio investments, as of November 30, 1999, and the related
statement of operations, statement of changes in net assets and the financial
highlights for the period from February 16, 1999 (date of initial public
investment) through November 30, 1999. These financial statements and the
financial highlights are the responsibility of Mercantile Mutual Funds, Inc.'s
management. Our responsibility is to express an opinion on these financial
statements and financial highlights based on our audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements. Our procedures included verification of securities
owned as of November 30, 1999, by examination, correspondence with brokers and
other appropriate audit procedures. An audit also includes assessing the
accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation. We believe
that our audit provides a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Conning Money Market Portfolio as of November 30, 1999, the results of their
operations, the changes in their net assets and the financial highlights for
the period indicated herein, in conformity with generally accepted accounting
principles.
KPMG LLP
Columbus, Ohio
January 21, 2000
11
<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.
1/00
CONNING MONEY MARKET PORTFOLIO
[LOGO APPEARS HERE]
ANNUAL REPORT
November 30, 1999
