<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):
-------------------------------------------------------------------------
<PAGE>
(4) Proposed maximum aggregate value of transaction:
-------------------------------------------------------------------------
(5) Total fee paid:
-------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials.
------------------------------------------------------------------------------
[_] 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:
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(4) Date Filed:
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-2-
<PAGE>
MERCANTILE MUTUAL FUNDS, INC.
----------------
NOTICE OF SPECIAL MEETING OF SHAREHOLDERS
OF THE INTERNATIONAL EQUITY PORTFOLIO
----------------
September 18, 2000
To the Shareholders of the
International Equity Portfolio of
Mercantile Mutual Funds, Inc.
A Special Meeting of Shareholders of the International Equity Portfolio (the
"Portfolio") of Mercantile Mutual Funds, Inc. (the "Fund") will be held on
October 13, 2000, at 10:00 a.m. Eastern Time, at the offices of the Fund's
legal counsel, Drinker Biddle & Reath LLP, One Logan Square, 18th and Cherry
Streets, Philadelphia, Pennsylvania 19103, for the purpose of considering and
voting upon:
(1) A proposal to approve a new sub-advisory agreement between Firstar
Investment Research & Management Company, LLC and Clay Finlay Inc. with
respect to the Portfolio; and
(2) The transaction of such other business as may properly come before
the meeting or any adjournment thereof.
The Board of Directors recommends that you vote in favor of the proposal.
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 August 28, 2000 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
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 INTERNATIONAL EQUITY
PORTFOLIO SCHEDULED FOR OCTOBER 13, 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>
MERCANTILE MUTUAL FUNDS, INC.
615 East Michigan Street
Milwaukee, Wisconsin 53202
----------------
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
International Equity Portfolio (the "Portfolio") to be held at the offices of
the Fund's legal counsel, Drinker Biddle & Reath LLP, One Logan Square, 18th
and Cherry Streets, Philadelphia, Pennsylvania 19103, on October 13, 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 ADP Proxy Services to assist in the solicitation of proxies by mail,
the internet and telephone and to tabulate votes returned at a cost of
approximately $7,000. The Fund's officers and service contractors may also
solicit proxies by telephone, facsimile or personal interview. Clay Finlay
Inc. ("CF Inc."), the proposed sub-adviser for the Portfolio as discussed in
this Proxy Statement, or its parent, Old Mutual plc, 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 September 18, 2000.
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
Firstar Investment Research & Management Company, LLC ("FIRMCO"), as
successor to Mississippi Valley Advisors Inc. ("MVA"), serves as investment
adviser to the Portfolio. MVA and CF Inc. entered into a sub-advisory
agreement dated as of August 29, 1996 (the "1996 Agreement") whereby CF Inc.
agreed to provide sub-advisory services to the Portfolio. CF Inc. currently is
a wholly-owned subsidiary of United Asset Management Corporation ("UAM").
On June 16, 2000, Old Mutual plc ("Old Mutual"), a public limited company
based in the United Kingdom, OM Acquisition Corp. ("OMAC"), a Delaware
corporation and a wholly-owned subsidiary of Old Mutual, and UAM entered into
an Agreement and Plan of Merger (the "Merger Agreement") pursuant to which Old
Mutual agreed to acquire UAM for $25 per share ("Offer Price") in cash
(subject to possible downward adjustment, as described below) through a tender
offer and merger (the "Old Mutual Transaction"). The total cost of the
acquisition of UAM is valued at $1.46 billion.
1
<PAGE>
The price to be paid in the Old Mutual Transaction is subject to downward
adjustment in the event that UAM's revenues from assets under management,
excluding the effects of market movements, decline below a specified level
prior to the consummation of the offer. The Old Mutual Transaction is subject
to a number of conditions, including (but not limited to): (i) tender by
holders of a majority of UAM's outstanding shares; (ii) the absence of any
legal restraint or prohibition preventing the transaction; (iii) expiration of
any waiting period required by antitrust laws; and (iv) approval of the Old
Mutual Transaction by fund and non-fund clients representing specified
percentages of UAM. The Merger Agreement provides that, subject to the
satisfaction or waiver of certain conditions, following completion of the
tender offer, OMAC will be merged with and into UAM and each UAM share
outstanding (other than certain dissenting shareholders) will be converted
into the right to receive the tender offer price, as adjusted, or any greater
amount per share paid pursuant to the tender offer. Each of the foregoing
conditions may be waived in whole or in part in connection with the
consummation of the Old Mutual Transaction.
As a result of the Old Mutual Transaction, CF Inc. will become an indirect
subsidiary of Old Mutual. The Old Mutual Transaction will constitute an
assignment of, and automatically terminate, the 1996 Agreement under the
Investment Company Act of 1940, as amended (the "1940 Act"). The Old Mutual
Transaction is expected to close in the fourth quarter of 2000, although there
is no assurance it will be consummated. Pursuant to the terms of the Merger
Agreement, however, Old Mutual may be required to purchase all UAM shares that
have been tendered at some time prior to the consummation of the Old Mutual
Transaction. When a majority of UAM shares have been tendered by the date on
which Old Mutual is required to purchase such shares and certain other
conditions have been satisfied, then Old Mutual will acquire a controlling
interest in UAM as a result of which CF Inc. will become an indirect
subsidiary of Old Mutual, and the 1996 Agreement will terminate, at that time.
No change in CF Inc.'s investment personnel, investment style, method of
operation, or the location where it conducts its business are contemplated as
a result of the Old Mutual acquisition of UAM. The revenue sharing agreement
and employment contracts that CF Inc. principals entered into with UAM upon
becoming a UAM affiliate will survive the Old Mutual Transaction. CF Inc. will
continue to enjoy complete autonomy in its investment process and operations.
CF Inc. will also continue to retain approximately 55% of all revenues earned
by CF Inc. Old Mutual has expressed a commitment to honor a re-equitization
plan recently negotiated between UAM and CF Inc. Up to 24% of the equity of CF
Inc. will be available to management through a combination of stock and
warrants and 50% of CF Inc. staff will be able to participate in the re-
equitization plan which is anticipated to be implemented in the near future.
At a regular meeting of the Board of Directors of the Fund held on July 11,
2000 (the "July 11, 2000 Meeting"), FIRMCO recommended that CF Inc. be
reappointed as sub-adviser to the Portfolio. At that meeting, a new sub-
advisory agreement (the "New Agreement") for the Portfolio between FIRMCO and
CF Inc. 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 were
not "interested persons" (as that term is defined in the 1940 Act) of FIRMCO
or CF Inc.
When it became apparent that Old Mutual might acquire a controlling interest
in UAM before shareholders of the Portfolio had approved the New Agreement, a
special meeting of the Board of Directors of the Fund was held on August 2,
2000 (the "August 2, 2000 Meeting"). At that meeting, an interim sub-advisory
agreement (the "Interim Agreement") between FIRMCO and CF Inc. was approved by
the Board of Directors pursuant to Rule 15a-4 under the 1940 Act. Under Rule
15a-4, an adviser (or sub-adviser) can serve pursuant to an interim advisory
(or sub-advisory) agreement for up to 150 days while a fund seeks shareholder
approval of a new
2
<PAGE>
investment advisory (or sub-advisory) agreement. Rule 15a-4 imposes the
following conditions, all of which were met in the case of the Interim
Agreement:
(i) the compensation under the interim contract may be no greater than
under the previous contract;
(ii) the fund's board of directors, including a majority of the
independent directors, has voted in person to approve the interim contract
before the previous contract is terminated;
(iii) the fund's board of directors, including a majority of the
independent directors, determines that the scope and quality of services to
be provided to the fund under the interim contract will be at least
equivalent to the scope and quality of services provided under the previous
contract;
(iv) the interim contract provides that the fund's board of directors or
a majority of the fund's outstanding voting securities may terminate the
interim contract at any time, without the payment of any penalty, on not
more than 10 calendar days' written notice to the adviser (or sub-adviser);
(v) the interim contract contains the same provisions as the previous
contract with the exception of effective and termination dates, provisions
required by Rule 15a-4 and other differences determined to be immaterial by
the fund's board; and
(vi) the interim contract provides in accordance with the specific
provisions of Rule 15a-4 for the establishment of an escrow account for
fees received under the interim contract pending approval of a new contract
by shareholders.
At the August 2, 2000 Meeting, the Board of Directors of the Fund also
reapproved the New Agreement, after taking into consideration the Interim
Agreement. This action was taken 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 were not "interested persons" (as that term is defined in the
1940 Act) of FIRMCO and CF Inc. The Interim Agreement will become effective
when Old Mutual acquires a controlling interest in UAM.
When the Interim Agreement does become effective, the sub-advisory fees
earned by CF Inc. during the interim period will be held in an interest-bearing
escrow account at the Fund's custodian, Firstar Bank, N.A., as successor to
Mercantile Trust Company National Association. Fees that are paid to the escrow
account, including interest earned, will be paid to CF Inc. if the Portfolio's
shareholders approve the New Agreement within 150 days of the date of the
Interim Agreement. If shareholders of the Portfolio do not approve the New
Agreement within 150 days of the date of the Interim Agreement, then CF Inc.
will be paid, out of the escrow account, the lesser of: (i) any costs incurred
in performing the Interim Agreement, plus interest earned on the amount while
in escrow; or (ii) the total amount in the escrow account, plus interest if
earned.
The Board of Directors of the Fund is proposing that shareholders of the
Portfolio approve the New Agreement to ensure that CF Inc. will continue to act
as the Portfolio's sub-adviser. If the New Agreement is approved, that approval
will be viewed as an implicit approval of the Interim Agreement by shareholders
and CF Inc. will receive any escrowed fees plus interest.
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.
3
<PAGE>
DESCRIPTION OF THE NEW AGREEMENT
Terms and Fees. The terms and conditions of the New Agreement with CF Inc.
are substantially identical to those of the 1996 Agreement, except for the
effective date and termination date.
As investment adviser, FIRMCO 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, 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, CF Inc. will assist FIRMCO 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, CF Inc.: (a) will prepare, subject to FIRMCO's approval, lists
of foreign countries for investment by the Portfolio and determine from time to
time what securities and other investments will be purchased, retained or sold
for the Portfolio, including, with the assistance of FIRMCO, the Portfolio's
investments in futures and forward currency contracts; (b) will manage in
consultation with FIRMCO the Portfolio's temporary investments in securities;
(c) will place orders pursuant to its investment determinations for the
Portfolio either directly with the issuer or with any broker or dealer; (d)
will not purchase shares of the Portfolio for itself or for accounts with
respect to which it exercises sole investment discretion in connection with
such transactions except as permitted by law and by the Fund's Board of
Directors; (e) will manage the Portfolio's overall cash position and determine
from time to time what portion of the Portfolio's assets will be held in
different currencies; (f) will provide FIRMCO with foreign broker research, a
quarterly review of international economic and investment developments, and
occasional "White Papers" on international investment issues; (g) will attend
regular business and investment-related meetings with the Fund's Board of
Directors and FIRMCO if requested to do so by the Fund and/or FIRMCO; and (h)
will maintain books and records with respect to the Portfolio's securities
transactions, furnish to FIRMCO 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 FIRMCO 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 FIRMCO and the maximum
sub-advisory fees payable by FIRMCO to CF Inc. will not change as a result of
approval of the New Agreement. The maximum annual advisory fee rate payable by
the Portfolio to FIRMCO is 1.00% of the Portfolio's average daily net assets,
computed daily and payable monthly. Under both the 1996 Agreement and the New
Agreement, the annual sub-advisory fee rate payable by FIRMCO to CF Inc. is
.75% of the first $50 million of the Portfolio's average daily net assets, plus
.50% of the next $50 million of average daily net assets, plus 25% of average
daily net assets in excess of $100 million, computed daily and payable monthly.
The sub-advisory fees payable by FIRMCO to CF Inc. under both the 1996
Agreement and the New Agreement are the responsibility of FIRMCO 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 fiscal year ended
November 30, 1999 were $785,618 and $526,364, 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 for the
fiscal year ended November 30, 1999 were 1.00% and .67%, respectively, of the
Portfolio's average daily net assets. The fee waivers are voluntary and may be
terminated at any time.
4
<PAGE>
The New Agreement provides that CF Inc. 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 CF Inc. 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 CF Inc. 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 CF Inc. will bear a proportionate share of
any expense reimbursements made by FIRMCO under its advisory agreement with
respect to the Portfolio, by waiving fees otherwise payable to 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, CF Inc. 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, CF Inc. will use its reasonable
best efforts to seek the most favorable execution of orders, after taking into
consideration all factors that CF Inc. 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, CF Inc. 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 CF Inc.
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 CF Inc.'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 FIRMCO and CF Inc. and does not
reduce the advisory fees payable to FIRMCO 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 FIRMCO or CF Inc. 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 FIRMCO and CF Inc. 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 FIRMCO or CF Inc.
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, CF Inc. 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 FIRMCO, CF Inc., the Fund's
principal underwriter, or any affiliated person thereof, except as permitted by
law.
5
<PAGE>
The New Agreement will become effective on the date of its approval by the
Portfolio's shareholders, and will continue in effect until January 31, 2002.
Thereafter, if not terminated, the New Agreement will 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). 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 FIRMCO or CF Inc. on 60 days'
written notice.
Evaluation by the Fund's Directors. At both the July 11, 2000 Meeting and the
August 2, 2000 Meeting, 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 its 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) CF Inc.'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 1996 Agreement; and (d) CF Inc.'s representation that
the persons currently responsible for the investment policies of CF Inc. will
be the same persons who will direct CF Inc.'s investment policies under the New
Agreement. 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, FIRMCO's ultimate parent.
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, FIRMCO,
which has principal offices located at 777 East Wisconsin Avenue, Suite 800,
Milwaukee, Wisconsin 53202, will continue to serve as the Portfolio's adviser
under its existing advisory agreement dated as of April 1, 1991 and CF Inc.
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,
FIRMCO will manage the Portfolio while considering other alternatives,
including the possible recommendation of another sub-adviser.
6
<PAGE>
THE FUND'S BOARD OF DIRECTORS RECOMMENDS THAT
SHAREHOLDERS VOTE "FOR" THE NEW AGREEMENT
VOTING INFORMATION
General Information. The Board of Directors of the Fund is furnishing this
Proxy Statement in connection with the solicitation of proxies for the Special
Meeting. It is expected that the solicitation of proxies will be primarily by
mail. Officers and service contractors of the Fund may also solicit proxies by
telephone or otherwise. In this connection, the Fund has retained ADP Proxy
Services ("ADP") to assist in the solicitation of proxies. Shareholders may
vote (1) by mail, by marking, signing, dating and returning the enclosed Proxy
Card in the enclosed postage-paid envelope, (2) by touch-tone voting, or (3)
by on-line voting. 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 Special
Meeting and voting in person. Authorization to permit ADP to execute proxies
may be obtained by telephonic or electronically transmitted instructions from
shareholders of the Portfolio. The Directors of the Fund believe that the
procedures that will be followed with respect to touch-tone voting and on-line
voting are reasonably designed to ensure that the identity of the shareholder
casting the vote is accurately determined and that the voting instructions of
the shareholder are accurately determined.
Record Date. Only shareholders of record of the Portfolio at the close of
business on August 28, 2000 will be entitled to vote at the Meeting. On that
date, there were 240,262 shares of Class H Common Stock (Investor A Shares),
7,403,934 shares of Class H Common Stock--Special Series 1 (Trust Shares),
1,109,532 shares of Class H Common Stock--Special Series 2 (Institutional
Shares) and 48,149 shares of Class H Common Stock--Special Series 3 (Investor
B Shares) of the Portfolio, outstanding and entitled to be voted at the
Meeting. All shares of the Portfolio will vote in the aggregate and not by
class at the Meeting.
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.
Other Shareholder Information. At the record date for the Meeting, FIRMCO
and its affiliates held of record 83.37% of the outstanding shares of the
Portfolio in a fiduciary or other representative capacity for the benefit of
their customers. The Fund has been advised by Firstar Bank, N.A. that with
respect to shares over which Firstar Bank, N.A. and its affiliates have voting
authority, such shares may be voted by Firstar Bank, N.A. and/or its
affiliates in their capacity as fiduciary. At the record date for the Meeting,
the name, address and share
7
<PAGE>
ownership of each person who may have possessed sole or shared voting or
investment power with respect to more than 5% of the Portfolio's outstanding
share classes were:
<TABLE>
<CAPTION>
Percentage of
Class of Percentage of Portfolio
Name and Address Shares Owned Class Owned Shares Owned
---------------- ------------ ------------- -------------
<S> <C> <C> <C>
Conref & Co.................... Trust Shares 43.95% 36.97%
P.O. Box 387
St. Louis, MO 63166
Roland & Company............... Trust Shares 35.13% 29.55%
P.O. Box 387
St. Louis, MO 63166
Frances Dakers................. Investor A Shares 14.65% 0.40%
200 E. 89th Street 28D
New York, NY 10128
Muggs & Co..................... Institutional Shares 14.21% 1.79%
P.O. Box 1787
Milwaukee, WI 53201
Conref & Co.................... Institutional Shares 13.24% 1.67%
P.O. Box 387
St. Louis, MO 63166
Band & Co...................... Trust Shares 7.40% 6.22%
P.O. Box 1787
Milwaukee, WI 53201
Muggs & Co..................... Trust Shares 5.26% 4.42%
P.O. Box 1787
Milwaukee, WI 53201
</TABLE>
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
Firstar Funds, Inc. Reorganization. At a special meeting of the Board of
Directors of the Fund held on June 6, 2000, the Board of Directors approved the
reorganization of the Fund into Firstar Funds, Inc. ("Firstar Funds.") This
action was ratified by the Board at the July 11, 2000 Meeting. The proposed
reorganization will be submitted to a vote of the shareholders of the Fund at a
meeting to be held on or about November 8, 2000. If the reorganization is
approved by shareholders, and certain other conditions are satisfied, the
assets and liabilities of each of the Fund's portfolios, including the
Portfolio, will be transferred to a corresponding portfolio of Firstar Funds.
It is expected that CF Inc. will serve as sub-adviser to the Firstar Funds
portfolio that corresponds to the Portfolio. Shareholders will receive a
separate proxy statement in connection with the reorganization in the near
future.
CF Inc. CF Inc., a New York corporation with principal offices at 200 Park
Avenue, New York, New York 10166, is registered with the SEC as an investment
adviser under the Investment Advisers Act of 1940, as
8
<PAGE>
amended. CF Inc. is currently a wholly-owned subsidiary of UAM, a New York
Stock Exchange-listed company which is principally engaged, through affiliated
firms in the United States and abroad, in providing institutional investment
management services. UAM's corporate headquarters is located at One
International Place, Boston, Massachusetts 02110. UAM has approximately $188
billion in assets under management in institutional and individual private
accounts and mutual funds.
As a result of the Old Mutual Transaction, CF Inc. will become an indirect
subsidiary of Old Mutual. Old Mutual is a United Kingdom-based financial
services group with a substantial life assurance business in South Africa and
other southern African countries and an integrated, international portfolio of
activities in asset management, banking and general insurance. When the Old
Mutual Transaction is completed, Old Mutual's assets under management will
increase to approximately $275 billion. Old Mutual's corporate headquarters is
located at Lansdowne House, 57 Berkeley Square, London, UK 5D8. As of August
15, 2000, no person owned beneficially or of record 10% or more of any class
of issued and outstanding voting securities of Old Mutual or OMAC.
The name and principal occupation of the principal executive officers and
each director of CF Inc. as of August 28, 2000 were as follows:
<TABLE>
<CAPTION>
Name Position with CF Inc. Principal Occupation
---- --------------------- --------------------
<C> <S> <C>
D. Francis Finlay..... Chief Executive Chief Executive Officer, President and Co-
Officer, President and Chairman of CF Inc.
Co-Chairman of the
Board
John P. Clay.......... Co-Chairman of the Principal and Co-Chairman of the Board of CF
Board Inc.
D. Arthur Barton...... Director and Chief Principal and Chief Administration Officer
Administration Officer of CF Inc.
Gregory M. Jones...... Director Principal and Senior Portfolio Manager of CF
Inc.
Susan B. Kenneally.... Director Principal and Senior Portfolio Manager of CF
Inc.
Peter G. R. Lyon...... Director Principal of CF Inc.
Virginie Maisonneuve.. Director Principal and Senior Portfolio Manager of CF
Inc.
Frances R. E. Dakers.. Director Principal and Senior Portfolio Manager of CF
Inc.
Robert C. Schletter... Director Principal and Senior Portfolio Manager of CF
Inc.
</TABLE>
All of the above persons may be reached c/o Clay Finlay Inc., 200 Park
Avenue, New York, New York 10166.
CF Inc. does not serve as adviser or sub-adviser to any other registered
investment company that has an investment objective similar to that of the
Portfolio.
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 during the two-year period after the change in
control whereby the investment adviser (or predecessor or
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<PAGE>
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). In the Merger Agreement, UAM and Old
Mutual have agreed to use their best efforts to ensure that the Old Mutual
Transaction will not cause the imposition of an unfair burden on the Fund. To
avoid any "unfair burden" being imposed on the Fund, certain extraordinary
expenses incurred by the Fund on account of the Old Mutual Transaction, such
as proxy expenses, will be paid directly by either CF Inc. or Old Mutual. The
second condition 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 CF Inc. or Old Mutual or any of their affiliates within
the meaning of the 1940 Act is currently a director of the Fund, and Old
Mutual and UAM have agreed in the Merger Agreement that 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. Firstar Bank, N.A. ("Firstar Bank"), as successor to
Mercantile Trust Company National Association ("Mercantile Trust"), serves as
the custodian of the Portfolio's assets. The Fund pays Firstar Bank, which is
an affiliate of FIRMCO, an annual fee for its custodial services equal to .19%
of the first $50 million of the Portfolio's average daily net assets, .175% of
the next $50 million of average daily net assets, .15% of the next $150
million of average net assets, and .125% of average daily net assets in excess
of $250 million, as well as certain transaction charges. For the fiscal year
ended November 30, 1999, the Portfolio paid Mercantile Trust custody fees of
$29,598.
Affiliates of FIRMCO are also entitled to receive fees ("Plan Fees") under
the Fund's Administrative Services Plans with respect to the Portfolio's Trust
Shares and Institutional Shares and under the Fund's Distribution and Service
Plans with respect to the Portfolio's Investor A Shares and Investor B Shares
at the maximum annual rates of .30%, .30% .30% and 1.00% of the average daily
net asset value of the respective share classes that are outstanding from time
to time. These fees are for shareholder liaison, shareholder administrative
support and distribution-related services. For the fiscal year ended November
30, 1999, Plan Fees paid by the Portfolio to affiliates of FIRMCO were $0 with
respect to Trust Shares, $27,139 with respect to Institutional Shares, $2,656
with respect to Investor A Shares and $4,838 with respect to Investor B
Shares.
Effective January 1, 2000, Firstar Mutual Fund Services, LLC ("Firstar"), an
affiliate of FIRMCO, and BISYS Fund Services Ohio, Inc. ("BISYS Ohio") serve
as co-administrators to the Fund. For their administrative services, Firstar
and BISYS Ohio are entitled to receive a joint fee, computed daily and paid
monthly, at the annual rate of .20% of the Portfolio's average daily net
assets. Effective March 20, 2000, Firstar also serves as the Fund's transfer
agent and dividend disbursing agent and is entitled to receive annual base
fees of $10,000 each for the Portfolio's Investor A Shares and Investor B
Shares and $8,000 each for the Portfolio's Trust Shares and Institutional
Shares, plus certain per account fees. No payments were made by the Fund to
Firstar for these administration and transfer agency services for the fiscal
year ended November 30, 1999.
It is expected that the entities named above will continue to provide the
services described to the Portfolio after the Meeting.
1996 Agreement. The 1996 Agreement was approved by the Fund's Board of
Directors on August 21, 1996 and was approved by the Portfolio's shareholders
at a special meeting held on October 18, 1996. The 1996 Agreement was last
approved by the Fund's Board of Directors on January 18, 2000.
10
<PAGE>
Co-Administrators and Distributor. As previously noted, Firstar and BISYS
Ohio serve as the Fund's co-administrators. BISYS Fund Services Limited
Partnership ("BISYS Fund Services") serves as the exclusive distributor of the
shares of the Fund. BISYS Ohio and BISYS Fund Services are both subsidiaries of
The BISYS Group, Inc. with principal offices located at 3435 Stelzer Road,
Columbus, Ohio 43219. The principal offices of Firstar 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.
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: September 18, 2000
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 AT 615 E. MICHIGAN STREET, P.O. BOX 3011, MILWAUKEE, WI
53201-3011 OR BY CALLING 1-800-452-2724.
11
<PAGE>
EXHIBIT A
SUB-ADVISORY AGREEMENT
(International Equity Fund)
AGREEMENT made as of , 2000 between Firstar Investment Research &
Management Company, LLC ("FIRMCO"), a Wisconsin corporation (the "Adviser"),
and Clay Finlay Inc., a New York 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
International Equity 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;
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-
advisor 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 prepare, subject to the Adviser's approval, lists of foreign
countries for investment by the Portfolio and determine from time to time
what securities and other investments will be purchased, retained or sold
for the Portfolio, including, with the assistance of the Adviser, the
Portfolio's investments in futures and forward currency contracts;
(b) will manage in consultation with the Adviser the Portfolio's
temporary investments in securities;
(c) will place orders pursuant to its investment determinations for the
Portfolio either directly with the issuer or with any broker or dealer;
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<PAGE>
(d) will not purchase shares of the Portfolio for itself or for accounts
with respect to which it exercises sole investment discretion in connection
with such transactions except as permitted by the Fund's Board of Directors
or by federal, state and local law;
(e) will manage the Portfolio's overall cash position, and determine from
time to time what portion of the Portfolio's assets will be held in
different currencies;
(f) will provide the Adviser with foreign broker research, a quarterly
review of international economic and investment developments, and
occasional "White Papers" on international investment issues;
(g) 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
(h) 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
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<PAGE>
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
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 Adviser, calculated at the annual
rate of .75% of the first $50 million of the Portfolio's average daily net
assets, plus .50% of the next $50 million of average daily net assets, plus
.25% of average daily net assets in excess of $100 million.
(b) If the Adviser reimburses the Fund, pursuant to Section 8(b) of the
Advisory Agreement, with respect to the Portfolio, 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.
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<PAGE>
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.
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 upon its
approval by the shareholders of the Portfolio in accordance with the terms of
the 1940 Act. Unless sooner terminated as provided herein, this Agreement
shall continue until January 31, 2002, 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 the 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 by the vote of a
majority of the outstanding voting securities of the Portfolio.
13. Notice. Any notice, advice or report to be given pursuant to this
Agreement shall be delivered or mailed:
To Sub-Adviser at:
200 Park Avenue
New York, NY 10166
To the Adviser at:
One Firstar Plaza
7th and Washington Streets
Suite 2100
St. Louis, MO 63101
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<PAGE>
To the Fund at:
c/o W. Bruce McConnel, Esq.
Drinker Biddle & Reath LLP
One Logan Square
18th and Cherry Streets
Philadelphia, PA 19103-6996
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
Maryland 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]
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