<PAGE>
CONNING MONEY MARKET PORTFOLIO Schedule of Portfolio Investments
October 31, 2000
<TABLE>
<CAPTION>
Commercial Paper (85.7%)
Principal Amortized
Amount Cost (a)
---------- -----------
<S> <C> <C>
Asset-Backed (5.1%):
Triple-A1 Funding Corp., 6.51%, 11/07/00 (b)........... $5,000,000 $ 4,994,575
Triple-A1 Funding Corp., 6.51%, 11/20/00 (b)........... 5,000,000 4,982,821
-----------
9,977,396
-----------
Auto (1.0%):
General Motors Acceptance Corp., 6.48%, 11/20/00....... 2,000,000 1,993,160
-----------
Banking (5.1%):
Moat Funding LLC, 6.51%, 12/15/00 (b).................. 3,000,000 2,976,130
Zions Bancorporation, 6.63%, 11/13/00.................. 7,000,000 6,984,693
-----------
9,960,823
-----------
Beverage (2.3%):
Brown-Forman Corp., 6.54%, 11/16/00.................... 4,500,000 4,487,738
-----------
Building Society (3.6%):
Yorkshire Building Society, 6.60%, 11/14/00............ 2,200,000 2,194,834
Yorkshire Building Society, 6.50%, 12/06/00............ 5,000,000 4,968,403
-----------
7,163,237
-----------
Business Credit Institutional (4.8%):
Sweetwater Capital Corp., 6.52%, 11/02/00 (b).......... 2,000,000 1,999,638
Sweetwater Capital Corp., 6.52%, 11/06/00 (b).......... 5,000,000 4,995,472
Sweetwater Capital Corp., 6.51%, 11/20/00 (b).......... 2,500,000 2,491,410
-----------
9,486,520
-----------
Cruise Lines (1.3%):
Carnival Corp., 6.50%, 11/16/00........................ 2,500,000 2,493,229
-----------
Electronic (3.0%):
Hitachi Credit America Corp., 6.60%, 11/30/00.......... 2,525,000 2,511,779
Hitachi Credit America Corp., 6.60%, 12/05/00.......... 3,400,000 3,379,128
-----------
5,890,907
-----------
</TABLE>
<TABLE>
<CAPTION>
Commercial Paper, continued
Principal Amortized
Amount Cost (a)
---------- -----------
<S> <C> <C>
Financial Services (4.9%):
Countrywide Home Loans, 6.53%,
11/09/00............................ $8,000,000 $ 7,988,391
General Electric Capital Corp.,
6.55%, 11/06/00..................... 1,650,000 1,648,510
-----------
9,636,901
-----------
Industrial (4.8%):
Parker-Hannifin Corp., 6.48%,
11/03/00............................ 9,500,000 9,496,580
-----------
Insurance (1.0%):
Cooperative Assoc. of Tractor, 6.52%,
11/09/00............................ 2,000,000 1,997,102
-----------
Miscellaneous Business Credit (4.8%):
Barton Capital Corp., 6.50%, 11/10/00
(b)................................. 6,500,000 6,489,438
Sheffield Receivables Corp., 6.51%,
11/02/00 (b)........................ 3,000,000 2,999,458
-----------
9,488,896
-----------
Miscellaneous Personal Credit (4.2%):
Enterprise Funding Corp., 6.50%,
11/02/00 (b)........................ 5,000,000 4,999,097
Market Street Funding, 6.52%,
11/07/00 (b)........................ 461,000 460,499
Market Street Funding, 6.49%,
12/12/00 (b)........................ 2,000,000 1,985,217
Thunder Bay Funding Corp., 6.51%,
11/09/00 (b)........................ 772,000 770,883
-----------
8,215,696
-----------
Mortgage Bank (3.5%):
Cooper River Funding, 6.54%,
11/17/00............................ 7,000,000 6,979,653
-----------
Personal Credit Institution (8.3%):
Delaware Funding Corp., 6.57%,
11/07/00 (b)........................ 2,000,000 1,997,833
Edison Asset Securitization, 6.50%,
11/01/00 (b)........................ 4,500,000 4,500,000
World Omni Vehicles Leasing Corp.,
6.58%, 11/09/00 (b)................. 9,929,000 9,914,622
-----------
16,412,455
-----------
</TABLE>
See notes to financial statements
1
<PAGE>
CONNING MONEY MARKET PORTFOLIO Schedule of Portfolio Investments
October 31, 2000
<TABLE>
<CAPTION>
Commercial Paper, continued
Principal Amortized
Amount Cost (a)
---------- ------------
<S> <C> <C>
Pharmaceuticals (5.3%):
Allergan Inc., 6.67%, 11/01/00........................ $1,855,000 $ 1,855,000
Allergan Inc., 6.55%, 11/03/00........................ 2,400,000 2,399,127
Allergan Inc., 6.61%, 11/07/00........................ 5,325,000 5,319,187
Allergan Inc., 6.64%, 11/16/00........................ 750,000 747,947
------------
10,321,261
------------
Telecommunications (3.0%):
British Telecommunications PLC, 6.62%, 11/06/00....... 6,000,000 5,994,558
------------
Utility (19.7%):
Centennial Energy Holdings, 6.62%, 12/05/00 (b)....... 9,500,000 9,441,572
Dayton Power & Light, 6.53%, 11/06/00................. 1,750,000 1,748,413
Dayton Power & Light, 6.54%, 11/14/00................. 6,825,000 6,808,882
Dayton Power & Light, 6.55%, 11/15/00................. 1,786,000 1,781,451
Florida Power & Light Corp., 6.48%, 11/07/00.......... 9,000,000 8,990,280
Southern Company, 6.58%, 11/15/00 (b)................. 3,000,000 2,992,323
Southern Company, 6.57%, 12/07/00 (b)................. 7,000,000 6,954,010
------------
38,716,931
------------
TOTAL COMMERCIAL PAPER 168,713,043
------------
<CAPTION>
Floating Rate Notes (8.9%)
<S> <C> <C>
Insurance (4.3%):
Racers Trust--Zurich Capital, 6.9452%, 12/15/00....... 8,500,000 8,500,000
------------
Telecommunications (4.6%):
GTE Corp., 6.7637%,
1/05/01.............................................. 9,000,000 8,998,758
------------
TOTAL FLOATING RATE NOTES 17,498,758
------------
</TABLE>
<TABLE>
<CAPTION>
Time Deposits (4.1%)
Principal Amortized
Amount Cost (a)
---------- ------------
<S> <C> <C>
Banking (4.1%):
Banco Espirito Santo Euro, 7.00%, 11/27/00............. $5,000,000 $ 5,000,000
Banco Espirito Santo Euro, 6.56%, 1/26/01.............. 2,000,000 2,000,000
Banco Espirito Santo Euro, 7.031%, 7/19/01............. 1,000,000 1,000,000
------------
TOTAL TIME DEPOSITS 8,000,000
------------
<CAPTION>
Investment Company (1.8%)
Shares
----------
<S> <C> <C>
SEI Prime Obligation Money Market...................... 3,588,495 3,588,495
------------
TOTAL INVESTMENT COMPANY 3,588,495
------------
TOTAL INVESTMENTS--100.5% 197,800,296
------------
Liabilities, less Other Assets--(0.5%)................. (899,492)
------------
TOTAL NET ASSETS--100.0% $196,900,804
============
</TABLE>
------
(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
Statement of Assets and Liabilities
October 31, 2000
<TABLE>
<S> <C> <C>
Assets:
Investments, at value (cost $197,800,296).............. $197,800,296
Interest receivable.................................... 366,582
Other assets........................................... 29,810
------------
Total Assets.......................................... 198,196,688
Liabilities:
Dividends payable...................................... $988,476
Payable to affiliates.................................. 51,811
Payable for shareholder liaison and administrative
service fees.......................................... 249,925
Other liabilities...................................... 5,672
--------
Total Liabilities..................................... 1,295,884
------------
Net Assets:
Capital................................................ $196,899,437
Undistributed net investment income.................... 1,963
Undistributed net realized loss........................ (596)
------------
Net Assets............................................. $196,900,804
============
Net Assets............................................ $196,900,804
Shares................................................ 196,901,269
Offering and redemption price per share............... $1.00
=====
</TABLE>
Statement of Operations
Eleven Months Ended October 31, 2000
<TABLE>
<S> <C> <C>
Investment Income:
Interest income........................................ $12,263,599
-----------
Expenses:
Shareholder liaison and administrative service fees.... $1,440,803
Investment advisory fees............................... 768,647
Administration fees.................................... 384,324
Custodian fees......................................... 38,431
Transfer agent fees.................................... 15,078
Accounting fees........................................ 4,518
Other.................................................. 67,070
----------
Total expenses before voluntary fee reduction......... 2,718,871
Expenses voluntarily reduced.......................... (898,143)
-----------
Net Expenses.......................................... 1,820,728
-----------
Net Investment Income................................. 10,442,871
-----------
Realized Loss from Investments:
Net realized loss from investment transactions........ (596)
-----------
Change in net assets resulting from operations........ $10,442,275
===========
</TABLE>
See notes to financial statements
3
<PAGE>
CONNING MONEY MARKET PORTFOLIO
Statements of Changes in Net Assets
<TABLE>
<CAPTION>
Eleven
Months Ended Period Ended
October 31, November 30,
2000 1999(a)
------------ ------------
<S> <C> <C>
From Investment Activities:
Operations:
Net investment income............................. $ 10,442,871 $ 4,041,444
Net realized gain (loss) from investment
transactions..................................... (596) 131
------------ ------------
Change in net assets resulting from operations..... 10,442,275 4,041,575
------------ ------------
Distributions to Shareholders:
From net investment income........................ (10,442,871) (4,041,444)
------------ ------------
Change in net assets from shareholder
distributions..................................... (10,442,871) (4,041,444)
------------ ------------
Change in net assets from capital transactions..... (33,678,918) 230,580,187
------------ ------------
Change in net assets............................... (33,679,514) 230,580,318
Net Assets:
Beginning of period............................... 230,580,318 --
------------ ------------
End of period..................................... $196,900,804 $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
Financial Highlights
<TABLE>
<CAPTION>
Eleven
Months Ended Period Ended
October 31, November 30,
2000 1999(a)
------------ ------------
<S> <C> <C>
Net Asset Value, Beginning of Period........ $ 1.00 $ 1.00
-------- --------
Investment Activities
Net investment income...................... 0.050 0.034
-------- --------
Total from Investment Activities........... 0.050 0.034
-------- --------
Distributions
Net investment income...................... (0.050) (0.034)
-------- --------
Total Distributions........................ (0.050) (0.034)
-------- --------
Net Asset Value, End of Period.............. $ 1.00 $ 1.00
======== ========
Total Return................................ 5.09%(b) 3.41%(b)
Ratios/Supplementary Data:
Net Assets at end of period (000)........... $196,901 $230,580
Ratio of expenses to average net assets..... 0.95%(c),(d) 0.99%(c)
Ratio of net investment income to average
net assets................................. 5.44%(c),(d) 4.47%(c)
</TABLE>
------
(a)For the period from February 16, 1999 (initial public investment) through
November 30, 1999.
(b)Not annualized.
(c)Annualized.
(d) Without fees waived, ratios of net expenses to average net assets for the
periods ended October 31, 2000 and November 30, 1999 would have been 1.42%
and 1.47%, respectively.
See notes to financial statements
5
<PAGE>
CONNING MONEY MARKET PORTFOLIO
Notes to Financial Statements
October 31, 2000
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 October 31, 2000, the Fund offered
nineteen investment portfolios (see Note 6). 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 Portfolio 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 which
approximates market value. Amortized cost valuation involves valuing an
instrument at its cost initially and, thereafter, assuming a constant
amortization to maturity of any discount or premium.
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 no 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 October 31,
2000, Section 4(2) paper amounted to $75,944,998 or 38.6%, 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
October 31, 2000
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
October 31, 2000
As of October 31, 2000, no reclassifications were made to the Portfolio.
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.
At October 31, 2000, the Portfolio had accumulated net realized capital
loss carryovers of $596, expiring in 2007.
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 October 31, 2000, the Fund's Articles of Incorporation authorized 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.
Shareholder transactions in the Portfolio were as follows:
<TABLE>
<CAPTION>
Conning Money
Market Portfolio
----------------------------
Eleven
Months Ended Period Ended
October 31, November 30,
2000 1999(a)
------------- -------------
<S> <C> <C>
CAPITAL TRANSACTIONS:
Proceeds from shares issued................. $ 429,938,648 $ 555,184,789
Dividends reinvested........................ 10,315,340 3,180,519
Cost of shares redeemed..................... (473,932,906) (327,785,121)
------------- -------------
Total net increase (decrease) from capital
transactions................................ $ (33,678,918) $ 230,580,187
============= =============
SHARE TRANSACTIONS:
Issued...................................... 429,938,648 555,184,789
Reinvested.................................. 10,315,340 3,180,519
Redeemed.................................... (473,932,906) (327,785,121)
------------- -------------
Total net increase (decrease) from share
transactions................................ (33,678,918) 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
October 31, 2000
4.Related Party Transactions
Investment advisory services are provided to the Fund by Firstar Investment
Research & Management Company ("FIRMCO"), a wholly owned subsidiary of
Firstar Corporation. Under the terms of its investment advisory agreement
with the Fund, FIRMCO 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
Metropolitan Life Insurance Company, serves as sub-adviser to the
Portfolio. Under the terms of its sub-advisory agreement with FIRMCO,
Conning is entitled to receive fees from FIRMCO based on a percentage of
the average daily net assets of the Portfolio. Firstar Bank, N.A.
("Firstar") serves as custodian for the Fund. Prior to September 1, 2000,
Mercantile Trust Company National Association served as custodian for the
Fund. Under the terms of the custodian agreement, Firstar receives fees
computed on the average daily net assets of the Portfolio at a rate of
0.02%.
The Company has entered into a Co-Administration Agreement with BISYS Fund
Services Ohio, Inc. and Firstar Mutual Fund Services, LLC (the "Co-
Administrators") for certain administrative services. Pursuant to the Co-
Administration Agreement with the Company, the Co-Administrators are
entitled to receive a fee, computed daily and payable monthly, at the
annual rate of 0.20% of the Company's average aggregate daily net assets.
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
liaison services and (ii) Service Organizations for administrative support
services. Certain of the service organizations to which fees are paid are
affiliates of FIRMCO. 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 0.66% of the average daily net 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 October 31, 2000:
<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% $441,973 $288,243 $167,927
</TABLE>
Continued
9
<PAGE>
CONNING MONEY MARKET PORTFOLIO
Notes to Financial Statements, Continued
October 31, 2000
5.Results of Special Meeting of Shareholders (Unaudited)
At a Special Meeting of Shareholders of the Portfolio held on January 21,
2000, shareholders of the Portfolio approved a new sub-advisory agreement
between Mississippi Valley Advisors Inc. (all of the assets and liabilities
of which were subsequently acquired by Firstar Investment Research &
Management Company, LLC) and Conning Asset Management Company ("Conning")
with respect to the Portfolio in connection with the acquisition of
Conning's parent company, GenAmerica Corporation, by Metropolitan Life
Insurance Company.
The results of the shareholder vote were as follows:
<TABLE>
<CAPTION>
For Against Abstain
--- ------- ---------
<S> <C> <C>
225,070,495 697,718 2,542,630
</TABLE>
6.Subsequent Event--Special Meeting of Shareholders (Unaudited)
A Special Meeting of Shareholders of the Fund was held on November 24, 2000
at which shareholders were asked to approve an Agreement and Plan of
Reorganization providing for the reorganization of each portfolio of the
Fund, including the Portfolio, into a corresponding portfolio of Firstar
Funds, Inc. At the Special Meeting, no business was transacted with respect
to the Portfolio because a quorum was not present, although each other
portfolio of the Fund approved the Agreement and Plan of Reorganization.
The reorganization of these other portfolios into Firstar Funds, Inc. was
completed on December 11, 2000. Fund management is considering what further
action with respect to the Portfolio should be recommended to the Board of
Directors.
10
<PAGE>
CONNING MONEY MARKET PORTFOLIO
Change of Accountants
On October 16, 2000, KPMG LLP ("KPMG") resigned as the Fund's independent
auditors. KPMG's reports on the Fund's financial statements for the fiscal
years ended November 30, 1999 and November 30, 1998 contained no adverse
opinion or disclaimer of opinion nor were they qualified or modified as to
uncertainty, audit scope or accounting principles. During the Fund's fiscal
years ended November 30, 1999 and November 30, 1998 and the interim period
commencing December 1, 1999 and ending October 16, 2000, (i) there were no
disagreements with KPMG on any matter of accounting principles or
practices, financial statement disclosure or auditing scope or procedure,
which disagreements, if not resolved to the satisfaction of KPMG, would
have caused it to make reference to the subject matter of the disagreements
in connection with its reports on the Fund's financial statements for such
years, and (ii) there were no "reportable events" of the kind described in
Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of
1934, as amended.
On November 7, 2000, the Fund by action of its Board of Directors engaged
PricewaterhouseCoopers LLP ("PwC") as the independent auditors to audit the
Fund's financial statements for the 11-month fiscal period ending October
31, 2000. During the Fund's fiscal years ended November 30, 1999 and
November 30, 1998 and the interim period commencing December 1, 1999 and
ending November 7, 2000, neither the Fund nor anyone on its behalf has
consulted PwC on items which (i) concerned the application of accounting
principles to a specified transaction, either completed or proposed, or the
type of audit opinion that might be rendered on the Fund's financial
statements or (ii) concerned the subject of a disagreement (as defined in
paragraph (a)(1)(iv) of Item 304 of Regulation S-K) or reportable events
(as described in paragraph (a)(1)(v) of said Item 304).
11
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholders
of Mercantile Mutual Funds, Inc.:
In our opinion, the accompanying statement of assets and liabilities,
including the schedule of investments, and the related statements of
operations and of changes in net assets and the financial highlights present
fairly, in all material respects, the financial position of the Conning Money
Market Portfolio (one of the portfolios comprising Mercantile Mutual Funds,
Inc., hereafter referred to as the "Fund") at October 31, 2000, the results of
its operations, the changes in its net assets and the financial highlights for
the period then ended, all in conformity with accounting principles generally
accepted in the United States of America. These financial statements and
financial highlights (hereafter referred to as "financial statements") are the
responsibility of the Funds' management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our
audit of these financial statements in accordance with auditing standards
generally accepted in the United States of America, which require that we plan
and perform the audit to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audit, which included confirmation
of securities at October 31, 2000 by correspondence with the custodian,
provides a reasonable basis for our opinion. The financial statements of the
Fund as of November 30, 1999 and for the period then ended were audited by
other independent accountants whose report dated January 21, 2000 expressed an
unqualified opinion on those statements.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
December 29, 2000
12
<PAGE>
INVESTMENT ADVISER
Firstar Investment Research & Management Company, LLC
Firstar Center
777 East Wisconsin Avenue, Suite 800
Milwaukee, Wisconsin 53202
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
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue, Suite 1500
Milwaukee, WI 53202
LEGAL COUNSEL
Drinker Biddle & Reath LLP
One Logan Square
18th & Cherry Streets
Philadelphia, Pennsylvania 19103-6996
TRANSFER AGENT
Firstar Mutual Fund Services, LLC
615 East Michigan Street
Milwaukee, Wisconsin 53202
This report is submitted for the general information of the shareholders of
the Conning Money Market Portfolio. It is not authorized for distribution to
prospective investors unless accompanied or preceded by a current prospectus
for the Portfolio, which contains information concerning the Portfolio's in-
vestment policies and expenses as well as other pertinent information. An in-
vestment 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 preserve the value of your investment at $1.00 per share, it is possible to
lose money by investing in the Portfolio.
12/00
CONNING MONEY MARKET PORTFOLIO
[LOGO OF CONNING ASSET MANAGEMENT]
ANNUAL REPORT
October 31, 2000
