ST. LOUIS - Mercantile Bancorp. is hoping to round out is proprietary Arch Funds by adding a tax-exempt bond portfolio to the mix.

The $12 billion-asset banking company, through its mutual fund unit, Mississippi Valley Advisors, filed for permission from the Securities and Exchange Commission to launch the Kansas Tax-Exempt Bond Portfolio.

St. Louis-based Mercantile manages $1.8 billion of mutual fund assets, spread across 11 portfolios and three share classes.

Bank officials said the new tax-exempt fund will make it easier to market the Arch Funds to Kansas customers who want to invest in state securities, and those in higher income tax brackets.

According to federal filings, the tax-exempt fund will be administered by Bisys Fund Services and distributed by Bisys' Winsbury unit. The Little Falls, N.J.-based company will also be the transfer agent for the fund.

Class A shares of the fund will carry a 4.5% up-front sales charge, while Class B shares will have a 5% back-end load. Investors will also be levied a 0.20% administrative fee. An advisory fee is under consideration, the documents said.

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