preparations to combine some of their mutual funds, as the two banks near completion of a merger. Bank officials say the assets in seven Shawmut mutual fund portfolios will be merged into existing portfolios of Fleet's proprietary Galaxy Funds. Another four Shawmut funds will remain intact but carry the Galaxy name. Fleet's acquisition of Shawmut is slated to be approved by federal regulators this month, sources said. Once finalized, it would make Fleet the ninth-largest banking company in the country, with the 11th-largest bank mutual fund complex. "We're very excited about this merger," said Thomas N. Howe, executive vice president and managing director of Fleet Investment Services. "We will have 29 different portfolios - enough product to satisfy all sorts of investment goals and risk tolerances." The changes to the fund families, which were approved by shareholders on Oct. 30, drive a final stake into Fleet's much vaunted no-load mutual fund program. Consumers investing in the Galaxy Funds after Nov. 10 will be charged a fee of 3.75% of assets. Shareholders voted to keep four Shawmut mutual funds including growth and income, small cap equity, and Connecticut and Massachusetts municipal money market portfolios. The seven Shawmut Funds that will be consolidated after the merger will include growth equity, prime money market, limited term bond, fixed income, intermediate government bond, and Massachusetts and Connecticut municipal bond portfolios. It's unclear whether the portfolio managers of those funds will be retained by Fleet after the Shawmut Funds are consolidated. A spokeswoman for Fleet said that the bank was trying to limit any changes in the way the funds are managed and that "the dominant portfolio manager would remain in that role after the merger." "During these mergers you generally pick the one with the best record and you go with that one," said Geoffrey Bobroff, a mutual fund consultant in East Greenwich, R.I. "But sometimes when you put two banks together you are put into a situation of having excess management talent." Daniel Darst, an executive vice president for Optima Group, Fairfield, Conn., said that often investment managers will leave institutions once shareholder votes are held and mergers are approved. "It's during that time that the companies can pat themselves on the back and say they reduced costs," Mr. Darst said. Fleet however may be pressured to keep some of its adviser fees lower after the merger, experts say. Federal regulators have dictated that investors cannot charged more in advisory fees than they were before a merger takes place. Indeed, according to proxy statements sent out to its mutual fund shareholders, retail investors in the four new Galaxy Funds will pay between five and 25 basis points less than before the changes. Institutional shares of the same funds are usually not affected, Mr. Bobroff said, because "there are fewer share owners, and typically those relationships are held at a much higher level at the bank."
