First Fidelity Bancorp's FFB-Lexicon funds after the two banking companies' planned merger. The Evergreen Funds are mostly invested in stocks. The relatively small FFB Funds family manages only $1.8 billion in mutual funds - mostly money- market funds. First Fidelity's fund shareholders meet Dec. 12, ahead of the planned merger, which may be approved by banking regulators before yearend. Proxy statements mailed out to investors in First Fidelity's FFB-Lexicon Funds said 11 FFB fund portfolios would be absorbed by existing First Union Evergreen Funds. Five more FFB Fund portfolios will continue operating on their own, but they will adopt the Evergreen name. Changes have been expected since June, when Charlotte, N.C.-based First Union announced it would acquire Newark, N.J.-based First Fidelity. "Some of the stand-alone funds from First Fidelity will be great, given the new markets we will be in," said Barbara J. Colvin, a senior vice president at First Union Corp. and chief operating officer of Evergreen Investment Services. "They fill in some holes for us, and give us some exposure we didn't have before." The largest infusion into the Evergreen Funds will come from the FFB Cash Management Fund portfolio, which manages assets of $767.6 million. That money fund will be merged with the Evergreen Money Market Fund, boosting assets under management in that portfolio to $1.66 billion. Money market funds will be an important aspect of First Union's push into the northern markets, Ms. Colvin said. "Money market funds are your link to sweep account customers and our institutional customers," she said. "We want more exposure for those funds in our cash management accounts and capital management area." First Union will gain New Jersey and Pennsylvania tax-free funds now managed by First Fidelity. They will take the Evergreen name after the merger. First Fidelity's FFB Fixed Income Fund, the FFB Intermediate-Term Government Securities Fund, and the Lexicon Cash Management Fund will also remain intact, with just a slight name change, Ms. Colvin said. The $121.6 million-asset FFB Tax-Free Money Market Fund will be combined the Evergreen Tax Exempt Money Market Fund, which manages $932 million. On the equity side, the FFB Lexicon Small Company Growth Fund, with $24.8 million of assets under management, will be merged with the $580 million-asset Evergreen Fund. First Union's Evergreen Value Fund, which manages about $1 billion, will soak up the FFB Select Value Fund and the FFB Equity Fund that combined manage $95.3 million of assets. In the process, First Fidelity fund shareholders will no longer have to pay an up-front sales charge of 4.5% of assets every time they invest in the small-cap or equity funds. Companies that service the First Fidelity's mutual funds will also be affected by the banks' merger, with some seeing their role diminished or eliminated. In the case of the $26.1 million-asset FFB Diversified International Growth Fund, the portfolio's subadviser, Blairlogie Capital Management, will be dropped once the portfolio is merged with the Evergreen International Equity Fund, which manages $43.7 million. Fund shareholders will also decide whether to hold on to SEI Corp., which provides administrative and transfer agency services for many of the FFB Funds. First Union brought most of its mutual fund administration in-house after it acquired the Evergreen Funds from Lieber & Co. Right now, the First Union only farms out a handful of responsibilities to other companies. Custody responsibilities are handled by State Street Bank and Trust, Boston. And Furman Selz, New York, markets and distributes the funds - activities that banks are excluded from doing by federal regulators. Furman Selz also provides fund accounting and administration for the FFB Funds. It could have its duties reduced if fund shareholders approve of the changes. Robert A. Hering, Furman Selz's managing director, said that though his company will lose the administrative fees, which are based on a percentage of assets, it could make up for some of the loss as First Union's funds grow bigger.
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