Evergreen Funds, the $58 billion mutual fund arm of First Union Corp., plans to merge seven portfolios into existing funds.

The seven, which cover both equities and bonds, are considered too small to remain independent, an Evergreen spokesman said. Some of the portfolios contain less than $20 million of assets, he said.

Four are state-specific municipal funds covering New York, California, Missouri, and Massachusetts. The New York and California funds are to be merged into the Evergreen High Grade Municipal Bond Fund; the Missouri and Massachusetts funds are to be absorbed into the Evergreen Municipal Bond Fund.

A microcap stock fund is to be merged into the $2 billion Evergreen Fund, which focuses on small-cap equities, the spokesman said. And an intermediate-term government securities portfolio is to be rolled into the Evergreen U.S. Government Fund. A small balanced fund containing both stocks and bonds is to be merged into the Evergreen Growth and Income Fund.

"Being small is not an argument against a particular fund," the spokesman said, "but it does create some challenges managing assets." For example, in the municipal market managers sometimes have to buy blocks of bonds valued in the millions, he said.

The changes are awaiting the approval of the Securities and Exchange Commission and fund shareholders.

Portfolio managers will be reassigned, the spokesman said. Evergreen would have 83 portfolios after the merger.

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