John Hancock Merging Five Closed-End Stock Funds

John Hancock Funds is merging five closed-end stock funds with similar investment strategies in an effort to cut expenses and increase liquidity.

The boards of the $227 million (PDF Quote)Patriot Premium Dividend Fund I, the $183 million (PGD Quote)Patriot Global Dividend Fund , the $157 million (PPF Quote)Patriot Preferred Dividend Fund and the $227 million (DIV Quote)Patriot Select Dividend Trust approved the reorganization into the $298 million (PDT Quote)Patriot Premium Dividend Fund II in December, and a prospectus is being mailed to investors this week. Shareholders will vote on April 23.

All five of the funds are subadvised by Gregory Phelps and Mark Maloney of Sovereign Asset Management, a wholly owned unit of John Hancock.

If the merger is approved, shareholders of the first four funds will collect newly issued shares of the Patriot Premium Dividend Fund II. Those shares will equal the aggregate net asset value of the shares held at the time of reorganization. Each fund's decision will be made independently of the others' and will proceed even should one or more funds refuse the reorganization.

Andy Arnott, vice president of product management and product development at John Hancock, says trading in a single, larger fund would be more liquid than it is in the five individual funds. The rationale "is pretty straight-forward. It's about expense savings and market liquidity," he says. The company chose the Patriot Premium Dividend Fund II as the surviving investment vehicle because it is the largest of the group.