What’s happening with the FundX Upgrader Fund (FUNDX) and Aggressive Upgrader Fund (HOTFX)?
FundX Upgrader Fund (FUNDX) and Aggressive Upgrader Fund (HOTFX), which are currently mutual funds, will be converted into exchange-traded funds (ETFs) on October 17, 2022.
This process is considered a reorganization: the Upgrader Fund (FUNDX) will be reorganized as FundX ETF (XCOR) and the Aggressive Upgrader Fund (HOTFX) will be reorganized as FundX Aggressive ETF (XNAV).
The ETFs will invest in an underlying portfolio of other ETFs. The ETFs will be managed according to the same investment objectives and strategies, and the ETFs will retain the track records of the mutual funds.
Why is this happening?
By converting FUNDX and HOTFX into ETFs, we can effectively lower fees and provide greater tax efficiency for our shareholders. ETFs can benefit shareholders in the following ways:
● Greater flexibility: ETFs don’t have the same trading restrictions as mutual funds and can be traded more frequently.
● Lower overall expenses: Each ETF is expected to have lower overall expenses compared to the existing mutual fund.
● Greater tax efficiency: ETFs typically don’t distribute capital gains, which benefits shareholders who own shares in taxable accounts.
● Transparency: ETFs disclose their holdings daily, so investors always know what they own.
We have structured the conversion in a tax-wise way that helps shareholders avoid realizing taxable gains (or losses) for US federal income tax purposes. The one exception is that any fractional shares will be sold (and proceeds sent to shareholders via check), and this will be a taxable event. This will be a very minimal sale applying to only holdings of less than one share.
The FundX Funds’ board of directors, which works on behalf of shareholders, determined that converting the mutual funds into ETFs is in the best interests of shareholders and unanimously approved this reorganization.
What’s the process for converting the funds into ETFs? What should I expect as a shareholder?
Your current shares in FUNDX and/or HOTFX will be exchanged for the same number of shares (less any fractional shares) and value in the corresponding ETFs. Shares of ETFs are not issued in fractional shares, so if you own fractional shares, these will be redeemed at NAV immediately prior to the reorganization, and this will result in a small cash payment, which will be taxable if you hold the shares in a taxable account.
Once the conversion has occurred, you will no longer be a shareholder of the FundX Upgrader Fund or Aggressive Upgrader Fund; you will be a shareholder of the corresponding ETF(s).
Is there anything I need to do as a shareholder of FUNDX or HOTFX?
If you own FUNDX or HOTFX in a brokerage account that permits you to purchase securities traded in the stock market, such as ETFs, then there’s nothing you need to do. On October 17, 2022, your shares will be exchanged for shares of the ETF, and you’ll be able to purchase or trade these shares.
If you own FUNDX or HOTFX directly with our shareholder services, you will need to set up a brokerage account prior to the reorganization and then transfer your shares into the brokerage account. If you have an existing brokerage account for other assets, you’ll need to transfer your shares to your brokerage account in order to be able to purchase or trade shares of the ETF.
If you participate in an automatic investment or withdrawal plan, you should be aware that these plans will no longer be available. These plans will be turned off after October 10, 2022 and will not restart in the ETF.
How do I transfer my shares to my brokerage account?
Transferring your shares to a brokerage account should be a simple process. Reach out to the brokerage firm and tell them that you would like to transfer a mutual fund position that you hold directly into your brokerage account and that your brokerage account will need to be set up to accept ETF shares
We suggest you provide your broker with a copy of your quarterly statement for your direct account with the FundX funds. Your broker will require your account number, which can be found on your statement. Your broker will help you complete a form to initiate the transfer. Once you sign that form, your broker will submit the form to our shareholder services at US Bank and your shares will be transferred into your brokerage account.
Will I have to pay any sales load, commission, or other similar fee in connection with the conversion?
No. The Fund adviser will pay all expenses incurred in connection with the reorganizations. Shareholders will not pay any sales load, commission, or other similar fee. However, brokers may charge shareholders a commission to trade ETFs.
What are the potential tax consequences of the conversion?
The reorganizations are designed to be treated as tax-free reorganizations for U.S. federal income tax purposes. However, some shareholders may receive cash compensation for fractional shares they hold. The redemption of these fractional shares will likely be a taxable event, albeit a small one. We recommend that shareholders consult their tax advisors about possible state, local, or foreign tax considerations.
Are the other FundX Funds turning into ETFs?
There are no current plans to convert the FundX Conservative Upgrader Fund (RELAX), Sustainable Impact Fund (SRIFX), and Flexible Income Fund (INCMX). However, if you currently own these funds directly with our shareholder services at US Bank Corp, you may consider transferring these shares to a brokerage account in order to keep your investments all in one place.
What if I don’t want my shares to be converted into an ETF?
You’ll need to redeem your shares by October 7, 2022 (prior to the conversion). We recommend you consult with your tax adviser as selling your shares may have tax consequences.
How will this affect my investment plans?
The conversion should have no effect on your portfolio plan. Both funds will target the same levels of risk when they become ETFs. However, if you have any concerns about your portfolio or questions about your plans, call us at 800-323-1510. Our advisers are available to help shareholders understand how to best use the funds to work toward their personal financial goals.
I still have questions. Who can I talk to?
We’re here to help. Give us a call at 800-323-1510 and we’ll walk you through it.
BEFORE INVESTING YOU SHOULD CAREFULLY CONSIDER THE FUND’S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. THIS AND OTHER INFORMATION IS IN THE PROSPECTUS; A PRELIMINARY PROSPECTUS IS AVAILABLE HERE. PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST. INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE SECURITIES AND EXCHANGE COMMISSION BUT HAS NOT YET BECOME EFFECTIVE. THESE SECURITIES MAY NOT BE SOLD NOR MAY OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT BECOMES EFFECTIVE. THIS COMMUNICATION SHALL NOT CONSTITUTE AN OFFER TO BUY OR THE SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR TO REGISTRATION OR QUALIFICATION UNDER SECURITIES LAWS OF ANY SUCH STATE. AN INDICATION OF INTEREST IN RESPONSE TO THIS ADVERTISEMENT WILL INVOLVE NO OBLIGATION OR COMMITMENT OF ANY KIND.
