Performance
Performance data quoted represent past performance. Past performance is no guarantee of future results and investment returns and principal value of the Funds (or of the investment company) will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance quoted. Call 1-833-X-SQUARE or (if applicable) visit www.x2etfs.com for current month end performance. An investor should consider the investment objectives, risks, charges and expenses of the Fund carefully before investing.
Market price returns reflect the midpoint of the bid/ask spread at 4:00 p.m. Eastern time. Market price returns do not represent the returns you would receive if you traded shares at other times.
Investing involves risks, including loss of principal.
Fund Details
Objective & Strategy
X-Square Municipal Income ETF (the “Fund”) seeks to provide income exempt from federal income tax.
The Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve its investment objective by investing in a non-diversified portfolio of U.S. dollar-denominated municipal securities issued by Puerto Rico, Guam and the U.S. Virgin Islands.
Under normal market conditions, the Fund invests at least 80% of its assets (defined as net assets plus any borrowing for investment purposes, if any) in tax-exempt municipal securities, the income from which is exempt from both federal and state income tax (“80% investment policy”). The Fund expects to invest up to 100% of its assets in tax-exempt municipal securities issued by Puerto Rico, Guam and the U.S. Virgin Islands. Municipal securities may be of any maturity, duration or credit rating including those rated below investment grade (commonly known as “junk bonds”). The Fund considers non-investment grade fixed income securities to be those that are rated lower than Baa3 by Moody’s Investors Service (“Moody’s”) or lower than BBB- by Standard and Poor’s Rating Group (“S&P”).
The Fund’s adviser identifies municipal security investments by analyzing the issuer’s legal and economic fundamentals, strength and quality of revenues and other fundamentals.
The Fund is a “non-diversified” fund which means that the Fund may invest in fewer securities at any one time than a diversified fund.
If you are subject to U.S. federal income tax, you will be subject to tax on taxable Fund distributions, other than exempt-interest dividends paid by the Fund, as discussed in the Prospectus. For federal income tax purposes, taxable Fund distributions will be taxable to you as either ordinary income or capital gains. Fund distributions of long-term capital gains are taxable to you as long-term capital gains no matter how long you have owned your Shares. For more information, please refer to our Prospectus, mainly the ‘Taxes on Distributions’ section.
The ETF does not follow an index. Furthermore, investments following ETF strategy cannot be made directly into an index.
Portfolio Management
Premium Discount**
| Days Traded at Premium | Days Traded at Discount | |
|---|---|---|
Performance data quoted represent past performance. Past performance is no guarantee of future results so that shares, when redeemed may be worth more or less than their original cost. The investment return and principal value will fluctuate. Current performance may be higher or lower than the performance quoted.
*A Basis Point is a unit that is equal to 1/100th of 1% and is used to denote the change in a financial instrument.
**Rule 6c-11 under the Investment Company Act of 1940, as amended (the “1940 Act”), requires an ETF to disclose on its website when its premium or discount has exceeded 2% for seven consecutive trading days and provide a discussion of the factors that are reasonably believed to have materially contributed to the premium or discount. It is expected that the Fund may trade at greater than 2% premium to its net asset value under most circumstances because of different circumstances that are beyond the control of the adviser. In periods of outflows, it is expected that the Fund may trade at greater than 2% discount to its net asset value for the same reason. These variations in premium or discount may have disparate effects on certain investors. Shareholders who purchase shares on the secondary market at a premium to NAV may lose disproportionate value should the Fund begin trading at a discount. Similarly, Authorized Participants who wish to redeem creation units at NAV may receive a basket with a per share value below that of the current trading price of the Fund.
The above frequency distribution chart presents information about the difference between the daily market price for shares of the Fund and the Fund's reported net asset value. The amount that the fund's market price is above the reported NAV is called the premium. The amount that the fund's market price is below the reported NAV is called the discount. The market price is determined using the midpoint between the highest bid and the lowest offer on the listing exchange, as of the time that the Fund's NAV is calculated (usually 4:00 pm Eastern time). The horizontal axis of the chart shows the premium or discount expressed in basis points. The vertical axis indicates the number of trading days in the period covered by the chart. Each bar in the chart shows the number of trading days in which the Fund traded within the premium/discount range indicated.
Distributions
Distributions are not guaranteed.
Risk Disclosures:
Fixed Income Risk. When the Fund invests in fixed income securities, the value of your investment in the Fund will fluctuate with changes in interest rates. Typically, a rise in interest rates causes a decline in the value of fixed income securities owned by the Fund. In general, the market price of fixed income securities with longer maturities will increase or decrease more in response to changes in interest rates than shorter-term securities. Other risk factors include credit risk (the debtor may default), extension risk (an issuer may exercise its right to repay principal on a fixed rate obligation held by the Fund later than expected), and prepayment risk (the debtor may pay its obligation early, reducing the amount of interest payments). These risks could affect the value of a particular investment by the Fund, possibly causing the Fund’s share price and total return to be reduced and fluctuate more than other types of investments.
Municipal Securities Risk. The municipal securities market could be significantly affected by adverse political and legislative changes, as well as uncertainties related to taxation or the rights of municipal security holders. Changes in the financial health of a municipality or other issuer, or an insurer of municipal securities, may make it difficult for it to pay interest and principal when due and may affect the overall municipal securities market. To the extent that the Fund invests a significant portion of its assets in the municipal securities of a particular state or U.S. territory or possession, there is greater risk that political, regulatory, economic or other developments within that jurisdiction may have a significant impact on the Fund’s investment performance. Declines in real estate prices and general business activity may reduce the tax revenues of state and local governments. Municipal issuers have on occasion defaulted on obligations, been downgraded, or commenced insolvency proceedings.
The governments of Puerto Rico, Guam and the U.S. Virgin Islands are subject to the PROMES Act which provides that any bankruptcy restructuring regarding these territories is to be overseen by a financial oversight and control board, instead of a bankruptcy court. Accordingly, the Fund may not receive the same treatment in a bankruptcy overseen by the financial oversight and control board as it would in a bankruptcy proceeding overseen by a court.
- Puerto Rico. Because the Fund invests a substantial percentage of its assets in municipal bonds issued by Puerto Rico, the Fund is susceptible to economic, political, regulatory or other factors adversely affecting issuers in Puerto Rico.
- Guam. Guam’s economy is heavily dependent upon support from the U.S. Treasury and tourism, particularly from Japan, which makes Guam’s economy sensitive to fluctuations in Japan’s economy.
- U.S. Virgin Islands. The economy of the U.S. Virgin Islands is driven by tourism, which typically accounts for a substantial portion of gross domestic product and a significant share of employment. The U.S. Virgin Islands government carries a large public sector payroll and taxes continue account for a significant share of government revenues and had numerous years of budget imbalances.
High-Yield Bond Risk. Lower-quality fixed income securities, known as “high yield” or “junk” bonds, present greater risk than bonds of higher quality, including an increased risk of default. These securities are considered speculative. An economic downturn or period of rising interest rates could adversely affect the market for these bonds and reduce the Fund’s ability to sell its bonds. The lack of a liquid market for these bonds could decrease the Fund’s share price. Defaulted securities or those subject reorganization proceeding may become worthless and are illiquid.
Interest Rate Risk.The risk that fixed income securities will decline in value because of an increase in interest rates; a fund with a longer average portfolio duration will be more sensitive to changes than a fund with a shorter average portfolio duration.
