ANNUAL
report 2022

Motley Fool Asset Management ETFs
Series of The RBB Fund, Inc.

8/31/22

Motley Fool Asset Management ETFS

President’s Letter to Shareholders

AUGUST 31, 2022 (Unaudited)

Kelsey Mowrey
President,
Motley Fool Asset Management

Dear Fellow Shareholders,

First, I want to extend a heartfelt thank you for being members of our Foolish Family. We realize you have many investment options and appreciate the trust you place in us. We consider ourselves very fortunate to be on this journey with you.

And what a journey the last 12 months have been! Have you ever had the opportunity to ride Mr. Toad’s Wild Ride in Disneyland or Walt Disney World? When I sat down to write this letter and reflect on the past year, that beloved theme park ride kept coming to mind.

Maybe you can recall the magical, whimsical, sometimes perilous, and often buggy ride through Toad Hall and the English countryside. Mr. Toad’s Wild Ride was an original attraction when both Disneyland and Walt Disney World opened. While the Disney World iteration closed in 1998, the ride at Disneyland has had several reimaginations over the years, and still operates today.

As the Disney Universe keeps expanding, Mr. Toad’s Wild Ride provides a happy sense of nostalgia for many visitors, a reminder of the original magic that made Disney so special. This year, we also got a bit nostalgic and made the decision to bring Foolishness back to our brand in a big way. We moved away from our acronym, MFAM, and reintroduced our proper name, Motley Fool Asset Management. In addition, we are once again proudly wearing and displaying our jester cap in our company logo.

But Mr. Toad has evolved since 1955 as well (the original ride had plywood cutout characters!) Technical updates in 1961 and 1983 have transformed Mr. Toad’s Wild Ride into the beloved attraction we know today. At Motley Fool Asset Management, we had a transformation of our own last year. We converted two mutual funds to ETFs (a somewhat bumpy transition, to be honest!) and launched two new passive ETF products. With these ETF products we were able to improve efficiency, lower fees, increase transparency, and gain more access to our sister company, The Motley Fool, LLC’s stock recommendations.

That brings me to perhaps the most obvious parallel between Mr. Toad and the stock market: The Wild Ride. The past year, particularly the last 8 months, has been a challenging time to be an investor to say the least. Domestic stock market indexes logged numerous record highs during the latter half of 2021, only to come tumbling down in 2022. The S&P 500 Index closed at an all-time high on January 3, 2022, and then dropped 19.96% by June 30, 2022. As of August 31, 2022, it is down 16.14% year to date. Similar scenarios played out in the Dow Jones Industrial Average as well as the Nasdaq Composite and the domestic bond markets have not been the usual safe havens we have come to expect. A wild ride, indeed!

Throughout their trip with Mr. Toad, travelers encounter several obstacles or dangers. Whether you are trying to avoid a stack of falling books, plunging into a stream, or a collision with a delivery truck, there’s a lot that threatens to knock you off course. These last twelve months have had their share of obstacles too. Historically high inflation, continued supply chain issues and slowing domestic growth are just a few of the issues impeding our investment path.

Even though our time with Mr. Toad consists of many twists, turns, and startling moments, most park goers wouldn’t consider jumping out of the buggy mid-ride. That’s because they know if they wait long enough, the trek will end with a satisfying resolution. Investing shouldn’t be much different. With patience and a long time horizon, we believe short term market fluctuations most likely will not prevent us from reaching our long-term goals.

With that in mind, I’d like to thank you for staying on this ride with us. As investors, we know it is always important to stay the course; however, when the ride gets wild it can be difficult to maintain that mindset. Please know that we will continue to navigate this track along with you and be good stewards for your investments. We are grateful for your business and look forward to more adventures with you in the coming year, whatever the road ahead may bring.

Kindly,

Kelsey Mowrey

President

Motley Fool Asset Management ETFS

President’s Letter to Shareholders (Concluded)

AUGUST 31, 2022 (Unaudited)

Motley Fool Asset Management’s ETFs are distributed by Quasar Distributors, LLC.

The investment advisor for each fund is Motley Fool Asset Management, LLC (“MFAM”). MFAM is a wholly owned subsidiary of Motley Fool Investment Management, LLC, whose parent company, The Motley Fool Holdings, Inc., is a multimedia financial-services holding company. MFAM, an affiliate of The Motley Fool LLC (“TMF”), is a separate legal entity. No TMF analyst is involved in the investment decision-making or daily operations of MFAM. With respect to its actively-managed funds, MFAM does not attempt to track any TMF services and, as such, those funds may diverge completely from TMF’s services.

The information contained herein does not take into account the particular investment objectives or financial circumstances of any specific person who may receive it.

All investing involves risk. Principal loss is possible. Each of Motley Fool Asset Management ETFs invests in particular market capitalizations or qualifications distinct to that individual fund, including small cap stocks and mid cap stocks, thus each fund’s performance will be especially sensitive to market conditions that particularly affect that fund’s particular market. Some funds are non-diversified, which means its NAV, market price and total returns may fluctuate or fall more than a diversified fund. Gains or losses on a single stock may have a greater impact on any of Motley Fool Asset Management’s ETFs. For these and other reasons, there is no guarantee any of Motley Fool Asset Management ETFs will achieve its particular, stated objective.

Please consider the charges, risks, expenses, and investment objectives carefully before you invest. Please see the prospectuses for the Motley Fool Global Opportunities ETF, the Motley Fool Mid-Cap Growth ETF, the Motley Fool 100 Index ETF, the Motley Fool Small-Cap Growth ETF, the Motley Fool Next Index ETF and the Motley Fool Capital Efficiency 100 Index ETF containing this and other information. Read it carefully before you invest or send money.

Motley Fool Asset Management ETFS

Letter to Shareholders

AUGUST 31, 2022 (Unaudited)

Bryan Hinmon
Chief Investment Officer,
Motley Fool Asset Management

“It is imperative that we remain vigilant in questioning how we do things that lead to decisions about investing your capital. We are on a quest to do this better, every day.”

    — Me, back in 2016

Dear Fellow Shareholder,

You’re probably thinking: I can’t believe the ego of this guy, quoting himself to open this letter! Let me reassure you that my ego is kept well in check by my two year old. Most recently, he has admired the “stripes” across my forehead and around my eyes, mocked my “silly” attempt to build his train tracks, and laughed uncontrollably as my mini breakfast burritos “look like trash cans.” Writing this reminds me those barbs still sting and my ego has no chance of inflating.

In preparing to write this letter I went back and read what I’ve written in the past. I’ve touched on several important topics over the years: the folly of economic and market forecasting, bias and decision making, and simplicity and focus, to name a few. But the idea that tends to come up again and again, as highlighted in the opening quote, is the need to be open to change on a never-ending quest for better.

I think the reason this is the most popular idea to explore is because of the nature of investing. Investing resembles a wicked problem.¹ That is, the problem isn’t fully understood, the context and constraints are always changing, and there is no obvious single answer that a rote process can solve for.

Given the messy nature of the endeavor, blindly applying thinking and methods that have worked in the past can be dangerous. Reflection, which addresses an honest capacity to accept underperformance and intelligently adapt, is critical for making sure we remain on the path to long term success. I believe that is the path we are on. We reflect on and consider improving our methods every year, but the state of affairs here in late 2022 make the exercise seem more poignant.

CAPACITY TO SUFFER

It is well known that investors feel losses more powerfully than gains. The urge to sell or to shift investing styles or methods, when things aren’t going well, is rooted in pain relief. Even if an investor is wired to handle some pain, as their stocks head relentlessly lower, the emotional hits keep coming. Research shows that, under such stress, investor focus narrows to the immediate future and, according to Michael Mauboussin, “turn[s] off any thought about the long term. So even if an investor believes a stock or industry group is likely to fare well over a three to six year period, anxiety about the next three to six months prevails – and a great opportunity slips away.”²

This narrowing of time frame has, in our view, come to life today via the broad selling of companies with the promise of strong cash flow generation in the future, but little current profitability. In investing shorthand, there has been a strong preference for value stocks over growth stocks. Value stocks, with their perceived tendency for tangible, bird-in-the-hand cash generation, have outperformed growth stocks by more than 35 percentage points over the past two years.³

This performance gap is breathtaking. Within the context of persistent inflation, rising global recession risk, changing monetary policy, and ongoing war during that two year period, a recalibration of the value of future cash flows seems warranted in our opinion. But the breadth and violence of the growth exodus suggests to us a degree of “stress” selling⁴ and raises the chance of some perfectly viable, high-value-creating (but not-yet-cash-flowing) businesses being tossed aside with the pretenders.

Motley Fool Asset Management ETFS

Letter to Shareholders (Continued)

AUGUST 31, 2022 (Unaudited)

We can’t in good faith, and simply won’t, state that many high-flyers are pretenders while ours are clear-cut, long-term winners that the market is mistreating. We have inked plenty of mistakes in the past and time will show us to have made additional ones. Said differently, it is unclear whether the market is treating our chosen growthy businesses rationally or whether it is panicking to some degree. But what we can say with confidence is that we understand our own beliefs and expectations behind each investment (thanks to our research process) and accept such pricing swings in exchange for the reward potential we believe persists.

We are, and remain, patient owners of businesses. While we don’t like poor performance, we appreciate that it is what sometimes creates mispricings and may open the door to long-term rewards.

ADAPTATION

You probably didn’t ignore the statement above about our past and inevitable future mistakes. We understand that no flavor of investing works 100% of the time, and that no active manager can operate in a mistake free utopia. The recent past has been trying, and we are frustrated with our performance. It is critical we dispassionately assess the situation and learn the right lessons.

Most importantly, we wholeheartedly believe that our core investing principle and core investing belief remain on firm foundations. Let’s lay these out plainly. The core principle that underpins our investing program is that, in the long run, we believe portfolio returns will converge on the business returns our companies achieve, as determined by realized earnings power (cash flows). The core belief that emerges from that principle, in our practice, is that independent research (centered on our unique definition of Quality) with a long-term mindset, expressed through focused portfolios, can potentially outperform and is how our team is best wired to achieve outperformance.

We’ve stress tested these ideas and have happily and completely re-underwritten them.

With our philosophy checked, we can move to execution. The largest class of mistake we made over the fiscal year, in my view, was in execution. Specifically, it was the improper weighting of base rates and the attendant link to position sizing. Let’s take a moment to make that not sound like gobbledygook.

We study businesses deeply, in an attempt to assess each company’s management, culture, and incentives; its economics, competitive advantages, and trajectory. Understanding a business in this fashion helps inform a view of the value it might be able to create for the world and how much of that value it might capture for itself, in a future that will undoubtedly be filled with competitors, changing preferences, and other uncertainties. It’s a complicated exercise where experience, imagination, humility, and skepticism are all needed. In the end, we’ve crafted a researched story behind each investment, called an inside view.

A problem arises when, as our knowledge of a business grows, our confidence in a single (but highly uncertain!) future grows even more quickly. Because of a highly informed inside view of each specific investment, our calibration of the reference class (the base rate statistical average, or the outside view of what has actually shown to most likely happen in similar situations) may be crowded out.⁵

Investing decisions are best made with a balanced account of the inside and outside views. However, the nature of our endeavor, to strive to find truly special Quality companies that can and do defy base rates, means that we must invest counter to what action the outside view suggests, and do it regularly. We knowingly override it.

The error is not in investing counter to what the outside view might recommend, but in not adequately using a tool we have available to marry the two views: position sizing. Knowing the outside view, of both the reference class of the stock and the business, should help us better assess the odds our inside view is correct, which should help establish guardrails for the amount of capital we put at risk in a given stock or class of risk exposures.

This is an exercise we can, will, and must do better. The outside view is something that has already entered our conversations more and more – like a voice over our shoulder. Practical implementations we are exploring further are making the outside view explicit in a premortem⁶ or establishing the role of a decision observer.⁷ Refinement of our process is ongoing and we’re energized when we uncover helpful possible solutions.

Motley Fool Asset Management ETFS

Letter to Shareholders (Continued)

AUGUST 31, 2022 (Unaudited)

MARKET PERFORMANCE AND COMMENTARY

Coming into calendar year 2022, the U.S. economy was strong and inflation was accelerating. Some level of inflation was expected as the result of shifting consumption patterns influenced by the flow-through of pandemic imbalances. The prevailing debate was whether this would fix itself (this was the U.S. Federal Reserve’s (the “Fed”) thinking) or be persistent. The purity of that debate was muddied as early 2022 brought about the Russian invasion of Ukraine and China’s continued aggressive lockdown policy to manage the spread of COVID – both events mucking up global supply chains and exacerbating the supply-demand imbalance that has been feeding inflation.

Over the full year fiscal period of September 1, 2021 to August 31, 2022, monthly U.S. inflation rates were between 5.4% and 9.1%. This, unsurprisingly, contributed to the Fed’s Open Market Committee decision to raise rates by 25 basis points, 50 basis points, 75 basis points, and another 75 basis points between March and July of this year. (Although outside the fiscal year ended August 31, 2022, we know the Fed raised another 75 basis points in September.) They were busy, and the aggressive pace of rate increases marked a clear new stance in monetary policy. This shift, alongside weakening European economic outlooks, had a negative impact on markets broadly as investors dealt with greater uncertainty, grappled with the likelihood of a global recession, and repriced risk.

The broad brush outcome was that, for the full year period of September 1, 2021 to August 31, 2022, there was almost no safe place to hide.

Cash lost value given the strongly rising inflation. Bonds had a historically poor period, falling more than 10% as interest rates moved higher. Gold, often seen as a safe-haven and beneficiary of inflation, lost more than 5%. Bellwether large capitalization stocks fell 12% with eight of 11 sectors declining. Small- and mid-capitalization stocks fell similarly to large caps. Simple style preferences offered no reprieve, with growth stocks continuing their recent trend of underperformance relative to value stocks (-17% vs -5%). Outside the U.S., global stocks fell 20%.⁸

ACTIVE ETF PERFORMANCE AND COMMENTARY

Motley Fool Global Opportunities ETF

With that sour backdrop, the Motley Fool Global Opportunities ETF returned -27.61% during the fiscal year ended August 31, 2022, trailing its benchmark’s return of -15.98% for the same period. Cumulatively since inception, the Motley Fool Global Opportunities ETF has returned 91.55% versus 70.94% returns for the benchmark over the same period.⁹

During the period, the ETF’s investments’ tilt towards growth companies, a lack of exposure to the Energy sector, and security selection within the Information Technology sector drove its underperformance. These headwinds were offset by strong security selection within the Industrials and Consumer Staples sectors. Our aim, as you know, is to construct focused portfolios of truly special Quality businesses (we have a “no strangers in the portfolio” mantra), so whether our performance is relatively good or bad, we can usually attribute the bulk of any relative performance versus the benchmark to stock selection. That was again the case this year.

Motley Fool Asset Management ETFS

Letter to Shareholders (Continued)

AUGUST 31, 2022 (Unaudited)

The top three contributors to returns¹⁰ were Gentera (+45%), Waste Connections (+8%), and Costco (+15%). Gentera has historically been a unique, group lender in several Latin American countries. Management has deftly handled pandemic and general macroeconomic challenges, achieving admiral loan and customer growth in Mexico and Peru while keeping costs in check. Shares soared as the company won back investor confidence, though we chose to sell our position towards the end of the period as the company’s business model is changing via its entry into a more crowded lending arena. Waste Connections is a North American trash hauler with irreplaceable landfill assets and an admirable service record. Trash collection is a safe-haven type of business that often does well in uncertain times – demand for its services doesn’t change much regardless of world events and proven pricing power above the rate of inflation are key business model features that investors are looking for. Costco, the membership retail behemoth, continues to use its scale to bring more products and services to its loyal customer base. The value proposition, in terms of savings and purchase confidence, has never been stronger, in our view, and the model continues to translate outside the core U.S. market.

The bottom three contributors to returns were Paypal Holdings(-68%), MercadoLibre (-54%), and Everbridge (-75%). Paypal remains an entrenched player in online payments, but it has seen its primary end market (ecommerce) slow as pandemic demand pull-forward is digested. A lack of internal innovation has also contributed to slowing new user growth, and several high profile leaders have left the company. Payments remains a hyper-competitive and dynamic industry, but Paypal’s scale and newfound sense of urgency equip it well to thrive once again. MercadoLibre, the everything business in Latin America, continues to strengthen its network effects across commerce and payments. The only significant business blip we have seen is a spike in non-payments of installment loans at peer companies (many e-commerce transactions are paid by installment in Latin America). The more likely drivers of the stock’s decline, in our view, are the simple market-wide declines in highly-valued tech companies that were clear pandemic beneficiaries. Everbridge’s decline has been swift. In early December, during a widespread sell-off of many software businesses, the company announced the unexpected resignation of its CEO and preliminary 2022 guidance that was lower than expected. This was a powerfully poisonous cocktail and shares fell by nearly half in a single day. As the dust has settled, it appears that the former CEO was too aggressive pursuing growth via acquisitions and product launches, at the expense of product integration and a clear product map. Under new leadership, and with greater focus, we believe these issues are fixable.

Motley Fool Mid-Cap Growth ETF

The Motley Fool Mid-Cap Growth ETF returned -26.66% during the fiscal year ended August 31, 2022, edging its benchmark’s return of -26.69% for the same period. Cumulatively since inception (8 years and counting!), the Motley Fool Mid-Cap Growth ETF has returned 79.75% versus 111.00% returns for its benchmark over the same period.¹¹

The ETF’s performance, relative to its benchmark, was impacted by a lack of exposure to the energy sector, which was strong and where we had no investment. Performance was also driven by our investments in the Consumer Discretionary and Financials sectors, where our stock selection was strong, and offset by stock selection in the Information Technology and Healthcare sectors.

The top three contributors to returns were Brown & Brown (+9%), Healthequity (+3%), and Broadridge Financial Solutions (+1%). Brown & Brown is an insurance broker that has been churning out great results – quarterly results have been consistently outstanding. Insurance, itself, is a cyclical market and Brown is benefiting from strong pricing that won’t last forever. However, its ability to grow policy count, make smart acquisitions, and manage costs have helped its business perform well through up and down cycles. HealthEquity, the largest administrator of Health Savings Accounts, is a beneficiary of the rising interest rate and inflation environment. Account holders opt to invest their savings in funds or cash, and as rates rise, the interest earned on that cash rises too. As an administrator, HealthEquity earns more on better rates and higher balances. Inflation is also likely to drive healthcare costs higher, in general, and should continue to highlight the value of Health Savings Accounts and benefit HealthEquity with greater adoption and contributions. Broadridge had a business-as-usual year. Its business model benefits from facilitating investor communications required by law which provides steady demand it has been able to turn into stable cash flow. This stability and proven profit engine are highly prized by investors given all the uncertainties elsewhere, and shares of the company’s stock have held up recently.

Motley Fool Asset Management ETFS

Letter to Shareholders (Continued)

AUGUST 31, 2022 (Unaudited)

The bottom three contributors to returns were Axon Enterprise (-36%), Teladoc Health (-77%), and Everbridge (-75%). Axon Enterprise, the business, continues to hum along. Its safety, transparency, and efficiency-focused products are resonating with law enforcement far and wide. However, the company’s CFO unexpectedly took another job and several members of its ethics board resigned in the wake of the company pushing forward its Taser-equipped drone initiative. The CFO departure is a clear loss for the company, but one which we believe will be overcome. The ethics board drama bears watching. Axon is a mission-driven company and its Founder/CEO’s ambition is great – but we have admired the checks and balances of impartial counsel and dislike the apparent lack of teeth it has been given. Telemedicine provider Teladoc continues to struggle to achieve profitability even as the pandemic created a strong adoption and utilization tailwind for its business. In addition, in the second calendar quarter of 2022, management wrote down over $6 billion of goodwill from its 2020 merger with Livongo Health. In hindsight, the merger was an obviously atrocious capital allocation decision, and combined with continued uneven execution, we have lost faith in management and sold our position. We detailed Everbridge’s poor performance above, in the Motley Fool Global Opportunities ETF section.

Motley Fool Small-Cap Growth ETF

The Motley Fool Small-Cap Growth ETF returned -36.66% during the fiscal year ended August 31, 2022, exceeding its benchmark’s decline of -25.26% for the same period. Cumulatively since inception, the Motley Fool Small-Cap Growth ETF has returned 38.08% versus 27.87% returns for the benchmark over the same period.¹²

The ETF’s performance, relative to its benchmark, was impacted negatively by an underweight of exposure to the Energy sector. However, the primary driver of underperformance was stock selection in the Industrials, Financials, and Information Technology sectors. The market environment was highly punitive to companies delaying profits to pursue growth and market development. Our holdings were not spared, with roughly one-third of the portfolio’s holdings declining in price by 50% or more.

The top three contributors to returns¹³ were Ping Identity Holding (+8%), Northern Oil and Gas (+15%), and PTC Therapeutics (+14%). Enterprise security software veteran Ping Identity had been working hard to transform its business to be a long-term winner in the critical enterprise security world. Private Equity firm Thoma Bravo apparently believed this too, and announced it would take Ping private at an enterprise value of $2.8 billion. The transaction had not yet closed at period end and Ping shares have continued to bop around the buyout price. We purchased shares of Northern Oil and Gas in May. Historically, we haven’t found many businesses in the Energy sector that meet our Quality threshold, but Northern’s unique business model and strong leadership fit the bill. The company buys up land leases and then lets other exploration and production companies drill on their land. As the land owner, Northern can choose to participate in the production cash flows or not. We believe the company’s controlling family has valuable insights and experience to make that decision wisely, more often than not. As energy prices increase, the value of Northern’s land rights and production options has increased. PTC Therapeutics is a biotechnology company that focuses on orphan diseases. More often than not, the performance of companies like PTC depends on whether there have been beneficial or adverse developments in the perceived medical and commercial progress of its drug pipeline. PTC had positive news on both fronts as its diversified portfolio of drugs and candidates continues to demonstrate value and efficacy.

The bottom three contributors to returns were Everbridge (-75%), Cardlytics (-85%), and Heska (-66%). We detailed Everbridge’s poor performance above, in the Motley Fool Global Opportunities ETF section. Cardlytics provides app-native digital advertising solutions to financial institutions. The business experienced a tumultuous year, punctuated by executive turnover, slow-moving customers, and a potentially competitive acquisition by a key customer. The stock’s decline reflects this, as well as the aggressive sell-off of profit promise stocks we outlined earlier. In our view, the new CEO brings the right experience for Cardlytics’ future, development of its self-serve ad platform has gone well, and the likelihood of customer defection remains low. In short, we think the market is getting this one wrong. Heska provides diagnostic tools and tests to veterinarians. Investors had bid up shares reflecting what we believe to be the company’s strong execution strengthening its domestic business and vision in becoming a market leader in several non-U.S. markets. Investors fear that a pandemic-related pet adoption boom may harm upcoming growth rates, which we view as a likely short-term blip in a longer-term attractive opportunity.

Motley Fool Asset Management ETFS

Letter to Shareholders (Continued)

AUGUST 31, 2022 (Unaudited)

PASSIVE ETF PERFORMANCE AND COMMENTARY

Motley Fool 100 Index ETF

The Motley Fool 100 Index ETF declined -19.18% during the fiscal year ended August 31, 2022. During the same period, the Motley Fool 100 Index, which the Motley Fool 100 Index ETF is designed to track, declined -18.79% and the S&P 500 Total Return Index declined -11.23%. Cumulatively since inception, the Motley Fool 100 Index ETF returned 73.03%. Over that period, the Motley Fool 100 Index returned 77.03% and the S&P 500 Index returned 50.38%.¹⁴

The ETF’s net asset value return differed from that of its underlying index, the Motley Fool 100 Index, due primarily to the deduction of management fees and transaction costs. A small cash balance across the period and securities lending income helped reduce tracking error.

As a passive implementation of active stock selection, the ETF’s performance in each period is reflective of the construction of its underlying index, the Motley Fool 100 Index, which is a market capitalization weighted portfolio of the 100 largest, liquid, high-conviction stock selections from The Motley Fool, LLC.¹⁵ The Motley Fool 100 Index has historically had, and continues through this measurement period to have, a top-heavy construction and concentration in a subset of sectors. As a result, the largest holdings and sector exposures have a significant impact on overall performance.

The top three contributors¹⁶ to the Motley Fool 100 Index ETF’s performance were UnitedHealth Group (+26%), Apple (+5%) and Costco (+15%). These three companies had a combined average portfolio weight during the period of more than 16%. The bottom three contributors were Meta Platforms (-57%), Alphabet (-25%), and Amazon (-27%). These three companies had a combined average portfolio weight during the period of nearly 20%.

Over the period from September 1, 2021 to August 31, 2022, a drastic underweighting to the Energy sector and overweighting to the Communication Services sector drove underperformance versus the S&P 500 Index.

Motley Fool Next Index ETF

On December 30, 2021, we launched The Motley Fool Next Index ETF. Over the period from December 30, 2021 to August 31, 2022, the ETF declined -24.88%. During the same period, the Motley Fool Next Index, which the Motley Fool Next Index ETF is designed to track, declined -24.72% and the Russell Midcap Growth Total Return Index (the “benchmark”) declined -25.42%.¹⁷

The ETF’s net asset value return differed from that of its underlying index, the Motley Fool Next Index, due primarily to the deduction of management fees and transaction costs. A small cash balance across the period helped reduce tracking error.

As a passive implementation of active stock selection, the ETF’s performance in each period is reflective of the construction of its underlying index, the Motley Fool Next Index, which is a market capitalization weighted index of the mid- and small-capitalization U.S. companies that have been recommended by The Motley Fool, LLC’s analysts, or research publications.¹⁸

The top three contributors to the Motley Fool Next Index ETF’s performance were McKesson (+31%), EPAM Systems (+44%) and Cloudflare (+43%). These three companies had a combined average portfolio weight during the period of a bit more than 3%. The bottom three contributors were The Trade Desk (-33%), Zebra Technologies (-50%), and Wayfair (-73%). These three companies had a combined average portfolio weight during the period of 3%.

Motley Fool Asset Management ETFS

Letter to Shareholders (Continued)

AUGUST 31, 2022 (Unaudited)

The Motley Fool Next Index was significantly underweight in the Energy sector and overweight in the Communication Services sector, relative to the benchmark. During the year ended August 31, 2022, the ETF reflected these relative positions, and performance suffered accordingly. Stock selection was strongest in the Healthcare sector to which the Motley Fool Next Index and ETF maintained a modest underweight to the benchmark.

Motley Fool Capital Efficiency 100 Index ETF

On December 30, 2021, we launched The Motley Fool Capital Efficiency 100 Index ETF. Over the period from December 30, 2021 to August 31, 2022, the ETF declined -23.13%. During the same period, the Motley Fool Capital Efficiency 100 Index, which the Motley Fool Capital Efficiency 100 Index ETF is designed to track, declined -23.07% and the S&P 500 Total Return Index (the “benchmark”) declined -16.36%.¹⁹

The ETF’s net asset value return differed from that of its underlying index, the Motley Fool Capital Efficiency 100 Index, due primarily to the deduction of management fees and transaction costs. A small cash balance across the period helped reduce tracking error.

As a passive implementation of active stock selection, the ETF’s performance in each period is reflective of the construction of its underlying index, the Motley Fool Capital Efficiency 100 Index, which tracks the performance of the highest scoring stocks of U.S. companies, measured by a company’s capital efficiency, that have been recommended The Motley Fool’s analysts and newsletters.²⁰ Capital efficiency is a measure of how a business turns its investments into revenue and profit, and it provides insight into the company’s return on invested capital.

The top three contributors²¹ to the Motley Fool Capital Efficiency Index ETF’s performance were UnitedHealth Group (+4%), Texas Instruments (+8%) and Vertex Pharmaceuticals (+27%). These three companies had a combined average portfolio weight during the period of nearly 7%. The bottom three contributors were Meta Platforms (-53%), NVIDIA (-49%), and Alphabet (-25%). These three companies had a combined average portfolio weight during the period of just over 14%.

The Motley Fool Capital Efficiency 100 Index was significantly underweight in the Energy sector and overweight in the Communication Services and Information Technology sectors, relative to the benchmark during the period ended August 31, 2022. In fact, the Index and ETF had no Energy sector exposure and nearly 55% to Communication Services and IT, compared to 4% and 37%, respectively, for the benchmark.

MORE IMPORTANT THAN EVER

We know that in challenging, stressful times the timeframe of the typical market participant shrinks. We posit that there is a degree of pessimism-extrapolation present in equity markets today. This puts us squarely in a place where maintaining a long-term orientation is increasingly valuable to achieve long-term returns.

Thankfully, our investing philosophy guides us to do just that. Our focus remains on patiently owning a collection of special, Quality businesses that will create winning outcomes for their stakeholders over time. We hope this orientation still rings true to you.

We remain thankful for and humbled by your trust.

Onward,

Bryan Hinmon
Chief Investment Officer, Motley Fool Asset Management LLC

Motley Fool Asset Management ETFS

Letter to Shareholders (Concluded)

AUGUST 31, 2022 (Unaudited)

Past performance does not guarantee future results. There can be no guarantee that any strategy (risk management or otherwise) will be successful. All investing involves risk, including potential loss of principal. Securities in a Fund may not match those in an index and performance of the Fund will be different. You cannot invest directly into an index.

The Letter to Shareholders seeks to describe some of the Adviser’s current opinions and views of the financial markets. Although the Adviser believes it has a reasonable basis for any opinions or views expressed, actual results may differ, sometimes significantly so, from those expected or expressed. The securities held by the Funds that are discussed in the Letter to Shareholders were held during the period covered by the annual report. They do not comprise the entire investment portfolio of the Funds, may be sold at any time, and may no longer be held by the Funds. The opinions of the Adviser with respect to those securities may change at any time.

Motley Fool GLOBAL OPPORTUNITIES ETF

Portfolio Characteristics

(Unaudited)

Effective December 3, 2021, the outstanding Investor Class Shares of the Fund were converted into Institutional Class Shares of the Fund.

The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.fooletfs.com. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.

Motley Fool GLOBAL OPPORTUNITIES ETF

Portfolio Characteristics (CONTINUED)

(Unaudited)

The investment objective of the Motley Fool Global Opportunities ETF is to achieve long-term capital appreciation, and it pursues this objective by investing primarily in common stocks of companies located anywhere in the world. The Fund seeks long-term growth by identifying and acquiring securities of companies that are, in the view of Motley Fool Asset Management, LLC (the “Adviser”), high quality. To identify these high-quality businesses, the Adviser engages in research to evaluate each company under consideration using four criteria: management, culture, and incentives; the economics of the business; competitive advantage; and trajectory. The Adviser’s approach prizes a long-term mindset and a balance of qualitative and quantitative factors.

The Fund will invest in areas of the market, that, in the view of the Adviser, offer the greatest potential for long-term capital appreciation, and it does not attempt to match the allocations of its benchmark. As such, significant deviation from the benchmark is expected from time to time, especially over shorter time frames.

The allocations to various sectors, countries, or any other macro-economic designation, are the byproduct of rigorous bottom-up analysis rather than an intentional top-down opinion of asset classes. While market conditions are constantly changing, exposure to equity market risk is needed to consistently achieve equity-like returns.

The following tables show the top ten holdings, sector allocations, and top ten countries in which the Fund was invested in as of August 31, 2022. Portfolio holdings are subject to change without notice.

Motley Fool GLOBAL OPPORTUNITIES ETF

Portfolio Characteristics (Concluded)

(Unaudited)

The Motley Fool Global Opportunities ETF uses the Global Industry Classification Standard^SM (“GICS ^SM”) as the basis for the classification of securities on the Schedule of Investments (“SOI”).

Motley Fool MID-CAP GROWTH ETF

Portfolio Characteristics

(Unaudited)

Effective December 3, 2021, the outstanding Investor Class Shares of the Fund were converted into Institutional Class Shares of the Fund.

The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. Performance data current to the most recent month-end may be obtained at www.fooletfs.com. The investment return and principal value of an investment will fluctuate so that shares, when redeemed, may be worth more or less than their original cost.

The investment objective of the Motley Fool Mid-Cap Growth ETF is to achieve long-term capital appreciation, and it pursues this objective by investing primarily in common stocks of companies organized in the United States. The Fund seeks long-term growth by identifying and acquiring securities of companies that are, in the view of the Adviser, high quality. To identify these high-quality businesses, the Adviser engages in research to evaluate each company under consideration using four criteria: management, culture, and incentives; the economics of the business; competitive advantage; and trajectory. The Adviser’s approach prizes a long-term mindset and a balance of qualitative and quantitative factors.

Motley Fool MID-CAP GROWTH ETF

Portfolio Characteristics (Concluded)

(Unaudited)

The Fund will invest in areas of the market, that, in the view of the Adviser, offer the greatest potential for long-term capital appreciation, and it does not attempt to match the allocations of its benchmark. As such, significant deviation from the benchmark is expected from time to time, especially over shorter time frames.

The allocations to various sectors, or any other macro-economic designation, are the byproduct of rigorous bottom-up analysis rather than an intentional top-down opinion of asset classes. While market conditions are constantly changing, exposure to equity market risk is needed to consistently achieve equity-like returns. The Adviser views its time as best spent focused on evaluating businesses and seeking to minimize company-specific risk in order to pursue its objective of long-term capital appreciation.

Although the Motley Fool Mid-Cap Growth ETF may invest in companies with any market capitalization, the Adviser expects that investments in the securities of companies having smaller- and mid-market capitalizations will be important components of the Fund’s investment program. Investments in securities of these companies may involve greater risk than do investments in larger, more established companies. Small- and mid-cap stocks tend to be more volatile and less liquid than their large-cap counterparts.

The following tables show the top ten holdings, and sector allocations in which the Fund was invested in as of August 31, 2022.Portfolio holdings are subject to change without notice.

The Motley Fool Mid-Cap Growth ETF uses the Global Industry Classification Standard^SM (“GICS ^SM”) as the basis for the classification of securities on the Schedule of Investments (“SOI”).

Motley Fool 100 Index ETF

Portfolio Characteristics

(Unaudited)

The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. The investment return and principal value of an investment will fluctuate so that shares, when redeemed or sold, may be worth more or less than their original cost.

Motley Fool 100 Index ETF

Portfolio Characteristics (Concluded)

(Unaudited)

The following tables show the top ten holdings and sector allocations, in which the Motley Fool 100 Index ETF was invested in as of August 31, 2022. Portfolio holdings are subject to change without notice.

The Motley Fool 100 Index ETF uses the Global Industry Classification Standard^SM (“GICS^SM”) as the basis for the classification of securities on the Schedule of Investments (“SOI”). We believe that this makes the SOI classifications more standard with the rest of the industry.

MOTLEY FOOL SMALL-CAP GROWTH ETF

Portfolio Characteristics

(Unaudited)

The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. The investment return and principal value of an investment will fluctuate so that shares, when redeemed or sold, may be worth more or less than their original cost.

MOTLEY FOOL SMALL-CAP GROWTH ETF

Portfolio Characteristics (CONCLUDED)

(Unaudited)

The following tables show the top ten holdings and sector allocations, in which the Motley Fool Small-Cap Growth ETF was invested in as of August 31, 2022. Portfolio holdings are subject to change without notice.

The Motley Fool Small-Cap Growth ETF uses GICS^SM as the basis for the classification of securities on the Schedule of Investments.

MOTLEY FOOL CAPITAL EFFICIENCY 100 INDEX ETF

Portfolio Characteristics

(Unaudited)

The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. The investment return and principal value of an investment will fluctuate so that shares, when redeemed or sold, may be worth more or less than their original cost.

MOTLEY FOOL CAPITAL EFFICIENCY 100 INDEX ETF

Portfolio Characteristics (CONCLUDED)

(Unaudited)

The following tables show the top ten holdings and sector allocations, in which the Motley Fool Capital Efficiency 100 Index ETF was invested in as of August 31, 2022. Portfolio holdings are subject to change without notice.

The Motley Fool Capital Efficiency 100 Index ETF uses GICS^SM as the basis for the classification of securities on the Schedule of Investments.

MOTLEY FOOL NEXT INDEX ETF

Portfolio Characteristics

(Unaudited)

The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. The investment return and principal value of an investment will fluctuate so that shares, when redeemed or sold, may be worth more or less than their original cost.

MOTLEY FOOL NEXT INDEX ETF

Portfolio Characteristics (CONCLUDED)

(Unaudited)

The following tables show the top ten holdings and sector allocations, in which the Motley Fool Next Index ETF was invested in as of August 31, 2022. Portfolio holdings are subject to change without notice.

The Motley Fool Next Index ETF uses GICS^SM as the basis for the classification of securities on the Schedule of Investments.

Motley Fool Asset Management ETFs

Fund Expense Examples

AUGUST 31, 2022 (Unaudited)

As a shareholder of the Fund(s), you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchase payments, (if any), including brokerage commissions on purchases and sales of Fund shares, and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund(s) and to compare these costs with the ongoing costs of investing in other ETFs.

These examples are based on an investment of $1,000 invested at the beginning of the six-month period from March 1, 2022 through August 31, 2022, and held for the entire period.

Actual Expenses

The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

Hypothetical Examples for Comparison Purposes

The second line of the accompanying table provides information about hypothetical account values and hypothetical expenses based on each Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in a Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the accompanying table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the accompanying table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

Motley Fool Asset Management ETFs

Fund Expense Examples (Concluded)

AUGUST 31, 2022 (Unaudited)

Motley Fool global opportunities ETF

Schedule of Investments

AUGUST 31, 2022

The accompanying notes are an integral part of these financial statements.

Motley Fool global opportunities ETF

Schedule of Investments (continued)

AUGUST 31, 2022

The accompanying notes are an integral part of these financial statements.

Motley Fool global opportunities ETF

Schedule of Investments (continued)

AUGUST 31, 2022

The accompanying notes are an integral part of these financial statements.

Motley Fool global opportunities ETF

Schedule of Investments (CONCLUDED)

AUGUST 31, 2022

ADR — American Depositary Receipt

PLC — Public Limited Company

SP ADR — Sponsored ADR

The accompanying notes are an integral part of these financial statements.

Motley Fool mid-cap growth ETF

Schedule of Investments

AUGUST 31, 2022

The accompanying notes are an integral part of these financial statements.

Motley Fool mid-cap growth ETF

Schedule of Investments (continued)

AUGUST 31, 2022

The accompanying notes are an integral part of these financial statements.

Motley Fool mid-cap growth ETF

Schedule of Investments (CONCLUDED)

AUGUST 31, 2022

The accompanying notes are an integral part of these financial statements.

Motley Fool 100 Index ETF

Schedule of Investments

AUGUST 31, 2022

The accompanying notes are an integral part of these financial statements.

Motley Fool 100 Index ETF

Schedule of Investments (continued)

AUGUST 31, 2022

The accompanying notes are an integral part of these financial statements.

Motley Fool 100 Index ETF

Schedule of Investments (continued)

AUGUST 31, 2022

The accompanying notes are an integral part of these financial statements.

Motley Fool 100 Index ETF

Schedule of Investments (continued)

AUGUST 31, 2022

The accompanying notes are an integral part of these financial statements.

Motley Fool 100 Index ETF

Schedule of Investments (Continued)

AUGUST 31, 2022

The accompanying notes are an integral part of these financial statements.

Motley Fool 100 Index ETF

Schedule of Investments (Concluded)

AUGUST 31, 2022

The accompanying notes are an integral part of these financial statements.

MOTLEY FOOL Small-Cap Growth ETF

Schedule of Investments

AUGUST 31, 2022