ANNUAL
report 2023

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

8/31/23

Motley Fool ASSET MANAGEMENT ETFS

Letter to Shareholders

AUGUST 31, 2023 (Unaudited)

Bryan Hinmon
Chief Investment Officer,
Motley Fool Asset Management

“We feel that high quality ownership can be attracted and maintained if we consistently communicate our business and ownership philosophy - along with no other conflicting messages - and then let self selection follow its course. For example, self selection will draw a far different crowd to a musical event advertised as an opera than one advertised as a rock concert even though anyone can buy a ticket to either.”

    - Warren Buffett, 1983 Shareholder Letter

Dear Fellow Shareholder,

Investing is hard and structural advantages are rare. Let me clarify a bit. Sustained market outperformance over long periods of time is hard and one of the biggest reasons that is true is because unique and lasting differential advantages are rare.

I don’t think the short- or long-version sentences above are controversial, so let’s just accept them as true and move on.¹ The introductory quote above offers us an example of a unique and lasting differential advantage that Warren Buffet has used (“high quality ownership”) to help achieve his awe-inspiring performance track record.² Lawrence Cunningham, a professor at George Washington University and author who has studied Buffett deeply, said he believes “one of the most important reasons for Berkshire’s success was having those shareholders that a different shareholder base wouldn’t have permitted.” Quality ownership seems important enough to explore.

PATIENT CAPITAL

So what does Buffett mean by high quality ownership? Cunningham published a book called Quality Shareholders in 2020 to detail the topic from the perspective of public company management teams. I recommend you read the entire book to fully understand the concept, but a simplified definition is a shareholder base that is committed to a company’s long-term success via aligned time horizon and mission. Such shareholders afford managers ample runway to execute their business strategy and they stay committed when the business navigates the inevitable adversities of capitalism and markets. They are committed and patient because of deep alignment.

Motley Fool Asset Management, LLC is not a publicly traded company with shareholders, but the principle is equally as crucial for us. Like Buffett suggests, we communicate our investing and ownership philosophy - hopefully with no other conflicting messages - with the goal of attracting a self-selecting collection of shareholders committed to joint long-term success. I’d be shocked if you cracked open this letter and didn’t expect to find mention of our focus on Quality or our long-term orientation.³ It’s heartening that, before reading a single word, you probably knew the gist of what you were going to read. It tells me we are aligned and that Motley Fool Asset Management benefits from quality ownership.

Just like the forces of capitalism create hiccups along the path to long-term business success, the forces of markets ensure no investing strategy works all the time (otherwise there would be only one!). We believe the disciplined application of a prudent strategy, through the inevitable ups and downs, can yield great results. It is only with the patient capital of quality owners that this is a possibility. Why?

CAREER RISK

The primary reason is career risk. If an asset manager doesn’t keep its investors happy, the investors will rightly withdraw their money. With no money to manage, there is no job.

Motley Fool ASSET MANAGEMENT ETFS

Letter to Shareholders (Continued)

AUGUST 31, 2023 (Unaudited)

There seem to be two primary ways for an asset manager to make its investors unhappy. The first is through persistent or extreme poor performance and the second is looking too different while underperforming. Both of these things often result in asset redemptions, which can trigger other investors to follow suit, and create a negative feedback loop.

To be clear, bad money managers probably shouldn’t have jobs. But the insidious effect of this spiral is that in the case of temporary, or aberrational, or unlucky performance hiccups, it can negatively influence the asset manager’s investment decision making. In order to protect against the asset withdrawal death spiral, a manager may be tempted to deviate from their investment strategy, chase what is working at the moment, take undue risk, or worse. Career risk can trigger primal survival mechanisms that can be hard to overcome and can be sparked by even just a whiff of perceived underperformance.

Owning an odd portfolio (looking too different) while underperforming can cause asset managers to make fewer investments of their own discretion and instead hew towards their benchmark weightings. It probably feels more comfortable knowing results probably won’t be too different than what everyone else is achieving and, as the old saying goes, it’s better to fail conventionally than succeed unconventionally.⁴ Hewing towards the benchmark is a phenomenon called “closet indexing” and has been studied at length by Notre Dame professor Martijn Cremers⁵ and his co-authors. In his 2015 paper Do Mutual Fund Investors Get What They Pay For?, Cremers and co-author Quinn Curtis found that 12% of the assets in US equity mutual funds were invested in closet index funds – that is, funds that purport to be actively managed but in actuality failed to achieve a sufficient level of differentiation from their index. Considering the trillions invested in “active” US equity funds today, that’s a lot of career risk-driven closet indexing!

But it’s worse than just that. The situations above focus on the behavior of the investment manager alone. But there are two in this dance: the manager and the investor. There is a body of academic work that shows individual investors, the investors the investment manager is working for, demonstrate behavioral biases such as trend chasing among the funds they are invested in.⁶ So even if the investment manager isn’t making investment decisions inappropriately, the shareholders could be causing withdrawals that start the capital flight death spiral.

Career risk, whether kicked off by the asset manager or the end investor, has nasty consequences.

TIME ARBITRAGE

But it’s not all sour grapes, thanks to quality shareholders. Let me explain.

Martijn Cremers, the professor referenced above, has demonstrated in his 2015 paper referenced above that investment managers who construct portfolios that look sufficiently different from relevant benchmarks (ones with high “active share”) can be more likely to outperform their benchmarks. Said another way, managers that can buck the fears and altered decision making that can accompany career risk and build unique portfolios, are employing a strategy that has, in the past, statistically been shown to work in many cases.

The academic work on active share makes logical sense to us. As Cremers says , “after all, an active manager can only add value relative to the index by deviating from it.” But to beat the benchmark, a manager has to be both different and right.

Motley Fool ASSET MANAGEMENT ETFS

Letter to Shareholders (Continued)

AUGUST 31, 2023 (Unaudited)

Let’s bring Kalash Jain, a professor at Columbia Business School, into the conversation. Jain recently published a working paper⁷ that helps explain why the persistent presence of career risk can create mispricing opportunities for some asset managers to take advantage of and outperform. Which managers ? “Longer-term fund managers who do not face such [career concerns related to the rear of asset redemption] frictions.”

In a creative way, Jain hypothesizes, tests and demonstrates in his study that career risk pushed many managers into a herding mentality, owning the same securities and avoiding others. The securities that are piled into (the comfortable residence of the herd) were bid up in demand and consequently often faced lower future expected returns. Meanwhile, the securities that managers fled, whether due to poor past performance or idiosyncratic volatility, generally had artificially low demand and therefore were set up for higher future expected returns. This is, as they say, the high price of a cheery consensus.

The opportunity here is to own the stocks a career risk-constrained manager is avoiding, which can only be done over time if a fund manager has the permission to own a portfolio that looks different from what everyone else owns, and they can hold long enough for the dynamic to fully play out (which Jain notes persists for years). This dynamic, where longer-term fund managers are allowed to behave differently – striving to generate returns by exploiting a different time horizon – than short-term driven fund managers, is called “time arbitrage” and an oft-cited example of fund strategy and advantage. We believe we fit squarely into this camp.

The role of quality shareholders can’t be overstated. Time arbitrage only works with time. And as committed as a manager is to a long time frame and shaking off the pressures from career risk, the opportunity can only be harnessed if the manager is given the time from a fully aligned quality owner, which is rare, special, and (hopefully now) obviously valuable.

MARKET PERFORMANCE AND COMMENTARY

Inflation continues to be the leading factor that has driven the US economy and markets since 2021. After wildly imbalanced demand trends and disrupted supply chains played primary roles in 2021 and 2022, things eventually began to normalize. For the first half of the fiscal year of September 1, 2022 to August 31, 2023, US inflation averaged nearly 7%, and by the second half, averaged a more tolerable 4%.

The US Federal Reserve Open Market Committee helped market forces slow inflation with seven rate increases over the fiscal year ended August 31, 2023, starting with a trio of aggressive rate increases in the calendar fourth quarter of 2022 before enacting a steady quartet of more modest 25 basis point increases over the remainder of the fiscal year. All in, rates increased by 300 basis points, on top of the 225 implemented in the first calendar half of 2022 which pulled rates off the near zero mark that had been customary for several years.

During the 2022 fiscal year, the US and international stock markets scrambled to reprice risk and recession odds as this never-before-seen rate move began and all major asset classes lost money. The result, as I wrote in last year’s shareholder letter, was that for investors “there was almost no safe place to hide.” It turns out that the broad walloping investors felt last year may have been a response too crude for the situation.

While it seems apparent to us that ZIRP (zero interest rate policy) is firmly in the rearview, the US and global economies have remained stronger than feared, and for the fiscal year ended August 31, 2023, investors were more discerning with their assessments when sorting through value. Bonds declined in value for a third straight fiscal year, losing almost 4%. Gold, often seen as a hedge on inflation, advanced 13%. Large capitalization US stocks gained more than 15%, with nine of eleven sectors advancing. Only the most rate-sensitive sectors, Real Estate and Utilities, declined in value. The Information Technology and Communication Services sectors led the way with roughly 32% and 25% returns for the fiscal year, partially thanks to their

Motley Fool ASSET MANAGEMENT ETFS

Letter to Shareholders (Continued)

AUGUST 31, 2023 (Unaudited)

ownership of the largest capitalization stocks. The strong performance of large caps outpaced mid caps by more than 5 percentage points and small caps by more than 12. Both growth and value stocks returned double digits. Outside the US, global stocks grew 11% to help retrace some of the prior fiscal year’s decline.⁸

The healthy gain of global stocks is even more impressive in light of a global banking scare in March 2023. Multiple US banks failed due to an asset-liability mismatch (their loan duration did not match their bond holdings, and with rapid interest rate changes their bonds repriced lower and wiped out equity capital) and regional banks, as a class, came under immense pressure. Abroad, Credit Suisse needed saving as its balance sheet deteriorated and threatened European counterparties. Rapid intervention by government agencies helped markets largely shake off contagion fears and markets in March finished higher!

ACTIVE ETF PERFORMANCE AND COMMENTARY

Motley Fool Global Opportunities ETF

The Motley Fool Global Opportunities ETF returned 11.24% during the fiscal year ended August 31, 2023, trailing its benchmark’s return of 13.96% for the same period. Cumulatively since inception, the Motley Fool Global Opportunities ETF has returned 113.07% versus 94.79% returns for the benchmark over the same period.⁹

During the fiscal year, the ETF’s investments in the Information Technology sector were the largest detractors to investment performance. The Fund carried a lower exposure to the sector than its benchmark, which benefited from the strong performance of the sector broadly. The Fund’s selected investments within the sector also underperformed. The opposite situation occurred in the Industrial sector, where the Fund maintained investments in greater proportion than its benchmark and its security selection within the sector was superior. Our holdings in the IT sector were half of the benchmark’s and our holdings in the Industrials sector were twice the benchmark’s. Ultimately, we’re seeking to build a reasonably diversified portfolio of attractive individual opportunities that work together to achieve the Fund’s stated objectives. This will, most of the time, result in different sector and position weights than our benchmark. This is a feature, not a bug, of our investing process, and one we embrace. Ultimately, we would expect our stock selection to be the primary driver of returns.

The top three contributors to returns¹⁰ were Axon Enterprise (+82%), Mastercard (+28%), and MercadoLibre (+60%). Axon has continued to transform its business, develop and commercialize products its law enforcement and safety markets need, and surpass expectations. The company now receives 90% of its revenue from subscriptions and has begun expanding its end markets. On the product front, the reveal of Axon’s Taser 10 looks to be a leap forward in technology, should potentially buoy the value of Taser subscription bundles, and furthers the company’s goal to reduce gun-related deaths (between police and the public) by 50% over the next decade. The future continues to look bright to us, too, as the company has laid out the path to an expected $2 billion in 2025 revenue with growing profitability. Mastercard’s results reflect the resilient global consumer. The company’s key metrics have continued to evolve strongly, led by cross-border volume (up 70% over 2019, which removes the distortions of Covid-19). Mastercard naturally benefits from inflation as its services are largely related to the volume and value of global personal consumption expenditures, so as prices rise, so does its revenue. The key is managing expenses beneath this rate of increase, which the company has and hopefully will continue to do well. Latin American e-commerce and payments giant MercadoLibre’ s shares

Motley Fool ASSET MANAGEMENT ETFS

Letter to Shareholders (Continued)

AUGUST 31, 2023 (Unaudited)

rallied impressively during the fiscal year ended August 31, 2023. Its payments segment, where it posted impressive profitability and growth in its installment lending business, was supported by ongoing strength in its core e-commerce segment. Mercado Libre continues to benefit from low e-commerce penetration as a percentage of total retail sales remains in Latin America. Pago, its payments platform, has successfully parlayed its payments dominance into very profitable ancillary revenue streams.

The bottom three contributors to returns were Atlassian (-18%), SVB Financial Group (-100%), and Signature Bank (-36%). Shares of critical collaboration software provider Atlassian had been resilient while many other software companies struggled. That changed during the fiscal year ended August 31, 2023. Macro headwinds challenged demand from the innovation economy that drives Atlassian’s growth. Atlassian’s slowdown was delayed later than most for two reasons: its products are critical, so they’re farther down the cut list, and because they’re relatively inexpensive. These are positive attributes, and on a longer-term view, the business in our view remains healthy. However, the stock was still carrying a premium valuation, and management continues to hire aggressively (while many other software firms are laying engineers off), which has investors nervous about a strategic misstep. We think the company is wise to invest in its advantages and the opportunities it sees (acknowledging this is a management team with a history of prudence and vision) and zig while others zag. Silicon Valley Bank (“SVB”), the bank subsidiary of SVB Financial Group, experienced a run on its deposits when the bank liquidated some of its Treasury securities at a discount and announced a capital raise. As can happen in periods of fear and contagion, the bank didn’t survive. It was taken into receivership on March 10, 2023 and its assets were sold off with the bulk being acquired by First Citizens Bank in late March. In this painful investing lesson, equity holders were essentially wiped out. Thankfully, our position in SVB Financial Group was small. Signature Bank shares sagged as investors shunned the banking industry, fearing there were more shoes to drop after SVB’s collapse. Signature Bank’s lending profile, ties to the crypto economy, and asset makeup put it squarely in the crosshairs. Thankfully, we exited our position and avoided much of the company’s collapse.

Motley Fool Mid-Cap Growth ETF

The Motley Fool Mid-Cap Growth ETF returned 8.58% during the fiscal year ended August 31, 2023, trailing its benchmark’s return of 13.00% for the same period. Cumulatively since inception, the Motley Fool Mid-Cap Growth ETF has returned 95.16% versus 138.44% returns for its benchmark over the same period.¹¹

The Fund’s performance, relative to its benchmark, during the fiscal year ended August 31, 2023 was impacted by higher exposures to the Real Estate sector, which was weak, and the Industrials sector, which was strong. Performance was also driven by poor individual stock performance in the Financials and Information Technology Industries. Positive stock selection in the Health Care Industry was not enough to overcome these other forces.

The top three contributors to returns¹² were Axon Enterprise (+82%), Watsco (+38%), and Markel Group (+24%). We detailed Axon’s stellar performance above, in the Motley Fool Global Opportunities ETF section. Watsco, the largest distributor of HVAC units and supplies in the US, continues to deliver strong execution and a steady outlook.

The market is waiting for margins to fall as residential replacement unit demand falls, inflation hits costs, and higher priced inventory flows through the financials. Our view is that, while these are realistic expectations, Watsco should have the firepower to keep creating value. We think there are enough offsetting positive factors (e.g., regulatory tailwinds for higher efficiency units, strong commercial demand, and efficiency efforts now that supply chains are normalizing) that Watsco can continue to hum along. Markel is a specialty insurer that has benefited from strong pricing in its insurance niches. Its conservative reserving enables it to navigate challenging periods and invest its float in stocks and private businesses, which was an additional benefit to profit and book value growth during the fiscal year. The three legs of success at Markel (prudent reserving, healthy underwriting, and strong investing) have all been on show lately.

Motley Fool ASSET MANAGEMENT ETFS

Letter to Shareholders (Continued)

AUGUST 31, 2023 (Unaudited)

The bottom three contributors to returns were Paylocity Holding (-17%), SBA Communications (-30%), and SVB Financial Group (-100%). Paylocity’s business continues to chug along and its payroll and human capital management software solutions are evolving to solve more time- and labor- intensive tasks. Its stock sold off alongside many higher-growth, richly valued software businesses during the fiscal year ended August 31, 2023 and also suffered from investors raising probabilities of a recession that would bring about lower employment, which is a key driver of results. Tower operator SBA Communications continues to see its shares languish. SBA faces moderating near-term growth as cell carriers lap peak 5G investments and debt costs rise on the back of higher rates. That is no surprise, but investors have focused on it, and it’s the current reality. We see SBA management aptly managing its balance sheet, prioritizing free cash flow for debt reduction over share repurchases, and being disciplined in new tower purchases. With a longer view, the value of SBA’s services to enable data consumption and connectivity continues to increase. We detailed SVB Financial Group’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 16.13% during the fiscal year ended August 31, 2023, besting its benchmark’s gain of 6.78% for the same period. Cumulatively since inception (almost five years!), the Motley Fool Small-Cap Growth ETF has returned 60.36% versus 36.53% returns for the benchmark over the same period.¹³

The Fund’s performance, relative to its benchmark, during the fiscal year ended August 31, 2023 was impacted overwhelmingly by stock selection. Stock selection in the Information Technology and Communication Services sectors were the largest detractors from return. However, stock selection in the Health Care and Industrials sectors more than offset these headwinds.

The top three contributors to returns¹⁴ were Axon Enterprise (+82%), Penumbra (+61%), and Leonardo DRS (+56%). We detailed Axon’s stellar performance above, in the Motley Fool Global Opportunities ETF section. Penumbra is a medical device company that continues to execute on its Lightning series of products related to aspirated blood clot removals. With additional products on the way, the company is demonstrating its products achieve valuable patient outcomes worthy of transitioning “watched” patients to “treated” patients. Penumbra looks to surpass $1 billion in revenue during 2023 as it makes progress on helping the 3 million or so patients that suffer from clinically significant blood clots. Leonardo DRS is a defense contractor that announced several large contract awards, including an April 2023 award valued over $1 billion to provide integrated electric propulsion components for the US Navy’s next generation Columbia-class submarine. The Columbia-class submarine will replace the Ohio-class, the first submarine of which was commissioned in the late 1970s. In June, Leonardo DRS was added to the Russell 2000 and Russell 3000 Indexes as part of the 2023 Russell index annual reconstitution. Leonardo DRS shares gained 34% in the quarter.

The bottom three contributors to returns were Cardlytics (-62%), Alarm.com Holdings (-12%), and Clarus (-52%). Cardlytics provides an advertising platform driven by unique access to debit and credit card data provided by its banking partner. The company and its stock have been hit from several angles. The broad slowdown in digital advertising as companies anticipate a recession clearly doesn’t help, but Cardlytics has also faced a more company-specific issue from a strategic rethink at Starbucks (one of their major advertisers) with the management change at that company. Cardlytics has also seen its founders leave the company, which is definitely something worthy of investor attention. The company is still unprofitable and many investors, including ourselves, have lost patience in the company’s promising platform (we exited our position in January). Competitive intensity in the smart home security industry and the perception of risk, overall, is rising for Alarm.com. Home security frenemy Vivint announced it would stop paying license fees to Alarm.com, immediately. Vivint has been paying those license fees for over a decade and Alarm.com is pursuing the legal actions necessary to collect, but the announcement of an unexpected $24 million, high margin hit to next-year’s results, sent shares lower. Vivint also announced it was being acquired by NRG, an energy business looking to beef up subscription revenue and deepen relationships with homeowners. Add on rising recession fears, inflation and supply chain challenges impacting its hardware profitability, and falling software valuations and Alarm.com’s stock has hit a rough patch. In our view, the business continues to perform well and its prospects are bright. Clarus is a holding company that buys and builds “super-fan” outdoor brands. Its best known asset is the rock climbing and mountaineering brand Black Diamond. In hindsight, perhaps we should have waited for a larger margin of safety with our initial purchase and subsequent small addition. While we believe the company’s strategy is sound and management is a good steward of its outdoor brands, the macro realities

Motley Fool ASSET MANAGEMENT ETFS

Letter to Shareholders (Continued)

AUGUST 31, 2023 (Unaudited)

of falling consumer savings rates, full employment, input cost environment, and rising recession risks are expected to weigh on Clarus and other consumer discretionary businesses in the near term. The company has lowered guidance on several occasions and brought in new management to navigate its path forward.

PASSIVE ETF PERFORMANCE AND COMMENTARY

Motley Fool 100 Index ETF

The Motley Fool 100 Index ETF increased 22.71% during the fiscal year ended August 31, 2023. During the same period, the Motley Fool 100 Index, which the Motley Fool 100 Index ETF is designed to track, increased 23.37% and the S&P 500 Total Return Index increased 15.94%. Cumulatively since inception, the Motley Fool 100 Index ETF returned 112.33%. Over that period, the Motley Fool 100 Index returned 118.41% and the S&P 500 Index returned 74.36%.¹⁵

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 fiscal year ended August 31, 2023 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.¹⁶ The Motley Fool 100 Index has historically had, and continued through the fiscal year ended August 31, 2023 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 the Motley Fool 100 Index’s overall performance.

The top three contributors¹⁷ to the Motley Fool 100 Index ETF’s performance were NVIDIA (+227%), Microsoft (+27%) and Apple (+20%). These three companies had a combined average portfolio weight during the fiscal year of more than 28%. The bottom three contributors were CVS Health (-32%), The Walt Disney Company (-25%), and Tesla (-6%). These three companies had a combined average portfolio weight during the fiscal year of a bit over 5%.

Over the fiscal year ended August 31, 2023, nearly 1 in 3 holdings detracted from returns. However, the ETF’s large weighting in the largest market capitalization stocks and to the Information Technology and Communication Services sectors overcame this headwind and drove its outperformance versus the S&P 500 Index.

Motley Fool Next Index ETF

The Motley Fool Next Index ETF gained 5.21% during the fiscal year ended August 31, 2023. During the same period, the Motley Fool Next Index, which the Motley Fool Next Index ETF is designed to track, rose 5.76% and the Russell Midcap Growth Total Return Index increased 13.00%. Cumulatively since the ETF’s inception, the Motley Fool Next Index ETF returned -20.96%, the Motley Fool Next Index returned -20.39% and the Russell Midcap Growth Total Return Index returned -15.72%.¹⁸

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 fiscal year ended August 31, 2023 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.¹⁹

Motley Fool ASSET MANAGEMENT ETFS

Letter to Shareholders (Continued)

AUGUST 31, 2023 (Unaudited)

The top three contributors to the Motley Fool Next Index ETF’s performance were Fair Isaac (+101%), HubSpot (+62%) and Exact Sciences (+135%). These three companies had a combined average portfolio weight during the fiscal year of 3%. The bottom three contributors were Warner Brothers Discovery (-28%), EPAM Systems (-39%), and SVB Financial Group (-100%). These three companies had a combined average portfolio weight during the fiscal year just shy of 3%.

The Motley Fool Next Index had larger than benchmark exposure to the strongest two performing sectors, Consumer Discretionary and Industrials, which helped performance. However, stock selection in the Consumer Discretionary and Information Technology sectors overtook that tailwind and led to underperformance during the year ended August 31, 2023. The ETF reflected these relative positions and performance suffered accordingly.

Motley Fool Capital Efficiency 100 Index ETF

The Motley Fool Capital Efficiency 100 Index ETF rose 24.81% over the fiscal year ended August 31, 2023. During the same period, the Motley Fool Capital Efficiency 100 Index, which the Motley Fool Capital Efficiency 100 Index ETF is designed to track, increased 25.52% and the S&P 500 Total Return Index advanced 15.94%. Cumulatively since inception, the Motley Fool Capital Efficiency 100 Index ETF returned -2.45%. Over that period, the Motley Fool Capital Efficiency 100 Index returned -2.08% and the S&P 500 Index returned -1.82%.²⁰

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 fiscal year ended August 31, 2023 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 US companies, measured by a company’s capital efficiency, that have been recommended The Motley Fool, LLC’s analysts and newsletters.²¹ 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 contributors²² to the Motley Fool Capital Efficiency Index ETF’s performance were Meta Platforms (+82%), Broadcom (+90%) and Mastercard (+28%). These three companies had a combined average portfolio weight during the fiscal year of greater than 13%. The bottom three contributors were UnitedHealth Group (-7%), Advanced Micro Devices (-25%), and NVIDIA (-17%). These three companies had a combined average portfolio weight during the fiscal year of nearly 6%.

The Motley Fool Capital Efficiency 100 Index was overweight in the Information Technology sector, which performed well during the fiscal year ended August 31, 2023. However, the stock selection within the Information Technology sector detracted from performance. The ETF reflected these same phenomena.

Motley Fool ASSET MANAGEMENT ETFS

Letter to Shareholders (Concluded)

AUGUST 31, 2023 (Unaudited)

THANKFUL AND HOPEFULLY DESERVING

Quality ownership and patient capital are enablers of long-term success. But they’re so rare that they actually represent a competitive advantage. Yes, that’s a role you play in our joint long-term success. I hope that fact is empowering.

I’m not sure if Motley Fool Asset Management is an opera, a rock concert, or a Taylor Swift cover band, but we’re glad you’ve self-selected to be here. If you get the shareholders you deserve, we feel like we belong together.²³

We remain thankful for and humbled by your trust.

Onward,

Bryan Hinmon
Chief Investment Officer, Motley Fool Asset Management, LLC

Disclosures

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 and may lose money, including 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.

This 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 this 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 any of 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)

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, 2023. 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)

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.

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.

Motley Fool MID-CAP GROWTH ETF

Portfolio Characteristics (Concluded)

(Unaudited)

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, 2023.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. 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 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, 2023. 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, 2023. 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, 2023. 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, 2023. 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, 2023 (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, 2023 through August 31, 2023, 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, 2023 (UNAUDITED)

Motley Fool global opportunities ETF

Schedule of Investments

AUGUST 31, 2023

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

Motley Fool global opportunities ETF

Schedule of Investments (continued)

AUGUST 31, 2023

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

Motley Fool global opportunities ETF

Schedule of Investments (continued)

AUGUST 31, 2023

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, 2023

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

Motley Fool mid-cap growth ETF

Schedule of Investments (Continued)

AUGUST 31, 2023

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

Motley Fool mid-cap growth ETF

Schedule of Investments (CONCLUDED)

AUGUST 31, 2023

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

Motley Fool 100 Index ETF

Schedule of Investments

AUGUST 31, 2023

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

Motley Fool 100 Index ETF

Schedule of Investments (continued)

AUGUST 31, 2023

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

Motley Fool 100 Index ETF

Schedule of Investments (continued)

AUGUST 31, 2023

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

Motley Fool 100 Index ETF

Schedule of Investments (continued)

AUGUST 31, 2023

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

Motley Fool 100 Index ETF

Schedule of Investments (continued)

AUGUST 31, 2023

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

Motley Fool 100 Index ETF

Schedule of Investments (Concluded)

AUGUST 31, 2023

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

MOTLEY FOOL Small-Cap Growth ETF

Schedule of Investments

AUGUST 31, 2023