Strategy. The Capital Efficiency Fund is an exchange-traded fund (ETF) and employs a passive management or indexing investment approach designed to track the total return performance, before fees and expenses, of the Capital Efficiency Index. Motley Fool Asset Management, LLC (the Adviser) serves as the investment adviser to the Capital Efficiency Fund. The Capital Efficiency Index was developed by Motley Fool Investment Analytics, LLC (the Index Provider). The Motley Fool Capital Efficiency Index The Capital Efficiency Index was established by the Index Provider in 2021 and is a proprietary, rules-based index designed to track the performance of the highest scoring stocks of U.S. companies, measured by a companys capital efficiency quality factor, that have been recommended by analysts and newsletters of … Show more… The Capital Efficiency Fund is an exchange-traded fund (ETF) and employs a passive management or indexing investment approach designed to track the total return performance, before fees and expenses, of the Capital Efficiency Index. Motley Fool Asset Management, LLC (the Adviser) serves as the investment adviser to the Capital Efficiency Fund. The Capital Efficiency Index was developed by Motley Fool Investment Analytics, LLC (the Index Provider). The Motley Fool Capital Efficiency Index The Capital Efficiency Index was established by the Index Provider in 2021 and is a proprietary, rules-based index designed to track the performance of the highest scoring stocks of U.S. companies, measured by a companys capital efficiency quality factor, that have been recommended by analysts and newsletters of The Motley Fool, LLC (TMF), and that also meet certain liquidity requirements. Capital efficiency quality factor is a measure of how a business turns its investments into revenue and profit and it provides insight into the companys return on invested capital. Both the Index Provider and TMGF are affiliates of the Adviser. The Index Providers TMFs recommendation universe includes all companies domiciled in the United States that are either active recommendations of a newsletter published by TMF or are among the 150 highest rated U.S. companies in TMFs analyst opinion database, subject to universe continuity rules. With respect to universe continuity, the Capital Efficiency Index is constructed utilizing a buffering methodology. The buffer is intended to reduce index turnover from movements in constituent weightings that could result in a company dropping out of the index only to be added back with the next rebalance. Specifically, stocks ranked in the top 105 positions based on TMFs analyst opinion database (70% of the 150-stock target) are automatically included in the candidate universe. Additionally, companies that were previously eligible based on their TMF analyst ratings will still be included as long as their rank is equal to or better than 195 (130% of the 150-stock target). Stocks are then added based on conviction score rank until the 150-stock target is reached. Company shares that meet the requirements for universe inclusion must also meet the minimum requirements for liquidity and for calculating the Quality Factor Factor Score (defined herein). Specifically, the liquidity requirements mandate that at least $1 million worth of a companys shares trade daily, on average, during the preceding three months. With respect to calculating capital efficiency quality factor, a company must report gross profits (or net revenues for financial companies) and meet a minimum total assets threshold as of the most recent filing prior to each index weighting date. TMFs proprietary Capital Efficiency Factor Score is a composite score that incorporates growth, profitability, and stability metrics in assessing a companys capital efficiency. To determine final index membership, candidate stocks are first ranked based on their composite scores. The top 100 stocks are then selected based on index continuity rules. Each selected companys share of the Capital Efficiency Index (or weighting) is set to equal the companys share of all Capital Efficiency Index companies aggregate market value multiplied by their respective Capital Efficiency Factor Scores. A maximum position size limit of 4.8% is also enforced (tested at the time of rebalancing and subject to index continuity rules). The Capital Efficiency Index is reconstituted and rebalanced quarterly. The index methodology for the Capital Efficiency Index applies an enhanced calculation logic to reconstitutions and special month-end rebalances as needed to keep the Capital Efficiency Index constituent weights in conformity with tax code diversification requirements for registered investment companies. When applicable, position weights will be adjusted during a reconstitution or special rebalance to ensure that no individual position exceeds 24% of the Capital Efficiency Index and the percentage of the Capital Efficiency Index comprised of individual positions in excess of 4.8% does not cumulatively exceed 48%. The Capital Efficiency Index will typically include 100 companies at any one time and may contain companies of any size capitalization. The Capital Efficiency Index is calculated and administered by Solactive AG (the Index Calculation Agent), which is not affiliated with the Capital Efficiency Fund, the Adviser, Index Provider or TMF. Additional information regarding the Capital Efficiency Index, including its value, is available on the websites of the Capital Efficiency Index at www.foolindices.com and the Index Calculation Agent, at www.solactive.com. The Capital Efficiency Funds Investment Strategy Under normal circumstances, at least 80% of the Capital Efficiency Funds total assets (exclusive of any collateral held from securities lending) will be invested in the component securities of the Capital Efficiency Index. The Adviser expects that, over time, if it has sufficient assets, the correlation between the Capital Efficiency Funds performance and that of the Capital Efficiency Index, before fees and expenses, will be 95% or better. The Capital Efficiency Fund will generally use a replication strategy to achieve its investment objective, meaning it generally will invest in all of the component securities of the Capital Efficiency Index. However, the Capital Efficiency Fund may use a representative sampling strategy, meaning it may invest in a sample of the securities in the Capital Efficiency Index whose risk, return and other characteristics closely resemble the risk, return and other characteristics of the Capital Efficiency Index as a whole, when the Adviser believes it is in the best interests of the Capital Efficiency Fund (e.g., when replicating the Capital Efficiency Index involves practical difficulties or substantial costs, a Capital Efficiency Index constituent becomes temporarily illiquid, unavailable or less liquid, or as a result of legal restrictions or limitations that apply to the Capital Efficiency Fund but not to the Capital Efficiency Index). The Capital Efficiency Fund generally may invest up to 20% of its total assets (exclusive of any collateral held from securities lending) in securities or other investments not included in the Capital Efficiency Index, but which the Adviser believes will help the Capital Efficiency Fund track the Capital Efficiency Index. For example, the Capital Efficiency Fund may invest in securities that are not components of the Capital Efficiency Index to reflect various corporate actions and other changes to the Capital Efficiency Index (such as reconstitutions, additions and deletions). The Capital Efficiency Fund is non-diversified for the purposes of the Investment Company Act of 1940, as amended (1940 Act), which means that the Capital Efficiency Fund may invest in fewer securities at any one time than a diversified fund. To the extent the Capital Efficiency Index concentrates (i.e., holds more than 25% of its total assets) in the securities of a particular industry, the Capital Efficiency Fund will concentrate its investments to approximately the same extent as the Capital Efficiency Index. The Capital Efficiency Fund may also seek to increase its income by lending securities. The Capital Efficiency Fund has elected to be, and intends to qualify each year for treatment as, a regulated investment company (RIC) under Subchapter M of Subtitle A, Chapter 1, of the Internal Revenue Code of 1986, as amended (the Code). Show less