MSOS: 3rd Quarter 2024 Portfolio Review

Performance
Between July 1, 2024, and September 30, 2024, the net asset value (NAV) of MSOS declined by 2.98%. Despite this, the year-to-date NAV remained positive at 2.18% as of September 30, 2024.

Portfolio
The portfolio has consistently prioritized its top holdings, particularly the largest multi-state operators (MSOs). This focus has remained steady over time, with the top five holdings making up:

• Q3 2023: 76.36% of the portfolio
• Q4 2023: 82.07% of the portfolio
• Q1 2024: 83.11% of the portfolio
• Q2 2024: 83.53% of the portfolio
• Q3 2024: 82.86% of the portfolio

New Positions
During the third quarter of 2024 no new positions were added or removed. We actively adjusted weightings to effectively manage the portfolio. Goodness Growth Holdings Inc. (GDNSF) changed its name to Vireo Growth Inc. (VREOF). The CEO, commented that the name change reflects the company’s heritage and return to its roots and does not impact affect the rights of the Company’s shareholders and there will be no consolidation of capital associated with the name change.

Winners and Losers
During the quarter, Trulieve Cannabis (TCNNF) posted a notable gain of 28.79%, while Glass House Brands (GLASF) rose by 28.76%. On the downside, Green Thumb Industries (GTBIF) declined by 10.09%, and Curaleaf Holdings Inc. (CRLBF) experienced a drop of 22.16%.

As of 9.30.2024. Cash is not included. Subject to change.

Please see our complete fund holdings at advisorshares.com/etfs/msos. The holdings details are updated each market day.

On July 22, 2024, the public comment period for the Drug Enforcement Administration’s (DEA) cannabis rescheduling closed, with over 43,000 submissions. More than 65% of these comments advocated for either descheduling, decriminalizing, or legalizing cannabis. Following the comment period, in August, the U.S. Department of Health and Human Services (HHS) recommended moving cannabis from Schedule I to Schedule III under the Controlled Substances Act (CSA). A notice has been posted in the Federal Register for an Administrative Law Judge (ALJ) hearing on the rescheduling, set for December 2, 2024. After this hearing, the ALJ will submit findings, along with evidence and testimonies to the DEA. The DEA will then review these findings alongside HHS’s recommendation, a memorandum from the Office of Legal Counsel (OLC), and its own analysis along with the public comments. Based on this review, the DEA will make a final determination. Once a decision is reached, the final rule will be published in the Federal Register. Interested parties will then have 30 days to seek judicial review. Assuming no court order delays it, the rule would go into effect and potentially as early as mid 2025.

In a pivotal moment before the November 2024 presidential election, both Republican and Democratic candidates have shown support for substantial cannabis reform, with both expressing interest in rescheduling or descheduling cannabis. Moving cannabis from Schedule I to Schedule III would mark a significant milestone for the industry, particularly from an investment standpoint. U.S. cannabis companies would no longer face the burdensome tax penalties imposed under IRS Code Section 280E, enabling them to deduct ordinary business expenses. This shift could also set the stage for the passage of the SAFER Banking Act, which would offer “safe harbor” provisions for banks and SEC-regulated activities including investment banking and stock exchanges. Additionally, the U.S. Treasury Department may be forced to revise the FinCEN framework to provide stronger protections for financial institutions working with cannabis businesses.

At the state level, progress continues. Ohio recently legalized adult-use cannabis, with sales surpassing $76 million in less than 50 days. In Florida, voters will decide in November on Amendment 3, a proposed constitutional amendment to legalize recreational cannabis for adults aged 21 and older. This measure requires 60% voter approval and could transform Florida’s market, which already ranks as the third-largest in the U.S., with $2.5 billion in medical sales. Meanwhile, in North Dakota and South Dakota, measures will be on the November ballot to legalize the recreational use and distribution of cannabis for adults 21 and older. In Nebraska, two ballot measures on medical cannabis will also be voted on. One would allow patients with a healthcare provider’s recommendation to possess up to five ounces of medical cannabis, while the other would eliminate penalties for the possession and distribution of medical cannabis and establish a commission to regulate it in the state.

Despite past political hurdles in the U.S., the long-term outlook for the cannabis industry remains strong with significant growth potential. As public support for legalization increases, more states implement cannabis-friendly policies, and bipartisan backing from presidential candidates gains momentum, pressure on federal lawmakers to enact meaningful reform continues to mount. While volatility persists in the evolving cannabis sector, strategic planning, due diligence, and risk management are critical for investors looking to successfully navigate this dynamic market.

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To get updates on the funds, tune in to AdvisorShares’ AlphaNooner Show streaming live each regular weekday starting at 12:00 pm (East Coast time), where I am a guest almost every Tuesday. Other important guests from the cannabis world often join too. Find it on most major social media platforms or visit our the AdvisorShares “Events” webpage for more information.

Q2 2024 Portfolio Commentary