MSOS: 2nd Quarter 2026 Portfolio Review

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. Returns less than one year are not annualized. For the fund’s most recent standardized and month-end performance, please click www.advisorshares.com/etfs/msos.

Performance

The AdvisorShares Pure US Cannabis ETF (MSOS) rebounded sharply in the second quarter of 2026 following a difficult start to the year. MSOS returned +42.15% (NAV) / +42.82% (market) for the quarter ended June 30, 2026. By comparison, the S&P 500 Index returned +15.20% over the same period.

Over the trailing one-year period ending June 30, 2026, MSOS returned +113.68% (NAV) / +111.25% (market).

The quarter’s advance followed the Department of Justice’s April 23, 2026, final order reclassifying state-licensed medical cannabis to Schedule III of the Controlled Substances Act.

The fund’s NAV initially declined following the announcement, as some investors took profits after a long-awaited development. It then recovered and continued to rise through May and June as the market gained a clearer understanding of what the order could mean and turned its attention to the DEA’s broader rescheduling hearing.

Portfolio

MSOS maintained its concentrated approach during the quarter, remaining primarily invested in the largest multi-state operators (MSOs).

Top 5 MSO portfolio allocations by quarter:

• Q3 2025: 80.38%
• Q4 2025: 81.56%
• Q1 2026: 82.30%
• Q2 2026: 88.30%

This continued concentration reflects our ongoing emphasis on the operators with the deepest state footprints, the most established brands, and the balance sheet capacity to benefit first from any 280E relief tied to rescheduling.

Positions

The most consequential development of the quarter was the DOJ’s April 23 final order, which immediately moved state-licensed medical cannabis (along with FDA-approved cannabis drug products) to Schedule III. The order took effect April 28, 2026. Separately, a DEA administrative hearing on broader rescheduling of marijuana from Schedule I to Schedule III began June 29, 2026, running into the current quarter.

We did not make material additions or removals to the portfolio’s core holdings during the quarter, though we continued to make modest adjustments to existing positions as we assessed which operators stand to benefit most directly from the April order. Capital markets access for the sector’s larger operators continued to improve during the quarter, highlighted by Trulieve Cannabis Corp.’s uplisting to the NYSE under the new ticker TRLV, marking the first U.S. cannabis operator to list on the exchange, followed by Glass House Brands Inc.’s uplisting to the NYSE on June 30^th under the new ticker GLAS. We view these listings as an early sign of the broader normalization the sector may continue to experience as rescheduling takes effect.

Winners and Losers

The second quarter of 2026 marked a sharp reversal for the cannabis sector, with the MSOS portfolio posting broad-based gains across nearly every holding following the April rescheduling order.

A few positions stood out as the strongest contributors to performance. These included:

• Curaleaf Holdings Inc. (CURLF): +64.09%
• Trulieve Cannabis (TRLV): +68.15%

A few positions lagged the broader rally or posted declines despite the sector’s overall strength. These included:

• Cresco Labs Inc. (CRLBF): -9.68%
• Jushi Holdings Inc. (JUSHF): -4.81%

As of 06.30.2026. Cash is not included. Holdings are subject to change.

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

Cannabis Landscape

The second quarter of 2026 delivered the regulatory milestone the sector had waited years for, on April 23, 2026, the Department of Justice issued an order immediately placing cannabis subject to a state medical marijuana license into Schedule III of the Controlled Substances Act.

The order applies specifically to qualifying state-licensed medical cannabis and FDA-approved cannabis drug products. This does not legalize adult-use cannabis and does not extend Schedule III treatment to the broader recreational market, which generates the majority of revenue for most multi-state operators.

At the same time, the DOJ withdrew its prior notice of hearing on the broader rulemaking and announced a new administrative hearing addressing the full rescheduling of cannabis from Schedule I to Schedule III. That hearing began on June 29, 2026, and continues into the third quarter. Because a broader rescheduling decision could apply across the full cannabis market rather than only the medical subset covered by the April order, it remains the more consequential regulatory process to watch.

One of the most significant potential financial benefits of the April order is relief from Section 280E of the Internal Revenue Code for qualifying medical cannabis operations. Cannabis subject to an eligible state medical license is no longer classified in a manner that would make Section 280E applicable. This change is expected to alleviate a tax burden that has weighed on multi-state operator profitability for years.

One of the most direct potential financial benefits of rescheduling is 280E relief for medical-license operations: as of April 22, 2026, medical cannabis subject to a state license is no longer classified under Section 280E of the Internal Revenue Code, which is expected to remove a tax burden that has weighed on multi-state operator profitability for years, pending clarification on implementation. The mechanics and timing of how 280E relief will actually be administered have not yet been fully determined, and we would caution against treating this benefit as settled until further IRS or Treasury guidance clarifies its application.

However, the mechanics and timing of that relief remain uncertain. Until the IRS or Treasury provides additional guidance on how the change will be implemented and applied, investors should avoid treating the potential benefit as fully settled.

Uplisting to national exchanges like Nasdaq or the NYSE remains available only to the medical-cannabis operator businesses. Trulieve and Glass House Brands both restructured ahead of their respective NYSE listings, separating their medical operations from their adult-use/recreational businesses so that the medical only entity, now Schedule III, met listing standards. Broader Federal reforms, banking access and exchange listing for the sector’s adult-use operators still require separate action.

Outlook

As we move into Q3 2026, the DEA’s administrative hearing on full rescheduling is the sector’s central storyline, alongside the ongoing D.C. Circuit litigation over the April order’s legal basis. Either process could meaningfully extend, or complicate, the relief the industry has waited years to see.

We continue to believe the largest, best-capitalized multi-state operators are best positioned to benefit as 280E relief flows through their financials and as the broader rescheduling process plays out. Volatility is likely to persist as the market reacts to hearing developments, court rulings, and the pace of implementation. Our concentrated approach continues to reflect that view.

Sources:
1. Marijuana Policy Project. DOJ Reschedules State-Legal Medical Cannabis to Schedule III: Questions and Answers. 2026.
2. Congress.gov, Congressional Research Service. Department of Justice Eases Control of Medical Marijuana. April 30, 2026.
3. Foley Hoag LLP. DOJ Immediately Reschedules State-Licensed Medical Cannabis to Schedule III — and Restarts the Clock on Broader Rescheduling. April 23, 2026.
4. Ropes & Gray LLP. Clearing the Haze? Federal Marijuana Rescheduling Heads to DEA Hearing as Legal Challenges Loom. 2026.
5. Duane Morris LLP. Relief, Finally? DEA Issues Order Expediting Cannabis Rescheduling to Schedule III. April 24, 2026.

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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 Page for more information.

1Q 2026 Portfolio Commentary