MSOS: 2nd Quarter 2024 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
During the three-month period ending June 30, 2024, the net asset value (NAV) of MSOS decreased by 26.22%. However, as of June 30, 2024, the year-to-date return remains positive at 5.31% (NAV).

Portfolio
The portfolio has consistently focused on its top holdings, especially the largest multi-state operators (MSOs). This emphasis has been maintained over time, with the top five holdings comprising 82.53% by the end of the second quarter of 2023, 76.36% by the end of the third quarter, and 82.07% by the end of the fourth quarter 2023. In 2024, the top five concentration was 83.11% at the end of the first quarter and almost the same with 83.53% at the end of the second quarter 2024.

New Positions
During the quarter second quarter of 2024 no new positions were added. We actively adjusted weightings to effectively manage the portfolio including, but not limited to, the addition of 1,751,013 shares of Green Thumb Industries (GTBIF), 5,745,089 shares of Curaleaf Holdings Inc. (CURLF), and 3,843,783 shares of Verano Holdings Corp. (VRNOF).

Winners and Losers
During the quarter, small holdings RIV Capital Inc. (RIV) and Grown Rogue International (GRUSF) increased 44.44%  and 20.37%, respectively. However, there were significant underperformers among the fund’s largest positions with Verano Holdings Corp. (VRNOF) declining 42.92% and Curaleaf Holdings Inc. (CURLF) facing a downturn of 29.74%.

Ticker	Security Description	Portfolio Weight %
GTBIF	GREEN THUMB INDUSTRIES SWAP	28.14%
CURLF	CURALEAF HOLDINGS INC SWAP	19.67%
TCNNF	TRULIEVE CANNABIS SWAP	18.08%
VRNOF	VERANO HOLDINGS CORP SWAP	11.89%
CRLBF	CRESCO LABS INC SWAP	5.76%
TSNDF	TERRASCEND CORP	5.50%
GLASF	GLASS HOUSE BRANDS SWAP	3.40%
AYRWF	AYR WELLNESS INC SWAP	2.73%
JUSHF	JUSHI HOLDINGS INC SWAP	1.34%
CBDHF	HEMPFUSION WELLNESS INC	0.83%

As of 6.30.2024. 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.

In a landmark decision in April, cannabis may soon be reclassified in the United States from Schedule I – substances with no currently accepted medical use and a high potential for abuse – to Schedule III, which includes substances with medical value and low potential for dependence. This monumental shift signifies the recognition of the evolving landscape surrounding cannabis and its potential benefits.

As regulations evolve, investors are preparing for potential impacts on market dynamics, investment strategies, and the overall landscape of cannabis-related businesses. This is expected to introduce considerable volatility, as demonstrated in Q2. AdvisorShares is dedicated to supporting policies that foster a fair, safe, and economically beneficial cannabis industry.

The U.S. Government’s potential reclassification of cannabis acknowledges its potential medicinal properties and its lower risk of abuse. Additionally, it may further destigmatize public opinion of cannabis and ease the economic burden on American cannabis companies. With this rescheduling, cannabis businesses operating in the U.S. would no longer be unfairly hobbled by the tax penalties enforced under IRS Code Section 280E. This would allow these companies to deduct ordinary and necessary business expenses related to their operations without being penalized for working with cannabis. Furthermore, rescheduling may lead to the easing of banking and capital market restrictions that currently hinder the cannabis industry.

At the state level, we have seen significant progress. Ohio has legalized cannabis for adult use, with sales expected to begin in fall 2024. In Florida, a proposed constitutional amendment aims to legalize recreational cannabis, allowing adults 21 and older to purchase and possess it. This measure, requiring 60% voter approval, would tap into Florida’s vast market, which is already the nation’s largest medical marijuana market with 880,000 patient cardholders as of April. With $2.5 billion in medical sales, Florida ranks as the third-largest market by revenue, following California and Michigan, both of which have legalized adult use.

In Pennsylvania, legislative efforts to legalize cannabis are ongoing, with support from Governor Josh Shapiro, though achieving consensus in the divided legislature remains a challenge. Kentucky has already signed medical marijuana into law, set to be implemented in 2025, and there is continued support and discussion for further cannabis reforms. In Nebraska, advocates are working to get a medical marijuana initiative on the ballot.

In conclusion, the potential reclassification of cannabis marks a significant step forward in recognizing its medical value and reducing its stigma. This change would not only benefit cannabis businesses by alleviating financial and regulatory burdens but also pave the way for broader acceptance and integration of cannabis into the healthcare and economic landscape. As the regulatory environment continues to evolve, the support and participation of the community are crucial in shaping a fair and thriving cannabis industry.

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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.