Narrator: Dan Ahrens, portfolio manager of ACT The AdvisorShares Vice ETF Ticker: ACT www.advisorshares.com 1
Narrator: Dan Ahrens, portfolio manager of ACT Table of Contents Investment Strategy Overview................3 Risk Management................................13 Investment Process………….….............4 The Case for ACT................................14 Historical Look at Alcohol & Tobacco.....5-6 How ACT Fits Within a Portfolio……...15 What Does the Future Look Like?..........7 About the Portfolio Manager................16-17 Alcohol & Tobacco’s Durable Moat….....8 Strategy Summary...............................18 A New Frontier for Growth......................9 Benefits of the Active ETF Structure....19 Caution Required...................................10 About AdvisorShares...........................20 Drivers for Security Selection….............11 Contact Us...........................................21 Portfolio Construction.............................12 Disclosure............................................22-23 www.advisorshares.com 2
Narrator: Dan Ahrens, portfolio manager of ACT Investment Strategy Overview § The AdvisorShares Vice ETF (Ticker: ACT) is an actively managed ETF designed to invest in select companies – conducting federally legal business per the United States government – related to alcohol, cannabis and tobacco. § Alcohol and tobacco have been often viewed as potentially recession-resistant areas simply because individuals take pleasure in such related activities during both good and bad economic environments. § ACT’s investment thesis believes that investing in select alcohol and tobacco companies can provide continued growth and long-term performance across all types of market environments. With evolving societal and regulatory landscapes, the upside potential of cannabis as a new § investment avenue complements the historically resilient characteristics of alcohol and tobacco equities. ACT only invests in cannabis-related companies legal on the U.S. federal level. While many state jurisdictions legalized the possession and use of cannabis, it still remains illegal under U.S. federal law. The U.S. regulation of marijuana remains evolving and there is no assurance of continued regulatory approvals. www.advisorshares.com 3 Next slide: Investment Process
Narrator: Dan Ahrens, portfolio manager of ACT Investment Process Invests primarily in U.S. exchange-listed equity securities including common and preferred stock, § and American depositary receipts (ADRs). § Employs a fundamental process to identify well-established companies that have shown consistency in their financial results and earnings quality, as well as attractive operating histories and established positions in their respective markets. § Seeks to identify alcohol and tobacco companies that can potentially carry a competitive advantage operating within heavily regulated industries reinforced by a well-established performance history across multiple market and economic environments. § Seeks to identify U.S. federally legal cannabis-related companies across various formats that may potentially provide tremendous upside potential for significant growth, especially as the market matures and evolves. On a U.S. federal legal level, cannabis-related companies can span across multiple industries § including agriculture, biotechnology, pharmaceutical, real estate, retail, finance and medical applications. www.advisorshares.com 4 Next slide: Alcohol Historical Performance
Narrator: Dan Ahrens, portfolio manager of ACT Alcohol: Historical Performance Source: Morningstar, 12/20/2004 through 12/31/2017 The growth of $10,000 chart is hypothetical and does not reflect the deduction of fees and expenses, in which performance would have been lower. Past performance is not indicative of future results. You cannot invest directly in an index. The Dow Jones US Brewers Index is a subset of the Dow Jones US Index. It represents the Brewers Subsector as defined by Industry Classification Benchmark (ICB) within the Beverages Sector; Food, Beverage & Tobacco Supersector; and the Consumer Staples Industry. The ICB is an industry classification taxonomy launched by Dow Jones and FTSE and now solely owned by FTSE International. It is float market cap weighted. The Dow Jones US Distillers & Vintners Index is a subset of the Dow Jones US Index. It represents the Distillers & Vintners Subsector as defined by Industry Classification Benchmark (ICB) within the Beverages Sector; Food, Beverage & Tobacco Supersector; and the Consumer Staples Industry. The ICB is an industry classification taxonomy launched by Dow Jones and FTSE and now solely owned by FTSE International. It is float market cap weighted. www.advisorshares.com 5 Next slide: Tobacco Historical Performance
Narrator: Dan Ahrens, portfolio manager of ACT Tobacco: Historical Performance Source: Morningstar, 12/20/2004 through 12/31/2017 The growth of $10,000 chart is hypothetical and does not reflect the deduction of fees and expenses, in which performance would have been lower. Past performance is not indicative of future results. You cannot invest directly in an index. The Dow Jones US Tobacco Index is a subset of the Dow Jones US Index. It represents the Brewers Subsector as defined by Industry Classification Benchmark (ICB) within the Tobacco Sector; Food, Beverage & Tobacco Supersector; and the Consumer Staples Industry. The ICB is an industry classification taxonomy launched by Dow Jones and FTSE and now solely owned by FTSE International. It is float market cap weighted. www.advisorshares.com 6 Next slide: What Does the Future Look Like?
Narrator: Dan Ahrens, portfolio manager of ACT What Does the Future Look Like? 10/5/2017, reuters.com 10/18/2016, fortune.com 11/2/2017, cnbc.com Please refer to the Holdings section on ACT’s webpage -- www.advisorshares.com/fund/act -- to view the fund's holdings at any time. www.advisorshares.com 7 Next slide: Alcohol & Tobacco’s Durable Moat
Narrator: Dan Ahrens, portfolio manager of ACT Alcohol & Tobacco’s Durable Moat Select alcohol and tobacco companies’ ability to maintain a competitive advantage over peers to protect their long-term profits can be attributed to: Regulatory Oversight § § Manufacturing & Production § Distribution (Domestic & International) Branding § § Barriers to Entry www.advisorshares.com 8 Next slide: Cannabis, A New Frontier
Narrator: Dan Ahrens, portfolio manager of ACT Cannabis: A New Frontier for Potential Growth § U.S. federally legal cannabis-related companies can fall into numerous industries and formats including biotechnology, pharmaceutical, agriculture, real estate, retail and finance. § While marijuana use and possession has been allowed under select circumstances for certain U.S. states and the District of Columbia, it remains not legal on the U.S. federal level. While societal and regulatory landscapes have evolved, the path to federal legality stands unclear. We are neither predicting nor anticipating that history could repeat itself but after the ratification of the 21 st Amendment to the U.S. Constitution, the alcohol industry realized significant growth with regulation and oversight. § As regulations and oversight evolves, cannabis can be a potential boon to markets and the economy and generator of tax revenue via aforementioned industries and formats. § The number of investable companies related to cannabis may likely continue to grow. § Merger & Acquisition potential may possibly develop as the market evolves and matures. www.advisorshares.com 9 Next slide: Caution Required
Narrator: Dan Ahrens, portfolio manager of ACT Caution Required § Despite the emerging growth opportunity of cannabis, not all cannabis-related companies will succeed – and some may not be legal on a U.S. federal level – blindly investing in this area may have adverse effects on an investment portfolio. 4/18/2017, cnbc.com 12/19/2016, latimes.com 8/15/2017, fool.com www.advisorshares.com 10 Next slide: Drivers for Security Selection
Narrator: Dan Ahrens, portfolio manager of ACT Drivers for Security Selection Alcohol, Identifies compelling companies through portfolio manager’s purview that fit within the parameters of the strategy’s Cannabis, investment objective and thesis Tobacco Consistency in financial results and earnings quality; Strong attractive operating histories and established positions Fundamentals in their respective markets Upside Screens for emerging companies that may possess upside for growth Potential www.advisorshares.com 11 Next slide: Portfolio Construction
Narrator: Dan Ahrens, portfolio manager of ACT Portfolio Construction Investment Universe Qualifies for Screening Meets Criteria for Portfolio Management Review Portfolio Holdings (typically < 50 securities) www.advisorshares.com 12 Next slide: Risk Management
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