Narrator: Dan Ahrens, portfolio manager of ACT. The AdvisorShares Vice ETF. Ticker: ACT.

Transcription

1 The AdvisorShares Vice ETF Ticker: ACT 1

2 Table of Contents Investment Strategy Overview...3 Investment Process....4 Historical Look at Alcohol & Tobacco What Does the Future Look Like?...7 Alcohol & Tobacco s Durable Moat...8 A New Frontier for Growth...9 Caution Required...10 Drivers for Security Selection...11 Portfolio Construction...12 Risk Management...13 The Case for ACT...14 How ACT Fits Within a Portfolio...15 About the Portfolio Manager Strategy Summary...18 Benefits of the Active ETF Structure...19 About AdvisorShares...20 Contact Us...21 Disclosure

3 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. 3 Next slide: Investment Process

4 4 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. Next slide: Alcohol Historical Performance

5 Alcohol: Historical Performance 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. 5 Source: Morningstar, 12/20/2004 through 12/31/2017 Next slide: Tobacco Historical Performance

6 Tobacco: Historical Performance 6 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. Next slide: What Does the Future Look Like?

7 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 -- /fund/act -- to view the fund's holdings at any time. 7 Next slide: Alcohol & Tobacco s Durable Moat

8 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 8 Next slide: Cannabis, A New Frontier

9 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. 9 Next slide: Caution Required

10 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 10 Next slide: Drivers for Security Selection

11 Drivers for Security Selection Alcohol, Cannabis, Tobacco Identifies compelling companies through portfolio manager s purview that fit within the parameters of the strategy s investment objective and thesis Strong Fundamentals Consistency in financial results and earnings quality; attractive operating histories and established positions in their respective markets Upside Potential Screens for emerging companies that may possess upside for growth 11 Next slide: Portfolio Construction

12 Portfolio Construction Investment Universe Qualifies for Screening Meets Criteria for Portfolio Management Review Portfolio Holdings (typically < 50 securities) 12 Next slide: Risk Management

13 Risk Management Certain factors may cause the portfolio manager to reduce exposure or remove a specific holding, which includes: Portfolio monitored daily Portfolio manager regularly reviews securities on a name by name basis Portfolio rebalance may happen at any time based on the manager s assessment of position sizes and tax efficiency May sell or reduce a position size when the portfolio manager believes that a security is overvalued or better investment opportunities become available 13 Next slide: The Case for ACT

14 The Case for ACT Select alcohol and tobacco companies may carry a durable moat advantage within heavily regulated industries, reinforced by an established record of performance across multiple market and economic environments. Tobacco still possesses among the highest profit margins of consumer products despite less people smoking and heavily restricted advertising. The largest alcohol and tobacco companies are among the equity market s top dividend payers, with a history of consistent growth and increasing dividends that can potentially enhance the portfolio s total return. U.S. federally legal cannabisrelated equities may present an emerging growth opportunity across multiple industries and various formats. Cannabis-related companies may also realize merger & acquisition potential as the market matures and evolves. ACT is the only ETF with this emerging investment theme, including passive strategies, that provides concentrated exposure to select companies associated with alcohol, cannabis and tobacco. 14 Next slide: How ACT Fits Within a Portfolio

15 How ACT Fits Within a Portfolio ACT can deliver an alpha-seeking complement or satellite equity holding to a broad-based equity allocation. ACT seeks direct exposure to select leaders within the alcohol and tobacco industries complemented by the potential emerging upside of U.S. federally legal cannabis-related companies. ACT 15 Next slide: About the Portfolio Manager

16 About the Portfolio Manager Dan Ahrens is managing director and chief operating officer of AdvisorShares. Dan carries over two decades of experience in the financial services industry serving in a variety of senior-level capacities. He founded Ahrens Advisors, L.P., an SEC-registered investment advisor, where he was portfolio manager of the Ladenburg Thalmann Gaming and Casino Fund. Dan also served as president of the MUTUALS.com Funds, where he launched the Vice Fund (VICEX) and served as its original portfolio manager. He was also the portfolio manager of the Generation Wave Growth Fund (GWGFX). During that time, he also served as president and chief compliance officer of Mutuals Advisors, Inc., and acted as president, treasurer and financial & operations officer of an affiliated broker dealer firm. Dan is the author of Investing in Vice (St. Martin s Press, 2004) and has appeared prominently across financial media outlets and major national and trade publications. He earned a Bachelor in Business Administration in Finance from Texas Tech University. 16 Next slide: About the Portfolio Manager

17 About the Portfolio Manager Rob Parker is the director of capital markets for AdvisorShares, where he oversees trading, portfolio management and fund operations activity for the firm. Rob s professional career has spanned over a decade and a half within the financial services industry, where he has worked across compliance, due diligence, and investment analysis as well as positions of senior portfolio manager and firm principal. Rob managed assets for a proprietary investment practice that he created after serving as senior portfolio manager at ProShares Advisors, where he managed leveraged, inverse, and long-short ETFs. Rob previously held positions held at Capital Financial Group, Wachovia Securities, The Advisors Group, and FOLIOfn, serving in a variety of analyst roles. He is a graduate of National University, earning a Bachelor of Science. He holds the Chartered Financial Analyst (CFA) designation and is a member of the CFA Society of Washington, DC. 17 Next slide: Strategy Summary

18 Strategy Summary Actively managed ETF designed to invest invest in select companies related to alcohol, cannabis and tobacco. Employs a fundamental process to identify companies often historically viewed as recessionresistant, which exhibit consistency in their financial results and earnings quality, operating histories, durable moats, and attractive returns through multiple market cycles. Provides a component of potential upside for growth as a new investment avenue emerges to complement the historically resilient characteristics of alcohol and tobacco. The only ETF, among both active and passive strategies, that provides concentrated exposure to select companies associated with alcohol, cannabis and tobacco; backed by an experienced portfolio management team with established expertise within this investment theme. 18 Next slide: Benefits of Active ETF Structure

19 Benefits of the Active ETF Structure Full Transparency Investors can view all the underlying holdings of this active ETF on a daily basis. Intraday Liquidity This active ETF can be bought and sold like a stock during market trading day. Also, volume does not equal liquidity. This ETF s liquidity is driven by the constituents of its underlying portfolio. Operational & Tax Efficiency Unlike mutual funds where investors are responsible for taxes on capital gains, this active ETF structure provides the potential to not pay any taxable capital gain distributions. 19 Next slide: About AdvisorShares

20 About AdvisorShares AdvisorShares is a leading provider of actively managed exchange-traded funds (ETFs) with approximately $1.1 billion in assets under management. AdvisorShares became among the first firms to bring actively managed ETFs to market, delivering numerous industry firsts, and remains a leading and innovative provider in the rapidly expanding actively managed ETF space. Our diversified suite of investment strategies features accomplished investment managers making active decisions, similar to traditional mutual funds, except our fund portfolios are delivered in a fully-transparent ETF structure. 20 Next slide: Contact Us

21 Contact Us AdvisorShares 4800 Montgomery Lane Suite 150 Bethesda, MD You May Reach an AdvisorShares Investment Consultant by Calling: Follow AdvisorShares on Twitter Like' Us on Facebook Get active ETF insights at AlphaBaskets.com 21 Next slide: Disclosure

22 Disclosure Investing involves risks including possible loss of principal. Cannabis-related companies are subject to various laws and regulations that may differ at the state/local and federal level. These laws and regulations may significantly affect a cannabis-related company s ability to secure financing, impact the market for marijuana industry sales and services, and set limitations on marijuana use, production, transportation, and storage. In addition to regulatory action, litigation initiated by private citizens or companies could have a negative impact on the financial and/or operational status of cannabis-related companies. Pronouncements from the current Administration suggest the Department of Justice ( DOJ ) may push back against states where marijuana use and possession is legal, step up the enforcement of federal marijuana laws and the prosecution of nonviolent federal drug crimes and, in the event the Rohrabacher-Farr amendment is not renewed by Congress, begin using federal funds to prevent states from implementing laws that authorize medical marijuana use, possession, distribution, and cultivation. Such actions by the DOJ could produce a chilling effect on the industry s growth and discourage banks from expanding their services to cannabis-related companies where such services are currently limited. 22

23 Disclosure Companies in the food, beverage and tobacco industry are very competitive and subject to a number of risks. Demographic and product trends, changing consumer preferences, nutritional and healthrelated concerns, competitive pricing, marketing campaigns, environmental factors, adverse changes in general economic conditions, government regulation, food inspection and processing control, consumer boycotts, risks of product tampering, product liability claims, and the availability and expense of liability insurance can affect the demand for, and success of, such companies products in the marketplace. For a full summary of the risks please see the prospectus. BEFORE INVESTING YOU SHOULD CAREFULLY CONSIDER THE FUND S INVESTMENT OBJECTIVES, RISKS, CHARGES AND EXPENSES. THIS AND OTHER INFORMATION IS IN THE PROSPECTUS, A COPY OF WHICH MAY BE OBTAINED BY CALLING PLEASE READ THE PROSPECTUS CAREFULLY BEFORE YOU INVEST. Distributor: Foreside Fund Services, LLC 23