As the push for legalization of cannabis continues to grow both in the U.S. and abroad, the cannabis industry is garnering more and more attention from investors. To help our clients understand this dynamic and growing industry and the investment opportunities it offers, Tiedemann Advisors canvassed the landscape of legal cannabis, primarily focusing on the United States and Canada.

EXPLORING INVESTMENT OPPORTUNITIES IN THE CANNABIS INDUSTRY

EXECUTIVE SUMMARY

+ Legal cannabis (for medicinal and recreational use) is now a mainstream topic among the investment community, in the media, among family, friends and colleagues, and even with policymakers who might have considered it verboten less than a decade ago.

+ The legal landscape is moving quickly, particularly in the U.S., where liberalization is bubbling up through states and municipalities.

+ Investment opportunities in public and private companies, as well as through diversified and dedicated funds, are emerging rapidly.

+ We believe the space is still young and have only small exposures in our portfolios where trusted managers have chosen to invest as part of a broader strategy.

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MARIJUANA LEGALIZATION BY STATE As of January 2020

Source: https://disa.com/map-of-marijuana-legality-by-state

Legalized Medical + Decriminalized

Medical Decriminalized Fully Illegal

EXPLORING OPPORTUNITIES IN CANNABIS

WHAT IS CANNABIS?

Cannabis is a plant that has been harvested for thousands of years to produce textiles, oil and medicine. It is comprised of at least 750 compounds including Cannabidiol (CBD) and Tetrahydrocannabinol (THC).

CURRENT MARKET AND GROWTH POTENTIAL

CANNABIS, HEMP AND MARIJUANA Cannabis is the genus of plant. All hemp and marijuana varieties are a type of cannabis. Hemp is reserved solely for cannabis plants containing little-to-no THC, while marijuana is the term used to describe the psychotropic varieties of cannabis and contain a fair amount of THC.

Today, marijuana is considered legal in several U.S. states, despite the fact that it is classified as a Schedule I drug (a substance with no currently accepted medical use and a high potential for abuse) by the Food and Drug Administration, alongside heroin, ecstasy, LSD and psilocybin. The U.S. has encouraged and often insists that its trading partners also enforce restrictions similar to FDA guidelines.

HO

OH OH

O

VS.CBD

CBD is the primary source of the medicinal properties of cannabis. It is widely sold legally as a dietary supplement in various forms and is not psychoactive.

CONSUMERConsumer products will ultimately act like many other consumer packaged goods (CPGs) where brand power is key to generating and sustaining high returns on invested capital. The consumer cannabis market services two related verticals: Food & Beverages and Health & Wellness.

MEDICINALCBD is believed to be useful in reducing pain and inflammation, controlling epileptic seizures and other nerve disorders, treating mental illness, addictions and more. Cannabis is typically used for medical consumption through:

INGESTION | edibles, tinctures, sprays and capsules

INHALATION | smoking, vaporizing or dabbing

TOPICALLY | patches and balms

CULTIVATIONThis vertical is less attractive due to declining profit margins where cannabis is becoming commoditized.

THC

THC is the main psychoactive component of cannabis. Since the 1970s, THC-rich strains of cannabis have been engineered for recreational use so that THC concentrations in cannabis have risen from 0.5% (pre-cultivation) to as much as 30%. (Source: Purdue University Hemp Project, Ministry of Hemp, 2018)

EXPLORING OPPORTUNITIES IN CANNABIS

BROADER MARKET BY THE NUMBERS

We expect the illicit market to continue to dominate global sales but will lose share to legal markets in North America over time.

INVESTMENT OPPORTUNITIES

GROWTH IN LEGAL CANNABIS The legal market in North America is expected to grow while the

rest of the world will largely remain dominated by the illicit market.

2019 GLOBAL ADDRESSABLE MARKET

$166 Billion

A HIGHLY VOLATILE MARKET

Global Legal Cannabis Sales $15 Billion

Black Market Cannabis Sales $151 Billion

PUBLIC COMPANIES Constellation Brands, Altria and Scotts Miracle-Gro are among the most prominent public companies that have invested in other cannabis companies or in cannabis-related operations.

PUBLIC PASSIVE INVESTMENT FUNDS

There are three cannabis ETFs available on U.S. exchanges:

ETFMG Alternative Harvest ETF (NYSE: MJ)

Cannabis ETF (NYSE: THCX)

AdvisorShares Pure Cannabis ETF (NYSE:

YOLO)

We recommend avoiding these offerings due to high fees, low asset bases, illiquidity and concerning underlying holdings.

Bloomberg Intelligence estimates that large ETF issuers will emerge, boosting assets in cannabis ETFs to $5 billion over the next few years. BlackRock is reportedly one of the firms considering launching a cannabis ETF.

PUBLIC ACTIVE INVESTMENT FUNDS

American Growth Fund Series II (AMREX), was the first cannabis-focused mutual fund. Currently, AMREX has less than $700k in AUM and a very high expense ratio.

The $1.6 billion market cap Innovative Industrial Properties REIT (IIPR) is engaged in the acquisition, ownership and management of specialized industrial properties leased to state-licensed operators for their regulated medical-use cannabis facilities.

PRIVATE COMPANIES Opportunities continue to multiply for private cannabis companies seeking to raise capital. Money raised by global cannabis-related companies skyrocketed in 2018. DEDICATED PRIVATE

EQUITY FUNDS

Asset managers who claim expertise in the cannabis industry have launched private vehicles for investing in private cannabis-related entities. Tiedemann Advisors has not invested in any of these cannabis-centric funds.

Global cannabis market capitalization across the approx. 150 companies at the sector’s peak during Q2 2019 was more than twice as much as at the end of 2019.

$74B

Q2 - 2019 Q4 - 2019

$35B

United States Canada Rest of the World Global

2019

0% 0% 0% 0%10% 10% 10% 10%20% 20% 20% 20%30% 30% 30% 30%40% 40% 40% 40%50% 50% 50% 50%60% 60% 60% 60%70% 70% 70% 70%

2019

2019

2019

2020

2020

2020

2020

2021

2021

2021

2021

2022

2022

2022

2022

$13 Billion raised in 2018

$3.5 Billion raised in 2017

Source: BofAML Global Research: BDS Analytics; European Monitoring Centre for Drugs and Drug Addictions; Statistics Canada; U.S. Department of Health & Human Services (Substance Abuses and Mental Health Services Administration SAMHSA); UN Office on Drugs and Crime, United States Census Bureau; U.S. Centers for Disease Control and Prevention; Australian Institute of Health and Welfare; priceofweed.weedindex.com

Source: Bank of America

Source: Bank of America

Source: Viridian Cannabis Deal Tracker

Source: Bloomberg, The Pot ETF Is Poised to Go Mainstream, Analysts Say, July 12, 2019

FREQUENTLY ASKED QUESTIONS

What does Tiedemann’s exposure to the cannabis market look like today?

We believe we have sufficient coverage on consumer-related cannabis investments with our very small current exposure through our public and private equity managers.

Does Tiedemann have exposure to the medicinal cannabis market?

Conducting research in the medicinal market is very difficult because cannabis is currently classified as a Schedule I substance; therefore, we would not invest in this segment today. However, we do believe the medicinal market has the potential to become compelling over the long term, particularly if the federal ban is lifted. Firms specialized in healthcare would likely offer the most attractive investment opportunities.

What type of investments does Tiedemann consider in this space?

We support opportunistic, moderately sized investments in the space through long-standing, trusted partners. Given the uncertainties and risks surrounding the cannabis industry, we currently would not invest in a specialist cannabis fund.

What characteristics does Tiedemann look for in managers to gain exposure to this market?

We believe experienced managers with demonstrated track records and skill sets at picking good businesses and winners in general will likely outperform the inexperienced investors who claim cannabis expertise. We will continue to monitor the industry for developments but remain confident in our current managers who have experience sourcing disruptive consumer businesses to actively manage this exposure.

How do you foresee Tiedemann’s cannabis industry exposure changing over time?

As the investable universe grows, we will continue to actively evaluate cannabis-related funds and investments in the consumer and medicinal markets. Our long-term goal is to build up Tiedemann’s pipeline of cannabis managers over time, so that if our desire and capacity to invest intersect, we would have the ability to act.

EXPLORING OPPORTUNITIES IN CANNABIS

NOTES & IMPORTANT DISCLOSURESThis information is being provided by Tiedemann Advisors, LLC (“Tiedemann”) and is for illustration and discussion purposes only. It is not intended to be, nor should it be construed or used as, investment, tax, accounting, legal or financial advice. This information is intended as an illustration of the services offered by Tiedemann and to serve as the basis of a discussion with a Tiedemann professional. This information is not designed for any particular client or type of client and Tiedemann’s services may not be suitable for all clients. You should consult with your tax and legal advisors prior to entering into any wealth planning or trust arrangements. Any statements, assertions or the like (collectively, “statements”) regarding prior or future market or other events, or views about investing, are based upon our or a source’s expectations or beliefs, should not be relied on and involve inherent risks and uncertainties, both general and specific, many of which cannot be predicted or quantified and are beyond Tiedemann’s control. This material is as of the date indicated, is not complete, and is subject to change. Certain information has been provided by and/or is based on third-party sources and, although believed to be reliable, has not been independently verified and Tiedemann is not responsible for third-party errors. Additional information is available upon request.©2020 Tiedemann Advisors

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