Passive ETF’s do not have managers VanEck Vectors and thus typically have lower fees. A very popular ETF is SPY which follows Semiconductor ETF: the S&P 500 index! ($SMH) Why Semiconductors? ● The semiconductor industry has seen a Analyst Information: decrease in revenue since late 2018, Coverage Analysts: Bruce Ferguson, Jake Turtil, from a high of $468.8 billion in 2018 to James Cavallo, Kate Anderson, Kyle Kadziolka, $412 billion in 2019. Despite setbacks Marc Verwiel, Mikey Bernard, Sara Wiltshire, due to COVID-19, there was a 6.5% Tedi Totojani, Zul Ahmed, Tarik Cigeroglu increase in revenue in 2020, and World Semiconductor Trade Statistics projects Managing Director of Research: revenue growth to 2018 numbers Veronica Kikena ● Main drivers for the semiconductor industry growth include development in Overview: 5G wireless, Artificial Intelligence, Ticker: SMH autonomous driving, cloud computing NAV 52 week high: $256.05 and Machine Learning Sector: Information Technology ● The 2020 chip shortage has increased Price: $233.68 investment into infrastructure for the Expense ratio: 0.350% production of semiconductor devices in Average Daily Vol: $958.69M order to meet demand Turnover ratio 14.00% ● The semiconductor space has substantial Div Yield: 1.10% room to grow as chip supply chains LTM Median Tracking Difference: -0.48% improve. The space has seen an Total Market Cap: 4.95274B enormous amount of innovation in the last year from major players including AMD, AAPL, Taiwan semiconductor What is an ETF? and Nvidia. Moore's law in regards to ● ETF is short for Exchange Traded transistor count per unit area of board is Fund. ETFs are similar to open end very much alive and well with the mutual funds with the primary release of Apple's 5mn chip architecture difference being that the ETF adjusts in 2020. AMD’s 7nm process and Intel’s prices throughout the day and the 10nm processor continue to compete viability to composition investments is closely as the race for smaller, more greater. ETFs in essence are a portfolio efficient and more powerful processors of stocks and other securities that continues to dominate the consumer investors can buy as a substitute for marketplace. It is rumored that TSC will choosing an individual security. soon release a 3nm processor pushing Typically ETF’s are a passive product the mobile space even further. In meaning they follow a set of defined addition to the traditional dedicated rules for what will be added to the ETF. component manufacturing companies (NVDA, INTC,AMD, NSQ) a semiconductors and semiconductor movement into sensors and system on equipment chip (SOC) solutions will provide a ● YTD there has been a -0.03 performance novel way for manufacturing firms to differential between VanEck and MVIS expand options and provide additional ● This indicates that VanEck is meeting value in more bespoke solutions for IOT performance expectations based on the and automotive use cases benchmark and will likely continue to do so Material Recent News Breakdown of Holdings ● Biden signed an executive order specifically aimed at reviewing the semiconductor supply chains to address Ticker Holding Name % of Assets the chip shortage TSM US Taiwan Semiconductor 13.16 ● Remote working during the pandemic Manufacturing Co L has caused sales of electronic devices to soar but access to materials for NVDA US Nvidia Corp 6.26 semiconductor chips to fall ● Intel will spend $20 billion building new INTC US Intel Corp 5.79 semiconductor factories in Arizona, expected to begin production in 2024. ASML US Asml Holding Nv 5.45 This points to an expected trend of supply catching up with demand within AMAT US Applied Materials Inc 5.42 the next few years ● Semiconductor supply chains criticized for being too concentrated in Asia, will likely continue to see more plants in other areas being built as a result ● Cryptocurrency boom is further driving MU US Micron Technology Inc 5.27 chip shortages which has been compounded by supply chain NXPI US Nxp Semiconductors Nv 5.25 disruptions from the recent snowstorm

in Texas and fires AVGO US Broadcom Inc 5.12

Benchmark TXN US Texas Instruments Inc 4.86 ● The creators of VanEck semiconductors ETF used the MVIS US Listed LRCX US Lam Research Corp 4.44 Semiconductor 25 Index as a benchmark Other 39.50 to build out the ETF ● MVIS tracks the performance of companies that have at least 50% of their revenues from semiconductors. The companies that are tracked are only those that primarily produce Risk/Return

Chart 2 ● Chart 2 is a civilization of different portfolios along the frontier for the TMT SIlicon space. The bottom axis is return (in anulized %) and the vertical axis is Performance volatility (in standard deviation). When assessing the frontier diagram it is Vaneck Semiconductors ETF (SMH) important to select portfolios along the “efficient frontier”. That is to say the prolfios where you receive the highest amount of return for a given level of risk. Choosing a portfolio with a lower return for a given level of risk would not be efficient. The $SMH ETF is the highest return for a given level of risk and would be considered to be an efficient portfolio.

Chart 1 Potential Risk Factors ● Chart 1 shows growth in price/year ($) ● Companies within the Semiconductor for $SMH, the Technology category and industry grow partially through large how the Morningstar US Technology acquiring smaller companies and their TR USD as of Mar 19, 2021. $SMH has technology which will elevate their out performed Morningstar US position within the industry Technology TR by about 48% since ● Tightened M&A regulations can pose 2011. risk and challenges and companies will ● We anticipate $SMH to continue a need to adapt their M&A strategies strong growth trajectory as the demand ● Regardless Nvidia, which is a major for silicon products continues to grow holding in VanEck, is still set to acquire and supply chains recover from Arm COVID-19. ● Chip shortages stand as a mild risk factor but supply is expected to catch up with demand by 2022 ● See chart at the end for a breakdown of Impact of COVID alternatives ● The TMT sector in general has been stagnating over the past couple of Thesis months, as vaccines are rolling out and ● Overall, VanEck Vectors Semiconductor analysts are predicting an end to the ETF is an attractive investment for our pandemic, which would supposedly group, with growth and returns expected mean an end to its gigantic gains over to continue in the long run the past year as the world went into ○ VanEck takes on an appropriate lockdown. The ETF, for instance, grew amount of risk for the expected about 50% over that period returns ● However, the pandemic only accelerated ○ The companies within the ETF the deployment of many technologies align well with our sector and that were going to surface either way. provide us with diversity in our The semiconductor industry will remain investment strong as consumers have been ○ The industry as a whole is accustomed and even developed a expected to continue growing preference for novel ways. Innovations with demand increasing in the workplace, in the classroom, in ○ Although there are supply medicine, in e-commerce, and in issues, companies are working payment methods are all here to stay diligently to mitigate the costs and work towards building Alternative ETFs stronger supply chains. With a ● VanEck is the most applicable ETF to buy and hold position we are our group given that the top 3 holding bound to see returns as supply stocks, that account for 25.21% of the catches up with demand in the holdings, are all semiconductor stocks next few years that we have considered: Nvidia, Taiwan Semiconductors, and Intel. VanEck’s holdings are also diversified so that they do not have too much concentration in one company ● In contrast, ETFs such as Invesco, SPDR, and First Trust have top holdings which have much smaller market values ● When compared to other semiconductor ETFs VanEck is most similar to iShares Semiconductor, however Vaneck is a better cost alternative and has a higher yield percentage ● $SMH is high reward, low cost and moderate risk, according to S&P ETF Rating Details