Exelity Monthly Report – March 2023

The net return for Exelity during the month of March amounted to +1.4 %. The fund has no relevant comparison index, but in general March was a volatile and tough month for the stock markets, where the fund continuously resisted, in line with the strategy. Future income from our existing loans and guarantees in the second quarter now amounts to approximately 2.3 % in relation to the fund's total current asset mass (AUM). Together with the net return so far this year of a total of +5.2 %, this provides good support for the goal of reaching at least 10 % per year.

The return from financial transactions during the period was +0.6 % in relation to AUM, the lion's share of which consisted of interest income. Warrant proceeds contributed only to a minor extent this month as we sold off a large proportion of our allocated warrant shares from previously completed issues. Otherwise, the listed portfolio made a strong result of a total of +0.8 %, despite the fact that most holdings were traded down. The development was mainly driven by Smart Eye's recovery after the rights issue and our new holding Empir Group. In short, Empir is completely changed after recently acquiring the majority of the insurance company MySafety, at a very favorable price of 1x EBITDA, in what can be described as a forced seller. During March, Smart Eye announced twelve new design wins from an existing, large end customer in South Korea, of which three car models are already in production this year. We assess that there are many possible similar contracts with an equally short time to launch that can speed up the road to profitability.

There is high activity on the guarantee market, where many companies have waited a long time to raise new capital. During the period, we have signed five new guarantees for a total of 10 % of AUM, which can be compared with 6% in February. Although this is a relatively large percentage increase, in most cases we have applied for limited amounts. In contrast, there are individual guarantees in our pipeline that could potentially more than double our current guarantee exposure, given that we get the terms right in those transactions. We have reduced the listed portfolio further to 39 % to have even more opportunities to do more transactions. Loan exposure increased during the month from 26 % to 31 %, through two new loans. This is the highest level to date and slightly higher than the beginning of the year, before we converted the loan to Intellego. However, we are still not satisfied with either the proportion of loans and guarantees or the rate of ramp-up. During April, we aim to make a couple of larger loans, alternatively credit promises.

Regarding news in the other listed portfolio, we can particularly highlight the defense company W5 Solutions and the gaming company 11 Bit Studios. W5 shares rose 12% during the month after making another value-adding acquisition, of Kongsberg Target Systems. 11 Bit released a stable Q4 report with high margins where the company also revealed that it will release Thaumaturge in 2023. Thaumaturge has garnered a lot of interest and is an important release with twice the budget of 11 Bit's blockbuster Frostpunk.

We enter April with a strong pipeline and with the intention of gearing up substantially in loans and guarantees.