THORNEY TECHNOLOGIES LTD — Management Reports 2019

Apr 2, 2019

Thorney Technologies Ltd

ABN 66 096 782 188

3 April 2019

Dear fellow TEK shareholder

Chairman’s Update

The period since my last shareholder update has been one of significant
volatility in the listed technology space.

The latter half of 2018 saw big falls in the share prices of many global tech
giants including Apple, Amazon and Google.  Key Australian listed tech
companies were affected as well.

However, as we enter Q2 2019, the prices of many listed tech companies on both
global and local markets have staged a substantial recovery.

These sorts of fluctuations can distract from what I believe is the ongoing and
unstoppable technology revolution which continues to disrupt and forever change
the way business is done and lives are led around the world.

Thorney Technologies exists to give our shareholders exposure to this exciting
technology revolution by holding shares in both listed and unlisted companies
at every stage of the business life cycle in key technology markets not only in
Australia, but also the USA and Israel.

Our portfolio now consists of more than 50 investments giving us exposure to a
very wide range of companies across a broad cross section of the technology
space and in several different countries.

More than 30% of TEK's investments by value are now in unlisted companies,
providing a form of hedge against sharemarket volatility as well as the
potential to throw up future tech winners at valuations much higher than those
at which they are currently held.

This balance of exposure to both listed and unlisted technology companies in
several countries is one of the attributes that sets TEK apart from other
Listed Investment Companies.

It is also why I believe holding shares in TEK is one of the best available
ways for investors to participate in the highly prospective potential of the
tech revolution, taking advantage of TEK’s strong management team and its
portfolio approach.

My belief in the TEK model is underscored by the history of growth in TEK’s net
tangible assets (NTA) since inception in January 2017.

Level 39, 55 Collins Street, Melbourne Vic 3000
Telephone: + 61 3 9921 7116 Facsimile: + 61 3 9921 7100
Website: http://www.thorneytechnologies.com.au/

Chairman’s Update continued

Thorney Technologies Ltd

As the chart below shows, TEK’s NTA has grown steadily and, although affected
by the global downturn late last year, is recovering well.  At February 28
TEK’s NTA stood at 26.8 cents per share (cps). TEK’s NTA for March, reported
this week was 27.5 cps due to strong performances by some of our leading
portfolio stocks including the Afterpay Touch Group (APT), Zip Co Limited (Z1P)
and Credible Labs (CRD).

TEK NTA (after costs) vs All Ords Accum. Index (January 2017 to March 2019)

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40%
TEK NTA (20.8 Jan-17 /
35% 27.5 Mar-19)
All Ords Accum Index
30%
25%
20%
15%
10%
5%
0%
-5%
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While I remain very pleased with TEK’s proven ability to show strong NTA
growth, I remain disappointed with the current approximate 19% discount to NTA
at which TEK shares are trading.

The stock market investor in me sees this as a buying opportunity and, just as
I’ve been doing with Thorney Opportunities (TOP) shares recently, I’ve been
steadily adding more TEK shares to my personal portfolio to take advantage of
this discrepancy.

TEK’s trading discount is one of the main topics I get asked about when I speak
to TEK investors and other interested parties so, for a change of pace for this
newsletter, I will address that and a couple of other questions that I am
regularly asked.

But firstly some highlights from both the listed and unlisted shares in the TEK
portfolio.

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Chairman’s Update continued

Thorney Technologies Ltd

PORTFOLIO HIGHLIGHTS

Afterpay Touch Group Limited (APT)

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Afterpay remains TEK’s largest holding and we continue to be impressed with the
company’s growth and leadership.  It appears to have come through the recent
Senate Inquiry into the “buy now pay later” sector with limited downside risk
to the company and an enhanced reputation for setting high standards in the
sector.

More importantly APT’s expansion into the USA seems to be going extremely well
with early penetration levels significantly above what was achieved in
Australia over the same time period.  This augers well for continued growth in
the massive US market. With APT planning expansion in the UK market this year
we continue to be excited about the global potential for this company.

ZIP Co Limited (Z1P)

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Another “buy now pay later company”, Zip Co is TEK’s second largest holding by
value and, like APT, has also been showing tremendous growth.  Z1P recently
announced some very significant partnerships including Chemist Warehouse and
Bunnings Warehouse, and also completed a successful $50 million capital raise
to fund expansion and strengthen its balance sheet.

TEK participated in this raise along with our associated private Thorney
Investment Group.

Credible Labs Inc (CRD)

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The financial services space is an area which we believe is potentially one of
the most vulnerable to tech disruption.  Our third largest holding,  Credible
Labs Inc is also a fintech growth story.

Based in the USA, Credible started out as an online marketplace in the massive
US student loan market and has recently expanded into the even more massive US
home mortgage market.  Partly as a result of its US domicile and operations,
CRD was not immediately well understood by many Australian investors.

But after its expansion into home mortgages and the strong growth reported in
its most recent results, CRD is finally starting to get some of the investor
recognition it deserves.  We added to our holdings of CRD at lower price levels
and are optimistic that there is substantial growth ahead for this company.

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Chairman’s Update continued

Thorney Technologies Ltd

OneVue Holdings Limited (OVH)

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One of TEK’s listed fintech holdings which has not received the sharemarket
attention it arguably deserves is the superannuation fund services and platform
company OneVue (OVH).

Despite reporting excellent results recently and selling one of its divisions
for an attractive price, the OVH share price has underperformed.

At current levels we regard this as being a buying opportunity and remain
confident that OVH will be re-rated by the market once its strong performance
and potential for continued growth are more widely understood.

Dubber Corporation Limited (DUB)

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This “cloud” based communications call recording software as a service (SaaS)
corporation is an Australian based, internationally applicable technology
company for which the team at TEK has had high hopes for some time.

However, along the way we have also been critical of DUB’s board, some of the
leadership structure and the costs of running the business.  In recent times
DUB has taken steps to address these issues.

It’s most recent results showed a strong lift in customer numbers and financial
performance and its share price has responded accordingly.  It recently
reported a promising deal with Optus and earlier this week completed a $22
million equity raising for accelerated expansion and marketing. TEK
participated in the raise along with Thorney Investment Group.

Mesoblast Limited (ASX:MSB NASDAQ:MESO)

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A global biotech leader, Mesoblast has a range of patented stem cell treatments
for several intractable diseases including acute graft versus host disease,
chronic heart failure and chronic back pain.  This year and next will be
pivotal for MSB as it seeks to obtain FDA approval for its first product sales
in the USA.

We have been pushing the company to make changes to prepare for the
commercialisation phase.  We welcome the recently announced appointment of a
new US-based Chairman, Mr Joseph Swedish, with very strong US health care
experience and credentials to oversee this next crucial stage in the company’s
development.

After many years we believe MSB may finally be on the cusp of becoming an
Australian-based global biotech success story in the tradition of CSL,
Cochlear, Resmed and all too few others.

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Chairman’s Update continued

Thorney Technologies Ltd

Updater Inc. (unlisted)

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This New York based residential moving and relocation (“ReloTech”) app company
delisted from the ASX last year and is now TEK’s largest unlisted investment.
Updater makes moving easier for the millions of Americans who relocate each
year, allowing them to book moving companies and connect utilities and other
services through one app.  It has continued growing strongly since becoming a
private company.

The company recently announced to shareholders that a planned capital raising
to secure funds to further accelerate its US growth plans has been delayed.
While this is a very significant disappointment for supportive shareholders who
had been hoping for confirmation of a sizeable uplift in the valuation of
Updater since it delisted from the ASX, the underlying Updater business
continues to grow as evidenced by $US140 million of Total Transaction Value
during 2018.  Its long term prospects remain exciting.

Given some recent negativity about aspects of Updater’s capital raise and its
communication to investors I am pleased to see that Updater is maintaining the
same disciplines as when it was on the ASX.  It has committed to provide
regular and detailed reports to its shareholders on an, at least, quarterly
basis as well as continuing to produce audited accounts.

We encourage the company to make sure these future reports are as detailed as
possible, especially given its private status and the delayed capital raise.

There have also been reports about one particular shareholder who has been
agitating for more clarity around Updater’s financials and also potentially
seeking to sell their shareholding.  Whilst Thorney is always supportive of
maximum transparency from companies, we have urged Updater not to give any
individual shareholder preferential treatment.

Worthy Inc. (unlisted)

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Worthy is a New York-based, Israel-founded online jewellery auction site that
enables people to trade in estate and relationship jewellery items like
diamonds by creating a highly efficient online auction marketplace.  It is
growing strongly and more than $US30 million worth of jewellery has already
been traded on its site in the past 12 months. Not surprisingly it is
attracting attention from some major players. We are excited by its potential
and continuing to support its expansion.  TEK recently participated in a
capital raise for Worthy at higher valuation than our original investment.

Arbe Robotics (unlisted)

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This Israeli company uses radar technology to produce real time, four-
dimensional images with huge potential in the rapidly growing autonomous
(“driverless”) vehicles sector.  It has just completed a capital raise at a
substantially higher valuation than TEK’s average entry price. Arbe has
developed a turnkey solution which has the potential to make any vehicle fully
autonomous and its vision is to make autonomous driving safe, affordable and
available.

The autonomous vehicle space is extremely exciting and Arbe is gaining
attention from the major auto makers. We have high hopes for Arbe which came to
us through our alliance with the Israel-based, iAngels group.

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Chairman’s Update continued

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Caja Systems (unlisted)

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Caja is another Israel founded robotics company which offers an integrated
system for automating warehouses. It provides software, robots and
infrastructure which it claims can reduce the manpower required in conventional
warehouses by more than 80% and increase throughput by more than 40%.  It has
been focused mainly on the European market but has begun to make inroads into
the US.

Honk (unlisted)

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Honk is a Los Angeles-based company that enables roadside assist services to be
provided much faster and more efficiently than the traditional AAA services
available in the USA. Unlike traditional roadside services which require an
annual membership fee similar to those in Australia, Honk has developed an app
that offers a low fee for service model, dispatching registered roadside assist
vehicles to a breakdown in much the same way as Uber operates.  Its revenue has
grown significantly and it is gaining many strategic partners, including
insurance companies.

If Honk continues its strong growth trajectory it will likely be on track to a
potential IPO over the next year or two.

Cluey (unlisted)

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Cluey is a Sydney-based technology company that matches students with online
tutors to deliver online learning programs adapted to each student’s needs.

Currently offering programs in English, Maths and Chemistry, Cluey can develop
tailor-made online tutoring programs that have built in monitoring and progress
reporting tools.

We’re particularly excited by Cluey’s potential, not only because it is in the
important education space but because of the range, flexibility and
accessibility it offers.  It has equal application for city-based students as
well as those in remote locations who now have access to a much more
sophisticated and personalised version of the old “school of the air” service
that used to be provided to students in highly remote locations.

With a much needed service, an experienced management team that has had
numerous successes in the education sector before and a highly impressive
academic board of advice, we think Cluey has great growth potential ahead.

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Chairman’s Update continued

Thorney Technologies Ltd

Why should people invest in TEK shares?

Technology has been, and will continue to change the world.

Just as we have seen over the last decade or two with the creations of giants
likes of Amazon, Apple, Facebook and Google, we anticipate the creation of huge
value in the tech sector in coming years.

In almost every field, - whether it is artificial intelligence, machine
learning, medical technology, quantum physics, digital analytics, medical
devices, diagnostics, financial services, all industries will be disrupted and
facilitated by new technology.

New industries will emerge around new technologies and great changes to the
world will occur. Significant valuations will manifest around the best
companies that emerge out of this revolution.

So, in my view every investor should have some exposure to technology to give
themselves a chance to participate in the outperformance that the tech
revolution will provide.

However, unless you are a highly sophisticated and resourced investor in your
own right, you need to partner with an experienced and connected investor at
the helm. TEK is such an investor and our team has been investing in tech very
successfully for well over a decade.

We’ve positioned ourselves to be at the heart of it which, although as a
boutique company, enables us to be highly efficient in the way we operate.

TEK shareholders not only get exposure to the public and private tech sector in
Australia, but uniquely through our network built up over the last 20 plus
years, they can indirectly own a part of technology companies based in places
like Israel, which is a leader in the tech knowledge revolution, and in the
United States through our connections in places like New York, Boston, San
Francisco, Los Angeles and other locations.

This exposure to unique deal flow would otherwise not be available to retail
investors in Australia.  We think that is a particularly exciting opportunity
and one which investors will find they will be well rewarded for over time.

Why is TEK trading at a discount to NTA?

Well, I think that the wide range of exposure to the tech sector that TEK
provides is still not well understood.  At the moment, people really only have
visibility to a few of the listed investments that we have in Australia, which
by the way, with the way they've performed, would justify people owning TEK
shares on its own.

Our job is to educate the investment community about the breadth and potential
of TEK’s entire portfolio. I believe we have a tremendous amount of embedded
value in the portfolio which will flourish over the next several years and we
are starting to get that message out.  But whilst TEK is trading at such a
large discount to NTA, I’ve been adding to my own personal position and have
been very happy to do so. I’d recommend other shareholders do so too.

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Chairman’s Update continued

Thorney Technologies Ltd

Are there any disappointments in the portfolio?

The nature of technology investing is that the risk profile is always quite
high both in terms of the operating risk of early stage companies and in terms
of how the market will value such companies at various times.

Our experience, especially with start ups, is that it usually  costs more and
takes longer to achieve the outcome that management are optimistic about. We
have some of those in our portfolio of course.  And we will continue to work
hard with those companies to see if we can narrow those bridges and tighten up
the performance and speed of outcomes.

But we take a portfolio approach, so that we don't have all our eggs in one
basket.  Secondly, we leave ourselves sufficient bandwidth.  So if companies we
like get knocked about in their share price, we can actually buy more shares.

We take a prudent approach based on our 20 plus years of experience in the
marketplace.  We always take some money off the table when the prices are
performing particularly well.

Afterpay is our best example of that.  It is our largest holding by far and yet
our carrying cost is zero because we have taken money off the table at various
times and various prices over the past couple of years and we have bought back
in at times when we’ve judged the stock to be oversold.  But while APT is the
best example of this in the TEK portfolio it is far from the only one.

Conclusion

TEK continues to be inundated with deal flow in the unlisted tech sector, from
our network in Israel, from our contacts in the United States, and directly in
our home country of Australia.

There will continue to be volatility, victories and casualties in the tech
sector just as there is in any revolution.  But the mega trend of technology
disruption and its subsequent potential to deliver significant outperformance
is clear.

TEK is extremely well placed to participate and profit from this and I am
confident our shareholders will reap the benefits over time.

Thank you for your continuing support of TEK and I look forward to
communicating with you again soon.

Yours sincerely

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Alex Waislitz
Chairman

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