WAM Strategic Value : Appendix 4D and Financial Report

WAM STRATEGIC VALUE LIMITED

ABN 24 649 096 220

For personal use only

Appendix 4D

Half Year Report

for the period from 30 March 2021 (date of incorporation) to 31 December 2021

Results for Announcement to the Market

				$
Revenue from ordinary activities			13,648,439
Profit from ordinary activities before income tax expense			9,530,075
Net profit from ordinary activities after income tax expense			7,642,469
The amount and percentage change up or down from the previous period are not disclosed as this is the first
reporting period.
		Franked amount	Tax rate for
Dividend information	Cents per share	per share	franking
2022 Interim dividend cents per share	1.0c	1.0c	30%
Interim dividend dates
Ex dividend date			4	April 2022
Record date			5	April 2022
Last election date for the DRP			7	April 2022
Payment date			14	April 2022

Dividend Reinvestment Plan

The Dividend Reinvestment Plan ('DRP') is in operation and the recommended fully franked interim dividend of 1.0 cents per share qualifies. Participating shareholders will be entitled to be allotted the number of shares (rounded to the nearest whole number) which the cash dividend would purchase at the relevant issue price. The relevant issue price will be calculated as the VWAP (volume weighted average market price) of shares sold on the ASX on the ex date for the relevant dividend and the three trading days following that date. The DRP will operate without a discount for the interim dividend.

31 Dec 21

Net tangible asset backing (after tax) per share	$1.29

This report is based on the Financial Report which has been subject to independent review by the Auditors, Pitcher Partners. All the documents comprise the information required by Listing Rule 4.2A.

For personal use only

Financial Report

For the period from 30 March 2021 (date of incorporation) to 31 December 2021

ABN 24 649 096 220

WAM Strategic Value Limited

WAM Strategic Value Limited (WAM Strategic Value or the Company) is a listed investment company and is a reporting entity. It primarily invests in discounted asset opportunities, particularly in listed investment companies (LICs) and listed investment trusts (LITs) (commonly referred to as closed-end funds).

Directors

Geoff Wilson AO (Chairman)

Kate Thorley

Glenn Burge

Company Secretary

Jesse Hamilton

Investment Manager

Wilson Asset Management

(International) Pty Limited

Level 26, Governor Phillip Tower

1 Farrer Place

Sydney NSW 2000

Auditor

Pitcher Partners

Country of Incorporation

Australia

Registered Office

Level 26, Governor Phillip Tower

1 Farrer Place

Sydney NSW 2000

Contact Details

Postal Address: GPO Box 4658 Sydney NSW 2001

1. [phone]

1. [phone]

1. [e-mail]

1. wilsonassetmanagement.com.au

Share Registry

Automic Pty Limited

Level 5, 126 Phillip Street

Sydney NSW 2000

1. 1300 408 788 (in Australia)
   [phone] (International)

E: [e-mail]

For enquiries relating to shareholdings, dividends (including participation in the dividend reinvestment plan) and related matters, please contact the share registry.

Australian Securities Exchange

WAM Strategic Value Limited

Ordinary Shares (WAR)

For personal use only

Contents

Directors' Report to shareholders	4
Auditor's Independence Declaration	7
Statement of comprehensive income	8
Statement of financial position	9
Statement of changes in equity	10
Statement of cash flows	11
Notes to the financial statements	12
Directors' Declaration	20

Independent Auditor's Review Report

21

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Financial Report Dec 2021	ABN 24 649 096 220

Directors' Report to shareholders for the period ended 31 December 2021

For personal use only

The Directors present their report together with the financial report of WAM Strategic Value Limited for the period from 30 March 2021 (date of incorporation) to 31 December 2021.

Directors

The following persons were Directors of the Company during the financial period and up to the date of this report:

Geoff Wilson AO, Chairman - Non-independent (appointed 30 March 2021)

Kate Thorley, Director - Non-independent (appointed 30 March 2021)

Glenn Burge, Director - Independent (appointed 30 March 2021)

Principal activity

The principal activity of the Company is making investments in discounted assets. The Company's investment objectives are to provide capital growth over the medium to long term, deliver a stream of fully franked dividends and preserve capital. No change in this activity took place during the period or is likely to in the future.

Initial Public Offering

The Company successfully raised $225 million through an Initial Public Offering (IPO) in accordance with the Replacement Prospectus dated 17 May 2021, by the issue of 180,000,000 ordinary fully paid shares at an issue price of $1.25 per share. The shares were allotted to shareholders on 22 June 2021 and began trading under the ASX code WAR on 28 June 2021. Since the IPO in June 2021, the Company has selectively invested shareholders' capital in companies that meet our rigorous investment process.

The Investment Manager has agreed to be responsible for the payment of the offer costs that the Company would normally be liable for. These costs were paid upfront by the Company however, the Investment Manager will repay the offer costs to the Company in 30 equal monthly repayments. The Company's ongoing operating costs, including ASX and ASIC fees, audit costs, legal and tax advisory fees will be paid by the Company.

The Company was registered with the Australian Securities and Investments Commission (ASIC) on 30 March 2021 and commenced operations on 21 June 2021.

Operating and financial review

Investment operations during the period to 31 December 2021 resulted in an operating profit before tax of $9,530,075 and an operating profit after tax of $7,642,469. The profit for the period is reflective of the solid performance of the investment portfolio in the period to 31 December 2021. The investment portfolio increased 6.2% since inception, achieved with an average cash weighting of 28.9%.

WAM Strategic Value takes advantage of market mispricing opportunities, including securities trading at discounts to assets or net tangible assets, corporate transactions and dividend yield arbitrages, and continues to see opportunities in the Australian listed closed-ended investment universe. During the period, we realised a strong return on our investment in Magellan High Conviction Trust (ASX: MHH). Following WAM Strategic Value's initial public offering we began investing in MHH at an approximate 12% share price discount to its underlying net tangible asset (NTA) value. In August, MHH moved from a

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Financial Report Dec 2021	ABN 24 649 096 220

Directors' Report to shareholders for the period ended 31 December 2021

For personal use only

closed-end listed investment trust (LIT) to an exchange traded fund (ETF). We exited our position during the period at its underlying asset backing, recording a weighted average annualised return on our investment of 117.6%.

Other notable contributors to WAM Strategic Value's investment portfolio since listing include Pengana International Equities Limited (ASX: PIA) and Westoz Investment Company Limited (ASX: WIC). PIA's share price discount to NTA widened in the calendar year following the announcement of departures from its investment team in March 2021 and the appointment of New Jersey-based Harding Loevner LP as the new investment team for the company in May 2021. During the period, PIA received favourable ratings from independent research providers Zenith and Independent Investment Research (IIR), and announced an increased fully franked quarterly dividend of 1.35 cents per share, an 8% increase on the previous quarter. The PIA Board of Directors also announced its intention to target future quarterly dividends of 1.35 cents per share, franked to the maximum possible extent. The positive capital management updates and favourable recommendations contributed to an 11.4% increase in the company's share price in the six months to 31 December 2021 and the narrowing of the company's share price discount to NTA.

In December, Westoz, Ozgrowth (ASX: OZG) and WAM Capital (ASX: WAM) announced Scheme Implementation Agreements to merge the three entities under separate transactions. Under the agreements, WAM Capital will acquire 100% of the shares in Westoz and Ozgrowth while Westoz and Ozgrowth shareholders will receive new WAM Capital shares as consideration for their respective shares. The proposed transactions offer Westoz and Ozgrowth shareholders the ability to exit their investments at a premium to the pre-tax NTAs of both entities, and a premium to the Westoz and Ozgrowth share prices. Following the announcement, Westoz and Ozgrowth saw an uplift in their respective share prices which were trading at significant discounts to their underlying net asset backings. We expect to realise further upside in our investment in the companies if the schemes are approved by Westoz and Ozgrowth shareholders in March 2022.

The operating profit for the period includes unrealised gains or losses arising from changes in the fair value of the investments held in the investment portfolio during the period. This movement in the fair value of investments can add to or reduce the realised gains and losses on the investment portfolio and other revenue from operating activities (such as dividend and interest income) in each period. This treatment under the Accounting Standards can cause large variations in reported operating profits between periods.

The operating profit or loss for each financial period is reflective of the underlying investment portfolio performance and is important to understand with context to the overall performance of equity markets in any given period. As a result, we believe the more appropriate measures of the financial results for the period are the investment portfolio performance, the change in NTA and fully franked dividends, together with total shareholder return.

WAM Strategic Value's before tax NTA increased 4.1% for the period to 31 December 2021. There were no dividends paid during the Company's initial operating period. The significant items of difference between the investment portfolio increase of 6.2% and the net tangible asset performance were performance fees accrued of 1.3%, management fees of 0.5% and other company related expenses and estimated selling costs on the investment portfolio of 0.3%. Estimated selling costs on the investment portfolio are adjusted for in the NTA calculation in line with the requirements of the ASX Listing Rules

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