REG - JPMorgan Global Core JPM Glbl Core - JARU JPM Glbl Core - JARE - Final Results
25/06/2024 07:15
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RNS Number : 6810T JPMorgan Global Core Real Assets Ld 25 June 2024
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN GLOBAL CORE REAL ASSETS LIMITED
FINAL RESULTS FOR THE YEAR ENDED 29(TH) FEBRUARY 2024
The information communicated within this announcement is deemed to constitute
inside information as stipulated under the Market Abuse Regulations (EU) No
596/2014 which is part of UK law by virtue of the European Union (Withdrawal)
Act 2018. Upon publication of this announcement, this inside information is
now considered to be in the public domain.
RESILIENT PERFORMANCE IN CHALLENGING MARKETS
NEW TARGET EXPOSURES TO INCREASE ALLOCATION TO HIGHER YIELDING SECTORS
Legal Entity Identifier: 549300D8JHZTH6GI8F97
Information disclosed in accordance with the DTR 4.1.3
JPMorgan Global Core Real Assets Limited (the 'Company' or 'JARA'), the
diversified global infrastructure, transportation and real estate investment
company, is pleased to announce its annual results for the year ended 29th
February 2024, in which its portfolio of core assets from around the world
performed robustly under the current macroeconomic conditions.
Highlights for the year ended 29(th) February 2024
Performance
· The net asset value ('NAV') total return was -4.4%, whilst
shareholder total return was -20.9% due to a widening of the share price
discount to NAV.
· Underlying asset performance in local currency was +0.3%. Real Estate
was the main detractor to Company performance during the period (-3.2%) as
already elevated interest rates moved higher over the year, adding further
pressure to rate sensitive assets.
· The share price discount to NAV widened during the period, to
30.5%, from 14.9%, as poor equity market sentiment and challenging
macroeconomic conditions continued to weigh on sentiment.
· At the asset level, transportation (+1.6%), infrastructure
(+1.6%) and other real assets (+0.3%) contributed positively to performance.
· Total dividends of 4.20 pence per share were declared during the
period, comprising four quarterly dividends of 1.05 pence per share, providing
a 5% uplift on the prior year (FY2022/23: 4.05 pence per share).
· Income from investments increased from £10.85 million in
FY2022/23 to £11.24 million during the period.
Portfolio
· The portfolio's diversity across geographies, asset classes and
macro and political environments continues to be a standout feature of the
Company, with 348 investments, providing investors with exposure to a
portfolio of 1,410 core real assets worldwide.
· Looking ahead, the Company aims to adjust its target exposures to
increase allocations to higher income generating real assets within
infrastructure, transport and mezzanine debt, while reducing exposures to real
estate.
· During the period, the Company's infrastructure allocation increased
from 21% to 24%, driven partially by strong performance of the private
allocation over the year, as well as a further investment of USD 3 million
into the private infrastructure sleeve (~1% of the total NAV).
· JARA's transportation allocation increased over the year from 22% to
23%. Of particular importance has been this strategy's ability to weather
continued geopolitical events which are impacting traditional shipping routes.
This disruption is, in effect, acting as an artificial constraint on supply
which, when combined with moderate order books, is boosting both lease rates
and values in this market. At the year end, the Company had look-through
exposure to over 130 private transportation assets.
· The Company's real estate equity allocation decreased over the year
from 47% to 42%. This was driven by both negative performance from the private
real estate sleeve as well as active rebalancing out of the asset class by the
portfolio management team.
· In addition, the Liquid Strategy exposure has been re-weighted
towards infrastructure and transportation investments, thereby reducing the
Company's exposure to publicly listed REITs.
· Occupancy across the real estate and transportation segments stands
at 96%, in line with expectations.
· Average lease length across the real estate and transportation
segments is 5.0 years, with 15% due to expire in 2024.
· The blended average discount rate across the portfolio is 8.2%.
Gearing
· JARA is debt free at the company level and the underlying
portfolio takes a conservative approach to debt, given its core nature.
· The portfolio's look-through cost of debt is 4.4%, with a loan to
value of 39.3%. Of this leverage, 66% is fixed and 34% is floating rate.
Discount Management
· Despite the relatively stable NAV total returns provided by the
Company's portfolio, the discount ranged from 4.2% to 35.7% during the year.
The Board therefore instigated the use of its share repurchase authority
granted by shareholders and has been actively buying back shares.
· Over the past financial year, the Company bought back 8,962,814 of
its own shares into Treasury (representing approximately 4.0% of the issued
share capital*), at a total cost of c.£6.4 million. The repurchase of its own
shares in the market at a discount can be an attractive use of capital and the
shares bought in during FY2023/24 added 1.07 pence per share to the Company's
NAV. The Board will continue to make use of available liquidity to buy back
shares, while also aiming to achieve the portfolio's targeted re-weightings
across the Company's strategies.
· The Board remains focussed on narrowing the discount and since the
financial year end the Company has bought back a further 2,925,000 shares into
Treasury, with the discount tightening which, at the time of writing, stands
at 19.1%.
Continuation Vote
· A resolution that the Company continues as an investment trust will
be proposed to shareholders at the forthcoming Annual General Meeting ('AGM').
Conditional on the passing of this continuation resolution, the Board is
proposing to change the frequency of continuation resolutions from five years
to every three years, future votes being held at the 2027 AGM and every third
year thereafter.
* as at 21(st) June 2024.
Sector Exposure
Sector Allocation (%)
Industrial / Logistics 17%
Office 9%
Residential 8%
Retail 5%
Other Real Estate 4%
Total Real Estate (private % / public %) 42% (35% / 7%)
Utilities 12%
Renewable Energy 6%
Liquid Bulk Storage 2%
Conventional Energy 2%
Fixed Transportation Assets 1%
Other Infrastructure <1%
Total Infrastructure (private % / public %) 24% (20% / 4%)
Maritime 10%
Energy Logistics 6%
Aviation 4%
Rolling Stocks 2%
Other Transportation 1%
Total Transportation (private % / public %) 23% (21% / 3%)
Real Estate Mezzanine Debt 7%
Other Real Asset Debt 2%
Other Real Assets (private % / public %) 10% (7% / 2%)
Total Invested Portfolio 99%
Geographical and Currency Exposure
Region
North America 55%
Asia-Pacific 26%
Europe (Including 3% U.K.) 18%
Currency
USD 58%
CAD <1%
GBP 21%
EUR 2%
Other(1) <1%
JPY 6%
AUD 4%
Other(2) 8%
Source: J P. Morgan Asset Management. Data as of 29th February 2024. Totals
may not add up to 100% due to rounding. FX exposure differs from regional
exposure due to currency hedged investments.
(1)Includes DKK (<1%), CHF (<1%), NOK (<1%) and SEK (<1%).
(2) Includes SGD (3%), RMB (2%), NZD (1%), HKD (1%), and KRW (<1%).
John Scott, Chairman, commented:
"The Directors are committed to addressing JARA's discount to NAV through
proactive measures and are pleased to see that the discount has narrowed since
the end of the reporting period, to 19.1% as at 24(th) June 2024. To maintain
this encouraging progress, aside from continuing the share buyback programme,
which added 1.07 pence per share to the Company's NAV during the period under
review, the Board and Manager intend to reduce JARA's exposure to real estate
and recycle this capital into other sectors, such as transport and
infrastructure, where we expect stronger risk adjusted returns. These changes,
which are subject to approval from the Financial Conduct Authority and
shareholders, should in time also support higher dividends for shareholders.
"JARA offers a compelling means of accessing real assets through a diversified
and high quality global portfolio and your Board unanimously recommends that
shareholders vote in favour of the Company's forthcoming continuation
resolution. We would like to thank shareholders for their continued support,
and we look forward to updating the market regularly on further progress."
Enquiries:
JPMorgan Global Core Real Assets Limited
Press enquiries through Buchanan
JPMorgan Funds Limited Tel: 0800 20 40 20 or +44 1268 44 44 70
Emma Lamb E-mail: invtrusts.cosec@jpmorgan.com
Buchanan Communications Tel: +44 (0) 20 7466 5000
Financial PR Email: JARA@buchanancomms.co.uk
Henry Wilson, Helen Tarbet, George Beale
CHAIRMAN'S STATEMENT
After a respectable set of results in FY2022/23, the year ended 29th February
2024 was a challenging period for the Company, which found itself affected by
macroeconomic upheavals in global markets. Infrastructure assets in particular
reacted adversely to the succession of interest rate increases, following
close to a decade of near zero rates. In addition, we were confronted by
reduced market liquidity, a change in investor appetite for real assets and
the emergence of the widest gap for half a century between underlying asset
values and share prices in the investment trust sector.
Performance
JARA's return on net asset value ('NAV') for the year was -4.4%. While the
Company's NAV fell during the year to 29th February 2024, the Board assesses
the performance of the Investment Manager over the longer term. Since
inception (24th September 2019) the Company's annualised return on NAV has
been 2.7%. Largely on account of difficulties consequent on the outbreak of
Covid-19, the portfolio was not fully invested until 1st March 2021 and the
Company's annualised return on NAV from that date to 29th February 2024 has
been 6.3%.
The Company's return to shareholders of -20.9% for the past year can only be
seen as deeply disappointing and is in the main driven by the considerable
disconnect that developed between the underlying NAV and the Company's share
price - known as the discount. JARA is far from alone in the world of closed
end funds in experiencing this phenomenon, and your Board has been active in
addressing this issue, not least in buying back shares. This programme would
appear to have been effective in delivering the substantial discount
reductions seen since the end of our financial year.
The Investment Manager's Report reviews the Company's performance and gives a
detailed commentary on the investment strategy and portfolio construction, and
an outlook for the individual investment sleeves which comprise JARA's
portfolio.
Currency Exposure
The Company aims to provide shareholders with both a stable income and capital
appreciation from a globally diversified portfolio of Core Real Assets across
different sectors, currencies and geographies. During the year, the Company
reallocated the private infrastructure allocation into a vehicle whose
exposure to the US Dollar is hedged against Sterling, with a view to reducing
the currency-related volatility in NAV returns from the private infrastructure
allocation. As it happens, Sterling strengthened marginally over the year,
causing a slight drag on the Company's NAV performance.
Portfolio Changes and Change of Investment Policy
An important aspect of the Company is its diversification, which aims to avoid
over-exposure to any one sector, asset or counterparty, as well as to provide
the flexibility for the Investment Manager to manage the portfolio on an
active basis and to drive returns, while managing risk for investors. During
the year, the Investment Manager has adjusted the portfolio in light of
prevailing market conditions, and changed allocations to optimise income
returns, while maintaining its broader goals as a global, diversified real
asset portfolio.
Your Board believes there is scope for further changes in portfolio
allocations, principally by reducing real estate exposures. With this in the
mind, we are seeking the approval of shareholders to make changes to the
investment policy to provide increased flexibility for the Investment Manager
to allocate to those underlying strategies that we believe are more attractive
in the current environment, and likely to lead to enhanced outcomes for
shareholders. The Board is therefore proposing that the Company amend its
investment policy to raise the current investment restriction from a maximum
of 20%, to a maximum of 30% of its gross asset value in any single private
fund, and otherwise no more than 20% of its gross asset value in securities,
or other interests, of any single company or other entity. This will provide
the Investment Manager with greater flexibility and the ability to increase
the portfolio's exposure to the infrastructure and transport strategies, while
reducing the private real estate allocation. As explained below, your Board
believes that this reallocation will not reduce the investment diversification
enjoyed by JARA shareholders.
Details can be found in the full annual report, which shows the proposed
changes to the investment policy. The Board considers that the change of
investment policy is in the best interests of the Company and its shareholders
as a whole. Accordingly, the Board unanimously recommends that shareholders
vote in favour of the resolution to be proposed at the 2024 Annual General
Meeting.
Discount and Share Buybacks
During the year, a material disconnect developed between the price at which
the Company's shares traded and the NAV per share, a source of concern to your
Board. Through the year, the discount ranged from 4.2% to 35.7%.
Notwithstanding the relatively stable NAV total returns provided by the
Company's portfolio, the Board instigated the use of its share repurchase
authority granted by shareholders and has been actively buying back shares.
Over the past year, the Company repurchased 8,962,814 of its own shares into
treasury (representing approximately 4.0% of the issued share capital*), at a
total cost of c.£6.4 million. The repurchase of its own shares in the market
at a discount can be an attractive use of capital and the shares bought in
during FY2023/24 added 1.07 pence per share to the Company's NAV.
The Board remains focused on narrowing the discount. Since the financial year
end, the Company has bought back a further 2,925,000 shares into treasury. I
am pleased to report that the discount has tightened and, at the time of
writing, stands at 19.1%*. The Board believes that the share buyback facility
is an important tool in the management of discount volatility and, subject to
available liquidity, it intends to continue to use the Company's buyback
facility on a proactive basis in its quest to establish a stable discount or
premium over the longer term.
At the Annual General Meeting to be held in September, the Company will be
seeking a renewal of its authority from shareholders to repurchase its own
shares. The Company will also be seeking authority from shareholders to issue
up to 10% of its issued share capital on a non-pre-emptive basis. Share
issuances will be made only if the Directors determine such issues to be in
the best interests of shareholders and the Company as a whole, and when the
Company's shares are trading at or above NAV.
*As at 21st June 2024.
Continuation Resolution
The Company's Articles of Incorporation (the 'Articles') require that at the
Annual General Meeting to be held in 2024, and every fifth year thereafter,
the Directors propose a resolution that the Company continue as an investment
trust.
The Board is fully aware of the disappointing recent share price performance
of the Company. Since its inception, the Company has navigated challenging
macroeconomic conditions, including inflation and, in recent times, higher
interest rates; its early days were blighted by the disruptions caused by
Covid-19 and since February 2022 the world has been living with the
consequences of Russia's full-scale invasion of Ukraine. Notwithstanding this,
as I reported above, since the portfolio was fully invested the Company's
return on NAV has been 6.3% per annum and the Company has successfully
delivered against its targeted annual dividend yield. The total dividend for
the year to 29th February 2024 represents a 4.2% yield based on the initial
issue price of 100.0 pence per share.
It is important for shareholders to remember that core real assets are, by
their nature, long-term investments, providing services and goods typically
over an extended life cycle. As such, an investment in the Company should be
viewed through a similar lens in order to assess the benefits of
diversification and the financial returns of core real assets.
Over the next three years, the Board intends to reduce JARA's exposure to real
estate investments and to recycle the funds released thereby into the other
legs on which the Company is built. As well as the prospect of providing
better performance, both the Transport and Infrastructure funds offer a higher
yield than the property assets; an increased weighting in these sleeves
should, in time, support higher dividends from JARA. Concurrently with this
reallocation, the Board will continue to be proactive in buying back the
Company's shares in a continuing effort to stabilise and narrow the discount,
while providing a material NAV uplift for continuing shareholders. The
Transportation fund, being invested in many different sectors operating in
multiple economies and currencies, offers a much greater degree of
diversification than the real estate exposures and it is the Board's view that
the diversification offered by JARA will not suffer as a consequence of higher
weightings in transportation and infrastructure.
The Board believes that the strategy remains attractive and relevant in the
longer term. Should shareholders approve the change in the investment policy,
the Investment Manager will need time to implement the changes to the
portfolio and for shareholders to benefit, not least because funds will need
to be redeemed from existing investments before they can be reallocated to the
alternative strategies. The continuation resolution requires a simple majority
of votes in favour in order to pass. Should a substantial minority of
shareholders vote against the continuation resolution the Board will give
consideration to whether further steps should be taken to address shareholder
concerns.
Conditional on the passing of the continuation resolution at this year's
Annual General Meeting, the Board is offering a change to the Company's
Articles in respect of future continuation resolutions. The Board is proposing
to increase the frequency of future continuation resolutions from every five
years to every three years, such that at the Annual General Meeting to be held
in 2027, and every third year thereafter a continuation resolution will be
proposed to shareholders. A resolution that the Company continue as an
investment trust for a further three year period will be proposed to
shareholders at the forthcoming Annual General Meeting.
The Board unanimously recommends that shareholders vote in favour of the
forthcoming continuation resolution and the resolution to change the frequency
of future continuation resolutions to every three years, both of which are to
be proposed at the forthcoming Annual General Meeting. The Directors intend to
vote in favour of these resolutions in respect of their own beneficial
shareholdings of 599,485 Ordinary Shares, representing approximately 0.003% of
the existing issued share capital of the Company (excluding shares held in
Treasury) as at 21st June 2024 (being the latest practicable date prior to the
publication of this report).
My fellow Board members and I are available to meet with shareholders and I
would welcome comments ahead of the Annual General Meeting. Please contact the
Company Secretary at invtrusts.cosec@jpmorgan.com in the first instance.
If the continuation resolution is not passed at the 2024 Annual General
Meeting, the Board will convene a general meeting of the Company within six
months, at which proposals to shareholders for the voluntary liquidation,
unitisation, reconstruction or reorganisation of the Company would be put
forward.
Revenue and Dividends
The Board declared total dividends of 4.20 pence per share in respect of the
financial year under review, comprising four quarterly dividends of 1.05 pence
per share, providing an uplift on the prior year (FY2022/23: 4.05 pence per
share). This dividend has been delivered notwithstanding the macroeconomic
challenges that have affected valuations and revenues across all sectors of
real assets.
The Directors intend, in the absence of unforeseen circumstances, for the
financial year ending 28th February 2025, to pay three equal interim dividends
of 1.05 pence per share and, as in the current year, if the Directors believe
that an increase in distributions is warranted, this will be considered as
part of the fourth quarter interim dividend. The minimum distribution is
expected to be 4.20 pence per share.
The Board and Corporate Governance
In accordance with the Company's Articles and the AIC Code of Corporate
Governance, all Directors will be retiring and seeking re-election by
shareholders at the Company's Annual General Meeting. The Board's knowledge
and experience is detailed in the full annual report. Chris Russell has
indicated that, if re-elected, he intends to retire from the Board before the
end of FY2024/25 once a successor director has been identified.
Environmental, Social and Governance
The Investment Manager continues to enhance its Environmental, Social and
Governance ('ESG') approach which ensures it best captures the fundamental
insights of the investment team. The Board continues to engage with the
Investment Manager on financially material ESG considerations and how the
investment team integrates ESG into investment decisions. More information can
be found in the Investment Manager's Approach to ESG in the ESG Report in the
full annual report.
Across the portfolio the Investment Manager considers climate change risk and
mitigation, which is strongly supported by the Board. This involves
identifying and measuring physical risks, then assessing and developing
mitigation strategies for high-risk assets. Finally, it involves analysing
climate-related transition risks and opportunities. Further details can be
found in the ESG Report in the full annual report.
Stay Informed
The Company releases monthly NAVs to the market, as well as quarterly NAVs
with more detailed commentary at the end of May, August, November and
February, all via the London Stock Exchange's Regulatory News Service. The
monthly NAVs contain the latest pricing for the liquid strategy and exchange
rates, with the private strategies being priced on a quarterly basis. The
Company also delivers email updates on the Company's progress with regular
news and views. If you have not already signed up to receive these
communications and you wish to do so, you can opt in via
https://tinyurl.com/JARA-Subscribe.
Annual General Meeting
The Company's fifth Annual General Meeting will be held on Tuesday, 3rd
September 2024 at 2.30 p.m. at the offices of JPMorgan, Level 3, Mill Court,
La Charroterie, St Peter Port, Guernsey GY1 1EJ. I would encourage all
shareholders to vote in advance. Details on how to submit your proxy vote can
be found in the notes to the Notice of Meeting in the full annual report.
If shareholders are unable to attend the Annual General Meeting, they are
welcome to raise any questions in advance of the meeting with the Company
Secretary at the Company's registered address, or via the 'Ask Us a Question'
link which can be found in the 'Contact Us' section on the Company's website,
or by writing to the Company Secretary at the address in the full annual
report or via email to invtrusts.cosec@jpmorgan.com
(mailto:invtrusts.cosec@jpmorgan)
Outlook
During the past year, your Board has given very careful thought to the future
of JARA and whether it has a role to play in offering something not easily
available elsewhere in the wide spectrum of opportunities available to
investors. When our discount was above 35%, serious consideration was given to
recognising that JARA's offering was not finding favour with investors and
that the best outcome for shareholders might be a dissolution of the Company,
followed by liquidation and a return of capital.
Following detailed discussions with the Investment Manager and consultations
with shareholders - as well as a recent re-rating of our shares in the market
- we have come to the view that JARA's investment proposition is something
which does meet the needs of a particular group of investors. Many of these
recognise that, given the torrid investment conditions which have prevailed
since JARA's launch in 2019, this is a product that, suitably tweaked, should
have an attractive future in the parish of those looking for exposure to an
international portfolio of real assets. It is also your Board's view that the
major detractor to investment return, as reflected in the share price and
adjusted for dividend distributions, is what has historically been a cyclical
one, namely the discount to NAV at which our shares have been trading. This is
a malaise which currently blights almost the whole closed ended fund sector,
affecting large and small funds alike, with scant attention paid to underlying
investment performance or the skill of the Investment Manager.
To summarise what has been set out above in some detail, we intend to increase
the frequency of future continuation votes to a three year cycle, and to
reduce our exposure to real estate with a concomitant increase in investments
in infrastructure and transport, while continuing to use our capacity to buy
back shares when market conditions are judged appropriate. Higher yields on
our underlying investments should in due course lead to increased dividends
from JARA. Your Board has great confidence in the abilities of, and the
resources available to, the team at JPMorgan charged with the management of
the Company. Accordingly, the Board of JARA is unanimous in recommending to
shareholders that they support the resolutions before them.
John Scott
Chairman
24(th) June 2024
INVESTMENT MANAGER'S REPORT
Performance Review
During the financial year, the Company continued to implement its diversified
real asset approach across infrastructure, transportation and real estate on a
global basis. JARA's ability to allocate across a wide spectrum of real asset
categories has proven crucial this year. It has provided steady income and NAV
resiliency against the backdrop of high and rising interest rates,
geopolitical tensions, and slowing economic growth in certain pockets of the
market. JARA continues to provide access to investment opportunities that are
otherwise difficult for UK retail investors to access by utilising the scale
and breadth of the J.P. Morgan Asset Management - Global Alternatives
platform.
For the reporting period, the NAV total return was -4.4% in GBP, while the
local currency performance was +0.3%. The difference between the GBP return
and the local (underlying) currency return was caused by Sterling
strengthening over the period compared to the underlying currencies in JARA's
portfolio. The table below shows the contributors to JARA's performance by
asset class and is calculated using the average weighting within the portfolio
throughout the year.
JARA return contribution
Real Estate -3.2%
Infrastructure 1.6%
Transport 1.6%
Other Real Assets 0.3%
Total Local Return 0.3%
Currency Impact -5.3%
Company Impact 0.6%
Total GBP Return -4.4%
Source: J.P. Morgan Asset Management. Numbers may not sum due to rounding.
Currency impact also includes return earned from cash holdings over the year.
Table shows the components of return contribution made up of income and
capital. Asset class level returns are net of associated management fees.
Company impact includes accretive impacts from share repurchases during the
year, the management fee charged by JPMF (0.05% pa), and the Company's other
administration expenses. The strategy returns above are net returns and
include the impact of the relevant management fee of each strategy. Capital
contribution may be negative for reasons including asset depreciation, asset
write downs or due to income return including some return of capital.
As already elevated interest rates moved higher over the year, rate sensitive
assets were challenged by the higher cost of borrowing and reduced market
liquidity. This led to real estate being the largest detractor within the
portfolio last year. Transportation and infrastructure were more resilient and
provided strong, positive returns due to the demand insensitive nature of the
underlying assets and key structural tailwinds such as the energy transition
and geopolitical disruption. Other private real assets - which for JARA is
real estate debt - is a small allocation within the portfolio but was also
a positive contributor as income payments remained steady through the year.
Finally, listed real assets provided a broadly flat return over the year.
Altogether, JARA's portfolio produced a +0.3% local (underlying) currency
return, which, when combined with the impact of currency and company factors
(costs, buybacks, etc.), resulted in a total GBP NAV return of -4.4%.
Review of underlying strategies
Global Infrastructure
JARA's infrastructure allocation increased over the year, from 21% to 24%.
This was partially driven by strong performance of the private allocation over
the year, with infrastructure contributing 1.6% to the Company's total return.
In addition to this performance, the portfolio management team also added USD
3 million to the private infrastructure sleeve (~1% of the total NAV). Our
infrastructure exposure benefitted from the higher inflationary environment
(contracts and regulatory structures often allow for some inflationary pass
through in relation to costs and revenues) and the important role of
infrastructure in enabling the energy transition. At year end, the Company has
look through exposure to a total of approximately 1,000 private infrastructure
assets in addition to listed infrastructure companies around the world.
JARA invests in core private infrastructure which generally means assets that
provide essential services in a regulated or contracted way. This includes
assets such as contracted power generation (e.g., renewables), utilities and
storage assets within Organisation for Economic Cooperation and Development
('OECD') economies. In our listed infrastructure allocation, we are investing
in high quality, lower beta securities that are expected to pay a predictable
dividend.
We believe our approach to investing in infrastructure continues to provide a
number of opportunities at this time. Notably, many assets offer the
opportunity for further capital deployment either via smaller bolt-on
acquisitions or further capital expenditure to upgrade the assets. With the
cost of debt being high, this deployment approach can be more cost-effective,
compared to larger transactions. We continue to see significant opportunities
to employ this form of investment, especially in the utility and renewables
space.
Global Transportation
JARA's transportation allocation increased over the year, from 22% to 23%.
This was driven by strong performance with it contributing 1.6% to the
Company's total return. Of particular importance has been transportation's
ability to weather continued geopolitical events which are impacting
traditional shipping routes. This disruption is, in effect, acting as an
artificial constraint of supply which, when combined with moderate order
books, is supporting both lease rates and values in this market. At the year
end, the Company had look-through exposure to over 130 private transportation
assets.
Our strategy within private transportation focuses on leasing out large,
'backbone' transport assets such as ships, aircraft, rail and fleet leasing
and energy logistics, which are critical to the functioning of global trade.
We prefer, on average, to deal with investment grade counterparties, and these
assets are leased to some of the largest corporates in the world. In our
listed transportation allocation, we are investing in high quality, lower beta
securities expected to pay a predictable dividend.
Transportation provided resilient, income driven, returns throughout the year
in the face of disrupted global supply chains. In shipping, assets must now
travel further (for example, shifting trade away from the Red Sea to the Cape
of Good Hope can add on average 10-14 days to normal transit times) leading to
increasing charter rates. Another positive dynamic for shipping is that,
across the sector, new assets added in this area have been marginal. We have
seen more opportunity in other transportation areas with a focus on those
which benefit from broader decarbonisation efforts. One of these areas which
has been a focus has been railcar leasing. The U.S. railcar market is well
positioned for growth due to favourable supply/demand dynamics with freight
movement by rail rather than truck also helping to reduce greenhouse gas
emissions.
Global Real Estate Equity
JARA's real estate equity allocation decreased over the year, from 47% to 42%.
This was driven by both negative performance from the private real estate
sleeve contributing -3.2% to the Company's total return as well as active
rebalancing out of the asset class by the portfolio management team. Public
real estate equity rebounded during the year and contributed 0.1% to the
Company's total return. Overall, real estate was materially affected by higher
interest rates, which impacted the cost of borrowing and reduced the prices
investors were willing to pay. Importantly, fundamentals (i.e., occupancy,
rental growth etc.) have generally remained resilient, apart from certain
office markets. The prospect of an economic soft landing and the pullback of
interest rates, suggested that we may be approaching a floor for valuations,
positioned JARA well for the NAV recovery. JARA's diverse geographic exposure
has been beneficial with the Asia-Pacific real estate allocation (16% at the
year-end) proving much more resilient than other regional markets.
At year-end, the Company had look-through exposure to over 275 private real
estate equity assets in addition to a range of public REITs.
JARA's private real estate equity allocation focuses on high quality assets
across the U.S. and the Asia-Pacific regions. We focus on core property
sectors - logistics, warehouses, residential, office and retail - in major
growth markets and in the most dynamic gateway cities. The Company's listed
real estate equity allocation is primarily concentrated in the U.S and has a
complementary sector exposure to the private assets due to its focus on
'extended' sectors. Extended sectors include data centres, self-storage, and
other facilities which serve new, high growth industries such as healthcare
and biotech. These high growth areas are more prevalent in the listed real
estate space and are complementary to the more established sectors.
U.S. real estate was the most significant drag on portfolio performance during
the period, whereas Asia-Pacific real estate markets produced a broadly flat
return. Fundamentals have remained resilient with the office sector being the
main area of concern. However, there are significant regional differences. Of
JARA's 9% allocation in office equity, almost half is located in the
Asia-Pacific region wherein fundamentals are stable due to flexible working
routines becoming much less entrenched compared to other regions. On the
positive side, retail outperformed expectations with income growth occurring
throughout the year coupled with low vacancy rates. In public real estate,
there was some volatility, but prices reverted alongside downward trending
inflation, compressing price discounts to net asset value and providing some
respite to negative returns.
Other Real Assets
JARA's other real assets allocation consists of U.S. real estate debt.
Separate from real estate equity, this is an income-focused part of the
portfolio backed by high quality, moderately leveraged assets. This exposure
acts as both an income diversifier, and as a dampener on volatility, as the
assets are less sensitive to macroeconomic fluctuations than real estate
equity. Other real assets contributed 0.3% to total return during the period
and at the year-end the Company had exposure to approximately 20 private
loans as well as public debt-like instruments such as preferred equity,
convertible debt, and senior unsecured loans.
As traditional commercial real estate lenders have exited the market, given
the rise in rates and lack of lendable capital, the alternative and public
markets have seen a rise in the all-in yields for real estate debt. The
existing higher income profile of mezzanine debt provides some offset from the
drag of U.S. real estate equity and allows the Company to take advantage of
the imbalance seen in the supply and demand of commercial real estate. On the
private side, although there have been some impairments, particularly in the
office sector, we expect the majority of these loans to offer attractive
risk-adjusted returns throughout the remainder of this tightening cycle and
beyond.
Real Asset Market Outlook
Inflation has fallen significantly from peak levels but remains above target
in most developed economies and continues to be a key focus for investors and
policy makers. In this context, central banks will have to balance the
trade-offs between reducing rates to offset flatlining growth and maintaining
(or increasing) rates to mitigate the risks of a secondary bout of
inflationary pressure. Whereas rising rates had a negative impact on most real
asset markets in 2023, falling rates should be a tailwind, especially if a
'soft landing' is achieved. Importantly, as rates decline, we would expect
liquidity in most markets to increase, allowing greater price discovery and
investor confidence.
Other macroeconomic factors such as geo-political tensions and China's growth
prospects are also adding uncertainty into the mix. Nevertheless,
opportunities persist across the real asset universe - driven by attractive
entry points (real estate); constrained supply dynamics (transportation) and
the need for further investment in the energy transition (infrastructure).
Importantly, a strategic asset allocation which invests across these markets
offers, in our view, investors the best option of capturing these
opportunities whilst helping to protect against some of the risks that linger.
Infrastructure: The transition to renewable energy is set to boost certain
energy assets
• Despite economic turbulence, core infrastructure assets have
shown resilience. This is because they are often providing essential services
and have monopolistic characteristics - therefore they are relatively
insensitive to the economic cycle.
• We expect valuations to remain relatively stable due to the
strong cash flows being generated, robust demand, and the ability to pass
higher costs to the end-consumer.
• A key area for investment opportunity is driven by ongoing
capital requirements - especially in areas such as utilities - given the need
to upgrade them over time. Also, investment opportunities exist in energy
transition projects. The above chart shows where the net additions to the
energy mix are expected to occur - a picture dominated by renewable energy.
Please see graphic in the full annual report.
Transportation: Supply chain constraints and disruption are benefiting lease
rates and asset values
• Key tailwinds to the transportation markets include:
1. Geopolitical conflicts and tensions causing artificial constraints on
supply (e.g. longer voyages as a result of avoiding Red Sea's shipping
lanes). Further constraints also caused by low water levels in the Panama
Canal.
2. Shifting global supply chains.
3. Continued need for investment supporting decarbonisation
efforts.
• As a result of this, lease rates are currently elevated, which
can be seen on the right hand side of the graphic in the full annual report.
The asset class is likely to maintain its low correlation to public markets
while offering attractive cash yields.
• Importantly, the order books (amount of assets being or soon to
be constructed) are relatively low for maritime assets, which may keep supply
of assets tight even in the face of slower global trade growth.
Please see graphic in the full annual report.
Global real estate: Adapting to the new economy
• Fading economic headwinds, a more accommodating interest rate
outlook and relatively healthy industry fundamentals mean the opportunity to
capitalise on the disruption may be shorter and come sooner than many
expected.
• Demographic changes and consumer preferences create both risks
and opportunities. These also vary across regions, for example, with APAC
working from home ('WFH') practices or e-commerce preferences differing from
other regions. Differing WFH tendencies per region can be seen on the
right-hand side of the graphic in the full annual report.
• Long-term success will require investors to adapt existing
buildings and expand portfolios to incorporate what were once considered niche
subsectors (e.g., data centres, self-storage, single family rental), which has
a sizeable allocation in the listed real estate space, including JARA's listed
allocation.
Please see graphic in the full annual report.
Other real assets: Alternative lending is becoming mainstream
• Banks, particularly regional banks, are the traditional lenders
for commercial real estate (CRE) loans, but this dynamic has slowly begun to
change with the rise of rates and consolidation of lending. Traditional
lenders are pulling back from the CRE space, as shown on the right-hand side.
Traditional lenders are focusing on shoring up deposits and maintaining
capital ratios.
• This dynamic, combined with some deterioration in real estate
values, has led to a broad tightening in lending standards and has created
a mismatch in the supply and demand for real estate debt. This has allowed
alternative lenders to step in and offer necessary financing at more
attractive risk-adjusted spread levels. Mezzanine investment is expected to
continue providing stable income due to the supply/demand imbalance and the
flexibility to invest in both floating and fixed rate loans.
• For public borrowers, such as REITs, this dynamic has also been
in play to a different extent. Here, borrowers are forced to issue debt at
higher yields to attract a comparatively smaller buyer base.
Please see graphic in the full annual report.
Portfolio Review
Please see the full annual report for the Company's asset allocation and
sector breakdowns.
JARA's portfolio incorporates a mix of listed assets and private funds, which
we believe should enhance the overall investment outcome of the portfolio.
Listed assets serve not only as a means of liquidity but also as significant
investment instrument. For instance, compared to private core real estate,
Real Estate Investment Trusts ('REITs') offer exposure to a wider spectrum of
real estate sectors, including 'extended' sectors that are not well
represented in private funds. These sectors provide for broader access and, as
a result, significantly lower exposure to sectors such as office. However,
REITs come with greater volatility and higher equity beta when compared to the
private funds. Therefore, blending public and private exposures will improve
the risk-adjusted outcome of the portfolio. As illustrated in the full annual,
a blend of 70/30 or 80/20 private/public U.S. Real Estate could be optimal,
which aligns with the portfolio's strategic and current exposure.
Blending public and private real estate may provide higher risk-adjusted
return versus standalone allocations
Please see graphic in the full annual report.
At the year-end (and throughout the year), JARA had no company level leverage.
On a look-through basis, JARA's underlying vehicles utilise leverage on an
asset level. The weighted average loan-to-value for JARA's private asset
exposure was marginally higher over the year at 39.3% (year to 28th February
2023: 36.6%); this was driven by depreciation in U.S. real estate asset values
and debt funded bolt-on infrastructure acquisitions. More positively, the debt
profile has slightly shifted away from fixed rate debt, which could benefit
the overall portfolio if central banks begin to reduce interest rates.
A summary of the key portfolio management decisions made by the investment
team over the 12 months to 29th February 2024 is detailed in the full annual
report.
The portfolio management team continues to consider how to evolve the
portfolio's asset allocation to optimise the long-term risk-adjusted return
profile and increase income levels as well as considering Board/shareholder
feedback. To this end, we are seeking to change the Company's investment
guidelines allow the Company to invest up to a maximum of 30% of its gross
assets in any private fund. This change is pending approval from the Financial
Conduct Authority and shareholders and, if approved, we intend to increase
exposures to global core infrastructure and transport, as well as reducing
private real estate equity exposure. For the listed sleeve, we may also
explore portfolio options to enhance the yield profile, such as adjusting the
equity, preferred, and debt mix in the U.S. REITs sleeve. The implementation
of any changes will be an incremental process, taking into account factors
such as market conditions, the size of the buyback programme, the magnitude of
the portfolio change, as well as the projected receipt of redemptions against
the queue for the relevant private fund.
Investment Manager
J.P. Morgan Asset Management, Inc.
Security Capital Research & Management Inc. and J.P. Morgan Alternative
Asset Management Inc.
24th June 2024
PRINCIPAL AND EMERGING RISKS
The Board, through delegation to the Audit Committee, has undertaken a robust
assessment and review of the principal risks facing the Company, together with
a review of any new and emerging risks that may have arisen during the year to
29th February 2024, including those that would threaten its business model,
future performance, solvency or liquidity. With the assistance of JPMF, the
Audit Committee and the Market Risk Committee, chaired by Helen Green and
Simon Holden, respectively, have drawn up a risk matrix, which identifies the
key risks to the Company. The risk matrix, including emerging risks, are
reviewed formally by both the Audit Committee and Market Risk every six months
or more regularly as appropriate. The principal and emerging risks identified
and the broad categories in which they fall, and the ways in which they are
managed or mitigated, are summarised below. Note these are in no particular
order. At each meeting, the Board considers emerging risks which it defines as
potential trends, sudden events or changing risks which are characterised by a
high degree of uncertainty in terms of occurrence probability and possible
effects on the Company.
As the impact of emerging risks is understood, they may be entered on the
Company's risk matrix and mitigating actions considered as necessary. In
assessing the risks and how they can be mitigated, the Board has given
particular attention to those risks that might threaten the viability of the
Company.
Principal risk Description Mitigation/Control Movement in risk status in the year to 29th February 2024
Investment management and performance
Discount control Investment company shares often trade at discounts to their underlying NAVs, The Board monitors the level of both the absolute and sector relative The Board was aware of the material disconnect that developed during the year
although they can also trade at a premium. Discounts and premiums can premium/discount at which the shares trade. The Board reviews both sales and between the Company's
fluctuate considerably leading to volatile returns for shareholders. marketing activity and sector relative performance, which it believes are the
primary drivers of the relative premium/discount level. In addition, the NAV and the Company's share price, impacted by macroeconomics affecting the
Company has authority, when it deems appropriate, to buy back its existing attractiveness of the Company's total NAV return versus the risk and returns
shares to enhance the NAV per share for remaining shareholders and to reduce of other liquid securities, such as money market instruments. The Board
the absolute level of discount and discount volatility. instigated the use of the share buyback facility. Please see the Chairman's
Statement above for further details.
In addition, the Board has overseen an initial reallocation of the portfolio
by reducing real estate exposures and increasing allocation to other
strategies where the risk and return profile can enhance that of the portfolio
as a whole.
Investment delay Delays in capital being redeemed/called by the private funds, resulting in The Manager monitors and reports to the Board on the expected timing of During the year, the Investment Manager submitted redemptions into the real
loss of expected income and capital growth opportunities. redemptions and calls from the underlying strategies. Any slowing of estate allocations.
deployment patterns is reported to Board and the impact on income is modelled.
The Board is aware of the considerable length of time that it is taking for
these redemption requests to be fulfilled and the consequential impact that
this has on the speed of which the portfolio can be re-allocated.
Since the year end, there has been an increase in redemption payouts and this
is expected to continue as real estate transaction volumes increase from
historic lows.
Foreign exchange risk to income There is a risk that material sterling strength or volatility will result in a One of JARA's attributes is that it offers shareholders access to real assets In July 2023, the Board approved the decision to invest in the hedged vehicle
diminution of the value of income received when converted into sterling. globally and with this comes a global currency exposure. A decision was taken of its Infrastructure allocation in order to reduce some of the
at launch not to hedge the capital value of the portfolio into sterling, nor currency-related volatility in NAV returns. Whilst this assisted to some
to hedge the income generated by the portfolio into sterling. However, the degree with mitigating the impact of foreign exchange risk, Sterling
Board is aware of the impact that fluctuating currency movements can have on strengthened against the underlying currencies in the portfolio over the year,
the Company's returns. and this caused a drag on the Company's NAV performance.
Foreign exchange risk to NAV/share price volatility There is a risk that material sterling strength or volatility will result in a
volatile NAV/share price since most the Company's assets are denominated in
U.S. dollars, or in currencies which tend to be closely correlated with the
dollar.
Income generation There is a risk that the Company fails to generate sufficient income from its The Board reviews quarterly detailed estimates of revenue income and The Company generated an income return of 4.4% (on a total return basis) for
investment portfolio to meet the Company's target annual dividend yield of 4 expenditure prepared by the Manager and, if required, challenges the Manager the year. The Company delivered a total dividend for the year of 4.20 pence
to 6%, based on the initial issue price of 100.0p per share. as to the assumptions made in earnings from the underlying strategies and the per share, representing a 4.2% yield based on the initial issue price of 100.0
Company's expenditure. Under Guernsey company law, the Company is permitted to pence per share.
pay dividends despite losses provided solvency tests are performed and passed
ahead of dividend declaration.
Under-performance Poor implementation of the investment strategy, for example as to thematic The Board manages these risks by diversification of investments and through During the year, the Company's NAV decreased by 4.4%, predominately due to
exposure, sector allocation, undue concentration of holdings, factor risk its investment restrictions and guidelines, which are monitored and reported currency exposures in the underlying strategies as well as poor performance in
exposure or the degree of total portfolio risk, may lead to the Company not on by the Manager. The Manager provides the Directors with timely and accurate the US Real Estate allocation.
achieving its investment objective of providing a stable income and capital management information, including performance data, revenue estimates,
appreciation, and/or underperformance against the Company's peer companies. liquidity reports and shareholder analyses. The Investment Manager has undertaken, and continues to consider, strategic
changes to the allocations within the portfolio to meet long term target
returns and mitigate volatility.
Please see the Investment Manager's Report above and in the full annual
report.
Operational risks
Corporate strategy and shareholder demand The corporate strategy, including the investment objectives and policies, may The Manager has a dedicated sales team that engages with both existing and The Company continues to pursue its investment objective in accordance with
not be of sufficient interest to current or prospective shareholders. prospective shareholders of the Company. This engagement includes the the agreed strategy.
education/description of how JARA's portfolio is invested and the exposures
Certain buyers within the sector will only consider investing into an that this generates. The Board regularly reviews its strategy, and assesses, During the year, the Board instigated improvements to marketing materials,
investment trust where its AUM is over a certain level; the Company's AUM with its broker and Manager, shareholder demand. strategy-specific webinars for investors to better disclose the features of
currently stands below these levels. the portfolio's real estate, transport and infrastructure investments.
The Board continued to monitor performance of the portfolio over the year
under review and continues to evaluate the options available to the Company.
Whilst the performance has been disappointing, the Board is aware that there
is scope for further adjustments in portfolio allocations to improve and
optimise the Company's returns. This should improve the attractiveness of the
Company's strategy.
Post year-end, the Board has led a preparatory review of the options available
to the Company and continues to seek feedback from investors on the Company.
Cyber crime The threat of cyber-attack, in all guises, is regarded as at least as The Company benefits directly or indirectly from all elements of JPMorgan's To date, the Manager's extensive cyber security arrangements are in operation.
important as more traditional physical threats to business continuity and Cyber Security programme. The information technology controls around physical
security. security of JPMorgan's data centres, security of its networks and security of
its trading applications, are tested by independent auditors and reported
In addition to threatening the Company's operations, such an attack is likely every six months against the AAF Standard.
to raise reputational issues which may damage the Company's share price and
reduce demand for its shares.
Counterparty risk The nature of the contractual frameworks that underpin many of the real assets The Board is able to seek information from the Manager in relation to To date, the operations and controls of the Company's counterparties have
within the underlying strategies necessitate close partnerships with a range counterparty concentration and correlation of providers. As counterparty proven robust. The Company has not been impacted by any operational issues
of counterparties. In addition to the financial risks arising from exposure to quality is key to maintaining predictable income streams, the Manager seeks from its counterparties.
customers, client and lenders, there are a large number of operational regular contact with key counterparties throughout the supply chain and with
counterparties including construction and maintenance subcontractors. revenue-providing counterparties, while also actively monitoring the financial
Counterparty risk would primarily manifest itself as either counterparty strength and stability of all these entities.
failure or underperformance of contractors.
Regulatory risks
Outsourcing Disruption to, or failure of, the Manager's accounting, dealing or payments Details of how the Board monitors the services provided by JPM and its To date, the Manager's operations and controls have proven robust. The Company
systems or the Depositary or Custodian's records may prevent accurate associates and the key elements designed to provide effective risk management has not been impacted by any operational issues.
reporting and monitoring of the Company's financial position or a and internal control are included within the Risk Management and Internal
misappropriation of assets. Controls section of the Corporate Governance Statement in the full annual
report.
The Manager has a comprehensive business continuity plan which facilitates
continued operation of the business in the event of a service disruption.
Directors have received reassurance that the Manager and its key service
providers have business continuity plans in place and that these are regularly
tested.
Regulatory change Various legal and regulatory changes may adversely impact the Company and its The Manager and its advisers continually monitor any potential or actual The Company continued to adhere to relevant requirements.
underlying investments. This could take the form of legislation impacting the changes to regulations to ensure its assets and service providers remain
supply chain or contractual costs or obligations to which the underlying compliant. Most social and transportation infrastructure concessions provide a
strategies are exposed. Certain investments in the underlying strategies are degree of protection, through their contractual structures, in relation to
subject to regulatory oversight. Regular price control reviews by regulators changes in legislation which affect either the asset or the way the services
determine levels of investment and service that the portfolio company must are provided. Regulators seek to balance protecting customer interests with
deliver and revenue that may be generated. Particularly severe reviews may making sure that investments have enough money to finance their functions.
result in poor financial performance of the affected investment.
The Company invests in real assets via a series of private funds. The
operation of these entities including their ability to be bought, held or sold
by investors across a number of jurisdictions and the taxation suffered
within the funds and by investors into the funds depend on a complex mix of
regulatory and tax laws and regulations across a wide range of countries.
These may be subject to change that may threaten the Company's access to and
returns earned from the private funds.
Environmental risks
Climate change Climate change is one of the most critical emerging issues confronting asset In the Board's and Manager's view, investments that successfully manage The Investment Manager has responsibility for ESG. Whilst the Company is not a
managers and their investors. Climate change may have a disruptive effect on climate change risks will perform better in the long-term. Consideration of sustainable or ESG investment vehicle, a broader view of financially material
the business models and profitability of individual investments, and indeed, climate change risks and opportunities is an integral part of the investment ESG factors remain a part of the investment process.
whole sectors. The Board is also considering the threat posed by the direct process. The Manager aims to influence the management of climate related risks
impact of climate change on the operations of the Manager and other major through engagement and voting with respect to the equity portion of the Please refer to the full annual report for the ESG Report.
service providers. portfolio and is a participant of Climate Action 100+ and a signatory of the
United Nations Principles for Responsible Investment.
The Company may be exposed to substantial risk of loss from environmental
claims arising in respect of its underlying real assets that have Generally, the Manager (or, in the case of an investment made by a JPMAM
environmental problems, and the loss may exceed the value of such underlying product, the relevant manager) performs market practice environmental due
assets, although for some real assets this can be mitigated to some extent by diligence of all of the investments to identify potential sources of
contracted lease commitments. Furthermore, changes in environmental laws and pollution, contamination or other environmental hazard for which such
regulations or in the environmental condition of investments may create investment may be responsible and to assess the status of environmental
liabilities that did not exist at the time of acquisition of an underlying regulatory compliance.
asset and that could not have been foreseen. It is also possible that certain
underlying assets to which the Company will be exposed could be subject to
risks associated with natural disasters (including wildfire, storms,
hurricanes, cyclones, typhoons, hail storms, blizzards and floods) or non
climate related manmade disasters (including terrorist activities, acts of war
or incidents caused by human error).
Global risks
Geopolitical risk The Company's investments are exposed to various geopolitical and This risk is managed to some extent by diversification of investments and by The rise in geopolitical tensions contributed to volatility and economic
macro-economic risks incidental to investing. Political, economic, military regular communication with the Manager on matters of investment strategy and disruption over the year.
and other events around the world (including trade disputes) may impact the portfolio construction which will directly or indirectly include an assessment
economic conditions in which the Company operates, by, for example, causing of these risks. The Board can, with shareholder approval, look to amend the
exchange rate fluctuations, interest rate changes, heightened or lessened investment policy and objectives of the Company to gain exposure to or
competition, tax advantages or disadvantages, inflation, reduced economic mitigate the risks arising from geopolitical instability although this is
growth or recession, and so on. Such events are not in the control of the limited if it is truly global.
Company and may impact the Company's performance.
The crisis in Ukraine has affected energy and commodity markets and may cause
further damage to the global economy. The turmoil in the Middle East
(Israel/Palestine conflict) has further affected shipping routes, costs and
has potential to also cause further damage in financial markets.
Inflation Excessive inflation is likely to increase the Company's cost of capital and There is a degree of inflationary linkage within the investment portfolio, Inflation appears to be decreasing from its high, albeit slightly slower than
cost of operations. albeit on a lagging basis. the market initially expected.
Global inflation is largely stabilising. However, the Board is unable to
forecast macro-economic developments.
Emerging Risks
The Board continually monitors the changing risk landscape and any emerging
and increasing threats to the Company's business model, as they come into view
via a variety of means, including advice from the Manager, the Company's
professional advisors and Directors' knowledge of markets, changes and events.
These threats and/or changes have a degree of uncertainty in terms of
probability of occurrence and possible effects on the Company. Should an
emerging risk become sufficiently clear, and the implications evaluated, it
may be moved to a principal risk.
Emerging risk Description Mitigating Factors
Technological and behavioural change The returns generated from the underlying investment strategies in which the The Board manages these risks through maintaining a diversified portfolio of
Company is invested may be materially affected by new or emerging changes in investments, ensuring the underlying investment team consider these threats in
technology which change the behaviour of individuals or corporations or may portfolio construction and investment plans and are aware of the investment
require substantial investment in new or replacement technologies. Such opportunities as well as the threats presented by these shifts in the sectors
changes may include the decline in demand for office space as remote working in which they invest.
technologies become widespread, material changes in transport technologies and
new technologies for the generation and transmission of energy.
Real Estate More material shift than anticipated in real estate usage patterns (increasing The portfolio is actively managed with a focus on ensuring that the properties
working from home, accelerating decline of retail) or substantial increase in are ESG rated in accordance with GRESB. Please see the ESG Report in the full
environmental standards expected of new and built properties renders current annual report.
real estate strategies inappropriate or unable to meet expected returns.
Transport Significant reduction in global trade reduces demand/pricing for maritime The assets are on long term leases.
assets. Rising environmental awareness reduces demand for aviation and
increased emission obligations increase the cost and reduce the demand for
aviation.
Energy Cost of energy drops materially either through increased supply or new rival The Company has a broadly diversified portfolio and has exposure to energy
technologies materially reducing returns from renewable energy projects. transition assets which expands both traditional and renewable sources. Assets
tend to be on long-term off-take agreements providing a stabilised cash flow.
TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
Details of the management contract are set out in the Directors' Report in the
annual report. The management fee payable to the Manager for the year was
£709,000 (2023: £2,231,000) of which £225,000 (2023: £27,000) was
outstanding at the year end.
The Company holds cash in JPMorgan GBP Liquidity Fund, which is managed by
JPMF. At the year end, this was valued at £0.51 million (2023: £0.71
million). Interest amounting to £26,000 (2023: £28,000) was receivable
during the year of which £nil (2023: £nil) was outstanding at the year end.
The Company holds cash in JPMorgan USD Liquidity Fund, which is managed by
JPMF. At the year end, this was valued at £0.46 million (2023: £0.46
million). Interest amounting to £25,000 (2023: £9,000) was receivable during
the year of which £nil (2023: £nil) was outstanding at the year end.
Included in administration expenses in note 7 in the annual report are safe
custody fees amounting to £2,000 (2023: £1,000) payable to JPMorgan Chase
Bank N.A. of which £nil (2023: £nil) was outstanding at the year end.
Handling charges on dealing transactions amounting to £27,000 (2023:
£27,000) were payable to JPMorgan Chase Bank N.A during the year of which
£3,000 (2023: £nil) was outstanding at the year end.
At the year end, a bank balance of £2,709,000 (2023: £2,374,000) was held
with JPMorgan Chase N.A. A net amount of interest of £33,000 (2023: £7,000)
was receivable by the Company during the year from JPMorgan Chase N.A. of
which £nil (2023: £nil) was outstanding at the year end.
Please see below for details of the Directors' remuneration.
Single total figure of remuneration(1)
The single total figure of remuneration for each Director is detailed below.
2024 2023
Total Total
Directors £ £
John Scott 64,280 61,800
Helen Green 53,560 51,500
Simon Holden 57,876 55,650
Chris Russell 45,032 43,300
Total 220,748 212,250
(1) Other subject headings for the single figure table are not included
because there is nothing to disclose in relation thereto.
Whilst not required by the Company and not constituting part of the Directors'
remuneration, the Directors own shares in the Company. The Directors' received
a dividend from their shares over the reporting period commensurate with their
shareholdings, which does not constitute part of their remuneration. There are
no balances payable to the Directors at the year end.
STATEMENT OF DIRECTORS' RESPONSIBILITIES
The Directors are responsible for preparing the Annual Report & Financial
Statements in accordance with applicable law and regulations.
The Companies (Guernsey) Law, 2008 ('the law') requires the Directors to
prepare the Financial Statements for each financial year. Under that law, the
Directors have elected to prepare the financial statements in accordance with
International Financial Reporting Standards to meet the requirements of
applicable law and regulations. Under Company law the Directors must not
approve the Financial Statements unless they are satisfied that, taken as
a whole, the Annual Report & Financial Statements are fair, balanced and
understandable, provide the information necessary for shareholders to assess
the Company's position, performance, business model and strategy and that they
give a true and fair view of the state of affairs of the Company and of the
total return or loss of the Company for that period. In order to provide these
confirmations, and in preparing these financial statements, the Directors are
required to:
• select suitable accounting policies and then apply them
consistently;
• make judgements and accounting estimates that are reasonable and
prudent;
• state whether applicable International Financial Reporting
Standards have been followed, subject to any material departures disclosed and
explained in the financial statements; and
• prepare the financial statements on a going concern basis unless
it is inappropriate to presume that the Company will continue in business
and the Directors confirm that they have done so.
The Directors are responsible for keeping proper accounting records that are
sufficient to show and explain the Company's transactions and disclose with
reasonable accuracy at any time the financial position of the Company and to
enable them to ensure that the financial statements comply with the law. They
are also responsible for safeguarding the assets of the Company and hence for
taking reasonable steps for the prevention and detection of fraud and other
irregularities.
The accounts are published on the www.jpmrealassets.co.uk website, which is
maintained by the Company's Manager. The maintenance and integrity of the
website maintained by the Manager is, so far as it relates to the Company, the
responsibility of the Manager. The work carried out by the Auditor does not
involve consideration of the maintenance and integrity of this website and,
accordingly, the Auditor accepts no responsibility for any changes that have
occurred to the accounts since they were initially presented on the website.
Legislation in Guernsey governing the preparation and dissemination of
financial statements may differ from legislation in other jurisdictions. The
accounts are prepared in accordance with International Financial Reporting
Standards.
Under applicable law and regulations, the Directors are also responsible for
preparing a Directors' Report, Corporate Governance Statement and Directors'
Remuneration Report that comply with that law and those regulations.
Each of the Directors, whose names and functions are listed in the annual
report confirms that, to the best of their knowledge:
• the financial statements, which have been prepared in accordance
with International Financial Reporting Standards and applicable law, give a
true and fair view of the assets, liabilities, financial position and return
or loss of the Company; and
• the Strategic Report includes a fair review of the development
and performance of the business and the position of the Company, together with
a description of the principal and emerging risks and uncertainties that it
faces.
The Board also confirms that it is satisfied that the Strategic Report and
Directors' Report include a fair review of the development and performance of
the business, and the position of the Company, together with a description of
the principal and emerging risks and uncertainties that the Company faces.
For and on behalf of the Board
John Scott
Chairman
24th June 2024
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 29th February 2024
Year ended Year ended
29th February 28th February
2024 2023
£'000 £'000
(Losses)/gains on investments held at fair value through profit or loss (20,488) 16,763
Net foreign currency (losses)/gains (41) 183
Income from investments 11,239 10,853
Interest receivable and similar income 84 44
Total (loss)/return (9,206) 27,843
Management fee (709) (2,231)
Other administrative expenses (705) (687)
(Loss)/return before finance costs and taxation (10,620) 24,925
Finance costs - (1)
(Loss)/return before taxation (10,620) 24,924
Taxation (1,259) (1,094)
Net (loss)/return after taxation (11,879) 23,830
(Loss)/return per share (5.49)p 10.91p
STATEMENT OF CHANGES IN EQUITY
Share Retained
premium earnings Total
£'000 £'000 £'000
Year ended 28th February 2023
At 28th February 2022 217,123 (10,534) 206,589
Issue of ordinary shares 2,155 - 2,155
Return for the year - 23,830 23,830
Dividends paid in the year (note 2) - (8,846) (8,846)
At 28th February 2023 219,278 4,450 223,728
Year ended 29th February 2024
At 28th February 2023 219,278 4,450 223,728
Repurchase of shares into Treasury - (6,356) (6,356)
Loss for the year - (11,879) (11,879)
Dividends paid in the year (note 2) - (9,082) (9,082)
At 29th February 2024 219,278 (22,867) 196,411
STATEMENT OF FINANCIAL POSITION
At 29th February 2024
2024 2023
£'000 £'000
Assets
Non current assets
Investments held at fair value through profit or loss 192,122 219,960
Current assets
Debtors 1,080 990
Cash and cash equivalents 3,682 3,541
4,762 4,531
Liabilities
Current liabilities
Other payables (473) (763)
Net current assets 4,289 3,768
Total assets less current liabilities 196,411 223,728
Net assets 196,411 223,728
Amounts attributable to shareholders
Share premium 219,278 219,278
Retained earnings (22,867) 4,450
Total shareholders' funds 196,411 223,728
Net asset value per share 93.3p 102.0p
STATEMENT OF CASH FLOWS
For the year ended 29th February 2024
2024 2023
£'000 £'000
Cash flows from operating activities
(Loss)/return before taxation (10,620) 24,924
Deduct dividends received (11,133) (10,770)
Deduct investment income - interest (106) (83)
Deduct deposit and liquidity fund interest income (84) (44)
Less interest expense - (1)
Add indirect management fee - 1,265
Add performance fee - 128
Add losses/(deduct gains) on investments held at fair value through profit 20,488 (16,763)
& loss
Add exchange losses/(deduct exchange gains) on cash and cash equivalents 41 (6)
(Increase)/decrease in prepayments and accrued income (2) 6
Increase in other payables (92) 255
Tax paid (1,265) (1,101)
Net cash outflow from operating activities before interest and taxation (2,773) (2,190)
Investing activities
Dividends received 11,043 10,856
Interest received 104 80
Deposit and liquidity fund interest received 84 44
Interest expense - 1
Purchases of investments held at fair value through profit or loss (49,387) (21,148)
Sales of investments held at fair value through profit or loss 56,549 21,408
Net cash flow from operating and investing activities 15,620 9,051
Financing activities
Dividends paid (9,082) (8,846)
Issue of ordinary shares - 2,155
Repurchase of shares into Treasury (6,356) -
Net cash outflow from financing activities (15,438) (6,691)
Increase in cash and cash equivalents 182 2,360
Cash and cash equivalents at start of year 3,541 1,175
Exchange movements (41) 6
Cash and cash equivalents at end of year(1) 3,682 3,541
(1) Cash and cash equivalents includes liquidity funds.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 29th February 2024
1. General information
The Company is a closed-ended investment company incorporated in accordance
with The Companies (Guernsey) Law, 2008. The address of its registered office
is at Level 3, Mill Court, La Charroterie, St Peter Port, Guernsey GY1 1EJ.
The principal activity of the Company is investing in securities as set out in
the Company's Objective and Investment Policies.
The Company was incorporated on 22nd February 2019. The Company was admitted
to the Market of the London Stock Exchange and had its first day of trading on
24th September 2019.
Investment objective
The Company will seek to provide Shareholders with stable income and capital
appreciation from exposure to a globally diversified portfolio of core real
assets.
Investment policy
The Company will pursue its investment objective through diversified
investment in private funds or accounts managed or advised by entities within
J.P. Morgan Asset Management (together referred to as 'JPMAM'), the asset
management business of JPMorgan Chase & Co. These JPMAM Products will
comprise 'Private Funds', being private collective investment vehicles, and
'Managed Accounts', which will typically take the form of a custody account
the assets in which are managed by a discretionary manager.
Material Uncertainty around Going Concern
The Company, in accordance with its Articles of Incorporation, is subject to a
continuation vote by its shareholders at its fifth Annual General Meeting,
which will be held on 3rd September 2024.
This represents a material uncertainty in respect of the ability of the
Company to continue as a going concern.
The Directors have assessed this material uncertainty, holding meetings,
directly or through the Investment Manager, with brokers and stakeholders to
attempt to predict the outcome of the vote. As a result, the Directors have
made their recommendation to the shareholders to vote for the Company to
continue.
Given the vote takes place after the expected issuance of these financial
statements, the Directors have taken into account the guidance issued by the
AIC for companies subject to continuation votes and determined even if the
continuation vote fails, given the nature of investments held by the Company,
an orderly wind down would take over 12 months from the current balance sheet
date.
They have therefore determined that it is appropriate to continue to prepare
these financial statements on a going concern basis.
2. Dividends
2024 2023
£'000 £'000
Dividends paid
2023/2024 First interim dividend of 1.05p (2023: 1.00p) per share 2,304 2,174
2023/2024 Second interim dividend of 1.05p (2023: 1.00p) per share 2,304 2,174
2023/2024 Third interim dividend of 1.05p (2023: 1.00p) per share 2,247 2,194
2023/2024 Fourth interim dividend of 1.05p (2023: 1.05p) per share 2,227 2,304
Total dividends paid in the year 9,082 8,846
Dividend declared
2024/2025 First interim dividend of 1.05p (2023: 1.05p) per share - 2,304
3. (Loss)/return per share
2024 2023
£'000 £'000
Total (loss)/return (11,879) 23,830
Weighted average number of shares in issue during the year 216,377,222 218,481,925
Total (loss)/return per share (5.49)p 10.91p
4. Net asset value per share
2024 2023
Shareholders' funds (£'000) 196,411 223,728
Number of shares in issue 210,445,138 219,407,952
Net asset value per share 93.3p 102.0p
5. Status of announcement
2023 Financial Information
The figures and financial information for 2023 are extracted from the Annual
Report and Financial Statements for the year ended 28th February 2023 and do
not constitute the statutory accounts for the year. The Annual Report &
Financial Statements includes the Report of the Independent Auditors which was
unqualified.
2024 Financial Information
The figures and financial information for 2024 are extracted from the
published Annual Report and Financial Statements for the year ended 29th
February 2024 and do not constitute the statutory accounts for that year.
The Annual Report and Financial Statements include the Report of the
Independent Auditors which is unqualified.
JPMORGAN FUNDS LIMITED
25(th) June 2024
For further information, please contact:
Emma Lamb
For and on behalf of
JPMorgan Funds Limited
Telephone: 0800 20 40 20 or or +44 1268 44 44 70
Neither the contents of the Company's website nor the contents of any website
accessible from hyperlinks on the Company's website (or any other website) is
incorporated into, or forms part of, this announcement.
ENDS
A copy of the Annual Report will be submitted to the National Storage
Mechanism and will shortly be available for inspection at
https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism)
The Annual Report will also shortly be available on the Company's website at
www.jpmrealassets.co.uk where up to date information on the Company, including
monthly and quarterly NAV and share prices, factsheets and portfolio
information can also be found.
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