JPMorgan Global Core JPM Glbl Core - JARU JPM Glbl Core - JARE - Half-year Report
28/11/2023 07:00
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RNS Number : 8263U JPMorgan Global Core Real Assets Ld 28 November 2023
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN GLOBAL CORE REAL ASSETS LIMITED
UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31ST AUGUST 2023
RESILIENT POSITIVE ASSET PERFORMANCE +0.7% IN CHALLENGING MARKETS
5% DIVIDEND INCREASE DURING THE PERIOD
SHARE BUYBACKS INITIATED
Legal Entity Identifier: 549300D8JHZTH6GI8F97
Information disclosed in accordance with the DTR 4.2.2
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 half year results for the six-months ended
31st August 2023, in which its carefully calibrated portfolio performed
robustly in the current challenging macroeconomic conditions.
Highlights for the six months ended 31st August 2023
Performance
· The net asset value ('NAV') total return was -4.6%, whilst total
returns to shareholders was -7.8%.
· Underlying asset performance in local currency was +0.7%. Currency
was the key negative contributor to Company performance during the period
(-5.1%) as Sterling generally strengthened. To help reduce this volatility the
Company initiated a partial hedge in July.
· The share price discount to NAV widened during the period, to 18.1%,
from 14.9%, against a background of volatile equity markets.
· At the asset level, transportation (+0.9%), infrastructure (+0.6%)
and real estate debt (+0.3%) contributed positively to performance, while US
private real estate equity was the principal detractor (-0.9%).
· Dividends during the period were increased 5% year on year, with two
distributions of 1.05p compared with 1 penny per share in the prior year.
Portfolio
· The portfolio remains highly diversified across geographies, asset
classes and importantly macro and political environments, with 344
investments, providing investors a remarkably diverse portfolio of 1,409 core
real assets worldwide.
· During the period, the Company invested a further £2.4m in the
infrastructure strategy, increasing investor exposure to a platform of 20
global infrastructure operating businesses which the manager views as
attractively positioned.
· Meanwhile, the Company reduced its private real estate exposure from
40% to 37% in response to the prevailing market conditions.
· Occupancy across the real estate and transportation segments stands
at 96%, in line with expectations.
· Contracted income received stands at 96%, which is within normal
operational levels.
· Average lease length across the real estate and transportation
segments is 4.7 years, with c.10% due to expire in 2023.
· The blended average discount rate across the portfolio is 7.9%, with
6.5% being applied to property, and infrastructure and transport using a rate
of 9.3%.
Valuation
· Four out of the seven exits at the portfolio level occurred at
valuations which were up to 10% higher than their carrying NAV, a reflection
of prudent valuations. On average, these seven deals achieved an approximate
+2% increase on their appraisal value, which affirms the quality and
resilience of JARA's NAV.
· In contrast to the widening discount, the portfolio management team
has reviewed historical sales data in relation to the appraisal (carrying)
NAVs for JARA's investments in private real assets.
· In analysing recently closed transactions across the US real estate,
APAC real estate, and global infrastructure strategies, exit valuations were
largely in line with the appraisal values at that time. This is an indication
of the rigor of the valuation process which is undertaken for each of these
portfolios and underlying assets.
· The stability of underlying valuations reflects the quality of the
portfolio and strategy even in a period of considerable market uncertainty,
most notably in the real estate sector.
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 4.3%, with a loan to
value of 38.2%. Of this leverage, almost 80% is fixed rate and less than 10%
is maturing by the end of 2024.
Discount Management
· The Board and Investment Manager are focused on using the tools
available to them to close the discount to NAV at which the Company's shares
trade, which has grown during the recent period of macro-economic uncertainty.
· During the period, the Company initiated a share buyback programme
and, to date, 3.2% of the Company's share capital has been bought back at an
average discount of 26.2%, providing an uplift in the Company's NAV.
ESG
· On 30th June 2023, in line with regulatory requirements, the Manager
published its first UK Task Force on Climate-related Financial Disclosures
('TCFD') Report for the Company in respect of the year ended 31st December
2022. This is available to view on the Company's website.
Sector Exposure
Sector Allocation (%)
Industrial / Logistics 17%
Office 9%
Residential 10%
Retail 5%
Other Real Estate 2%
Total Real Estate (private % / public %) 43% (37% / 6%)
Utilities 12%
Renewable Energy 5%
Liquid Bulk Storage 2%
Conventional Energy 2%
Fixed Transportation Assets 1%
Total Infrastructure (private % / public %) 23% (19% / 4%)
Maritime 9%
Energy Logistics 6%
Aviation 2%
Rolling Stocks 3%
Other Transportation 1%
Total Transportation (private % / public %) 22% (20% / 3%)
Real Estate Mezzanine Debt 7%
Other Real Asset Debt 2%
Other Real Assets (private % / public %) 10% (7% / 2%)
Total Invested Portfolio 98%
Geographical and Currency Exposure
Region
North America 56%
Europe (Including 3% U.K.) 18%
Asia-Pacific 26%
Currency
USD 58%
CAD <1%
GBP 20%
EUR 2%
Other(1) <1%
JPY 6%
AUD 4%
Other(2) 9%
Source: J P. Morgan Asset Management. Data as of 31st August 2023. 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%), and SEK (<1%).
(2) Includes SGD (3%), RMB (2%), NZD (2%), HKD (<1%), and KRW (<1%).
John Scott, Chairman, commented:
"Despite the macro-economic challenges that have caused significant share
price volatility across the investment companies sector, from which the
Company was unfortunately not immune, the Company's underlying portfolio has
continued to perform respectably, achieving a +0.7% return at asset level.
"The Company remains focused on addressing the discount to NAV at which the
shares currently trade and during the period has initiated four proactive
measures. These are: increasing dividend payments by 5%; reducing private real
estate exposure which has been the principal asset detractor; introducing a
degree of currency hedging into the strategy; and initiating a share buyback
programme to preserve and improve shareholder value, as well as attract new
demand for the shares.
"Whilst headwinds are still steering the direction of macro-economic travel,
there are reasons to be optimistic. Inflation appears to be coming under
control and we can expect with a reasonable degree of confidence that central
banks will begin to start cutting interest rates, a move that should have a
positive impact on the Company's share price.
"Further, we have every confidence in the Company's portfolio positioning with
numerous drivers of shareholder value creation across our global asset base
now in place. An example of this is the strong outlook for APAC real estate
where growth opportunities are less affected by interest rate-driven
headwinds. Our real estate mezzanine debt will continue to benefit from the
higher rate environment. There is every sign that the valuation declines we
have seen in US private real estate are flattening and may be near the bottom.
The US government has passed some of the most important public infrastructure
legislation in the country's history, presenting a major growth investment
opportunity. Finally, the global search for increased energy security has seen
demand for traditional and alternative energy sources, as well as for assets
in the transportation sector to support this demand.
"Ultimately, the Company's carefully curated and diverse portfolio of 344
investments in 1,409 assets around the world places it in a compelling
position to generate an attractive level of risk-adjusted returns for our
shareholders and we look to the future with confidence."
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
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
Introduction
I am pleased to present the interim report for the Company for the six months
ended 31st August 2023.
This has been a difficult period for many investment trusts - and JARA is no
exception. The Company recorded a 4.6% decrease in total return on net assets
over the six months, reflecting a period of respectable performance in our
underlying holdings, offset by adverse currency movements which contributed
-5.1% to returns. Our main problem, however, has been the significant widening
of the discount to our net asset value ('NAV') and the result is a total
return for shareholders of -7.8%, the discount having moved out from 14.9% to
18.1% over the same period. Our view is that this widened discount reflects
the current weak demand across our sector of the equity markets, and is not a
reflection of the underlying quality of our diversified portfolio.
Features of the period
Activity in most developed economies continued its halting recovery from the
disruption caused by COVID-19, but many years of loose monetary policy,
combined with supply chain difficulties, have provoked widespread inflation.
While there are signs that in most economies the worst is past, inflation has
worked its way into the system and is proving very difficult to cast aside. On
top of this, Russia's war in Ukraine, already by far the most serious conflict
in Europe since 1945, shows every sign of descending into a bloody stalemate.
Although energy and other commodity markets have to an extent adapted to the
new realities of eastern Europe, gas, oil and fertiliser prices remain
stubbornly higher than in pre-invasion days, contributing to a cost-of-living
crisis in many countries. Your Company, which invests in a diversified
portfolio of core real assets, was designed to perform resiliently in
difficult environments such as the one we face today and in the main this is
proving to be the case; our underlying asset value has borne up well when
measured in local currency.
Share Price and Discount
JARA's discount to NAV averaged 15.4% over the six-month period, ending at
18.1% at the end of August. At the time of writing the discount has widened
still further and currently stands at 26.2%*. The Directors believe that much
of this is driven by investor response to the dramatically changed interest
rate environment, and indeed is reflected across the entire listed investment
companies sub-sector. As yields on government debt have risen, so in tandem
has the yield demanded by the market on other investments which, absent a
significant rise in dividends, drives a reduction in share prices. The
weakening of our share price pays little heed to the quality of the underlying
asset portfolio, nor the prospect of growing dividends. That this is a feature
being experienced by a wide range of funds is, we are aware, of little comfort
to our shareholders, and that is why your Board is taking a number of
concerted actions to address the discount.
* As at 24th November 2023.
Board Actions
Your Board is responding to this challenging environment with the aim of
preserving and restoring shareholder value.
First: we have increased dividend payments in order to return greater value to
shareholders. Further detail is set out in the 'Dividend' section below.
Secondly: responding to shareholder feedback regarding the proportion of the
Company's investments in private real estate strategies, total exposure has
been reduced from 40% to 37% over the past year and further adjustments will
be made, as needed. Part of the proceeds were used to make a further
£2.4 million investment into the Infrastructure strategy, demonstrating the
Board's confidence in building greater exposure for shareholders in what is
essentially a platform of 20 global infrastructure operating businesses.
Furthermore, we have asked the Investment Manager to continue to evaluate the
allocations across our entire portfolio to ensure a balance of risk and return
best suited to today's environment and opportunities.
Thirdly: the Board has explored cost effective options available to the
Company to dampen the effects of currency fluctuations which continue to
provide some distraction to shareholders from the resilient constant currency
performance of our various real asset strategies. To this end, the Company
switched its investment allocation within Infrastructure strategy to a hedged
unit class. This reallocation of the existing unhedged investment in
Infrastructure to the hedged vehicle is intended to reduce the
currency-related volatility in returns. This is discussed in more detail in
the Investment Managers' Report below.
Fourthly: we have initiated a series of share buybacks and, to date, 3.2% of
our share capital has been bought back, at an average discount of 26.2%; the
programme continues and, by buying in our own shares at a significant
discount, provides a worthwhile uplift in NAV for continuing shareholders.
Dividends
The Company declared two interim dividends of 1.05 pence each per ordinary
share each, which were paid to shareholders on 31st May 2023 and 30th August
2023. A third dividend of 1.05 pence per Ordinary Share was declared after the
period end and will be paid to shareholders on 29th November 2023. This is a
5% increase on the comparable quarterly dividends for May and August 2022,
which were 1 penny per ordinary share.
Task Force on Climate-related Financial Disclosures
On 30th June 2023, in line with regulatory requirements, the Investment
Manager published its first UK Task Force on Climate-related Financial
Disclosures ('TCFD') Report for the Company in respect of the year ended 31st
December 2022. The report provides estimates of the portfolio's
climate-related risks and opportunities, disclosed in accordance with the
Financial Conduct Authority's Environmental, Social and Governance ('ESG')
sourcebook and TCFD recommendations.
This is the first report under the new disclosure requirements, and it is
available on the Company's website: www.jpmrealassets.co.uk. The Board is
aware that best practice reporting under the TCFD regime is still evolving
both with regard to metrics and input data quality, as well as the
interpretation and implications of the outputs produced. We continue to
monitor and respond to developments.
Outlook
Despite the acute geopolitical tensions arising from Russia's war in Ukraine
and Israel's military operation in Gaza, the global economy and financial
markets have to date been relatively muted in their response to these threats.
Whilst we all fervently hope that both conflicts will be resolved as rapidly
as possible, it is now apparent that in both theatres of war we may be facing
the prospect of engagements which endure much longer than was initially
thought possible, with the consequent effects on macro-economic conditions of
inflation, higher interest rates, and equity market uncertainty.
As I have noted in the past, the Company invests in many different classes of
real assets, on a basis that is highly diversified both by sector and by
geography. We pursue a progressive dividend policy while also seeking capital
growth in real terms. This should appeal to investors wanting a running return
combined with the delivery of steady long-term growth in asset values across
the cycle. It is deeply frustrating for your Directors to observe that, on the
one hand, JARA is achieving what it set out to do, while on the other seeing
little of the Company's success reflected in our current share price.
Nonetheless, I see grounds for optimism: inflation's dragon appears to have
been tamed, if not yet slain, and there are indications that central banks may
start to cut interest rates, a move that would be expected to result in a
positive re-rating of your Company's shares, albeit rates will remain at
higher levels than have prevailed in recent times. Your Board is aware that
there will be a continuation vote in August 2024, at which shareholders will
have the opportunity to decide whether the Company continues in business for a
further five years. In recommending a course of action, your Board will
consider all options before determining what it considers to be the best
outcome for investors. Until then, we value the support of our shareholders,
whom I ask to reflect on the underlying investment proposition of JARA, which
I believe to be sound and carefully calibrated to offer resilience in the
times in which we live.
John Scott
Chairman
27th November 2023
INVESTMENT MANAGERS' REPORT
Review of Markets
The six months to 31st August 2023 brought about some optimism across markets,
with inflation cooling off and a reasonable assumption that developed
economies are approaching the end of monetary tightening. However,
inflationary forces may be stickier than expected as energy prices present
upward pressure. In the U.S., equities have rallied on the back of larger tech
stocks bolstered by the potential opportunity stemming from Artificial
Intelligence (AI), while in the U.K. other fiscal and monetary policy concerns
continue to weigh heavily on the public indices. In fixed income, rates remain
volatile, with shifting central bank policy expectations driving market
pricing.
Monetary policy has continued to tighten over the past six months, with the
Federal Reserve and the Bank of England increasing policy rates to above 5%
(up +75-100bps over the period). The impact of these hikes has begun to pass
through the economy, but this takes time, and hence interest rates are likely
to remain higher for longer than initially expected.
During the reporting period, uncertainty remained a prominent theme across
markets. The setbacks of interest rates, quantitative tightening, and
geopolitical factors were more pronounced. Inflation seems to be cooling
across the U.S. and U.K., led by supply-chain related factors and a fall in
energy prices. The U.K. is showing slower progress as wage growth is trending
higher, whereas in the U.S. this inflationary aspect appears to have peaked.
With crude oil prices re-approaching high levels, the ongoing war in Ukraine,
the Gaza conflict and other geopolitical tensions in the Middle East there
might be upward pressure on overall prices, and this could keep inflation at
the forefront of the minds of consumers and central banks alike. Given real
assets have historically been able to provide some level of inflation linkage
in returns they are a useful asset class for investors looking to protect
against this risk.
We continue to believe that the case for core real assets is as attractive as
ever. APAC real estate has a strong outlook, with growth opportunities and
fewer interest rate-driven headwinds. Real estate mezzanine debt also benefits
from higher base rates, resilient spreads, and exposure to floating rate
loans. Although U.S. private real estate has continued to face near term
difficulties, market pricing has started to flatten out, showing signs that it
may be nearing a bottom. In addition, the valuation of listed real assets
looks attractive given the recent sell-off. As the U.S. government passed two
of the most significant pieces of public infrastructure legislation in the
nation's history, fiscal policy has shifted from a short-term pandemic
response to a longer-term public investment model. This represents
a significant opportunity for infrastructure. Finally, the search for energy
security given the distribution in the global energy supply from geopolitics
conflicts, has driven demand for both traditional and alternatives energy
sources, creating a dynamic, multi-year opportunity for global core transport.
Near term global real assets outlook
See graphs in the half year report, available on the Company's website;
www.jpmrealassets.co.uk.
Performance Review
In the first six months of this financial year, the Company's NAV return, in
GBP, was -4.6%. This return is inclusive of two 1.05 pence per share
dividends. The annualised yield based on the NAV at 31st August 2023 is 4.4%
and 4.2% based on initial issue price.
During the same six-month period, the underlying asset performance in local
currency was +0.7%. Infrastructure, transportation and real estate debt
provided a positive contribution, while U.S. private real estate equity was
the primary detractor. A significant driver of the negative return in GBP
terms was the impact of currency movements on the portfolio as Sterling
generally strengthened. This was most noticeable against the US Dollar (the
key currency pair), as Sterling strengthened from 1.21 to 1.27 over the
six-month period. To help reduce some of this currency related volatility, the
Company initiated a partial currency hedge in July, which is discussed further
below.
Return attribution (1st March 2023 to 31st August 2023)
U.S. Real Estate -0.9%
Asia Pacific Real Estate -0.2%
Global Infrastructure 0.6%
Global Transportation 0.9%
U.S. Real Estate Mezzanine Debt 0.3%
Listed Real Assets -0.1%
Total Local Return 0.7%
Currency Impact -5.1%
Company Level Costs -0.2%
Total -4.6%
Source: J.P. Morgan Asset Management. Data as of 31st August 2023. 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. Capital contribution may be negative for reasons
including asset depreciation, asset write downs or public mark-to-market.
U.S. private real estate contributed -0.9% to the portfolio in local currency
returns. This was primarily driven by the higher interest rate environment
which impacted borrowing costs causing buyers to increase underwriting
requirements significantly and reduce transaction activity. Further friction
was created in the office market, which continued to be challenged as work
from home headwinds weigh on the sector resulting in reduced demand.
JARA's global exposure and diversification across both equity and debt in real
estate offered some buffer to this U.S. volatility as Asia-Pacific real estate
produced a -0.2% local currency performance contribution and U.S. real estate
debt was positive in local currency terms, contributing +0.3%. Looking
forward, sustained economic growth and a peaking of interest rates will be
important for real estate markets. Most fundamentals continue be resilient -
an example of this was that at mid-year, the U.S. private real estate strategy
is on track to deliver 11% net operating income growth, which is currently
over 100 basis points ahead of budget for the year and higher than the growth
generated in 2022.
Core infrastructure and transportation markets performed resiliently,
providing positive contributions of +0.6% and +0.9% respectively on a local
currency basis. As economies have slowed, the demand-insensitive nature of
many of these assets and the inflation-linked nature of some cashflows have
been supportive to performance. This collective allocation across both private
infrastructure and transportation has now reached 38.4% (45.0% including
public markets). This increased over the reporting period - both as a result
of relative outperformance but also as a result of asset allocation decisions
discussed in the next section.
During the period, capital deployment within infrastructure and transportation
was primarily focused on incremental or smaller 'bolt-on' investments to
existing assets. We typically call these 'platform' investments as they allow
for a diversified platform to be created over time. A key benefit of this is
that building large, diversified platforms allows for efficient capital
deployment and growth which will deliver increasing shareholder value over
time. Investments over the period included additional allocations across areas
such as railcar leasing, utilities, renewable energy, and dry bulk carriers.
Finally, the Company's listed real asset allocation was a small negative
contributor of -0.1% on a local currency basis. This was driven by volatility
at the end of the period, as a particularly negative performance in the REIT
sector offset gains made earlier in the period. As a reminder, our listed real
asset allocation is made up of two distinct strategies: U.S. all-tranche REITs
and a broader allocation across a variety of other listed real assets. The
benefit of having an allocation to listed real assets within the portfolio is
both as a source of liquidity - giving more flexibility around asset
allocation - and as a further diversifier in returns and sectoral exposure.
Portfolio Valuations
The portfolio management team has reviewed historical transactional data in
relation to the appraisal (carrying) NAVs for JARA's investments in private
real assets. In analysing recently closed transactions across US real estate,
APAC real estate, and global infrastructure, exit valuations were largely in
line with the appraisal values at that time. This is an indication of the
rigor of the valuation process which is undertaken for each of these
portfolios and underlying assets. It's important to highlight that this has
occurred during a period of market uncertainty, most notably in the real
estate sector. Four out of the seven exits occurred at valuations which were
up to 10% higher than their carrying NAV which is a reflection of prudent
valuations. On average, these seven deals observed an approximate +2% increase
on their appraisal value, which affirms the quality and resilience of JARA's
NAV.
JARA's NAV has shown resilience
Each of JARA's underlying private sub-funds produces a valuation on a
quarterly basis which is independently validated by a third-party appraisal
firm on a regular basis and no less than once a year.
See data chart in the half year report, available on the Company's website;
www.jpmrealassets.co.uk.
Portfolio Rebalancing
At the beginning of the period, the portfolio management team viewed that
JARA's overweight exposure to private real estate equity, in comparison to its
strategic allocation, coupled with its negative outlook relative to other
alternatives, warranted rebalancing.
Consequently, we initiated a rebalancing process in the first and second
quarters of 2023 and received partial payouts from both the U.S. Core real
estate and APAC Core real estate strategies, amounting to US$5.2 million as
of 31st August 2023. This meant JARA ended the period with real estate equity
exposure of 43%, reduced from 46% at the start of the financial year. The
portfolio management team will continue to monitor the market and make further
adjustments as needed.
Hedging Update
The Company announced at the end of June an update to its hedging strategy. As
of 3rd July 2023, JARA has been invested in the hedged vehicle of its private
Infrastructure allocation. The reallocation of the existing unhedged
investment in private infrastructure to the hedged vehicle is intended to
reduce the currency-related volatility in returns from the private
infrastructure allocation. As a result of the change, based on portfolio
weightings as of 31st August 2023, the Company has 20% of its NAV exposed to
GBP, with reduced exposure to EUR of 2% and to USD of 58%. The Company will
continue to consider additional actions to reduce currency-related NAV
volatility as appropriate.
See charts in the half year report, available on the Company's website;
www.jpmrealassets.co.uk.
Please find below JARA's detailed breakdown of sector, geographic, and
currency exposure as of 31st August 2023.
Sector Exposure
Sector Allocation (%)
Industrial / Logistics 17%
Office 9%
Residential 10%
Retail 5%
Other Real Estate 2%
Total Real Estate (private % / public %) 43% (37% / 6%)
Utilities 12%
Renewable Energy 5%
Liquid Bulk Storage 2%
Conventional Energy 2%
Fixed Transportation Assets 1%
Total Infrastructure (private % / public %) 23% (19% / 4%)
Maritime 9%
Energy Logistics 6%
Aviation 2%
Rolling Stocks 3%
Other Transportation 1%
Total Transportation (private % / public %) 22% (20% / 3%)
Real Estate Mezzanine Debt 7%
Other Real Asset Debt 2%
Other Real Assets (private % / public %) 10% (7% / 2%)
Total Invested Portfolio 98%
Source: J P. Morgan Asset Management. Data as of 31st August 2023. Holdings,
sector weights, allocations and leverage, as applicable, are subject to change
at the discretion of the investment manager without notice. Numbers may not
sum to total invested portfolio due to rounding. Cash represents ~2% of the
total portfolio.
Geographical and Currency Exposure
Region
North America 56%
Europe (Including 3% U.K.) 18%
Asia-Pacific 26%
Currency
USD 58%
CAD <1%
GBP 20%
EUR 2%
Other(1) <1%
JPY 6%
AUD 4%
Other(2) 9%
Source: J P. Morgan Asset Management. Data as of 31st August 2023. 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%), and SEK (<1%).
(2) Includes SGD (3%), RMB (2%), NZD (2%), HKD (<1%), and KRW (<1%).
Buyback Update
Further to the announcement made on 10th August 2023 regarding the Board's
decision to make use of the share repurchase authority granted by shareholders
at the Company's annual general meeting, the programme's first repurchase was
on 11th August 2023 and the Company repurchased 1,400,000 shares in the
quarter to 31st August 2023. The shares were repurchased at a weighted average
discount of c. 18.4%. The programme is ongoing.
JARA is unlevered at the Company level and the exposure to listed real assets,
along with the rebalancing redemption proceeds from private strategies,
provides a certain level of flexibility for the buyback without compromising
portfolio integrity. The portfolio management team will continue to work with
the Board to ensure any future buybacks are balanced against the overall
portfolio positioning and liquidity.
Balance Sheet
JARA's private asset balance sheet remains robust. JARA continues to have no
Company level leverage whilst look through loan-to-values at the underlying
strategies have a weighted average of 38.2%. Of this leverage, almost 80% is
fixed rate and less than 10% is maturing by the end of 2024.
Further details on the balance sheet are provided in the half year report,
which is available on the Company's website; www.jpmrealassets.co.uk.
Investment Managers
Alternatives Solutions Group Investment Committee
Security Capital Research & Management Inc. and J.P. Morgan Alternative
Asset Management Inc.
27th November 2023
INTERIM MANAGEMENT REPORT
The Company is required to make the following disclosures in its half year
report.
Principal and Emerging Risks and Uncertainties
The principal and emerging risks and uncertainties faced by the Company fall
into the following broad categories: investment management and performance,
operational, regulatory, environmental, and global. Information on each of
these areas is given in the Company's Strategic Report within the Annual
Report and Financial Statements for the year ended 28th February 2023.
Related Parties Transactions
During the first six months of the current financial year, no transactions
with related parties have taken place which have materially affected
the financial position or the performance of the Company during the period.
Going Concern
The Directors believe that having considered the Company's objective, risk
management policies, capital management policies and procedures, the nature of
the portfolio and expenditure projections, the Company has adequate resources,
an appropriate financial structure and suitable management arrangements in
place to continue in operational existence for a period of at least 12 months
from the date of approval of this Half Year Report. The Directors have noted
that the Company has a relatively large portion of the portfolio (liquid real
estate allocation) that is capable of being realised fairly quickly.
The Board is aware that the Company has a continuation vote at its 2024 Annual
General Meeting. At this time, the Board considers that the basic investment
proposition of the Company is sound.
Directors' Responsibilities
The Board of Directors confirms that, to the best of its knowledge:
(i) the condensed set of financial statements contained within the
Half Year Report has been prepared in accordance with FRS104 'Interim
Financial Reporting' and gives a true and fair view of the assets,
liabilities, financial position and net return of the Company as required by
the Disclosure Guidance and Transparency Rules ('DTR') 4.2.4R; and
(ii) the interim management report includes a fair review of the
information required by DTR 4.2.7R and 4.2.8R.
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 UK Accounting Standards have been
followed, subject to any material departures disclosed and explained in the
financial statements; and
• prepare the financial statements on the 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.
For and on behalf of the Board
John Scott
Chairman
27th November 2023
CONDENSED STATEMENT OF COMPREHENSIVE INCOME
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st August 2023 31st August 2022 28th February 2023
£'000 £'000 £'000
(Losses)/gains on investments held at fair value through
profit or loss (13,920) 28,896 16,763
Foreign currency (losses)/gains (105) 203 183
Investment income 5,517 5,443 10,853
Interest receivable and similar income 39 2 44
Total (loss)/return (8,469) 34,544 27,843
Management fee (981) (934) (2,231)
Other administrative expenses (344) (426) (687)
(Loss)/return before finance costs and taxation (9,794) 33,184 24,925
Finance costs - (1) (1)
(Loss)/return before taxation (9,794) 33,183 24,924
Taxation (749) (535) (1,094)
Net (loss)/return (10,543) 32,648 23,830
(Loss)/return per share (note 3) (4.81)p 15.01p 10.91p
CONDENSED STATEMENT OF CHANGES IN EQUITY
Share Retained
premium earnings Total
£'000 £'000 £'000
Six months ended 31st August 2023 (Unaudited)
At 28th February 2023 219,278 4,450 223,728
Repurchase of shares into Treasury - (1,096) (1,096)
Net loss for the period - (10,543) (10,543)
Dividends paid in the period (note 4) - (4,608) (4,608)
At 31st August 2023 219,278 (11,797) 207,481
Six months ended 31st August 2022 (Unaudited)
At 28th February 2022 217,123 (10,534) 206,589
Issue of ordinary shares 2,155 - 2,155
Net return for the period - 32,648 32,648
Dividends paid in the period (note 4) - (4,348) (4,348)
At 31st August 2022 219,278 17,766 237,044
Year ended 28th February 2023 (Audited)
At 28th February 2022 217,123 (10,534) 206,589
Issue of ordinary shares 2,155 - 2,155
Net return for the year - 23,830 23,830
Dividends paid in the year (note 4) - (8,846) (8,846)
At 28th February 2023 219,278 4,450 223,728
CONDENSED STATEMENT OF FINANCIAL POSITION
(Unaudited) (Unaudited) (Audited)
At 31st August At 31st August At 28th February
2023 2022 2023
£'000 £'000 £'000
Assets
Non current assets
Investments held at fair value through profit or loss 202,997 232,492 219,960
Current assets
Other receivables 1,060 459 990
Cash and cash equivalents 4,056 4,573 3,541
5,116 5,032 4,531
Liabilities
Current liabilities
Other payables (632) (480) (763)
Net current assets 4,484 4,552 3,768
Total assets less current liabilities 207,481 237,044 223,728
Net assets 207,481 237,044 223,728
Amounts attributable to shareholders
Share premium 219,278 219,278 219,278
Retained earnings (11,797) 17,766 4,450
Total shareholders' funds 207,481 237,044 223,728
Net asset value per share (note 5) 95.2p 108.0p 102.0p
CONDENSED STATEMENT OF CASH FLOWS
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st August 2023 31st August 2022 28th February 2023
£'000 £'000 £'000
Operating activities
Loss/(return) before taxation (9,794) 33,183 24,924
Deduct dividends received (5,465) (5,407) (10,770)
Deduct investment income - interest (52) (36) (83)
Deduct deposit and liquidity fund interest received (39) (2) (44)
Less interest expense - (1) (1)
Add indirect management fee 603 497 1,265
Add performance fee 7 - 128
Add losses/(deduct gains) on investments held at fair value
through profit or loss 13,920 (28,896) (16,763)
Decrease in prepayments and accrued income 16 25 6
Increase in other payables 8 90 255
Add exchange losses/(deduct exchange gains) on cash and
cash equivalents 13 (71) (6)
Taxation (755) (541) (1,101)
Net cash outflow from operating activities before interest
and taxation (1,538) (1,159) (2,190)
Dividends received 5,410 6,004 10,856
Investment income - interest 54 38 80
Deposit and liquidity fund interest received 39 2 44
Interest expense - 1 1
Purchases of investments held at fair value through profit or loss (7,622) (31,021) (21,148)
Sales of investments held at fair value through profit or loss 9,811 31,655 21,408
Net cash inflow from operating activities 6,154 5,520 9,051
Financing activities
Issue of ordinary shares - 2,155 2,155
Repurchase of shares into treasury (1,018) - -
Dividends paid (4,608) (4,348) (8,846)
Net cash outflow from financing activities (5,626) (2,193) (6,691)
Increase in cash and cash equivalents 528 3,327 2,360
Cash and cash equivalents at the start of the period/year 3,541 1,175 1,175
Exchange movements (13) 71 6
Cash and cash equivalents at the end of the period/year(1) 4,056 4,573 3,541
1 Cash and cash equivalents includes liquidity funds.
NOTES TO THE FINANCIAL STATEMENTS
For the six months ended 31st August 2023.
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 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 Policy.
The Company was incorporated on 22nd February 2019. It was admitted to the
premium listing category of the Official List of the Financial Conduct
Authority and to trading on the Main Market and had its first day of trading
on 24th September 2019.
The information contained within the condensed financial statements in this
half year report has not been audited or reviewed by the Company's auditor.
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.
2. Accounting policies
The Company's financial statements have been prepared in accordance with
International Financial Reporting Standards ('IFRS'), which comprise standards
and interpretations approved by the International Accounting Standards Board
('IASB'), the IFRS Interpretations Committee and interpretations approved by
the International Accounting Standards Committee ('IASC') that remain in
effect and the Companies (Guernsey) Law, 2008.
These financial statements have been prepared on a going concern basis in
accordance with IAS 1, applying the historical cost convention, except for the
measurement of financial assets including derivative financial instruments
designated as held at fair value through profit or loss ('FVTPL') that have
been measured at fair value.
All of the Company's operations are of a continuing nature.
The accounting policies applied to this condensed set of financial statements
are consistent with those applied in the financial statements for the year
ended 28th February 2023.
3. Loss/(return) per share
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st August 2023 31st August 2022 28th February 2023
£'000 £'000 £'000
Total (loss)/return (10,543) 32,648 23,830
Weighted average number of shares in issue during
the period/year 219,309,718 217,570,995 218,481,925
Total (loss)/return per share (4.81)p 15.01p 10.91p
4. Dividends paid
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st August 2023 31st August 2022 28th February 2023
£'000 £'000 £'000
2023/2024 First interim dividend of 1.05p
(2022/2023: 1.00p) per share 2,304 2,174 2,174
2023/2024 Second interim dividend of 1.05p
(2022/2023: 1.00p) per share 2,304 2,174 2,174
2022/2023 Third interim dividend of 1.00p - - 2,194
2022/2023 Fourth interim dividend of 1.05p - - 2,304
Total dividends paid in the period 4,608 4,348 8,846
A third interim dividend of 1.05p per share, amounting to £2,242,000 has been
declared payable on 29th November 2023 in respect of the year ending 29th
February 2024.
5. Net asset value per share
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st August 2023 31st August 2022 28th February 2023
Net assets (£'000) 207,481 237,044 223,728
Number of shares in issue 218,007,952 219,407,952 219,407,952
Net asset value per share 95.2p 108.0p 102.0p
JPMORGAN FUNDS LIMITED
28th November 2023
For further information:
Emma Lamb,
JPMorgan Funds Limited
0800 20 40 20 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 Half Year Report will shortly be submitted to the FCA's National
Storage Mechanism and will be available for inspection
at https://data.fca.org.uk/#/nsm/nationalstoragemechanism
(https://data.fca.org.uk/#/nsm/nationalstoragemechanism) . It will also
shortly be available on the Company's website at www.jpmrealassets.co.uk
(http://www.jpmrealassets.co.uk/) where up-to-date information on the
Company, including the NAV and share prices, factsheets and portfolio
information can also be found.
aru
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