JPMorgan Global Core JPM Glbl Core - JARU JPM Glbl Core - JARE - Half-Year Results 2021
16/11/2021 07:00
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RNS Number : 4484S JPMorgan Global Core Real Assets Ld 16 November 2021
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN GLOBAL CORE REAL ASSETS LIMITED
UNAUDITED HALF YEAR RESULTS FOR THE SIX MONTHS ENDED 31ST AUGUST 2021
Legal Entity Identifier: 549300D8JHZTH6GI8F97
Information disclosed in accordance with the DTR 4.1.3
CHAIRMAN'S STATEMENT
Introduction
I am pleased to present the interim report for JPMorgan Global Core Real
Assets Limited (the 'Company', or 'JARA') for the six months ended
31st August 2021.
Over the period economic activity and business confidence have increased,
largely on the back of the successful roll-out of Covid-19 vaccines - at
least in developed markets. The gradual return to something approaching normal
life has already delivered benefits to the sectors in which your Company
invests. The real estate sectors, in both the public and private markets, and
the transportation markets have all seen more activity, resulting in strong
utilisation levels. JARA's listed allocation supplemented its exposure to
private businesses by providing strong positive performance over the six
months.
The Company recorded a total return on net assets of +6.5% over the six months
ended 31st August 2021. The total return for shareholders was -2.8% over the
same period as a result of the premium to net asset value narrowing, moving
from 10.6% at the previous year end to 0.9% at 31st August 2021. The
Investment Managers' Report reviews the Company's performance and gives a
detailed commentary on the investment strategy and portfolio construction, and
their outlook for the underlying strategies.
Objectives and Features
The Company's objective is to provide shareholders with stable income and
capital appreciation from exposure to a globally diversified portfolio of core
real assets, being assets that offer reliable, highly forecastable, long term
cash flows. These are focused on unlisted assets held in private funds
investing in the global infrastructure, real estate and transportation
sectors, alongside a more liquid element of the portfolio investing in listed
real assets.
The Company aims to provide investors with a long-term NAV return of 7 to 9%
per annum, inclusive of a dividend yield (based on the initial issue price of
100p per share) of 4 to 6% per annum.
Capital Deployment
As I wrote in my Chairman's statement for the year ended 28th February 2021,
the Company was 90% invested at the start of the latest six month period.
There were a number of capital calls from the funds into which we invest over
the period, including $12 million into the Global Transport Strategy and a
smaller call into the Global Infrastructure Strategy (including a post period
Infrastructure investment of $0.8 million). A further $15.8 million of
capital has been called into Global Real Estate, primarily in the Asia-Pacific
markets. During the period, there was also a maiden commitment to JPMorgan's
US Real Estate Mezzanine Debt Strategy which aims to capture the attractive
returns currently available in that sector and will serve to boost the income
receivable by JARA.
After taking into account the share issuance in the period, the Company had
95% of shareholders' funds invested at 31st August 2021, with uncalled
commitments of $20.9 million.
Dividends
Over the review period the Company has declared and paid two quarterly
dividends, both for 1 penny per share. Based on the closing share price as at
31st August 2021, this represents an annualised yield of 4.4%.
Share Issuance and Capital Raising
In the six month review period the Company took advantage of investor demand
to issue an additional 8.6 million shares, raising some £7.8 million of
proceeds. This level of issuance reflects the Board's assessment of the
benefits that come from additional share issuance, the new shares being issued
at a premium to NAV to compensate existing shareholders for any possible
dilution of returns that can arise when new capital is waiting to be deployed.
After talking to existing shareholders, the Board and Manager maintain their
view that periodic issuance of new shares at a modest premium when client
demand and market opportunities arise is a sound way to grow JARA.
Outlook
Given the pandemic that we sailed into and which has had such a profound
effect on the world for the past 18 months, it is clear that the decision to
launch an investment fund in September 2019 with significant exposure to
sectors such as transportation and real estate has ensured that JARA has had a
baptism of fire. Not only were many of our target sectors severely affected by
what was to come, we also experienced significant delays in the deployment of
our funds, being forced to sit with cash at a time when interest rates were
effectively zero. The fact that our reference currency is sterling, which has
appreciated against almost every currency in which our underlying assets are
valued, has provided a further brake on our performance when reported in
sterling.
Fortunately, our Investment Managers held their nerve and JARA is now seeing
the benefits of their patience and expertise. I am very encouraged both by the
speed of the recovery we are seeing in so many of the sectors where our
shareholders' money has been deployed; and by the way our revenue account has
been growing, thus allowing us to make quarterly distributions in line with
what was offered at the time of our 2019 IPO. After what I have already
referred to as a baptism of fire, I believe that we are remarkably well placed
to profit from the next phase of the recovery in the world economy and that
our shareholders will continue to capture the benefits of the high quality,
internationally diversified portfolio of real assets in which we are invested.
John Scott
Chairman
16th November 2021
INVESTMENT MANAGERS' REPORT
Review of Markets
In the prior six months, many developed economies made sufficient progress on
vaccination levels to allow them to ease COVID-related restrictions
significantly - enabling greater mobility and for activity levels to pick
up. As a result of this, more economically sensitive parts of the market, such
as equities and real estate, rose strongly. The relaxation of pandemic-related
restrictions was achieved despite the highly contagious Delta variant
spreading across much of the world. Winter brings with it further uncertainty
in relation to COVID's transmissibility and if hospitalisations do increase
further, the economic recovery could be impeded though, in our view, not
derailed.
As a result of the reopening, economic data over the period was generally very
strong, especially in the US, which posted an annualised growth rate in excess
of 6% in both the first and second quarters of 2021. Although the Eurozone
economy contracted by 0.6% in the first quarter, it was able to grow strongly
in Q2 owing in no small part to an accelerated vaccination effort. Despite
supply side strain, indicators point to continued economic growth over the
remainder of the year.
The reopening of economies and the quick rebound in activity has met with some
production and transportation bottlenecks - constraining growth and fuelling
inflation in some countries. The US consumer price index increased over 5%
year on year and whether or not supply side issues can ease and whether
inflation will be with us for a while are the big questions for investors.
Whilst the Federal Reserve continues to see this inflation increase as
transitory, it has recently become slightly more hawkish, as have other
central banks, meaning quicker tapering and earlier rate rises are being
discussed. Importantly for investors, in an environment where inflation is
running above trend, gaining a positive real return is a challenge. As such,
assets that can increase their cash flows as a result of inflation or nominal
GDP growth - something real assets are typically well positioned to
do - should become a valuable quality within investors' portfolios.
The other significant driver of markets in the last six months has been
politics and regulation. Examples of what investors have had to deal with
recently include: new regulation in China; changing governments in Japan and
Germany; and the wide variety of policies in the name of greener, more
sustainable economies. Real assets are an asset class where regulation and/or
political interference can have an impact and this is something of which we
are mindful when we invest. Nevertheless, in our view, diversification across
many countries and regulatory regimes remains the best way of protecting a
portfolio from these issues and is a major focus of our portfolio
construction approach.
Portfolio Review
Portfolio Review and Positioning
The first six months of this financial year represent JARA's first two
quarters of being significantly invested. Over the period, the Company's
portfolio had a total return in GBP of +6.5%, inclusive of two 1 quarterly
dividends of 1 penny per share. The annualised yield, based on the NAV as at
31st August 2021, was 4.4% and this is within the Company's 4 to 6% target
range. This strong positive NAV return aligns with JARA being a more fully
invested portfolio which is well positioned to generate positive real returns
over the long term.
The Company started the year with an investment level of 90% and finished the
period at 95%. During the six months the Company invested $27.8 million of
additional capital primarily into Transportation and Asia-Pacific Real Estate
markets with smaller investments in the US Real Estate and Infrastructure
markets. JARA's initial commitment to Real Estate Mezzanine Debt has also been
made - an attractive sub-sector of real estate which offers a strong yield
from more senior securities. This commitment, which has yet to be funded, will
represent just over 5% of JARA and the allocation will be funded from cash and
the Company's existing real estate allocation.
JARA Sector Exposures
JARA has now achieved its target of being a globally diversified portfolio.
The Company currently has 51% of its portfolio in North America, 30% in
Asia-Pacific, 16% in Europe and 3% in the UK. With this portfolio comes
currency exposure, and whilst the strength of sterling has been a negative
influence on returns since inception we would highlight that the majority of
return in the past six months was driven by strong local currency asset
return, with currency as a slight tailwind. Over the six months JARA's real
estate, infrastructure and transportation allocations were positive
contributors to the portfolio.
JARA entered the year with a slight overweight to real estate - something we
were comfortable with due to real estate being a slightly more economically
sensitive asset class and therefore one we feel should benefit over the next
12-18 months from a favourable economic environment. This positioning had
positive outcomes as we saw real estate provide the largest contribution to
the portfolio - with the Company's industrial and residential exposure
leading the way. Across the portfolio we continue to have a pipeline of over
11 million square feet in industrial assets, helping to build on this high
conviction area. Further investments into Asia deepen the exposure in markets
where we expect strong economic and demographic growth during the next cycle,
as well as further diversifying the currency exposure.
The infrastructure and transportation markets continued their consistent run,
with a +3.6% and a +2.5% performance, respectively. Similar to real estate,
the transportation market is benefiting from the increase in economic activity
with measures such as port call data and utilisation levels looking strong. As
a core investor in the asset class the Company is focused on access to this
market through longer term contracts, which are less affected by spot rates,
but the portfolio takes advantage of attractive economics when renewing lease
rates or acquiring new vessels. This addition of new vessels at higher rates
serves to benefit the overall portfolio and we have targeted new capital
towards the containership market and new build assets in the Liquid Natural
Gas sector. In Infrastructure the focus remains on smaller, bolt on
acquisitions and these continue to be made in the utilities and renewable
energy areas.
The portfolio is focused on achieving positive environmental, social and
governance benefits across its real assets - something we believe to be
vitally important given the assets are often fundamental to the societies in
which they operate. With this in mind, we are reviewing the Company's
emissions footprint with a view to providing investors with a full
understanding of the portfolio, as well as how we will improve this over time.
In this vein we would like to highlight that across the Company's real estate
portfolio we are targeting a reduction of energy and emissions by 25% over
ten years in alignment with the Paris Accord and reduce water and waste by
15% over the decade. In the past year these targets were achieved and we were
also able to avoid 4 million metric tonnes of emissions as a result of the
renewable energy generated.
Other Portfolio metrics/exposures
Please refer to the Company's Half Year Report & Financial Statements
('Half Year Report') for various graphics highlighting other portfolio
metrics, exposures and key portfolio themes.
J.P.Morgan Asset Management's Alternative Solutions Group
Investment
Managers
16th November 2021
HALF YEAR 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 eight broad categories: investment and strategy; valuation of
investments; counterparty; operational and cybercrime; geopolitical events and
regulatory change; over reliance on the Manager; climate change; and global
pandemics. Information on each of these areas is given in the Company's
Strategic Report within the Annual Report and Financial Statements for the
period ended 28th February 2021.
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. They have not identified
any material uncertainties to the Company's ability to continue to do so over
a period of at least 12 months from the date of approval of this Half Year
Report. This conclusion also takes into account the Board's assessment of the
risks arising from the COVID-19 pandemic on the current and future operations
of the Company.
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 UK Listing Authority Disclosure and Transparency Rules ('DTR') 4.2.4R; and
(ii) the half year 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 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 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
16th November 2021
STATEMENT OF COMPREHENSIVE INCOME
FOR THE SIX MONTHS ENDED 31ST AUGUST 2021
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Period ended
31st August 2021 31st August 2020 28th February 2021
£'000 £'000 £'000
Gains/(losses) on investments held at fair value through profit
or loss 7,315 (5,842) (9,297)
Net foreign currency gains/(losses) 1,093 (5,197) (5,290)
Investment income 4,653 1,268 3,049
Interest receivable and similar income 8 495 565
Total return/(loss) 13,069 (9,276) (10,973)
Management fee (337) (383) (703)
Other administrative expenses (654) (300) (642)
Return/(loss) before finance costs and taxation 12,078 (9,959) (12,318)
Taxation (128) (126) (412)
Net return/(loss) 11,950 (10,085) (12,730)
Return/(loss) per share (note 3) 5.67p (4.94)p (6.16)p
The Company does not have any income or expense that is not included in the
net return/(loss) for the period/year. Accordingly the 'Net return/(loss) for
the period/year, is also the 'Total comprehensive income/(expense)' for the
period/year, as defined in IAS1 (revised).
All Items in the above statement derive from continuing operations. No
operations were acquired or discontinued in the period/year.
STATEMENT OF CHANGES IN EQUITY
FOR THE SIX MONTHS ENDED 31ST AUGUST 2021
Share Retained
premium earnings Total
£'000 £'000 £'000
Six months ended 31st August 2021 (Unaudited)
At 28th February 2021 209,136 (25,619) 183,517
Issue of ordinary shares 7,987 - 7,987
Net return for the period - 11,950 11,950
Dividends paid in the period (note 4) - (4,260) (4,260)
At 31st August 2021 217,123 (17,929) 199,194
Six months ended 31st August 2020 (Unaudited)
At 29th February 2020 200,574 (6,159) 194,415
Issue of ordinary shares 8,679 - 8,679
Share issue costs (117) - (117)
Net loss for the period - (10,085) (10,085)
Dividends paid in the period (note 4) - (3,076) (3,076)
At 31st August 2020 209,136 (19,320) 189,816
Year ended 28th February 2021 (Audited)
At 29th February 2020 200,574 (6,159) 194,415
Issue of ordinary shares 8,679 - 8,679
Share issue costs (117) - (117)
Net loss - (12,730) (12,730)
Dividends paid in the year (note 4) - (6,730) (6,730)
At 28th February 2021 209,136 (25,619) 183,517
STATEMENT OF FINANCIAL POSITION
AT 31ST AUGUST 2021
(Unaudited) (Unaudited) (Audited)
31st August 2021 31st August 2020 28th February 2021
£'000 £'000 £'000
Assets
Non current assets
Investments held at fair value through profit or loss 187,983 74,297 163,450
Current assets
Other receivables 485 546 814
Cash and cash equivalents 11,185 115,285 19,867
11,670 115,831 20,681
Liabilities
Current liabilities
Other payables (459) (312) (614)
Net current assets 11,211 115,519 20,067
Total assets less current liabilities 199,194 189,816 183,517
Net assets 199,194 189,816 183,517
Amounts attributable to shareholders
Share premium 217,123 209,136 209,136
Retained earnings (17,929) (19,320) (25,619)
Total shareholders' funds 199,194 189,816 183,517
Net asset value per share (note 5) 91.6p 90.9p 87.9p
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED 31ST AUGUST 2021
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Year ended
31st August 2021 31st August 2020 28th February 2021
£'000 £'000 £'000
Operating activities
Return/(loss) before finance costs and taxation 12,078 (9,959) (12,318)
Deduct dividends received (4,583) (1,222) (2,972)
Deduct investment income - interest (70) (46) (77)
Deduct deposit and liquidity fund interest received (8) (495) (565)
(Less gains)/add losses on investments held at fair value
through profit or loss (7,315) 5,842 9,297
Decrease/(increase) in prepayments and accrued income 15 16 (16)
Increase/(decrease) in other payables 34 (173) (93)
Add exchange (losses)/gains on cash and cash equivalents (166) 5,273 3,981
Taxation (240) (129) (414)
Net cash outflow from operating activities before interest (255) (893) (3,177)
Dividends received 4,952 1,195 2,318
Investment income - interest 103 69 124
Deposit and liquidity fund interest received 8 667 737
Purchases of investments held at fair value through profit or loss (79,396) (22,223) (128,334)
Sales of investments held at fair value through profit or loss 62,013 9,544 23,635
Net cash outflow from operating activities (12,575) (11,641) (104,697)
Financing activities
Issue of ordinary shares 7,987 8,679 8,679
Share issue costs - (117) (117)
Dividends paid (4,260) (3,076) (6,730)
Net cash inflow from financing activities 3,727 5,486 1,832
Decrease in cash and cash equivalents (8,848) (6,115) (102,865)
Cash and cash equivalents at the start of the period/year 19,867 126,713 126,713
Exchange movements 166 (5,273) (3,981)
Cash and cash equivalents at the end of the period/year(1) 11,185 115,285 19,867
(1) Presented under Cash and cash equivalents in Statement of Financial
Position.
NOTES TO THE FINANCIAL STATEMENTS
FOR THE SIX MONTHS ENDED 31ST AUGUST 2021
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 1st Floor, Les Echelons Court, Les Echelons, South Esplanade, St Peter
Port, Guernsey GY1 1AR.
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. It was admitted to the
premium listing category of the Official List of the FCA and to trading on the
Main Market and had its first day of trading on 24th September 2019.
The information contained within the financial statements in this half year
report has not been audited or reviewed by the Company's auditors.
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 2021.
3. Return/(loss) per share
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Period ended
31st August 2021 31st August 2020 28th February 2021
£'000 £'000 £'000
Total return/(loss) 11,950 (10,085) (12,730)
Weighted average number of shares in issue during the
period/year 211,009,854 204,311,144 206,541,068
Total return/(loss) per share 5.67p (4.94)p (6.16)p
4. Dividends paid
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Period ended
31st August 2021 31st August 2020 28th February 2021
£'000 £'000 £'000
2021/2022 First interim dividend of 1.00p
(2020/2021: 0.75p) per share 2,088 1,510 1,510
2021/2022 Second interim dividend of 1.00p
(2020/2021: 0.75p) per share 2,172 1,566 1,566
2020/2021 Third interim dividend of 0.75p - - 1,566
2020/2021 Fourth interim dividend of 1.00p - - 2,088
Total dividends paid in the period 4,260 3,076 6,730
A third interim dividend of 1.00p per share, amounting to £2,174,000 has been
declared payable on 29th November 2021 in respect of the year ending 28th
February 2022.
5. Net asset value per share
(Unaudited) (Unaudited) (Audited)
Six months ended Six months ended Period ended
31st August 2021 31st August 2020 28th February 2021
£'000 £'000 £'000
Net assets (£'000) 199,194 189,816 183,517
Number of shares in issue 217,407,952 208,807,952 208,807,952
Net asset value per share 91.6p 90.9p 87.9p
JPMORGAN FUNDS LIMITED
16th November 2021
For further information, please contact:
Alison Vincent
For and on behalf of
JPMorgan Funds Limited
020 7742 4000
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)
The annual report will 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 daily NAV and share prices, factsheets
and portfolio information can also be found.
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