TIDMJARA TIDMJARU TIDMJARE
RNS Number : 4714E
JPMorgan Global Core Real Assets Ld
30 June 2023
LONDON STOCK EXCHANGE ANNOUNCEMENT
JPMORGAN GLOBAL CORE REAL ASSETS LIMITED
(the "Company")
FINAL RESULTS FOR THE YEARED 28(TH) FEBRUARY 2023
CHAIRMAN'S STATEMENT
I am pleased to present a robust set of results for the Company
for the year ended 28th February 2023 (the 'Period') against a
challenging and volatile macroeconomic environment.
Performance
The Company's strategy is continuing to generate attractive
returns for investors, delivering a share price total return of
+7.0% for the Period, but it must be recognised that a significant
part of this return derives from the strengthening of the US dollar
against our reference currency, sterling. The Company's NAV
performance was +11.6%, the difference between this number and the
share price return reflecting the higher discount prevailing at the
end of the Period as compared with that at the start of the year.
During the Period the price at which the Company's shares traded
relative to its underlying NAV fluctuated from a discount at the
start of -10.8%, to a premium in the middle (which allowed for
incremental share issuance in August 2022), with the Company ending
its financial year at a discount of -14.9%. The discount has since
narrowed and, at the time of writing, stands at -9.5% to NAV. The
share price has been relatively stable post year end, through what
has been a volatile time for markets overall.
It is worth noting that over the Period significant changes were
seen in global financial markets, with the end of an extended
period of very low interest rates. This has had a major impact on
asset prices, especially in the public markets. Higher rates have
weighed on real assets, although not to the same extent seen in the
public markets. Within our portfolio, an appropriate debt structure
and some inflation linkage for cashflows have been important in
offsetting the impact of higher rates, which JARA has to date been
able to manage well.
Measured in local currency terms, the Listed Real Assets
investment registered a decline in its NAV, but the other
strategies in which the Company was invested posted positive
returns over the Period in their local currencies. Given the
testing macroeconomic and financial conditions during the year, the
Board regards this as a respectable outcome, one which supports
both the diversification and in aggregate defensive characteristics
of the portfolio.
Most of the Company's assets are denominated in U.S. dollars and
a variety of other currencies, so returns were significantly
assisted by sterling's general weakness over the Period. One of
JARA's attributes is that it offers shareholders access to real
assets globally and with this comes a global currency exposure. It
should be noted that, subsequent to the Period end, sterling has
strengthened and acted as a drag on the NAV. Later in this
Statement I describe the Board's recent actions to reduce the
Company's exposure to foreign exchange volatility.
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 strategies which comprise JARA's portfolio.
Portfolio
As described in more detail in the Investment Manager's Report,
the Company remains well diversified across a range of different
sectors throughout the real asset spectrum. Relatively new
additions to the portfolio mix, such as real estate debt, have
offered useful stability and a growing income stream, with
potential for further increases due to its exposure to floating
rates. An important aspect of JARA is its diversification, which
aims to ensure no over-exposure to any one sector, asset or
counterparty. JARA benefits from the active management at both the
portfolio and underlying strategy level to drive returns and manage
risk for investors. One example of this active allocation saw a
reduction in office exposure by 4% and an increase in energy
logistics.
Since the Period end, the Investment Manager has started the
process of restoring the allocations in infrastructure and
transport to their target range after strong performance in the
other portfolio allocations. This rebalancing should help increase
the level of portfolio income and provide further stability to the
NAV given the long-term predicable nature of the cashflows of the
underlying transport and infrastructure assets.
Share Issuance
The Company grew its share capital by circa 1% through the issue
of 2,000,000 new shares. As at 28th February 2023, the Company had
219,407,952 shares in issue and net assets of GBP223.7 million.
These proceeds were invested in line with the Company's investment
policies across the underlying investment strategies.
Share issuance is always executed at a premium to the prevailing
cum-income NAV per share and so is accretive to existing
shareholders. If conditions are appropriate, the Company will
continue to issue new shares which, as well as assisting with
premium management, will also enhance liquidity and continue to
underpin the Company as an attractive investment. The Board also
assesses the need for buybacks when the shares are trading at a
discount to NAV and will aim to balance factors such as changes on
the shareholder register and whether buybacks would be more
accretive to NAV when compared to any foregone opportunity for
potential investment opportunities.
Revenue and Dividends
The Board declared total dividends of 4.05 pence per share in
respect of the financial year under review, comprising three
quarterly dividends of 1 penny per share and a fourth quarterly
dividend of 1.05 pence per share, providing an uplift on the prior
year (2022: 4.00 pence per share). This dividend has been delivered
notwithstanding the macroeconomic challenges of recent years,
including inflation, Covid-19, energy shortages and the impact of
the war consequent upon the Russian invasion of the Ukraine, all of
which have affected valuations and revenues across all sectors of
real assets.
The first interim dividend for the financial year ending 29th
February 2024, being 1.05 pence per share, was paid to shareholders
on 31st May 2023; the Directors intend for there to be three
further interim dividends and - following the pattern established
in the 2022/23 financial year - if the Directors believe that an
increase in distributions is warranted this will be paid as part of
the last dividend for the financial year.
Your Board believes that, over the longer term, the success of
the underlying businesses and strategies into which JARA invests
will facilitate a steadily growing level of dividends.
Currency Exposure
Since JARA's IPO in September 2019 there has been no currency
hedging employed across the portfolio (although the ability to do
so has always been available) and it has therefore been primarily
exposed to currencies other than the Company's base currency of GBP
.
Currency volatility since IPO has been significantly above
long-run levels, and this has resulted in additional volatility in
the NAV. Following a review of the approach to currency exposure,
and taking into account recent investor feedback, the Board has
resolved to introduce a currency hedging strategy with the aim of
reducing, but not eliminating, the currency-related volatility in
returns .
The initial step in this strategy will be the reallocation of
the existing unhedged investment in the Infrastructure allocation
to the GBP hedged investment and the Board will continue to monitor
its currency hedging strategy.
The Board and Corporate Governance
In accordance with the Company's Articles of Incorporation 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 Company's full annual report.
The Board recognises the importance of having a diverse range of
views and experiences, along with broad professional expertise, to
support decision-making. The current Board composition - with one
female director on a board of four and no director from a minority
ethnic background - means that the Board composition does not
currently comply with the recommendations made by the FTSE Women
Leaders Review (the successor of the Hampton-Alexander Review and
the Davies Review) and Parker Review as well as the Financial
Conduct Authority's Listing Rule. The Board's succession planning
is considered and discussed by the Nomination Committee, which will
take into account these recommendations for future Board
appointments.
Environmental, Social and Governance ('ESG')
The Investment Manager continues to enhance its ESG approach
which ensures it best captures the fundamental insights of the
investment team. The Board continues to engage with the Investment
Manager on ESG considerations and how the investment team
integrates ESG into investment decisions.
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 Company's full annual report.
Keeping Investors 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.
Annual General Meeting
The Company's fourth Annual General Meeting ('AGM') will be held
on Wednesday, 2nd August 2023 at 12.30p.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.
If shareholders are unable to attend the AGM, they are welcome
to raise any questions in advance of the meeting with the Company
Secretary at the Company's registered address, or by writing to the
Company Secretary at the address provided in the Company's full
annual report, or via email to invtrusts.cosec@jpmorgan.com.
Outlook
The current environment is both at the political and macro level
one of the most uncertain in the last decade, if not since the
global financial crisis of 2008/09. The public capital markets have
adjusted rapidly to the increase in central bank rates and monetary
tightening; the private markets have begun this process, but the
market has been and will continue to go through a process of price
discovery as views on the trajectory of inflation and rate
movements become clearer and therefore allow both buyers and
sellers to focus on what is an acceptable range of pricing.
The resetting of rates has also led many investors to revisit
levels of leverage and portfolio allocations, leading to a large
dispersion of sector and asset level returns. In many ways the
Company was designed with such an environment in mind, given that
its exposure to multiple asset classes and interest rate
environments ensures that no one external change either at the
monetary, economic or political level should threaten the viability
of the Company. Overall, the Board believes that the Company is
well placed to continue navigating the evolving core real asset
landscape, given the experience and scale of the underlying
strategies and overall size and reach of the Alternatives Platform.
The Board is confident that the portfolio will, in aggregate,
benefit from the inflation which has become a feature in all
Western economies, and which seems likely to be with us for some
time. On the basis of this confidence, the Board envisages
providing shareholders with a progressive dividend profile, paid
quarterly, but as in the Period under review, with increments paid
as part of the fourth distribution.
There remains a significant appetite for new capital, not least
in the area of decarbonising our energy cycle, notably the
substitution of wind, solar and nuclear electricity for fossil
fuelled generation. An advantage enjoyed by your Company is that,
even as the current environment sees capital raising in the
investment trust market all but closed, the underlying strategies
in which the Company is invested, given their perpetual life and
core nature, are able to recycle capital and change their
allocations to adapt to this shift. Global, secular trends such as
the drive to net zero and increasing digitisation of industry and
consumer experience, will be long term asset growth drivers,
fundamental to shaping the economies of tomorrow. JARA, through its
underlying portfolios, is well placed to harness these
opportunities.
John Scott
Chairman
29th June 2023
INVESTMENT MANAGER'S REPORT
Portfolio Review
During the financial year, the Company continued to implement
its multi-alternatives allocation strategy across global real
estate, infrastructure and transportation markets, providing access
to many investment opportunities that are otherwise difficult for
UK retail investors to access. JARA's low UK exposure means it is
well-positioned to complement UK investors' allocations to domestic
real assets. (See graphic in the Company's full annual report
showing the portfolio's weighting to each sector as at end February
2023.)
A central tenet of JARA's investment philosophy is to provide
shareholders with a diversified real asset portfolio allocated not
only across asset classes, but also across end user counterparties
and regions. This flexibility proved crucial in the past year, as
inflation, rising interest rates and geopolitical events had a
significant impact on financial markets, and some real assets were
also challenged. At the year-end, JARA's allocation remained truly
global and very diversified.
This diversification allowed the Company to weather the year's
market volatility and deliver an NAV total return of +11.6% (in GBP
terms), while the local currency performance was +3.9%. The
difference between the GBP return and the local currency return was
caused by the weakness of sterling, which was accretive to the
Company's GBP NAV. This was the case because, as always, the
Company's portfolio is unhedged and therefore foreign exchange risk
is incurred when allocating to overseas markets. This can impact
performance in GBP terms both positively, as in the past year, and
negatively.
The table below shows the contributors to JARA's performance
calculated using each strategy's investment performance and its
average weighting within the portfolio throughout the year.
U.S. Real Estate +0.5%
Asia-Pacific Real Estate +1.1%
Global Infrastructure +1.1%
Global Transportation +2.2%
U.S. RE Mezzanine Debt +0.4%
Listed Real Assets -1.4%
Total Local Return 3.9%
Currency Impact 8.0%
Company Level Costs -0.4%
Total GBP Return 11.6%
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. Strategy level returns
are net of associated management fees. Company level costs includes
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.
Interest rates rose rapidly and significantly from their
historic lows across most developed markets in the year just past,
making the extent, cost and nature of leverage across private real
asset markets a clear focus for investors, including JARA. At the
year-end, JARA had no company level leverage. However, on a
look-through basis, JARA's underlying vehicles do utilise leverage,
primarily at an asset level. The weighted average loan-to-value for
JARA's private asset exposure was 36.6% at the end of the reporting
period. Importantly, over 70% of this debt is fixed rate, which
provided the portfolio with significant protection from the year's
rates hikes.
As is to be expected in the current market environment, higher
interest rates have lifted discount rates. The weighted average
discount rate of the portfolio's private assets was 7.9% at year
end, up from 7.3% at the end of the previous year. This increase in
discount rates over the year has, to some extent, been offset by
increasing allocations to lower risk sectors such as liquid natural
gas and utilities, whose discount rates are, on average, relatively
lower due to their risk profile.
Portfolio Movement
As shown in the table in the Company's full annual report, at
the year end, JARA was fully invested across a range of different
sectors throughout the real asset universe. This positioning aligns
with both our strategic asset allocation and also areas of
conviction in the medium term.
Review of underlying strategies
A further detailed review of the individual underlying
strategies can be found below.
Global Private Real Estate
The Company's investments in global private real estate fall
into several categories:
-- High quality real estate equity, across the US and
Asia-Pacific regions. The focus is on core property sectors -
logistics, warehouses, residential, office and retail - in major
growth markets and in the most dynamic gateway cities, which are
important hubs for economic growth. These core real assets are low
risk investments which have reliable, highly predictable, long-term
cash flows;
-- 'Extended core' real estate equity. The strategy seeks assets
with exposure to structural shifts in the way we shop, work and
live. This includes 'extended core' sectors, for example truck
terminals, outdoor storage, and other facilities which serve new,
high growth industries such as healthcare and biotech companies.
These assets tend to cluster in parts of the market overlooked by
other property investors; and
-- Core real estate mezzanine debt in the US. This is an
income-producing portfolio of loans backed by high quality,
moderately leveraged core real estate assets. These investments
were new to the portfolio over the past year, and serve as both an
income diversifier, and as a dampener on volatility, as mezzanine
real estate debt is less sensitive to macroeconomic fluctuations
than real estate equity. In addition, by being more senior in the
debtors' capital structure than equity financing, this allocation
is less exposed to changes in real estate values.
The financial year under review was a tale of two halves within
the real estate sector. The year began on a positive note,
supported by extraordinary demand fuelled by a tight job market,
upbeat consumers and relative supply constraints. However, this
very strong early year performance cooled, and in some cases,
reversed, in the second half as investors became increasing
concerned about the pace of interest rate increases and their
inevitable adverse impact on the sector.
The Company's overall allocation to real estate has been broadly
stable over the review period.
During much of the first two quarters, JPMorgan's real asset
platform (explained in further detail in the Company's full annual
report) utilised the favourable real estate environment to evolve
its exposure, focusing on sectors, geographies and assets in which
we have the highest long-term conviction. For example, we increased
our exposure to Industrial Logistics by 1%, via investments in both
infill locations (assets near urban areas) and assets across the
Asia-Pacific market.
In early 2022, the global energy supply chain was upended by
Russia's invasion of Ukraine. This caused a major shift in how
countries, particularly in Europe, source their energy and think
about their future energy security. These major ructions benefitted
assets involved in the transportation of oil and gas around the
globe (referred to as Energy Logistics), which saw a surge in
demand. In response, we increased exposure to Energy Logistics by
2%.
The other significant change to the Company's real estate
positioning was a GBP14.4 million allocation to real estate
mezzanine debt, for reasons discussed above. This investment, which
represented 7% of the Company's real estate holdings at year end,
was made at the end of February 2022, and unitised on 1st April
2022.
In terms of divestments, the underlying strategy sold more than
$4 billion of retail and office assets that fell short of its
long-term growth objectives. For example, the disposal of some US
office investments was motivated by what was perceived as a
structural decline in demand for office space, as this market
adapts to more flexible working patterns.
As the year progressed, the twin drags of higher borrowing costs
and reduced liquidity adversely impacted both real estate
transaction activity and valuations. However, these effects were
not felt equally across all real estate markets, and as such,
JARA's global exposure and diversification across both real estate
equity and debt provided significant stability compared with
standalone sector and country-specific allocations. This can be
seen in the returns; JARA's US real estate exposure contributed
0.5% to the Company's total return over the year, while our
Asia-Pacific exposure added 1.1% and real estate debt contributed a
further 0.4%.
US real estate saw the greatest reversal over the course of the
year. Sectors that have seen the greatest appreciation in the last
few years - namely industrial and residential - gave back most of
the gains realised in H122. While these sectors generally continued
to see growth in rents, some moderation in the rate of rental
increases saw cap rates expand, driving valuations lower.
Asia-Pacific (APAC) real estate outperformed, remaining
consistently positive throughout the year. This sector did not
experience the same appreciation in 2021 and early 2022 as the US,
and so escaped the same degree of subsequent decline. This relative
stability was driven in part by the diversity of the region, where
economies are in varying stages of their economic cycles and
interest rate tightening journeys. There are also specific trends
in the APAC region which helped create differentiated performance
relative to other regions. For example, while the US office sector
has been one of the most operationally challenged, due to the
widespread adoption of flexible working, this has not been the case
in much of the APAC region, where flexible working has proved less
popular amongst workers and employers. This has underpinned the
APAC office market, especially in business hubs like Singapore.
The allocation to real estate debt, initiated just before the
beginning of the financial year, was also a consistent, but more
modest, performer. The interest rate structure of the debt within
the strategy's portfolio of real estate loans is primarily floating
rate, which generated increasing income as rates rose over the year
- the annualised yield of this allocation is now in excess of
8%.
At end-February 2023, the real estate allocation, on a look
through basis, held 299 assets and loans globally, equating to $49
billion in value (including leverage). The average leverage
(loan-to-value) across the real estate portfolio was 25%.
Global Private Infrastructure & Transportation
JARA invests in core and core+ infrastructure and transportation
assets. Within Infrastructure, the Company has exposure to a global
portfolio of +20 operating company platforms, each benefiting from
dedicated management, and are active across a diverse range of
infrastructure sectors such as power generation, regulated and
unregulated utilities and fixed transportation. JARA's
infrastructure allocation therefore represents a conglomerate of
separately managed and incentivised businesses operating to
maximise efficiency and grow within their respective market
places.
These investments come with specialised management teams and a
unique avenue of capital deployment due to the ability to add
smaller assets over time via acquisitions, developments and build
outs. This approach can provide the means for long term value
creation. While there were some larger transactions in the past
financial year, over the last ten years, investment through this
platform investment approach has accounted for approximately half
of all capital deployed. We continue to see significant
opportunities to employ this form of investment, especially in the
utility and renewables spaces. These industries are currently
fragmented, and thus ripe for consolidation, and there will be an
ongoing need for investment as the global transition to renewable
energy gathers momentum.
Over the past year, overall exposure to infrastructure was
stable but the Company's infrastructure allocation has shifted away
from 'GDP-sensitive' assets such as airports and seaports, towards
contracted power provision and utilities. In our view, these
sectors exhibit strong cash-flow generation, with lower sensitivity
to fluctuations in demand and macroeconomic developments, which
leaves them well-positioned to cope with slowing growth. In
addition, these sectors will remain supported by broader structural
trends - primarily the push towards net zero carbon emissions.
JARA's private infrastructure allocation had a strong year,
contributing 1.1% to the Company's total return. In this part of
the portfolio, a significant majority of the return is generated by
income, with income returns typically within the 6%-9% range. This
performance illustrates the resilience of infrastructure markets,
and the sector's ongoing popularity amongst investors seeking
refuge from declines in conventional equity and bond markets.
Power generation was one area of outperformance, as this
industry has benefited from significantly higher energy prices.
Whilst JARA's exposure is primarily focused on fixed long-term
energy supply contracts, many assets do retain some merchant (spot
market) exposure - typically in the region of 20%-30% - and these
served to enhance returns over the past year as spot prices rose.
In addition, several of the underlying strategy's fixed
transportation assets, such as ports and airports, which comprise
part of our infrastructure portfolio, also performed strongly,
thanks to post-COVID rebounds, which had been delayed in some cases
by congestion and operational challenges such as shortages of
trained staff. Japan's decision to re-open its borders to foreign
tourists last October, which was closely followed by China's
surprise decision to lift all pandemic restrictions, also boosted
the performance of these assets.
At year end, the underlying strategy owned a total of 141
infrastructure assets (or 931, if look-through assets are
considered), equating to $62 billion in asset value (including
leverage)). The average loan-to-value ratio of these assets was
47%.
The strategy within the transportation sector 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. It is preferred, on average, to
deal with investment grade counterparties, and these assets are
leased to some of the largest corporates in the world.
JARA's exposure to transportation assets rose marginally over
the past year and this sector contributed +2.1% to the Company's
total return over the period. As is the case with infrastructure
investments, most of the return on the Company's transport
allocation is income orientated. Performance from our transport
allocation was in line with expectations, and the strategy
collected all lease payments on time.
Although JARA's exposure in Energy Logistics real assets
benefited from changes to the energy sector sparked by Russia's
invasion of Ukraine, as mentioned above, the Company's largest
exposure to recent developments in the energy market is via its
investments in liquid natural gas (LNG) carriers. Demand for these
vessels has surged as gas pipelines have become less reliable, and
we believe that the carriers to which JARA is exposed are
particularly competitive and attractive, as they are new and highly
fuel efficient.
Towards the end of the year, the strategy added exposure to
several new transportation sub-sectors, including electric vehicle
(EV) charging points and railcar leasing. Demand for EV charging
points is certain to increase as these vehicles become more
popular. Railcar leasing is an integral part of the North American
supply chain, currently representing c. 26% of annual US freight
ton miles. This share is likely to rise over time as moving freight
by rail rather than road significantly reduces greenhouse gas
emissions. Demand for existing railcar inventory is therefore
likely to strengthen, and there is scope for the sector to grow
substantially as efforts to achieve 'net zero' carbon emissions
intensify.
Liquid Real Assets
JARA's exposure to liquid real assets comprises listed
investments across real estate, infrastructure and transportation
securities. The Company's listed real asset allocation is made up
of two distinct strategies: US all-tranche REITs, in which
investments are diversified into debt securities; and a broader
allocation across a variety of other listed real assets, including
sectors such as data centres and medical real estate. We are
currently equally weighted between these two strategies. Our
allocations to liquid real assets bring dual benefits. Their
liquidity provides us with greater flexibility within our asset
allocation process, and they are also an additional diversifier in
terms of both returns and sectoral exposure. Overall exposure to
liquid real assets declined over the year.
The past year was a volatile period for public markets and, as a
result, our allocation to liquid real assets was the only area
which detracted from returns. Our investments in liquid assets
declined by 1.4% over the period. However, historically, such
sell-offs in public markets are typically followed by rebounds, and
these rebounds often coincide with sell-offs in private markets,
which tend to lag developments in public markets. This lack of
correlation between the returns across public and private markets
helps smooth performance across the portfolio over time, and we
expect a similar dynamic to play out in the current market
environment. Indeed, public markets began to rebound in the months
since the Company's year-end.
Real Asset Market Outlook
Inflation is expected to remain elevated throughout the course
of 2023, with labour shortages and pricing pressures likely to
continue. This suggests that the current high interest rate
environment will remain in place throughout 2023. The impact these
high rates will have on real assets, as well as other financial
markets, will thus remain a major focus for investors, and
volatility will stay high across asset classes. Other macroeconomic
drivers such as China's faltering recovery, combined with simmering
geo-political tensions, may add further uncertainty to the
prevailing climate. However, on the positive side, core real assets
provide essential economic services, and are thus largely immune to
adverse short-term macroeconomic developments.
The impact of higher rates on real asset markets will be
dependent on several factors, including the timing of refinancing,
the level of fixed vs. floating debt and assumptions regarding the
trajectory of interest rates and the equity cost of capital over
the long-term. Possibly most importantly, performance will hinge on
the extent of repricing of both debt and equity required to reflect
the new, higher rate environment. Investors who based valuations on
consistent long-term methodologies - typically inherent across most
core real asset markets - will be best placed to cope with current
tight monetary conditions.
Global Real Estate Outlook: Divergence across markets calls for
a diversified approach
We expect to see divergence across real estate markets by
sectors, regions and security types over coming months, although by
the end of 2023, asset valuations should stabilise, as the outlook
for inflation and interest rates becomes clearer. In this climate,
diversified portfolios should prove most resilient, so adopting a
globally diversified approach remains as important as ever.
In the US real estate market, we expect the risk of recession to
linger, while growth in rents will slow further and transaction
volumes will stay low. The availability of debt financing is likely
to remain limited and will be further constrained as US regional
banks reassess their lending practices in the wake of recent
turmoil in the sector. As mentioned above, office real estate has
been under pressure due to the enduring popularity of flexible
working patterns. Going forward, tenants are likely to be more
selective in the office space they rent. This can already be seen
in the net absorption levels - the net newly occupied space minus
the newly vacant space (see graph in the Company's full annual
report). As shown in the graph in the Company's full annual report,
newer assets, are continuing to see demand a premium whilst older,
lower quality assets are struggling.
In the APAC real estate markets, performance patterns have
differed markedly from other regions, for reasons discussed above,
and we expect the APAC region to maintain its comparatively steady
course, due to the lack of correlation in economies across the
region and the nuances of local market dynamics. Real estate across
the region will be the main beneficiary of China's reopening. These
factors all support the case for ongoing exposure to the APAC
region.
On the positive side, commercial vacancy rates are still
comparatively low, and despite the recent slowdown, rent growth is
still trending above its long-term average, so real estate
fundamentals are broadly holding up. This, combined with low levels
of liquidity, suggests that it is a lenders' market for investors
such as JARA. We believe core mezzanine lending constitutes a
particularly attractive way to invest during the current market
dislocation, as it provides a high-quality hedge against rising
rates, declining values and inflation, and thus helps to moderate
volatility in returns. We will therefore remain vigilant for
opportunities to add more of this form of real estate debt to our
portfolio.
Longer-term, real estate performance will continue to be driven
by how we consume, work and live. Investors therefore need to look
beyond the current market volatility and uncertainties and consider
how best to reposition their portfolios to take advantage of
longer-term trends in consumption, working practices and
lifestyles. We believe it is especially important to focus on
opportunities in 'extended' subsectors, such as truck terminals,
outdoor storage, single family rentals, age-restricted housing and
life sciences facilities, so we will be monitoring these areas
closely.
Infrastructure Outlook: Positive, with the transition to
renewable energy set to boost certain energy assets
The outlook for core private infrastructure remains strong,
despite the macroeconomic headwinds. The asset class offers
investors a highly attractive mix of built-in inflation protection,
uncorrelated returns and consistent income. Core private
infrastructure is proving to be immune to the economic cycle, in
large part due to the essential nature of the services provided by
the underlying assets. This should ensure relatively low volatility
and steady returns. Yields are therefore likely to remain
consistent, and in some sectors, especially core focused
infrastructure, the ability to pass on commodity cost increases to
end customers will boost revenues.
The cycle agnostic nature of utilities can be seen on the
right-hand side of the chart in the Company's full annual report-
the chart shows how household utility spending has not, in the
past, been negatively impacted by periods of recession.
The transition to renewable energy is expected to remain
foremost in the considerations for many investors, in both the
immediate future and over the mid- to long-term. This represents a
major opportunity for utilities and renewable energy assets
contributing to the decarbonisation of energy sources.
On the downside, persistently high interest rates will hamper
some more opportunistic approaches to infrastructure, as most
projects are reliance on leverage, which is more expensive in the
current environment.
Transportation outlook: Ship and aircraft leasing rates should
remain well-supported
We are also constructive on global transportation in the year
ahead, and longer-term. We do not expect further significant
bottlenecks in ports, as the backlogs that accumulated during the
pandemic have now largely dissipated. However, sanctions against
Russia are shifting and lengthening supply chains, especially in
energy transport, and causing other forms of disruption.
While the global transport fleet has been growing steadily,
worldwide order books for new ships remain relatively weak. The
graph in the Company's full annual report on the right-hand side
shows how the Orderbook as a percentage of the operating fleet has
dropped and remains significantly lower than during the Global
Financial Crisis. In our view, this is due at least in part to
uncertainties related to future asset designs. In any case,
shipyards are already operating above full capacity, so the supply
of new assets will remain tight. These supply constraints, combined
with shifting supply chains, should continue to support lease rates
across the industry.
Beyond shipping markets, we are also positive on the prospects
for aviation and land-based transport assets. The continued
recovery in travel demand, combined with inflation kickers and a
limited supply of new aircraft, should all have a positive impact
on aircraft lease rates in 2023/2024. Sovereign-backed carriers
should remain attractive counterparties if governments prioritise
airline services and support national carriers, as they have done
in the past. In the land-based transport sector, rail freight will
remain a highly fuel-efficient means of transporting cargo,
compared to road haulage, and is thus an attractive alternative for
shippers in the current, higher fuel cost environment, and
longer-term, as they step-up their efforts to reduce
carbon-emissions.
Real assets - worthy of a place in all truly diversified
portfolios
Recent events attest to the resilience of real asset markets,
even in times of extreme market uncertainty. Investment in real
assets also provides diversification benefits, inflation protection
and exposure to major investment themes such as the transition to
renewable energy. All this suggests that real assets deserve a
place in any fully diversified portfolio, especially at times when
the performance of more traditional asset classes such as equities
and bonds has been disappointing. We believe JARA offers investors
the ideal means of investing in this exciting, but otherwise hard
to access, asset class.
Investment Manager
J.P. Morgan Asset Management, Inc.
Security Capital Research & Management Inc. and J.P. Morgan
Alternative Asset Management Inc.
29th June 2023
PRINCIPAL AND EMERGING RISKS
The Board has overall responsibility for the Company's system of
risk management and internal controls. The Directors confirm that
they have carried out a robust assessment of the principal risks
facing the Company, including those that would threaten its
business model, future performance, solvency or liquidity. With the
assistance of JPMF, the Audit Committee and 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.
These are reviewed and noted by the Board. 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. The AIC Code of Corporate Governance requires the
Audit Committee to put in place procedures to identify emerging
risks and to provide an explanation of how these are managed or
mitigated.
Principal Description Mitigating activities
risk
Investment management and performance
Discount control Investment company shares often The Board monitors the level
risk trade at discounts to their of both the absolute and sector
underlying NAVs, although they relative premium/discount at
can also trade at a premium. which the shares trade. The Board
Discounts and premiums can reviews both sales and marketing
fluctuate considerably leading activity and sector relative
to volatile returns for shareholders. performance, which it believes
are the primary drivers of the
relative premium/discount level.
In addition, the Company has
authority, when it deems appropriate,
to buy back its existing shares
to enhance the NAV per share
for remaining shareholders and
to reduce the absolute level
of discount and discount volatility.
----------------------------------------- ------------------------------------------
Foreign exchange There is a risk that material A decision was taken at launch
risk to income sterling strength or volatility not to hedge the capital value
will result in a diminution of the portfolio into sterling,
of the value of income received nor to hedge the income generated
when converted into sterling. by the portfolio into sterling.
One of JARA's attributes is that
it offers shareholders access
to real assets globally and with
this comes a global currency
exposure. Whilst this currency
impact has benefited the Company
over the last year and post the
year end, experience of recent
years suggests that currency
movements have a habit of reversing
themselves and should represent
a neutral impact for shareholder
returns in the long run. The
Board keeps the decision on whether
to hedge the capital value or
income generation under review.
Please see the Chairman's Statement
above for further details.
----------------------------------------- ------------------------------------------
Foreign exchange There is a risk that material
risk to NAV/share sterling strength or volatility
price 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 The Board reviews quarterly detailed
risk fails to generate sufficient estimates of revenue income and
income from its investment expenditure prepared by the Manager
portfolio to meet the Company's and, if required, challenges
target annual dividend yield the Manager as to the underlying
of 4 to 6%, based on the initial assumptions made in earnings
issue price of 100.0p per share. from the underlying strategies
and the Company's expenditure.
Under Guernsey company law, the
Company is permitted to pay dividends
despite losses provided solvency
tests are performed and passed
ahead of dividend declaration.
----------------------------------------- ------------------------------------------
Underperformance Poor implementation of the The Board manages these risks
investment strategy, for example by diversification of investments
as to thematic exposure, sector and through its investment restrictions
allocation, undue concentration and guidelines, which are monitored
of holdings, factor risk exposure and reported on by the Manager.
or the degree of total portfolio The Manager provides the Directors
risk, may lead to the Company with timely and accurate management
not achieving its investment information, including performance
objective of providing a stable data, revenue estimates, liquidity
income and capital appreciation, reports and shareholder analyses.
and/or underperformance against
the Company's peer companies.
----------------------------------------- ------------------------------------------
Operational risks
Corporate strategy The corporate strategy, including The Manager has a dedicated investment
and shareholder the investment objectives and company sales team that engages
demand policies, may not be of sufficient with both existing and prospective
interest to current or prospective shareholders of the Company.
shareholders. This engagement includes the
Certain buyers within the sector education/description of how
will only consider investing JARA's portfolio is invested
into an investment trust where and the exposures that this generates.
its AUM is over a certain level; The Board regularly reviews its
the Company's AUM currently strategy, and assesses, with
stands below these levels. its broker and Manager, shareholder
demand.
----------------------------------------- ------------------------------------------
Cyber crime The threat of cyber attack, The Company benefits directly
in all guises, is regarded or indirectly from all elements
as at least as important as of JPMorgan's Cyber Security
more traditional physical threats programme. The information technology
to business continuity and controls around physical security
security. of JPMorgan's data centres, security
In addition to threatening of its networks and security
the Company's operations, such of its trading applications,
an attack is likely to raise are tested by independent auditors
reputational issues which may and reported every six months
damage the Company's share against the AAF Standard.
price and reduce demand for
its shares.
----------------------------------------- ------------------------------------------
Counterparty The nature of the contractual The Board is able to seek information
risk frameworks that underpin many from the Manager in relation
of the real assets within the to counterparty concentration
underlying strategies necessitate and correlation of providers.
close partnerships with a range As counterparty quality is key
of counterparties. In addition to maintaining predictable income
to the financial risks arising streams, the Manager seeks regular
from exposure to customers, contact with key counterparties
client and lenders, there are throughout the supply chain and
a large number of operational with revenue-providing counterparties,
counterparties including construction while also actively monitoring
and maintenance subcontractors. the financial strength and stability
Counterparty risk would primarily of all these entities.
manifest itself as either counterparty
failure or underperformance
of contractors.
----------------------------------------- ------------------------------------------
Investment Investment into underlying The Manager monitors and reports
delay strategies could be delayed to the Board on 'queue' length
resulting in loss of expected and the underlying pattern of
income and capital growth opportunity. deployment in the underlying
strategies. Any slowing of deployment
patterns is reported to Board
and the income impact is modelled.
----------------------------------------- ------------------------------------------
Outsourcing Disruption to, or failure Details of how the Board monitors
of, the Manager's accounting, the services provided by JPM
dealing or payments systems and its associates and the key
or the Depositary or Custodian's elements designed to provide
records may prevent accurate effective risk management and
reporting and monitoring of internal control are included
the Company's financial position within the Risk Management and
or a misappropriation of assets. Internal Controls section of
the Corporate Governance Statement
in the Company's 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 (including
and disruption resulting from
the COVID-19 pathogen). 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 risks
Regulatory Various legal and regulatory The Manager and its advisers
change changes may adversely impact continually monitor any potential
the Company and its underlying or actual changes to regulations
investments. This could take to ensure its assets and service
the form of legislation impacting providers remain compliant. Most
the supply chain or contractual social and transportation infrastructure
costs or obligations to which concessions provide a degree
the underlying strategies are of protection, through their
exposed. Certain investments contractual structures, in relation
in the underlying strategies to changes in legislation which
are subject to regulatory oversight. affect either the asset or the
Regular price control reviews way the services are provided.
by regulators determine levels Regulators seek to balance protecting
of investment and service that customer interests with making
the portfolio company must sure that investments have enough
deliver and revenue that may money to finance their functions.
be generated. Particularly
severe reviews may 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 In the Board's and Manager's
most critical emerging issues view, investments that successfully
confronting asset managers manage climate change risks will
and their investors. Climate perform better in the long-term.
change may have a disruptive Consideration of climate change
effect on the business models risks and opportunities is an
and profitability of individual integral part of the investment
investments, and indeed, whole process. The Manager aims to
sectors. The Board is also influence the management of climate
considering the threat posed related risks through engagement
by the direct impact of climate and voting with respect to the
change on the operations of equity portion of the portfolio,
the Manager and other major and is a participant of Climate
service providers. Action 100+ and a signatory of
The Company may be exposed the United Nations Principles
to substantial risk of loss for Responsible Investment.
from environmental claims arising Generally, the Manager (or, in
in respect of its underlying the case of an investment made
real assets that have environmental by a JPMAM product, the relevant
problems, and the loss may manager) performs market practice
exceed the value of such underlying environmental due diligence of
assets, although for some real all of the investments to identify
assets this can be mitigated potential sources of pollution,
to some extent by contracted contamination or other environmental
lease commitments. Furthermore, hazard for which such investment
changes in environmental laws may be responsible and to assess
and regulations or in the environmental the status of environmental regulatory
condition of investments may compliance.
create liabilities that did
not exist at the time of acquisition
of an underlying 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 The Company's investments are This risk is managed to some
risk exposed to various geopolitical extent by diversification of
and macro-economic risks incidental investments and by regular communication
to investing. Political, economic, with the Manager on matters of
military and other events around investment strategy and portfolio
the world (including trade construction which will directly
disputes) may impact the economic or indirectly include an assessment
conditions in which the Company of these risks. The Board can,
operates, by, for example, with shareholder approval, look
causing exchange rate fluctuations, to amend the investment policy
interest rate changes, heightened and objectives of the Company
or lessened competition, tax to gain exposure to or mitigate
advantages or disadvantages, the risks arising from geopolitical
inflation, reduced economic instability although this is
growth or recession, and so limited if it is truly global.
on. Such events are not in
the control of the 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
ongoing conflict between Russia
and Ukraine has heightened
the possibility that tensions
will spill over and intensify
geo-political unrest between
other countries sharing a common
border.
----------------------------------------- ------------------------------------------
Inflation Excessive inflation is likely There is a degree of inflationary
to increase the Company's cost linkage within the investment
of capital and cost of operations. portfolio, albeit on a lagging
basis.
Global inflation is largely stablising.
However, the Board is unable
to forecast macro-economic developments.
----------------------------------------- ------------------------------------------
Emerging risk Description Mitigating activities
----------------------------------------- ------------------------------------------
Technological The returns generated from The Board manages these risks
and behavioural the underlying investment strategies through maintaining a diversified
change in which the Company is invested portfolio of investments, ensuring
may be materially affected the underlying investment team
by new or emerging changes consider these threats in portfolio
in technology which change construction and investment plans
the behaviour of individuals and are aware of the investment
or corporations, or may require opportunities as well as the
substantial investment in new threats presented by these shifts
or replacement technologies. in the sectors in which they
Such changes may include the invest.
decline in demand for office
space as remote working technologies
become widespread, material
changes in transport technologies
and new technologies for the
generation and transmission
of energy.
----------------------------------------- ------------------------------------------
Pandemics The emergence of COVID-19 has During the year under review,
highlighted the speed and extent much of the world adapted to
of economic damage that can living with COVID-19 and the
arise from a pandemic from disruption caused by the pandemic.
both known or unknown pathogens, The Board receives reports on
or unforeseen global emergencies. the business continuity plans
The Company is at risk from of the Manager and other key
both the financial impacts service providers. The effectiveness
of such an event, as well as of these measures have been assessed
possible disruption to the throughout the course of the
day-to-day activities of its COVID-19 pandemic and the Board
service providers. will continue to monitor developments
as they occur and seek to learn
lessons which may be of use in
the event of future pandemics.
China in particular was affected
by its pursuit of 'Zero COVID'.
This approach changed by the
end of the year, when restrictions
were removed. The Company has
minimal exposure to China, circa
3% of the Company's NAV.
----------------------------------------- ------------------------------------------
Real Estate Material shift in real estate The portfolio is actively managed
usage patterns (increasing with a focus on ensuring that
working from home, accelerating the properties are ESG rated
decline of retail) or substantial in accordance with GRESB. Please
increase in environmental standards see the ESG Report in the Company's
expected of new and built properties full annual report.
renders current real estate
strategies inappropriate or
unable to meet expected returns.
----------------------------------------- ------------------------------------------
Transport Significant reduction in global The assets are on long term leases.
trade reduces demand/pricing
for maritime assets. Rising
environmental awareness reduces
demand for aviation and increased
emission obligations increase
the cost and reduce the demand
for aviation.
----------------------------------------- ------------------------------------------
Energy Cost of renewable energy drops The Company has a broadly diversified
materially either through increased portfolio and has exposure to
supply or new rival technologies energy transition assets which
(e.g. fusion) materially reducing expands both traditional and
returns from renewable energy renewable sources. Renewable
projects. assets tend to be on long-tern
off-take agreements providing
a stabilised cash flow.
----------------------------------------- ------------------------------------------
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. The Board escalated
Climate Change and Geopolitical risks as Principal Risks from
Emerging Risks.
TRANSACTIONS WITH THE MANAGER AND RELATED PARTIES
Details of the management contract are set out in the Directors'
Report in the Company's full annual report. The management fee
payable to the Manager for the year was GBP2,231,000 (2022:
GBP1,628,000) of which GBP27,000 (2022: GBP67,000) was outstanding
at the year end.
The Company holds cash in JPMorgan Sterling Liquidity Fund,
which is managed by JPMF. At the year end, this was valued at
GBP0.71 million (2022: GBP0.01 million). Interest amounting to
GBP28,000 (2022: GBP4,000) was receivable during the year of which
GBPnil (2022: GBPnil) was outstanding at the year end.
The Company holds cash in JPMorgan US Dollar Liquidity Fund,
which is managed by JPMF. At the year end, this was valued at
GBP0.46 million (2022: GBP0.1 million). Interest amounting to
GBP9,000 (2022: GBP8,000) was receivable during the year of which
GBPnil (2022: GBPnil) was outstanding at the year end.
Included in administrative expenses in note 7 in the Company's
full annual report are safe custody fees amounting to GBP1,000
(2022: GBP2,000) payable to JPMorgan Chase N.A. of which GBPnil
(2022: GBP1,000) was outstanding at the year end.
Handling charges on dealing transactions amounting to GBP27,000
(2022: GBP30,000) were payable to JPMorgan Chase N.A. during the
year of which GBPnil (2022: GBP4,000) was outstanding at the year
end.
At the year end, a bank balance of GBP2,374,000 (2022:
GBP1,052,000) was held with JPMorgan Chase N.A. A net amount of
interest of GBP7,000 (2022: GBP171,000) was receivable by the
Company during the year from JPMorgan Chase N.A. of which GBPnil
(2022: GBPnil) 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.
2023 2022
Total Total
Directors GBP GBP
--------------- -------- --------
John Scott 61,800 60,000
Helen Green 51,500 50,000
Simon Holden 55,650 54,000
Chris Russell 43,300 42,000
--------------- -------- --------
Total 212,250 206,000
--------------- -------- --------
(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 Company's full 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
29th June 2023
STATEMENT OF COMPREHENSIVE INCOME
For the year ended 28th February 2023
Year ended Year ended
28th February 28th February
2023 2022
GBP'000 GBP'000
------------------------------------------------- -------------- --------------
Gains on investments held at fair value through
profit or loss 16,763 15,896
Net foreign currency gains 183 905
Investment income 10,853 9,846
Interest receivable and similar income 44 183
------------------------------------------------- -------------- --------------
Total return 27,843 26,830
Management fee (2,231) (1,628)
Other administrative expenses (687) (1,023)
------------------------------------------------- -------------- --------------
Return before finance costs and taxation 24,925 24,179
Finance costs (1) (1)
------------------------------------------------- -------------- --------------
Return before taxation 24,924 24,178
Taxation (1,094) (485)
------------------------------------------------- -------------- --------------
Return for the year 23,830 23,693
------------------------------------------------- -------------- --------------
Return per share 10.91p 11.06p
STATEMENT OF CHANGES IN EQUITY
Share Retained
premium earnings Total
GBP'000 GBP'000 GBP'000
------------------------------------- --------- ---------- ---------
Year ended 28th February 2022
At 28th February 2021 209,136 (25,619) 183,517
Issue of ordinary shares 7,987 - 7,987
Return for the year - 23,693 23,693
Dividends paid in the year (note 2) - (8,608) (8,608)
------------------------------------- --------- ---------- ---------
At 28th February 2022 217,123 (10,534) 206,589
------------------------------------- --------- ---------- ---------
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
------------------------------------- --------- ---------- ---------
STATEMENT OF FINANCIAL POSITION
At 28th February 2023
2023 2022
GBP'000 GBP'000
------------------------------------------------------- --------- ---------
Assets
Non current assets
Investments held at fair value through profit or loss 219,960 204,667
------------------------------------------------------- --------- ---------
Current assets
Other receivables 990 1,063
Cash and cash equivalents 3,541 1,175
------------------------------------------------------- --------- ---------
4,531 2,238
Liabilities
Current liabilities
Other payables (763) (316)
------------------------------------------------------- --------- ---------
Net current assets 3,768 1,922
------------------------------------------------------- --------- ---------
Total assets less current liabilities 223,728 206,589
------------------------------------------------------- --------- ---------
Net assets 223,728 206,589
------------------------------------------------------- --------- ---------
Amounts attributable to shareholders
Share premium 219,278 217,123
Retained earnings 4,450 (10,534)
------------------------------------------------------- --------- ---------
Total shareholders' funds 223,728 206,589
------------------------------------------------------- --------- ---------
Net asset value per share 102.0p 95.0p
STATEMENT OF CASH FLOWS
For the year ended 28th February 2023
Year ended Year ended
28th February 28th February
2023 2022
GBP'000 GBP'000
----------------------------------------------------- -------------- --------------
Operating activities
Return before taxation 24,924 24,179
Deduct dividend income (10,770) (9,730)
Deduct investment income - interest (83) (116)
Deduct deposit and liquidity fund interest income (44) (183)
Less interest expense (1) (1)
Add indirect management fee 1,265 880
Add performance fee 128 -
Deduct gains on investments held at fair value
through profit or loss (16,763) (15,896)
Decrease/(increase) in prepayments and accrued
income 6 (14)
Increase/(decrease) in other payables 255 (101)
(Deduct exchange gains)/add exchange losses on
cash and cash equivalents (6) 107
Taxation (1,101) (484)
----------------------------------------------------- -------------- --------------
Net cash outflow from operating activities before
interest and taxation (2,190) (1,359)
----------------------------------------------------- -------------- --------------
Dividends received 10,856 9,413
Investment income - interest 80 150
Deposit and liquidity fund interest received 44 183
Interest expense 1 -
Purchases of investments held at fair value through
profit or loss (21,148) (53,630)
Sales of investments held at fair value through
profit or loss 21,408 27,279
----------------------------------------------------- -------------- --------------
Net cash inflow/(outflow) from operating activities 9,051 (17,964)
----------------------------------------------------- -------------- --------------
Financing activities
Issue of ordinary shares 2,155 7,987
Dividends paid (8,846) (8,608)
----------------------------------------------------- -------------- --------------
Net cash outflow from financing activities (6,691) (621)
Increase/(decrease) in cash and cash equivalents 2,360 (18,585)
Cash and cash equivalents at start of year 1,175 19,867
Exchange movements 6 (107)
----------------------------------------------------- -------------- --------------
Cash and cash equivalents at end of year(1) 3,541 1,175
----------------------------------------------------- -------------- --------------
(1) Cash and cash equivalents includes liquidity funds.
NOTES TO THE FINANCIAL STATEMENTS
For the year ended 28th February 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 Policies.
The Company was incorporated on 22nd February 2019. The Company
was admitted to the Main 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.
2. Dividends
2023 2022
GBP'000 GBP'000
----------------------------------------------------------- -------- --------
Dividends paid
2022/2023 First interim dividend of 1.00p (2022: 1.00p)
per share 2,174 2,088
2022/2023 Second interim dividend of 1.00p (2022: 1.00p)
per share 2,174 2,172
2022/2023 Third interim dividend of 1.00p (2022: 1.00p)
per share 2,194 2,174
2022/2023 Fourth interim dividend of 1.05p (2022: 1.00p)
per share 2,304 2,174
----------------------------------------------------------- -------- --------
Total dividends paid in the year 8,846 8,608
----------------------------------------------------------- -------- --------
Dividend declared
2023/2024 First interim dividend declared of 1.05p (2022:
1.00p) 2,304 2,174
----------------------------------------------------------- -------- --------
3. Return per share
2023 2022
GBP'000 GBP'000
------------------------------------------------------- ------------- ------------
Total return 23,830 23,693
Weighted average number of shares in issue during the
year 218,481,925 214,182,610
------------------------------------------------------- ------------- ------------
Total return per share 10.91p 11.06p
------------------------------------------------------- ------------- ------------
4. Net asset value per share
2023 2022
------------------------------- ------------ ------------
Shareholders' funds (GBP'000) 223,728 206,589
Number of shares in issue 219,407,952 217,407,952
------------------------------- ------------ ------------
Net asset value per share 102.0p 95.0p
------------------------------- ------------ ------------
5. Status of announcement
2022 Financial Information
The figures and financial information for 2022 are extracted
from the Annual Report and Financial Statements for the year ended
28th February 2022 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.
2023 Financial Information
The figures and financial information for 2023 are extracted
from the published Annual Report and Financial Statements for the
year ended 28th February 2023 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
.
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.
29th June 2023
For further information:
Emma Lamb,
JPMorgan Funds Limited
020 7742 4000
ENDS
A copy of the annual 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
The annual report will shortly be available on the Company's
website at 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.
JPMORGAN FUNDS LIMITED
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END
FR SEMEEUEDSELM
(END) Dow Jones Newswires
June 30, 2023 02:01 ET (06:01 GMT)
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