European companies with international operations, strong balance sheets and structural growth provide will deliver the best opportunities for the region in the medium term, while domestically-orientated companies and highly regulated sectors such as banks, utilities and telecoms present the greatest risks, according to Cedric de Fonclare, highly regarded fund manager of Jupiter European Special Situations Fund.

Cedric, who has managed the £470m Jupiter European Special Situations Fund since 15 July 2005, has delivered top decile performance over three and five years. The Fund has returned 50.47% over five years, compared to a 28.18% average sector return and 34.80% return from the FTSE World Europe EX UK Index, the Fund's benchmark. Over three years, the Fund has returned -4.91% compared to a return of -15.1% for the sector average and -11.80% return from the FTSE World Europe EX UK Index while over one year the Fund has returned 22.86% compared to a return of 22.33% for the sector average and 20.95% return from the FTSE World Europe EX UK Index.*

His consistent outperformance has been achieved by implementing a robust investment strategy while remaining flexible enough to adapt swiftly to changeable market conditions. During the bull market of 2006, for example, the Fund benefited from its exposure to mid caps and cyclical stocks. In 2007, concerned about overly high expectations for corporate growth and market valuations, Cedric took profits which helped protect most of the additional value gained during the period of expansion; and throughout 2008, Cedric continued to take steps with the aim of protecting investors' capital. In late 2008, he increased exposure to cyclicals again, positioning the Fund to benefit from the extraordinary upswing in equity markets that began in March 2009.

Cedric commented: "There has been a dramatic change in investment conditions in the five years since I have been managing the Fund. We have seen further global credit expansion, a property bubble, a resurgent China, a credit crunch, a banking crisis, a global slowdown, huge government stimulus, a record equity market bounce and most recently, a sovereign debt crisis in Europe."

Now in 2010, he believes one of the more significant consequences of the recent crisis will be greater political intervention. In his view, this will lead inevitably to higher taxation and more regulation. At present, therefore, Cedric remains wary of highly regulated sectors such as banks, utilities and telecoms where political decision-making could have a profound effect.

He also has concerns about companies exposed solely to domestic European markets which could suffer from slacker demand as countries impose austerity measures to tackle large sovereign deficits.

Instead, the portfolio is currently focused on European companies with international businesses, strong balance sheets and structural growth that he believes should continue to perform despite the weak backdrop. He particularly favours those in core European countries such as Germany and Finland. Outside the eurozone, he is currently focused on Switzerland and Norway.

Cedric says: "The European market is now trading on a high single digit price earnings (p/e) ratio for 2011 earnings, increasingly discounting the possibility of a double dip recession. Given the growing consensus around this, we remain alert to the opportunities it may provide.
 
"Among these may be the potential benefits of a weak euro for exporters. Balance sheets have been strengthened, costs taken out and, encouragingly, companies have not used macro events in Southern Europe as an excuse for earnings' caution, though market levels suggest some investors are already discounting a weaker second half."

"While macro-economic concerns continue to dominate the headlines, markets are likely to remain volatile. However we expect investors' focus to shift over time towards the qualities of individual stocks capable of delivering growth in a challenging environment, and away from sector-driven trading. "

Many of his core holdings have strong growth prospects according to Cedric, driven by specific themes, such as Fresenius Medical Care, a dialysis provider exposed to changing healthcare demographics and increasingly aging populations; testing services company SGS, which has seen its growth driven by regulatory change and; Syngenta, a producer of agrochemicals and seeds that allow farmers to produce higher crop yields that stands to benefit from global food scarcity and world population growth.

- ENDS -

Notes to Editors

* Source: Financial Express, bid to bid, net income reinvested to 15.7.2010 and Jupiter.

JUPITER EUROPEAN SPECIAL SITUATIONS FUND FACTS
Launch date: 1.3.99
Manager: Cedric de Fonclare (since 15 July 2005)
Minimum investment: £500 lump sum or £50 a month regular savings
Charges: 5.25% initial charge and 1.5% annual management fee

Jupiter Unit Trust Managers Limited (JUTM) is authorised and regulated by the Financial Services Authority and the registered address is 1 Grosvenor Place London SW1X 7JJ. The group is collectively known as "Jupiter". The above commentary represents the views of the Fund Manager at the time of preparation and may be subject to change, and this is particularly likely during periods of rapidly changing market circumstances. They are not necessarily those of Jupiter and should not be interpreted as investment advice. The above commentary is based on Jupiter's understanding of current law and practice and could alter as a result of future legislation. If you are in any doubt regarding your tax position you should seek professional advise. Past Performance should not be seen as a guide to future returns, the value of an investment and the income from it can fall as well as rise and may be affected by exchange rate variations. You may get back less than you invested.  Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given.