Opportunities are starting to emerge among Europe's larger cyclical businesses, according to Cédric de Fonclare, manager of the Jupiter European Special Situations Unit Trust.

De Fonclare switched out of cyclicals and into defensives during 2007 - a move that has benefited relative performance. In the past year, for example, the Fund has produced -25.83% against -33.84% for the IMA Europe ex UK sector. This return places the Fund 8th out of 108 funds in the IMA Europe ex UK sector and cements the Fund's long term record as the strongest performer in its sector. In the 10 years since its launch, the Jupiter European Special Situations Fund has produced 214.75%, compared with 10.57% for the sector average. This places it 1st out of 56 funds over that time period.*

While markets remain highly volatile, de Fonclare now believes opportunities are starting to re-emerge among larger cyclical stocks - on a very selective basis. He explained: "European cyclicals were very strong in 2006 and this had proved positive for the Fund. However, going into 2007 we became increasingly concerned about valuations in this area and felt that cyclical companies would be less able to produce the reliable profits growth I look for in a deteriorating economic environment. So, we reduced exposure to sectors such as chemicals and engineering and switched into more defensive growth areas such as healthcare. While this move, together with our long-maintained underweight position in banks and other financials, was a little bit early, it proved very beneficial as growth slowed, particularly during last year. Among the Fund's best performers were drug development company Actelion (one of Europe's top 10 performers in 2008), dialysis stock Fresenius Medical Care and Greek gaming group OPAP.

"Looking ahead, my central view is that Europe's economies will continue to contract during the year. The OECD's composite leading indicators point to strong slowdowns in Germany, France and Italy. Conditions are expected to be even worse for those economies such as Austria, Spain and Ireland which are the most vulnerable to financial crisis and/or sharp falls in house prices.

"Against this backdrop, we expect markets will remain volatile while the following issues remain unresolved: the likely impact of government stimulus packages; concerns over companies with balance sheet weakness; the likelihood of an increase in the number of rights issues and the ongoing unease about the stability of banks. In addition, there are a wide range of analysts' estimates in the market, given the lack of guidance from companies. This provides opportunities for stock pickers and we have started to identify some areas of opportunity, notably large cap cyclicals.

"We have initiated positions in consumer-facing businesses, technology and capital goods companies where we feel share price declines already discount a significant part of the bad news. The common characteristics of the businesses we are selecting are: quality franchises and/or brand, the ability to grow faster than the broader sector, market leadership and strong balance sheets - characteristics we believe will help these businesses emerge stronger from the current downturn."

Examples of businesses de Fonclare has invested in are: SAP (a global leader in enterprise software with strong recurrent revenues and the ability to protect margins); Richemont (which has a unique brand portfolio in luxury goods); CRH (a company that is raising capital to buy assets being sold by distressed competition and a beneficiary of government infrastructure plans); Schneider Electric (a global leader in energy management and a big beneficiary of the outsourcing trend); DSM (a chemicals company he believes is misunderstood. It trades at significant discount to sector despite 40% of its portfolio being made up of more resilient nutrition and pharmaceuticals businesses).

Since de Fonclare took over the Jupiter European Special Situations Fund in July 2005, it has returned 9.23% against -9.31% for the sector average, placing it 5th out of 88 funds.* He has been able to achieve these returns against a backdrop of both rising and falling markets by adopting a flexible investment approach. His approach is predominantly driven by a focus on bottom-up stock picking, seeking out companies with strong fundamentals which are able to grow faster than GDP; good cash flow generation and attractive valuations. Top down considerations also influence portfolio construction by helping to identify specific investment themes. This has enabled him to generate absolute returns well above the Fund's peer group during bull market and to protect capital better than peers in the bear market as illustrated by last year's performance.

-ENDS-

Notes to Editors

*Source: Financial Express. Bid to bid net income reinvested to 28.02.2009. Cédric de Fonclare started managing the Fund on 15 July 2005.

FUND FACTS

Jupiter European Special Situations was launched on 1 March 1999
Fund initially managed by Richard Pease until April 2001, when it was taken over by Leon Howard Spink. Cédric was Leon's back-up on the portfolio from April 2001 and took over the Fund in July 2005
AA rated by OBSR and A Rated by S&P
Initial fee 5.25% and annual management fee of 1.5%
Minimum investment of £500 lump sum, £50 a month regular savings  

CEDRIC DE FONCLARE BIOGRAPHY

• Joined Jupiter in 1999
• Has 10 years investment management experience
• Also manages the Jupiter European Opportunities (SICAV), the CCR Centrale Croissance Europe and the Continental European component of Jupiter Global Managed Fund (Unit Trust) - as well as institutional monies
• Won two gold medals in the 'European Equities including UK' category of the Sauren Awards 2008 and Best European equity fund over five years award in Germany's Lipper Awards 2009 for his management for his management of the Jupiter European Opportunities Fund (Sicav).
• Works as member of Jupiter's European Equity desk, which comprises nine investment professionals.

NOTE
Jupiter Asset Management Limited (JAM) is authorised and regulated by the Financial Services Authority and their 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. They are not necessarily those of Jupiter and should not be interpreted as investment advice. The value of an investment and the income from it can fall as well as rise and may be affected by exchange rate variations. Every effort is made to ensure the accuracy of any information provided but no assurances or warranties are given.

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