Ariel bezalel

Jupiter Strategic Bond Fund

Citywire South West Investors Retreat, 2nd – 4th May 2012

For professional investors only

Presented by: Ariel Bezalel, Fund ManagerMark Ingram, Regional Sales Director

Jupiter Strategic Bond Fund performance

2

Ranked 2nd in sector since launch (02.06.08)

Source: FE, bid to bid, net income reinvested to 31.03.12. Fund launched 02.06.08. Ranked 2 / 55 in IMA Sterling Strategic Bond sector since launch.Past performance is no guide to the future.

Jun 08 Nov 08 Apr 09 Sep 09 Feb 10 Jul 10 Dec 10 May 11 Oct 11 Mar 12-30

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60Jupiter - Strategic Bond Acc in GB 53.35 IMA Sterling Strategic Bond TR in GB 23.71

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Jupiter Strategic Bond Fund

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Performance

Cumulative 1 year % Since launch %

Jupiter Strategic Bond 6.4 53.4

IBOXX Stg Non Gilts All Maturities 8.8 30.5

IMA Sterling Strategic Bond sector average 5.1 23.7

Sector ranking 21 / 68 2 / 55

Source: FE, bid to bid, net income reinvested to 31.03.12. Fund launched 02.06.08. Past performance is no guide to the future.

Discrete years 2009 % 2010 % 2011 %

Jupiter Strategic Bond 42.5 11.2 4.5

IBOXX Stg Non Gilts All Maturities 10.8 8.4 6.9

Sterling Strategic Bond sector average 20.8 8.1 2.7

Sector ranking 3 / 57 11 / 63 21 / 68

4

The power of money

LTRO having substantial impact on credit spreads

Refinancing risk has essentially been removed for European banks

Monti finding favour with markets

Eurozone beginning to realise that policies to boost growth are also essential

*Source: FRB, BEA, ECB, Eurostat, BoE, UK Office for National Statistics, BoJ, Japan Cabinet Office. **Source: Bloomberg, 30.03.12.

3M 6M 1Y 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y 20Y 25Y 30Y0

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10 30 March 2012 29 November 2011

Central bank balance sheets as % of GDP*

Italy’s sovereign yield curve** Spain’s sovereign yield curve**

3M 6M 1Y 18M 2Y 3Y 4Y 5Y 6Y 7Y 8Y 9Y 10Y 15Y 20Y 30Y0

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10 30 March 2012 29 November 2011

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Europe – what did the Romans ever do for us?

It is, in fact, a classic utopian project, a monument to the vanity of intellectuals, a programme whose inevitable destiny is failure: only the scale of the final damage done is in doubt. Margaret Thatcher

31/12/1998Exchange rates fixed

01/01/2002Euro launched

Source: FRB, BEA, ECB, Eurostat, BoE, UK Office for National Statistics, BoJ, Japan Cabinet Office. **Source: Bloomberg, 30.03.12.

Source: Bloomberg as at 31.12.11.

Interest rates likely to remain low

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2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 20112%

4%

6%

8%

10%

12%

Europe: austerity + bank recaps + record high oil prices = recession

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Manufacturing activity Non-manufacturing activity

Source: Bloomberg as at 31.01.12.

Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 1130

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65EU UK US

Expansion

Contraction

Mar 06 Mar 07 Mar 08 Mar 09 Mar 10 Mar 1130

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65US UK EU

Expansion

Contraction

US on target for 3% growth approx.

Morgan Stanley estimate 3trn Euros of deleveraging by EU banks in next 3-5 years

Consumer balance sheets on the road to recovery

Household debt & debt service Credit card delinquencies

% of disposable income %, 90+ days delinquent

Source: J.P.Morgan 01.01.12.

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US business getting more confident

Capital spending recovery C&I loan growth

Billions of 2005 USD % change, YoY

Source: J.P.Morgan 01.01.12.

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For the bumpy road to recovery

Long Australian government bonds

Safe haven

Pristine finances

Resource rich

Housing bubbles?

Short Italian government bonds (3 year future)

Collapse in yields presents great entry point to hedge bank risk in portfolio

Short US treasuries (2 year and 5 year futures)

Trade is asymmetric

Cheap hedge against US economic recovery

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Current active positions of the UK-domiciled bond fund

The fund manager has the power to use derivatives but it is intended that these will only be used for efficient portfolio management and not for investment purposes

Australia – credit worthiness not in doubt; net debt to GDP of just 6%*

Spurred by China, Australia may be entering dangerous resources trap known as Dutch disease

No other nation in developed world at greater risk from a China slowdown

Property market looking vulnerable

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Resources boom is hitting other export sectors…

Source: Macquarie, Thomson Reuters DataStream. *Financial Times 24.08.11., Wall Street Journal. Fund manager views of the at the time of writing and will change in the future.

However…

"We are seeing troubling signs for our economy at large--maybe even signs of a coming downturn," he said. Liveris said Australia's current growth trajectory is "unsustainable" and that the country had grown far too reliant on China for its prosperity. Andrew Liveris, Chief Exec. Dow Chemicals

In the past 50 years, Australia's manufacturing sector has shrunk from nearly a third of the overall economy to just 8.6% today

Valuations – the case for credit

Piling up

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Source: Absolute Strategy Research, The Wall Street Journal, 23.03.12.

Gross cash balances at FTSE 350 non-financial companies

Ratio of cash at hand to short term debt has risen to 2x in the UK and 1.1x in Europe, above the respective 1.5x and 0.9x averages since 1995

Across Europe, corporate cash balances hit €569bn

Investment grade balance sheets are solid

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Source: Morgan Stanley Research, Markit iBoxx October 2011.

European IG issuer leverage (based on ~170 credits) Debt has been falling despite the low cost of borrowing

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Lower corporate supply expected

Euro non-financial issuance Sterling non-financial issuance

Lower issuance should be supportive of spreadsSource: DB, as at November 2011.

1925 1929 1934 1939 1944 1949 1954 1958 1963 1968 1973 1978 1983 1987 1992 1997 2002 2007 20120

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Corporate bond valuations

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US, UK and European BBB corporate spreads

BBB spreads are pricing in a recessionSource: Morgan Stanley, Moody’s, The Yield Book, NBER , Bloomberg / Merrill Lynch, as at 20.03.12.

In a typical US recession, BBB spreads peak at 300 – 350 bps

US: May – June 1932 = 724 bps

IG: Still reasonable value. Financials abit of a value trap

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Merrill Lynch Sterling corporate benchmark spreads

Source: Merrill Lynch, Bloomberg 02.03.12.

01/06/200607/28/200602/09/200708/31/200703/14/200810/03/200804/24/200911/06/200906/11/201012/24/201007/15/201101/27/20120

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Which banking sectors need capital?

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Source: Q2 2011 company reports and EBA. *Total assets less intangible assets. All figures denoted in Euro billions, aggregation based on largest banks stress tested by the EBA. Fund manager views of the at the time of writing and will change in the future.

CountryTotal assets

(€bn)Tangible common

equity (€bn)

Tangible common equity / total assets* (%)

Core tier 1 capital ratio (%)

Austria 346 18 5 12

Belgium 826 14 2 13

Denmark 417 14 3 17

France 4,644 112 2 11

Germany 2,644 57 2 14

Greece 230 12 5 10

Italy 2,035 96 5 10

Netherlands 1,237 39 3 10

Norway 238 13 6 9

Portugal 80 6 7 9

Spain 2,075 73 4 10

Sweden 740 29 4 16

UK 7,487 310 4 13

Unlike their European counterparts, UK banks do not have a domestic bond problem and are relatively well capitalised

Bank bonds, in the main, got off lightly in the last round of bailouts. Unlikely this time round

“It all boils down to capital. If you don’t have enough simple common equity you will run into problems.” Stefan Ingves, Chairman of the Basel Committee on Banking Supervision

*TOTAL ASSETS LESS INTANGIBLE ASSETS

High yield pricing in downturn in economic growth

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EUR & USD HY benchmark spreads

Source: Bloomberg, JP Morgan as at 16.03.12. Fund manager views of the at the time of writing and will change in the future.

High yield still pricing in a slowdown

Geographic exposure still important here. Top down macro fundamentals for much of Europe still poor

Subordination continues to be important. Have preference for secured debt but parts of this market now rich. Beware of RATES!

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US High Yield European High Yield

900bps is the magic number

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High yield valuations

European high yield spreads and default rates

Spreads are very wide but defaults are still very low

Source: Bloomberg, S&P at 29.02.12.

European high yield fundamentals

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Source: Morgan Stanley Research, Bloomberg, company reports October 2011.

High yield balance sheets have been improving. Metrics better then in 2000 – 2002 cycle

“Good quality issuance”

Uncertain economic outlook favours senior secured paper with asset coverage

FCF is above long-term averagesLTM FCF to debt

LTM interest coverage still below averageInterest coverage

HY non-financial leverage: Net down, gross up Net debt / EBITDA

Stock examples

Tight supply demand dynamics pushing day rates back up to the highs

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Ultra deepwater rigs >7500ft Ultra deepwater rigs >7500ft day rates

Source: ODS-Petrodata, Pareto Research, March 2012.

Golden Close 11% 09.12.15

Redemption yield: 8.6%

Yield to call (09.12.12): 7.6%

Issue size: $460m

Senior secured first lien

*Bond issued 01.11.10 with 1st lien security on 6th gen. UDW drillship Deepsea Metro 1. Built at Hyundai and delivered 22.06.11

Construction cost: $800m. LTV: 58% approx.

Secured 365 day contract with BG Group ($65bn mkt. cap). Day rate est. at $431-$455k per day

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Day rates approx. $600k

Free cash flow to debt should exceed 10% as new contract is secured

High conviction bonds to be refinanced at the first call

Cov’ts: No additional debt parri to bonds related to vessel allowed

No dividends allowed for life of bond

Source: Jupiter December 2011.

RDS Ultra-Deepwater – US$270m 11.875% senior secured notes due 2017

6th generation semi-submersible ultra deepwater (>7,500 feet) rig

5 year contract with Pemex on dayrate of $495,000 for 2 years*

Value of rig is $665m of which $225m is financed with first lien bank debt and $270m financed with second lien 11.875% notes due 2017. LTV is 75%

Mandatory paydown of 1st lien loan with free cash flow. Repaid $65mm so far

1st lien on course to disappear by 2014

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Source: Jefferies. *Subsequent to that, dayrate based on formula that is the average of the 90th percentile of dayrate contracts set in the marketplace for similar assets at time of fixing.

Eksportfinans (EXPT)

Provider of loans to Norwegian exporters

Shareholders: DNB: Nordea: Norway State: Danske: Savings banks & others:

Junked by Moody’s (Aa3 to Ba1 on 22.11.11); junked by S&P to BB+ 15.02.12

Downgraded because Gov’t decided to put EXPT into runoff. Agency not given exemption by Gov’t from large exposure provisions under EU’s CRD. Shareholders have also decided not to inject more capital

Ratings agencies in turn question commitment of Gov’t to EXPT

Norwegian government to take control over the system for government subsidised loans

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NOK185bn bond outstanding (approx €23.5bn) – Eksellent opportunity?

Source: Jupiter December 2011. Fund manager views of the at the time of writing and will change in the future.

40% (DNB 34% owned by Norwegian gov’t)23%15%8%14%

Eksportfinans (EXPT)

Norway’s trade & industry minister Trond Giske: “No grounds for a default”

“had I not been an insider I would have bought these bonds myself”“In my view, there is no reason to downgrade Eksportfinans. On the contrary, when the government comes in and takes responsibility for all future loans that means that the situation is much more predictable than it was before.”

He also said that the analyses are wrong because “all of the future loans that could be of risk the government will take part in. So the framework around Eksportfinans have never been any more predictable and safer than they are now.”

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Source: Jupiter, Pareto Securities December 2011.

Assets NOK125bn customer loans. All guaranteed by

Norway government and Norway banks. Other assets add up to NOK94bn

Liabilities NOK190bn borrowings

NOK15bn financial derivatives

NOK11bn other

NOK16bn sub. debt

NOK5bn equity

Shareholders continue to be supportive Same dynamics as BP

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…leaving investors with a great opportunity

Source: Bloomberg, Pareto Company, 09.03.12.

Dec 10 Mar 11 May 11 Jul 11 Sep 11 Nov 11 Jan 12 Mar 120

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Yield development EXPT 5.5% 26.06.17 Yield development EXPT 3% 17.11.14

Yield development EXPT 2% 15.09.15 Yield development EXPT 5.5% 25.05.16

Dramatic increase in yields following the rating downgrade

Appendix

Strategic asset allocation since launch

Truly strategic. Exploiting opportunities across the ratings spectrum

Source: Jupiter as at 31.03.12. The fund manager has the power to use derivatives but it is intended that these will only be used for efficient portfolio management and not for investment purposes

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Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12-60%

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120%

Sovereign (long) Sovereign (short) High Yield Investment Grade Cash

Portfolio breakdown by rating

Average rating BBB+

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Top 10 holdings by Issuer

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Source: Jupiter as at 31.03.12.

Company %

Australian Government 18.10

Eksportfinans 4.24

Spirit 2.31

LBG Capital 2.30

Royal Bank of Scotland 2.27

Co-Operative Bank 2.22

Golden Close Marit 1.87

TUI Travel 1.85

Microsoft 1.76

Interxion 1.48

Portfolio breakdown by country and sector

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Country – currently a European bias Sector split

-4.9% exposure to GIPSI nations

Source: Jupiter as at 31.03.12. *Other includes Austria, Belgium, Bermuda, Brazil, Croatia, Finland, Mauritius, Netherlands, Russia, Saudi Arabia, Singapore, Spain and Cash all between 1% and -1%. The fund manager has the power to use derivatives but it is intended that these will only be used for efficient portfolio management and not for investment purposes

Brita

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Norw

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ark

Czec

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Italy

Unite

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Indu

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Rig

Fina

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gCo

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-10%

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35%

Exposure to banks

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Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-120%

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35%

Banks

Portfolio features

Effective yield*: 6.35% (net basis)

Duration of portfolio**: 3.83 years

Invest in all parts of the ratings spectrum

Fund manager tends to have a 10% limit in convertibles

80% of assets must be in sterling or hedged back to sterling

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*Source = HSBC, 02.04.12, Institutional class. **Source = Jupiter 31.03.12. Yields quoted are not guaranteed and may change in the future.

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Jupiter Strategic Bond Fund performance

Monthly returns since launch

Source: FE, bid to bid, net income reinvested 30.06.08 to 31.03.12. Fund launched 02.06.08. The fund manager has the power to use derivatives but it is intended that these will only be used for efficient portfolio management and not for investment purposes

Jun 08 Nov 08 Apr 09 Sep 09 Feb 10 Jul 10 Dec 10 May 11 Oct 11 Mar 12-10

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8Jupiter - Strategic Bond Acc in GB IMA Sterling Strategic Bond TR in GB

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Banks exposure

Continue to be selective about banks we invest in

Sticking to UK and German banks

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Distribution by types of bank debt


Covered 0.8%

Senior 0.5%

LT2 9.6%

UT2 0.1%

Tier1 4.2%

Change in rating profile since launch

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Jun-08 Nov-08 Apr-09 Sep-09 Feb-10 Jul-10 Dec-10 May-11 Oct-11 Mar-12-40%

-20%

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100%cash

NR

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BBB

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AAA

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Disclosure

Jupiter Unit Trust Managers Limited (‘JUTM’) and Jupiter Asset Management Limited (‘JAM’) are both registered in England and Wales (nos. 2009040 and 2036243). The registered office of both is 1 Grosvenor Place, London SW1X 7JJ. JUTM and JAM are authorised and regulated by the Financial Services Authority whose address is 25 The North Colonnade, Canary Wharf, London E14 5HS.

Past performance should not be seen as a guide to future performance. The value of an investment in a unit trust and the income from it can go down as well as up, it may be affected by exchange rate variations, and you may not get back the amount invested. The manager has the power to invest a significant proportion of the portfolio in high yield bonds (a type of bond with a low rating from a credit rating agency). While such bonds may offer a higher income the interest paid on them and their capital value is at greater risk, particularly during periods of changing market conditions. Due to the overall structure of the portfolio, the level of quarterly income payments will not be constant and will fluctuate.

This presentation is intended for investment professionals and not for the benefit of private investors. However any one attending the presentation or who has the opportunity to view the accompanying slides should bear in mind that the value of an investment and the income from it can go down as well as up. It may be affected by exchange rate variations and you may not get back the amount invested. Quoted yields are not guaranteed. Past performance should not be seen as a guide to future performance.

For your security we may record or randomly monitor all telephone calls. If you are unsure of the suitability of an investment please contact your financial advisor. Any data or views given should not be construed as investment advice. Every effort is made to ensure the accuracy of the information but no assurance or warranties are given.

2588_UT_STRAT BOND_AB

Ariel bezalel

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