Jennings restructures Morley's Privilege Portfolio Global Themes Fund

Morley Fund Management's ("Morley's") Michael Jennings has taken over management of the Privilege Portfolio Global Themes Fund with effect from 9 April 2002. Since then, Jennings, who joined Morley in October 2001, has been restructuring the fund to concentrate on a focused portfolio of around 70 high quality stocks, away from the constraints of traditional benchmarking used by other global equity funds.

Key features of the restructured Privilege Portfolio Global Themes Fund include:

• Truly global: Jennings believes that the country in which a company is located and the sector in which it operates are irrelevant to the investment decision-making process. He argues that many companies derive a substantial part of their profits from outside their home market. As an example, Nokia dominates the Finnish stockmarket, accounting for approximately 50% of the value, yet in 2000, less than 2% of Nokia's turnover derived from Finland (source: Bloomberg International).
• Genuinely themed: The Privilege Portfolio Global Themes Fund invests in stocks that represent or benefit from a major global trend or set of characteristics. The fund does not focus on any single sector or industry.
• Actively managed: Unlike traditional global equity funds, the Global Themes Fund is not constructed around a predetermined benchmark, but according to major themes. The definition of a Theme according to Jennings is: "a major global trend or set of characteristics which are expected to lead to enhanced long-term equity outperformance."

The four themes currently favoured by Jennings are:

• Mis-allocation of Capital: Many core industries - power, roads, transport - have been under-funded in recent years, as 'new economy' stocks became the focus of stockmarket activity. Companies with the requisite size and ability to meet renewed demand in these key industries are well placed to benefit from increased allocation of capital. Prime sectors include power generation and utilities, oil exploration and supply, defence, building and construction (housing, schools and hospitals), road and rail networks.
• Competitive Advantage: With no geographical bias, and no requirement to match the performance of any particular stockmarket index, the Fund Manager is free to select companies with sustainable competitive advantage, anywhere in the world. These might be companies with strong management; low production costs; innovative research and design; high quality products; or those utilising new technologies to enhance profitability.
• Restructuring: Whether at a corporate, industrial or national level, restructuring is likely to be a driving theme in equity markets over the coming years, fuelled by weak economic conditions and tough global competition. Those companies with the strength of management to tackle inefficiencies and focus upon a quality core business may add substantial shareholder value.
• The Disinflationary World: In this era of low inflation, low prices, and deregulation, corporate profits and margins have come under increasing pressure. The fund manager will look for companies that offer sustainable earnings growth through market dominance; strong brands; patent protection and successful exploitation of a niche market.

Jennings explains his choice of themes: "In a world where the rate of price increases is declining, the companies that can withstand pressure to cut prices will be favoured. These will include companies facing limited competition, those with a strong brand name, or those whose products are in demand whatever the prevailing economic climate. In industries that have suffered from lack of Government funding, such as education or the transport system in the UK, the dominant companies in these sectors are likely to benefit substantially from the effects of the re-allocation of capital. In an increasingly global market place, the companies with distinct competitive advantage are set to dominate their industries and achieve a re-rating as a result. As an example, Citibank, a market leader in the banking sector is running away from the pack in terms of margins. Finally, the restructuring theme will target beneficiaries of restructuring on a national, industrial, or corporate basis that are able, as a result, to boost their efficiency and/or change their business model to accommodate an increasingly tough global economic environment."

Jennings joined Morley from Sarasin Investment Management, where he pioneered the themed approach to managing global equities. Jennings spent 13 years at Sarasin, where the funds that he managed were awarded AAA ratings by Standard and Poor's Fund Services between 1999 and 2001.

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For further information:

Stephen Roberts, Head of International Retail Marketing
Tel: +352 40.28.20.319
Fax: +352 40.83.58.319
E-mail: stephenroberts@privilege.lu
GSM: +352 021.265.611

Notes to Editors:

• The value of an investment in the Privilege Portfolio funds can fall as well as rise. The investor may not get back the original amount invested.
• The information contained within this document should not be construed as a recommendation to purchase or sell stocks.
• Privilege Portfolio is the Luxembourg domiciled investment fund of the CGNU Group with 28 sub-funds ranging from lower risk money market and bond funds through international and regional equity funds to more speculative single country and theme funds.
• Morley Fund Management Limited is the Investment Adviser to Privilege Portfolio and is a member of the Norwich Union Marketing Group, members of which are regulated in the UK by the Financial Services Authority for life assurance, pensions and investments. Morley Fund Management Limited is a CGNU Group company.
• CGNU plc is the UK's largest insurance group, one of the top-five insurers in Europe and has substantial positions in other markets around the world. CGNU is the world's seventh- largest insurer based on gross worldwide premiums.
• CGNU's principal business activities are long-term savings, fund management and general insurance, with worldwide premium income and investment sales from ongoing business of more than Ł28 billion, and over Ł200 billion in assets under management at 31 December 2001.