Luxembourg: Aviva adds Value to Privilege Portfolio range

In a departure from the normal GARP ('growth at a reasonable price') style of management for its Luxembourg domiciled funds, Aviva Funds International has added a European Value Fund to its Privilege Portfolio range on 3 December 2002.

Authorisation for marketing of the new fund is currently being sought in Spain, Italy, France, Belgium and the Nordic countries, amongst others.

The Privilege Portfolio-European Value Fund aims to provide long-term capital appreciation by investing primarily in the equities of continental European companies that are quoted or traded on developed stock markets and which appear to offer significant value. The fund is priced in euros and the initial offer price on 3 December 2002 was five euros per share.

The Privilege Portfolio-European Value Fund is managed by Rita Dhut, who joined Morley Fund Management ('Morley'), the Investment Adviser to Privilege Portfolio, in June 2001. Prior to joining Morley, Rita managed both UK and European funds at Prudential/M&G. Since joining Morley, the newly created Value team of which Rita is a key member has achieved outperformance of 6.4% compared to the benchmark for its internal Value funds for the period from start of April 2002 to end-November 2002.

The portfolio of the Privilege Portfolio-European Value Fund will concentrate on around 80 holdings, with the emphasis on low- valued stocks where an historic deterioration in fundamentals or understatement of improvement is aggressively built into the price. The Morley value style utilises theories of behavioural finance and employs fundamental analysis and consistent valuation techniques. It is based on a number of premises:

• Investor overconfidence or lack of confidence can lead to extreme valuations in individual stocks;
• Most market participants are unable to accurately forecast the future;
• As a result, stocks with high ratings are often devastated by negative earnings surprises as they price in little risk, whereas negative surprises tend to have far less effect on low-rated stocks in which investors already have low expectations.

Rita Dhut, manager of the Privilege Portfolio-European Value Fund said: "In my opinion, the Value style of fund management entails selecting out of favour stocks that have low valuation criteria. I believe that markets are currently somewhat directionless following the large falls of recent times and that valuations have compressed significantly. As a result, I think that markets are quite irrational with investors lacking the usual thorough analysis of stocks due to confusion about both markets and the global economy. This suits our value style well, as our process is based on strong disciplines of analysis and removing as much emotion as possible from the decision-making process. We adopt a bottom up process and therefore avoid making a call on the market. We aim to outperform through good stock selection."

Robert Woolf, managing director of Aviva Funds International commented: "The addition of the Privilege Portfolio-European Value Fund to the range gives our investors a further opportunity for diversification in the style of investment management that they have access to. The last few years have demonstrated that there is not one single way to outperform the markets and investing in different styles of management can reduce the risks of investing in a single style."

For further information:
Stephen Roberts, Head of European Retail Marketing
Aviva Funds International Ltd
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.
• Aviva Funds International Limited is the marketing and distribution agent for Privilege Portfolio. Privilege Portfolio is the Luxembourg-domiciled investment fund of the Aviva Group with 29 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 and Aviva Funds International Limited are Aviva companies.
• Aviva is the UK's largest insurance group, one of the top- five life insurers in Europe and has substantial positions in other markets around the world. Aviva is the world's seventh- largest insurer based on worldwide gross written premiums.
• Aviva'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.