Notes to the consolidated statement of changes in equity

Amounts in EUR million, unless otherwise stated

14	Shareholders’ equity

Issued share capital and reserves attributable to shareholders of AEGON N.V.

	Note	2007	2006	2005
Share capital – par value		258	255	251
Share premium		7,101	7,104	7,106
Treasury shares		(2,053)	(787)	(545)
Total share capital		5,306	6,572	6,812
Retained earnings		12,402	10,923	8,406
Revaluation reserves		(516)	1,648	2,644
Other reserves		(2,041)	(538)	853
Total shareholders’ equity		15,151	18,605	18,715

14.1	Share capital – par value

	2007	2006	2005
Common shares	196	195	192
Preferred shares A	53	53	53
Preferred shares B	9	7	6
Total share capital – par value	258	255	251

Common shares	2007	2006	2005
Authorized share capital	360	360	360
Number of authorized shares (in millions)	3,000	3,000	3,000
Par value in cents per share	12	12	12

	Number of shares (thousands)	Total amount
At January 1, 2005	1,552,685	186
Share dividend	46,292	6
At December 31, 2005	1,598,977	192
Share dividend	23,950	3
At December 31, 2006	1,622,927	195
Withdrawal	(11,600)	(2)
Share dividend	25,218	3
At December 31, 2007	1,636,545	196

Preferred shares	2007	2006	2005
Authorized share capital	250	250	250
Par value in cents per share	25	25	25

	Preferred shares A		Preferred shares B
	Number of shares (thousands)	Total amount	Number of shares (thousands)	Total amount
At January 1, 2005	211,680	53	16,900	4
Shares issued	–	–	6,950	2
At December 31, 2005	211,680	53	23,850	6
Shares issued	–	–	5,440	1
At December 31, 2006	211,680	53	29,290	7
Shares issued	–	–	5,880	2
At December 31, 2007	211,680	53	35,170	9

All issued common and preferred shares are fully paid. Repayment of capital can only be initiated by the Executive Board, is subject to approval of the Supervisory Board and must be resolved by the General Meeting of Shareholders. Moreover, repayment on preferred shares needs approval of the related shareholders.

There are restrictions on the amount of funds that companies within the Group may transfer in the form of cash dividends or otherwise to the parent company. These restrictions stem from solvency and legal requirements. Refer to note 44 for a description of these requirements.

Vereniging AEGON, based in The Hague, holds all of the issued preferred shares.

Vereniging AEGON, in case of an issuance of shares by AEGON N.V., may purchase as many class B preferred shares as would enable Vereniging AEGON to prevent or correct dilution to below its actual percentage of voting shares, unless Vereniging AEGON as a result of exercising these option rights would increase its voting power to more than 33%. Class B preferred shares will then be issued at par value (EUR 0.25), unless a higher issue price is agreed. In the years 2003 through 2006 29,290,000 class B preferred shares were issued under these option rights. In 2007, Vereniging AEGON exercised its option rights to purchase in aggregate 5,880,000 class B preferred shares at par value to correct dilution caused by AEGON’s stock dividend issuances and treasury stock sales during the year.

AEGON N.V. and Vereniging AEGON have entered into a preferred shares voting rights agreement, pursuant to which Vereniging AEGON has voluntarily waived its right to cast 25/12 vote per class A or class B preferred share. Instead, Vereniging AEGON has agreed to exercise one vote only per preferred share, except in the event of a ‘special cause’ , such as the acquisition of a 15% interest in AEGON N.V., a tender offer for AEGON N.V. shares or a proposed business combination by any person or group of persons, whether individually or as a group, other than in a transaction approved by the Executive Board and Supervisory Board. If, in its sole discretion, Vereniging AEGON determines that a ‘special cause’ has occurred, Vereniging AEGON will notify the General Meeting of Shareholders and retain its right to exercise the full voting power of 25/12 vote per preferred share for a limited period of six months.

In both 2001 and 2002, AEGON N.V. entered into total return swaps with Vereniging AEGON in order to hedge the share option plan for each respective year. On April 15, 2005, these total return swaps were terminated, resulting in a positive impact on shareholders– equity of EUR 115 million. The amount has been added to retained earnings.

With regard to granted share appreciation rights and option rights and their valuation we refer to note 37.

14.2	Share PREMIUM

	2007	2006	2005
At January 1	7,104	7,106	7,112
Share dividend	(3)	(2)	(6)
At December 31	7,101	7,104	7,106
Share premium relating to:
- Common shares	5,049	5,052	5,054
- Preferred shares	2,052	2,052	2,052
Total share premium	7,101	7,104	7,106

The share premium account reflects the balance of paid-in amounts above par value at issuance of new shares less the amounts charged for share dividends.

14.3	Treasury shares

On the balance sheet date AEGON N.V. and its subsidiaries held 136,330,982 of its own common shares with a face value of EUR 0.12 each.

Movements in the number of repurchased own shares held by AEGON N.V. were as follows:

	2007	2006	2005
	Number of shares (thousands)	Number of shares (thousands)	Number of shares (thousands)
At January 1	37,724	18,651	25,233
Transactions in 2007:
Purchase: 3 transactions, average price EUR 13.71	33,200
Share repurchase program: various transactions, average price EUR 13.41	74,570	–	–
Sale: 7 transactions, average price EUR 15.53	(66)
Withdrawal of common share capital	(11,600)	–	–
Transactions in 2006:
Purchase: 30 transactions, average price EUR 14.78	–	19,076	–
Sale: 2 transactions, average price EUR 13.46	–	(3)	–
Transactions in 2005:
Purchase: one transaction on May 17, price EUR 9.85	–	–	3,821
Sale: 31 transactions, average price EUR 10.28	–	–	(10,403)
At December 31	133,828	37,724	18,651

As part of their insurance and investment operations, subsidiaries within the Group also hold AEGON N.V. common shares, both for their own account and for account of policyholders. These shares have been treated as treasury shares and are (de)recognized at the consideration paid or received.

	2007		2006		2005
	Number of shares (thousands)	Total amount	Number of shares (thousands)	Total amount	Number of shares (thousands)	Total amount
Held by AEGON N.V.	133,828	2,007	37,724	724	18,651	442
Held by subsidiaries	2,503	46	3,086	63	4,664	103
at December 31	136,331	2,053	40,810	787	23,315	545

14.4	Revaluation reserves

	Available- for-sale investments	Real estate held for own use	Cash flow hedging reserve	Total
At January 1, 2005	2,064	27	50	2,141
Gross revaluation	772	(1)	139	910
Net (gains)/losses transferred to income statement	(714)	–	63	(651)
Foreign currency translation differences	139	3	–	142
Tax effect	157	–	(62)	95
Other	32	(4)	(21)	7
At December 31, 2005	2,450	25	169	2,644
At January 1, 2006	2,450	25	169	2,644
Gross revaluation	(629)	15	(17)	(631)
Net (gains)/losses transferred to income statement	(527)	–	(130)	(657)
Foreign currency translation differences	(70)	(3)	(4)	(77)
Tax effect	235	(5)	51	281
Other	77	–	11	88
At December 31, 2006	1,536	32	80	1,648
At January 1, 2007	1,536	32	80	1,648
Gross revaluation	(2,150)	9	(5)	(2,146)
Net (gains)/losses transferred to income statement	(891)	–	25	(866)
Foreign currency translation differences	46	(2)	(12)	32
Tax effect	823	(2)	(34)	787
Other	(43)	(1)	73	29
At December 31, 2007	(679)	36	127	(516)

The revaluation accounts for both available-for-sale investments and for real estate held for own use include unrealized gains and losses on these investments, net of tax. Upon sale, the amounts realized are recognized in the income statement or transferred to retained earnings. Upon impairment, unrealized losses are recognized in the income statement. There are restrictions on the distribution of the balance of the revaluation reserve related to real estate held for own use to shareholders.

The closing balances of the revaluation reserve for available-for-sale investments relate to the following instruments:

	2007	2006	2005
Shares	278	909	1,097
Bonds	(992)	612	1,423
Other	35	15	(70)
Revaluation reserve for available-for-sale investments	(679)	1,536	2,450

The cash flow hedging reserve is made up of (un)realized gains and losses on the effective portions of hedging instruments, net of tax. The amounts are recognized in the income statement at the moment of realization of the hedged position to offset the gain or loss from the hedged cash flow. No amounts have been released from equity to be included in the initial measurement of non-financial assets or liabilities.

14.5	Other reserves

	Foreign currency translation reserve	Net foreign investment hedging reserve	Equity movements of associates	Total
At January 1, 2005	(827)	72	74	(681)
Movement in foreign currency translation and net foreign investment hedging reserves	2,143	(628)	–	1,515
Equity movements of associates	–	–	19	19
At December 31, 2005	1,316	(556)	93	853
At January 1, 2006	1,316	(556)	93	853
Movement in foreign currency translation and net foreign investment hedging reserves	(1,478)	153	–	(1,325)
Disposals	–	–	2	2
Equity movements of associates	–	–	(68)	(68)
At December 31, 2006	(162)	(403)	27	(538)
At January 1, 2007	(162)	(403)	27	(538)
Movement in foreign currency translation and net foreign investment hedging reserves	(1,598)	153	–	(1,445)
Equity movements of associates	–	–	(58)	(58)
At December 31, 2007	(1,760)	(250)	(31)	(2,041)

The foreign currency translation reserve includes the currency results from investments in non-euro denominated subsidiaries. The amounts are released to the income statement upon the sale of the subsidiary.

The net foreign investment hedging reserve is made up of unrealized gains and losses on the effective portions of hedging instruments, net of tax. The amounts are recognized in the income statement at the moment of realization of the hedged position to offset the gain or loss from the net foreign investment.

The equity movements of associates reflect AEGON’s share of changes recognized directly in the associate’s equity.

15	Other equity instruments

	Junior perpetual capital securities	Perpetual cumulative subordinated bonds	Share options not yet exercised	Total
At January 1, 2005	1,352	1,517	–	2,869
Instruments issued	1,457	–	–	1,457
Instruments redeemed	–	(950)	–	(950)
Share options granted	–	–	3	3
At December 31, 2005	2,809	567	3	3,379
At January 1, 2006	2,809	567	3	3,379
Instruments issued	638	–	–	638
Share options granted	–	–	13	13
Deferred tax	–	–	2	2
At December 31, 2006	3,447	567	18	4,032
At January 1, 2007	3,447	567	18	4,032
Instruments issued	745	–	–	745
Share options granted	–	–	18	18
At December 31, 2007	4,192	567	36	4,795

Junior perpetual capital securities	Coupon rate	Coupon date: quarterly, as of	Year of first call	2007	2006	2005
USD 500 million	6.5%	March 15	2010	424	424	424
USD 250 million	floating LIBOR rate 1	March 15	2010	212	212	212
USD 550 million	6.875%	September 15	2011	438	438	–
EUR 200 million	6.0%	July 21	2011	200	200	–
EUR 950 million	floating CMT rate 2	January 15	2014	950	950	950
USD 500 million	floating CMS rate 3	January 15	2014	402	402	402
USD 1 billion	6.375%	March 15	2015	821	821	821
USD 1,050 million	7.25%	December 15	2012	745	–	–
Total junior perpetual capital securities				4,192	3,447	2,809
The coupon of the USD 250 million junior perpetual capital securities, callable in 2010, is based on the yield of three-month LIBOR plus an additional spread of 87.5 basis points. The coupon will be reset each quarter based on the then prevailing three-month LIBOR yield, with a minimum of 4%. The coupon of the EUR 950 million junior perpetual capital securities, callable in 2014, is based on the yield of ten-year Dutch government bonds plus an additional spread of ten basis points. The coupon will be reset each quarter based on the then prevailing ten-year Dutch government bond yield, with a maximum of 8%. The coupon of the USD 500 million junior perpetual capital securities, callable in 2014, is based on the yield of ten-year US dollar interest rate swaps, with an additional spread of ten basis points. The coupon is reset each quarter based on the then prevailing ten-year US dollar interest rate swap yield, with a maximum of 8.5%.

The interest rate exposure on some of these securities has been swapped, using derivatives, to three-month LIBOR yield.

The securities have been issued at par. The securities have subordination provisions and rank junior to all other liabilities. The conditions of the securities contain certain provisions for optional and required coupon payment deferral. Although the securities have no stated maturity, AEGON has the right to call the securities for redemption at par for the first time on the coupon date in the years as specified, or on any coupon payment date thereafter.

Perpetual cumulative subordinated bonds	Coupon rate	Coupon date	Year of first call	2007	2006	2005
EUR 114 million	7.625% 1	July 10	2008	114	114	114
EUR 136 million	7.25% 2	October 14	2008	136	136	136
EUR 203 million	7.125% 2	March 4	2011	203	203	203
EUR 114 million	4.156% 3	June 8	2015	114	114	114
Total perpetual cumulative subordinated bonds				567	567	567
The coupon of the EUR 114 million bonds with an interest rate of 7.625% is fixed. The coupon for the EUR 136 million 7.25% bonds is set at 7.25% until October 14, 2008, while the coupon for the EUR 203 million 7.125% bonds is set at 7.125% until March 4, 2011. On these dates, and after every consecutive period of ten years, the coupons will be reset at the then prevailing effective yield of nine- to ten-year Dutch government securities and a spread of 85 basis points. The coupon for the EUR 114 million bonds was set at 8% until June 8, 2005. As of this date, the coupon is set at 4.156% until 2015.

The bonds have the same subordination provisions as dated subordinated debt. In addition, the conditions of the bonds contain provisions for interest deferral and for the availability of principal amounts to meet losses. Although the bonds have no stated maturity, AEGON has the right to call the bonds for redemption at par for the first time on the coupon date in the years as specified.