Our shareholders

AEGON works hard to create sustainable financial returns for its shareholders, while making sure the Group also continues to respect its core values and the interests of its other stakeholders.

Clear, accurate, timely and transparent, financial communication allows shareholders to make informed decisions regarding their investments in the company.

AEGON has thousands of institutional and retail shareholders around the world. More than three-quarters are located in North America, the Netherlands and United Kingdom – the Group’s three main markets. AEGON’s largest single shareholder is Vereniging AEGON, an association set up to safeguard the long-term interests of all AEGON’s stakeholders. At the end of December 2007, Vereniging AEGON was the only shareholder controlling 5% or more of the Group 1. Vereniging AEGON’s stake currently totals 34.02% of AEGON’s total voting capital 2.

AEGON is listed on four stock exchanges: Amsterdam, New York, London and Tokyo. The Group’s primary listing is in Amsterdam.

Financial communication

AEGON’s Investor Relations program seeks to provide the Group’s investors – shareholders and bondholders – with the information they need to make sound investment decisions. During 2007, AEGON took a number of measures designed to improve its financial communications:

• Launched a new measure of operating earnings;
• Changed accounting rules in the Netherlands to ensure the Group’s financial statements better reflect the economic matching of assets and liabilities;
• Started publishing a quarterly financial supplement.

These changes were all designed to help investors, analysts and other interested parties more accurately assess the economic performance of AEGON’s businesses.

In addition, during 2007, AEGON’s Investor Relations staff 3 in the Netherlands and the United States maintained active communications with the international financial community through:

• Regular press releases;
• Investor road shows in Europe, Asia and North America;
• Individual meetings between analysts, investors and AEGON senior management;
• Two Analyst and Investor conferences in Amsterdam, in May 2007, and in New York, in November 2007.

In February 2008, AEGON’s Executive Board formally adopted a new policy setting out guidelines for communications between the Group and its investors, in line with recent recommendations from the Dutch Corporate Governance Code Monitoring Committee, available on AEGON’s website.

Shareholder returns

AEGON returned a total of EUR 1.9 billion to shareholders in 2007 in the form of share repurchases and increased dividend payments. Thanks to strong cash flows and a solid financial base, the Group was able to increase its proposed dividend payment for 2007 to EUR 0.62 per share, a 13% improvement from the previous year’s EUR 0.55 per share. In addition, between August and November 2007, AEGON bought back EUR 1 billion worth of its own shares, as part of a strategy to return surplus capital to shareholders and improve returns for investors in the company.

Including dividends paid during the year, the total return on an AEGON common share in 2007 was a negative 12.7% 4, compared with +8.7% in 2006. In US dollars, the total return in 2007 was -3.5%. The overall decrease was due to a lower stock price. By comparison, total returns from the DJ Stoxx 600 Insurance Index and the US-dollar denominated S&P 500 Insurance Index were –9.0% and –6.3% respectively.

In 2007, AEGON paid out a total of EUR 1,325 million in interest and dividends to shareholders and bondholders, up from EUR 1,086 million the year before.

During the course of 2007, AEGON’s share price lost 16.3% of its value. In US dollar terms, the decline was more moderate, at 7.5%.

By comparison, during 2007 the DJ Stoxx 600 Insurance Index fell by 11.9%. The S&P 500 Insurance Index, meanwhile, was down 7.7%.

AEGON’s solid financial base

Despite recent turbulence in world financial markets, AEGON enjoys a strong capital position. At the end of December 2007, shareholders’ equity amounted to EUR 15.2 billion, down from EUR 18.6 billion twelve months previously. This decline was due primarily to three factors:

• A decrease in the revaluation reserves as a result of lower asset values;
• The impact of a weaker US dollar;
• The cost of dividend and coupon payments and share repurchases.

It should be noted that any declines in revaluation reserves impact shareholders’ equity, but do not affect the Group’s net income (unless the underlying assets are considered to be ‘impaired’). The effect of movements in the revaluation reserve on AEGON’s capitalization ratios and capital adequacy are therefore minimal. During 2007, net impairments (which directly impact earnings) totaled just EUR 76 million, a fraction of the Group’s overall revenue-generating investments of EUR 371 billion.

Shareholders’ equity represented 71.5% of AEGON’s overall capital base, above the minimum requirement of 70% that the Group sets for itself. Perpetual securities accounted for another 21.7% of AEGON’s total capital base at the end of 2007 and senior and dated subordinated debt the remaining 6.8%.

This solid financial base:

• Provides strong capital adequacy for local operations and business units, as well as for the Group as a whole;
• Strengthens customer, policyholder, investor and employee confidence;
• Forms the basis for the Group’s strategy of promoting a combination of organic growth and selective, targeted acquisitions in high-growth markets.

AEGON’s financial strength is reflected in the continued confidence of major international rating agencies:

Ratings	AEGON USA	AEGON The Netherlands	AEGON Scottish Equitable
S&P rating	AA	AA	AA
S&P outlook	Stable	Stable	Stable
Moody’s rating	Aa3	Not rated	Not rated
Moody’s outlook	Stable	Not rated	Not rated
Fitch rating	AA+	Not rated	Not rated
Fitch outlook	Stable	Not rated	Not rated

Managing risk

Managing risk is at the heart of what an insurance company does. Insurers must be able to fulfill the long-term promises they make to their policyholders and investors. That means managing a range of financial and operational risks as effectively and efficiently as possible.

In recent years, risk management has grown in significance. Capital markets have become more sophisticated, while changes to international accounting rules and a possible reform of European capital adequacy requirements are creating new challenges and new opportunities. Events such as the September 11th, 2001, attacks on New York and Washington and the more recent concerns over the subprime mortgage market in the United States serve to highlight the importance risk management now plays in the success or otherwise of leading financial sector companies.

AEGON faces a number of different types of risk. These include:

• Movements in financial markets and the credit strength of investments;
• Movements in interest and currency exchange rates;
• Changes in longevity, mortality or morbidity trends;
• Lawsuits, fraud, changes in tax rates, business and other strategic risks.

Clearly, the amount of risk an insurance company is willing to take on – and the nature of that risk – has a profound impact on its corporate strategy. Risk management helps determine the way an insurance company designs its products and services, the way it prices insured risks, the way it allocates available capital, and even its approach to mergers and acquisitions.

As a company with businesses in more than twenty countries around the world, AEGON’s approach to risk management is an integrated one, combining local knowledge with clearly defined principles and policies established at Group level.

This approach:

• Allows country units to share best practice;
• Ensures a closer alignment between risk management and AEGON’s underlying businesses.

In recent years, AEGON has been setting up new governance structures, both at Group level and within its country units, to ensure the effectiveness of an integrated, Group-wide risk management strategy.

AEGON has put in place a series of local and international risk and capital committees. Through these committees, AEGON’s local operations play a central role in identifying and measuring risk. Thanks to AEGON’s integrated approach, they are also able to use more coordinated, Group-wide strategies to handle that risk more effectively. Today, AEGON has approximately twenty senior risk managers in The Hague, Dublin and the United States, responsible for overseeing risk management for AEGON’s businesses around the world.

AEGON has recently announced a number of measures designed to further strengthen the Group’s risk management. As part of these measures:

• A dedicated risk committee will be created, made up of members of AEGON’s Supervisory Board;
• The Management Board will increase its involvement in risk management;
• AEGON’s two corporate risk departments – US Corporate Risk and Group Risk – will be brought together to form a single Group Risk function, providing support and risk supervision to individual operating units. Under this set-up, the existing US Corporate/Group Risk team will continue to support US management;
• Regional Chief Risk Officers will be appointed to facilitate Group-wide risk management initiatives.

The next few years will bring significant changes to the way in which Europe’s insurance companies manage their finances:

• The European Union Commission is planning the first major overhaul of EU capital adequacy guidelines in 30 years;
• The method commonly used to calculate embedded value – probably the most important measure of an insurance company’s underlying worth – is also being redefined;
• Under IFRS (International Financial Reporting Standards), many accounting rules have already changed and further changes are planned.

AEGON is planning to incorporate these changes into its ‘Economic Framework’ – a new internal model for risk and capital management that the Group intends to introduce in 2008. The ‘Economic Capital Model’ will help more closely align AEGON’s financial management with its underlying businesses. Having an efficient, working internal model is a necessary precondition for AEGON to switch to ‘Group Supervision’ under proposed new EU solvency requirements – a step that is expected to reward the Group’s sound and efficient risk management and, ultimately, reduce the amount of capital AEGON needs to hold and free more money for other projects.

Corporate governance

AEGON is a public company under Dutch law. It is governed by three corporate bodies:

• General Meeting of Shareholders
• Executive Board
• Supervisory Board

The Executive Board is charged with the management of the company. It comprises three members:

• Donald J. Shepard (Chairman)
• Alexander R. Wynaendts (Chief Operating Officer)
• Joseph B. M. Streppel (Chief Financial Officer)

Mr. Shepard is due to retire in 2008 in accordance with the terms of his contract. He will be succeeded by Mr. Wynaendts.

Governance stucture

1. Please note that members of AEGON's Executive Board are also members of the Management Board.
2. AEGON's Risk Committee was established at the beginning of 2008, as part of broader efforts to strengthen supervision of the Group's risk management strategy.

In addition, AEGON has a Management Board, introduced at the beginning of 2007 and comprising the three members of the Group’s Executive Board and the CEOs of the three largest country units, the United States, the Netherlands and the United Kingdom. There were no further changes to the corporate governance structure of either AEGON N.V. or its country units during 2007. In January 2008, Johan van der Werf stepped down from the Management Board and announced his resignation as Chief Executive Officer of AEGON The Netherlands.

AEGON’s Supervisory Board oversees the management of the Executive Board as well as the overall course of the company’s business and corporate strategy, taking into account the relevant interests of AEGON’s stakeholders. The Supervisory Board comprises eleven members:

• Dudley G. Eustace (Chairman)
• O. John Olcay (Vice-Chairman)
• Irving W. Bailey II
• Antony Burgmans
• René Dahan (Chairman, Compensation Committee)
• Shemaya Levy (Chairman, Audit Committee)
• Karla M.H. Peijs
• Toni Rembe
• Willem F.C. Stevens
• Leo M. van Wijk

Mr. Eustace also serves as Chairman of AEGON’s Nominating committees. A decision was taken to discontinue AEGON’s Strategy Committee at the end of 2007.

All members of AEGON’s Supervisory Board may be considered ‘independent’, as defined by the Dutch Corporate Governance Code, with the exception of Mr. Storm, who formerly served as Chairman of the Group’s Executive Boards.

A General Meeting of Shareholders is held at least once a year. Its main function is to decide matters such as the adoption of annual accounts, the approval of dividend payments and appointments to AEGON’s Executive and Supervisory Boards.

Further details on AEGON’s governance as well as Executive and Supervisory Board remuneration may be found either in the 2007 Annual Report or on the company’s website.

Regulations

AEGON is registered in the Netherlands, and listed on four seperate stock exchanges. As such, the Group complies with a variety of different governance codes. These include:

• Sarbanes Oxley Act in the United States;
• The Dutch Corporate Governance Code in the Netherlands;
• The Combined Code on Corporate Governance in the United Kingdom.

AEGON’s high quality investment portfolio

World financial markets came under considerable pressure in 2007. Initially, this pressure stemmed from problems in the US housing market and so-called ‘subprime’ mortgages. By the end of the year, concerns had spread to credit markets around the world.
AEGON has taken a number of measures designed to maintain its strong financial position, despite difficult market conditions.
 • AEGON first became concerned about the direction of the US subprime market in 2002.
Since then the company has switched more money into safer, higher quality subprime investments. Today, 99% of AEGON USA’s subprime investments are rated either ‘AAA’ or ‘AA’.
 • In addition, the Group has also taken further steps to reduce its exposure to equity markets in both the Americas and the Netherlands.
 • Despite difficult market conditions, AEGON has proposed a 13% increase in full-year dividends for shareholders and has maintained its very high credit rating with international rating agencies such as Standard & Poor’s and Moody’s.
“In 2007, AEGON maintained its strong financial position despite considerable turbulence in world financial markets. We suffered no material impairments during the year, a testimony to the Group’s robust and effective approach to managing risk.” – Don Shepard, Chairman of AEGON’s Executive Board.

Investing responsibly: AEGON as a shareholder

With EUR 371 billion in revenue-generating assets, AEGON is one of the world’s leading institutional investors. It manages investments not only on its own account, but also on behalf of its various customers and policyholders. The Group places great importance on the responsibilities it has as an investor and recognizes that poor social or environmental practices can affect the value of the companies in which it invests.

Investment strategy

AEGON’s investment strategy consists in attempting to balance the need to maximize returns with consideration for social, environmental and other non-financial factors. AEGON’s asset management companies adhere to a range of local, regional and international corporate governance initiatives. These include guidelines provided by the:

• Organization for Economic Cooperation and Development (OECD);
• International Corporate Governance Network (ICGN);
• Dutch Corporate Governance Code 5
• Department of Labor in the United States;
• Combined Code in the United Kingdom.

Based on these initiatives, AEGON’s investment companies in the United States, the Netherlands, the United Kingdom and Canada have their own local voting policies 6. These policies are periodically reviewed and updated.

In addition, AEGON companies regularly report their voting activities or, alternatively, will supply voting records to customers and investors, if requested.

Early in 2008, AEGON introduced a new Global Voting Policy. This sets out common Group-wide practices and principles for all AEGON asset management companies around the world and operates alongside existing local voting policies.

The Global Voting Policy covers the following areas:

• Interaction with local voting policies;
• How and when to exercise voting rights;
• Use of proxy voting, agencies and advisors;
• Avoiding possible conflicts of interest;
• Approach to securities lending;
• Importance of sustainability.

A copy of the Global Voting Policy may be found on AEGON’s corporate website.

AEGON’s new Global Voting Policy is in line with the principles on responsible investment and sustainability contained in the Group’s Code of Conduct. These principles stress the importance of managing investments responsibly with consideration for ‘the financial and non-financial factors likely to affect the returns on those investments’.

When making investments, AEGON takes into account a number of non-financial risks and factors including:

• Political
• Regulatory and /or legal
• Environmental
• Social
• Accounting
• Reputational

AEGON’s investment analysis explicitly considers company management’s track record on these issues, particularly for sectors of the economy that have significant environmental impact or exposure to political risk. Both AEGON UK and AEGON The Netherlands engage actively with management of companies in which they invest. AEGON fund managers and analysts regularly meet executives from these companies. The aim of continuous and in-depth dialogue is to ensure AEGON is aware of all aspects of the company’s activities.

Socially Responsible Investments

In the United Kingdom, the Netherlands and Hungary, AEGON offers Socially Responsible Investments (SRI) funds. These funds invest in companies that offer ethically and environmentally sound business practices. Certain AEGON companies in the United States offer similar SRI funds managed by third parties. SRI funds typically avoid investing in certain sectors of the economy, including armaments, tobacco, firearms and gambling. They may also exclude investments in companies that have in the past made political donations, have been fined for pollution offenses or operate in countries with poor human rights records. As well as ‘negative screening’, AEGON’s SRI funds also focus on investing in companies that, in individual sectors, offer the best corporate responsibility records.

At the end of 2007, AEGON had six separate SRI funds, three in the United Kingdom, two in the Netherlands and one in Hungary. AEGON UK launched its Ethical Cautious Managed fund at the beginning of March 2007. The fund complements AEGON UK’s Ethical Corporate Bond and Ethical Equity fund and provides a combination of income and long-term capital growth by investing in a range of UK equities, bonds and cash that meet the fund’s pre-determined criteria.

Country unit	Funds
AEGON UK	Ethical Cautious Managed Ethical Corporate Bond Ethical Equiy Fund
AEGON The Netherlands	AEGON Duurzaam Aandelen Fonds 1 AEGON Sustainable World Equity Fund
AEGON Hungary	AEGON Climate Change Fund
Translation: the AEGON Sustainable Shares Fund.

In 2007, AEGON Hungary, meanwhile, launched its first SRI fund – the AEGON Climate Change Fund. The new fund invests primarily in listed, investment-grade companies likely to benefit from global climate change or involved in the agribusiness sector. This includes companies operating in areas such as clean technology, environmental management, renewable energies, bio fuels as well as livestock and commodity producers.

At the end of 2007, AEGON’s SRI funds in the United Kingdom, the Netherlands and Hungary totaled EUR 1.08 billion, or 0.3% of the Group’s total revenue-generating assets, up from EUR 800 million or 0.2% the year before. This increase reflects the growing demand among international investors for socially, environmentally and ethically sound investments. As a proportion of AEGON’s assets under management, SRI funds grew by 32% in 2007.

AEGON’s SRI assets under management in the Netherlands fell slightly in 2007 – the result of a decision by AEGON The Netherlands to reduce its exposure during the year to world equity markets.

Naturally, AEGON does not seek to place a pre-determined proportion of its assets in SRI funds. Most assets in both the United Kingdom and the Netherlands are managed by AEGON on behalf of individual policyholders.

SRI funds Country unit	Total invested		Change	Total invested as % of country unit’s assets under management
Year end	2007	2006		2007	2006
United Kingdom (in GBP million)	740	472	57%	1.39%	0.97%
The Netherlands (in EUR million)	68	97 1	-30%	0.10%	0.15%
Hungary (in EUR million)	1	n/a	n/a	n/a	n/a
Total (in EUR million)	1,078	800	35%	0.29%	0.22%
Please note that this figure has been restated. Due to a financial reporting error, total SRI assets under management in the Netherlands at the end of 2006 were published mistakenly as EUR 154 million in AEGON’s 2006 Corporate Responsibility Report.

AEGON upholds a number of different international agreements, setting out guidelines or minimum standards for pollution, human rights or labor conditions. These agreements help shape and inform the Group’s investment decisions.

Carbon Disclosure Project – AEGON knows that failing to tackle climate change could have significant consequences in the years ahead not only for the environment, but also for the world economy. AEGON is a signatory to the Carbon Disclosure Project, a program that encourages companies to be more open about their greenhouse gas emissions. Investors that have signed up to the Project have approximately USD 41 trillion in assets under management.

Human Rights – As a global company, AEGON recognizes its responsibility for helping defend and promote human rights. AEGON upholds the United Nations’ Universal Declaration of Human Rights and subscribes to the core standards of the International Labor Organization (ILO) as well as the principles on human rights and labor standards contained in the UN Global Compact. AEGON applies this policy both to its own operations and, wherever possible, to its business dealings with third parties.

Global Reporting Initiative – AEGON supports the Global Reporting Initiative (GRI) – a project that aims to develop accepted and comparable standards for measuring corporate and social responsibility performance. GRI’s ‘G3’ guidelines served as a framework for this 2007 Corporate Responsibility Report (for further information, please refer to Appendix II).

Renewable, natural resources in the United States

AEGON’s investments in the United States include a number of projects designed to encourage use of renewable natural resources. AEGON USA Realty Advisors has invested in four wind generation plants capable of producing more than 286 MW. In addition, solar panels will be installed on one of AEGON’s affordable housing tax credit investment sites in the United States. Together, these projects represent enough energy production to power between 75,000 and 85,000 homes.

As part of its overall equity portfolio, AEGON USA Realty Advisors also maintains investments of more than USD 100 million in timberland, a renewable, natural resource. In addition, AEGON’s US timberland loan portfolio currently stands at USD 84 million, including USD 20 million in credits agreed during 2007.

1. As determined under Dutch securities law.
2. Including preference shares. Vereniging AEGON has, however, agreed voluntarily not to make use of the full voting rights attached to its preference shares, except in the event of a ‘special cause’. Special causes may include a hostile bid for all or part of the Group. In absence of such a ‘special cause’, Vereniging AEGON’s voting interest represents 23.94%. For more information on Vereniging AEGON and its relationship with AEGON please refer to the Annual Report, available at the Group’s website.
3. Use this link for contact details for AEGON’s Investor Relations department.
4. Total shareholder return reflects both movements in the AEGON stock price during the year as well as dividend payments. The calculation is based on the assumption that any cash dividends are reinvested in the stock.
5. For further information on AEGON’s compliance with the Dutch Corporate Governance Code, please refer to the Group’s Annual Report, available on the corporate website.
6. Further details may be found online at:
   AEGON Nederland N.V. (Netherlands) www.aegon.nl
   AEGON Capital Management Inc. (United States) www.aegoncapital.ca
   Transamerica Investment Management LLC (United States) www.timllc.com
   AEGON Asset Management UK (United Kingdom) www.aegonam.co.uk