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from the top. AEGON’s senior management at both the Executive Board and country unit level are committed to living in accordance with a corporate responsibility code. 

Increasingly, companies are judged not only on the quality of their products, services and financial performance, but also on many intangible criteria that fall within the category of corporate responsibility. It is important to us that we continue to meet international expectations and we are proud of our many contributions to the local communities where we operate. Examples of these activities are included in this year’s annual report. 

## The divestiture of Transamerica Finance Corporation 

It has been a long-standing strategy of AEGON to focus on core activities, the business we know best – life insurance, pensions, savings and investment products. 

As part of this strategy, we announced in August 2003 the agreement to sell most of Transamerica Finance Corporation’s (TFC) commercial lending activities to General Electric. This transaction was successfully completed in January 2004. We also sold Transamerica’s real estate tax services and flood hazard certification businesses in October 2003. The TFC companies had a successful year and we wish them well under their new owners. 

TFC’s businesses owned by AEGON now consist largely of maritime container and European trailer leasing. We will continue to seek the divestiture of the remaining TFC businesses in order to align AEGON’s resources with its focused strategy. 

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## AEGON’s policy towards currency hedging 

As it is for any international business with exposure to foreign currencies, currency translation affects AEGON. The majority of AEGON’s earnings are generated in non-euro currencies, while the company’s reporting currency is the euro. Our policy is quite simple - we do not hedge translation risk. While some form of hedging activity may have tempered the volatility of earnings in recent years, hedging our translated dollar earnings would have cost hundreds of millions of euro and would not have been a prudent use of shareholders’ funds. Rather than hedging against translation, we will continue our practice of advising investors about the approximate influence of currency movements on our reported earnings through the sensitivity analysis we perform and report on each year. 

For our balance sheet, liabilities in a particular currency are balanced against assets in that same currency. At the same time, all capital leverage debt is pro-rated in the local currencies relative to the invested capital, so changes in currency rates do not affect debt-to-capital ratios. 

## Discontinuation of the indirect income method 

As announced in the 2002 annual report, starting January 1, 2004, we will no longer use the indirect income method for recognizing gains and losses on our investments in shares and real estate. Since 1995, we have used this method to reflect the long-term nature of our business, by recognizing gains and losses on shares and real estate using a thirty-year average return against the seven-year average portfolio balance. In the international environment that AEGON operates, comparability is critical. For this reason, a new method will be used, which will be in line with what will be required by IFRS and is similar to US GAAP. This new method recognizes gains and losses on equity and real estate investments when realized. While the effect on net income is not determinable, future results are expected to become more volatile. However, we believe the increase in transparency and comparability is important. 

