In 2003, AEGON set up the Group Risk and Capital Committee at group level. This is in addition to the pre-existing risk management systems set up at country unit level. The objectives of the Group Risk and Capital Committee include monitoring AEGON’s overall risk exposures, making recommendations and overseeing remedial action where exposures are deemed excessive. Moreover, this committee is tasked with ensuring that risks are well measured and managed within the country units. The Group Risk and Capital Committee regularly reports to the Executive Board and the Supervisory Board. In the annual report, the Executive Board shall comment on the adequacy and effectiveness of its internal risk management and control systems also describing any significant changes and improvements that are contemplated. [II.1.3; II.1.4] 

In 2002, AEGON has adopted a Code of Conduct at group level. The Code of Conduct is monitored and implemented by a taskforce reporting directly to the Executive Board. This is in addition to the pre-existing Codes of Conduct adopted earlier by the majority of AEGON’s country units. The Code of Conduct includes appropriate whistleblower provisions, which give employees the ability to report on suspected irregularities without jeopardizing their positions. More detailed rules and regulations regarding the reporting of irregularities are being developed. Serious violations of the Code of Conduct, as well as any alleged irregularities concerning the functioning of Executive Board members are reported directly to the chairman of the Supervisory Board. The Code of Conduct of AEGON N.V. is posted on its website www.aegon.com. [II.1.3; II.1.6] 

AEGON’s annual report includes information about the most important external factors and variables influencing the results of the company. These sensitivity analyses customarily reported on in AEGON's annual report include the sensitivity to interest rates, equity and real estate markets, long-term assumptions of AEGON and currency markets. The Executive Board and Supervisory Board will continue to consider the publication of additional sensitivity analyses if and when appropriate. [II.1.5] 

None of the members of the Executive Board are a member of the Supervisory Board of more than one Dutch listed company nor are any of them chairman of the Supervisory Board of a listed company. Any appointment of members of the Executive Board as a supervisory or non-executive director of another listed company are subject to the prior approval of the Supervisory Board. The Executive Board and the Supervisory Board have agreed that members of the Executive Board intending to accept any other important position will notify the Supervisory Board prior to acceptance of such position. [II.1.7] 

## REMUNERATION 

In 2003, the Supervisory Board has on the advice of the Compensation Committee made amendments to the Remuneration Policy, which amendments came into effect on January 1, 2004. This revised Remuneration Policy will be 

submitted to the General Meeting of Shareholders on April 22, 2004 and, if adopted, be in place for a period of three years. 

AEGON places a high importance on attracting and retaining qualified directors and personnel, whilst safeguarding and promoting AEGON’s medium- and long-term interests. The Remuneration Policy for members of the Executive Board is reflective thereof. It is designed to support AEGON’s strategy for value creation and shareholder alignment, as well as the focus on performance and business results. In addition, it offers an incentive for board members through performance- linked pay, reflecting both their individual role as well as the collective responsibilities of the Executive Board as a whole. The Remuneration Policy also takes into consideration compensation levels in relevant reference markets and segments and corporate governance guidelines. [II.2] 

The Remuneration Policy for the members of the Executive Board includes fixed and variable components. For the variable components, the Supervisory Board has set clear and measurable criteria including performance of the AEGON share price and the development of AEGON’s earnings per share. For an overview of the Remuneration Policy for the Executive Board, please refer to page 71 and following. 

The Remuneration Policy also includes a plan for members of the Executive Board to be remunerated partly in stock options or stock appreciation rights. If members of the Executive Board are entitled to stock options and stock appreciation rights, these options and rights are granted solely by reference to the AEGON share price on Euronext Amsterdam at the close of trading on the date of granting thereof. The terms under which stock options and stock appreciation rights are issued shall not be altered during the term thereof except for technical alterations in accordance with market practice in events such as a stock split, mergers and acquisitions, share issuances and (super)dividends. [II.2.4; II.2.5] 

The Supervisory Board will implement further changes to the Remuneration Policy with regard to severance payments payable to new members of the Executive Board. These changes will include a maximum severance payment in the event of dismissal of the fixed component of the relevant member’s salary of one year, or two years in cases where a maximum of one year’s salary would be manifestly unreasonable for a member of the Executive Board who is dismissed in his first term of office. In addition, whilst giving due regard to the existing employment agreements with the current members of the Executive Board and the fact that employment conditions in the United States are different, the Supervisory Board intends to investigate whether the existing arrangements with regard to severance payments with current members of the Executive Board can be reconciled with the Dutch Corporate Governance Code provision purporting to limit the severance payment in the event of dismissal to the maximum indicated by the code. [II.2.7] 

