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Aegon operates a Currency Risk Policy which applies currency risk exposure limits both at Group and regional levels, and under which direct currency speculation or program trading by country units is not allowed unless explicit approval has been granted by the Group Risk and Capital Committee. Assets should be held in the functional currency of the business written or hedged back to that currency. Where this is not possible or practical, remaining currency exposure should be sufficiently documented and limits are placed on the total exposure at both group level and for individual country units. 

Information on Aegon’s 3-year historical net income / (loss) and shareholders’ equity in functional currency are shown in the table below: 

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The exchange rates for US dollar and UK pound per euro for each of the last five year-ends are set forth in the table below: 

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Aegon Group companies’ foreign currency exposure from monetary assets and liabilities denominated in foreign currencies is not material. 

The sensitivity analysis in the table below shows an estimate of the effect of movements in the exchange rates of Aegon’s non-euro currencies relative to the euro on net income and shareholders’ equity. The effects as included in the table below are due to the translation of subsidiaries and joint-ventures in the consolidated financial statements. 

## Sensitivity analysis of net income and shareholders’ equity to translation risk 

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The effect of currency exchange movements is reflected as a one-time shift up or down in the value of the non-euro currencies relative to the euro on December 31. 

## Interest rate risk 

Aegon bears interest rate risk with many of its products. In cases where cash flows are highly predictable, investing in assets that closely match the cash flow profile of the liabilities can offset this risk. For some Aegon country units, local capital markets are not well developed, which prevents the complete matching of assets and liabilities for those businesses. For some products, cash flows are less predictable as a result of policyholder actions that can be affected by the level of interest rates. 

In periods of rapidly increasing interest rates, policy loans, surrenders and withdrawals may and usually do increase. Premiums in flexible premium policies may decrease as policyholders seek investments with higher perceived returns. This activity may result in 

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