Other information 192 Proposal for profit appropriation 193 Major shareholders 195 Auditors’ report
The 2005 annual report marks a major change in the way that AEGON reports its financial results. As of January 1, 2005, all publicly listed companies in the European Union are required to prepare their financial statements in conformity with International Financial Reporting Standards (IFRS).
IFRS is an accounting framework that establishes recognition, measurement, presentation and disclosure requirements relating to transactions and events that are reflected in the financial statements. IFRS was developed by the International Accounting Standards Board (IASB) in the public interest to provide a single set of high quality, understandable and uniform accounting standards. Within the IFRS framework, the insurance standard is still under review. AEGON participates actively in these discussions via the CFO Forum of the European insurance industry and also as a member of the IASB’s Insurance Working Group.
Free float of common shares* 12/31/2005 88% Average daily trading volume 2005 (million common shares) 8.4 * Percentage of outstanding common shares, excluding Treasury shares and shares owned by Vereniging AEGON.
AEGON-CNOOC received new licenses to begin operations in Beijing, as well as Nanjing which is located in the highly developed Jiangsu province of mainland China. In January of 2006, AEGON was among the first foreign insurers to receive a license to operate in Shandong, a prosperous coastal province. In addition, AEGON recently launched operations in Singapore under its well-established Transamerica brand. We have made clear our long-term commitment to China and believe that the 165 million inhabitants living in the areas where AEGON is now active are an indication of the future growth potential for our business.
Maintaining a strong capital base is essential to our ability to pursue and achieve long-term growth. During 2005, AEGON's capital position was improved further by the 21% increase in net income for the year, growth of equity through benign financial markets and the further issuance of perpetual capital securities. AEGON continues to benefit from strong capitalization in all our local country units, and the Group’s capital position remains solid. While AEGON expects capital definition to evolve over time, we remain committed to maintaining the strong capitalization of our companies.
NOMINATING COMMITTEE Dudley G. Eustace, chairman René Dahan, member O. John Olcay, member
In all your main markets, regulators are moving to greater transparency and disclosure by insurance companies. What impact does this have on AEGON and the way it operates around the world? Transparency in our business is a top priority at AEGON. It’s the only way to really gain the trust of our partners, customers and shareholders, and keep it. The way we conduct our business, the relationships that we depend on and the products we deliver have to be transparent not only to regulators but to all our stakeholders. Of course, the costs for doing so are significant and are likely to increase over time. The work of ensuring transparency is ongoing and requires a substantial commitment or resources both in terms of people and costs.
AEGON UK is traditionally seen as a pure pensions company, but has experienced significant growth in other areas such as protection products and annuities. What are the rationale and drivers behind this growth? Although we believe that pensions are, and will continue to be, the most important product area in the UK long-term savings market, we recognized that in a ‘stakeholder pensions’ world, margins on pensions products would inevitably be reduced. We, therefore, decided to expand into other product areas where higher margins were available.
This has delivered significant efficiencies into our working practices allowing us to reduce underlying operating expenses by over 25% since 2002. We will remain focused on delivering further efficiencies while continuing to diversify and grow our business, a strategy that continues to provide AEGON UK with a definite advantage. And finally, we have a very strong parent company — the AEGON Group — which provides us access to a range of resources and expertise.
The Executive Board and the Supervisory Board will continue to take responsibility for AEGON’s corporate governance structure. Whenever a substantial change in the company’s corporate governance structure is proposed, AEGON will submit the proposal for debate as a separate agenda item at the General Meeting of Shareholders.
The Supervisory Board has agreed with the Executive Board and its individual members on a reappointment and retirement schedule for Executive Board members. The 2005 annual General Meeting of Shareholders reappointed the chairman of the Executive Board, Mr. Shepard, and the CFO, Mr. Streppel, for four-year terms in accordance with this schedule, which is available on the company’s website www.aegon.com. The Supervisory Board also intends to propose to the annual General Meeting of Shareholders in 2006 that Mr. Van der Werf be reappointed as a member of the Executive Board for a fouryear term. Mr. Wynaendts is eligible for reappointment in 2007.
The Supervisory Board is responsible for decisions relating to the resolution of conflicts of interest between members of the Executive Board, members of the Supervisory Board, major shareholders, and the independent auditor on the one hand, and AEGON. The Supervisory Board assists the Executive Board by giving advice. In performing their duties. The members of the Supervisory Board are required to act in accordance with the interests of AEGON and its affiliated enterprises. Pursuant to AEGON’s Articles of Incorporation and the Supervisory Board Rules, the Supervisory Board members are empowered to obtain all information they deem necessary for the performance of their duties, including the right to acquire information from company officers and external experts.
The members of the Supervisory Board are appointed by the General Meeting of Shareholders. For the purpose of making nominations to the Supervisory Board, including any nominations for reappointment, the Supervisory Board has drawn up a profile that specifies requirements for individual members as well as the desired composition and competences of the Supervisory Board as a whole. This profile also reflects the detailed composition requirements of the Dutch Corporate Governance Code.
In accordance with the Supervisory Board Rules, the chairman is responsible for overseeing the day-to-day functions of the Supervisory Board and its committees, for keeping close track of the flow of information to the Supervisory Board, and for overseeing the consultation and decision-making processes within the Supervisory Board. The chairman is also responsible for initiating the performance evaluation of the individual members of the Supervisory and Executive Boards and for maintaining appropriate contact with the Executive Board and the Dutch Central Works Council.
Over the past few years, AEGON has made significant progress in the field of CR. The company developed a Code of Conduct, instituted an environmental policy, and launched an annual CR report. In 2005, AEGON launched the planning phase for a global e-learning program to further educate and train the global workforce on the Code of Conduct and core values. This e-learning program will be rolled out in mid-2006 and supplements the Code of Conduct education that was developed by AEGON Americas in 2004. In addition, the Group maintained its position in the leading CSR indices, placing in the top 10% of the Dow Jones Sustainability Index and successfully maintaining the Group’s position in the FTSE4Good list.
We demonstrate that we are good corporate citizens by striving to establish long-term relationships with and enrich the communities where we do business.
Messrs. Shepard and Streppel have been reappointed in 2005 for a four-year term. Messrs. Van der Werf and Wynaendts are eligible for reappointment in 2006 and 2007.
In line with the regulations of the STI Plan, it was established that the 2004 VNB of the Group and of the relevant country units was positive, as stated in the 2004 Embedded Value Report. Subsequently, operating earnings (OE) have been compared to the relevant target OE. On this basis and after adoption of the 2004 annual accounts by shareholders, this translated into the STI bonuses for the 2004 Plan as paid in 2005.
Impairment losses in 2005 were more than offset by impairment recoveries. Interest rate swaps in AEGON The Netherlands contributed EUR 307 million in 2005 (2004: EUR 347 million) to gains/(losses) on investments. Included in 2004 other nonoperating income/(charges) is a EUR 218 million charge relating to the settlement with Dexia. Also included in other nonoperating income/(charges) are charges to AEGON UK policyholders related to taxes payable for the account of policyholders. There is an equal and opposite tax charge in the corporate tax line. Both amounts increased in 2005 due to higher bond values in 2005 resulting from a significant fall in bond yields.
valuation. In aggregate, these items contributed pre-tax operating earnings of USD 316 million during 2005 compared to USD 255 million in 2004. These items are as follows: Asset valuation — Certain financial assets that are managed on a total return basis, such as hedge funds, convertible bonds and certain limited partnerships, are carried at fair value with no offsetting change in the fair value of liabilities. As of December 3 1, 2005, these assets totaled USD 3.2 billion. The market valuation of these assets contributed net USD 269 million to operating earnings before tax in 2005 compared to USD 241 million in 2004. The impact of this is notable in the traditional life, fixed annuity and institutional guaranteed products lines of business.
Life general account single premiums of USD 922 million decreased 24% in 2005 due to higher BOLI/COLI premiums in 2004, while life general account recurring premiums of USD 5,568 million increased 9% driven by strong reinsurance recurring premium production.
Investment income was 7% higher in 2005 compared to that of 2004. This increase was primarily due to rising short-term rates on floating rate investments, increased investing in mortgage loans and improved results from other long-term investments.
Operating expenses for the Americas decreased by USD 2 million to USD 1,768 million compared to 2004. The decrease is due to the effect of expense savings and the release of an accrual for performance bonuses, partly offset by higher expenses for sharebased payments and USD 14 million of one-time expenses in 2005 in Canada.
Fixed annuity deposits of USD 2,221 million decreased 26% in 2005 compared to 2004 due to the current low interest rate environment, flat yield curve and AEGON’s commitment to write profitable business with acceptable risk profiles. In response to the low interest rate environment, during 2003 and 2004 new products were introduced with a lower guaranteed annual interest rate. Withdrawals from existing contracts in 2005 exceeded 2004 and increased throughout the year. Fixed annuity account balances of USD 52.9 billion decreased by 4% from year end 2004 as withdrawals exceeded deposits during the year.
The result of life was break-even compared to a profit of EUR 4 million in 2004. Accident and health showed a profit of EUR 4 million in 2005 compared to a profit of EUR 8 million in 2004. Following the sale of the general insurance activities, accident and health in Spain only includes health insurance. Both businesses were negatively impacted by a loss of economies of scale due to the sale of the general insurance business.
Standardized new premium production increased from NTD 7.8 billion during 2004 to NTD 12.3 billion during 2005. The production in the second half year of 2005 was negatively affected by a decision to cut commissions and stop selling certain products through the brokerage and bank channels as these products required higher reserves as mandated by the Insurance Bureau.
As part of these risk management programs, AEGON takes inventory of its current risk position across risk categories. AEGON also measures the sensitivity of net income and shareholders’ equity to stochastic and deterministic scenarios. Management uses the insight gained through these ‘what if?’ scenario’s to manage the Group’s risk exposure and capital position. The models, scenarios and assumptions used are reviewed regularly and updated if necessary.
AEGON’s earnings depend significantly upon the extent to which actual claims experience is consistent with the assumptions used in setting the prices for products and establishing the technical provisions and liabilities for claims. To the extent that actual claims experience is less favorable than the underlying assumptions used in establishing such liabilities, income would be reduced. Furthermore, if these higher claims were part of a trend, AEGON may be required to increase liabilities, which could reduce income. In addition, certain acquisition costs related to the sale of new policies and the purchase of policies already in force have been recorded as assets on the balance sheet and are being amortized into income over time. If the assumptions relating to the future profitability of these policies (such as future claims, investment income and expenses) are not realized, the amortization of these costs could be accelerated and may even require write offs due to unrecoverability. This could have a material adverse effect on AEGON’s business, results of operations and financial condition.
AEGON’s result of operations and financial condition may be materially affected from time to time by the general economic conditions, such as levels of employment, consumer lending or inflation, in the countries in which the Group operates.
While systems and processes are designed to support complex transactions and to avoid systems failure, fraud, information security failures, processing errors and breaches of regulation, any failure could lead to a material adverse effect on AEGON’s results of operation and corporate reputation. In addition, AEGON must commit significant resources to maintain and enhance its existing systems in order to keep pace with industry standards and customer preferences. If AEGON fails to keep upto -date information systems, the Group may not be able to rely on accurate information for product pricing and underwriting decisions.
AEGON maintains back-up credit facilities to support outstanding amounts under its Commercial Paper Programs. The principal arrangement is a USD 5 billion syndicated facility maturing in 2010 and extendable until 2012, of which USD 3 billion acts as a back-up facility for AEGON’s Commercial Paper Programs. At December 31, 2005, AEGON N.V. had EUR 2.0 billion outstanding under its Medium Term Notes Program and no amounts under its Commercial Paper Programs.
The Pension Group includes Diversified Investment Advisors and Transamerica Retirement Services.
• AEGON Spaarbeleg — supports AEGON The Netherlands’ own advisors as well as direct sales.
Mortgage savings products. AEGON The Netherlands provides mortgage loans to customers for a period of twenty or thirty years. The loan is repaid in full or in part at the redemption date with the proceeds from a savings policy. If the insured dies within the policy contract period, the benefit payment is used to repay the mortgage loan. The interest paid on the loan is normally tax deductible, and the customer retains the full income tax benefit over the contract period so long as there is no early redemption. The interest paid on the mortgage loan usually equals the interest accumulated on the account balance under the savings policy. In case of surrender, the policyholder loses the tax benefit.
The primary operating subsidiaries of AEGON UK are: • Scottish Equitable plc • AEGON Asset Management UK plc • Origen Financial Services Ltd • Positive Solutions Ltd • HS Administrative Services Ltd • Guardian Assurance plc AEGON UK operates four distinct businesses: • AEGON Individual — all operations relating to the individual investment, protection, and pension markets in the United Kingdom; this business primarily operates under the Scottish Equitable brand name
Group pensions. Group pensions is a key business area of AEGON Corporate. These are pension arrangements for the employees of corporate customers that cover a range of benefit options, which are predominantly defined contribution. At retirement, cash up to the maximum allowed can be taken, with the remainder of the pension fund used to purchase an annuity or to invest in a drawdown policy until age 75. AEGON Corporate also sells and administers defined benefit pension schemes. The market for new defined benefit schemes has decreased in recent years, but opportunities remain to take over the administration and investment of existing schemes.
Individual life products are sold by specialized agents and brokers in urban centers and by specialized agents and through direct marketing in rural areas. Group life products are distributed through banks and financial institutions as well as through brokers and specialized agents.
In 1998, AEGON Taiwan took over a block of business comprised of 55,000 policies of American Family Life Assurance Company Taiwan. In 1999, the Transamerica Taiwan branch was added to AEGON’s business as a result of AEGON’s acquisition of Transamerica. The integration with the existing operations was completed in 2001.
26,726 24,169 Issued capital and reserves attributable to equity holders of AEGON N.V. 22,655 17,744 82,909 81,595 Insurance contracts for account of policyholders 20 70,280 59,904 69,277 64,212 Investment contracts for account of policyholders 22 58,724 47,142 367,140 365,986 TOTAL EQUITY AND LIABILITIES 311,215 268,692
479 247 Fair value and foreign exchange losses 34 385 199 2 16 Losses on investments for account of policyholders 35 2 13 465 495 Interest charges and related fees 42 373 398 4,478 3,445 INCOME BEFORE SHARE IN PROFIT/(LOSS) OF ASSOCIATES AND TAX 3,595 2,770 25 31 Share in profit/(loss) of associates 20 25 2 (2) Attributable to minority interest 2 (2)
Other equity instruments issued — — — — 1,456 1,456 — 1,456 Other equity instruments redeemed — — — — (950) (950) — (950) Dividends paid on ordinary shares — (193) — — — (193) — (193)
Coupons on perpetuals — (132) — — — (132) — (132)
Coupons on perpetuals — (84) — — — (84) — (84)
The Group intends to apply these standards and interpretations as of the required date of adoption, subject to EU endorsement. IFRS 7, the related amendments to IAS 1 and the implementation guidance to IFRS 4 will affect the disclosures on financial instruments, insurance contracts and capital provided in the Group’s consolidated financial statements. The Group will adopt these standards effective January 1, 2007.
The following accounting principles have been applied consistently to the interests in subsidiaries and joint ventures acquired after the transition to IFRS on January 1, 2004. Business combinations that occurred before this date have not been restated.
The resulting exchange differences are recognized in the ‘foreign currency translation reserve’, which is part of equity. On disposal of a foreign entity the related cumulative exchange differences included in the reserve are recognized in the income statement.
When unrealized gains or losses arise on available-for-sale assets, VOBA is adjusted to equal the effect that the realization of the gains or losses would have had. The adjustment is recognized directly in equity.
In the Netherlands, an additional liability is established for guaranteed minimum benefits that are not bifurcated on group pension plans, based on stochastic modeling. The liability is measured by applying the accrual method based on market assumptions less actual claims incurred. A corridor for the provision is determined regularly based on stochastic modeling methods. If the provision develops outside the corridor, a charge or credit is recognized in the income statement. Due to the nature of the product, these guarantees have a long-term horizon of 30 to 60 years.
Plan assets are qualifying insurance policies and assets held by long-term employee benefit funds that can only be used to pay the employee benefits under the plan and are never available to the Group’s creditors. They are measured at fair value and are deducted in determining the amount recognized on the balance sheet.
c. Share-based payments The Group has issued share-based plans that entitle employees to receive equity instruments issued by the Group or cash payments based on the price of Group equity instruments. Some plans provide employees of the Group with the choice of settlement.
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON GROUP Amounts in EUR millions, unless otherwise stated 2.28 POLICYHOLDER CLAIMS AND BENEFITS
Investment assumptions are either prescribed by the local regulator or based on management’s future expectations. In the latter case, the anticipated future investment returns are set by management on a countrywide basis, considering available market information and economic indicators. A significant assumption related to estimated gross profits on variable annuities and variable life insurance products in the United States and Canada is the annual net long-term growth rate of the underlying assets. As equity markets do not move in a systematic manner, assumptions as to the net long-term growth rate are made after considering the net effects of short-term variances from the long-term assumptions (a reversion to the mean assumption). The reconsideration of this assumption may affect the original DPAC or VOBA amortization schedule, referred to as DPAC or VOBA unlocking. The difference between the original DPAC or VOBA amortization schedule and the revised schedule, which is based on estimates of actual and future gross profits, is recognized in the income statement as an expense or a benefit in the period of determination.
A key risk for all countries selling traditional life business is mortality risk. The most significant factors that could increase the overall frequency or timing of claims are epidemics, natural or man-made disasters, or a general deterioration in population mortality due to lifestyle changes. Insured mortality risk can usually be reasonably predicted under normal circumstances with thorough underwriting and with a large number of insureds. The level of underwriting employed by the company depends on the materiality of the mortality risk relative to other product attributes, the size of the sum assured and the cost-benefit analysis for each product.
In addition to the mortality risk as described above, the pension and annuity business of specifically AEGON The Netherlands and AEGON UK that are reported as part of traditional life also carry significant longevity risk. Longevity risk arises from enhanced medical treatment and improved life circumstances, although this is not easy to predict.
Besides the minimum interest rate guarantee, some recent fixed deferred annuity products also offer a bailout provision. Under the bailout provision, if the crediting rate falls below the bailout rate, policyholders can surrender their contracts without incurring any surrender charges. The bailout provision serves as a pseudo guarantee to the customers during the surrender charge period.
The investment performance of the with profits funds is distributed to policyholders through a system of bonuses which depend on: • The guarantees under the policy, including previous annual bonus additions.
Premiums paid on variable annuity contracts are invested in funds offered by AEGON and other third party providers, including bond and equity funds, with most products selected by a client based on the client’s preferred level of risk. The assets and liabilities related to this product are legally segregated for the benefit of particular policyholders in separate accounts of the insurance company. These separate accounts are classified as investments for the account of policyholders. Various riders are available on variable annuity contracts, providing guaranteed minimum death, maturity, withdrawal or income benefits.
Pension asset management services are being provided in Slovakia since the beginning of 2005.
a. Currency exchange rate risk As an international group, AEGON is subject to currency risk. Also, currency risk exists for any policy denominated in currencies other than the policy’s local currency. In the Netherlands, the majority of equity holdings are invested in an internationally diversified portfolio, rather than solely in Dutch equities. Equity held in subsidiaries is kept in local currencies to the extent shareholders’ equity is required to satisfy regulatory and self-imposed capital requirements. Therefore, currency exchange rate fluctuations may affect the level of shareholders’ equity as a result of translation into euro. The remainder of the capital base (capital securities, subordinated and senior debt) is held in various currencies in amounts that are targeted to correspond to the book value of its country units. This balancing mitigates currency translation impacts to equity and leverage ratios. Currency risk in the investment portfolios is managed using asset liability matching principles.
AEGON does not hedge the income streams from the main non-euro units and, as a result, earnings may fluctuate due to currency translation. As AEGON has significant business segments in the Americas and in the United Kingdom, the principal sources of exposure from currency fluctuations are from the differences between the US dollar and of the euro and between the UK pound and the euro. AEGON may experience significant changes in net income and shareholders’ equity because of these fluctuations.
The table that follows shows each of the last five year end interest rates for the period from 2001 through 2005.
GENERAL ACCOUNT BONDS, MONEY MARKET INVESTMENTS, MORTGAGE LOANS AND PRIVATE LOANS – 2005
Sensitivity analysis of net income and shareholders’ equity to various underwriting risks is shown in the table that follows.1,2
Accident and health insurance 2,305 211 — 92 — — 2,608
No property interests held under operating leases are classified and accounted for as investment property. Rental income is reported as part of investment income in the income statement. There are no restrictions on the realizability of investment property or the remittance of income and proceeds of disposal. Refer to note 50 for a summary of contractual obligations to purchase investment property or for repairs, maintenance or enhancements.
Notional Fair Notional Fair Notional Fair Notional Fair value value value value value value value value
Movement in foreign currency translation and net foreign investment hedging reserves 2,143 (628) — 1,515 Equity movements of associates — — 19 19
Technical reserves released — (3,198) (3,198) Fund charges released (26) — (26) Net exchange differences 1,599 849 2,448 1Refer to note 48 for a summary of all financial assets and financial liabilities at fair value through profit or loss.
1 Issued by subsidiaries of, and guaranteed by AEGON N.V. 2Recorded at fair value. Proceeds have been swapped, using derivatives, to USD floating-rate. Changes to AEGON’s credit spread had no significant impact on the valuation of these borrowings throughout the year.
Included in debentures and other loans are EUR 1,025 million (2004: EUR 574 million) relating to borrowings measured at fair value. The remainder of the balance consists of borrowings measured at amortized cost.
Expected return on plan assets 184 169 Actuarial gains and losses 58 65 Contributions by employer 33 37 Contributions by plan participants 3 2 Benefits paid (107) (102) Settlements — (1) Net exchange differences 274 (134)
Negative fair value changes of for account of policyholder financial assets at fair value through profit or loss 2 13
Plans for share appreciation rights and share options can only be established with prior consent of the annual General Meeting of Shareholders. If, subsequently, the Executive Board decides to implement such plans, that decision has to be approved by the Supervisory Board. Options granted pursuant to the purchase agreement with Providian have various expiration dates. The options granted in 1997 to senior executives of former Providian business units fully vest in three years and the exercise period is up to ten years, with the latest period ending in August 2008.
AEGON is subject to legal restrictions on the amount of dividends it can pay to its shareholders. Under Dutch law the amount that is available to pay dividends consists of total shareholders’ equity less the issued and outstanding capital and less the reserves required by law. At December 31, 2005, the issued and outstanding capital is EUR 251 million, the reserves required by law amount to EUR 3,373 million and EUR 15,652 million is available for dividends. However, certain of AEGON’s subsidiaries, principally insurance companies, are subject to restrictions on the amounts of funds they may transfer in the form of cash dividends or otherwise to their parent companies. While management does not believe such restrictions on AEGON’s subsidiaries will affect its ability to pay dividends in the future, there can be no assurance that these restrictions will not limit or prevent AEGON from doing so.
Investments for general account 774 9,965 581 9,770 Investments for account of policyholders — 126,141 — 106,210 Derivatives with positive values not designated as hedges 1,498 — 917 —
No loans and receivables were designated as at fair value through profit or loss. Changes in the fair value of financial liabilities designated as at fair value through profit or loss were not attributable to changes in credit risk. There are also no differences between the carrying amounts of these financial liabilities and the contractual amounts payable at maturity (net of surrender penalties).
United Kingdom AEGON Asset Management UK plc, London AEGON UK Distribution Holdings Ltd., London AEGON UK plc, London Guardian Assurance plc, Lytham St Annes Guardian Linked Life Assurance Limited, Lytham St Annes Guardian Pensions Management Limited, Lytham St Annes HS Administrative Services Limited, Chester Scottish Equitable International Holdings plc, London Scottish Equitable plc, Edinburgh
Other countries AEGON Hungary Composite Insurance Company Rt., Budapest (Hungary) AEGON España S.A., Madrid (Spain) (99.98%) AEGON Life Insurance (Taiwan) Inc., Taipei (Taiwan) AEGON Pension Fund Management Company Slovakia, Bratislava (Slovakia) AEGON Pojistóvna a.s., Prague (Czech Republic) AEGON Towarzystwo Ubezpieczen na Zycie S.A., Warsaw (Poland)
Related party transactions for the period under review include transactions between AEGON N.V. and Vereniging AEGON, as well as the reinsurance of blocks of immediate annuity business in with profit funds to shareholders of Guardian Assurance plc and transactions from the relationship with Prisma Capital Partners LP.
Minority shareholders’ interest relates to entities that are consolidated under IFRS, but that were not consolidated under DAP, and in which AEGON owns less than a 100% interest.
Under DAP, interest related gains and losses on debt securities were deferred and released into the income statement, as investment income, over the estimated average remaining term to maturity. Investment income under IFRS decreased due to the reversal of the amortization of deferred investment gains.
The following table provides a summary of the fair value of financial assets and financial liabilities designated into each of these categories as at January 1, 2004, and their classification and carrying amount in the previous financial statements: FINANCIAL ASSETS DESIGNATED AS AT FAIR VALUE THROUGH PROFIT OR LOSS AT JANUARY 1, 2004 Carrying value Fair value under January 1, DAP 2004
Detailed information on remuneration of active and retired members of the Executive Board including their share option rights, remuneration of active and retired members of the Supervisory Board along with information about shares held in AEGON by the members of the Boards is included on pages 174 and following of the consolidated financial statements of the Group.
The coupon for the EUR 1 14 million 8% bonds was set at 8% until June 8, 2005. As of this date, the coupon is set at 4.156% until 2015. 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, 201 1. 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 0.85%. The coupon of the EUR 1 14 million with an interest rate of 7.625% is fixed.
The repayment periods of borrowings vary from in excess of one year up to a maximum of 26 years. The interest rates vary from 2.75 to 9% per annum.
5. The Executive Board may, subject to the approval of the Supervisory Board, make one or more interim distributions to the holders of common shares and/or to the holders of preferred shares, the latter subject to the maximum dividend amount set forth under 3.
f) Insurance and investment contracts IFRS Refer to note 2 of the consolidated financial statements for a discussion of the accounting for technical reserves under IFRS.
Master netting agreement is an agreement providing for an entity that undertakes a number of financial instrument transactions with a single counterparty to make a single net settlement of all financial instruments covered by the agreement in the event of default on, or termination of, any contract.