GICS AND FUNDING AGREEMENTS DISTRIBUTION CUSTOMERS Guaranteed investment contracts (GICs) and funding agreements (FAs) contributed 8% of AEGON’s income before tax in 2003 (13% in 2002 and 6% in 2001). GICs and FAs are marketed only to institutional investors such as pension funds, retirement plans, college savings programs, money market funds, municipalities and United States and overseas investors. GICs are primarily sold to tax qualified plans while FAs are typically sold to non-tax qualified institutional investors. The products are marketed directly and through brokers and independent agents in the United States and internationally from the United States. GICs and FAs are spread-based products that are generally issued on a fixed or floating rate basis and provide the customer a return of principal and a guaranteed rate of interest. For some of the products, the customer receives a return based on a change in a published index, such as the S&P 500. The term of the contract can be fixed (primarily from six months up to ten years) or it can have an indefinite maturity. Contracts with an indefinite maturity provide the customer with a put option whereby the contract will be terminated with advance notice ranging from three to thirteen months. (independent) agents brokers direct pension funds* financial institutions* money market funds** municipalities** overseas investors** (independent) agents, marketing organizations, financial institutions, worksite marketing, franchise organizations and brokers in the United States, the Netherlands, the United Kingdom, Canada, Hungary, Spain and Taiwan. Products for the account of policyholders are those where the policyholders carry the investment risk. AEGON earns management, administration and guarantee fees and mortality results on these products. individuals  (independent) agents marketing organizations financial institutions worksite marketing franchise organizations brokers Life products for account of policyholders contributed 15% of AEGON’s income before tax in 2003 (17% in 2002 and 17% in 2001). These products are sold to individuals through LIFE FOR ACCOUNT OF POLICYHOLDERS CUSTOMERS ACCOUNT OF POLICYHOLDERS DISTRIBUTION Unit-linked products are contracts whereby the policyholder is able to choose initially, and change subsequently, the proportion of the premium that is invested in certain funds. The benefits on death or maturity are equal to the value of the units, in certain cases subject to a minimum of the guaranteed benefits. Unit-linked products generally have variable maturities and variable premiums. Tontine plans are linked pure endowment savings contracts, with a tontine bonus structure. Policyholders can choose from several funds in which to invest premiums paid. When death occurs before maturity, the tontine plans pay a death benefit equal to the premiums accumulated at 4% compound interest, subject to a minimum of 110% of the fund value during the first half of the contract term. This death benefit is charged on a yearly risk premium basis. The amount of death benefit that is charged for is equal to the total benefit paid to the policyholder, plus any unrecouped acquisition costs. When death occurs, the balance in the investment account is not paid out to the policyholder’s estate, but is distributed out at the end of the year to the surviving policyholders of the specific series (a new series starts at the beginning of each calendar year) to which the deceased policyholder belonged. On survival to the maturity date, a benefit equal to the fund value, inclusive of tontine bonuses, is paid out. This is subject to a minimum of the premiums paid, provided the Mix Fund was chosen for investing premiums. Variable universal life products are similar to universal life products, but include investment options and maintenance of investments for account of policyholders. Life products for account of policyholders include several forms of life insurance and pension products whereby death benefits and cash values vary with the performance of a portfolio of investments. Premiums can be allocated among a variety of investments that offer different degrees of risk and reward, including stocks, bonds, combinations of both, or investment products that guarantee interest and principal. The customer retains the investment risk and AEGON earns a return from investment management fees, mortality-based cost of insurance charges and expense charges. The contract account balance varies with the performance of the investments chosen by the policyholder. These products also include variable universal life (United States), tontine plans (the Netherlands) and unit-linked life insurance (UK and Other Countries). * tax qualified ** non-tax qualified AEGON GROUP ANNUAL REPORT 2003 43