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ROLE OF THE SUPERVISORY BOARD
The duties of the Supervisory Board, which consists currently of nine
non-executive members, are to supervise the Executive Board's
management and to advise the Executive Board. With the active assistance
of its four specialized committees, the Supervisory Board prepares
nominations, resignations and the compensation of Executive Board
members and discusses the quarterly results and the accounting principles,
dividends, capital, internal control procedures and risk management,
as well as the corporate strategy. We carried out our responsibilities
in 2003 in close cooperation with the Executive Board, holding five
regular meetings. The attendance at the meetings was over 95% on average.
The meetings were often preceded or followed by informal meetings
and Committee meetings.
During a combined meeting of the Audit Committee and the Supervisory
Board, AEGON's risk management was discussed in-depth.
CORPORATE GOVERNANCE
Following our proposal to shareholders that AEGON N.V. exempt itself
from the Dutch 'large company regime' shareholders approved
this proposal during an extraordinary General Meeting of Shareholders
held on May 9, 2003. This proposal had also been on the agenda of the
annual General Meeting of Shareholders held on April 17, 2003, but
shareholders could not decide on this issue during that meeting because
the statutory required quorum was not
represented. Following the decision taken by shareholders on May 9, 2003, AEGON N.V.'s Articles of Incorporation were amended on
May 26, 2003. The most important changes concern the appointment of
members of the Executive Board and Supervisory Board and the adoption
of the annual accounts. Henceforth, the authority to appoint members of the Executive
Board and Supervisory Board and to adopt theannual accounts is vested
with shareholders. For further details about AEGON's corporate
governance please click here.
CORPORATE GOVERNANCE CODE
We discussed the draft of the Dutch Corporate Governance Code following
its publication in July 2003. The final version of the code was published
on December 9, 2003 and came into effect on January 1, 2004. We share
the views of the Committee that drafted the code that the principles
and best
practice provisions included therein are reflective of the most current
general views of good corporate governance in relation to Dutch listed
companies. We have given our support to the implementation of the code
within AEGON N.V.
At the annual General Meeting of Shareholders to be held on April
22, 2004, we hope to engage shareholders in a discussion of AEGON
N.V.'s corporate governance as described in the corporate
governance section of this annual report. This describes in
detail the application of the code by AEGON.
SUPERVISORY BOARD MEETINGS
In accordance with the Board's Rules and Regulations, preparatory
meetings preceded the regular meetings, attended by the chairman and
vice-chairman of the Supervisory Board as well as the chairman and
the chief financial officer of the Executive Board. All Executive
Board members attended the regular meetings, held in March, June, August, November and December
2003. In December 2003, the Supervisory Board discussed the Executive
Board's and its own composition and performance, without the
Executive Board being present.
The meetings, during which the quarterly and annual results were discussed,
were also attended by the director of the Group Finance department.
Representatives from Ernst & Young, AEGON's independent auditor,
attended the discussion regarding the results for 2002. As usual,
special meetings of the Supervisory Board were dedicated to AEGON's
budget for 2004, to the business strategy and to a management overview,
in order to identify top managers within AEGON worldwide. The all-day
meeting regarding AEGON's business strategy was preceded and
prepared by the Strategy Committee.
Among the many topics discussed in our meetings in 2003 were embedded
value and fair value, dividend policy, capital management and risk
management. We discussed and supported the Executive Board's
intention to disclose the embedded value, after which the 2002 Embedded
Value Report
was published on August 7, 2003. Following the adoption of the Sarbanes-Oxley
Act 2002 (SOX) by the United States Congress, risk management has
become an even more important issue for AEGON and after an extensive
presentation on this subject we discussed the measures that AEGON
has taken on risk management.
Attention was also devoted to joint ventures and divestitures. We approved
AEGON's participation in the management buy-out of Unirobe, a
group of insurance intermediaries. We also approved the start of a
greenfield insurance operation in Slovakia as well as the partnership
between AEGON and Caja de Ahorros del Mediterráneo, one of
the largest savings banks in Spain.We also approved the Executive
Board's decision to divest the commercial finance and real estate tax services' businesses of Transamerica Finance
Corporation.
We discussed the consequences of SOX for AEGON and we amended in the
light thereof the Rules and Regulations for the Supervisory Board, the
Audit Committee Charter and the Terms of Reference of the Nominating
Committee, the Compensation Committee and the Strategy Committee. We also adopted, in line with the SOX requirements, a 'Pre-approval
Policy' for the services of Ernst & Young.
SUPERVISORY BOARD COMMITTEES
The Supervisory Board relies upon four committees to prepare specific
issues for decision-making by the Board. Each committee has four members,
all drawn from the Supervisory Board.
The Audit Committee, established in 1983, has Mr. Eustace as chairman
and Mrs. Rembe and Messrs. De Ruiter and Stevens as members. During
the year, the Committee adopted a revised Audit Committee Charter
to better reflect the Committee's purpose and responsibilities
in the light of SOX and other developments in corporate governance.
In accordance with the revised Charter, the Committee has the authority
to: recommend the appointment or replacement of the independent auditor,
pre-approve all services provided by the auditor and retain independent advisors, as it deems appropriate.
The Charter also states that the company shall provide appropriate
funding to the Audit Committee for the payment of compensation to
the independent auditors and any advisor employed by the Audit Committee
and that the
Committee shall establish procedures for the receipt and retention
of complaints relating to accounting and internal control issues.The
Audit Committee is comprised of independent members of the Supervisory
Board who are experienced and competent in financial accounting matters.
The chairman of the Committee, Mr. Eustace, is a financial expert,
in accordance with the requirements of SOX.
The Committee held six meetings during 2003 attended by the Executive
Board members and representatives from Ernst & Young. The discussions
were dominated by its permanent agenda:the quarterly results, annual
accounts and the auditing of these by Ernst & Young, the actuarial
analysis, AEGON's Capital Plan and the report on currency exposure, accounting
principles, internal control systems, the Risk Management Report as
well as Ernst & Young&'s independence and fees. The Committee
continued its practice in 2003 of meeting with the internal and independent
auditors from AEGON's key operating countries.The Committee subsequently
reported to the Supervisory Board on its findings and advised the
Supervisory Board to recommend to the shareholders that Ernst &
Young be reappointed as independent auditor.
It also discussed the consequences of SOX, especially the independence
criteria, for AEGON, the Supervisory Board and its committees and
for the independent auditor. Two meetings, in March and September,
were devoted to AEGON's filings with the Security and Exchange
Commission (SEC), the annual report (Form 20-F) and the first six
months results (Form 6-K). The Committee also discussed the SEC's
review following AEGON's filings for a shelf registration.
The Committee endorsed AEGON's decision to implement
an internal audit function at group level and to enhance the group
compliance and risk management function. The Committee notes with
satisfaction the appointment in 2003 of a new Group Compliance Officer, a
Group Risk Officer and a Group Internal Auditor.
The Compensation Committee, active since 1989, with Mr. De Wit as chairman
and Messrs. De Ruiter, Stevens and Van Wijk as members, held five meetings,
attended also by the Executive Board's chairman. In the course
of 2003, Mr. Tabaksblat stepped down as chairman, in compliance with
the Dutch Corporate Governance Code. Discussions concentrated on the
remuneration of the Executive Board members and revisions to the Remuneration
Policy. The Committee also discussed the granting of stock appreciation
rights (SARs) to AEGON employees worldwide in March 2003 and advised
the Supervisory Board to approve a SAR Program for 2003 and 2004. Due
to the condition in the SAR Program for the Executive Board that SARs
or stock options will only be granted if AEGON's net income per
share has increased, the Executive Board members did not receive any
SARs (nor stock options) in 2003. For further details, please refer
to the Remuneration Report and the
remuneration of the Executive Board.
The Nominating Committee, active since 1983, with Mr. Tabaksblat as
chairman and Messrs. De Ruiter, Olcay and De Wit as members, held five
meetings in 2003. Four meetings were also attended by the Executive
Board's chairman, one meeting was being held without any Executive
Board member present. The Committee discussed the functioning and the
composition of the Executive Board and the Supervisory Board and the
existing and forthcoming vacancies in both Boards.
The Strategy Committee, active since 2002, with Mr. Tabaksblat as chairman
and Messrs. De Ruiter, Olcay and Storm as members, held three meetings,
also attended by the Executive Board members. The purpose of this
Committee is to review the major features of AEGON's strategy,
to look at alternatives and to consider the material aspects relating to the implementation of the strategy. The Committee discussed AEGON’s business strategy at length and prepared the agenda for the strategy meeting of the Supervisory Board held in June 2003.
SUPERVISORY BOARD CHANGES IN COMPOSITION
Mrs. Peijs stepped down from the Supervisory Board on May 20, 2003, following her appointment as the Minister for Transport, Public Works and Water Management of the Netherlands. We congratulate her with this appointment while at the same time regretting the fact that we have lost a valuable member on our Board.
Mr. Posthumus stepped down from the Supervisory Board on April 17, 2003, as he reached the retirement age of 70 years. He had been a member since 1997. We thank him for his valuable contributions to the Board's discussions.
Mr. Van Wijk was appointed as a member of the Supervisory Board as from April 17, 2003.
In 2004, Mr. De Ruiter will reach the retirement age of 70 years and will step down at the end of the annual General Meeting of Shareholders in that year. It is the intention that this vacancy be filled by nominating Mr. René Dahan, a former director of Exxon Mobil Corp. He will be nominated for appointment during the annual General Meeting of Shareholders to be held on April 22, 2004. Further details of Mr. Dahan will be provided together with the agenda for the annual General Meeting of Shareholders on April 22, 2004.
Also in 2004, the four-year terms of office of Mrs. Rembe and Messrs. Olcay and De Wit will end. Mr. De Wit has been a member of this Board for fourteen years and will, in compliance with the Dutch Corporate Governance Code, step down as a member at the annual General Meeting of Shareholders to be held on April 22, 2004. Mrs. Rembe and Mr. Olcay are eligible for reappointment. We intend to nominate them for reappointment during the annual General Meeting of Shareholders on April 22, 2004.
The departures of Mrs. Peijs and Mr. De Wit caused two vacancies in the Board. We will fill these vacancies.
In 2005, the four-year terms of office of Messrs. Eustace, Stevens and Tabaksblat will end. Messrs. Eustace and Stevens are eligible for reappointment. In compliance with the Dutch Corporate Governance Code, Mr. Tabaksblat is not available for reappointment and he will consequently step down at the end of the annual General Meeting of Shareholders to be held in 2005.
EXECUTIVE BOARD CHANGES IN COMPOSITION
Mr. Wynaendts was appointed a member of the Executive Board as per the close of the annual General Meeting of Shareholders held on April 17, 2003.
On November 1, 2003, Mr. Van de Geijn stepped down as a member of the Executive Board. We thank him for over 30 years of good service to the AEGON Group.
ANNUAL ACCOUNTS AND DIVIDEND
This annual report includes the annual accounts for 2003, as submitted by the Executive Board and advised upon and proposed by the Audit Committee. We recommend that shareholders adopt these accounts. A total dividend for 2003 of EUR 0.40 per common share is proposed.
ACKNOWLEDGEMENT
In what has been a year of real progress for AEGON under difficult circumstances, we would like to express our gratitude to the Executive Board and all members of the AEGON community worldwide for their strong commitment and dedication towards growing AEGON's business. We thank them for their unabated energy and professionalism in responding to difficult and rapidly changing markets.
The Hague, March 11, 2004
On behalf of the Supervisory Board,
Morris Tabaksblat, chairman
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