Filed pursuant to Rule 424(b)(5)
Registration No. 333-71438
PROSPECTUS SUPPLEMENT
(To Prospectus dated October 22, 2001)
AEGON N.V.
(a Netherlands public company with limited liability)
----------
206,400,000 Common Shares
in the Form of Bearer Shares or New York Shares
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We are offering 206,400,000 of our common shares in the form of bearer shares or
New York Shares in a global offering, including a public offering in the United
States. Concurrently with this offering, Vereniging AEGON, our controlling
shareholder, is conducting a secondary offering of 143,600,000 of our common
shares outside the United States in reliance on Regulation S under the
Securities Act of 1933.
We have entered into an agreement with Vereniging AEGON to repurchase from
Vereniging AEGON the common shares we are offering. See "Restructuring of
Relationship with Vereniging AEGON". The closing of this offering and the
secondary offering by Vereniging AEGON are contingent on one another.
No new shares will be issued as part of these transactions.
Our common shares are listed on the Official Segment of the stock market of
Euronext Amsterdam, the principal market for our common shares, on which they
trade under the symbol "AGN". Our common shares are also listed on the New York
Stock Exchange (NYSE) under the symbol "AEG" and on the Frankfurt, London and
Tokyo stock exchanges as well as on the SWX Swiss Exchange. On September 17,
2002, the reported last sale price of our common shares on Euronext Amsterdam
was (euro)10.04 and the reported last sale price of our common shares on the
NYSE was U.S.$9.65.
INVESTING IN OUR COMMON SHARES INVOLVES RISKS. SEE "RISK FACTORS"
BEGINNING ON PAGE S-7.
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NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS IS TRUTHFUL OR
COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
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Per Bearer Per New York
Share Share(1) Total(2)
----------- ------------ -------------------
Public offering price ...... (euro)10.00 U.S.$9.71 (euro)2,064,000,000
Underwriting discount(3) ... (euro)0.20 U.S.$0.19 (euro) 41,280,000
Proceeds, before expenses .. (euro)9.80 U.S.$9.52 (euro)2,022,720,000
(1) Translated at a rate of U.S.$0.9714 per (euro)1.00.
(2) Assuming all common shares are sold in the form of bearer shares.
(3) In the underwriting agreement, the underwriters have agreed to pay to us
the total public offering price against payment by Vereniging AEGON of the
underwriting discount relating to the offering, including any additional
discount. See "Plan of Distribution".
We expect that the New York Shares will be delivered through the book-entry
facilities of The Depository Trust Company against payment and the bearer shares
will be delivered through the book-entry facilities of NECIGEF, Euroclear Bank
S.A./N.A., as operator of the Euroclear System, and Clearstream Banking, S.A.
against payment on or about September 23, 2002.
Joint Global Coordinators and Joint Bookrunners
ABN AMRO Rothschild Morgan Stanley
Credit Suisse First Boston Rabo Securities
ING Investment Banking Schroder Salomon Smith Barney
Banc of America Securities JPMorgan Merrill Lynch International
Fox-Pitt, Kelton Stephens Inc. WestLB Panmure
September 17, 2002
CONTENTS
PROSPECTUS SUPPLEMENT
Page
About this Prospectus Supplement ........................................ S-1
Restructuring of Relationship with Vereniging AEGON ..................... S-2
Description of the Offering ............................................. S-4
Use of Proceeds ......................................................... S-6
Risk Factors ............................................................ S-7
Capitalization .......................................................... S-12
Selected Historical Financial Data ...................................... S-13
Recent Developments ..................................................... S-15
Share Capital ........................................................... S-16
Dutch Taxation .......................................................... S-18
U.S. Taxation ........................................................... S-18
Plan of Distribution .................................................... S-19
Where You Can Find More Information About Us ............................ S-22
Validity of Securities .................................................. S-23
Experts ................................................................. S-23
PROSPECTUS
Page
Forward-Looking Statements .............................................. 3
About this Prospectus ................................................... 3
AEGON N.V. .............................................................. 3
AEGON Funding Corp. ..................................................... 4
AEGON Funding Corp. II .................................................. 4
Where You Can Find More Information About Us ............................ 4
Financial and Exchange Rate Information ................................. 5
Enforcement of Civil Liabilities Against Foreign Persons ................ 6
Use of Proceeds ......................................................... 6
Ratios of Earnings to Fixed Charges ..................................... 6
Description of Share Capital of AEGON N.V. .............................. 7
Description of Debt Securities .......................................... 10
Taxation ................................................................ 17
Plan of Distribution .................................................... 29
Validity of Securities .................................................. 31
Experts ................................................................. 31
We have not taken any action to permit a public offering of the common shares
outside the United States or to permit the possession or distribution of this
prospectus supplement and the accompanying prospectus outside the United States.
Persons outside the United States who come into possession of this prospectus
supplement and the accompanying prospectus must inform themselves about and
observe any restrictions relating to the offering of the common shares and the
distribution of this prospectus supplement and the accompanying prospectus
outside the United States. We reserve the right to withdraw this offering of
common shares at any time.
This prospectus supplement and the accompanying prospectus are not a prospectus
under the Euronext Amsterdam rules and are not approved by Euronext Amsterdam.
ii
ABOUT THIS PROSPECTUS SUPPLEMENT
You should rely only on information contained in this prospectus supplement and
the accompanying prospectus. We have not authorized anyone to provide you with
information different from that contained in this prospectus supplement and the
accompanying prospectus. We are offering to sell common shares, and seeking
offers to buy common shares, only in jurisdictions where offers and sales are
permitted. The information contained in this prospectus supplement and the
accompanying prospectus is accurate only as of the date of this prospectus
supplement, regardless of the time of delivery of this prospectus supplement and
the accompanying prospectus or the time of any sale of the common shares. Our
business, financial condition, results of operations and prospects may have
changed since that date. In this prospectus supplement and the accompanying
prospectus, "we", "us" and "our" refer to AEGON N.V. and any or all of our
subsidiaries and joint ventures as the context requires.
This prospectus supplement contains the terms of the offering of the common
shares. Certain additional information about us is contained in the accompanying
prospectus. This prospectus supplement, or the information incorporated by
reference in this prospectus supplement or in the accompanying prospectus, may
add, update or change information in the accompanying prospectus. If the
information in this prospectus supplement or the information incorporated by
reference in this prospectus supplement or in the accompanying prospectus is
inconsistent with the accompanying prospectus, this prospectus supplement or the
information incorporated by reference in this prospectus supplement or in the
accompanying prospectus, as applicable, will apply and will supersede the
information in the accompanying prospectus.
It is important for you to read and consider all information contained in this
prospectus supplement and the accompanying prospectus in making your investment
decision. You should also read and consider the information in the documents we
have referred you to in "Where You Can Find More Information About Us" on page
S-22 of this prospectus supplement and pages 4 and 5 of the accompanying
prospectus.
S-1
RESTRUCTURING OF RELATIONSHIP WITH VERENIGING AEGON
We and our controlling shareholder, Vereniging AEGON, are undertaking the series
of transactions described below. We are undertaking these transactions now in
order to enhance our capital base in light of recent volatile financial market
conditions as well as to adjust our capital structure in connection with the
refinancing being undertaken by Vereniging AEGON. The proceeds of these
transactions will be used to:
o strengthen our capital base without diluting our common shareholders;
o enable Vereniging AEGON to reduce its outstanding debt; and
o increase Vereniging AEGON's economic investment in our preferred shares to
a level more commensurate with its voting rights.
To effect these transactions, Vereniging AEGON and we have entered into a
recapitalization agreement. In accordance with the recapitalization agreement,
the following transactions will take place concurrently with the closings of the
offerings and will be conditioned upon one another:
o We are making a global offering of common shares as described in this
prospectus and will repurchase from Vereniging AEGON the common shares we
deliver in this offering. The repurchase price for these common shares will
be equal to the gross proceeds of this offering.
o Vereniging AEGON will contribute an amount equal to the proceeds from our
share repurchase as additional paid-in capital on our existing preferred
shares, all of which it holds. We and Vereniging AEGON have agreed to set
off our respective payment obligations to each other. Accordingly, no cash
will be exchanged between us with respect to these transactions. The annual
dividend on the preferred shares is calculated on the basis of the paid-in
capital on the preferred shares using a rate equal to the European Central
Bank's fixed interest percentage for basic refinancing transactions plus
1.75%, as determined on the first Euronext Amsterdam working day of the
financial year to which the dividend relates. Accordingly, our annual
dividend obligations on the preferred shares will increase. Applying the
rate applicable in 2002 of 5.00% to the paid-in capital on the preferred
shares following these transactions would result in an annual dividend on
our preferred shares of (euro)105,840,000, compared to an annual dividend
on our preferred shares of (euro)2,640,000 prior to these transactions. We
will be responsible for any capital tax due in connection with the increase
in paid-in capital.
o Vereniging AEGON is making an offering of 143,600,000 of our common shares
held by it in a secondary offering outside the United States in reliance on
Regulation S under the Securities Act of 1933 that will result in net
proceeds to it of (euro)1,407,280,000. Vereniging AEGON will use the net
proceeds from that offering to repay a portion of its debt.
o Vereniging AEGON will enter into a three-year committed revolving credit
facility consisting of an equity repurchase facility (the Repo Facility)
and a back-up credit facility (the Back-up Facility). Under the Repo
Facility, up to (euro)2,000,000,000 will be available for repurchase
transactions using the common shares retained by Vereniging AEGON after the
concurrent offerings. Under the Back-up Facility an amount of up to
(euro)1,200,000,000 will be available subject to certain conditions.
Drawdowns under the Back-up Facility are principally intended to make
certain cash payments under the Repo Facility that will be required if the
value of the common shares subject to the Repo Facility is insufficient to
meet certain customary requirements. The aggregate amount outstanding under
the Repo Facility and the Back-up Facility will not exceed
(euro)2,000,000,000.
In addition, Vereniging AEGON and we have agreed to mark to market our existing
total return swap agreements that hedge our 2001 and 2002 share option plans
based on the (euro)10.04 closing price of our common shares on Euronext
Amsterdam on September 17, 2002. This will result in a payment to Vereniging
AEGON of (euro)378,300,000 by us. Vereniging AEGON will also use the proceeds of
this payment to reduce its debt.
As a result of these transactions, the percentage of our voting shares
beneficially owned by Vereniging AEGON will decrease from approximately 52% to
approximately 33%. Because no new common shares will be issued as part of these
transactions, the total number of common shares used in calculating our earnings
per share will remain unchanged.
S-2
We and Vereniging AEGON are currently parties to an option agreement. The option
agreement gives Vereniging AEGON the right to acquire our preferred shares in an
amount necessary to prevent Vereniging AEGON's total voting power from being
diluted to less than a majority as a result of new issuances of our common
shares. Pursuant to the recapitalization agreement, we have agreed to amend this
option agreement so that Vereniging AEGON will only be entitled to acquire
preferred shares in an amount to be mutually agreed, which will not exceed the
amount necessary to maintain its voting power at the level it will have
immediately following the completion of the transactions described above.
Our Executive Board and Supervisory Board are considering proposing and
implementing corporate governance changes in the future. In accordance with our
recapitalization agreement, if those changes are adopted, they would be followed
by a further reduction in the total voting power of Vereniging AEGON by reducing
the number of preferred shares held by it.
S-3
DESCRIPTION OF THE OFFERING
Common shares offered ........... 206,400,000 common shares, in the form of
bearer shares or New York Shares, in a global
offering, including a public offering in the
United States.
Offering price .................. (euro)10.00 per bearer share.
U.S.$9.71 per New York Share.
Description of the concurrent
offering and changes in our
capital structure ............... Concurrently with this offering, Vereniging
AEGON, our controlling shareholder, is
conducting a secondary offering of
143,600,000 of our common shares outside the
United States in reliance on Regulation S
under the Securities Act.
We will repurchase from Vereniging AEGON the
common shares we are offering, at a purchase
price equal to the (euro)2,064,000,000 net
proceeds of this offering.
Vereniging AEGON will contribute an amount
equal to the proceeds from our share
repurchase as additional paid-in capital on
our existing preferred shares, all of which
it holds. We and Vereniging AEGON have agreed
to set off our respective payment obligations
to each other. Accordingly, no cash will be
exchanged between us with respect to these
transactions.
The closing of this offering and the
secondary offering by Vereniging AEGON are
contingent on one another.
No new shares will be issued as part of these
transactions.
Proceeds from the offering and
the concurrent offering ......... Proceeds to Vereniging AEGON from its
offering will be (euro)1,407,280,000 and will
be used to repay a portion of its debt.
We will receive the net proceeds from this
offering. See "Use of Proceeds".
Issued common shares ............ As of August 31, 2002, we had 1,433,379,403
common shares issued and outstanding. As a
result of these transactions there will be no
change in the number of common shares issued
and outstanding. See "Share Capital".
Lock-up ......................... Subject to certain exceptions, we have agreed
not to issue, offer, pledge, sell or contract
to sell any common shares, options to
purchase common shares or securities
convertible into or exchangeable for common
shares for a period of 90 days following the
pricing of this offering. See "Plan of
Distribution -- Lock-up".
Dividends ....................... Common shares delivered in this offering will
not be entitled to the interim dividend
declared on August 8, 2002, but will be
entitled to any future dividends declared on
common shares.
Listing ......................... Our common shares are listed on Euronext
Amsterdam and the NYSE, and on the Frankfurt,
London and Tokyo stock exchanges as well as
the SWX Swiss Exchange. Our common shares
trade in the form of New York Shares on the
NYSE.
S-4
Euronext Amsterdam symbol ....... AGN.
NYSE symbol ..................... AEG.
Security numbers for the
common shares ................... Bearer shares:
Euronext Amsterdam security code 30176
ISIN code NL0000301760
Common code 11165524
New York Shares:
CUSIP code 007924103
ISIN code US 0079241032
S-5
USE OF PROCEEDS
After giving effect to the changes in our capital structure described in this
prospectus, we intend to use substantially all the proceeds of this offering to
strengthen our capital base by reducing short-term indebtedness incurred to
finance our corporate activities, with any remaining proceeds to be used for
other general corporate purposes.
S-6
RISK FACTORS
Your investment in the common shares entails risks. You should carefully
consider the risk factors below, as well as the other information contained in
this prospectus supplement and the accompanying prospectus, before investing in
the common shares.
RISKS RELATED TO OUR BUSINESS
INTEREST RATE VOLATILITY MAY ADVERSELY AFFECT OUR PROFITABILITY
In periods of increasing interest rates, policy loans and surrenders and
withdrawals may tend to increase as policyholders seek investments with higher
perceived returns. This process may result in cash outflows requiring that we
sell invested assets at a time when the prices of those assets are adversely
affected by the increase in market interest rates, which may result in realized
investment losses. Regardless of whether we realize an investment loss, these
cash payments would result in a decrease in total invested assets and a decrease
in net income. Among other things, premature withdrawals may also cause us to
accelerate amortization of policy acquisition costs, which would also reduce our
net income.
Conversely, during periods of declining interest rates, life insurance and
annuity products may be relatively more attractive to consumers, resulting in
increased premium payments on products with flexible premium features, and a
higher percentage of insurance policies remaining in force from year to year.
During such a period, investment earnings may be lower because the interest
earnings on fixed income investments likely will have declined in parallel with
market interest rates. In addition, mortgages and bonds in the investment
portfolio will be more likely to be repaid or redeemed as borrowers seek to
borrow at lower interest rates, and we may be required to reinvest the proceeds
in securities bearing lower interest rates. Accordingly, during periods of
declining interest rates, profitability may suffer as a result of a decrease in
the spread between interest rates credited to policyholders and returns on the
investment portfolio.
The profitability of spread-based business depends in large part upon the
ability to manage interest rate spreads, and the credit and other risks inherent
in the investment portfolio. We may not be able to successfully manage interest
rate spreads or the potential negative impact of those risks.
A DECLINE IN THE SECURITIES MARKETS MAY ADVERSELY AFFECT OUR PROFITABILITY AND
SHAREHOLDERS' EQUITY AS WELL AS OUR SALES OF SAVINGS AND INVESTMENT PRODUCTS AND
THE AMOUNT OF ASSETS UNDER MANAGEMENT
Fluctuations in the securities markets and other economic factors have adversely
affected and may continue to adversely affect our profitability as well as our
sales of our separate account unit linked products, pension products, variable
annuities, variable life insurance, and mutual funds. The level of volatility in
the markets in which we invest and the overall investment returns earned in
those markets also affect our profitability and can reduce our shareholders'
equity. In particular, protracted or steep declines in the stock or bond markets
have required and may continue to require us to accelerate amortization of
policy acquisition costs, which reduces our net income and can reduce the level
of surplus funds we carry on our balance sheet. These market conditions may also
significantly reduce the popularity of our savings and investment products,
which could lead to lower sales and net income.
DIFFERENCES BETWEEN ACTUAL CLAIMS EXPERIENCE AND UNDERWRITING AND RESERVE
ASSUMPTIONS MAY REQUIRE LIABILITIES TO BE INCREASED
Our earnings depend significantly upon the extent to which our actual claims
experience is consistent with the assumptions we use in setting the prices for
products and establishing the liabilities for obligations for technical
provisions and claims. To the extent that our actual claims experience is less
favorable than the underlying assumptions used in establishing such liabilities,
we may be required to increase our liabilities, which may reduce our net income.
In addition, certain 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 accurate, 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 our business, results of operations and
financial condition.
FLUCTUATIONS IN CURRENCY EXCHANGE RATES MAY AFFECT OUR REPORTED RESULTS OF
OPERATIONS
As an international life insurance company, we are subject to currency risk.
Equity held in subsidiaries is kept in local currencies to the extent
shareholders' equity is required to satisfy
S-7
regulatory and self-imposed capital requirements. We hold the remainder of our
capital base (capital securities, subordinated and senior debt) in various
currencies in amounts we believe correspond approximately to the book value of
our activities in those currencies to minimize any impact on our debt/equity
ratios. Currency risk in the investment portfolios is managed using
asset/liability matching principles. In 2000, we discontinued hedging the income
streams from the main non-Dutch units and, as a result, our earnings may
fluctuate due to currency translation. The principal exposure we have to
currency fluctuations are the differences between U.S. dollars and euro as well
as U.K. pounds and euro.
A DOWNGRADE IN RATINGS MAY INCREASE POLICY SURRENDERS AND WITHDRAWALS, ADVERSELY
AFFECT RELATIONSHIPS WITH DISTRIBUTORS AND NEGATIVELY AFFECT OUR RESULTS OF
OPERATIONS
Claims paying ability and financial strength ratings are a factor in
establishing the competitive position of insurers. A rating downgrade (or the
potential for such a downgrade) of us or any of our rated insurance subsidiaries
could, among other things, materially increase the number of policy surrenders
and withdrawals by policyholders of cash values from their policies, adversely
affect relationships with broker-dealers, banks, agents, wholesalers and other
distributors of our products and services, negatively impact new sales, and
adversely affect our ability to compete and thereby have a material adverse
effect on our business, results of operations and financial condition. Negative
changes in credit ratings may increase our cost of funding. Our credit is rated
AA- on Credit Watch negative by Standard & Poor's and Aa3 on review for
possible downgrade by Moody's Investors Service. See "Recent Developments".
CHANGES IN GOVERNMENT REGULATIONS IN THE COUNTRIES IN WHICH WE OPERATE MAY
AFFECT OUR PROFITABILITY
Our insurance business is subject to comprehensive regulation and supervision in
all countries in which we operate. The primary purpose of such regulation is to
protect policyholders, not shareholders.
Changes in existing insurance laws and regulations may affect the way in which
we conduct our business and the products we may offer. In addition, changes in
pension and employee benefit regulation, social security regulation, financial
services regulation, taxation and the regulation of securities products and
transactions may also adversely affect our ability to sell new policies or our
claims exposure on existing policies. Additionally, the insurance laws or
regulations adopted or amended from time to time may be more restrictive or may
result in higher costs than current requirements. See Item 4 of our annual
report on Form 20-F for the year ended December 31, 2001 under the caption
"Regulation".
LITIGATION AND REGULATORY INVESTIGATIONS MAY ADVERSELY AFFECT OUR BUSINESS,
RESULTS OF OPERATIONS AND FINANCIAL CONDITION
We face significant risks of litigation and regulatory investigations and
actions in connection with our activities as an insurer, employer, investment
advisor, investor and taxpayer. Lawsuits, including class actions and regulatory
actions may be difficult to assess or quantify, may seek recovery of very large
and/or indeterminate amounts, including punitive and treble damages, and their
existence and magnitude may remain unknown for substantial periods of time. A
substantial legal liability or a significant regulatory action could have a
material adverse effect on our business, results of operations and financial
condition.
DEFAULTS IN OUR FIXED MATURITY AND MORTGAGE LOAN PORTFOLIOS MAY ADVERSELY AFFECT
PROFITABILITY
Issuers of fixed maturity securities and mortgage loan borrowers have defaulted
and may continue to default on principal and interest payments with respect to
securities we hold. Significant terrorist actions, as well as general economic
conditions, have led to and may continue to result in significant decreases in
the value of the securities in which we invest. A continuation of or increase in
defaults on, or other reductions in the value of, these securities could have a
material adverse effect on our business, results of operations and financial
condition.
LIQUIDITY RISK OF CERTAIN INVESTMENT ASSETS
Our investments in privately placed securities, mortgage loans, real estate,
including real estate joint ventures and other limited partnership interests are
relatively illiquid. If we require significant amounts of cash on short notice
in excess of our normal cash requirements, we may have difficulty selling these
investments at attractive prices, in a timely manner, or both.
WE MAY BE UNABLE TO MANAGE OUR RISKS SUCCESSFULLY THROUGH DERIVATIVES
We are exposed to currency fluctuations, changes in the fair value of our
investments, the impact of interest rate changes and changes in mortality and
longevity. We use common derivative financial instruments such as interest rate
swaps, options, futures and foreign exchange contracts
S-8
to hedge our exposures related to both investments backing our insurance
products and company borrowings. We may not be able to manage successfully
through the use of derivatives the risks to which we are exposed. In addition, a
counterparty may fail to honor the terms of its derivatives contracts with us.
Our inability to manage our risks successfully through derivatives or a
counterparty's failure to honor its obligations to us could have a material
adverse effect on our business, results of operations and financial condition.
THE PAYMENT OF DIVIDENDS TO SHAREHOLDERS AND PAYMENTS ON OUR INDEBTEDNESS MAY BE
AFFECTED BY LIMITATIONS ON SUBSIDIARIES REGARDING THE PAYMENT OF DIVIDENDS
Our ability to pay dividends to stockholders, make payments on debt obligations
and pay certain operating expenses is dependent upon the receipt of dividends
from our subsidiaries. Certain of these subsidiaries have regulatory
restrictions which can limit the payment of dividends.
TAX LAW CHANGES MAY ADVERSELY AFFECT THE SALE AND OWNERSHIP OF INSURANCE
PRODUCTS
Insurance products enjoy certain tax advantages, particularly in the U.S. and
The Netherlands, which permit the tax-deferred accumulation of earnings on the
premiums paid by the holders of annuities and life insurance products. Taxes, if
any, are payable on accumulated tax-deferred earnings when earnings are actually
paid. The U.S. Congress has, from time to time, considered possible legislation
that would eliminate the deferral of taxation on the accretion of value within
certain annuities and life insurance products. Recent changes in tax laws in The
Netherlands have reduced the attractiveness of certain of our individual life
products. The current administration in The Netherlands has indicated that it is
contemplating further changes in law that would eliminate the tax advantages of
certain of our products, including group savings products. Any changes in U.S.
or Dutch tax law affecting our products could have a material adverse effect on
our business and results of operations.
COMPETITIVE FACTORS MAY ADVERSELY AFFECT OUR MARKET SHARE
Competition in our business segments is based on service, product features,
price, commission structure, financial strength, claims paying ability ratings
and name recognition. We face intense competition from a large number of other
insurers, as well as non-insurance financial services companies such as banks,
broker-dealers and asset managers, for individual customers, employer and other
group customers and agents and other distributors of insurance and investment
products. The recent consolidation in the global financial service industry has
also enhanced the competitive position of some of our competitors by broadening
the range of their products and services, and increasing their distribution
channels and their access to capital. In addition, development of alternative
distribution channels for certain types of insurance and securities products,
including through the Internet, may result in increasing competition as well as
pressure on margins for certain types of products. These competitive pressures
could result in increased pricing pressures on a number of our products and
services, particularly as competitors seek to win market share, and may harm our
ability to maintain or increase our profitability.
WE MAY BE UNABLE TO RETAIN PERSONNEL WHO ARE KEY TO OUR BUSINESS
As a global financial services enterprise with a decentralized management
structure, we rely, to a considerable extent, on the quality of local management
in the various countries in which we operate. The success of our operations is
dependent, among other things, on our ability to attract and retain highly
qualified professional personnel. Competition for key personnel in most
countries in which we operate is intense. Our ability to attract and retain key
personnel, and in particular senior officers, experienced portfolio managers,
mutual fund managers and sales executives, is dependent on a number of factors,
including prevailing market conditions and compensation packages offered by
companies competing for the same talent, which may offer compensation packages
that include considerable equity-based incentives through stock option or
similar programs.
JUDGMENTS OF U.S. COURTS MAY NOT BE ENFORCEABLE AGAINST US
Judgments of U.S. courts, including those predicated on the civil liability
provisions of the federal securities laws of the United States, may not be
enforceable in Dutch courts. As a result, our shareholders who obtain a judgment
against us in the United States may not be able to require us to pay the amount
of the judgment.
REINSURERS TO WHOM WE HAVE CEDED RISK MAY FAIL TO MEET THEIR OBLIGATIONS
Our insurance subsidiaries cede premiums to other insurers under various
agreements that cover individual risks, group risks or defined blocks of
business, on a co-insurance, yearly renewable term, excess or catastrophe excess
basis. These reinsurance agreements spread the risk and minimize the effect of
losses. The amount of each risk retained depends on its evaluation of the
S-9
specific risk, subject, in certain circumstances, to maximum limits based on
characteristics of coverage. Under the terms of the reinsurance agreements, the
reinsurer agrees to reimburse for the ceded amount in the event the claim is
paid. However, our insurance subsidiaries remain liable to their policyholders
with respect to ceded insurance if any reinsurer fails to meet the obligations
assumed by it.
WE MAY HAVE DIFFICULTY MANAGING OUR EXPANDING OPERATIONS AND WE MAY NOT BE
SUCCESSFUL IN ACQUIRING NEW BUSINESSES OR DIVESTING EXISTING OPERATIONS
In recent years we have effected a number of acquisitions and divestitures
around the world and we may make further acquisitions and divestitures in the
future. Growth by acquisition involves risks that could adversely affect our
operating results and financial condition, including the diversion of financial
and management resources from existing operations, difficulties in assimilating
the operations, technologies, products and personnel of the acquired company,
significant delays in completing the integration of acquired companies, the
potential loss of key employees or customers of the acquired company, potential
losses from unanticipated litigation, and tax and accounting issues.
Our acquisitions could result in the incurrence of additional indebtedness,
costs, contingent liabilities and amortization expenses related to goodwill and
other intangible assets. Divestitures of existing operations could result in our
assuming or retaining certain contingent liabilities. All of the foregoing could
materially adversely affect our businesses, financial condition and results of
operations. Future acquisitions may also have a dilutive effect on the ownership
and voting percentages of existing shareholders.
There can be no assurance that we will successfully identify suitable
acquisition candidates or that we will properly value acquisitions we make. We
are unable to predict whether or when any prospective acquisition candidate will
become available or the likelihood that any acquisition will be completed once
negotiations have commenced.
RISKS RELATED TO OUR COMMON SHARES
OUR SHARE PRICE COULD BE VOLATILE AND COULD DROP UNEXPECTEDLY FOLLOWING THIS
OFFERING, AND YOU MAY NOT BE ABLE TO RESELL YOUR COMMON SHARES AT OR ABOVE THE
PRICE YOU PAID
The price at which our common shares will trade will be influenced by a large
number of factors, some of which will be specific to us and our operations and
some of which will be related to the insurance industry and equity markets
generally. As a result of these factors, you may not be able to resell your
common shares at or above the price which you paid for them. In particular, the
following factors, in addition to other risk factors described in this section,
may have a significant impact on the market price of our common shares:
o investor perception of our company, including actual or anticipated
variations in our revenues or operating results;
o announcement by us of intended acquisitions, disposals or financings or
speculation about such acquisitions, disposals or financings;
o sales of blocks of our shares by significant shareholders, including
Vereniging AEGON;
o investor perception of the success and effect of this offering and
Vereniging AEGON's secondary offering of our common shares;
o a downgrade or rumored downgrade of our credit or financial strength
ratings, including placement on credit watch;
o potential litigation involving us or the insurance industry generally;
o changes in financial estimates and recommendations by securities research
analysts;
o fluctuations in foreign exchange rates and interest rates;
o the performance of other companies in the insurance sector;
o regulatory developments in The Netherlands, the United States, the United
Kingdom and other countries;
o international political and economic conditions, including the effects of
terrorist attacks, military operations and other developments stemming from
such events and the uncertainty related to these developments;
o news or analyst reports related to our markets or industries in which we
operate; and
o general market conditions.
S-10
WE AND OUR SIGNIFICANT SHAREHOLDERS MAY OFFER ADDITIONAL COMMON SHARES IN THE
FUTURE, AND THESE AND OTHER SALES MAY ADVERSELY AFFECT THE MARKET PRICE OF OUR
OUTSTANDING COMMON SHARES
We have no current plans for a subsequent offering of our common shares or of
rights to subscribe for our common shares. However, it is possible that we may
decide to offer additional common shares in the future, for example to effect an
acquisition. In connection with Vereniging AEGON's refinancing, it entered into
the Repo Facility and the Back-up Facility. As is customary in these repurchase
agreements, if sufficient collateral is not maintained by Vereniging AEGON
(which in this case is based on the number of common shares and the prevailing
share price) and amounts are not available under the Back-up Facility, the
lenders under the Repo Facility may dispose of the common shares held by them
under the Repo Facility in order to satisfy amounts outstanding. An additional
offering of common shares by us, sales of common shares by significant
shareholders or by lenders to Vereniging AEGON, or the public perception that an
offering or such sales may occur, could have an adverse effect on the market
price of our common shares.
OUR CONTROLLING SHAREHOLDER, VERENIGING AEGON, WILL CONTINUE TO HOLD A LARGE
PERCENTAGE OF OUR VOTING SHARES AFTER THIS OFFERING AND THE SECONDARY OFFERING
BY VERENIGING AEGON, AND THEREFORE WILL RETAIN SIGNIFICANT INFLUENCE OVER OUR
CORPORATE ACTIONS
As of August 31, 2002, Vereniging AEGON, our controlling shareholder,
beneficially owned approximately 52% of our voting shares and thus held voting
control over us. Upon completion of this offering and the concurrent
transactions described in "Restructuring of Relationship with Vereniging AEGON"
and "Description of the Offering", including the secondary offering planned by
Vereniging AEGON, Vereniging AEGON will beneficially own approximately 33% of
our voting shares. In addition, we will agree with Vereniging AEGON to amend its
existing option agreement with us to reduce its ability to acquire our preferred
shares upon issuance of new shares to maintain its voting power to an amount to
be mutually agreed, which will not exceed the amount necessary to maintain its
voting power at the level it will have immediately following this offering and
the concurrent transactions described above in "Restructuring of Relationship
with Vereniging AEGON". Consequently, although Vereniging AEGON will no longer
control a majority of our voting shares, it will remain a significant
shareholder and may have substantial influence on the outcome of corporate
actions requiring shareholder approval, including:
o adopting amendments to our articles of association; and
o approving a merger or consolidation, liquidation or sale of all or
substantially all of our assets.
CURRENCY FLUCTUATIONS MAY ADVERSELY AFFECT THE TRADING PRICES OF OUR COMMON
SHARES AND THE VALUE OF ANY DISTRIBUTIONS WE MAKE
Because our common shares listed on Euronext Amsterdam are quoted in euro and
our common shares listed on the NYSE are quoted in U.S. dollars, fluctuations in
exchange rates between the euro and the U.S. dollar may affect the value of your
investment. In addition, we declare cash dividends in euro, but pay dividends on
our New York Shares in U.S. dollars based on an exchange rate set the business
day following the shareholder meeting approving the dividend. As a result,
fluctuations in exchange rates may affect the value of the dividends you
receive.
S-11
CAPITALIZATION
The following table sets forth our consolidated capitalization (1) as of June
30, 2002 and (2) as of June 30, 2002, as adjusted to give effect to this
offering and the related changes in our capital structure, including the
increase in the additional paid-in capital on our preferred shares held by
Vereniging AEGON. See "Restructuring of Relationship with Vereniging AEGON" and
"Description of the Offering". It is important that you read this table in
conjunction with, and it is qualified by reference to, "Selected Historical
Financial Data" and the historical financial statements and related notes in our
annual report on Form 20-F for 2001 filed with the U.S. Securities and Exchange
Commission (SEC), including the section titled "Operating and Financial Review
and Prospects", as well as in the information relating to our results for the
six months ended June 30, 2002 furnished to the SEC on Form 6-K and incorporated
by reference in this prospectus.
As of June 30, 2002
----------------------
As adjusted
for this
offering and
change in
our capital
Actual structure
--------- ------------
(in millions of (euro))
Preferred shares(1)(2) ............................... 53 53
Common shares(2) ..................................... 172 172
Surplus funds(3) ..................................... 13,422 15,486
--------- ------------
Shareholders' equity ................................. 13,647 15,711
--------- ------------
Perpetual cumulative subordinated loans .............. 1,517 1,517
Trust pass-through securities ........................ 524 524
--------- ------------
Capital securities ................................... 2,041 2,041
Subordinated debt .................................... 639 639
Senior debt related to insurance activities(4) ....... 3,297 1,233
--------- ------------
Total capital base ................................... 19,624 19,624
========= ============
----------
(1) Vereniging AEGON holds all of our issued preferred shares.
(2) On June 30, 2002, our authorized share capital consisted of 1,400,000,000
preferred shares and 2,600,000,000 common shares. On June 30, 2002, our
issued share capital consisted of 440,000,000 preferred shares and
1,433,379,403 common shares, each par value (euro)0.12 per share. All of
our issued shares are fully paid-up. As of June 30, 2002 we held 30,918,580
common shares in our treasury.
(3) The change in surplus funds results from a (euro)2,064,000,000 increase in
paid-in capital on our preferred shares resulting from the offering and
change in capital structure described in this prospectus.
(4) Reflects reduction in senior debt with proceeds of our global offering of
(euro)2,064,000,000.
We have published our results as of and for the six months ended June 30, 2002.
We have not prepared any consolidated financial statements as of any date or for
any period subsequent to June 30, 2002. Since June 30, 2002 global equity
markets have declined. A decline in the value of our equity portfolio has a
negative impact on surplus funds and reduces shareholders' equity. We included a
sensitivity analysis in Item 11 of our annual report on Form 20-F for the year
ended December 31, 2001 that indicated that a decrease in equity and real estate
markets of 15% would result in a decrease in shareholders' equity of 7% to 8.5%.
At June 30, 2002 shareholders' equity totaled (euro)13,647 million, compared to
(euro)15,292 million at December 31, 2001. The (euro)1,645 million decrease was
due primarily to exchange rate differences of (euro)1,392 million and investment
losses of (euro)759 million, offset by net income of (euro)763 million. Since
June 30, 2002 there have been further declines in equity and real estate markets
which have reduced the value of our equity and real estate portfolio. We have
not prepared a sensitivity analysis since December 31, 2001, but we believe that
the sensitivities at June 30, 2002 to decreases in equity and real estate
markets would be lower than at December 31, 2001. As a result of our policy of
hedging our employee and management share option plans for 2001 and 2002 using
total return swap agreements, we are exposed to fluctuations in our own common
share price. Based on the public offering price of (euro)10.00, the negative
effect on shareholders' equity since June 30, 2002 in relation to the total
return swap agreements is approximately (euro)212 million.
S-12
SELECTED HISTORICAL FINANCIAL DATA
In the table below, we provide you with our summary historical financial data.
We have prepared this information using our consolidated financial statements
for the five years ended December 31, 2001 and the six months ended June 30,
2001 and 2002. The financial statements for the five fiscal years ended December
31, 2001 have been audited by Ernst & Young Accountants, independent
auditors. The selected consolidated financial data for the six months ended June
30, 2001 and 2002 have been derived from our unaudited consolidated financial
statements, which have been prepared on the same basis as our audited financial
statements and, in the opinion of our management, reflect all normal recurring
adjustments necessary for a fair presentation of our financial position and
results of operations as of the end of and for such periods. The results for the
six months ended June 30, 2002 may not be indicative of the operating results to
be expected for the entire year.
The consolidated financial statements are prepared in accordance with generally
accepted Dutch accounting principles (Dutch accounting principles), which differ
in certain significant respects from generally accepted accounting principles in
the United States (U.S. GAAP). You can find a description of the significant
differences between Dutch accounting principles and U.S. GAAP and a
reconciliation of certain income statement and balance sheet items to U.S. GAAP
in note 5 of the notes to our consolidated financial statements, which are
incorporated by reference from our annual report on Form 20-F for the year ended
December 31, 2001.
When you read this summary historical financial data, it is important that you
read it in conjunction with, and it is qualified by reference to, the historical
financial statements and related notes in our annual report on Form 20-F for
2001 filed with the SEC, including the section titled "Operating and Financial
Review and Prospects", as well as in the information relating to our results for
the six months ended June 30, 2002 furnished to the SEC on Form 6-K and
incorporated by reference in this prospectus.
All per share amounts have been calculated based on the weighted average number
of common shares outstanding after giving effect to all stock dividends and
stock splits through June 30, 2002.
S-13
As of and for the
Six Months Ended As of and for the
June 30, Year Ended December 31,
-------------------- -----------------------------------------------------------------
2002 2001 2001 2000 1999 1998 1997
------ ------ ------ ------ ------ ------ -----
(Unaudited)
(in millions of euro, except per share amounts and ratios)
CONSOLIDATED INCOME
STATEMENT INFORMATION:
Amounts based upon Dutch
accounting principles(1)
Premium income .............. 11,219 10,958 21,578 20,771 14,980 11,550 9,532
Investment income ........... 4,857 4,900 9,933 9,612 6,690 5,003 4,001
Total revenues(2)(3) ........ 16,266 16,051 31,895 30,707 22,374 17,179 14,207
Income before tax ........... 990 1,598 3,243 2,839 2,181 1,634 1,287
Net income(3) ............... 763 1,161 2,397 2,066 1,570 1,247 1,001
Net income per common
share(4)
Net income ................ 0.55 0.87 1.76 1.57 1.28 1.08 0.90
Net income, fully diluted . 0.55 0.87 1.75 1.55 1.26 1.06 0.88
Amounts based upon U.S.
GAAP(1)
Premium income .............. -- -- 10,214 7,509 5,784 4,928 4,506
Investment income ........... -- -- 11,001 12,576 7,013 5,656 4,762
Total revenues(2)(3) ........ -- -- 21,599 20,457 13,501 11,210 9,943
Income before tax ........... -- -- 1,199 3,254 1,950 1,928 1,826
Net income .................. -- -- 632 2,588 1,601 1,471 1,518
Net income per common
share(4)
Basic ..................... -- -- 0.46 1.97 1.31 1.28 1.36
Diluted ................... -- -- 0.46 1.94 1.29 1.25 1.33
CONSOLIDATED BALANCE
SHEET INFORMATION:
Amounts based upon Dutch
accounting principles(1)
Total assets ................ 248,901 267,133 264,061 244,216 228,808 131,196 123,762
Technical provisions ........ 206,102 223,579 220,523 206,097 190,145 102,959 95,447
Long-term liabilities
(including current
portion) .................. 7,874 7,335 7,855 6,528 5,735 3,891 5,434
Capital and reserves ........ 13,647 15,639 15,292 12,844 13,543 7,934 8,227
Amounts based upon U.S.
GAAP(1)
Total assets ................ -- -- 299,603 281,580 262,694 138,083 130,705
Technical provisions ........ -- -- 240,297 225,602 206,007 108,355 100,822
Long-term liabilities
(including current
portion) .................. -- -- 12,197 15,749 14,770 3,804 5,338
Trust pass-through
securities (TRUPS) and
monthly income preferred
stock (MIPS) .............. -- -- 584 553 512 87 96
Shareholders' equity ........ -- -- 20,669 18,965 17,050 9,612 9,764
OTHER:
Life insurance in force ..... -- -- 1,248,452 1,163,443 972,560 300,466 292,604
Investment income for
the account of
policyholders(2) .......... (6,380) (5,367) (9,515) (3,495) 13,533 8,466 6,523
Annuity deposits,
including GIC/funding
agreements(2) ............. 15,642 13,232 26,381 25,506 17,445 6,723 4,679
Combined underwriting
expense ratio(5) .......... -- -- 100% 102% 104% 104% 103%
Share capital ............... 225 223 224 215 216 185 193
NUMBER OF COMMON SHARES:
(in thousands)
Balance at January 1 ........ 1,422,253 1,350,524 1,350,524 668,426 583,180 289,863 265,234
Stock split ................. -- -- -- 668,426 -- 289,863 --
Issuance of shares .......... -- 55,000 55,000 -- 82,546 -- 22,264
Stock dividends ............. 11,126 11,259 16,484 13,194 2,319 2,195 1,624
Exercise of options ......... -- 245 245 478 381 1,259 741
Balance at end of period .... 1,433,379 1,417,028 1,422,253 1,350,524 668,426 583,180 289,863
S-14
----------
(1) Our consolidated financial statements were prepared in accordance with
Dutch accounting principles, which differ in certain respects from U.S.
GAAP. See Note 5 to our consolidated financial statements for information
concerning the differences between Dutch accounting principles and U.S.
GAAP. Amounts based on U.S. GAAP are not available as of, and for the six
month period ended, June 30, 2002.
(2) Excluded from the income statements prepared in accordance with Dutch
accounting principles are receipts related to investment-type annuity
products and investment income for the account of policyholders. In
addition, universal life-type deposits are excluded from premium revenue in
the income statements prepared in accordance with U.S. GAAP.
(3) Foreign currency items in the consolidated income statements have been
converted at weighted average annual rates.
(4) Per share data have been computed in conformity with U.S. GAAP
requirements. Such data are calculated based on the weighted average number
of common shares outstanding after giving effect to all stock dividends and
stock splits through June 30, 2002. Diluted per share data give effect to
all dilutive securities.
(5) The combined underwriting expense ratio refers to general insurance and is
the sum of the ratio of losses and loss adjustment expenses incurred to net
premiums earned and the ratio of policy acquisition costs and other
underwriting expenses to net premiums written. Our investment income in
respect of general insurance is not taken into account when calculating
this ratio. This ratio has been computed on a basis that is similar to that
used in reporting to insurance regulatory authorities in the United States
and is consistent with U.S. GAAP.
RECENT DEVELOPMENTS
On July 22, 2002 we announced that due to continued deteriorating financial
market conditions and a weakened U.S. dollar we expected our annual 2002
earnings to be 30% to 35% lower compared to our 2001 earnings. That outlook was
based on information from our second quarter and, barring unforeseen financial
market circumstances, and included an average annual (euro)/U.S.$ rate of
(euro)1.00 = U.S.$0.95. See our Report on Form 6-K furnished to the SEC on
August 12, 2002, which is incorporated by reference in this prospectus.
As a result of this announcement, the financial strength ratings of our
principal operating companies were revised as follows:
Standard & Poor's Moody's Investors Service
----------------- -------------------------
AEGON USA ......................... AA+ on Credit Watch Negative Aa3 on outlook stable
Scottish Equitable ................ AA+ on Credit Watch Negative Aa2 on review for possible downgrade
AEGON The Netherlands ............. AA+ on Credit Watch Negative --
S-15
SHARE CAPITAL
DESCRIPTION OF SHARE CAPITAL
As of August 31, 2002, our total authorized share capital consisted of
2,600,000,000 common shares and 1,400,000,000 preferred shares, each with a par
value of (euro)0.12 per share. At the same date, there were 1,433,379,403 common
shares and 440,000,000 preferred shares issued, of which 30,918,580 common
shares were held by us as treasury shares. All of our common shares are fully
paid and not subject to calls for additional payments of any kind. Our common
shares are held by shareholders worldwide in bearer or registered form. Holders
of shares of New York registry hold their common shares in registered form (New
York Shares) issued by our New York transfer agent on our behalf. New York
Shares and bearer shares are exchangeable on a one-to-one basis and are entitled
to the same rights, except that cash dividends are paid in U.S. dollars on New
York Shares.
As of August 31, 2002, in The Netherlands 476,741,800 common shares were held in
registered form. As of August 31, 2002, 117,261,582 common shares were held in
the form of New York Shares.
As of August 31, 2002, Vereniging AEGON, our controlling shareholder,
beneficially owned 100% of our outstanding preferred shares and approximately
37% of our outstanding common shares (excluding shares we hold as treasury
shares), which give Vereniging AEGON beneficial ownership of approximately 52%
of our voting shares and thus voting control over us. We and Vereniging AEGON
are currently parties to an option agreement. The option agreement gives
Vereniging AEGON the right to acquire our preferred shares in an amount
necessary to prevent Vereniging AEGON's total voting power from being diluted to
less than a majority resulting from new issuances of our common shares. We have
agreed to amend this option agreement in connection with the changes in our
capital structure described in "Restructuring of Relationship with Vereniging
AEGON". The table below sets forth Vereniging AEGON's ownership of our common
and preferred shares as of August 31, 2002.
Percent of Class
Title of Class Number Owned Outstanding(1)
-------------- ------------ ----------------
Common Shares ............... 521,974,055 37.2%
Preferred Shares ............ 440,000,000 100%
----------
(1) Excluding shares held by us as treasury shares.
We have entered into an agreement with Vereniging AEGON to repurchase from
Vereniging AEGON the common shares we are offering. We will repurchase the
common shares offered in this offering at a purchase price equal to the gross
proceeds of this offering. Vereniging AEGON will contribute an amount equal to
the gross proceeds from our share repurchase as additional paid-in capital on
our existing preferred shares, all of which it holds. We and Vereniging AEGON
have agreed to set off our respective payment obligations to each other.
Accordingly, no cash will be exchanged between us with respect to these
transactions.
Upon completion of this offering and the other transactions described in
"Restructuring of Relationship with Vereniging AEGON" and "Description of the
Offering", including the secondary offering planned by Vereniging AEGON,
Vereniging AEGON will beneficially own approximately 33% of our voting shares,
including approximately 12% of our outstanding common shares, excluding treasury
shares, and 100% of our preferred shares.
Vereniging AEGON and we have agreed, subject to conditions, to reduce further in
the future the voting power of Vereniging AEGON. See "Restructuring of
Relationship with Vereniging AEGON".
For the New York Shares, ANT Trust is the transfer agent in The Netherlands and
Citibank, N.A. is the registrar and transfer agent in the United States.
DIVIDEND POLICY
Under Dutch law and our articles of incorporation, holders of our common shares
are entitled to payment of dividends out of our profits remaining after the
creation of a reserve account, if any. Our Executive Board may determine the
dividend payment date for the common shares, which may vary for registered and
bearer shares, the record date applicable to holders of registered common shares
and, with the approval of our Supervisory Board, the currency or currencies in
which dividends will be paid. With respect to common shares, we historically
have declared both an interim dividend during the fiscal year and a final
dividend after our shareholders have approved our annual accounts. Shareholders
historically have been permitted to elect to receive
S-16
dividends in cash or in common shares. We pay dividends on New York Shares in
U.S. dollars, through Citibank, N.A., based on an exchange rate set the business
day following the shareholder meeting approving the dividend.
The annual dividend on our preferred shares is calculated on the basis of the
paid-in capital on the preferred shares using a rate equal to the European
Central Bank's fixed interest percentage for basic refinancing transactions plus
1.75%, as determined on the first Euronext Amsterdam working day of the
financial year to which the dividend relates. Accordingly, our annual dividend
obligations on the preferred shares will increase. Applying the rate applicable
in 2002 of 5.00% to the paid-in capital on the preferred shares following these
transactions would result in an annual dividend of (euro)105,840,000, compared
to an annual dividend of (euro)2,640,000 prior to these transactions. Dividends
on the preferred shares payable for 2002 will be subject to a pro rata
adjustment based on the weighted average paid-in capital during the year.
Dividends on our preferred shares are paid annually, concurrently with the final
dividend on common shares and are not cumulative.
LISTING OF THE COMMON SHARES
The principal market for our common shares is Euronext Amsterdam. Our common
shares are also listed on the NYSE and the Frankfurt, London, Tokyo stock
exchanges as well as the SWX Swiss Exchange.
The table below sets forth, for the calendar periods indicated, the high and low
sales prices of our common shares on Euronext Amsterdam and the NYSE. Share
prices have been adjusted for all stock splits through June 30, 2002.
Euronext New York Stock
Amsterdam Exchange
((euro)) (U.S.$)
--------------- ---------------
High Low High Low
----- ----- ----- -----
1997 ........................ 20.59 11.93 22.69 15.28
1998 ........................ 53.98 20.43 62.88 22.22
1999 ........................ 55.83 34.13 65.06 34.81
2000 ........................ 49.00 33.00 49.13 31.50
2001 ........................ 45.10 21.25 41.81 19.69
2000
First quarter ............. 49.00 33.00 49.13 31.50
Second quarter ............ 45.25 36.20 42.75 34.25
Third quarter ............. 48.30 36.20 41.56 33.00
Fourth quarter ............ 48.89 41.67 43.00 35.38
2001
First quarter ............. 45.10 29.65 41.81 25.82
Second quarter ............ 38.48 29.80 34.08 26.40
Third quarter ............. 35.90 21.25 31.98 19.69
Fourth quarter ............ 32.14 26.38 28.78 23.88
2002
First quarter ............. 30.73 23.70 27.46 20.75
Second quarter ............ 28.80 17.85 25.16 17.97
March 2002 .................. 28.50 24.80 25.10 21.68
April 2002 .................. 28.80 25.25 25.16 22.80
May 2002 .................... 25.90 22.90 23.50 21.45
June 2002 ................... 23.39 17.85 21.81 17.97
July 2002 ................... 21.89 10.05 21.24 9.95
August 2002 ................. 16.69 10.82 16.22 10.90
September 2002 (through
September 17) ............. 15.22 9.87 14.84 9.60
Trading on Euronext Amsterdam has been in euro since January 4, 1999. Prior year
figures have been translated at a rate of (euro)1.00 = NLG 2.20371. On Euronext
Amsterdam only bearer shares may be traded and on the NYSE only New York Shares
may be traded.
On September 17, 2002, the noon buying rate for euro as reported by the Federal
Reserve Bank of New York was (euro)1.00 = U.S.$0.9685 ((euro)1.0325 =
U.S.$1.00). On that date, the closing price of the common shares on Euronext
Amsterdam was (euro)10.04 and on the NYSE was U.S.$9.65.
S-17
DUTCH TAXATION
For a description of the material Dutch tax consequences of owning our common
shares, see "Taxation -- Taxation in The Netherlands" in the accompanying
prospectus.
Recently legislation took effect in The Netherlands that provides that no
exemption from, or refund or credit of, Dutch withholding tax on dividends is
available to recipients of dividends that are not considered beneficial owners
for Dutch tax purposes. The recipient of the dividend will not be considered the
beneficial owner if:
o in connection with the receipt of the dividend, the shareholder has agreed,
as part of one or more related transactions, to pass the dividend in whole
or in part to the benefit of a person that would otherwise be subject to a
less favorable exemption from or refund of dividend withholding tax than
the recipient of the dividend; and
o the other person retains or acquires, directly or indirectly, an interest
in the common shares on which the dividend was paid, comparable to the
interest that person had before the related transactions were entered into.
U.S. TAXATION
For a description of the material U.S. tax consequences of owning our common
shares, see "Taxation -- Taxation in the United States" in the accompanying
prospectus.
TAX CONSEQUENCES TO NON-U.S. HOLDERS -- INFORMATION REPORTING AND BACKUP
WITHHOLDING
If you provide the required tax certifications of exempt or foreign status,
dividends received by you will generally be exempt from U.S. information
reporting requirements and backup withholding.
Sales proceeds you receive on a sale of your common shares through a broker may
be subject to information reporting and backup withholding if you are not
eligible for an exemption. In particular, information reporting and backup
withholding may apply if you use the U.S. office of a broker, and information
reporting (but not backup withholding) may apply if you use the foreign office
of a broker that is a "U.S. Controlled Person", and if payments of dividends on
the common shares are made outside of the United States by a custodian, nominee
or other agent of the holder that is a U.S. Controlled Person. For purposes of
these rules, a "U.S. Controlled Person" is:
o a "United States Person" for United States federal income tax purposes;
o a controlled foreign corporation for United States federal income tax
purposes;
o a foreign person for which 50% or more of its gross income from all
sources, over a specified three year period, is effectively connected with
a U.S. trade or business; or
o a foreign partnership that, at any time in its taxable year, is 50% or more
(by income or capital interest) owned by a United States Person or is
engaged in the conduct of a U.S. trade or business.
Backup withholding is not an additional tax. Any amounts withheld under the
backup withholding rules from a payment made to a non-U.S. holder generally may
be claimed as a credit against such holder's U.S. federal income tax liability
provided the appropriate information is furnished to the U.S. Internal Revenue
Service.
Non-U.S. holders should consult their own tax advisors concerning information
reporting and backup withholding on a sale or dividend, as well as their
qualification for any exemptions.
S-18
PLAN OF DISTRIBUTION
ABN AMRO Rothschild and Morgan Stanley & Co. International Limited are acting as
joint global coordinators and joint bookrunners for this offering.
Under the terms and subject to the conditions contained in an underwriting
agreement dated September 17, 2002, in connection with this offering, the
underwriters named below, for whom ABN AMRO Rothschild and Morgan Stanley & Co.
International Limited are acting as representatives, have severally agreed to
purchase, and we have agreed to sell to them, severally, the number of our
common shares indicated below:
Number of
Name Common Shares
---- -------------
ABN AMRO Rothschild ............................................. 81,528,000
Morgan Stanley & Co. International Limited ...................... 81,528,000
Credit Suisse First Boston (Europe) Limited ..................... 6,192,000
ING Bank N.V. ................................................... 6,192,000
Rabo Securities N.V. ............................................ 6,192,000
Salomon Brothers International Limited .......................... 6,192,000
Banc of America Securities Limited .............................. 4,128,000
J.P. Morgan Securities Limited .................................. 4,128,000
Merrill Lynch International ..................................... 4,128,000
Fox-Pitt, Kelton N.V. ........................................... 2,064,000
Stephens Inc. ................................................... 2,064,000
WestLB Panmure Limited .......................................... 2,064,000
-----------
Total ........................................................... 206,400,000
===========
The underwriters may elect to take delivery of all or a portion of the common
shares purchased in the form of bearer shares or New York Shares.
The underwriters are offering the common shares subject to their acceptance of
the shares from us and subject to prior sale. The underwriting agreement
provides that the obligations of the several underwriters to pay for and accept
delivery of the common shares offered hereby are subject to the approval of
certain legal matters by their counsel and to certain other conditions. In
addition, ABN AMRO Rothschild and Morgan Stanley & Co. International Limited, on
behalf of the underwriters, have the right to terminate the underwriting
agreement in certain circumstances prior to the closing of this offering. The
underwriters are obligated to take and pay for all of the common shares offered
hereby if any common shares are taken.
The offering of the common shares in the United States will be made by
affiliates of the underwriters that are broker-dealers registered under the
Securities Exchange Act of 1934.
The underwriters may agree to allocate a number of shares to underwriters for
sale to their online brokerage account holders. Internet distributions will be
allocated by the joint global coordinators to underwriters that may make
Internet distributions on the same basis as other allocations.
In the agreement among underwriters, sales may be made between the underwriters
of any number of shares as may be mutually agreed. The per share price of any
shares sold by the underwriters among themselves shall be the public offering
price listed on the cover page of this prospectus, less an amount not greater
than the per share amount of the concession to underwriters that will not exceed
(euro)0.12 a share in the case of bearer shares or U.S.$0.12 a share in
the case of New York Shares.
The underwriters initially propose to offer in the public offering in the United
States part of the common shares directly to the public at the public offering
price listed on the cover page of this prospectus. Common shares will also be
offered to investors outside the United States at the public offering price
listed on the cover page of this prospectus. After the initial offering of the
common shares, the offering price and other selling terms may from time to time
be varied by the representatives.
The following table shows the public offering price per bearer share and per New
York Share, the total underwriting discount to be paid to the underwriters for
the offering and our total proceeds before expenses from the offering:
S-19
Per Bearer Per New York
Share Share(1) Total(2)
----------- ------------ ------------------
Public offering price ............ (euro)10.00 U.S.$9.71 (euro)2,064,000,000
Underwriting discount(3) ......... (euro) 0.20 U.S.$0.19 (euro) 41,280,000
Proceeds to us, before expenses .. (euro) 9.80 U.S.$9.52 (euro)2,022,720,000
----------
(1) Translated at a rate of U.S.$0.9714 per (euro)1.00.
(2) Assuming all common shares are sold in the form of bearer shares.
(3) In the underwriting agreement, the underwriters have agreed to pay to us
the total public offering price against payment by Vereniging AEGON of the
underwriting discount relating to the offering, including any additional
discount.
In addition to the underwriting discount included in the table above, in our
sole discretion we may pay some or all of the underwriters on the closing date
for the offering an additional underwriting discount of up to 0.50% of the gross
proceeds of the offering. We will not take into account any trading, research or
similar activities of any underwriter after the pricing of the offering in
exercising its discretion.
In addition to underwriting discounts and commissions, the estimated offering
expenses payable by us in connection with this offering are approximately
U.S.$2,950,000. The following table details the estimated offering expenses
payable in connection with this offering:
SEC registration fee ........................................... U.S.$1,000,000
Printing and engraving expenses ................................ 75,000
Legal fees and expenses ........................................ 1,000,000
Accounting fees and expenses ................................... 25,000
Transfer agent fees and expenses ............................... 10,000
Publicity and marketing ........................................ 50,000
Miscellaneous .................................................. 790,000
--------------
Total .......................................................... U.S.$2,950,000
==============
Vereniging AEGON has agreed to bear our expenses related to this offering,
including underwriting discounts and commissions, except for any expenses
incurred in connection with our SEC registration and any capital tax payable in
connection with the contribution of additional paid-in capital with respect to
the preferred shares.
We and the underwriters have agreed to indemnify each other against certain
liabilities, including liabilities under the Securities Act. We have agreed to
reimburse the underwriters for certain expenses incurred by them in connection
with this offering.
Some of the underwriters and their affiliates are providing, have provided and
may in the future provide investment banking services and financial services to
us in the ordinary course of business and for which they will receive customary
compensation. ABN AMRO Bank N.V., an affiliate of ABN AMRO Rothschild, is acting
as the arranger of the Repo Facility and Back-up Facility with a syndicate of
banks, including certain of the other underwriters, for Vereniging AEGON
described in "Restructuring of Relationship with Vereniging AEGON". The proceeds
of the secondary offering, together with the proceeds from Vereniging AEGON's
new credit facility, will refinance Vereniging AEGON's existing indebtedness,
including outstanding indebtedness owed to ABN AMRO Bank N.V.
LOCK-UP
We have agreed that, without the prior written consent of ABN AMRO Rothschild
and Morgan Stanley & Co. International Limited on behalf of the underwriters, we
will not, during the period ending 90 days following the pricing of this
offering:
o issue, offer, pledge, sell, contract to sell, sell any option or contract
to purchase, purchase any option or contract to sell, grant any option,
right or warrant to purchase, lend, or otherwise transfer or dispose of,
directly or indirectly, any common shares or any securities convertible
into or exercisable or exchangeable for common shares; or
o enter into any swap or other arrangement that transfers to another, in
whole or in part, any of the economic consequences of ownership of common
shares
whether any transaction described in the two clauses above is to be settled by
delivery of common shares or such other securities, in cash or otherwise.
S-20
The restrictions described in the paragraph above do not apply to some
circumstances, including:
o the sale of common shares to the underwriters in this offering;
o the issuance or transfer by us of common shares upon the exercise of an
option or a warrant or the conversion of a security outstanding at the date
of this prospectus;
o the issuance of common shares pursuant to our shareholder dividend policy;
o the issuance of preferred shares to Vereniging AEGON; and
o the issuance of options on our common shares under our share option plans
or ESOP and any common shares issuable upon the exercise of these options
pursuant to our share option plans or ESOP existing on the date of this
prospectus as well as related purchases and sales.
STABILIZATION
In order to facilitate the offering of the common shares, the underwriters may
engage in transactions that stabilize, maintain or otherwise affect the price of
the common shares. Specifically, the underwriters may over-allot in connection
with the offering, creating a naked short position in the common shares for
their own account. The underwriters must close out any naked short position by
purchasing shares in the open market. A naked short position is more likely to
be created if the underwriters are concerned that there may be downward pressure
on the price of the shares in the open market after pricing that could adversely
affect investors who purchase in the offering. In addition, to cover
over-allotments or to stabilize the price of the common shares, the underwriters
may bid for, and purchase, common shares in the open market. Finally, the
underwriting syndicate may reclaim selling concessions allowed to an underwriter
for distributing the common shares in the offering, if the syndicate repurchases
previously distributed common shares in transactions to cover syndicate short
positions, in stabilization transactions or otherwise. Any of these activities
may stabilize or maintain the market price of the common shares above
independent market levels which might otherwise prevail or retard a decline in
the market price of the common shares, in either case for a limited period. The
underwriters are not required to engage in these activities, may end any of
these activities at any time and must end these activities after a limited
period. To the extent required by applicable law, the foregoing activities will
be conducted by Morgan Stanley & Co. International Limited, as stabilizing
manager (and its agents), on behalf of the underwriters.
SELLING RESTRICTIONS
No action has been or will be taken in any jurisdiction, except in the United
States, that would permit a public offering of the common shares, or the
possession, circulation or distribution of this prospectus or any other material
relating to our company or the common shares, in any jurisdiction where action
for that purpose is required.
In connection with the offering of common shares outside the United States, each
underwriter has represented and agreed that:
o it has only communicated or caused to be communicated and will only
communicate or cause to be communicated any invitation or inducement to
engage in investment activity (within the meaning of section 21 of the
Financial Services and Markets Act 2000 of the United Kingdom, which we
refer to as the FSMA) received by it in connection with the issue or sale
of any common shares in circumstances in which section 21(1) of the FSMA
does not apply to us; and
o it has complied, and will comply, with all applicable provisions of the
FSMA with respect to anything done by it in relation to the common shares
in, from or otherwise involving the United Kingdom.
The common shares have not been and will not be registered under the Securities
and Exchange Law of Japan (Law No. 25 of 1948 as amended), and may not be
offered or sold, directly or indirectly, in Japan or to a resident of Japan
except pursuant to an exemption from the registration requirements of, and
otherwise in compliance with, the Securities and Exchange Law and other relevant
laws and regulations of Japan.
The common shares will not be offered publicly, directly or indirectly, in
Belgium at the time of the offering. This offering has not been notified to, and
the offering documents have not been approved by, the Belgian Banking and
Finance Commission. The common shares may only be sold in Belgium to
professional investors as defined in article 3 of the Royal Decree of July 7,
1999 on the public nature of financial transactions acting for their account,
and this prospectus may not be delivered or passed on to any other investors.
S-21
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
We file annual reports with and furnish other information to the SEC. You may
read and copy any document that we have filed with or furnished to the SEC at
the SEC's public reference room at 450 Fifth Street, N.W., Washington, D.C.
20549. Our SEC filings are also available to the public through the SEC's web
site at http://www.sec.gov. Please call the SEC at 1-800-SEC-0330 for further
information on the public reference room in Washington, D.C. and in other
locations.
As allowed by the SEC, this prospectus supplement and the accompanying
prospectus do not contain all the information you can find in our registration
statement or the exhibits to the registration statement. The SEC allows us to
"incorporate by reference" information into this prospectus supplement and the
accompanying prospectus, which means that:
o incorporated documents are considered part of this prospectus supplement
and the accompanying prospectus;
o we can disclose important information to you by referring you to those
documents;
o information that we file with the SEC after the date of this prospectus
supplement that is incorporated by reference in this prospectus supplement
and the accompanying prospectus automatically updates and supersedes this
prospectus supplement and the accompanying prospectus; and
o information that is more recent than is included in this prospectus
supplement and the accompanying prospectus automatically updates and
supersedes information in documents incorporated by reference with a date
earlier than this prospectus supplement.
This prospectus supplement incorporates by reference our documents listed below:
o Annual Report on Form 20-F for the fiscal year ended December 31, 2001;
o Report on Form 6-K furnished to the SEC on April 25, 2002 relating to
appointments to our Executive and Supervisory Boards;
o Report on Form 6-K furnished to the SEC on May 7, 2002;
o Report on Form 6-K furnished to the SEC on May 14, 2002;
o Report on Form 6-K furnished to the SEC on August 12, 2002;
o Report on Form 6-K furnished to the SEC on September 6, 2002; and
o each of the following documents that we file with or furnish to the SEC
after the date of this prospectus supplement from now until we terminate
the offering of securities under this prospectus supplement, the
accompanying prospectus and the registration statement:
-- reports filed under Section 13(a), 13(c) or 15(d) of the Exchange Act,
and
-- reports filed or furnished on Form 6-K that indicate that they are
incorporated by reference in this prospectus.
These documents contain important information about us and our financial
condition. You may obtain copies of these documents in the manner described
above. You may also request a copy of these filings (excluding exhibits) at no
cost by contacting us as follows:
Investor Relations Investor Relations
AEGON N.V. AEGON USA, Inc.
P.O. Box 202 1111 North Charles Street
2501 CE The Hague Baltimore, MD 21201
The Netherlands USA
Tel: 011-31-70-344-8305 Tel: 1-410-576-4577
Fax: 011-31-70-383-2773 Fax: 1-410-347-8685
E-mail: groupir@aegon.nl E-mail: ir@aegonusa.com
S-22
VALIDITY OF SECURITIES
Certain matters of United States law relating to the common shares offered
through this prospectus supplement will be passed upon for us by Allen & Overy,
New York, New York and London, England. Certain Dutch legal matters relating to
the common shares will be passed upon for us by Allen & Overy, Amsterdam, The
Netherlands. Certain legal matters in connection with this offering will be
passed upon for the underwriters by Davis Polk & Wardwell, London, England and
New York, New York.
EXPERTS
Ernst & Young Accountants, independent auditors, have audited our consolidated
financial statements and schedules included in our annual report on Form 20-F
for the year ended December 31, 2001, as set forth in their report, which is
incorporated by reference in this prospectus supplement. Our financial
statements and schedules are incorporated by reference in reliance on Ernst &
Young Accountants' report, given on their authority as experts in accounting and
auditing.
S-23
[THIS PAGE IS LEFT INTENTIONALLY BLANK]
PROSPECTUS
AEGON N.V.
(a Netherlands public company with limited liability)
and
AEGON FUNDING CORP.
(a Delaware corporation)
and
AEGON FUNDING CORP. II
(a Delaware corporation)
U.S. $4,000,000,000
----------
AEGON N.V. may offer its common shares and senior or subordinated debt
securities, including debt securities convertible or exchangeable into its
common shares, for sale through this prospectus.
AEGON Funding Corp. and AEGON Funding Corp. II may offer senior or
subordinated debt securities guaranteed by AEGON N.V. for sale through this
prospectus.
We may offer these securities from time to time in one or more offerings with a
total initial offering price of up to U.S. $4,000,000,000. We may also offer any
combination of these securities.
We will provide the specific terms of the securities that we are offering in
supplements to this prospectus. You should read this prospectus and any
prospectus supplement carefully before you invest.
----------
NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR DETERMINED THAT
THIS PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
----------
The date of this prospectus is October 22, 2001.
CONTENTS
Page
----
Forward-Looking Statements ................................................ 3
About this Prospectus ..................................................... 3
AEGON N.V ................................................................. 3
AEGON Funding Corp. ....................................................... 4
AEGON Funding Corp. II .................................................... 4
Where You Can Find More Information About Us .............................. 4
Financial and Exchange Rate Information ................................... 5
Enforcement of Civil Liabilities Against Foreign Persons .................. 6
Use of Proceeds ........................................................... 6
Ratios of Earnings to Fixed Charges ....................................... 6
Description of Share Capital of AEGON N.V ................................. 7
Description of Debt Securities ............................................ 10
Taxation .................................................................. 17
Plan of Distribution ...................................................... 29
Validity of Securities .................................................... 31
Experts ................................................................... 31
2
FORWARD-LOOKING STATEMENTS
This prospectus contains and incorporates by reference forward-looking
statements that are based on current expectations, estimates, forecasts and
projections about the industries in which we operate, management's beliefs and
assumptions made by management. Such statements include, in particular,
statements about our plans, strategies and prospects. Words such as "expects",
"anticipates", "intends", "plans", "believes", "seeks", "estimates", variations
of such words and similar expressions are intended to identify such
forward-looking statements. These statements are not guarantees of future
performance and involve risks, uncertainties and assumptions that are difficult
to predict. Therefore, actual outcomes and results may differ materially from
what is expressed or forecasted in these forward-looking statements. Except as
required under the Federal securities laws and the rules and regulations of the
Securities and Exchange Commission, we do not have any intention or obligation
to update publicly any forward-looking statements after they are made, whether
as a result of new information, future events or otherwise.
Some of the important factors that could cause actual outcomes and results to
differ materially from forward-looking statements we make may include factors
described under "Risk Factors" in any related prospectus supplement, factors
described in our other filings with the SEC and the following factors:
o changes in general economic conditions, particularly in the U.S., The
Netherlands and the United Kingdom;
o changes in performance of financial markets, including emerging markets;
o the frequency and severity of insured loss events;
o changes affecting mortality and morbidity levels and trends;
o changes affecting interest rate levels;
o changes affecting currency exchange rates, including the euro/U.S.
dollar and euro/pound sterling exchange rates;
o increasing levels of competition in the U.S., The Netherlands, the
United Kingdom and emerging markets;
o changes in laws and regulations;
o regulatory changes relating to insurance industries;
o acts of God, acts of terrorism and acts of war;
o changes in policies of central banks and/or foreign governments; and
o general competitive factors, in each case on a global, regional and/or
national basis.
ABOUT THIS PROSPECTUS
This prospectus is part of a registration statement that we filed with the
Securities and Exchange Commission utilizing the "shelf" registration process.
Under the shelf registration process, we may sell the securities described in
this prospectus in one or more offerings.
This prospectus provides you with a general description of the securities we may
offer. Each time we sell securities, we will provide a prospectus supplement
that will contain specific information about the terms of the securities. The
prospectus supplement may also add to or update or change information contained
in this prospectus. You should read both this prospectus and any prospectus
supplement together with the additional information described under the heading
"Where You Can Find More Information About Us".
AEGON N.V.
AEGON N.V. (AEGON), through its member companies we collectively refer to as the
AEGON Group, is a leading international insurance group with its headquarters in
The Hague, The Netherlands. Its shares are quoted on the stock exchanges of
Amsterdam, Frankfurt, New York, London, Zurich and Tokyo. Ranked by market
capitalization, total assets and profits, the AEGON Group is one of the world's
ten largest listed insurance groups. The AEGON Group has major operations in the
U.S., The Netherlands, the United Kingdom, Canada and Mexico. The AEGON Group is
also present in Hungary, Spain, Belgium, Germany, Hong Kong, Italy, Luxembourg,
the
3
Philippines and Taiwan, and has representative offices in China and India.
With roots dating back 150 years, the AEGON Group has extensive experience in
the insurance industry. Crucial differences exist in local markets and for this
reason the AEGON Group emphasizes a decentralized organization structure. Our
operating companies, with knowledgeable and experienced local management and
employees, market their own, unique products using tailored distribution
channels.
Close to 90% of the AEGON Group's core business is life insurance and pension
related savings and investment products. The AEGON Group is also active in
accident and health insurance, property and casualty insurance and limited
banking activities. Consistent with a policy of spreading risks to achieve
reliable performance, the AEGON Group seeks to maintain a good balance of
business within the AEGON Group, both geographically and among product groups.
AEGON's headquarters are located at Mariahoeveplein 50, P.O. Box 202, 2501 CE
The Hague, The Netherlands (telephone 011-31-70-344-3210; internet:
www.aegon.com).
AEGON FUNDING CORP.
AEGON Funding Corp. (AFC) was incorporated on May 21, 1999 under the laws of the
State of Delaware. AFC is an indirect wholly owned subsidiary of AEGON and has
no subsidiaries of its own.
AFC was established as a financing vehicle to be used to raise funds for the
U.S. subsidiaries of AEGON. AFC's registered office is at Corporation Trust
Center, 1209 Orange Street, Wilmington, Delaware, 19801, and the telephone
number of this office is 1-302-658-7581.
AEGON FUNDING CORP. II
AEGON Funding Corp. II (AFC II) was incorporated on September 19, 2000 under the
laws of the State of Delaware. AFC II is an indirect wholly owned subsidiary of
AEGON and has no subsidiaries of its own.
AFC II was established as a financing vehicle to be used to raise funds for the
U.S. subsidiaries of AEGON. AFC II's registered office is at Corporation Trust
Center, 1209 Orange Street, Wilmington, Delaware, 19801, and the telephone
number of this office is 1-302-658-7581.
WHERE YOU CAN FIND MORE INFORMATION ABOUT US
AEGON files annual reports with and furnishes other information to the
Securities and Exchange Commission. You may read and copy any document filed
with or furnished to the SEC by AEGON at the SEC's public reference room at 450
Fifth Street, N.W., Washington, D.C. 20549. AEGON's SEC filings are also
available to the public through the SEC's web site at www.sec.gov. Please call
the SEC at 1-800-SEC-0330 for further information on the public reference room
in Washington D.C. and in other locations.
As allowed by the SEC, this prospectus does not contain all the information you
can find in our registration statement or the exhibits to the registration
statement. The SEC allows AEGON to "incorporate by reference" information into
this prospectus, which means that:
o incorporated documents are considered part of this prospectus;
o AEGON can disclose important information to you by referring you to
those documents;
o information that AEGON files with the SEC after the date of this
prospectus that is incorporated by reference in this prospectus
automatically updates and supersedes this prospectus; and
o information that is more recent than is included in this prospectus
automatically updates and supersedes information in documents incorporated
by reference with a date earlier than this prospectus.
o This prospectus incorporates by reference the documents of AEGON listed
below:
o Annual Report on Form 20-F for the fiscal year ended December 31, 2000;
o Report on Form 6-K dated April 6, 2001;
o Report on Form 6-K dated May 3, 2001;
4
o Report on Form 6-K dated May 4, 2001;
o Report on Form 6-K dated May 21, 2001;
o Report on Form 6-K dated May 30, 2001;
o Report on Form 6-K dated May 31, 2001;
o Report on Form 6-K dated June 19, 2001;
o Report on Form 6-K dated July 3, 2001;
o Report on Form 6-K dated August 10, 2001;
o Report on Form 6-K dated September 25, 2001;
o Report on Form 6-K dated October 4, 2001;
o Report on Form 6-K/A dated October 11, 2001; and
o each of the following documents that AEGON files with or furnishes to the
SEC after the date of this prospectus from now until we terminate the
offering of securities under this registration statement:
-- reports filed under Section 13(a), 13(c) or 15(d) of the Exchange
Act, and
-- reports filed on Form 6-K that indicate that they are incorporated by
reference in this prospectus.
These documents contain important information about the AEGON Group and our
financial condition. You may obtain copies of these documents in the manner
described above. You may also request a copy of these filings (excluding
exhibits) at no cost by contacting us as follows:
Investor Relations Investor Relations
AEGON N.V. AEGON USA, Inc.
P.O. Box 202 1111 North Charles Street
2501 CE The Hague Baltimore, MD 21201
The Netherlands USA
Tel: 011-31-70-344-8305 Tel: 1-410-576-4577
Fax: 011-31-70-383-2773 Fax: 1-410-347-8685
E-mail: groupir@aegon.nl E-mail: ir@aegonusa.com
No person is authorized to give any information or represent anything not
contained in this prospectus and the accompanying prospectus supplement. We are
only offering the securities in places where sales of those securities are
permitted. The information contained in this prospectus and any accompanying
prospectus supplement, as well as information incorporated by reference, is
current only as of the date of that information. The AEGON Group's business,
financial condition, results of operations and prospects may have changed since
that date.
AFC and AFC II do not, and will not, file separate reports with the SEC.
FINANCIAL AND EXCHANGE RATE INFORMATION
Except as otherwise noted, we present the financial statement amounts in this
prospectus and in the documents incorporated by reference in this prospectus in
accordance with generally accepted accounting principles in The Netherlands
(Dutch GAAP), which differ in significant respects from generally accepted
accounting principles in the U.S. (U.S. GAAP). For a discussion of the principal
differences between Dutch GAAP and U.S. GAAP relevant to AEGON, see Note 5 to
AEGON's audited consolidated financial statements included in AEGON's Annual
Report on Form 20-F for the fiscal year ended December 31, 2000, and Note 3 to
AEGON's unaudited financial statements contained in AEGON's report on Form 6-K/A
dated October 11, 2001, which are incorporated by reference in this prospectus.
We have derived the financial data in this prospectus presenting year-end
figures from audited financial statements of AEGON. We have derived all
financial data in this prospectus presenting interim figures from unaudited
financial statements.
As used in this prospectus, "NLG" and "guilder" refer to the Dutch guilder,
"dollar" and "$" refer to the U.S. dollar and "euro" refer to the unified
currency that was introduced in connection with the European Economic and
Monetary Union in The Netherlands and the other participating member states of
the European Union on January 1, 1999. AEGON adopted the euro as its reporting
currency beginning January 1, 1999. Effective January 1, 1999, the official
euro/guilder exchange rate was fixed at a rate of euro 1.00 = NLG 2.20371.
AEGON's financial statements for
5
fiscal years prior to fiscal 1999 and certain other data included in this
prospectus were originally stated in guilders, but have been translated to euros
using this fixed exchange rate.
ENFORCEMENT OF CIVIL LIABILITIES AGAINST FOREIGN PERSONS
AEGON is a Netherlands corporation. A substantial number of the directors and
management of AEGON, AFC and AFC II and certain of the experts named in this
prospectus are residents of The Netherlands or other countries outside the
United States. As a result, it may not be possible for investors to effect
service of process within the United States upon AEGON or such persons with
respect to matters arising under U.S. Federal securities laws or to enforce
against them judgments of courts of the United States predicated upon civil
liability under the Federal securities laws. Because of the absence of a
convention between the United States and The Netherlands providing for the
reciprocal recognition and enforcement of judgments in civil and commercial
matters, it is uncertain whether a court in The Netherlands, in original actions
or in actions for enforcement of judgments of United States courts, will find
liability or enforce judgments predicated solely upon the Federal securities
laws. Judgments of United States courts may be enforced by courts in The
Netherlands only if such courts independently determine that fairness and good
faith require such enforcement and that such enforcement does not contravene
principles of pubic policy of The Netherlands. AEGON has consented to service of
process in New York City for claims based upon the indenture, the debt
securities and the guarantees described under "Description of Debt Securities".
USE OF PROCEEDS
Unless otherwise set forth in the applicable prospectus supplement, we intend to
use the proceeds from the sale of securities offered through this prospectus for
the AEGON Group's general corporate purposes, which include financing our
operations, debt repayment and refinancing, capital expenditures and
acquisitions. The specific purpose of any individual issuance of securities will
be described in the applicable prospectus supplement.
RATIOS OF EARNINGS TO FIXED CHARGES
The following table shows AEGON's historical ratios of earnings to fixed charges
for the periods indicated, computed in accordance with Dutch GAAP and U.S. GAAP.
Six months
ended
June 30,
2001 Year ended December 31,
(unaudited) (audited)
----------- ----------------------------------
2000 1999 1998 1997 1996
---- ---- ---- ---- ----
Dutch GAAP ....... 4.8 4.6 3.9 3.2 2.7 2.5
U.S. GAAP ........ 4.1 5.1 3.6 3.6 3.5 2.3
CALCULATION OF RATIOS
The data used to prepare the ratios have been derived from our consolidated
financial statements.
For purposes of these tables, "earnings" means income before tax plus fixed
charges.
"Fixed charges" are calculated by adding:
(1) interest expensed and capitalized; and
(2) amortized premiums, discounts and capitalized expenses related to
indebtedness.
6
DESCRIPTION OF SHARE CAPITAL OF AEGON N.V.
The following is a summary of the terms of AEGON's share capital, including
brief descriptions of provisions contained in AEGON's articles of incorporation,
as last amended on May 30, 2000. These summaries and descriptions do not purport
to be complete statements of these provisions.
SHARE CAPITAL
As of June 30, 2001, the total authorized capital stock of AEGON consisted of
2,600,000,000 common shares and 1,400,000,000 preferred shares, each par value
euro 0.12 per share. At the same date, there were 1,417,027,697 common shares
and 440,000,000 preferred shares issued, of which 31,178,080 common shares were
held by AEGON as treasury shares.
All of AEGON's issued common shares are fully paid and not subject to calls for
additional payments of any kind. AEGON's common shares are held by shareholders
worldwide in bearer and registered form. Holders of shares of New York registry
hold their common shares in registered form (New York Shares).
As of June 30, 2001, 549,684,370 common shares were registered in AEGON's
registry in The Netherlands, of which 517,271,586 common shares were held by
Vereniging AEGON, AEGON's controlling shareholder. As of that date 132,286,231
shares were held as New York Shares. The balance of the issued common shares was
held in bearer form.
DIVIDENDS
Under Dutch law and AEGON's articles of incorporation, the holders of AEGON
common shares are entitled to payment of dividends out of the profits remaining
after the creation of a reserve account, if any. The Executive Board of AEGON
may determine the dividend payment date for the common shares and preferred
shares, which may vary for registered and bearer shares, the record date for
payment applicable to holders of registered common shares and, with the approval
of the AEGON's Supervisory Board, the currency or currencies in which dividends
will be paid. For dividends on New York Shares, AEGON may make payment in U.S.
dollars. With respect to common shares, AEGON typically declares both an interim
dividend during the fiscal year and a final dividend after the shareholders have
approved AEGON's annual accounts. These dividends typically may be paid in cash
or common shares at the option of the shareholder.
Preferred dividends are payable on the capital actually paid in on the preferred
shares, and each such dividend, on an annual basis, is equal to the European
Central Bank's fixed interest percentage for basic refinancing transactions,
increased by 1.75%, as determined on the first Euronext Amsterdam working day of
the financial year to which the dividend relates.
VOTING RIGHTS
All holders of AEGON common shares and preferred shares are entitled to attend
personally or by proxy any general meeting of shareholders upon compliance with
the procedures described below. Each holder of common shares or preferred shares
is entitled to one vote for each share held by him and represented at the
meeting.
A general meeting of shareholders is required to be held not later than June 30
in each year. General meetings of shareholders are called by AEGON's Supervisory
Board or AEGON's Executive Board and are required to be held in The Hague, The
Netherlands or certain other cities in The Netherlands. In order to attend a
general meeting of shareholders, holders of bearer shares must produce evidence
that such shares were held on a date specified in the notice of the meeting.
Holders of registered shares must be listed on a date specified in the notice of
the meeting as being the holders of shares in a register, irrespective of
whether or not they are the owners of such shares on the date of the meeting.
Action is taken at general meetings by an absolute majority of the votes cast
unless a larger majority is explicitly provided by law or by the articles of
incorporation.
AEGON may not vote shares held by it as treasury shares.
CONTROL OF AEGON N.V.
Vereniging AEGON. As of June 30, 2001, Vereniging AEGON held 100% of the
outstanding preferred shares and 37.3% of the outstanding common shares
(excluding shares held by AEGON
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as treasury shares). These holdings give Vereniging AEGON 52.4% of AEGON's
voting shares and thus voting control of AEGON. Vereniging AEGON is a membership
association under Dutch law. One of the principal characteristics of a
membership association is that it has no share capital. The major objective of
Vereniging AEGON is to promote the direct and indirect interests of AEGON Group
companies, as well as insured parties, employees, shareholders and other
relations of those companies. Vereniging AEGON expects to achieve its objective
by, among other things, maintaining and executing voting control of AEGON. The
table below shows the ownership percentage of Vereniging AEGON as of June 30,
2001.
Percent of
Number Class
Title of Class Owned Outstanding
------------------------------- ----------- -----------
Common Shares ................. 517,271,586 37.3%
Preferred Shares .............. 440,000,000 100%
Vereniging AEGON has two administrative bodies: the general membership and
executive committee. The general membership currently consists of 20 individuals
who were elected as members of Vereniging AEGON. Of these 20 individuals, 16
represent a broad cross-section of Dutch society, and are called elected
members. Of the other four members of the general membership, two are elected
from the AEGON Supervisory Board and two are elected from the AEGON Executive
Board. No employee (or former employee) of AEGON or its subsidiaries may be
elected to the general membership.
Appointment of the AEGON Supervisory Board and Executive Board. AEGON has a
two-tier management system consisting of an executive board and a supervisory
board. Members of the Supervisory Board and the Executive Board are appointed by
the Supervisory Board. The number of members of the Supervisory Board is
determined from time to time by the Supervisory Board but may not consist of
less than seven members. Reference is made to "Item 6. Directors, Senior
Management and Employees" in AEGON's Annual Report on Form 20-F for the year
ended December 31, 2000.
Shareholder Proposals. Proposals by shareholders are required to be placed on
the agenda of a general meeting of shareholders, but only if such proposals have
been signed by the holder or holders of at least 0.1% of the total capital
issued and are submitted in writing to AEGON at least two months and not more
than three months prior to the meeting, unless in the opinion of the Supervisory
Board and the Executive Board there are important company interests that should
prevent this from happening.
Amendment of Articles. AEGON's articles of incorporation may be amended at any
general meeting of shareholders where at least 50% of the issued capital is
represented, by an absolute majority of the votes cast. If the required quorum
is not represented at the shareholder meeting, the amendment may be approved at
a subsequent meeting to be called and held within four weeks with the same
required vote, but without such quorum requirement. Any amendment of the
articles of incorporation must have been proposed by the Executive Board and
approved by the Supervisory Board.
Annual Accounts. The Supervisory Board adopts annually AEGON's annual accounts
with respect to the previous calendar year, accompanied by a certificate of an
independent accountant certifying such annual accounts. The annual accounts are
submitted for approval to the annual general meeting of shareholders by the
Executive Board, and the Executive Board is also required to present to the
annual general meeting of shareholders a report of management with respect to
the previous calendar year.
LIQUIDATION RIGHTS
In the event of the liquidation of AEGON, the general meeting of shareholders
determines the remuneration of the liquidators and of the members of the
Supervisory Board. The assets remaining after payment of all debts, liquidation
expenses and taxes are to be distributed first to the holders of preferred
shares in the amount of their paid-in capital. The amount left after such
payment will be distributed to the holders of common shares.
PREEMPTIVE RIGHTS
Except in certain instances prescribed by law, the holders of common shares have
preemptive rights on a pro rata basis to purchase any common shares to be
issued. Holders of preferred shares, as such, have no preemptive rights in
respect of any common shares.
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Preemptive rights in respect of common shares may be limited or precluded by a
resolution approved by the general meeting of shareholders. See "Issuance of
Additional Shares" below. In the notice of the meeting, the reasons for the
proposal to limit or preclude the preemptive rights in respect of common shares
and the intended issue price must be explained in writing. Preemptive rights may
also be limited or precluded by the Executive Board if a resolution is approved
by a general meeting of shareholders that confers this power on the Executive
Board for a maximum of five years. This power may from time to time be extended,
but never for a period longer than five years. A resolution approved at the
general meeting of shareholders or taken by the Executive Board to limit or
preclude the preemptive rights in respect of common shares requires the approval
of the Supervisory Board. If AEGON makes a rights offering to the holders of
common shares, the rights of holders of New York Shares to exercise the rights
offered may be subject to a restriction that permits AEGON to sell those rights
in a manner to be determined by the Executive Board and to remit the cash
proceeds of that sale to the holders of New York Shares if the additional common
shares are not registered under the Securities Act of 1933.
ISSUANCE OF ADDITIONAL SHARES
Shares of AEGON's authorized but unissued capital stock may be issued at such
times and on such conditions as may be determined at a general meeting of
shareholders or by the Executive Board if authorized by the shareholders. At the
general meeting of shareholders held on May 3, 2001, the shareholders authorized
the Executive Board for a period of three years effective January 1, 2002
subject to the approval of the Supervisory Board:
(a) to issue shares and grant rights to acquire shares up to the amount of
AEGON's authorized capital; and
(b) to limit or exclude shareholders' preemption rights with regard to the
issuance of shares and rights to acquire shares.
The Supervisory Board subsequently approved this authorization. At the same
general meeting, the shareholders revoked a similar authorization to the
Executive Board granted at the general meeting of shareholders held May 4, 2000.
In respect of the issuance of common shares and the granting of rights to
acquire shares without preemption rights, the authority given under clause(a) is
limited to common shares with an aggregate par value of:
o 1% of the capital, if the issuance is to employees or management of any
AEGON Group company pursuant to an option plan that has been instituted
for the entire AEGON Group;
o 10% of the capital; and
o 20% of the capital, if the issuance occurs in connection with the
acquisition of an enterprise or a corporation.
For the purposes of this paragraph, the term "capital" means the par value
amount of the common share capital issued at the moment this authority is used
for the first time in a certain year. The authorizations described above may
only be withdrawn by a resolution of the general meeting of shareholders
following a proposal by the Executive Board that has been approved by the
Supervisory Board.
REPURCHASE BY AEGON OF ITS SHARES
Subject to certain restrictions contained in the laws of The Netherlands and
AEGON's articles of incorporation, the Executive Board may cause AEGON to
purchase its own shares, provided that the total number of shares so repurchased
may not exceed, in the aggregate, 10% of the issued capital. These purchases may
be made only upon authorization by the general meeting of shareholders, which
authorization is valid for a maximum of 18 months and must include the number of
shares to be acquired, the way in which they may be acquired and the minimum and
maximum purchase price. At the general meeting of shareholders held May 3, 2001,
the shareholders authorized the Executive Board for a period of 18 months to
acquire shares up to the maximum number allowed by law and AEGON's articles of
incorporation, for a consideration not to exceed 10% of the quoted local market
price.
CERTIFICATES FOR COMMON SHARES AND THEIR TRANSFER
Certificates evidencing common shares are issuable, subject to the restrictions
described below, in bearer or registered form, as the holder may elect.
Certificates issued by the New York registrar are in registered form and are
printed in the English language. Bearer shares are evidenced by
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certificates printed only in the Dutch language. Common shares in bearer form
and New York Shares may be held by residents as well as non-residents of The
Netherlands. Only common shares in bearer form may be traded on Euronext
Amsterdam and the London, Frankfurt, Tokyo and Zurich stock exchanges. Only New
York Shares may be traded on the New York Stock Exchange.
Upon presentation of a bearer certificate to AEGON's Dutch transfer agent,
accompanied by a request that the shares evidenced by that certificate be
transferred to New York Shares, the Dutch transfer agent will cancel the bearer
shares and will instruct AEGON's New York transfer agent to issue a New York
Share certificate evidencing those shares. Similarly, upon presentation to the
New York transfer agent of New York Shares accompanied by an appropriate
request, the New York transfer agent will cancel those New York Shares and will
instruct the Dutch transfer agent to issue a bearer share certificate evidencing
those shares.
Transfers of common shares in bearer form are accomplished by delivery of the
share certificates. New York Shares may be transferred on the books of AEGON at
the office of the New York transfer agent by surrendering the New York Shares
with the deed of transfer on the New York Shares or in a separate instrument
completed in full and signed by the transferor. Upon surrender, AEGON, acting
through its New York transfer agent, will either note the transfer on the
surrendered New York Shares or issue replacement New York Shares registered in
the name of the new owner. In addition, a shareholder is entitled, upon written
request to AEGON and the surrender for cancellation of any share certificate
previously issued, to have his name entered in the register of shareholders with
respect to the shares owned by him and to receive, in lieu of a certificate, a
non-negotiable declaration of registration of those shares.
DESCRIPTION OF DEBT SECURITIES
The following is a summary of the general terms of the debt securities. Each
time that we issue debt securities pursuant to this prospectus we will file a
prospectus supplement with the Securities Exchange Commission that you should
read carefully. The prospectus supplement may contain additional terms of those
debt securities. The terms presented here, together with the terms contained in
the prospectus supplement, will be a description of the material terms of the
debt securities, but if there is any inconsistency between the terms presented
here and those in the prospectus supplement, those in the prospectus supplement
will apply and will replace those presented here. You should also read the
indenture under which we will issue the debt securities, which we have filed
with the SEC as an exhibit to the registration statement of which this
prospectus is a part. The terms of the debt securities include those stated in
the indenture and those made part of the indenture by reference to the Trust
Indenture Act of 1939.
GENERAL
The debt securities will be issued by AEGON, AFC or AFC II, as the case may be,
under an indenture with Citibank, N.A., unless specified otherwise in a
prospectus supplement.
Any debt securities issued by AFC or AFC II will be guaranteed by AEGON.
The total principal amount of debt securities that can be issued under the
indenture is unlimited. Except as otherwise provided in the prospectus
supplement relating to a particular series of debt securities, the indenture
does not limit the amount of other debt, secured or unsecured, that we may
issue. We may issue the debt securities in one or more series.
The prospectus supplement relating to any series of debt securities being
offered will include specific terms relating to the offering. These terms will
include some or all of the following:
o the issuer of the debt securities, AEGON, AFC or AFC II;
o the price of the debt securities offered;
o the title of the debt securities;
o the total principal amount of the debt securities;
o the date or dates, if any, on which the principal of and any premium on
the debt securities will be payable;
o any interest rate, the date from which interest will accrue, interest
payment dates and record dates for interest payments;
o whether the debt securities are senior or subordinated debt securities;
o the places at which payments of principal and interest are payable;
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o the terms of any optional or mandatory redemption, including the price
for the redemption;
o any sinking fund provisions;
o whether payments on the debt securities will be payable in foreign
currency or currency units or another form and whether payments will be
payable by reference to any index or formula;
o any changes or additions to the events of default or covenants described
in this prospectus;
o whether debt securities will be issued as discount securities and the
amount of any discount;
o whether the debt securities will be represented by one or more global
securities;
o whether the debt securities will be issued in registered or bearer form,
and any restrictions that may apply;
o any terms for the conversion or exchange of the debt securities for other
securities of AEGON Group companies or any other entity (including any
related cash-out option); and
o any other terms of the debt securities.
We have the ability under the indenture to "reopen" a previously issued series
of debt securities and issue additional debt securities of that series or
establish additional terms of the series. We are also permitted to issue debt
securities with the same terms as previously issued debt securities. Unless
otherwise indicated in the applicable prospectus supplement, the debt securities
will not be listed on any securities exchange.
The senior debt securities will be unsecured, unsubordinated indebtedness and
will rank equally with all other unsecured and unsubordinated debt of their
issuer. The subordinated debt securities will be unsecured indebtedness and will
be subordinated in right of payment to some existing and future debt of their
issuer. See "Subordination" below.
Some of the debt securities may be sold at a substantial discount below their
stated principal amount. These debt securities will either bear no interest or
will bear interest at a rate which at the time of issuance is below market
rates. U.S. Federal income tax consequences and other special considerations
applicable to discounted debt securities are discussed below under "Taxation in
the United States" and may be discussed further in the prospectus supplement
relating to these debt securities.
GUARANTEES
If AFC or AFC II issues the debt securities, AEGON will fully and
unconditionally guarantee the due and punctual payment of the principal of, any
premium and any interest on those debt securities, when and as these payments
become due and payable, whether at maturity, upon redemption or declaration of
acceleration, or otherwise. The guarantees of senior debt securities will
constitute an unsecured, unsubordinated obligation of AEGON and will rank
equally with all other unsecured and unsubordinated obligations of AEGON. The
guarantees of subordinated debt securities will constitute an unsecured
obligation of AEGON and will be subordinated in right of payment to all senior
indebtedness of AEGON.
AEGON will (1) agree that its obligations under the guarantees will be as
principal obligor and not merely as surety, and will be enforceable irrespective
of any invalidity, irregularity or unenforceability of the guaranteed debt
securities or the indenture and (2) waive any right to require a proceeding
against AFC or AFC II, as the case may be, before its obligations under the
guarantees shall become effective. See "Enforcement of Civil Liabilities Against
Foreign Persons".
GOVERNING LAW
The debt securities, the indenture and the guarantees will be governed by and
construed in accordance with the laws of the State of New York. The laws of the
State of New York would not require the trustee to pursue or exhaust its legal
and equitable remedies against AFC or AFC II, as the case may be, prior to
exercising its rights under the guarantee relating to the guaranteed debt
securities. We cannot assure you that a Dutch court would give effect to this
provision. However, AEGON will waive any right to require a proceeding against
AFC or AFC II before its obligations under the guarantees shall become
effective. There are no limitations under the laws of The Netherlands or the
articles of incorporation of AEGON on the right of non-residents of The
Netherlands to hold the debt securities issued by AEGON.
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FORM, EXCHANGE AND TRANSFER
Unless otherwise specified in the related prospectus supplement, the debt
securities of each series will be issuable in fully registered form, without
coupons, in denominations of $1,000 and integral multiples thereof.
Unless otherwise specified in the related prospectus supplement, any payments of
principal, interest and premium on registered debt securities will be payable
and, subject to the terms of the indenture and the limitations applicable to
global securities, debt securities may be transferred or exchanged, at any
office or agency we maintain for such purpose, without the payment of any
service charge except for any applicable tax or governmental charge.
GLOBAL SECURITIES
The debt securities of a series may be issued in the form of one or more global
certificates that will be deposited with a depositary identified in a prospectus
supplement. Unless a global certificate is exchanged in whole or in part for
debt securities in definitive form, a global certificate may generally be
transferred only as a whole and only to the depositary or to a nominee of the
depositary or to a successor depositary or its nominee.
Unless otherwise indicated in any prospectus supplement, The Depositary Trust
Company (DTC) will act as depositary. Beneficial interests in global
certificates will be shown on records maintained by DTC and its participants,
and transfers of global certificates will be effected only through these
records.
DTC has provided us the following information, and we take no responsibility for
its accuracy. DTC is a limited purpose trust company organized under the New
York Banking Law, a "banking organization" within the meaning of the New York
Banking Law, a member of the United States Federal Reserve System, a "clearing
corporation" within the meaning of the New York Uniform Commercial Code and a
"clearing agency" registered under Section 17A of the Exchange Act. DTC holds
securities that its participants deposit with DTC. DTC also facilitates the
clearance and recording of the settlement among its participants of securities
transactions, such as transfers and pledges, in deposited securities through
computerized records for participant's accounts. This eliminates the need for
physical exchange of certificates. Direct participants include securities
brokers and dealers, banks, trust companies, clearing corporations and certain
other organizations. Other organizations such as securities brokers and dealers,
banks and trust companies that work through a participant, either directly or
indirectly use DTC's book-entry system. The rules that apply to DTC and its
participants are on file with the SEC.
Pursuant to DTC's procedures, upon the sale of debt securities represented by a
global certificate to underwriters, DTC will credit the accounts of the
participants designated by the underwriters with the principal amount of the
debt securities purchased by the underwriters. Ownership of beneficial interests
in a global certificate will be shown on DTC's records (with respect to
participants), by the participants (with respect to indirect participants and
certain beneficial owners) and by the indirect participants (with respect to all
other beneficial owners). The laws of some states require that certain persons
take physical delivery in definitive form of the securities that they own.
Consequently, the ability to transfer beneficial interests in a global
certificate may be limited.
We will wire to DTC's nominee principal and interest payments with respect to
global certificates. We and the trustees under the indenture will treat DTC's
nominee as the owner of the global certificates for all purposes. Accordingly,
we, the trustee and the paying agent will have no direct responsibility or
liability to pay amounts due on the global certificates to owners of beneficial
interests in the global certificates.
It is DTC's current practice, upon receipt of any payment of principal or
interest, to credit participants' accounts on the payment date according to
their beneficial interests in the global certificates as shown on DTC's records.
Payments by participants to owners of beneficial interests in the global
certificates will be governed by standing instructions and customary practices
between the participants and the owners of beneficial interests in the global
certificates, as is the case with securities held for the account of customers
registered in "street name". However, payments will be the responsibility of the
participants and not of DTC, the trustee or us.
Debt securities of any series represented by a global certificate will be
exchangeable for debt securities in definitive form with the same terms in
authorized denominations only if:
o DTC notifies us that it is unwilling or unable to continue as depositary,
or DTC is no longer eligible to act as depositary, and we do not appoint a
successor depositary within 90 days; or
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o we determine not to have the debt securities of a series represented by
global certificates and notify the trustee of our decision.
PAYMENTS OF ADDITIONAL AMOUNTS
If the prospectus supplement for a particular series of debt securities so
provides, the issuer or guarantor will make all payments on the debt securities
of that series without withholding or deduction for any taxes, or other
governmental charges in effect on the date of issuance of the debt securities of
that series or imposed in the future by or on behalf of The Netherlands, in the
case of AEGON, or the United States, in the case of AFC or AFC II, or any
authority in The Netherlands or the United States, as applicable. In the event
any Dutch, in the case of payments by AEGON, or United States, in the case of
payments by AFC or AFC II, taxes or other charges are imposed on payments on any
debt security of that series held by you, the issuer or guarantor will pay to
you such additional amounts as may be necessary so that the net amounts
receivable by you after any payment, withholding or deduction of tax or charge
will equal the amounts of principal, any interest and any premium which would
have been receivable on the debt security if there were no such payment,
withholding or deduction; provided, however, that (a) in the case of payments by
AEGON, the amounts with respect to any Dutch taxes shall be payable only to
holders that are not residents in The Netherlands for purposes of its tax laws;
and (b) in the case of payments by AFC or AFC II, the amounts with respect to
any United States taxes shall be payable only to holders that are non-U.S.
persons not resident in the United States, foreign corporations or certain
trusts or estates not subject to taxes, for United States tax purposes, and
provided further, that the issuer or guarantor shall not be required to make any
payment of any additional amounts on account of:
o in the case of payments by AEGON, your being a resident of The Netherlands
or having some connection with The Netherlands or United States (in the
case of Dutch taxes) other than the mere holding of the debt security or
the receipt of principal, any interest, or any premium on the debt
security;
o in the case of payments by AFC or AFC II, your being a resident of the
United States or having some connection with the United States (in the
case of United States taxes) other than the mere holding of the debt
security or the receipt of principal, and interest, or any premium on the
debt security;
o your presentation of the debt security for payment more than 30 days after
the later of (1) the due date for such payment or (2) the date we provide
funds to make such payment to the trustee;
o any estate, inheritance, gift, sales, transfer, personal property or
similar tax, assessment or other governmental charge;
o any tax, assessment or other governmental charge payable other than by
withholding from payments on the debt security;
o in the case of payments by AFC or AFC II, with respect to United States
taxes, any tax imposed by reason of the holder's past or present status as
a tax-exempt organization with respect to the United States or as a
corporation which accumulates earnings to avoid United States Federal
income tax;
o any tax, assessment or other governmental charge which would not have
been imposed or withheld if the holder had declared his or her
non-residence in The Netherlands, in the case of payments by AEGON, or
the United States, in the case of payments by AFC or AFC II, or made a
similar claim for exemption so that, upon making the declaration or the
claim, the holder would either have been able to avoid the tax,
assessment or charge or to obtain a refund of the tax, assessment or
charge;
o any tax, assessment or other governmental charge required to be withheld
by any paying agent from any payment of principal of, premium, if any, or
any interest on, any debt security, if such payment can be made without
such withholding by any other paying agent; or
o any combination of items above,
nor shall additional amounts be paid with respect to any payment of the
principal of, premium, if any, or any interest on any debt security to any
holder who is a fiduciary, a partnership or a beneficial owner and who is other
than the sole beneficial owner of the payment to the extent the fiduciary or a
member of the partnership or a beneficial owner would not have been entitled to
any additional amount had it been the holder of the debt security.
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TAX REDEMPTION
If the prospectus supplement for a particular series of debt securities so
provides, the issuer or guarantor may redeem that series of debt securities
before its maturity, in whole but not in part, if, at any time after the date of
issuance of that series of securities, as a result of any:
o amendment to, or change in, the laws of The Netherlands, in the case of
payments by AEGON, or the United States, in the case of payments by AFC or
AFC II, or any political subdivision thereof; or
o change in the application or official interpretation of such laws or
regulations,
where the amendment or change becomes effective after the date of the issuance
of the series of debt securities, the issuer or guarantor become, or will
become, obligated to pay any additional amounts as provided above under
"Payments of Additional Amounts" and cannot reasonably avoid such obligation.
Before the issuer or guarantor may redeem debt securities of a particular series
as provided above, the issuer or guarantor must deliver to the trustee at least
30 days, but not more than 60 days, prior to the date fixed for redemption:
o a written notice stating that the debt securities of a particular series
are to be redeemed, specifying the redemption date and other pertinent
information; and
o an opinion of independent legal counsel selected by us to the effect that,
as a result of the circumstances described above, we have or will become
obligated to pay any additional amounts.
The issuer or guarantor will give you at least 30 days', but not more than 60
days', notice before any tax redemption of a series of securities. On the
redemption date, the issuer or guarantor will pay you the principal amount of
your debt security, plus any accrued interest (including any additional amounts)
to the redemption date.
CONVERSION OR EXCHANGE
The terms, if any, upon which debt securities of any series are convertible into
or exchangeable for other securities will be set forth in the related prospectus
supplement. These terms may include the conversion price, the conversion period,
provisions as to whether conversion or exchange will be at the option of the
holders of that series of debt securities or at our option, any events requiring
an adjustment of the conversion price, provisions affecting conversion in the
event of the redemption of such series of debt securities and other relevant
provisions relating to those securities.
EVENTS OF DEFAULT
The following are defined as events of default with respect to securities of any
series outstanding under the indenture, unless otherwise stated in the related
prospectus supplement:
(a) failure to pay principal or premium, if any, on any debt security of that
series when due, and continuance of such a default beyond any applicable
grace period;
(b) failure to pay any interest on any debt security of that series when due,
and continuance of such a default for a period of 30 days beyond any
applicable grace period;
(c) failure to deposit any sinking fund payment, when due and continuance of
such a default beyond any applicable grace period, on any debt security of
that series;
(d) failure to perform any of our other covenants or the breach of any of the
warranties in the indenture after being given written notice and
continuance of such a default for a period of 90 days beyond any
applicable grace period; and
(e) certain events in bankruptcy, insolvency or reorganization of AEGON, AFC
or AFC II.
If an event of default for any series of debt securities occurs and continues,
the trustee or the holders of at least 25% in aggregate principal amount of the
outstanding debt securities of that series may accelerate the maturity of the
debt securities of that series (or, such portion of the principal amount of such
debt securities as may be specified in a prospectus supplement). If an
acceleration occurs, subject to specified conditions, the holders of a majority
of the aggregate principal amount of the outstanding debt securities of that
series may rescind and annul such acceleration. Because each series of debt
securities will be independent of each other series, a default in respect of one
series will not necessarily in itself result in a default or acceleration of the
maturity of a different series of debt securities.
Other than its duties in case of an event of default, the trustee is not
obligated to exercise any of its rights or powers under the indenture at the
request or direction of any of the holders, unless
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the holders offer the trustee reasonable indemnity. Subject to the
indemnification of the trustee, the holders of a majority in aggregate principal
amount of the outstanding debt securities of any series may direct the time,
method and place of conducting any proceeding for any remedy available to the
trustee or exercising any trust or power conferred on the trustee with respect
to the debt securities of that series.
A holder of debt securities of any series will not have any right to institute
any proceeding with respect to the indenture unless:
o the holder previously gave written notice to the trustee of an event of
default;
o the holders of at least 25% in aggregate principal amount of the
outstanding debt securities of that series have made written request, and
have offered reasonable indemnity to the trustee to institute such
proceeding as trustee; and
o the trustee fails to institute such proceeding, and has not received from
the holders of a majority in aggregate principal amount of the outstanding
debt securities of that series a direction inconsistent with such request,
within 60 days after such notice, request and offer.
The limitations described above do not apply to a suit instituted by a holder of
a debt security for the enforcement of payment of the principal, interest or
premium on that debt security on or after the applicable due date specified in
that debt security.
We will be required to furnish to each trustee annually a statement by our
officers as to whether or not we are in default in the performance of any of the
terms of the indenture.
SUBORDINATION
The indebtedness evidenced by the subordinated debt securities will, to the
extent set forth in the indenture with respect to each series of subordinated
debt securities, be subordinate in right of payment to the prior payment in full
of all of our senior debt, as defined, including any senior debt securities. The
prospectus supplement relating to any subordinated debt securities will
summarize the subordination provisions of the indenture applicable to that
series including:
o the applicability and effect of such provisions upon any payment or
distribution of our assets to creditors upon any liquidation,
bankruptcy, insolvency or similar proceedings;
o the applicability and effect of such provisions in the event of specified
defaults with respect to senior debt, including the circumstances under
which and the periods in which we will be prohibited from making payments
on the subordinated debt securities; and
o the definition of senior debt applicable to the subordinated debt
securities of that series.
In the event and during the continuation of any default in the payment of any
senior debt continuing beyond any applicable grace period specified in the
instrument evidencing that senior debt (unless and until the default shall have
been cured or waived or shall have ceased to exist), no payments on account of
principal, premium, if any, or interest, if any, on the subordinated debt
securities or sums payable with respect to the conversion or exchange, if
applicable, of the subordinated debt securities may be made pursuant to the
subordinated debt securities.
Upon payment or distribution of our assets to creditors upon dissolution or
winding-up or total or partial liquidation or reorganization, whether voluntary
or involuntary in bankruptcy, insolvency, receivership or other proceedings, the
holders of our senior debt will be entitled to receive payment in full of all
amounts due on the senior debt before any payment is made by us on account of
principal, premium, if any, or interest, if any, on the subordinated debt
securities.
By reason of this subordination, in the event of our insolvency, holders of
subordinated debt securities may recover less, ratably, and holders of senior
debt may recover more, ratably, than our other creditors. The indenture does not
limit the amount of senior debt that we may issue.
LIMITATION ON LIENS
If so specified in a prospectus supplement relating to a series of debt
securities, so long as any of the debt securities of that series remain
outstanding, the issuer and its subsidiaries may not secure any indebtedness in
respect of borrowed moneys having an original maturity of more than two years by
granting security upon any of their present or future assets or revenues unless
they effectively provide that the same or equal and ratable security (or other
security acceptable to the trustee) is accorded to all debt securities of that
series for so long as the secured indebtedness is so secured. This limitation
does not apply to:
o security created over any shares in, assets of or securities owned by any
subsidiaries that are not principally engaged in the business of life
insurance and that do not contribute more than 10% of
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AEGON's total aggregate consolidated gross premium income as reflected in
its most recent annual audited financial statements;
o security created in the normal course of the insurance business carried on
in a manner consistent with generally accepted insurance practice for that
insurance business;
o security or preference arising by operation of any law;
o security over real property to secure borrowings to finance the purchase
or improvement of that real property;
o security over assets existing at the time of the acquisition of those
assets; and
o security not otherwise permitted by the above that secures borrowed money
in an aggregate principal amount not exceeding 50% of AEGON's total
aggregate consolidated indebtedness with an original maturity of more than
two years.
DEFEASANCE
Unless otherwise indicated in the related prospectus supplement, we may elect,
at our option at any time, to have the provisions of the indenture relating (a)
to defeasance and discharge of indebtedness or (b) to defeasance of certain
restrictive covenants apply to the debt securities of any series, or to any
specified part of a series.
In order to exercise either option, we must irrevocably deposit, in trust for
the benefit of the holders of those debt securities, money or U.S. government
securities, or both, which, through the payment of principal and interest in
accordance with their terms, will provide amounts sufficient to pay the
principal of and any premium and interest on those debt securities on the
respective stated maturities in accordance with the terms of the indenture and
those debt securities. Any additional conditions to exercising these options
with respect to a series of debt securities will be described in an applicable
prospectus supplement.
If we meet all the conditions to clause(a) above and elect to do so, we will be
discharged from all our obligations with respect to the applicable debt
securities and if those debt securities are subordinated debt securities, the
provisions relating to subordination will cease to be effective (other than
obligations to register transfer of debt securities, to replace lost, stolen or
mutilated certificates and to maintain paying agencies). We shall be deemed to
have paid and discharged the entire indebtedness represented by the applicable
debt securities and to have satisfied all of our obligations under the debt
securities and the indenture relating to those debt securities.
If we meet all the conditions to clause(b) above and elect to do so, we may omit
to comply with and shall have no liability in respect of certain restrictive
covenants as described in the related prospectus supplement and, if those debt
securities are subordinated debt securities, the provisions of the indenture
relating to subordination will cease to be effective, in each case with respect
to those debt securities.
MODIFICATION OF THE INDENTURE
Under the indenture, our rights and obligations and the rights of holders may be
modified with the consent of the holders holding not less than a majority of the
aggregate principal amount of the outstanding debt securities of each series
affected by the modification. No modification of the principal or interest
payment terms, and no modification reducing the percentage required for
modifications or altering the provisions relating to the waiver of any past
default, is effective against any holder without its consent. We and the trustee
may also amend the indenture or any supplement to the indenture without the
consent of the holders of any debt securities to evidence the succession or
addition of another corporation to AEGON, AFC or AFC II, as the case may be, to
evidence the replacement of the trustee with respect to one or more series of
debt securities and for certain other purposes.
CONSOLIDATION, MERGER OR DISPOSITION OF ASSETS OF AEGON, AFC OR AFC II
We may not consolidate with or merge into, or sell or lease substantially all of
our assets to any person unless:
o the successor person expressly assumes our obligations on the debt
securities and under the indenture;
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o immediately after giving effect to the transaction, no event of default,
and no event which, after notice or lapse of time or both, would become an
event of default, shall have occurred and be continuing; and
o any other conditions specified in the related prospectus supplement are
met.
CONCERNING THE TRUSTEE
We and certain of our affiliates and subsidiaries may maintain deposit account
and lines of credit and have other customary banking relationship with the
trustee and its affiliates in the ordinary course of our and their respective
businesses.
Pursuant to the Trust Indenture Act, should a default occur with respect to the
debt securities constituting our senior debt securities or subordinated debt
securities, the trustee would be required to resign as trustee with respect to
the debt securities constituting either the senior debt securities or the
subordinated debt securities under the indenture within 90 days of the default
unless the default were cured, duly waived or otherwise eliminated or unless
only senior debt securities or subordinated debt securities are outstanding
under the indenture at the time of the default.
TAXATION
TAXATION IN THE NETHERLANDS
General. The following describes the principal Dutch tax consequences of the
acquisition, holding and disposal of common shares in AEGON or an interest in
the debt securities. This summary does not purport to be a comprehensive
description of all Dutch tax considerations that may be relevant to a decision
to acquire, hold, convert or dispose of the common shares or the debt
securities. EACH PROSPECTIVE INVESTOR SHOULD CONSULT A PROFESSIONAL TAX ADVISOR
WITH RESPECT TO THE TAX CONSEQUENCES OF AN INVESTMENT IN THE COMMON SHARES OR
THE DEBT SECURITIES. THE DISCUSSION OF CERTAIN DUTCH TAXES BELOW IS INCLUDED FOR
GENERAL INFORMATION ONLY.
This summary is based on tax legislation, published case law, treaties, rules,
regulations and similar documentation in force as of the date of this
prospectus.
For the purposes of this discussion we have assumed that:
o AFC and AFC II are not residents, nor deemed to be residents, of The
Netherlands for Dutch tax purposes;
o a corporate holder does not hold, directly or indirectly, an interest of
5% or more of the total issued capital of AEGON, and
o an individual holder, alone, or together with his or her partner
(statutory defined term) or certain other related persons does not hold,
directly or indirectly, (a) an interest of 5% or more of the total issued
capital of AEGON or 5% or more of a certain class of AEGON's shares, (b)
rights to acquire, directly or indirectly, such interest or (c) certain
profit sharing rights in AEGON.
A holder that acquires an interest in excess of the thresholds mentioned above
is strongly recommended to consult a professional tax adviser with respect to
the Dutch tax consequences of an investment in the common shares.
COMMON SHARES OF AEGON.
DIVIDEND WITHHOLDING TAX
Dividends and other revenue from the common shares will be generally subject to
Dutch dividend withholding tax at a rate of 25%. Dividends include:
o distributions in cash or in kind including deemed and constructive
distributions;
o liquidation proceeds, proceeds on redemption of the common shares and, as
a rule, the consideration for the repurchase of common shares by AEGON in
excess of the average paid-in capital recognized for Dutch dividend
withholding tax purposes, unless the repurchase is exempt on the basis of
Article 4c of the Dividend Tax Act 1965;
o the par value of shares issued to a holder of common shares or an increase
of the par value of common shares, except when the increase is funded out
of AEGON's paid-in capital as recognized for Dutch dividend withholding
tax purposes; and
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o partial repayments of paid-in capital, if and to the extent there are net
profits, unless the general meeting of the shareholders of AEGON has
resolved in advance to make such repayment and provided that the nominal
value of the common shares concerned has been reduced by an equal amount
by way of an amendment of the articles of incorporation and the paid-in
capital is recognized as capital for Dutch dividend withholding tax
purposes.
In general, AEGON is required to remit all amounts withheld as Dutch dividend
withholding tax to the Dutch tax authorities.
RESIDENTS OF THE NETHERLANDS
In general, the Dutch dividend withholding tax withheld with respect to dividend
distributions will be creditable for Dutch income tax purposes for the
beneficial owner thereof, or, subject to certain conditions, may be recoverable
in whole or in part by the Dutch resident beneficial owner of such dividend.
AEGON can refrain from withholding dividend withholding tax on the portion of
the proceeds from the common shares in respect of which the temporary special
distribution tax (as discussed below) is applicable, if the recipient of
proceeds from the common shares is a resident of The Netherlands.
On request and if certain conditions are met, a refund of the Dutch dividend
withholding tax applies to Dutch qualifying pension funds, certain exempt
entities and Dutch investment institutions as defined in Article 28 of the
Corporate Income Tax Act 1969.
NON-RESIDENTS OF THE NETHERLANDS
If a holder is resident in a country other than The Netherlands and if a treaty
for the avoidance of double taxation with respect to taxes on income is in
effect between The Netherlands and such country, and the holder is the
beneficial owner of the dividends and a qualifying resident for purposes of the
treaty, the holder will, depending on the terms of the particular treaty,
qualify for full or partial relief at source or for a refund (in whole or in
part) of the Dutch dividend withholding tax.
Residents of the United States that qualify for, and comply with the procedures
for claiming benefits under the income tax convention between The Netherlands
and the United States (NL/US income tax treaty), generally are eligible for a
reduction of up to 15% of the Dutch withholding tax on dividend income. The
NL/US income tax treaty provides a complete exemption for dividends received by
exempt pension trusts and exempt organizations, as defined therein. A holder of
the common shares will qualify for benefits under the NL/US income tax treaty
(subject to compliance with the procedures for claiming benefits) if the holder:
o is the beneficial owner of the common shares and the dividends paid on
those common shares;
o is resident in the United States;
o is not also resident in another jurisdiction;
o does not hold the common shares in connection with the conduct of
business in The Netherlands; and
o is an individual, an exempt pension trust or exempt organization (as
defined in the NL/US income tax treaty), an estate or trust whose income
is subject to U.S. taxation as the income of a resident, either in its
hands or in the hands of its beneficiaries, or a corporation that is not
subject to the treaty's limitation of benefits provision.
AEGON can refrain from withholding Dutch dividend withholding tax on the part of
the dividend distribution in respect of which the distribution tax discussed
below is applicable, if the recipient of the dividend distribution is a resident
of The Netherlands, The Netherlands Antilles or Aruba, a member state of the
European Union or a country with which The Netherlands has concluded a treaty
for the avoidance of double taxation.
PROPOSED LEGISLATION
Recently, a proposal for legislation was announced that may affect the
eligibility for an exemption, reduction or refund of the Dutch dividend
withholding tax. The proposed legislation would have retroactive effect as of
April 27, 2001. A recipient of a dividend on the common shares will not be
entitled to an exemption, reduction or partial refund of Dutch dividend
withholding tax if the recipient is not considered the beneficial owner of such
dividend. This is the case if:
o the recipient of the dividend, in connection with the receipt of the
dividend has incurred an obligation, as part of one or more related
transactions, as a result of which the dividend in whole or in part has
accrued or will accrue to the benefit of a person that is to a lesser
extent entitled to an exemption, reduction or refund than the recipient of
the dividend; and
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o such person, other than the recipient of the dividend, retains or
acquires, directly or indirectly, a comparable interest in the common
shares on which the dividends are paid, as such person had before the
related transactions were entered into.
DISTRIBUTION TAX
AEGON is subject to a temporary special distribution tax at a rate of 20% to the
extent that any "excessive" dividends are distributed on the common shares in
the period from January 1, 2001 up to and including December 31, 2005. This
distribution tax is a corporate income tax, not a creditable or refundable
withholding tax. For purposes of this distribution tax, dividends are considered
to be "excessive" when during a particular calendar year, the total amount of
dividends distributed exceeds the highest of the following three amounts:
o 4% of the market capitalization of AEGON at the beginning of the
relevant calendar year;
o twice the amount of the average annual dividends (exclusive of
extraordinary dividends) by reference to the three calendar years
immediately preceding January 1, 2001; or
o the adjusted statutory income of AEGON for the preceding book year.
The temporary special distribution tax is not levied insofar as the aggregate
amount of dividend distributions during the period January 1, 2001 through
December 31, 2005 is in excess of the balance of the fair market value of the
net assets at the end of the fiscal year that ended prior to January 1, 2001
reduced by the paid-in capital recognized for Dutch tax purposes.
The distribution tax due is reduced pro rata for common shares that were held,
at the time of the dividend distribution, for an uninterrupted period of three
years, or as of September 14, 1999, by individuals or entities (other than
investment institutions as defined in the Corporate Income Tax Act 1969) holding
at least 5% of AEGON's nominal capital.
CORPORATE INCOME TAX AND INDIVIDUAL INCOME TAX
RESIDENTS OF THE NETHERLANDS
If a corporate holder is subject to Dutch corporate income tax, and the common
shares are attributable to its business assets or deemed business assets,
payments on the common shares and the gains realized upon the disposal of the
common shares are taxable.
If an individual holder is resident or deemed to be a resident in The
Netherlands for Dutch tax purposes (including an individual who has opted to be
taxed as a resident of The Netherlands), payments on the common shares and gains
realized upon the disposal of the common shares are taxable at the progressive
rates of the Income Tax Act 2001, if:
(1) the holder of the common shares has an enterprise or an interest in an
enterprise to which the common shares are attributable; or
(2) the payments and gains qualify as income from miscellaneous activities in
The Netherlands within the meaning of Section 3.4 of the Income Tax Act
2001, which include the performance of activities with respect to the
common shares that exceed "regular, active portfolio management" (normaal,
actief vermogensbeheer).
If neither condition (1) nor (2) applies to an individual holder of common
shares, the common shares will be included in the individual's yield basis.
Consequently, actual payments on the common shares and the actual gains realized
upon the disposal of the common shares will not be taxable. Instead, the holder
of the common shares will be taxed at a flat rate of 30% on deemed income from
"savings and investments" (sparen en beleggen) within the meaning of Section 5.1
of the Income Tax Act 2001. This deemed income amounts to 4% of the average of
the individual's "yield basis" (rendementsgrondslag) within the meaning of
Article 5.3 of the Income Tax Act 2001 at the beginning of the calendar year,
and the individual's yield basis at the end of the calendar year, insofar as the
average exceeds a certain threshold.
NON-RESIDENTS OF THE NETHERLANDS
Dividend distributions on the common shares and capital gains realized upon the
disposal of the common shares for a holder that is not resident nor deemed to be
resident in The Netherlands for Dutch tax purposes (and, in the case of an
individual holder, has not opted to be taxed as a resident of The Netherlands)
are not taxable in The Netherlands, provided that:
o the holder does not have an enterprise or an interest in an enterprise
that is carried on through a permanent establishment or a permanent
representative in The Netherlands to which the common shares are
attributable;
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o the holder is not entitled to a share in the profits of an enterprise that
is effectively managed in The Netherlands, other than by way of securities
or through an employment contract, and to which enterprise the common
shares are attributable; and
o with respect to an individual holder, the dividend distributions or
capital gains do not qualify as income from miscellaneous activities in
The Netherlands within the meaning of Section 3.4 of the Income Tax Act
2001, which include the performance of activities in The Netherlands with
respect to the common shares that exceed "regular, active portfolio
management" (normaal, actief vermogensbeheer).
GIFT AND INHERITANCE TAXES
RESIDENTS OF THE NETHERLANDS
Generally, gift and inheritance taxes will be due in The Netherlands in respect
of an acquisition of the common shares by way of a gift by, or on the death of,
an individual holder who, for the purposes of the Dutch gift and inheritance
tax, is resident or deemed to be resident in The Netherlands at the time of the
gift or his or her death.
An individual of Dutch nationality is deemed to be a resident of The Netherlands
for the purposes of the Dutch gift and inheritance tax if he or she has been
resident in The Netherlands during the 10 years preceding the gift or his or her
death. An individual of any other nationality is deemed to be a resident of The
Netherlands for the purposes of the Dutch gift and inheritance tax only if he or
she has been residing in The Netherlands at any time during the 12 months
preceding the time of the gift.
NON-RESIDENTS OF THE NETHERLANDS
No gift or inheritance taxes will arise in The Netherlands in respect of an
acquisition of the common shares by way of gift by, or as a result of the death
of, an individual holder who is neither resident nor deemed to be a resident of
The Netherlands, unless:
o the individual holder at the time of the gift has, or at the time of his
or her death had, an interest in a Dutch enterprise to which the common
shares are or were attributable;
o the common shares are or were attributable to the assets of an enterprise
that is effectively managed in The Netherlands and the donor is, or the
deceased was, entitled, other than by way of securities or through an
employment contract, to a share in the profits of that enterprise at the
time of the gift or, as applicable, at the time of his or her death; or
o in the case of a gift of the common shares by an individual who at the
date of the gift was neither resident nor deemed to be resident in The
Netherlands, such individual dies within 180 days after the date of the
gift, if at the time of his or her death such individual was a resident or
deemed to be a resident of The Netherlands.
VALUE ADDED TAX (VAT)
In general, no Dutch VAT will arise with respect to the issuance of the common
shares and with respect to dividend distributions, partial or complete repayment
of paid-in capital or other payments and distributions on common shares.
CAPITAL TAX
Dutch capital tax will, in principle, be due by AEGON at the rate of 0.55% of
the fair market value of any contribution to the capital of AEGON upon the
issuance of the common shares.
OTHER TAXES AND DUTIES
No net wealth tax, registration tax, customs duty, transfer tax, stamp duty or
any other similar documentary tax or duty will be payable in The Netherlands by
a holder in respect of or in connection with the subscription, issue, placement,
allotment or delivery of the common shares.
DEBT SECURITIES OF AEGON, AFC AND AFC II.
WITHHOLDING TAX
No Dutch withholding tax is due upon payments on the debt securities provided
that, in the case of debt securities issued by AEGON, the payments do not
depend, nor are deemed to depend, on profits or distributions of profits by
AEGON.
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CORPORATE INCOME TAX AND INDIVIDUAL INCOME TAX
RESIDENTS OF THE NETHERLANDS
If a holder of the debt securities is subject to Dutch corporate income tax and
the debt securities are attributable to its business assets or its deemed
business assets, payments on the debt securities and the gains realized upon the
disposal of the debt securities will be taxable.
If a holder of the debt securities is an individual resident or deemed to be
resident in The Netherlands for Dutch tax purposes (including an individual who
has opted to be taxed as a resident of The Netherlands), payments on the debt
securities and the gains realized upon the disposal of the debt securities will
be taxable at the progressive rates of the Income Tax Act 2001, if:
(1) the holder of the debt securities has an enterprise or an interest in an
enterprise, to which enterprise the debt securities are attributable; or
(2) such payments and gains qualify as income from miscellaneous activities in
The Netherlands within the meaning of Section 3.4 of the Income Tax Act
2001, which include the performance of activities with respect to the debt
securities that exceed "regular, active portfolio management" (normaal,
actief vermogensbeheer).
If neither condition (1) nor (2) applies to an individual holder of the debt
securities, the debt securities will be included in the individual's yield
basis. Consequently, actual payments on the debt securities and the actual gains
realized upon the disposal of the debt securities will not be taxable. Instead,
the holder of the debt securities will be taxed at a flat rate of 30% on deemed
income from "savings and investments" (sparen en beleggen) within the meaning of
Section 5.1 of the Income Tax Act 2001. This deemed income amounts to 4% of the
average of the individual's "yield basis" (rendementsgrondslag) within the
meaning of Article 5.3 of the Income Tax Act 2001 at the beginning of the
calendar year and the individual's yield basis at the end of the calendar year,
insofar as the average exceeds a certain threshold.
NON-RESIDENTS OF THE NETHERLANDS
A corporate holder and individual holder of the debt securities that is not
resident nor deemed to be resident in The Netherlands for Dutch tax purposes
(nor, in the case of an individual holder, has opted to be taxed as a resident
of The Netherlands) is not taxable in respect of a payment on the debt
securities or the gains realized upon the disposal of the debt securities,
provided that:
o the corporate holder or individual holder of the debt securities does not
have an interest in a Dutch enterprise to which Dutch enterprise the debt
securities are attributable;
o the corporate holder or the individual holder of the debt securities is
not entitled to a share in the profits of an enterprise that is
effectively managed in The Netherlands, other than by way of securities or
through an employment contract, and to which enterprise the debt
securities are attributable; or
o in respect of an individual holder such payments and gains do not qualify
as income from miscellaneous activities in The Netherlands within the
meaning of Section 3.4 of the Income Tax Act 2001, which include the
performance of activities in The Netherlands with respect to the debt
securities that exceed "regular, active portfolio management" (normaal,
actief vermogensbeheer).
GIFT AND INHERITANCE TAXES
RESIDENTS OF THE NETHERLANDS
Generally, gift and inheritance taxes will be due in The Netherlands in respect
of an acquisition of the debt securities by way of a gift by, or on the death
of, an individual holder who for the purposes of the Dutch gift and inheritance
tax is resident or deemed to be resident in The Netherlands at the time of the
gift or his or her death.
An individual of Dutch nationality is deemed to be resident in The Netherlands
for the purposes of the Dutch gift and inheritance tax, if he or she has been
resident in The Netherlands during the 10 years preceding the gift or his or her
death. An individual of any other nationality is deemed to be resident in The
Netherlands for the purposes of the Dutch gift and inheritance tax only if he or
she has been residing in The Netherlands at any time during the 12 months
preceding the time of the gift.
NON-RESIDENTS OF THE NETHERLANDS
No gift or inheritance taxes will arise in The Netherlands in respect of an
acquisition of the debt securities by way of gift by, or as a result of the
death of, an individual holder who is neither resident nor deemed to be resident
in The Netherlands, unless:
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o such individual holder at the time of the gift has or at the time of his
or her death had, an interest in a Dutch enterprise to which Dutch
enterprise the debt securities are or were attributable;
o the debt securities are or were attributable to the assets of an
enterprise that is effectively managed in The Netherlands and the donor is
or the deceased was entitled to a share in the profits of that enterprise,
at the time of the gift or at the time of his or her death, other than by
way of securities or through an employment contract; or
o in the case of a gift of the debt securities by an individual who at the
date of the gift was neither a resident nor deemed to be a resident of The
Netherlands, such individual dies within 180 days after the date of the
gift, if at the time of his or her death such individual was a resident or
deemed to be a resident of The Netherlands.
OTHER TAXES AND DUTIES
No capital duty, registration tax, customs duty, transfer tax, stamp duty or any
other similar documentary tax or duty, will be payable in The Netherlands by the
corporate holder or the individual holder in respect of or in connection with
the subscription, issue, placement, allotment or delivery of the debt
securities.
PROPOSED EU SAVINGS DIRECTIVE
On July 18, 2001 the EU Commission published a proposal for a new directive
regarding the taxation of savings income. It is proposed that, subject to a
number of important conditions being met, member states will be required to
provide to the tax authorities of another member state details of payments of
interest or other similar income paid by a person within its jurisdiction to an
individual resident in that other member state, subject to the right of certain
member states to opt instead for a withholding system for a transitional period
in relation to such payments. The proposed directive is not yet final, and may
be subject to further amendment and clarification.
TAXATION IN THE UNITED STATES
General. This section summarizes the material U.S. tax consequences to
beneficial holders of the common shares and the debt securities. This summary
addresses only the U.S. Federal income tax considerations for holders that
acquire the securities at their original issuance and hold the securities as
capital assets. This summary does not address all U.S. Federal income tax
matters that may be relevant to a particular prospective holder. EACH
PROSPECTIVE INVESTOR SHOULD CONSULT A PROFESSIONAL TAX ADVISOR WITH RESPECT TO
THE TAX CONSEQUENCES OF AN INVESTMENT IN THE COMMON SHARES OR THE DEBT
SECURITIES. This summary does not address tax considerations applicable to a
holder of security that may be subject to special tax rules including, without
limitation, the following:
o financial institutions;
o insurance companies;
o dealers or traders in securities or currencies;
o tax-exempt entities;
o persons that will hold the securities as part of a "hedging" or
"conversion" transaction or as a position in a "straddle" for U.S.
Federal income tax purposes;
o holders that own (or are deemed to own) 10% or more of the voting shares
of the relevant issuer or guarantor; and
o holders that have a "functional currency" other than the U.S. dollar.
Further, this summary does not address alternative minimum tax consequences or
the indirect effects on the holders of equity interests in a holder of security.
This discussion does not cover every type of security that may be issued under
this prospectus. If we intend to issue a security of a type not described in
this summary, additional tax information will be provided in the prospectus
supplement for the applicable security.
This summary is based on the U.S. Internal Revenue Code of 1986, as amended,
U.S. Treasury regulations and judicial and administrative interpretations, in
each case as in effect and available on the date of this prospectus. All of the
foregoing are subject to change, which change could apply retroactively and
could affect the tax consequences described below.
Each prospective investor should consult its own tax advisor with respect to the
U.S. Federal, state, local and foreign tax consequences of acquiring, owning or
disposing of the securities.
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For the purposes of this summary, a "U.S. holder" is a beneficial owner of
securities that is, for U.S. Federal income tax purposes:
o a citizen or resident of the United States;
o a corporation, or other entity that is treated as a corporation for U.S.
Federal income tax purposes, created or organized in or under the laws
of the United States or any state of the United States (including the
District of Columbia);
o an estate the income of which is subject to U.S. Federal income taxation
regardless of its source; or
o a trust, if a court within the United States is able to exercise primary
supervision over its administration and one or more U.S. persons have
the authority to control all of the substantial decisions of such trust.
If a partnership holds securities, the tax treatment of a partner will generally
depend upon the status of the partner and upon the activities of the
partnership. Partners of partnerships holding securities should consult their
tax advisor. A non-U.S. holder is a beneficial owner of securities that is not a
U.S. holder.
TAX CONSEQUENCES TO U.S. HOLDERS.
COMMON SHARES OF AEGON
DISTRIBUTIONS
The gross amount of any distribution (including any amounts withheld in respect
of Dutch withholding tax) actually or constructively received by a U.S. holder
with respect to common shares will be taxable to the U.S. holder as a dividend
to the extent of AEGON's current and accumulated earnings and profits as
determined under U.S. Federal income tax principles. The U.S. holder will not be
eligible for any dividends received deduction in respect of the dividend
otherwise allowable to corporations. Distributions in excess of earnings and
profits will be non-taxable to the U.S. holder to the extent of, and will be
applied against and reduce, the U.S. holder's adjusted tax basis in the common
shares. Distributions in excess of earnings and profits and such adjusted tax
basis will generally be taxable to the U.S. holder as capital gain from the sale
or exchange of property. AEGON does not maintain calculations of its earnings
and profits under U.S. Federal income tax principles. If AEGON does not report
to a U.S. holder the portion of a distribution that exceeds earnings and
profits, the distribution will generally be taxable as a dividend even if that
distribution would otherwise be treated as a non-taxable return of capital or as
capital gain under the rules described above. The amount of any distribution of
property other than cash will be the fair market value of that property on the
date of distribution.
The amount of any distribution paid in currency other than U.S. dollars (a
"foreign currency") including the amount of any withholding tax thereon, will
be included in the gross income of a U.S. holder in an amount equal to the
U.S. dollar value of the foreign currencies calculated by reference to the
exchange rate in effect on the date of receipt, regardless of whether the
foreign currencies are converted into U.S. dollars. If the foreign currencies
are converted into U.S. dollars on the date of receipt, a U.S. holder
generally should not be required to recognize foreign currency gain or loss
in respect of the dividend. If the foreign currencies received in the
distribution are not converted into U.S. dollars on the date of receipt, a
U.S. holder will have a basis in the foreign currencies equal to its U.S.
dollar value on the date of receipt. Any gain or loss on a subsequent
conversion or other disposition of the foreign currencies will be treated as
ordinary income or loss.
Dividends received by a U.S. holder with respect to common shares will be
treated as foreign source income for the purposes of calculating that holder's
foreign tax credit limitation. Subject to certain conditions and limitations,
and subject to the discussion in the next paragraph, any Dutch income tax
withheld on dividends may be deducted from taxable income or credited against a
U.S. holder's Federal income tax liability. The limitation on foreign taxes
eligible for the U.S. foreign tax credit is calculated separately with respect
to specific classes of income. For this purpose, dividends distributed by AEGON
generally will constitute "passive income", or, in the case of some U.S.
holders, "financial services income". In certain circumstances, a U.S. holder
may be unable to claim foreign tax credits for foreign taxes imposed on a
dividend if the U.S. holder (1) has not held the common shares for at least 16
days in the 30-day period beginning 15 days before the ex-dividend date, during
which it is not protected from risk of loss; (2) is obligated to make payments
related to the dividends; or (3) holds the common shares in arrangements in
which the U.S. holder's expected profit, after non-U.S. taxes, is insubstantial.
In general, upon making a distribution to shareholders, AEGON is required to
remit all amounts withheld as Dutch dividend withholding tax to the Dutch tax
authorities and, in such circumstances, the full amount of the taxes so withheld
would generally (subject to certain limitations and conditions) be eligible for
the U.S. holder's foreign tax deduction or credit as
23
described above. INVESTORS ARE URGED TO CONSULT THEIR TAX ADVISERS REGARDING THE
GENERAL CREDITABILITY OR DEDUCTIBILITY OF DUTCH WITHHOLDING TAXES.
A distribution of additional common shares to U.S. holders with respect to their
common shares that is made as part of a pro rata distribution to all
shareholders generally will not be subject to U.S. Federal income tax unless
U.S. holders can elect that the distribution be payable in either additional
common shares or cash. AEGON expects that U.S. holders would have this option
upon each distribution. Accordingly, a distribution of additional common shares
to U.S. holders with respect to their common shares where U.S. holders may elect
that distribution be payable in additional common shares or cash will be taxable
under the rules described above.
SALE OR OTHER DISPOSITION OF SHARES
A U.S. holder will generally recognize gain or loss for U.S. Federal income tax
purposes upon the sale or exchange of common shares in an amount equal to the
difference between the U.S. dollar value of the amount realized from such sale
or exchange and the U.S. holder's tax basis for those common shares. This gain
or loss will be a capital gain or loss and will generally be treated as from
sources within the United States, except that losses will be treated as foreign
source to the extent the U.S. holder received dividends that were includible in
the financial services income basket during the 24-month period prior to the
sale. PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT
TO THE TREATMENT OF CAPITAL GAINS (WHICH MAY BE TAXED AT LOWER RATES THAN
ORDINARY INCOME FOR TAXPAYERS WHO ARE INDIVIDUALS, TRUSTS OR ESTATES THAT HAVE
HELD THE COMMON SHARES FOR MORE THAN ONE YEAR) AND CAPITAL LOSSES (THE
DEDUCTIBILITY OF WHICH IS SUBJECT TO LIMITATIONS).
If a U.S. holder receives foreign currency upon a sale or exchange of common
shares, gain or loss, if any, recognized on the subsequent sale, conversion or
disposition of such foreign currency will be ordinary income or loss, and will
generally be income or loss from sources within the United States for foreign
tax credit limitation purposes. However, if such foreign currency is converted
into U.S. dollars on the date received by the U.S. holder, the U.S. holder
generally should not be required to recognize any gain or loss on such
conversion.
REDEMPTION OF COMMON SHARES
The redemption of common shares by AEGON will be treated as a sale of the
redeemed shares by the U.S. holder (which is taxable as described above under
"Sale or Other Disposition of Shares") or, in certain circumstances, as a
distribution to the U.S. holder (which is taxable as described above under
"Distributions").
PASSIVE FOREIGN INVESTMENT COMPANY CONSIDERATIONS
A corporation organized outside the United States generally will be classified
as a passive foreign investment company (PFIC) for U.S. Federal income tax
purposes in any taxable year in which, after applying certain look-through
rules, either: (1) at least 75% of its gross income is passive income, or (2) on
average at least 50% of the gross value of its assets is attributable to assets
that produce passive income or are held for the production of passive income. In
arriving at this calculation, AEGON must also include a pro rata portion of the
income and assets of each corporation in which it owns, directly or indirectly,
at least a 25% interest. Passive income for this purpose generally includes
dividends, interest, royalties, rents and gains from commodities and securities
transactions, but excludes any income derived in the active conduct of an
insurance business by a corporation which is predominantly engaged in an
insurance business. Based on AEGON's estimated gross income, the average value
of AEGON's gross assets and the nature of AEGON's active insurance business,
AEGON does not believe that it will be classified as a PFIC in the current
taxable year. AEGON's status in any taxable year will depend on its assets and
activities in each year and no assurances can be provided in that regard. If
AEGON were treated as a PFIC in any year during which a U.S. holder owns common
shares, certain adverse tax consequences could apply. INVESTORS SHOULD CONSULT
THEIR OWN TAX ADVISORS WITH RESPECT TO ANY PFIC CONSIDERATIONS.
DEBT SECURITIES OF AEGON, AFC AND AFC II.
INTEREST
Interest paid on the debt securities, other than interest on a discount note
that is not qualified stated interest (each as defined below under "Original
Issue Discount -- General"), will be taxable to a U.S. holder as ordinary
interest income at the time it is received or accrued, depending on the U.S.
holder's method of accounting for U.S. Federal income tax purposes.
A U.S. holder utilizing the cash method of accounting for U.S. Federal income
tax purposes that receives an interest payment denominated in a foreign
currency will be required to include in income the U.S. dollar value of that
interest payment, based on the exchange rate in effect on the date of
receipt, regardless of whether the payment is in fact converted into U.S.
dollars.
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If interest on a debt security is payable in a foreign currency, an accrual
basis U.S. holder is required to include in income the U.S. dollar value of the
amount of interest income accrued on a debt security during the accrual period.
An accrual basis U.S. holder may determine the amount of the interest income to
be recognized in accordance with either of two methods. Under the first accrual
method, the amount of income accrued will be based on the average exchange rate
in effect during the interest accrual period or, with respect to an accrual
period that spans two taxable years, the part of the period within the taxable
year. Under the second accrual method, the U.S. holder may elect to determine
the amount of income accrued on the basis of the exchange rate in effect on the
last day of the accrual period or, in the case of an accrual period that spans
two taxable years, the exchange rate in effect on the last day of the part of
the period within the taxable year. If the last day of the accrual period is
within five business days of the date the interest payment is actually received,
an electing accrual basis U.S. holder may instead translate that interest
expense at the exchange rate in effect on the day of actual receipt. Any
election to use the second accrual method will apply to all debt instruments
held by the U.S. holder at the beginning of the first taxable year to which the
election applies or thereafter acquired by the U.S. holder and will be
irrevocable without the consent of the U.S. Internal Revenue Service.
A U.S. holder utilizing either of the foregoing two accrual methods will
recognize ordinary income or loss with respect to accrued interest income on the
date of receipt of the interest payment (including a payment attributable to
accrued but unpaid interest upon the sale or retirement of a debt security). The
amount of ordinary income or loss will equal the difference between the U.S.
dollar value of the interest payment received (determined on the date the
payment is received) in respect of the accrual period and the U.S. dollar value
of interest income that has accrued during that accrual period (as determined
under the accrual method utilized by the U.S. holder).
Foreign currency received as interest on the debt securities will have a tax
basis equal to its U.S. dollar value at the time the interest payment is
received. Gain or loss, if any, realized by a U.S. holder on a sale or other
disposition of that foreign currency will be ordinary income or loss and will
generally be income from sources within the United States for foreign tax credit
limitation purposes.
Interest on the debt securities received by a U.S. holder will be treated as
foreign source income for the purposes of calculating that holder's foreign tax
credit limitation. The limitation on foreign taxes eligible for the U.S. foreign
tax credit is calculated separately with respect to specific classes of income.
For this purpose, the interest on the debt securities should generally
constitute "passive income", or in the case of certain U.S. holders, "financial
services income".
ORIGINAL ISSUE DISCOUNT
GENERAL
A debt security, other than a debt security with a term of one year or less (a
short-term note), will be treated as issued at an original issue discount (OID,
and a debt security issued with OID, a Discount Note) for U.S. Federal income
tax purposes if the excess of the sum of all payments provided under the debt
security, other than "qualified stated interest payments" (as defined below),
over the issue price of the debt security is more than a "de minimis amount" (as
defined below). "Qualified stated interest" is generally interest paid on a debt
security that is unconditionally payable at least annually at a single fixed
rate. The issue price of the debt securities will be the first price at which a
substantial amount of the debt securities are sold to persons other than bond
houses, brokers, or similar persons or organizations acting in the capacity of
underwriters, placement agents, or wholesalers.
In general, if the excess of the sum of all payments provided under the debt
security other than qualified stated interest payments over its issue price is
less than 0.25% of the debt security's stated redemption price at maturity
multiplied by the number of complete years to its maturity (the "de minimis
amount"), then such excess, if any, constitutes "de minimis OID" and the debt
security is not a Discount Note. Unless the election described below under
"Election to Treat All Interest as OID" is made, a U.S. holder of a debt
security with de minimis OID must include such de minimis OID in income as
stated principal payments on the debt security are made. The includible amount
with respect to each such payment will equal the product of the total amount of
the debt security's de minimis OID and a fraction, the numerator of which is the
amount of the principal payment made and the denominator of which is the stated
principal amount of the debt security.
A U.S. holder will be required to include OID on a discount debt security in
income for U.S. Federal income tax purposes as it accrues calculated on a
constant-yield method (described below) before the actual receipt of cash
attributable to that income, regardless of the U.S. holder's method of
accounting for U.S. Federal income tax purposes. Under this method, U.S. holders
25
generally will be required to include in income increasingly greater amounts of
OID over the life of Discount Notes. Investors should consult their own tax
advisors to determine the U.S. Federal income tax implications of the
constant-yield method and regarding the accrual of OID generally.
OID for any accrual period on a debt security that is denominated in, or
determined by reference to, a foreign currency will be determined in that
foreign currency and then translated into U.S. dollars in the same manner as
interest payments accrued by an accrual basis U.S. holder, as described under
"Interest" above. Upon receipt of an amount attributable to OID in these
circumstances, a U.S. holder may recognize ordinary income or loss.
OID on a Discount Note will be treated as foreign source income for the purposes
of calculating a U.S. holder's foreign tax credit limitation. The limitation on
foreign taxes eligible for the U.S. foreign tax credit is calculated separately
with respect to specific classes of income. For this purpose, OID on a Discount
Note should generally constitute "passive income" or, in the case of certain
U.S. holders, "financial services income".
ACQUISITION PREMIUM
A U.S. holder that purchases a debt security for an amount less than or equal to
the sum of all amounts payable on the debt security after the purchase date
other than payments of qualified stated interest but in excess of its adjusted
issue price and that does not make the election described below under "Election
to Treat All Interest as OID" will have acquisition premium. Investors should
consult their own tax advisors regarding the U.S. Federal income tax
implications of acquisition premium.
MARKET DISCOUNT
A debt security, other than a short-term note, will be treated as purchased at a
market discount (a market discount note) if the debt security's stated
redemption price at maturity or, in the case of a Discount Note, the debt
security's "revised issue price", exceeds the amount for which the U.S. holder
purchased the debt security by at least 0.25% of the debt security's stated
redemption price at maturity or revised issue price, respectively, multiplied by
the number of complete years to the debt security's maturity. If such excess is
not sufficient to cause the debt security to be a market discount note, then
such excess constitutes "de minimis market discount" and the debt security is
not subject to the rules discussed in the following paragraphs. For these
purposes, the "revised issue price" of a debt security generally equals its
issue price, increased by the amount of any OID that has accrued on the debt
security.
Any gain recognized on the maturity or disposition of a market discount note
will be treated as ordinary income to the extent that such gain does not exceed
the accrued market discount on that debt security. Alternatively, a U.S. holder
of a market discount note may elect to include market discount in income
currently over the life of the debt security. Such an election shall apply to
all debt instruments with market discount acquired by the electing U.S. holder
on or after the first day of the first taxable year to which the election
applies. This election may not be revoked without the consent of the IRS.
Market discount on a market discount note will accrue on a straight-line basis
unless the U.S. holder elects to accrue such market discount on a constant-yield
method. Such an election shall apply only to the debt security with respect to
which it is made and may not be revoked. A U.S. holder of a market discount note
that does not elect to include market discount in income currently generally
will be required to defer deductions for interest on borrowings allocable to
that debt security in an amount not exceeding the accrued market discount on
that debt security until the maturity or disposition of that debt security.
ELECTION TO TREAT ALL INTEREST AS OID
A U.S. holder may elect to include in gross income all interest that accrues on
a debt security using the constant-yield method described above under the
heading "Original Issue Discount -- General", with the modifications described
below. For the purposes of this election, interest includes stated interest,
OID, de minimis OID, market discount, de minimis market discount and unstated
interest, as adjusted by any amortizable bond premium or acquisition premium.
In applying the constant-yield method to a debt security with respect to which
this election has been made, the issue price of the debt security will equal its
cost to the electing U.S. holder, the issue date of the debt security will be
the date of its acquisition by the electing U.S. holder, and no payments on the
debt security will be treated as payments of qualified stated interest. This
election will generally apply only to the debt security with respect to which it
is made and may not be revoked without the consent of the IRS. If this election
is made with respect to a debt security with amortizable bond premium, then the
electing U.S. holder will be deemed to have elected to apply amortizable bond
premium against interest with respect to all debt instruments with amortizable
bond premium (other than debt instruments the interest on which is excludible
26
from gross income) held by the electing U.S. holder as of the beginning of the
taxable year in which the debt security with respect to which the election is
made is acquired or thereafter acquired. The deemed election with respect to
amortizable bond premium may not be revoked without the consent of the IRS.
If the election to apply the constant-yield method to all interest on a debt
security is made with respect to a market discount note, the electing U.S.
holder will be treated as having made the election discussed above under
"Original Issue Discount -- Market Discount" to include market discount in
income currently over the life of all debt instruments held or thereafter
acquired by such U.S. holder.
DEBT SECURITIES PURCHASED AT A PREMIUM
A U.S. holder that purchases a debt security for an amount in excess of its
principal amount may elect to treat such excess as amortizable bond premium. If
this election is made, the amount required to be included in the U.S. holder's
income each year with respect to interest on the debt security will be reduced
by the amount of amortizable bond premium allocable (based on the debt
security's yield to maturity) to such year. In the case of a debt security that
is denominated in, or determined by reference to, a foreign currency,
amortizable bond premium will be computed in units of foreign currency, and
amortizable bond premium will reduce interest income in units of foreign
currency. At the time amortizable bond premium offsets interest income, a U.S.
holder realizes exchange gain or loss (taxable as ordinary income or loss) equal
to the difference between exchange rates at that time and at the time of the
acquisition of the debt securities. Any election to amortize bond premium shall
apply to all bonds (other than bonds the interest on which is excludible from
gross income) held by the U.S. holder at the beginning of the first taxable year
to which the election applies or thereafter acquired by the U.S. holder and is
irrevocable without the consent of the IRS.
SALE, EXCHANGE OR RETIREMENT OF THE DEBT SECURITIES
A U.S. holder's tax basis in a debt security will generally equal its "U.S.
dollar cost", increased by the amount of any OID or market discount included in
the U.S. holder's income with respect to the debt security and the amount, if
any, of income attributable to de minimis OID and de minimis market discount
included in the U.S. holder's income with respect to the debt security (each as
determined above), and reduced by the amount of any payments with respect to the
debt security that are not qualified stated interest payments and the amount of
any amortizable bond premium applied to reduce interest on the debt security.
The "U.S. dollar cost" of a debt security purchased with a foreign currency will
generally be the U.S. dollar value of the purchase price on (1) the date of
purchase or (2) in the case of a debt security traded on an established
securities market (as defined in the applicable U.S. Treasury regulations), that
are purchased by a cash basis U.S. holder (or an accrual basis U.S. holder that
so elects), on the settlement date for the purchase.
A U.S. holder will generally recognize gain or loss on the sale, exchange or
retirement of a debt security equal to the difference between the amount
realized on the sale, exchange or retirement and the tax basis of the debt
security. The amount realized on the sale, exchange or retirement of a debt
security for an amount in foreign currency will be the U.S. dollar value of that
amount on the date of disposition, except in the case of debt securities traded
on an established securities market (as defined in the applicable U.S. Treasury
regulations) that are sold by an accrual basis U.S. holder that elects to
utilize the U.S. dollar value on the settlement date for the sale.
Gain or loss recognized by a U.S. holder on the sale, exchange or retirement of
a debt security that is attributable to changes in currency exchange rates will
be ordinary income or loss and will consist of OID exchange gain or loss and
principal exchange gain or loss. OID exchange gain or loss will equal the
difference between the U.S. dollar value of the amount received on the sale,
exchange or retirement of a debt security that is attributable to accrued but
unpaid OID as determined by using the exchange rate on the date of the sale,
exchange or retirement and the U.S. dollar value of accrued but unpaid OID as
determined by the U.S. holder under the rules described above under "Original
Issue Discount -- General". Principal exchange gain or loss will equal the
difference between the U.S. dollar value of the U.S. holder's purchase price of
the debt security in foreign currency determined on the date of the sale,
exchange or retirement, and the U.S. dollar value of the U.S. holder's purchase
price of the debt security in foreign currency determined on the date the U.S.
holder acquired the debt security. The foregoing foreign currency gain or loss
will be recognized only to the extent of the total gain or loss realized by the
U.S. holder on the sale, exchange or retirement of the debt security, and will
generally be treated as from sources within the United States for U.S. foreign
tax credit limitation purposes.
Any gain or loss recognized by a U.S. holder in excess of foreign currency gain
recognized on the sale, exchange or retirement of a debt security would
generally be U.S. source capital gain or loss
27
(except to the extent such amounts are attributable to market discount, accrued
but unpaid interest, or subject to the general rules governing contingent
payment obligations). PROSPECTIVE INVESTORS SHOULD CONSULT THEIR OWN TAX
ADVISORS WITH RESPECT TO THE TREATMENT OF CAPITAL GAINS (WHICH MAY BE TAXED AT
LOWER RATES THAN ORDINARY INCOME FOR TAXPAYERS WHO ARE INDIVIDUALS, TRUSTS OR
ESTATES THAT HELD THE DEBT SECURITIES FOR MORE THAN ONE YEAR) AND CAPITAL LOSSES
(THE DEDUCTIBILITY OF WHICH IS SUBJECT TO LIMITATIONS).
A U.S. holder will have a tax basis in any foreign currency received on the
sale, exchange or retirement of a debt security equal to the U.S. dollar value
of the foreign currency at the time of the sale, exchange or retirement. Gain or
loss, if any, realized by a U.S. holder on a sale or other disposition of that
foreign currency will be ordinary income or loss and will generally be income
from sources within the United States for foreign tax credit limitation
purposes.
PAYMENTS BY GUARANTOR
A payment on guaranteed debt securities made by AEGON will be treated in the
same manner as if made directly by the issuer.
SPECIAL CATEGORIES OF DEBT SECURITIES OF AEGON, AFC AND AFC II
Additional tax rules may apply to other categories of debt securities of AEGON,
AFC and AFC II. The prospectus supplement for these debt securities may describe
these rules. In addition, you should consult your tax advisor in these
situations. These categories of debt securities include:
o debt securities that are convertible into common shares of AEGON;
o debt securities that are issued in bearer form;
o debt securities with contingent payments;
o debt securities with variable rate payments;
o indexed debt securities where payments will be payable by reference to
any index or formula;
o debt securities that are perpetual in maturity;
o debt securities that are callable by the issuer before their maturity,
other than typical calls at a premium; and
o debt securities that are extendable at the option of the issuer or the
holder.
INFORMATION REPORTING AND BACKUP WITHHOLDING
If you hold your securities through a broker or other securities intermediary,
the intermediary is required to provide information to the IRS concerning
interest, OID or dividend, as the case may be, and retirement proceeds on your
securities, unless an exemption applies. In addition, you must provide the
intermediary with your taxpayer identification number for its use in reporting
information to the IRS and comply with other IRS requirements concerning
information reporting. If you are subject to these requirements but do not
comply, the intermediary is required to backup withhold in respect of amounts
payable to you on the securities. If the intermediary backup withholds payments,
you may use the withheld amount as a credit against your Federal income tax
liability. Some U.S. holders, including corporations and tax-exempt
organizations, are exempt from these requirements. U.S. holders should consult
their tax advisors as to their qualification for exemption from backup
withholding and the procedure for obtaining an exemption.
TAX CONSEQUENCES TO NON-U.S. HOLDERS.
WITHHOLDING TAXES
Generally, payments of principal and interest, including OID, on the guaranteed
debt securities will not be subject to U.S. withholding taxes. The same rules
will apply to payments of additional amounts and payments made by a guarantor on
a guaranteed debt security. However, if you hold guaranteed debt securities
issued by AFC or AFC II, for the exemption from U.S. withholding taxes to apply
to you, you must meet one of the following requirements:
o You provide your name, address, and a signed statement that you are the
beneficial owner of the guaranteed debt security and are not a U.S.
holder. This statement is generally made on U.S. IRS Form W-8BEN;
o You or your agent claim an exemption from withholding tax under an
applicable tax treaty. This claim is generally made on U.S. IRS Form
W-8BEN; or
28
o You or your agent claim an exemption from withholding tax on the ground
that the income is effectively connected with the conduct of a trade or
business in the U.S. This claim is generally made on U.S. IRS Form W-8ECI.
You should consult your tax advisor about the specific methods for satisfying
these requirements. A claim for exemption will not be valid if the person
receiving the application form has actual knowledge that the statements on the
form are false.
Even if you comply with these conditions, U.S. withholding tax might arise on
guaranteed debt securities issued by AFC and AFC II if the amount of interest is
based on the earnings or other attributes of AFC and AFC II, as the case may be,
or a related party. If this exception applies, additional information will be
provided in the prospectus supplement.
INFORMATION REPORTING AND BACKUP WITHHOLDING
If you provide the tax certifications needed to avoid withholding tax on
interests, as described above, principal and interest payments received by you
will automatically be exempt from U.S. information reporting requirements and
backup withholding. Interest payments made to you by AFC and AFC II will be
reported to the IRS. Sales proceeds you receive on a sale of your guaranteed
debt through a broker may be subject to information reporting and backup
withholding if you are not eligible for an exemption. In particular, information
reporting and backup withholding may apply if you use the U.S. office of a
broker, and information reporting (but not backup withholding) may apply if you
use the foreign office of a broker that has certain connections to the U.S. You
should consult your tax advisor concerning information reporting and backup
withholding on a sale.
SALE, EXCHANGE OR RETIREMENT OF SECURITIES
If you sell, exchange or redeem common shares or debt securities, you will not
be subject to U.S. Federal income tax on any gain unless one of the following
applies:
o the gain is connected with a trade or business that you conduct in the
U.S.;
o you are an individual, you are present in the U.S. for at least 183 days
during the year in which you dispose of the guaranteed debt security,
and certain other conditions are satisfied; or
o the gain represents accrued interest or OID, in which case the rules for
interest would apply.
U.S. TRADE OR BUSINESS
If you hold your securities in connection with a trade or business that you are
conducting in the U.S., any interest or dividend on the security and any gain
from disposing the security generally will be subject to income tax as if you
were a U.S. holder, and if you are a corporation, you may be subject to the
"branch profits tax" on your earnings that are connected with your U.S. trade or
business. This tax is 30%, but may be reduced or eliminated by an applicable
income tax treaty.
PLAN OF DISTRIBUTION
We may sell the securities offered by this prospectus in and outside the United
States in one or more of the following ways:
o through underwriters;
o through dealers;
o through agents; or
o directly to purchasers.
The distribution of the securities may be carried out from time to time in one
or more transactions at a fixed price or prices, which may be changed, at market
prices prevailing at the time of sale, at prices related to such prevailing
market prices or at negotiated prices. Underwriters, dealers and agents may be
customers of, engage in transactions with or perform services for the AEGON
Group in the ordinary course of business.
The prospectus supplement relating to any offering will include the following
information:
o the terms of the offering;
o the names of any underwriters, dealers or agents;
o the purchase price of the securities;
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o the net proceeds to us from the sale of the securities;
o any delayed delivery arrangements;
o any underwriting discounts or other underwriters' compensation; and
o any discounts or concessions allowed or reallowed or paid to dealers.
SALES THROUGH UNDERWRITERS OR DEALERS
If we use underwriters in an offering using this prospectus, we will execute an
underwriting agreement with one or more underwriters. The underwriting agreement
will provide that the obligations of the underwriters with respect to a sale of
the offered securities are subject to specified conditions precedent and that
the underwriters will be obligated to purchase all of the offered securities if
they purchase any. Underwriters may sell those securities through dealers. The
underwriters may change the initial offering price and any discounts or
concessions allowed or re-allowed or paid to dealers. If we use underwriters in
an offering of securities using this prospectus, the applicable prospectus
supplement will contain a statement regarding the intention, if any, of the
underwriters to make a market in the offered securities.
We may grant to the underwriters an option to purchase additional offered
securities, to cover over-allotments, if any, at the public offering price (with
additional underwriting discounts or commissions), as may be set forth in the
related prospectus supplement. If we grant any over-allotment option, the terms
of the over-allotment option will be set forth in the prospectus supplement
relating to such offered securities.
If we use a dealer in an offering of securities using this prospectus, we will
sell the offered securities to the dealer as principal. The dealer may then
resell those securities to the public or other dealers at a fixed price or
varying prices to be determined at the time of resale.
DIRECT SALES AND SALES THROUGH AGENTS
We may also use this prospectus to directly solicit offers to purchase
securities. In this case, no underwriters or agents would be involved. Except as
set forth in the applicable prospectus supplement, none of our directors,
officers or employees will solicit or receive a commission in connection with
those direct sales. Those persons may respond to inquiries by potential
purchasers and perform ministerial and clerical work in connection with direct
sales.
We may also sell the offered securities through agents we designate from time to
time. In the prospectus supplement, we will describe any commission payable by
us to the agent. Unless we inform you otherwise in the prospectus supplement,
any agent will agree to use its reasonable best efforts to solicit purchases for
the period of its appointment.
DELAYED DELIVERY CONTRACTS
We may authorize underwriters and agents to solicit offers by certain
institutions to purchase securities pursuant to delayed delivery contracts
providing for payment and delivery on a future date specified in the prospectus
supplement. Institutions with which delayed delivery contracts may be made
include commercial and savings banks, insurance companies, educational and
charitable institutions and other institutions we may approve. The obligations
of any purchaser under any delayed delivery contract will not be subject to any
conditions except that any related sale of offered securities to underwriters
shall have occurred and the purchase by an institution of the securities covered
by its delayed delivery contract shall not at the time of delivery be prohibited
under the laws of any jurisdiction in the United States to which that
institution is subject. Any commission paid to agents and underwriters
soliciting purchases of securities pursuant to delayed delivery contracts
accepted by us will be detailed in the prospectus supplement.
INDEMNIFICATION
Underwriters, dealers or agents participating in a distribution of securities
using this prospectus may be deemed to be underwriters under the Securities Act.
Pursuant to agreements that we may enter into, underwriters, dealers or agents
who participate in the distribution of securities by use of this prospectus may
be entitled to indemnification by us against certain liabilities, including
liabilities under the Securities Act, or contribution with respect to payments
that those underwriters, dealers or agents may be required to make in respect of
those liabilities.
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VALIDITY OF SECURITIES
Certain matters of United States law relating to the securities offered through
this prospectus will be passed upon for AEGON, AFC and AFC II by Allen & Overy,
New York, New York. Certain Dutch legal matters relating to the securities will
be passed upon for AEGON by Allen & Overy, Amsterdam, The Netherlands.
EXPERTS
Ernst & Young Accountants, independent auditors, have audited the consolidated
financial statements and schedules included in AEGON's annual report on Form
20-F for the year ended December31, 2000, as set forth in their report, which is
incorporated by reference in this prospectus. AEGON's financial statements and
schedules are incorporated by reference in reliance on Ernst & Young
Accountants' report, given on their authority as experts in accounting and
auditing.
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