In accordance with the established risk management paradigm used by AEGON Institutional Markets and AEGON USA, AGIM's portfolio will follow a conservative management philosophy focusing on:

• Operational limits (i.e., allocation guidelines on credit, sector, name diversification)
• Bias toward high credit quality assets (average single "A" quality)
• Bias toward high liquidity

In addition, AGIM's portfolio will be integrated into AEGON Institutional Markets' "float-to-float" strategy, where all fixed-rate liabilities and most fixed-rate assets are swapped to a floating-rate LIBOR basis. This "float-to-float" strategy enhances risk management capability by creating greater consistency between credited rates on liabilities and asset cash flows.

Several dimensions of risk are continuously monitored and controlled in the AGIM portfolio, including:

Duration (interest rate)
Duration mismatch is expected to be three months or less and is limited to six months. The "float-to-float" strategy will help minimise any unintended interest rate positions.

Spread Duration (maturity mismatch)
AGIM is expected to maintain a positive spread duration mismatch (i.e., average weighted maturity of assets longer than the average weighted maturity of liabilities); however, this will be no greater than two years.

Credit
AGIM will maintain a diversified portfolio within appropriate AEGON and rating agency requirements. Average portfolio credit quality will generally be single "A."