An introduction to the tactical

asset allocation process

15 February 2011

Olaf van den Heuvel - Head of Tactical Asset Allocation Gerard Moerman - Senior portfolio manager, TAA team Jean-Louis Guillaume - Head of Institutional Sales, French European speaking countries

Agenda
o o o o AEGON Asset Management AEGON Tactical Asset Allocation (TAA) performance The Tactical Asset Allocation team Our philosophy

o
o o o

Our Tactical Asset Allocation process

2011 market outlook Conclusion Illustration case

AEGON Asset Management

AEGON Life Insurance Pension

Asset Management
AEGON Asset Management

o o o o

We are a global organisation with investment teams in the UK, Continental Europe and the US AEGON Asset Management manages 215 billion We excel at client service and investment performance Award-winning expertise in equities and fixed income investment and a distinguished record in managing ethical and property funds

Source: AEGON Asset Management as at 30 September 2010

The Tactical Asset Allocation team

1. Rogier Van Aart

Real Estate/FX

2. Jacob Vijverberg

Rates/Risk Management

3. Gerard Moerman
Commodities/Equities

4. Olaf van den Heuvel

Head of Tactical Asset Allocation

5. Robert-Jan van der Mark

FX/Commodities

AEGON TAA historical performance

350.0

300.0
Long real estate/ short bonds

279.4

250.0

200.0
%

Long equities

150.0
Long Credits (CDS)

100.0
Long equities
Short equities

Short commodities
Long USD Long v

50.0

0.0
Dec-06 Jun-07 Dec-07 Jun-08 Dec-08 Jun-09 Dec-09 Jun-10 Dec-10
Source: AEGON Asset Management as at 31 December2010. Gross of fees. Cumulative performance of the GTAA+ overlay fund managed by the Tactical Asset Allocation team, applying the strategies of the Reference Portfolio. This fund is an alpha provider for the allocation used by our Dutch insurance company. Examples above highlight our team capabilities. For illustrative purposes and directed only at investment professionals. This should not be distributed to, or relied upon by, private investors.

Our philosophy
o o o Markets are inefficient This offers opportunities Discipline is key to succeed

Our tactical asset allocation process

Step1: Ideas generation

Step 2: Ideas screening

Step 3: Reference portfolio

Step 4: Monitoring

Step 1: Idea generation

The Investment Clock

Step 2: Ideas screening

Step 3: Reference portfolio

Macro Economics +1.5 Total Score =4 Qualitative +0.0 Technicals +0.5 Valuation +2.0 Strategies Paired Strategies Fixed Income Currencies Description Long Equity markets Short Commodities Long Credit Flattener USD Curve Total Score >=5 +4 +3 +2 +1 0 Conviction level 25% 20% 15% 10% 5% 0% Commodities Equity Real Estate FX Carry model G10 Currencies FX Carry model Emerging mkts Allocation 20% 12.5% 12.5% 10% 12.5% 5% 10% 7.5% 10% 0%

Long South African Rand Short Chilean Peso

Long Palladium/Platinium Short Commodities Long Dax Short S&P High Dividend Stocks Basket

Total Portfolio
Source: AEGON Asset Management. The above example is provided for illustration purposes only.

100%

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Step 4: Monitoring
o o o o Constant update of the quadrants leading to allocation adjustments VaR and diversified portfolio VaR approach to set the risk budget Soft stop loss / Soft stop gain Stress tests Review coupled with tail risk hedging

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2011 market outlook

Strategy Carry Trades Currency Long Mexican Peso v Short Columbian Peso 2.5% % risk budget 12.5%

o o

Recovery continues Inflation pressures in many parts of the world Uncertainty about stability Middle-east Attractive valued investments can still be found

Long Equity
Multi Assets Short Commodities Long Australian Linker Rates Long Investment Grade Credits Long High dividend basket Equities Long Dax/Short S&P Commodities Long WTI, Short Brent

12.5%
12.5% 2.5% 10.0% 7.5% 7.5% 2.5%

o o

Use of risk budget

70%

Source: AEGON Asset Management as at 31 January 2011. Based on the AEGON Global Opportunities Fund.

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Conclusion

Provide a new source of alpha with minimal human emotion involved

Accessing AEGON Asset Managements Tactical Asset Allocation capabilities o AEGON Global Opportunities

in a well-defined investment process

UCITS III Dublin domiciled fund EUR share class ISIN: IE00B51NFJ61

Managed account for an amount in excess of 50m

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Illustration case

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Illustration case: Long DAX, Short S&P 500

Macro score: +1.0 Performance of the DAX Index v S&P500 Index
8,00% 6,00% 4,00% 2,00% 0,00% -2,00% -4,00% -6,00% -8,00% Long Dax, Short S&P

-10,00%
-12,00% Phase1 Phase2 Phase3 Phase4

Investment clock is in phase 3, which supports the trade

Source: AEGON Asset Management. The above example is provided for illustration purposes only.

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Illustration case: Long DAX, Short S&P 500

Valuation score: 0

Region WORLD US EU GERMANY

Graham-Dodd PE
Current Average Difference Current Average

1year PE
Difference

PE using max trailing earnings

21.1 22.1 15.7 16.4

16.9 15.8 13.5 14.0

4.2 6.3 2.2 2.4

OVERVALUED OVERVALUED OVERVALUED OVERVALUED

16.0 17.7 15.2 15.4

17.1 16.2 13.6 15.2

1.1 1.5 1.6 0.3

FAIRLY VALUED FAIRLY VALUED FAIRLY VALUED FAIRLY VALUED

13.2 15.1 8.8 10.8

16.5 15.5 12.2 13.4

UNDERVALUED FAIRLY VALUED UNDERVALUED UNDERVALUED

Region WORLD US EU GERMANY

Dividend yield
Current Average Difference Current Average

Price/Book
Difference Current

Return on Equity
Average Difference

2.3 1.7 2.8 2.5

2.8 3.1 3.7 2.6

0.5 1.4 0.8 0.1

FAIRLY VALUED OVERVALUED FAIRLY VALUED FAIRLY VALUED

1.9 2.5 1.6 1.8

2.1 2.5 1.7 2.0

0.1 0.0 0.1 0.2

FAIRLY VALUED FAIRLY VALUED FAIRLY VALUED FAIRLY VALUED

12% 14% 11% 11%

11% 15% 12% 12%

1% -1% -1% -1%

AVERAGE AVERAGE AVERAGE AVERAGE

Valuation screen (+0.5)

o o

Germany: The German market is fairly valued on all measures. The US: is overvalued on G&D PE and dividend yield

The Regional Equity model ranks the US only slightly above EU (-0.5). This difference decreased

Source: AEGON Asset Management. The above example is provided for illustration purposes only.

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Illustration case: Long DAX, Short S&P 500

Technicals score: 1.0

Positive trend (6-months moving average moving up green line)

o o

DAX lost clearly vs SPX, 6-month momentum turns negative score -1 MDAX still has a positive uptrend versus the SPX score 1

DAX/SPX is oversold with an RSI of 26 (+1) SP500 is overbought with an RSI of 75, while DAX (48) and MDAX (57) are not (+0.5)

Source: AEGON Asset Management. The above example is provided for illustration purposes only.

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Illustration case: Long DAX, Short S&P 500

Qualitative score: 0
65 40 15 vs. Prior vs. Threshold Surprise United States 225 175 125 75 65 40 15 -10 Jun-09 -35 -60 -85 Sep-09 Dec-09 Mar-10 Jun-10 vs. Prior vs. Threshold Surprise Europe 225 175 125

75
25 -25 -75 -125 -175 -225

25
Sep-09 Dec-09 Mar-10 Jun-10 -25 -75 -125

-10 Jun-09
-35 -60 -85

-175 -225

o o

Pro

Additional analysis would say that Germany could profit from the current situation (+1) Economic surprises score much better for Europe than for the US (+0.5)

Con

Positioning slightly higher in EU than US (-0.5) FED is more supportive for markets (QE2), while ECB does not want to increase purchases (-0.5) Teams view (-0.1)
Our proprietary profit model forecasts the same level of profit (13%)

Neutral

Source: AEGON Asset Management. The above example is provided for illustration purposes only.

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Illustration case: Long DAX, Short S&P 500

Conclusion: 10% is the conviction resulting from a total score of +2
Macro Economics +1.0 Valuation
Total Score Conviction level

>=5 +4 +3 +2

25% 20% 15% 10%

5% 0%

Total Score =2
Qualitative
+0.0 Technicals +1.0

+1 0

Source: AEGON Asset Management. The above example is provided for illustration purposes only.

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Appendices

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Step 1: Idea generation

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Step 1: Idea generation

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Important information
This communication is directed at professional investment advisors. It should not be distributed to, or relied on, by private customers. The information in this presentation is based on our understanding of the current and historical position of the markets. The views expressed should not be interpreted as recommendations or advice. Past performance is not a guide to future performance. The value of investments and the income from them may fall as well as rise and is not guaranteed. We refer to the full prospectus and the simplified prospectus which is available from AEGON Asset Management UK plc, www.aegonam.co.uk. Any investment objective, performance benchmark and yield information will be treated as a target only and should not be considered as an assurance or guarantee of the performance of the fund or any part of it. The Global Opportunities Fund invests primarily in financial derivatives. The fund also follows a share or bond index and the value of the assets may greatly fluctuate as a result of the investment policy. The Global Opportunities Fund is a sub fund of AEGON Investment Company (Ireland) plc which is registered in the Netherlands by the Netherlands Authority for the Financial Markets (AFM). AEGON Investment Company (Ireland) plc is an umbrella type open ended investment company with variable capital registered in the Republic of Ireland (no: 442106) registered office at 25-28 North Wall Quay, International Financial Services Centre, Dublin 1. AEGON Investment Company (Ireland) plc is regulated by the Financial Regulator. AEGON Asset Management includes AEGON Asset Management UK plc (no: 113505) and AEGON Investment Management UK ltd (no: 212159). AEGON Asset Management is the Investment Manager and Marketing Agent for AEGON Investment Company (Ireland) plc. AEGON Asset Management UK plc is authorised and regulated by the Financial Services Authority, (FSA reference no: 144267). AEGON Investment Management UK ltd is an appointed representative of Scottish Equitable plc, an AEGON company, whose registered office is 1 Lochside Crescent, Edinburgh Park, Edinburgh, EH12 9SE (FSA reference no: 165548). AEGON Investment Management UK ltd is a subsidiary company of AEGON Asset Management UK plc and provides investment management services to AEGON which provides pooled funds, life and pension contracts. AEGON Investment Company Ireland is a UCITS collective investment scheme registered in Luxembourg by the Commission de Surveillance du Secteur Financier. The Prospectus, Supplement and Simplified Prospectus of AEGON Investment Company (Ireland) are available from CACEIS Bank Luxembourg 5, alle Scheffer, L-2520 Luxembourg

FP ID No: 2011/11348
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