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1 Further information on equity risk is provided in section ‘equity market and other investment risk. 

AEGON has entered into free-standing credit derivative transactions (Single Tranche Synthetic CDOs and Single Name Credit Default Swaps - CDSs). The positions outstanding at the end of the year were: 

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AEGON USA unwound significantly all of its synthetic CDO positions during 2009. For a fee, AEGON USA had taken credit exposure on a credit index, i.e. super-senior tranches of the CDX index, via a synthetic collateralized debt obligation program (synthetic CDO). 

In August 2007, the Canadian asset backed commercial paper markets froze, which ultimately resulted in a restructuring of the Asset Backed Commercial Paper (ABCP) into long term asset backed notes. The restructuring required AEGON to restructure its EUR 113 million notional liquidity facility agreement backing the original ABCP. To restructure the liquidity facility, AEGON entered into swaps (the “Swaps”) that are linked to three collaterilized debt obligations comprising the assets within the liquidity facility backed ABCP (the “CDO”). The three CDOs are as follows: 

■ 15%-30% tranche of a bespoke CDO (EUR 957 million notional) maturing 6/20/2013 

■ 30%-60% tranche of the CDX.IG.6 index (EUR 766 million notional) maturing 6/20/2016 

■ 30%-60% tranche of the CDX.IG.7 index (EUR 287 million notional) maturing 12/20/2016 

AEGON has issued the Swaps under an ISDA Master Agreement requiring collateralization of the Swap’s market value. The amount of collateral to be posted by AEGON is subject to a threshold of EUR 15 million, provided AEGON maintains it current credit rating. 

The Swaps exposure to the CDO will be reduced by a proportionate share of the assets that supported the original ABCP and from additional funding sources negotiated as part of the ABCP restructuring (the “Margin”). The market value of the Margin allocated to the Swaps is EUR 403 million. If losses attached to any of the CDO that exceeds the fair value of the Margin, then AEGON will recognize a loss on its Swaps. AEGON considers it remote that a loss will be incurred due to the attachment point on the tranches and the amount of Margin. 

The Swaps also incorporate the unwind triggers that were built into the restructured long term notes. The triggers are defined by a matrix based on credit losses and credit spreads related to the underlying CDX.IG.7. If a trigger event occurs, AEGON will have the option to continue with the existing Swaps, settle the market value of the Swaps, or terminate the Swaps and enter 

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