162 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS OF AEGON N.V.  NOTE 10 DERIVATIVE INSTRUMENTS DESIGNATED AS  FAIR VALUE HEDGES DERIVATIVE INSTRUMENTS DESIGNATED AS CASH FLOW  HEDGES AEGON has entered into interest rate swap agreements that  effectively convert certain fixed-rate assets and liabilities to a  floating-rate basis (generally to six months or less LIBOR).  These hedges are used for portfolio management to better  match assets to liabilities or to protect the value of the hedged  item from interest rate movements. These agreements involve  the payment or receipt of fixed-rate interest amounts in  exchange for floating-rate interest amounts over the life of the  agreement without the exchange of the underlying principal  amounts. Some of the arrangements use forward starting swaps  to better match the duration of assets and liabilities. AEGON uses forward starting interest rate swap agreements to  hedge the variability in future cash flows associated with the  forecasted purchase of fixed-income assets. These agreements  reduce the impact of future interest rate changes on the  forecasted transaction. Fair value adjustments for these interest  rate swaps are deferred and recorded in equity until the  occurrence of the forecasted transaction at which time the  interest rate swaps will be terminated. The accumulated gain or  loss in equity will be amortized into investment income as the  acquired asset affects income. AEGON is hedging its exposure  to the variability of future cash flows from interest rate  movements for terms up to 22 years. The cash flows from these  hedging instruments are expected to affect the profit and loss  for approximately the next 41 years. For the year ended  December 31, 2010, the contracts for which cash flow hedge  accounting was terminated resulted in deferred gains of EUR 57  million that are recognized directly in equity to be reclassified  into net income during the period when the cash flows occur of  the underlying hedged items. For the same year, none of  AEGON’s cash flow hedges were discontinued, as it was  probable that the original forecasted transactions would occur  by the end of the originally specified time period documented  at the inception of the hedging relationship. AEGON has entered into cross-currency interest rate swap  agreements that effectively convert certain foreign currency  fixed-rate and floating-rate assets and liabilities to US dollar  floating-rate assets and liabilities. These agreements involve  the exchange of the underlying principal amounts.  For the years ended December 31, 2010, 2009 and 2008,  AEGON recognized gains and (losses) related to the ineffective  portion of designated fair value hedges of EUR (6) million,  EUR (31) million and EUR 38 million respectively. No portion of  derivatives was excluded when assessing hedge effectiveness. In addition, AEGON also makes use of cross currency swaps to  convert variable or fixed foreign currency cash flows into fixed  cash flows in local currencies. The cash flows from these  hedging instruments are expected to occur over the next  16 years. These agreements involve the exchange of the  underlying principal amounts. For the year ended December 31, 2010, AEGON recognized a  gain of EUR 6 million of hedge ineffectiveness on cash flow  hedges. In 2009 and 2008 gains of EUR 10 million and EUR 12  million respectively of hedge ineffectiveness were recorded in  the income statement. In 2010 EUR (8) million was released  from equity into investment income (2009: EUR (117) million,  2008: EUR 306 million). The amount of deferred gains or losses  to be reclassified from equity into net income during the next  twelve months is expected to be EUR 10 million.  The periods when the cash flows are expected to occur are  as follows: AEGON has entered primarily into interest rate swap  agreements that effectively convert certain variable-rate assets  and liabilities to a fixed-rate basis in order to match the cash  flows of the assets and liabilities within AEGON’s portfolio more  closely. These agreements involve the payment or receipt of  variable-rate interest amounts in exchange for fixed-rate  interest amounts over the life of the agreement without the  exchange of the underlying principal amounts. AEGON is  hedging its exposure to the variability of future cash flows from  the interest rate movements for terms up to 31 years for hedges  converting existing floating-rate assets and liabilities to  fixed-rate assets.  < 1 year 1 – 5  years 5 – 10  years > 10 years 2010  Total Cash infl ows 496 2,150 1,825 2,133 6,604 Cash outfl ows 1 1 1 5 8 NET CASH FLOWS 495 2,149 1,824 2,128 6,596