Under the initial terms of a capital facility agreement between the FRBNY and AIG, a 77.9 percent equity interest in AIG (in the form of Series C Convertible Participating Serial Preferred Stock convertible into approximately 77.9 percent of the issued and outstanding shares of AIG common stock) was issued to a trust (Trust) established by the FRBNY. Subsequent to the initial agreement, a reverse stock split of AIG's common stock increased this equity interest to 79.8 percent. The General Fund of the U.S. Government was the sole beneficiary of the Trust. In connection with the establishment of the Trust, Treasury, as custodian of the General Fund, recorded a non-entity asset of $23.5 billion as of September 30, 2009, along with a corresponding entry to custodial revenue for the same amount, to reflect the value of the General Fund's beneficiary interest holding in the Trust. As of September 30, 2010, the value of the Trust had declined by $2.7 billion, reducing the carrying value of this non-entity asset to $20.8 billion.
On September 30, 2010, an AIG Recapitalization Agreement was established for the purpose of restructuring the holdings in AIG. This restructuring was executed on January 14, 2011, converting the Trust's AIG preferred stock into 562.9 million shares of AIG common stock, and the Trust was dissolved (see Note 5 for a discussion of the TARP-related transactions that occurred in connection with the January 14, 2011, restructuring).
On May 27, 2011, 200 million shares of AIG common shares held by the General Fund and Treasury under TARP (68 million and 132 million shares, respectively) was sold in the open market. The sale of the AIG common stock resulted in total gross cash proceeds of $5.8 billion, of which the General Fund and Treasury under TARP received $2.0 billion and $3.8 billion, respectively, for the fiscal year ended September 30, 2011.
After taking into consideration the May 2011 sale of AIG common stock, the carrying value of the non-TARP investment in AIG was $10.9 billion as of September 30, 2011, which represented the fair value as of that date of the remaining AIG common stock held by the General Fund. As of September 30, 2010, the carrying value of the non-TARP investment in AIG was $20.8 billion, which represented the fair value, as of that date, of the General Fund's sole beneficiary interest in the Trust. The fair value of the non-TARP AIG investments recorded as of September 30, 2011, and 2010 were based on the market value of AIG's common stock which is actively traded on the New York Stock Exchange. This basis of valuation was used for the Trust since the underlying AIG common stock, to which the preferred shares were converted, represented the best independent valuation available for the General Fund's beneficial interest. During fiscal years 2011 and 2010, AIG investments held on behalf of the General Fund experienced a net fair value decline of $9.9 billion and $2.7 billion, respectively. Accordingly, the carrying value of the AIG common stock investment was decreased by this amount.