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ITEM 8 / NOTE 7. INVESTMENTS.....................................................................................................................................................................................Maiden Lane III..............................................................................................................................................................................................The FRBNY completed the liquidation of ML III assets during the third quarter of 2012 and substantially all of thesales proceeds have been distributed in accordance with the priority of payments of the transaction. In 2012, wereceived total payments of approximately $8.5 billion, which included contractual and additional distributions and ouroriginal $5.0 billion equity interest in ML III.In 2012, we purchased $7.1 billion of securities through the FRBNY’s auction of ML III assets.Other Invested Assets..............................................................................................................................................................................................The following table summarizes the carrying values of other invested assets:December 31,(in millions) 2012 2011Alternative investments (a) $ 18,990 $ 18,793Mutual funds 128 258Investment real estate (b) 3,195 2,778Aircraft asset investments (c) 984 1,100Life settlement contracts 4,357 4,006Retained interest in AIA – 12,367All other investments 1,463 1,442Total $ 29,117 $ 40,744(a)Includes hedge funds, private equity funds, affordable housing partnerships and other investment partnerships.(b)(c)Net of accumulated depreciation of $469 million and $428 million in 2012 and 2011, respectively.Consist primarily of AIG Life and Retirement investments in aircraft equipment held in trusts.Other Invested Assets Carried at Fair Value..............................................................................................................................................................................................Certain hedge funds, private equity funds, affordable housing partnerships and other investment partnerships forwhich we have elected the fair value option are reported at fair value with changes in fair value recognized in Netinvestment income with the exception of DIB investments, for which such changes are reported in Other income.Other investments in hedge funds, private equity funds, affordable housing partnerships and other investmentpartnerships in which our insurance operations do not hold aggregate interests sufficient to exercise more than minorinfluence over the respective partnerships are reported at fair value with changes in fair value recognized as acomponent of Accumulated other comprehensive income (loss). These investments are subject toother-than-temporary impairment evaluation (see below for discussion on evaluating equity investments forother-than-temporary impairment). The gross unrealized loss recorded in Accumulated other comprehensive incomeon such investments was $68 million and $269 million at December 31, 2012 and 2011, respectively, the majority ofwhich pertains to investments in private equity funds and hedge funds that have been in continuous unrealized lossposition for less than 12 months.Other Invested Assets – Equity Method Investments..............................................................................................................................................................................................We account for hedge funds, private equity funds, affordable housing partnerships and other investment partnershipsusing the equity method of accounting unless our interest is so minor that we may have virtually no influence overpartnership operating and financial policies. Under the equity method of accounting, our carrying value generally isour share of the net asset value of the funds or the partnerships, and changes in our share of the net asset valuesare recorded in Net investment income with the exception of DIB investments, for which such changes are reportedin Other income. In applying the equity method of accounting, we consistently use the most recently availablefinancial information provided by the general partner or manager of each of these investments, which is one to threemonths prior to the end of our reporting period. The financial statements of these investees are generally auditedannually...................................................................................................................................................................................................................................256 AIG 2012 Form 10-K