As of June 30, 2009, the market value of Council’s $29.2 million investment in CDOs was $6.78 million, up from $4.45 million on January 31, when market valuations of the controversial securities first became available.

Council’s total investments were valued at $66 million at the end of June, compared with $58 million at the end of January.

Mr Paull said due to the improved valuation of some CDOs, Council’s financial outlook was a little bit more promising.

However, the market value of four Lehman Brothers CDOs known as “the Dante Series” is still uncertain.

Council has committed a further $27,000 to a legal action in the United Kingdom in an attempt to recover $6.6 million in capital from the Bank of New York Mellon, trustees of the Dante Series.

Mr Paull said Dante Series noteholders participating in the joint action in the High Court of England had been successful in their attempt to prevent Lehman Brothers Holdings from transferring the capital from the Dante Series to the Lehman Brothers United States branch.

On July 28, the Chancellor of the High Court handed down a judgement stating that noteholders should be given priority in payment of collateral from the CDOs.

An appeal by Lehman Brothers Holdings will be heard in early September.

Council last week approved further expenditure of $27,000 on the UK case, in addition to $30,000 allocated for the original hearing.

Mr Paull said Council expected to recover its original costs if the noteholders were successful in the appeal process.

With Acting Mayor Ken Halstead absent from this section of the meeting, only Cr Jim Mauger voted against the additional spending.

In addition to the CDOs, Council holds $21.3 million in Floating Rate Notes (FRN) with financial institutions including the Adelaide Bank, Elders Rural Bank, the Bank of Queensland, HSGC, Macquarie Bank, the Royal Bank of Scotland, Westpac and St George.

Council received $3 million in interest on its investments at the end of June, 2009.