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Monday, November 17, 2008

2 Town Councils Invested in Troubled Structured Products

It is reported that at least 2 out of the 14 PAP managed town councils invested in troubled structured products namely DBS High Notes, Lehman Brothers' Minibond Notes and Merrill Lynch's Jubilee Series 3. These investment products were worthless as of today. Holland-Bukit Panjang and Pasir Ris-Punggol town councils are the two most heavily invested in these products with amount sum up to S$12m. Holland-Bukit Panjang Town Council invested about S$8 million or 6.7 per cent of its available funds, while Pasir Ris-Punggol Town Council invested some 2.6 per cent, totalling S$4 million.

Other town councils such as Aljunied, Ang Mo Kio-Yio Chu Kang, Hong Kah, Marine Parade, Tampines and Tanjong Pagar also have exposure to Lehman Brothers.

Since Dec 1 last year, the amount that town councils can invest in non-government stocks, funds or securities has been capped at 35 per cent of the total sinking fund.

Holland-Bukit Panjang town council another investment in Creative Technology came to light few months back only when Creative published its financial report. Its share price has since fallen quite a fair bit.

On 9 Nov, Minister Mentor Lee commented on the plight of investors who have lost money investing in Lehman-related mini-bonds. MM Lee said,

"Please remember, when you get higher returns than what is the average in the markets, that means you are incurring higher risk. So on that message I leave you to ponder about your next purchase".

MM Lee also said many educated and young investors went in with their eyes open and banks will offer compensation according to what is fair.

So, it looks to me MM Lee's remarks is actually telling the town councils they went in with their eyes wide open and their losses incurred are their own self-deserved. Do remember Tanjong Pagar is under MM Lee and Ang Mo Kio-Yio Chu Kang is by PM Lee.

2 town councils invested S$12m in Lehman-related structured products [via]

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