Aussie windfall may make Poms whinge

READERS' LIVES: Colonial shares ... PEP payments. Your financial queries answered
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The Independent Online
My wife and I are due free shares in the insurer Colonial which, is demutualising. We have been given a deadline of 2 May to decide whether to keep or sell the shares. The issue seems more complicated than with other windfall shares because the company is Australian. What should we do?

AM, Devon

First, the deadline. You have to get paperwork back to Colonial by this date if you want it to sell the shares (for which there will be a charge of up to 2 per cent) or if you want to buy more for pounds 1.30 apiece. If you simply want to keep the shares you have already been allocated, you need do nothing. You can always sell them at a later date.

But that is the first possible problem. You will have to sell through a broker willing to deal in Australian shares. The price for this is likely to be higher than for dealing in UK shares. You could pay between pounds 40 and pounds 70 and this can be a big proportion of the value of the shares, especially if you are due the minimum handout of 225 shares.

The shares are denominated in Australian dollars. When you sell eventually, you will have the cost of converting pounds as well as higher dealing costs. The dividends are also initially payable in Australian dollars, although Colonial has arranged for them to be converted for payment into sterling.

This means you won't have big currency exchange costs when receiving dividends. But you still carry the risk that goes with investing in any foreign shares. Even if the investment does well, currency fluctuations could go against you.

Only you can decide whether these complications make the shares worth holding. But ask yourself if you would normally choose to invest some of your money directly in the shares of a foreign company. For many, the answer is almost certainly "no".

Colonial plans to set up a helpline in the UK to give shareholders information - on points such as the current share price and with details of brokers willing to deal in the shares - but it cannot advise on whether to sell or hold the shares.

I recently received an unexpected cheque for pounds 402 from Gartmore. While it is nice to receive the money, it concerns me that I had no inkling that anything was owed to me, let alone such a significant sum. I closed my Gartmore PEP in March 1996 but did not receive the outstanding money until March 1997. When I closed my PEP I received an extraordinary amount of paper, yet in the end I was in the dark about my entitlements and had to take it all on trust. The implication in March 1996 was that everything was finalised when evidently it was not. RS, London

Your letter raises an important point: any financial organisation can make a mistake, but what chance have you if you do not know of the mistake?

With your PEP, as with many others, the account was not fully reconciled when closed. Dividends and reclaimed tax were paid after the closure. Gartmore acknowledges that procedures were not up to scratch.

Gartmore says that the way it remedied the deficiency had the agreement of the relevant watchdog. In addition to paying you interest it also made an ex gratia payment of pounds 50.

But this does not resolve what you see as the basic problem: you had no idea you were owed money. The clear lesson for all PEP investors is to find out what, if any, money might come in after you have closed a PEP account - and to chase the PEP manager until you are sure you have received all you are owed.

Write to Steve Lodge, Independent on Sunday, 1 Canada Square, Canary Wharf, London E14 5DL, and include a telephone number. Do not enclose SAEs or any documents that you wish to be returned. We cannot give personal replies or guarantee to answer every letter we receive. We accept no legal responsibility for any advice given.

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