pounds 200m payout for Morgan investors

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The Independent Online
Ninety thousand unit trust and PEP investors hit by the City's most recent rogue trader scandal were on Friday sent details of a compensation package that will cost City bank Morgan Grenfell as much as pounds 200m.

Compensation could amount to thousands of pounds for many investors and will be paid, with interest, in April. Morgan says nine out of 10 investors will get payouts. Investors affected are those in Morgan Grenfell's European Growth Trust, Europa Fund and European Capital Growth Fund, and tax-free PEP versions of these funds.

The funds, which invest in shares in continental Europe and the UK, were strongly recommended on the back of star past performance but were suspended in September after the uncovering of "irregularities". Peter Young, the investment manager, has been dismissed and is under investigation by the Serious Fraud Office.

Anyone who invested during the period 1 August 1995 to 5 September 1996 - even if they then cashed in their investments - is potentially in line for compensation. Money lost on an original investment will be returned and there will be compensation for any difference between what investors made during this time and what comparable funds would have given them.

Robert Smith, chief executive of Morgan Grenfell Asset Management, said: "No one will lose money as a result of these recent events." Investors do not need to do anything. Morgan will write to them again in January and they should be paid automatically by the end of April. They will also get interest on the compensation for the interim period. Morgan, which has taken out a full-page advertisement in the Independent on Sunday and other newspapers to explain the deal (see page 5), says it is unable to pay out until April because of the large number of investors involved. The funds were worth pounds 1.4bn, although thousands of investors sold out after the scandal broke in September.

Imro, the investment management regulator, is also considering ordering Morgan to pay a potentially record fine of pounds 1m - possibly reflecting suggestions that Morgan carried on selling funds while aware of the problems.

Ironically, many of those duecompensation have already done well from the funds. Morgan is now even offering investors the opportunity to have the compensation money automatically reinvested in the affected funds.