q I will receive about 6000 shares when Australian Mutual Provident Society lists on the Australian stock market shortly. I do not need to raise any money from them for the next few years. Since the pound has strengthened considerably against the Australian dollar recently, and given the rise in share values of other demutualised companies, would it be better to retain the shares rather than sell and buy Peps and unit trusts from UK-based companies?

n Until dealings in AMP shares begin and we see the price that they command, it is impossible to say whether they should be sold or retained. In general terms, long-term prospects look good for life companies given the worldwide trend towards individuals taking more responsibility for their savings and old age.

But AMP shares will not necessarily perform as demutualised companies have here. The UK stock market has been buoyant and the shares have been driven higher by hopes for takeovers, which so far have not been fulfiled.

As a quoted company, AMP would be more vulnerable to a bid than as a mutual, but it would be a big fish to swallow. The other factor you need to bear in mind is that AMP will make it easy for UK holders to sell if they want to. Selling independently later on will be more complicated and expensive in terms of commission.

Torn between trusts

o I would like to put some money in a general investment trust and am considering Foreign & Colonial and Scottish Mortgage but cannot make up my mind between the two. What is your opinion?

n Both these large and long-established investment trusts have sound track records, though Foreign & Colonial slipped up in 1996-97, partly because it failed to hedge overseas currencies. In addition, its UK portfolio concentrated on higher yielding shares to offset the low yields prevailing on overseas equities. These shares under-performed in the period.

The trust's performance improved considerably last year, with a 33% increase in net assets in the 15 months to March. That reflected overweight positions in the US and Europe and light positions in Japan and Asia.

F&C has a new manager, Jeremy Tigue, and he is confident about markets, though with equities at high valuations, stock selection is particularly important.

Scottish Mortgage is also positive about markets. It did well in the year to March with a rise in asset value of 29.3%, which compared with its benchmark index gain of 26.7%. The group made timely sales of investments in Asia and Japan, and is now concentrated in defensive sectors such as telecommunications and pharmaceuticals.

However, the trust's manager Max Ward is prepared to take some quite large positions where he believes value lies. For example, the trust bought into Argentine US dollar bonds during the Asian panic and they have already shown a useful profit. This is not an investment that many trust managers would have cottoned on to.

The US portfolio has 38% of its investments in a handful of oil service stocks on the grounds that they are unduly depressed as a result of the low oil price. Ward believes their earning potential is under-estimated. These moves suggest an aggressive approach to seeking out good investments wherever they may be and the confidence to back hunches.

So the investment approaches differ, and which of the two trusts will perform better in years to come is impossible to say. Can you not split your investment between the two?

Miras cut confusion

o I bought my first flat in January this year and agreed a fixed-rate mortgage with the building society for a period of three years. I have recently received a letter advising me my monthly repayment is to increase as the tax relief due under Miras is being cut from 15% to 10%.

I don't remember reading about this change in the recent press coverage of the Budget. Can you please confirm whether my monthly mortgage payment has been correctly increased.

n The reduction of the tax relief due under Miras from 15% to 10% was not part of the recent Budget. It was announced in last year's Budget and is now contained in the Finance Act (No 2) 1997. Your building society is, therefore, correct. There is no indication the tax relief will be further reduced in the short term, however it would appear the intention is to gradually phase it out.

Unfair tax penalty

o I did not manage to lodge my 1997 tax return with the Inland Revenue by January 31. I did, however, settle my tax bill by January 31. I was under the impression that even though

my tax return was filed late, as I had paid my tax by the date

that it was due, I would not be subject to the #100 penalty for late submission.

I have just received a self-assessment statement of account which shows part of my tax payment is being allocated against a #100 penalty, which means that #100 of income tax remains outstanding. Have I misunderstood the position and should I pay the additional #100, as interest is accruing, or should I query the statement with my tax office?

n You have not misunderstood the position. Provided that the full balance of your 1996-97 tax liability and the first payment on account for 1997-98 was settled by the due date, even though your tax return was submitted after January 31, you should not be due to pay the #100 penalty. You should contact your tax office and point out the error it has made in the statement of account and request that it rectifies the position as soon as possible and issues you with a revised statement.

The editor of The Herald accepts no legal responsibility for the answers given in these columns. Readers are invited to submit concise questions for answer in the paper. No correspondence can be entered into.

Questions answered by RE Dundas, Christopher Sims

and Angus Gawn