Monday, 4 March 2013

Law Debenture IT

Last year I converted my sipp to income drawdown and several shares were sold to provide the funds for the 25% tax-free lump sum. When I looked at the portfolio a little while afterwards, I decided the remaining individual shares were too few to be adequately diversified so decided to dispose of the remainder and reinvest the proceeds into more investment trusts.

I already had several from the growth & income sector so decided to look at one or two of the global growth trusts which also provided a reasonable level of income and Law Debenture seemed to tick most of the boxes I wanted - good track record, low costs, diversified, solid reserves etc.

In addition to the investment trust, it also has a fiduciary services business which contributes to overall profits but the value of this business is not accounted for in the trusts NAV. According to the latest results issued last week, earning from this business were 6.7p per share - if we use a fairly conservative p/e of 10, this would value the fiduciary business at 67p per share. This would give a NAV including dividend (currently) of £4.96 - the share price of £4.63 would therefore be at a discount to NAV.

Here’s a link to the results -law debenture results

The investment trust has been managed by James Henderson (Henderson Global Investors) for the past 10 years - the allocation has a mid cap bias and a significant exposure to manufacturing. Total return on NAV was 19.7% compared to the FTSE All Share TR of 12.3%. It is proposed to increase the dividend by 5.5% to 14.25p giving a current yield around 3%.

The share price has increased a further 9% since the start of 2013.

The costs remain low at under 0.5% TER and also portfolio turnover rate is low at around 10%.

I’m happy so far with my recent addition and I suspect LWDB may well become another of my long term buy and hold core holdings.

As ever DYOR.

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