Framlington trust calls in administrators

Framlington yesterday became the latest fund manager to call in administrators to break up one of its struggling funds exposed to the stricken split capital investment trust sector.

Deloitte & Touche, the accountancy firm, has been appointed to handle the liquidation of Framlington Health & Income. This follows a statement in June from Framlington warning the Guernsey-based trust had breached its banking covenants.

The announcement marks the second UK trust to have been placed into insolvent liquidation. The trust's main creditor, Bank of Scotland, took control of its assets in June this year, after the trust's directors said the company was insolvent.

Separately, LeggMason Investors Income & Growth Trust issued a statement saying its debts have overtaken assets, leading to a suspension in its shares. The fund, a split capital trust, has £21.3m of assets and owes £22.4m to Bank of Scotland and Allied Irish Banks. All of its assets are invested in rival split trusts. This is the third investment trust fund managed by LeggMason to have suspended its shares.

Split caps, a form of investment trust that offers both shares intended to provide income and shares intended for growth, have slumped in value in the past year. They have been hit particularly severely by the falling stock markets because most of them are highly geared. About 40 trusts have halted dividend payments or restructured finances, including 18 which have gone into receivership.