THE former managers of the GBP80m Platinum investment trust, whose right to claim millions of free shares was upheld in a shock court judgment, are now suggesting that a further GBP1.5m payment is in order before they will agree to vote for the trust's liquidation.

Institutions which hold 70-per cent of the shares are urging the board of the Edinburgh-run trust to resist the informal proposal of Isle of Man-based Knox d'Arcy Asset Management. It has the support of US arbitrageur QVT, and between them they hold 30-per cent of the shares and can block any vote on liquidation.

The courts last month upheld a deed drawn up in 1996 that entitled founding manager Knox d'Arcy to receive share warrants for a five-year period following the termination of its management contract in January 2003, depending on the trust's asset performance.

Platinum argued unsuccessfully that asset performance as defined in the deed in fact triggered almost no rewards to the former managers.

Platinum, however, was forced to issue 7.4 million warrants in respect of 2003 and 2004, wiping around 10-per cent off the trust's net asset value. Last year's 15-per cent asset growth would trigger a pay-out of a further 6.6 million warrants, with two more years of pay-outs in prospect. The trust also had to shell out GBP500,000 in legal costs.

Six weeks ago Platinum announced that "the majority of shareholders" now wanted to exit the trust, despite its having returned 80-per cent in the four years since relaunch, 10 points above benchmark, because they were unwilling to suffer further dilution.

One shareholder commented this week: "How we interpreted the real movement in net asset value and how the City interpreted it doesn't seem to have been reflected in the court's judgment. Now we are in a very awkward position, being asked to approve what is at best a sweetener."

Knox d'Arcy and QVT are also arguing that they are entitled to more warrants in relation to the last pay-out, because the trust is excluding from its asset value an estimated GBP750,000 of liquidation costs.

"That is ironic as it is all their doing that we are having to liquidate in the first place, " the shareholder said.

"One thing we cannot fathom is why QVT is supporting this, as it is not in their interest for the trust's assets to be reduced in this way."

Eric McAuslan, co-founder of Platinum Fund Managers which launched the trust, commented: "We are making progress towards a stalemate. All I can say is that we have just had another really good month in the portfolio."