The proposals, which are subject to shareholder approval, would also allow NZIT investors to receive cash when the fund officially winds up.

However, the NZIT also warned that because it has relinquished its exemption from the Fair Dividend Rate (FDR) rules, some investors could face a tax disadvantage if they accept cash when the fund closes.

"... New Zealand resident shareholders who are otherwise exempt from the Fair Dividend Rate Regime (because they have overseas shareholdings costing NZ$50,000 or less), despite the loss of the exemption granted to the company, could have a significantly greater tax burden if they wish to receive cash for their investment but do not sell their shares prior to the receipt of cash in the liquidation of the company," the NZIT letter says.

"These investors may be taxable on some of their liquidation proceeds."

The NZIT won a two-year exemption from the FDR rules in January 2007 but the scheme's managers later decided to wind up the fund after failing to find a way to merge it with a NZX-listed entity.

The managers had been exploring options with NZIT's investment advisers, Brook Asset Management, to create a listed Portfolio Investment Entity (PIE).

In the consequent wind-up process NZIT managers have lifted the fund's cash holdings to 19% - well above the 10% maximum cash level required to maintain its exemption from the FDR rules. As well, the NZIT managers have extended its financial reporting period beyond the original October 31, 2007, and will provide a final report when the fund closes. The NZIT has been in operation for 19 years and provided a total investment return of 440% over that period, the latest shareholder letter says. "Given the performance of the Company, it is obvious that the winding up is not because of any failing by the Company, or by its investment manager and investment adviser," NZIT says.