Shareholders of VenGrowth Investment Fund Inc. and VenGrowth II Investment Fund Inc. will receive funds through an annual distribution of the proceeds from the disposition of portfolio companies, rather than through weekly redemptions, the funds announced Tuesday.

“In light of extended adverse market conditions, the Board of directors of the funds have determined it is in the best interest of shareholders to halt redemptions and adopt an annual distribution policy, effective immediately,” Vengrowth Asset Management said in a release.

“The Boards and the Managers of each of the Funds believe this measure will prevent any mid-term liquidity challenges, help achieve optimal exit values for maturing portfolio companies once market conditions improve and ensure that proceeds generated from those exits are returned to all shareholders.”

The Independent Review Committee of each fund recommended the change to an annual distribution policy, Vengrowth said.

Under the new distribution policy, the board of each fund will make a determination of the surplus cash available to be distributed to shareholders at the completion of each fiscal year, starting Aug. 31, 2009.

“While not a decision we take lightly, we are convinced that the move to an annual distribution policy is the right decision for our shareholders,” said David Ferguson, VenGrowth managing general partner. “It will balance the desire to generate annual distributions to shareholders, while ensuring that a fair value for the excellent private portfolio companies can be obtained.”

In light of economic and stock market turmoil, the funds find themselves with what they believe to be portfolios of high quality private companies, but without an environment conducive to exit events to generate cash to fund redemptions. “The IPO market has essentially been shut down to private companies since the beginning of 2008,” Vengrowth said.

The funds are invested in some of Canada’s leading venture-backed companies. Wireless chip maker SiGe Semiconductor Inc. topped $69 million in revenues in 2007, with more than 300 million chips shipped worldwide. BelAir Networks Inc. was named by Dell’Oro Group as the number one wireless Internet infrastructure company, based on revenue for the last four quarters.

IE