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Press release from CNW Group

Proventure Income Fund to Sell Certain Assets to Cervus Equipment Corporation

Monday, October 31, 2011

Proventure Income Fund to Sell Certain Assets to Cervus Equipment Corporation07:30 EDT Monday, October 31, 2011CALGARY, Oct. 31, 2011 /CNW/ - Proventure Income Fund ("Proventure") (TSX-V: PVT.UN) and Cervus Equipment Corporation (TSX: CVL) today announced that that they have agreed to complete a series of transactions, including the sale from Proventure to Cervus of certain real estate assets that Cervus currently leases from Proventure for the purposes of operating Cervus' agricultural and construction equipment dealerships (the "Assets") for aggregate consideration equal to approximately $25.90 million.  The sale of the Assets from Proventure to Cervus is conditional upon receipt of all required regulatory approvals, including the approval of the TSX Venture Exchange and the approval of the disinterested unitholders of Proventure.From Proventure's perspective, the transactions are necessary in order for Proventure to qualify for the REIT Exemption (as defined below) to the SIFT Rules (as defined below) under the Income Tax Act (Canada) (the "TaxAct")."Cervus' acquisition of 14 dealership locations that it currently leases from Proventure is part of Cervus' strategy to own the properties in which it operates," said Peter Lacey, President and CEO of both Proventure and Cervus. "The restructuring actions serve to simplify the corporate structure of Cervus and related parties, while providing liquidity to Proventure unitholders."Recent Amendments to the SIFT RulesThe Tax Act contains rules (the "SIFT Rules") applicable to certain publicly listed partnerships or trusts ("SIFTs") and their investors, which generally tax the SIFT at a rate similar to a taxable Canadian corporation on income from business carried on in Canada and income (other than taxable dividends) or capital gains from "non-portfolio property" (as defined in the Tax Act). The distribution of such income to unitholders is generally treated as dividends received from a taxable Canadian corporation.The SIFT Rules are not applicable to a real estate investment trust (a "REIT") that meets certain specified criteria relating to the nature of its revenue and investments (the "REIT Exemption"). With the intention of qualifying for the REIT Exemption, in 2010 Proventure completed a series of transactions which included the sale of certain assets of Proventure to ProDev Trust ("ProDev"), a private income trust. The purchase price for the assets was paid to Proventure in the form of an interest-bearing promissory note in the aggregate principal amount of approximately $17.1 million (the "Promissory Note"), plus the assumption of the mortgages on the assets being transferred.In July 2011, the Government of Canada announced amendments to the SIFT Rules, which had the effect of excluding the Promissory Note from the definition under the Tax Act of "non-portfolio property". As a result of that amendment, Proventure does not qualify for the REIT Exemption and the SIFT Rules will apply to Proventure unless Proventure further restructures its business affairs to no longer hold the Promissory Note. Consequently, Proventure proposes to enter into a series of transactions, including the sale of the Assets from Proventure to Cervus. Those transactions are discussed below.Proposed Restructuring ActionsSubject to the receipt of all required approvals, Proventure, Cervus and ProDev have agreed to complete the following transactions:Repayment of Promissory Note. ProDev has agreed to repay in full the aggregate principle amount of the Promissory Note plus interest, which is expected to occur prior to year end. The source of the funds for the repayment of the Promissory Note is expected to be as follows:    (a) Proventure has agreed to cause its subsidiary, Proventure Holding Limited Partnership (the "Partnership"), to redeem the preferred units of the Partnership registered in the name of ProDev for their aggregate redemption value of approximately $6.80 million, and to offset such amount against the outstanding principal amount of the Promissory Note; and    (b) Cervus has agreed to issue to ProDev a loan in the aggregate principal amount of up to $11.20 million(the "Loan"), the proceeds of which are to be applied to pay off the balance of the Promissory Note.          This step does not require Proventure unit holder approval.    December 2011 Distribution to Proventure Unit Holders. Following repayment of the Promissory Note, Proventure has agreed to declare a distribution to its unit holders in December 2011 (the "DecemberDistribution") in an amount to be determined. The source of the funds for the December Distribution is expected to be the cash portion of the proceeds from the repayment by ProDev of the Promissory Note. This step does not require Proventure unit holder approval.Repayment of Loan. Following the December Distribution, ProDev has agreed to repay in full the Loan. The source of the funds for the repayment of the Loan is expected to be a loan from Peter Lacey to ProDev.Asset Disposition. Proventure has agreed to sell to Cervus the Assets for aggregate consideration equal to $25.90 million, which is payable in the form of cash in the amount of approximately $14.25 million and the assumption of mortgages on the Assets in the amount of approximately $11.65 million(the "Asset Disposition").The Asset Disposition is expected to occur in the new year. The Asset Disposition will be considered a "related party transaction" under applicable Canadian securities legislation and the rules of the TSX Venture Exchange and therefore requires (i) preparation of an independent valuation on the assets to be transferred and a summary thereof in the information circular and (ii) receipt of disinterested Proventure unit holder approval at the Meeting (as defined below).The Assets being sold include 14 dealership locations currently leased by Cervus. Following completion of the sale of the Assets, the remaining properties of Proventure will include dealerships locations in Cranbrook, British Columbia; Fort St. John, British Columbia; Moosomin, Saskatchewan; Red Deer, Alberta; Saskatoon, Saskatchewan; and Russell, Manitoba.January 2011 Distribution to Proventure Unit Holders. Following completion of the sale of the Assets, Proventure has agreed to declare a distribution to its unit holders in January 2011 (the "January Distribution") in an amount to be determined. The source of the funds for the January Distribution is expected to be the cash portion of the proceeds from the Asset Disposition.The Asset Disposition does not require approval of disinterested Cervus security holders under applicable Canadian securities legislation because, at the time the Asset Disposition was agreed to, neither the aggregate fair market value of the Assets and the subject matter of the other transactions involving Cervus, nor the aggregate fair market value of the consideration for the Asset Disposition and the other transactions involving Cervus, exceeded 25 per cent of Cervus' market capitalization.TimingProventure intends to hold a special meeting of its unit holders in mid to late December (the "Meeting") to approve the sale of the Assets to Cervus. It is currently anticipated that an information circular describing the proposed transactions will be filed on www.sedar.com and mailed to Proventure's unit holders in late November in advance of the Meeting. The parties then intend to complete the transactions mentioned above during the month of December to the extent possible and to the extent that all approvals are received.About ProventureProventure Income Fund is an open-ended mutual fund trust established under laws of the Province of Alberta. Proventure is in the commercial property development business and leases real estate to Cervus Equipment Corporation. The units of Proventure Income Fund are listed on the TSX Venture Exchange and trade under the symbol "PVT.UN".About Cervus Equipment CorporationCervus acquires and manages authorized agricultural, commercial and industrial equipment dealerships in Western Canada through 30 dealership locations in Alberta, Saskatchewan and Manitoba. Cervus holds an approximate 60% equity interest in Agriturf Limited, a New Zealand-based corporation that offers authorized John Deere equipment, parts and service in the Manawatu, Rotorua, Hawke's Bay and Taranaki regions. The primary equipment brands represented by Cervus include John Deere agricultural equipment, Bobcat and JCB construction equipment, and Clark, Sellick, Nissan and Doosan material handling equipment. The common shares of Cervus are listed on the Toronto Stock Exchange and trade under the symbol "CVL".Forward Looking InformationThis press release contains certain forward-looking information ("forward-looking information") within the meaning of applicable Canadian securities laws. Forward-looking information is often, but not always, identified by the use of words such as "anticipate", "believe", "plan", "intend", "objective", "continuous", "ongoing", "estimate", "expect", "may", "will", "project", "should" or similar words suggesting future outcomes. In particular, this press release includes forward-looking information relating to Proventure's intention to re-qualify for the REIT Exemption to the SIFT Rules, the completion of the proposed transactions including the Asset Disposition, the repayment of the Promissory Note, the December Distribution and the January Distribution and the amount thereof, and the private placement of ProDev and the repayment of the Loan. Proventure's intention to re-qualify for the REIT Exemption to the SIFT Rules is based on the assumption that all of the foregoing transactions will be completed and is subject to the risk, among others, that all of the foregoing transactions may not be completed including the repayment of the Promissory Note. The completion of the proposed transactions are subject to the risk that all required approvals may not be received or may not be received in sufficient time to complete the proposed transactions on the terms outlined herein. The payment of the Distribution and the amount thereof are based on the assumption that the proposed transactions will be completed as currently contemplated and are subject to the risks, among others, that sufficient funds may not be available to Proventure due to lack of payments being made by Proventure by other parties as contemplated or that there may be currently unanticipated tax consequences of the transactions. The private placement of ProDev and the repayment of the Loan are based on the assumption that ProDev will be able to raise sufficient funds to repay the Loan as contemplated and are subject to the risk that ProDev may not in fact be able to raise sufficient proceeds via the private placement to repay the Loan. Proventure believes the expectations reflected in such forward-looking information are reasonable but no assurance can be given that these expectations will prove to be correct and such forward-looking information should not be unduly relied upon.Forward-looking information is based on various assumptions. Those assumptions are based on information currently available to Proventure, including the current business and economic trends, and the opportunities this restructuring will provide for Proventure to re-qualify for the REIT exemption to the SIFT rules. You are cautioned that the preceding list of assumptions is not exhaustive.Forward-looking information is not a guarantee of future performance and involves a number of risks and uncertainties some of which are described herein. Such forward-looking information necessarily involves known and unknown risks and uncertainties, which may cause Proventure's actual performance and financial results in future periods to differ materially from any projections of future performance or results expressed or implied by such forward-looking information. Such risks include Proventure's ability to obtain unitholder and regulatory approval with respect to, and its ability to complete, the restructuring. Any forward-looking information is made as of the date hereof and, except as required by law, Proventure assumes no obligation to publicly update or revise such information to reflect new information, subsequent or otherwise.Neither the TSX Venture Exchange nor its Regulation Services Provider (as that term is defined in the policies of the TSX Venture Exchange) accepts responsibility for the adequacy or accuracy of this release.For further information: Peter Lacey - President & CEOof each of Cervus Equipment Corporation and Proventure Income Fund Telephone: (403) 567-0339 Fax: (403) 567-0392 Email: placey@cervuscorp.com Randy Muth - Chief Financial Officerof each of Cervus Equipment Corporation and Proventure Income Fund Telephone: (403) 567-0339 Fax: (403) 567-0392 Email: rmuth@cervuscorp.com