TORONTO, December 6th, 2004 – Ontario taxpayers have reaped impressive returns from federal and provincial government policies to encourage investment in labour-sponsored investment funds, according to a comprehensive new study of the sector.

The study found that in just over a decade, these funds have added $2.3 billion annually to Ontario's economy, created 27,000 jobs, generated significant net tax revenue for governments and enabled the growth of some of the province's most innovative companies — including household names as Indigo and Research in Motion (RIM).

"Roughly a decade ago, governments started using the tax system to encourage Ontarians to invest in small and medium-sized businesses — and it's now clear this investment has paid off," said Don Allen, one of Canada's most experienced econometric researchers and the author of the LSIF Economic and Fiscal Impact Study. "Thanks to LSIFs, Ontario's economy is larger, its unemployment rate is lower, innovative companies have greater access to capital, and more people are saving and investing for their retirement."

The study reveals some compelling numbers about the impact of LSIFs on the Ontario economy. Based on a rigorous survey of 185 companies that have received LSIF funding and using a widely accepted econometric model, the study estimates the following:

• Ontario's GDP is $2.3 billion larger than it would have been without LSIFs. At the national level, the positive impact on GDP is $2.6 billion.

• LSIF funding has created 27,000 high value jobs in Ontario; without LSIFs, the province's unemployment rate would have been 0.3% higher in 2002.

• The payback to the government in terms of tax revenue has been swift and substantial. For example, in 2002 alone, the provincial tax revenue attributable to LSIF investments was $357 million — a number that far exceeds the cost of the tax credits.

• LSIF financing has had a catalytic impact on the growth of small- and medium-sized businesses. One-third of LSIF investments have gone to start-up firms – a group that has great difficulty in finding venture capital.

• Export growth from companies receiving LSIF funding has been sensational. Before ALSIF financing, these companies exported $515 million and by the year 2002, this total quadrupled to $2 billion.

• 48% of LSIF investors have incomes below $60,000. LSIFs have made private equity and venture capital investing available to middle-income Ontarians for the first time, giving them an additional, affordable choice for their retirement investments.

"This study proves that anyone who thinks government policies don't create jobs and growth should think twice," said Dale Patterson, executive director of the Association of Labour-Sponsored Investment Funds. "By giving Ontarians tax incentives to invest in labour-sponsored investment funds, Ottawa and Queen's Park have made a huge impact on our economy, and these incentives are more than paying for themselves."

The author, Don Allen, is president of Regional Data Corp. He started his career in econometric research at Statistics Canada in 1965, and has been developing and analyzing databases for 40 years.

The study also used data provided by Macdonald & Associates Ltd., one of the leading sources of analysis on venture capital and private equity in Canada.

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