Labour Sponsored Investment Fund Evaluation

Great Returns Under Most Scenarios!

LSIF Investm't	Assumed Growth Rate	Investm't Vehicle	Tax Refund Rate	Total Cash Invested	Holding Period (Years)	Investm't at End of Period	Fund Redempt'n Fee	Fund Proceeds	Tax on Gain	Net Proceeds	RSP Redempt'n Tax Rate	Final Value	Avg. Annual Return
$5,000	5.00%	RSP	78%	$1,100	8	7,387	0.00%	7,387	0%	7,387	48%	$3,841	16.9%
$5,000	5.00%	RSP	66%	$1,700	8	7,387	0.00%	7,387	0%	7,387	36%	$4,728	13.6%
$5,000	0.00%	RSP	78%	$1,100	8	5,000	0.00%	5,000	0%	5,000	48%	$2,600	11.4%
$5,000	-5.00%	RSP	78%	$1,100	8	3,317	0.00%	3,317	0%	3,317	48%	$1,725	5.8%
$5,000	5.00%	Non RSP	30%	$3,500	8	7,387	0.00%	7,387	24%	6,814	0%	$6,814	8.7%
$5,000	5.00%	Non RSP	30%	$3,500	8	7,387	0.00%	7,387	18%	6,958	0%	$6,958	9.0%
$5,000	0.00%	Non RSP	30%	$3,500	8	5,000	0.00%	5,000	0%	5,000	0%	$5,000	4.6%
$5,000	-5.00%	Non RSP	30%	$3,500	8	3,317	0.00%	3,317	0%	3,317	0%	$3,317	-0.7%

Prepared by Carl Spiess, Director, Wealth Management, ScotiaMcLeod

Assumptions

• Marginal Tax Rates used: 48% or 36% as indicated.
• Capital Gains taxed at 50% of the marginal rate (in the last example losses could be used to offset future gains).
• Fund is kept for the full 8 year holding period to avoid 30% tax credit clawback. Retirees now also need to hold the fund for 8 years to avoid tax.
• Since fund is held for the full 8 year period, there is no redemption fee. Redemption fees are paid only on early withdrawal of fund.
• Upon early withdrawal of investment and subsequent repayment of tax credits, investment will still have benefited from the deferral of tax.
• Average Annual return calculated on growth of total cash invested over the holding period.
• You live in a province where the tax breaks are available.

Bottom Line

• Even assuming low returns, for people in high tax brackets (earning over $29,000 a year) LSIFs can provide good after tax total returns.

Inside and Outside the RSP - LSIFs Provide a 30% Tax Break (up to 35% for some Ontario funds)

Maximum tax credit used in this illustration on a $5,000 investment is $1500. This $1500 includes 15% Federal ($750) and 15% Provincial ($750) Tax credits. (Can be up to 20% in Ontario for a 35% total)

Please note that these are projections only. Please consult the fund prospectus for complete details on risk factors, tax refund rates and other pertinent information. Unit values and investment returns will fluctuate.

For more information on how labour funds might fit with your investment goals, contact Andrew McGoey at 416.945.4107.