Clarington Funds Inc. - MRRS Decision

Headnote

Mutual Reliance Review System for Exemptive Relief Applications -- abridgement of the 60 day notice period in connection with a change of control of a mutual fund manager, subject to no changes being made to portfolio management operations.

Rules Cited

National Instrument 81-102 Mutual Funds, s. 5.8.

December 21, 2005

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

BRITISH COLUMBIA, ALBERTA, SASKATCHEWAN,

MANITOBA, ONTARIO, QUÉBEC, NEW BRUNSWICK,

NOVA SCOTIA, PRINCE EDWARD ISLAND, NEWFOUNDLAND

AND LABRADOR, YUKON TERRITORY,

NORTHWEST TERRITORIES

AND NUNAVUT TERRITORY (the "Jurisdictions")

AND

IN THE MATTER OF

THE MUTUAL RELIANCE REVIEW SYSTEM

FOR EXEMPTIVE RELIEF APPLICATIONS

AND

IN THE MATTER OF

CLARINGTONFUNDS INC. (the "Filer")

MRRS DECISION DOCUMENT

Background

The local securities regulatory authority or regulator (the "Decision Maker") in each of the Jurisdictions has received an application from the Filer for a decision under the securities legislation of the Jurisdictions (the "Legislation") to abridge the 60-day notice period in respect of the notice required to be given to all securityholders of a mutual fund before the direct or indirect change of control of the manager of the mutual fund (the "Requested Relief").

Under the Mutual Reliance Review System for Exemptive Relief Applications:

(a) the Ontario Securities Commission is the principal regulator for this application; and

(b) this MRRS decision document evidences the decision of each Decision Maker.

Interpretation

Defined terms contained in National Instrument 14-101 - Definitions have the same meaning in this decision unless they are defined in this decision. The following additional terms shall have the following meanings:

"CC" means Clarington Corporation;

"CFI" means ClaringtonFunds Inc., a wholly-owned subsidiary of CC;

"Funds" means the Clarington Funds and the Clarington Target Click Funds, as set out in the application; and

"Industrial Alliance" means Industrial Alliance Insurance and Financial Services Inc.

Representations

This decision is based on the following facts represented by the Filer:

1. CFI is a corporation incorporated under the laws of the Province of Ontario. It acts as the trustee and the manager of the Funds that are mutual fund trusts and as the manager of the Funds that are classes of shares of mutual fund corporations. CFI is registered as a mutual fund dealer and as a limited market dealer under the Securities Act (Ontario). As at October 31, 2005, CFI had assets under administration of over $4.2 billion. Securities of the Funds are sold in all of the Jurisdictions through registered dealers. CC owns all of the issued and outstanding shares of CFI.

2. The Funds consist of the 22 Clarington Funds and the four Clarington Target Click Funds. The Funds are reporting issuers (where such status exists) in each of the Jurisdictions and are not in default of any of the requirements of the Jurisdictions. Securities of the Clarington Funds are qualified for distribution in all of the Jurisdictions by an amended and restated simplified prospectus and annual information form each dated August 26, 2005, as further amended. Units of the Clarington Target Click Funds are qualified for distribution in all of the Jurisdictions by a simplified prospectus and annual information form each dated June 28, 2005.

3. On November 7, 2005, Industrial Alliance publicly announced its intention to make a take-over bid for all of the common shares of CC. If successful, the take-over bid will result in an indirect change of control of CFI. The take-over bid circular was mailed to shareholders of CC on November 20, 2005 and Industrial Alliance expects to take up and pay for the shares deposited under the bid as early as December 28, 2005.

4. Notice of the change of control was mailed to securityholders of the Funds on November 24, 2005.

5. CFI believes that shortening the notice period to not less than 30 days will not be prejudicial to securityholders of the Funds.

Decision

Each of the Decision Makers is satisfied that the test contained in the Legislation that provides the Decision Maker with the jurisdiction to make the decision has been met.

The decision of the Decision Makers under the Legislation is that the Requested Relief is granted provided that:

(a) securityholders of the Funds are given at least 30 days notice of the change of control of CFI prior to the change; and

(b) no changes are made to the portfolio management operations of the Funds during the 60-day period following the giving of notice of the change of control of CFI to securityholders of the Funds.