Galileo Funds Inc.

Headnote

National Policy 11-203 -- Process for Exemptive Relief Applications in Multiple Jurisdictions -- approval granted for indirect change of control of mutual fund manager under s. 5.5(2) of NI 81-102 -- minimal impact on the manager and the funds.

Applicable Legislative Provisions

National Instrument 81-102 Mutual Funds, s. 5.5(2).

September 1, 2011

IN THE MATTER OF

THE SECURITIES LEGISLATION OF

ONTARIO

(the Jurisdiction)

AND

IN THE MATTER OF

THE PROCESS FOR EXEMPTIVE RELIEF

APPLICATION IN MULTIPLE JURISDICTIONS

AND

IN THE MATTER OF

GALILEO FUNDS INC.

(the Manager)

DECISION

Background

The principal regulator in the Jurisdiction (the "Decision Maker") has received an application from the Manager for a decision under the securities legislation of the Jurisdiction of the principal regulator (the "Legislation") for approval pursuant to subsection 5.5(2) of National Instrument 81-102 Mutual Funds ("NI 81-102") of an indirect change of control of the Manager (the "Approval Sought").

Under the Process for Exemptive Relief Applications in Multiple Jurisdictions (for a passport application):

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

(b) The Manager has provided notice that section 4.7(1) of Multilateral instrument 11-102 Passport System ("MI 11-102") is intended to be relied upon in Alberta, British Columbia, Manitoba, Newfoundland and Labrador, New Brunswick, Nova Scotia, Prince Edward Island, Québec, Saskatchewan, Northwest Territories, Yukon and Nunavut (together with Ontario, the "Jurisdictions").

Interpretation

Defined terms contained in National Instrument 14-101 Definitions and MI 11-102 have the same meaning in this decision unless they are otherwise defined in this decision.

Representations

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

The Manager and the Funds

1. The Manager is a corporation incorporated under the laws of the Province of Ontario and is registered in the category of investment fund manager. The Manager's head office is located in Ontario. The Manager is not in default of securities legislation in any Jurisdiction.

2. The Manager manages Galileo High Income Plus Fund and Galileo Global Opportunities Fund (collectively, the "Funds"). The Manager handles and oversees the day-to-day operation of the Funds.

3. The Manager is a wholly-owned subsidiary of Galileo Global Equity Advisors Inc. ("GGEA"), a corporation incorporated under the laws of the Province of Ontario.

4. GGEA is registered: (a) in Ontario, as an exempt market dealer, investment counsel and as an adviser in the category of portfolio manager; (b) in Alberta, as an investment counsel and portfolio manager; (c) in Manitoba, as a portfolio manager, (d) in British Columbia, as a portfolio manager, (e) in Nova Scotia, as a portfolio manager and (f) in Québec, as a portfolio manager an and exempt market dealer.

5. Investment advice and portfolio management services to the Funds are provided by GGEA.

6. The Funds are reporting issuers in the Jurisdictions and are not in default of any of the securities law requirements of those Jurisdictions. The securities of the Funds are qualified for distribution in British Columbia, Alberta, Saskatchewan, Manitoba, Ontario, Québec, Nova Scotia, New Brunswick and Prince Edward Island, Nunavut, Northwest Territories and Yukon Territories, by a consolidated simplified prospectus dated November 10, 2010 and annual information form dated November 10, 2010.

7. The Funds are marketed and distributed through registered dealers and brokers. Neither the Funds nor the Manager is part of any arrangement that grants any person the exclusive right to distribute units of the Funds in a particular area, or which could give any person a material competitive advantage over others in the distribution of units.

The Proposed Acquisition

8. On July 5, 2011, Michael Waring, a minority shareholder of GGEA, entered into a share purchase agreement (the "Purchase Agreement") with Northland Bancorp Inc. ("Northland"), a majority shareholder of GGEA, pursuant to which Michael Waring has agreed to purchase from Northland 5,769,618,175 Class A common shares in the capital of GGEA, representing approximately 83.93% of the issued and outstanding common shares of GGEA (the "Transaction"). Michael Waring currently holds 1,104,458,753 Class B common shares in the capital of GGEA, representing approximately 16.06% of the common shares of GGEA. Accordingly, following the completion of the Transaction, Michael Waring will hold 99.99% of the issued and outstanding common shares of GGEA and Northland will cease to be a shareholder of GGEA. The remaining shares will continue to be held by other shareholders. The completion of the Transaction is subject to the satisfaction of closing conditions, including regulatory approvals and is expected to close on or about September 14, 2011 following receipt of the regulatory approvals and the expiration of the notice period provided for in section 5.8(1)(a) of NI 81-102.

8. Michael Waring was GGEA's founder and is GGEA's Chief Executive Officer, President and Chief Investment Officer. He was previously a majority shareholder in GGEA prior to July 2009, when he sold 80.5% of the shares of GGEA to Northland. Michael Waring has overall responsibility for the Manager's investment management activities and is the Chief Compliance Officer for GGEA. He has over a quarter century of experience as an investment manager/investment analyst. For a period of 15 years prior to forming GGEA in 2000, Michael was a vice-president, director and portfolio manager at KBSH Capital Management Inc., a private investment management firm with close to $7 billion under management.

Proposed Change of Control

10. The Transaction will result in an indirect change of control of the Manager. Pursuant to section 5.5(2) of NI 81-102, the approval of the Decision Maker must be obtained prior to the proposed change of control.

11. A press release describing the proposed transaction was issued by the Manager on July 7, 2011 and filed under SEDAR Project No. 01775126.

12. Securityholder notice regarding the change of control was posted on SEDAR under SEDAR Project No. 01775126 and was sent to securityholders of the Funds on July 12, 2011, pursuant to section 5.8(1)(a) of NI 81-102.

13. In respect of the impact of the Proposed Change of Control on the Manager and the management and administration of the Funds:

(a) The indirect acquisition of control of the Manager by Michael Waring will have no negative consequences on the ability of the Manager to comply with all applicable regulatory requirements or its ability to satisfy its obligations to clients.

(b) Following the Transaction, while Mr. Waring will become the new indirect owner of the Manager, there will not be any change in how the Manager operates or acts in relation to the Funds.

(c) There are no current plans to change the Funds' portfolio manager or the individual portfolio managers of GGEA who currently manage the investment portfolios of the Funds within a foreseeable period of time following the closing of the Transaction.

(d) Following the Transaction, some of the directors and officers of GGEA and the Manager are anticipated to change, however, the individuals chiefly responsible for the management and administration of the Funds, namely the President, Chief Executive and Chief Investment Officer, and the Chief Financial Officer, will continue on in their current capacities. All directors and officers of the Manager following closing of the Transaction will continue to have the requisite integrity and experience as contemplated under s. 5.7(1)(a)(v) of NI 81-102.

(e) Although the current members of the Funds' independent review committee (IRC) will automatically cease to be members of the IRC by operation of section 3.10(1)(c) of National Instrument 81-107 -- Independent Review Committee for Investment Funds upon the closing of the Transaction, the Manager intends to reappoint them immediately after the closing of the Transaction.

(f) It is not expected that there will be any change to the investment objectives and strategies of the Funds or the expenses that are charged to the Funds as a result of the Transaction.

(g) The proposed Transaction is not expected to impact the financial stability of the Manager or its stability to fulfill its regulatory obligations.

Decision

The principal regulator is satisfied that the decision meets the test set out in the Legislation for the principal regulator to make the decision.

The decision of the principal regulator under the Legislation is that the Approval Sought is granted.