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 -- indirect change in control of the manager will not result in any change in how the manager operates or acts in relation to the mutual funds -- decision revokes and replaces prior decision.

Applicable Legislative Provisions

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

March 28, 2012

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:

(a) 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); and

(b) a revocation of the prior decision dated December 8, 2011 (the Original Decision) granting approval pursuant to subsection 5.5(2) of NI 81-102 of an indirect change of control of the Manager.

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 Ontario 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 is the investment fund manager of Galileo High Income Plus Fund and Galileo Global Opportunities Fund (collectively, 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 and portfolio manager; (b) in Alberta, as a 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; (f) in Québec, as a portfolio manager and an exempt market dealer; (g) in New Brunswick, as an exempt market dealer; and (h) in Newfoundland and Labrador, as an 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 the Jurisdictions by a simplified prospectus and annual information form.

7. The Funds are marketed and distributed through registered dealers.

The Proposed Acquisition

8. As of October 18, 2011, Michael Waring was the controlling shareholder of GGEA, holding 6,874,886,928 Class A common shares in the capital of GGEA, which represented approximately 99.9999985% of the total issued and outstanding common shares of GGEA. On October 18, 2011, Michael Waring entered into an agreement with Michael Wekerle, Stephen Craig, Joseph MacDonald and Paul Sparkes (collectively, the Original Purchasers) pursuant to which Michael Waring agreed to sell approximately 75% of the issued and outstanding common shares of GGEA to the Original Purchasers (the Transaction). Upon closing of the Transaction, the Manager would undergo an indirect change of control as Michael Waring would no longer have sole control of GGEA. Instead, GGEA would be owned by five shareholders, none of whom would own more than 25% of the outstanding shares of GGEA.

9. The Transaction was expected to close on or about December 31, 2011, but did not close as originally anticipated.

10. Pursuant to articles of amendment dated January 6, 2012, all of the issued and outstanding Class A common shares of GGEA were exchanged for 500,000 common shares. On the date hereof, Michael Waring is the sole shareholder of GGEA, holding 500,000 common shares representing 100% of the issued and outstanding shares of GGEA.

11. The Transaction has been modified such that Michael Waring will now sell a portion of his interest in GGEA to two of the Original Purchasers, being Joseph MacDonald and Stephen Craig (together, the Purchasers). It is now contemplated that instead of Michael Waring selling approximately 75% of the issued and outstanding common shares of GGEA to the Original Purchasers, Michael Waring will sell approximately 66?% of the issued and outstanding common shares of GGEA to Joseph MacDonald and Stephen Craig. Following the closing of the Transaction, the issued and outstanding common shares of GGEA will be owned as follows:

Name of Shareholder	Number of Common Shares	% of Total
Michael Waring	166,667.67	33 1/3%
Joseph MacDonald	166,667.67	33 1/3%
Stephen Craig	166,667.66	33 1/3%
Totals	500,000	100%

12. The completion of the Transaction is subject to the satisfaction of closing conditions, including regulatory approvals, and is expected to close on or before March 31, 2012.

Proposed Change of Control

13. The Transaction will result in an indirect change of control of the Manager.

14. The current directors of GGEA and the Manager are Michael Waring, Joseph MacDonald and Evelyn Foo. Following the closing of the Transaction, Stephen Craig will also join the board of directors of GGEA and the Manager.

15. The Purchasers are experienced executives. By adding the Purchasers as shareholders and adding Stephen Craig as a director of both GGEA and the Manager, the Transaction is intended to enhance GGEA's reputation as a leading provider of specialized asset management in Canada, and to assist in growing GGEA's assets under management.

16. A press release describing the Transaction was issued by the Manager on October 18, 2011 and filed on SEDAR. A subsequent press release describing the modifications to the Transaction was issued by the Manager on March 20, 2012 and filed on SEDAR.

17. Securityholder notice describing the Transaction and the resulting change of control was filed on SEDAR and was sent to securityholders of the Funds on October 25, 2011, pursuant to section 5.8(1)(a) of NI 81-102. A notice providing an update about the sale of Michael Waring's holdings (including the revised shareholdings as set out in paragraph 11 of this decision) will be filed on SEDAR and will be sent to securityholders of the Funds either (i) with the annual financial statements and management reports of fund performance of the Funds for those unitholders who have chosen to receive those documents, or (ii) with the annual solicitation of instructions for financial reporting for those unitholders who have chosen not to receive those documents. The notice is expected to be sent on or about March 30, 2012.

18 In respect of the impact of the proposed indirect change of control of the Manager on the management and administration of the Funds:

(a) The indirect change of control of the Manager 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 the Funds.

(b) Following the Transaction, while Michael Waring will no longer own 100% of the outstanding shares of the Manager, and the shares of the Manager will be indirectly owned by three shareholders each owning one-third of the outstanding shares, the Transaction will not result in any change in how the Manager operates or acts in relation to the Funds. The Transaction will not have a negative impact on the Funds or their securityholders.

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

(d) Following the Transaction, Stephen Craig will be appointed as a director and Executive Vice-President of GGEA and the Manager. The other individuals chiefly responsible for the management and administration of the Funds, namely, Michael Waring (President, Chief Executive Officer, Chief Investment Officer and Chief Compliance Officer), Evelyn Foo (Chief Financial Officer and Secretary) and Joseph MacDonald (Chief Operating Officer), will continue 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 to fulfil their roles.

(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 ability to fulfill its regulatory obligations.

19. The Original Decision issued on December 8, 2011 described how the shareholdings of GGEA would change upon the sale of Michael Waring's interest in GGEA to the Original Purchasers. It is intended that the Original Decision be revoked upon the issuance of this decision, in order to reflect the revised shareholdings set out in paragraph 11 of this decision.

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:

(a) the Approval Sought is granted; and

(b) the Original Decision is revoked and replaced by this decision.