Brompton Energy Split : Understanding Split Share MER

Split Share funds are unique Canadian investments that have been in existence for over 20 years. Class A shares issued by Split Share funds are attractive because they provide enhanced growth potential from investing in high-quality, dividend-paying stocks.

Class A shares provide enhanced (or leveraged) returns because Split Share funds also issue Preferred shares which provide the leverage to the fund. Preferred shareholders forfeit any capital growth in exchange for a fixed dividend, generally funded by dividends earned from the stocks held in the Split Share fund's portfolio.

Example: Brompton Split Banc Corp. (SBC)

Class A shares receive a benefit from this structure: extra dividends and the potential for enhanced returns. However, unlike other types of leveraged investment funds, Split Share funds are required by regulation to report the Preferred share dividend as a part of the Class A share's MER. Other types of leveraged funds may report MER excluding leverage costs (interest paid to earn extra interest income or dividends may be excluded from MER as interest charges are viewed as being part of the investment returns, and not as a component of MER). Because the MER reporting rules are different for Split Share funds, we believe that the performance of the Class A shares, net of all fees and expenses, provides a more complete picture of the value investors receive from their investment in Class A shares.

To explain this issue, we will look at SBC which is the oldest Split Share fund in the Brompton line-up, launched in 2005. The MER of SBC Class A shares, including Preferred share distributions, was 6.99% as of December 31, 2025. Excluding Preferred share distributions and issuance costs, the MER per Class A share was 1.37%. We believe the lower figure is more representative of the ongoing efficiency of the administration of the fund. SBC invests in a portfolio of Canadian banks and the dividends earned on that investment portfolio more than exceeds the Preferred share dividends it pays.

The easiest way to think of this is borrowing money at 3% (for example), to invest in a portfolio of fixed income which earns 5.5%: this strategy actually nets 2.5% in extra interest income, so overall it represents a benefit to investors, not a cost. The same concept applies to a Split Share fund. Continuing with our SBC example, dividend income from the SBC portfolio exceeds the dividends paid on its Preferred shares.

The table below reconciles the Split Corp. "regulatory" MER to the 1.37% "operating cost" noted above.

As at December 31, 2025
MER - Class A Shares	6.99%
Less: Preferred Share Distributions	(5.18)%
Less: Preferred Share Issuance Costs	(0.46)%
Less: Preferred Share Premium/(Discount) Amortization1	0.02%
Management fees and Operating Costs of Class A shares	1.37%

Despite the reported MER, the benefit of the Split Share fund's structure is enhanced returns. In 2025, SBC Class A shares delivered a total return of 69.1%, after all fees and expenses of the fund. SBC Class A shares outperformed the S&P/TSX Equal Weight Diversified Banks Total Return Index in 2025 by 24.4%, demonstrating the strong value proposition offered by Class A share investments.

Understanding Split Share MER

The basic premise supporting Split Share funds is to invest in high quality stocks, preferably with a history of dividend growth; add leverage through issuing Preferred shares (similar to an operating company, a bank etc.); and that will enhance long-term returns. If an investor has a long-term goal of holding high-quality stocks because of the upside potential, then being leveraged to that attractive upside potential could be a natural extension to that investment approach. Returns for SBC demonstrate how this split share structure can outperform over various periods.

SBC Annual Compound Returns, Net of Fees2

	1-Year	3-Year	5-Year	10-Year	Since Inception
Brompton Split Banc Corp. - Class A share	69.1%	39.2%	28.0%	20.2%	14.2%
S&P/TSX Capped Financials Total Return Index	35.3%	26.1%	19.9%	14.6%	10.7%
S&P/TSX Equal Weight Diversified Banks Total Return Index	44.7%	24.6%	19.2%	14.7%	11.6%
S&P/TSX Composite Total Return Index	31.7%	21.4%	16.1%	12.7%	8.7%

Brompton Split Corp. Enhanced Equity ETF (CLSA)

CLSA invests in a diversified portfolio of Class A shares issued by Canadian Split Share funds. CLSA offers investors the potential for enhanced liquidity compared to a single Class A share investment and provides the benefit of professional portfolio management. The MER of CLSA was 10.71% in 2025, of which 0.80% was attributable to the ETF's direct operating expenses. The remaining portion of the MER reflects the ETF's proportionate share of the expenses of the Class A shares held in the portfolio (ETFs which hold other ETFs or funds are required to report the MER of the portfolio holdings). These indirect expenses largely reflect distributions paid to Preferred shareholders of the underlying Split Share funds. Over the last year, CLSA delivered a total return of 55.1%, net of all fees and expenses of the fund, outperforming the S&P/TSX Composite Total Return Index by 20%.

CLSA Annual Compound Returns, Net of Fees3

	1-Year	Since Inception
Brompton Split Corp. Enhanced Equity Income ETF	55.1%	53.3%
S&P/TSX Composite Total Return Index	34.9%	33.1%

1. Issuance costs and premium/discount amortization were incurred in connection with the issuance of new Preferred shares.

2. Returns are for the periods ended December 31, 2025 and are unaudited. Inception date November 16, 2005. The table shows the Fund's compound return on a Class A share for each period indicated compared with the S&P/TSX Capped Financials Total Return Index (''Financials Index''), the S&P/ TSX Equal Weight Diversified Banks Total Return Index ("Banks Index"), and the S&P/TSX Composite Total Return Index ("Composite Index"). The Financials Index is derived from the Composite Index based on the financials sector of the Global Industry Classification Standard. The Banks Index is the equal-weighted version of the S&P/TSX Diversified Banks Total Return Index, a benchmark including commercial banks whose businesses are derived primarily from commercial lending operations and also have significant activity in retail banking and small and medium corporate lending. The Composite Index tracks the performance, on a market-weight basis and a total return basis, of a broad index of large-capitalization issuers listed on the Toronto Stock Exchange ("TSX"). The Fund invests in six Canadian banks on an approximately equal weight basis with up to 10% of its total assets held directly or indirectly in global financial services companies; therefore, its performance is not expected to mirror that of the Indices. The Indices' performance is calculated without the impact of management fees, fund expenses and trading commissions, whereas the performance of the Class A shares is calculated after deducting such fees and expenses. Additionally, the performance of the Class A shares is impacted by the leverage provided by the Fund's Preferred shares. The performance information shown is based on net asset value per Class A share and assumes that cash distributions were reinvested at net asset value per Class A share in additional Class A shares of the Fund. Past performance does not necessarily indicate how the Fund will perform in the future.

3. Returns are for the periods ended March 31, 2026 and are unaudited. Inception date March 20, 2025. The table shows the ETF's compound returns for each period indicated compared with the Composite Index. The Composite Index tracks the performance, on a market-weight basis and a total return basis, of a broad index of large-capitalization issuers listed on the Toronto Stock Exchange. The Index is not leveraged, whereas the ETF does not currently use leverage but has the ability to do so. The performance of the Class A shares held in the ETF's portfolio are impacted by the leverage provided by the respective fund's Preferred shares. The ETF is actively managed; therefore, its performance is not expected to mirror that of the Composite Index which has a more diversified portfolio and includes a substantially larger number of companies. Furthermore, the Indices' performance is calculated without the deduction of management fees, fund expenses and trading commissions, whereas the performance of the Fund includes the impact of leverage (if any) and is calculated after deducting such fees and expenses. Past performance does not necessarily indicate how the ETF will perform in the future. The information shown is based on Net Asset Value per unit and assumes that distributions made by the ETF on its units in the period shown were reinvested at Net Asset Value per unit in additional units of the ETF.

This document is for information purposes only and does not constitute an offer to sell or a solicitation to buy the securities referred to herein. The opinions contained in this report are solely those of Brompton Funds Limited ("BFL") and are subject to change without notice. BFL makes every effort to ensure that the information has been derived from sources believed to BE reliable and accurate. However, BFL assumes no responsibility for any losses or damages, whether direct or indirect which arise from the use of this information. BFL is under no obligation to update the information contained herein. The information should not be regarded as a substitute for the exercise of your own judgment. Please read the annual information form or prospectus before investing.

You will usually pay brokerage fees to your dealer if you purchase or sell shares of the Fund on the TSX or other alternative Canadian trading system (an "exchange"). If the shares are purchased or sold on an exchange, investors may pay more than the current net asset value when buying shares of the investment fund and may receive less than the current net asset value when selling them.

There are ongoing fees and expenses associated with owning shares of an investment fund. An investment fund must prepare disclosure documents that contain key information about the Fund. You can find more detailed information about the Fund in the public filings available at https://www.sedarplus.ca. The indicated rates of return are the historical annual compounded total returns including changes in share value and reinvestment of all distributions and do not take into account certain fees such as redemption costs or income taxes payable by any securityholder that would have reduced returns. Investment funds are not guaranteed, their values change frequently and past performance may not be repeated.

Commissions, trailing commissions, management fees and expenses all may be associated with exchange-traded fund investments. The indicated rates of return are the historical annual compounded total returns including changes in unit value and reinvestment of all distributions and do not take into account sales, redemption, distribution or optional charges or income taxes payable by any securityholder that would have reduced returns. Please read the prospectus before investing. Exchange-traded funds are not guaranteed, their values change frequently and past performance may not be repeated.

Information contained in this document was published at a specific point in time. Upon publication, it is believed to be accurate and reliable, however, we cannot guarantee that it is complete or current at all times. Certain statements contained in this document constitute forward-looking information within the meaning of Canadian securities laws. Forward-looking information may relate to matters disclosed in this document and to other matters identified in public filings relating to the Fund, to the future outlook of the Fund and anticipated events or results and may include statements regarding the future financial performance of the Fund. In some cases, forward-looking information can be identified by terms such as "may", "will", "should", "expect", "plan", "anticipate", "believe", "intend", "estimate", "predict", "potential", "continue" or other similar expressions concerning matters that are not historical facts. Actual results may vary from such forward-looking information. Investors should not place undue reliance on forward-looking statements. These forward- looking statements are made as of the date hereof and we assume no obligation to update or revise them to reflect new events or circumstances.

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