Brompton Split Banc : Annual Report – 2023

Brompton Split

Banc Corp.

Annual Report 2023

VALUE

INTEGRITY PERFORMANCE

THE FOUNDATION FOR EXCELLENCE

MANAGEMENT REPORT OF FUND PERFORMANCE

March 18, 2024

This annual management report of fund performance for Brompton Split Banc Corp. (the "Fund") contains financial highlights but does not contain the audited annual financial statements of the Fund. The audited annual financial statements follow this report. You may obtain a copy of the audited annual or unaudited interim financial statements, at no cost, by calling 1-866-642-6001 or by sending a request to Investor Relations, Brompton Funds, Bay Wellington Tower, Brookfield Place, 181 Bay Street, Suite 2930, Box 793, Toronto, Ontario, M5J 2T3, or by visiting our website atwww.bromptongroup.comor SEDAR at www.sedar.com. Shareholders may also contact Brompton Funds by using one of these methods to request a copy of the Fund's proxy voting policies and procedures, proxy voting disclosure record, Independent Review Committee's report, or quarterly portfolio disclosure.

THE FUND

Brompton Split Banc Corp. is a mutual fund corporation managed by Brompton Funds Limited (the "Manager"). The Fund has Class A and Preferred shares outstanding which are traded on the Toronto Stock Exchange ("TSX") under the symbols SBC and SBC.PR.A, respectively. The Class A and Preferred shares are RRSP, DPSP, RRIF, RESP, TFSA and FHSA eligible. The Preferred shares are rated Pfd-3 by Dominion Bond Rating Service Limited ("DBRS").

Preferred shares of the Fund receive fixed, cumulative quarterly payments. Payments are usually in the form of eligible Canadian dividends which are taxed at a lower rate to individuals than interest income. Preferred shares have a priority claim ahead of the Class A shares on the Fund's assets in the event of liquidation. However, the Net Asset Value of Preferred shares generally does not benefit from growth in value of the underlying investments. Generally, the Class A shares capture the price movement of the underlying investments but in a more magnified way than if an investor owned the underlying portfolio of securities directly. This magnification of return is commonly known as "leverage", which is provided by the Preferred shares.

INVESTMENT OBJECTIVES AND STRATEGIES

The Fund's investment objectives are:

i) to provide holders of Preferred shares with fixed, cumulative, preferential quarterly cash distributions and to return the original issue price of $10.00 per Preferred share to shareholders at maturity; and

ii) to provide holders of Class A shares with regular monthly cash distributions, targeted to be at least $0.10 per Class A share, and the opportunity for growth in Net Asset Value per Class A share.

To achieve these objectives, the Fund invests in a portfolio, on an approximately equally weighted basis, of common shares of the six largest Canadian Banks. In addition, the Fund may hold up to 10% of the total assets of the portfolio directly in investments in global financial companies or indirectly through exchange-traded funds ("ETF") for the purposes of enhanced diversification and return potential, at the discretion of the Manager.

Canadian Banks	ETF
Bank of Montreal	Royal Bank of Canada	Brompton North American Financials
Dividend ETF
Canadian Imperial Bank of Commerce	Bank of Nova Scotia (The)
National Bank of Canada	Toronto-Dominion Bank (The)

The Manager is responsible for maintaining the portfolio in accordance with the investment guidelines and rebalancing criteria. The portfolio may contain the common shares of less than six Canadian banks as a result of the impact of a merger, acquisition or other significant corporate actions or events affecting one or more of the Canadian banks in the portfolio. Holdings in the six Canadian Banks will generally be equal weighted at each rebalancing of the portfolio, however the Fund may at the Manager's discretion, hold non-equal weighted positions. The Manager, at its discretion, selectively writes covered call options from time to time on the portfolio, to generate additional distributable cash for the Fund and to reduce volatility. The Fund may from time to time hold cash and cash equivalents. The Fund also hedges substantially all of its foreign currency exposure to the holdings in the Portfolio back to the Canadian dollar, if any.

The Fund may invest, at the Manager's discretion, a portion of the portfolio's assets in exchange-traded funds. This may include exchange-traded funds managed by the Manager. There is no duplication of management fees in connection with the Fund's investments in exchange-traded funds managed by the Manager.

RECENT DEVELOPMENTS

Market Conditions

Monetary policy response to persistently higher levels of inflation over the Bank of Canada's 2% target rate has led to higher interest rates and fluctuations in securities prices. The Fund's Net Asset Value reflecting the value of the Fund's portfolio based on the most recent valuation date can be found on the Fund's webpage atwww.bromptongroup.com.

RISKS

Risks associated with an investment in the shares of the Fund are discussed in the Fund's 2023 annual information form, which is available on the Fund's website atwww.bromptongroup.comor on SEDAR at www.sedar.com. There were no changes to the risks during the year ended December 31, 2023 that could materially affect an investment in the shares of the Fund as they were discussed in the annual information form.

RESULTS OF OPERATIONS Distributions

Class A share cash distributions for the year ended December 31, 2023 amounted to $1.20 per share, unchanged from the year ended December 31, 2022, reflecting monthly cash distributions of $0.10 per Class A share. Preferred share cash distributions declared were $0.63 per share in 2023, compared to $0.51 per Preferred share in 2022. Effective November 30, 2022, the quarterly distribution rate on the Preferred shares increased from $0.125 to $0.15625. Since its inception date of November 16, 2005, the Fund has paid total cash distributions of $21.35 per Class A share and $9.12 per Preferred share.

The Fund has a distribution reinvestment plan which allows participating Class A shareholders to automatically reinvest monthly distributions, commission free, in additional Class A shares of the Fund. Pursuant to this plan, during the year ended December 31, 2023, 100,714 Class A shares were acquired in the market at an average price of $9.66 per Class A share.

Revenue and Expenses

The Fund earned revenue of $0.85 per Class A share in 2023, compared to $0.82 per Class A share in 2022. The Fund's dividend income received a boost as all the holdings in the portfolio increased their dividend rates. On average, the dividend rates experienced growth of 6.2%. Additionally, in 2023, the Fund earned four dividends from Bank of Nova Scotia, compared to three in 2022.

Expenses in 2023 amounted to $0.40 per Class A share, compared to $0.34 per Class A share in 2022. Expenses include issue costs, agents' fees and Preferred share premium/discount amortization as a result of issuing Preferred shares. Any issuance related costs were borne by the new subscribing shareholders through the payment of a premium issue price over the Net Asset Value at the time of issuance. Excluding these expenses, Class A share expense was $0.12 per share in 2023, compared to $0.14 per share in 2022.

Net Asset Value

The Net Asset Value per Class A share was $8.48 at December 31, 2023, down 4.6% from $8.89 at December 31, 2022. The aggregate Net Asset Value of the Fund was $394.5 million at December 31, 2023, up from $350.3 million at December 31, 2022. For the purpose of calculating the Net Asset Value of the Fund as a whole, the Preferred shares are not considered a liability of the Fund. During 2023, the Fund had gross proceeds of $30.1 million from one treasury offering and $25.0 million in proceeds from share issuances of the at-the-market-equity program.

Investment Portfolio

As at December 31, 2023, the Fund's investment portfolio held 6 securities representing the largest Canadian Banks, and 1 ETF which is managed by the same Manager. The portfolio was rebalanced in April 2023, in accordance with the Fund's investment guidelines. The ETF in the portfolio is Brompton North American Financials Dividend ETF, and this investment provides exposure to global financial companies. As at December 31, 2023, the underlying ETF represented 9.0% of the Fund's Net Asset Value (the Net Asset Value includes the value of the Preferred shares). The investment weightings and a detailed listing of the Fund's holdings are provided in the financial statements.

For the year ended December 31, 2023, the Fund's portfolio recorded a net realized loss of $0.5 million and a change in unrealized gain of $17.7 million. Canadian Imperial Bank of Commerce and National Bank of Canada were the largest contributors to the Fund's net gains generating $8.5 million and $5.6 million, respectively. Together, the net gains from these two holdings accounted for over 80% of the Fund's total net gains.

During the year ended December 31, 2023, the Fund selectively wrote covered call options on the underlying securities in the portfolio and generated premiums of $1.7 million. The net realized and change in unrealized loss on option writing was $3.1 million whichrepresents the premium received, less the amount paid to close out the options at expiry. As at December 31, 2023, there were 4,614 option contracts outstanding, with a notional value representing 11.5% of the portfolio.

Portfolio Sectors

Total
% of	Change in
Portfolio	Realized	Unrealized	$
Net Gains (Losses) by Sector (millions)	as of 31-Dec-23	$	$
Banks	91.0	3.1	15.0	18.1
Investment Funds	9.0	(1.1)	3.3	2.2
Options	-	(2.5)	(0.6)	(3.1)
Net Realized & Unrealized gain (loss)	100.0	(0.5)	17.7	17.2
Liquidity

To provide liquidity for shareholders, the Class A shares and Preferred shares of the Fund are listed on the TSX. Investors also have the right to retract their shares in accordance with the Fund's retraction provisions for each class of share.

RELATED PARTY TRANSACTIONS

Related party transactions consist of services provided by the Manager pursuant to a management agreement. See the Management Fees section below. At December 31, 2023, 4.0% (December 31, 2022 - 0.3%) of the Fund's Preferred shares were held by an investment fund managed by the same manager of the Fund and 1.6% (December 31, 2022 - 2.6%) were held by a related party of the Manager.

MANAGEMENT FEES

Pursuant to a management agreement, the Manager provides management and administrative services to the Fund, for which it is paid a management fee equal to 0.55% per annum of the Net Asset Value of the Fund plus applicable taxes. The Fund does not pay any management fees on investments in funds managed by the Manager. The Net Asset Value of the Fund is determined by taking the total assets of the Fund and deducting the Fund's liabilities. For this purpose, the Preferred shares are not considered a liability of the Fund. The management fee is used by the Manager to cover its costs to obtain the Fund's assets, the cost to administer the Fund, the cost of investment management services and for profit. During the year ended December 31, 2023, management fees amounted to $2.0 million.

FINANCIAL HIGHLIGHTS

The following tables show selected key financial information about the Fund and are intended to help readers understand the Fund's financial performance for the fiscal periods indicated. This information is derived from the Fund's audited annual financial statements which have been prepared in accordance with IFRS Accounting Standards. The information in the following tables is presented in accordance with National Instrument ("NI") 81-106 and, as a result, does not act as a continuity of opening and closing Net Assets per Class A share. The increase (decrease) in Net Assets from operations is based on average shares outstanding during the period, and all other numbers are based on actual shares outstanding at the relevant point in time.

Net Assets per Class A Share1,2

2023	2022	2021	2020	2019
For the year ended December 31	$	$	$	$	$
Net Assets, beginning of year3	8.89	13.13	8.51	9.84	8.53
Increase (decrease) from operations:4
Total revenue	0.85	0.82	0.80	0.77	0.76
Total expenses	(0.40)	(0.34)	(0.16)	(0.21)	(0.19)
Preferred share distributions	(0.62)	(0.51)	(0.40)	(0.40)	(0.41)
Realized gains (losses)	(0.03)	0.37	0.33	0.05	0.24
Unrealized gains (losses)	0.89	(3.56)	5.02	(0.06)	1.71
Total increase (decrease) in Net Assets	0.69	(3.22)	5.59	0.15	2.11
from operations
Distributions to Class A shareholders:3
Net investment income	0.03	0.30	0.27	0.16	0.22
Capital gains	-	-	-	-	0.09
Return of capital	1.17	0.90	0.71	0.80	0.65
Total distributions to Class A shareholders	1.20	1.20	0.98	0.96	0.96
Net Assets, end of year3	8.48	8.89	13.13	8.51	9.84

• 1 The per Class A share information has been retroactively restated for the years prior to 2021 to reflect the Class A share split effective December 14, 2021. Class A shareholders received 25 additional shares for every 100 shares held. Prior to the restatement:

  Distributions to Class A shareholders were: 2018 to November 2021 - $1.20.

  Net Assets per Class A share at the end of each year were: 2020 - $10.64; and 2019 - $12.30.

• 2 The financial information was prepared in accordance with IFRS Accounting Standards.

• 3 Net Assets per Class A share and distributions per Class A share are based on the actual number of Class A shares outstanding at the relevant time.

• 4 The increase (decrease) in Net Assets from operations per Class A share is based on the weighted average number of Class A shares outstanding over the fiscal period.

Ratios and Supplemental Data (Based on Net Asset Value)

2023	2022	2021	2020	2019
Net Asset Value ($) (000s) - including	394,507	350,273	365,871	278,966	194,112
Preferred shares1
Number of Class A shares outstanding (000s)2	21,536	18,546	15,821	16,896	10,883
Management expense ratio ("MER") -	13.26%	8.48%	4.93%	10.89%	6.82%
Class A shares3
Trading expense ratio4	0.01%	0.01%	0.01%	0.02%	0.02%
Portfolio turnover rate5	2.99%	5.30%	5.11%	3.78%	4.29%
Net Asset Value per unit ($)2,6	18.64	19.02	23.25	16.61	17.94
Net Asset Value per Class A share ($)2	8.48	8.89	13.13	8.51	9.84
Net Asset Value per Preferred share ($)7	10.00	10.00	10.00	10.00	10.00
Closing market price - Class A shares ($)2	9.31	11.48	13.07	8.48	10.43
Closing market price - Preferred shares ($)	9.79	9.80	10.28	10.35	10.48

As at December 31

• 1 Net Asset Value does not include Preferred share discount/premium. Net Asset Value net of Preferred share discount was $394,351,151 (2022 - $346,125,158).

• 2 The information for the years prior to 2021 has been retroactively restated to reflect the Class A share split effective December 14, 2021. Class A shareholders received 25 additional shares for every 100 shares held. Prior to the restatement:

  Number of Class A shares outstanding (000s) at the end of each year were: 2020 - 13,517; and 2019 - 8,706. Net Asset Value per unit at the end of each year were: 2020 - $20.76; and 2019 - $22.42.

  Net Asset Value per Class A share at the end of each year were: 2020 - $10.64; and 2019 - $12.30; Closing market price per Class A share at the end of each year were: 2020 - $10.60; and 2019 - $13.04.

• 3 MER for Class A shares is based on the requirements of NI 81-106 and includes the total expenses of the Fund for the stated period, including distributions on Preferred shares, issuance costs, Preferred share premium (discount) amortization, and a proportionate share of any underlying funds' expenses, but excluding brokerage commissions on securities transactions, and is expressed as an annualized percentage of the average Net Asset Value of the Fund for Class A shares over the period. Please see the Expense Ratio section following this table for further discussion of the calculation.

• 4 The trading expense ratio represents total commissions, transaction costs, and a proportionate share of any underlying funds' transaction costs expressed as an annualized percentage of daily average Net Asset Value of the Fund during the period.

• 5 The Fund's portfolio turnover rate indicates how actively the Fund manages its portfolio investments. A portfolio turnover rate of 100% is equivalent to the Fund buying and selling all of the securities in its portfolio once in the course of the year. The higher the Fund's portfolio turnover rate in a year, the greater the trading costs payable by the Fund in the year and the greater the chance of an investor receiving taxable capital gains in the year. There is not necessarily a relationship between a high turnover rate and the performance of the Fund. Portfolio turnover rate is calculated by dividing the lesser of the cost of purchases and the proceeds of sales of portfolio securities for the period, excluding cash and short-term investments maturing in less than one year, by the average market value of such investments during the period.

• 6 A unit includes one Class A share and one Preferred share. Net Asset Value per unit is determined by the Net Asset Value of the Fund, for which the Preferred shares are not treated as liabilities. Net Asset Value per unit includes any distributions declared and not paid that are payable to Shareholders.

• 7 Net Asset Value per Preferred share does not include the accrued Preferred share distributions and Preferred share discount/premium. Net assets per Preferred share net of Preferred share discount was $9.99 as at December 31, 2023 (December 31, 2022 - $9.78).

Expense Ratio

In 2023, the MER per Class A share, which includes agents' fees, issuance costs, Preferred share premium/discount amortization, and Preferred share distributions, was 13.26%, up from 8.48% in the prior year ended 2022. Expenses for agents' fees and issuance costs were borne by the new subscribing shareholders as the share issuances were priced at an amount higher than the Net Asset Value per unit plus these associated expenses; therefore, any share issuances are not dilutive for the existing shareholders. Pursuant to the prescribed regulatory formula, these costs must be included in the MER calculation. The MER per Class A share excluding agent's fees, issuance costs, and Preferred share premium/discount amortization was 9.20% in 2023 compared to 5.99% in the prior year. The primary reason for the increase in the MER was the rise in the Preferred share distribution rate, which came into effect on November 30, 2022. Excluding Preferred share distributions, the MER per Class A share was 1.63% in 2023 up from 1.37% in the prior year. The increase was reflective of a higher management fee calculated based on the Unit Net Asset Value; the growth rate of the Unit Net Asset Value surpassed that of the Class A Net Asset Value, resulting in an increase in the management fee as a proportion of the average Class A Net Asset Value.

The MER per unit (includes one Class A share and one Preferred share) of the Fund, excluding agents' fees, issuance costs, Preferred share premium/discount amortization, and Preferred share distributions, was 0.73% in 2023, compared to 0.72% in 2022. This latter ratio is more representative of the ongoing efficiency of the administration of the Fund.

PAST PERFORMANCE

The following chart and table show the past performance of the Fund. Past performance does not necessarily indicate how the Fund will perform in the future. The information shown is based on Net Asset Value per Class A share and per unit (each unit includes one Class A share and one Preferred share) and assumes that distributions (including deemed distributions based on the intrinsic value of the warrants at approximately the exercise date of the warrants) made by the Fund on the Class A shares and units in the periods shown were reinvested (at Net Asset Value per Class A share and per unit, respectively) in additional Class A shares and units of the Fund.

The bar chart shows the Fund's returns for a Class A share and a unit for the years ended December 31, 2014 to December 31, 2023. The chart shows, in percentage terms, how investments held in a Class A share and a unit of the Fund on the first day of each fiscal period would have changed by the last day of the fiscal period.

Year by Year Returns

Class A

Unit

The following table shows the Fund's compound return on a Class A share, Preferred share and unit for each period indicated compared with the S&P/TSX Capped Financials Index ("Financials Index"), the S&P/TSX Composite Index ("Composite Index") and the S&P/TSX Preferred Share Index ("Preferred Share Index") (together the "Indices"). The Financials Index is derived from the Composite Index based on the financials sector of the Global Industry Classification Standard. The Composite Index tracks the performance, on a market-weight basis, of a broad index of large-capitalization issuers listed on the TSX. The Preferred Share Index tracks the performance, on a market-weight basis, of a broad index of preferred shares trading on the TSX that meet the criteria relating to size, liquidity and issuer rating. The Fund passively invests on an approximately equal weight basis in a portfolio of six Canadian banks which are in both the Financials Index and the Composite Index but may hold up to 10% of its total assets in global financial services companies. Since the Indices have more diversified portfolios, it is not expected that the Fund's performance will mirror that of the indices. The Indices are calculated without the deduction of management fees, fund expenses and trading commissions, whereas the performance of the Fund is calculated after deducting such fees and expenses. Furthermore, the performance of the Fund's Class A shares is impacted by the leverage provided by the Fund's Preferred Shares.

Annual Compound Returns

1-Year 3-Year 5-Year 10-Year % % % %

Brompton Split Banc Corp. - Class A share1	10.8	12.1	12.3	10.6
S&P/TSX Capped Financials Index	13.9	12.1	11.7	9.3
S&P/TSX Equal Weight Diversified Banks TR Index	8.6	10.5	9.8	9.1
S&P/TSX Composite Index	11.8	9.7	11.3	7.6
Brompton Split Banc Corp. - Preferred share1	6.4	5.6	5.4	5.0
S&P/TSX Preferred Share Index	5.9	1.2	2.6	1.5
Brompton Split Banc Corp. - unit2	8.2	9.1	8.9	8.4

• 1 Based on the Net Asset Value per Class A share and Preferred share, and assuming that distributions on the Class A shares and Preferred shares made by the Fund in the periods shown were reinvested (at Net Asset Value per Class A share and Preferred share, respectively) in additional Class A shares and Preferred shares of the Fund.

• 2 Based on the Net Asset Value per unit (each unit includes one Class A share and one Preferred share) and assuming that distributions on the units made by the Fund were reinvested (at Net Asset Value per unit) in additional units of the Fund.

The Fund's mandate is to invest in the six big Canadian banks with a small allocation to a diversified portfolio of North American financials. In 2023, the Canadian banking sector experienced equity appreciation, with the share prices of the six big Canadian banks increasing by approximately 6% which was reflected in the Fund's unit performance. The Fund's Class A share performance return was exacerbated by the leverage obtained from the Preferred Shares, generating 10.8% return. The Fund's Preferred shares delivered a return of 6.4% with the new distribution rate as of November 30, 2022. Please see the Portfolio Manager's report for further details.

SUMMARY OF INVESTMENT PORTFOLIO

As at December 31, 2023

Total Net Asset Value¹	$ 394,507,132
% of	% of Net
Portfolio Composition	Portfolio	Asset Value
Banks	89.3	90.3
North American financials exchange-traded fund	8.9	9.0
Total Investments	98.2	99.3
Cash	1.8	1.8
Other net assets (liabilities)	(1.1)
Total	100.0	100.0
% of	% of Net
Holdings	Portfolio	Asset Value
Canadian Imperial Bank of Commerce	15.8	16.0
Bank of Montreal	15.3	15.5
Toronto-Dominion Bank	14.8	15.0
National Bank of Canada	14.7	14.8
Royal Bank of Canada	14.4	14.6
Bank of Nova Scotia	14.3	14.4
Brompton North American Financials Dividend ETF	8.9	9.0
Cash	1.8	1.8
Total	100.0	101.1

1

Net Asset Value of the Fund includes the value of the Preferred shares and Class J shares.

The investment portfolio may change due to ongoing portfolio transactions of the investment fund. Quarterly updates are available on the Fund's website atwww.bromptongroup.comwithin 60 days of each quarter end.

2023 TAX INFORMATION

The following information is applicable to holders who, for the purpose of the Income Tax Act (Canada), are resident in Canada and hold shares as capital property outside of an RRSP, DPSP, RRIF, RESP or TFSA. Shareholders should receive a T5 slip from their investment dealer providing this information.

T5 supplementary slips will indicate Capital Gains Dividends in Box 18 and Actual Amount of Eligible Dividends in Box 24. Dividend income is subject to the standard gross-up and federal dividend tax credit rules. The return of capital component is a non-taxable amount that serves to reduce the adjusted cost base of Fund shares.

The following tables outline the breakdown in the Fund's distributions on Class A and Preferred shares paid in 2023 on a per share basis:

Class A Shares

Eligible	Return of	Total
Dividends	Capital	Distributions
Record Date	Payment Date	$	$	$
30-Dec-22	16-Jan-23	0.00223	0.09777	0.10000
31-Jan-23	14-Feb-23	0.00223	0.09777	0.10000
28-Feb-23	14-Mar-23	0.00223	0.09777	0.10000
31-Mar-23	17-Apr-23	0.00223	0.09777	0.10000
28-Apr-23	12-May-23	0.00223	0.09777	0.10000
31-May-23	14-Jun-23	0.00223	0.09777	0.10000
30-Jun-23	17-Jul-23	0.00223	0.09777	0.10000
31-Jul-23	15-Aug-23	0.00223	0.09777	0.10000
31-Aug-23	15-Sep-23	0.00223	0.09777	0.10000
29-Sep-23	16-Oct-23	0.00223	0.09777	0.10000
31-Oct-23	14-Nov-23	0.00223	0.09777	0.10000
30-Nov-23	14-Dec-23	0.00223	0.09777	0.10000
0.02676	1.17324	1.20000
Preferred Shares
Eligible	Total
Dividends	Distributions
Record Date	Payment Date	$	$
30-Dec-22	16-Jan-23	0.13587	0.13587
31-Mar-23	17-Apr-23	0.15625	0.15625
30-Jun-23	17-Jul-23	0.15625	0.15625
29-Sep-23	16-Oct-23	0.15625	0.15625
0.60462	0.60462

This information is of a general nature and does not constitute legal or tax advice to any particular investor. Accordingly, investors are advised to consult their own tax advisors with respect to their individual circumstances.

MANAGER/PORTFOLIO MANAGER

Founded in 2000, Brompton is an experienced investment fund manager with income focused investment solutions including exchange-traded funds (ETFs) and other TSX traded investment funds. Brompton's Portfolio Management team specializes in Canadian and global equity investments and is a leading manager of covered call writing strategies in Canada. Brompton actively manages 21 investment funds, which are listed on the TSX.