Annual Report – 2022

TSX: LCS, LCS.PR.A

Brompton Lifeco

Split Corp.

Annual Report 2022

Equal-weight portfolio of major

Canadian life insurance companies.

VALUE

INTEGRITY

PERFORMANCE

THE FOUNDATION FOR EXCELLENCE

Brompton Lifeco Split Corp. - Annual Report 2022

MANAGEMENT REPORT OF FUND PERFORMANCE

March 17, 2023

This annual management report of fund performance for Brompton Lifeco Split 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 at www.bromptongroup.com or SEDAR at www.sedar.com. Shareholders may also contact us 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 Lifeco Split Corp. is a mutual fund corporation managed by Brompton Funds Limited (the "Manager"). The Fund has Class A and Preferred shares outstanding which trade on the Toronto Stock Exchange ("TSX") under the symbols LCS and LCS.PR.A, respectively. The Class A and Preferred shares are RRSP, DPSP, RRIF, RESP and TFSA eligible. The Preferred shares are rated Pfd-3 (low) 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 stocks. Class A shares capture the movement of the underlying stocks but in a more magnified way than if an investor owned the underlying portfolio of securities directly. This magnification of retuis commonly known as "leverage", which is provided by the preferred shares.

INVESTMENT OBJECTIVES AND STRATEGIES

The Fund's investment objectives are:

1. to provide holders of Preferred shares with fixed, cumulative, preferential quarterly cash distributions and to retuthe original issue price of $10.00 per Preferred share to Preferred shareholders at maturity; and
2. to provide holders of Class A shares with regular monthly cash distributions, targeted to be $0.075 per share, and the opportunity for growth in Net Asset Value per share.

To achieve these objectives, the Fund invests in a common share portfolio of the following Canadian life insurance companies on an equally weighted basis at the time of investment and any subsequent rebalancing:

Life Insurance Companies

The Fund's portfolio is rebalanced at least annually to adjust for changes in the market value of investments and to reflect the impact of a merger or acquisition affecting one or more of the life insurance companies. Covered call options and cash-covered put options may be written in respect of the portfolio to generate additional distributable income for the Fund and/or to reduce the volatility of the Fund. In addition, the Fund may sell investments for working capital purposes or replace investments with proceeds from the exercise of covered call options previously written.

RECENT DEVELOPMENTS

Market Conditions

Fiscal and monetary policy responses to increased levels of inflation have led to higher interest rates and to fluctuations in securities prices. In addition, global political tension and military events in Ukraine and Russia have also caused increased volatility and disruptions in global financial markets.

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Brompton Lifeco Split Corp. - Annual Report 2022

The collapse of Silicon Valley Bank and Signature Bank, followed by unfavourable news for Credit Suisse in early March 2023 led to overall financial market decline especially in the banking sector as of the date of the annual report. The Fund does not have any direct exposure to the three banks but its portfolio value has been impacted by overall market selloff.

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 at www.bromptongroup.com.

RISKS

Risks associated with an investment in the shares of the Fund are discussed in the Fund's 2022 annual information form, which is available on the Fund's website at www.bromptongroup.com or on SEDAR at www.sedar.com. There were no changes to the risks during the year ended December 31, 2022 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

The Fund distributed $0.30 per class A share during the year ended December 31, 2022, reflecting four monthly distributions of $0.075 per share for the months of January to April. During 2021, Class A shareholders received distributions of $0.825 per share reflecting eleven monthly distributions of $0.075 per share for the months of February to December. Per the terms of the Fund's distribution plan, no distributions will be paid on to the Class A Shares if (i) the distributions payable on the Preferred Shares are in arrears, or (ii) in respect of a cash distribution, after the payment of a cash distribution by the Company, the NAV per Unit would be less than $15.00. The Fund's Preferred shares declared distributions of $0.625 per share in the year ended December 31, 2022, unchanged from 2021. Since inception, the Fund has distributed $7.38 per Class A share and $8.76 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, 2022, 9,632 Class A shares were acquired in the market at an average price of $6.45 per Class A share.

Income and Expenses

The Fund's investment portfolio generated income of $0.71 per Class A share during the year ended December 31, 2022 compared to $0.65 in 2021. The Fund's dividend income increased by $0.06 per Class A share or by 9.2% due to the Fund's constituents increasing their dividend rates for the year on average by 16.5% in comparison to the rates they paid in the prior year. Expenses were $0.30 per Class A share, compared to $0.15 per Class A share in 2021. Class A expenses as of December 31, 2022 include $0.17 per share that arose from the treasury offerings of the Preferred shares that closed during the year. Excluding this, Class A expenses were $0.13 per share compared to $0.15 in 2021.

Net Asset Value

The Net Asset Value per Class A share was $4.80 at December 31, 2022 compared to $6.20 at December 31, 2021. This reflected 22.6% or $1.40 per Class A share decrease. 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. The aggregate Net Asset Value of the Fund was $133.5 million at December 31, 2022 compared to $79.6 million at December 31, 2021, reflecting an increase of 67.7% or $53.9 million. During the year, the fund had gross proceeds of $70.5 million from follow on treasury offerings.

Investment Portfolio

As of December 31, 2022, The Fund had $0.1 million in net realized gains and $10.1 million in net change in unrealized losses for the year ended December 31, 2022. The stock price of Great-West Lifeco Inc. and Sun Life Financial Inc. in comparison to their price at December 31, 2021 had respectively decreased by 17.5% and 10.7% as at December 31, 2022. The Fund's holdings in iA Financial Corporation Inc. softened the overall net realized and change in unrealized loss, as it had $2.3 million in net realized and change in unrealized gains, attributed by an increase of 9.5% in the stocks price over the year. For the year ended December 31, 2022, the Fund selectively wrote call options on the insurance companies in the portfolio to generate premiums of $0.3 million and had a net realized and change in unrealized loss on the options of $0.3 million. The net loss represents the premiums received less the amounts paid to close out the options at expiry. For the year ended December 31, 2022, the Fund wrote call options on an average notional value of 1.2% of the Fund's portfolio. There were 2,008 outstanding option contracts as of December 31, 2022 which represent 5.3% of the portfolio.

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Brompton Lifeco Split Corp. - Annual Report 2022

Liquidity

To provide liquidity for shareholders, the Class A shares and Preferred shares of the Fund are listed on the TSX. Investors may 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.

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 0.60% per annum of the Net Asset Value 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. In 2022, management fees amounted to $0.8 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. 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.

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Brompton Lifeco Split Corp. - Annual Report 2022

Net Assets per Class A Share1

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