Dividend Growth Split : Annual Report – 2021

TSX: DGS, DGS.PR.A

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Dividend Growth

Split Corp.

Annual Report 2021

Large-capitalization portfolio of primarily Canadian equities with high dividend growth rates and high yields.

VALUE

INTEGRITY PERFORMANCE

THE FOUNDATION FOR EXCELLENCE

MANAGEMENT REPORT OF FUND PERFORMANCE

March 18, 2022

This annual management report of fund performance for Dividend Growth 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 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

Dividend Growth Split Corp. is a mutual fund corporation managed by Brompton Funds Limited (the "Manager"). The Fund has Class A and Preferred shares which trade on the Toronto Stock Exchange ("TSX") under the symbols DGS and DGS.PR.A, respectively. The Class A and Preferred shares are RRSP, DPSP, RRIF, RESP and TFSA 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 termination. However, the Net Asset Value of Preferred shares 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 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.

The Fund invests in a portfolio consisting primarily of equity securities of Canadian dividend growth companies. In addition, the Fund may hold up to 20% of the total assets of the portfolio directly in global dividend growth companies or indirectly through exchange-traded funds for diversification and improved return potential, at the Manager's discretion. Covered call options and cash-covered put options may be written from time to time in respect of the equity securities of the issuers included in the portfolio to generate additional distributable income for the Fund and to reduce volatility. Investments will generally be equal weighted at the time of investment and after rebalancing the portfolio, but the Fund may hold non-equal weight positions.

In order to qualify for inclusion in the portfolio, at the time of investment and at the time of each periodic reconstitution and/or rebalancing, each dividend growth company included in the portfolio directly must (i) have a market capitalization of at least $2.0 billion, and (ii) have a history of dividend growth or, in the Manager's view, have high potential for future dividend growth.

In addition, the Fund will hedge substantially all of its foreign currency exposure to the holdings in the portfolio back to the Canadian dollar, if any.

RECENT DEVELOPMENTS Treasury Offering

On March 3, 2022, the Fund completed a treasury offering of Class A shares and Preferred shares for an aggregate gross proceeds of approximately $67 million. Class A shares were offered at $6.80 and Preferred shares were offered at a price of $10.00 per share.

On December 15, 2021 the Fund completed a treasury offering of Class A shares and Preferred shares for an aggregate gross proceeds of approximately $76.4 million. Class A shares were offered at $6.80 and Preferred shares were offered at a price of $10.00 per share.

On September 28, 2021 the Fund completed a treasury offering of Class A shares and Preferred shares for an aggregate gross proceeds of approximately $60.2 million. Class A shares were offered at $6.70 and Preferred shares were offered at a price of $10.00 per share.

Market Conditions

The outbreak of the respiratory disease COVID-19 continues to affect certain businesses with new variants exhibiting increased transmissibility. Government efforts to protect their constituents and health care systems may cause increased volatility in the financial markets and prices of the securities held by the Fund. Furthermore, aggressive fiscal and monetary policy responses by governments have contributed to increased levels of inflation which may lead 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. 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 2021 annual information form, which is available on the Fund's website atwww.bromptongroup.comor on SEDAR at www.sedar.com. There were no changes during the year ended December 31, 2021 that materially affected the risks associated with an investment in the shares of the Fund as they were discussed in the annual information form.

RESULTS OF OPERATIONS Distributions

Class A share distributions declared in 2021 amounted to $1.00 per share, reflecting 10 monthly distributions of $0.10 per share for the months of March to December. The Net Asset Value per unit (each unit includes one Class A share and one Preferred share) of the Fund was less than $15 per unit for the months of January and February and, consequently there were no distributions on the Class A shares for those months. In 2020, Class A share distributions amounted to $0.20 per share, reflecting 2 monthly distributions of $0.10 per share for the months of January and February. Preferred share declared distributions were $0.55 per share in 2021, unchanged from 2020. Since inception, the Fund has distributed $14.49 per Class A share and $7.40 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. In 2021, 252,168 Class A shares were acquired in the market at an average price of $6.69 pursuant to the distribution reinvestment plan.

Income and Expenses

The Fund's investment portfolio generated income of $0.54 per Class A share in 2021, unchanged from 2020. Expenses were $0.24 per Class A share in 2021 compared to $0.10 per Class A share in 2020. The increase was due to issuance costs included in total expenses, which represented $0.13 per unit. Issuance costs were borne by new subscribing shareholders through the payment of premium issue price over the current Net Asset Value by the new Class A shareholders.

Net Asset Value

Net Asset Value per Class A share was $6.47 at December 31, 2021 compared to $3.99 at December 31, 2020. The 62.2% or $2.48 per Class A share increase was due primarily to gains from securities in the portfolio. The Net Asset Value of the Fund is determined by taking the total assets of the Fund and deducting the Fund's liabilities. 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 Fund's aggregate Net Asset Value at December 31, 2021 was $727.7 million, up from $425.6 million at December 31, 2020. The $302.1 million increase reflected $134.2 million of net investment income, $233.8 million proceeds from treasury offering, less Class A share distributions of $35.8 million, Preferred share distributions of $19.4 million, $0.7 million Class A retraction payment, $1.5 million Preferred shares retraction payment, and $8.5 million agents' fees and issuance costs in connection with the treasury offering.

Investment Portfolio

The Fund's investments at December 31, 2021 include 34 Canadian equities and 1 exchange-traded fund investment, which is managed by the Manager to enhance global diversification. In comparison at December 31, 2020, the Fund held 33 Canadian equities and 1 exchange-traded fund investment, which is managed by the Manager. The exchange-traded fund is Brompton Global Dividend Growth ETF and this investment provides exposure to global dividend growth companies.

The Fund had net realized and change in unrealized gain of $119.5 million during the year ended December 31, 2021. The Fund's top performing sectors were Financials, Industrials and Energy. As of December 31, 2021, the Fund's Net Asset Value (includes the value of the Preferred shares) consisted of 11.2% in an exchange-traded fund ("ETF") managed by the same manager of the Fund. The Fund's total percentage of ownership interest in the ETF is approximately 86.6%.

There are 7 outstanding option contracts as of December 31, 2021, which represent 2.6% of the equites portfolio. During 2021, the Fund wrote call options on an average notional of 2.5% of the Fund's portfolio. As of December 31, 2021 the Fund generated $1.4 million premiums from its call options written and has generated $1.6 million net realized and change in unrealized loss. This loss represents the premiums received less the amounts paid to close out the options at expiry.

Portfolio Sectors

Change in

Unrealized	Total
Net Gains (Losses) by Sector (millions)	as of 31-Dec-21	$	$	$
Communication services	7.3	0.3	4.5	4.8
Consumer discretionary	6.8	3.7	2.3	6.0
Consumer staples	5.7	(0.2)	7.1	6.9
Energy	12.1	(0.4)	20.9	20.5
Financials	28.0	8.1	25.8	33.9
Industrials	15.4	10.0	14.4	24.4
Information technology	-	0.7	(0.3)	0.4
Materials	5.4	1.6	7.0	8.6
Real estate	4.5	(0.5)	4.3	3.8
Utilities	3.6	7.0	(4.9)	2.1
Brompton Global Dividend Growth ETF	11.2	-	9.7	9.7
Options	-	(1.7)	0.1	(1.6)
Total	100.0	28.6	90.9	119.5
Liquidity

% of Portfolio Realized

To provide liquidity for shareholders, the Class A shares and Preferred shares of the Fund are listed on the TSX. Investors may also retract their shares at Net Asset Value, less applicable costs, 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, 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 these purposes, 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, 2021, management fees were $3.1 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.

Net Assets per Class A share1

2021	2020	2019	2018	2017
For the year ended December 31	$	$	$	$	$
Net Assets, beginning of year2	3.99	5.20	3.56	7.12	7.10
Increase (decrease) from operations:3
Total revenue	0.54	0.54	0.57	0.67	0.69
Total expenses	(0.24)	(0.10)	(0.12)	(0.13)	(0.30)
Preferred share distributions	(0.56)	(0.54)	(0.53)	(0.52)	(0.56)
Realized gains (losses)	0.83	(0.16)	1.10	(0.56)	0.16
Unrealized gains (losses)	2.63	(0.78)	1.48	(2.13)	1.01
Total increase (decrease) in Net Assets	3.20	(1.04)	2.50	(2.67)	1.00
from operations
Distributions to Class A shareholders:2
Return of capital	1.00	0.20	0.80	0.90	1.20
Total distributions to Class A shareholders	1.00	0.20	0.80	0.90	1.20
Net Assets, end of year2	6.47	3.99	5.20	3.56	7.12
4

• 1 Financial information was prepared in accordance with International Financial Reporting Standards.

• 2 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.

• 3 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.