Dividend Growth Split : Interim Report – 2023

TSX: DGS, DGS.PR.A

.

Dividend Growth

Split Corp.

Interim Report 2023

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

VALUE

INTEGRITY

PERFORMANCE

THE FOUNDATION FOR EXCELLENCE

Dividend Growth Split Corp. - Interim Report 2023

MANAGEMENT REPORT OF FUND PERFORMANCE

August 18, 2023

This interim management report of fund performance for Dividend Growth Split Corp. (the "Fund") contains financial highlights but does not contain the unaudited interim financial statements of the Fund. The unaudited interim 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 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 outstanding which are traded 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 (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 price 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:

1. 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
2. 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, at the Manager's discretion, 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. 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 cash 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 directly in the portfolio must (i) have a market capitalization of at least CDN$2.0 billion, and (ii) have a history of dividend growth or, in the Manager's view, have high potential for future dividend growth.

The Manager, at its discretion, selectively writes covered call options and cash-covered put options from time to time in respect of the holdings included in the portfolio to generate additional distributable cash for the Fund and to reduce volatility. In addition, the Fund 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 ("ETF"). This may include exchange-traded funds managed by the Manager. There is no duplication of management fees payable by the Fund in connection with any investment by the Fund in exchange-traded funds managed by the Manager.

1

Dividend Growth Split Corp. - Interim Report 2023

RECENT DEVELOPMENTS

At-The-Market Equity Program

On April 14, 2023, the Fund announced that it has established an at-the-market equity program ("ATM Program"), which would allow the Fund to issue Class A and Preferred shares to the public from time to time, at the Fund's discretion. Any Class A shares or Preferred Shares sold in the ATM Program will be sold through the Toronto Stock Exchange (the "TSX") or any other marketplace in Canada on which these shares are listed, quoted or otherwise traded at the prevailing market price at the time of sale.

The volume and timing of distributions under the ATM Program, if any, will be determined at the Fund's sole discretion. The Fund intends to use the proceeds from the ATM program in accordance with the investment objectives and investment strategies of the Company subject to the investment restrictions of the Fund. The ATM Program has been offered pursuant to a prospectus supplement dated April 14, 2023 to the Fund's short form base shelf prospectus dated December 21, 2021.

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 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 period ended June 30, 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 six months ended June 30, 2023, amounted to $0.20 per share, compared to $0.50 per Class A share for the six months ended June 30, 2022. This reflected two monthly cash payments of $0.10 per Class A share in 2023, compared to five monthly cash payments of $0.10 per Class A share in 2022. The terms of the Fund's distribution plan state that no distributions will be paid on the Class A shares if, after the payment of a cash distribution by the Fund, the Net Asset Value per unit (each unit includes one Class A share and one Preferred share) would be less than $15.00. Preferred share cash distributions declared were $0.28 per share for the six months ended June 30, 2023, unchanged from the same period in 2022. Since its inception date of December 3, 2007, the Fund has paid total cash distributions of $15.69 per Class A share and $8.22 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 six months ended June 30, 2023, 149,950 Class A shares were acquired in the market at an average price of $5.99 per Class A share.

Income and Expenses

The Fund earned income of $0.27 per Class A share during the six months ended June 30, 2023, compared to $0.24 per Class A share during the six months ended June 30, 2022. The increase in income can be largely attributed to a special distribution earned from Thomson Reuters Corp. in June 2023. The special distribution amounted to $0.02 per Class A share. Expenses for the period ended June 30, 2023, amounted to $0.05 per Class A share, compared to $0.08 per Class A share for the same period in 2022. Expenses include issue costs, agents' fees and Preferred share premium/discount amortization incurred, if applicable 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 $0.05 per share for the first six months of 2023, unchanged from the same period in 2022.

Net Asset Value

The Net Asset Value per Class A share was $4.97 at June 30, 2023, up 4.9% from $4.74 at December 31, 2022. The aggregate Net Asset Value of the Fund was $720.5 million at June 30, 2023, up from $709.3 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.

2

Dividend Growth Split Corp. - Interim Report 2023

Investment Portfolio

As at June 30, 2023, the Fund's investment portfolio included 32 securities across 9 sectors, and 1 exchange-traded fund which is managed by the same Manager, compared to 35 securities across 8 sectors, and 1 exchange-traded fund at December 31, 2022. During the six months ended June 30, 2023, the Fund bought 5 securities and sold 8 securities. The exchange-traded fund in the portfolio is Brompton Global Dividend Growth ETF, and this investment provides exposure to global dividend growth companies. As at June 30, 2023, the underlying ETF represented 9.6% 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 six months ended June 30, 2023, the Fund's portfolio recorded net realized gains of $12.1 million and a change in unrealized gains of $11.4 million. The Fund's overweight positions in the Consumer Discretionary sector saw the largest net gains, contributing $10.6 million. In addition, the Fund's gains from the Financials sector were strengthened by reducing exposure to Banks and reallocating those funds towards the Life Insurance and Wealth Management sectors.

During the first six months of 2023, the Fund selectively wrote covered call options on the underlying securities in the portfolio and generated premiums of $3.0 million. The net realized and change in unrealized loss on option writing was $1.2 million which represents the premium received, less the amount paid to close out the options at expiry. As at June 30, 2023, there were 6,450 option contracts outstanding, with a notional value representing 8.2% of the portfolio.

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

Liquidity

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 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 June 30, 2023, 0.4% of the Fund's Preferred shares were held by two investment funds managed by the Manager (December 31, 2022 - 0.1%).

3

Dividend Growth Split Corp. - Interim Report 2023

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 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 period ended June 30, 2023 management fees were $2.1 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 unaudited interim and 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

4