LBS.PR.A: Capital Unit Split

Brompton Funds has announced (on 2025-10-6):

Life & Banc Split Corp. (the “Fund”) is pleased to announce its intention to complete a stock split of its class A shares (the “Share Split”) due to the Fund’s strong performance. Class A shareholders of record at the close of business on October 27, 2025 will receive 10 additional class A shares for every 100 class A shares held, pursuant to the Share Split. The Share Split is subject to the approval of the Toronto Stock Exchange (the “TSX”).

Class A shareholders will continue to receive regular monthly cash distributions targeted to be $0.10 per class A share following the Share Split. As a result, the total dollar amount of distributions to be paid to class A shareholders is expected to increase by approximately 10%. The Fund provides a distribution reinvestment plan, on a commission-free basis for class A shareholders that wish to reinvest distributions and realize the benefits of compound growth.

Over the last 10 years, the class A shares have delivered a 20.5% per annum total return based on net asset value, outperforming the S&P/TSX Capped Financials Total Return Index by 6.8% per annum and the S&P/TSX Composite Total Return Index by 8.7% per annum.(1) Since inception, class A shareholders have received cash distributions of $20.95 per share.

Following the completion of the Share Split, the preferred shares of the Fund are expected to have downside protection from a decline in the value of the Fund’s portfolio of approximately 52%.(2)

The class A shares are expected to commence trading on an ex-split basis at the opening of trading on October 27, 2025. No fractional class A shares will be issued and the number of class A shares each holder shall receive will be rounded down to the nearest whole number. The Share Split is a non-taxable event.

The Fund invests on an approximately equally weighted basis in a portfolio consisting of common shares of the six largest Canadian banks and the four major publicly traded Canadian life insurance companies:

Bank of Montreal	Great-West Lifeco Inc.
National Bank of Canada	The Bank of Nova Scotia
Canadian Imperial Bank of Commerce	Royal Bank of Canada
iA Financial Corporation Inc.	The Toronto-Dominion Bank
Sun Life Financial Inc.	Manulife Financial Corporation

This harms the credit quality of the preferreds by increasing the cash drag (due to increased distributions to the Capital Units due to the split) and by decreasing the Asset Coverage ratio. However, with a Whole Unit NAVPU of 22.31 as of 2025-10-9, there is no immediate cause for alarm.

My guess is that they’re doing this to increase the leverage provided by owning the Capital Units, given my assumption that this is what these shareholders want.