Canadian High Income Equity Fund : Interim Report – 2022

TSX: CIQ.UN

Canadian High Income

Equity Fund

Interim Report 2022

Actively managed portfolio focused on higher-yielding Canadian securities.

VALUE

INTEGRITY

PERFORMANCE

THE FOUNDATION FOR EXCELLENCE

Canadian High Income Equity Fund - Interim Report 2022

MANAGEMENT REPORT OF FUND PERFORMANCE

August 17, 2022

This annual management report of fund performance for Canadian High Income Equity Fund (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.comor SEDAR at www.sedar.com. Unitholders 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

Canadian High Income Equity Fund is a mutual fund trust managed by Brompton Funds Limited (the "Manager"). The investment manager of the Fund is Bloom Investment Counsel, Inc. (the "Investment Manager"). The units of the Fund trade on the Toronto Stock Exchange ("TSX") under the symbol CIQ.UN. The units are RRSP, DPSP, RRIF, RESP and TFSA eligible.

INVESTMENT OBJECTIVES AND STRATEGIES

Canadian High Income Equity Fund is designed to provide unitholders with a high monthly distribution and the opportunity for capital appreciation through investment in an actively managed portfolio of publicly listed or traded Canadian securities. The Fund invests in an actively managed portfolio of publicly listed or traded Canadian securities across a broad range of industries.

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. 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 units of the Fund are discussed in the Fund's 2021 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 Fund during the period ended June 30, 2022, that materially affected the risks associated with an investment in the units of the Fund as they were discussed.

RESULTS OF OPERATIONS

Distributions

Cash distributions amounted to $0.24 per unit for the six months ended June 30, 2022, which has remained unchanged for the same period in 2021. Since inception in February 2010, the Fund has paid total cash distributions of $8.51 per unit.

The Fund has a distribution reinvestment plan which allows participating unitholders to automatically reinvest monthly distributions, commission free, in additional units of the Fund. Pursuant to this plan, 755 units were acquired in the market at an average price of $7.65 per unit and 398 units were issued from treasury at an average price of $7.67 during the period ended June 30, 2022.

Income and Expenses

The Fund earned income of $0.14 per unit in the first six months of 2022, unchanged from the same period in 2021. The Fund's expenses were $0.10 per unit for the six months of 2022, compared to $0.09 per unit for the same period in 2021.

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Canadian High Income Equity Fund - Interim Report 2022

Net Asset Value

The Net Asset Value per unit of the Fund at June 30, 2022 was $7.12, compared to December 31, 2021 at $7.97, a $0.85 per unit decrease as a result of portfolio losses and net loss from operations. Aggregate Net Asset Value of the Fund was $9.6 million at June 30, 2022, down from $10.7 million at December 31, 2021. The $1.1 million decrease in Net Asset Value reflected $0.8 million net loss from operations and $0.3 million in cash distributions paid.

Investment Portfolio

The Fund's investments at June 30, 2022 included 26 publicly listed Canadian securities, compared to 27 securities at December 31, 2021. During the period, the Fund sold its holding in Intertape Polymer Group Inc.. During the period ended June 30, 2022, the Fund had net realized and change in unrealized losses of $0.9 million. During the period, the Fund's portfolio positions across the eight sectors in which it was invested performed relatively the same. In comparison to the weightings as at December 31, 2021, during the period ended June 30, 2022, the Fund's portfolio sector weighting in the Financial sector was decreased by 7.4% and was reallocated to Short- Term Investments. The Industrial sector weighting as well was decreased by approximately 3.8% and was reallocated by approximately equal weights to the remainder of the sectors. The portfolio's investment weighting and detailed listing of the Fund's security holdings is provided in the financial statements.

Portfolio Sectors
	% of Portfolio	Realized	Change in	Total
Net Gains (Losses) by Sector (millions)	Unrealized
as of 30-Jun-22	$	$	$
Communication Services	3.2	-	-	-
Consumer Staples and Discretionary	20.2	-	(0.5)	(0.5)
Financial	17.7	0.2	(0.7)	(0.5)
Industrial	14.0	0.3	(0.2)	0.1
Materials	5.7	-	-	-
Oil and Gas	6.0	-	-	-
Pipes, Power, Utilities and Infrastructure	20.2	0.1	0.1	0.2
Real Estate	5.5	-	(0.2)	(0.2)
Short-Term Investments	7.5	-	-	-
Total	100.0	0.6	(1.5)	(0.9)

Liquidity and Capital Resources

To provide liquidity for unitholders, units of the Fund are listed on the TSX. The Fund's normal course issuer bid program allowed it to purchase up to approximately 10% of its units for cancellation for a period from March 14, 2021 to March 13, 2022 if they traded below Net Asset Value per unit. As a result, purchases under the issuer bid program were accretive to the Net Asset Value per unit at the time of purchase. During the period from January 1, 2022 to March 13, 2022, no units were purchased under this program. Subsequent to March 13, 2022 program's expiry date, the normal course issuer bid program was not renewed. Investors may redeem their units at Net Asset Value, less applicable costs, in accordance with the Fund's redemption provisions. During the period ended June 30, 2022, no units were redeemed.

RELATED PARTY TRANSACTIONS

Related-party transactions consist of services provided by the Manager pursuant to a management agreement. See the Management Fees section below.

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Canadian High Income Equity Fund - Interim Report 2022

MANAGEMENT FEES

Pursuant to a management agreement, the Manager provides management, investment management and administrative services to the Fund, for which it is paid a management fee equal to 1.25% per annum of the Net Asset Value of the Fund, plus applicable taxes. The Manager is responsible for paying the fees of the Investment Manager. The management fee is used by the Manager to cover certain costs to administer the Fund, the cost of the Investment Manager and for profit. For the first six months of 2022, management fees amounted to $0.07 million (six-month period ended June 30, 2021 - $0.09 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 which have been prepared in accordance with International Financial Reporting 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 unit. The increase (decrease) in Net Assets from operations is based on average units outstanding during the period, and all other numbers are based on actual units outstanding at the relevant point in time.

Net Assets per Unit1
				December 31
	June 30, 2022
For the period/year ended	2021	2020	2019	2018	2017
$	$	$	$	$	$
Net Assets per unit, beginning of period/year2	7.97	7.15	7.89	7.14	9.63	10.04
Increase (decrease) from operations:3
Total revenue	0.14	0.28	0.28	0.35	0.37	0.39
Total expenses	(0.10)	(0.19)	(0.16)	(0.20)	(0.21)	(0.22)
Realized gains (losses)	0.42	0.75	(0.06)	(0.47)	(0.21)	0.35
Unrealized gains (losses)	(1.06)	0.50	(0.40)	1.68	(1.67)	(0.37)
Total increase (decrease) in Net Assets	(0.60)	1.34	(0.34)	1.36	(1.72)	0.15
from operations
Distributions to unitholders:2,4
From net investment income	n/a	0.04	0.07	0.10	0.10	0.12
Return of capital	n/a	0.44	0.44	0.50	0.50	0.48
Total distributions to unitholders	0.24	0.48	0.51	0.60	0.60	0.60
Net Assets per unit, end of period/year2	7.12	7.97	7.15	7.89	7.14	9.63

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

Net Assets per unit and distributions per unit are based on the actual number of units outstanding at the relevant time.

The increase (decrease) in Net Assets from operations per unit is based on the weighted average number of units outstanding over the fiscal period. Allocations for tax purposes for the period ended June 30, 2022 are not available until year end.

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Canadian High Income Equity Fund - Interim Report 2022

Ratios and Supplemental Data (Based on Net Asset Value)

				December 31
As at	June 30, 2022	2021	2020	2019	2018	2017
Net Asset Value ($) (000s)	9,610	10,746	12,040	15,043	15,012	25,690
Number of units outstanding (000s)	1,349	1,348	1,685	1,905	2,104	2,668
Management expense ratio ("MER")1	2.65%	2.32%	2.35%	2.52%	2.33%	2.21%
Trading expense ratio2	0.03%	0.05%	0.07%	0.07%	0.08%	0.06%
Portfolio turnover rate3	4.23%	3.95%	15.18%	12.27%	9.62%	14.49%
Net Asset Value per unit ($)	7.12	7.97	7.15	7.89	7.14	9.63
Closing market price - units ($)	6.91	7.85	7.08	7.62	6.99	9.42

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MER is based on the requirements of NI 81-106 and includes the total expenses (excluding commissions and other portfolio transaction costs) of the Fund for the stated period, including interest expense and issuance costs, and is expressed as an annualized percentage of the average Net Asset Value of the period. Please see the Expense Ratio section following this table for further discussion of the calculation.

The trading expense ratio represents total commissions expressed as an annualized percentage of daily average Net Asset Value of the Fund during the period.

The Fund's portfolio turnover rate indicates how actively the Fund's Investment Manager 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.

Expense Ratio

The MER of the Fund for the first six months of 2022 was 2.65%, compared to 2.32% in 2021. The increase in MER was primarily a result of a lower average Net Asset Value in comparison to 2021, while the annualized expenses in dollar amounts remained relatively unchanged.

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