UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT
INVESTMENT COMPANY
Investment Company Act file number 811-21727
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First Trust Mortgage Income Fund
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(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(Name and address of agent for service)
Registrant's telephone number, including area code: 630-765-8000
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Date of fiscal year end: October 31
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Date of reporting period: July 31, 2017
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Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 (ss.ss. 239.24 and 274.5 of
this chapter), to file reports with the Commission, not later than 60 days after
the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under
the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use
the information provided on Form N-Q in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and
the Commission will make this information public. A registrant is not required
to respond to the collection of information contained in Form N-Q unless the
Form displays a currently valid Office of Management and Budget ("OMB") control
number. Please direct comments concerning the accuracy of the information
collection burden estimate and any suggestions for reducing the burden to the
Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC
20549. The OMB has reviewed this collection of information under the clearance
requirements of 44 U.S.C. ss. 3507.
ITEM 1. SCHEDULE OF INVESTMENTS. The Schedule of Investments is attached
herewith.
FIRST TRUST MORTGAGE INCOME FUND (FMY)
PORTFOLIO OF INVESTMENTS
JULY 31, 2017 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- -------------------------------------------------------- ----------- -------------- ------------
MORTGAGE-BACKED SECURITIES - 62.7%
COLLATERALIZED MORTGAGE OBLIGATIONS - 53.0%
Accredited Mortgage Loan Trust
$ 380,145 Series 2003-2, Class A1 ............................. 4.98% 10/01/33 $ 388,456
ACE Securities Corp. Home Equity Loan Trust
969,323 Series 2006-ASAP6, Class A2D (a)..................... 1.45% 12/25/36 508,406
Banc of America Funding Corp.
127,102 Series 2008-R2, Class 1A4 (b)........................ 6.00% 09/01/37 131,909
Banc of America Mortgage Trust
53,106 Series 2002-L, Class 1A1 (a)......................... 2.52% 12/01/32 48,764
278,511 Series 2005-A, Class 2A1 (a)......................... 3.43% 02/01/35 278,230
Chase Mortgage Finance Trust
239,617 Series 2007-A1, Class 1A3 (a)........................ 3.48% 02/01/37 238,525
Citigroup Mortgage Loan Trust
409,128 Series 2005-6, Class A1 (a).......................... 2.69% 09/01/35 423,513
954,611 Series 2012-7, Class 10A2 (a) (b).................... 3.56% 09/01/36 897,707
Countrywide Asset-Backed Certificates
107,742 Series 2006-S8, Class A6 ............................ 5.51% 04/01/36 107,005
Countrywide Home Loan Mortgage Pass-Through Trust
522,080 Series 2003-46, Class 2A1 (a)........................ 3.30% 01/01/34 519,554
341,681 Series 2006-21, Class A8 ............................ 5.75% 02/01/37 306,901
573,966 Series 2006-HYB5, Class 3A1A (a)..................... 3.30% 09/01/36 468,777
Credit Suisse First Boston Mortgage Securities Corp.
376,275 Series 2004-AR2, Class 1A1 (a)....................... 3.40% 03/01/34 372,483
639,826 Series 2004-AR8, Class 6A1 (a)....................... 3.31% 09/01/34 644,154
197,211 Series 2005-5, Class 3A2 (a)......................... 1.53% 07/25/35 191,077
Deutsche ALT-A Securities Inc Mortgage Loan Trust
35,496 Series 2003-3, Class 3A1 ............................ 5.00% 10/01/18 35,752
DSLA Mortgage Loan Trust
792,505 Series 2004-AR3, Class 2A2A (a)...................... 1.60% 07/19/44 782,735
864,815 Series 2007-AR1, Class 2A1A (a)...................... 1.37% 04/19/47 771,081
GMAC Mortgage Corporation Loan Trust
145,914 Series 2004-AR1, Class 22A (a)....................... 3.96% 06/01/34 143,312
GSR Mortgage Loan Trust
15,782 Series 2003-10, Class 1A12 (a)....................... 3.26% 10/01/33 15,721
285,438 Series 2005-AR1, Class 4A1 (a)....................... 2.75% 01/01/35 273,317
Harborview Mortgage Loan Trust
487,548 Series 2004-6, Class 3A1 (a)......................... 3.78% 08/01/34 473,736
Home Equity Asset Trust
65,000 Series 2005-3, Class M4 (a).......................... 1.87% 08/25/35 64,256
520,000 Series 2005-9, Class M1 (a).......................... 1.64% 04/25/36 493,995
Impac CMB Trust
298,976 Series 2004-6, Class 1A2 (a)......................... 2.01% 10/25/34 288,121
IXIS Real Estate Capital Trust
1,178,447 Series 2007-HE1, Class A3 (a)........................ 1.39% 05/25/37 480,556
JP Morgan Mortgage Trust
1,289,310 Series 2005-ALT1, Class 4A1 (a)...................... 3.56% 10/01/35 1,222,627
See Notes to Portfolio of Investments
FIRST TRUST MORTGAGE INCOME FUND (FMY)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2017 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- -------------------------------------------------------- ----------- -------------- ------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
JP Morgan Mortgage Trust (Continued)
$ 1,174,527 Series 2006-A2, Class 4A1 (a)........................ 3.71% 08/01/34 $ 1,185,429
286,737 Series 2006-A2, Class 5A3 (a)........................ 3.15% 11/01/33 292,436
JP Morgan Re-REMIC
310,716 Series 2009-7, Class 12A1 (b)........................ 6.25% 01/03/37 316,652
MASTR Alternative Loan Trust
3,959,093 Series 2006-2, Class 2A3 (a)......................... 1.58% 03/25/36 878,053
MASTR Asset Backed Securities Trust
945,023 Series 2006-HE5, Class A3 (a)........................ 1.39% 11/25/36 622,919
1,420,963 Series 2006-NC2, Class A3 (a)........................ 1.34% 08/25/36 763,309
648,602 Series 2006-NC2, Class A5 (a)........................ 1.47% 08/25/36 356,853
MASTR Asset Securitization Trust
23,269 Series 2003-11, Class 5A2 ........................... 5.25% 12/01/23 23,030
90,471 Series 2003-11, Class 6A16 .......................... 5.25% 12/01/33 91,804
Mellon Residential Funding Corp. Mortgage Pass-Through
Trust
370,105 Series 2001-TBC1, Class A1 (a)....................... 1.93% 11/15/31 370,956
384,874 Series 2002-TBC2, Class A (a)........................ 2.09% 08/15/32 370,608
Meritage Mortgage Loan Trust
318,139 Series 2004-2, Class M3 (a).......................... 2.21% 01/25/35 315,117
Morgan Stanley Mortgage Loan Trust
790,954 Series 2004-7AR, Class 2A6 (a)....................... 3.34% 09/01/34 811,958
MortgageIT Trust
329,934 Series 2005-2, Class 2A (a).......................... 2.88% 05/01/35 323,531
Nomura Asset Acceptance Corporation
663,684 Series 2004-AR4, Class M1 (a)........................ 1.83% 12/25/34 663,899
Nomura Resecuritization Trust
1,263,000 Series 2015-6R, Class 2A4 (a) (b).................... 6.81% 01/02/37 1,055,110
Provident Funding Mortgage Loan Trust
113,020 Series 2004-1, Class 1A1 (a)......................... 3.26% 04/01/34 113,265
396,665 Series 2005-1, Class 1A1 (a)......................... 3.45% 05/01/35 398,045
Residential Accredit Loans, Inc.
162,954 Series 2006-QO1, Class 2A1 (a)....................... 1.50% 02/25/46 114,512
2,030,019 Series 2006-QS6, Class 1AV, IO (a)................... 0.76% 06/01/36 55,014
Residential Asset Securitization Trust
49,191 Series 2004-A3, Class A7 ............................ 5.25% 06/01/34 50,731
Saxon Asset Securities Trust
1,008,323 Series 2007-2, Class A2D (a)......................... 1.53% 05/25/47 761,912
Springleaf Mortgage Loan Trust
120,434 Series 2013-3A, Class A (b).......................... 1.87% 09/01/57 120,600
850,000 Series 2013-3A, Class M3 (b)......................... 5.00% 09/01/57 857,854
Structured Adjustable Rate Mortgage Loan Trust
489,409 Series 2004-2, Class 4A2 (a)......................... 3.34% 03/01/34 491,288
Structured Asset Securities Corp. Mortgage
Pass-Through Certificates
49,997 Series 2001-SB1, Class A2 ........................... 3.38% 08/01/31 49,597
Thornburg Mortgage Securities Trust
412,896 Series 2003-4, Class A1 (a).......................... 1.87% 09/25/43 401,032
See Notes to Portfolio of Investments
FIRST TRUST MORTGAGE INCOME FUND (FMY)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2017 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- -------------------------------------------------------- ----------- -------------- ------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Towd Point Mortgage Trust
$ 656,324 Series 2015-2, Class 2A1 (a) (b)..................... 3.75% 11/01/57 $ 678,805
Wachovia Mortgage Loan Trust, LLC
381,546 Series 2006-A, Class 3A1 (a)......................... 3.16% 05/01/36 364,885
WaMu Mortgage Pass-Through Certificates
195,591 Series 2003-AR5, Class A7 (a)........................ 3.06% 06/01/33 198,727
540,203 Series 2004-AR1, Class A (a)......................... 3.14% 03/01/34 550,263
616,627 Series 2004-AR10, Class A1B (a)...................... 1.65% 07/25/44 600,629
479,348 Series 2004-AR13, Class A1A (a)...................... 1.95% 11/25/34 476,828
94,560 Series 2004-AR3, Class A2 (a)........................ 3.14% 06/01/34 96,159
635,182 Series 2005-AR1, Class A1A (a)....................... 1.87% 01/25/45 632,204
912,332 Series 2005-AR11, Class A1A (a)...................... 1.55% 08/25/45 906,342
848,933 Series 2005-AR6, Class 2A1A (a)...................... 1.46% 04/25/45 815,801
355,498 Series 2005-AR9, Class A1A (a)....................... 1.87% 07/25/45 350,979
617,523 Series 2006-AR2, Class 1A1 (a)....................... 2.92% 03/01/36 588,967
Washington Mutual Alternative Mortgage Pass-Through
Certificates
28,557 Series 2007-5, Class A11 (c)......................... 32.09% 06/25/37 53,872
Washington Mutual MSC Mortgage Pass-Through
Certificates
418,010 Series 2004-RA1, Class 2A ........................... 7.00% 03/01/34 457,573
Wells Fargo Mortgage Backed Securities Trust
472,952 Series 2003-H, Class A1 (a).......................... 3.09% 09/01/33 481,008
547,364 Series 2004-A, Class A1 (a).......................... 3.11% 02/01/34 555,121
56,199 Series 2004-EE, Class 3A1 (a)........................ 3.60% 12/01/34 58,426
1,012,378 Series 2004-R, Class 1A1 (a)......................... 3.07% 09/01/34 1,027,615
257,966 Series 2004-S, Class A1 (a).......................... 3.30% 09/01/34 263,961
509,679 Series 2004-Y, Class 1A2 (a)......................... 3.00% 11/01/34 520,511
6,785 Series 2004-Z, Class 2A1 (a)......................... 3.00% 12/01/34 6,901
28,580 Series 2004-Z, Class 2A2 (a)......................... 3.00% 12/01/34 29,068
264,705 Series 2005-AR10, Class 2A17 (a)..................... 3.20% 06/01/35 271,200
548,198 Series 2005-AR16, Class 1A1 (a)...................... 3.42% 08/01/33 563,838
401,136 Series 2005-AR3, Class 2A1 (a)....................... 3.36% 03/01/35 405,640
398,472 Series 2005-AR8, Class 1A1 (a)....................... 3.29% 06/01/35 406,124
460,762 Series 2006-13, Class A5 ............................ 6.00% 10/01/36 456,508
148,753 Series 2007-16, Class 1A1 ........................... 6.00% 12/04/37 155,822
229,106 Series 2007-2, Class 1A13 ........................... 6.00% 03/01/37 227,372
54,187 Series 2007-8, Class 2A2 ............................ 6.00% 07/01/37 54,348
------------
34,681,681
------------
COMMERCIAL MORTGAGE-BACKED SECURITIES - 9.7%
Banc of America Commercial Mortgage Trust
16,403 Series 2007-3, Class AJ, STRIP (a)................... 5.88% 06/01/49 16,506
Bayview Commercial Asset Trust
485,882 Series 2004-2, Class A (a) (b)....................... 1.66% 08/25/34 465,598
See Notes to Portfolio of Investments
FIRST TRUST MORTGAGE INCOME FUND (FMY)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2017 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- -------------------------------------------------------- ----------- -------------- ------------
MORTGAGE-BACKED SECURITIES (CONTINUED)
COMMERCIAL MORTGAGE-BACKED SECURITIES (CONTINUED)
BXHTL Mortgage Trust
$ 800,000 Series 2015-JWRZ, Class B (a) (d).................... 2.93% 05/15/29 $ 803,606
Greenwich Capital Commercial Funding Corp.
700,000 Series 2007-GG11, Class AJ (a)...................... 6.27% 12/01/49 703,505
Hudsons Bay Simon JV Trust
510,000 Series 2015-HBFL, Class DFL (a) (b).................. 4.88% 08/05/34 508,732
Hyatt Hotel Portfolio Trust
1,040,000 Series 2015-HYT, Class B (a) (b)..................... 2.93% 11/15/29 1,040,987
UBS-Barclays Commercial Mortgage Trust
14,726,534 Series 2013-C5, Class XA, IO (a) (b)................. 1.14% 03/01/46 649,184
Wachovia Bank Commercial Mortgage Trust
448,544 Series 2007-C30, Class AJ ........................... 5.41% 12/01/43 454,846
650,000 Series 2007-C33, Class AJ, STRIP (a)................. 6.00% 02/01/51 663,785
Waldorf Astoria Boca Raton Trust
1,000,000 Series 2016-BOCA, Class E (a) (d).................... 5.58% 06/15/29 1,010,032
------------
6,316,781
------------
TOTAL MORTGAGE-BACKED SECURITIES..................................................... 40,998,462
(Cost $40,861,284) ------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES - 31.0%
COLLATERALIZED MORTGAGE OBLIGATIONS - 20.4%
Federal Home Loan Mortgage Corp.
28,665 Series 1007, Class H (c)............................. 19.23% 10/15/20 33,690
44,109 Series 1394, Class ID (c)............................ 9.57% 10/15/22 51,520
43,868 Series 2303, Class SW (c)............................ 10.00% 03/01/24 9,263
435,034 Series 2439, Class XI, IO (c)........................ 6.50% 03/01/32 93,093
994,945 Series 2807, Class SB, IO (c)........................ 6.22% 11/15/33 206,228
2,003,020 Series 2975, Class SJ, IO (c)........................ 5.42% 05/15/35 308,922
45,347 Series 3012, Class GK (c)............................ 19.23% 06/15/35 73,902
198,039 Series 3108, Class QZ ............................... 6.00% 02/01/36 275,998
13,874 Series 3195, Class SX (c)............................ 38.18% 07/15/36 51,825
160,255 Series 3410, Class HC ............................... 5.50% 02/01/38 177,993
337,580 Series 3619, Class EI, IO ........................... 4.50% 05/01/24 4,566
256,957 Series 3692, Class PS, IO (c)........................ 5.37% 05/15/38 7,261
1,554,074 Series 3726, Class KI, IO ........................... 3.50% 04/01/25 80,246
2,072,346 Series 3784, Class BI, IO ........................... 3.50% 01/01/21 83,395
250,000 Series 3797, Class KB ............................... 4.50% 01/01/41 281,263
1,333,336 Series 3870, Class WS, IO (c)........................ 5.37% 06/15/31 157,039
440,126 Series 3898, Class NI, IO ........................... 5.00% 07/01/40 25,660
98,182 Series 4021, Class IP, IO ........................... 3.00% 03/01/27 8,491
1,203,489 Series 4206, Class IA, IO ........................... 3.00% 03/01/33 169,849
501,231 Series 4615, Class GT (c)............................ 4.00% 10/15/42 473,225
8,926,143 Series 4619, Class IB, IO ........................... 4.00% 12/01/47 1,151,602
Federal National Mortgage Association
141,385 Series 2003-15, Class MS, IO (c)..................... 6.77% 03/25/33 33,165
26,798 Series 2004-74, Class SW (c)......................... 13.05% 11/25/31 36,670
See Notes to Portfolio of Investments
FIRST TRUST MORTGAGE INCOME FUND (FMY)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2017 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- -------------------------------------------------------- ----------- -------------- ------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Federal National Mortgage Association (Continued)
$ 500,000 Series 2004-W10, Class A6 ........................... 5.75% 08/01/34 $ 567,939
305,184 Series 2005-122, Class SN (c)........................ 23.67% 01/25/36 423,101
169,388 Series 2006-5, Class 3A2 (a)......................... 3.25% 05/01/35 178,650
212,379 Series 2007-30, Class ZM ............................ 4.25% 04/01/37 235,291
453,273 Series 2007-37, Class SB, IO (a)..................... 5.52% 05/25/37 91,894
291,957 Series 2008-17, Class BE ............................ 5.50% 10/01/37 355,389
6,837 Series 2008-50, Class AI, IO ........................ 5.50% 06/01/23 253
353,000 Series 2009-28, Class HX ............................ 5.00% 05/01/39 409,072
161,311 Series 2009-37, Class NZ ............................ 5.71% 02/01/37 204,777
1,204,627 Series 2010-10, Class NI, IO ........................ 5.00% 01/01/39 36,328
2,183,068 Series 2010-103, Class ID, IO ....................... 5.00% 09/01/40 302,348
1,099,649 Series 2010-104, Class CI, IO ....................... 4.00% 09/01/20 41,311
3,022,182 Series 2010-139, Class KI, IO ....................... 1.09% 12/01/40 127,767
64,502 Series 2010-142, Class PS, IO (c).................... 4.82% 05/25/40 1,364
374,011 Series 2010-145, Class TI, IO ....................... 3.50% 12/01/20 15,323
413,042 Series 2010-40, Class MI, IO ........................ 4.50% 08/01/24 3,713
238,272 Series 2011-5, Class IK, IO ......................... 8.00% 02/01/21 20,586
250,000 Series 2011-52, Class LB ............................ 5.50% 06/01/41 287,605
3,110,013 Series 2011-66, Class QI, IO ........................ 3.50% 07/01/21 156,153
209,290 Series 2012-111, Class B ............................ 7.00% 10/01/42 238,567
2,406,962 Series 2012-112, Class BI, IO ....................... 3.00% 09/01/31 248,462
2,046,876 Series 2012-125, Class MI, IO ....................... 3.50% 11/01/42 429,942
2,741,329 Series 2013-32, Class IG, IO ........................ 3.50% 04/01/33 388,534
648,139 Series 2013-51, Class PI, IO ........................ 3.00% 11/01/32 77,615
2,291,427 Series 2015-20, Class ES, IO (c)..................... 4.92% 04/25/45 450,661
2,032,312 Series 2015-76, Class BI, IO ........................ 4.00% 10/01/39 243,464
5,280,135 Series 2015-97, Class AI, IO ........................ 4.00% 09/01/41 840,048
168,142 Series 2016-74, Class LI, IO ........................ 3.50% 09/01/46 60,354
Federal National Mortgage Association, STRIP
94,852 Series 305, Class 12, IO (a)......................... 6.50% 12/01/29 19,569
100,861 Series 355, Class 18, IO ............................ 7.50% 11/01/33 26,468
1,426,801 Series 406, Class 6, IO ............................. 4.00% 01/01/41 269,031
Government National Mortgage Association
176,638 Series 2004-95, Class QZ ............................ 4.50% 11/01/34 192,796
365,992 Series 2005-33, Class AY ............................ 5.50% 04/01/35 414,578
120,304 Series 2005-68, Class DP (c)......................... 13.48% 06/17/35 149,110
525,646 Series 2005-68, Class KI, IO (c)..................... 5.07% 09/20/35 85,837
139,672 Series 2007-50, Class AI, IO (c)..................... 5.55% 08/20/37 25,446
450,141 Series 2007-68, Class PI, IO (c)..................... 5.42% 11/20/37 84,132
100,000 Series 2008-2, Class HB ............................. 5.50% 01/01/38 120,716
220,000 Series 2008-32, Class JD ............................ 5.50% 04/01/38 264,458
383,013 Series 2008-73, Class SK, IO (c)..................... 5.51% 08/20/38 64,161
200,996 Series 2009-65, Class NJ, IO ........................ 5.50% 07/01/39 13,362
113,305 Series 2009-79, Class PZ ............................ 6.00% 09/01/39 158,002
1,631,401 Series 2009-100, Class SL, IO (c).................... 5.27% 05/16/39 129,527
1,150,219 Series 2010-115, Class IQ, IO ....................... 4.50% 11/01/38 55,261
715,000 Series 2010-61, Class KE ............................ 5.00% 05/01/40 858,092
See Notes to Portfolio of Investments
FIRST TRUST MORTGAGE INCOME FUND (FMY)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2017 (UNAUDITED)
PRINCIPAL STATED STATED
VALUE DESCRIPTION COUPON MATURITY VALUE
---------------- -------------------------------------------------------- ----------- -------------- ------------
U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES (CONTINUED)
COLLATERALIZED MORTGAGE OBLIGATIONS (CONTINUED)
Government National Mortgage Association (Continued)
$ 959,952 Series 2011-131, Class EI, IO ....................... 4.50% 08/01/39 $ 40,148
69,462 Series 2016-139, Class MZ ........................... 1.50% 07/01/45 44,388
133,992 Series 2017-4, Class CZ ............................. 3.00% 01/01/47 119,366
------------
13,365,825
------------
COMMERCIAL MORTGAGE-BACKED SECURITIES - 0.3%
Government National Mortgage Association
218,000 Series 2013-57, Class D ............................. 2.35% 06/01/46 193,960
------------
193,960
------------
PASS-THROUGH SECURITIES - 10.3%
Federal Home Loan Mortgage Corp.
939,031 Gold Pool ........................................... 3.00% 08/01/46 941,804
665,910 Pool A94738 ......................................... 4.50% 11/01/40 716,627
547,777 Pool K36017 ......................................... 5.00% 09/01/47 587,169
Federal National Mortgage Association
25,030 Pool 535919 ......................................... 6.50% 05/01/21 27,716
1,107,579 Pool 831145 ......................................... 6.00% 12/01/35 1,266,113
1,120,944 Pool 843971 ......................................... 6.00% 11/01/35 1,293,891
966,939 Pool AS9194 ......................................... 4.50% 12/01/44 1,045,341
860,928 Pool AT2720 ......................................... 3.00% 05/01/43 867,264
------------
6,745,925
------------
TOTAL U.S. GOVERNMENT AGENCY MORTGAGE-BACKED SECURITIES.............................. 20,305,710
(Cost $21,849,633) ------------
ASSET-BACKED SECURITIES - 1.7%
Green Tree Financial Corp.
11,301 Series 1997-3, Class A6 ............................. 7.32% 03/15/28 11,522
1,563 Series 1997-7, Class A6 ............................. 6.76% 07/15/28 1,569
103,757 Series 1998-4, Class A7 (a).......................... 6.87% 04/01/30 111,759
Mid-State Capital Corp. Trust
441,944 Series 2004-1, Class M1 ............................. 6.50% 08/01/37 478,119
450,606 Series 2005-1, Class A .............................. 5.75% 01/01/40 491,202
------------
TOTAL ASSET-BACKED SECURITIES........................................................ 1,094,171
(Cost $1,074,364) ------------
TOTAL INVESTMENTS - 95.4%............................................................ 62,398,343
(Cost $63,785,281) (e)
NET OTHER ASSETS AND LIABILITIES - 4.6%.............................................. 3,000,972
------------
NET ASSETS - 100.0%.................................................................. $ 65,399,315
============
-----------------------------
(a) Floating or variable rate security. The interest rate shown reflects the
rate in effect at July 31, 2017.
See Notes to Portfolio of Investments
FIRST TRUST MORTGAGE INCOME FUND (FMY)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2017 (UNAUDITED)
(b) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A of the Securities Act
of 1933, as amended (the "1933 Act"), and may be resold in transactions
exempt from registration, normally to qualified institutional buyers.
Pursuant to procedures adopted by the Fund's Board of Trustees, this
security has been determined to be liquid by First Trust Advisors L.P.
("First Trust" or the "Advisor"), the Fund's advisor. Although market
instability can result in periods of increased overall market illiquidity,
liquidity for each security is determined based on security specific
factors and assumptions, which require subjective judgment. At July 31,
2017, securities noted as such amounted to $6,723,138, or 10.28% of net
assets.
(c) Inverse floating rate instrument. The interest rate shown reflects the
rate in effect at July 31, 2017.
(d) This security, sold within the terms of a private placement memorandum, is
exempt from registration upon resale under Rule 144A of the 1933 Act, and
may be resold in transactions exempt from registration, normally to
qualified institutional buyers (see Note 2C - Restricted Securities in the
Notes to Portfolio of Investments).
(e) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of July 31, 2017, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $1,975,428 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $3,362,366.
IO Interest-Only Security - Principal amount shown represents par value on
which interest payments are based.
STRIP Separate Trading of Registered Interest and Principal of Securities
-----------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of July 31, 2017
is as follows (see Note 2A - Portfolio Valuation in the Notes to Portfolio of
Investments):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
7/31/2017 PRICES INPUTS INPUTS
------------- ------------- ------------- -------------
Mortgage-Backed Securities...................... $ 40,998,462 $ -- $ 40,998,462 $ --
U.S. Government Agency Mortgage-Backed
Securities................................... 20,305,710 -- 20,305,710 --
Asset-Backed Securities......................... 1,094,171 -- 1,094,171 --
------------- ------------- ------------- -------------
Total Investments............................... 62,398,343 -- 62,398,343 --
Futures Contracts............................... 3,156 3,156 -- --
------------- ------------- ------------- -------------
Total........................................... $ 62,401,499 $ 3,156 $ 62,398,343 $ --
============= ============= ============= =============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
7/31/2017 PRICES INPUTS INPUTS
------------- ------------- ------------- -------------
Futures Contracts............................... $ (664) $ (664) $ -- $ --
============= ============= ============= =============
All transfers in and out of the Levels during the period are assumed to occur on
the last day of the period at their current value. There were no transfers
between Levels at July 31, 2017.
See Notes to Portfolio of Investments
FIRST TRUST MORTGAGE INCOME FUND (FMY)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JULY 31, 2017 (UNAUDITED)
OPEN FUTURES CONTRACTS AT JULY 31, 2017 (see Note 2D - Futures Contracts in the
Notes to Portfolio of Investments):
UNREALIZED
NUMBER OF EXPIRATION NOTIONAL APPRECIATION/
LONG FUTURES CONTRACTS CONTRACTS MONTH VALUE (DEPRECIATION)
------------------------------------------------------------- --------- ---------- ------------ --------------
U.S. Treasury 10-Year Notes 5 Sep-2017 $ 629,453 $ (664)
U.S. Treasury Long Bond Futures 8 Sep-2017 1,223,750 3,156
------------ --------------
$ 1,853,203 $ 2,492
============ ==============
See Notes to Portfolio of Investments
NOTES TO PORTFOLIO OF INVESTMENTS
FIRST TRUST MORTGAGE INCOME FUND (FMY)
JULY 31, 2017 (UNAUDITED)
1. ORGANIZATION
First Trust Mortgage Income Fund (the "Fund") is a diversified, closed-end
management investment company organized as a Massachusetts business trust on
February 22, 2005, and is registered with the Securities and Exchange Commission
under the Investment Company Act of 1940, as amended (the "1940 Act"). The Fund
trades under the ticker symbol FMY on the New York Stock Exchange ("NYSE").
The Fund is considered an investment company and follows accounting and
reporting guidance under Financial Accounting Standards Board Accounting
Standards Codification Topic 946, "Financial Services-Investment Companies."
2. VALUATION AND INVESTMENT PRACTICES
A. PORTFOLIO VALUATION
The net asset value ("NAV") of the Common Shares of the Fund is determined
daily, as of the close of regular trading on the NYSE, normally 4:00 p.m.
Eastern time, on each day the NYSE is open for trading. If the NYSE closes early
on a valuation day, the NAV is determined as of that time. Domestic debt
securities and foreign securities are priced using data reflecting the earlier
closing of the principal markets for those securities. The NAV per Common Share
is calculated by dividing the value of all assets of the Fund (including accrued
interest and dividends), less all liabilities (including accrued expenses,
dividends declared but unpaid and any borrowings of the Fund), by the total
number of Common Shares outstanding.
The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Fund's
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Fund's Board of Trustees,
and in accordance with provisions of the 1940 Act. Investments valued by the
Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to
the Portfolio of Investments. The Fund's investments are valued as follows:
U.S. government securities, mortgage-backed securities, asset-backed
securities and other debt securities are fair valued on the basis of
valuations provided by dealers who make markets in such securities or by a
third-party pricing service approved by the Fund's Board of Trustees,
which may use the following valuation inputs when available:
1) benchmark yields;
2) reported trades;
3) broker/dealer quotes;
4) issuer spreads;
5) benchmark securities;
6) bids and offers; and
7) reference data including market research publications.
Exchange-traded futures contracts are valued at the closing price in the
market where such contracts are principally traded. If no closing price is
available, exchange-traded futures contracts are fair valued at the mean
of their most recent bid and asked price, if available, and otherwise at
their closing bid price.
Fixed income and other debt securities having a remaining maturity of
sixty days or less when purchased are fair valued at cost adjusted for
amortization of premiums and accretion of discounts (amortized cost),
provided the Advisor's Pricing Committee has determined that the use of
amortized cost is an appropriate reflection of fair value given market and
issuer-specific conditions existing at the time of the determination.
Factors that may be considered in determining the appropriateness of the
use of amortized cost include, but are not limited to, the following:
1) the credit conditions in the relevant market and changes thereto;
2) the liquidity conditions in the relevant market and changes thereto;
3) the interest rate conditions in the relevant market and changes
thereto (such as significant changes in interest rates);
4) issuer-specific conditions (such as significant credit
deterioration); and
5) any other market-based data the Advisor's Pricing Committee
considers relevant. In this regard, the Advisor's Pricing Committee
may use last-obtained market-based data to assist it when valuing
portfolio securities using amortized cost.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Fund's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended (the "1933 Act")) for which a third-party pricing service is
unable to provide a market price; securities whose trading has been formally
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
FIRST TRUST MORTGAGE INCOME FUND (FMY)
JULY 31, 2017 (UNAUDITED)
suspended; a security whose market or fair value price is not available from a
pre-established pricing source; a security with respect to which an event has
occurred that is likely to materially affect the value of the security after the
market has closed but before the calculation of the Fund's NAV or make it
difficult or impossible to obtain a reliable market quotation; and a security
whose price, as provided by the third-party pricing service, does not reflect
the security's fair value. As a general principle, the current fair value of a
security would appear to be the amount which the owner might reasonably expect
to receive for the security upon its current sale. When fair value prices are
used, generally they will differ from market quotations or official closing
prices on the applicable exchanges. A variety of factors may be considered in
determining the fair value of such securities, including, but not limited to,
the following:
1) the fundamental business data relating to the issuer;
2) an evaluation of the forces which influence the market in which
these securities are purchased and sold;
3) the type, size and cost of security;
4) the financial statements of the issuer;
5) the credit quality and cash flow of the issuer, based on the
Advisor's or external analysis;
6) the information as to any transactions in or offers for the
security;
7) the price and extent of public trading in similar securities (or
equity securities) of the issuer/borrower, or comparable companies;
8) the coupon payments;
9) the quality, value and salability of collateral, if any, securing
the security;
10) the business prospects of the issuer, including any ability to
obtain money or resources from a parent or affiliate and an
assessment of the issuer's management;
11) the prospects for the issuer's industry, and multiples (of earnings
and/or cash flows) being paid for similar businesses in that
industry; and
12) other relevant factors.
The Fund is subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of July 31, 2017, is
included with the Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Interest income is recorded daily on the accrual basis. Amortization of premiums
and the accretion of discounts are recorded using the effective interest method.
The Fund invests in interest-only securities. For these securities, if there is
a change in the estimated cash flows, based on an evaluation of current
information, then the estimated yield is adjusted. Additionally, if the
evaluation of current information indicates a permanent impairment of the
security, the cost basis of the security is written down and a loss is
recognized. Debt obligations may be placed on non-accrual status and the related
interest income may be reduced by ceasing current accruals and writing off
interest receivables when the collection of all or a portion of interest has
become doubtful based on consistently applied procedures. A debt obligation is
removed from non-accrual status when the issuer resumes interest payments or
when collectability of interest is reasonably assured.
Securities purchased or sold on a when-issued, delayed-delivery or forward
purchase commitment basis may have extended settlement periods. The value of the
security so purchased is subject to market fluctuations during this period. The
Fund maintains liquid assets with a current value at least equal to the amount
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
FIRST TRUST MORTGAGE INCOME FUND (FMY)
JULY 31, 2017 (UNAUDITED)
of its when-issued, delayed-delivery or forward purchase commitments until
payment is made. At July 31, 2017, the Fund had no when-issued, delayed-delivery
or forward purchase commitments.
C. RESTRICTED SECURITIES
The Fund invests in restricted securities, which are securities that may not be
offered for public sale without first being registered under the 1933 Act. Prior
to registration, restricted securities may only be resold in transactions exempt
from registration under Rule 144A under the 1933 Act, normally to qualified
institutional buyers. As of July 31, 2017, the Fund held restricted securities
as shown in the following table that the Advisor has deemed illiquid pursuant to
procedures adopted by the Fund's Board of Trustees. Although market instability
can result in periods of increased overall market illiquidity, liquidity for
each security is determined based on security-specific factors and assumptions,
which require subjective judgment. The Fund does not have the right to demand
that such securities be registered. These securities are valued according to the
valuation procedures as stated in the Portfolio Valuation note (Note 2A) and are
not expressed as a discount to the carrying value of a comparable unrestricted
security. There are no unrestricted securities with the same maturity dates and
yields for these issuers.
% OF
ACQUISITION PRINCIPAL CURRENT CARRYING NET
SECURITY DATE VALUE PRICE COST VALUE ASSETS
--------------------------------------------------- ----------- ----------- --------- ----------- ----------- ---------
BXHTL Mortgage Trust, Series 2015-JWRZ, Class B 6/19/15 $ 800,000 $ 100.45 $ 800,000 803,606 1.23%
Waldorf Astoria Boca Raton Trust, Series 2016-BOCA,
Class E 7/12/16 1,000,000 101.00 1,000,000 1,010,032 1.54
----------- ----------- ---------
$ 1,800,000 $ 1,813,638 2.77%
----------- ----------- ---------
D. FUTURES CONTRACTS
The Fund may purchase or sell (i.e., is long or short) exchange-listed futures
contracts to hedge against changes in interest rates (interest rate risk).
Futures contracts are agreements between the Fund and a counterparty to buy or
sell a specific quantity of an underlying instrument at a specified price and at
a specified date. Depending on the terms of the contract, futures contracts are
settled either through physical delivery of the underlying instrument on the
settlement date or by payment of a cash settlement amount on the settlement
date. Open futures contracts can also be closed out prior to settlement by
entering into an offsetting transaction in a matching futures contract. If the
Fund is not able to enter into an offsetting transaction, the Fund will continue
to be required to maintain margin deposits on the futures contract. When the
contract is closed or expires, the Fund records a realized gain or loss equal to
the difference between the value of the contract at the time it was opened and
the value at the time it was closed or expired.
Upon entering into a futures contract, the Fund must deposit funds, called
margin, with its custodian in the name of the clearing broker equal to a
specified percentage of the current value of the contract. Open futures contacts
are marked to market daily. Pursuant to the contract, the Fund agrees to receive
from or pay to the broker an amount of cash equal to the daily fluctuation in
value of the contract. Such receipts or payments are known as variation margin.
If market conditions change unexpectedly, the Fund may not achieve the
anticipated benefits of the futures contract and may realize a loss. The use of
futures contracts involves the risk of imperfect correlation in movements in the
price of the futures contracts, interest rates and the underlying instruments.
E. INVERSE FLOATING-RATE SECURITIES
An inverse floating-rate security is one where the coupon is inversely indexed
to a short-term floating interest rate multiplied by a specific factor. As the
floating rate rises, the coupon is reduced. Conversely, as the floating rate
declines, the coupon is increased. The price of these securities may be more
volatile than the price of a comparable fixed-rate security. These instruments
are typically used to enhance the yield of the portfolio and have the effect of
creating leverage. These securities, if any, are identified on the Portfolio of
Investments.
F. STRIPPED MORTGAGE-BACKED SECURITIES
Stripped Mortgage-Backed Securities are created by segregating the cash flows
from underlying mortgage loans or mortgage securities to create two or more new
securities, each with a specified percentage of the underlying security's
principal or interest payments. Mortgage securities may be partially stripped so
that each investor class receives some interest and some principal. When
securities are completely stripped, however, all of the interest is distributed
to holders of one type of security known as an interest-only security ("IO
Security") and all of the principal is distributed to holders of another type of
security known as a principal-only security. These securities, if any, are
identified on the Portfolio of Investments.
NOTES TO PORTFOLIO OF INVESTMENTS (CONTINUED)
FIRST TRUST MORTGAGE INCOME FUND (FMY)
JULY 31, 2017 (UNAUDITED)
G. INTEREST-ONLY SECURITIES
An IO Security is the interest-only portion of a mortgage-backed security that
receives some or all of the interest portion of the underlying mortgage-backed
security and little or no principal. A reference principal value called a
notional value is used to calculate the amount of interest due to the IO
Security. IO Securities are sold at a deep discount to their notional principal
amount. Generally speaking, when interest rates are falling and prepayment rates
are increasing, the value of an IO Security will fall. Conversely, when interest
rates are rising and prepayment rates are decreasing, generally the value of an
IO Security will rise. These securities, if any, are identified on the Portfolio
of Investments.
3. DERIVATIVE TRANSACTIONS
During the fiscal year-to-date period (November 1, 2016 to July 31, 2017), the
amount of notional values of futures contracts opened and closed in the Fund
were $10,124,388 and $8,271,185, respectively.
ITEM 2. CONTROLS AND PROCEDURES.
(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the registrant's
disclosure controls and procedures (as defined in Rule 30a-3(c) under the
Investment Company Act of 1940, as amended (the "1940 Act") (17 CFR
270.30a-3(c))) are effective, as of a date within 90 days of the filing
date of the report that includes the disclosure required by this
paragraph, based on their evaluation of these controls and procedures
required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and
Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as
amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).
(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's last fiscal quarter
that have materially affected, or are reasonably likely to materially
affect, the registrant's internal control over financial reporting.
ITEM 3. EXHIBITS.
Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of
the Sarbanes-Oxley Act of 2002 are attached hereto.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) First Trust Mortgage Income Fund
--------------------------------------------------
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: September 19, 2017
--------------------
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, President and
Chief Executive Officer
(principal executive officer)
Date: September 19, 2017
--------------------
By (Signature and Title)* /s/ Donald P. Swade
----------------------------------------
Donald P. Swade, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: September 19, 2017
--------------------
* Print the name and title of each signing officer under his or her signature.