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Form N-Q AMERICAN FUNDS MORTGAGE For: May 31

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July 29, 2016 12:32 PM EDT

 

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: 811-22449

 

 

 

American Funds Mortgage Fund

(Exact Name of Registrant as Specified in Charter)

 

6455 Irvine Center Drive

Irvine, California 92618

(Address of Principal Executive Offices)

 

 

 

 

Registrant's telephone number, including area code: (213) 486-9200

 

Date of fiscal year end: August 31

 

Date of reporting period: May 31, 2016

 

 

 

 

 

Steven I. Koszalka

American Funds Mortgage Fund

333 South Hope Street

Los Angeles, California 90071

(Name and Address of Agent for Service)

 

 

 
 

ITEM 1 – Schedule of Investments

 

American Funds Mortgage Fund®
Investment portfolio
May 31, 2016
unaudited
Bonds, notes & other debt instruments 92.52%
Mortgage-backed obligations 64.55%
Federal agency mortgage-backed obligations 61.93% 		Principal amount
(000) 		Value
(000)
Fannie Mae 3.311% 20171 $205 $208
Fannie Mae 2.50% 20331 3,422 3,458
Fannie Mae 2.50% 20331 870 883
Fannie Mae 3.00% 20331 1,302 1,333
Fannie Mae 3.50% 20341 36,572 38,596
Fannie Mae 3.50% 20351 70,290 74,145
Fannie Mae 3.50% 20351 29,081 30,676
Fannie Mae 3.50% 20351 20,307 21,409
Fannie Mae 3.50% 20351 7,361 7,760
Fannie Mae 3.50% 20361 26,423 27,922
Fannie Mae 3.50% 20361 11,103 11,733
Fannie Mae 4.00% 20361 9,685 10,452
Fannie Mae 5.00% 20401 1,053 1,137
Fannie Mae 4.00% 20421 28,879 30,935
Fannie Mae 4.00% 20421 17,125 18,347
Fannie Mae 2.275% 20431 200 194
Fannie Mae 2.275% 20431 130 126
Fannie Mae 2.275% 20431 113 110
Fannie Mae 2.275% 20431 88 85
Fannie Mae 2.525% 20431 286 285
Fannie Mae 2.525% 20431 228 227
Fannie Mae 2.525% 20431 182 181
Fannie Mae 2.525% 20431 163 162
Fannie Mae 2.525% 20431 150 150
Fannie Mae 2.525% 20431 138 137
Fannie Mae 2.525% 20431 135 134
Fannie Mae 2.525% 20431 130 129
Fannie Mae 2.525% 20431 126 125
Fannie Mae 2.525% 20431 108 107
Fannie Mae 2.525% 20431 107 107
Fannie Mae 2.525% 20431 101 101
Fannie Mae 2.525% 20431 90 89
Fannie Mae 2.525% 20431 86 85
Fannie Mae 2.525% 20431 85 85
Fannie Mae 2.525% 20431 85 85
Fannie Mae 2.525% 20431 73 73
Fannie Mae 2.525% 20431 72 72
Fannie Mae 2.525% 20431 72 71
Fannie Mae 2.775% 20431 670 678
Fannie Mae 2.775% 20431 428 433
Fannie Mae 2.775% 20431 399 404
Fannie Mae 2.775% 20431 378 382
Fannie Mae 2.775% 20431 357 361
Fannie Mae 2.775% 20431 321 325
Fannie Mae 2.775% 20431 235 238
Fannie Mae 2.775% 20431 224 226
American Funds Mortgage Fund — Page 1 of 10
unaudited
Bonds, notes & other debt instruments
Mortgage-backed obligations (continued)
Federal agency mortgage-backed obligations (continued) 		Principal amount
(000) 		Value
(000)
Fannie Mae 2.775% 20431 $136 $138
Fannie Mae 2.775% 20431 135 136
Fannie Mae 2.775% 20431 126 128
Fannie Mae 2.775% 20431 121 123
Fannie Mae 2.775% 20431 112 113
Fannie Mae 2.775% 20431 110 111
Fannie Mae 2.775% 20431 106 107
Fannie Mae 2.775% 20431 105 106
Fannie Mae 2.775% 20431 58 59
Fannie Mae 2.775% 20431 49 50
Fannie Mae 3.025% 20431 363 373
Fannie Mae 3.025% 20431 222 227
Fannie Mae 3.025% 20431 200 206
Fannie Mae 3.025% 20431 177 181
Fannie Mae 3.025% 20431 143 147
Fannie Mae 3.025% 20431 142 146
Fannie Mae 3.025% 20431 117 120
Fannie Mae 3.025% 20431 113 116
Fannie Mae 3.025% 20431 105 107
Fannie Mae 3.025% 20431 93 95
Fannie Mae 3.025% 20431 92 95
Fannie Mae 3.025% 20431 91 93
Fannie Mae 3.025% 20431 88 90
Fannie Mae 3.025% 20431 81 83
Fannie Mae 3.025% 20431 46 48
Fannie Mae 3.275% 20431 225 234
Fannie Mae 3.275% 20431 191 198
Fannie Mae 3.275% 20431 167 173
Fannie Mae 3.275% 20431 132 137
Fannie Mae 3.275% 20431 124 129
Fannie Mae 3.275% 20431 75 78
Fannie Mae 3.275% 20431 64 66
Fannie Mae 3.275% 20431 34 35
Fannie Mae 4.00% 20431 8,609 9,320
Fannie Mae 4.00% 20451 16,084 17,300
Fannie Mae 3.50% 20461,2 9,810 10,230
Fannie Mae 4.00% 20461 7,558 7,894
Fannie Mae 4.00% 20461 6,292 6,572
Fannie Mae 4.00% 20461 6,210 6,486
Fannie Mae 4.00% 20461 3,819 3,984
Fannie Mae 4.00% 20461 2,708 2,828
Fannie Mae 4.50% 20461 32,887 35,995
Fannie Mae 4.50% 20461 10,393 11,375
Fannie Mae 3.50% 20531 2,348 2,415
Freddie Mac 3.50% 20351 96,463 101,960
Freddie Mac 3.50% 20351 16,926 17,891
Freddie Mac 3.50% 20351 13,921 14,714
Freddie Mac 3.50% 20351 10,710 11,320
Freddie Mac 3.50% 20351 9,646 10,199
Freddie Mac 3.50% 20351 2,167 2,290
Freddie Mac 3.50% 20361 67,599 71,458
Freddie Mac 3.50% 20361 4,181 4,424
Freddie Mac 6.00% 20381 266 303
Freddie Mac 4.00% 20411 382 407
American Funds Mortgage Fund — Page 2 of 10
unaudited
Bonds, notes & other debt instruments
Mortgage-backed obligations (continued)
Federal agency mortgage-backed obligations (continued) 		Principal amount
(000) 		Value
(000)
Freddie Mac 3.50% 20461 $145,523 $152,402
Freddie Mac 4.00% 20461 46,757 50,089
Freddie Mac 4.00% 20461 40,766 42,549
Freddie Mac 4.00% 20461,2 36,800 39,243
Freddie Mac 4.00% 20461 29,463 31,516
Freddie Mac 4.00% 20461 21,589 22,521
Freddie Mac 4.00% 20461 7,031 7,520
Freddie Mac 4.00% 20461 6,072 6,336
Freddie Mac 4.00% 20461 5,145 5,365
Freddie Mac 4.00% 20461 4,625 4,955
Freddie Mac 4.00% 20461 2,180 2,272
Freddie Mac 4.00% 20461 1,623 1,692
Freddie Mac 4.50% 20461 15,492 16,941
Freddie Mac 4.50% 20461 9,742 10,653
Freddie Mac 4.50% 20461 2,175 2,379
Government National Mortgage Assn. 4.00% 20321 1,089 1,173
Government National Mortgage Assn. 4.00% 20321 853 919
Government National Mortgage Assn. 6.50% 20321 1,635 1,885
Government National Mortgage Assn. 3.75% 20341 1,502 1,609
Government National Mortgage Assn. 4.25% 20341 1,357 1,471
Government National Mortgage Assn. 3.25% 20351 3,482 3,634
Government National Mortgage Assn. 3.25% 20351 2,095 2,187
Government National Mortgage Assn. 3.25% 20351 1,925 2,030
Government National Mortgage Assn. 3.25% 20351 1,846 1,927
Government National Mortgage Assn. 5.00% 20351 946 1,035
Government National Mortgage Assn. 3.75% 20371 729 781
Government National Mortgage Assn. 6.50% 20381 524 601
Government National Mortgage Assn. 6.50% 20381 265 303
Government National Mortgage Assn. 6.50% 20381 59 63
Government National Mortgage Assn. 6.00% 20391 5,182 5,949
Government National Mortgage Assn. 3.25% 20401 1,407 1,484
Government National Mortgage Assn. 3.25% 20401 1,206 1,259
Government National Mortgage Assn. 3.25% 20401 1,203 1,256
Government National Mortgage Assn. 5.00% 20401 520 563
Government National Mortgage Assn. 5.50% 20401 5,417 6,078
Government National Mortgage Assn. 4.00% 20411 1,276 1,324
Government National Mortgage Assn. 4.50% 20411 2,336 2,517
Government National Mortgage Assn. 4.50% 20411 1,431 1,502
Government National Mortgage Assn. 4.50% 20411 1,162 1,220
Government National Mortgage Assn. 4.50% 20411 1,009 1,085
Government National Mortgage Assn. 4.50% 20411 811 871
Government National Mortgage Assn. 5.00% 20411 7,275 7,882
Government National Mortgage Assn. 5.00% 20411 3,900 4,224
Government National Mortgage Assn. 5.00% 20411 1,464 1,542
Government National Mortgage Assn. 6.50% 20411 660 766
Government National Mortgage Assn. 2.75% 20421 747 758
Government National Mortgage Assn. 2.75% 20421 687 697
Government National Mortgage Assn. 2.75% 20421 513 521
Government National Mortgage Assn. 2.75% 20421 454 461
Government National Mortgage Assn. 2.75% 20421 357 363
Government National Mortgage Assn. 2.75% 20421 333 339
Government National Mortgage Assn. 2.75% 20421 74 75
Government National Mortgage Assn. 3.50% 20421 840 896
Government National Mortgage Assn. 3.50% 20421 711 758
American Funds Mortgage Fund — Page 3 of 10
unaudited
Bonds, notes & other debt instruments
Mortgage-backed obligations (continued)
Federal agency mortgage-backed obligations (continued) 		Principal amount
(000) 		Value
(000)
Government National Mortgage Assn. 4.00% 20421 $1,268 $1,362
Government National Mortgage Assn. 4.00% 20421 870 931
Government National Mortgage Assn. 4.00% 20421 802 853
Government National Mortgage Assn. 4.50% 20421 1,970 2,119
Government National Mortgage Assn. 3.50% 20431 1,289 1,370
Government National Mortgage Assn. 3.50% 20431 1,204 1,273
Government National Mortgage Assn. 4.00% 20431 1,647 1,722
Government National Mortgage Assn. 3.75% 20441 1,898 2,032
Government National Mortgage Assn. 4.25% 20441 1,182 1,278
Government National Mortgage Assn. 4.50% 20451 76,266 81,930
Government National Mortgage Assn. 4.50% 20451 14,001 15,035
Government National Mortgage Assn. 4.50% 20451 3,289 3,533
Government National Mortgage Assn. 4.50% 20451 539 579
Government National Mortgage Assn. 4.50% 20451 335 360
Government National Mortgage Assn. 4.50% 20451 321 347
Government National Mortgage Assn. 5.00% 20451 5,469 6,116
Government National Mortgage Assn. 5.00% 20451 2,124 2,366
Government National Mortgage Assn. 5.00% 20451 1,479 1,648
Government National Mortgage Assn. 4.00% 20461,2 171,120 182,487
Government National Mortgage Assn. 4.00% 20461 14,800 15,379
Government National Mortgage Assn. 4.797% 20611 420 437
Government National Mortgage Assn. 5.189% 20621 434 453
Government National Mortgage Assn. 5.398% 20641 454 466
Government National Mortgage Assn. 4.922% 20651 3,835 4,001
Government National Mortgage Assn. 4.752% 20661 1,535 1,608
Government National Mortgage Assn. 5.172% 20661 956 1,010
Government National Mortgage Assn., Series 2011-H02, Class BA, 4.45% 20611,3 467 484
Government National Mortgage Assn., Series 2016-JN5, Class BC, 2.375% 20621,3,4 130,000 3,088
Government National Mortgage Assn., Series 2016-H04, Class CI, 2.597% 20621,3 30,044 1,460
    1,434,742
Commercial mortgage-backed securities 2.13%    
Bear Stearns Commercial Mortgage Securities Trust, Series 2007-T28, Class A-1A, 5.71% 20421,3 1,009 1,052
EQTY 2014-INNS Mortgage Trust Commercial Mortgage Pass-Through Certificates, Series 2014-A,
1.288% 20311,3,5 		2,406 2,382
GS Mortgage Securities Corp. II, Series 2007-GG10, Class A-1-A, 5.794% 20451,3 6,928 7,147
Hilton USA Trust, Series 2013-HLF, AFX, 2.662% 20301,5 13,620 13,683
LB-UBS Commercial Mortgage Trust, Series 2007-C2, Class A-3, 5.43% 20401 16,208 16,470
ML-CFC Commercial Mortgage Trust, Series 2006-4, Class A1A, 5.166% 20491 1,307 1,320
Morgan Stanley Capital I Trust, Series 2007-TA27, Class A-1-A, 5.644% 20421,3 764 790
UBS-Barclays Commercial Mortgage Trust, Series 2012-C2, Class A2, 2.113% 20631 3,000 3,017
Wachovia Bank Commercial Mortgage Trust, Series 2006-C27, Class A1A, 5.749% 20451,3 196 196
WF-RBS Commercial Mortgage Trust, Series 2013-C-18, Class ASB, 3.676 20461 3,000 3,210
    49,267
Collateralized mortgage-backed 0.47%    
Station Place Securitization Trust, Series 2016-3, Class A, 1.546% 20481,3,4,5 11,000 11,000
Other mortgage-backed securities 0.02%    
Freddie Mac, Series KS01, Class A2, multifamily 2.522% 20231 480 490
Total mortgage-backed obligations   1,495,499
American Funds Mortgage Fund — Page 4 of 10
unaudited
Bonds, notes & other debt instruments
U.S. Treasury bonds & notes 11.78%
U.S. Treasury inflation-protected securities 9.22% 		Principal amount
(000) 		Value
(000)
U.S. Treasury Inflation-Protected Security 0.125% 20226 $2,350 $2,368
U.S. Treasury Inflation-Protected Security 0.125% 20236 5,385 5,376
U.S. Treasury Inflation-Protected Security 0.125% 20246 12,284 12,208
U.S. Treasury Inflation-Protected Security 0.375% 20256 55,924 56,540
U.S. Treasury Inflation-Protected Security 2.375% 20256 29,684 34,929
U.S. Treasury Inflation-Protected Security 2.125% 20416 522 662
U.S. Treasury Inflation-Protected Security 0.75% 20426 31,944 30,513
U.S. Treasury Inflation-Protected Security 1.375% 20446 39,430 43,416
U.S. Treasury Inflation-Protected Security 1.00% 20466 26,981 27,621
    213,633
U.S. Treasury 2.56%    
U.S. Treasury 0.875% 20177 22,000 22,038
U.S. Treasury 1.875% 20227 25,100 25,499
U.S. Treasury 2.875% 2045 7,575 7,932
U.S. Treasury 2.50% 2046 4,000 3,878
    59,347
Total U.S. Treasury bonds & notes   272,980
Asset-backed obligations 8.68%    
Aesop Funding LLC, Series 2012-2-A, Class A, 2.802% 20181,5 6,120 6,172
Aesop Funding LLC, Series 2012-3A, Class A, 2.10% 20191,5 5,200 5,209
AmeriCredit Automobile Receivables Trust, Series 2014-4, Class A-2-A, 0.72% 20181 1,304 1,303
AmeriCredit Automobile Receivables Trust, Series 2013-4, Class C, 2.72% 20191 1,750 1,769
Avant Loans Funding Trust, Series 2016-B, Class A, 3.92% 20191,5 1,545 1,550
Avant Loans Funding Trust, Series 2015-A, Class A, 4.00% 20211,5 730 727
Babson CLO Ltd., Series 2012-2-A, Class A-1-R, CLO, 1.866% 20231,3,5 7,660 7,643
Black Diamond CLO Ltd., Series 2006-1-A, Class AD, CLO, 0.888% 20191,3,5 2,494 2,466
Carlyle Global Market Strategies Commodities Fund, Series 2015-1A, Class A, 2.129% 20201,3,4,5 7,703 7,529
Citi Held For Issuance, Series 2015-PM-2, Class A, 2.35% 20221,5 3,112 3,106
Citi Held For Issuance, Series 2015-PM-3, Class A, 2.56% 20221,5 2,610 2,608
CPS Auto Receivables Trust, Series 2015-A, Class A, 1.53% 20191,5 2,377 2,373
CPS Auto Receivables Trust, Series 2015-C, Class A, 1.77% 20191,5 7,057 7,042
CPS Auto Receivables Trust, Series 2016-B, Class A, 2.07% 20191,5 3,735 3,735
CPS Auto Receivables Trust, Series 2016-A, Class A, 2.25% 20191,5 6,943 6,951
Drive Auto Receivables Trust, Series 2015-DA, Class A-2-A, 1.23% 20181,5 2,033 2,033
Drive Auto Receivables Trust, Series 2016-BA, Class A-2, 1.38% 20181,5 4,500 4,499
Drive Auto Receivables Trust, Series 2016-AA, Class A-2-A, 1.50% 20181,5 5,525 5,525
Drive Auto Receivables Trust, Series 2015-AA, Class B, 2.28% 20191,5 9,000 9,027
Drive Auto Receivables Trust, Series 2016-AA, Class B, 3.17% 20201,5 2,000 2,026
Drivetime Auto Owner Trust, Series 2015-3-A, Class A, 1.66% 20191,5 2,556 2,557
Dryden Senior Loan Fund, Series 2012-23-RA, Class A-1-R, CLO, 1.878% 20231,3,5 4,000 3,982
Exeter Automobile Receivables Trust, Series 2016-1-A, Class A, 2.35% 20201,5 4,069 4,061
Hertz Vehicle Financing LLC, Rental Car Asset-backed Notes, Series 2015-1, Class A, 2.73% 20211,5 20,640 20,683
Magnetite CLO Ltd. Series 2012-6-A, Class A-R, 1.884% 20231,3,5 6,740 6,729
Marine Park CLO Ltd., Series 2012-1-A, Class A1-AR, CLO, 1.906% 20231,3,5 14,000 13,955
MarketPlace Loan Trust, Series 2015-AV-1, Class A, 4.00% 20211,5 663 660
Octagon Investment Partners XII Ltd., Series 2012-1AR, Class AR, CLO, 1.903% 20231,3,5 4,816 4,803
Octagon Investment Partners XV Ltd., Series 2013-1A, Class A, CLO, 1.923% 20251,3,5 9,400 9,339
Prestige Auto Receivables Trust, Series 2015-1, Class A-2, 1.09% 20191,5 2,739 2,737
Santander Drive Auto Receivables Trust, Series 2012-4, Class C, 2.94% 20171 951 952
Santander Drive Auto Receivables Trust, Series 2015-5, Class A-2-A, 1.12% 20181 3,081 3,080
Santander Drive Auto Receivables Trust, Series 2013-5, Class B, 1.55% 20181 4,110 4,111
American Funds Mortgage Fund — Page 5 of 10
unaudited
Bonds, notes & other debt instruments
Asset-backed obligations (continued) 		Principal amount
(000) 		Value
(000)
Santander Drive Auto Receivables Trust, Series 2012-AA, Class C, 1.78% 20181,5 $2,862 $2,867
Santander Drive Auto Receivables Trust, Series 2012-6, Class C, 1.94% 20181 798 799
Santander Drive Auto Receivables Trust, Series 2012-5, Class C, 2.70% 20181 5,652 5,672
Santander Drive Auto Receivables Trust, Series 2012-3, Class C, 3.01% 20181 381 381
Santander Drive Auto Receivables Trust, Series 2015-2, Class B, 1.83% 20201 6,000 5,994
Santander Drive Auto Receivables Trust, Series 2014-3, Class C, 2.13% 20201 1,265 1,270
Santander Drive Auto Receivables Trust, Series 2014-1, Class C, 2.36% 20201 11,530 11,601
Santander Drive Auto Receivables Trust, Series 2014-4, Class C, 2.60% 20201 11,420 11,546
    201,072
Federal agency bonds & notes 7.51%    
Fannie Mae 1.25% 2017 46,000 46,171
Fannie Mae 5.00% 2017 123,000 127,877
    174,048
Total bonds, notes & other debt instruments (cost: $2,130,248,000)   2,143,599
Short-term securities 22.27%    
3M Co. 0.33% due 6/3/20165 36,800 36,799
ANZ New Zealand (International) Ltd. 0.93% due 10/17/20165 9,000 8,976
Bank of Nova Scotia 0.92% due 10/14/20165 9,000 8,975
Bank of Tokyo-Mitsubishi UFJ, Ltd. 0.38% due 6/7/2016 40,000 39,997
Fannie Mae 0.60% due 1/3/2017 80,500 80,244
Federal Farm Credit Banks 0.49% due 11/15/2016 50,000 49,886
Federal Home Loan Bank 0.28%–0.64% due 7/6/2016–1/25/2017 117,600 117,296
Freddie Mac 0.60% due 1/4/2017–1/9/2017 94,100 93,794
General Electric Co. 0.32% due 6/1/2016 27,100 27,100
National Australia Bank Ltd. 0.90% due 11/1/20165 9,500 9,473
Toronto-Dominion Holdings USA Inc. 0.93% due 9/22/20165 9,000 8,982
Wal-Mart Stores, Inc. 0.37% due 6/20/20165 25,000 24,995
Wells Fargo Bank, N.A. 0.81% due 8/16/2016 9,500 9,503
Total short-term securities (cost: $515,834,000)   516,020
Total investment securities 114.79% (cost: $2,646,082,000)   2,659,619
Other assets less liabilities (14.79)%   (342,758)
Net assets 100.00%   $2,316,861
Interest rate swaps
The fund has entered into interest rate swaps as shown in the following table. The average month-end notional amount of interest rate swaps while held was $2,474,044,000.
Pay/receive
fixed rate 		Clearinghouse Floating rate index Fixed
rate 		Expiration
date 		Notional
(000) 		Unrealized
appreciation
(depreciation)
at 5/31/2016
(000)
Receive LCH 3-month USD-LIBOR 0.979% 11/12/2017 $246,000 $118
Receive LCH 3-month USD-LIBOR 0.947 11/17/2017 102,000 2
Receive LCH 3-month USD-LIBOR 1.1005 12/22/2017 100,000 207
Pay LCH 3-month USD-LIBOR 0.9915 10/28/2018 170,000 372
Pay LCH 3-month USD-LIBOR 0.98875 10/29/2018 170,000 377
Receive LCH 3-month USD-LIBOR 1.515 6/4/2019 40,000 432
Receive LCH 3-month USD-LIBOR 1.789 6/20/2019 18,150 346
American Funds Mortgage Fund — Page 6 of 10
unaudited
Pay/receive
fixed rate 		Clearinghouse Floating rate index Fixed
rate 		Expiration
date 		Notional
(000) 		Unrealized
appreciation
(depreciation)
at 5/31/2016
(000)
Receive LCH 3-month USD-LIBOR 1.7945% 6/20/2019 $11,300 $217
Receive LCH 3-month USD-LIBOR 1.7905 6/20/2019 4,550 87
Receive LCH 3-month USD-LIBOR 1.732 6/27/2019 18,000 313
Receive LCH 3-month USD-LIBOR 1.799 8/8/2019 24,000 475
Receive LCH 3-month USD-LIBOR 1.7255 8/19/2019 95,000 1,671
Receive LCH 3-month USD-LIBOR 1.9225 9/25/2019 75,000 1,808
Receive LCH 3-month USD-LIBOR 1.675 10/30/2019 242,000 3,935
Receive LCH 3-month USD-LIBOR 1.6625 12/18/2019 13,000 206
Receive LCH 3-month USD-LIBOR 1.785 1/2/2020 30,000 606
Receive LCH 3-month USD-LIBOR 1.655 2/11/2020 75,000 1,181
Receive LCH 3-month USD-LIBOR 1.7615 2/19/2020 15,000 295
Receive LCH 3-month USD-LIBOR 1.8315 6/10/2020 40,000 914
Receive LCH 3-month USD-LIBOR 1.8445 6/16/2020 40,000 935
Receive LCH 3-month USD-LIBOR 1.86 6/19/2020 40,000 960
Receive LCH 3-month USD-LIBOR 1.872 6/30/2020 5,000 123
Receive LCH 3-month USD-LIBOR 1.76327 7/1/2020 6,000 121
Pay LCH 3-month USD-LIBOR 1.785 3/27/2022 35,000 (748)
Pay LCH 3-month USD-LIBOR 1.96516 11/10/2022 18,000 (569)
Pay LCH 3-month USD-LIBOR 2.74125 11/22/2023 4,000 (346)
Pay LCH 3-month USD-LIBOR 2.683 8/4/2024 16,000 (1,373)
Pay LCH 3-month USD-LIBOR 1.894 1/20/2025 5,000 (114)
Pay LCH 3-month USD-LIBOR 2.1525 12/22/2025 23,000 (994)
Pay LCH 3-month USD-LIBOR 3.34 6/27/2044 11,000 (2,927)
Pay LCH 3-month USD-LIBOR 3.206 7/31/2044 7,000 (1,658)
Pay LCH 3-month USD-LIBOR 3.238 8/8/2044 6,000 (1,463)
Pay LCH 3-month USD-LIBOR 3.2265 9/25/2044 12,500 (3,023)
Pay LCH 3-month USD-LIBOR 2.7045 1/2/2045 16,500 (2,061)
Pay LCH 3-month USD-LIBOR 2.4945 1/9/2045 7,000 (541)
Pay LCH 3-month USD-LIBOR 2.454 1/15/2045 7,000 (477)
Pay LCH 3-month USD-LIBOR 2.525 10/20/2045 10,000 (850)
Pay LCH 3-month USD-LIBOR 2.516 10/20/2045 15,000 (1,244)
Pay LCH 3-month USD-LIBOR 2.5315 10/26/2045 16,000 (1,384)
Receive LCH 3-month USD-LIBOR 2.567 11/9/2045 500 47
Pay LCH 3-month USD-LIBOR 2.57067 11/9/2045 6,600 (631)
Pay LCH 3-month USD-LIBOR 2.6485 11/16/2045 6,525 (742)
Pay LCH 3-month USD-LIBOR 2.52822 11/23/2045 13,350 (1,146)
Pay LCH 3-month USD-LIBOR 2.59125 12/16/2045 13,500 (1,356)
Pay LCH 3-month USD-LIBOR 2.4095 1/14/2046 10,000 (583)
Pay LCH 3-month USD-LIBOR 2.33725 2/1/2046 25,000 (1,037)
            $(9,519)
American Funds Mortgage Fund — Page 7 of 10
unaudited
Futures contracts
The fund has entered into futures contracts as shown in the following table. The average month-end notional amount of open futures contracts while held was $563,376,000.
Contracts Clearinghouse Type Number of
contracts 		Expiration Notional
amount
(000) 		Unrealized
(depreciation)
appreciation
at 5/31/2016
(000)
20 Year U.S. Treasury Bond Futures CME Short 212 September 2016 $34,558 $(64)
30 Year Ultra U.S. Treasury Bond Futures CME Long 89 September 2016 15,513 73
5 Year U.S. Treasury Note Futures CME Long 4,543 October 2016 545,592 101
2 Year U.S. Treasury Note Futures CME Long 1,416 October 2016 308,469 86
            $196
    
1 Principal payments may be made periodically. Therefore, the effective maturity date may be earlier than the stated maturity date.
2 Purchased on a TBA basis.
3 Coupon rate may change periodically.
4 Valued under fair value procedures adopted by authority of the board of trustees. The total value of all such securities was $21,617,000, which represented .93% of the net assets of the fund.
5 Acquired in a transaction exempt from registration under Rule 144A or Section 4(2) of the Securities Act of 1933. May be resold in the U.S. in transactions exempt from registration, normally to qualified institutional buyers. The total value of all such securities was $277,859,000, which represented 11.99% of the net assets of the fund.
6 Index-linked bond whose principal amount moves with a government price index.
7 A portion of this security was pledged as collateral. The total value of pledged collateral was $33,917,000, which represented 1.46% of the net assets of the fund.
Valuation disclosures
Capital Research and Management Company (“CRMC”), the fund’s investment adviser, values the fund’s investments at fair value as defined by accounting principles generally accepted in the United States of America. The net asset value of each share class of the fund is generally determined as of approximately 4:00 p.m. New York time each day the New York Stock Exchange is open. Security transactions are recorded by the fund as of the date the trades are executed with brokers.
Methods and inputs — The fund’s investment adviser uses the following methods and inputs to establish the fair value of the fund’s assets and liabilities. Use of particular methods and inputs may vary over time based on availability and relevance as market and economic conditions evolve.
Fixed-income securities, including short-term securities, are generally valued at prices obtained from one or more pricing vendors. Vendors value such securities based on one or more of the inputs described in the following table. The table provides examples of inputs that are commonly relevant for valuing particular classes of fixed-income securities in which the fund is authorized to invest. However, these classifications are not exclusive, and any of the inputs may be used to value any other class of fixed-income security.
Fixed-income class Examples of standard inputs
All Benchmark yields, transactions, bids, offers, quotations from dealers and trading systems, new issues, spreads and other relationships observed in the markets among comparable securities; and proprietary pricing models such as yield measures calculated using factors such as cash flows, financial or collateral performance and other reference data (collectively referred to as “standard inputs”)
Bonds & notes of governments & government agencies Standard inputs and interest rate volatilities
Mortgage-backed; asset-backed obligations Standard inputs and cash flows, prepayment information, default rates, delinquency and loss assumptions, collateral characteristics, credit enhancements and specific deal information
Municipal securities Standard inputs and, for certain distressed securities, cash flows or liquidation values using a net present value calculation based on inputs that include, but are not limited to, financial statements and debt contracts
American Funds Mortgage Fund — Page 8 of 10
unaudited
When the fund’s investment adviser deems it appropriate to do so (such as when vendor prices are unavailable or deemed to be not representative), fixed-income securities will be valued in good faith at the mean quoted bid and ask prices that are reasonably and timely available (or bid prices, if ask prices are not available) or at prices for securities of comparable maturity, quality and type. Interest rate swaps are generally valued by pricing vendors based on market inputs that include the index and term of index, reset frequency, payer/receiver, currency and pay frequency.Exchange-traded futures are generally valued at the official settlement price of, or the last reported sale price on, the exchange or market on which such instruments are traded, as of the close of business on the day the futures are being valued or, lacking any sales, at the last available bid price. Prices for each future are taken from the exchange or market on which the security trades.
Securities and other assets for which representative market quotations are not readily available or are considered unreliable by the fund’s investment adviser are fair valued as determined in good faith under fair valuation guidelines adopted by authority of the fund’s board of trustees as further described. The investment adviser follows fair valuation guidelines, consistent with U.S. Securities and Exchange Commission rules and guidance, to consider relevant principles and factors when making fair value determinations. The investment adviser considers relevant indications of value that are reasonably and timely available to it in determining the fair value to be assigned to a particular security, such as the type and cost of the security; contractual or legal restrictions on resale of the security; relevant financial or business developments of the issuer; actively traded similar or related securities; conversion or exchange rights on the security; related corporate actions; significant events occurring after the close of trading in the security; and changes in overall market conditions. In addition, the closing prices of equity securities that trade in markets outside U.S. time zones may be adjusted to reflect significant events that occur after the close of local trading but before the net asset value of each share class of the fund is determined. Fair valuations and valuations of investments that are not actively trading involve judgment and may differ materially from valuations that would have been used had greater market activity occurred.
Processes and structure — The fund’s board of trustees has delegated authority to the fund’s investment adviser to make fair value determinations, subject to board oversight. The investment adviser has established a Joint Fair Valuation Committee (the “Fair Valuation Committee”) to administer, implement and oversee the fair valuation process, and to make fair value decisions. The Fair Valuation Committee regularly reviews its own fair value decisions, as well as decisions made under its standing instructions to the investment adviser’s valuation teams. The Fair Valuation Committee reviews changes in fair value measurements from period to period and may, as deemed appropriate, update the fair valuation guidelines to better reflect the results of back testing and address new or evolving issues. The Fair Valuation Committee reports any changes to the fair valuation guidelines to the board of trustees with supplemental information to support the changes. The fund’s board and audit committee also regularly review reports that describe fair value determinations and methods.
The fund’s investment adviser has also established a Fixed-Income Pricing Review Group to administer and oversee the fixed-income valuation process, including the use of fixed-income pricing vendors. This group regularly reviews pricing vendor information and market data. Pricing decisions, processes and controls over security valuation are also subject to additional internal reviews, including an annual control self-evaluation program facilitated by the investment adviser’s compliance group.
Classifications — The fund’s investment adviser classifies the fund’s assets and liabilities into three levels based on the inputs used to value the assets or liabilities. Level 1 values are based on quoted prices in active markets for identical securities. Level 2 values are based on significant observable market inputs, such as quoted prices for similar securities and quoted prices in inactive markets. Certain securities trading outside the U.S. may transfer between Level 1 and Level 2 due to valuation adjustments resulting from significant market movements following the close of local trading. Level 3 values are based on significant unobservable inputs that reflect the investment adviser’s determination of assumptions that market participants might reasonably use in valuing the securities. The valuation levels are not necessarily an indication of the risk or liquidity associated with the underlying investment. For example, U.S. government securities are reflected as Level 2 because the inputs used to determine fair value may not always be quoted prices in an active market. At May 31, 2016, all of the fund’s investments were classified as Level 2.
Federal income tax information (dollars in thousands)
Gross unrealized appreciation on investment securities $16,524
Gross unrealized depreciation on investment securities (3,312)
Net unrealized appreciation on investment securities 13,212
Cost of investment securities 2,646,407
    
American Funds Mortgage Fund — Page 9 of 10
unaudited
Key to abbreviations
CLO = Collateralized Loan Obligations
CME = CME Group
LCH = LCH.Clearnet
LIBOR = London Interbank Offered Rate
TBA = To be announced
Investments are not FDIC-insured, nor are they deposits of or guaranteed by a bank or any other entity, so they may lose value.
Investors should carefully consider investment objectives, risks, charges and expenses. This and other important information is contained in the fund prospectus and summary prospectus, which can be obtained from your financial professional and should be read carefully before investing. You may also call American Funds Service Company (AFS) at (800) 421-4225 or visit the American Funds website at americanfunds.com.
MFGEFPX-042-0716O-S54181 American Funds Mortgage Fund — Page 10 of 10

 

 

ITEM 2 – Controls and Procedures

 

The Registrant’s Principal Executive Officer and Principal Financial Officer have concluded, based on their evaluation of the Registrant’s disclosure controls and procedures (as such term is defined in Rule 30a-3 under the Investment Company Act of 1940), that such controls and procedures are adequate and reasonably designed to achieve the purposes described in paragraph (c) of such rule.

 

There were no changes in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the Registrant’s last fiscal quarter that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

 

 

ITEM 3 – Exhibits

 

The certifications required by Rule 30a-2 of the Investment Company Act of 1940 and Section 302 of the Sarbanes-Oxley Act of 2002 are attached as exhibits 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.

 

  AMERICAN FUNDS MORTGAGE FUND
   
  By /s/ David J. Betanzos
 

David J. Betanzos, President and

Principal Executive Officer

   
  Date: July 29, 2016

 

 

 

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 /s/ David J. Betanzos

David J. Betanzos, President and

Principal Executive Officer

 
Date: July 29, 2016

 

 

 

By /s/ Brian C. Janssen

Brian C. Janssen, Treasurer and

Principal Financial Officer

 
Date: July 29, 2016

 

 

 

 

 

 

American Funds Mortgage Fund

6455 Irvine Center Drive

Irvine, California 92618

(213) 486-9200

 

CERTIFICATION

 

I, David J. Betanzos, certify that:

 

1. I have reviewed this report on Form N-Q of American Funds Mortgage Fund;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which this report is filed;
   
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
   
  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
  c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
   
  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
   
5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's Board of Trustees (or persons performing the equivalent functions):
   
  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
   
  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: July 29, 2016

 

/s/ David J. Betanzos

David J. Betanzos, President and

Principal Executive Officer

American Funds Mortgage Fund

 
 

 

 

 

 

 

American Funds Mortgage Fund

6455 Irvine Center Drive

Irvine, California 92618

(213) 486-9200

 

CERTIFICATION

 

I, Brian C. Janssen, certify that:

 

1. I have reviewed this report on Form N-Q of American Funds Mortgage Fund;
   
2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
   
3. Based on my knowledge, the schedules of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which this report is filed;
   
4. The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal controls over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:
   
  a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
   
  b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
   
  c) Evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and
   
  d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
   
5. The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's Board of Trustees (or persons performing the equivalent functions):
   
  a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and
   
  b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

Date: July 29, 2016

 

/s/ Brian C. Janssen

Brian C. Janssen, Treasurer and

Principal Financial Officer

American Funds Mortgage Fund


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