BOI Brookfield Mortgage Opportunity Income Fund Inc.

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 811-22773

Brookfield Mortgage Opportunity Income Fund Inc.

(Exact name of registrant as specified in charter)

Brookfield Place,

250 Vesey Street, 15th Floor,

New York, NY 10281-1023

(Address of principal executive offices) (Zip code)

Kim G. Redding,

Brookfield Place,

250 Vesey Street, 15th Floor,

New York, NY 10281-1023

(Name and address of agent for service)

Registrant's telephone number, including area code: (800) 497-3746

Date of fiscal year end: June 30, 2014

Date of reporting period: September 30, 2013

Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (Sections 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, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. Section 3507.

Item 1. Schedule of Investments.

Brookfield Mortgage Opportunity Income Fund Inc.
Schedule of Investments   (Unaudited)  

September 30, 2013

	Interest Rate	Maturity	Principal Amount (000s)	Value
HIGH YIELD CORPORATE BONDS (continued)
RKI Exploration & Production LLC 4,5	8.50%	08/01/21	$ 450	$ 452,250
W&T Offshore, Inc.	8.50	06/15/19	1,250	1,325,000
Total Energy				10,312,057
Healthcare – 0.7%
DJO Finance LLC/DJO Finance Corp.	9.88	04/15/18	750	795,000
inVentiv Health, Inc. 4,5	11.00	08/15/18	800	642,000
Kindred Healthcare, Inc.	8.25	06/01/19	1,350	1,437,750
Total Healthcare				2,874,750
Media – 0.9%
ARC Document Solutions, Inc.	10.50	12/15/16	850	888,250
Cenveo Corp.	8.88	02/01/18	1,000	995,000
Clear Channel Communications, Inc.	9.00	03/01/21	900	870,750
Cumulus Media Holdings, Inc.	7.75	05/01/19	850	881,875
Total Media				3,635,875
Services – 2.0%
Boyd Gaming Corp.	9.00	07/01/20	1,300	1,410,500
Casella Waste Systems, Inc.	7.75	02/15/19	900	895,500
Chester Downs & Marina LLC 4,5	9.25	02/01/20	875	881,562
Isle of Capri Casinos, Inc.	5.88	03/15/21	850	796,875
MGM Resorts International	7.75	03/15/22	1,250	1,354,688
MTR Gaming Group, Inc.	11.50	08/01/19	850	932,875
Palace Entertainment Holdings LLC/Palace Entertainment Holdings Corp. 4,5	8.88	04/15/17	1,250	1,271,875
PulteGroup, Inc.	6.38	05/15/33	1,000	892,500
Total Services				8,436,375
Technology & Electronics – 0.8%
First Data Corp. 4,5	11.25	01/15/21	1,350	1,410,750
Freescale Semiconductor, Inc.	8.05	02/01/20	1,150	1,210,375
ION Geophysical Corp. 4,5	8.13	05/15/18	500	465,000
Total Technology & Electronics				3,086,125
Telecommunications – 2.0%
CenturyLink, Inc.	7.65	03/15/42	1,250	1,112,500
Cincinnati Bell, Inc.	8.75	03/15/18	850	897,813
Fairpoint Communications, Inc. 4,5	8.75	08/15/19	850	864,875
Frontier Communications Corp.	7.13	01/15/23	1,350	1,346,625
Intelsat Luxembourg SA 4,5,8	7.75	06/01/21	650	672,750
Level 3 Financing, Inc.	8.63	07/15/20	950	1,037,875
MetroPCS Wireless, Inc. 4,5	6.63	04/01/23	1,350	1,353,375
Windstream Corp.	7.50	06/01/22	1,000	997,500
Total Telecommunications				8,283,313
Total HIGH YIELD CORPORATE BONDS (Cost $59,297,430)				58,094,058

 

^{See Notes to Financial Statements.}

Brookfield Mortgage Opportunity Income Fund Inc.
Schedule of Investments   (Unaudited)  

September 30, 2013

			Shares	Value
COMMON STOCKS – 1.7%
Banking – 1.7%
Home Loan Servicing Solutions Ltd. 8			200,000	$ 4,402,000
Ocwen Financial Corp. 9			50,000	2,788,500
Total Banking				7,190,500
Total COMMON STOCKS (Cost $6,604,385)				7,190,500

 

	Interest Rate	Maturity	Principal Amount (000s)	Value
SHORT TERM INVESTMENTS – 0.1%
United States Treasury Bills	0.04 %	10/10/13	$ 250,000	$ 249,998
Total SHORT TERM INVESTMENTS (Cost $249,998)				249,998
Total Investments – 98.7% (Cost $422,971,097)				408,146,152
Other Assets in Excess of Liabilities – 1.3%				5,441,262
TOTAL NET ASSETS – 100.0%				$ 413,587,414

 

The following notes should be read in conjunction with the accompanying Schedule of Investments.

 

1	— Variable rate security – Interest rate shown is the rate in effect as of September 30, 2013.
2	— Security is a “step up” bond where the coupon increases or steps up at a predetermined date. At that date, the coupon increases to LIBOR plus a predetermined margin.
3	— Investment in subprime security. As of September 30, 2013, the total value of these securities was $84,816,873 which amounted to 20.5% of the net assets.
4	— Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities may only be resold in transactions exempt from registration, normally to qualified institutional buyers. As of September 30, 2013, the total value of all such investments was $71,855,163 or 17.4% of net assets.
5	— Private Placement.
6	— Portion or entire principal amount delivered as collateral for reverse repurchase agreements.
7	— Represents a subordinated class in a trust of mortgage-backed securities.
8	— Foreign security or a U.S. security of a foreign company.
9	— Non-income producing security.

^{See Notes to Financial Statements.}

BROOKFIELD MORTGAGE OPPORTUNITY INCOME FUND INC.
Notes to Schedule of Investments   (Unaudited)  

September 30, 2013

Significant Accounting Policies

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Valuation of Investments: Debt securities, including U.S. government securities, listed corporate bonds, other fixed income and asset-backed securities, and unlisted securities and private placement securities, are generally valued at the bid prices furnished by an independent pricing service or, if not valued by an independent pricing service, using bid prices obtained from at least two active and reliable market makers in any such security or a broker-dealer. Short-term debt securities with remaining maturities of sixty days or less are valued at cost with interest accrued or discount accreted to the date of maturity, unless such valuation, in the judgment of Brookfield Investment Management Inc.'s (the "Adviser’s") Valuation Committee, does not represent market value.

Investments in equity securities listed or traded on any securities exchange or traded in the over-the-counter market are valued at the last trade price as of the close of business on the valuation date. Equity securities for which no sales were reported for that date are valued at “fair value” as determined in good faith by the Adviser’s Valuation Committee. Investments in open-end registered investment companies, if any, are valued at the net asset value (“NAV”) as reported by those investment companies.

The Board of Directors (the "Board") has adopted procedures for the valuation of the Fund’s securities and has designated the day to day responsibilities for valuation determinations under these procedures to the Adviser. The Board has reviewed and approved the valuation procedures utilized by the Adviser and regularly reviews the application of the procedures to the securities in the Fund’s portfolio. Securities are valued using unadjusted quoted market prices, when available, as supplied primarily by third party pricing services or dealers. When price quotations for certain securities are not readily available or cannot be determined, a significant event has occurred that would materially affect the value of the security, or if the available quotations are not believed to be reflective of the market value by the Adviser, those securities will be valued at “fair value” as determined in good faith by the Adviser’s Valuation Committee using procedures adopted by and under the supervision of the Fund’s Board. The Valuation Committee is comprised of senior members of the Adviser’s management team. There can be no assurance that the Fund could purchase or sell a portfolio security at the price used to calculate the Fund’s NAV.

Fair valuation procedures may be used to value a substantial portion of the assets of the Fund. The Fund may use the fair value of a security to calculate its NAV when, for example, (1) a portfolio security is not traded in a public market or the principal market in which the security trades is closed, (2) trading in a portfolio security is suspended and not resumed prior to the normal market close, (3) a portfolio security is not traded in significant volume for a substantial period, or (4) the Adviser determines that the quotation or price for a portfolio security provided by a broker-dealer or an independent pricing service is inaccurate.

The “fair value” of securities may be difficult to determine and thus judgment plays a greater role in the valuation process. The fair valuation methodology may include or consider the following guidelines, as appropriate: (1) evaluation of all relevant factors, including but not limited to, pricing history, current market level, supply and demand of the respective security; (2) comparison to the values and current pricing of securities that have comparable characteristics; (3) knowledge of historical market information with respect to the security; (4) other factors relevant to the security which would include, but not be limited to, duration, yield, fundamental analytical data, the Treasury yield curve, and credit quality.

The values assigned to fair valued investments are based on available information and do not necessarily represent amounts that might ultimately be realized, since such amounts depend on future developments inherent in long-term investments. Changes in the fair valuation of portfolio securities may be less frequent and of greater magnitude than changes in the price of portfolio securities valued at their last sale price, by an independent pricing

BROOKFIELD MORTGAGE OPPORTUNITY INCOME FUND INC.
Notes to Schedule of Investments   (Unaudited)  

September 30, 2013

service, or based on market quotations. Imprecision in estimating fair value can also impact the amount of unrealized appreciation or depreciation recorded for a particular portfolio security and differences in the assumptions used could result in a different determination of fair value, and those differences could be material.

The Fund has established methods of fair value measurements in accordance with GAAP. Fair value denotes the price that the Fund would receive upon selling an investment in a timely transaction to an independent buyer in the principal or most advantageous market of the investment. A three-tier hierarchy has been established to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk, for example, the risk inherent in a particular valuation technique used to measure fair value including such a pricing model and/or the risk inherent in the inputs to the valuation technique. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The three-tier hierarchy of inputs is summarized in the three broad levels listed below.

The Adviser’s valuation policy, as previously stated, establishes parameters for the sources and types of valuation analysis, as well as, the methodologies and inputs the Adviser uses in determining fair value, including the use of the Adviser’s Valuation Committee. If the Valuation Committee determines that additional techniques, sources or inputs are appropriate or necessary in a given situation, such additional work will be undertaken.

To assess the continuing appropriateness of security valuations, the Adviser (or its third party service provider who is subject to oversight by the Adviser), compares daily its prior day prices, prices on comparable securities and sales prices and challenges those prices that either remain unchanged or exceeds certain tolerance levels with the third party pricing service or broker source. For those securities valued by fair valuations, the Valuation Committee reviews and affirms the reasonableness of the valuations based on such methodologies and fair valuation determinations on a regular basis after considering all relevant information that is reasonably available.

The inputs or methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those securities.

The following table summarizes the Fund’s investments categorized in the disclosure hierarchy as of September 30, 2013:

 

Item 2. Controls and Procedures.

(a) The Registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s Disclosure Controls and Procedures are effective, based on their evaluation of such Disclosure Controls and Procedures as of a date within 90 days of the filing of this report on Form N-Q.

(b) As of the date of filing this Form N-Q, the Registrant’s principal executive officer and principal financial officer are aware of no changes in the Registrant’s internal control over financial reporting 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(a) of the 1940 Act 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)

Brookfield Mortgage Opportunity Income Fund Inc.

By (Signature and Title)

/s/ Kim G. Redding

 Kim G. Redding

 President and Principal Executive Officer

Date: November 4, 2013

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/ Kim G. Redding

 Kim G. Redding

 President and Principal Executive Officer

Date: November 4, 2013

By (Signature and Title)

/s/ Steven M. Pires

 Steven M. Pires

 Treasurer and Principal Financial Officer

Date: November 4, 2013