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 811-21905
First Trust/Aberdeen Emerging Opportunity Fund
(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
(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
(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 765-8000
Date of fiscal year end: December 31
Date of reporting period: March 31, 2010
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, 100 F Street, NE, Washington, DC
20549. The OMB has reviewed this collection of information under the clearance
requirements of 44 U.S.C. Section 3507.
ITEM 1. SCHEDULE OF INVESTMENTS.
The Schedule(s) of Investments is attached herewith.
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) (b)
MARCH 31, 2010 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
--------- -------------------------------------------------- ------ -------- ------------
BONDS AND NOTES (c) -- 58.4%
ARGENTINA -- 2.8%
1,365,417 Republic of Argentina (ARS) (d) .................. 4.82% 02/04/18 $ 576,786
2,510,000 Republic of Argentina (USD) ...................... 7.00% 03/28/11 2,461,028
------------
3,037,814
------------
BRAZIL -- 5.8%
740,000 Brazil Notas do Tesoura Nacional Series B (BRL) .. 6.00% 08/15/10 799,539
4,070,000 Brazil Notas do Tesoura Nacional Series F (BRL) .. 10.00% 01/01/17 2,057,535
144,000 Dasa Finance Corp. (USD) ......................... 8.75% 05/29/18 154,800
740,000 Federal Republic of Brazil (USD) ................. 7.13% 01/20/37 846,190
710,000 Federal Republic of Brazil (USD) ................. 5.63% 01/07/41 672,015
580,000 Odebrecht Finance Ltd. (USD) ..................... 7.00% 04/21/20 606,825
540,000 Petrobras International Finance Co. (USD) ........ 7.88% 03/15/19 630,234
630,000 Rearden G Holdings Eins GmbH (USD) ............... 7.88% 03/30/20 641,592
------------
6,408,730
------------
CHINA -- 1.0%
470,000 Agile Property Holdings Ltd. (USD) ............... 10.00% 11/14/16 505,250
580,000 Parkson Retail Group Ltd. (USD) .................. 7.88% 11/14/11 606,783
------------
1,112,033
------------
COLOMBIA -- 2.3%
460,000 Republic of Colombia (USD) ....................... 7.38% 03/18/19 531,300
260,000 Republic of Colombia (USD) ....................... 7.38% 09/18/37 292,500
1,735,000 Republic of Colombia (USD) ....................... 6.13% 01/18/41 1,669,938
------------
2,493,738
------------
CROATIA -- 0.5%
530,000 Croatia Government International Bond (USD) ...... 6.75% 11/05/19 584,276
------------
DOMINICAN REPUBLIC -- 1.0%
505,000 Cerveceria Nacional Dominica (USD) (d) ........... 16.00% 03/27/12 499,799
528,000 Dominican Republic (USD) ......................... 8.63% 04/20/27 562,320
------------
1,062,119
------------
EL SALVADOR -- 1.0%
1,070,000 Republic of El Salvador (USD) .................... 7.65% 06/15/35 1,131,525
------------
HUNGARY -- 2.6%
227,370,000 Hungary Government Bond (HUF) .................... 6.00% 10/24/12 1,164,638
87,000,000 Hungary Government Bond (HUF) .................... 5.50% 02/12/16 419,767
67,000,000 Hungary Government Bond (HUF) .................... 6.50% 06/24/19 333,883
930,000 Republic of Hungary (USD) ........................ 6.25% 01/29/20 988,125
------------
2,906,413
------------
INDONESIA -- 5.2%
340,000 Indo Integrated Energy II B.V. (USD) ............. 9.75% 11/05/16 362,845
5,730,000,000 Indonesian Government Bond (IDR) ................. 10.75% 05/15/16 700,906
330,000 Indonesian Government Bond (USD) ................. 6.75% 03/10/14 364,473
See Notes to Quarterly Portfolio of Investments
Page 1
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) (b) -- (CONTINUED)
MARCH 31, 2010 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
--------- -------------------------------------------------- ------ -------- ------------
BONDS AND NOTES (c) -- (CONTINUED)
INDONESIA -- (CONTINUED)
1,850,000,000 Indonesian Recapitalization Bond (IDR) ........... 13.40% 02/15/11 $ 214,686
4,350,000,000 Indonesian Recapitalization Bond (IDR) ........... 13.45% 08/15/11 517,786
1,140,000 Majapahit Holding B.V. (USD) ..................... 7.75% 10/17/16 1,243,607
150,000 Majapahit Holding B.V. (USD) ..................... 7.25% 06/28/17 159,424
620,000 MGTI Finance Company, Ltd. (USD) ................. 8.38% 09/15/10 623,918
590,000 PT Adaro Indonesia (USD) ......................... 7.63% 10/22/19 615,842
280,000 Republic of Indonesia (USD) ...................... 10.38% 05/04/14 349,300
550,000 Star Energy Geotherm al (Wayang Windu) Ltd.
(USD) ......................................... 11.50% 02/12/15 584,375
------------
5,737,162
------------
IRAQ -- 0.6%
780,000 Republic of Iraq (USD) ........................... 5.80% 01/15/28 635,700
------------
KAZAKHSTAN -- 2.2%
420,000 Halyk Savings Bank of Kazakhstan (USD) ........... 9.25% 10/16/13 453,600
730,000 KazakhGold Group Ltd. (USD) ...................... 9.38% 11/06/13 765,295
350,000 KazMunaiGaz Finance Sub B.V. (USD) ............... 8.38% 07/02/13 397,250
430,000 Turanalem Finance B.V. (USD) (e) ................. 7.88% 06/02/10 193,500
350,000 Turanalem Finance B.V. (USD) (e) ................. 7.75% 04/25/13 154,875
910,000 Turanalem Finance B.V. (USD) (e) ................. 8.25% 01/22/37 418,600
------------
2,383,120
------------
LITHUANIA -- 2.4%
1,310,000 Republic of Lithuania (USD) ...................... 6.75% 01/15/15 1,434,450
1,140,000 Republic of Lithuania (USD) ...................... 7.38% 02/11/20 1,245,450
------------
2,679,900
------------
MALAYSIA -- 1.4%
1,240,000 Petronas Capital Ltd. (USD) ...................... 7.88% 05/22/22 1,510,027
------------
MEXICO -- 5.7%
525,000 Corp. Geo S.A. de C.V. (USD) ..................... 8.88% 09/25/14 565,688
550,000 Corporativo Javer S.A. de C.V. (USD) ............. 13.00% 08/04/14 633,589
666,000 Desarrolladora Homex S.A. (USD) .................. 7.50% 09/28/15 679,320
450,000 Grupo Posadas S.A.B. de C.V. (USD) ............... 9.25% 01/15/15 471,375
5,100,000 Mexican Bonos Desarr Fixed Rate Bond (MXN) ....... 7.25% 12/15/16 413,239
11,950,000 Mexican Bonos Desarr Fixed Rate Bond (MXN) ....... 8.00% 06/11/20 996,464
5,440,000 Mexican Bonos Desarr Fixed Rate Bond (MXN) ....... 10.00% 11/20/36 519,151
9,240,000 Mexican Cetes (MXN) .............................. (f) 06/03/10 741,367
380,000 Pemex Project Funding Master Trust (USD) ......... 6.63% 06/15/35 374,846
910,000 Pemex Project Funding Master Trust (USD) ......... 6.63% 06/15/38 886,803
------------
6,281,842
------------
NIGERIA -- 0.7%
790,000 GTB Finance B.V. (USD) ........................... 8.50% 01/29/12 812,752
------------
PAKISTAN -- 0.6%
100,000 Islamic Republic of Pakistan (USD) ............... 7.13% 03/31/16 94,066
See Notes to Quarterly Portfolio of Investments
Page 2
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) (b) -- (CONTINUED)
MARCH 31, 2010 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
--------- -------------------------------------------------- ------ -------- ------------
BONDS AND NOTES (c) -- (CONTINUED)
PAKISTAN -- (CONTINUED)
350,000 Islamic Republic of Pakistan (USD) ............... 6.88% 06/01/17 $ 320,250
290,000 Islamic Republic of Pakistan (USD) ............... 7.88% 03/31/36 234,320
------------
648,636
------------
PERU -- 1.4%
490,000 CFG Investment S.A.C. (USD) ...................... 9.25% 12/19/13 515,725
2,440,000 Peru Bono Soberano (PEN) ......................... 8.20% 08/12/26 1,006,521
------------
1,522,246
------------
PHILIPPINES -- 3.8%
620,000 Republic of Philippines (USD) .................... 10.63% 03/16/25 890,507
1,470,000 Republic of Philippines (USD) .................... 7.75% 01/14/31 1,690,500
880,000 Republic of Philippines (USD) .................... 6.38% 10/23/34 870,930
740,000 SM Investments Corp. (USD) ....................... 6.00% 09/22/14 759,000
------------
4,210,937
------------
QATAR -- 1.1%
840,000 State of Qatar (USD) ............................. 5.25% 01/20/20 876,120
340,000 State of Qatar (USD) ............................. 6.40% 01/20/40 357,000
------------
1,233,120
------------
RUSSIA -- 5.5%
670,000 BOM Capital PLC (USD) ............................ 6.70% 03/11/15 678,375
1,180,000 Gaz Capital S.A. (USD) ........................... 9.25% 04/23/19 1,401,250
630,000 LUKOIL International Finance B.V. (USD) .......... 7.25% 11/05/19 662,256
19,855,845 Red Arrow International Leasing PLC (RUB) ........ 8.38% 06/30/12 696,359
19,600,000 RSHB Capital S.A. (RUB) .......................... 7.50% 03/25/13 666,748
423,200 Russia Government International Bond (USD) ....... 7.50% 03/31/30 488,838
700,000 Russian Railways (USD) ........................... 5.74% 04/03/17 704,900
670,000 TNK-BP Finance S.A. (USD) ........................ 7.50% 07/18/16 735,325
------------
6,034,051
------------
SINGAPORE -- 0.7%
700,000 Ciliandra Perkasa Finance Co. Pte Ltd. (USD) ..... 10.75% 12/08/11 720,641
------------
SOUTH AFRICA -- 2.2%
1,000,000 Rebublic of South Africa (USD) ................... 5.50% 03/09/20 1,010,000
9,200,000 Republic of South Africa (ZAR) ................... 10.50% 12/21/26 1,446,119
------------
2,456,119
------------
UKRAINE -- 1.8%
1,340,000 EX-IM Bank of Ukraine (USD) ...................... 7.65% 09/07/11 1,343,350
500,000 UBS AG Jersey Branch, Credit Linked Note
(USD) (g) ..................................... 9.13% 06/21/10 216,000
310,000 Ukraine Government Bond (USD) .................... 6.88% 03/04/11 312,821
160,000 Ukraine Government Bond (USD) .................... 6.75% 11/14/17 154,208
------------
2,026,379
------------
See Notes to Quarterly Portfolio of Investments
Page 3
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) (b) -- (CONTINUED)
MARCH 31, 2010 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
--------- -------------------------------------------------- ------ -------- ------------
BONDS AND NOTES (c) -- (CONTINUED)
URUGUAY -- 2.7%
110,000 Republic of Uruguay (USD) ........................ 7.88% 01/15/33 $ 128,150
1,350,000 Republic Orient Uruguay (USD) .................... 7.63% 03/21/36 1,535,625
19,280,000 Republic Orient Uruguay,
Inflation Adjusted Bond (UYU) (h) ............. 5.00% 09/14/18 1,361,804
------------
3,025,579
------------
VENEZUELA -- 3.4%
1,620,000 Bolivarian Republic of Venezuela (USD) ........... 7.75% 10/13/19 1,162,350
740,000 Petroleos de Venezuela S.A. (USD) ................ 5.25% 04/12/17 456,950
2,610,000 Republic of Venezuela (USD) ...................... 5.75% 02/26/16 1,905,300
300,000 Republic of Venezuela (USD) ...................... 7.00% 12/01/18 215,250
------------
3,739,850
------------
TOTAL BONDS AND NOTES
(Cost $60,245,983) ................................................... 64,394,709
------------
SHARES DESCRIPTION VALUE
------ ---------------------------------------------------------------------- ------------
COMMON STOCKS -- 44.3%
BRAZIL -- 8.4%
86,295 Banco Bradesco S.A., ADR ............................................. 1,590,417
43,000 Lojas Renner S.A ..................................................... 988,467
31,000 Multiplan Empreendimentos Imobiliarios S.A. .......................... 519,122
44,000 Petroleo Brasileiro S.A., ADR ........................................ 1,741,960
25,300 Souza Cruz S.A ....................................................... 884,614
28,000 Ultrapar Participacoes S.A., Preference Shares ....................... 1,337,847
80,000 Vale S.A., Preference Shares, ADR .................................... 2,220,800
------------
9,283,227
------------
CHILE -- 1.0%
15,600 Banco Santander Chile S.A., ADR ...................................... 1,064,232
------------
CHINA -- 4.7%
155,000 China Mobile Ltd. .................................................... 1,491,253
200,000 Hang Lung Group Ltd .................................................. 1,061,271
920,000 PetroChina Co., Ltd., H Shares ....................................... 1,075,902
700,000 Swire Pacific Ltd., B Shares ......................................... 1,536,267
------------
5,164,693
------------
HUNGARY -- 1.2%
6,300 Richter Gedeon Nyrt (i) .............................................. 1,362,866
------------
INDIA -- 4.6%
32,000 Bharti Airtel Ltd. ................................................... 222,777
20,000 GlaxoSmithKline Pharmaceuticals Ltd. ................................. 792,070
13,000 Grasim Industries Ltd. ............................................... 815,081
29,000 Hero Honda Motors Ltd. ............................................... 1,255,988
59,000 Hindustan Unilever Ltd. .............................................. 314,811
11,500 Housing Development Finance Corp., Ltd. .............................. 696,020
See Notes to Quarterly Portfolio of Investments
Page 4
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) (b) -- (CONTINUED)
MARCH 31, 2010 (UNAUDITED)
SHARES DESCRIPTION VALUE
------ ---------------------------------------------------------------------- ------------
COMMON STOCKS -- (CONTINUED)
INDIA -- (CONTINUED)
20,000 ICICI Bank Ltd. ...................................................... $ 424,323
10,000 Infosys Technologies Ltd. ............................................. 582,682
------------
5,103,752
------------
INDONESIA -- 1.3%
310,000 PT Astra International Tbk ........................................... 1,427,441
------------
ITALY -- 0.9%
23,600 Tenaris S.A., ADR .................................................... 1,013,384
------------
MALAYSIA -- 1.8%
70,300 British American Tobacco Malaysia Berhad ............................. 951,270
289,000 Public Bank Berhad ................................................... 1,034,801
------------
1,986,071
------------
MEXICO -- 4.4%
31,900 Fomento Economico Mexicano, S.A.B. de C.V., ADR ...................... 1,516,207
40,000 Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., ADR ............ 601,200
352,000 Grupo Financiero Banorte, S.A.B. de C.V., O Shares ................... 1,561,313
209,000 Kimberly-Clark de Mexico, S.A.B. de C.V., A Shares ................... 1,181,607
------------
4,860,327
------------
PHILIPPINES -- 1.1%
1,164,000 Bank of the Philippine Islands ....................................... 1,159,106
------------
POLAND -- 0.5%
9,000 Bank Pekao S.A. (i) .................................................. 522,999
------------
RUSSIA -- 1.1%
20,500 LUKOIL, ADR .......................................................... 1,162,350
------------
SOUTH AFRICA -- 2.7%
130,000 Massmart Holdings Ltd. ............................................... 1,936,681
142,729 Truworths International Ltd. .......................................... 1,024,847
------------
2,961,528
------------
SOUTH KOREA -- 2.7%
27,008 Busan Bank ........................................................... 290,024
4,900 Samsung Electronics Co., Ltd., Preference Shares ..................... 2,329,931
850 Shinsegae Co., Ltd. .................................................. 401,918
------------
3,021,873
------------
TAIWAN -- 2.5%
800,450 Taiwan Mobile Co., Ltd. .............................................. 1,507,239
643,953 Taiwan Semiconductor Manufacturing Co., Ltd. ......................... 1,247,028
------------
2,754,267
------------
THAILAND -- 2.2%
250,000 PTT Exploration and Production Public Co., Ltd. ...................... 1,148,137
163,000 Siam Cement Public (The) Co., Ltd. ................................... 1,320,736
------------
2,468,873
------------
See Notes to Quarterly Portfolio of Investments
Page 5
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) (b) -- (CONTINUED)
MARCH 31, 2010 (UNAUDITED)
SHARES DESCRIPTION VALUE
------ ---------------------------------------------------------------------- ------------
COMMON STOCKS -- (CONTINUED)
TURKEY -- 2.1%
55,226 Akbank TAS ........................................................... $ 356,590
253,000 Aksigorta AS ......................................................... 355,058
16,610 Bim Birlesik Magazalar AS ............................................ 864,563
181,150 Haci Omer Sabanci Holding AS (i) ..................................... 775,802
------------
2,352,013
------------
UNITED KINGDOM -- 1.1%
45,696 Standard Chartered PLC ............................................... 1,246,450
------------
TOTAL COMMON STOCKS 48,915,452
------------
(Cost $35,031,091)
TOTAL INVESTMENTS -- 102.7% .......................................... 113,310,161
(Cost $95,277,074) (j)
OUTSTANDING LOAN -- (5.2)% ........................................... (5,800,000)
NET OTHER ASSETS AND LIABILITIES -- 2.5% ............................. 2,800,422
------------
NET ASSETS -- 100.0% ................................................. $110,310,583
============
----------
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) All of these securities are available to serve as collateral for the
outstanding loan.
(c) Fixed-income portfolio securities are included in a country based upon
their underlying credit exposure as determined by Aberdeen Asset Management
Inc., the investment sub-advisor.
(d) Variable rate security. The interest rate shown reflects the rate in effect
at March 31, 2010.
(e) This issuer is in default and interest is not being accrued by the Fund nor
paid by the issuer.
(f) Zero coupon bond.
(g) Credit linked to the KSC State Export-Import Bank of Ukraine.
(h) Security whose principal value is adjusted in accordance with changes to
the country's Consumer Price Index. Interest is calculated on the basis of
the current adjusted principal value.
(i) Non-income producing security.
(j) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of March 31, 2010, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $19,607,858 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $1,574,771.
ADR American Depositary Receipt
Currency Abbreviations:
ARS Argentine Peso
BRL Brazilian Real
HUF Hungarian Forint
IDR Indonesian Rupiah
MXN Mexican Peso
PEN Peruvian New Sol
RUB Russian Ruble
USD United States Dollar
UYU Uruguayan Peso
ZAR South African Rand
See Notes to Quarterly Portfolio of Investments
Page 6
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS -- (CONTINUED)
MARCH 31, 2010 (UNAUDITED)
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of March 31,
2010 is as follows (see Note A - Portfolio Valuation in the Notes to Quarterly
Portfolio of Investments):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
3/31/2010 PRICES INPUTS INPUTS
------------ ----------- ----------- ------------
Bonds and Notes* ....................... $ 64,394,709 $ -- $64,394,709 $--
Common Stocks* ......................... 48,915,452 48,915,452 -- --
------------ ----------- ----------- ---
Total Investments ...................... 113,310,161 48,915,452 64,394,709 --
------------ ----------- ----------- ---
Other Financial Instruments:
Forward Foreign Currency Contracts** ... 26,859 26,859 -- --
------------ ----------- ----------- ---
$113,337,020 $48,942,311 $64,394,709 $--
============ =========== =========== ===
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL MARKET LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
3/31/2010 PRICES INPUTS INPUTS
------------ -------- ----------- ------------
Forward Foreign Currency Contracts** ... $(36,687) $(36,687) $-- $--
======== ======== === ===
The Fund had common stocks valued at $30,028,780 as of December 31, 2009 that
were either sold or transferred from Level 2 to Level 1 of the fair value
hierarchy. The common stocks that transferred from Level 2 to Level 1 did so as
a result of foreign equities that were fair valued at December 31, 2009 that are
now being valued based on quoted prices. The value of the securities that were
transferred to Level 1 as of March 31, 2010 is $29,084,994.
* See the Portfolio of Investments for country breakout.
** See the Schedule of Forward Foreign Currency Contracts for contract and
currency detail.
% OF TOTAL
INDUSTRY CLASSIFICATION INVESTMENTS
----------------------- -----------
Government Bonds and Notes 34.7%
Commercial Banks 11.1
Oil, Gas & Consumable Fuels 10.4
Real Estate Management & Development 3.2
Semiconductors & Semiconductor Equipment 3.2
Diversified Financial Services 3.1
Construction Materials 3.0
Food Retailing & Staples 2.8
Wireless Telecommunication Services 2.6
Metals & Mining 2.6
Automobiles 2.4
Specialty Retail 2.1
Multiline 2.1
Pharmaceuticals 1.9
Beverages 1.8
Electric Utilities 1.8
Tobacco 1.6
Household Products 1.3
Import/Export Bank 1.2
Household Durables 1.1
Food Products 1.1
Other 4.9
-----
Total 100.0%
=====
See Notes to Quarterly Portfolio of Investments
Page 7
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
MARCH 31, 2010 (UNAUDITED)
FORWARD FOREIGN CURRENCY CONTRACTS
TO SELL CONTRACTS TO DELIVER
---------------------------------------- NET NET
LOCAL UNREALIZED UNREALIZED
CURRENCY IN APPRECIATION DEPRECIATION
SETTLEMENT LOCAL VALUE IN EXCHANGE OF CONTRACTS OF CONTRACTS
DATE COUNTERPARTY CURRENCY (a) U.S. $ FOR U.S. $ U.S. $ U.S. $
---------- ------------ -------------- ---------- ---------- ------------ ------------
06/09/10 JPM BRL 3,834,000 $2,123,218 $2,086,531 $ -- $(36,687)
04/22/10 MS HUF117,495,000 596,370 623,229 26,859 --
------- --------
$26,859 $(36,687)
------- --------
Unrealized Appreciation (Depreciation) ............................. $26,859 $(36,687)
======= ========
Net Unrealized Appreciation (Depreciation) ......................... $ (9,828)
========
(a) Please see page 6 for currency descriptions.
Counterparty Abbreviations:
JPM JPMorgan Chase
MS Morgan Stanley
See Notes to Quarterly Portfolio of Investments
Page 8
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
MARCH 31, 2010 (UNAUDITED)
VALUATION AND INVESTMENT PRACTICES
A. PORTFOLIO VALUATION:
The net asset value ("NAV") of the Common Shares of First Trust/Aberdeen
Emerging Opportunity Fund (the "Fund") is determined daily as of the close of
regular trading on the New York Stock Exchange ("NYSE"), normally 4:00 p.m.
Eastern time, on each day the NYSE is open for trading. 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
dividends and interest), 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 according
to procedures adopted by the Fund's Board of Trustees. A majority of the Fund's
assets are valued using market information supplied by third parties. In
addition, structured products, including currency linked notes and credit linked
notes, as well as interest rate swaps and credit default swaps, are valued using
a pricing service or quotes provided by the selling dealer or financial
institution. In the event that market quotations are not readily available, the
pricing service does not provide a valuation for a particular asset, or the
valuations are deemed unreliable, the Fund's Board of Trustees has designated
First Trust Advisors L.P. ("First Trust") to use a fair value method to value
the Fund's securities and other investments. Additionally, if events occur after
the close of the principal markets for particular securities (e.g., domestic
debt and foreign securities), but before the Fund values its assets, that could
materially affect NAV, First Trust may use a fair value method to value the
Fund's securities and other investments. The use of fair value pricing by the
Fund is governed by valuation procedures adopted by the Fund's Board of
Trustees, and in accordance with the provisions of the Investment Company Act of
1940, as amended.
Portfolio securities listed on any exchange other than the NASDAQ National
Market ("NASDAQ") or the London Stock Exchange Alternative Investment Market
("AIM") are valued at the last sale price on the business day as of which such
value is being determined. Securities listed on the NASDAQ or the AIM are valued
at the official closing price on the business day as of which such value is
being determined. If there has been no sale on such day, or no official closing
price in the case of securities traded on the NASDAQ or the AIM, the securities
are valued at the mean of the most recent bid and asked prices on such day.
Portfolio securities traded on more than one securities exchange are valued at
the last sale price or official closing price, as applicable, on the business
day as of which such value is being determined at the close of the exchange
representing the principal market for such securities. Portfolio securities
traded in the over-the-counter market, but excluding securities trading on the
NASDAQ or the AIM, are valued at the closing bid prices. Fixed income securities
with a remaining maturity of 60 days or more will be valued by the Fund using a
pricing service. Short-term investments that mature in less than 60 days when
purchased are valued at amortized cost.
Foreign securities traded outside the United States are generally valued as of
the time their trading is complete, which is usually different from the close of
the NYSE. Occasionally, events affecting the value of such securities may occur
between such times and the close of the NYSE that will not always be reflected
in the computation of the value of such securities. If events materially
affecting the value of such securities occur during such period, these
securities will be valued at their fair value according to procedures adopted by
the Fund's Board of Trustees. All securities and other assets of the Fund
initially expressed in foreign currencies will be converted to U.S. dollars
using exchange rates in effect at the time of valuation.
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:
- Level 1 -- Level 1 inputs are quoted prices in active markets for
identical securities. An active market is a market in which
transactions for the security occur with sufficient
frequency and volume to provide pricing information on an
ongoing basis.
- Level 2 -- Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
- Quoted prices for similar securities in active markets.
- Quoted prices for identical or similar securities in
markets that are non-active. A non-active market is a
market where there are few transactions for the
security, 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.
- Inputs other than quoted prices that are observable for
the security (for example, interest rates and yield
curves observable at commonly quoted intervals,
volatilities, prepayment speeds, loss severities,
credit risks, and default rates).
- Inputs that are derived principally from or
corroborated by observable market data by correlation
or other means.
Page 9
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (CONTINUED)
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
MARCH 31, 2010 (UNAUDITED)
- Level 3 -- Level 3 inputs are unobservable inputs.
Unobservable inputs reflect the reporting entity's own
ssumptions about the assumptions that market
participants would use in pricing the security.
The inputs or methodology used for valuing securities are not necessarily an
indication of the risk associated with investing in those securities. A summary
of the inputs used to value the Fund's investments as of March 31, 2010 is
included with the Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS:
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income on such securities
is not accrued until settlement date. The Fund maintains liquid assets with a
current value at least equal to the amount of its when-issued or
delayed-delivery purchase commitments. As of March 31, 2010, the Fund had no
when-issued or delayed-delivery purchase commitments.
C. CREDIT LINKED NOTES:
The Fund invests in credit linked notes. Credit linked notes are securities that
are collateralized by one or more designated securities that are referred to as
"reference securities". Through the purchase of a credit linked note, the buyer
assumes the risk of the default or, in some cases, other declines in credit
quality of the reference securities. The buyer also takes on exposure to the
issuer of the credit linked note in the full amount of the purchase price of the
note. The issuer of a credit linked note normally will have hedged its risk on
the reference securities without acquiring any additional credit exposure. The
Fund has the right to receive periodic interest payments from the issuer of the
credit linked note at an agreed-upon interest rate, and, if there has been no
default or, if applicable, other declines in credit quality, a return of
principal at the maturity date.
Credit linked notes are subject to credit risk of the reference securities
underlying the credit linked notes. If one of the underlying reference
securities defaults, or suffers certain other declines in credit quality, the
Fund may, instead of receiving repayment of principal in whole or in part,
receive the security that has defaulted.
Credit linked notes typically are privately negotiated transactions between two
or more parties. The Fund bears the risk that the issuer of the credit linked
note will default or become bankrupt. The Fund bears the risk of loss of the
principal amount it invested, and the periodic interest payments expected to be
received for the duration of its investment in the credit linked note.
The market for credit linked notes may suddenly become illiquid. The other
parties to the transaction may be the only investors with sufficient
understanding of the derivative to be interested in bidding for it. Changes in
liquidity may result in significant, rapid and unpredictable changes in the
prices for credit linked notes. In certain cases, a market price for a credit
linked note may not be available.
D. FORWARD FOREIGN CURRENCY CONTRACTS:
The Fund is subject to foreign currency exchange rate risk in the normal course
of pursuing its investment objectives. Forward foreign currency contracts are
agreements to exchange one currency for another at a future date and at a
specified price. The Fund may use forward foreign currency contracts to
facilitate transactions in foreign securities and to manage the Fund's foreign
currency exposure. These contracts are valued daily, and the Fund's net equity
therein, representing unrealized gain or loss on the contracts as measured by
the difference between the forward foreign exchange rates at the dates of entry
into the contracts and the forward rates at the reporting date, is included on
the Schedule of Forward Foreign Currency Contracts. Risks arise from the
possible inability of counterparties to meet the terms of their contracts and
from movement in currency and securities values and interest rates. Due to the
risks, the Fund could incur losses up to the entire contract amount, which would
exceed the net unrealized value shown on the Schedule of Forward Foreign
Currency Contracts.
During the period ended March 31, 2010, the open and close values of forward
foreign currency contracts were $4,782,022 and $37,469, respectively.
E. FOREIGN CURRENCY:
The books and records of the Fund are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investment securities and items of income and expense are
translated on the respective dates of such transactions. Net realized foreign
currency gains and losses include the effect of changes in exchange rates
between trade date and settlement date on investment security transactions,
foreign currency transactions and interest and dividends received.
Page 10
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/Aberdeen Emerging Opportunity Fund
By (Signature and Title)* /s/ James A. Bowen
-----------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
Date May 27, 2010
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 A. Bowen
-----------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)
Date May 27, 2010
By (Signature and Title)* /s/ Mark R. Bradley
-----------------------------------------------------
Mark R. Bradley, Treasurer, Controller, Chief
Financial Officer and Chief Accounting Officer
(principal financial officer)
Date May 27, 2010
* Print the name and title of each signing officer under his or her
signature.