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: September 30, 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)
SEPTEMBER 30, 2010 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
---------------- ------------------------------------------------------------- ------ -------- -------------
BONDS AND NOTES (c) - 57.1%
ARGENTINA - 3.7%
2,970,903 Republic of Argentina (ARS) (d) ............................. 2.00% 02/04/18 $ 1,498,937
3,600,000 Republic of Argentina (USD) ................................. 7.00% 04/17/17 2,956,900
-------------
4,455,837
-------------
BELARUS - 0.6%
680,000 Republic of Belarus (USD) ................................... 8.75% 08/03/15 706,248
-------------
BRAZIL - 6.6%
3,700,000 Brazil Notas do Tesouro Nacional Series F (BRL) ............. 10.00% 01/01/13 2,108,267
4,070,000 Brazil Notas do Tesouro Nacional Series F (BRL) ............. 10.00% 01/01/17 2,226,925
1,610,000 Brazil Notas do Tesouro Nacional Series F (BRL) ............. 10.00% 01/01/21 853,681
144,000 Dasa Finance Corp. (USD) .................................... 8.75% 05/29/18 162,504
700,000 Gerdau Trade (USD) .......................................... 5.75% 01/30/21 711,025
630,000 Globo Communicacaos S.A. (USD) .............................. 6.25% 12/01/49 644,805
350,000 Odebrecht Finance Ltd. (USD) ................................ 7.50% 09/14/15 351,610
200,000 Petrobras International Finance Co. (USD) ................... 7.88% 03/15/19 250,210
630,000 Rearden G Holdings Eins GmbH (USD) .......................... 7.88% 03/30/20 675,675
-------------
7,984,702
-------------
COLOMBIA - 1.0%
870,000,000 Republic of Columbia (COP) .................................. 7.75% 04/14/21 568,094
600,000 TGI International Ltd. (USD) ................................ 9.50% 10/03/17 683,250
-------------
1,251,344
-------------
DOMINICAN REPUBLIC - 0.9%
505,000 Cerveceria Nacional Dominica (USD) (d) ...................... 16.00% 03/27/12 469,650
528,000 Dominican Republic (USD) .................................... 8.63% 04/20/27 627,000
-------------
1,096,650
-------------
EGYPT - 1.7%
7,900,000 Egypt Treasury Bill (EGP) ................................... (e) 10/05/10 1,387,329
4,000,000 Egypt Treasury Bills (EGP) .................................. (e) 11/16/10 695,089
-------------
2,082,418
-------------
EL SALVADOR - 2.0%
1,540,000 Republic of El Salvador (USD) ............................... 7.65% 06/15/35 1,682,450
650,000 Telemovil Finance Ltd. (USD) ................................ 8.00% 10/01/17 676,000
-------------
2,358,450
-------------
HONG KONG - 0.5%
620,000 CFG Investment S.A.C. (USD) ................................. 9.25% 12/19/13 658,750
-------------
HUNGARY - 2.6%
227,370,000 Hungary Government Bond (HUF) ............................... 6.00% 10/24/12 1,119,565
87,000,000 Hungary Government Bond (HUF) ............................... 5.50% 02/12/16 409,618
334,000,000 Hungary Government Bond (HUF) ............................... 6.50% 06/24/19 1,619,701
-------------
3,148,884
-------------
See Notes to Quarterly Portfolio of Investments
Page 1
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) (b) - (CONTINUED)
SEPTEMBER 30, 2010 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
---------------- ------------------------------------------------------------- ------ -------- -------------
BONDS AND NOTES (c) - (CONTINUED)
INDONESIA - 6.6%
540,000 Berau Capital Resources (USD) ............................... 12.50% 07/08/15 $ 604,885
340,000 Indo Integrated Energy II B.V. (USD) ........................ 9.75% 11/05/16 389,725
3,700,000,000 Indonesian Government Bond (IDR) ............................ 12.50% 03/15/13 468,027
11,230,000,000 Indonesian Government Bond (IDR) ............................ 10.75% 05/15/16 1,456,680
17,000,000,000 Indonesian Government Bond (IDR) ............................ 10.50% 08/15/30 2,286,196
1,850,000,000 Indonesian Recapitalization Bond (IDR) ...................... 13.40% 02/15/11 212,971
4,350,000,000 Indonesian Recapitalization Bond (IDR) ...................... 13.45% 08/15/11 518,197
250,000 Indosat Palapa (USD) ........................................ 7.38% 07/29/20 276,875
810,000 Majapahit Holding B.V. (USD) ................................ 7.75% 10/17/16 947,741
650,000 Star Energy Geothermal (Wayang Windu)
Ltd. (USD) ............................................... 11.50% 02/12/15 732,875
-------------
7,894,172
-------------
IVORY COAST - 0.6%
1,240,000 Ivory Coast Government Bond (USD) ........................... 2.50% 12/31/32 728,500
-------------
KAZAKHSTAN - 1.3%
504,153 BTA Bank JSC (USD) (f) (g) .................................. 10.75% 07/01/18 514,236
1,041,530 BTA Bank JSC (USD) (d) (f) .................................. 0.00% 07/01/20 52,077
114,233 BTA Bank JSC (USD) (f) ...................................... 7.20% 07/01/25 81,105
200,000 Kazakhstan Temir Zholy (USD) ................................ 6.38% 10/06/20 200,000
710,000 KazMunaiGaz Finance Sub B.V. (USD) .......................... 7.00% 05/05/20 786,325
-------------
1,633,743
-------------
LITHUANIA - 1.1%
1,140,000 Republic of Lithuania (USD) ................................. 7.38% 02/11/20 1,278,225
-------------
MALAYSIA - 0.8%
700,000 Petronas Capital Ltd. (USD) ................................. 7.88% 05/22/22 956,864
-------------
MEXICO - 7.1%
450,000 Axtel S.A.B. de C.V. (USD) .................................. 9.00% 09/22/19 417,375
680,000 BBVA Bancomer S.A./Texas (USD) .............................. 7.25% 04/22/20 732,183
525,000 Corp. Geo S.A. de C.V. (USD) ................................ 8.88% 09/25/14 585,375
320,000 Corp. Geo S.A. de C.V. (USD) ................................ 9.25% 06/30/20 359,040
550,000 Corporativo Javer S.A. de C.V. (USD) ........................ 13.00% 08/04/14 629,750
660,000 Desarrolladora Homex S.A. (USD) ............................. 9.50% 12/11/19 745,800
450,000 Grupo Posadas S.A.B. de C.V. (USD) .......................... 9.25% 01/15/15 432,225
5,100,000 Mexican Bonos Desarr Fixed Rate Bond (MXN) .................. 7.25% 12/15/16 434,941
27,950,000 Mexican Bonos Desarr Fixed Rate Bond (MXN) .................. 8.00% 06/11/20 2,524,708
1,840,000 Mexican Bonos Desarr Fixed Rate Bond (MXN) .................. 10.00% 11/20/36 197,336
9,300,000 Mexico Cetes (MXN) .......................................... (e) 12/09/10 731,726
650,000 Pemex Project Funding Master Trust (USD) .................... 6.63% 06/15/38 703,095
-------------
8,493,554
-------------
NIGERIA - 0.7%
790,000 GTB Finance B.V. (USD) ...................................... 8.50% 01/29/12 816,702
-------------
See Notes to Quarterly Portfolio of Investments
Page 2
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) (b) - (CONTINUED)
SEPTEMBER 30, 2010 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
---------------- ------------------------------------------------------------- ------ -------- -------------
BONDS AND NOTES (c) - (CONTINUED)
PERU - 0.9%
2,440,000 Peru Bono Soberano (PEN) .................................... 8.20% 08/12/26 $ 1,045,966
-------------
PHILIPPINES - 0.8%
250,000 Alliance Global Group (USD) ................................. 6.50% 08/18/17 250,225
500,000 Republic of Philippines (USD) ............................... 7.75% 01/14/31 667,500
-------------
917,725
-------------
QATAR - 0.8%
840,000 State of Qatar (USD) ........................................ 5.25% 01/20/20 928,200
-------------
RUSSIA - 1.8%
450,000 Alfa Bank (USD) ............................................. 7.88% 09/25/17 453,285
630,000 LUKOIL International Finance B.V. (USD) ..................... 7.25% 11/05/19 688,055
200,000 Russian Railways (USD) ...................................... 5.74% 04/03/17 211,350
700,000 Vnesheconombank (USD) ....................................... 6.90% 07/09/20 766,500
-------------
2,119,190
-------------
SOUTH AFRICA - 3.9%
20,900,000 Republic of South Africa (ZAR) .............................. 8.25% 09/15/17 3,090,636
9,200,000 Republic of South Africa (ZAR) .............................. 10.50% 12/21/26 1,620,317
-------------
4,710,953
-------------
TURKEY - 3.8%
450,000 Akbank TAS (USD) ............................................ 5.13% 07/22/15 450,495
2,800,000 Turkey Government Bond (TRY) ................................ 16.00% 03/07/12 2,144,205
1,400,000 Turkey Government Bond (USD) ................................ 5.63% 03/30/21 1,529,290
500,000 Yasar Holdings (USD) ........................................ 9.63% 10/07/15 500,000
-------------
4,623,990
-------------
UKRAINE - 1.3%
1,440,000 EX-IM Bank of Ukraine (USD) ................................. 7.65% 09/07/11 1,463,400
80,000 Ukraine Government Bond (USD) ............................... 6.58% 11/21/16 78,928
-------------
1,542,328
-------------
UNITED ARAB EMIRATES - 1.2%
650,000 Atlantic Finance Ltd. (USD) ................................. 9.75% 05/27/14 705,575
650,000 Dubai Electricity & Water Authority (USD) ................... 8.50% 04/22/15 700,385
-------------
1,405,960
-------------
UNITED KINGDOM - 0.6%
750,000 Continental Trustees (USD) (d) .............................. 7.38% 10/07/40 750,000
-------------
URUGUAY - 1.3%
20,320,000 Republic Orient Uruguay,
Inflation Adjusted Bond (UYU) (h) ........................... 5.00% 09/14/18 1,534,202
-------------
See Notes to Quarterly Portfolio of Investments
Page 3
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) (b) - (CONTINUED)
SEPTEMBER 30, 2010 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
---------------- ------------------------------------------------------------- ------ -------- -------------
BONDS AND NOTES (c) - (CONTINUED)
VENEZUELA - 2.9%
600,000 Bolivarian Republic of Venezuela (USD) ...................... 7.75% 10/13/19 $ 408,000
1,750,000 Republic of Venezuela (USD) ................................. 8.50% 10/08/14 1,478,750
2,230,000 Republic of Venezuela (USD) ................................. 5.75% 02/26/16 1,558,324
-------------
3,445,074
-------------
TOTAL BONDS AND NOTES
(Cost $63,080,644) ........................................................... 68,568,631
-------------
SHARES DESCRIPTION VALUE
---------------- ------------------------------------------------------------- -------------
COMMON STOCKS - 45.2%
BRAZIL - 8.8%
94,924 Banco Bradesco S.A., ADR .................................... 1,934,551
34,000 Lojas Renner S.A ............................................ 1,155,437
31,000 Multiplan Empreendimentos Imobiliarios S.A................... 659,025
61,000 Petroleo Brasileiro S.A., ADR ............................... 2,002,020
21,300 Souza Cruz S.A............................................... 1,076,078
25,000 Ultrapar Participacoes S.A., Preference Shares .............. 1,501,625
80,000 Vale S.A., Preference Shares, ADR ........................... 2,220,000
-------------
10,548,736
-------------
CHILE - 0.9%
11,600 Banco Santander Chile S.A., ADR ............................. 1,119,980
-------------
CHINA - 2.2%
155,000 China Mobile Ltd............................................. 1,587,186
920,000 PetroChina Co., Ltd., H Shares .............................. 1,070,725
-------------
2,657,911
-------------
HONG KONG - 2.6%
200,000 Hang Lung Group Ltd.......................................... 1,305,605
700,000 Swire Pacific Ltd., B Shares ................................ 1,804,390
-------------
3,109,995
-------------
HUNGARY - 1.2%
6,300 Richter Gedeon Nyrt. ........................................ 1,461,207
-------------
INDIA - 4.8%
32,000 Bharti Airtel Ltd............................................ 260,857
20,000 GlaxoSmithKline Pharmaceuticals Ltd.......................... 983,621
13,000 Grasim Industries Ltd........................................ 642,348
29,000 Hero Honda Motors Ltd........................................ 1,199,110
59,000 Hindustan Unilever Ltd....................................... 405,785
57,500 Housing Development Finance Corp., Ltd....................... 938,222
20,000 ICICI Bank Ltd............................................... 495,360
10,000 Infosys Technologies Ltd..................................... 678,869
7,428 UltraTech Cement Ltd......................................... 175,654
-------------
5,779,826
-------------
See Notes to Quarterly Portfolio of Investments
Page 4
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) (b) - (CONTINUED)
SEPTEMBER 30, 2010 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------- ------------------------------------------------------------- -------------
COMMON STOCKS - (CONTINUED)
INDONESIA - 1.4%
258,000 PT Astra International Tbk .................................. $ 1,639,059
-------------
ITALY - 0.8%
23,600 Tenaris S.A., ADR ........................................... 906,712
-------------
MALAYSIA - 1.9%
70,300 British American Tobacco Malaysia Berhad .................... 1,104,031
289,000 Public Bank Berhad .......................................... 1,164,613
-------------
2,268,644
-------------
MEXICO - 3.8%
31,900 Fomento Economico Mexicano, S.A.B. de C.V., ADR ............. 1,618,287
40,000 Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., ADR ... 584,000
352,000 Grupo Financiero Banorte, S.A.B. de C.V., O Shares .......... 1,335,190
152,000 Kimberly-Clark de Mexico, S.A.B. de C.V., A Shares .......... 975,206
-------------
4,512,683
-------------
PHILIPPINES - 1.3%
1,281,702 Bank of the Philippine Islands .............................. 1,591,723
-------------
POLAND - 0.6%
13,000 Bank Pekao S.A .............................................. 769,217
-------------
RUSSIA - 1.1%
23,500 LUKOIL, ADR ................................................. 1,332,450
-------------
SOUTH AFRICA - 2.8%
89,000 Massmart Holdings Ltd ....................................... 1,887,192
142,729 Truworths International Ltd ................................. 1,433,382
-------------
3,320,574
-------------
SOUTH KOREA - 2.7%
27,008 Busan Bank. ................................................. 332,789
4,900 Samsung Electronics Co., Ltd., Preference Shares ............ 2,393,598
850 Shinsegae Co., Ltd .......................................... 448,016
-------------
3,174,403
-------------
TAIWAN - 2.4%
800,450 Taiwan Mobile Co., Ltd ...................................... 1,652,578
643,953 Taiwan Semiconductor Manufacturing Co., Ltd ................. 1,277,950
-------------
2,930,528
-------------
THAILAND - 2.5%
250,000 PTT Exploration and Production Public Co., Ltd .............. 1,268,534
147,000 Siam Cement Public (The) Co., Ltd ........................... 1,782,405
-------------
3,050,939
-------------
TURKEY - 2.3%
73,635 Akbank TAS .................................................. 450,497
253,000 Aksigorta AS. ............................................... 356,794
33,220 Bim Birlesik Magazalar AS ................................... 958,788
See Notes to Quarterly Portfolio of Investments
Page 5
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) (b) - (CONTINUED)
SEPTEMBER 30, 2010 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------- ------------------------------------------------------------- -------------
COMMON STOCKS - (CONTINUED)
TURKEY - (CONTINUED)
181,150 Haci Omer Sabanci Holding AS. ............................... $ 939,217
-------------
2,705,296
-------------
UNITED KINGDOM - 1.1%
45,696 Standard Chartered PLC. ..................................... 1,310,768
-------------
TOTAL COMMON STOCKS
(Cost $34,892,676) ....................................... 54,190,651
-------------
TOTAL INVESTMENTS - 102.3%
(Cost $97,973,320) (i) ................................... 122,759,282
OUTSTANDING LOAN - (4.8)% ................................... (5,800,000)
NET OTHER ASSETS AND LIABILITIES - 2.5% ..................... 2,997,501
-------------
NET ASSETS - 100.0% ......................................... $ 119,956,783
=============
----------
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) All portfolio 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 September 30, 2010.
(e) Zero coupon bond.
(f) This security, sold within the terms of a private placement memorandum, is
exempt from registration under Rule 144A of the Securities Act of 1933, as
amended, and may be resold in transactions exempt from registration,
normally to qualified institutional buyers. Pursuant to procedures adopted
by the Fund's Board of Trustees, this security has been determined to be
liquid by the Fund's investment sub-advisor. At September 30, 2010,
securities noted as such amounted to $647,418 or 0.5% of net assets.
(g) Security is a "step-up" bond where the coupon increases or steps up at a
predetermined date.
(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) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of September 30, 2010,
the aggregate gross unrealized appreciation for all securities in which
there was an excess of value over tax cost was $25,793,840 and the
aggregate gross unrealized depreciation for all securities in which there
was an excess of tax cost over value was $1,007,878.
ADR American Depositary Receipt
Currency Abbreviations:
ARS Argentine Peso
BRL Brazilian Real
COP Colombian Peso
EGP Egyptian Pound
HUF Hungarian Forint
IDR Indonesian Rupiah
MXN Mexican Peso
PEN Peruvian New Sol
TRY Turkish Lira
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)
SEPTEMBER 30, 2010 (UNAUDITED)
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of September 30,
2010 is as follows (see Note 1A - 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
09/30/2010 PRICES INPUTS INPUTS
------------ ----------- ----------- ------------
Bonds and Notes * ...................... $ 68,568,631 $ -- $68,568,631 $--
Common Stocks * ........................ 54,190,651 54,190,651 -- --
------------ ----------- ----------- ---
Total Investments ...................... 122,759,282 54,190,651 68,568,631 --
------------ ----------- ----------- ---
Other Financial Instruments:
Forward Foreign Currency Contracts ** .. 29,151 29,151 -- --
------------ ----------- ----------- ---
$122,788,433 $54,219,802 $68,568,631 $--
============ =========== =========== ===
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
09/30/2010 PRICES INPUTS INPUTS
------------ ----------- ----------- ------------
Forward Foreign Currency Contracts ** .. $(221,714) $(221,714) $-- $--
========= ========= === ===
* 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 37.0%
Commercial Banks 11.1
Oil, Gas & Consumable Fuels 7.6
Real Estate Management & Development 3.7
Construction Materials 3.2
Diversified Financial Services 3.2
Semiconductors & Semiconductor Equipment 3.0
Food Retailing & Staples 2.7
Wireless Telecommunications 2.6
Specialty Retail 2.4
Metals & Mining 2.4
Automobiles 2.3
Pharmaceuticals 2.0
Electric Utilities 1.9
Diversified Telecommunication Services 1.8
Tobacco 1.8
Beverages 1.7
Household Durables 1.4
Import/Export Bank 1.2
Household Products 1.1
Transportation Infrastructure 1.0
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
SEPTEMBER 30, 2010 (UNAUDITED)
FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
CONTRACTS TO RECEIVE
-------------------------------------------
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. $
---------- ------------ ------------------- -------- ---------- ------------ ------------
10/22/10 JPM HUF 31,720,000 $156,112 $146,920 $ 9,192 $ --
10/22/10 RBS HUF 16,355,000 80,493 75,278 5,215 --
12/03/10 UBS IDR 2,834,363,000 313,966 315,806 -- (1,840)
10/22/10 JPM MXN 4,878,000 386,429 371,685 14,744 --
-- --
-- --
------- -------
$29,151 $(1,840)
------- -------
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. $
---------- ------------ ------------------- ---------- ---------- ------------ ------------
12/03/10 JPM BRL 3,834,000 $2,235,117 $2,124,100 $ -- $(111,017)
10/22/10 BAR HUF 248,477,000 1,222,898 1,131,122 -- (91,776)
12/03/10 RBS IDR 2,834,363,000 313,966 308,362 -- (5,604)
10/22/10 BAR MXN 4,878,000 386,429 374,952 -- (11,477)
-- --
-- --
------- ---------
$ -- $(219,874)
------- ---------
Unrealized Appreciation (Depreciation) .................................. $29,151 $(221,714)
======= =========
Net Unrealized Appreciation (Depreciation) .............................................. $(192,563)
=========
(a) Please see page 6 for currency descriptions.
Counterparty Abbreviations:
BAR Barclay's Bank PLC
JPM JPMorgan Chase
RBS Royal Bank of Scotland
UBS Union Bank of Switzerland
See Notes to Quarterly Portfolio of Investments
Page 8
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
SEPTEMBER 30, 2010 (UNAUDITED)
1. 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 (the "1940 Act").
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
SEPTEMBER 30, 2010 (UNAUDITED)
- Level 3 - Level 3 inputs are unobservable inputs. Unobservable inputs
reflect the reporting entity's own assumptions 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 September 30, 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 September 30, 2010, the Fund had no
when-issued or delayed-delivery purchase commitments.
C. CREDIT LINKED NOTES:
The Fund may invest 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 September 30, 2010, the open and close values of forward
foreign currency contracts were $12,833,628 and $4,638, 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
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (CONTINUED)
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
SEPTEMBER 30, 2010 (UNAUDITED)
2. SUBSEQUENT EVENT
On October 12, 2010, First Trust announced that James A. Bowen, its President,
acquired 100% of the voting stock of The Charger Corporation, the general
partner of First Trust (the "Transaction"). First Trust is a limited partnership
with one limited partner and one general partner (The Charger Corporation). The
Transaction is not expected to impact the day-to-day operations of the Fund. The
consummation of the Transaction is deemed to be an "assignment" (as defined in
the 1940 Act) of the Fund's investment management agreement and investment
sub-advisory agreement and resulted in the automatic termination of the
agreements.
The Board of Trustees of the Fund has approved an interim investment management
agreement with First Trust and an interim investment sub-advisory agreement,
which were entered into effective upon the closing of the Transaction and will
be in effect for a maximum period of 150 days. A new investment management
agreement with First Trust and a new investment sub-advisory agreement have been
approved by the Board of Trustees of the Fund and will be submitted to
shareholders of the Fund as of the record date (September 30, 2010) for approval
and will take effect upon such shareholder approval. A special shareholder
meeting of the Fund to vote on a proposal to approve the new investment
management and the new investment sub-advisory agreement is expected to be held
on December 6, 2010.
Page 11
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 November 23, 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 November 23, 2010
By (Signature and Title)* /s/ Mark R. Bradley
------------------------------------------------------
Mark R. Bradley, Treasurer, Chief Financial Officer
and Chief Accounting Officer
(principal financial officer)
Date November 23, 2010
* Print the name and title of each signing officer under his or her
signature.