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
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(Exact name of registrant as specified in charter)
1001 Warrenville Road, Suite 300
LISLE, IL 60532
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(Address of principal executive offices) (Zip code)
W. Scott Jardine, Esq.
First Trust Portfolios L.P.
1001 Warrenville Road, Suite 300
LISLE, IL 60532
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(Name and address of agent for service)
Registrant's telephone number, including area code: (630) 241-4141
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Date of fiscal year end: DECEMBER 31
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Date of reporting period: MARCH 31, 2008
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Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 (ss.ss. 239.24 and 274.5 of
this chapter), to file reports with the Commission, not later than 60 days after
the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under
the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use
the information provided on Form N-Q in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and
the Commission will make this information public. A registrant is not required
to respond to the collection of information contained in Form N-Q unless the
Form displays a currently valid Office of Management and Budget ("OMB") control
number. Please direct comments concerning the accuracy of the information
collection burden estimate and any suggestions for reducing the burden to the
Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC
20549. The OMB has reviewed this collection of information under the clearance
requirements of 44 U.S.C. ss. 3507.
ITEM 1. SCHEDULE OF INVESTMENTS.
The Schedule(s) of Investments is attached herewith.
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a)
MARCH 31, 2008 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
--------------- --------------------------------------------------- ------ -------- -------------
BONDS AND NOTES (b) - 58.9%
ARGENTINA - 4.1%
760,000 Banco Hipotecario SA (USD) ........................ 9.75% 04/27/16 $ 682,100
2,527,616 Republic of Argentina (ARS) (c) ................... 2.00% 01/03/10 1,603,970
3,840,000 Republic of Argentina (USD) ....................... 7.00% 04/17/17 2,781,446
-------------
5,067,516
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BRAZIL - 5.7%
3,420,000 Brazil NTN - B Note (BRL) ......................... 6.00% 08/15/10 3,192,534
430,000 Independencia International Ltd. (USD) ............ 9.88% 01/31/17 402,050
1,000,000 Isa Capital do Brasil SA (USD) .................... 7.88% 01/30/12 1,035,000
4,570,000 Nota do Tesouro Nacional (BRL) .................... 10.00% 01/01/17 2,179,682
130,000 Odebrecht Finance Ltd. (USD) ...................... 7.50% 10/18/17 134,863
-------------
6,944,129
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CHINA - 1.4%
630,000 Agile Property Holdings Ltd. (USD) ................ 9.00% 09/22/13 485,465
670,000 Parkson Retail Group Ltd. (USD) ................... 7.88% 11/14/11 659,950
540,000 Parkson Retail Group Ltd. (USD) ................... 7.13% 05/30/12 510,300
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1,655,715
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COLOMBIA - 3.0%
380,000 EEB International Ltd. (USD) ...................... 8.75% 10/31/14 394,687
3,140,000,000 Republic of Colombia (COP) ........................ 12.00% 10/22/15 1,800,926
1,430,000 Republic of Colombia (USD) ........................ 7.38% 09/18/37 1,531,745
-------------
3,727,358
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DOMINICAN REPUBLIC - 1.8%
820,000 Cerveceria Nacional Dominica (USD) (c) ............ 16.00% 03/27/12 848,700
1,310,000 Dominican Republic (USD) .......................... 8.63% 04/20/27 1,414,800
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2,263,500
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ECUADOR - 1.8%
630,000 Republic of Ecuador (USD) ......................... 9.38% 12/15/15 641,025
1,610,000 Republic of Ecuador (USD) ......................... 10.00% 08/15/30 1,565,725
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2,206,750
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EGYPT - 3.0%
7,500,000 Arab Republic of Egypt (EGP) ...................... 8.75% 07/18/12 1,407,562
2,140,000 Egypt Government Bond (EGP) ....................... 9.10% 09/20/12 402,147
10,000,000 Egypt Treasury Bill (EGP) ......................... 0.00% 04/29/08 1,827,376
-------------
3,637,085
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EL SALVADOR - 1.6%
420,000 Republic of El Salvador (USD) ..................... 8.25% 04/10/32 476,700
1,350,000 Republic of El Salvador (USD) ..................... 7.65% 06/15/35 1,437,750
-------------
1,914,450
-------------
GABON - 1.3%
1,480,000 Gabonese Republic (USD) ........................... 8.20% 12/12/17 1,559,624
-------------
See Notes to Quarterly Portfolio of Investments Page 1
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
MARCH 31, 2008 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
--------------- --------------------------------------------------- ------ -------- -------------
BONDS AND NOTES (b) - (CONTINUED)
GHANA - 1.1%
1,330,000 Republic of Ghana (USD) ........................... 8.50% 10/04/17 $ 1,402,970
-------------
INDIA - 1.9%
65,000,000 JPMorgan Chase Bank NA, Credit Linked
Note (INR) (c) ................................. 8.07% 01/15/17 1,629,050
28,000,000 JPMorgan International Derivatives (GBP) .......... 7.49% 09/08/08 681,492
-------------
2,310,542
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INDONESIA - 2.3%
290,000 BLT Finance BV (USD) .............................. 7.50% 05/15/14 185,369
4,200,000,000 Indonesian Government (IDR) ....................... 11.00% 12/15/12 466,334
650,000,000 Indonesian Government (IDR) ....................... 12.50% 03/15/13 75,973
1,850,000,000 Indonesian Recapitalization Bond (IDR) ............ 13.40% 02/15/11 218,402
4,650,000,000 Indonesian Recapitalization Bond (IDR) ............ 13.45% 08/15/11 553,888
700,000 Majapahit Holding BV (USD) ........................ 7.75% 10/17/16 688,618
670,000 Majapahit Holding BV (USD) ........................ 7.25% 06/28/17 637,673
-------------
2,826,257
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MEXICO - 4.2%
480,000 Desarrolladora Homex SA (USD) ..................... 7.50% 09/28/15 478,800
8,080,000 Mexican Fixed Rate Bonds (MXN) .................... 9.00% 12/20/12 808,930
15,580,000 Mexican Fixed Rate Bonds (MXN) .................... 9.50% 12/18/14 1,627,572
22,340,000 Mexican Fixed Rate Bonds (MXN) .................... 8.00% 12/07/23 2,189,552
-------------
5,104,854
-------------
NIGERIA - 1.2%
1,000,000 GTB Finance BV (USD) .............................. 8.50% 01/29/12 950,000
60,000,000 KfW Internatonal Finance (NGN) .................... 8.50% 01/18/11 506,042
-------------
1,456,042
-------------
PAKISTAN - 1.5%
270,000 Islamic Republic of Pakistan (USD) ................ 6.75% 02/19/09 266,230
1,020,000 Islamic Republic of Pakistan (USD) ................ 6.88% 06/01/17 869,550
830,000 Pakistan Mobile Communication (USD) ............... 8.63% 11/13/13 731,001
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1,866,781
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PANAMA - 0.3%
290,000 Republic of Panama (USD) .......................... 8.88% 09/30/27 369,968
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PERU - 2.6%
6,040,000 Peru Bono Soberano (PEN) .......................... 7.84% 08/12/20 2,409,228
790,000 Republic of Peru (USD) ............................ 6.55% 03/14/37 816,544
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3,225,772
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PHILIPPINES - 0.9%
480,000 Republic of Philippines (USD) ..................... 8.25% 01/15/14 550,493
100,000 Republic of Philippines (USD) ..................... 8.00% 01/15/16 114,500
330,000 Republic of Philippines (USD) ..................... 9.38% 01/18/17 412,973
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1,077,966
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Page 2 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
MARCH 31, 2008 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
--------------- --------------------------------------------------- ------ -------- -------------
BONDS AND NOTES (b) - (CONTINUED)
RUSSIA - 3.7%
830,000 Alfa Bond ISS (USD) (c) ........................... 8.64% 02/22/17 $ 769,825
780,000 Evraz Group SA (USD) .............................. 8.25% 11/10/15 766,350
10,400,000 GPB Eurobond Finance PLC (RUB) .................... 7.25% 02/22/10 434,297
41,981,119 Red Arrow International Leasing PLC (RUB) ......... 8.38% 06/30/12 1,792,068
830,000 RS Finance (RSB) (USD) ............................ 7.50% 10/07/10 759,118
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4,521,658
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SERBIA - 1.1%
1,460,000 Republic of Serbia (USD) (d) ...................... 3.75% 11/01/24 1,341,375
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SOUTH AFRICA - 1.1%
10,770,000 Republic of South Africa Government Bond (ZAR) .... 10.00% 02/28/09 1,321,674
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TURKEY - 2.1%
1,380,000 Turkey Government Bond (TRY) ...................... 10.00% 02/15/12 1,105,679
2,150,000 Turkey Government Bond (TRY) ...................... 16.00% 03/07/12 1,503,729
-------------
2,609,408
-------------
UKRAINE - 3.8%
800,000 Alfa Bank Ukraine (USD) ........................... 9.75% 12/22/09 807,584
1,070,000 EX-IM Bank of Ukraine (USD) ....................... 7.65% 09/07/11 1,070,953
4,000,000 JSCB Ukrsotsbank, Credit Linked Note (USD) ........ 12.00% 10/15/12 816,745
500,000 UBS AG Jersey Branch (USD) ........................ 9.13% 06/21/10 492,500
1,480,000 Ukraine Government International Bond (USD) ....... 6.75% 11/14/17 1,460,020
-------------
4,647,802
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URUGUAY - 3.2%
1,390,000 Republic Orient Uruguay (USD) ..................... 7.63% 03/21/36 1,419,885
37,710,000 Republic Orient Uruguay (UYU) ..................... 5.00% 09/14/18 2,013,362
8,560,000 Republic Orient Uruguay (UYU) ..................... 4.25% 04/05/27 418,536
-------------
3,851,783
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VENEZUELA - 4.2%
2,230,000 Petroleos de Venezuela SA (USD) ................... 5.25% 04/12/17 1,468,455
359,000 Republic of Venezuela (USD) ....................... 10.75% 09/19/13 371,368
1,140,000 Republic of Venezuela (USD) ....................... 8.50% 10/08/14 1,070,859
2,790,000 Republic of Venezuela (USD) ....................... 5.75% 02/26/16 2,204,100
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5,114,782
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TOTAL BONDS AND NOTES ................................................. 72,025,761
(Cost $71,620,316) -------------
See Notes to Quarterly Portfolio of Investments Page 3
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
MARCH 31, 2008 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ------------------------------------------------------------------ --------------
COMMON STOCKS - 45.0%
ARGENTINA - 1.2%
29,200 Tenaris SA, ADR .................................................. $ 1,455,620
--------------
BRAZIL - 7.1%
52,300 Banco Bradesco SA, ADR ........................................... 1,451,848
68,000 Companhia Vale do Rio Doce, ADR .................................. 1,982,200
56,370 Lojas Renner SA .................................................. 1,048,565
18,946 Petroleo Brasileiro SA, ADR ...................................... 1,604,537
43,000 Souza Cruz SA .................................................... 1,110,104
28,000 Telecomunicacoes de Sao Paulo SA ................................. 621,212
24,600 Ultrapar Participacoes SA, Preference Shares ..................... 841,029
--------------
8,659,495
--------------
CHILE - 1.2%
29,000 Banco Santander Chile SA, ADR .................................... 1,515,540
--------------
CHINA - 5.5%
95,000 China Mobile Ltd. ................................................ 1,413,529
190,000 CLP Holdings Ltd. ................................................ 1,563,671
350,000 Dah Sing Banking Group Ltd. ...................................... 594,528
200,000 Hang Lung Group Ltd. ............................................. 944,409
920,000 PetroChina Company Ltd., H Shares ................................ 1,149,018
490,000 Swire Pacific Ltd., B Shares ..................................... 1,091,737
--------------
6,756,892
--------------
CZECH REPUBLIC - 1.1%
9,000 Erste Bank der Oesterreichischen Sparkassen AG ................... 592,898
3,000 Komercni Banka AS ................................................ 716,958
--------------
1,309,856
--------------
HUNGARY - 0.9%
5,300 Richter Gedeon, Sponsored GDR .................................... 1,098,193
--------------
INDIA - 3.5%
60,000 Gail India Ltd. .................................................. 636,266
20,000 Glaxosmithkline Pharmaceuticals Ltd. ............................. 520,040
8,000 Grasim Industries Ltd. ........................................... 513,519
40,000 Hero Honda Motors Ltd. ........................................... 692,473
11,500 Housing Development Finance Corp. Ltd. ........................... 682,132
27,000 ICICI Bank Ltd. .................................................. 517,792
74,000 Satyam Computer Services Ltd. .................................... 731,054
--------------
4,293,276
--------------
INDONESIA - 1.8%
300,000 PT Astra International Tbk ....................................... 790,331
1,800,000 PT Unilever Indonesia Tbk ........................................ 1,349,267
--------------
2,139,598
--------------
MALAYSIA - 2.2%
85,000 British American Tobacco Malaysia Berhad ......................... 1,129,436
455,000 Public Bank Berhad ............................................... 1,550,571
--------------
2,680,007
--------------
Page 4 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
MARCH 31, 2008 (UNAUDITED)
SHARES DESCRIPTION VALUE
----------- ------------------------------------------------------------------ --------------
COMMON STOCKS - (CONTINUED)
MEXICO - 5.5%
48,900 Fomento Economico Mexicano, S.A.B. de C.V., Sponsored ADR ........ $ 2,043,042
34,000 Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., ADR ........ 758,200
361,000 Grupo Continental, S.A.B. ........................................ 873,435
297,000 Grupo Financiero Banorte, S.A.B. de C.V., O Shares ............... 1,287,598
274,000 Kimberly-Clark de Mexico, S.A.B. de C.V., A Shares ............... 1,215,432
390,000 SARE Holding S.A.B de C.V., B Shares (e) ......................... 538,677
--------------
6,716,384
--------------
PHILIPPINES - 1.0%
970,000 Bank of the Philippine Islands ................................... 1,230,788
--------------
QATAR - 0.6%
16,000 Qatar Insurance Company .......................................... 712,381
--------------
RUSSIA - 1.1%
15,000 LUKOIL, ADR ...................................................... 1,282,500
--------------
SOUTH AFRICA - 1.7%
177,000 Massmart Holdings Ltd. ........................................... 1,457,904
188,000 Truworths International Ltd. ..................................... 591,122
--------------
2,049,026
--------------
SOUTH KOREA - 3.3%
55,000 Pusan Bank ....................................................... 688,645
6,300 Samsung Electronics Company Ltd., Preference Shares .............. 2,837,179
850 Shinsegae Company Ltd. ........................................... 535,568
--------------
4,061,392
--------------
TAIWAN - 3.6%
890,000 Fubon Financial Holdings Company, Ltd. ........................... 1,010,714
866,451 Taiwan Mobile Company, Ltd. ...................................... 1,668,473
823,599 Taiwan Semiconductor Manufacturing Company, Ltd. ................. 1,710,664
--------------
4,389,851
--------------
THAILAND - 2.0%
220,000 PTT Exploration and Production Public Company Ltd. ............... 1,055,106
200,000 Siam Cement Public (The) Company Ltd. ............................ 1,384,786
--------------
2,439,892
--------------
TURKEY - 1.7%
249,000 Aksigorta AS ..................................................... 906,947
9,000 Bim Birlesik Magazalar AS ........................................ 708,237
35,350 Migros Turk TAS .................................................. 519,269
--------------
2,134,453
--------------
TOTAL COMMON STOCKS .............................................. 54,925,144
(Cost $44,346,374) --------------
See Notes to Quarterly Portfolio of Investments Page 5
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
MARCH 31, 2008 (UNAUDITED)
DESCRIPTION VALUE
------------------------------------------------------------------ --------------
TOTAL INVESTMENTS - 103.9% ....................................... $ 126,950,905
(Cost $115,966,690) (f)
LOAN OUTSTANDING - (6.5)% ........................................ (8,000,000)
NET OTHER ASSETS AND LIABILITIES - 2.6% .......................... 3,220,363
--------------
NET ASSETS - 100.0% .............................................. $ 122,171,268
==============
----------
(a) All percentages shown in the Portfolio of Investments are based on net
assets.
(b) 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.
(c) Variable rate security. The interest rate shown reflects the rate in effect
at March 31, 2008.
(d) Step-up security. A security where the coupon increases or steps up at a
predetermined date. Interest rate shown reflects the rate in effect at
March 31, 2008.
(e) Non-income producing security.
(f) Aggregate cost for federal income tax and financial reporting purposes.
ADR American Depositary Receipt
GDR Global Depositary Receipt
RSB Russian Standard Bank
CURRENCY
ARS Argentine Peso
BRL Brazilian Real
COP Colombian Peso
EGP Egyptian Pound
GBP British Pound Sterling
IDR Indonesian Rupiah
INR Indian Rupee
MXN Mexican Peso
NGN Nigerian Naira
PEN Peruvian New Sol
RUB Russian Ruble
TRY Turkish Lira
USD United States Dollar
UYU Uruguayan Peso
ZAR South African Rand
Page 6 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
MARCH 31, 2008 (UNAUDITED)
FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
CONTRACTS TO RECEIVE
------------------------------------------------
NET NET
UNREALIZED UNREALIZED
IN APPRECIATION DEPRECIATION
EXPIRATION LOCAL VALUE IN EXCHANGE OF CONTRACTS OF CONTRACTS
DATE CURRENCY (a) U.S. $ FOR U.S. $ U.S. $ U.S. $
---------- ---------------------- ---------- ---------- ------------ -------------
04/17/08 INR 83,830,000 $2,085,909 $2,109,992 $ -- $ (24,083)
04/17/08 MXN 15,844,000 1,485,340 1,461,591 23,749 --
04/17/08 TRY 2,751,000 2,048,736 2,200,109 -- (151,373)
------------ ------------
$ 23,749 $ (175,456)
------------ ------------
FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
CONTRACTS TO DELIVER
------------------------------------------------
NET NET
UNREALIZED UNREALIZED
IN APPRECIATION DEPRECIATION
EXPIRATION LOCAL VALUE IN EXCHANGE OF CONTRACTS OF CONTRACTS
DATE CURRENCY (a) U.S. $ FOR U.S. $ U.S. $ U.S. $
---------- ---------------------- ---------- ---------- ------------ -------------
04/17/08 BRL 7,157,000 $4,065,239 $3,929,117 $ -- $ (136,122)
04/17/08 COP 3,267,714,000 1,778,493 1,633,857 -- (144,636)
04/17/08 INR 89,855,000 2,235,827 2,263,635 27,808 --
04/17/08 MXN 23,750,000 2,226,510 2,155,592 -- (70,918)
04/17/08 RUB 51,314,000 2,180,779 2,075,851 -- (104,928)
04/17/08 TRY 4,533,000 3,375,833 3,646,235 270,402 --
04/17/08 ZAR 9,944,000 1,220,788 1,358,377 137,589 --
------------ ------------
$ 435,799 $ (456,604)
------------ ------------
Unrealized Appreciation (Depreciation) ...................... $ 459,548 $ (632,060)
============ ============
Net Unrealized Appreciation (Depreciation) .................. $ (172,512)
============
(a) Please see page 6 for currency descriptions.
See Notes to Quarterly Portfolio of Investments Page 7
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO COMPONENTS (a)
MARCH 31, 2008 (UNAUDITED)
PORTFOLIO COMPONENTS -- BY INDUSTRY
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Government Bonds and Notes 41.0%
Commercial Banks 11.6%
Oil, Gas & Consumable Fuels 5.2%
Diversified Financial Services 5.1%
Semiconductors & Semiconductor Equipment 3.6%
Beverages 3.0%
Food & Staples Retailing 2.5%
Wireless Telecommunication Services 2.4%
Electric Utilities 2.3%
Metals & Mining 2.2%
Household Products 2.0%
Real Estate Management & Development 2.0%
Tobacco 1.8%
Multiline Retail 1.7%
Construction Materials 1.5%
Insurance 1.3%
Pharmaceuticals 1.3%
Automobiles 1.2%
Energy Equipment & Services 1.1%
Specialty Retail 1.1%
Thrifts & Mortgage Finance 1.1%
Export/Import Bank 0.8%
Household Durables 0.8%
Transportation Infrastructure 0.6%
IT Services 0.6%
Telecommunications 0.6%
Gas Utilities 0.5%
Diversified Telecommunication 0.5%
Capital Markets 0.4%
Transportation 0.1%
Construction & Chemicals 0.1%
(a) Percentages are based on total investments. Please note that the
percentages on the Portfolio of Investments are based on net assets.
Page 8 See Notes to Quarterly Portfolio of Investments
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO COMPONENTS (a) (b) - (CONTINUED)
MARCH 31, 2008 (UNAUDITED)
PORTFOLIO COMPONENTS -- BY COUNTRY
[THE FOLLOWING TABLE WAS REPRESENTED BY A BAR CHART IN THE PRINTED MATERIAL.]
Brazil 12.3%
Mexico 9.3%
China 6.6%
India 5.2%
Argentina 5.1%
Russia 4.6%
Venezuela 4.0%
Indonesia 3.9%
Turkey 3.7%
Ukraine 3.7%
Taiwan 3.5%
South Korea 3.2%
Uruguay 3.0%
Colombia 2.9%
Egypt 2.9%
South Africa 2.7%
Peru 2.5%
Malaysia 2.1%
Thailand 1.9%
Philippines 1.8%
Dominican Republic 1.8%
Ecuador 1.7%
El Salvador 1.5%
Pakistan 1.5%
Gabon 1.2%
Chile 1.2%
Nigeria 1.1%
Ghana 1.1%
Serbia 1.1%
Czech Republic 1.1%
Hungary 0.9%
Qatar 0.6%
Panama 0.3%
(a) Percentages are based on total investments. Please note that the
percentages on the Portfolio of Investments are based on net assets.
(b) 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.
See Notes to Quarterly Portfolio of Investments Page 9
--------------------------------------------------------------------------------
NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
MARCH 31, 2008 (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
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, First Trust Advisors L.P. ("First Trust") may
use a fair value method to value the Fund's securities and other investments.
Additionally, if events occur after the close of the principal market 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") are valued at the last sale price on the business day as of
which such value is being determined. If there has been no sale on such day, the
securities are valued at the mean of the most recent bid and ask prices on such
day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing
Price as determined by NASDAQ. Portfolio securities traded on more than one
securities exchange are valued at the last sale price 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, 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 are valued at amortized
cost.
In September 2006, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 157, Fair Value Measurements ("FAS 157"),
effective for fiscal years beginning after November 15, 2007. This standard
clarifies the definition of fair value for financial reporting, establishes a
framework for measuring fair value and requires additional disclosures about the
use of fair value measurements. FAS 157 became effective for the Fund as of
January 1, 2008, the beginning of its current fiscal year. The three levels of
the fair value hierarchy under FAS 157 are described below:
o Level 1 - quoted prices in active markets for identical securities
o Level 2 - other significant observable inputs (including quoted
prices for similar securities, interest rates, prepayment speeds,
credit risk, etc.)
o Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
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 net assets as of March 31, 2008 is as
follows:
VALUATION INPUTS INVESTMENTS IN SECURITIES OTHER FINANCIAL INSTRUMENTS (a)
------------------------------------------------- ------------------------- -------------------------------
Level 1 - Quoted Prices- Investments ............ $ 54,925,144 $ (172,512)
Level 2 - Other Significant Observable Inputs ... 72,025,761 --
Level 3 - Significant Unobservable Inputs ....... -- --
------------- ----------
TOTAL ........................................... $ 126,950,905 $ (172,512)
------------- ----------
(a) Other financial instruments are forward foreign currency contracts not
reflected in the Portfolio of Investments, which are valued at the
unrealized appreciation (depreciation) on the contracts.
Page 10
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NOTES TO QUARTERLY PORTFOLIO OF INVESTMENTS - (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
MARCH 31, 2008 (UNAUDITED)
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. At March 31, 2008, 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:
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 in Net Other Assets and Liabilities on the
Portfolio of Investments. 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 may exceed the net
unrealized value shown in the Schedule of Forward Foreign Currency Contracts.
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 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 and foreign currency transactions.
2. UNREALIZED APPRECIATION (DEPRECIATION)
As of March 31, 2008, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $14,667,641
and the aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $3,683,426.
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 MAY 27, 2008
----------------------------------------------------------------------------
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, 2008
----------------------------------------------------------------------------
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, 2008
----------------------------------------------------------------------------
* Print the name and title of each signing officer under his or her signature.