UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT
COMPANIES
Investment Company Act file number 811-21905
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First Trust/Aberdeen Emerging Opportunity Fund
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(Exact name of registrant as specified in charter)
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
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(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
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(Name and address of agent for service)
registrant's telephone number, including area code: (630) 765-8000
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Date of fiscal year end: December 31
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Date of reporting period: June 30, 2015
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Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
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 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. REPORTS TO STOCKHOLDERS.
The Report to Shareholders is attached herewith.
FIRST TRUST
SEMI-ANNUAL
REPORT
FOR THE SIX MONTHS ENDED
JUNE 30, 2015
First Trust/
Aberdeen
Emerging
Opportunity
Fund
(FEO)
Aberdeen
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TABLE OF CONTENTS
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FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
SEMI-ANNUAL REPORT
JUNE 30, 2015
Shareholder Letter.......................................................... 1
At a Glance................................................................. 2
Portfolio Commentary........................................................ 4
Portfolio of Investments.................................................... 7
Statement of Assets and Liabilities......................................... 16
Statement of Operations..................................................... 17
Statements of Changes in Net Assets......................................... 18
Statement of Cash Flows..................................................... 19
Financial Highlights........................................................ 20
Notes to Financial Statements............................................... 21
Additional Information...................................................... 28
CAUTION REGARDING FORWARD-LOOKING STATEMENTS
This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and/or Aberdeen Asset Management Inc. ("Aberdeen" or
the "Sub-Advisor") and their respective representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.
Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
First Trust/Aberdeen Emerging Opportunity Fund (the "Fund") to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. When evaluating the information
included in this report, you are cautioned not to place undue reliance on these
forward-looking statements, which reflect the judgment of the Advisor and/or
Sub-Advisor and their respective representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.
PERFORMANCE AND RISK DISCLOSURE
There is no assurance that the Fund will achieve its investment objective. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund
shares may therefore be less than what you paid for them. Accordingly, you can
lose money by investing in the Fund. See "Risk Considerations" in the Additional
Information section of this report for a discussion of certain other material
risks of investing in the Fund.
Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
http://www.ftportfolios.com or speak with your financial advisor. Investment
returns, net asset value and common share price will fluctuate and Fund shares,
when sold, may be worth more or less than their original cost.
The Advisor may also periodically provide additional information on Fund
performance on the Fund's webpage at http://www.ftportfolios.com.
HOW TO READ THIS REPORT
This report contains information that may help you evaluate your investment in
the Fund. It includes details about the Fund and presents data and analysis that
provide insight into the Fund's performance and investment approach.
By reading the portfolio commentary by the portfolio management team of the
Fund, you may obtain an understanding of how the market environment affected the
Fund's performance. The statistical information that follows may help you
understand the Fund's performance compared to that of relevant market
benchmarks.
It is important to keep in mind that the opinions expressed by personnel of
Aberdeen are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The material risks of investing in the
Fund are spelled out in the prospectus, the statement of additional information,
this report and other Fund regulatory filings.
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SHAREHOLDER LETTER
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FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
JUNE 30, 2015 (UNAUDITED)
Dear Shareholders:
Thank you for your investment in First Trust /Aberdeen Emerging Opportunity Fund
(the "Fund").
First Trust Advisors L.P. ("First Trust") is pleased to provide you with this
semi-annual report which contains detailed information about your investment for
the six months ended June 30, 2015, including a portfolio commentary from the
Fund's management team, a performance analysis and a market and Fund outlook.
Additionally, First Trust has compiled the Fund's financial statements for you
to review. We encourage you to read this report and discuss it with your
financial advisor.
U.S. markets, fueled by accelerating growth and an accommodating Federal
Reserve, enjoyed a prosperous year in 2014. However, for the six months covered
by this report, some economic and global factors, including the continued
conflict in the Middle East and a sharp decline in oil prices, created
volatility in the U.S. and global markets. Another factor that has impacted
markets is the fact that many economists are predicting the Federal Reserve will
begin to raise interest rates this year.
As I have written previously, First Trust believes investors should maintain
perspective about the markets and have realistic expectations about their
investments. Markets will always go up and down, but we believe that having a
long-term investment horizon and being invested in quality products can help you
reach your goals.
Thank you for giving First Trust the opportunity to be a part of your investment
plan. We value the relationship and will continue to focus on our disciplined
investment approach and long-term perspective to help investors reach their
financial goals.
Sincerely,
/s/ James A. Bowen
James A. Bowen
Chairman of the Board of Trustees
Chief Executive Officer of First Trust Advisors L.P.
Page 1
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
"AT A GLANCE"
AS OF JUNE 30, 2015 (UNAUDITED)
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FUND STATISTICS
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Symbol on New York Stock Exchange FEO
Common Share Price $15.89
Common Share Net Asset Value ("NAV") $18.09
Premium (Discount) to NAV (12.16)%
Net Assets Applicable to Common Shares $96,372,459
Current Quarterly Distribution per Common Share (1) $0.350
Current Annualized Distribution per Common Share $1.400
Current Distribution Rate on Closing Common Share Price (2) 8.81%
Current Distribution Rate on NAV (2) 7.74%
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COMMON SHARE PRICE & NAV (WEEKLY CLOSING PRICE)
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Common Share Price NAV
6/14 $19.11 $21.38
19.18 21.50
19.33 21.59
19.34 21.67
7/14 19.50 21.84
18.95 21.32
18.80 21.20
19.01 21.57
19.11 21.60
8/14 19.24 21.77
19.41 21.87
18.93 21.30
18.73 21.19
9/14 18.04 20.47
17.60 20.05
17.71 20.00
17.60 20.00
17.83 20.06
10/14 17.88 20.33
17.56 19.93
17.52 19.90
17.83 20.19
11/14 17.80 20.11
17.53 19.65
16.44 18.75
16.57 18.89
12/14 16.37 18.68
16.54 18.53
16.50 18.58
16.48 18.76
17.00 19.19
1/15 16.69 18.74
16.79 18.97
17.09 19.11
16.91 19.11
2/15 17.03 19.19
16.90 18.83
16.24 18.29
16.13 18.44
3/15 16.25 18.40
16.64 18.80
16.92 19.18
4/15 16.92 19.31
16.66 19.14
16.83 19.25
16.95 19.43
16.57 19.24
5/15 16.44 18.82
16.13 18.44
16.11 18.44
16.19 18.51
15.80 18.22
6/15 15.89 18.09
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PERFORMANCE
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Average Annual Total Return
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6 Months Ended 1 Year Ended 5 Years Ended Inception (08/28/06)
6/30/15 6/30/15 6/30/15 to 6/30/15
FUND PERFORMANCE (3)
NAV 1.56% -8.02% 5.37% 7.74%
Market Value 0.81% -9.61% 3.67% 5.61%
INDEX PERFORMANCE
Blended Index(4) 0.70% -7.01% 4.40% 6.62%
Barclays Global Emerging Markets Index 1.49% -2.27% 6.57% 7.00%
FTSE All World Emerging Market Index 3.96% -1.83% 4.31% 6.04%
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% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
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Brazil Notas do Tesouro Nacional, Series F, 10.00%,
1/1/25 3.7%
Samsung Electronics Co., Ltd., Preference Shares 2.3
Russian Federal Bond - OFZ, 7.05%, 1/19/28 2.3
Housing Development Finance Corp., Ltd.. 1.9
Taiwan Semiconductor Manufacturing Co., Ltd. 1.9
Argentina Bonar Bonds, 7.00%, 4/17/17 1.7
Turkey Government Bond, 10.40%, 3/20/24 1.7
AIA Group Ltd. 1.6
Fomento Economico Mexicano, S.A.B. de C.V., ADR 1.6
Mexican Bonos, 8.50%, 11/18/38 1.6
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Total 20.3%
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% OF TOTAL
TOP 10 COUNTRIES(5) INVESTMENTS
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Brazil 9.9%
India 8.5
Mexico 7.7
Turkey 7.5
Russia 6.7
Hong Kong 5.8
South Africa 5.4
Indonesia 3.7
South Korea 3.1
Taiwan 2.4
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Total 60.7%
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(1) Most recent distribution paid or declared through 6/30/2015. Subject to
change in the future.
(2) Distribution rates are calculated by annualizing the most recent
distribution paid or declared through the report date and then dividing by
Common Share Price or NAV, as applicable, as of 6/30/2015. Subject to
change in the future.
(3) Total return is based on the combination of reinvested dividend, capital
gain and return of capital distributions, if any, at prices obtained by
the Dividend Reinvestment Plan and changes in NAV per share for NAV
returns and changes in Common Share Price for market value returns. Total
returns do not reflect sales load and are not annualized for periods less
than one year. Past performance is not indicative of future results.
(4) Blended Index consists of the following: JP Morgan Emerging Markets Bond
Index - Global Diversified (32.5%); JP Morgan Government Bond Index -
Emerging Markets (32.5%); MSCI Global Emerging Markets Index (35.0%).
(5) Fixed-income portfolio securities are included in a country based upon
their underlying credit exposure as determined by Aberdeen Asset
Management Inc., the sub-advisor.
(6) The credit quality and ratings information presented above reflects the
ratings assigned by one or more nationally recognized statistical rating
organizations (NRSROs), including Standard & Poor's Ratings Group, a
division of the McGraw-Hill Companies, Inc., Moody's Investors Service,
Inc., Fitch Ratings or a comparably rated NRSRO. For situations in which a
security is rated by more than one NRSRO and the ratings are not
equivalent, the highest ratings are used. The credit ratings shown relate
to the creditworthiness of the issuers of the underlying securities in the
Fund, and not to the Fund or its Shares. Credit ratings are subject to
change.
Page 2
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
"AT A GLANCE" (CONTINUED)
AS OF JUNE 30, 2015 (UNAUDITED)
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% OF TOTAL
INDUSTRY CLASSIFICATION INVESTMENTS
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Sovereigns 36.2%
Banks 12.3
Real Estate Management & Development 4.0
Food & Staples Retailing 3.6
Wireless Telecommunications Services 3.4
Oil, Gas & Consumable Fuels 3.4
Construction Materials 3.4
Beverages 2.6
Technology Hardware, Storage & Peripherals 2.3
Automobiles 2.2
Metals & Mining 2.1
Thrifts & Mortgage Finance 1.9
Semiconductors & Semiconductor 1.9
Tobacco 1.6
Insurance 1.6
IT Services 1.3
Real Estate 1.2
Household Products 1.1
Transportation Infrastructure 1.1
Government Agencies 1.1
Hotels Restaurants & Leisure 0.9
Specialty Retail 0.8
Integrated Oils 0.8
Exploration & Production 0.8
Energy Equipment & Services 0.8
Multiline Retail 0.7
Consumer Services 0.7
Financial Services 0.6
Diversified Financial Services 0.5
Pharmaceuticals 0.5
Central Bank 0.5
Oil & Gas Services & Equipment 0.5
Software & Services 0.4
Consumer Finance 0.4
Power Generation 0.4
Pipeline 0.4
Chemicals 0.3
Food & Beverage 0.3
Food Products 0.3
Wireline Telecommunications Services 0.3
Refining & Marketing 0.3
Home Improvement 0.2
Supermarkets & Pharmacies 0.2
Industrial Other 0.1
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Total 100.0%
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% OF TOTAL FIXED-INCOME
CREDIT QUALITY(6) INVESTMENTS
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A 6.5%
BBB+ 12.9
BBB 12.0
BBB- 15.6
BB+ 12.1
BB 2.6
BB- 11.7
B+ 13.1
B 7.4
CCC 0.9
Not Rated 5.2
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Total 100.0%
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Page 3
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PORTFOLIO COMMENTARY
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FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
SEMI-ANNUAL REPORT
JUNE 30, 2015 (UNAUDITED)
SUB-ADVISOR
Aberdeen Asset Management Inc. ("Aberdeen" or the "Sub-Advisor"), a Securities
and Exchange Commission registered investment advisor, is a wholly-owned
subsidiary of Aberdeen Asset Management PLC ("Aberdeen Group"). Aberdeen Group
is a publicly-traded international investment management group listed on the
London Stock Exchange, managing assets for both institutional and retail clients
from offices around the world.
PORTFOLIO MANAGEMENT TEAM
Investment decisions for the First Trust/Aberdeen Emerging Opportunity Fund (the
"Fund") are made by Aberdeen using a team approach and not by any one
individual. By making team decisions, Aberdeen seeks to ensure that the
investment process results in consistent returns across all portfolios with
similar objectives. Aberdeen does not employ separate research analysts.
Instead, Aberdeen's investment managers combine analysis with portfolio
management. Each member of the team has sector and portfolio responsibilities
such as day-to-day monitoring of liquidity. The overall result of this matrix
approach is a high degree of cross-coverage, leading to a deeper understanding
of the securities in which Aberdeen invests. Below are the members of the team
with significant responsibility for the day-to-day management of the Fund's
portfolio.
EQUITY MANAGEMENT TEAM
DEVAN KALOO
Head of Global Emerging Markets Equity
JOANNE IRVINE
Head of Global Emerging Markets ex Asia
MARK GORDON-JAMES
Senior Investment Manager, Global Emerging Markets Equity
FIONA MANNING
Senior Investment Manager, Global Emerging Markets Equity
PETER TAYLOR
Senior Investment Manager/Head of Corporate Governance,
Global Emerging Markets Equity
FIXED-INCOME MANAGEMENT TEAM
BRETT DIMENT
Head of Emerging Market Debt
KEVIN DALY
Senior Investment Manager, Emerging Market Debt
EDWIN GUTIERREZ
Head of Emerging Market Sovereign Debt
MAX WOLMAN
Senior Investment Manager, Emerging Market Debt
COMMENTARY
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
The investment objective of the Fund is to provide a high level of total return.
The Fund pursues its investment objective by investing at least 80% of its
managed assets in a diversified portfolio of equity and fixed-income securities
of issuers in emerging market countries. There can be no assurance that the
Fund's investment objective will be achieved, and the Fund may not be
appropriate for all investors.
FUND RECAP
The Fund had a net asset value ("NAV") total return(1) of 1.56% and a market
value total return of 0.81% for the six months ended June 30, 2015, compared to
the Fund's blended index(2) total return of 0.70% over the same period. In
addition to the blended index, the Fund currently uses other indexes for
comparative purposes. The total returns for the six months ended June 30, 2015,
for these indexes were as follows: the Barclays Global Emerging Markets Index
was 1.49% and the FTSE All World Emerging Market Index was 3.96%.
An important factor impacting the return of the Fund relative to the indexes was
the Fund's use of financial leverage through the use of bank borrowings. The
Fund uses leverage because its managers believe that, over time, leverage
provides opportunities for additional income and total return for common
shareholders. However, the use of leverage can also expose common shareholders
to additional volatility. For example, if the prices of securities held by the
Fund decline, the negative impact of changes on Common Share NAV and Common
Shareholder total return is magnified by the use of leverage. Conversely,
leverage may enhance Common Share returns during periods when the prices of
securities held by the Fund generally are rising. Unlike the Fund, the Barclays
Global Emerging Markets Index, the FTSE All World Emerging Market Index and the
components of the blended index are not leveraged. Leverage had a positive
impact on the performance of the Fund over this reporting period.
-----------------------------
1 Total return is based on the combination of reinvested dividend, capital
gain and return of capital distributions, if any, at prices obtained by
the Dividend Reinvestment Plan, and changes in NAV per share for NAV
returns and changes in Common Share Price for market value returns. Total
returns do not reflect sales load and are not annualized for periods less
than one year. Past performance is not indicative of future results.
2 The blended index consists of the following: JPMorgan Emerging Markets
Bond Index - Global Diversified (32.5%); JPMorgan Government Bond Index -
Emerging Markets (32.5%); MSCI Global Emerging Markets Index (35.0%).
Page 4
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PORTFOLIO COMMENTARY (CONTINUED)
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FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
SEMI-ANNUAL REPORT
JUNE 30, 2015 (UNAUDITED)
FIXED INCOME COMMENTARY
MARKET RECAP
Emerging market ("EM") debt performance was mixed over the period. Brief spells
of strong performance in January and April were negated by volatility in crude
oil prices, speculation over the commencement of U.S. interest rate hikes and
increasing fears over a potential Greek exit from the Eurozone. On the other
hand, the initiation of the European Central Bank's ("ECB") asset purchase
program caused global bond market rates to rally in March (allowing Eurozone
bonds to outperform) and limited ripple effects from other factors which may
have affected sentiment towards EM debt.
The direction of oil price movements negatively drove sentiment in certain
credits but those countries less affected by the volatility of commodity prices
have benefitted from yield-hungry investors looking to diversify away from
developed markets.
Speculation surrounding the start date for U.S. interest rate hikes also
affected sentiment over the period. Disappointing macroeconomic data quickly
ruled out the possibility of a June hike. Market conjecture now points to the
third or fourth quarter of the year, although no formal groundwork has yet been
laid by the U.S. Federal Reserve (the "Fed").
Elsewhere, in Greece, negotiations with the Troika group of official
creditors(3) failed and Prime Minister Alexis Tsipras called for a last minute
referendum on whether the country should accept further austerity measures. The
ECB board member, Benoit Coeure, said that the ECB would moderately frontload
its asset purchases due to poor market liquidity during the summer months. This
comment was leapt on by the market and triggered a complete unwind of the euro
strength witnessed earlier in the period.
Over the period, the JPMorgan Emerging Markets Bond Index - Global Diversified
returned 1.67%, with high yield comfortably outperforming investment grade
assets, returning 3.13% and 0.54% respectively. On a country level, Russia
(+15.7%), Belize (+12.0%) and Jamaica (+11.3%) performed the best. At the other
end of the spectrum, Zambia and Ukraine (both -4.0%) performed the worst over
the period.
In local currency debt, the JPMorgan Government Bond Index - Emerging Markets
(unhedged in USD) returned -2.96%, with positive bond returns but weak currency
performance. On a country level, Russia (+28.9%) was by far the top performer as
it rebounded from oversold levels, while the Philippines (+3.4%) and Nigeria
(+0.2%) were the only other countries to have positive returns. On the other
side, Turkey (-14.0%) and Brazil (-10.1%) had the most negative returns.
PERFORMANCE ANALYSIS
The EM debt portion of the Fund outperformed the EM debt portion of its blended
index over the six-month period. In hard currency debt, the Fund benefitted from
overweight positions in Russia, Venezuela and Kazakhstan as well as off-index
positioning in the United Arab Emirates. On the other side, an underweight in
China, relative to the EM debt portion of the blended index detracted from the
Fund, as did a lack of holdings in the Philippines, Hungary, Lebanon and
Jamaica. In local currency debt, an underweight to Eastern Europe, specifically
Romania, Hungary and Poland, was the main contributor to the Fund's performance,
while an overweight to Russia was also beneficial. Overweights in Brazil and
Colombia detracted from the Fund, while positioning in Indonesia was also
negative.
During the period, we participated in new U.S. dollar ("USD") 10-year Eurobonds
from Tunisia, Egypt and Gabon. We reduced the portfolio's Venezuela position,
based on recent good performance, and bought Argentina local-law USD securities.
We also reduced the Fund's exposure to Romania, as recent political developments
point to a loosening fiscal stance. We reduced some of the Fund's corporate
positions, specifically Cementos Pacasmayo, a Peruvian cement company, Bharti
Airtel, the Indian telecommunications company, and Offshore Drilling Holdings, a
Mexican corporate. We also initiated a switch within Russian corporates,
preferring Gazprom Neft over Rosneft. In local currency bonds, we switched part
of our Brazil nominal bonds into inflation-linked ones. We reduced our Russia
holding which has outperformed in 2015 and allowed positions in Egyptian and
Serbian treasury bills to mature. In terms of currency allocations, we reduced
our Colombian peso and Indonesia rupiah exposure; on the other side, we added to
the Fund's Nigerian naira and Turkish lira positions.
MARKET OUTLOOK
In terms of issuance, the first six months of the year have played out much as
recent years have suggested - that it is not the mainstream EM countries which
are the main drivers of new Eurobond issuance, but the high-yield nations.
Investment grade credits are more focused on using their local bond market for
their financing needs rather than issue in foreign currency, while high yielding
nations do not yet have a sophisticated pension fund system, banking sector or
asset management or insurance industry which can absorb large amounts of
government treasury bonds or bills. With new bonds this year from such countries
as the Dominican Republic, Armenia, Tunisia and Gabon, we do expect this trend
in "frontier market" bond growth to continue. We believe the exogenous risks
surrounding Greece and U.S. monetary policy will likely continue to keep risk
-----------------------------
3 International Monetary Fund, European Union and ECB.
Page 5
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PORTFOLIO COMMENTARY (CONTINUED)
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FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
SEMI-ANNUAL REPORT
JUNE 30, 2015 (UNAUDITED)
appetite subdued, although we do consider bond valuations attractive at this
point in time. Recent credit rating upgrades to Uruguay and Jamaica and an
upwards outlook revision in Malaysia indicate the improving nature of certain EM
countries, in our opinion.
EQUITY COMMENTARY
MARKET RECAP
Continued loose monetary policies pushed most emerging stock markets higher
despite heightened volatility towards the end of the six-month period. Together
with the ECB, which started its quantitative easing program, many central banks
across the world trimmed interest rates to stave off the threat of deflation.
Hopes that China would add more stimuli to bolster growth and the Fed's
suggestion of a more measured pace of interest rate hikes provided further
support, for the most part. In the last two months of the review period,
however, markets retreated amid growing uncertainty surrounding Greece's debt
saga and China's shaky markets.
PERFORMANCE ANALYSIS
The equity portion of the Fund underperformed the equity portion of its blended
index over the period mainly because of the large underweight to China, as well
as the overweight to both Turkey and Brazil.
The spectacular rise, and subsequent retreat, of China's stock markets was the
main focus of investor attention. The MSCI China Index rose sharply in the first
four months of the year in response to a tide of equity account openings, a
surge in margin trading activity, and monetary easing. However, the market
tumbled in May and June, as the weight of recent gains triggered profit-taking
in the face of continuing weak macroeconomic data and a clampdown on margin
financing. But China still ended as the best performing market in Asia at the
end of the review period. This hurt the Fund's performance given the
underweight. At the stock level, the lack of exposure to Tencent Holdings
Limited hurt the Fund's performance, as its share price rose after it announced
good results and planned to monetize its WeChat platform. However, the losses
were pared by Yum! Brands, which rose on news that hedge fund Third Point had
taken a stake in the company, citing the recovery of, and hidden value in, its
Chinese business.
In Turkey, uncertainty over its political future weighed on the local stock
market. The ruling AK Party lost its parliamentary majority in a landmark
election, while investors were also worried that central bank impartiality might
be compromised by President Erdogan's persistent hounding to trim interest
rates. At the stock level, retailer BIM and lenders such as Garanti and Akbank
fell along with the local market.
Brazil also tumbled on worries about the deepening slowdown. Although
first-quarter GDP growth shrank by less than expected, inflation remained
elevated and rising unemployment crimped domestic consumption. The central bank
continued to tighten policy, lifting the benchmark rate to 13.75% in June to
curb inflation; meanwhile, to meet fiscal targets, the government is cutting
spending as well and raising taxes for financial institutions. Shares of local
lenders, including holding Banco Bradesco, fell on concerns that the tax hikes
may affect profitability across the sector. However, other Brazilian holdings
such as clothing retailer Lojas Renner, fuels and chemical company Ultrapar, and
tobacco company Souza Cruz outperformed the market, resulting in positive
attribution.
MARKET AND FUND OUTLOOK
EM equities' bumpy ride in the first half of 2015 looks set to continue for the
rest of the year, in our opinion. Besides Greece, there are other lingering
concerns. Foremost is when the Fed will start normalizing monetary policy and
its impact on financial markets (we think emerging markets have, to an extent,
factored in higher interest rates). China is another worry. Further turmoil in
domestic stock markets could destabilize the economy at a time when it is
already decelerating. A bear market-induced downturn could reverberate beyond
the mainland. But the Chinese government remains committed to supporting the
market and the economy. At the time of writing, Beijing has eased monetary
policy to boost growth and made a series of announcements aimed at restoring
investor confidence following the recent sharp sell-off in domestic equities. In
addition, further government intervention to stabilize growth is expected,
either through interest rate cuts or higher infrastructure spending.
These macroeconomic issues, albeit significant, do not dim the long-term
attractiveness of emerging markets, in our opinion. For one, we are investing in
individual stocks, not entire economies. History shows there is little
correlation between equity returns and economic growth. The widening valuation
gap also favors the asset class. Emerging market stocks overall are still
trading at a discount relative to historical levels and they remain attractive
versus their developed market peers. Although subdued demand in developed
markets has hampered exports and earnings in the developing world, we believe
global growth - forecast to recover later this year - should help reverse this
trend. Companies outside the commodity sector are already enjoying margin
expansion, either through cost-cuts or declining input costs. We believe a
potential pickup in top-line numbers may not be too far off.
Page 6
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
PORTFOLIO OF INVESTMENTS (a)
JUNE 30, 2015 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------- ---------------------------------------------------------------------------------------- -------------
COMMON STOCKS - 51.5%
AUSTRALIA - 0.0%
15,636 South32 Ltd. (b)........................................................................ $ 21,129
-------------
BRAZIL - 5.5%
148,779 Banco Bradesco S.A., ADR................................................................ 1,362,816
12,458 BRF S.A................................................................................. 263,176
20,000 Lojas Renner S.A........................................................................ 730,758
30,454 Multiplan Empreendimentos Imobiliarios S.A., Preference Shares.......................... 471,047
62,500 Souza Cruz S.A.......................................................................... 493,511
58,267 Ultrapar Participacoes S.A.............................................................. 1,231,083
84,104 Vale S.A., ADR.......................................................................... 495,373
58,842 Vale S.A., Preference Shares, ADR....................................................... 297,152
-------------
5,344,916
-------------
CHILE - 0.6%
30,459 Banco Santander Chile S.A., ADR......................................................... 616,795
-------------
CHINA - 1.0%
862,000 PetroChina Co., Ltd., Class H........................................................... 961,911
-------------
HONG KONG - 5.8%
247,000 AIA Group Ltd........................................................................... 1,617,128
120,000 China Mobile Ltd........................................................................ 1,536,467
202,000 Hang Lung Group Ltd..................................................................... 889,925
528,000 Swire Pacific Ltd., B Shares............................................................ 1,239,700
89,600 Swire Properties Ltd.................................................................... 286,085
-------------
5,569,305
-------------
HUNGARY - 0.6%
36,354 Richter Gedeon Nyrt..................................................................... 546,095
-------------
INDIA - 8.2%
17,000 Grasim Industries Ltd................................................................... 918,996
18,500 Hero MotoCorp Ltd....................................................................... 733,115
78,000 Hindustan Unilever Ltd.................................................................. 1,122,842
93,500 Housing Development Finance Corp., Ltd.................................................. 1,903,550
100,000 ICICI Bank Ltd.......................................................................... 483,668
83,472 Infosys Ltd............................................................................. 1,290,290
231,173 ITC Ltd................................................................................. 1,144,067
7,428 UltraTech Cement Ltd.................................................................... 349,173
-------------
7,945,701
-------------
INDONESIA - 2.1%
306,300 Indocement Tunggal Prakarsa Tbk PT...................................................... 479,581
2,833,100 PT Astra International Tbk.............................................................. 1,503,408
-------------
1,982,989
-------------
ITALY - 0.8%
27,900 Tenaris S.A., ADR....................................................................... 753,858
-------------
MALAYSIA - 1.0%
234,167 CIMB Group Holdings Berhad.............................................................. 339,490
120,000 Public Bank Berhad...................................................................... 595,388
-------------
934,878
-------------
See Notes to Financial Statements Page 7
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
JUNE 30, 2015 (UNAUDITED)
SHARES DESCRIPTION VALUE
---------------- ---------------------------------------------------------------------------------------- -------------
COMMON STOCKS (CONTINUED)
MEXICO - 4.1%
17,700 Fomento Economico Mexicano, S.A.B. de C.V., ADR......................................... $ 1,576,893
28,500 Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., ADR............................... 1,118,625
229,200 Grupo Financiero Banorte, S.A.B. de C.V., O Shares...................................... 1,260,217
-------------
3,955,735
-------------
PHILIPPINES - 2.1%
1,400,000 Ayala Land, Inc......................................................................... 1,158,128
394,359 Bank of the Philippine Islands.......................................................... 826,501
-------------
1,984,629
-------------
POLAND - 0.8%
17,000 Bank Pekao S.A.......................................................................... 813,604
-------------
PORTUGAL - 0.5%
41,692 Jeronimo Martins SGPS S.A............................................................... 534,525
-------------
RUSSIA - 2.3%
26,500 LUKOIL, ADR............................................................................. 1,190,115
5,181 Magnit OJSC............................................................................. 1,070,186
-------------
2,260,301
-------------
SOUTH AFRICA - 3.2%
48,610 Massmart Holdings Ltd................................................................... 597,336
32,215 MTN Group Ltd........................................................................... 605,719
19,978 SABMiller PLC........................................................................... 1,036,587
119,729 Truworths International Ltd............................................................. 843,398
-------------
3,083,040
-------------
SOUTH KOREA - 3.2%
3,500 E-Mart Co., Ltd......................................................................... 724,820
2,620 Samsung Electronics Co., Ltd., Preference Shares........................................ 2,332,386
-------------
3,057,206
-------------
TAIWAN - 2.5%
150,005 Taiwan Mobile Co., Ltd.................................................................. 500,754
409,954 Taiwan Semiconductor Manufacturing Co., Ltd............................................. 1,866,779
-------------
2,367,533
-------------
THAILAND - 2.2%
67,700 Siam Cement Public (The) Co., Ltd....................................................... 1,038,285
230,600 Siam Commercial Bank Public Co., Ltd.................................................... 1,061,666
-------------
2,099,951
-------------
TURKEY - 2.5%
188,635 Akbank TAS.............................................................................. 545,472
40,444 BIM Birlesik Magazalar AS............................................................... 724,343
146,150 Haci Omer Sabanci Holding AS............................................................ 550,768
192,000 Turkiye Garanti Bankasi AS.............................................................. 598,903
-------------
2,419,486
-------------
UNITED KINGDOM - 1.5%
26,000 BHP Billiton PLC........................................................................ 514,251
60,559 Standard Chartered PLC.................................................................. 969,606
-------------
1,483,857
-------------
UNITED STATES - 1.0%
10,500 Yum! Brands, Inc........................................................................ 945,840
-------------
TOTAL COMMON STOCKS..................................................................... 49,683,284
(Cost $38,101,702) -------------
Page 8 See Notes to Financial Statements
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
JUNE 30, 2015 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
---------------- ------------------------------------------------------------ ---------- -------------- -------------
FOREIGN SOVEREIGN BONDS AND NOTES - 40.0%
ARGENTINA - 1.7%
1,750,000 Argentina Bonar Bonds (USD)................................. 7.00% 04/17/17 $ 1,687,194
-------------
ARMENIA - 0.6%
596,000 Republic of Armenia (USD) (c)............................... 6.00% 09/30/20 586,702
-------------
BRAZIL - 3.8%
13,160,000 Brazil Notas do Tesouro Nacional, Series F (BRL)............ 10.00% 01/01/25 3,669,305
-------------
CHILE - 0.3%
250,000 Empresa Nacional del Petroleo (USD) (c)..................... 4.38% 10/30/24 250,557
-------------
COLOMBIA - 1.7%
833,000,000 Colombia Government International Bond (COP)................ 7.75% 04/14/21 353,476
2,677,000,000 Colombia Government International Bond (COP)................ 9.85% 06/28/27 1,265,947
-------------
1,619,423
-------------
COSTA RICA - 0.3%
300,000 Costa Rica Government International Bond (USD).............. 4.25% 01/26/23 278,400
-------------
CROATIA - 1.3%
930,000 Croatia Government International Bond (USD)................. 6.63% 07/14/20 1,021,689
200,000 Croatia Government International Bond (USD)................. 6.00% 01/26/24 212,450
-------------
1,234,139
-------------
DOMINICAN REPUBLIC - 1.2%
200,000 Dominican Republic International Bond (USD)................. 7.50% 05/06/21 225,500
400,000 Dominican Republic International Bond (USD)................. 5.88% 04/18/24 417,000
458,000 Dominican Republic International Bond (USD)................. 8.63% 04/20/27 550,745
-------------
1,193,245
-------------
EGYPT - 0.5%
540,000 Egypt Government International Bond (USD) (c)............... 5.88% 06/11/25 528,660
-------------
ETHIOPIA - 0.6%
540,000 Federal Democratic Republic of Ethiopia (USD) (c)........... 6.63% 12/11/24 535,140
-------------
GABON - 0.2%
200,000 Gabonese Republic (USD) (c)................................. 6.95% 06/16/25 199,000
-------------
GEORGIA - 0.4%
350,000 Georgian Oil and Gas Corp. JSC (USD) (c).................... 6.88% 05/16/17 354,375
-------------
GHANA - 0.8%
500,000 Republic of Ghana (USD)..................................... 8.13% 01/18/26 456,350
350,000 Republic of Ghana (USD) (c)................................. 8.13% 01/18/26 319,445
-------------
775,795
-------------
HONDURAS - 0.7%
630,000 Honduras Government International Bond (USD) (c)............ 7.50% 03/15/24 684,599
-------------
HUNGARY - 0.6%
140,630,000 Hungary Government Bond (HUF)............................... 5.50% 06/24/25 562,319
-------------
INDONESIA - 1.8%
700,000 Indonesia Government International Bond (USD) (c)........... 5.88% 01/15/24 775,250
7,311,000,000 Indonesia Treasury Bond (IDR)............................... 8.38% 03/15/34 549,557
440,000 Pertamina Persero PT (USD) (c).............................. 4.30% 05/20/23 422,400
-------------
1,747,207
-------------
See Notes to Financial Statements Page 9
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
JUNE 30, 2015 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
---------------- ------------------------------------------------------------ ---------- -------------- -------------
FOREIGN SOVEREIGN BONDS AND NOTES (CONTINUED)
IRAQ - 0.7%
880,000 Republic of Iraq (USD)...................................... 5.80% 01/15/28 $ 715,968
-------------
IVORY COAST - 0.8%
240,000 Ivory Coast Government International Bond (USD) (c)......... 6.38% 03/03/28 235,200
570,000 Ivory Coast Government International Bond (USD)............. 5.75% 12/31/32 540,189
-------------
775,389
-------------
KAZAKHSTAN - 1.1%
1,170,000 Kazakhstan Government International Bond (USD) (c).......... 3.88% 10/14/24 1,105,650
-------------
KENYA - 0.2%
200,000 Kenya Government International Bond (USD)................... 6.88% 06/24/24 203,916
-------------
MEXICO - 2.4%
3,890,000 Mexican Bonos (MXN)......................................... 6.50% 06/09/22 257,020
20,590,000 Mexican Bonos (MXN)......................................... 8.50% 11/18/38 1,573,511
6,804,468 Mexican Udibonos, Inflation Adjusted Bond (MXN) (d)......... 4.50% 11/22/35 501,521
-------------
2,332,052
-------------
MONGOLIA - 1.0%
580,000 Development Bank of Mongolia LLC (USD)...................... 5.75% 03/21/17 571,300
400,000 Mongolia Government International Bond (USD)................ 5.13% 12/05/22 363,000
-------------
934,300
-------------
NIGERIA - 1.4%
253,240,000 Nigeria Government Bond (NGN)............................... 16.00% 06/29/19 1,316,644
-------------
POLAND - 0.7%
1,670,000 Poland Government Bond (PLN)................................ 4.00% 10/25/23 470,953
640,000 Poland Government Bond (PLN)................................ 5.75% 04/25/29 213,124
-------------
684,077
-------------
ROMANIA - 0.9%
700,000 Romanian Government International Bond (USD)................ 6.75% 02/07/22 819,875
-------------
RUSSIA - 2.8%
165,926,000 Russian Federal Bond - OFZ (RUB)............................ 7.05% 01/19/28 2,270,076
200,000 Russian Foreign Bond - Eurobond (USD)....................... 4.88% 09/16/23 198,800
200,000 Russian Foreign Bond - Eurobond (USD)....................... 5.88% 09/16/43 193,648
-------------
2,662,524
-------------
RWANDA - 0.5%
300,000 Rwanda International Government Bond (USD).................. 6.63% 05/02/23 303,000
200,000 Rwanda International Government Bond (USD) (c).............. 6.63% 05/02/23 202,000
-------------
505,000
-------------
SENEGAL - 0.4%
380,000 Senegal Government International Bond (USD)................. 8.75% 05/13/21 425,676
-------------
SERBIA - 1.2%
1,120,000 Republic of Serbia (USD).................................... 5.25% 11/21/17 1,162,672
-------------
SOUTH AFRICA - 2.4%
450,000 Eskom Holdings SOC Ltd. (USD)............................... 6.75% 08/06/23 456,786
210,000 Eskom Holdings SOC Ltd. (USD) (c)........................... 6.75% 08/06/23 213,933
9,550,000 South Africa Government Bond (ZAR).......................... 10.50% 12/21/26 914,260
9,490,000 South Africa Government Bond (ZAR).......................... 8.00% 01/31/30 736,597
-------------
2,321,576
-------------
Page 10 See Notes to Financial Statements
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
JUNE 30, 2015 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
---------------- ------------------------------------------------------------ ---------- -------------- -------------
FOREIGN SOVEREIGN BONDS AND NOTES (CONTINUED)
TANZANIA - 0.3%
300,000 Tanzania Government International Bond (USD) (e)............ 6.40% 03/09/20 $ 305,625
-------------
TURKEY - 4.8%
1,600,000 Turkey Government Bond (TRY)................................ 6.30% 02/14/18 554,755
4,150,000 Turkey Government Bond (TRY)................................ 10.40% 03/20/24 1,666,906
1,280,000 Turkey Government Bond (TRY)................................ 9.00% 07/24/24 474,490
2,110,000 Turkey Government Bond (TRY)................................ 8.00% 03/12/25 729,025
1,050,000 Turkey Government International Bond (USD).................. 6.25% 09/26/22 1,170,687
-------------
4,595,863
-------------
UNITED ARAB EMIRATES - 0.5%
410,000 Emirate of Dubai Government International Bonds (USD)....... 7.75% 10/05/20 501,943
-------------
URUGUAY - 1.1%
183,000 Uruguay Government International Bond (USD)................. 7.63% 03/21/36 244,763
20,953,195 Uruguay Government International Bond,
Inflation Adjusted Bond (UYU) (d)........................ 5.00% 09/14/18 791,453
-------------
1,036,216
-------------
ZAMBIA - 0.3%
250,000 Zambia Government International Bond (USD) (c).............. 8.50% 04/14/24 251,719
-------------
TOTAL FOREIGN SOVEREIGN BONDS AND NOTES................................................. 38,562,745
(Cost $41,558,287) -------------
FOREIGN CORPORATE BONDS AND NOTES (F) - 12.4%
BANGLADESH - 0.3%
250,000 Banglalink Digital Communications Ltd. (USD) (c)............ 8.63% 05/06/19 253,750
-------------
BRAZIL - 0.9%
270,000 Marfrig Overseas Ltd. (USD)................................. 9.50% 05/04/20 277,209
350,000 OAS Finance Ltd. (USD) (c) (h) (i) (j)...................... 8.88% (g) 73,150
200,000 OAS Investments GmbH (USD) (c) (h) (i)...................... 8.25% 10/19/19 41,800
560,604 QGOG Atlantic/Alaskan Rigs Ltd. (USD)....................... 5.25% 07/30/18 503,142
-------------
895,301
-------------
CHINA - 0.3%
260,000 Country Garden Holdings Co., Ltd. (USD)..................... 7.50% 03/09/20 268,934
-------------
COLOMBIA - 0.4%
460,000 Pacific Rubiales Energy Corp. (USD) (c)..................... 5.38% 01/26/19 379,040
-------------
DOMINICAN REPUBLIC - 0.4%
350,000 AES Andres Dominicana, Ltd. / Itabo
Dominicana, Ltd. (USD)................................... 9.50% 11/12/20 371,000
-------------
GUATEMALA - 0.9%
400,000 Comcel Trust via Comunicaciones Celulares SA (USD) (c)...... 6.88% 02/06/24 422,000
400,000 Industrial Subordinated Trust (USD)......................... 8.25% 07/27/21 434,040
-------------
856,040
-------------
HONG KONG - 0.3%
260,000 Shimao Property Holdings Ltd. (USD)......................... 8.38% 02/10/22 271,872
-------------
See Notes to Financial Statements Page 11
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
JUNE 30, 2015 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
---------------- ------------------------------------------------------------ ---------- -------------- -------------
FOREIGN CORPORATE BONDS AND NOTES (F) (CONTINUED)
INDIA - 0.6%
270,000 ABJA Investment Co. Pte Ltd. (USD).......................... 5.95% 07/31/24 $ 271,114
260,000 ICICI Bank Ltd. (USD) (j)................................... 6.38% 04/30/22 268,556
-------------
539,670
-------------
KAZAKHSTAN - 0.4%
400,000 Zhaikmunai LLP (USD) (c).................................... 7.13% 11/13/19 382,500
-------------
MEXICO - 1.5%
270,000 Alfa SAB de CV (USD)........................................ 6.88% 03/25/44 277,344
350,000 CEMEX Espana S.A. (USD)..................................... 9.88% 04/30/19 384,720
400,000 Sixsigma Networks Mexico S.A. de CV (USD) (c)............... 8.25% 11/07/21 414,480
103,000 Southern Copper Corp. (USD)................................. 3.88% 04/23/25 99,461
290,000 Unifin Financiera SAPI de CV SOFOMENR (USD)................. 6.25% 07/22/19 288,188
-------------
1,464,193
-------------
MOZAMBIQUE - 0.7%
700,000 EMATUM Via Mozambique EMATUM
Finance 2020 BV (USD).................................... 6.31% 09/11/20 654,150
-------------
NIGERIA - 0.7%
320,000 Diamond Bank PLC (USD) (c).................................. 8.75% 05/21/19 308,960
400,000 Zenith Bank PLC (USD) (c)................................... 6.25% 04/22/19 386,500
-------------
695,460
-------------
PARAGUAY - 0.6%
500,000 Banco Regional SAECA (USD) (c).............................. 8.13% 01/24/19 539,375
-------------
PERU - 0.4%
160,000 InRetail Consumer (USD) (c)................................. 5.25% 10/10/21 165,400
200,000 Union Andina de Cementos SAA (USD).......................... 5.88% 10/30/21 202,750
-------------
368,150
-------------
RUSSIA - 1.8%
400,000 Alfa Bank OJSC Via Alfa Bond Issuance PLC (USD)............. 7.75% 04/28/21 396,800
430,000 Evraz Group S.A. (USD) (c).................................. 6.50% 04/22/20 391,085
350,000 Lukoil International Finance BV (USD)....................... 4.56% 04/24/23 313,250
310,000 Sberbank of Russia Via SB Capital SA (USD).................. 6.13% 02/07/22 299,925
380,000 Vimpel Communications Via VIP
Finance Ireland Ltd., OJSC (USD)......................... 7.75% 02/02/21 385,225
-------------
1,786,285
-------------
TUNISIA - 0.5%
550,000 Banque Centrale de Tunisie SA (USD) (c)..................... 5.75% 01/30/25 539,000
-------------
TURKEY - 0.5%
200,000 Arcelik AS (USD) (c)........................................ 5.00% 04/03/23 192,324
300,000 Yasar Holdings AS (USD) (c)................................. 8.88% 05/06/20 318,000
-------------
510,324
-------------
UNITED ARAB EMIRATES - 0.7%
600,000 Jafz Sukuk Ltd. (USD)....................................... 7.00% 06/19/19 683,346
-------------
Page 12 See Notes to Financial Statements
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
PORTFOLIO OF INVESTMENTS (a) (CONTINUED)
JUNE 30, 2015 (UNAUDITED)
PRINCIPAL
VALUE
(LOCAL STATED STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
---------------- ------------------------------------------------------------ ---------- -------------- -------------
FOREIGN CORPORATE BONDS AND NOTES (F) (CONTINUED)
VENEZUELA - 0.5%
690,000 Petroleos de Venezuela S.A. (USD)........................... 8.50% 11/02/17 $ 476,100
-------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES................................................. 11,934,490
(Cost $12,424,809) -------------
TOTAL INVESTMENTS - 103.9%.............................................................. 100,180,519
(Cost $92,084,798) (k)
OUTSTANDING LOAN - (6.0%)............................................................... (5,800,000)
NET OTHER ASSETS AND LIABILITIES - 2.1%................................................. 1,991,940
-------------
NET ASSETS - 100.0%..................................................................... $ 96,372,459
=============
----------------------------
(a) All of these securities are available to serve as collateral for the
outstanding loan.
(b) Non-income producing security.
(c) This security, sold within the terms of a private placement memorandum, is
exempt from registration under Rule 144A under the Securities Act of 1933,
as amended (the "1933 Act"), 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 sub-advisor. At June 30, 2015 ,
securities noted as such amounted to $11,471,994 or 11.9% of net assets.
(d) 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.
(e) Floating rate security. The interest rate shown reflects the rate in
effect at June 30, 2015.
(f) Portfolio securities are included in a country based upon their underlying
credit exposure as determined by Aberdeen Asset Management Inc., the
Fund's sub-advisor.
(g) Perpetual maturity.
(h) This issuer is in default and interest is not being accrued by the Fund.
(i) This company has filed for protection in a Sao Paulo state court.
(j) Fixed-to-floating rate security. The interest rate shown reflects the
fixed rate in effect at June 30, 2015.
(k) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2015, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $17,112,378 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $9,016,657.
ADR American Depositary Receipt
Currency Abbreviations:
BRL Brazilian Real NGN Nigerian Naira
COP Colombian Peso PHP Philippines Peso
EUR Euro PLN Polish Zloty
GBP British Pound Sterling RUB Russian Ruble
HKD Hong Kong Dollar THB Thailand Baht
HUF Hungarian Forint TRY Turkish Lira
IDR Indonesian Rupiah TWD Taiwan New Dollar
INR Indian Rupee USD United States Dollar
KRW South Korean Won UYU Uruguayan Peso
MXN Mexican Peso ZAR South African Rand
MYR Malaysian Ringgit
See Notes to Financial Statements Page 13
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2015 (UNAUDITED)
---------------------------
VALUATION INPUTS
A summary of the inputs used to value the Fund's investments as of June 30, 2015
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):
ASSETS TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
INVESTMENTS 6/30/2015 PRICES INPUTS INPUTS
--------------------------------------------------- ------------- ------------ -------------- ------------
Common Stocks*..................................... $ 49,683,284 $ 49,683,284 $ -- $ --
Foreign Sovereign Bonds and Notes*................. 38,562,745 -- 38,562,745 --
Foreign Corporate Bonds and Notes*................. 11,934,490 -- 11,934,490 --
------------- ------------ -------------- ------------
Total Investments.................................. 100,180,519 49,683,284 50,497,235 --
Forward Foreign Currency Contracts**............... 65,307 -- 65,307 --
------------- ------------ -------------- ------------
Total.............................................. $ 100,245,826 $ 49,683,284 $ 50,562,542 $ --
============= ============ ============== ============
LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
INVESTMENTS 6/30/2015 PRICES INPUTS INPUTS
--------------------------------------------------- ------------- ------------ -------------- ------------
Forward Foreign Currency Contracts**............... $ (162) $ -- $ (162) $ --
============= ============ ============== ============
* See the Portfolio of Investments for country breakout.
** See the Forward Foreign Currency Contracts for contract and currency
detail.
All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. As of June 30,
2015, the Fund transferred common stocks valued at $36,810,292 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 are now being
valued based on quoted prices. Previously, these securities were fair valued
using a factor provided by a pricing service due to the change in value between
the foreign markets' close and the New York Stock Exchange close on December 31,
2014 exceeding a certain threshold.
Page 14 See Notes to Financial Statements
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
PORTFOLIO OF INVESTMENTS (CONTINUED)
JUNE 30, 2015 (UNAUDITED)
CURRENCY EXPOSURE % OF TOTAL
DIVERSIFICATION INVESTMENTS #
------------------------------------
USD 40.4
INR 9.1
BRL 6.9
HKD 6.6
ZAR 5.3
TRY 4.9
MXN 3.6
RUB 3.4
KRW 3.1
IDR 2.6
TWD 2.4
THB 2.1
PHP 2.0
PLN 1.5
NGN 1.3
HUF 1.1
GBP 1.0
MYR 0.9
UYU 0.8
EUR 0.5
COP 0.5
------------------------------------
Total 100.0%
======
# The weightings include the impact of currency forwards.
FORWARD FOREIGN CURRENCY CONTRACTS
(SEE NOTE 2C - FORWARD FOREIGN CURRENCY CONTRACTS IN THE NOTES TO FINANCIAL
STATEMENTS).
FORWARD FOREIGN CURRENCY CONTRACTS
-----------------------------------------------------------------
PURCHASE SALE UNREALIZED
SETTLEMENT AMOUNT AMOUNT VALUE AS OF VALUE AS OF APPRECIATION
DATE COUNTERPARTY PURCHASED (a) SOLD (a) JUNE 30, 2015 JUNE 30, 2015 (DEPRECIATION)
------------ ------------ --------------------- ---------------------- ----------------- ----------------- --------------
08/28/15 DB INR 66,980,000 USD 1,032,686 $ 1,039,764 $ 1,032,686 $ 7,078
08/28/15 CIT USD 1,149,060 COP 2,860,011,000 1,149,060 1,090,831 58,229
07/16/15 CIT USD 1,010,122 TRY 2,721,000 1,010,122 1,010,284 (162)
----------
Net Unrealized Appreciation (Depreciation).................................................................... $ 65,145
==========
(a) Please see Portfolio of Investments for currency descriptions.
See Note 2D - Offsetting on the Statement of Assets and Liabilities in the Notes
to Financial Statements for a table that presents the forward foreign currency
contracts' assets and liabilities on a gross basis.
Counterparty Abbreviations:
CIT Citibank, NA
DB Deutsche Bank
See Notes to Financial Statements Page 15
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2015 (UNAUDITED)
ASSETS:
Investments, at value
(Cost $92,084,798).......................................................................... $100,180,519
Cash........................................................................................... 854,239
Foreign currency (Cost $166,389)............................................................... 165,774
Unrealized appreciation on forward foreign currency contracts.................................. 65,307
Receivables:
Interest.................................................................................... 1,093,771
Dividends................................................................................... 193,512
Miscellaneous............................................................................... 40,381
Investment securities sold.................................................................. 17,395
Dividend reclaims........................................................................... 2,501
Prepaid expenses............................................................................... 16,718
------------
Total Assets................................................................................ 102,630,117
------------
LIABILITIES:
Outstanding loan............................................................................... 5,800,000
Unrealized depreciation on forward foreign currency contracts.................................. 162
Payables:
Deferred foreign capital gains tax.......................................................... 168,820
Investment advisory fees.................................................................... 85,501
Custodian fees.............................................................................. 68,546
Investment securities purchased............................................................. 64,164
Audit and tax fees.......................................................................... 32,887
Administrative fees......................................................................... 20,840
Printing fees............................................................................... 11,807
Transfer agent fees......................................................................... 2,949
Legal fees.................................................................................. 883
Financial reporting fees.................................................................... 771
Interest and fees on loan................................................................... 302
Trustees' fees and expenses................................................................. 26
------------
Total Liabilities........................................................................... 6,257,658
------------
NET ASSETS..................................................................................... $ 96,372,459
============
NET ASSETS CONSIST OF:
Paid-in capital................................................................................ $ 93,968,227
Par value...................................................................................... 53,278
Accumulated net investment income (loss)....................................................... (1,739,687)
Accumulated net realized gain (loss) on investments, forward foreign currency
contracts and foreign currency transactions................................................. (3,871,846)
Net unrealized appreciation (depreciation) on investments, forward foreign
currency contracts and foreign currency translation......................................... 7,962,487
------------
NET ASSETS..................................................................................... $ 96,372,459
============
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share)........................... $ 18.09
============
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized).... 5,327,785
============
Page 16 See Notes to Financial Statements
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2015 (UNAUDITED)
INVESTMENT INCOME:
Interest (net of foreign withholding tax of $3,371)............................................ $ 1,984,844
Dividends (net of foreign withholding tax of $83,778).......................................... 807,706
------------
Total investment income..................................................................... 2,792,550
------------
EXPENSES:
Investment advisory fees....................................................................... 526,763
Custodian fees................................................................................. 112,419
Administrative fees............................................................................ 67,120
Interest and fees on loan...................................................................... 32,080
Audit and tax fees............................................................................. 28,860
Printing fees.................................................................................. 20,725
Transfer agent fees............................................................................ 16,901
Trustees' fees and expenses.................................................................... 8,605
Financial reporting fees....................................................................... 4,625
Legal fees..................................................................................... 3,195
Other.......................................................................................... 24,391
------------
Total expenses.............................................................................. 845,684
------------
NET INVESTMENT INCOME (LOSS)................................................................... 1,946,866
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................................................................. (647,110)
Forward foreign currency contracts.......................................................... (12,143)
Foreign currency transactions............................................................... (2,958,850)
------------
Net realized gain (loss)....................................................................... (3,618,103)
------------
Net change in unrealized appreciation (depreciation) on:
Investments................................................................................. 2,533,470
Forward foreign currency contracts.......................................................... 123,074
Foreign currency translation................................................................ 46,641
Net change in deferred foreign capital gains tax............................................... 17,344
------------
Net change in unrealized appreciation (depreciation)........................................... 2,720,529
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)........................................................ (897,574)
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ 1,049,292
============
See Notes to Financial Statements Page 17
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
STATEMENTS OF CHANGES IN NET ASSETS
FOR THE SIX
MONTHS FOR THE
ENDED YEAR
6/30/2015 ENDED
(UNAUDITED) 12/31/2014
------------- ------------
OPERATIONS:
Net investment income (loss)...................................................... $ 1,946,866 $ 4,098,406
Net realized gain (loss).......................................................... (3,618,103) (523,121)
Net change in unrealized appreciation (depreciation).............................. 2,720,529 (6,876,815)
------------- ------------
Net increase (decrease) in net assets resulting from operations................... 1,049,292 (3,301,530)
------------- ------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income............................................................. (3,729,450) (1,678,391)
Net realized gain................................................................. -- (2,365,537)
Return of capital................................................................. -- (3,414,971)
------------- ------------
Total distributions to shareholders............................................... (3,729,450) (7,458,899)
------------- ------------
Total increase (decrease) in net assets........................................... (2,680,158) (10,760,429)
NET ASSETS:
Beginning of period............................................................... 99,052,617 109,813,046
------------- ------------
End of period..................................................................... $ 96,372,459 $ 99,052,617
============= ============
Accumulated net investment income (loss) at end of period......................... $ (1,739,687) $ 42,897
============= ============
CAPITAL TRANSACTIONS WERE AS FOLLOWS:
Common Shares at end of period.................................................... 5,327,785 5,327,785
============= ============
Page 18 See Notes to Financial Statements
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2015 (UNAUDITED)
CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase (decrease) in net assets resulting from operations................. $ 1,049,292
Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash provided by operating activities:
Purchases of investments.................................................. (24,029,677)
Sales, maturities and paydowns of investments............................. 25,236,495
Net amortization/accretion of premiums/discounts on investments........... (95,820)
Net realized gain/loss on investments..................................... 647,110
Net realized gain/loss on foreign currency transactions (a)............... 2,684,029
Net change in unrealized appreciation/depreciation on forward foreign
currency contracts..................................................... (123,074)
Net change in unrealized appreciation/depreciation on investments......... (2,533,470)
CHANGES IN ASSETS AND LIABILITIES:
Decrease in interest receivable........................................... 136,643
Increase in dividend reclaim receivable................................... (2,501)
Increase in dividends receivable.......................................... (121,838)
Increase in prepaid expenses.............................................. (15,457)
Decrease in interest and fees on loan payable............................. (10,923)
Decrease in investment advisory fees payable.............................. (5,520)
Decrease in audit and tax fees payable.................................... (25,313)
Decrease in legal fees payable............................................ (42)
Decrease in printing fees payable......................................... (3,053)
Decrease in administrative fees payable................................... (17,742)
Increase in custodian fees payable........................................ 9,375
Decrease in transfer agent fees payable................................... (2,541)
Increase in Trustees' fees and expenses payable........................... 23
Decrease in deferred foreign capital gains tax............................ (17,344)
Decrease in other liabilities............................................. (496)
------------
CASH PROVIDED BY OPERATING ACTIVITIES........................................... $ 2,758,156
-------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Common Shareholders from net investment income........... (3,729,450)
------------
CASH USED IN FINANCING ACTIVITIES............................................... (3,729,450)
-------------
Decrease in cash and foreign currency (b)....................................... (971,294)
Cash and foreign currency at beginning of period................................ 1,991,307
-------------
CASH AND FOREIGN CURRENCY AT END OF PERIOD...................................... $ 1,020,013
=============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest and fees............................... $ 43,003
=============
(a) This amount is a component of net realized gain/loss on foreign currency
transactions as shown on the Statement of Operations.
(b) Includes net change in unrealized appreciation (depreciation) on foreign
currency of $388.
See Notes to Financial Statements Page 19
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
FINANCIAL HIGHLIGHTS
FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD
SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
6/30/2015 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/2014 12/31/2013 12/31/2012 12/31/2011 12/31/2010
------------- ------------ ------------ ------------ ------------ ------------
Net asset value, beginning of period........ $ 18.59 $ 20.61 $ 23.67 $ 20.30 $ 22.77 $ 19.76
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)................ 0.37 0.77 0.79 0.90 0.98 0.97
Net realized and unrealized gain (loss)..... (0.17) (1.39) (2.45) 3.87 (2.05) 3.41
--------- --------- --------- --------- --------- ---------
Total from investment operations............ 0.20 (0.62) (1.66) 4.77 (1.07) 4.38
--------- --------- --------- --------- --------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income....................... (0.70) (0.32) (0.76) (0.88) (0.74) (0.83)
Net realized gain........................... -- (0.44) (0.64) (0.52) (0.66) (0.57)
Return of capital........................... -- (0.64) -- -- -- --
--------- --------- --------- --------- --------- ---------
Total from distributions.................... (0.70) (1.40) (1.40) (1.40) (1.40) (1.40)
--------- --------- --------- --------- --------- ---------
Capital share repurchases................... -- -- -- -- -- 0.03
--------- --------- --------- --------- --------- ---------
Net asset value, end of period.............. $ 18.09 $ 18.59 $ 20.61 $ 23.67 $ 20.30 $ 22.77
========= ========= ========= ========= ========= =========
Market value, end of period................. $ 15.89 $ 16.45 $ 18.05 $ 22.05 $ 17.82 $ 21.32
========= ========= ========= ========= ========= =========
Total return based on net asset value (a)... 1.56% (2.49)% (6.49)% 24.36% (4.18)% 23.29%
========= ========= ========= ========= ========= =========
Total return based on market value (a)...... 0.81% (1.47)% (12.13)% 32.02% (10.17)% 26.45%
========= ========= ========= ========= ========= =========
-----------------------
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's)........ $ 96,372 $ 99,053 $ 109,813 $ 126,093 $ 108,174 $ 121,338
Ratio of expenses to average net assets..... 1.70%(b) 1.71% 1.75% 1.78% 1.68% 1.76%
Ratio of total expenses to average net
assets excluding interest expense........ 1.63%(b) 1.64% 1.68% 1.70% 1.61% 1.62%
Ratio of net investment income (loss) to
average net assets....................... 3.91%(b) 3.73% 3.57% 4.04% 4.47% 4.55%
Portfolio turnover rate..................... 23% 48% 50% 49% 51% 87%
INDEBTEDNESS:
Total loan outstanding (in 000's)........... $ 5,800 $ 5,800 $ 5,800 $ 5,800 $ 5,800 $ 5,800
Asset coverage per $1,000 senior
indebtedness (c)......................... $ 17,616 $ 18,078 $ 19,933 $ 22,740 $ 19,651 $ 21,920
-----------------------
(a) Total return is based on the combination of reinvested dividend, capital
gain and return of capital distributions, if any, at prices obtained by
the Dividend Reinvestment Plan, and changes in net asset value per share
for net asset value returns and changes in Common Share price for market
value returns. Total returns do not reflect sales load and are not
annualized for periods less than one year. Past performance is not
indicative of future results.
(b) Annualized.
(c) Calculated by subtracting the Fund's total liabilities (not including the
loan outstanding) from the Fund's total assets, and dividing by the
outstanding loan balance in 000's.
Page 20 See Notes to Financial Statements
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
JUNE 30, 2015 (UNAUDITED)
1. ORGANIZATION
First Trust/Aberdeen Emerging Opportunity Fund (the "Fund") is a diversified,
closed-end management investment company organized as a Massachusetts business
trust on May 16, 2006 and is registered with the Securities and Exchange
Commission ("SEC") under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Fund trades under the ticker symbol FEO on the New York Stock
Exchange ("NYSE").
The Fund's investment objective is to seek a high level of total return. The
Fund pursues its objective by investing at least 80% of its Managed Assets in a
diversified portfolio of equity and fixed-income securities of issuers in
emerging market countries. "Managed Assets" means the total asset value of the
Fund minus the sum of the Fund's liabilities other than the principal amount of
borrowings, if any. There can be no assurance that the Fund will achieve its
investment objective.
2. SIGNIFICANT ACCOUNTING POLICIES
The Fund, which is an investment company within the scope of Financial
Accounting Standards Board ("FASB") Accounting Standards Update 2013-08, follows
accounting and reporting guidance under FASB Accounting Standards Codification
Topic 946, "Financial Services-Investment Companies." The following is a summary
of significant accounting policies consistently followed by the Fund in the
preparation of its financial statements. The preparation of financial statements
in accordance with accounting principles generally accepted in the United States
of America ("U.S. GAAP") requires management to make estimates and assumptions
that affect the reported amounts and disclosures in the financial statements.
Actual results could differ from those estimates.
A. PORTFOLIO VALUATION
The net asset value ("NAV") of the Common Shares of the Fund is determined
daily, as of the close of regular trading on the NYSE, normally 4:00 p.m.
Eastern time, on each day the NYSE is open for trading. If the NYSE closes early
on a valuation day, the NAV is determined as of that time. Domestic debt
securities and foreign securities are priced using data reflecting the earlier
closing of the principal markets for those securities. The Fund's NAV per Common
Share is calculated by dividing the value of all assets of the Fund (including
accrued interest and dividends), 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. Market
value prices represent last sale or official closing prices from a national or
foreign exchange (i.e., a regulated market) and are primarily obtained from
third-party pricing services. Fair value prices represent any prices not
considered market value prices and are either obtained from a third-party
pricing service or are determined by the Pricing Committee of the Fund's
investment advisor, First Trust Advisors L.P. ("First Trust" or the "Advisor"),
in accordance with valuation procedures adopted by the Fund's Board of Trustees,
and in accordance with provisions of the 1940 Act. Investments valued by the
Advisor's Pricing Committee, if any, are footnoted as such in the footnotes to
the Portfolio of Investments. The Fund's investments are valued as follows:
Corporate bonds, corporate notes and other debt securities are valued on
the basis of valuations provided by dealers who make markets in such
securities or by an independent pricing service approved by the Fund's
Board of Trustees, which may use the following valuation inputs when
available:
1) benchmark yields;
2) reported trades;
3) broker/dealer quotes;
4) issuer spreads;
5) benchmark securities;
6) bids and offers; and
7) reference data including market research publications.
Fixed income and other debt securities having a remaining maturity of
sixty days or less when purchased are fair valued at cost adjusted for
amortization of premiums and accretions of discounts (amortized cost),
provided the Advisor's Pricing Committee has determined that the use of
amortized cost is an appropriate reflection of fair value given market and
issuer specific conditions existing at the time of the determination.
Factors that may be considered in determining the appropriateness of the
use of amortized cost include, but are not limited to, the following:
1) the credit conditions in the relevant market and changes
thereto;
2) the liquidity conditions in the relevant market and changes
thereto;
3) the interest rate conditions in the relevant market and
changes thereto (such as significant changes in interest
rates);
4) issuer-specific conditions (such as significant credit
deterioration); and
5) any other market-based data the Advisor's Pricing Committee
considers relevant. In this regard, the Advisor's Pricing
Committee may use last-obtained market-based data to assist it
when valuing portfolio securities using amortized cost.
Page 21
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
JUNE 30, 2015 (UNAUDITED)
Common stocks and other securities listed on any national or foreign
exchange (excluding The NASDAQ(R) Stock Market LLC ("NASDAQ") and the
London Stock Exchange Alternative Investment Market ("AIM")) are valued at
the last sale price on the exchange on which they are principally traded
or, for NASDAQ and AIM securities, the official closing price. Securities
traded on more than one securities exchange are valued at the last sale
price or official closing price, as applicable, at the close of the
securities exchange representing the principal market for such securities.
Securities traded in an over-the-counter market are fair valued at the
mean of their most recent bid and asked prices, if available, and
otherwise at their closing bid price.
Forward foreign currency contracts are valued at the current day's
interpolated foreign exchange rate, as calculated using the current day's
spot rate, and the thirty, sixty, ninety and one-hundred eighty day
forward rates provided by an independent pricing service.
Certain securities may not be able to be priced by pre-established pricing
methods. Such securities may be valued by the Fund's Board of Trustees or its
delegate, the Advisor's Pricing Committee, at fair value. These securities
generally include, but are not limited to, restricted securities (securities
which may not be publicly sold without registration under the Securities Act of
1933, as amended) for which a pricing service is unable to provide a market
price; securities whose trading has been formally suspended; a security whose
market or fair value price is not available from a pre-established pricing
source; a security with respect to which an event has occurred that is likely to
materially affect the value of the security after the market has closed but
before the calculation of the Fund's NAV or make it difficult or impossible to
obtain a reliable market quotation; and a security whose price, as provided by
the pricing service, does not reflect the security's fair value. As a general
principle, the current fair value of a security would appear to be the amount
which the owner might reasonably expect to receive for the security upon its
current sale. When fair value prices are used, generally they will differ from
market quotations or official closing prices on the applicable exchanges. A
variety of factors may be considered in determining the fair value of such
securities, including, but not limited to, the following:
1) the fundamental business data relating to the issuer, or economic
data relating to the country of issue;
2) an evaluation of the forces which influence the market in which
these securities are purchased and sold;
3) the type, size and cost of security;
4) the financial statements of the issuer, or the financial condition
of the country of issue;
5) the credit quality and cash flow of the issuer, or country of issue,
based on the Sub-Advisor's or external analysis;
6) the information as to any transactions in or offers for the
security;
7) the price and extent of public trading in similar securities (or
equity securities) of the issuer/borrower, or comparable companies;
8) the coupon payments;
9) the quality, value and salability of collateral, if any, securing
the security;
10) the business prospects of the issuer, including any ability to
obtain money or resources from a parent or affiliate and an
assessment of the issuer's management (for corporate debt only);
11) the economic, political and social prospects/developments of the
country of issue and the assessment of the country's governmental
leaders/officials (for sovereign debt only);
12) the prospects for the issuer's industry, and multiples (of earnings
and/or cash flows) being paid for similar businesses in that
industry (for corporate debt only); and
13) other relevant factors.
Fair valuation of an equity security will be based on the consideration of all
available information, including, but not limited to, the following:
1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.
If the equity security in question is a foreign security, the following
additional information may be considered:
1) the value of similar foreign securities traded on other foreign
markets;
2) ADR trading of similar securities;
3) closed-end fund trading of similar securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of
foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur; and
8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions.
Page 22
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
JUNE 30, 2015 (UNAUDITED)
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:
o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.
o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:
o Quoted prices for similar investments in active markets.
o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, 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.
o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).
o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.
o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investment.
The inputs or methodologies used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of June 30, 2015, is
included with the Fund's Portfolio of Investments.
B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME
Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
daily on the accrual basis. Amortization of premiums and accretion of discounts
are recorded by using the effective interest method.
Securities purchased on a when-issued, delayed-delivery or forward commitment
basis may have extended settlement periods. The value of the security so
purchased is subject to market fluctuations during this period. The Fund
maintains liquid assets with a current value at least equal to the amount of its
when-issued, delayed-delivery or forward purchase commitments until payment is
made. At June 30, 2015, the Fund had no when-issued, delayed-delivery or forward
purchase commitments.
C. FORWARD FOREIGN CURRENCY CONTRACTS
The Fund is subject to foreign currency risk in the normal course of pursuing
its investment objective. Forward foreign currency contracts are agreements
between two parties ("Counterparties") to exchange one currency for another at a
future date and at a specified price. The Fund uses 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 "Unrealized appreciation/(depreciation) on forward foreign
currency contracts" on the Statement of Assets and Liabilities. The change in
unrealized appreciation/(depreciation) is included in "Net change in unrealized
appreciation(depreciation) on forward foreign currency contracts" on the
Statement of Operations. When the forward contract is closed, the Fund records a
realized gain or loss equal to the difference between the proceeds from (or the
cost of) the closing transaction and the Fund's basis in the contract. This
realized gain or loss is included in "Net realized gain (loss) on forward
foreign currency contracts" on the Statement of Operations. 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 in excess of the net unrealized value shown
on the Forward Foreign Currency Contracts table in the Portfolio of Investments.
In the event of default by the Counterparty, the Fund will provide notice to the
Counterparty of the Fund's intent to convert the currency held by the Fund into
the currency that the Counterparty agreed to exchange with the Fund. If a
Counterparty becomes bankrupt or otherwise fails to perform its obligations due
to financial difficulties, the Fund may experience significant delays in
obtaining any recovery in a bankruptcy or other reorganization proceeding. The
Fund may obtain only limited recovery or may obtain no recovery in such
circumstances.
D. OFFSETTING ON THE STATEMENT OF ASSETS AND LIABILITIES
Accounting Standards Update No. 2011-11 "Disclosures about Offsetting Assets and
Liabilities" ("ASU 2011-11") requires entities to disclose both gross and net
information about instruments and transactions eligible for offset on the
Statement of Assets and Liabilities, and disclose instruments and transactions
subject to master netting or similar agreements. These disclosure requirements
are intended to help investors and other financial statement users better assess
the effect or potential effect of offsetting arrangements on a fund's financial
position. In addition, Accounting Standards Update No. 2013-1 "Clarifying the
Scope of Offsetting Assets and Liabilities" ("ASU 2013-1"), specifies exactly
which transactions are subject to offsetting disclosures. The scope of the
disclosure requirements is limited to derivative instruments, repurchase
agreements and reverse purchase agreements, and securities borrowing and
securities lending transactions.
Page 23
--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
JUNE 30, 2015 (UNAUDITED)
For financial reporting purposes, the Fund does not offset financial assets and
financial liabilities that are subject to master netting arrangements ("MNAs")
or similar agreements on the Statement of Assets and Liabilities. MNAs provide
the right, in the event of default (including bankruptcy and insolvency) for the
non-defaulting Counterparty to liquidate the collateral and calculate the net
exposure to the defaulting party or request additional collateral.
At June 30, 2015, derivative assets and liabilities (by type) on a gross basis
are as follows:
Gross Amounts
not Offset in the
Statement of
Net Amounts of Assets and Liabilities
Gross Amounts Assets Presented ------------------------
Gross amounts of Offset in the in the Statement Collateral
Recognized Statement of Assets of Assets and Financial Amounts
Assets and Liabilities Liabilities Instruments Received Net Amount
----------------------------------------------------------------------------------------------------------------------
Forward Foreign
Currency Contracts* $ 65,307 $ -- $ 65,307 $ (162) $ -- $ 65,145
Gross Amounts
not Offset in the
Net Amounts of Statement of
Liabilities Assets and Liabilities
Gross Amounts Presented ------------------------
Gross amounts of Offset in the in the Statement Collateral
Recognized Statement of Assets of Assets and Financial Amounts
Liabilities and Liabilities Liabilities Instruments Pledged Net Amount
----------------------------------------------------------------------------------------------------------------------
Forward Foreign
Currency Contracts* $ (162) $ -- $ (162) $ 162 $ -- $ --
* The respective Counterparties for each contract are disclosed in the
Forward Foreign Currency Contracts table in the Portfolio of Investments.
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 investments and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
losses on assets and liabilities, other than investments in securities, which
result from changes in foreign currency exchange rates have been included in
"Net change in unrealized appreciation (depreciation) on foreign currency
translation" on the Statement of Operations. Unrealized gains and losses on
investments in securities which result from changes in foreign exchange rates
are included with fluctuations arising from changes in market price and are
shown in "Net change in unrealized appreciation (depreciation) on investments"
on the Statement of Operations. 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. The portion of foreign
currency gains and losses related to fluctuation in exchange rates between the
initial purchase trade date and subsequent sale trade date is included in "Net
realized gain (loss) on foreign currency transactions" on the Statement of
Operations.
F. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS
Level dividend distributions are declared and paid quarterly to Common
Shareholders after the payment of interest and/or dividends in connection with
leverage. The level dividend rate may be modified by the Board of Trustees from
time to time. If, for any quarterly distribution, net investment company taxable
income, if any (which term includes net short-term capital gain), is less than
the amount of the distribution, the difference will generally be a tax-free
return of capital distributed from the Fund's assets. Distributions of any net
long-term capital gains earned by the Fund are distributed at least annually.
Distributions will automatically be reinvested into additional Common Shares
pursuant to the Fund's Dividend Reinvestment Plan unless cash distributions are
elected by the shareholder.
Distributions from income and capital gains are determined in accordance with
income tax regulations, which may differ from U.S. GAAP. Certain capital
accounts in the financial statements are periodically adjusted for permanent
differences in order to reflect their tax character. These permanent differences
are primarily due to the varying treatment of income and gain/loss on portfolio
securities held by the Fund and have no impact on net assets or NAV per share.
Temporary differences, which arise from recognizing certain items of income,
expense and gain/loss in different periods for financial statement and tax
purposes, will reverse at some point in the future.
Page 24
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
JUNE 30, 2015 (UNAUDITED)
The tax character of distributions paid during the fiscal year ended December
31, 2014 was as follows:
Distributions paid from:
Ordinary income................................. $ 1,761,380
Capital gain.................................... 2,282,548
Return of capital............................... 3,414,971
As of December 31, 2014, the distributable earnings and net assets on a tax
basis were as follows:
Undistributed ordinary income................... $ --
Undistributed capital gains..................... --
--------------
Total undistributed earnings.................... --
Accumulated capital and other losses............ (219,132)
Net unrealized appreciation (depreciation)...... 5,441,219
--------------
Total accumulated earnings (losses)............. 5,222,087
Other........................................... (190,975)
Paid-in capital................................. 94,021,505
--------------
Net assets...................................... $ 99,052,617
==============
G. INCOME AND OTHER TAXES
The Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), which includes distributing substantially all
of its net investment income and net realized gains to shareholders.
Accordingly, no provision has been made for federal and state income taxes.
However, due to the timing and amount of distributions, the Fund may be subject
to an excise tax of 4% of the amount by which approximately 98% of the Fund's
taxable income exceeds the distributions from such taxable income for the
calendar year.
Certain countries assess a capital gains tax on securities sold in their local
markets. This tax is accrued as the securities in these foreign markets
appreciate in value and is paid at the time of sale to the extent a capital gain
is realized. Taxes accrued on securities in an unrealized appreciation position
are included in "Net change in unrealized appreciation (depreciation)" on the
Statement of Operations. The capital gains tax paid on securities sold is
included in "Other" expenses on the Statement of Operations.
The Fund intends to utilize provisions of the federal income tax laws which
allow it to carry a realized capital loss forward indefinitely following the
year of the loss and offset such loss against any future realized capital gains.
The Fund is subject to certain limitations under U.S. tax rules on the use of
capital loss carryforwards and net unrealized built-in losses. These limitations
apply when there has been a 50% change in ownership. At December 31, 2014, the
Fund had no non-expiring capital loss carryforwards for federal income tax
purposes.
Certain losses realized during the current fiscal year may be deferred and
treated as occurring on the first day of the following fiscal year for federal
income tax purposes. For the fiscal year ended December 31, 2014, the Fund
incurred and elected to defer capital losses of $219,132.
The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. Taxable years ended 2011, 2012,
2013 and 2014 remain open to federal and state audit. As of June 30, 2015,
management has evaluated the application of these standards to the Fund and has
determined that no provision for income tax is required in the Fund's financial
statements for uncertain tax positions.
H. EXPENSES
The Fund will pay all expenses directly related to its operations.
3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND
OTHER FEE ARRANGEMENTS
First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. The Charger Corporation is an Illinois corporation
controlled by James A. Bowen, Chief Executive Officer of First Trust. First
Trust is responsible for the ongoing monitoring of the Fund's investment
portfolio, managing the Fund's business affairs and providing certain
administrative services necessary for the management of the Fund. For these
services, First Trust is entitled to a monthly fee calculated at an annual rate
of 1.00% of the Fund's Managed Assets. First Trust also provides fund reporting
services to the Fund for a flat annual fee in the amount of $9,250.
Aberdeen Asset Management, Inc. ("Aberdeen" or the "Sub-Advisor") serves as the
Fund's sub-advisor and manages the Fund's portfolio subject to First Trust's
supervision. The Sub-Advisor receives a monthly portfolio management fee
calculated at an annual rate of 0.50% of the Fund's Managed Assets that is paid
by First Trust out of its investment advisory fee.
Page 25
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
JUNE 30, 2015 (UNAUDITED)
BNY Mellon Investment Servicing (US) Inc. ("BNYM IS") serves as the Fund's
Administrator, Fund Accountant and Transfer Agent in accordance with certain fee
arrangements. As administrator and fund accountant, BNYM IS is responsible for
providing certain administrative and accounting services to the Fund, including
maintaining the Fund's books of account, records of the Fund's securities
transactions, and certain other books and records. As transfer agent, BNYM IS is
responsible for maintaining shareholder records for the Fund. The Bank of New
York Mellon ("BNYM") serves as the Fund's Custodian in accordance with certain
fee arrangements. As custodian, BNYM is responsible for custody of the Fund's
assets.
Each Trustee who is not an officer or employee of First Trust, any sub-advisor
or any of their affiliates ("Independent Trustees") is paid a fixed annual
retainer that is allocated pro rata among each fund in the First Trust Fund
Complex based on net assets. Each Independent Trustee is also paid an annual per
fund fee that varies based on whether the fund is a closed-end or other actively
managed fund, or is an index fund.
Additionally, the Lead Independent Trustee and the Chairmen of the Audit
Committee, Nominating and Governance Committee and Valuation Committee are paid
annual fees to serve in such capacities, with such compensation allocated pro
rata among each fund in the First Trust Fund Complex based on net assets.
Trustees are reimbursed for travel and out-of-pocket expenses in connection with
all meetings. The Lead Independent Trustee and Committee Chairmen rotate every
three years. The officers and "Interested" Trustee receive no compensation from
the Trust for acting in such capacities.
4. PURCHASES AND SALES OF SECURITIES
Cost of purchases and proceeds from sales of investments, excluding short-term
investments, for six months ended June 30, 2015, were $23,928,190 and
$25,253,890, respectively.
5. DERIVATIVE TRANSACTIONS
The following table presents the type of derivative held by the Fund at June 30,
2015, the primary underlying risk exposure and location of these instruments as
presented on the Statement of Assets and Liabilities.
ASSET DERIVATIVES LIABILITY DERIVATIVES
--------------------------------------- ----------------------------------------
DERIVATIVE STATEMENT OF ASSETS AND STATEMENT OF ASSETS AND
INSTRUMENT RISK EXPOSURE LIABILITIES LOCATION VALUE LIABILITIES LOCATION VALUE
------------------ --------------- ----------------------- -------------- ----------------------- ---------------
Unrealized appreciation Unrealized depreciation
Forward foreign on forward foreign on forward foreign
currency contracts Currency Risk currency contracts $ 65,307 currency contracts $ (162)
The following table presents the amount of net realized gain (loss) and change
in net unrealized appreciation (depreciation) recognized for the six months
ended June 30, 2015, on derivative instruments, as well as the primary
underlying risk exposure associated with each instrument.
STATEMENT OF OPERATIONS LOCATION EQUITY RISK
--------------------------------------------------------------------------------
CURRENCY RISK EXPOSURE
Net realized gain (loss) on forward foreign currency contracts $ (12,143)
Net change in unrealized appreciation (depreciation) on forward
foreign currency contracts 123,074
During the six months ended June 30, 2015, notional values of forward foreign
currency contracts opened and closed were $23,497,212 and $14,397,082,
respectively.
6. BORROWINGS
The Fund has a credit agreement with The Bank of Nova Scotia, which provides for
a revolving credit facility to be used as leverage for the Fund. The revolving
credit facility provides for a secured line of credit for the Fund where Fund
assets are pledged against advances made to the Fund. Under the requirements of
the 1940 Act, the Fund, immediately after any such borrowings, must have an
"asset coverage" of at least 300% (33-1/3% of the Fund's total assets after
borrowings). The total commitment under the facility is up to $15,000,000. The
borrowing rate under the revolving credit facility is equal to the 1-month LIBOR
plus 75 basis points. As of June 30, 2015, the Fund had one loan outstanding
under the revolving credit facility totaling $5,800,000. For six months ended
June 30, 2015, the average amount outstanding was $5,800,000. The high and low
annual interest rates during the six months ended June 30, 2015 were 0.96% and
0.92%, respectively, and the weighted average interest rate was 0.93%. The
interest rate at June 30, 2015 was 0.94%. The Fund pays a commitment fee of
0.15% (or 0.30% if loan balance drops below 40% of total commitment) per year,
which is included in "Interest and fees on loan" on the Statement of Operations.
Page 26
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NOTES TO FINANCIAL STATEMENTS (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
JUNE 30, 2015 (UNAUDITED)
7. INDEMNIFICATION
The Fund has a variety of indemnification obligations under contracts with its
service providers. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.
8. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events to the Fund through
the date the financial statements were issued, and has determined that there
were no subsequent events requiring recognition or disclosure in the financial
statements that have not already been disclosed.
Page 27
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ADDITIONAL INFORMATION
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
JUNE 30, 2015 (UNAUDITED)
DIVIDEND REINVESTMENT PLAN
If your Common Shares are registered directly with the Fund or if you hold your
Common Shares with a brokerage firm that participates in the Fund's Dividend
Reinvestment Plan (the "Plan"), unless you elect, by written notice to the Fund,
to receive cash distributions, all dividends, including any capital gain
distributions, on your Common Shares will be automatically reinvested by BNY
Mellon Investment Servicing (US) Inc. (the "Plan Agent"), in additional Common
Shares under the Plan. If you elect to receive cash distributions, you will
receive all distributions in cash paid by check mailed directly to you by the
Plan Agent, as the dividend paying agent.
If you decide to participate in the Plan, the number of Common Shares you will
receive will be determined as follows:
(1) If Common Shares are trading at or above net asset value ("NAV") at
the time of valuation, the Fund will issue new shares at a price
equal to the greater of (i) NAV per Common Share on that date or
(ii) 95% of the market price on that date.
(2) If Common Shares are trading below NAV at the time of valuation, the
Plan Agent will receive the dividend or distribution in cash and
will purchase Common Shares in the open market, on the NYSE or
elsewhere, for the participants' accounts. It is possible that the
market price for the Common Shares may increase before the Plan
Agent has completed its purchases. Therefore, the average purchase
price per share paid by the Plan Agent may exceed the market price
at the time of valuation, resulting in the purchase of fewer shares
than if the dividend or distribution had been paid in Common Shares
issued by the Fund. The Plan Agent will use all dividends and
distributions received in cash to purchase Common Shares in the open
market within 30 days of the valuation date except where temporary
curtailment or suspension of purchases is necessary to comply with
federal securities laws. Interest will not be paid on any uninvested
cash payments.
You may elect to opt-out of or withdraw from the Plan at any time by giving
written notice to the Plan Agent, or by telephone at (866) 340-1104, in
accordance with such reasonable requirements as the Plan Agent and the Fund may
agree upon. If you withdraw or the Plan is terminated, you will receive a
certificate for each whole share in your account under the Plan, and you will
receive a cash payment for any fraction of a share in your account. If you wish,
the Plan Agent will sell your shares and send you the proceeds, minus brokerage
commissions.
The Plan Agent maintains all Common Shareholders' accounts in the Plan and gives
written confirmation of all transactions in the accounts, including information
you may need for tax records. Common Shares in your account will be held by the
Plan Agent in non-certificated form. The Plan Agent will forward to each
participant any proxy solicitation material and will vote any shares so held
only in accordance with proxies returned to the Fund. Any proxy you receive will
include all Common Shares you have received under the Plan.
There is no brokerage charge for reinvestment of your dividends or distributions
in Common Shares. However, all participants will pay a pro rata share of
brokerage commissions incurred by the Plan Agent when it makes open market
purchases.
Automatically reinvesting dividends and distributions does not mean that you do
not have to pay income taxes due upon receiving dividends and distributions.
Capital gains and income are realized although cash is not received by you.
Consult your financial advisor for more information.
If you hold your Common Shares with a brokerage firm that does not participate
in the Plan, you will not be able to participate in the Plan and any dividend
reinvestment may be effected on different terms than those described above.
The Fund reserves the right to amend or terminate the Plan if in the judgment of
the Board of Trustees the change is warranted. There is no direct service charge
to participants in the Plan; however, the Fund reserves the right to amend the
Plan to include a service charge payable by the participants. Additional
information about the Plan may be obtained by writing BNY Mellon Investment
Servicing (US) Inc., 301 Bellevue Parkway, Wilmington, Delaware 19809.
--------------------------------------------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES
A description of the policies and procedures that the Fund uses to determine how
to vote proxies and information on how the Fund voted proxies relating to
portfolio investments during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website located at http://www.ftportfolios.com; and (3) on the
Securities and Exchange Commission's ("SEC") website located at
http://www.sec.gov.
Page 28
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
JUNE 30, 2015 (UNAUDITED)
PORTFOLIO HOLDINGS
The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q
are available (1) by calling (800) 988-5891; (2) on the Fund's website located
at http://www.ftportfolios.com; (3) on the SEC's website at http://www.sec.gov;
and (4) for review and copying at the SEC's Public Reference Room ("PRR") in
Washington, DC. Information regarding the operation of the PRR may be obtained
by calling (800) SEC-0330.
SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS
The Joint Annual Meeting of Shareholders of the Common Shares of Macquarie/First
Trust Global Infrastructure/Utilities Dividend & Income Fund, First Trust Energy
Income and Growth Fund, First Trust Enhanced Equity Income Fund, First
Trust/Aberdeen Global Opportunity Income Fund, First Trust Mortgage Income Fund,
First Trust Strategic High Income Fund II, First Trust/Aberdeen Emerging
Opportunity Fund, First Trust Specialty Finance and Financial Opportunities
Fund, First Trust Dividend and Income Fund, First Trust High Income Long/Short
Fund, First Trust Energy Infrastructure Fund, First Trust MLP and Energy Income
Fund and First Trust Intermediate Duration Preferred & Income Fund was held on
April 20, 2015 (the "Annual Meeting"). At the Annual Meeting, Richard E.
Erickson and Thomas R. Kadlec were elected by the Common Shareholders of the
First Trust/Aberdeen Emerging Opportunity Fund as a Class II Trustees for a
three-year term expiring at the Fund's Annual Meeting of Shareholders in 2018.
The number of votes cast for Mr. Erickson was 3,646,897, the number of votes
against was 812,053 and the number of broker non-votes was 868,835. The number
of votes cast for Mr. Kadlec was 3,646,657, the number of votes against was
812,293 and the number of broker non-votes was 868,835. James A. Bowen, Robert
F. Keith and Niel B. Nielson are the other current and continuing Trustees.
ADVISORY AND SUB-ADVISORY AGREEMENTS
BOARD CONSIDERATION REGARDING CONTINUATION OF INVESTMENT MANAGEMENT AND
SUB-ADVISORY AGREEMENTS
The Board of Trustees of First Trust/Aberdeen Emerging Opportunity Fund (the
"Fund"), including the Independent Trustees, unanimously approved the
continuation of the Investment Management Agreement (the "Advisory Agreement")
between the Fund and First Trust Advisors L.P. (the "Advisor") and the
Investment Sub-Advisory Agreement (the "Sub-Advisory Agreement" and together
with the Advisory Agreement, the "Agreements") among the Fund, the Advisor and
Aberdeen Asset Management Inc. (the "Sub-Advisor"), at a meeting held on June
16, 2015. The Board determined that the continuation of the Agreements is in the
best interests of the Fund in light of the extent and quality of the services
provided and such other matters as the Board considered to be relevant in the
exercise of its reasonable business judgment.
To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (the "1940 Act"), as well as under
the general principles of state law in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. At meetings held on April 20, 2015 and June 16, 2015, the
Board, including the Independent Trustees, reviewed materials provided by the
Advisor and the Sub-Advisor responding to requests for information from counsel
to the Independent Trustees that, among other things, outlined the services
provided by the Advisor and the Sub-Advisor (including the relevant personnel
responsible for these services and their experience); the advisory and
sub-advisory fees for the Fund as compared to fees charged to other clients of
the Advisor and the Sub-Advisor and as compared to fees charged to a peer group
of funds selected by Management Practice, Inc. ("MPI"), an independent source
(the "MPI Peer Group"); expenses of the Fund as compared to expense ratios of
the funds in the MPI Peer Group; performance information for the Fund; the
nature of expenses incurred in providing services to the Fund and the potential
for economies of scale, if any; financial data on the Advisor and the
Sub-Advisor; any fall-out benefits to the Advisor and the Sub-Advisor; and
information on the Advisor's and the Sub-Advisor's compliance programs. The
Board reviewed initial materials with the Advisor at a special meeting held on
April 20, 2015, at which the Independent Trustees and their counsel met
separately to discuss the information provided by the Advisor and the
Sub-Advisor. Following the April meeting, independent legal counsel on behalf of
the Independent Trustees requested certain clarifications and supplements to the
materials provided, and those were considered at an executive session of the
Independent Trustees and independent legal counsel held prior to the June 16,
2015 meeting, as well as at the meeting. The Board applied its business judgment
to determine whether the arrangements between the Fund and the Advisor and among
the Fund, the Advisor and the Sub-Advisor are reasonable business arrangements
from the Fund's perspective as well as from the perspective of shareholders. The
Board considered that shareholders chose to invest or remain invested in the
Fund knowing that the Advisor and the Sub-Advisor manage the Fund.
In reviewing the Agreements, the Board considered the nature, extent and quality
of services provided by the Advisor and the Sub-Advisor under the Agreements.
With respect to the Advisory Agreement, the Board considered that the Advisor is
responsible for the overall management and administration of the Fund and
reviewed the services provided by the Advisor to the Fund, including the
oversight of the Sub-Advisor. The Board noted the compliance program that had
been developed by the Advisor and considered that it includes a robust
Page 29
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
JUNE 30, 2015 (UNAUDITED)
program for monitoring the Sub-Advisor's compliance with the 1940 Act and the
Fund's investment objective and policies. The Board considered the significant
asset growth of the First Trust Fund Complex and the Advisor's concomitant
investment in infrastructure and personnel dedicated to the First Trust funds.
With respect to the Sub-Advisory Agreement, the Board noted the background and
experience of the Sub-Advisor's portfolio management team. The Board reviewed
the materials provided by the Sub-Advisor and considered the services that the
Sub-Advisor provides to the Fund, including the Sub-Advisor's day-to-day
management of the Fund's investments. In light of the information presented and
the considerations made, the Board concluded that the nature, extent and quality
of services provided to the Fund by the Advisor and the Sub-Advisor under the
Agreements have been and are expected to remain satisfactory and that the
Sub-Advisor, under the oversight of the Advisor, has managed the Fund consistent
with its investment objective and policies.
The Board considered the advisory and sub-advisory fees paid under the
Agreements. The Board considered the advisory fees charged by the Advisor to
similar funds and other non-fund clients, noting that the Advisor provides
advisory services to another closed-end fund sub-advised by the Sub-Advisor and
certain separately managed accounts that may have investment objectives and
policies similar to the Fund's. The Board noted that the Advisor charges the
same advisory fee rate to the Fund and the other closed-end fund sub-advised by
the Sub-Advisor and a lower advisory fee rate to the separately managed
accounts. The Board noted the Advisor's statement that the nature of the
services provided to the separately managed accounts is not comparable to those
provided to the Fund. The Board considered the sub-advisory fee and how it
relates to the Fund's overall advisory fee structure and noted that the
sub-advisory fee is paid by the Advisor from its advisory fee. The Board also
considered information provided by the Sub-Advisor as to the fees it charges to
other clients, noting that the Sub-Advisor does not manage any other funds
directly comparable to the Fund, but that the sub-advisory fee rate is the same
as that received from the Advisor for the other closed-end fund for which it
serves as sub-advisor, and is generally lower than or equal to the fees the
Sub-Advisor charges to the other North American closed-end fixed income funds it
manages. In addition, the Board reviewed data prepared by MPI showing the
advisory fee and expense ratio of the Fund as compared to the advisory fees and
expense ratios of the MPI Peer Group. The Board discussed with representatives
of the Advisor the limitations in creating a relevant peer group for the Fund,
including that (i) the Fund is unique in its composition, which makes assembling
peers with similar strategies and asset mix difficult; (ii) peer funds may use
different amounts and types of leverage with different costs associated with
them or may use no leverage; (iii) none of the peer funds employ an
advisor/sub-advisor management structure; and (iv) all of the peer funds are
larger than the Fund, which causes the Fund's fixed expenses to be higher on a
percentage basis as compared to the larger peer funds. The Board took these
limitations into account in considering the peer data. In reviewing the peer
data, the Board noted that the Fund's advisory fee, based on average net assets,
was above the median of the MPI Peer Group.
The Board also considered performance information for the Fund, noting that the
performance information included the Fund's quarterly performance report, which
is part of the process that the Board has established for monitoring the Fund's
performance and portfolio risk on an ongoing basis. The Board determined that
this process continues to be effective for reviewing the Fund's performance. In
addition to the Board's ongoing review of performance, the Board also reviewed
data prepared by MPI comparing the Fund's performance for periods ended December
31, 2014 to the performance of the MPI Peer Group and to a blended benchmark
index. In reviewing the Fund's performance as compared to the performance of the
MPI Peer Group, the Board took into account the limitations described above with
respect to creating a relevant peer group for the Fund. The Board also
considered data from MPI on the Fund's annual distribution rate as of December
31, 2014 as compared to the MPI Peer Group and the Fund's leverage costs versus
the leverage costs of applicable funds in the MPI Peer Group. The Board
considered information provided by the Advisor on the impact of leverage on the
Fund's returns as well. In addition, the Board compared the Fund's
premium/discount over the past eight quarters to the average and median
premium/discount over the same period of a peer group selected by the Advisor,
as well as data on the average premium/discount for 2014 for the funds in the
MPI Peer Group, and considered factors that may impact a fund's
premium/discount.
On the basis of all the information provided on the fees, expenses and
performance of the Fund, the Board concluded that the advisory and sub-advisory
fees were reasonable and appropriate in light of the nature, extent and quality
of services provided by the Advisor and the Sub-Advisor under the Agreements.
The Board noted that the Advisor has made and continues to make significant
investments in personnel and infrastructure and considered whether fee levels
reflect any economies of scale for the benefit of shareholders. The Board
determined that due to the Fund's closed-end structure, the potential for
realization of economies of scale as Fund assets grow was not a material factor
to be considered. The Board also considered the costs of the services provided
and profits realized by the Advisor from serving as investment advisor to the
Fund for the twelve months ended December 31, 2014, as well as product-line
profitability data for the same period, as set forth in the materials provided
to the Board. The Board noted the inherent limitations in the profitability
analysis, and concluded that the pre-tax profits estimated to have been realized
by the Advisor in connection with the management of the Fund were not
unreasonable. In addition, the Board considered fall-out benefits described by
the Advisor that may be realized from its relationship with the Fund, including
the Advisor's compensation for fund reporting services pursuant to a separate
Fund Reporting Services Agreement.
The Board considered the Sub-Advisor's representation that because it manages
the Fund in a similar fashion to other accounts it is able to achieve economies
of scale through relationships with brokers, administrative systems and other
operational efficiencies and that while it expects operating costs in general to
continue to rise, it continues to expect to experience the benefits of economies
Page 30
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ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
JUNE 30, 2015 (UNAUDITED)
of scale. The Board considered that the sub-advisory fee rate was negotiated at
arm's length between the Advisor and the Sub-Advisor, an unaffiliated third
party. The Board also considered data provided by the Sub-Advisor as to the
profitability of the Sub-Advisory Agreement to the Sub-Advisor. The Board noted
the inherent limitations in the profitability analysis and concluded that the
profitability analysis for the Advisor was more relevant, although the estimated
profitability of the Sub-Advisory Agreement appeared to be not unreasonable in
light of the services provided to the Fund. The Board considered fall-out
benefits that may be realized by the Sub-Advisor from its relationship with the
Fund, including that the Sub-Advisor may enter into soft dollar and commission
sharing arrangements, and considered a summary of such arrangements.
Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, unanimously determined that the terms
of the Agreements continue to be fair and reasonable and that the continuation
of the Agreements is in the best interests of the Fund. No single factor was
determinative in the Board's analysis.
RISK CONSIDERATIONS
Risks are inherent in all investing. The following summarizes some, but not all,
of the risks that should be considered for the Fund. For additional information
about the risks associated with investing in the Fund, please see the Fund's
prospectus and statement of additional information, as well as other Fund
regulatory filings.
INVESTMENT AND MARKET RISK: An investment in the Fund's Common Shares is subject
to investment risk, including the possible loss of the entire principal
invested. An investment in Common Shares represents an indirect investment in
the securities owned by the Fund, which include a global bond and equity
portfolio of investment grade and below-investment grade government and
corporate debt securities. The value of these securities, like other market
investments, may move up or down, sometimes rapidly and unpredictably. Common
Shares at any point in time may be worth less than the original investment, even
after taking into account the reinvestment of Fund dividends and distributions.
Security prices can fluctuate for several reasons including the general
condition of the bond market, or when political or economic events affecting the
issuers occur. When the Advisor or Sub-Advisor determines that it is temporarily
unable to follow the Fund's investment strategy or that it is impractical to do
so (such as when a market disruption event has occurred and trading in the
securities is extremely limited or absent), the Fund may take temporary
defensive positions.
NON-INVESTMENT GRADE SECURITIES RISK: The Fund may invest up to 80% of its
Managed Assets in non-investment grade securities. Non-investment grade
securities are rated below "Baa3" by Moody's Investors Service, Inc., below
"BBB-" by Standard & Poor's, or comparably rated by another nationally
recognized statistical rating organization or, if unrated, determined by the
Sub-Advisor to be of comparable credit quality. Non-investment grade debt
instruments are commonly referred to as "high-yield" or "junk" bonds and are
considered speculative with respect to the issuer's capacity to pay interest and
repay principal and are susceptible to default or decline in market value due to
adverse economic and business developments. The market values for high-yield
securities tend to be very volatile, and these securities are less liquid than
investment grade debt securities.
EMERGING MARKETS RISK: Under normal market conditions, the Fund will invest at
least 80% of its Managed Assets in equity or fixed-income securities of issuers
located in countries considered to be emerging markets. Investments in such
securities are considered speculative. In addition to the general risks of
investing in non-U.S. securities, heightened risks of investing in emerging
markets securities include: smaller market capitalization of securities markets,
which may suffer periods of relative illiquidity; significant price volatility;
restrictions on foreign investment; and possible restrictions on repatriation of
investment income and capital. Furthermore, foreign investors may be required to
register the proceeds of sales, and future economic or political crises could
lead to price controls, forced mergers, expropriation or confiscatory taxation,
seizure, nationalization or creation of government monopolies. The currencies of
emerging market countries may experience significant declines against the U.S.
dollar, and devaluation may occur subsequent to investments in these currencies
by the Fund. Inflation and rapid fluctuations in inflation rates have had, and
may continue to have, negative effects on the economies and securities markets
of certain emerging market countries.
FIXED-INCOME SECURITIES Risk: Debt securities, including high-yield securities,
are subject to certain risks, including: (i) issuer risk, which is the risk that
the value of fixed-income securities may decline for a number of reasons which
directly relate to the issuer, such as management performance, financial
leverage and reduced demand for the issuer's goods and services or; (ii)
reinvestment risk, which is the risk that income from the Fund's portfolio will
decline if the Fund invests the proceeds from matured, traded or called bonds at
market interest rates that are below the Fund portfolio's current earnings rate;
(iii) prepayment risk, which is the risk that during periods of declining
interest rates, the issuer of a security may exercise its option to prepay
principal earlier than scheduled, forcing the reinvestment in lower yielding
securities; and (iv) credit risk, which is the risk that a security in the
Fund's portfolio will decline in price or the issuer fails to make interest
payments when due because the issuer of the security experiences a decline in
its financial status.
INTEREST RATE RISK: The Fund's portfolio is also subject to interest rate risk.
Interest rate risk is the risk that fixed-income securities will decline in
value because of changes in market interest rates. Investments in debt
securities with long-term maturities may experience significant price declines
if long-term interest rates increase.
Page 31
--------------------------------------------------------------------------------
ADDITIONAL INFORMATION (CONTINUED)
--------------------------------------------------------------------------------
FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
JUNE 30, 2015 (UNAUDITED)
NON-U.S. ISSUER RISK: Investments in the securities and instruments of non-U.S.
issuers involve certain considerations and risks not ordinarily associated with
investments in securities and instruments of U.S. issuers. Non-U.S. companies
are not generally subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to U.S. companies.
Non-U.S. securities exchanges, brokers and listed companies may be subject to
less government supervision and regulation than exists in the United States.
Dividend and interest income may be subject to withholding and other non-U.S.
taxes, which may adversely affect the net return on such investments. There may
be difficulty in obtaining or enforcing a court judgment abroad.
CURRENCY RISK: The value of securities denominated or quoted in foreign
currencies may be adversely affected by fluctuations in the relative currency
exchange rates and by exchange control regulations. The Fund's investment
performance may be negatively affected by a devaluation of a currency in which
the Fund's investments are denominated or quoted. Further, the Fund's investment
performance may be significantly affected, either positively or negatively, by
currency exchange rates because the U.S. dollar value of securities denominated
or quoted in another currency will increase or decrease in response to changes
in the value of such currency in relation to the U.S. dollar. While certain of
the Fund's non-U.S. dollar-denominated securities may be hedged into U.S.
dollars, hedging may not alleviate all currency risks.
LEVERAGE RISK: The use of leverage results in additional risks and can magnify
the effect of any losses. The funds borrowed pursuant to a leverage borrowing
program constitute a substantial lien and burden by reason of their prior claim
against the income of the Fund and against the net assets of the Fund in
liquidation. The rights of lenders to receive payments of interest on and
repayments of principal on any borrowings made by the Fund under a leverage
borrowing program are senior to the rights of holders of Common Shares with
respect to payment of dividends or upon liquidation. If the Fund is not in
compliance with certain credit facility provisions, the Fund may not be
permitted to declare dividends or other distributions, including dividends and
distributions with respect to Common Shares or purchase Common Shares.
GOVERNMENT SECURITIES RISK: The ability of a government issuer, especially in an
emerging market country, to make timely and complete payments on its debt
obligations will be strongly influenced by the government issuer's balance of
payments, including export performance, its access to international credits and
investments, fluctuations of interest rates and the extent of its foreign
reserves. A country whose exports are concentrated in a few commodities or whose
economy depends on certain strategic imports could be vulnerable to fluctuations
in international prices of these commodities or imports. To the extent that a
country receives payment for its exports in currencies other than U.S. dollars,
its ability to make debt payments denominated in U.S. dollars could be adversely
affected. If a government issuer cannot generate sufficient earnings from
foreign trade to service its external debt, it may need to depend on continuing
loans and aid from foreign governments, commercial banks, and multinational
organizations. There are no bankruptcy proceedings similar to those in the
United States by which defaulted government debt may be collected. Additional
factors that may influence a government issuer's ability or willingness to
service debt include, but are not limited to, a country's cash flow situation,
the availability of sufficient foreign exchange on the date a payment is due,
the relative size of its debt service burden to the economy as a whole, and the
issuer's policy towards the International Monetary Fund, the International Bank
for Reconstruction and Development and other international agencies to which a
government debtor may be subject.
NON-U.S. GOVERNMENT SECURITIES RISK: Economies and social and political climates
in individual countries may differ unfavorably from the United States. Non-U.S.
economies may have less favorable rates of growth of gross domestic product,
rates of inflation, currency valuation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many countries have
experienced extremely high rates of inflation for many years. Unanticipated
economic, political and social developments may also affect the values of the
Fund's investments and limit the availability of additional investments in such
countries. Furthermore, such developments may significantly disrupt the
financial markets or interfere with the Fund's ability to enforce its rights
against non-U.S. government issuers.
Investments in debt instruments of issuers located in emerging market countries
are considered speculative. Heightened risks of investing in emerging markets
government debt include: smaller market capitalization of securities markets,
which may suffer periods of relative illiquidity; significant price volatility;
restrictions on foreign investment; and possible repatriation of investment
income and capital. Furthermore, foreign investors may be required to register
the proceeds of sales and future economic or political crises could lead to
price controls, forced mergers, expropriation or confiscatory taxation, seizure,
nationalization or creation of government monopolies. The currencies of emerging
market countries may experience significant declines against the U.S. dollar,
and devaluation may occur subsequent to investments in these currencies by the
Fund. Inflation and rapid fluctuations in inflation rates have had, and may
continue to have, negative effects on the economies and securities markets of
certain emerging market countries.
Page 32
FIRST TRUST
INVESTMENT ADVISOR
First Trust Advisors L.P.
120 E. Liberty Drive, Suite 400
Wheaton, IL 60187
INVESTMENT SUB-ADVISOR
Aberdeen Asset Management Inc.
1735 Market Street, 32nd Floor
Philadelphia, PA 19103
ADMINISTRATOR,
FUND ACCOUNTANT &
TRANSFER AGENT
BNY Mellon Investment Servicing (US) Inc.
301 Bellevue Parkway
Wilmington, DE 19809
CUSTODIAN
The Bank of New York Mellon
101 Barclay Street, 20th Floor
New York, NY 10286
INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606
LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603
[BLANK BACK COVER]
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable.
ITEM 6. INVESTMENTS.
(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.
(b) Not applicable.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
(a) Not applicable.
(b) There have been no changes, as of the date of this filing, in any of the
portfolio managers identified in response to paragraph (a)(1) of this Item
in the Registrant's most recent annual report on Form N-CSR.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.
ITEM 11. 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 second fiscal quarter
of the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting.
ITEM 12. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section
302 of the Sarbanes-Oxley Act of 2002 are attached hereto.
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section
906 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/ Mark R. Bradley
----------------------------------------
Mark R. Bradley, President and
Chief Executive Officer
(principal executive officer)
Date: August 14, 2015
------------------
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/ Mark R. Bradley
----------------------------------------
Mark R. Bradley, President and
Chief Executive Officer
(principal executive officer)
Date: August 14, 2015
------------------
By (Signature and Title)* /s/ James M. Dykas
----------------------------------------
James M. Dykas, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)
Date: August 14, 2015
------------------
* Print the name and title of each signing officer under his or her signature.