As filed with the Securities and Exchange Commission on May 30, 2008
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number: 811-21342
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
---------------------------------------------------
(Exact Name of the Registrant as Specified in Charter)
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
(Address of Principal Executive Offices - Zip Code)
Registrant's telephone number, including area code: (212) 476-8800
Peter E. Sundman, Chief Executive Officer
Lehman Brothers First Trust Income Opportunity Fund
605 Third Avenue, 2nd Floor
New York, New York 10158-0180
Arthur Delibert, Esq.
Kirkpatrick & Lockhart Preston Gates Ellis LLP
1601 K Street, N.W.
Washington, D.C. 20006-1600
(Names and addresses of agents for service)
Date of fiscal year end: December 31, 2007
Date of reporting period: March 31, 2008
Form N-Q is to be used by management investment companies, other than small
business investment companies registered on Form N-5 (section 239.24 and 274.5
of this chapter), to file reports with the Commission not later than 60 days
after the close of their first and third fiscal quarters, pursuant to rule
30b1-5 under the Investment Company Act of 1940 ("1940 Act") (17 CFR
270.30b1-5). The Commission may use the information provided on Form N-Q in its
regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-Q, and
the Commission will make this information public. A registrant is not required
to respond to the collection of information contained in Form N-Q unless the
Form displays a currently valid Office of Management and Budget ("OMB") control
number. Please direct comments concerning the accuracy of the information
collection burden estimate and any suggestions for reducing the burden to
Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC
20549-0609. The OMB has reviewed this collection of information under the
clearance requirements of 44 U.S.C. {section} 3507.
ITEM 1. SCHEDULE OF INVESTMENTS.
MARCH 31, 2008
SCHEDULE OF INVESTMENTS Lehman Brothers First Trust Income Opportunity Fund
---------------------------------------------------------------------------
(UNAUDITED)
PRINCIPAL AMOUNT($) RATING MARKET VALUE($)(+)
Moody's S&P
CORPORATE DEBT SECURITIES (149.7%)
AEROSPACE/DEFENSE (2.8%)
3,705,000 L-3 Communications Corp., Guaranteed Senior Unsecured
Subordinated Notes, 7.63%, due 6/15/12 Ba3 BB+ 3,792,994
165,000 L-3 Communications Corp., Guaranteed Senior Unsecured
Subordinated Notes, 6.13%, due 7/15/13 Ba3 BB+ 161,287
340,000 L-3 Communications Corp., Guaranteed Notes, Ser. B, 6.38%,
due 10/15/15 Ba3 BB+ 332,350
---------
4,286,631
AIRLINES (1.7%)
2,897,923 Continental Airlines, Inc., Pass-Through Certificates, 9.80%,
due 4/1/21 Ba1 BB+ 2,637,110
APPAREL/TEXTILES (1.2%)
1,810,000 Levi Strauss & Co., Senior Unsubordinated Notes, 9.75%, due
1/15/15 B2 B+ 1,803,213
AUTO LOANS (6.2%)
265,000 Ford Motor Credit Co., Senior Unsecured Notes, 9.75%, due
9/15/10 B1 B 236,055
3,130,000 Ford Motor Credit Co., Senior Unsecured Notes, 7.38%, due
2/1/11 B1 B 2,609,985
1,940,000 Ford Motor Credit Co., Senior Unsecured Notes, 7.25%, due
10/25/11 B1 B 1,593,563
1,290,000 Ford Motor Credit Co., Senior Unsecured Notes, 7.80%, due
6/1/12 B1 B 1,064,087
5,265,000 General Motors Acceptance Corp., Senior Unsecured Notes,
6.88%, due 9/15/11 B1 B+ 4,029,641
---------
9,533,331
AUTO PARTS & EQUIPMENT (0.8%)
1,002,000 Goodyear Tire & Rubber Co., Guaranteed Notes, 8.63%, due
12/1/11 Ba3 BB- 1,050,847
115,000 Goodyear Tire & Rubber Co., Senior Unsecured Notes, 9.00%,
due 7/1/15 Ba3 BB- 121,613
---------
1,172,460
BEVERAGE (1.8%)
1,970,000 Constellation Brands, Inc., Guaranteed Notes, 8.38%, due
12/15/14 Ba3 BB- 2,029,100
720,000 Constellation Brands, Inc., Guaranteed Notes, 7.25%, due
9/1/16 Ba3 BB- 700,200
---------
2,729,300
CHEMICALS (4.3%)
1,680,000 Hexion US Finance Corp., Senior Secured Notes, 9.75%, due
11/15/14 B3 B 1,801,800
1,930,000 MacDermid, Inc., Senior Subordinated Notes, 9.50%,
due 4/15/17 Caa1 CCC+ 1,727,350(n)
3,450,000 Momentive Performance Materials, Inc., Guaranteed Notes,
10.13%, due 12/1/14 B3 B 3,001,500(E)
---------
6,530,650
ELECTRIC - GENERATION (15.1%)
1,330,000 AES Corp., Senior Secured Notes, 8.75%, due 5/15/13 Ba3 BB+ 1,383,200(n)
510,000 AES Corp., Senior Unsecured Notes, 7.75%, due 10/15/15 B1 BB- 513,825
1,185,000 AES Corp., Senior Unsecured Notes, 8.00%, due 10/15/17 B1 BB- 1,199,813
See Notes to Schedule of Investments
MARCH 31, 2008
SCHEDULE OF INVESTMENTS Lehman Brothers First Trust Income Opportunity Fund cont'd
----------------------------------------------------------------------------------
(UNAUDITED)
PRINCIPAL AMOUNT($) RATING MARKET VALUE($)(+)
Moody's S&P
5,415,000 Dynegy-Roseton Danskamme, Pass-Through Certificates, Ser. B,
7.67%, due 11/8/16 Ba3 B 5,425,180
5,130,000 Edison Mission Energy, Senior Unsecured Notes, 7.63%, due
5/15/27 B1 BB- 4,822,200
3,700,000 Mirant Americas Generation, Inc., Senior Unsecured Notes,
8.30%, due 5/1/11 B3 B- 3,774,000
2,515,000 Mirant Americas Generation, Inc., Senior Unsecured Notes,
8.50%, due 10/1/21 B3 B- 2,282,362
3,685,000 NRG Energy, Inc., Guaranteed Notes, 7.38%, due 2/1/16 B1 B 3,611,300
----------
23,011,880
ELECTRIC - INTEGRATED (8.4%)
2,595,000 Energy Future Holdings Corp., Guaranteed Notes, 10.88%,
due 11/1/17 B3 B- 2,620,950(n)
10,420,000 Texas Competitive Electric Holdings Co. LLC, Guaranteed Notes,
10.50%, due 11/1/16 B3 CCC 10,211,600(n)
----------
12,832,550
ELECTRONICS (4.2%)
1,640,000 Flextronics Int'l, Ltd., Senior Subordinated Notes, 6.25%, due
11/15/14 Ba2 BB- 1,508,800
2,470,000 Freescale Semiconductor, Inc., Guaranteed Notes, 9.13%, due
12/15/14 B2 B- 1,803,100
1,295,000 NXP BV Funding LLC, Guaranteed Floating Rate Notes, 7.01%,
due 4/15/08 Ba3 BB- 1,068,375(u)
2,275,000 NXP BV Funding LLC, Guaranteed Notes, 7.88%, due 10/15/14 Ba3 BB- 2,081,625
---------
6,461,900
ENERGY-EXPLORATION & PRODUCTION (5.5%)
3,905,000 Chesapeake Energy Corp., Guaranteed Notes, 7.50%, due 9/15/13 Ba3 BB 4,022,150
1,770,000 Chesapeake Energy Corp., Guaranteed Notes, 6.88%, due 1/15/16 Ba3 BB 1,752,300
1,350,000 Pioneer Natural Resources Co., Senior Unsecured Notes, 6.65%,
due 3/15/17 Ba1 BB+ 1,277,764
1,310,000 Southwestern Energy Co., Senior Unsecured Notes, 7.50%, due
2/1/18 Ba2 BB+ 1,355,850(n)
---------
8,408,064
ENVIRONMENTAL (0.9%)
1,375,000 Allied Waste North America, Inc., Senior Secured Notes, Ser.
B, 7.25%, due 3/15/15 B1 BB 1,373,281
FOOD & DRUG RETAILERS (1.3%)
1,175,000 Rite Aid Corp., Guaranteed Notes, 8.63%, due 3/1/15 Caa1 CCC+ 895,938
1,485,000 Rite Aid Corp., Guaranteed Notes, 9.50%, due 6/15/17 Caa1 CCC+ 1,165,725
---------
2,061,663
GAMING (5.1%)
765,000 Chukchansi Economic Development Authority, Senior Unsecured
Notes, 8.00%, due 11/15/13 B2 BB- 688,500(n)
1,025,000 Fontainebleau Las Vegas Holdings LLC, Second Mortgage, 10.25%,
due 6/15/15 Caa1 CCC+ 722,625(n)
260,000 Harrah's Operating Co., Inc., Guaranteed Notes, 5.50%, due
7/1/10 Caa1 B- 227,500
1,781,000 Pokagon Gaming Authority, Senior Notes, 10.38%, due 6/15/14 B3 B 1,878,955(n)
2,105,000 San Pasqual Casino, Notes, 8.00%, due 9/15/13 B2 BB- 1,962,912(n)
See Notes to Schedule of Investments
MARCH 31, 2008
SCHEDULE OF INVESTMENTS Lehman Brothers First Trust Income Opportunity Fund cont'd
----------------------------------------------------------------------------------
(UNAUDITED)
PRINCIPAL AMOUNT($) RATING MARKET VALUE($)(+)
Moody's S&P
2,600,000 Shingle Springs Tribal Gaming Authority, Senior Notes, 9.38%,
due 6/15/15 B3 B 2,301,000(n)
---------
7,781,492
GAS DISTRIBUTION (13.8%)
1,380,000 AmeriGas Partners L.P., Senior Notes, 7.13%, due 5/20/16 B1 1,352,400
2,315,000 El Paso Natural Gas Co., Senior Unsecured Notes, 8.38%, due
6/15/32 Baa3 BB 2,629,122
1,635,000 Ferrellgas Partners L.P., Senior Unsecured Notes, 8.75%, due
6/15/12 B2 B- 1,661,569
5,700,000 Kinder Morgan, Inc., Senior Unsecured Notes, 6.50%, due 9/1/12 Ba1 BB 5,779,709
2,285,000 Regency Energy Partners L.P., Guaranteed Notes, 8.38%, due
12/15/13 B1 B 2,330,700
810,000 Sabine Pass L.P., Senior Secured Notes, 7.25%, due 11/30/13 Ba3 BB 781,650
4,645,000 Sabine Pass L.P., Senior Secured Notes, 7.50%, due 11/30/16 Ba3 BB 4,482,425
2,025,000 Transcontinental Gas Pipe Line, Senior Unsecured Notes, 7.25%,
due 12/1/26 Baa2 BBB- 2,075,625
----------
21,093,200
HEALTH SERVICES (17.8%)
3,230,000 HCA, Inc., Senior Secured Notes, 9.25%, due 11/15/16 B2 BB- 3,351,125
6,795,000 HCA, Inc., Senior Secured Notes, 9.63%, due 11/15/16 B2 BB- 7,049,813
3,220,000 LVB Acquisition Merger, Inc., Guaranteed Notes, 10.38%, due
10/15/17 B3 B- 3,340,750(n)
1,920,000 LVB Acquisition Merger, Inc., Guaranteed Notes, 11.63%, due
10/15/17 Caa1 B- 1,920,000(n)
2,373,881 NMH Holdings, Inc., Senior Unsecured Floating Rate Notes,
9.93%, due 6/15/08 Caa2 CCC+ 2,065,276(n)(u)
4,115,000 Service Corp. Int'l, Senior Unsecured Notes, 7.50%, due 4/1/27 B1 BB- 3,497,750
2,175,000 US Oncology, Inc., Guaranteed Notes, 9.00%, due 8/15/12 B2 B- 2,164,125
520,000 Ventas Realty L.P., Senior Notes, 6.63%, due 10/15/14 Ba1 BBB- 512,200
2,015,000 Ventas Realty L.P., Guaranteed Notes, 6.50%, due 6/1/16 Ba1 BBB- 1,944,475
1,310,000 Ventas Realty L.P., Guaranteed Notes, 6.75%, due 4/1/17 Ba1 BBB- 1,280,525
----------
27,126,039
HOTELS (0.8%)
1,215,000 Host Hotels & Resorts L.P., Senior Secured Notes, 7.13%, due
11/1/13 Ba1 BB 1,190,700
INVESTMENTS & MISC. FINANCIAL SERVICES (2.2%)
2,675,000 Cardtronics, Inc., Guaranteed Notes, 9.25%, due 8/15/13 Caa1 B- 2,514,500
910,000 Cardtronics, Inc., Senior Subordinated Notes, Ser. B, 9.25%,
due 8/15/13 Caa1 B- 855,400(n)
---------
3,369,900
LEISURE (1.1%)
1,980,000 Royal Caribbean Cruises, Senior Unsecured Notes, 7.50%, due
10/15/27 Ba1 BB+ 1,679,836
See Notes to Schedule of Investments
MARCH 31, 2008
SCHEDULE OF INVESTMENTS Lehman Brothers First Trust Income Opportunity Fund cont'd
----------------------------------------------------------------------------------
(UNAUDITED)
PRINCIPAL AMOUNT($) RATING MARKET VALUE($)(+)
Moody's S&P
MEDIA - BROADCAST (4.9%)
4,270,000 CMP Susquehanna Corp., Guaranteed Notes, 9.88%, due 5/15/14 Caa1 CCC 2,946,300
3,415,000 LIN Television Corp., Guaranteed Notes, 6.50%, due 5/15/13 B1 B+ 3,167,412
675,000 LIN Television Corp., Guaranteed Notes, Ser. B, 6.50%, due
5/15/13 B1 B+ 626,063
1,140,000 Univision Communications, Inc., Guaranteed Notes, 9.75%, due
3/15/15 B3 CCC 689,700(n)
---------
7,429,475
MEDIA - CABLE (5.8%)
550,000 CCH I Holdings LLC, Senior Secured Notes, 11.00%, due 10/1/15 Caa2 CCC 382,250
4,310,000 DirecTV Holdings LLC, Guaranteed Notes, 8.38%, due 3/15/13 Ba3 BB- 4,369,262
1,880,000 EchoStar DBS Corp., Guaranteed Notes, 6.38%, due 10/1/11 Ba3 BB- 1,804,800
185,000 EchoStar DBS Corp., Guaranteed Notes, 7.00%, due 10/1/13 Ba3 BB- 174,363
2,495,000 Mediacom Broadband LLC, Senior Unsecured Notes, 8.50%, due
10/15/15 B3 B- 2,095,800
---------
8,826,475
MEDIA - SERVICES (2.4%)
1,215,000 Lamar Media Corp., Guaranteed Notes, 7.25%, due 1/1/13 Ba3 BB- 1,154,250
2,170,000 WMG Acquisition Corp., Senior Subordinated Notes, 7.38%, due
4/15/14 B3 B 1,670,900
1,750,000 WMG Holdings Corp., Guaranteed Notes, Step-Up, 0.00%/9.50%,
-%, due 12/15/14 B3 B 910,000(^^)
---------
3,735,150
METALS/MINING EXCLUDING STEEL (6.4%)
1,670,000 Aleris Int'l, Inc., Guaranteed Notes, 9.00%, due 12/15/14 B3 B- 1,219,100
2,065,000 Arch Western Finance Corp., Senior Secured Notes, 6.75%, due
7/1/13 B1 BB- 2,059,838
520,000 Freeport-McMoRan Copper & Gold, Senior Unsecured Notes, 8.39%,
due 4/1/08 Ba2 BBB- 510,900(u)
425,000 Freeport-McMoRan Copper & Gold, Senior Unsecured Notes, 8.25%,
due 4/1/15 Ba2 BBB- 448,375
1,500,000 Freeport-McMoRan Copper & Gold, Senior Unsecured Notes, 8.38%,
due 4/1/17 Ba2 BBB- 1,591,875
3,995,000 Massey Energy Co., Guaranteed Notes, 6.88%, due 12/15/13 B2 B+ 3,865,162
---------
9,695,250
NON-FOOD & DRUG RETAILERS (0.4%)
745,000 Blockbuster, Inc., Guaranteed Notes, 9.00%, due 9/1/12 Caa2 CCC 607,175
PACKAGING (5.2%)
5,030,000 Ball Corp., Guaranteed Unsecured Notes, 6.88%, due 12/15/12 Ba1 BB+ 5,118,025
1,260,000 Crown Americas LLC, Guaranteed Notes, 7.75%, due 11/15/15 B1 B 1,294,650
1,830,000 Graham Packaging Co., Inc., Guaranteed Notes, 9.88%, due
10/15/14 Caa1 CCC+ 1,537,200
---------
7,949,875
See Notes to Schedule of Investments
MARCH 31, 2008
SCHEDULE OF INVESTMENTS Lehman Brothers First Trust Income Opportunity Fund cont'd
----------------------------------------------------------------------------------
(UNAUDITED)
PRINCIPAL AMOUNT($) RATING MARKET VALUE($)(+)
Moody's S&P
PRINTING & PUBLISHING (3.1%)
2,335,000 Dex Media West LLC, Senior Subordinated Notes, Ser. B, 9.88%,
due 8/15/13 B1 BB- 2,031,450
905,000 Idearc, Inc., Guaranteed Notes, 8.00%, due 11/15/16 B3 BB- 585,988
855,000 R.H. Donnelley Corp., Senior Unsecured Notes, 6.88%, due
1/15/13 B3 B 521,550
2,335,000 Reader's Digest Association, Inc., Senior Subordinated Notes,
9.00%, due 2/15/17 Caa1 CCC 1,558,612(n)
---------
4,697,600
RAILROADS (1.3%)
1,880,000 TFM SA de C.V., Senior Unsubordinated Notes, 9.38%, due 5/1/12 B2 1,941,100
REAL ESTATE DEV. & MGT. (2.0%)
1,820,000 American Real Estate Partners L.P., Senior Unsecured Notes,
8.13%, due 6/1/12 Ba3 BBB- 1,774,500
1,470,000 American Real Estate Partners L.P., Guaranteed Notes, 7.13%,
due 2/15/13 Ba3 BBB- 1,334,025
---------
3,108,525
RESTAURANTS (0.9%)
1,435,000 NPC Int'l, Inc., Guaranteed Notes, 9.50%, due 5/1/14 Caa1 B- 1,298,675
SOFTWARE/SERVICES (3.9%)
3,955,000 First Data Corp., Guaranteed Notes, 9.88%, due 9/24/15 B3 B 3,252,988(n)
2,635,000 Sungard Data Systems, Inc., Guaranteed Notes, 10.25%, due
8/15/15 Caa1 B- 2,648,175
---------
5,901,163
STEEL PRODUCERS/PRODUCTS (2.8%)
1,620,000 Metals U.S.A. Holdings Corp., Senior Unsecured Floating Rate
Notes, 10.83%, due 4/1/08 Caa1 CCC 1,206,900(u)
1,365,000 Steel Dynamics, Inc., Senior Notes, 7.38%, due 11/1/12 Ba2 BB+ 1,378,650(n)
2,005,000 Tube City IMS Corp., Guaranteed Notes, 9.75%, due 2/1/15 B3 B- 1,764,400
---------
4,349,950
SUPPORT - SERVICES (1.6%)
2,600,000 Knowledge Learning Corp., Inc., Guaranteed Notes, 7.75%, due
2/1/15 B2 B 2,431,000(n)
TELECOM - INTEGRATED/SERVICES (10.8%)
1,440,000 Dycom Industries, Inc., Guaranteed Notes, 8.13%, due 10/15/15 Ba3 BB- 1,353,600
2,200,000 Intelsat Bermuda Ltd., Guaranteed Notes, 9.25%, due 6/15/16 B3 BB- 2,216,500
2,225,000 Intelsat Subsidiary Holdings Co. Ltd., Guaranteed Notes,
8.25%, due 1/15/13 B3 BB- 2,241,687
395,000 Intelsat Subsidiary Holdings Co. Ltd., Guaranteed Notes,
8.63%, due 1/15/15 B3 BB- 397,963
3,215,000 Nextel Communications, Inc., Guaranteed Notes, Ser. E, 6.88%,
due 10/31/13 Baa3 BBB- 2,539,850
2,520,000 Nordic Telephone Co. Holdings, Senior Secured Notes, 8.88%,
due 5/1/16 B2 B 2,444,400(n)
2,960,000 Qwest Corp., Senior Unsecured Notes, 8.88%, due 3/15/12 Ba1 BBB- 3,019,200
See Notes to Schedule of Investments
MARCH 31, 2008
SCHEDULE OF INVESTMENTS Lehman Brothers First Trust Income Opportunity Fund cont'd
----------------------------------------------------------------------------------
(UNAUDITED)
PRINCIPAL AMOUNT($) RATING MARKET VALUE($)(+)
Moody's S&P
600,000 Qwest Corp., Senior Unsecured Notes, 7.50%, due 10/1/14 Ba1 BBB- 585,000
1,230,000 Sprint Capital Corp., Guaranteed Notes, 6.88%, due 11/15/28 Baa3 BBB- 916,350
760,000 Windstream Corp., Guaranteed Notes, 8.63%, due 8/1/16 Ba3 BB 746,700
----------
16,461,250
THEATERS & ENTERTAINMENT (1.3%)
1,960,000 AMC Entertainment, Inc., Guaranteed Notes, Ser. B, 8.63%, due
8/15/12 Ba3 B- 1,979,600
TRANSPORTATION EXCLUDING AIR/RAIL (1.9%)
1,080,000 ERAC USA Finance Co., Guaranteed Notes, 6.38%, due 10/15/17 Baa2 BBB 964,964(n)
2,420,000 ERAC USA Finance Co., Guaranteed Notes, 7.00%, due 10/15/37 Baa2 BBB 1,989,409(n)
2,954,373
-----------
TOTAL CORPORATE DEBT SECURITIES (COST $238,183,346) 228,449,836
NUMBER OF SHARES
SHORT-TERM INVESTMENTS (6.9%)
10,096,794 Neuberger Berman Prime Money Fund Trust Class 10,096,794(#)(OO)(@)
448,611 Neuberger Berman Securities Lending Quality Fund, LLC 444,125(++)
TOTAL SHORT-TERM INVESTMENTS (COST $10,553,114) 10,540,919
TOTAL INVESTMENTS (156.6%) (COST $248,736,460) 238,990,755(##)
Cash, receivables and other assets, less liabilities (2.4%) 3,658,637(@@)
Money Market Cumulative Preferred Shares [(59.0%)] (90,000,000)
------------
TOTAL NET ASSETS (100.0%) $152,649,392
See Notes to Schedule of Investments
MARCH 31, 2008 (UNAUDITED)
NOTES TO SCHEDULE OF INVESTMENTS
(+) Investments in debt securities by Lehman Brothers First Trust Income
Opportunity Fund (the "Fund") are valued daily by obtaining valuations
from independent pricing services based on readily available bid
quotations, or if quotations are not available, by methods which include
considerations such as: yields or prices of securities of comparable
quality, coupon, maturity and type; indications as to values from
dealers; and general market conditions. If a valuation is not available
from an independent pricing service, the Fund seeks to obtain quotations
from principal market makers. If market quotations are not readily
available, securities are valued by methods the Board of Trustees of the
Fund (the "Board") has approved on the belief that they reflect fair
value. Numerous factors may be considered when determining the fair
value of a security, including available analyst, media or other
reports, trading in futures or ADRs and whether the issuer of the
security being fair valued has other securities outstanding. Fair value
prices are necessarily estimates, and there is no assurance that such a
price will be at or close to the price at which the security is next
quoted or next trades. Securities with remaining maturities of 60 days
or less are valued at amortized cost. This method involves valuing a
portfolio security initially at its cost and thereafter assumes a
constant amortization to maturity of any discount of premium.
(#) At cost, which approximates market value.
(##) At March 31, 2008, the cost of investments for U.S. federal income tax
purposes was $249,613,717. Gross unrealized appreciation of investments
was $1,866,363 and gross unrealized depreciation of investments was
$12,489,325, resulting in net unrealized depreciation of $10,622,962,
based on cost for U.S. federal income tax purposes.
(++) Managed by an affiliate of Neuberger Berman Management Inc. and could be
deemed an affiliate of the Fund
(@) Neuberger Berman Prime Money Fund ("Prime Money") is also managed by
Neuberger Berman Management Inc. and may be considered an affiliate
since it has the same officers, Board members, and investment manager as
the Fund and because, at times, the Fund may own 5% or more of the
outstanding voting securities of Prime Money.
(n) Restricted security subject to restrictions on resale under federal
securities laws. These securities may be resold in transactions exempt
from registration, normally to qualified institutional buyers under Rule
144A under the Securities Act of 1933, as amended, and have been deemed
by the investment manager to be liquid. At March 31, 2008, these
securities amounted to approximately $47,744,091 or 31.3% of net assets
applicable to common shareholders.
(^^) Denotes a step-up bond: a zero coupon bond that converts to a fixed rate
of interest at a designated future date.
(u) Floating rate securities are securities whose yields vary with a
designated market index or market rate. These securities are shown at
their current rates as of March 31, 2008.
(E) All or a portion of this security is on loan.
(OO) All or a portion of this security is segregated in connection with
obligations for interest rate swap contracts and/or security lending.
(@@) At March 31, 2008, the Fund had outstanding interest rate swap contracts as
follows:
RATE TYPE
------------------------
VARIABLE-
SWAP FIXED-RATE RATE ACCRUED NET
COUNTER NOTIONAL TERMINATION PAYMENTS PAYMENTS INTEREST UNREALIZED
PARTY AMOUNT DATE MADE BY THE RECEIVED BY RECEIVABLE APPRECIATION TOTAL
FUND THE FUND(1) (PAYABLE) (DEPRECIATION) FAIR VALUE
Citibank, N.A. $45,000,000 January 28, 2011 2.92% 2.6775% $(1,213) $(351,315) $(352,528)
(1) 30 day LIBOR (London Interbank Offered Rate) at March 26, 2008.
The Fund adopted Financial Accounting Standards Board ("FASB") Statement of
Financial Accounting Standards No. 157, Fair Value Measurements ("FAS 157"),
effective January 1, 2008. In accordance with FAS 157, "fair value" is defined
as the price that the Fund would receive upon selling an investment in an
orderly transaction to an independent buyer in the principal or most
advantageous market for the investment. Various inputs are used in determining
the value of the Fund's investments. FAS 157 established a three-tier hierarchy
of inputs to
establish a classification of fair value measurements for disclosure purposes.
The three-tier hierarchy of inputs is summarized in the three broad Levels
listed below.
o Level 1 - quoted prices in active markets for identical investments
o Level 2 - other significant observable inputs (including quoted prices for
similar investments, interest rates, prepayment speeds, credit risk, etc.)
o Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
The inputs or methodology used for valuing an investment are not necessarily an
indication of the risk associated with investing in those securities.
The following is a summary of the inputs used to value the Fund's investments as
of March 31, 2008:
OTHER
INVESTMENTS IN FINANCIAL
VALUATION INPUTS SECURITIES INSTRUMENTS*
Level 1 - Quoted Prices $ 10,540,919 $-
Level 2 - Other Significant
Observable Inputs 225,812,726 (351,315)
Level 3 - Significant
Unobservable Inputs 2,637,110 -
--------------------------------
TOTAL $ 238,990,755 $(351,315)
--------------------------------
*Other financial instruments include swap contracts.
Following is a reconciliation between the beginning and ending balances of
investments in which significant unobservable inputs (Level 3) were used in
determining value:
OTHER
INVESTMENTS FINANCIAL
IN SECURITIES INSTRUMENTS
Balance as OF 12/31/07 $ 2,971,504 $-
Accrued discounts/premiums - -
Realized gain/loss and change in
unrealized appreciation/depreciation (304,727) -*
Net purchases/sales (29,667) -
Net transfers in and/or out of Level 3 - -
------------------------------
BALANCE, AS OF 03/31/08 $ 2,637,110 $-
------------------------------
Net change in unrealized
appreciation/depreciation from
investments still held as of 03/31/08 $ (301,635) $-
*The realized gain/loss earned during the period ended March 31, 2008 for other
financial instruments was $0.
In March 2008, FASB issued Statement of Financial Accounting Standards No. 161,
"Disclosures about Derivative Instruments and Hedging Activities" ("SFAS 161").
SFAS 161 is effective for fiscal years and interim periods beginning after
November 15, 2008. SFAS 161 requires enhanced disclosures about funds'
derivative and hedging activities. Management is currently evaluating the impact
the adoption of SFAS 161 will have on the Fund's financial statement
disclosures.
For information on the Fund's significant accounting policies, please refer to
the Fund's most recent financial statements.
ITEM 2. CONTROLS AND PROCEDURES.
(a) Based on an evaluation of the disclosure controls and procedures (as
defined in rule 30a-3(c) under the 1940 Act) as of a date within 90 days
of the filing date of this document, the Chief Executive Officer and
Treasurer and Principal Financial and Accounting Officer of the
Registrant have concluded that such disclosure controls and procedures
are effectively designed to ensure that information required to be
disclosed by the Registrant on Form N-CSR and Form N-Q is accumulated and
communicated to the Registrant's management to allow timely decisions
regarding required disclosure.
(b) There were no significant changes in the Registrant's internal controls
over financial reporting (as defined in rule 30a-3(d) under the 1940 Act)
that occurred during the Registrant's last fiscal quarter that have
materially affected, or are reasonably likely to materially affect, the
Registrant's internal control over financial reporting.
ITEM 3. EXHIBITS.
The certifications required by Rule 30a-2(a) of the 1940 Act are filed herewith.
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.
Lehman Brothers First Trust Income Opportunity Fund
By: /s/ Peter E. Sundman
-------------------------
Peter E. Sundman
Chief Executive Officer
Date: May 27, 2008
Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the Registrant and in the capacities and on the
dates indicated.
By: /s/ Peter E. Sundman
------------------------
Peter E. Sundman
Chief Executive Officer
Date: May 27, 2008
By: /s/ John M. McGovern
------------------------
John M. McGovern
Treasurer and Principal Financial
and Accounting Officer
Date: May 27, 2008