As filed with the Securities and Exchange Commission on May 30, 2007
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)
399 Park Avenue
New York, New York 10022
(Address of Principal Executive Offices - Zip Code)
Registrant's telephone number, including area code: (212) 526-7000
Peter E. Sundman, Executive Vice President
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, 2007
Form N-Q is to be used by management investment companies 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.
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS
MARCH 31, 2007
(UNAUDITED)
PRINCIPAL MOODY'S S&P FITCH
AMOUNT DESCRIPTION RATINGS(*) RATINGS(*) RATINGS(*) VALUE(+)
------------------------------------------------------------------------------------------------------------------------------------
CORPORATE DEBT - 141.9%
AEROSPACE/DEFENSE - 1.4%
$ 1,830,000 L-3 Communications Corp., Guaranteed Senior
Subordinated Notes
7.63%, due 6/15/12 Ba3 BB+ BB $ 1,884,900
825,000 L-3 Communications Corp., Guaranteed Notes, Ser. B
6.38%, due 10/15/15 Ba3 BB+ BB 817,781
------------
2,702,681
AIRLINES - 1.2%
1,959,187 Continental Airlines, Inc., Pass-Through Certificates
9.80%, due 4/1/21 Ba1 BB+ B- 2,174,698
APPAREL/TEXTILES - 0.6%
1,085,000 Levi Strauss & Co., Senior Unsubordinated Notes
9.75%, due 1/15/15 B2 B BB- 1,190,788
AUTO LOANS - 12.8%
1,610,000 Ford Motor Credit Co., Unsecured Notes
7.38%, due 10/28/09 B1 B BB- 1,607,041
6,870,000 Ford Motor Credit Co., Senior Unsecured Notes
9.75%, due 9/15/10 B1 B BB- 7,236,460 (n)
8,515,000 Ford Motor Credit Co., Bonds
7.38%, due 2/1/11 B1 B BB- 8,374,783
5,755,000 General Motors Acceptance Corp., Notes
6.88%, due 9/15/11 Ba1 BB+ BB+ 5,760,577
880,000 General Motors Acceptance Corp., Unsecured Notes
7.00%, due 2/1/12 Ba1 BB+ BB+ 884,148
------------
23,863,009
AUTO PARTS & EQUIPMENT - 0.7%
540,000 Goodyear Tire & Rubber Co., Senior Notes
8.63%, due 12/1/11 B2 B- CCC+ 580,500 (n)
685,000 Goodyear Tire & Rubber Co., Senior Notes
9.00%, due 7/1/15 B2 B- CCC+ 751,788
------------
1,332,288
AUTOMOTIVE - 4.0%
4,485,000 General Motors Corp., Senior Unsecured Debentures
8.25%, 7/15/23 Caa1 B- B 4,036,500
3,845,000 General Motors Corp., Senior Unsubordinated Notes
8.38%, due 7/15/33 Caa1 B- B 3,450,887
------------
7,487,387
BEVERAGE - 0.7%
1,365,000 Constellation Brands, Inc., Guaranteed Notes
7.25%, due 9/1/16 Ba3 BB- BB- 1,382,063
CHEMICALS - 4.2%
780,000 Chemtura Corp., Guaranteed Notes
6.88%, due 6/1/16 Ba1 BB+ 754,650
2,595,000 Hexion US Finance Corp., Senior Notes
9.75%, due 11/15/14 B3 B- 2,721,506 (n)
1
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
MARCH 31, 2007
(UNAUDITED)
PRINCIPAL MOODY'S S&P FITCH
AMOUNT DESCRIPTION RATINGS(*) RATINGS(*) RATINGS(*) VALUE (+)
------------------------------------------------------------------------------------------------------------------------------------
CORPORATE DEBT - CONTINUED
CHEMICALS - CONTINUED
$ 760,000 Lyondell Chemical Co., Guaranteed Notes
8.25%, due 9/15/16 B1 B+ BB- $ 813,200
1,720,000 MacDermid, Inc., Senior Subordinated Notes
9.50%, due 4/15/17 Caa1 CCC+ 1,767,300 (n)(OO)
1,745,000 PQ Corp., Guaranteed Notes
7.50%, due 2/15/13 B3 B- 1,762,450
------------
7,819,106
CONSUMER - PRODUCTS - 2.0%
1,430,000 Amscan Holdings, Inc., Senior Subordinated Notes
8.75%, due 5/1/14 Caa1 CCC+ 1,404,975
2,340,000 Yankee Acquisition Corp., Senior Subordinated Notes
9.75%, due 2/15/17 Caa1 CCC+ 2,369,250 (n)
------------
3,774,225
DIVERSIFIED CAPITAL GOODS - 0.3%
530,000 American Railcar Industries, Inc., Senior Unsecured Notes
7.50%, due 3/1/14 B1 BB- 544,575 (n)
ELECTRIC - GENERATION 6.3%
2,050,000 Dynegy-Roseton Danskamme, Pass-Through Certificates,
Ser. B 7.67%, due 11/8/16 Ba3 B 2,173,000
3,070,000 Midwest Generation LLC, Secured Notes
8.75%, due 5/1/34 Ba2 B+ BB+ 3,330,950
3,345,000 Mirant Americas Generation, Inc., Senior Unsecured Notes
8.30%, due 5/1/11 Caa1 B- B 3,428,625
1,325,000 NRG Energy, Inc., Guaranteed Notes
7.38%, due 2/1/16 B1 B- B+ 1,361,437
1,375,000 NRG Energy, Inc., Guaranteed Notes
7.38%, due 1/15/17 B1 B- B+ 1,411,094
------------
11,705,106
ELECTRONICS - 4.4%
3,045,000 Flextronics Int'l., Ltd., Senior Subordinated Notes
6.50%, due 5/15/13 Ba2 BB- BB 3,014,550
2,790,000 Freescale Semiconductor, Inc., Senior Notes
9.13%, due 12/15/14 B1 B 2,769,075 (n)
660,000 NXP BV Funding LLC, Secured Notes
7.88%, due 10/15/14 Ba2 BB+ 681,450 (n)
1,650,000 NXP BV Funding LLC, Senior Notes
9.50%, due 10/15/15 B2 B+ 1,703,625 (n)
------------
8,168,700
ENERGY-EXPLORATION & PRODUCTION - 4.4%
670,000 Chesapeake Energy Corp., Guaranteed Notes
7.50%, due 9/15/13 Ba2 BB BB 700,150
1,345,000 Chesapeake Energy Corp., Guaranteed Notes
6.38%, due 6/15/15 Ba2 BB BB 1,338,275
475,000 Forest Oil Corp., Guaranteed Unsecured Notes
8.00%, due 12/15/11 B1 B+ 495,187
2
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
MARCH 31, 2007
(UNAUDITED)
PRINCIPAL MOODY'S S&P FITCH
AMOUNT DESCRIPTION RATINGS(*) RATINGS(*) RATINGS(*) VALUE (+)
------------------------------------------------------------------------------------------------------------------------------------
CORPORATE DEBT - CONTINUED
ENERGY-EXPLORATION & PRODUCTION - CONTINUED
$ 840,000 Forest Oil Corp., Guaranteed Senior Unsecured Notes
7.75%, due5/1/14 B1 B+ $ 852,600
4,860,000 Sabine Pass L.P., Secured Notes
7.50%, due 11/30/16 Ba3 BB 4,896,450 (n)
------------
8,282,662
ENVIRONMENTAL - 1.1%
1,375,000 Allied Waste North America, Inc., Guaranteed Notes
7.25%, due 3/15/15 B1 BB B+ 1,402,500
715,000 Allied Waste North America, Inc., Guaranteed Notes
6.88%, due 6/1/17 B1 BB B+ 716,787
------------
2,119,287
FOOD & DRUG RETAILERS - 1.7%
2,985,000 Jean Coutu Group PJC, Inc., Guaranteed Notes Caa2 B- CCC- 3,238,725
8.50%, due 8/1/14
FORESTRY/PAPER - 1.6%
535,000 Bowater, Inc., Senior Floating Rate Notes
8.35%, due 6/15/07 B3 B+ BB- 536,337 (u)
1,090,000 Bowater, Inc., Debentures
9.00%, due 8/1/09 B3 B+ BB- 1,141,775
1,200,000 Graphic Packaging Int'l., Inc., Guaranteed Notes
8.50%, due 8/15/11 B2 B- B 1,248,000
------------
2,926,112
GAMING - 6.1%
1,045,000 Chukchansi Economic Development Authority, Senior Notes
8.00%, due 11/15/13 B2 BB- 1,080,269 (n)
3,440,000 Majestic Star LLC, Senior Unsecured Notes
9.75%, due 1/15/11 Caa1 CCC+ 3,276,600
1,545,000 MGM Grand, Inc., Guaranteed Senior Notes
6.00%, due 10/1/09 Ba2 BB BB 1,546,931
460,000 Park Place Entertainment, Senior Subordinated Notes
7.88%, due 3/15/10 Ba1 B+ BB- 480,700
1,910,000 Pokagon Gaming Authority, Senior Notes
10.38%, due 6/15/14 B3 B 2,105,775 (n)
1,475,000 San Pasqual Casino, Notes
8.00%, due 9/15/13 B2 B+ 1,517,406 (n)
1,495,000 Station Casinos, Inc., Senior Unsecured Subordinated Notes
6.88%, due 3/1/16 Ba3 B 1,369,794
------------
11,377,475
GAS DISTRIBUTION - 7.0%
690,000 AmeriGas Partners, L.P., Senior Unsecured Notes
7.25%, due 5/20/15 B1 BB+ 696,900
670,000 AmeriGas Partners, L.P., Senior Notes
7.13%, due 5/20/16 B1 BB+ 671,675
1,635,000 Ferrellgas Partners L.P., Senior Unsecured Notes
8.75%, due 6/15/12 B2 B- 1,696,312
1,335,000 Kinder Morgan, Inc., Senior Notes
6.50%, due 9/1/12 Baa2 BB- BB 1,361,651
3
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
MARCH 31, 2007
(UNAUDITED)
PRINCIPAL MOODY'S S&P FITCH
AMOUNT DESCRIPTION RATINGS(*) RATINGS(*) RATINGS(*) VALUE (+)
------------------------------------------------------------------------------------------------------------------------------------
CORPORATE DEBT - CONTINUED
GAS DISTRIBUTION - CONTINUED
$ 1,500,000 Kinder Morgan, Inc., Guaranteed Notes
5.70%, due 1/5/16 Baa2 BB- $ 1,406,411
3,500,000 Regency Energy Partners, Senior Unsecured Notes
8.38%, due 12/15/13 B2 B 3,570,000 (n)
1,415,000 Targa Resources, Inc., Guaranteed Notes
8.50%, due 11/1/13 B3 B- 1,443,300 (n)
2,025,000 Transcontinental Gas Pipe Line, Debentures
7.25%, due 12/1/26 Ba1 BB+ BBB- 2,192,062
------------
13,038,311
HEALTH SERVICES - 16.4%
2,540,000 CDRV Investors, Inc., Senior Floating Rate Notes
9.86%, due 6/1/07 Caa1 CCC+ 2,527,300 (n)(u)
4,010,000 CDRV Investors, Inc., Senior Unsecured Notes, Step-Up
0.00%/9.63%, due 1/1/15 Caa1 CCC+ 3,448,600 (^^)
2,750,000 HCA, Inc., Senior Unsecured Notes
6.50%, due 2/15/16 Caa1 B- CCC+ 2,340,937
5,930,000 HCA, Inc., Secured Notes
9.25%, due 11/15/16 B2 BB- B 6,396,987 (n)
740,000 Omnicare, Inc., Senior Subordinated Notes
6.13%, due 6/1/13 Ba3 BB+ 721,500
2,265,000 Omnicare, Inc., Guaranteed Notes
6.88%, due 12/15/15 Ba3 BB+ 2,284,819
1,200,000 Service Corp. Int'l., Senior Unsecured Notes
7.38%, due 10/1/14 B1 BB- 1,248,000
675,000 Service Corp. Int'l., Senior Notes
7.00%, due 6/15/17 B1 BB- 680,063
2,420,000 Service Corp. Int'l., Senior Notes
7.50%, due 4/1/27 B1 BB- 2,432,100 (n)(OO)
1,040,000 Spheris, Inc., Senior Subordinated Notes
11.00%, due 12/15/12 Caa1 CCC 1,037,400
1,390,000 US Oncology, Inc., Senior Unsecured Floating Rate Notes
9.80%, due 9/17/07 B3 B- 1,403,900 (n)(u)
3,485,000 US Oncology, Inc., Senior Unsecured Floating Rate Notes
10.58%, due 9/17/07 B1 B- 3,554,700 (u)
1,065,000 US Oncology, Inc., Guaranteed Notes
9.00%, due 8/15/12 B1 B- 1,136,888
1,320,000 Ventas Realty L.P., Guaranteed Senior Notes
6.50%, due 6/1/16 Ba2 BB+ BBB- 1,351,350
------------
30,564,544
INVESTMENTS & MISC. FINANCIAL SERVICES - 1.5%
2,680,000 Cardtronics, Inc., Guaranteed Notes
9.25%, due 8/15/13 B3 B- 2,814,000
LEISURE - 1.3%
1,210,000 AMF Bowling Worldwide, Inc., Guaranteed Notes
10.00%, due 3/1/10 B3 CCC+ 1,264,450
1,255,000 Royal Caribbean Cruises, Senior Unsubordinated Notes
7.50%, due 10/15/27 Ba1 BBB- 1,226,611
------------
2,491,061
4
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
MARCH 31, 2007
(UNAUDITED)
PRINCIPAL MOODY'S S&P FITCH
AMOUNT DESCRIPTION RATINGS(*) RATINGS(*) RATINGS(*) VALUE (+)
------------------------------------------------------------------------------------------------------------------------------------
CORPORATE DEBT - CONTINUED
MEDIA - BROADCAST - 9.1%
$ 1,465,000 Clear Channel Communications, Inc., Senior Notes
5.50%, due 9/15/14 Baa3 BB+ BB- $ 1,296,975
2,865,000 CMP Susquehanna Corp., Senior Subordinated Notes
9.88%, due 5/15/14 B3 CCC 2,936,625 (n)
1,135,000 Entercom Radio/Capital, Guaranteed Senior Unsecured
Notes 7.63%, due 3/1/14 B1 B 1,146,350
2,020,000 LIN Television Corp., Senior Subordinated Notes
6.50%, due 5/15/13 B1 B- 1,977,075
675,000 LIN Television Corp., Guaranteed Notes, Ser. B
6.50%, due 5/15/13 B1 B- 660,656
3,480,000 Paxson Communications, Secured Floating Rate Notes
11.61%, due 4/16/07 Caa2 CCC- 3,627,900 (n)(u)
2,540,000 Umbrella Acquisition, Inc., Senior Notes
9.75%, due 3/15/15 B3 CCC+ 2,530,475 (n)
1,315,000 Young Broadcasting, Inc., Guaranteed Notes
10.00%, due 3/1/11 Caa1 CCC- 1,295,275
1,560,000 Young Broadcasting, Inc., Senior Subordinated Note
8.75%, due 1/15/14 Caa1 CCC- 1,454,700
------------
16,926,031
MEDIA - CABLE - 4.3%
715,000 CCH I Holdings LLC, Guaranteed Notes
10.00%, due 5/15/14 Caa3 CCC CCC 638,138
3,453,000 CCH I Holdings LLC, Secured Notes
11.00%, due 10/1/15 Caa2 CCC CCC 3,582,487
1,350,000 Charter Communications Operating LLC, Senior Notes
8.00%, due 4/30/12 B3 B B 1,405,687 (n)
1,065,000 EchoStar DBS Corp., Guaranteed Notes
7.00%, due 10/1/13 Ba3 BB- BB- 1,096,950
1,355,000 EchoStar DBS Corp., Guaranteed Notes
7.13%, due 2/1/16 Ba3 BB- BB- 1,399,038
------------
8,122,300
MEDIA - SERVICES - 2.1%
1,330,000 WMG Acquisition Corp., Senior Subordinated Notes
7.38%, due 4/15/14 B2 B B+ 1,266,825
3,465,000 WMG Holdings Corp., Guaranteed Notes, Step-Up
0.00%/9.50%, due 12/15/14 B2 B B 2,650,725 (^^)
------------
3,917,550
METALS/MINING EXCLUDING STEEL - 6.2%
950,000 Aleris Int'l., Inc., Senior Notes
9.00%, due 12/15/14 B3 B- 1,002,250 (n)
1,160,000 Aleris Int'l., Inc., Senior Subordinated Notes
10.00%, due 12/15/16 Caa1 B- 1,212,200 (n)
2,065,000 Arch Western Finance Corp., Guaranteed Notes
6.75%, due 7/1/13 B1 BB- 2,031,444
425,000 Freeport-McMoRan Copper & Gold, Senior Unsecured Notes
8.25%, due 4/1/15 Ba3 BB- BB- 457,406
2,205,000 Freeport-McMoRan Copper & Gold, Senior Unsecured Notes
8.38%, due 4/1/17 Ba3 BB BB- 2,384,156
5
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
MARCH 31, 2007
(UNAUDITED)
PRINCIPAL MOODY'S S&P FITCH
AMOUNT DESCRIPTION RATINGS(*) RATINGS(*) RATINGS(*) VALUE (+)
------------------------------------------------------------------------------------------------------------------------------------
CORPORATE DEBT - CONTINUED
METALS/MINING EXCLUDING STEEL - CONTINUED
$ 3,855,000 Massey Energy Co., Guaranteed Senior Notes
6.88%, due 12/15/13 B2 B+ $ 3,657,431
775,000 Peabody Energy Corp., Guaranteed Senior Notes
6.88%, due 3/15/13 Ba1 BB BB+ 788,563
------------
11,533,450
NON-FOOD & DRUG RETAILERS - 2.0%
780,000 Blockbuster, Inc., Senior Subordinated Notes
9.00%, due 9/1/12 Caa2 CCC+ CC 787,800
1,225,000 Bon-Ton Department Stores, Inc., Guaranteed Notes
10.25%, due 3/15/14 B3 B- CCC 1,315,344
660,000 GSC Holdings Corp., Guaranteed Notes
8.00%, due 10/1/12 B1 B+ 699,600
1,500,000 Michaels Stores, Inc., Subordinated Notes, Step-Up
0.00%/13.00%, due 11/1/16 Caa1 CCC 945,000 (n)(^^)
------------
3,747,744
PACKAGING - 4.6%
4,570,000 Ball Corp., Guaranteed Notes
6.88%, due 12/15/12 Ba1 BB BB 4,615,700
1,260,000 Crown Americas LLC, Guaranteed Notes
7.75%, due 11/15/15 B1 B B+ 1,310,400
860,000 Graham Packaging Co., Inc., Guaranteed Notes
9.88%, due 10/15/14 Caa1 CCC+ CCC 877,200
1,730,000 Owens-Brockway Glass Container, Inc., Guaranteed Notes
8.75%, due 11/15/12 Ba2 BB- BB- 1,820,825
------------
8,624,125
PRINTING & PUBLISHING - 8.5%
290,000 Dex Media West LLC, Senior Unsecured Notes, Ser. B
8.50%, due 8/15/10 B1 B B 303,413
580,000 Dex Media West LLC, Guaranteed Notes, Ser. B
9.88%, due 8/15/13 B2 B B- 632,925
2,960,000 Dex Media, Inc., Senior Unsecured Notes
8.00%, due 11/15/13 B3 B CCC+ 3,100,600
3,560,000 Idearc, Inc., Senior Notes
8.00%, due 11/15/16 B2 B+ 3,662,350 (n)
300,000 Primedia, Inc., Senior Floating Rate Notes
10.74%, due 5/15/07 B2 B 310,500 (u)
2,435,000 Primedia, Inc., Guaranteed Senior Unsecured Notes
8.88%, due 5/15/11 B2 B 2,501,962
3,130,000 R.H. Donnelley Corp., Senior Unsecured Notes, Ser A-3
8.88%, due 1/15/16 B3 B CCC+ 3,325,625
2,175,000 Reader's Digest Association, Inc., Senior Subordinated
Notes 9.00%, due 2/15/17 Caa1 CCC+ 2,093,437 (n)
------------
15,930,812
RAILROADS - 1.5%
2,640,000 TFM SA de C.V., Senior Notes
9.38%, due 5/1/12 B3 B- B+ 2,838,000
6
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
MARCH 31, 2007
(UNAUDITED)
PRINCIPAL MOODY'S S&P FITCH
AMOUNT DESCRIPTION RATINGS(*) RATINGS(*) RATINGS(*) VALUE (+)
------------------------------------------------------------------------------------------------------------------------------------
CORPORATE DEBT - CONTINUED
REAL ESTATE DEV. & MGT. -1.5%
$ 1,470,000 American Real Estate Partners L.P., Guaranteed Note
7.13%, due 2/15/13 Ba3 BB+ $ 1,451,625
1,270,000 American Real Estate Partners, L.P., Senior Notes
8.13%, due 6/1/12 Ba3 BB+ 1,292,225
------------
2,743,850
RESTAURANTS - 0.6%
1,060,000 NPC Int'l., Inc., Guaranteed Notes
9.50%, due 5/1/14 Caa1 B- 1,097,100
SOFTWARE/SERVICES - 1.1%
1,955,000 SunGard Data Systems, Inc., Guaranteed Notes
9.13%, due 8/15/13 Caa1 B- B- 2,096,738
STEEL PRODUCERS/PRODUCTS - 1.0%
1,875,000 Tube City IMS Corp., Senior Subordinated Notes
9.75%, due 2/1/15 B3 B- 1,950,000 (n)
SUPPORT - SERVICES - 8.2%
845,000 Aramark Corp., Senior Floating Rate Notes
8.86%, due 5/1/07 B3 B- B- 868,238 (n)(u)
1,360,000 Aramark Corp., Senior Notes
8.50%, due 2/1/15 B3 B- B- 1,414,400 (n)
475,000 Education Management LLC, Guaranteed Notes
8.75%, due 6/1/14 B2 CCC+ 499,938
3,645,000 Knowledge Learning Corp., Inc., Guaranteed Notes
7.75%, due 2/1/15 B2 B- 3,581,212 (n)
3,105,000 Language Line, Inc., Guaranteed Notes
11.13%, due 6/15/12 B3 CCC+ 3,299,062
3,105,000 Monitronics Int'l., Inc., Guaranteed Notes
11.75%, due 9/1/10 B3 B- 3,244,725
2,230,000 Rural/Metro Corp., Guaranteed Notes
9.88%, due 3/15/15 B3 CCC+ 2,363,800
------------
15,271,375
TELECOM - FIXED LINE - 0.5%
845,000 Level 3 Financing, Inc., Senior Notes
9.25%, due 11/1/14 B3 CCC+ B 868,238 (n)
TELECOM - INTEGRATED/SERVICES - 8.3%
4,250,000 Citizens Utilities Co., Bonds
7.13%, due 3/15/19 Ba2 BB+ BB 4,265,937 (n)
1,335,000 Dycom Industries, Inc., Guaranteed Notes
8.13%, due 10/15/15 Ba3 B+ 1,401,750
2,200,000 Intelsat Bermuda Ltd., Guaranteed Notes
9.25%, due 6/15/16 B2 B+ BB- 2,436,500 (n)
1,020,000 Nordic Telephone Co. Holdings, Secured Notes
8.88%, due 5/1/16 B2 B B+ 1,091,400 (n)
1,095,000 Qwest Corp., Senior Notes
7.88%, due 9/1/11 Ba1 BB+ BBB- 1,163,438
1,495,000 Qwest Corp., Notes
8.88%, due 3/15/12 Ba1 BB+ BBB- 1,651,975
1,340,000 Windstream Corp., Guaranteed Notes
8.13%, due 8/1/13 Ba3 BB- BB+ 1,450,550
7
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS CONTINUED
MARCH 31, 2007
(UNAUDITED)
PRINCIPAL MOODY'S S&P FITCH
AMOUNT DESCRIPTION RATINGS(*) RATINGS(*) RATINGS(*) VALUE (+)
------------------------------------------------------------------------------------------------------------------------------------
CORPORATE DEBT - CONTINUED
TELECOM - INTEGRATED/SERVICES - CONTINUED
$ 1,910,000 Windstream Corp., Guaranteed Notes
8.63%, due 8/1/16 Ba3 BB- BB+ $ 2,089,062
------------
15,550,612
THEATERS & ENTERTAINMENT - 1.6%
1,230,000 AMC Entertainment, Inc., Guaranteed Notes, Ser. B
8.63%, due 8/15/12 Ba3 B- B 1,303,800
1,455,000 AMC Entertainment, Inc., Guaranteed Notes
11.00%, due 2/1/16 B3 CCC+ CCC+ 1,656,881
------------
2,960,681
TRANSPORTATION EXCLUDING AIR/RAIL - 1.1%
2,055,000 Stena AB, Senior Unsecured Notes
7.00%, due 12/1/16 Ba3 BB- 2,034,450
TOTAL CORPORATE DEBT (IDENTIFIED COST $250,191,821) 265,209,859
NUMBER OF
SHARES
SHORT-TERM INVESTMENTS - 6.0%
11,191,616 Neuberger Berman Prime Money Fund Trust Class 11,191,616 (#)(@)
(COST $11,191,616)
TOTAL INVESTMENTS - 147.9% 276,401,475 (##)
(IDENTIFIED COST $268,383,437)
Other Assets, Less Liabilities - 0.4% 759,261 (@@)
Money Market Cumulative Preferred Shares plus cumulative
unpaid dividends (48.3%) (90,297,687)
TOTAL NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS - 100% $186,863,049
See Notes to Schedule of Investments
8
LEHMAN BROTHERS MARCH 31, 2007 (UNAUDITED)
NOTES TO SCHEDULE OF INVESTMENTS
--------------------------------
(+) Investments in debt securities by Lehman Brothers First Trust Income
Opportunity Fund (the "Fund") are valued using an independent pricing
service approved by the Board of Trustees, which utilizes closing
market prices, market quotations and transactions, quotations from
dealers and various relationships among securities in determining
value. Securities for which closing market prices or market quotations
are not available or are not considered by Neuberger Berman
Management Inc. to be reflective of a security's market value, are
valued at fair value as determined in good faith by methods established
by and under the supervision of the Board of Trustees. Criteria
considered in making this determination may include, but are not
limited to, a review of other securities by the same issuer for which
market quotations are available, recent bid and ask prices for the
security, the issuer's position in an economic outlook of the industry
and, if necessary, a review of similar securities in similar
industries. 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, 2007, the cost of investments for U.S. federal income tax
purposes was $268,616,728. Gross unrealized appreciation of investments
was $8,584,551 and gross unrealized depreciation of investments was
$799,804, resulting in net unrealized appreciation of $7,784,747, based
on cost for U.S. federal income tax purposes.
@ 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, and have been deemed by the investment manager to be liquid.
At March 31, 2007, these securities amounted to $83,639,077 or 44.8% 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.
(00) All or a portion of this security is segregated as collateral for
interest rate swap contracts.
(u) Denotes a floating rate security, which is a security whose yields vary
with a designated market index or market rate. These securities are
shown at their current rates as of March 31, 2007.
(*) Where no rating appears from any NRSRO, the security is deemed unrated.
(@@) At March 31, 2007, the Fund had outstanding the following interest
rate swap contract:
RATE TYPE
-------------------------
FIXED-RATE VARIABLE-RATE ACCRUED NET
PAYMENTS PAYMENTS INTEREST UNREALIZED
SWAP COUNTER NOTIONAL TERMINATION MADE BY RECEIVED BY RECEIVABLE APPRECIATION TOTAL FAIR
PARTY AMOUNT DATE THE FUND THE FUND(1) (PAYABLE) (DEPRECIATION) VALUE
Citibank, N.A. $22,500,000 September 28, 2007 3.22% 5.32% $3,930 $230,690 $234,620
(1) 30 day LIBOR (London Interbank Offered Rate) at March 26, 2007.
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 Investment Company Act of 1940, as
amended (the "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 29, 2007
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 29, 2007
By: /s/ John M. McGovern
---------------------
John M. McGovern
Treasurer and Principal Financial
and Accounting Officer
Date: May 29, 2007