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 811-21342
Lehman Brothers First Trust Income Opportunity Fund
(Exact name of registrant as specified in charter)
c/o Lehman Brothers Asset Management Inc., 399 Park Avenue, New York, NY 10022
(Address of principal executive offices) (Zip code)
Peter E. Sundman, Chief Executive Officer c/o Lehman Brothers Asset Management Inc.
Lehman Brothers First Trust Income Opportunity Fund, 399 Park Avenue, New York, NY 10022
(Name and address of agent for service)
Arthur C. Delibert, Esq. Kirkpatrick & Lockhart Nicholson Graham LLP
1601 K Street, N.W. Washington, DC 20006-1600
(Name and address of agent for service)
Registrant's telephone number, including area code: (212)526-7000
Date of fiscal year end: 12/31/2006
Date of reporting period: 06/30/2006
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 20549-0609. The OMB has reviewed this collection of information
under the clearance requirements of 44 U.S.C. Section 3507.
ITEM 1. REPORTS TO STOCKHOLDERS.
The semi-annual report for the period January 1, 2006 through June 30, 2006
is filed herewith.
SEMI ANNUAL REPORT 2006
LEHMAN BROTHERS
FIRST TRUST INCOME
OPPORTUNITY FUND
[GRAPHIC]
LEHMAN BROTHERS
CONTENTS
Chairman's Letter 2
Portfolio Manager's Report 3
Fund Overview 4
Schedule of Investments 5
Notes to Schedule of Investments 15
Statement of Assets and Liabilities 16
Statement of Operations 17
Statements of Changes in Net Assets 18
Financial Highlights 19
Notes to Financial Statements 20
Shareholder Voting Results 24
Dividend Reinvestment Plan 26
Trustees and Officers Table 27
Approval of Advisory and Sub-Advisory Agreements by the Board of Trustees 35
CHAIRMAN'S LETTER
Dear Shareholder:
We are pleased to present to you the 2006 semi-annual report of Lehman Brothers
First Trust Income Opportunity Fund, covering the six months ended June 30,
2006. The report includes portfolio commentary, a listing of the Fund's
investments, and its financial statements for the reporting period.
High yield bonds posted positive returns for the reporting period, despite
higher interest rates and renewed concern over potentially higher inflation.
Declining equity markets, domestically and in selected emerging markets,
resulted in a modest increase in credit spreads at the end of June, compared to
narrower spread levels in the first three months of the year. Given that default
rates and interest rates remain low, lower-rated credits performed mildly better
than higher-rated, more interest-rate-sensitive issues. Overall, we continue to
anticipate that 2006 will prove to be a relatively good year for high yield
portfolios and we maintain our expectation for a positive full-year 2006 total
return.
The Fund's investment objective is to seek high total return through income plus
capital appreciation. The Fund pursues this investment objective by investing
primarily in high yield debt securities.* Its performance is dependent on
several factors, including the rate of interest received on securities held by
the Fund, the cost of distributions payable on Money Market Cumulative Preferred
Shares issued by the Fund, and the results of interest rate hedges used by the
Fund in seeking to manage short-term interest rate costs.
Portfolio Manager Ann H. Benjamin and her team of seasoned investment
professionals at Lehman Brothers Asset Management LLC manage the portfolio. The
team takes a proactive approach to high yield asset management, integrating
detailed security and industry analysis within the context of a global economic
outlook. Ann's portfolio co-managers and research analysts are industry
specialists who carry out independent primary research on companies and
industries. In addition to seeking value from specific issue selections, they
also implement strategies seeking to take advantage of valuation opportunities
across industry sectors and credit quality tiers.
We thank you for the trust you have placed in us by investing in the Lehman
Brothers First Trust Income Opportunity Fund. We will continue to do our best to
earn it.
Sincerely,
/s/ Peter Sundman
--------------------------------
Peter Sundman
CHAIRMAN OF THE BOARD
LEHMAN BROTHERS FIRST TRUST
INCOME OPPORTUNITY FUND
----------
* Portfolios that invest in bonds and other fixed income securities can
provide regular income and have historically been less volatile than most
stock funds. However, they are subject to risks including credit risk,
default on principal or interest payments and interest rate fluctuations.
High yield bonds, also known as "junk bonds," are subject to additional
risks such as the increased risk of default.
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND SEMI-ANNUAL REPORT 2006
PORTFOLIO MANAGER'S REPORT
For the semi-annual reporting period ended June 30, 2006, Lehman Brothers First
Trust Income Opportunity Fund (NYSE: LBC) returned 2.77% on a Net Asset Value
(NAV) basis.
High yield bonds produced positive results for the period, outperforming the
10-year Treasury, investment-grade corporate bonds, emerging market bonds and
the S&P 500 Index, despite an increase in the Federal Funds rate to 5.25% since
January and ongoing inflation concerns. Credit spreads in the high yield segment
widened modestly in the second half of the period from their levels in the first
three months of the year, primarily in reaction to declines in domestic equity
and emerging markets. From a quality standpoint, lower-rated credit issues
performed mildly better than higher-rated, more interest-rate-sensitive issues.
Our positioning in higher-quality, less cyclical issues hurt returns in the
first three months of the year, but benefited returns at the end of the
reporting period. In terms of sector contributions to portfolio returns, the
Automotive sector added value during the period while the Building Materials
sector modestly detracted from performance. Select investments in lower-rated
bonds within the Media, Health Care, Consumer Cyclical and Electric Utilities
sectors minimized the effect of rising interest rates on the Fund's overall
return.
We continue to anticipate that 2006 will prove to be a relatively good year for
high yield issues. We believe that default rates will continue to remain low and
that spreads will continue to stabilize. Some sectors, such as housing, may see
wider spreads in response to a slowdown in industry-specific growth. In terms of
quality and sector positioning, we expect that, over the next 12 months,
defensive industries should outperform cyclical industries. As always, we will
continue to position the portfolio in issuers that, in our opinion, present the
best relative value by sector and quality tier.
Sincerely,
/s/ Ann H. Benjamin
--------------------------------
Ann H. Benjamin
PORTFOLIO MANAGER
----------
Past performance is not indicative of future results.
Portfolios that invest in bonds and other fixed income securities can provide
regular income and have historically been less volatile than most stock funds.
However, they are subject to risks including credit risk, default on principal
or interest payments and interest rate fluctuations. High yield bonds, also
known as "junk bonds," are subject to additional risks such as the increased
risk of default.
3
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
FUND OVERVIEW (AS OF 06/30/06)(1)
PERFORMANCE HIGHLIGHTS(2)
3 MONTHS ENDED 6 MONTHS ENDED CUMULATIVE TOTAL
INCEPTION ----------------- -------------- RETURN SINCE
DATE 3/31/06 6/30/06 6/30/06 INCEPTION(3)
--------------------------------------------------------------------------------
NAV 07/28/03 2.52% 0.24% 2.77% 34.44%
Market Price 07/28/03 -4.97% -4.08% -8.84% 22.57%
FUND FACTS
Ticker NYSE: LBC
Market Price (06/30/2006) $ 13.58
Net Asset Value (NAV) $ 14.23
Premium / (Discount) (4.57%)
Shares outstanding: 12,248,410
CUSIP number: 525178 10 9
Inception Date: 7/28/03
PORTFOLIO CHARACTERISTICS
Portfolio Turnover 56.48%
Expense Ratio 1.57%
Wtd. Avg. Maturity 7.49 Years
Average Coupon 8.07%
Average Credit Quality B
Portfolio Composition - % High Yield 94.1%
CAPITAL STRUCTURE AND LEVERAGE ($ mm)
Total Net Assets $ 264.3
Net Assets Attributable to Common Shares $ 174.2
Net Assets Attributable to Preferred Shares $ 90.0
Net Assets Attributable to Other Borrowings --
Leverage (% of total net assets) 34.1%
CREDIT QUALITY BREAKDOWN
(% OF TOTAL INVESTMENTS AND CASH)
[CHART]
Cash (AAA) 2.5%
BBB 3.4%
BB 45.9%
B 40.3%
CCC 7.9%
MARKET PRICE AND NAV PERFORMANCE
[CHART]
Premium/
Price ($) NAV ($) Discount (%)
--------- ------- ------------
7/29/2003 $15.00 $15.00 0.00%
7/30/2003 $15.01 $15.00 0.10%
7/31/2003 $15.01 $14.30 5.00%
8/1/2003 $15.00 $14.26 5.20%
8/4/2003 $15.00 $14.27 5.10%
8/5/2003 $15.01 $14.21 5.60%
8/6/2003 $15.01 $14.12 6.30%
8/7/2003 $15.00 $14.12 6.20%
8/8/2003 $15.00 $14.16 5.90%
8/11/2003 $15.01 $14.14 6.20%
8/12/2003 $15.00 $14.11 6.30%
8/13/2003 $15.05 $14.04 7.20%
8/14/2003 $15.02 $13.97 7.50%
8/15/2003 $15.10 $13.98 8.00%
8/18/2003 $15.00 $14.03 6.90%
8/19/2003 $14.25 $14.17 0.60%
8/20/2003 $14.48 $14.28 1.40%
8/21/2003 $14.81 $14.36 3.10%
8/22/2003 $14.56 $14.39 1.20%
8/25/2003 $14.46 $14.43 0.20%
8/26/2003 $14.55 $14.45 0.70%
8/27/2003 $14.70 $14.48 1.50%
8/28/2003 $14.40 $14.53 -0.90%
8/29/2003 $14.45 $14.60 -1.00%
9/2/2003 $14.44 $14.69 -1.70%
9/3/2003 $14.62 $14.71 -0.60%
9/4/2003 $14.85 $14.73 0.80%
9/5/2003 $14.75 $14.75 0.00%
9/8/2003 $14.76 $14.76 0.00%
9/9/2003 $14.81 $14.80 0.10%
9/10/2003 $14.76 $14.82 -0.40%
9/11/2003 $14.90 $14.83 0.50%
9/12/2003 $14.93 $14.83 0.70%
9/15/2003 $14.40 $14.83 -2.90%
9/16/2003 $14.72 $14.83 -0.70%
9/17/2003 $14.82 $14.89 -0.50%
9/18/2003 $14.74 $14.79 -0.30%
9/19/2003 $14.90 $14.82 0.50%
9/22/2003 $14.86 $14.79 0.50%
9/23/2003 $14.82 $14.78 0.30%
9/24/2003 $14.85 $14.78 0.50%
9/25/2003 $14.86 $14.78 0.50%
9/26/2003 $14.92 $14.78 0.90%
9/29/2003 $14.84 $14.81 0.20%
9/30/2003 $14.86 $14.83 0.20%
10/1/2003 $14.87 $14.84 0.20%
10/2/2003 $14.86 $14.84 0.10%
10/3/2003 $14.93 $14.87 0.40%
10/6/2003 $15.01 $14.89 0.80%
10/7/2003 $15.00 $14.92 0.50%
10/8/2003 $15.09 $14.97 0.80%
10/9/2003 $15.12 $14.97 1.00%
10/10/2003 $15.14 $15.00 0.90%
10/13/2003 $15.14 $15.01 0.90%
10/14/2003 $15.20 $15.05 1.00%
10/15/2003 $15.28 $15.10 1.20%
10/16/2003 $15.15 $14.96 1.30%
10/17/2003 $15.10 $14.95 1.00%
10/20/2003 $15.09 $14.98 0.70%
10/21/2003 $15.11 $15.00 0.70%
10/22/2003 $15.20 $14.87 2.20%
10/23/2003 $15.23 $14.79 3.00%
10/24/2003 $15.23 $14.80 2.90%
10/27/2003 $15.23 $14.82 2.80%
10/28/2003 $15.08 $14.84 1.60%
10/29/2003 $15.19 $14.85 2.30%
10/30/2003 $15.10 $14.87 1.50%
10/31/2003 $15.25 $14.88 2.50%
11/3/2003 $15.24 $14.91 2.20%
11/4/2003 $15.27 $14.93 2.30%
11/5/2003 $15.25 $14.93 2.10%
11/6/2003 $15.29 $14.93 2.40%
11/7/2003 $15.27 $14.94 2.20%
11/10/2003 $15.29 $14.95 2.30%
11/11/2003 $15.33 $14.95 2.50%
11/12/2003 $15.39 $14.94 3.00%
11/13/2003 $15.42 $14.97 3.00%
11/14/2003 $15.48 $15.01 3.10%
11/17/2003 $15.35 $15.04 2.10%
11/18/2003 $15.25 $15.07 1.20%
11/19/2003 $15.25 $15.08 1.10%
11/20/2003 $15.16 $14.96 1.30%
11/21/2003 $15.14 $14.99 1.00%
11/24/2003 $15.02 $15.01 0.10%
11/25/2003 $15.15 $15.03 0.80%
11/26/2003 $15.08 $15.04 0.30%
11/28/2003 $15.26 $15.06 1.30%
12/1/2003 $15.30 $15.10 1.30%
12/2/2003 $15.34 $15.15 1.30%
12/3/2003 $15.44 $15.25 1.20%
12/4/2003 $15.35 $15.30 0.30%
12/5/2003 $15.36 $15.34 0.10%
12/8/2003 $15.26 $15.39 -0.80%
12/9/2003 $15.21 $15.41 -1.30%
12/10/2003 $15.24 $15.42 -1.20%
12/11/2003 $15.28 $15.41 -0.80%
12/12/2003 $15.32 $15.43 -0.70%
12/15/2003 $15.42 $15.46 -0.30%
12/16/2003 $15.60 $15.49 0.70%
12/17/2003 $15.39 $15.53 -0.90%
12/18/2003 $15.43 $15.57 -0.90%
12/19/2003 $15.43 $15.60 -1.10%
12/22/2003 $15.52 $15.63 -0.70%
12/23/2003 $15.41 $15.44 -0.20%
12/24/2003 $15.41 $15.45 -0.30%
12/26/2003 $15.49 $15.46 0.20%
12/29/2003 $15.45 $15.48 -0.20%
12/30/2003 $15.55 $15.51 0.30%
12/31/2003 $15.91 $15.51 2.60%
1/2/2004 $15.85 $15.51 2.20%
1/5/2004 $15.86 $15.63 1.50%
1/6/2004 $15.92 $15.74 1.10%
1/7/2004 $15.85 $15.83 0.10%
1/8/2004 $15.65 $15.88 -1.40%
1/9/2004 $15.79 $15.92 -0.80%
1/12/2004 $15.84 $15.93 -0.60%
1/13/2004 $15.85 $15.92 -0.40%
1/14/2004 $16.02 $15.93 0.60%
1/15/2004 $16.25 $15.96 1.80%
1/16/2004 $16.59 $15.98 3.80%
1/20/2004 $16.69 $16.03 4.10%
1/21/2004 $16.43 $15.91 3.30%
1/22/2004 $16.50 $15.95 3.40%
1/23/2004 $16.25 $15.95 1.90%
1/26/2004 $16.14 $15.92 1.40%
1/27/2004 $15.97 $15.86 0.70%
1/28/2004 $15.98 $15.76 1.40%
1/29/2004 $15.90 $15.64 1.70%
1/30/2004 $16.10 $15.60 3.20%
2/2/2004 $16.08 $15.53 3.50%
2/3/2004 $16.07 $15.45 4.00%
2/4/2004 $16.01 $15.40 4.00%
2/5/2004 $15.97 $15.31 4.30%
2/6/2004 $16.00 $15.31 4.50%
2/9/2004 $16.19 $15.40 5.10%
2/10/2004 $16.15 $15.39 4.90%
2/11/2004 $16.39 $15.41 6.40%
2/12/2004 $16.42 $15.48 6.10%
2/13/2004 $16.52 $15.49 6.60%
2/17/2004 $16.30 $15.52 5.00%
2/18/2004 $16.25 $15.31 6.10%
2/19/2004 $16.16 $15.25 6.00%
2/20/2004 $15.99 $15.22 5.10%
2/23/2004 $16.00 $15.17 5.50%
2/24/2004 $15.41 $15.10 2.10%
2/25/2004 $15.70 $15.13 3.80%
2/26/2004 $15.80 $15.11 4.60%
2/27/2004 $16.17 $15.17 6.60%
3/1/2004 $16.25 $15.20 6.90%
3/2/2004 $16.29 $15.20 7.20%
3/3/2004 $16.16 $15.19 6.40%
3/4/2004 $16.16 $15.21 6.20%
3/5/2004 $16.03 $15.27 5.00%
3/8/2004 $16.10 $15.32 5.10%
3/9/2004 $16.30 $15.32 6.40%
3/10/2004 $16.21 $15.28 6.10%
3/11/2004 $16.00 $15.23 5.10%
3/12/2004 $16.22 $15.25 6.40%
3/15/2004 $16.32 $15.22 7.20%
3/16/2004 $16.33 $15.14 7.90%
3/17/2004 $16.17 $15.17 6.60%
3/18/2004 $16.37 $15.14 8.10%
3/19/2004 $16.43 $15.12 8.70%
3/22/2004 $16.05 $14.97 7.20%
3/23/2004 $16.10 $14.92 7.90%
3/24/2004 $15.82 $14.91 6.10%
3/25/2004 $15.95 $14.93 6.80%
3/26/2004 $16.02 $14.98 6.90%
3/29/2004 $16.09 $15.05 6.90%
3/30/2004 $16.09 $15.08 6.70%
3/31/2004 $16.20 $15.09 7.40%
4/1/2004 $16.17 $15.10 7.10%
4/2/2004 $16.16 $15.06 7.30%
4/5/2004 $16.23 $15.08 7.60%
4/6/2004 $16.00 $15.12 5.80%
4/7/2004 $15.82 $15.15 4.40%
4/8/2004 $15.90 $15.16 4.90%
4/9/2004 $15.90 $15.17 4.80%
4/12/2004 $15.75 $15.20 3.60%
4/13/2004 $15.30 $15.15 1.00%
4/14/2004 $14.94 $15.10 -1.10%
4/15/2004 $14.77 $15.13 -2.40%
4/16/2004 $14.82 $15.17 -2.30%
4/19/2004 $15.05 $15.19 -0.90%
4/20/2004 $15.04 $15.20 -1.10%
4/21/2004 $14.92 $15.06 -0.90%
4/22/2004 $14.81 $15.12 -2.10%
4/23/2004 $14.90 $15.14 -1.60%
4/26/2004 $15.00 $15.14 -0.90%
4/27/2004 $14.77 $15.17 -2.60%
4/28/2004 $14.71 $15.14 -2.80%
4/29/2004 $14.66 $15.03 -2.50%
4/30/2004 $14.71 $15.02 -2.10%
5/3/2004 $14.72 $14.99 -1.80%
5/4/2004 $14.50 $14.92 -2.80%
5/5/2004 $14.75 $14.89 -0.90%
5/6/2004 $14.65 $14.77 -0.80%
5/7/2004 $14.39 $14.65 -1.80%
5/10/2004 $13.99 $14.47 -3.30%
5/11/2004 $13.83 $14.45 -4.30%
5/12/2004 $14.08 $14.39 -2.20%
5/13/2004 $13.95 $14.27 -2.20%
5/14/2004 $13.98 $14.25 -1.90%
5/17/2004 $13.77 $14.29 -3.60%
5/18/2004 $13.76 $14.36 -4.20%
5/19/2004 $13.79 $14.33 -3.80%
5/20/2004 $13.84 $14.29 -3.10%
5/21/2004 $13.87 $14.35 -3.30%
5/24/2004 $13.89 $14.41 -3.60%
5/25/2004 $14.20 $14.46 -1.80%
5/26/2004 $14.55 $14.50 0.30%
5/27/2004 $14.80 $14.51 2.00%
5/28/2004 $14.94 $14.54 2.80%
6/1/2004 $14.65 $14.52 0.90%
6/2/2004 $14.79 $14.54 1.70%
6/3/2004 $14.82 $14.50 2.20%
6/4/2004 $14.95 $14.54 2.80%
6/7/2004 $14.97 $14.58 2.70%
6/8/2004 $14.97 $14.62 2.40%
6/9/2004 $14.99 $14.64 2.40%
6/10/2004 $14.98 $14.62 2.50%
6/11/2004 $14.98 $14.63 2.40%
6/14/2004 $14.71 $14.63 0.50%
6/15/2004 $14.86 $14.62 1.60%
6/16/2004 $14.74 $14.66 0.50%
6/17/2004 $14.94 $14.69 1.70%
6/18/2004 $14.95 $14.71 1.60%
6/21/2004 $14.73 $14.62 0.80%
6/22/2004 $14.90 $14.64 1.80%
6/23/2004 $14.78 $14.64 1.00%
6/24/2004 $14.69 $14.67 0.10%
6/25/2004 $14.75 $14.69 0.40%
6/28/2004 $14.63 $14.70 -0.50%
6/29/2004 $14.86 $14.69 1.20%
6/30/2004 $14.85 $14.67 1.20%
7/1/2004 $15.00 $14.69 2.10%
7/2/2004 $14.94 $14.72 1.50%
7/6/2004 $14.98 $14.79 1.30%
7/7/2004 $14.90 $14.81 0.60%
7/8/2004 $15.02 $14.82 1.30%
7/9/2004 $15.00 $14.85 1.00%
7/12/2004 $15.02 $14.89 0.90%
7/13/2004 $15.05 $14.91 0.90%
7/14/2004 $15.19 $14.93 1.70%
7/15/2004 $15.22 $14.95 1.80%
7/16/2004 $15.20 $14.98 1.50%
7/19/2004 $15.15 $15.03 0.80%
7/20/2004 $15.26 $15.07 1.30%
7/21/2004 $15.20 $14.89 2.10%
7/22/2004 $15.15 $14.86 2.00%
7/23/2004 $15.18 $14.85 2.20%
7/26/2004 $15.15 $14.82 2.20%
7/27/2004 $15.06 $14.74 2.20%
7/28/2004 $15.19 $14.76 2.90%
7/29/2004 $15.19 $14.76 2.90%
7/30/2004 $15.15 $14.82 2.20%
8/2/2004 $15.16 $14.82 2.30%
8/3/2004 $15.20 $14.81 2.60%
8/4/2004 $15.38 $14.81 3.80%
8/5/2004 $15.43 $14.83 4.00%
8/6/2004 $15.37 $14.86 3.40%
8/9/2004 $15.40 $14.86 3.60%
8/10/2004 $15.34 $14.79 3.70%
8/11/2004 $15.45 $14.78 4.50%
8/12/2004 $15.53 $14.79 5.00%
8/13/2004 $15.44 $14.81 4.30%
8/16/2004 $15.55 $14.82 4.90%
8/17/2004 $15.55 $14.83 4.90%
8/18/2004 $15.49 $14.85 4.30%
8/19/2004 $15.48 $14.88 4.00%
8/20/2004 $15.55 $14.88 4.50%
8/23/2004 $15.32 $14.79 3.60%
8/24/2004 $15.38 $14.81 3.80%
8/25/2004 $15.31 $14.83 3.20%
8/26/2004 $15.39 $14.85 3.60%
8/27/2004 $15.49 $14.85 4.30%
8/30/2004 $15.59 $14.87 4.80%
8/31/2004 $15.58 $14.87 4.80%
9/1/2004 $15.54 $14.89 4.40%
9/2/2004 $15.52 $14.89 4.20%
9/3/2004 $15.53 $14.91 4.20%
9/7/2004 $15.65 $14.94 4.80%
9/8/2004 $15.47 $14.97 3.30%
9/9/2004 $15.61 $15.02 3.90%
9/10/2004 $15.73 $15.06 4.40%
9/13/2004 $15.78 $15.12 4.40%
9/14/2004 $15.76 $15.12 4.20%
9/15/2004 $15.84 $15.09 5.00%
9/16/2004 $15.88 $15.10 5.20%
9/17/2004 $15.85 $15.11 4.90%
9/20/2004 $15.87 $15.13 4.90%
9/21/2004 $15.57 $15.01 3.70%
9/22/2004 $15.60 $15.03 3.80%
9/23/2004 $15.59 $15.07 3.50%
9/24/2004 $15.67 $15.03 4.30%
9/27/2004 $15.79 $15.04 5.00%
9/28/2004 $15.82 $15.03 5.30%
9/29/2004 $15.80 $15.03 5.10%
9/30/2004 $15.93 $15.02 6.10%
10/1/2004 $15.75 $15.03 4.80%
10/4/2004 $15.82 $15.05 5.10%
10/5/2004 $15.80 $15.08 4.80%
10/6/2004 $15.94 $15.12 5.40%
10/7/2004 $15.89 $15.13 5.00%
10/8/2004 $15.93 $15.15 5.10%
10/11/2004 $16.04 $15.16 5.80%
10/12/2004 $15.91 $15.20 4.70%
10/13/2004 $16.06 $15.18 5.80%
10/14/2004 $16.11 $15.20 6.00%
10/15/2004 $16.29 $15.20 7.20%
10/18/2004 $16.35 $15.20 7.60%
10/19/2004 $16.30 $15.19 7.30%
10/20/2004 $16.26 $15.04 8.10%
10/21/2004 $16.16 $15.07 7.20%
10/22/2004 $16.13 $15.08 7.00%
10/25/2004 $16.25 $15.12 7.50%
10/26/2004 $16.08 $15.16 6.10%
10/27/2004 $15.87 $15.20 4.40%
10/28/2004 $15.91 $15.24 4.40%
10/29/2004 $15.86 $15.32 3.50%
11/1/2004 $15.92 $15.34 3.80%
11/2/2004 $16.16 $15.37 5.10%
11/3/2004 $16.16 $15.44 4.70%
11/4/2004 $16.31 $15.51 5.20%
11/5/2004 $16.30 $15.53 5.00%
11/8/2004 $15.94 $15.53 2.60%
11/9/2004 $15.83 $15.52 2.00%
11/10/2004 $15.98 $15.47 3.30%
11/11/2004 $16.10 $15.46 4.10%
11/12/2004 $16.10 $15.49 3.90%
11/15/2004 $16.25 $15.52 4.70%
11/16/2004 $16.25 $15.53 4.60%
11/17/2004 $16.31 $15.54 5.00%
11/18/2004 $16.26 $15.58 4.40%
11/19/2004 $16.35 $15.57 5.00%
11/22/2004 $16.28 $15.44 5.40%
11/23/2004 $16.30 $15.46 5.40%
11/24/2004 $16.34 $15.47 5.60%
11/26/2004 $16.34 $15.48 5.60%
11/29/2004 $16.20 $15.46 4.80%
11/30/2004 $16.10 $15.41 4.50%
12/1/2004 $16.23 $15.41 5.30%
12/2/2004 $16.00 $15.40 3.90%
12/3/2004 $16.40 $15.43 6.30%
12/6/2004 $16.27 $15.46 5.20%
12/7/2004 $16.29 $15.48 5.20%
12/8/2004 $16.31 $15.51 5.20%
12/9/2004 $16.18 $15.54 4.10%
12/10/2004 $16.10 $15.55 3.50%
12/13/2004 $16.24 $15.58 4.20%
12/14/2004 $16.43 $15.60 5.30%
12/15/2004 $16.45 $15.64 5.20%
12/16/2004 $16.41 $15.64 4.90%
12/17/2004 $16.48 $15.63 5.40%
12/20/2004 $16.24 $15.51 4.70%
12/21/2004 $16.20 $15.53 4.30%
12/22/2004 $16.08 $15.54 3.50%
12/23/2004 $16.26 $15.55 4.60%
12/24/2004 $16.26 $15.55 4.60%
12/27/2004 $16.09 $15.57 3.30%
12/28/2004 $16.15 $15.56 3.80%
12/29/2004 $16.28 $15.57 4.60%
12/30/2004 $16.39 $15.59 5.10%
12/31/2004 $16.48 $15.59 5.70%
1/3/2005 $16.27 $15.63 4.10%
1/4/2005 $16.30 $15.65 4.20%
1/5/2005 $16.23 $15.61 4.00%
1/6/2005 $16.14 $15.60 3.50%
1/7/2005 $15.98 $15.61 2.40%
1/10/2005 $16.30 $15.60 4.50%
1/11/2005 $16.33 $15.55 5.00%
1/12/2005 $16.36 $15.55 5.20%
1/13/2005 $16.37 $15.54 5.30%
1/14/2005 $16.30 $15.53 5.00%
1/18/2005 $16.33 $15.51 5.30%
1/19/2005 $16.17 $15.54 4.10%
1/20/2005 $16.01 $15.37 4.20%
1/21/2005 $16.00 $15.36 4.20%
1/24/2005 $15.99 $15.38 4.00%
1/25/2005 $16.06 $15.40 4.30%
1/26/2005 $15.91 $15.42 3.20%
1/27/2005 $15.96 $15.45 3.30%
1/28/2005 $15.91 $15.46 2.90%
1/31/2005 $15.91 $15.49 2.70%
2/1/2005 $15.93 $15.51 2.70%
2/2/2005 $15.91 $15.56 2.20%
2/3/2005 $15.85 $15.60 1.60%
2/4/2005 $15.84 $15.65 1.20%
2/7/2005 $15.89 $15.70 1.20%
2/8/2005 $15.98 $15.75 1.50%
2/9/2005 $16.00 $15.70 1.90%
2/10/2005 $15.99 $15.68 2.00%
2/11/2005 $15.99 $15.68 2.00%
2/14/2005 $16.05 $15.70 2.20%
2/15/2005 $16.00 $15.72 1.80%
2/16/2005 $15.78 $15.63 1.00%
2/17/2005 $15.81 $15.64 1.10%
2/18/2005 $15.73 $15.64 0.60%
2/22/2005 $15.39 $15.64 -1.60%
2/23/2005 $15.21 $15.66 -2.90%
2/24/2005 $15.41 $15.69 -1.80%
2/25/2005 $15.53 $15.72 -1.20%
2/28/2005 $15.50 $15.75 -1.60%
3/1/2005 $15.53 $15.73 -1.30%
3/2/2005 $15.48 $15.71 -1.50%
3/3/2005 $15.46 $15.72 -1.70%
3/4/2005 $15.44 $15.73 -1.80%
3/7/2005 $15.44 $15.78 -2.20%
3/8/2005 $15.48 $15.78 -1.90%
3/9/2005 $15.25 $15.73 -3.10%
3/10/2005 $15.22 $15.73 -3.20%
3/11/2005 $15.23 $15.69 -2.90%
3/14/2005 $15.30 $15.66 -2.30%
3/15/2005 $15.07 $15.65 -3.70%
3/16/2005 $15.00 $15.53 -3.40%
3/17/2005 $15.09 $15.46 -2.40%
3/18/2005 $15.05 $15.45 -2.60%
3/21/2005 $14.93 $15.21 -1.80%
3/22/2005 $14.99 $15.12 -0.90%
3/23/2005 $14.67 $15.01 -2.30%
3/24/2005 $14.20 $15.02 -5.50%
3/25/2005 $14.20 $15.03 -5.50%
3/28/2005 $14.16 $15.00 -5.60%
3/29/2005 $14.22 $14.94 -4.80%
3/30/2005 $14.42 $14.85 -2.90%
3/31/2005 $14.85 $14.83 0.10%
4/1/2005 $14.78 $14.85 -0.50%
4/4/2005 $14.76 $14.81 -0.30%
4/5/2005 $14.92 $14.84 0.50%
4/6/2005 $14.90 $14.94 -0.30%
4/7/2005 $14.90 $15.01 -0.70%
4/8/2005 $15.00 $15.03 -0.20%
4/11/2005 $14.95 $14.98 -0.20%
4/12/2005 $14.89 $14.94 -0.30%
4/13/2005 $14.89 $14.94 -0.30%
4/14/2005 $14.85 $14.80 0.30%
4/15/2005 $14.58 $14.68 -0.70%
4/18/2005 $14.68 $14.61 0.50%
4/19/2005 $14.74 $14.67 0.50%
4/20/2005 $14.75 $14.60 1.00%
4/21/2005 $14.60 $14.65 -0.30%
4/22/2005 $14.68 $14.66 0.10%
4/25/2005 $14.71 $14.66 0.30%
4/26/2005 $14.61 $14.59 0.10%
4/27/2005 $14.65 $14.48 1.20%
4/28/2005 $14.58 $14.43 1.00%
4/29/2005 $14.72 $14.38 2.40%
5/2/2005 $14.82 $14.44 2.60%
5/3/2005 $14.80 $14.45 2.40%
5/4/2005 $14.75 $14.50 1.70%
5/5/2005 $14.93 $14.51 2.90%
5/6/2005 $14.94 $14.45 3.40%
5/9/2005 $14.76 $14.47 2.00%
5/10/2005 $14.91 $14.45 3.20%
5/11/2005 $14.90 $14.37 3.70%
5/12/2005 $14.90 $14.35 3.80%
5/13/2005 $14.87 $14.27 4.20%
5/16/2005 $14.89 $14.12 5.50%
5/17/2005 $14.72 $14.04 4.80%
5/18/2005 $14.83 $14.10 5.20%
5/19/2005 $14.89 $14.09 5.70%
5/20/2005 $14.86 $14.16 4.90%
5/23/2005 $14.75 $14.25 3.50%
5/24/2005 $14.70 $14.28 2.90%
5/25/2005 $14.75 $14.39 2.50%
5/26/2005 $14.68 $14.50 1.20%
5/27/2005 $14.78 $14.56 1.50%
5/31/2005 $15.01 $14.65 2.50%
6/1/2005 $15.08 $14.75 2.20%
6/2/2005 $15.04 $14.89 1.00%
6/3/2005 $15.01 $14.94 0.50%
6/6/2005 $15.03 $14.88 1.00%
6/7/2005 $15.13 $14.89 1.60%
6/8/2005 $15.07 $14.86 1.40%
6/9/2005 $15.06 $14.84 1.50%
6/10/2005 $15.13 $14.87 1.70%
6/13/2005 $15.18 $14.89 1.90%
6/14/2005 $15.29 $14.92 2.50%
6/15/2005 $15.25 $14.96 1.90%
6/16/2005 $15.30 $14.95 2.30%
6/17/2005 $15.34 $14.95 2.60%
6/20/2005 $15.20 $14.81 2.60%
6/21/2005 $15.24 $14.83 2.80%
6/22/2005 $15.23 $14.84 2.60%
6/23/2005 $15.25 $14.85 2.70%
6/24/2005 $15.17 $14.84 2.30%
6/27/2005 $15.22 $14.80 2.80%
6/28/2005 $15.19 $14.87 2.20%
6/29/2005 $15.25 $14.91 2.30%
6/30/2005 $15.27 $14.95 2.10%
7/1/2005 $15.31 $14.96 2.30%
7/5/2005 $15.40 $14.94 3.10%
7/6/2005 $15.60 $14.95 4.30%
7/7/2005 $15.65 $14.95 4.70%
7/8/2005 $15.70 $14.98 4.80%
7/11/2005 $15.75 $15.06 4.60%
7/12/2005 $15.90 $15.11 5.20%
7/13/2005 $15.77 $15.13 4.20%
7/14/2005 $15.94 $15.16 5.10%
7/15/2005 $15.95 $15.16 5.20%
7/18/2005 $15.98 $15.16 5.40%
7/19/2005 $15.99 $15.16 5.50%
7/20/2005 $15.79 $15.02 5.10%
7/21/2005 $15.76 $15.03 4.90%
7/22/2005 $15.92 $15.04 5.90%
7/25/2005 $15.93 $15.07 5.70%
7/26/2005 $15.86 $15.09 5.10%
7/27/2005 $15.96 $15.11 5.60%
7/28/2005 $15.89 $15.14 5.00%
7/29/2005 $15.93 $15.15 5.10%
8/1/2005 $15.91 $15.13 5.20%
8/2/2005 $15.92 $15.13 5.20%
8/3/2005 $15.77 $15.12 4.30%
8/4/2005 $15.76 $15.11 4.30%
8/5/2005 $15.49 $15.06 2.90%
8/8/2005 $15.27 $15.01 1.70%
8/9/2005 $15.25 $15.03 1.50%
8/10/2005 $15.53 $15.05 3.20%
8/11/2005 $15.54 $15.07 3.10%
8/12/2005 $15.55 $15.10 3.00%
8/15/2005 $15.67 $15.10 3.80%
8/16/2005 $15.68 $15.12 3.70%
8/17/2005 $15.80 $15.12 4.50%
8/18/2005 $15.86 $15.15 4.70%
8/19/2005 $15.98 $15.17 5.30%
8/22/2005 $15.89 $15.02 5.80%
8/23/2005 $15.95 $15.05 6.00%
8/24/2005 $15.91 $15.06 5.60%
8/25/2005 $15.83 $15.09 4.90%
8/26/2005 $15.85 $15.10 5.00%
8/29/2005 $15.87 $15.09 5.20%
8/30/2005 $15.86 $15.07 5.20%
8/31/2005 $15.82 $15.05 5.10%
9/1/2005 $15.71 $15.04 4.50%
9/2/2005 $15.70 $15.02 4.50%
9/6/2005 $15.71 $15.04 4.50%
9/7/2005 $15.78 $15.04 4.90%
9/8/2005 $15.81 $15.05 5.00%
9/9/2005 $15.90 $15.06 5.60%
9/12/2005 $15.97 $15.07 6.00%
9/13/2005 $15.99 $15.08 6.00%
9/14/2005 $15.96 $15.07 5.90%
9/15/2005 $15.79 $15.05 4.90%
9/16/2005 $15.82 $15.01 5.40%
9/19/2005 $15.80 $14.96 5.60%
9/20/2005 $15.87 $14.91 6.40%
9/21/2005 $15.79 $14.75 7.10%
9/22/2005 $15.73 $14.71 6.90%
9/23/2005 $15.73 $14.72 6.90%
9/26/2005 $15.72 $14.76 6.50%
9/27/2005 $15.74 $14.74 6.80%
9/28/2005 $15.54 $14.73 5.50%
9/29/2005 $15.57 $14.73 5.70%
9/30/2005 $15.64 $14.73 6.20%
10/3/2005 $15.87 $14.74 7.70%
10/4/2005 $15.85 $14.75 7.50%
10/5/2005 $15.65 $14.73 6.20%
10/6/2005 $15.55 $14.70 5.80%
10/7/2005 $15.84 $14.68 7.90%
10/10/2005 $15.78 $14.70 7.30%
10/11/2005 $15.53 $14.62 6.20%
10/12/2005 $15.50 $14.53 6.70%
10/13/2005 $15.12 $14.44 4.70%
10/14/2005 $15.30 $14.50 5.50%
10/17/2005 $15.42 $14.62 5.50%
10/18/2005 $15.50 $14.69 5.50%
10/19/2005 $15.46 $14.68 5.30%
10/20/2005 $15.13 $14.55 4.00%
10/21/2005 $15.05 $14.61 3.00%
10/24/2005 $15.20 $14.61 4.00%
10/25/2005 $15.37 $14.61 5.20%
10/26/2005 $15.46 $14.52 6.50%
10/27/2005 $15.24 $14.48 5.20%
10/28/2005 $15.10 $14.45 4.50%
10/31/2005 $15.14 $14.48 4.60%
11/1/2005 $15.10 $14.50 4.10%
11/2/2005 $15.15 $14.50 4.50%
11/3/2005 $15.11 $14.52 4.10%
11/4/2005 $15.16 $14.51 4.50%
11/7/2005 $15.12 $14.55 3.90%
11/8/2005 $15.17 $14.54 4.30%
11/9/2005 $15.30 $14.51 5.40%
11/10/2005 $15.29 $14.49 5.50%
11/11/2005 $15.40 $14.50 6.20%
11/14/2005 $15.52 $14.45 7.40%
11/15/2005 $15.54 $14.45 7.50%
11/16/2005 $15.57 $14.42 8.00%
11/17/2005 $15.46 $14.40 7.40%
11/18/2005 $15.36 $14.32 7.30%
11/21/2005 $15.29 $14.35 6.60%
11/22/2005 $15.33 $14.37 6.70%
11/23/2005 $15.31 $14.37 6.50%
11/25/2005 $15.36 $14.38 6.80%
11/28/2005 $15.40 $14.42 6.80%
11/29/2005 $15.40 $14.45 6.60%
11/30/2005 $15.24 $14.45 5.50%
12/1/2005 $15.40 $14.47 6.40%
12/2/2005 $15.46 $14.50 6.60%
12/5/2005 $15.36 $14.48 6.10%
12/6/2005 $15.30 $14.49 5.60%
12/7/2005 $15.50 $14.49 7.00%
12/8/2005 $15.47 $14.49 6.80%
12/9/2005 $15.60 $14.53 7.40%
12/12/2005 $15.64 $14.55 7.50%
12/13/2005 $15.54 $14.57 6.70%
12/14/2005 $15.50 $14.59 6.20%
12/15/2005 $15.56 $14.57 6.80%
12/16/2005 $15.67 $14.59 7.40%
12/19/2005 $15.64 $14.61 7.00%
12/20/2005 $15.64 $14.44 8.30%
12/21/2005 $15.64 $14.44 8.30%
12/22/2005 $15.60 $14.46 7.90%
12/23/2005 $15.69 $14.46 8.50%
12/27/2005 $15.60 $14.49 7.70%
12/28/2005 $15.51 $14.50 7.00%
12/29/2005 $15.50 $14.50 6.90%
12/30/2005 $15.61 $14.51 7.60%
1/3/2006 $15.71 $14.54 8.00%
1/4/2006 $15.68 $14.58 7.50%
1/5/2006 $15.70 $14.63 7.30%
1/6/2006 $15.64 $14.68 6.50%
1/9/2006 $15.78 $14.72 7.20%
1/10/2006 $15.84 $14.70 7.80%
1/11/2006 $15.81 $14.69 7.60%
1/12/2006 $15.62 $14.67 6.50%
1/13/2006 $15.12 $14.68 3.00%
1/17/2006 $14.75 $14.64 0.80%
1/18/2006 $14.78 $14.65 0.90%
1/19/2006 $14.87 $14.56 2.10%
1/20/2006 $14.80 $14.54 1.80%
1/23/2006 $14.73 $14.56 1.20%
1/24/2006 $14.50 $14.59 -0.60%
1/25/2006 $14.26 $14.60 -2.30%
1/26/2006 $13.81 $14.59 -5.30%
1/27/2006 $14.08 $14.60 -3.60%
1/30/2006 $13.92 $14.64 -4.90%
1/31/2006 $14.04 $14.64 -4.10%
2/1/2006 $14.08 $14.65 -3.90%
2/2/2006 $14.27 $14.65 -2.60%
2/3/2006 $14.17 $14.64 -3.20%
2/6/2006 $14.20 $14.66 -3.10%
2/7/2006 $14.28 $14.61 -2.30%
2/8/2006 $14.42 $14.62 -1.40%
2/9/2006 $14.37 $14.62 -1.70%
2/10/2006 $14.34 $14.62 -1.90%
2/13/2006 $14.35 $14.62 -1.80%
2/14/2006 $14.55 $14.59 -0.30%
2/15/2006 $14.40 $14.61 -1.40%
2/16/2006 $14.59 $14.52 0.50%
2/17/2006 $14.65 $14.57 0.50%
2/21/2006 $14.69 $14.59 0.70%
2/22/2006 $14.94 $14.62 2.20%
2/23/2006 $15.20 $14.62 4.00%
2/24/2006 $15.05 $14.63 2.90%
2/27/2006 $14.97 $14.64 2.30%
2/28/2006 $15.09 $14.64 3.10%
3/1/2006 $15.04 $14.62 2.90%
3/2/2006 $15.13 $14.59 3.70%
3/3/2006 $14.95 $14.58 2.50%
3/6/2006 $14.94 $14.57 2.50%
3/7/2006 $14.90 $14.53 2.50%
3/8/2006 $15.00 $14.52 3.30%
3/9/2006 $14.96 $14.50 3.20%
3/10/2006 $14.95 $14.50 3.10%
3/13/2006 $14.90 $14.51 2.70%
3/14/2006 $14.93 $14.54 2.70%
3/15/2006 $14.92 $14.56 2.50%
3/16/2006 $15.03 $14.60 2.90%
3/17/2006 $15.00 $14.61 2.70%
3/20/2006 $15.02 $14.63 2.70%
3/21/2006 $14.89 $14.53 2.50%
3/22/2006 $14.98 $14.54 3.00%
3/23/2006 $14.86 $14.54 2.20%
3/24/2006 $14.88 $14.55 2.30%
3/27/2006 $14.82 $14.56 1.80%
3/28/2006 $14.61 $14.57 0.30%
3/29/2006 $14.65 $14.53 0.80%
3/30/2006 $14.45 $14.52 -0.50%
3/31/2006 $14.50 $14.54 -0.30%
4/3/2006 $14.47 $14.56 -0.60%
4/4/2006 $14.41 $14.56 -1.00%
4/5/2006 $14.36 $14.56 -1.40%
4/6/2006 $14.32 $14.54 -1.50%
4/7/2006 $14.09 $14.54 -3.10%
4/10/2006 $13.97 $14.53 -3.90%
4/11/2006 $13.94 $14.55 -4.20%
4/12/2006 $14.01 $14.56 -3.80%
4/13/2006 $13.91 $14.53 -4.30%
4/14/2006 $13.91 $14.53 -4.30%
4/17/2006 $13.91 $14.55 -4.40%
4/18/2006 $13.98 $14.56 -4.00%
4/19/2006 $13.94 $14.46 -3.60%
4/20/2006 $13.97 $14.48 -3.50%
4/21/2006 $14.11 $14.51 -2.80%
4/24/2006 $14.06 $14.54 -3.30%
4/25/2006 $14.00 $14.53 -3.60%
4/26/2006 $13.92 $14.51 -4.10%
4/27/2006 $13.83 $14.52 -4.80%
4/28/2006 $13.75 $14.54 -5.40%
5/1/2006 $13.66 $14.56 -6.20%
5/2/2006 $13.78 $14.57 -5.40%
5/3/2006 $13.75 $14.58 -5.70%
5/4/2006 $13.81 $14.58 -5.30%
5/5/2006 $13.83 $14.59 -5.20%
5/8/2006 $13.84 $14.64 -5.50%
5/9/2006 $13.80 $14.66 -5.90%
5/10/2006 $13.85 $14.67 -5.60%
5/11/2006 $13.79 $14.70 -6.20%
5/12/2006 $13.84 $14.66 -5.60%
5/15/2006 $13.86 $14.64 -5.30%
5/16/2006 $14.03 $14.63 -4.10%
5/17/2006 $13.81 $14.55 -5.10%
5/18/2006 $13.79 $14.57 -5.40%
5/19/2006 $13.79 $14.49 -4.80%
5/22/2006 $13.83 $14.45 -4.30%
5/23/2006 $13.82 $14.45 -4.40%
5/24/2006 $13.74 $14.42 -4.70%
5/25/2006 $13.83 $14.44 -4.20%
5/26/2006 $13.76 $14.46 -4.80%
5/30/2006 $13.72 $14.45 -5.10%
5/31/2006 $13.77 $14.45 -4.70%
6/1/2006 $13.76 $14.45 -4.80%
6/2/2006 $13.88 $14.49 -4.20%
6/5/2006 $13.89 $14.48 -4.10%
6/6/2006 $13.80 $14.44 -4.40%
6/7/2006 $13.81 $14.46 -4.50%
6/8/2006 $13.77 $14.43 -4.60%
6/9/2006 $13.86 $14.45 -4.10%
6/12/2006 $13.77 $14.46 -4.80%
6/13/2006 $13.76 $14.42 -4.60%
6/14/2006 $13.73 $14.33 -4.20%
6/15/2006 $13.66 $14.32 -4.60%
6/16/2006 $13.58 $14.31 -5.10%
6/19/2006 $13.54 $14.30 -5.30%
6/20/2006 $13.55 $14.28 -5.10%
6/21/2006 $13.40 $14.10 -5.00%
6/22/2006 $13.50 $14.08 -4.10%
6/23/2006 $13.58 $14.08 -3.60%
6/26/2006 $13.57 $14.06 -3.50%
6/27/2006 $13.46 $14.08 -4.40%
6/28/2006 $13.45 $14.07 -4.40%
6/29/2006 $13.53 $14.14 -4.30%
6/30/2006 $13.58 $14.23 -4.60%
TOP INDUSTRIES (% OF TOTAL INVESTMENTS)
[CHART]
Media Broadcasting & Publishing 15.7%
Automotive 12.6%
Entertainment & Leisure 9.8%
Oil & Gas 8.1%
Telephone Systems 7.2%
Commercial Services 6.1%
Electric Utilities 5.9%
Health Care Providers 5.3%
Retailers 4.4%
Communications 3.6%
Other 21.3%
MATURITY BREAKDOWN
(% OF TOTAL INVESTMENTS AND CASH)
[CHART]
LESS THAN 1 Year 2.9%
1-3 Years 5.1%
3-5 Years 16.4%
5-7 Years 26.5%
7-10 Years 36.6%
10+ Years 12.5%
----------
1. Unless noted, data at or for six months ended June 30, 2006. High yield
securities, also known as "junk bonds," are subject to additional risks
such as the increased risk of default. Portfolio holdings are subject to
change.
2. Performance for NAV and Market Price assume reinvestment of all dividends
and capital gains. Shares of the Fund fluctuate in value. Fund performance
changes over time and currently may be different from that shown as of
6/30/06. Past performance is no guarantee of future results. More current
Fund performance information can be obtained by visiting the Fund's website
at www.lbftincomeopportunity.com.
3. Not annualized.
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS
JUNE 30, 2006
(UNAUDITED)
PRINCIPAL S&P MOODY'S FITCH
AMOUNT DESCRIPTION RATINGS RATINGS RATINGS VALUE (a)
ASSET BACKED SECURITIES -- 0.8% OF TOTAL NET ASSETS
AIRLINES -- 0.8%
$1,405,000 Delta Airlines, Inc., Pass-Through Certificates,
Series 2000-1, Class A2
7.570%, 11/18/2010 BB Ba B $ 1,410,269
TOTAL ASSET BACKED SECURITIES (IDENTIFIED COST $1,300,128) 1,410,269
CORPORATE DEBT -- 146.3% OF TOTAL NET ASSETS
AUTOMOTIVE -- 18.6%
1,100,000 Ford Motor Credit Co., Global Note
7.375%, 10/28/2009 B Ba BB 1,016,992
5,000,000 Ford Motor Credit Co., Note
6.500%, 1/25/2007 B Ba BB 4,991,345
6,870,000 Ford Motor Credit Co., Note, 144A
9.750%, 9/15/2010 B Ba BB 6,694,025
2,630,000 Ford Motor Credit Co., Senior Note
4.950%, 1/15/2008 B Ba BB 2,475,774
2,495,000 General Motors Acceptance Corp., Global Note
5.125%, 5/09/2008 BB Ba BB 2,390,222
4,900,000 General Motors Acceptance Corp., Global Note
6.125%, 1/22/2008 BB Ba BB 4,803,347
4,375,000 General Motors Acceptance Corp., Global Note
6.875%, 9/15/2011 BB Ba BB 4,174,450
935,000 General Motors Acceptance Corp., Senior Note
7.000%, 2/01/2012 BB Ba BB 887,502
4,360,000 General Motors Corp., Senior Note
8.250%, 7/15/2023 B Caa B 3,433,500
1,580,000 Goodyear Tire & Rubber Co. Senior Note
9.000%, 7/01/2015 B B CCC 1,508,900
32,376,057
BEVERAGES, FOOD & TOBACCO -- 0.7%
1,120,000 Le-Natures, Inc., Senior Subordinated Note, 144A
9.000%, 6/15/2013 CCC B NR 1,180,200
BUILDING MATERIALS -- 1.6%
1,290,000 Nortek, Inc., Senior Subordinated Note
8.500%, 9/01/2014 CCC Caa NR 1,248,075
2,140,000 NTK Holdings, Inc., Senior Note, Step-Up
0.000%/10.750%, 3/01/2014 (c) CCC Caa NR 1,548,825
2,796,900
See accompanying notes to financial statements.
5
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
PRINCIPAL S&P MOODY'S FITCH
AMOUNT DESCRIPTION RATINGS RATINGS RATINGS VALUE (a)
CORPORATE DEBT -- CONTINUED
CHEMICALS -- 3.8%
$1,550,000 AmeriGas Partners, LP, Senior Note
7.250%, 5/20/2015 BB B BB $ 1,464,750
670,000 AmeriGas Partners, LP/AP Eagle Finance Corp., Senior Note
7.125%, 5/20/2016 BB B BB 628,125
1,155,000 Equistar Chemicals, LP/Equistar Funding Corp., Senior Note
10.625%, 5/01/2011 BB B BB 1,240,181
915,000 Methanex Corp., Senior Note
8.750%, 8/15/2012 BBB Ba BBB 982,481
670,000 Nell AF Sarl, Guaranteed Senior Subordinated Note, 144A
8.375%, 8/15/2015 B B NR 644,037
1,745,000 PQ Corp., Senior Subordinated Note
7.500%, 2/15/2013 B B NR 1,640,300
6,599,874
COAL -- 3.7%
2,650,000 Arch Western Finance LLC, Guaranteed Senior Note
6.750%, 7/01/2013
2,800,000 Massey Energy Co., Senior Note BB Ba NR 2,537,375
6.875%, 12/15/2013
1,275,000 Peabody Energy Corp., Senior Note BB B NR 2,604,000
6.875%, 3/15/2013
BB Ba BBB 1,252,687
6,394,062
COMMERCIAL SERVICES -- 9.0%
1,375,000 Allied Waste North America Inc., Senior Note
7.250%, 3/15/2015 BB B B 1,313,125
2,300,000 Cardtronics, Inc., Senior Subordinated Note, 144A
9.250%, 8/15/2013 B Caa NR 2,265,500
1,320,000 Education Management LLC/Education Management Corp.,
Senior Note, 144A
8.750%, 6/01/2014 CCC B NR 1,306,800
2,945,000 Knowledge Learning Corp., Inc., Senior Subordinated
Note, 144A
7.750%, 2/01/2015 B B NR 2,694,675
3,105,000 Language Line, Inc., Note
11.125%, 6/15/2012 CCC Caa NR 3,011,850
3,105,000 Monitronics International, Inc., Senior Subordinated Note
11.750%, 9/01/2010 B B NR 3,062,306
2,125,000 Service Corp. International/US, Senior Note, 144A Step-Up
7.000%/8.000%, 6/15/2017 (c) BB Ba NR 1,986,875
15,641,131
See accompanying notes to financial statements.
PRINCIPAL S&P MOODY'S FITCH
AMOUNT DESCRIPTION RATINGS RATINGS RATINGS VALUE (a)
CORPORATE DEBT -- CONTINUED
COMMUNICATIONS -- 5.3%
$1,335,000 Dycom Industries, Inc., Senior Subordinated Note
8.125%, 10/15/2015 B Ba NR $1,338,337
2,200,000 Intelsat Bermuda, Ltd., Guaranteed Senior Note, 144A
9.250%, 6/15/2016 (d) B B BB 2,271,500
3,375,000 Intelsat Subsidiary Holding Co., Ltd., Guaranteed Senior Note
8.625%, 1/15/2015 B B BB 3,383,437
450,000 L-3 Communications Corp., Senior Subordinated Note
5.875%, 1/15/2015 BB Ba BB 419,625
1,830,000 L-3 Communications Corp., Senior Subordinated Note
7.625%, 6/15/2012 BB Ba BB 1,857,450
9,270,349
COMPUTERS -- 1.9%
3,225,000 Sungard Data Systems, Inc., Senior Note, 144A
9.125%, 8/15/2013 B B B 3,345,937
CONTAINERS & PACKAGING -- 2.9%
860,000 Ball Corp., Guaranteed Senior Note
6.875%, 12/15/2012 BB Ba BB 842,800
1,855,000 Crown Americas, Inc., Guaranteed Senior Note, 144A
7.750%, 11/15/2015 B B NR 1,827,175
2,345,000 Owens-Brockway Glass Container, Senior Secured Note
8.750%, 11/15/2012 BB B BB 2,441,731
5,111,706
ELECTRIC UTILITIES -- 8.7%
1,445,000 AES Corp. Senior Secured Note, 144A
8.750%, 5/15/2013 BB Ba BB 1,546,150
2,505,000 CMS Energy Corp., Senior Note
7.750%, 8/01/2010 B B BB 2,542,575
2,485,000 Midwest Generation LLC, Senior Secured Note
8.750%, 5/01/2034 B Ba B 2,634,100
2,595,000 Mirant Americas Generation, Inc., Senior Note
8.300%, 5/01/2011 B B B 2,562,562
1,410,000 Mission Energy Holding Co., Senior Secured Note
13.500%, 7/15/2008 B B B 1,572,150
1,300,000 NRG Energy, Inc., Senior Note
7.375%, 2/01/2016 B B B 1,267,500
1,580,000 TECO Energy, Inc., Note
7.500%, 6/15/2010 BB Ba BB 1,611,600
See accompanying notes to financial statements.
7
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
PRINCIPAL S&P MOODY'S FITCH
AMOUNT DESCRIPTION RATINGS RATINGS RATINGS VALUE (a)
CORPORATE DEBT -- CONTINUED
ELECTRIC UTILITIES -- CONTINUED
$1,500,000 TXU Corp., Series Q, Senior Note
6.500%, 11/15/2024 BB Ba BBB $ 1,338,048
15,074,685
ELECTRONICS -- 2.6%
1,350,000 Flextronics International Ltd., Senior Subordinated Note
6.500%, 5/15/2013 BB Ba BB 1,282,500
1,565,000 Sensata Technologies BV, Senior Note, 144A
8.000%, 5/01/2014 B B NR 1,510,225
1,720,000 Xerox Corp., Note
7.625%, 6/15/2013 BB Ba BB 1,732,900
4,525,625
ENTERTAINMENT & LEISURE -- 14.4%
1,210,000 AMC Entertainment, Inc., Senior Subordinated Note
11.000%, 2/01/2016 CCC B NR 1,294,700
2,160,000 AMF Bowling Worldwide, Inc., Senior Subordinated Note
10.000%, 3/01/2010 CCC Caa NR 2,208,600
1,750,000 Blockbuster, Inc., Senior Subordinated Note
9.000%, 9/01/2012 CCC Caa B 1,631,875
990,000 Choctaw Resort Development Enterprise, Senior Note, 144A
7.250%, 11/15/2019 BB B NR 970,200
2,630,000 Chukchansi Economic Development Authority, Note, 144A
8.000%, 11/15/2013 BB B NR 2,646,437
2,000,000 Chumash Casino & Resort Enterprise, Senior Note, 144A
9.000%, 7/15/2010 BB Ba NR 2,087,500
1,115,000 Majestic Star Casino LLC/ Majestic Star Casino Cap,
Senior Note
9.500%, 10/15/2010 BB B NR 1,167,962
500,000 Majestic Star Casino LLC/ Majestic Star Casino Capital
Corp. II, Senior Secured Note, 144A
9.750%, 1/15/2011 B B NR 501,250
1,090,000 Marquee, Inc., Series B, Senior Note
8.625%, 8/15/2012 B B B 1,119,975
1,370,000 MGM Mirage, Guaranteed Senior Note
8.500%, 9/15/2010 BB Ba BB 1,423,087
1,275,000 Mohegan Tribal Gaming Authority, Senior Subordinated Note
8.000%, 4/01/2012 B Ba NR 1,295,719
1,550,000 Pokagon Gaming Authority, Senior Note, 144A
10.375%, 6/15/2014 B B NR 1,602,312
See accompanying notes to financial statements.
PRINCIPAL S&P MOODY'S FITCH
AMOUNT DESCRIPTION RATINGS RATINGS RATINGS VALUE (a)
CORPORATE DEBT -- CONTINUED
ENTERTAINMENT & LEISURE -- CONTINUED
$1,255,000 Royal Caribbean Cruises Ltd., Senior Note
7.500%, 10/15/2027 BBB Ba NR $ 1,203,578
1,475,000 San Pasqual Casino, Senior Note, 144A
8.000%, 9/15/2013 B B NR 1,471,312
480,000 Station Casinos, Inc., Senior Note
6.000%, 4/01/2012 BB Ba NR 449,400
1,730,000 Station Casinos, Inc., Senior Subordinated Note
6.875%, 3/01/2016 B B NR 1,613,225
3,385,000 WMG Holdings Corp., Senior Note, Step-Up
0.000%/9.500%, 12/15/2014 (c) B B B 2,437,200
25,124,332
FINANCIAL SERVICES -- 1.1%
500,000 American Real Estate Partners, LP, Senior Note
8.125%, 6/01/2012 BB Ba NR 498,750
1,470,000 American Real Estate Partners, LP/American Real Estate
Finance Corp., Senior Note
7.125%, 2/15/2013 BB Ba NR 1,411,200
1,909,950
FOREST PRODUCTS & PAPER -- 1.8%
1,090,000 Bowater, Inc., Note
9.000%, 8/01/2009 B B BB 1,106,350
535,000 Bowater, Inc., Senior Note, (FRN)
8.329%, 3/15/2010 B B BB 535,000
310,000 Graphic Packaging International Corp., Senior
Subordinated Note
9.500%, 8/15/2013 B B NR 306,900
1,200,000 Graphic Packaging International Corp., Senior Note
8.500%, 8/15/2011 B B NR 1,197,000
3,145,250
HEALTH CARE PROVIDERS -- 7.9%
1,370,000 Multiplan, Inc., Senior Subordinated Note, 144A
10.375%, 4/15/2016 B Caa NR 1,387,125
1,465,000 National Mentor Holdings, Senior Subordinated Note, 144A
11.250%, 7/01/2014 CCC Caa NR 1,490,637
2,100,000 Rural/Metro Corp., Senior Subordinated Note
9.875%, 3/15/2015 CCC B NR 2,170,875
1,460,000 Select Medical Corp., Guaranteed Senior Subordinated Note
7.625%, 2/01/2015 B B NR 1,270,200
See accompanying notes to financial statements.
9
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
PRINCIPAL S&P MOODY'S FITCH
AMOUNT DESCRIPTION RATINGS RATINGS RATINGS VALUE (a)
CORPORATE DEBT -- CONTINUED
HEALTH CARE PROVIDERS -- CONTINUED
$2,485,000 Spheris, Inc., Senior Subordinated Note
11.000%, 12/15/2012 CCC Caa NR $ 2,311,050
1,260,000 Triad Hospitals, Inc., Senior Subordinated Note
7.000%, 11/15/2013 B B B 1,225,350
1,595,000 US Oncology Holdings, Inc., Senior Note, (FRN)
10.320%, 3/15/2015 B Caa NR 1,626,900
900,000 US Oncology, Inc., Senior Note
9.000%, 8/15/2012 B B NR 936,000
1,330,000 Ventas Realty, LP/Ventas Capital Corp. REIT, Senior Note
6.500%, 6/01/2016 BB Ba NR 1,275,138
13,693,275
HEAVY MACHINERY -- 1.0%
570,000 Mueller Group, Inc., Senior Subordinated Note
10.000%, 5/01/2012 B B NR 612,750
1,250,000 Mueller Holdings, Inc., Senior Note, Step-Up
0.000%/14.750%, 4/15/2014 (c) B Caa NR 1,050,000
1,662,750
HOME CONSTRUCTION, FURNISHINGS & APPLIANCES -- 0.3%
560,000 K Hovnanian Enterprises, Inc., Senior Note
8.000%, 4/01/2012 BB Ba BB 560,000
MEDIA - BROADCASTING & PUBLISHING -- 23.1%
2,005,000 CCH I Holdings LLC, Guaranteed Senior Note
10.000%, 5/15/2014 CCC Ca CCC 1,203,000
633,000 CCH I LLC, Senior Secured Note
11.000%, 10/01/2015 CCC Caa CCC 553,875
1,000,000 Charter Communications Operating LLC/Charter
Communications Capital Corp., Senior Note, 144A
8.375%, 4/30/2014 B B B 1,001,250
2,420,000 CMP Susquehanna Corp., Senior Subordinated Note, 144A
9.875%, 5/15/2014 CCC B NR 2,250,600
2,525,000 CSC Holdings, Inc., Series B, Senior Note
8.125%, 8/15/2009 B B BB 2,569,188
2,960,000 Dex Media, Inc., Note
8.000%, 11/15/2013 B B CCC 2,974,800
1,800,000 DirecTV Holdings LLC/DirecTV Financing Co., Senior Note
8.375%, 3/15/2013 BB Ba BB 1,885,500
2,010,000 Echostar DBS Corp., Guaranteed Senior Note, 144A
7.125%, 2/01/2016 BB Ba BB 1,934,625
See accompanying notes to financial statements.
PRINCIPAL S&P MOODY'S FITCH
AMOUNT DESCRIPTION RATINGS RATINGS RATINGS VALUE (a)
CORPORATE DEBT -- CONTINUED
MEDIA - BROADCASTING & PUBLISHING -- CONTINUED
$1,400,000 Echostar DBS Corp., Senior Note
6.625%, 10/01/2014 BB Ba BB $ 1,316,000
720,000 Entercom Radio LLC/Entercom Capital, Inc., Senior
Subordinated Note
7.625%, 3/01/2014 B Ba NR 718,200
3,975,000 Houghton Mifflin Co., Senior Note
8.250%, 2/01/2011 CCC B B 4,024,688
1,675,000 Liberty Media Corp., Senior Note
8.500%, 7/15/2029 BB Ba BB 1,629,058
580,000 LIN Television Corp., Senior Subordinated Note
6.500%, 5/15/2013 B B NR 529,250
675,000 LIN Television Corp., Series B, Senior Subordinated Note
6.500%, 5/15/2013 B B NR 615,938
320,000 Mediacom Broadband LLC, Senior Note
8.500%, 10/15/2015 B B B 307,200
2,070,000 Mediacom LLC/Mediacom Capital Corp., Senior Note
9.500%, 1/15/2013 B B CCC 2,059,650
5,615,000 Paxson Communications Corp., Senior Note, 144A, (FRN)
11.318%, 1/15/2013 CCC B NR 5,629,038
2,375,000 Primedia, Inc., Senior Note
8.875%, 5/15/2011 B B NR 2,280,000
300,000 Primedia, Inc., Senior Note, (FRN)
10.545%, 5/15/2010 B B NR 306,375
3,130,000 RH Donnelley Corp., Senior Note, 144A
8.875%, 1/15/2016 B Caa CCC 3,157,388
785,000 Rogers Cable, Inc., Senior Secured Note
7.875%, 5/01/2012 BB Ba BB 802,663
1,355,000 Rogers Cable, Inc., Senior Secured Note
8.750%, 5/01/2032 BB Ba BB 1,460,013
1,025,000 Young Broadcasting, Inc., Senior Subordinated Note
8.750%, 1/15/2014 CCC Caa NR 855,875
190,000 Young Broadcasting, Inc., Senior Subordinated Note
10.000%, 3/01/2011 CCC Caa NR 169,100
40,233,274
MEDICAL SUPPLIES -- 1.9%
4,995,000 CDRV Investors, Inc., Senior Note, Step-Up
0.000%/9.625%, 1/01/2015 (c) B Caa NR 3,371,625
See accompanying notes to financial statements.
11
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
PRINCIPAL S&P MOODY'S FITCH
AMOUNT DESCRIPTION RATINGS RATINGS RATINGS VALUE (a)
CORPORATE DEBT -- CONTINUED
OIL & GAS -- 12.0%
$2,065,000 Chesapeake Energy Corp., Senior Note
6.375%, 6/15/2015 BB Ba BB $ 1,915,288
210,000 Chesapeake Energy Corp., Senior Note
7.000%, 8/15/2014 BB Ba BB 203,175
3,290,000 Chesapeake Energy Corp., Senior Note
7.625%, 7/15/2013 BB Ba BB 3,310,563
2,650,000 El Paso Corp., Note, 144A
7.750%, 6/15/2010 B B NR 2,689,750
920,000 El Paso Corp., Senior Note, 144A
9.625%, 5/15/2012 B B NR 1,005,100
2,190,000 El Paso Natural Gas Co., Note
8.375%, 6/15/2032 B Ba NR 2,329,337
2,015,000 Ferrellgas Partners, LP/Ferrellgas Partners Finance Corp.,
Senior Note
8.750%, 6/15/2012 B B NR 2,045,225
840,000 Forest Oil Corp., Senior Note
7.750%, 5/01/2014 B Ba NR 842,100
1,090,000 Forest Oil Corp., Senior Note
8.000%, 12/15/2011 B Ba NR 1,114,525
1,770,000 Kerr-McGee Corp., Note
6.950%, 7/01/2024 BB Ba BB 1,779,193
500,000 Newfield Exploration Co., Senior Note
7.625%, 3/01/2011 BB Ba BB 506,250
435,000 Southern Natural Gas Co., Note
8.000%, 3/01/2032 B Ba NR 449,488
740,000 Targa Resources, Inc., Senior Note, 144A
8.500%, 11/01/2013 B B NR 714,100
2,025,000 Transcontinental Gas Pipe Line Corp., Note
7.250%, 12/01/2026 BB Ba BBB 1,971,844
20,875,938
PHARMACEUTICALS -- 2.4%
1,655,000 Athena Neurosciences Finance LLC, Senior Note
7.250%, 2/21/2008 B B NR 1,642,588
1,230,000 Biovail Corp., Senior Subordinated Note
7.875%, 4/01/2010 BB B NR 1,245,375
1,280,000 Elan Finance PLC/Elan Finance Corp., Guaranteed Senior
Note, (FRN)
9.170%, 11/15/2011 B B NR 1,292,800
4,180,763
See accompanying notes to financial statements.
PRINCIPAL S&P MOODY'S FITCH
AMOUNT DESCRIPTION RATINGS RATINGS RATINGS VALUE (a)
CORPORATE DEBT -- CONTINUED
RESTAURANTS -- 0.8%
$1,370,000 NPC International, Inc., Senior Subordinated Note, 144A
9.500%, 5/01/2014 B Caa NR $ 1,325,475
RETAILERS -- 6.5%
2,255,000 Amscan Holdings, Inc., Senior Subordinated Note
8.750%, 5/01/2014 CCC Caa NR 1,973,125
1,050,000 Autonation, Inc., Guaranteed Senior Note, 144A
7.000%, 4/15/2014 BB Ba BB 1,034,250
260,000 Autonation, Inc., Guaranteed Senior Note, 144A, (FRN)
7.045%, 4/15/2013 BB Ba BB 258,700
1,130,000 Dollarama Group, LP, Senior Subordinated Note, 144A
8.875%, 8/15/2012 B B NR 1,135,650
660,000 GSC Holdings Corp., Guaranteed Senior Note
8.000%, 10/01/2012 B Ba NR 660,000
2,045,000 JC Penney Corp., Note
8.125%, 4/01/2027 BBB Baa BBB 2,113,223
180,000 Jean Coutu Group, Inc., Senior Note
7.625%, 8/01/2012 B B B 174,600
2,265,000 Jean Coutu Group, Inc., Senior Subordinated Note
8.500%, 8/01/2014 B Caa CCC 2,083,800
2,205,000 Movie Gallery, Inc., Senior Note
11.000%, 5/01/2012 CCC Caa NR 1,642,725
295,000 Stripes Acquisition LLC/Susser Finance Corp., Senior
Note, 144A
10.625%, 12/15/2013 B B NR 311,225
11,387,298
TELEPHONE SYSTEMS -- 10.6%
640,000 American Cellular Corp., Series B, Senior Note
10.000%, 8/01/2011 B B B 673,600
895,560 Calpoint Receivables Structured Trust 2001, Note, 144A
7.440%, 12/10/2006 NR B CCC 897,799
2,635,000 Centennial Cellular Operating Co./Centennial
Communications Corp., Guaranteed Senior Note
10.125%, 6/15/2013 CCC B B 2,773,338
35,000 Dobson Cellular Systems, Senior Note
8.375%, 11/01/2011 B B BB 35,963
2,740,000 Dobson Communications Corp., Senior Note
8.875%, 10/01/2013 CCC Caa CCC 2,692,050
2,540,000 Nordic Telephone Co. Holdings, Senior Note, 144A
8.875%, 5/01/2016 B B B 2,609,850
See accompanying notes to financial statements.
13
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
PRINCIPAL S&P MOODY'S FITCH
AMOUNT DESCRIPTION RATINGS RATINGS RATINGS VALUE (a)
CORPORATE DEBT -- CONTINUED
TELEPHONE SYSTEMS -- CONTINUED
$3,280,000 Qwest Corp., Note
8.875%, 3/15/2012 BB Ba BB $ 3,460,400
665,000 Rogers Wireless Communications, Inc.,
Senior Secured Note
7.500%, 3/15/2015 BB Ba BB 671,650
2,715,000 Windstream Corp., Senior Note, 144A
8.125%, 8/01/2013 (d) BB Ba BB 2,769,300
1,910,000 Windstream Corp., Senior Note, 144A
8.625%, 8/01/2016 (d) BB Ba BB 1,952,975
18,536,925
TRANSPORTATION -- 3.7%
2,640,000 Grupo Transportacion Ferroviaria Mexicana SA de CV,
Senior Note
9.375%, 5/01/2012 B B B 2,811,600
175,000 Stena AB, Note
9.625%, 12/01/2012 BB Ba NR 185,938
2,055,000 Stena AB, Senior Note
7.000%, 12/01/2016 BB Ba NR 1,890,600
1,675,000 Stena AB, Senior Note
7.500%, 11/01/2013 BB Ba NR 1,624,750
6,512,888
TOTAL CORPORATE DEBT (IDENTIFIED COST $255,093,354) 254,836,269
TOTAL INVESTMENTS -- 147.1%
(IDENTIFIED COST $256,393,482) (b) 256,246,538
Other Assets, Less Liabilities -- 4.6% 8,016,246
Money Market Cumulative Preferred Shares plus cumulative unpaid dividends (51.7%) (90,026,401)
TOTAL NET ASSETS APPLICABLE TO COMMON SHAREHOLDERS -- 100% $174,236,383
See accompanying notes to financial statements.
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
NOTES TO SCHEDULE OF INVESTMENTS
a See Note 2a of Notes to Financial Statements.
b Federal Tax Information:
At June 30, 2006, the net unrealized appreciation on investments based
on cost of $256,971,449 for federal income tax purposes was as follows:
Aggregate gross unrealized appreciation for all
investments in which there is an excess of value over tax
cost $ 4,100,305
Aggregate gross unrealized depreciation for all investments
in which there is an excess of tax cost over value (4,825,216)
Net unrealized depreciation $ (724,911)
c Denotes a step-up bond: a zero coupon bond that converts to a fixed rate
of interest at a designated future date.
d All or a portion of this security was purchased on a when-issued basis.
At June 30, 2006, these securities amounted to $6,993,775.
FRN 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 June 30, 2006.
144 A 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 adviser to be liquid. At the period
end, the value of 144A securities amounted to $70,106,947 or 40.2% of
net assets applicable to common shareholders.
Quality Profile
The quality ratings of securities in the Fund as of June 30, 2006 were
as follows:
PERCENT OF
TOTAL INVESTMENTS
S&P RATING/MOODY'S RATING/FITCH RATING AND CASH**
BBB/Baa/BBB 3.4%
BB/Ba/BB 45.9
B/B/B 40.3
CCC/Caa/CCC 7.9
Cash 2.5
100.0%
** Percentages compiled using the highest rating for each security.
See accompanying notes to financial statements.
15
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
STATEMENT OF ASSETS & LIABILITIES
JUNE 30, 2006
(UNAUDITED)
ASSETS
Investments at cost $256,393,482
Net unrealized (depreciation) (146,944)
INVESTMENTS AT VALUE 256,246,538
Cash 6,534,744
Receivable for securities sold 4,314,397
Interest receivable 5,017,670
Interest rate swap contracts, at market value 1,167,699
Prepaid expenses 9,195
TOTAL ASSETS 273,290,243
LIABILITIES
Payable for securities purchased 7,436,639
Distributions payable to common shareholders 8,991
Management fees payable 130,824
Payable for collateral on interest rate swap contracts 1,226,000
Other accrued expenses 225,005
TOTAL LIABILITIES 9,027,459
MONEY MARKET CUMULATIVE PREFERRED SHARES (3,600 SHARES ISSUED AND
OUTSTANDING) AT LIQUIDATION VALUE PLUS CUMULATIVE UNPAID DISTRIBUTIONS 90,026,401
NET ASSETS APPLICABLE TO COMMON SHARES $174,236,383
NET ASSETS CONSIST OF:
Common Shares, no par value; unlimited number of shares authorized,
12,248,410 shares issued and outstanding $173,836,893
Distributions in excess of net investment income (173,073)
Accumulated net realized loss on investments (448,192)
Net unrealized appreciation of investments and interest rate swap contracts 1,020,755
NET ASSETS APPLICABLE TO COMMON SHARES $174,236,383
COMPUTATION OF NET ASSET VALUE PER COMMON SHARE:
NET ASSETS $174,236,383
COMMON SHARES ISSUED AND OUTSTANDING 12,248,410
NET ASSET VALUE PER SHARE $ 14.23
MARKET VALUE (CLOSING PRICE PER SHARE ON THE NEW YORK STOCK EXCHANGE) $ 13.58
See accompanying notes to financial statements.
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED JUNE 30, 2006 (UNAUDITED)
INVESTMENT INCOME
Interest $11,387,912
Expenses
Management fee 797,304
Investor service fee 66,442
Trustees' fees and expenses 35,173
Custodian fee 157,156
Audit and tax services 25,638
Legal fee 95,179
Shareholder reports 33,012
Preferred shares auction 114,942
Insurance expense 41,033
Miscellaneous 19,395
TOTAL EXPENSES 1,385,274
NET INVESTMENT INCOME 10,002,638
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
Realized gain on:
Investments -- net 43,244
Interest rate swap contracts -- net 578,982
Change in unrealized appreciation (depreciation) of:
Investments -- net (3,649,168)
Interest rate swap contracts -- net (234,943)
Net realized and unrealized loss on investments and interest
rate swap contracts (3,261,885)
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 6,740,753
------------------------------------------------------------------------------
LESS DISTRIBUTIONS TO PREFERRED SHAREHOLDERS FROM NET INVESTMENT
INCOME (2,091,952)
------------------------------------------------------------------------------
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES RESULTING
FROM OPERATIONS $ 4,648,801
------------------------------------------------------------------------------
See accompanying notes to financial statements.
17
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
STATEMENTS OF CHANGES IN NET ASSETS
SIX MONTHS ENDED
JUNE 30, 2006 YEAR ENDED
(UNAUDITED) DECEMBER 31, 2005
FROM OPERATIONS:
Net investment income $ 10,002,638 $ 20,919,672
Net realized gain (loss) on investments and interest rate swap
contracts 622,226 (115,972)
Net change in unrealized (depreciation) of investments and
interest rate swap contracts (3,884,111) (11,421,758)
Distributions to preferred shareholders from net investment
income (2,091,952) (2,993,978)
NET INCREASE IN NET ASSETS APPLICABLE TO COMMON SHARES
RESULTING FROM OPERATIONS 4,648,801 6,387,964
LESS DISTRIBUTIONS TO COMMON SHAREHOLDERS:
Net investment income (8,083,759) (19,265,627)
Net realized gain on investments -- (235,064)
Return of capital -- (49,045)
(8,083,759) (19,549,736)
INCREASE (DECREASE) IN NET ASSETS DERIVED FROM
COMMON SHARE TRANSACTIONS: 12,766 120,786
TOTAL NET INCREASE (DECREASE) IN NET ASSETS APPLICABLE TO
COMMON SHARES (3,422,192) (13,040,986)
NET ASSETS APPLICABLE TO COMMON SHARES
Beginning of period 177,658,575 190,699,561
End of period $174,236,383 $177,658,575
DISTRIBUTIONS IN EXCESS OF NET INVESTMENT INCOME $ (173,073) $ --
See accompanying notes to financial statements.
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
FINANCIAL HIGHLIGHTS
SIX MONTHS FOR THE PERIOD
ENDED JULY 28, 2003
JUNE 30, THROUGH
2006 YEAR ENDED DECEMBER 31, DECEMBER 31,
(UNAUDITED) 2005 2004 2003*
NET ASSET VALUE, BEGINNING OF PERIOD (COMMON SHARES) $ 14.51 $ 15.58 $ 15.51 $ 14.33(a)
Net Investment Income (b) 0.82 1.71 1.72 0.64
Net Realized and Unrealized Gain (Loss) on Investments (0.27) (0.94) 0.11 1.31
Distributions to Preferred Shareholders from Net Investment Income (0.17) (0.24) (0.11) (0.02)
TOTAL FROM INVESTMENT OPERATIONS APPLICABLE TO COMMON SHAREHOLDERS 0.38 0.53 1.72 1.93
Less Distributions to Common Shareholders
From Net Investment Income (0.66) (1.58) (1.55) (0.60)
From Net Realized Gains -- (0.02) (0.10) (0.02)
From Return of Capital -- (0.00)(g) -- --
TOTAL DISTRIBUTIONS TO COMMON SHAREHOLDERS (0.66) (1.60) (1.65) (0.62)
Common Shares Offering Costs Charged to Paid-in Capital -- -- -- (0.03)
Preferred Shares Underwriting Commissions and Offering Costs Charged
to Paid in Capital -- -- -- (0.10)
NET ASSET VALUE, END OF PERIOD (COMMON SHARES) $ 14.23 $ 14.51 $ 15.58 $ 15.51
-----------------------------------------------------------------------------------------------------------------------------
MARKET VALUE - END OF PERIOD (COMMON SHARES) $ 13.58 $ 15.61 $ 16.48 $ 15.91
-----------------------------------------------------------------------------------------------------------------------------
Total Return on Net Asset Value (Common Shares) (%) 2.77 3.63 11.99 12.73(c)
Total Return on Market Value (Common Shares) (%) (8.84) 5.40 15.48 10.47(d)
Ratio of Expenses (excluding interest expense) to Average Net Assets
Applicable to Common Shares (%) (f) 1.57(e) 1.53 1.48 1.42(e)
Ratio of Interest Expense to Average Net Assets Applicable to
Common Shares (%) (f) -- -- -- 0.19(e)
Ratio of Net Investment Income to Average Net Assets Applicable to
Common Shares (%) (f) 11.34(e) 11.44 11.36 10.00(e)
Portfolio Turnover Rate (%) 56.48 96.18 106.76 32.08
Net Assets Applicable to Common Shares, End of Period (000) $174,236 $177,659 $190,700 $189,644
MONEY MARKET CUMULATIVE PREFERRED SHARES
Preferred Shares Outstanding, End of Period (000) 90,000 90,000 90,000 90,000
Asset Coverage Per Share $ 73,399 $ 74,350 $ 77,975 $ 77,675
Involuntary Liquidation Preference Per Share $ 25,000 $ 25,000 $ 25,000 $ 25,000
Approximate Market Value Per Share $ 25,000 $ 25,000 $ 25,000 $ 25,000
* Commencement of operations.
(a) Net asset value at beginning of period reflects the deduction from the
$15.00 offering price of the sales load of $0.675 per share paid by the
shareholder.
(b) Calculated using average shares outstanding during the period.
(c) Total return on net asset value is calculated assuming a purchase at the
offering price of $15.00 less the sales load of $0.675 paid by the
shareholder on the first day and the ending net asset value per share and
is not annualized.
(d) Total return on market value is calculated assuming a purchase at the
offering price of $15.00 on the first day and a sale at the current market
price on the last day of the period and is not annualized.
(e) Annualized.
(f) Expense and net investment income ratios include accumulated and unpaid
distributions.
(g) Rounds to less than $0.01.
See accompanying notes to financial statements.
19
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2006 (UNAUDITED)
NOTE 1 -- ORGANIZATION
Lehman Brothers First Trust Income Opportunity Fund (the "Fund") was organized
as a statutory trust under the laws of the state of Delaware on April 8, 2003,
and is registered under the Investment Company Act of 1940, as amended (the
"1940 Act"), as a diversified, closed-end management investment company. Lehman
Brothers Asset Management Inc. (the "Adviser") is investment adviser to the
Fund. Lehman Brothers Asset Management LLC is the sub-adviser to the Fund. The
Fund's common shares are listed on the New York Stock Exchange under the symbol
LBC.
The Fund's investment objective is to seek high total return (income plus
capital appreciation). The Fund pursues its investment objective by investing
its assets primarily in high yield debt securities.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
The preparation of financial statements in accordance with U.S. generally
accepted accounting principles requires the Adviser to make estimates and
assumptions that affect the reported amounts of assets and liabilities at the
date of the financial statements and the reported amounts of income and expenses
during the reporting period. Actual results could differ from those estimates.
The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements.
A) VALUATION: Debt securities 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 the
Adviser to be reflective of a security's market value, are valued at fair value
as determined in good faith under consistently applied procedures 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 and 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 or premium.
B) SECURITY TRANSACTIONS AND RELATED INVESTMENT INCOME: Security transactions
are recorded on a trade date basis. Dividend income is recorded on the
ex-dividend date. Interest income, including amortization of premium and
accretion of discount on securities, is recorded on the accrual basis. Realized
gains and losses on investments are recorded on the basis of identified cost.
C) FEDERAL INCOME TAXES: It is the policy of the Fund to continue to comply with
the requirements of Subchapter M of the Internal Revenue Code applicable to
regulated investment companies and distribute all of its net taxable income,
including any net realized gains on investments, to its shareholders. Therefore,
no federal income tax provision is required.
D) REVERSE REPURCHASE AGREEMENTS: The Fund is permitted to enter into reverse
repurchase agreements with banks or securities firms deemed creditworthy by the
Adviser. A reverse repurchase agreement involves the sale of a security by the
Fund, with an agreement to repurchase the same or substantially similar security
at an agreed upon price and date. Securities purchased subject to repurchase
agreements must have an aggregate market value greater than or equal to the
repurchase price plus accrued interest at all times. Reverse repurchase
agreements involve the risk that the market value of the securities purchased
with the proceeds from the sale of securities received by the Fund may decline
below the price of the securities that the Fund is obligated to repurchase.
There were no reverse repurchase agreements outstanding at June 30, 2006.
E) INTEREST RATE SWAP CONTRACTS: The Fund may enter into interest rate swap
transactions. A swap is an agreement to exchange the return generated by one
instrument for the return generated by another instrument. The Fund may enter
into interest rate swap agreements to manage its exposure to interest rate risk.
Interest rate swap contracts involve the exchange by the Fund with another party
of their respective commitments to pay or receive interest. Swaps are marked to
market daily based upon quotations from market makers and the change in value,
if any, is recorded as unrealized gain or loss in the Statement of Operations.
Net payments of interest on interest rate swap contracts are included as part of
realized gain or loss. Entering
into these agreements involves, to varying degrees, elements of credit and
market risk in excess of the amounts recognized on the Statement of Assets and
Liabilities. Such risks involve the possibility that there will be no liquid
market for these agreements, that the counterparty to these agreements may
default on its obligation to perform and that there may be unfavorable changes
in interest rates. At June 30, 2006, the Fund had the following open swap
agreements:
NOTIONAL EXPIRATION NET UNREALIZED
AMOUNT DATE DESCRIPTION APPRECIATION
-------------------------------------------------------------------------------------------------
$22,500,000 3/15/07 Agreement with Citibank N.A. dated 3/11/04 to pay the $538,348
notional amount multiplied by 2.27% and to receive
the notional amount multiplied by the 1 month U.S.
Dollars -- London Interbank Offered Rate -- British
Bankers Association (USD -- LIBOR -- BBA).
$22,500,000 9/28/07 Agreement with Citibank N.A. dated 9/24/04 to pay the $629,351
notional amount multiplied by 3.22% and to receive
the notional amount multiplied by the 1 month U.S.
Dollars -- London Interbank Offered Rate -- British
Bankers Association (USD -- LIBOR -- BBA).
Periodically, the Fund receives from or deposits, with the counter party, a
specific amount of cash equal to the market value of the interest rate swap
contracts. At June 30, 2006, the Fund had $1,226,000 payable for collateral on
interest rate swap contracts under this arrangement.
NOTE 3 -- FEES AND TRANSACTIONS WITH RELATED PARTIES
The Fund pays all expenses incurred in connection with the operations of the
Fund. These expenses, among others, include custodian and fund accounting and
administrative fees, legal and audit fees, fees and expenses of the Trustees who
are not "interested persons" within the meaning of the 1940 Act ("Independent
Fund Trustee"), registration fees, and printing expenses.
The Fund pays the Adviser a monthly fee computed at an annual rate of 0.60% of
the Fund's average daily "Managed Assets" (net assets, including assets
attributable to any outstanding preferred shares, plus the aggregate principal
amount of any borrowings). The Adviser is responsible for developing,
implementing and supervising the Fund's investment program and providing certain
administrative services to the Fund. The Adviser has retained Lehman Brothers
Asset Management LLC ("LBAM LLC") to serve as the sub-adviser of the Fund and to
manage the Fund's investment portfolio. The Adviser compensates LBAM LLC for its
services as sub-adviser. The Adviser pays LBAM LLC a monthly sub-advisory fee
calculated at the following annual percentage rates of the Fund's average daily
Managed Assets: 0.55% on the Fund's first $25 million of Managed Assets, 0.45%
on the next $25 million of Managed Assets, 0.35% on the next $50 million of
Managed Assets, and 0.30% on Managed Assets that are in excess of $100 million.
The Adviser and LBAM LLC are wholly owned subsidiaries of Lehman Brothers
Holdings Inc., a publicly traded corporation.
First Trust Portfolios L.P. ("First Trust") serves as the Fund's distribution
and marketing agent, and investor servicing agent. As the Fund's distribution
and marketing agent, First Trust provides certain distribution and marketing
services for the Fund's common shares including preparing marketing materials
and presentations, developing contacts with brokers whose clients may have an
interest in acquiring Fund shares and replying to information requests from
prospective investors. In consideration for these services, First Trust receives
a fee paid by the Adviser.
First Trust, as the investor servicing agent, developed and maintains a website
for the Fund, assists in the review of shareholder materials, assists in the
dissemination of the Fund's net asset value and market price, provides ongoing
shareholder and account maintenance services, replies to information requests
from shareholders and aids in secondary market support. In consideration for
these services, the Fund pays First Trust a monthly fee computed at the annual
rate 0.05% of the Fund's average daily Managed Assets. For the six months ended
June 30, 2006, the Fund paid First Trust, as the investor servicing agent, a fee
equal to $66,442.
21
LEHMAN BROTHERS FIRST TRUST INCOME OPPORTUNITY FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
The Fund pays no compensation to its officers or to its Trustees who are also
employees of the Adviser or its affiliates.
NOTE 4 -- INVESTMENT IN SECURITIES
For the six months ended June 30, 2006, purchases and sales of investments,
other than short-term securities, aggregated $150,929,032 and $145,288,227,
respectively.
NOTE 5 -- MONEY MARKET CUMULATIVE PREFERRED SHARES
The Fund is authorized to issue 3,750 Money Market Cumulative Preferred Shares
("MMP"), each without par value. On October 22, 2003, the Fund issued 3,600 MMP
with proceeds of $90,000,000 in a public offering. The underwriting commissions
and offering costs of $1,236,545 were incurred in connection with the offering
and were charged directly to paid-in capital of the common shares. Distributions
to preferred shareholders are cumulative at a rate which was established at the
offering and is reset every twenty-eight days based on the results of an
auction. The Fund pays service fees to certain broker-dealers at the end of each
auction at an annual rate of 0.25% for a regular distribution period and at a
rate agreed to by the Fund and the broker-dealers for a special distribution
period. For the six months ended June 30, 2006, Lehman Government Securities,
Inc., an affiliate of the Adviser, earned $111,471 in commissions.
The MMP are redeemable at the option of the Fund at a redemption price equal to
$25,000 per share, plus accumulated and unpaid distributions, on any
distribution payment date. The MMP are also subject to mandatory redemption at a
redemption price equal to $25,000 per share, plus accumulated and unpaid
distributions, if the Fund defaults on its asset maintenance requirements with
respect to the MMP and fails to cure such a default within the time permitted.
If the distributions on the MMP shall remain unpaid in an amount equal to two
full years' distributions, the holders of the MMP, as a class, have the right to
elect a majority of the Board of Trustees. In general, the holders of the MMP
and the common shares have one vote for each dollar, and a proportionate
fraction of a vote for each fraction of a dollar, of the net asset value per
share, and vote together as a single class, except that the holders of the MMP,
as a separate class, have the right to elect at least two members of the Board
of Trustees and to vote under certain other circumstances specified in the
Fund's Amended By-Laws. The MMP have a liquidation preference of $25,000 per
share, plus accumulated and unpaid distributions. The Fund is required to
maintain certain asset coverage with respect to the MMP as defined in the Fund's
Amended By-Laws and the 1940 Act.
NOTE 6 -- DISTRIBUTIONS TO SHAREHOLDERS
The Fund intends to make monthly distributions of net investment income to
common shareholders, after payments of any distributions on outstanding MMP.
Distributions to common shareholders are recorded on the ex- date. Distributions
to preferred shareholders are recorded daily and are payable at the end of each
distribution period. Each distribution payment period for the MMP is generally
twenty-eight days. For the six months ended June 30, 2006, the distribution
rates for MMP ranged from 4.35% to 5.35%. The distribution rate for MMP on June
30, 2006 was 5.35%. In addition, at least annually, the Fund intends to
distribute net capital gains, if any. The timing and characterization of certain
income and capital gains distributions are determined in accordance with federal
tax regulations which may differ from U.S. generally accepted accounting
principles. Permanent differences between book and tax accounting relating to
distributions are reclassified to paid-in capital.
NOTE 7 -- SHARES OF BENEFICIAL INTEREST
The Fund's Declaration of Trust authorizes the Trustees to issue an unlimited
number of common shares for the Fund, each without par value. Transactions in
common shares were as follows:
SIX MONTHS ENDED YEAR ENDED
JUNE 30, 2006 DECEMBER 31, 2005
---------------- -----------------
SHARES AMOUNT SHARES AMOUNT
------ ------- ------ --------
Shares issued pursuant to the Fund's
dividend reinvestment plan 872 $12,766 8,148 $120,786
--- ------- ----- --------
Increase derived from capital share transactions 872 $12,766 8,148 $120,786
=== ======= ===== ========
NOTE 8 -- CONCENTRATION OF CREDIT RISK
The Fund will normally invest at least 80% of its Managed Assets in investments
offering high current income, which generally will be in the lower rating
categories of recognized rating agencies. These investments are regarded as
predominantly speculative with respect to capacity to pay interest and repay
principal in accordance with the terms of the obligations and will generally
involve more credit risk than securities in the higher rating categories. In
addition, the trading market for high yield investments may be relatively less
liquid than the market for higher-rated investments.
NOTE 9 -- RISK ASSOCIATED WITH THE USE OF LEVERAGE
The Fund's use of leverage through the issuance of preferred shares and
borrowings, as well as the economic leverage inherent in certain derivatives,
including credit default swaps, creates risks for holders of common shares.
There is no assurance that the Fund's leveraging strategies will be successful.
If the Fund issues preferred shares or borrows money to make additional
investments and the income and capital appreciation from those investments
exceed the distributions payable on the preferred shares or the costs of
borrowing, the Fund's investment return will be greater than if leverage had not
been used. However, if the distributions payable on the preferred shares or the
costs of borrowing exceed the income and capital appreciation from the
additional investments, the Fund would lose money and its investment return will
be lower than if leverage had not been used. Leverage creates risk which may
adversely affect the return for holders of common shares, including:
(a) the likelihood of greater volatility of net asset value and market price of
the Fund's common shares;
(b) the possibility either that common share income will fall if the preferred
share distribution rate rises or the Fund's borrowing costs increase, or
that common share income will fluctuate because of changes in the preferred
share distribution rates or borrowing costs.
NOTE 10 -- INDEMNIFICATIONS
In the ordinary course of business, the Fund enters into contracts that contain
a variety of indemnifications. 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.
NOTE 11 -- UNAUDITED FINANCIAL INFORMATION
The financial information included in this interim report is taken from the
records of the Fund without audit by independent auditors. Annual reports
contain audited financial statements.
23
OTHER INFORMATION
SHAREHOLDER VOTING RESULTS (UNAUDITED)
The annual meeting of the Trust's shareholders was held on April 19, 2006 at
which shareholders considered and approved the following proposals regarding the
election of the new Trustees to the Board. The incumbent Trustees did not stand
for reelection. The voting results were the following:
With respect to the election of Faith Colish as a Trustee
of the Fund:
11,404,789.085 shares of Common Shares and MMP Shares,
voting together as a single class or 98.461% of shares
cast in the affirmative, with 178,265 shares or 1.539% of
shares cast withheld;
With respect to the election of C. Anne Harvey as a
Trustee of the Fund:
11,406,404.085 shares of Common Shares and MMP Shares,
voting together as a single class or 98.475% of shares
cast in the affirmative, with 176,650 shares or 1.525% of
shares cast withheld;
With respect to the election of Cornelius T. Ryan as a
Trustee of the Fund:
11,414,797.085 shares of Common Shares and MMP Shares,
voting together as a single class or 98.547% of shares
cast in the affirmative, with 168,257 shares or 1.453% of
shares cast withheld;
With respect to the election of Peter E. Sundman as a
Trustee of the Fund:
11,422,515.085 shares of Common Shares and MMP Shares,
voting together as a single class or 98.614% of shares
cast in the affirmative, with 160,539 shares or 1.386% of
shares cast withheld;
With respect to the election of Peter P. Trapp as a
Trustee of the Fund:
11,418,395.085 shares of Common Shares and MMP Shares,
voting together as a single class or 98.578% of shares
cast in the affirmative, with 164,659 shares or 1.422% of
shares cast withheld;
With respect to the election of John Cannon as a Trustee
of the Fund:
11,412,696.085 shares of Common Shares and MMP Shares,
voting together as a single class or 98.529% of shares
cast in the affirmative, with 170,358 shares or 1.471% of
shares cast withheld;
With respect to the election of Jack L. Rivkin as a
Trustee of the Fund:
11,416,478.085 shares of Common Shares and MMP Shares,
voting together as a single class or 98.562% of shares
cast in the affirmative, with 166,576 shares or 1.438% of
shares cast withheld;
With respect to the election of Tom D. Seip as a Trustee
of the Fund:
11,414,503.085 shares of Common Shares and MMP Shares,
voting together as a single class or 98.545% of shares
cast in the affirmative, with 168,551 shares or 1.455% of
shares cast withheld;
With respect to the election of Robert A. Kavesh as a
Trustee of the Fund:
11,412,613.085 shares of Common Shares and MMP Shares,
voting together as a single class or 98.529% of shares
cast in the affirmative, with 170,441 shares or 1.471% of
shares cast withheld;
With respect to the election of Edward I. O'Brien as a
Trustee of the Fund:
11,415,833.085 shares of Common Shares and MMP Shares,
voting together as a single class or 98.556% of shares
cast in the affirmative, with 167,221 shares or 1.444% of
shares cast withheld;
With respect to the election of William E. Rulon as a
Trustee of the Fund:
11,408,458.085 shares of Common Shares and MMP Shares,
voting together as a single class or 98.493% of shares
cast in the affirmative, with 174,596 shares or 1.507% of
shares cast withheld;
With respect to the election of Candace L. Straight as a
Trustee of the Fund:
11,417,523.085 shares of Common Shares and MMP Shares,
voting together as a single class or 98.571% of shares
cast in the affirmative, with 165,531 shares or 1.429% of
shares cast withheld;
With respect to the election of Barry Hirsch* as a
Trustee of the Fund:
2,980 MMP shares or 100% of shares cast in the
affirmative, with 0 shares or 0% of shares cast withheld;
and
With respect to the election of Howard A. Mileaf as a
Trustee of the Fund:
2,980 MMP shares or 100% of shares cast in the
affirmative, with 0 shares or 0% of shares cast withheld.
* Mr. Hirsch passed away after the annual shareholder meeting.
25
DIVIDEND REINVESTMENT PLAN (UNAUDITED)
The Fund has a Dividend Reinvestment Plan (the "Plan") commonly referred to as
an "opt-out" plan. Each common shareholder will have all distributions of
dividends and capital gains automatically reinvested in additional common shares
by Investors Bank & Trust Company, as agent for shareholders pursuant to the
Plan (the "Plan Agent"), unless the shareholder elects to receive cash or unless
the shares are registered in the name of a broker-dealer or other nominee (that
is, in "street name") and the respective nominee does not participate in the
Plan. For Plan participants, the Plan Agent will either (i) effect purchases of
common shares under the Plan in the open market or (ii) distribute newly issued
common shares of the Fund. Shareholders who elect not to participate in the Plan
will receive all distributions in cash paid by check mailed directly to the
shareholder of record (or if the shares are held in street or other nominee
name, then to the nominee) by the Plan Agent, as dividend disbursing agent.
Certain broker-dealers and nominees do not permit their clients to participate
in dividend reinvestment plans. Shareholders whose common shares are held in the
name of a broker or nominee should contact the broker or nominee to determine
whether and how they may participate in the Plan.
The Plan Agent serves as agent for the shareholders in administering the Plan.
After the Fund declares a dividend or makes a capital gain distribution, the
Plan Agent will, as agent for the participants, either (i) receive the cash
payment and use it to buy common shares in the open market, on the New York
Stock Exchange or elsewhere, for the participants' accounts or (ii) distribute
newly issued common shares of the Fund on behalf of the participants. The Plan
Agent will receive cash from the Fund with which to buy common shares in the
open market if, on the determination date, the net asset value per share exceeds
the market price per share plus estimated brokerage commissions on that date.
The Plan Agent will receive the dividend or distribution in newly issued common
shares of the Fund if, on the determination date, the market price per share
plus estimated brokerage commissions equals or exceeds the net asset value per
share of the Fund on that date. The number of shares to be issued will be
computed at a per share rate equal to the greater of (i) the net asset value or
(ii) 95% of the closing market price per share on the payment date.
Participants in the Plan may withdraw from the Plan upon written notice to the
Plan Agent. Such withdrawal will be effective immediately if received not less
than ten days prior to a distribution record date; otherwise, it will be
effective for all subsequent dividend record dates. When a participant withdraws
from the Plan or upon termination of the Plan as provided below, certificates
for whole common shares credited to his or her account under the Plan will be
issued and a cash payment will be made for any fraction of a common share
credited to such account. In the alternative, upon receipt of the participant's
instructions, common shares will be sold and the proceeds sent to the
participant less brokerage commissions and any applicable taxes.
The Plan Agent maintains each shareholder's account in the Plan and furnishes
confirmations of all acquisitions made for the participant. Common shares in the
account of each Plan participant will be held by the Plan Agent on behalf of the
participant. Proxy material relating to shareholders' meetings of the Fund will
include those shares purchased as well as shares held pursuant to the Plan.
In the case of shareholders, such as banks, brokers or nominees, which hold
common shares for others who are the beneficial owners, the Plan Agent will
administer the Plan on the basis of the number of common shares certified from
time to time by the record shareholders as representing the total amount
registered in the record shareholder's name and held for the account of
beneficial owners who are participants in the Plan.
The Plan Agent's fees for the handling of reinvestment of dividends and other
distributions will be paid by the Fund. Each participant will pay a pro rata
share of brokerage commissions incurred with respect to the Plan Agent's open
market purchases in connection with the reinvestment of distributions. There are
no other charges to participants for reinvesting dividends or capital gain
distributions; however, the Fund reserves the right to amend the Plan to include
a service charge payable by the participants.
The automatic reinvestment of dividends and other distributions will not relieve
participants of any income tax that may be payable or required to be withheld on
such dividends or distributions.
The Fund and the Plan Agent reserve the right to amend or terminate the Plan.
All correspondence concerning the Plan should be directed to: Investors Bank &
Trust Company, 200 Clarendon Street, Mail Stop OPS22, Boston, MA 02116
(Telephone) 800-988-5196.
TRUSTEES AND OFFICERS TABLE (UNAUDITED)
Set forth below is information about the Trustees. The address for each Trustee
is Lehman Brothers Asset Management Inc., 399 Park Avenue, New York, NY 10022.
CLASS I
INDEPENDENT FUND TRUSTEES:
NUMBER OF
PORTFOLIOS
IN FUND OTHER
COMPLEX DIRECTORSHIPS
LENGTH OF OVERSEEN HELD OUTSIDE
NAME, AGE AND TIME BY FUND FUND COMPLEX BY
POSITION(1) WITH FUND SERVED PRINCIPAL OCCUPATION(S)(2) TRUSTEE(3) FUND TRUSTEE
----------------------------------------------------------------------------------------------------------------------------------
Faith Colish (70) Since 2006 Counsel, Carter Ledyard & Milburn 50 Advisory Director, ABA Retirement
Trustee LLP (law firm) since October 2002; Funds (formerly, American Bar
formerly, Attorney-at-Law and Retirement Association (ABRA))
President, Faith Colish, A since 1997 (not-for-profit
Professional Corporation, 1980 to membership association).
2002.
C. Anne Harvey (69) Since 2006 President, C.A. Harvey Associates 50 Formerly, President, Board of
Trustee since October 2001; formerly, Associates to The National
Director, AARP, 1978 to December Rehabilitation Hospital's Board of
2001. Directors, 2001 to 2002; formerly,
Member, Individual Investors
Advisory Committee to the New York
Stock Exchange Board of Directors,
1998 to June 2002.
Cornelius T. Ryan (74) Since 2006 Founding General Partner, Oxford 50 None.
Trustee Partners and Oxford Bioscience
Partners (venture capital
investing) and President, Oxford
Venture Corporation since 1981.
Peter P. Trapp (61) Since 2006 Regional Manager for Mid-Southern 50 None.
Trustee Region, Ford Motor Credit Company
since September 1997; formerly,
President, Ford Life Insurance
Company, April 1995 to August
1997.
27
TRUSTEES AND OFFICERS TABLE (UNAUDITED) (CONTINUED)
FUND TRUSTEE WHO IS AN "INTERESTED PERSON"
NUMBER OF
PORTFOLIOS
IN FUND OTHER
COMPLEX DIRECTORSHIPS
LENGTH OF OVERSEEN HELD OUTSIDE
NAME, AGE AND TIME BY FUND FUND COMPLEX BY
POSITION(1) WITH FUND SERVED PRINCIPAL OCCUPATION(S)(2) TRUSTEE(3) FUND TRUSTEE
----------------------------------------------------------------------------------------------------------------------------------
Peter E. Sundman* (47) Since 2006 Executive Vice President, 50 Director and Vice President,
Chief Executive Officer, Neuberger Berman Inc. (holding Neuberger & Berman Agency, Inc.
Trustee and Chairman of the company) since 1999; Head of since 2000; formerly, Director,
Board Neuberger Berman Inc.'s Mutual Neuberger Berman Inc. (holding
Funds Business (since 1999) and company), October 1999 to March
Institutional Business (1999 to 2003; Trustee, Frost Valley YMCA;
October 2005); responsible for Trustee, College of Wooster.
Managed Accounts Business and
intermediary distribution since
October 1999; President and
Director, NB Management since
1999; Managing Director, Neuberger
Berman since 2005; formerly,
Executive Vice President,
Neuberger Berman, 1999 to December
2005; formerly, Principal,
Neuberger Berman, 1997 to 1999;
formerly, Senior Vice President,
NB Management, 1996 to 1999.
CLASS II*
INDEPENDENT FUND TRUSTEES:
John Cannon (76) Since 2006 Consultant; formerly, Chairman, 50 Independent Trustee or Director of
Trustee CDC Investment Advisers three series of Oppenheimer Funds:
(registered investment adviser), Limited Term New York Municipal
1993 to January 1999; formerly, Fund, Rochester Fund Municipals,
President and Chief Executive and Oppenheimer Convertible
Officer, AMA Investment Advisors, Securities Fund since 1992.
an affiliate of the American
Medical Association.
* Barry Hirsch was elected as a Class II Trustee at the annual shareholder
meeting held on April 19, 2006. Mr. Hirsch passed away in July 2006.
NUMBER OF
PORTFOLIOS
IN FUND OTHER
COMPLEX DIRECTORSHIPS
LENGTH OF OVERSEEN HELD OUTSIDE
NAME, AGE AND TIME BY FUND FUND COMPLEX BY
POSITION(1) WITH FUND SERVED PRINCIPAL OCCUPATION(S)(2) TRUSTEE(3) FUND TRUSTEE
----------------------------------------------------------------------------------------------------------------------------------
Tom D. Seip (56) Since 2006 General Partner, Seip Investments 50 Director, H&R Block, Inc.
Lead Independent LP (a private investment (financial services company) since
Trustee partnership); formerly, President May 2001; Director, America One
and CEO, Westaff, Inc. (temporary Foundation since 1998; formerly,
staffing), May 2001 to January Director, Forward Management, Inc.
2002; formerly, Senior Executive (asset management company), 1999
at the Charles Schwab Corporation, to 2006; formerly Director, E-Bay
1983 to 1999, including Chief Zoological Society, 1999 to 2003;
Executive Officer, Charles Schwab formerly, Director, General Magic
Investment Management, Inc. and (voice recognition software), 2001
Trustee, Schwab Family of Funds to 2002; formerly, Director,
and Schwab Investments, 1997 to E-Finance Corporation (credit
1998, and Executive Vice decisioning services), 1999 to
President-Retail Brokerage, 2003; formerly, Director,
Charles Schwab Investment Save-Daily.com (micro investing
Management,1994 to 1997. services), 1999 to 2003.
FUND TRUSTEE WHO IS AN "INTERESTED PERSON"
Jack L. Rivkin* (66) Since 2006 Executive Vice President and Chief 50 Director, Dale Carnegie and
President and Investment Officer, Neuberger Associates, Inc. (private company)
Trustee Berman Inc. (holding company) since 1998; Director, Solbright,
since 2002 and 2003, respectively; Inc. (private company) since 1998.
Managing Director and Chief
Investment Officer, Neuberger
Berman since December 2005 and
2003, respectively; formerly,
Executive Vice President,
Neuberger Berman, December 2002 to
2005; Director and Chairman, NB
Management since December 2002;
formerly, Executive Vice
President, Citigroup Investments,
Inc., September 1995 to February
2002; formerly, Executive Vice
President, Citigroup Inc.,
September 1995 to February 2002.
29
TRUSTEES AND OFFICERS TABLE (UNAUDITED) (CONTINUED)
CLASS III
INDEPENDENT FUND TRUSTEES:
NUMBER OF
PORTFOLIOS
IN FUND OTHER
COMPLEX DIRECTORSHIPS
LENGTH OF OVERSEEN HELD OUTSIDE
NAME, AGE AND TIME BY FUND FUND COMPLEX BY
POSITION(1) WITH FUND SERVED PRINCIPAL OCCUPATION(S)(2) TRUSTEE(3) FUND TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
Robert A. Kavesh (78) Since 2006 Marcus Nadler Professor Emeritus of 50 Director, The Caring
Trustee Finance and Economics, New York Community (not-for-profit);
University Stern School of Business; formerly, Director, DEL
formerly, Executive Secretary-Treasurer, Laboratories, Inc. (cosmetics
American Finance Association, 1961 to and pharmaceuticals), 1978 to
1979. 2004; formerly, Director, Apple
Bank for Savings, 1979 to 1990;
formerly, Director, Western
Pacific Industries, Inc., 1972
to 1986 (public company).
Howard A. Mileaf (69) Since 2006 Retired; formerly, Vice President and 50 Director, Webfinancial
Trustee General Counsel, WHX Corporation Corporation (holding
(holding company), 1993 to 2001. company) since
December 2002; formerly,
Director WHX Corporation
(holding company),
January 2002 to June 2005;
formerly, Director, State
Theatre of New Jersey
(not-for-profit theater), 2000
to 2005; formerly, Director,
Kevlin Corporation
(manufacturer of microwave and
other products).
Edward I. O'Brien (77) Since 2006 Formerly, Member, Investment Policy 50 Director, Legg Mason, Inc.
Trustee Committee, Edward Jones, 1993 to 2001; (financial services holding
President, Securities Industry Association company) since 1993; formerly,
("SIA") (securities industry's representative Director, Boston Financial
in government relations and regulatory Group (real estate and tax
matters at the federal and state levels), shelters), 1993 to 1999.
1974 to 1992; Adviser to SIA,
November 1992 to November 1993.
William E. Rulon (73) Since 2006 Retired; formerly, Senior Vice President, 50 Formerly, Director, Pro-Kids
Trustee Foodmaker, Inc. (operator and franchiser Golf and Learning Academy
of restaurants) until January 1997. (teach golf and computer usage
to "at risk" children), 1998 to
2006; formerly, Director,
Prandium, Inc. (restaurants),
March 2001 to July 2002.
NUMBER OF
PORTFOLIOS
IN FUND OTHER
COMPLEX DIRECTORSHIPS
LENGTH OF OVERSEEN HELD OUTSIDE
NAME, AGE AND TIME BY FUND FUND COMPLEX BY
POSITION(1) WITH FUND SERVED PRINCIPAL OCCUPATION(S)(2) TRUSTEE(3) FUND TRUSTEE
------------------------------------------------------------------------------------------------------------------------------------
Candace L. Straight (58) Since 2006 Private investor and consultant specializing 50 Director, National Atlantic
Trustee in the insurance industry; formerly, Holdings Corporation (property
Advisory Director, Securitas Capital LLC and casualty insurance
(a global private equity investment firm company) since 2004; Director,
dedicated to making investments in the The Proformance Insurance
insurance sector), 1998 to December 2003. Company (personal lines
property and casualty insurance
company) since March 2004;
formerly, Director, Providence
Washington Insurance
Company (property and
casualty insurance company),
December 1998 to March 2006;
formerly, Director, Summit
Global Partners (insurance
brokerage firm, 2000 to 2005.
(1) The Board of Trustees shall at times be divided as equally as possible into
three classes of Trustees designated Class I, Class II, and Class III. The
terms of office of Class I, Class II, and Class III Trustees shall expire
at the annual meeting of shareholders held in 2009, 2007, and 2008,
respectively, and at each third annual meeting of stockholders thereafter.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
(3) For funds organized in a master-feeder structure, we count the master fund
and its associated feeder funds as a single portfolio.
* Indicates a Fund Trustee who is an "interested person" within the meaning
of the 1940 Act. Mr. Sundman and Mr. Rivkin are interested persons of the
Trust by virtue of the fact that they are officers and/or directors of
Neuberger Berman Management Inc. ("NB Management") and Neuberger Berman,
LLC ("Neuberger Berman").
31
TRUSTEES AND OFFICERS TABLE (UNAUDITED) (CONTINUED)
Set forth below is information about the officers of the Fund. The address for
each officer is Lehman Brothers Asset Management Inc., 399 Park Avenue, New
York, NY 10022.
POSITION
AND LENGTH
NAME AND AGE OF TIME SERVED(1) PRINCIPAL OCCUPATION(S)(2)
------------------------------------------------------------------------------------------------------
Andrew B. Allard (45) Anti-Money Senior Vice President, Neuberger Berman since 2006;
Laundering Deputy General Counsel, Neuberger Berman since 2004;
Compliance formerly, Vice President, Neuberger Berman, 2000 to
Officer 2006; formerly, Associate General Counsel, Neuberger
since 2006 Berman, 1999 to 2004; formerly, Associate General
Counsel, NB Management, 1994 to 1999; Anti-Money
Laundering Compliance Officer, fifteen registered
investment companies for which NB Management acts as
investment manager and administrator (seven since 2002,
three since 2003, four since 2004 and one since 2005)
and one registered investment company for which Lehman
Brothers Asset Management Inc. acts as investment
adviser (since 2006).
Michael J. Bradler (36) Assistant Vice President, Neuberger Berman since 2006; Employee,
Treasurer NB Management since 1997; Assistant Treasurer, fifteen
since 2006 registered investment companies for which NB Management
acts as investment manager and administrator (fifteen
since 2005) and one registered investment company for
which Lehman Brothers Asset Management Inc. acts as
investment adviser (since 2006).
Claudia A. Brandon (49) Secretary Vice President-Mutual Fund Board Relations, NB
since 2006 Management since 2000 and Assistant Secretary since
2004; Vice President, Neuberger Berman since 2002 and
Employee since 1999; formerly, Vice President, NB
Management, 1986 to 1999; Secretary, fifteen registered
investment companies for which NB Management acts as
investment manager and administrator (three since 2000,
four since 2002, three since 2003, four since 2004 and
one since 2005) and one registered investment company
for which Lehman Brothers Asset Management Inc. acts as
investment adviser (since 2006).
Robert Conti (50) Vice Senior Vice President, Neuberger Berman since 2003;
President formerly, Vice President, Neuberger Berman, 1999 to
since 2006 2003; Senior Vice President, NB Management since 2000;
formerly, Controller, NB Management, 1994 to 1996;
formerly, Treasurer, NB Management, 1996 to 1999; Vice
President, fifteen registered investment companies for
which NB Management acts as investment manager and
administrator (three since 2000, four since 2002, three
since 2003, four since 2004 and one since 2005) and one
registered investment company for which Lehman Brothers
Asset Management Inc. acts as investment adviser (since
2006).
Brian J. Gaffney (53) Vice Managing Director, Neuberger Berman since 1999; Senior
President Vice President, NB Management since 2000; formerly, Vice
since 2006 President, NB Management, 1997 to 1999; Vice President,
fifteen registered investment companies for which NB
Management acts as investment manager and administrator
(three since 2000, four since 2002, three since 2003,
four since 2004 and one since 2005) and one registered
investment company for which Lehman Brothers Asset
Management Inc. acts as investment adviser (since 2006).
Maxine L. Gerson (55) Chief Legal Senior Vice President, Neuberger Berman since 2002;
Officer Deputy General Counsel and Assistant Secretary,
since 2006 Neuberger Berman since 2001; formerly, Vice President,
(only for Neuberger Berman, 2001 to 2002; formerly, Associate
purposes of General Counsel, Neuberger Berman, 2001; formerly,
sections 307 Counsel, Neuberger Berman, 2000; Secretary and General
and 406 of Counsel, NB Management since 2004; Chief Legal Officer,
the fifteen registered investment companies for which NB
Sarbanes-Oxley Management acts as investment manager and administrator
Act of 2002) (fifteen since 2005) and one registered investment
company for which Lehman Brothers Asset Management, Inc.
acts as investment adviser (since 2006).
POSITION
AND LENGTH
NAME AND AGE OF TIME SERVED(1) PRINCIPAL OCCUPATION(S)(2)
------------------------------------------------------------------------------------------------------
Sheila R. James (41) Assistant Employee, Neuberger Berman since 1999; formerly,
Secretary Employee, NB Management, 1991 to 1999; Assistant
since 2006 Secretary, fifteen registered investment companies for
which NB Management acts as investment manager and
administrator (seven since 2002, three since 2003, four
since 2004 and one since 2005) and one registered
investment company for which Lehman Brothers Asset
Management Inc. acts as investment adviser (since 2006).
Kevin Lyons (51) Assistant Employee, Neuberger Berman since 1999; formerly,
Secretary Employee, NB Management, 1993 to 1999; Assistant
since 2006 Secretary, fifteen registered investment companies for
which NB Management acts as investment manager and
administrator (ten since 2003, four since 2004 and one
since 2005) and one registered investment company for
which Lehman Brothers Asset Management Inc. acts as
investment adviser (since 2006).
John M. McGovern (36) Treasurer Vice President, Neuberger Berman since 2004; Employee,
since 2006 NB Management since 1993; Treasurer and Principal
Financial and Accounting Officer, fifteen registered
investment companies for which NB Management acts as
investment manager and administrator (fifteen since
2005) and one registered investment company for which
Lehman Brothers Asset Management Inc. acts as investment
adviser (since 2006); formerly, Assistant Treasurer,
fifteen registered investment companies for which NB
Management acts as investment manager and administrator,
2002 to 2005.
Frank Rosato (35) Assistant Vice President, Neuberger Berman since 2006; Employee,
Treasurer NB Management since 1995; Assistant Treasurer, fifteen
since 2006 registered investment companies for which NB Management
acts as investment manager and administrator (fifteen
since 2005) and one registered investment company for
which Lehman Brothers Asset Management Inc. acts as
investment adviser (since 2006).
Frederic B. Soule (60) Vice Senior Vice President, Neuberger Berman since 2003;
President formerly, Vice President, Neuberger Berman, 1999 to
since 2006 2003; formerly, Vice President, NB Management, 1995 to
1999; Vice President, fifteen registered investment
companies for which NB Management acts as investment
manager and administrator (three since 2000, four since
2002, three since 2003, four since 2004 and one since
2005) and one registered investment company for which
Lehman Brothers Asset Management Inc. acts as investment
adviser (since 2006).
Chamaine Williams (35) Chief Vice President, Lehman Brothers Inc. since 2003; Chief
Compliance Compliance Officer, fifteen registered investment
Officer companies for which NB Management acts as investment
since 2005 manager and administrator (fifteen since 2005) and one
registered investment company for which Lehman Brothers
Asset Management Inc. acts as investment adviser (since
2005); Chief Compliance Officer, Lehman Brothers Asset
Management Inc. since 2003; Chief Compliance Officer,
Lehman Brothers Alternative Investment Management LLC
since 2003; formerly, Vice President, UBS Global Asset
Management (US) Inc. (formerly, Mitchell Hutchins Asset
Management, a wholly-owned subsidiary of PaineWebber
Inc.), 1997-2003.
(1) Pursuant to the By-Laws of the Trust, each officer elected by the Fund
Trustees shall hold office until his or her successor shall have been
elected and qualified or until his or her earlier death, inability to
serve, or resignation. Officers serve at the pleasure of the Fund Trustees
and may be removed at any time with or without cause.
(2) Except as otherwise indicated, each individual has held the positions shown
for at least the last five years.
33
TRUSTEES AND OFFICERS TABLE (UNAUDITED) (CONTINUED)
The Fund's Statement of Additional Information includes additional information
about the Trustees of the Fund as of 2003, and is available without charge, upon
request, by calling 1-800-988-5196, or visiting the Fund's website at
www.lbftincomeopportunity.com.
A description of the Fund's proxy voting policies and procedures is available
(1) without charge, upon request, by calling 1-800-988-5196, (2) on the Fund's
website at www.lbftincomeopportunity.com and (3) on the Commission's website at
www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio
securities during the 12-month period ended June 30, 2006 is available (1) on
the Fund's website www.lbftincomeopportunity.com and (2) on the Commission's
website at www.sec.gov.
In accordance with Section 303A.12 (a) of the New York Stock Exchange Listed
Company Manual, the Fund's Annual CEO Certification certifying as to compliance
with NYSE's Corporate Governance Listing Standards was submitted to the Exchange
on May 26, 2006.
The Fund files a complete schedule of portfolio holdings with the Securities and
Exchange Commission for the first and third quarters of each fiscal year on Form
N-Q. The Fund's Forms N-Q are available on the Securities and Exchange
Commission's website at www.sec.gov and may be reviewed and copied at the
Securities and Exchange Commission's Public Reference Room in Washington, DC.
Information on the operation of the Public Reference Room may be obtained by
calling 1-800-SEC-0330. The information on Form N-Q is available upon request,
without charge, by calling 1-800-877-9700 (toll free).
APPROVAL OF INVESTMENT ADVISORY AGREEMENTS
At a Meeting held on February 16, 2006, called pursuant to section 15(c) of the
Investment Company Act of 1940, as amended (the "1940 Act"), the Board of
Trustees of the Fund considered the approval of the renewal of the Fund's
Advisory Agreement with Lehman Brothers Asset Management Inc. (the "Adviser")
and the Sub-Advisory Agreement with Lehman Brothers Asset Management LLC (the
"Sub-Adviser").
At the Meeting, the Board received substantial information regarding the
proposed continuation of the Advisory and Sub-Advisory Agreements, following
which the Board determined that it would be in the best interests of the Fund to
continue the Advisory and Sub-Advisory Agreements. In reaching this overall
determination, the Board reviewed, among other things: (i) the nature, extent
and quality of advisory service, including the performance of the Fund; (ii) the
appropriateness of the fee structure and rate of compensation paid to the
Adviser relative to the cost of services provided and profits realized by the
Adviser from the relationship with the Fund; (iii) the potential for economies
of scale and whether the fee structure reflects potential for such economies of
scale; (iv) fee/service comparisons, including other funds and other clients of
the Adviser; and (v) the existence of any ancillary benefits realized by the
Adviser.
In connection with its review of the nature and quality of the services provided
by the Adviser and Sub-Adviser, the Board considered the performance achieved
for the Fund by the Adviser and Sub-Adviser relative to its designated
benchmark. In connection with the Fund's performance, the Board reviewed
statistical information regarding the performance of the Fund during the fiscal
year ended December 31, 2005, and the following periods: the month ended January
31, 2006, the quarter ended December 31, 2005, August 1, 2003 through December
31, 2005 and from inception through December 31, 2005. The Board also considered
a comparison prepared by Lipper Analytical of the Fund's performance relative to
comparable funds registered under the 1940 Act and managed by other investment
advisors ("Peer Group"), together with a detailed description of the methodology
used by Lipper to prepare this information. Based on this information, the Board
concluded that the services provided by the Adviser and Sub-Adviser under the
Advisory and Sub-Advisory Agreements are satisfactory and the Fund's performance
continues to support the Board's original selection of the Adviser and
Sub-Adviser.
The Board was also informed as to the performance of the Fund and institutional
clients of the Sub-Adviser (collectively, "comparable accounts") as presented by
the Adviser and Sub-Adviser. The Board did not specifically rely upon such
comparisons, particularly in light of the different regulatory and investment
environments to which registered vehicles are subject, but rather focused on an
overall evaluation of the investment methodologies and strategies employed by
the Adviser and Sub-Adviser and Fund performance relative to its designated
benchmark. The Board also considered information to the effect that expense
levels of the Fund compared favorably to the expense levels of other funds in
the Peer Group. Based on this information, the Board concluded that the advisory
fee for the Fund for the most recent fiscal year was below the median for its
Peer Group and that the Fund's actual total expenses were also lower than the
median for the Fund's Peer Group, based on the statistical information regarding
the expense ratio components, contractual advisory and sub-advisory fees, and
actual and total expenses of the Fund in comparison with the same information
for other funds that Lipper determined are in the Fund's Peer Group.
In addition, the Board considered the Adviser's and Sub-Adviser's investment
philosophy and experience, investment processes and strategies and the
background and experience of the persons responsible for the day-to-day
management of the Fund, including brokerage allocation policies. The Board
considered the non-advisory services provided by the Adviser, including the
Adviser's provision of officers for the Fund, coordination of service providers
and compliance-related activities.
The Board also considered the costs incurred by the Adviser in connection with
the provision of services to the Fund (including, for this purpose, the fee paid
by the Adviser to the Sub-Adviser), as well as the costs incurred by the
Sub-Adviser. The Board concluded that, based on the profit levels reported by
the Adviser and Sub-Adviser, and the information included in the 15(c)
Materials, the fee schedules included in the Advisory and Sub-Advisory
Agreements are fair and reasonable and have not resulted in a profit that is
excessive or beyond the range that would have been negotiated at arm's length in
light of the specific facts and circumstances of the Fund. The Board reviewed
information about the profitability of the Fund to the Adviser and Sub-Adviser,
based on the fees payable
35
APPROVAL OF INVESTMENT ADVISORY AGREEMENTS (CONTINUED)
under the Advisory and Sub-Advisory Agreements; information regarding direct
revenue received by the Adviser and Sub-Adviser and/or their affiliates in
connection with the services provided to the Fund by the Adviser and Sub-Adviser
and/or their affiliates; and the Adviser's and Sub-Adviser's profit margins as
reflected in the profitability analysis. The Board also received and considered
information regarding the Fund's investment advisory fee rate under the Advisory
Agreement in comparison to the investment management fee rates for other
funds/accounts with substantially similar investment objectives and strategies
for which the Adviser, the Sub-Adviser or their affiliates provide investment
management services. The Board analyzed the level of the investment
advisory/management fees in relation to the nature and extent of services
provided to the Fund in comparison with the nature and extent of services
provided to the Adviser's and Sub-Adviser's other clients and accounts,
including, among other factors, the level of complexity in managing the Fund and
other accounts under differing regulatory requirements and various client
guidelines or requirements, the nature and extent of the shareholder support
services provided to the Fund and its shareholders in comparison with the nature
and extent of the services provided to other accounts and their clients, and in
relation to the Fund's and other accounts' fee structures and asset levels.
In connection with its review of the Fund's advisory fee structure, the Board
considered the extent to which the Adviser or Sub-Adviser derive any ancillary
or "fall-out" benefits as a result of their relationship with the Fund or
whether there is any potential for the realization of economies of scale that
may be appropriately reflected in fee schedules. With regard to these factors,
the Board concluded that, because the Fund is a closed-end vehicle, the
potential for growth in assets is limited. Similarly, the Board concluded that
the "fall-out" benefits to the Adviser and Sub-Adviser, if any, are generally
limited in light of the small size of the Fund relative to the other assets
managed by the Adviser and Sub-Adviser.
On the basis of these considerations and in recognition of the fiduciary duty
deemed owed by the Adviser and Sub-Adviser to the Fund with respect to the
receipt of compensation for services or of payments of a material nature paid to
the Adviser or Sub-Adviser, the Board, including a majority of the Trustees of
the Fund who are not "interested persons" within the meaning of the 1940 Act,
concluded that the Advisory and Sub-Advisory Agreements continued to be in the
best interests of the Fund and approved the Advisory and Sub-Advisory Agreements
for continuance for the period ending February 28, 2007, unless terminated or
amended prior to that date according to its terms. Subsequent to this Board
Meeting, the current Trustees were elected at the annual meeting of
shareholders; they are described in the section of this report entitled
"Trustees and Officers Table."
LEHMAN BROTHERS
(C)2006 Lehman Brothers Inc. All Rights Reserved. LB10183
ITEM 2. CODE OF ETHICS.
Not applicable to this filing.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable to this filing.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable to this filing.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable to this filing.
ITEM 6. SCHEDULE OF INVESTMENTS
The complete schedule of investments is disclosed in the semi-annual report,
which is included as item 1.
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable to this filing.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable to this filing.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.
No reportable purchases for the period covered by this report.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
There were no changes to the procedures by which shareholders may recommend
nominees to the Board of Trustees of the Fund.
ITEM 11. 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 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 control
over financial reporting (as defined in Rule 30a-3(d) under the Act) that
occurred during the 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 to this filing
(a)(2) The certifications required by rule 30a-2(a) of the Act and Section
302 of the Sarbanes-Oxley Act of 2002 ("Sarbanes-Oxley Act") are filed
herewith.
(a)(3) Not applicable to the Registrant.
(b) The certifications required by rule 30a-2(b) of the Act and Section 906
of the Sarbanes-Oxley Act are filed herewith.
The certifications provided pursuant to Section 906 of the Sarbanes-Oxley Act
are not deemed "filed" for purposes of Section 18 of the Securities Exchange Act
of 1934 ("Exchange Act"), or otherwise subject to the liability of that section.
Such certifications will not be deemed to be incorporated by reference into any
filing under the Securities Act of 1933 or the Exchange Act, except to the
extent that the Registrant specifically incorporates them by reference.
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: 08/30/06
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: 08/30/06
By: /s/ John M. McGovern
------------------------------------------
John M. McGovern, Treasurer and
Principal Financial and Accounting Officer
Date: 08/30/06