Edgar Filing: FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

Investment Company Act file number 811-21905
-----------

First Trust/Aberdeen Emerging Opportunity Fund
--------------------------------------------------------------
(Exact name of registrant as specified in charter)

120 East Liberty Drive, Suite 400
Wheaton, IL 60187
--------------------------------------------------------------
(Address of principal executive offices) (Zip code)

W. Scott Jardine, Esq.
First Trust Portfolios L.P.
120 East Liberty Drive, Suite 400
Wheaton, IL 60187
--------------------------------------------------------------
(Name and address of agent for service)

registrant's telephone number, including area code: (630) 765-8000
----------------

Date of fiscal year end: December 31
-------------

Date of reporting period: June 30, 2012
---------------

Form N-CSR is to be used by management investment companies to file reports with
the Commission not later than 10 days after the transmission to stockholders of
any report that is required to be transmitted to stockholders under Rule 30e-1
under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may
use the information provided on Form N-CSR in its regulatory, disclosure review,
inspection, and policymaking roles.

A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. The OMB has reviewed this collection of information under
the clearance requirements of 44 U.S.C. ss. 3507.

ITEM 1. REPORTS TO STOCKHOLDERS.

The Report to Shareholders is attached herewith.

FIRST TRUST

SEMI-ANNUAL REPORT
FOR THE SIX MONTHS ENDED
JUNE 30, 2012

First Trust/
Aberdeen
Emerging Opportunity
Fund

ABERDEEN
ASSET MANAGEMENT

--------------------------------------------------------------------------------
TABLE OF CONTENTS
--------------------------------------------------------------------------------

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
SEMI-ANNUAL REPORT
JUNE 30, 2012

Shareholder Letter........................................................... 1
At A Glance.................................................................. 2
Portfolio Commentary......................................................... 3
Portfolio of Investments..................................................... 7
Schedule of Forward Foreign Currency Contracts............................... 15
Statement of Assets and Liabilities.......................................... 16
Statement of Operations...................................................... 17
Statements of Changes in Net Assets.......................................... 18
Statement of Cash Flows...................................................... 19
Financial Highlights......................................................... 20
Notes to Financial Statements................................................ 21
Additional Information....................................................... 28

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This report contains certain forward-looking statements within the meaning of
the Securities Act of 1933, as amended, and the Securities Exchange Act of 1934,
as amended. Forward-looking statements include statements regarding the goals,
beliefs, plans or current expectations of First Trust Advisors L.P. ("First
Trust" or the "Advisor") and/or Aberdeen Asset Management Inc. ("Aberdeen" or
the "Sub-Advisor") and their respective representatives, taking into account the
information currently available to them. Forward-looking statements include all
statements that do not relate solely to current or historical fact. For example,
forward-looking statements include the use of words such as "anticipate,"
"estimate," "intend," "expect," "believe," "plan," "may," "should," "would" or
other words that convey uncertainty of future events or outcomes.

Forward-looking statements involve known and unknown risks, uncertainties and
other factors that may cause the actual results, performance or achievements of
First Trust/Aberdeen Emerging Opportunity Fund (the "Fund") to be materially
different from any future results, performance or achievements expressed or
implied by the forward-looking statements. When evaluating the information
included in this report, you are cautioned not to place undue reliance on these
forward-looking statements, which reflect the judgment of the Advisor and/or
Sub-Advisor and their respective representatives only as of the date hereof. We
undertake no obligation to publicly revise or update these forward-looking
statements to reflect events and circumstances that arise after the date hereof.

PERFORMANCE AND RISK DISCLOSURE

There is no assurance that the Fund will achieve its investment objective. The
Fund is subject to market risk, which is the possibility that the market values
of securities owned by the Fund will decline and that the value of the Fund
shares may therefore be less than what you paid for them. Accordingly, you can
lose money by investing in the Fund. See "Risk Considerations" in the Notes to
Financial Statements for a discussion of certain other risks of investing in the
Fund.

Performance data quoted represents past performance, which is no guarantee of
future results, and current performance may be lower or higher than the figures
shown. For the most recent month-end performance figures, please visit
http://www.ftportfolios.com or speak with your financial advisor. Investment
returns, net asset value and common share price will fluctuate and Fund shares,
when sold, may be worth more or less than their original cost.

HOW TO READ THIS REPORT

This report contains information that may help you evaluate your investment. It
includes details about the Fund and presents data and analysis that provide
insight into the Fund's performance and investment approach.

By reading the portfolio commentary by the portfolio management team of the
Fund, you may obtain an understanding of how the market environment affected the
Fund's performance. The statistical information that follows may help you
understand the Fund's performance compared to that of relevant market
benchmarks.

It is important to keep in mind that the opinions expressed by personnel of
Aberdeen are just that: informed opinions. They should not be considered to be
promises or advice. The opinions, like the statistics, cover the period through
the date on the cover of this report. The risks of investing in the Fund are
spelled out in the prospectus, the statement of additional information, this
report and other Fund regulatory filings.

--------------------------------------------------------------------------------
SHAREHOLDER LETTER
--------------------------------------------------------------------------------

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
SEMI-ANNUAL LETTER FROM THE CHAIRMAN AND CEO
JUNE 30, 2012

Dear Shareholders:

I am pleased to present you with the semi-annual report for your investment in
First Trust/Aberdeen Emerging Opportunity Fund (the "Fund").

The report you hold contains detailed information about your investment; a
portfolio commentary from the Fund's management team that provides a recap of
the period; a performance analysis and a market and Fund outlook. Additionally,
you will find the Fund's financial statements for the period this report covers.
I encourage you to read this document and discuss it with your financial
advisor. A successful investor is also typically a knowledgeable one, as we have
found to be the case at First Trust.

First Trust remains committed to being a long-term investor and investment
manager and to bringing you quality financial solutions regardless of market ups
and downs. We have always believed, as I have written previously, that there are
two ways to attain success in reaching your financial goals: staying invested in
quality products and having a long-term investment horizon. We are committed to
this approach in the products we manage or supervise and offer to investors.

As you know, First Trust offers a variety of products that we believe could fit
many financial plans to help investors seeking long-term investment success. We
encourage you to talk to your advisor about the other investments First Trust
offers that might also fit your financial goals and to discuss those goals with
your advisor regularly so that he or she can help keep you on track.

First Trust will continue to make available up-to-date information about your
investments so you and your financial advisor are current on any First Trust
investments you own. We value our relationship with you, and thank you for the
opportunity to assist you in achieving your financial goals. I look forward to
the remainder of 2012 and to the next edition of your Fund's report.

Sincerely,

/s/ James A. Bowen

James A. Bowen
Chairman of the Board of Trustees of First Trust/Aberdeen Emerging Opportunity
Fund and Chief Executive Officer of First Trust Advisors L.P.

Page 1

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
"AT A GLANCE"
AS OF JUNE 30, 2012 (UNAUDITED)

-----------------------------------------------------------------
FUND STATISTICS
-----------------------------------------------------------------
Symbol on New York Stock Exchange FEO
Common Share Price $19.24
Common Share Net Asset Value ("NAV") $21.52
Premium (Discount) to NAV (10.59)%
Net Assets Applicable to Common Shares $114,677,044
Current Quarterly Distribution per Common Share (1) $0.350
Current Annualized Distribution per Common Share $1.400
Current Distribution Rate on Closing Common Share Price (2) 7.28%
Current Distribution Rate on NAV (2) 6.51%
-----------------------------------------------------------------

------------------------------------------------
COMMON SHARE PRICE & NAV (WEEKLY CLOSING PRICE)
------------------------------------------------

Common Share Price NAV
6/11 20.89 22.87
21.08 23.15
20.82 22.83
20.92 23.11
7/11 20.72 23.14
19.83 22.36
19.52 21.79
19.29 21.81
8/11 19.52 21.94
19.88 22.27
19.43 21.93
19.36 21.63
17.58 19.77
9/11 17.26 19.73
17.40 19.99
18.61 20.89
18.14 20.72
10/11 19.48 21.80
19.19 21.41
19.16 21.39
18.33 20.81
11/11 17.70 19.96
18.59 20.97
18.57 20.93
17.93 20.41
17.85 20.34
12/11 17.82 20.30
18.28 20.43
18.51 20.71
19.17 21.40
1/12 19.74 21.82
20.18 22.29
20.40 22.11
20.60 22.50
2/12 20.68 22.55
20.98 22.80
20.88 22.63
21.06 22.77
20.43 22.27
3/12 20.78 22.32
21.35 22.20
20.90 22.08
20.50 22.21
4/12 20.79 22.42
21.20 22.26
20.49 21.79
19.03 20.94
5/12 18.95 20.78
18.39 20.47
19.20 20.99
19.24 21.26
18.99 21.01
6/12 19.24 21.52

----------------------------------------------------------------------------------------------------------------
PERFORMANCE
----------------------------------------------------------------------------------------------------------------

Average Annual Total Return
____________________________________________

6 Months Ended 1 Year Ended 5 Years Ended Inception (08/28/2006)
6/30/2012 6/30/2012 6/30/2012 to 6/30/2012
FUND PERFORMANCE (3)

NAV 9.68% 1.25% 9.09% 11.01%
Market Value 11.70% -0.89% 9.38% 8.04%

INDEX PERFORMANCE
Blended Benchmark(4) 7.10% -2.55% 6.39% 9.09%
Barclays Capital Global
Emerging Markets Index 6.82% 6.75% 8.34% 8.24%
FTSE All World Emerging
Market Index 3.54% -15.61% 0.37% 6.54%
----------------------------------------------------------------------------------------------------------------

----------------------------------
% OF TOTAL
TOP 10 COUNTRIES(5) INVESTMENTS
----------------------------------
Brazil 14.0%
Mexico 11.6
South Africa 6.5
Russia 6.4
Turkey 6.1
India 4.9
China 4.1
Hungary 3.9
Indonesia 3.7
Hong Kong 3.2
----------------------------------
Total 64.4%
=====

--------------------------------------------------------------------
% OF TOTAL
TOP 10 HOLDINGS INVESTMENTS
--------------------------------------------------------------------
Mexican Bonos Desarr Fixed Rate Bond, 8.00%, 6/11/20 2.4%
Samsung Electronics Co., Ltd., Preference Shares 2.4
Hungary Government Bond, 6.75%, 11/24/17 2.4
Republic of South Africa, 10.50%, 12/21/26 2.2
Brazil Notas do Tesouro Nacional, Series F, 10.00%, 1/1/21 2.1
China Mobile Ltd. 2.0
Russian Foreign Bond, 7.85%, 3/10/18 1.8
Brazil Notas do Tesouro Nacional, Series F, 10.00%, 1/1/17 1.7
Grupo Financiero Banorte, S.A.B. de C.V., O Shares 1.6
Vale S.A., Preference Shares, ADR 1.6
--------------------------------------------------------------------
Total 20.2%
=====

----------------------------------
TOP 10 % OF TOTAL
COUNTRIES (5) INVESTMENTS
----------------------------------
AA 1.7%
A 10.2
A- 8.9
BBB+ 11.5
BBB 10.6
BBB- 18.5
BB+ 4.6
BB 4.7
BB- 6.7
B+ 12.2
B 4.4
B- 1.1
NR 4.9
----------------------------------
Total 100.0%
======

-----------------------------------------------------
% OF TOTAL
INDUSTRY CLASSIFICATION INVESTMENTS
-----------------------------------------------------
Government Bonds and Notes 42.5%
Commercial Banks 11.3
Oil, Gas & Consumable Fuels 7.6
Real Estate Management & Development 4.3
Semiconductors & Semiconductor Equipment 3.9
Wireless Telecommunication Services 2.9
Metals & Mining 2.7
Household Durables 2.3
Beverages 2.2
Automobiles 2.0
Food & Staples Retailing 1.7
Diversified Financial Services 1.6
Electric Utilities 1.6
Pharmaceuticals 1.4
Construction Materials 1.2
Specialty Retail 1.1
Thrifts & Mortgage Finance 1.1
Insurance 0.9
IT Services 0.9
Energy Equipment & Services 0.9
Household Products 0.9
Tobacco 0.8
Multiline Retail 0.7
Diversified Telecommunication Services 0.7
Special Purpose Banks 0.6
Transportation Infrastructure 0.5
Chemicals 0.5
Food Products 0.4
Consumer Finance 0.3
Construction & Engineering 0.3
Machinery 0.2
-----------------------------------------------------
Total 100.0%
======

(1) Most recent distribution paid or declared through 6/30/2012. Subject to
change in the future.

(2) Distribution rates are calculated by annualizing the most recent
distribution paid or declared through the report date and then dividing by
Common Share price or NAV, as applicable, as of 6/30/2012. Subject to
change in the future.

(3) Total return is based on the combination of reinvested dividend, capital
gain and return of capital distributions, if any, at prices obtained by the
Dividend Reinvestment Plan and changes in NAV per share for net asset value
returns and changes in Common Share price for market value returns. Total
returns do not reflect sales load and are not annualized for periods less
than one year. Past performance is not indicative of future results.

(4) Blended benchmark consists of the following: JPMorgan Emerging Markets Bond
Index - Global Diversified (32.5%); JPMorgan Government Bond Index -
Emerging Markets (32.5%); MSCI Emerging Markets Index (35.0%).

(5) Fixed-income portfolio securities are included in a country based upon
their underlying credit exposure as determined by Aberdeen Asset Management
Inc., the sub-advisor.

(6) The credit quality information represented reflects the ratings assigned by
one or more nationally recognized statistical rating organizations
(NRSROs). For situations in which a security is rated by more than one
NRSRO and the ratings are not equivalent, the highest ratings are used.

Page 2

--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY
--------------------------------------------------------------------------------

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
SEMI-ANNUAL REPORT
JUNE 30, 2012

SUB-ADVISOR

Aberdeen Asset Management Inc. ("Aberdeen" or the "Sub-Advisor"), a Securities
and Exchange Commission registered investment advisor, is a wholly-owned
subsidiary of Aberdeen Asset Management PLC ("Aberdeen Group"). Aberdeen Group
is a publicly-traded international investment management group listed on the
London Stock Exchange, managing assets for both institutional and retail clients
from offices around the world.

PORTFOLIO MANAGEMENT TEAM

Investment decisions for the First Trust/Aberdeen Emerging Opportunity Fund (the
"Fund") are made by Aberdeen using a team approach and not by any one
individual. By making team decisions, Aberdeen seeks to ensure that the
investment process results in consistent returns across all portfolios with
similar objectives. Aberdeen does not employ separate research analysts.
Instead, Aberdeen's investment managers combine the roles of analysis with
portfolio management. Each member of the team has sector and portfolio
responsibilities such as day-to-day monitoring of liquidity. The overall result
of this matrix approach is a high degree of cross-coverage, leading to a deeper
understanding of the securities in which Aberdeen invests. Included below is
additional information about the members of the team with significant
responsibility for the day-to-day management of the Fund's portfolio.

EQUITY MANAGEMENT TEAM

DEVAN KALOO
HEAD OF EMERGING MARKET EQUITY FOR THE ABERDEEN GROUP

Mr. Kaloo is responsible for the London-based Global Emerging Market ("GEM")
Equity Team, which manages Latin America, Europe, Middle East and Africa
equities, and also has oversight of global emerging market input from the Asia
research team based in Singapore, with which he works closely. Mr. Kaloo began
his career at Martin Currie in Edinburgh, Scotland, shortly after graduation,
working initially on the North American desk before transferring to the global
asset allocation team. Mr. Kaloo moved off the global asset allocation team in
1997, and for the next three years, he worked on Asian portfolios before joining
Murray Johnstone in Singapore in July 2000. Following the latter's acquisition,
he transferred to the Aberdeen Group where he was responsible for the Asian
ex-Japan region as well as regional portfolios within emerging market mandates
and technology stocks.

JOANNE IRVINE
HEAD OF GEM EQUITY TEAM EX-ASIA

Ms. Irvine is on the GEM Equity Team, where she specializes in the emerging
markets of Europe, Africa and the Middle East. After qualifying as a chartered
accountant in 1992, she worked in corporate finance, specializing in raising
development capital finance for private businesses. In January 1996, Ms. Irvine
joined the Aberdeen Group in a group development role. Since May 1997, Ms.
Irvine has been part of Aberdeen's emerging markets fund management group in
London.

MARK GORDON-JAMES
INVESTMENT MANAGER, GEM EQUITY TEAM

After graduating with a degree in Geography and Economics from the London School
of Economics in 2000, Mr. Gordon-James worked with the emerging markets team of
Merrill Lynch Investment Managers. Mr. Gordon-James joined the Aberdeen Group in
April 2004.

FIONA MANNING
INVESTMENT MANAGER, GEM EQUITY TEAM

Ms. Manning is an investment manager on the emerging markets ex-Asia team. Ms.
Manning joined Aberdeen in 2001 as an analyst.

ANDY BROWN
INVESTMENT MANAGER, GEM EQUITY TEAM

Mr. Brown is an investment manager on the emerging markets ex-Asia team. Prior
to joining Aberdeen in March 2005, Mr. Brown worked in the oil field consumables
industry in the United Arab Emirates.

PETER TAYLOR
SENIOR INVESTMENT MANAGER/HEAD OF CORPORATE GOVERNANCE

Mr. Taylor is an investment manager and head of corporate governance on the
Asian equities desk. Mr. Taylor joined Aberdeen in 2007 from the International
Finance Corporation, where he worked on corporate governance and capital markets
development for seven years from their Washington DC and Hong Kong offices.

Page 3

--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY - (CONTINUED)
--------------------------------------------------------------------------------

FIXED-INCOME MANAGEMENT TEAM

BRETT DIMENT
HEAD OF EMERGING MARKET DEBT

Mr. Diment joined Deutsche Asset Management Group Limited ("Deutsche") in 1991
as a member of the fixed-income group and became head of the Emerging Market
Debt team at Deutsche in 1999. Mr. Diment joined Aberdeen following the Deutsche
acquisition in 2005 and is now responsible for the day-to-day management of the
Emerging Market Debt team and portfolios.

KEVIN DALY
PORTFOLIO MANAGER, EMERGING MARKET DEBT

Mr. Daly joined the Emerging Market Debt team at Aberdeen in April 2007 as a
portfolio manager, having spent the previous 10 years at Standard & Poor's in
London and Singapore as a credit market analyst covering global emerging market
debt, and was head of marketing for Global Sovereign Ratings. Mr. Daly was a
regular participant on the Global Sovereign Committee, served as a member of the
Sovereign Ratings Review Board, and was one of the initial members of the
Emerging Market Council, formed in 2006 to advise senior management on business
and market developments in emerging markets.

EDWIN GUTIERREZ
PORTFOLIO MANAGER, EMERGING MARKET DEBT

Mr. Gutierrez has served as an economist specializing in Latin America at LGT
Asset Management, and more recently as a portfolio manager specializing in
emerging market fixed-income at Invesco Asset Management. He joined Deutsche in
2000 and Aberdeen in 2005.

MAX WOLMAN
PORTFOLIO MANAGER, EMERGING MARKET DEBT

Mr. Wolman joined Aberdeen in January 2001 and is portfolio manager on the
Global Emerging Market Debt mandates. Mr. Wolman originally specialized in
currency and domestic debt analysis; however, he is now responsible for wider
emerging debt analysis, including external and corporate issuers. He is a member
of the Emerging Market Debt investment committee at Aberdeen and is also
responsible for the daily implementation of the investment process.

ESTHER CHAN
PORTFOLIO MANAGER, EMERGING MARKET DEBT

Ms. Chan joined Aberdeen in Singapore in 2005 where she started as a corporate
credit analyst and trader working across investment-grade and high-yield assets
in the region. She has 6 years of experience in the fixed-income asset class,
and now serves as a portfolio manager in Aberdeen London with specialization in
analysis, management and trading of external Asian debt, and Emerging Market
corporates. Prior to joining Aberdeen, Ms. Chan worked as a corporate finance
analyst at John Moore, assisting in various deals focused on the debt
restructuring in Indonesian firms facing creditor holdout situations, post Asian
crisis.

COMMENTARY

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND

The investment objective of the Fund is to provide a high level of total return.
The Fund pursues its investment objective by investing at least 80% of its
managed assets in a diversified portfolio of equity and fixed-income securities
of issuers in emerging market countries. There can be no assurance that the
Fund's investment objective will be achieved, and the Fund may not be
appropriate for all investors.

MARKET RECAP - EQUITY

Emerging markets equities posted positive returns during the six months ended
June 30, 2012. Stock markets rose at first, lifted by the U.S. Federal Reserve's
commitment to keep interest rates low until late 2014 and liquidity injections
from leading central banks, which eased Eurozone contagion fears. Subsequently,
however, risk appetite waned as soft economic data stoked global growth fears,
while Europe's debt woes deepened on the back of Spain's banking crisis.
Equities rebounded at the end of the reporting period, helped by the outcome of
the Greek election and Europe's latest efforts to address the region's debt
crisis. China's interest rate cut and the hopes that other leading central banks
might introduce similar stimulus to counter flagging economic growth further
boosted sentiment.

MARKET RECAP - FIXED INCOME

Emerging market debt posted strong gains during the six months under review,
despite a blip in May when some emerging market currencies' losses reached
double-digits. Improved global risk appetite at the beginning of the year was
inspired by the European Central Bank's ("ECB") liquidity injection via the
initial Long-Term Refinancing Operation ("LTRO") and the U.S. Federal Reserve's
dovish interest rate outlook. There was some positive news from Europe, where
politicians agreed to plan for the establishment of a pan Eurozone Bank
Supervisory body, allowing distressed banks to access the European Financial
Stability Fund/European Stability Mechanism directly with lighter conditionality
and without the need to go via the Sovereign Bank.

Page 4

--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY - (CONTINUED)
--------------------------------------------------------------------------------

On the other hand, Standard & Poor's, the credit rating agency, downgraded Spain
by two notches to BBB+, forcing the economy to request a bailout of (euro)100
billion. The French presidential election was won by Francois Hollande. In Greek
elections, the New Democracy party gained the most votes and managed to form a
working coalition with minority partner group Panhellenic Socialist Movement
("PASOK") and Dimokratiki Aristera ("DIMAR"). In the U.S., the Fed announced an
extension of Operation Twist, buying $267 billion worth of securities. The
Peoples Bank of China cut the Required Reserve Ratios by 50 basis points to 20%
for large banks and reduced benchmark lending and deposit rates by 25 basis
points to 6.31% and 3.25%, respectively, in response to the softer data.

Over the six-month period, the JPMorgan Emerging Markets Bond Index-Global
Diversified ("JPM EMBI") gained 7.1%, while the benchmark spread narrowed by
44bps to 360bps over U.S. treasuries. Top performers came in the form of the
high yielders, as Ivory Coast, Senegal, Belarus and Venezuela surged ahead,
while Argentina and Belarus were the only credits whose returns were negative.
The JPMorgan Government Bond Index-Emerging Markets ("JPM GBI-EM") returned
9.75% during the period. Europe was the strongest region, spurred on by good
performance in Hungary and Turkey, while Asia lagged as Indonesia and Thailand
underperformed.

FUND RECAP

The Fund had a net asset value ("NAV") total return1 of 9.68% and a market value
total return1 of 11.70% for the six months ended June 30, 2012, compared to the
Fund's blended benchmark total return of 7.10% over the same period. In addition
to the blended benchmark, the Fund currently uses other indexes for comparative
purposes. The total returns for the six months ended June 30, 2012, for these
indices were as follows: the Barclays Capital Global Emerging Markets Index was
6.82% and the FTSE All World Emerging Market Index was 3.54%.

PERFORMANCE ANALYSIS - EQUITY

The equity portion of the Fund outperformed the MSCI (Morgan Stanley Capital
International) Global Emerging Markets Index portion of the benchmark by 7.41%
in U.S. dollar terms over the six-month period ended June 30, 2012. The Fund's
outperformance was largely driven by good stock selection.

At the stock level, the Fund's holdings in Brazil, Mexico and South Africa
contributed to relative performance. Brazilian fuels and chemicals company
Ultrapar's share price rallied on the back of another set of solid results where
all its divisions did well. However, the gains in Brazil were pared somewhat by
Petrobras and Bradesco. Oil company Petrobras' shares fell as the recent price
hikes were lower than expected, while bank Bradesco was affected by anxieties
over growing government intervention. The bank's share price also came under
pressure after it lowered its full-year loan growth guidance given the sluggish
domestic economy, while its credit rating was cut a notch by Moody's.

In Mexico, good first-quarter earnings and a positive domestic outlook supported
lender Banorte as well as beverage company and convenience store operator Femsa.
In South Africa, better-than-expected domestic retail sales underpinned retailer
Truworths, while brewer SABMiller benefited from positive earnings that were
driven by encouraging pricing and volume growth in Latin America and Africa.
Likewise, Turkish discount retail chain BIM gained from solid results as
impressive cost control led to better-than-expected margins.

Asset allocation was also positive, aided by the overweight to both Turkey and
Mexico, as well as the non-benchmark exposure to Hong Kong. Healthy domestic
economic growth buoyed Turkish and Mexican equities; Turkey was further boosted
towards the end of the review period when Moody's upgraded the country's credit
rating to a notch below investment-grade because of improved finances.

On the other hand, the Fund's overweight to Brazil and non-benchmark exposure to
Argentina detracted from relative performance. Both stock markets lagged the
region as their currencies depreciated markedly against the U.S. dollar.
Regulatory and policy risks also weighed on Brazilian stocks, while in
Argentina, sentiment was further dampened by the re-nationalization of YPF, the
nation's biggest oil company.

An important factor impacting the return of the Fund relative to its benchmarks
was the Fund's use of financial leverage through the use of bank borrowings. The
Fund uses leverage because its managers believe that, over time, leverage
provides opportunities for additional income and total return for common
shareholders. However, the use of leverage can also expose common shareholders
to additional volatility. For example, as the prices of securities held by the
Fund decline, the negative impact of the evaluation changes on Common Share NAV
and Common shareholder total return is magnified by the use of leverage.
Conversely, leverage may enhance Common Share returns during periods when the
prices of securities held by the Fund generally are rising. Unlike the Fund, the
Barclays Capital Global Emerging Markets Index and the FTSE All World Emerging
Market Index are not leveraged. Leverage had a positive impact on the
performance of the Fund over this reporting period.

-------------------

1 Total return is based on the combination of reinvested dividend, capital
gain and return of capital distributions, if any, at prices obtained by
the Dividend Reinvestment Plan, and changes in net asset value per share
for net asset value returns and changes in Common Share price for market
value returns. Total returns do not reflect sales load. Past performance
is not indicative of future results.

Page 5

--------------------------------------------------------------------------------
PORTFOLIO COMMENTARY - (CONTINUED)
--------------------------------------------------------------------------------

PERFORMANCE ANALYSIS - FIXED INCOME

The Fund outperformed its blended benchmark of both hard currency and local
bonds, although underperformed in local currency space.

Within the hard currency space, the Fund's overweight position in Ivory Coast
was the key positive contributor to performance as the credit paid its first
coupon since the end of the political crisis and official creditors granted debt
relief that will reduce public debt/GDP to a more sustainable level of
approximately 50%. Overweight positions in Latin America, specifically Venezuela
and Mexico, also added value to the Fund. An overweight position in Argentina,
where fears of forced conversion of dollar-denominated instruments into pesos
unnerved the market; and underweights in Peru, Poland and Hungary, were the key
detractors from the Fund.

Within the local currency holdings, overweight positions in Mexico and South
Africa benefited the Fund as did an underweight in Malaysia. Underweight
positions in Colombia and Peru were the main detractors from performance as was
an overweight in Indonesia.

MARKET OUTLOOK - EQUITY

Emerging markets equities remain vulnerable to further deterioration in Europe's
debt crisis and its impact on world growth. Eurozone leaders appear to be
tackling the region's debt problems with the fresh emergency measures, but the
underlying structural issues remain unresolved. Meanwhile, global economic
activity is losing momentum after an optimistic start to the year, with various
leading indicators pointing to weaker growth conditions ahead. At the corporate
level, most of the Fund's holdings remain resilient despite slower earnings
prospects. Notably, valuations in the asset class have come off in the wake of
previous sell-offs and this should provide opportunities to pick up favoured
stocks at reasonable prices.

MARKET OUTLOOK - FIXED INCOME

At the end of June, better than expected news from the European Union summit
provided the market with a sense of palpable relief heading into the second half
of 2012. Looking ahead, the focus is likely to shift back to growth indicators,
namely China and the U.S., where signs of a slowdown are gathering some pace. In
this environment, risk assets could see some profit-taking following a strong
recovery in June, but inflows into Emerging Market Debt are likely to increase
in the still low yield environment, which should provide further support for the
asset class.

Page 6

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a)
JUNE 30, 2012 (UNAUDITED)

SHARES DESCRIPTION VALUE
--------------- ---------------------------------------------------------------------------------------- ------------
COMMON STOCKS - 46.4%

BRAZIL - 8.1%

100,924 Banco Bradesco S.A., ADR................................................................ $ 1,500,740
28,000 Lojas Renner S.A........................................................................ 782,773
33,000 Multiplan Empreendimentos Imobiliarios S.A.............................................. 805,078
76,000 Petroleo Brasileiro S.A., ADR........................................................... 1,378,640
66,500 Souza Cruz S.A.......................................................................... 966,129
84,000 Ultrapar Participacoes S.A.............................................................. 1,910,441
99,100 Vale S.A., Preference Shares, ADR....................................................... 1,933,441
------------
9,277,242
------------
CHILE - 0.8%
12,600 Banco Santander Chile S.A., ADR......................................................... 976,374
------------
CHINA - 3.3%
216,500 China Mobile Ltd........................................................................ 2,376,626
1,070,000 PetroChina Co., Ltd., Class H........................................................... 1,384,860
------------
3,761,486
------------
HONG KONG - 3.4%
245,600 AIA Group Ltd........................................................................... 848,317
202,000 Hang Lung Group Ltd..................................................................... 1,249,000
640,000 Swire Pacific Ltd., B Shares............................................................ 1,477,077
89,600 Swire Properties Ltd.................................................................... 269,829
------------
3,844,223
------------
HUNGARY - 0.8%
5,500 Richter Gedeon Nyrt..................................................................... 907,700
------------
INDIA - 5.1%
29,543 Bharti Airtel Ltd....................................................................... 162,642
20,000 GlaxoSmithKline Pharmaceuticals Ltd..................................................... 725,984
13,000 Grasim Industries Ltd................................................................... 616,707
23,000 Hero Honda Motors Ltd................................................................... 892,363
62,000 Hindustan Unilever Ltd.................................................................. 506,293
110,500 Housing Development Finance Corp., Ltd.................................................. 1,303,032
20,000 ICICI Bank Ltd.......................................................................... 324,864
23,668 Infosys Technologies Ltd................................................................ 1,072,993
7,428 UltraTech Cement Ltd.................................................................... 202,334
------------
5,807,212
------------
INDONESIA - 1.3%
1,955,000 PT Astra International Tbk.............................................................. 1,441,223
------------
ITALY - 0.9%
30,600 Tenaris S.A., ADR....................................................................... 1,070,082
------------
KAZAKHSTAN - 0.0%
376 BTA Bank JSC (g)........................................................................ 2
------------
MALAYSIA - 1.4%
220,000 CIMB Group Holdings Berhad.............................................................. 527,208
249,000 Public Bank Berhad...................................................................... 1,082,235
------------
1,609,443
------------

See Notes to Financial Statements Page 7

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
JUNE 30, 2012 (UNAUDITED)

SHARES DESCRIPTION VALUE
--------------- ---------------------------------------------------------------------------------------- ------------
COMMON STOCKS - (CONTINUED)

MEXICO - 4.3%

19,900 Fomento Economico Mexicano, S.A.B. de C.V., ADR......................................... $ 1,776,075
40,000 Grupo Aeroportuario del Centro Norte, S.A.B. de C.V., ADR............................... 656,000
380,000 Grupo Financiero Banorte, S.A.B. de C.V., O Shares...................................... 1,963,852
276,000 Kimberly-Clark de Mexico, S.A.B. de C.V., A Shares...................................... 540,633
------------
4,936,560
------------
PHILIPPINES - 1.4%
1,550,000 Ayala Land, Inc......................................................................... 799,397
484,672 Bank of the Philippine Islands.......................................................... 861,769
------------
1,661,166
------------
POLAND - 0.7%
18,000 Bank Pekao S.A.......................................................................... 821,056
------------
RUSSIA - 1.2%
25,500 LUKOIL, ADR............................................................................. 1,430,040
------------
SOUTH AFRICA - 2.7%
43,610 Massmart Holdings Ltd................................................................... 902,961
20,978 SABMiller PLC........................................................................... 849,079
119,729 Truworths International Ltd............................................................. 1,313,735
------------
3,065,775
------------
SOUTH KOREA - 2.8%
1,256 E-Mart Co., Ltd......................................................................... 275,685
4,300 Samsung Electronics Co., Ltd., Preference Shares........................................ 2,838,653
443 Shinsegae Co., Ltd...................................................................... 81,640
------------
3,195,978
------------
TAIWAN - 2.1%
210,005 Taiwan Mobile Co., Ltd.................................................................. 694,480
643,954 Taiwan Semiconductor Manufacturing Co., Ltd............................................. 1,762,804
------------
2,457,284
------------
THAILAND - 2.7%
190,000 PTT Exploration and Production Public Co., Ltd.......................................... 1,012,707
89,200 Siam Cement Public (The) Co., Ltd....................................................... 1,023,381
230,600 Siam Commercial Bank Public Co., Ltd.................................................... 1,079,146
------------
3,115,234
------------
TURKEY - 2.4%
87,635 Akbank TAS.............................................................................. 321,289
253,000 Aksigorta AS............................................................................ 270,614
20,222 Bim Birlesik Magazalar A.S.............................................................. 834,791
181,150 Haci Omer Sabanci Holding AS............................................................ 762,768
141,000 Turkiye Garanti Bankasi AS.............................................................. 555,047
------------
2,744,509
------------
UNITED KINGDOM - 1.0%
51,408 Standard Chartered PLC.................................................................. 1,116,732
------------
TOTAL COMMON STOCKS..................................................................... 53,239,321
(Cost $38,021,381) ------------

Page 8 See Notes to Financial Statements

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
JUNE 30, 2012 (UNAUDITED)

PRINCIPAL
VALUE
(LOCAL STATED VALUE
CURRENCY) DESCRIPTION COUPON MATURITY (US DOLLARS)
--------------- ------------------------------------------------------------ ----------- ------------ ------------
FOREIGN SOVEREIGN BONDS AND NOTES - 44.1%

ARGENTINA - 1.1%

470,000 Republic of Argentina (USD)................................. 7.00% 09/12/13 $ 416,601
815,000 Republic of Argentina (USD)................................. 7.00% 04/17/17 554,735
295,000 Republic of Argentina (USD)................................. 8.75% 06/02/17 255,175
------------
1,226,511
------------
BRAZIL - 4.7%
738,000 Brazil Notas do Tesouro Nacional Series F (BRL)............. 10.00% 01/01/15 379,477
4,070,000 Brazil Notas do Tesouro Nacional Series F (BRL)............. 10.00% 01/01/17 2,080,772
4,910,000 Brazil Notas do Tesouro Nacional Series F (BRL)............. 10.00% 01/01/21 2,456,584
400,000 Republic of Brazil (USD).................................... 5.63% 01/07/41 492,600
------------
5,409,433
------------
CROATIA - 1.5%
700,000 Croatia Government International Bond (USD)................. 6.25% 04/27/17 698,832
1,000,000 Croatia Government International Bond (USD)................. 6.63% 07/14/20 998,940
------------
1,697,772
------------
DOMINICAN REPUBLIC - 0.9%
450,000 Dominican Republic (USD).................................... 7.50% 05/06/21 482,625
528,000 Dominican Republic (USD).................................... 8.63% 04/20/27 572,880
------------
1,055,505
------------
EGYPT - 0.6%
250,000 Arab Republic of Egypt (USD)................................ 6.88% 04/30/40 217,500
500,000 Arab Republic of Egypt (USD)................................ 6.88% 04/30/40 435,000
------------
652,500
------------
EL SALVADOR - 0.2%
270,000 Republic of El Salvador (USD)............................... 7.63% 02/01/41 285,255
------------
GEORGIA - 0.5%
350,000 Georgian Oil and Gas Corp. (USD)............................ 6.88% 05/16/17 344,050
200,000 JSC Georgian Railway (USD).................................. 7.75% 07/11/22 199,996
------------
544,046
------------
HUNGARY - 3.2%
40,000,000 Hungary Government Bond (HUF)............................... 6.75% 08/22/14 175,200
663,000,000 Hungary Government Bond (HUF)............................... 6.75% 11/24/17 2,828,417
550,000 Republic of Hungary (EUR)................................... 4.50% 01/29/14 687,918
------------
3,691,535
------------
INDONESIA - 1.4%
4,000,000,000 Indonesian Government Bond (IDR)............................ 10.00% 07/15/17 509,654
8,000,000,000 Indonesian Government Bond (IDR)............................ 10.50% 08/15/30 1,165,534
------------
1,675,188
------------
IVORY COAST - 1.3%
1,930,000 Ivory Coast Government Bond (USD)........................... 3.75% 12/31/32 1,447,500
------------

See Notes to Financial Statements Page 9

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
JUNE 30, 2012 (UNAUDITED)

LITHUANIA - 1.5%

1,140,000 Republic of Lithuania (USD)................................. 7.38% 02/11/20 $ 1,350,626
300,000 Republic of Lithuania (USD)................................. 6.63% 02/01/22 344,625
------------
1,695,251
------------
MALAYSIA - 1.8%
2,500,000 Malaysia Government Bond (MYR).............................. 3.21% 05/31/13 788,985
3,900,000 Malaysia Government Bond (MYR).............................. 4.01% 09/15/17 1,273,059
------------
2,062,044
------------
MEXICO - 4.9%
16,500,000 Mexican Bonos Desarr Fixed Rate Bond (MXN).................. 9.50% 12/18/14 1,375,746
32,200,000 Mexican Bonos Desarr Fixed Rate Bond (MXN).................. 8.00% 06/11/20 2,862,692
12,800,000 Mexican Bonos Desarr Fixed Rate Bond (MXN).................. 7.50% 06/03/27 1,091,760
1,840,000 Mexican Bonos Desarr Fixed Rate Bond (MXN).................. 10.00% 11/20/36 192,002
100,000 United Mexican States (USD)................................. 6.05% 01/11/40 129,500
------------
5,651,700
------------
PAKISTAN - 0.6%
900,000 Islamic Republic of Pakistan (USD).......................... 6.88% 06/01/17 711,000
------------
PERU - 1.1%
2,900,000 Peruvian Government Bond (PEN).............................. 7.84% 08/12/20 1,292,733
------------
QATAR - 1.0%
990,000 State of Qatar (USD)........................................ 5.25% 01/20/20 1,146,420
------------
RUSSIA - 3.3%
50,000,000 Russian Foreign Bond (RUB).................................. 7.85% 03/10/18 1,631,093
65,000,000 Russian Foreign Bond (RUB).................................. 7.85% 03/10/18 2,120,422
------------
3,751,515
------------
SENEGAL - 0.4%
450,000 Republic of Senegal (USD)................................... 8.75% 05/13/21 497,250
------------
SERBIA - 1.1%
650,000 Republic of Serbia (USD).................................... 7.25% 09/28/21 671,125
61,000,000 Serbia Treasury Bill (RSD).................................. (b) 12/13/12 632,711
------------
1,303,836
------------
SOUTH AFRICA - 4.1%
520,000 Eskom Holdings Ltd. (USD)................................... 5.75% 01/26/21 571,350
11,350,000 Republic of South Africa (ZAR).............................. 8.25% 09/15/17 1,489,927
17,470,000 Republic of South Africa (ZAR).............................. 10.50% 12/21/26 2,597,682
------------
4,658,959
------------
TURKEY - 3.3%
1,000,000 Republic of Turkey (USD).................................... 6.25% 09/26/22 1,135,000
1,470,000 Turkey Government Bond (TRY)................................ 16.00% 08/28/13 877,855
1,300,000 Turkey Government Bond (TRY)................................ 9.00% 01/27/16 731,407
1,700,000 Turkey Government Bond (TRY)................................ 10.50% 01/15/20 1,035,416
------------
3,779,678
------------

Page 10 See Notes to Financial Statements

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
JUNE 30, 2012 (UNAUDITED)

UKRAINE - 0.1%

130,000 Ukraine Government Bond (USD)............................... 6.58% 11/21/16 $ 117,000
------------
UNITED ARAB EMIRATES - 1.3%
1,300,000 Dubai Government International Bond (USD)................... 7.75% 10/05/20 1,469,000
------------
URUGUAY - 1.2%
14,020,000 Republica Orient Uruguay, Inflation Adjusted Bond (UYU) (c). 5.00% 09/14/18 1,088,042
3,720,000 Republica Orient Uruguay, Inflation Adjusted Bond (UYU) (c). 4.25% 04/05/27 273,666
------------
1,361,708
------------
VENEZUELA - 2.5%
300,000 Republic of Venezuela (USD)................................. 8.50% 10/08/14 298,500
2,150,000 Republic of Venezuela (USD)................................. 5.75% 02/26/16 1,859,750
600,000 Republic of Venezuela (USD)................................. 7.75% 10/13/19 463,500
350,000 Republic of Venezuela (USD)................................. 7.65% 04/21/25 243,250
------------
2,865,000
------------
VIETNAM - 0.5%
500,000 Socialist Republic of Vietnam (USD)......................... 6.88% 01/15/16 533,750
------------
TOTAL FOREIGN SOVEREIGN BONDS AND NOTES................................................. 50,582,089
(Cost $49,347,991) ------------

FOREIGN CORPORATE BONDS AND NOTES (D) - 13.3%

BRAZIL - 1.8%
200,000 Banco do Estado do Rio Grande do Sul (USD).................. 7.38% 02/02/22 206,316
200,000 BRF - Brasil Foods S.A. (USD)............................... 5.88% 06/06/22 206,500
200,000 Centrais Eletricas Brasileiras S.A. (USD)................... 5.75% 10/27/21 219,758
150,000 Odebrecht Finance Ltd. (USD)................................ 7.50% 09/14/15 154,920
200,000 Odebrecht Finance Ltd. (USD)................................ 7.13% 06/26/42 200,000
550,000 OGX Petroleo e Gas Participacoes S.A. (USD)................. 8.50% 06/01/18 492,250
300,000 OSX 3 Leasing B.V. (USD).................................... 9.25% 03/20/15 301,050
230,000 Rearden G Holdings Eins GmbH (USD).......................... 7.88% 03/30/20 242,891
------------
2,023,685
------------
CHINA - 1.0%
350,000 Central China Real Estate Ltd. (USD)........................ 12.25% 10/20/15 366,170
100,000 China Overseas Finance Cayman II Ltd. (USD)................. 5.50% 11/10/20 103,514
500,000 MCC Holding (Hong Kong) Corp. Ltd. (USD).................... 4.88% 07/29/16 495,401
200,000 Yancoal International Resources Development Co. Ltd. (USD).. 5.73% 05/16/22 197,246
------------
1,162,331
------------
DOMINICAN REPUBLIC - 0.3%
350,000 AES Andres Dominicana/Itabo Dominicana (USD)................ 9.50% 11/12/20 364,000
------------
EL SALVADOR - 0.4%
450,000 Telemovil Finance Co., Ltd. (USD)........................... 8.00% 10/01/17 465,737
------------
GUATEMALA - 0.4%
400,000 Industrial Subordinated Trust (USD)......................... 8.25% 07/27/21 424,548
------------

See Notes to Financial Statements Page 11

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
JUNE 30, 2012 (UNAUDITED)

INDONESIA - 1.1%

410,000 Majapahit Holding B.V. (USD)................................ 7.75% 10/17/16 $ 469,963
600,000 Pertamina Persero PT (USD).................................. 4.88% 05/03/22 602,064
150,000 PT Adaro Indonesia (USD).................................... 7.63% 10/22/19 160,500
------------
1,232,527
------------
KAZAKHSTAN - 0.0%
10 BTA Bank JSC (USD) (e)...................................... 10.75% 07/01/18 2
------------
MEXICO - 2.8%
540,000 Axtel S.A.B. de C.V. (USD).................................. 9.00% 09/22/19 361,800
400,000 Corporacion GEO S.A. de C.V. (USD).......................... 8.88% 03/27/22 413,000
684,000 Desarrolladora Homex S.A. (USD)............................. 9.50% 12/11/19 718,200
200,000 Desarrolladora Homex S.A. (USD)............................. 9.75% 03/25/20 211,000
640,250 GEO Maquinaria S.A. de C.V. (USD)........................... 9.63% 05/02/21 580,227
100,000 Petroleos Mexicanos (USD)................................... 6.50% 06/02/41 117,250
457,000 Servicios Corporativos Javer Sapi de C.V. (USD)............. 9.88% 04/06/21 434,150
125,000 Urbi Desarrollos Urbanos Sab de C.V. (USD).................. 9.50% 01/21/20 131,875
200,000 Urbi Desarrollos Urbanos Sab de C.V. (USD).................. 9.75% 02/03/22 211,500
------------
3,179,002
------------
MULTINATIONAL - 0.6%
700,000 African Export-Import Bank (USD)............................ 5.75% 07/27/16 733,250
------------
NIGERIA - 0.3%
350,000 GTB Finance B.V. (USD)...................................... 7.50% 05/19/16 364,000
------------
PHILIPPINES - 0.2%
250,000 Alliance Global Group, Inc. (USD)........................... 6.50% 08/18/17 265,730
------------
RUSSIA - 2.2%
450,000 Alfa Bank (USD)............................................. 7.88% 09/25/17 455,175
200,000 Alfa Bank OJSC Via Alfa Bond Issuance PLC (USD)............. 7.75% 04/28/21 196,550
350,000 Home Credit & Finance Bank via Eurasia Capital S.A. (USD)... 7.00% 03/18/14 360,500
400,000 Metalloinvest Finance Ltd. (USD)............................ 6.50% 07/21/16 399,000
300,000 Sberbank of Russia via SB Capital S.A. (USD)................ 6.13% 02/07/22 313,776
200,000 Vimpelcom Ltd. (USD)........................................ 6.49% 02/02/16 199,900
400,000 VTB Bank OJSC Via VTB Capital S.A. (USD).................... 6.00% 04/12/17 407,000
150,000 VTB Bank OJSC Via VTB Capital S.A. (USD).................... 6.55% 10/13/20 151,312
------------
2,483,213
------------
TURKEY - 0.6%
200,000 Turkiye Vakiflar Bankasi (USD).............................. 5.75% 04/24/17 203,304
500,000 Yasar Holdings (USD)........................................ 9.63% 10/07/15 501,275
------------
704,579
------------
UKRAINE - 0.4%
200,000 Metinvest B.V. (USD)........................................ 8.75% 02/14/18 183,000
250,000 MHP S.A. (USD).............................................. 10.25% 04/29/15 242,190
------------
425,190
------------

Page 12 See Notes to Financial Statements

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (a) - (CONTINUED)
JUNE 30, 2012 (UNAUDITED)

UNITED ARAB EMIRATES - 0.7%

750,000 Dubai Electricity & Water Authority (USD)................... 7.38% 10/21/20 $ 825,000
------------
VENEZUELA - 0.5%
750,000 Petroleos de Venezuela S.A. (USD)........................... 8.50% 11/02/17 611,250
------------
TOTAL FOREIGN CORPORATE BONDS AND NOTES................................................. 15,264,044
------------
(Cost $15,059,107)

TOTAL INVESTMENTS - 103.8%.............................................................. 119,085,454
(Cost $102,428,479) (f)

OUTSTANDING LOANS - (5.0%).............................................................. (5,800,000)
NET OTHER ASSETS AND LIABILITIES - 1.2%................................................. 1,391,590
------------
NET ASSETS - 100.0%..................................................................... $114,677,044
============

-----------------------------
(a) All of these securities are available to serve as collateral for the
outstanding loans.

(b) Zero coupon bond.

(c) Security whose principal value is adjusted in accordance with changes to
the country's Consumer Price Index. Interest is calculated on the basis of
the current adjusted principal value.

(d) Portfolio securities are included in a country based upon their underlying
credit exposure as determined by Aberdeen Asset Management Inc., the
Fund's sub-advisor.

(e) The issuer is in default and has filed for protection in bankruptcy court.
Income is not being accrued.

(f) Aggregate cost for financial reporting purposes, which approximates the
aggregate cost for federal income tax purposes. As of June 30, 2012, the
aggregate gross unrealized appreciation for all securities in which there
was an excess of value over tax cost was $20,274,591 and the aggregate
gross unrealized depreciation for all securities in which there was an
excess of tax cost over value was $3,617,616.

(g) Non-income producing security.

ADR American Depositary Receipt

Currency Abbreviations
BRL Brazilian Real
EUR Euro
HUF Hungarian Forint
IDR Indonesian Rupiah
MXN Mexican Peso
MYR Malaysian Ringgit
PEN Peruvian New Sol
RSD Serbian Dinar
RUB Russian Ruble
TRY Turkish Lira
USD United States Dollar
UYU Uruguayan Peso
ZAR South African Rand

See Notes to Financial Statements Page 13

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS (A) - (CONTINUED)
JUNE 30, 2012 (UNAUDITED)

VALUATION INPUTS

A summary of the inputs used to value the Fund's investments as of June 30, 2012
is as follows (see Note 2A - Portfolio Valuation in the Notes to Financial
Statements):

ASSETS TABLE

LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
6/30/2012 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------

Common Stocks:
Brazil..................................... $ 9,277,242 $ 9,277,242 $ -- $ --
Chile...................................... 976,374 976,374 -- --
China...................................... 3,761,486 -- 3,761,486 --
Hong Kong.................................. 3,844,223 -- 3,844,223 --
Hungary.................................... 907,700 -- 907,700 --
India...................................... 5,807,212 -- 5,807,212 --
Indonesia.................................. 1,441,223 -- 1,441,223 --
Italy...................................... 1,070,082 -- 1,070,082 --
Kazakhstan................................. 2 -- 2 --
Malaysia................................... 1,609,443 -- 1,609,443 --
Mexico..................................... 4,936,560 4,936,560 -- --
Philippines................................ 1,661,166 -- 1,661,166 --
Poland..................................... 821,056 -- 821,056 --
Russia..................................... 1,430,040 1,430,040 -- --
South Africa............................... 3,065,775 -- 3,065,775 --
South Korea................................ 3,195,978 -- 3,195,978 --
Taiwan..................................... 2,457,284 -- 2,457,284 --
Thailand................................... 3,115,234 -- 3,115,234 --
Turkey..................................... 2,744,509 -- 2,744,509 --
United Kingdom............................. 1,116,732 -- 1,116,732 --
------------ ------------ ------------ ------------
Total Common Stocks..................... 53,239,321 16,620,216 36,619,105 --
Foreign Sovereign Bonds and Notes*.............. 50,582,089 -- 50,582,089 --
Foreign Corporate Bonds and Notes*.............. 15,264,044 -- 15,264,044 --
------------ ------------ ------------ ------------
Total Investments............................... 119,085,454 16,620,216 102,465,238 --
Forward Foreign Currency Contracts**............ 39,310 -- 39,310 --
------------ ------------ ------------ ------------
Total........................................... $119,124,764 $ 16,620,216 $102,504,548 $ --
============ ============ ============ ============

LIABILITIES TABLE
LEVEL 2 LEVEL 3
TOTAL LEVEL 1 SIGNIFICANT SIGNIFICANT
VALUE AT QUOTED OBSERVABLE UNOBSERVABLE
6/30/2012 PRICES INPUTS INPUTS
------------ ------------ ------------ ------------
Forward Foreign Currency Contracts**............ $ (124,032) $ -- $ (124,032) $ --
============ ============ ============ ============

* See the Portfolio of Investments for country breakout.

** See the Schedule of Forward Foreign Currency Contracts for contract and
currency detail.

All transfers in and out of the Levels during the period are assumed to be
transferred on the last day of the period at their current value. As of June 30,
2012, the Fund transferred common stock valued at $47,901,930 from Level 1 to
Level 2 of the fair value hierarchy. The common stocks that transferred from
Level 1 to Level 2 did so as a result of a lack of trading volume on the primary
exchange on June 29, 2012, the last business day of the month, and as a result
of foreign equities that were valued based on quoted prices at December 31, 2011
that are now being fair valued using a factor provided by a pricing service due
to the change in value between the foreign markets' close and the New York Stock
Exchange close on June 29, 2012 exceeding a certain threshold.

Page 14 See Notes to Financial Statements

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
JUNE 30, 2012 (UNAUDITED)

FORWARD FOREIGN CURRENCY CONTRACTS
----------------------------------------------------------
PURCHASE SALE UNREALIZED
SETTLEMENT AMOUNT AMOUNT VALUE AS OF VALUE AS OF APPRECIATION
DATE COUNTERPARTY PURCHASED (a) SOLD (a) JUNE 30, 2012 JUNE 30, 2012 (DEPRECIATION)
----------- ------------ -------------------- ------------------- ------------- ------------- --------------

07/20/12 JPM HUF 193,857,000 USD 850,732 $ 855,938 $ 850,732 $ 5,206
07/20/12 RBS HUF 275,178,000 USD 1,247,294 1,214,995 1,247,294 (32,299)
07/20/12 RBS MXN 2,491,000 USD 187,782 186,340 187,782 (1,442)
09/05/12 RBS RUB 21,117,000 USD 634,907 643,856 634,907 8,949
07/20/12 JPM TRY 1,087,000 USD 601,241 598,122 601,241 (3,119)
09/05/12 RBS USD 1,883,844 BRL 3,834,000 1,883,844 1,884,172 (328)
07/20/12 SSB USD 642,973 EUR 490,000 642,973 620,203 22,770
07/20/12 SSB USD 3,604,958 HUF 826,862,000 3,604,958 3,650,849 (45,891)
09/05/12 RBS USD 680,291 IDR 6,734,876,000 680,291 710,427 (30,136)
07/20/12 SSB USD 188,725 MXN 2,491,000 188,725 186,340 2,385
09/05/12 RBS USD 637,075 RUB 21,117,000 637,075 643,856 (6,781)
07/20/12 SSB USD 594,086 TRY 1,087,000 594,086 598,122 (4,036)
------------
Net Unrealized Appreciation (Depreciation)............................................................... $ (84,722)
============

(a) Please see portfolio of investments for currency descriptions.

Counterparty Abbreviations:
JPM JPMorgan Chase
RBS Royal Bank of Scotland
SSB State Street Bank

See Notes to Financial Statements Page 15

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
STATEMENT OF ASSETS AND LIABILITIES
JUNE 30, 2012 (UNAUDITED)

ASSETS:

Investments, at value
(Cost $102,428,479)........................................................................ $119,085,454
Cash........................................................................................... 1,111,519
Foreign currency (Cost $415,001)............................................................... 414,427
Unrealized appreciation on forward foreign currency contracts.................................. 39,310
Prepaid expenses............................................................................... 15,097
Receivables:
Interest.................................................................................... 1,350,112
Investment securities sold.................................................................. 362,437
Dividends................................................................................... 100,467
------------
Total Assets................................................................................ 122,478,823
------------
LIABILITIES:
Outstanding loan............................................................................... 5,800,000
Unrealized depreciation on forward foreign currency contracts.................................. 124,032
Payables:
Investment securities purchased............................................................. 1,322,757
Deferred Thailand capital gains tax......................................................... 182,949
Custodian fees.............................................................................. 161,309
Investment advisory fees.................................................................... 96,354
Deferred Indonesian capital gains tax....................................................... 42,267
Audit and tax fees.......................................................................... 29,150
Thailand capital gains tax.................................................................. 15,719
Administrative fees......................................................................... 8,320
Printing fees............................................................................... 6,690
Trustees' fees and expenses................................................................. 4,381
Transfer agent fees......................................................................... 2,387
Legal fees.................................................................................. 1,599
Interest and fees on loan................................................................... 1,207
Financial reporting fees.................................................................... 771
Other liabilities.............................................................................. 1,887
------------
Total Liabilities........................................................................ 7,801,779
------------
NET ASSETS..................................................................................... $114,677,044
============
NET ASSETS consist of:
Paid-in capital................................................................................ $ 97,511,411
Par value...................................................................................... 53,278
Accumulated net investment income (loss)....................................................... 1,612,668
Accumulated net realized gain (loss) on investments, forward foreign currency
contracts and foreign currency transactions................................................. (796,747)
Net unrealized appreciation (depreciation) on investments, forward foreign
currency contracts and foreign currency translation......................................... 16,296,434
------------
NET ASSETS..................................................................................... $114,677,044
============
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share)........................... $ 21.52
============
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized).... 5,327,785
============

Page 16 See Notes to Financial Statements

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JUNE 30, 2012 (UNAUDITED)

INVESTMENT INCOME:

Interest (net of foreign withholding tax of $8,781)............................................ $ 2,646,062
Dividends (net of foreign withholding tax of $82,091).......................................... 936,056
------------
Total investment income..................................................................... 3,582,118
------------
EXPENSES:
Investment advisory fees....................................................................... 605,157
Custodian fees................................................................................. 105,990
Administrative fees............................................................................ 52,490
Interest and fees on loan...................................................................... 40,006
Audit and tax fees............................................................................. 27,856
Printing fees.................................................................................. 20,977
Legal fees..................................................................................... 18,553
Transfer agent fees............................................................................ 18,269
Trustees' fees and expenses.................................................................... 15,322
Financial reporting fees....................................................................... 4,625
Other.......................................................................................... 184,098
------------
Total expenses.............................................................................. 1,093,343
------------
NET INVESTMENT INCOME (LOSS)................................................................... 2,488,775
------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments................................................................................. 963,483
Forward foreign currency contracts.......................................................... (586,765)
Foreign currency transactions............................................................... 530
------------
Net realized gain (loss)....................................................................... 377,248
------------
Net change in unrealized appreciation (depreciation) on:
Investments................................................................................. 7,680,283
Forward foreign currency contracts.......................................................... (285,154)
Foreign currency translation................................................................ 4,186
Net change in deferred Thailand capital gains tax.............................................. 9,875
Net change in deferred Indonesian capital gains tax............................................ (42,267)
------------
Net change in unrealized appreciation (depreciation)........................................... 7,366,923
------------
NET REALIZED AND UNREALIZED GAIN (LOSS)........................................................ 7,744,171
------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS............................... $ 10,232,946
============

See Notes to Financial Statements Page 17

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
STATEMENTS OF CHANGES IN NET ASSETS

SIX MONTHS
ENDED YEAR
6/30/2012 ENDED
(UNAUDITED) 12/31/2011
-------------- --------------
OPERATIONS:

Net investment income (loss)....................................................... $ 2,488,775 $ 5,240,364
Net realized gain (loss)........................................................... 377,248 4,356,376
Net change in unrealized appreciation (depreciation)............................... 7,366,923 (15,302,660)
-------------- --------------

Net increase (decrease) in net assets resulting from operations.................... 10,232,946 (5,705,920)
-------------- --------------
DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income.............................................................. (1,864,725) (3,929,384)
Net realized gain.................................................................. (1,864,725) (3,529,515)
Return of capital.................................................................. -- --
-------------- --------------
Total distributions to shareholders................................................ (3,729,450) (7,458,899)
-------------- --------------
CAPITAL TRANSACTIONS:
Proceeds from Common Shares reinvested............................................. -- --
-------------- --------------
Net increase (decrease) in net assets resulting from capital transactions.......... -- --
-------------- --------------
Total increase (decrease) in net assets............................................ 6,503,496 (13,164,819)

NET ASSETS:
Beginning of period................................................................ 108,173,548 121,338,367
-------------- --------------
End of period...................................................................... $ 114,677,044 $ 108,173,548
============== ==============
Accumulated net investment income (loss) at end of period.......................... $ 1,612,668 $ 988,618
============== ==============
CAPITAL TRANSACTIONS WERE AS FOLLOWS:
Common Shares at beginning of period............................................... 5,327,785 5,327,785
Common Shares issued as reinvestment under the Dividend Reinvestment Plan.......... -- --
-------------- --------------
Common Shares at end of period..................................................... 5,327,785 5,327,785
============== ==============

Page 18 See Notes to Financial Statements

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
STATEMENT OF CASH FLOWS
FOR THE SIX MONTHS ENDED JUNE 30, 2012 (UNAUDITED)

CASH FLOWS FROM OPERATING ACTIVITIES:

Net increase (decrease) in net assets resulting from operations ................... $ 10,232,946
Adjustments to reconcile net increase (decrease) in net assets resulting from
operations to net cash provided by operating activities:
Purchases of investments..................................................... (22,483,765)
Sales, maturities and paydowns of investments................................ 25,204,548
Net amortization/accretion of premiums/discounts on investments.............. (151,676)
Net realized gain/loss on investments........................................ (963,483)
Net change in unrealized appreciation/depreciation on forward foreign
currency contracts....................................................... 285,154
Net change in unrealized appreciation/depreciation on investments............ (7,680,283)
CHANGES IN ASSETS AND LIABILITIES:
Decrease in interest receivable.............................................. 91,722
Increase in dividends receivable............................................. (50,179)
Increase in prepaid expenses................................................. (11,670)
Decrease in due to custodian................................................. (58,385)
Decrease in interest and fees on loan payable................................ (843)
Decrease in investment advisory fees payable................................. (1,651)
Decrease in audit and tax fees payable....................................... (23,680)
Decrease in legal fees payable............................................... (1,487)
Decrease in printing fees payable............................................ (6,280)
Decrease in administrative fees payable...................................... (157)
Increase in custodian fees payable........................................... 86,414
Decrease in transfer agent fees payable...................................... (735)
Increase in Trustees' fees and expenses payable.............................. 4,381
Decrease in deferred Thailand capital gains tax.............................. (9,875)
Increase in Thailand capital gains tax....................................... 15,719
Increase in deferred Indonesian capital gains tax............................ 42,267
Decrease in other liabilities payable........................................ (2,578)
--------------
CASH PROVIDED BY OPERATING ACTIVITIES.............................................. $ 4,516,424
--------------
CASH FLOWS FROM FINANCING ACTIVITIES:
Distributions to Common Shareholders from net realized gain.................. (1,864,725)
Distributions to Common Shareholders from net investment income.............. (1,864,725)
--------------
CASH USED IN FINANCING ACTIVITIES.................................................. (3,729,450)
--------------
Increase in cash and foreign currency (a).......................................... 786,974
Cash and foreign currency at beginning of period................................... 738,972
--------------
CASH AND FOREIGN CURRENCY AT END OF PERIOD......................................... $ 1,525,946
==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the period for interest and fees.................................. $ 40,849
==============

-----------------------

(a) Includes net change in unrealized appreciation (depreciation) on foreign
currency of $6,659.

See Notes to Financial Statements Page 19

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
FINANCIAL HIGHLIGHTS
FOR A COMMON SHARE OUTSTANDING THROUGHOUT EACH PERIOD

SIX MONTHS
ENDED YEAR YEAR YEAR YEAR YEAR
6/30/2012 ENDED ENDED ENDED ENDED ENDED
(UNAUDITED) 12/31/2011 12/31/2010 12/31/2009 12/31/2008 12/31/2007
------------- ------------- ------------- ------------- ------------- -------------

Net asset value, beginning of period ... $ 20.30 $ 22.77 $ 19.76 $ 12.87 $ 21.69 $ 20.58
--------- --------- --------- --------- --------- ---------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income (loss)............ 0.47 0.98 0.97 1.01 1.09 (a) 0.92
Net realized and unrealized gain (loss). 1.45 (2.05) 3.41 7.16 (8.37) 2.00
--------- --------- --------- --------- --------- ---------
Total from investment operations........ 1.92 (1.07) 4.38 8.17 (7.28) 2.92
--------- --------- --------- --------- --------- ---------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income................... (0.35) (0.74) (0.83) (0.81) (1.08) (0.79)
Net realized gain....................... (0.35) (0.66) (0.57) -- (0.10) (1.02)
Return of capital....................... -- -- -- (0.63) (0.38) --
--------- --------- --------- --------- --------- ---------
Total from distributions................ (0.70) (1.40) (1.40) (1.44) (1.56) (1.81)
--------- --------- --------- --------- --------- ---------
Capital share repurchases............... -- -- 0.03 0.16 0.02 --
--------- --------- --------- --------- --------- ---------
Net asset value, end of period.......... $ 21.52 $ 20.30 $ 22.77 $ 19.76 $ 12.87 $ 21.69
========= ========= ========= ========= ========= =========
Market value, end of period............. $ 19.24 $ 17.82 $ 21.32 $ 18.04 $ 10.25 $ 19.50
========= ========= ========= ========= ========= =========
TOTAL RETURN BASED ON NET ASSET VALUE (b) 9.68% (4.18)% 23.29% 69.25% (33.94)% 15.74%
========= ========= ========= ========= ========= =========
TOTAL RETURN BASED ON MARKET VALUE (b).. 11.70% (10.17)% 26.45% 94.01% (41.48)% 12.53%
========= ========= ========= ========= ========= =========

-----------------------

RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ... $ 114,677 $ 108,174 $ 121,338 $ 106,717 $ 75,365 $ 128,112
Ratio of total expenses to average net
assets............................... 1.90% (c) 1.68% 1.76% 2.11% 2.00% 2.04%
Ratio of total expenses to average net
assets excluding interest expense ... 1.83% (c) 1.61% 1.62% 1.80% 1.60% 1.58%
Ratio of net investment income (loss) to
average net assets................... 4.32% (c) 4.47% 4.55% 6.11% 5.73% 4.31%
Portfolio turnover rate................. 21% 51% 87% 66% 64% 95%
INDEBTEDNESS:
Total loan outstanding (in 000's)....... $ 5,800 $ 5,800 $ 5,800 $ 5,800 $ 13,500 $8,000
Asset coverage per $1,000 of
indebtedness (d)..................... $ 20,772 $ 19,651 $ 21,920 $ 19,399 $ 6,583 $ 17,014

-----------------------

(a) Based on average shares outstanding.

(b) Total return is based on the combination of reinvested dividend, capital
gain and return of capital distributions, if any, at prices obtained by
the Dividend Reinvestment Plan, and changes in net asset value per share
for net asset value returns and changes in Common Share price for market
value returns. Total returns do not reflect sales load and are not
annualized for periods less than one year. Past performance is not
indicative of future results.

(d) Calculated by subtracting the Fund's total liabilities (not including the
loan outstanding) from the Fund's total assets, and dividing by the
outstanding loan balance in 000's.

Page 20 See Notes to Financial Statements

--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS
--------------------------------------------------------------------------------

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
JUNE 30, 2012 (UNAUDITED)

1. FUND DESCRIPTION

First Trust/Aberdeen Emerging Opportunity Fund (the "Fund") is a diversified,
closed-end management investment company organized as a Massachusetts business
trust on May 16, 2006 and is registered with the Securities and Exchange
Commission ("SEC") under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Fund trades under the ticker symbol FEO on the New York Stock
Exchange ("NYSE").

The Fund's investment objective is to seek a high level of total return. The
Fund pursues its objective by investing at least 80% of its Managed Assets in a
diversified portfolio of equity and fixed-income securities of issuers in
emerging market countries. "Managed Assets" means the total asset value of the
Fund minus the sum of the Fund's liabilities other than the principal amount of
borrowings, if any. There can be no assurance that the Fund will achieve its
investment objective. The Fund may not be appropriate for all investors.

2. SIGNIFICANT ACCOUNTING POLICIES

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statements. The
preparation of financial statements in accordance with accounting principles
generally accepted in the United States of America ("U.S. GAAP") requires
management to make estimates and assumptions that affect the reported amounts
and disclosures in the financial statements. Actual results could differ from
those estimates.

A. PORTFOLIO VALUATION:

The net asset value ("NAV") of the Fund's Common Shares is determined daily as
of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern time, on
each day the NYSE is open for trading. If the NYSE closes early on a valuation
day, the NAV is determined as of that time. Domestic debt securities and foreign
securities are priced using data reflecting the earlier closing of the principal
markets for those securities. The NAV per Common Share is calculated by dividing
the value of all assets of the Fund (including accrued interest and dividends),
less all liabilities (including accrued expenses, dividends declared but unpaid
and any borrowings of the Fund), by the total number of Common Shares
outstanding.

The Fund's investments are valued daily in accordance with valuation procedures
adopted by the Fund's Board of Trustees, and in accordance with provisions of
the 1940 Act. All securities and other assets of the Fund initially expressed in
foreign currencies will be converted to U.S. dollars using exchange rates in
effect at the time of valuation. All market quotations used in valuing the
Fund's securities will be obtained from a third party pricing service. The
Fund's securities will be valued as follows:

Bonds, notes and other debt securities not traded in an organized market
are valued on the basis of valuations provided by dealers who make markets
in such securities or by an independent pricing service approved by the
Fund's Board of Trustees, which may use the following valuation inputs
when available:

1) benchmark yields;

2) reported trades;

3) broker/dealer quotes;

4) issuer spreads;

5) benchmark securities;

6) bids and offers; and

7) reference data including market research publications.

Common stocks and other securities listed on any national or foreign
exchange (excluding the NASDAQ National Market ("NASDAQ") and the London
Stock Exchange Alternative Investment Market ("AIM")) are valued at the
last sale price on the exchange on which they are principally traded. If
there are no transactions on the valuation day, the securities are valued
at the mean between the most recent bid and asked prices.

Securities listed on the NASDAQ or the AIM are valued at the official
closing price. If there is no official closing price on the valuation day,
the securities are valued at the mean between the most recent bid and
asked prices.

Securities traded in the over-the-counter market are valued at their
closing bid prices.

Forward foreign currency contracts are valued at the current day's
interpolated foreign exchange rate, as calculated using the current day's
spot rate, and the thirty, sixty, ninety and one-hundred eighty day
forward rates provided by an independent pricing service.

Debt securities having a remaining maturity of sixty days or less when
purchased are valued at cost adjusted for amortization of premiums and
accretions of discounts.

In the event that market quotations are not readily available, the pricing
service does not provide a valuation for a particular asset, or the valuations
are deemed unreliable, the Fund's Board of Trustees has designated First Trust
Advisors L.P. ("First Trust") to use a fair value method to value the Fund's
securities and other investments. Additionally, if events occur after the close
of the principal market for particular securities (e.g., domestic debt and
foreign securities), but before the Fund values its assets, that could
materially affect NAV, First

Page 21

--------------------------------------------------------------------------------
NOTES TO FINANCIAL STATEMENTS - (CONTINUED)
--------------------------------------------------------------------------------

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
JUNE 30, 2012 (UNAUDITED)

Trust may use a fair value method to value the Fund's securities and other
investments. The use of fair value pricing by the Fund is governed by valuation
procedures adopted by the Fund's Board of Trustees, and in accordance with the
provisions of the 1940 Act. As a general principle, the fair value of a security
is the amount which the Fund might reasonably expect to receive for the security
upon its current sale. However, in light of the judgment involved in fair
valuations, there can be no assurance that a fair value assigned to a particular
security will be the amount which the Fund might be able to receive upon its
current sale. Fair valuation of a debt security will be based on the
consideration of all available information, including, but not limited to, the
following:

1) the fundamental business data relating to the issuer;
2) an evaluation of the forces which influence the market in which
these securities are purchased and sold;
3) the type, size and cost of security;
4) the financial statements of the issuer, or the financial condition
of the country of issue;
5) the credit quality and cash flow of the issuer, or country of issue,
based on the Sub-Advisor's or external analysis;
6) the information as to any transactions in or offers for the
security;
7) the price and extent of public trading in similar securities (or
equity securities) of the issuer/borrower, or comparable companies;
8) the coupon payments;
9) the quality, value and salability of collateral, if any, securing
the security;
10) the business prospects of the issuer, including any ability to
obtain money or resources from a parent or affiliate and an
assessment of the issuer's management (for corporate debt only);
11) the economic, political and social prospects/developments of the
country of issue and the assessment of the country's governmental
leaders/officials (for sovereign debt only);
12) the prospects for the issuer's industry, and multiples (of earnings
and/or cash flows) being paid for similar businesses in that
industry (for corporate debt only); and
13) other relevant factors.

Fair valuation of an equity security will be based on the consideration of all
available information, including, but not limited to, the following:

1) the type of security;
2) the size of the holding;
3) the initial cost of the security;
4) transactions in comparable securities;
5) price quotes from dealers and/or pricing services;
6) relationships among various securities;
7) information obtained by contacting the issuer, analysts, or the
appropriate stock exchange;
8) an analysis of the issuer's financial statements; and
9) the existence of merger proposals or tender offers that might affect
the value of the security.

If the equity securities in question are foreign securities, the following
additional information may be considered:

1) the value of similar foreign securities traded on other foreign
markets;
2) ADR trading of similar securities;
3) closed-end fund trading of similar securities;
4) foreign currency exchange activity;
5) the trading prices of financial products that are tied to baskets of
foreign securities;
6) factors relating to the event that precipitated the pricing problem;
7) whether the event is likely to recur; and
8) whether the effects of the event are isolated or whether they affect
entire markets, countries or regions.

The Fund is subject to fair value accounting standards that define fair value,
establish the framework for measuring fair value and provide a three-level
hierarchy for fair valuation based upon the inputs to the valuation as of the
measurement date. The three levels of the fair value hierarchy are as follows:

o Level 1 - Level 1 inputs are quoted prices in active markets for
identical investments. An active market is a market in which
transactions for the investment occur with sufficient frequency and
volume to provide pricing information on an ongoing basis.

o Level 2 - Level 2 inputs are observable inputs, either directly or
indirectly, and include the following:

o Quoted prices for similar investments in active markets.

o Quoted prices for identical or similar investments in markets
that are non-active. A non-active market is a market where
there are few transactions for the investment, the prices are
not current, or price quotations vary substantially either
over time or among market makers, or in which little
information is released publicly.

o Inputs other than quoted prices that are observable for the
investment (for example, interest rates and yield curves
observable at commonly quoted intervals, volatilities,
prepayment speeds, loss severities, credit risks, and default
rates).

Page 22

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
JUNE 30, 2012 (UNAUDITED)

o Inputs that are derived principally from or corroborated by
observable market data by correlation or other means.

o Level 3 - Level 3 inputs are unobservable inputs. Unobservable
inputs may reflect the reporting entity's own assumptions about the
assumptions that market participants would use in pricing the
investments.

The inputs or methodology used for valuing investments are not necessarily an
indication of the risk associated with investing in those investments. A summary
of the inputs used to value the Fund's investments as of June 30, 2012, is
included with the Fund's Portfolio of Investments.

B. SECURITIES TRANSACTIONS AND INVESTMENT INCOME:

Securities transactions are recorded as of the trade date. Realized gains and
losses from securities transactions are recorded on the identified cost basis.
Dividend income is recorded on the ex-dividend date. Interest income is recorded
daily on the accrual basis. Amortization of premiums and accretion of discounts
are recorded by using the effective interest method.

Securities purchased on a when-issued, delayed-delivery or forward commitment
basis may have extended settlement periods. The value of the security so
purchased is subject to market fluctuations during this period. The Fund
maintains liquid assets with a current value at least equal to the amount of its
when-issued, delayed-delivery or forward purchase commitments until payment is
made. At June 30, 2012, the Fund had no when-issued, delayed-delivery or forward
purchase commitments.

C. FORWARD FOREIGN CURRENCY CONTRACTS:

The Fund is subject to foreign currency risk in the normal course of pursuing
its investment objectives. Forward foreign currency contracts are agreements to
exchange one currency for another at a future date and at a specified price. The
Fund uses forward foreign currency contracts to facilitate transactions in
foreign securities and to manage the Fund's foreign currency exposure. These
contracts are valued daily, and the Fund's net equity therein, representing
unrealized gain or loss on the contracts as measured by the difference between
the forward foreign exchange rates at the dates of entry into the contracts and
the forward rates at the reporting date, is included in "Unrealized
appreciation/(depreciation) on forward foreign currency contracts" on the
Statement of Assets and Liabilities. When the forward contract is closed, the
Fund records a realized gain or loss equal to the difference between the
proceeds from (or the cost of) the closing transaction and the Fund's basis in
the contract. This realized gain or loss is included in "Net realized gain
(loss) on forward foreign currency contracts" on the Statement of Operations.
Risks arise from the possible inability of counterparties to meet the terms of
their contracts and from movement in currency and securities values and interest
rates. Due to the risks, the Fund could incur losses in excess of the net
unrealized value shown on the Schedule of Forward Foreign Currency Contracts.

During the six months ended June 30, 2012, the open and close notional values of
forward foreign currency contracts were $39,345,390 and $34,556,966,
respectively.

D. FOREIGN CURRENCY:

The books and records of the Fund are maintained in U.S. dollars. Foreign
currencies, investments and other assets and liabilities are translated into
U.S. dollars at the exchange rates prevailing at the end of the period.
Purchases and sales of investment securities and items of income and expense are
translated on the respective dates of such transactions. Unrealized gains and
losses on assets and liabilities, other than investments in securities, which
result from changes in foreign currency exchange rates have been included in
"Net change in unrealized appreciation (depreciation) on foreign currency
translation" on the Statement of Operations. Unrealized gains and losses on
investments in securities which result from changes in foreign exchange rates
are included with fluctuations arising from changes in market price and are
shown in "Net change in unrealized appreciation (depreciation) on investments"
on the Statement of Operations. Net realized foreign currency gains and losses
include the effect of changes in exchange rates between trade date and
settlement date on investment security transactions, foreign currency
transactions and interest and dividends received. The portion of foreign
currency gains and losses related to fluctuation in exchange rates between the
initial purchase trade date and subsequent sale trade date is included in "Net
realized gain (loss) on foreign currency transactions" on the Statement of
Operations.

E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:

Level dividend distributions are declared and paid quarterly to Common
Shareholders after the payment of interest and/or dividends in connection with
leverage. The level dividend rate may be modified by the Board of Trustees from
time to time. If, for any quarterly distribution, net investment company taxable
income, if any (which term includes net short-term capital gain), is less than
the amount of the distribution, the difference will generally be a tax-free
return of capital distributed from the Fund's assets. Distributions of any net
long-term capital gains earned by the Fund are distributed at least annually.
Distributions will automatically be reinvested into additional Common Shares
pursuant to the Fund's Dividend Reinvestment Plan unless cash distributions are
elected by the shareholder.

Page 23

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
JUNE 30, 2012 (UNAUDITED)

Distributions from income and capital gains are determined in accordance with
income tax regulations, which may differ from U.S. GAAP. Certain capital
accounts in the financial statements are periodically adjusted for permanent
differences in order to reflect their tax character. These permanent differences
are primarily due to the varying treatment of income and gain/loss on portfolio
securities held by the Fund and have no impact on net assets or NAV per share.
Temporary differences, which arise from recognizing certain items of income,
expense and gain/loss in different periods for financial statement and tax
purposes, will reverse at some point in the future.

The tax character of distributions paid during the fiscal year ended December
31, 2011, was as follows:

Distributions paid from:

Ordinary income................................. $ 4,338,566
Long-term capital gains......................... 3,120,333

As of December 31, 2011, the distributable earnings and net assets on a tax
basis were as follows:

Undistributed ordinary income................... $ 1,738,421
Undistributed capital gains..................... 1,173,136
--------------
Total undistributed earnings.................... 2,911,557
Accumulated capital and other losses............ (663,408)
Net unrealized appreciation (depreciation)...... 8,666,265
--------------
Total accumulated earnings (losses)............. 10,914,414
Other........................................... (3 05,555)
Paid-in capital................................. 97,564,689
--------------
Net assets...................................... $ 108,173,548
==============

F. INCOME TAXES:

The Fund intends to continue to qualify as a regulated investment company by
complying with the requirements under Subchapter M of the Internal Revenue Code
of 1986, as amended (the "Code"), which includes distributing substantially all
of its net investment income and net realized gains to shareholders.
Accordingly, no provision has been made for federal or state income taxes.

Under the Regulated Investment Company Modernization Act of 2010 (the "Act"),
net capital losses recognized after December 31, 2010, may be carried forward
indefinitely, and their character is retained as short-term and/or long-term
losses. Previously, net capital losses were carried forward for eight years and
treated as short-term losses. As a transition rule, the Act requires that
post-enactment net capital losses be used before pre-enactment net capital
losses. At December 31, 2011, the Fund had no capital loss carryforward for
federal income tax purposes.

Certain losses realized during the fiscal year may be deferred and treated as
occurring on the first day of the following fiscal year for federal income tax
purposes. For the fiscal year ended December 31, 2011, the Fund intends to elect
to defer net ordinary losses of $215,600 and net realized capital losses of
$447,808.

The Fund is subject to accounting standards that establish a minimum threshold
for recognizing, and a system for measuring, the benefits of a tax position
taken or expected to be taken in a tax return. Taxable years ending 2008, 2009,
2010 and 2011 remain open to federal and state audit. As of June 30, 2012,
management has evaluated the application of these standards to the Fund and has
determined that no provision for income tax is required in the Fund's financial
statements for uncertain tax positions.

G. EXPENSES:

The Fund will pay all expenses directly related to its operations.

3. INVESTMENT ADVISORY FEE, AFFILIATED TRANSACTIONS AND OTHER FEE ARRANGEMENTS

First Trust, the investment advisor to the Fund, is a limited partnership with
one limited partner, Grace Partners of DuPage L.P., and one general partner, The
Charger Corporation. First Trust is responsible for the ongoing monitoring of
the Fund's investment portfolio, managing the Fund's business affairs and
providing certain administrative services necessary for the management of the
Fund. For these services, First Trust is entitled to a monthly fee calculated at
an annual rate of 1.00% of the Fund's Managed Assets. First Trust also provides
fund reporting services to the Fund for a flat annual fee in the amount of
$9,250.

Aberdeen Asset Management Inc. ("Aberdeen" or the "Sub-Advisor") serves as the
Fund's sub-advisor and manages the Fund's portfolio subject to First Trust's
supervision. The Sub-Advisor receives a monthly portfolio management fee
calculated at an annual rate of 0.50% of the Fund's Managed Assets that is paid
by First Trust out of its investment advisory fee.

BNY Mellon Investment Servicing (US) Inc. serves as the Fund's Administrator,
Fund Accountant and Transfer Agent in accordance with certain fee arrangements.
The Bank of New York Mellon serves as the Fund's Custodian in accordance with
certain fee arrangements.

Page 24

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
JUNE 30, 2012 (UNAUDITED)

Effective January 23, 2012, James A. Bowen resigned from his position as the
President and Chief Executive Officer of the Fund. He will continue as a
Trustee, the Chairman of the Board of Trustees and a member of the Executive
Committee. The Board elected Mark R. Bradley to serve as the President and Chief
Executive Officer of the Fund and James M. Dykas to serve as the Treasurer,
Chief Financial Officer and Chief Accounting Officer of the Fund. Effective
January 1, 2012, each Trustee who is not an officer or employee of First Trust,
any sub-advisor or any of their affiliates ("Independent Trustees") is paid a
fixed annual retainer of $125,000 per year and an annual per fund fee of $4,000
for each closed-end fund or other actively managed fund and $1,000 for each
index fund in the First Trust Fund Complex. The fixed annual retainer is
allocated pro rata among each fund in the First Trust Fund Complex based on net
assets. Prior to January 1, 2012, each Independent Trustee received an annual
retainer of $10,000 per trust for the first 14 trust of the First Trust Fund
Complex and an annual retainer of $7,500 per trust for each additional trust in
the First Trust Fund Complex. The annual retainer was allocated equally among
each of the trusts.

Additionally, the Lead Independent Trustee is paid $15,000 annually, the
Chairman of the Audit Committee is paid $10,000 annually, and each of the
Chairmen of the Nominating and Governance Committee and the Valuation Committee
is paid $5,000 annually to serve in such capacities, with such compensation
allocated pro rata among each fund in the First Trust Fund Complex based on net
assets. Prior to January 1, 2012, the annual amounts paid were $10,000, $5,000
and $2,500, respectively. Trustees are reimbursed for travel and out-of-pocket
expenses in connection with all meetings. The Lead Independent Trustee and each
Committee chairman will serve two-year terms before rotating to serve as
chairman of another committee or as Lead Independent Trustee. The officers and
"Interested" Trustee receive no compensation from the funds for serving in such
capacities.

4. PURCHASES AND SALES OF SECURITIES

Cost of purchases and proceeds from sales of investment securities, excluding
short-term investments, for the six months ended June 30, 2012, were $23,746,605
and $25,493,691, respectively.

5. BORROWINGS

The Fund has entered into a credit agreement with The Bank of Nova Scotia, which
provides for a revolving credit facility to be used as leverage for the Fund.
The revolving credit facility provides for a secured line of credit for the Fund
where Fund assets are pledged against advances made to the Fund. Under the
requirements of the 1940 Act, the Fund, immediately after any such borrowings,
must have an "asset coverage" of at least 300% (33-1/3% of the Fund's total
assets after borrowings). The total commitment under the facility is up to
$12,000,000. As of June 30, 2012, the Fund had one loan outstanding under the
revolving credit facility totaling $5,800,000. For the six months ended June 30,
2012, the average amount outstanding was $5,800,000. The high and low annual
interest rates during the six months ended June 30, 2012 were 1.24% and 1.19%,
respectively, and the weighted average interest rate was 1.20%. The interest
rate at June 30, 2012 was 1.20%. The Fund pays a commitment fee of 0.15% (or
0.30% if loan balance drops below 40% of total commitment) per year, which is
included in "Interest and fees on loan" on the Statement of Operations.

6. INDEMNIFICATION

The Fund has a variety of indemnification obligations under contracts with its
service providers. The Fund's maximum exposure under these arrangements is
unknown. However, the Fund has not had prior claims or losses pursuant to these
contracts and expects the risk of loss to be remote.

7. RISK CONSIDERATIONS

Risks are inherent in all investing. The following summarizes some, but not all,
of the risks that should be considered for the Fund. For additional information
about the risks associated with investing in the Fund, please see the Fund's
prospectus and statement of additional information, as well as other Fund
regulatory filings.

INVESTMENT AND MARKET RISK: An investment in the Fund's Common Shares is subject
to investment risk, including the possible loss of the entire principal
invested. An investment in Common Shares represents an indirect investment in
the securities owned by the Fund, which include a global bond and equity
portfolio of investment grade and below-investment grade government and
corporate debt securities. The value of these securities, like other market
investments, may move up or down, sometimes rapidly and unpredictably. Common
Shares at any point in time may be worth less than the original investment, even
after taking into account the reinvestment of Fund dividends and distributions.
Security prices can fluctuate for several reasons including the general
condition of the bond market, or when political or economic events affecting the
issuers occur. When the Advisor or Sub-Advisor determines that it is temporarily
unable to follow the Fund's investment strategy or that it is impractical to do
so (such as when a market disruption event has occurred and trading in the
securities is extremely limited or absent), the Fund may take temporary
defensive positions.

NON-INVESTMENT GRADE SECURITIES RISK: The Fund may invest up to 80% of its
Managed Assets in non-investment grade securities. Non-investment grade
securities are rated below "Baa3" by Moody's Investors Service, Inc., below
"BBB-" by Standard & Poor's, or comparably rated by another nationally
recognized statistical rating organization or, if unrated, determined by the
Sub-Advisor to be of

Page 25

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
JUNE 30, 2012 (UNAUDITED)

comparable credit quality. Non-investment grade debt instruments are commonly
referred to as "high-yield" or "junk" bonds and are considered speculative with
respect to the issuer's capacity to pay interest and repay principal and are
susceptible to default or decline in market value due to adverse economic and
business developments. The market values for high-yield securities tend to be
very volatile, and these securities are less liquid than investment grade debt
securities.

EMERGING MARKETS RISK: Under normal market conditions, the Fund will invest at
least 80% of its Managed Assets in equity or fixed-income securities of issuers
located in countries considered to be emerging markets. Investments in such
securities are considered speculative. In addition to the general risks of
investing in non-U.S. securities, heightened risks of investing in emerging
markets securities include: smaller market capitalization of securities markets,
which may suffer periods of relative illiquidity; significant price volatility;
restrictions on foreign investment; and possible restrictions on repatriation of
investment income and capital. Furthermore, foreign investors may be required to
register the proceeds of sales, and future economic or political crises could
lead to price controls, forced mergers, expropriation or confiscatory taxation,
seizure, nationalization or creation of government monopolies. The currencies of
emerging market countries may experience significant declines against the U.S.
dollar, and devaluation may occur subsequent to investments in these currencies
by the Fund. Inflation and rapid fluctuations in inflation rates have had, and
may continue to have, negative effects on the economies and securities markets
of certain emerging market countries.

FIXED-INCOME SECURITIES RISK: Debt securities, including high-yield securities,
are subject to certain risks, including: (i) issuer risk, which is the risk that
the value of fixed-income securities may decline for a number of reasons which
directly relate to the issuer, such as management performance, financial
leverage and reduced demand for the issuer's goods and services or; (ii)
reinvestment risk, which is the risk that income from the Fund's portfolio will
decline if the Fund invests the proceeds from matured, traded or called bonds at
market interest rates that are below the Fund portfolio's current earnings rate;
(iii) prepayment risk, which is the risk that during periods of declining
interest rates, the issuer of a security may exercise its option to prepay
principal earlier than scheduled, forcing the reinvestment in lower yielding
securities; and (iv) credit risk, which is the risk that a security in the
Fund's portfolio will decline in price or the issuer fails to make interest
payments when due because the issuer of the security experiences a decline in
its financial status.

INTEREST RATE RISK: The Fund's portfolio is also subject to interest rate risk.
Interest rate risk is the risk that fixed-income securities will decline in
value because of changes in market interest rates. Investments in debt
securities with long-term maturities may experience significant price declines
if long-term interest rates increase.

NON-U.S. ISSUER RISK: Investments in the securities and instruments of non-U.S.
issuers involve certain considerations and risks not ordinarily associated with
investments in securities and instruments of U.S. issuers. Non-U.S. companies
are not generally subject to uniform accounting, auditing and financial
standards and requirements comparable to those applicable to U.S. companies.
Non-U.S. securities exchanges, brokers and listed companies may be subject to
less government supervision and regulation than exists in the United States.
Dividend and interest income may be subject to withholding and other non-U.S.
taxes, which may adversely affect the net return on such investments. There may
be difficulty in obtaining or enforcing a court judgment abroad.

CURRENCY RISK: The value of securities denominated or quoted in foreign
currencies may be adversely affected by fluctuations in the relative currency
exchange rates and by exchange control regulations. The Fund's investment
performance may be negatively affected by a devaluation of a currency in which
the Fund's investments are denominated or quoted. Further, the Fund's investment
performance may be significantly affected, either positively or negatively, by
currency exchange rates because the U.S. dollar value of securities denominated
or quoted in another currency will increase or decrease in response to changes
in the value of such currency in relation to the U.S. dollar. While certain of
the Fund's non-U.S. dollar-denominated securities may be hedged into U.S.
dollars, hedging may not alleviate all currency risks.

LEVERAGE RISK: The use of leverage results in additional risks and can magnify
the effect of any losses. The funds borrowed pursuant to a leverage borrowing
program constitute a substantial lien and burden by reason of their prior claim
against the income of the Fund and against the net assets of the Fund in
liquidation. The rights of lenders to receive payments of interest on and
repayments of principal on any borrowings made by the Fund under a leverage
borrowing program are senior to the rights of holders of Common Shares with
respect to payment of dividends or upon liquidation. If the Fund is not in
compliance with certain credit facility provisions, the Fund may not be
permitted to declare dividends or other distributions, including dividends and
distributions with respect to Common Shares or purchase Common Shares.

GOVERNMENT SECURITIES RISK: The ability of a government issuer, especially in an
emerging market country, to make timely and complete payments on its debt
obligations will be strongly influenced by the government issuer's balance of
payments, including export performance, its access to international credits and
investments, fluctuations of interest rates and the extent of its foreign
reserves. A country whose exports are concentrated in a few commodities or whose
economy depends on certain strategic imports could be vulnerable to fluctuations
in international prices of these commodities or imports. To the extent that a
country receives payment for its exports in currencies other than U.S. dollars,
its ability to make debt payments denominated in U.S. dollars could be adversely
affected. If a government issuer cannot generate sufficient earnings from
foreign trade to service its external debt, it may need to depend on continuing
loans and aid from foreign governments, commercial banks, and multinational
organizations. There are no bankruptcy proceedings similar to those in the
United States by which defaulted government debt may be collected. Additional
factors that may influence a government issuer's ability or willingness to
service debt include, but are not limited to, a country's cash flow situation,
the availability of sufficient

Page 26

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
JUNE 30, 2012 (UNAUDITED)

foreign exchange on the date a payment is due, the relative size of its debt
service burden to the economy as a whole, and the issuer's policy towards the
International Monetary Fund, the International Bank for Reconstruction and
Development and other international agencies to which a government debtor may be
subject.

NON-U.S. GOVERNMENT SECURITIES RISK: Economies and social and political climates
in individual countries may differ unfavorably from the United States. Non-U.S.
economies may have less favorable rates of growth of gross domestic product,
rates of inflation, currency valuation, capital reinvestment, resource
self-sufficiency and balance of payments positions. Many countries have
experienced extremely high rates of inflation for many years. Unanticipated
economic, political and social developments may also affect the values of the
Fund's investments and limit the availability of additional investments in such
countries. Furthermore, such developments may significantly disrupt the
financial markets or interfere with the Fund's ability to enforce its rights
against non-U.S. government issuers.

8. SUBSEQUENT EVENTS

Management has evaluated the impact of all subsequent events to the Fund through
the date the financial statements were issued, and has determined that there
were no subsequent events.

Page 27

--------------------------------------------------------------------------------
ADDITIONAL INFORMATION
--------------------------------------------------------------------------------

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
JUNE 30, 2012 (UNAUDITED)

DIVIDEND REINVESTMENT PLAN

If your Common Shares are registered directly with the Fund or if you hold your
Common Shares with a brokerage firm that participates in the Fund's Dividend
Reinvestment Plan (the "Plan"), unless you elect, by written notice to the Fund,
to receive cash distributions, all dividends, including any capital gain
distributions, on your Common Shares will be automatically reinvested by BNY
Mellon Investment Servicing (US) Inc. (the "Plan Agent"), in additional Common
Shares under the Plan. If you elect to receive cash distributions, you will
receive all distributions in cash paid by check mailed directly to you by the
Plan Agent, as the dividend paying agent.

If you decide to participate in the Plan, the number of Common Shares you will
receive will be determined as follows:

(1) If Common Shares are trading at or above net asset value ("NAV") at
the time of valuation, the Fund will issue new shares at a price
equal to the greater of (i) NAV per Common Share on that date or
(ii) 95% of the market price on that date.

(2) If Common Shares are trading below NAV at the time of valuation, the
Plan Agent will receive the dividend or distribution in cash and
will purchase Common Shares in the open market, on the NYSE or
elsewhere, for the participants' accounts. It is possible that the
market price for the Common Shares may increase before the Plan
Agent has completed its purchases. Therefore, the average purchase
price per share paid by the Plan Agent may exceed the market price
at the time of valuation, resulting in the purchase of fewer shares
than if the dividend or distribution had been paid in Common Shares
issued by the Fund. The Plan Agent will use all dividends and
distributions received in cash to purchase Common Shares in the open
market within 30 days of the valuation date except where temporary
curtailment or suspension of purchases is necessary to comply with
federal securities laws. Interest will not be paid on any uninvested
cash payments.

You may elect to opt-out of or withdraw from the Plan at any time by giving
written notice to the Plan Agent, or by telephone at (866) 340-1104, in
accordance with such reasonable requirements as the Plan Agent and the Fund may
agree upon. If you withdraw or the Plan is terminated, you will receive a
certificate for each whole share in your account under the Plan, and you will
receive a cash payment for any fraction of a share in your account. If you wish,
the Plan Agent will sell your shares and send you the proceeds, minus brokerage
commissions.

The Plan Agent maintains all Common Shareholders' accounts in the Plan and gives
written confirmation of all transactions in the accounts, including information
you may need for tax records. Common Shares in your account will be held by the
Plan Agent in non-certificated form. The Plan Agent will forward to each
participant any proxy solicitation material and will vote any shares so held
only in accordance with proxies returned to the Fund. Any proxy you receive will
include all Common Shares you have received under the Plan.

There is no brokerage charge for reinvestment of your dividends or distributions
in Common Shares. However, all participants will pay a pro rata share of
brokerage commissions incurred by the Plan Agent when it makes open market
purchases.

Automatically reinvesting dividends and distributions does not mean that you do
not have to pay income taxes due upon receiving dividends and distributions.
Capital gains and income are realized although cash is not received by you.
Consult your financial advisor for more information.

If you hold your Common Shares with a brokerage firm that does not participate
in the Plan, you will not be able to participate in the Plan and any dividend
reinvestment may be effected on different terms than those described above.

The Fund reserves the right to amend or terminate the Plan if in the judgment of
the Board of Trustees the change is warranted. There is no direct service charge
to participants in the Plan; however, the Fund reserves the right to amend the
Plan to include a service charge payable by the participants. Additional
information about the Plan may be obtained by writing BNY Mellon Investment
Servicing (US) Inc., 301 Bellevue Parkway, Wilmington, Delaware 19809.

--------------------------------------------------------------------------------
PROXY VOTING POLICIES AND PROCEDURES

A description of the policies and procedures that the Fund uses to determine how
to vote proxies and information on how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30 is
available (1) without charge, upon request, by calling (800) 988-5891; (2) on
the Fund's website located at http://www.ftportfolios.com; and (3) on the
Securities and Exchange Commission's website at http://www.sec.gov.

Page 28

--------------------------------------------------------------------------------
ADDITIONAL INFORMATION - (CONTINUED)
--------------------------------------------------------------------------------

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
JUNE 30, 2012 (UNAUDITED)

PORTFOLIO HOLDINGS

The Fund files its complete schedule of portfolio holdings with the SEC for the
first and third quarters of each fiscal year on Form N-Q. The Fund's Forms N-Q
are available (1) by calling (800) 988-5891; (2) on the Fund's website located
at http://www.ftportfolios.com; (3) on the SEC's website at http://www.sec.gov;
and (4) for review and copying at the SEC's Public Reference Room ("PRR") in
Washington, DC. Information regarding the operation of the PRR may be obtained
by calling (800) SEC-0330.

SUBMISSION OF MATTERS TO A VOTE OF SHAREHOLDERS

The Joint Annual Meeting of Shareholders of the Common Shares of First Trust
Energy Income and Growth Fund, First Trust Enhanced Equity Income Fund, First
Trust/Aberdeen Global Opportunity Income Fund, First Trust Mortgage Income Fund,
First Trust Strategic High Income Fund II, First Trust/Aberdeen Emerging
Opportunity Fund, First Trust Specialty Finance and Financial Opportunities
Fund, First Trust Active Dividend Income Fund, First Trust Energy Infrastructure
Fund, Macquarie/First Trust Global Infrastructure/Utilities Dividend & Income
Fund and First Trust High Income Long/Short Fund was held on April 18, 2012 (the
"Annual Meeting"). At the Annual Meeting, Richard E. Erickson and Thomas R.
Kadlec were elected by the Common Shareholders of the First Trust/Aberdeen
Emerging Opportunity Fund as Class II Trustees for a three-year term expiring at
the Fund's annual meeting of shareholders in 2015. The number of votes cast in
favor of Mr. Erickson was 5,037,020, the number of votes against was 82,820 and
the number of abstentions was 207,945. The number of votes cast in favor of Mr.
Kadlec was 5,036,548, the number of votes against was 83,292 and the number of
abstentions was 207,945. James A. Bowen, Niel B. Nielson and Robert F. Keith are
the other current and continuing Trustees.

BOARD CONSIDERATIONS REGARDING CONTINUATION OF INVESTMENT MANAGEMENT AND
SUB-ADVISORY AGREEMENTS

The Board of Trustees of First Trust/Aberdeen Emerging Opportunity Fund (the
"Fund"), including the Independent Trustees, approved the continuation of the
Investment Management Agreement (the "Advisory Agreement") between the Fund and
First Trust Advisors L.P. (the "Advisor") and the Investment Sub-Advisory
Agreement (the "Sub-Advisory Agreement" and together with the Advisory
Agreement, the "Agreements") among the Fund, the Advisor and Aberdeen Asset
Management Inc. (the "Sub-Advisor"), at a meeting held on June 10-11, 2012. The
Board determined that the continuation of the Agreements is in the best
interests of the Fund in light of the extent and quality of the services
provided and such other matters as the Board considered to be relevant in the
exercise of its reasonable business judgment.

To reach this determination, the Board considered its duties under the
Investment Company Act of 1940, as amended (the "1940 Act"), as well as under
the general principles of state law in reviewing and approving advisory
contracts; the requirements of the 1940 Act in such matters; the fiduciary duty
of investment advisors with respect to advisory agreements and compensation; the
standards used by courts in determining whether investment company boards have
fulfilled their duties; and the factors to be considered by the Board in voting
on such agreements. To assist the Board in its evaluation of the Agreements, the
Independent Trustees received a separate report from each of the Advisor and the
Sub-Advisor in advance of the Board meeting responding to a request for
information from counsel to the Independent Trustees. The reports, among other
things, outlined the services provided by the Advisor and the Sub-Advisor
(including the relevant personnel responsible for these services and their
experience); the advisory and sub-advisory fees for the Fund as compared to fees
charged to other clients of the Advisor and the Sub-Advisor and as compared to
fees charged by investment advisors and sub-advisors to comparable funds;
expenses of the Fund as compared to expense ratios of comparable funds; the
nature of expenses incurred in providing services to the Fund and the potential
for economies of scale, if any; financial data on the Advisor and the
Sub-Advisor; any fall-out benefits to the Advisor and the Sub-Advisor; and
information on the Advisor's and the Sub-Advisor's compliance programs.
Following receipt of this information, counsel to the Independent Trustees posed
follow-up questions, and the Independent Trustees and their counsel then met
separately to discuss the information provided by the Advisor and the
Sub-Advisor, including the supplemental responses. The Board applied its
business judgment to determine whether the arrangements between the Fund and the
Advisor and among the Fund, the Advisor and the Sub-Advisor are reasonable
business arrangements from the Fund's perspective as well as from the
perspective of shareholders. The Board considered that shareholders chose to
invest or remain invested in the Fund knowing that the Advisor and the
Sub-Advisor manage the Fund. The Board also considered that the Agreements were
approved by shareholders of the Fund at a meeting held in December 2010.

In reviewing the Agreements, the Board considered the nature, extent and quality
of services provided by the Advisor and the Sub-Advisor under the Agreements.
The Board considered the Advisor's statements regarding the incremental benefits
associated with the Fund's advisor/sub-advisor management structure. With
respect to the Advisory Agreement, the Board considered that the Advisor is
responsible for the overall management and administration of the Fund and
reviewed the services provided by the Advisor to the Fund, including the
oversight of the Sub-Advisor. The Board noted the compliance program that had
been developed by the Advisor and considered that it includes a robust program
for monitoring the Sub-Advisor's compliance with the 1940 Act and the Fund's
investment objective and policies. With respect to the Sub-Advisory Agreement,
the Board reviewed the materials provided by the Sub-Advisor and considered the
services that the Sub-Advisor provides to the Fund, including the Sub-Advisor's
day-to-day management of the Fund's investments. In light of the information
presented and the considerations made, the Board concluded that the nature,
extent and quality of services provided to the Fund by the Advisor and the
Sub-Advisor under the Agreements have been and are expected to remain
satisfactory and that the Sub-Advisor, under the oversight of the Advisor, has
managed the Fund consistent with its investment objective and policies.

Page 29

--------------------------------------------------------------------------------
ADDITIONAL INFORMATION - (CONTINUED)
--------------------------------------------------------------------------------

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
JUNE 30, 2012 (UNAUDITED)

The Board considered the advisory and sub-advisory fees paid under the
Agreements. The Board considered the advisory fees charged by the Advisor to
similar funds and other non-fund clients, noting that the Advisor provides
services to another closed-end fund sub-advised by the Sub-Advisor and certain
separately managed accounts with investment objectives and policies similar to
the Fund's. The Board noted that the Advisor charges the same advisory fee rate
to the Fund and the other closed-end fund sub-advised by the Sub-Advisor and a
lower advisory fee rate to the separately managed accounts. The Board noted the
Advisor's statement that the nature of the services provided to the separately
managed accounts is not comparable to those provided to the Fund. The Board
considered the sub-advisory fee and how it relates to the Fund's overall
advisory fee structure and noted that the sub-advisory fee is paid by the
Advisor from its advisory fee. The Board also considered information provided by
the Sub-Advisor as to the fees it charges to other clients, noting that the
Sub-Advisor does not manage any other closed-end funds directly comparable to
the Fund, but that the sub-advisory fee rate is the same as that received from
the Advisor for the other closed-end fund for which it serves as sub-advisor,
and is generally lower than the fees the Sub-Advisor charges to the other North
American closed-end fixed income and equity funds that it manages. In addition,
the Board received data prepared by Lipper Inc. ("Lipper"), an independent
source, showing the advisory fees and expense ratios of the Fund as compared to
the advisory fees and expense ratios of a peer group selected by Lipper and
similar data for a separate peer group selected by the Advisor. The Board noted
that the Lipper and Advisor peer groups did not include any overlapping peer
funds. The Board discussed with representatives of the Advisor the limitations
in creating a relevant peer group for the Fund, including that (i) the Fund is
unique in its composition, which makes assembling peers with similar strategies
and asset mix difficult; (ii) most peer funds do not use leverage; (iii) most
peer funds do not employ an advisor/sub-advisor management structure; and (iv)
many of the peer funds are larger than the Fund, which causes the Fund's fixed
expenses to be higher on a percentage basis as compared to the larger peer
funds. The Board took these limitations into account in considering the peer
data. In reviewing the peer data, the Board noted that the Fund's contractual
advisory fee was below the median of the Lipper peer group and equal to the
median of the Advisor peer group.

The Board also considered performance information for the Fund, noting that the
performance information included the Fund's quarterly performance report, which
is part of the process that the Board has established for monitoring the Fund's
performance and portfolio risk on an ongoing basis. The Board determined that
this process continues to be effective for reviewing the Fund's performance. In
addition to the Board's ongoing review of performance, the Board also received
data prepared by Lipper comparing the Fund's performance to the Lipper peer
group, as well as to a larger peer universe and to a blended benchmark. In
reviewing the Fund's performance as compared to the performance of the Lipper
peer group and Lipper peer universe, the Board took into account the limitations
described above with respect to creating a relevant peer group for the Fund. The
Board also considered the Fund's dividend yield as of March 30, 2012 and an
analysis prepared by the Advisor on the continued benefits provided by the
Fund's leverage. In addition, the Board compared the Fund's premium/discount
over the past eight quarters to the average and median premium/discount of the
Advisor peer group over the same period, noting that the Fund's premium/discount
was generally indicative of the asset class and market events.

On the basis of all the information provided on the fees, expenses and
performance of the Fund, the Board concluded that the advisory and sub-advisory
fees were reasonable and appropriate in light of the nature, extent and quality
of services provided by the Advisor and Sub-Advisor under the Agreements.

The Board noted that the Advisor has continued to invest in personnel and
infrastructure and considered whether fee levels reflect any economies of scale
for the benefit of shareholders. The Board noted the Advisor's statement that
economies of scale in providing services to the Fund are not available at
current asset levels. The Board determined that due to the Fund's closed-end
structure, the potential for realization of economies of scale as Fund assets
grow was not a substantial factor to be considered. The Board also considered
the costs of the services provided and profits realized by the Advisor from
serving as investment advisor to the Fund for the twelve months ended December
31, 2011, as set forth in the materials provided to the Board. The Board noted
the inherent limitations in the profitability analysis, and concluded that the
Advisor's estimated profitability appeared to be not excessive in light of the
services provided to the Fund. In addition, the Board considered fall-out
benefits described by the Advisor that may be realized from its relationship
with the Fund, including the Advisor's compensation for fund reporting services
pursuant to a separate Fund Reporting Services Agreement.

The Board considered the Sub-Advisor's representation that because it manages
the Fund in a similar fashion to other accounts it is able to achieve economies
of scale through relationships with brokers, administrative systems and other
efficiencies and that while it expects operating costs in general to continue to
rise, it continues to expect to experience the benefits of economies of scale.
The Board considered that the sub-advisory fee rate was negotiated at arm's
length between the Advisor and the Sub-Advisor, an unaffiliated third party. The
Board also considered data provided by the Sub-Advisor as to the profitability
of the Sub-Advisory Agreement to the Sub-Advisor. The Board noted the inherent
limitations in the profitability analysis and concluded that the profitability
analysis for the Advisor was more relevant, although the profitability of the
Sub-Advisory Agreement appeared to be not excessive in light of the services
provided to the Fund. The Board considered fall-out benefits that may be
realized by the Sub-Advisor from its relationship with the Fund, including that
the Sub-Advisor may enter into soft-dollar arrangements, and considered a
summary of such arrangements.

Based on all of the information considered and the conclusions reached, the
Board, including the Independent Trustees, unanimously determined that the terms
of the Agreements continue to be fair and reasonable and that the continuation
of the Agreements is in the best interests of the Fund. No single factor was
determinative in the Board's analysis.

Page 30

This Page Left Blank Intentionally.

FIRST TRUST

INVESTMENT ADVISOR
First Trust Advisors L.P.
120 E. Liberty Drive, Suite 400
Wheaton, IL 60187

INVESTMENT SUB-ADVISOR
Aberdeen Asset Management Inc.
1735 Market Street, 32nd Floor
Philadelphia, PA 19103

ADMINISTRATOR,
FUND ACCOUNTANT &
TRANSFER AGENT
BNY Mellon Investment Servicing (US) Inc.
301 Bellevue Parkway
Wilmington, DE 19809

CUSTODIAN
The Bank of New York Mellon
1 Wall Street
New York, NY 10286

INDEPENDENT REGISTERED
PUBLIC ACCOUNTING FIRM
Deloitte & Touche LLP
111 S. Wacker Drive
Chicago, IL 60606

LEGAL COUNSEL
Chapman and Cutler LLP
111 W. Monroe Street
Chicago, IL 60603

[BLANK BACK COVER]

ITEM 2. CODE OF ETHICS.

Not applicable.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

Not applicable.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

Not applicable.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

Not applicable.

ITEM 6. INVESTMENTS.

(a) Schedule of Investments in securities of unaffiliated issuers as of the
close of the reporting period is included as part of the report to
shareholders filed under Item 1 of this form.

(b) Not applicable.

ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.

Not applicable.

ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

(a) Not applicable.

(b) There have been no changes, as of the date of filing, in any of the
Portfolio Managers identified in response to paragraph (a)(1) of this item
in the Registrant's most recent annual report on Form N-CSR.

ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT
COMPANY AND AFFILIATED PURCHASERS.

Not applicable.

ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

There have been no material changes to the procedures by which the shareholders
may recommend nominees to the registrant's board of directors, where those
changes were implemented after the registrant last provided disclosure in
response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR
229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)),
or this Item.

ITEM 11. CONTROLS AND PROCEDURES.

(a) The registrant's principal executive and principal financial officers, or
persons performing similar functions, have concluded that the
registrant's disclosure controls and procedures (as defined in Rule
30a-3(c) under the Investment Company Act of 1940, as amended (the "1940
Act") (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days
of the filing date of the report that includes the disclosure required by
this paragraph, based on their evaluation of these controls and
procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR
270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities
Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)).

(b) There were no changes in the registrant's internal control over financial
reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR
270.30a-3(d)) that occurred during the registrant's second fiscal quarter
of the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the registrant's internal control
over financial reporting.

ITEM 12. EXHIBITS.

(a)(1) Not applicable.

(a)(2) Certifications pursuant to Rule 30a-2(a) under the 1940 Act and
Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto.

(a)(3) Not applicable.

(b) Certifications pursuant to Rule 30a-2(b) under the 1940 Act and
Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.

(registrant) First Trust/Aberdeen Emerging Opportunity Fund
-----------------------------------------------------------

By (Signature and Title)* /s/ Mark R. Bradley
------------------------------------------------
Mark R. Bradley, President and
Chief Executive Officer
(principal executive officer)

Date August 20th, 2012
---------------------

Pursuant to the requirements of the Securities Exchange Act of 1934 and the
Investment Company Act of 1940, this report has been signed below by the
following persons on behalf of the registrant and in the capacities and on the
dates indicated.

By (Signature and Title)* /s/ Mark R. Bradley
------------------------------------------------
Mark R. Bradley, President and
Chief Executive Officer
(principal executive officer)

Date August 20th, 2012
---------------------

By (Signature and Title)* /s/ James M. Dykas
------------------------------------------------
James M. Dykas, Treasurer,
Chief Financial Officer and
Chief Accounting Officer
(principal financial officer)

Date August 20th, 2012
---------------------

* Print the name and title of each signing officer under his or her signature.