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)

1001 Warrenville Road, Suite 300
LISLE, IL 60532
- --------------------------------------------------------------------------------
(Address of principal executive offices) (Zip code)

W. Scott Jardine, Esq.
First Trust Portfolios L.P.
1001 Warrenville Road, Suite 300
LISLE, IL 60532
- --------------------------------------------------------------------------------
(Name and address of agent for service)

registrant's telephone number, including area code: (630) 241-4141
---------------

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

Date of reporting period: DECEMBER 31, 2006
------------------

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

A registrant is required to disclose the information specified by Form N-CSR,
and the Commission will make this information public. A registrant is not
required to respond to the collection of information contained in Form N-CSR
unless the Form displays a currently valid Office of Management and Budget
("OMB") control number. Please direct comments concerning the accuracy of the
information collection burden estimate and any suggestions for reducing the
burden to Secretary, Securities and Exchange Commission, 100 F Street, NE,
Washington, DC 20549. 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/ABERDEEN EMERGING OPPORTUNITY
FUND
ANNUAL REPORT
FOR THE PERIOD JULY 14, 2006 TO DECEMBER 31, 2006

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

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
DECEMBER 31, 2006

Shareholder Letter....................................................... 1
Portfolio Commentary..................................................... 2
Portfolio Components..................................................... 5
Portfolio of Investments................................................. 7
Schedule of Forward Foreign Currency Contracts........................... 12
Statement of Assets and Liabilities...................................... 13
Statement of Operations.................................................. 14
Statement of Changes in Net Assets....................................... 15
Statement of Cash Flows.................................................. 16
Financial Highlights..................................................... 17
Notes to Financial Statements............................................ 18
Report of Independent Registered Public Accounting Firm.................. 23
Additional Information................................................... 24
Dividend Reinvestment Plan
Proxy Voting Policies and Procedures
Portfolio Holdings
Tax Information
NYSE Certification Information
By-Law Amendments
Advisory Agreements
Board of Trustees and Officers........................................... 27

CAUTION REGARDING FORWARD-LOOKING STATEMENTS

This Annual Report contains certain forward-looking statements within the
meaning of Section 27A of the Securities Act of 1933. Forward-looking statements
include statements regarding the goals, beliefs, plans or current expectations
of First Trust Advisors L.P. (the "Advisor") and/or Aberdeen Asset Management
Inc. (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
the 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 Annual Report, you are cautioned not to place undue reliance on
these forward-looking statements, which reflect the judgment of the Advisor and
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.

HOW TO READ THIS REPORT

This report contains information that can 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 letter from the Fund's President, James A. Bowen, together with
the portfolio commentary by the portfolio management team of the Sub-Advisor,
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.

It is important to keep in mind that the opinions expressed by Mr. Bowen and
personnel of the Sub-Advisor 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. Of course, the risks of
investing in the Fund are spelled out in the prospectus.

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

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND (FEO)
ANNUAL REPORT
DECEMBER 31, 2006

Dear Shareholders:

We are pleased to present the initial annual report of the First Trust/Aberdeen
Emerging Opportunity Fund (NYSE: FEO) (the "Fund"), which commenced trading on
the New York Stock Exchange on August 29, 2006. Since that time, emerging
markets have generally performed well, supported by robust economic fundamentals
in the major emerging economies. Despite pressure on the market price, the
Fund's net asset value has steadily increased over the four months since the
inception of trading. It also declared and paid its first dividend distribution
in December, providing an annualized dividend rate of 7.00% on the $20 common
share initial public offering price.

The Fund's investment objective is to provide to provide a high level of total
return. The Fund intends to achieve 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.

First Trust Advisors L.P. ("First Trust") the Fund's advisor, serves as
investment advisor or portfolio supervisor to investment portfolios with
approximately $28 billion in assets which it managed or supervised as of
December 31, 2006. Aberdeen Asset Management Inc. ("Aberdeen") is the Fund's
sub-advisor. Aberdeen is a wholly-owned subsidiary of Aberdeen Asset Management
PLC, which is the parent company of an asset management group managing
approximately $195 billion in assets, including approximately $76.5 billion in
global fixed-income securities, for a range of pension funds, financial
institutions, investment trusts, unit trusts, offshore funds, charities and
private clients.

For a discussion of the specific market conditions that affected the Fund and
how the Fund performed, please review the portfolio commentary by Aberdeen found
on the following pages. We thank you for your investment in the First
Trust/Aberdeen Emerging Opportunity Fund and remain dedicated to assisting you
in achieving your financial goals.

Sincerely,

/S/ JAMES A. BOWEN
James A. Bowen
President of the First Trust/Aberdeen Emerging Opportunity Fund
February 21, 2007

Page 1

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

PORTFOLIO MANAGEMENT TEAM

Investment decisions for the First Trust/Aberdeen Emerging Opportunity Fund (the
"Fund") are typically made by Aberdeen Asset Management Inc. ("Aberdeen" or the
"Sub-Advisor") 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 companies 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 FUND MANAGER BIOGRAPHIES

DEVAN KALOO

HEAD OF EMERGING MARKETS EQUITY FOR THE ABERDEEN GROUP

Mr. Kaloo is responsible for the London based Global Emerging Markets ("GEM")
Equity Team, which manages Latin America and Europe, Middle East and Africa
equities, and also has oversight of global emerging market input from the Asia
research team based in Singapore, with whom he works closely. Mr. Kaloo began
his career at Martin Currie in Edinburgh 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. Mr. Kaloo took his current position in July 2005. Mr. Kaloo
graduated with an MA (Hons) in Management and International Relations from St.
Andrews University and holds a post-graduate degree in Investment Analysis from
Stirling University, also in Scotland.

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 BUTLER

SENIOR INVESTMENT MANAGER, GEM EQUITY TEAM

Mr. Butler is fund manager specializing in the emerging markets of Europe,
Middle East and Africa. After graduating with a Bachelor of Accounting from the
University of Natal in 1992, he joined the Johannesburg office of Deloitte &
Touche in 1993 where he worked for the entrepreneurial and special services
teams. He qualified as a chartered accountant (South Africa) in 1996 and
re-located to London. Mr. Butler joined Baring Asset Management in 1997 where he
was a member of the African and Middle East team. In February 2000, Mr. Butler
joined the Aberdeen Group. Mr. Butler is a member of the UK Society of
Investment Professionals.

MARK GORDON-JAMES

INVESTMENT MANAGER, GEM EQUITY TEAM

After graduating 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.

FIXED-INCOME FUND MANAGER BIOGRAPHIES

DEREK FULTON

HEAD OF GLOBAL AND ASIAN BONDS

After graduation, Mr. Fulton joined Murray Johnstone in 1996 as a graduate
trainee in Fixed-Income. In 1998, he qualified as an Associate of the Institute
of Investment Management & Research. Mr. Fulton has since become a senior member
of the fixed-income team with Aberdeen and is responsible for the day-to-day
management of global fixed-income and government portfolios. He is a member of
the Aberdeen's global economics team.

Page 2

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

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.

EDWIN GUTIERREZ

PORTFOLIO MANAGER, EMERGING MARKET DEBT

Mr. Gutierrez has served previously as an economist specializing in Latin
America at LGT Asset Manager, 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.

NIMA TAYEBI

PORTFOLIO MANAGER, EMERGING MARKET DEBT

Mr. Tayebi has 9 years of experience as executive director responsible for
emerging markets trading at Millennium Global Investments, vice president at
Salomon Brothers, focusing on emerging currency and debt trading and head of
fixed-income research at Renaissance Capital. He joined Deutsche in 2001 as an
emerging market currency portfolio manager and Aberdeen in 2005.

MAX WOLMAN

PORTFOLIO MANAGER, EMERGING MARKET DEBT

Mr. Wolman moved to 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 market debt analysis, including external and corporate issuers. He is a
member of the Emerging Markets Debt investment committee at Aberdeen and is also
responsible for the daily implementation of the investment process.

NET ASSET VALUE AND MARKET PRICE PERFORMANCE COMMENTARY

The following commentary by Aberdeen will help explain the Fund's performance,
along with the various factors that have impacted the Fund's investment
portfolio.

The Fund performed strongly on a net asset value basis with a total return of
9.7% for the period from August 29, 2006 to December 31, 2006. This compares to
12.0% for the Fund's blended benchmark* total return over the same period.
Emerging market debt and equity securities were generally weak from May into
July, just prior to the inception of the Fund as investors exhibited a brief
period of risk averse sentiment. These markets rallied in the final five months
of 2006, with emerging market equities showing particular strength. The Fund
benefited from this rally with contributions to performance from both the
fixed-income and equity components of the portfolio.

Initially offered at $20.00 per share, the market price of the Fund struggled in
the month of October but climbed back steadily over the final two months of the
year. The market price ended the year at $19.03 while the Fund also declared its
first quarterly distribution of $0.35 per share in December. Total return based
on market price for the period ended December 31, 2006 was -3.1%.

FIXED-INCOME MARKET REVIEW

Emerging debt markets performed well during the period from August 29, 2006 to
December 31, 2006. The markets were helped by continued sound economic policy
management in the major emerging economies and the fact that the external
backdrop for the market remained generally supportive. Investor risk appetite
remained robust, as evidenced by the strong performance in global equity
markets. Although the market remains divided on the likely future path of
interest rate changes by the U.S. Federal Reserve, there seem to be few concerns
over a protracted retrenchment in global liquidity conditions over the months
ahead.

Considering specific markets, the Fund's holdings in Argentine debt performed
especially well, given the country's strong growth prospects and limited
near-term debt service requirements. In Brazil, President Lula da Silva secured
a second term in office as expected, with a comfortable margin of victory over
his opponent Geraldo Alckmin Filho. The extent to which Lula da Silva can
implement structural reform, notably on social security and taxation during his
next term in office remains to be seen. In the meanwhile, Brazil remains solidly
underpinned by a robust trade surplus, prudent fiscal policy and declining
inflation. The latter has in turn enabled the Central Bank to maintain its
interest rate cutting cycle, benefiting the Fund's local currency-denominated
bonds. Elsewhere in Latin America, the Fund continues to hold local
currency-denominated bonds in Mexico and Colombia, looking for a decline in real
interest rates in both countries as the inflation profile remains subdued.

- ------------
* The Funds' Blended Benchmark consisted of the following: 32.5% JP Morgan
Emerging Market Bond Index Global Diversified; 32.5% JP Morgan GBI-EM
(Government Bond Index-Emerging Markets); and 35% MSCI (Morgan Stanley
Capital International) Global Emerging Markets Index.

Page 3

In Turkey, the inflation outlook has begun to improve recently, which should
help the outlook for the Fund's local currency-denominated bonds over time. The
country's European Union ("EU") accession process took a set-back in December as
the EU Council placed certain limited restraints on the country's accession
process, due primarily to the lack of Turkey's progress in normalizing trade
relations with Cyprus. The markets however had largely priced in this
development, and the conditions surrounding the partial suspension of accession
negotiations can be reversed over time. During the period, a position was also
established in Egyptian treasury bills, primarily for income generation
purposes.

In Asia, the Fund's holdings in Philippines external debt performed well given
the country's ongoing improvement in the fiscal outlook. Pakistan also performed
well as external debt spreads tightened in relation to comparable sovereign
debt. The Fund also continues to hold a position in Indonesian
Rupiah-denominated bonds, looking for the Indonesian Central Bank to continue
cutting interest rates as inflation declines.

OUTLOOK

Looking ahead, the Sub-Advisor believes the emerging market debt asset class
overall remains supported by robust economic fundamentals in the major emerging
economies. In the near term, a potential rise in global risk aversion remains
the most tangible threat to the asset class, though this would be expected to
only have a transient impact on the market outlook. A sustained decline in
commodity prices could dent the balance sheet of certain commodity exporting
countries, although in this regard it should be noted that the majority of these
countries have used the boom in commodity prices in recent years responsibly to
build reserves and reduce indebtedness.

EQUITY MARKET REVIEW

Emerging markets equities performed strongly in the final four months of 2006
with aggregate gains of the MSCI Emerging Market Index exceeding 18% in U.S.
dollar terms. The rise in share prices over the entire year, which helped many
markets hit fresh records, was backed by solid corporate earnings growth buoyed
by robust economic expansion.

In the Europe/Middle East/Africa region, South African ("EMEA") holdings
performed strongly with Edgars becoming the subject of private equity interest,
while retailer Massmart posted strong earnings growth. In Latin America, the
Fund's holdings in Mexico included beverage company Femsa and bank Banorte,
which performed particularly well.

In Asia, the Fund tended to be underweight in China, where valuations were
demanding and, in the Sub-Advisor's view, did not appropriately reflect the
associated risks. This detracted from relative performance during the period. In
addition, the Fund's positions in Thailand were impacted adversely by the
military coup and subsequent bungled attempt to stem the Baht's appreciation,
both taking their toll on investor sentiment. On a positive note, the Fund's
underweighted positions in Korea added to Fund value where the strong local
currency weighed on exporters, such as Samsung Electronics and Hyundai Motor.

Comparing the Fund's equity positioning to the MSCI Index, the Fund is currently
underweighted in Europe/Middle East/Africa, overweighted in Latin America and in
line with the benchmark in Asia.

OUTLOOK

Calendar year 2006 was another strong year for emerging markets, with aggregate
gains exceeding 30%. Although valuations are no longer as cheap as they once
were after the four-year rally, we believe economies remain in good shape
entering 2007.

In Asia, while Gross Domestic Product growth and corporate earnings remain
strong, we are wary of several factors, such as heavily oversubscribed new
issues in China and continued political uncertainty under Thailand's
military-appointed leadership and inflationary pressures.

In the EMEA region, we are positive about the prospects for domestic consumption
in South Africa, Hungary, the Czech Republic and Turkey.

In Latin America, corporate governance is improving in Brazil, while Mexico's
economic fundamentals remain strong. The region's leading economies, Brazil and
Mexico, also have room to further cut interest rates.

Overall, our outlook for emerging markets remains sanguine in 2007, although a
pause at these levels could be healthy, if only to allow earnings to catch up
with share prices. The key risks include a sharper-than-expected slowdown in the
U.S., still volatile oil prices and political uncertainty from elections in
several countries. Given the recent strong rally there is the possibility for a
correction in markets, but the Sub-Advisor would view this as an opportunity to
pick up good quality companies at more favorable prices.

Page 4

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO COMPONENTS+
DECEMBER 31, 2006

PORTFOLIO COMPONENTS -- BY INDUSTRY

[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:

Government Bonds and Notes 51.3%
Commercial Banks Non-US 8.6%
Diversified Financial Services 4.9%
Oil & Gas 3.8%
Cellular Telecommunications 3.0%
Retail 3.0%
Semiconductors 3.0%
Steel Producers 2.4%
Diversified Minerals 1.6%
Export/Import Bank 1.6%
Tobacco 1.6%
Building Products-Cement/Aggregates 1.5%
Regional Authority 1.4%
Insurance 1.1%
Medical-Drugs 1.1%
Airport Development/Maintenance 1.0%
Household Products 1.0%
Brewery 0.9%
Telecommunications 0.9%
Electric Utilities 0.8%
Diversified Operations 0.7%
Applications Software 0.6%
Commercial Services 0.6%
Leisure Time 0.6%
Paper & Related Products 0.6%
Real Estate 0.5%
Auto-Cars/Light Trucks 0.4%
Food-Retail 0.4%
Gas Utilities 0.4%
Chemicals 0.4%
Internet Security 0.3%

+ Percentages are based on total investments. Please note that the percentages
on the Portfolio of Investments are based on net assets.

See Notes to Financial Statements. Page 5

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO COMPONENTS+*
DECEMBER 31, 2006

PORTFOLIO COMPONENTS -- BY COUNTRY

[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC AS FOLLOWS:

Brazil 13.4%
Mexico 9.5%
Argentina 7.3%
Turkey 6.5%
China 6.0%
Russia 4.9%
South Africa 4.8%
Indonesia 4.5%
Colombia 4.2%
Venezuela 4.2%
India 3.5%
South Korea 3.3%
Taiwan 2.9%
Philippines 2.8%
Egypt 2.6%
Luxembourg 2.6%
Uruguay 2.4%
Ukraine 2.3%
Peru 1.7%
Thailand 1.6%
Pakistan 1.4%
Malaysia 1.4%
El Salvador 1.3%
Dominican Republic 1.0%
Chile 1.0%
Serbia 1.0%
Hungary 0.7%
Czech Republic 0.6%
Israel 0.3%
United States 0.3%

+ Percentages are based on total investments. Please note that the percentages
on the Portfolio of Investments are based on net assets.
* Portfolio securities are included in a country based upon their underlying
credit exposure as determined by the Sub-Advisor, Aberdeen Asset Management
Inc.

Page 6 See Notes to Financial Statements.

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS
DECEMBER 31, 2006

PRINCIPAL MARKET
VALUE VALUE
(LOCAL CURRENCY) DESCRIPTION (US DOLLARS)
--------------- ---------------------------------------------- -------------

BONDS AND NOTES+ - 63.9%

ARGENTINA - 6.4%
1,160,000 Banco Hipotecario SA (USD),
9.75%, 4/27/16 ......................... $ 1,236,850
5,203,729 Central Bank of Argentina (ARS),
3.85%, 2/04/18++ ....................... 2,744,088
1,700,000 Province of Buenos Aires (USD),
9.38%, 9/14/18 ......................... 1,758,480
1,829,715 Republic of Argentina (USD),
8.28%, 12/31/33 ........................ 1,992,560
--------------
7,731,978
--------------
BRAZIL - 8.1%
4,520,000 Brazil NTN - B Note (BRL),
6.00%, 8/15/10 ......................... 3,243,562
11,690,000 Brazil NTN - F Note (BRL),
10.00%, 1/01/12 ........................ 4,987,901
1,300,000 Federal Republic of Brazil (USD),
11.00%, 1/11/12 ........................ 1,603,420
--------------
9,834,883
--------------
CHINA - 0.6%
670,000 Parkson Retail Group Ltd. (CNY),
7.88%, 11/14/11 ........................ 697,069
--------------
COLOMBIA - 4.4%
7,975,000,000 Republic of Colombia (COP),
12.00%, 10/22/15 ....................... 4,226,732
1,050,000 Republic of Colombia (USD),
7.38%, 1/27/17 ......................... 1,121,092
--------------
5,347,824
--------------
DOMINICAN REPUBLIC - 1.1%
1,120,000 Dominican Republic (USD),
8.63%, 4/20/27 ......................... 1,293,040
--------------
EGYPT - 2.7%
4,800,000 Egypt Treasury Bill (EGP),
Zero Coupon, 4/24/07 ................... 816,746
14,300,000 Egypt Treasury Bill (EGP),
Zero Coupon, 4/03/07 ................... 2,446,618
--------------
3,263,364
--------------
EL SALVADOR - 1.4%
1,490,000 Republic of El Salvador (USD),
7.65%, 6/15/35 ......................... 1,698,600
--------------
INDONESIA - 3.6%
35,000,000,000 Indonesian Government (IDR),
12.50%, 3/15/13 ........................ 4,372,266
--------------
LUXEMBOURG - 2.6%
1,950,000 Evraz Group SA (USD),
8.25%, 11/10/15 ........................ 2,016,124
1,200,000 Russian Standard Bank (USD),
8.63%, 5/05/11 ......................... 1,205,640
--------------
3,221,764
--------------

See Notes to Financial Statements. Page 7

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
DECEMBER 31, 2006

PRINCIPAL MARKET
VALUE VALUE
(LOCAL CURRENCY) DESCRIPTION (US DOLLARS)
--------------- ---------------------------------------------- -------------

BONDS AND NOTES+ - CONTINUED

MEXICO - 5.4%
33,260,000 Mexican Fixed Rate Bonds (MXN),
9.00%, 12/22/11 ........................ $ 3,295,982
31,660,000 Mexican Fixed Rate Bonds (MXN),
9.50%, 12/18/14 ........................ 3,297,001
--------------
6,592,983
--------------
PAKISTAN - 1.5%
1,660,000 Islamic Republic of Pakistan (USD),
7.88%, 3/31/36 ......................... 1,809,342
--------------
PERU - 1.7%
6,040,000 Peru Bono Soberano (PEN),
7.84%, 8/12/20 ......................... 2,136,095
--------------
PHILIPPINES - 2.0%
2,200,000 Republic of Philippines (USD),
8.25%, 1/15/14 ......................... 2,486,000
--------------
RUSSIA - 4.2%
820,000 Alfa MTN Issuance, Ltd (USD),
7.88%, 10/10/09 ........................ 824,830
35,000,000 Dal Capital (Vneshtorgbk) (RUB),
7.00%, 4/13/09 ......................... 1,348,123
41,974,600 Red Arrow International Leasing PLC (RUB),
8.38%, 3/31/12 ......................... 1,644,671
1,180,000 UBS (Vimpelcom) (USD),
8.25%, 5/23/16 ......................... 1,240,298
--------------
5,057,922
--------------
SERBIA - 1.0%
1,280,000 Republic of Serbia (USD),
3.75%, 11/01/24 ........................ 1,200,832
--------------
SOUTH AFRICA - 2.9%
24,090,000 Republic of South Africa (ZAR),
10.00%, 2/28/08 ........................ 3,479,237
--------------
TURKEY - 5.2%
1,500,000 Republic of Turkey (USD),
8.00%, 2/14/34 ......................... 1,643,700
7,450,000 Turkey, Government of (TRY),
14.00%, 1/19/11 ........................ 4,655,054
--------------
6,298,754
--------------
UKRAINE - 2.3%
800,000 Alfa Bank Ukraine (USD),
9.75%, 12/22/09 ........................ 814,720
2,000,000 EX-IM Bank of Ukraine (USD),
7.65%, 9/07/11 ......................... 2,053,600
--------------
2,868,320
--------------
URUGUAY - 2.4%
1,190,000 Oriental Republic of Uruguay (USD),
7.63%, 3/21/36 ......................... 1,314,950
37,710,000 Oriental Republic of Uruguay (UYU),
5.00%, 9/14/18 ......................... 1,673,772
--------------
2,988,722
--------------
Page 8 See Notes to Financial Statements.

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
DECEMBER 31, 2006

PRINCIPAL MARKET
VALUE VALUE
(LOCAL CURRENCY) DESCRIPTION (US DOLLARS)
--------------- ---------------------------------------------- -------------

BONDS AND NOTES+ - CONTINUED

VENEZUELA - 4.4%
1,160,000 Republic of Venezuela (USD),
7.65%, 4/21/25 ....................... $ 1,265,270
4,260,000 Republic of Venezuela (USD),
5.75%, 2/26/16 ....................... 4,050,408
--------------
5,315,678
--------------

TOTAL BONDS AND NOTES...................... 77,694,673
--------------
(Cost $73,729,080)

SHARES
------------

COMMON STOCKS - 38.4%

BRAZIL - 5.9%
23,000 Banco Bradesco SA, Sponsored ADR .......... 928,050
77,000 Companhia Vale do Rio Doce, Sponsored ADR . 2,021,250
16,000 Petroleo Brasileiro SA, ADR ............... 1,484,160
64,000 Souza Cruz SA.............................. 1,139,808
50,000 Telecomunicacoes de Sao Paulo SA........... 1,107,419
19,000 Ultrapar Participacoes SA, Preference Shares 435,670
--------------
7,116,357
--------------
CHILE - 1.0%
26,000 Banco Santander Chile SA, ADR.............. 1,252,160
--------------
CHINA - 5.7%
160,000 China Mobile Ltd........................... 1,382,309
140,000 CPL Holdings Ltd........................... 1,034,932
300,000 Dah Sing Banking Group Ltd................. 677,270
200,000 Hang Lung Group, Ltd....................... 608,103
1,120,000 PetroChina Company Ltd., H Shares.......... 1,586,776
440,000 Swire Pacific Ltd., B Shares............... 898,295
950,000 Zhejiang Expressway Company, Ltd.,
H Shares ............................. 727,924
--------------
6,915,609
--------------
CZECH REPUBLIC - 0.6%
9,000 Erste Bank der Oesterreichischen Sparkassen
AG ................................... 692,035
--------------
HUNGARY - 0.7%
4,000 Richter Gedeon, Sponsored GDR.............. 909,000
--------------
INDIA - 3.6%
90,000 Gail India Ltd............................. 531,744
20,000 Glaxosmithkline Pharmaceuticals Ltd........ 525,508
8,000 Grasim Industries Ltd...................... 506,354
40,000 Hero Honda Motors, Ltd..................... 690,194
22,000 Housing Development Finance Corp., Ltd..... 808,672
33,000 ICICI Bank, Ltd............................ 664,697
64,000 Satyam Computer Services, Ltd.............. 698,997
--------------
4,426,166
--------------
INDONESIA - 1.1%
1,750,000 PT Unilever Indonesia Tbk.................. 1,284,261
--------------

See Notes to Financial Statements. Page 9

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
DECEMBER 31, 2006

PRINCIPAL MARKET
VALUE VALUE
(LOCAL CURRENCY) DESCRIPTION (US DOLLARS)
--------------- ---------------------------------------------- -------------

COMMON STOCKS - CONTINUED

ISRAEL - 0.3%
19,000 Check Point Software Technologies Ltd. **.. $ 416,480
--------------
MALAYSIA - 1.5%
68,000 British American Tobacco Malaysia Berhad... 833,617
420,000 Public Bank Berhad......................... 934,524
--------------
1,768,141
--------------
MEXICO - 4.4%
10,000 Fomento Economico Mexicano SA,
Sponsored ADR ........................ 1,157,600
13,000 Grupo Aeroportuaria del Sureste S.A.B.
de CV, ADR ........................... 552,110
34,000 Grupo Aeroportuario del Centro Norte, S.A.B.
de C.V., ADR ** ...................... 756,840
297,000 Grupo Financiero Banorte SA de CV, O
Shares ............................... 1,161,278
174,000 Kimberly Clark de Mexico SAB de CV,
A Shares ............................. 803,721
19,000 Tenaris SA, ADR............................ 947,910
--------------
5,379,459
--------------
PHILIPPINES - 0.9%
810,000 Bank of Philippine Islands................. 1,048,624
--------------
RUSSIA - 0.9%
13,000 LUKOIL, Sponsored ADR...................... 1,136,200
--------------
SOUTH AFRICA - 2.1%
164,000 Edgars Consolidated Stores Ltd............. 912,222
164,000 Massmart Holdings Ltd...................... 1,641,578
--------------
2,553,800
--------------
SOUTH KOREA - 3.4%
12,500 Hyundai Motor Company Ltd., Preference
Shares ............................... 509,408
65,000 Pusan Bank................................. 810,753
4,500 Samsung Electronics Company, Ltd.,
Preference Shares .................... 2,322,581
850 Shinsegae Company, Ltd..................... 530,107
--------------
4,172,849
--------------
TAIWAN - 3.0%
1,000,000 Fubon Financial Holdings Company, Ltd...... 936,014
1,140,000 Taiwan Mobile Company, Ltd................. 1,182,507
720,000 Taiwan Semiconductor Manufacturing
Company, Ltd. ........................ 1,491,484
--------------
3,610,005
--------------
THAILAND - 1.7%
220,000 PTT Exploration and Production Public
Company, Ltd. ........................ 598,872
200,000 Siam Cement Public (The) Company, Ltd...... 1,433,004
--------------
2,031,876
--------------

Page 9 See Notes to Financial Statements.

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
PORTFOLIO OF INVESTMENTS - (CONTINUED)
DECEMBER 31, 2006

PRINCIPAL MARKET
VALUE VALUE
(LOCAL CURRENCY) DESCRIPTION (US DOLLARS)
--------------- ---------------------------------------------- -------------

COMMON STOCKS - CONTINUED

TURKEY - 1.6%
359,000 Aksigorta AS............................... $ 1,356,870
43,000 Migros Turk TAS **......................... 555,917
--------------
1,912,787
--------------
TOTAL COMMON STOCKS........................... 46,625,809
--------------
(Cost $40,875,475)

WARRANTS - 1.2%

ARGENTINA - 1.2%
8,400,000 Republic of Argentina (EUR), 12/15/35......... 1,447,033
--------------

TOTAL WARRANTS................................ 1,447,033
--------------
(Cost $1,003,665)

PRINCIPAL
VALUE
------------

U.S. TREASURY OBLIGATIONS - 0.3%

U.S. TREASURY BONDS - 0.3%
$ 340,000 U.S. Treasury Bond, 6.13%, 11/15/27........... 394,586
--------------

TOTAL U.S. TREASURY OBLIGATIONS............... 394,586
--------------
(Cost $391,950)

TOTAL INVESTMENTS - 103.8%.................... 126,162,101
(Cost $116,000,170)*

LOAN OUTSTANDING - (5.7%)..................... (7,000,000)
NET OTHER ASSETS AND LIABILITIES - 1.9%....... 2,357,224
--------------
NET ASSETS - 100.0%........................... $ 121,519,325
==============
- -----------------------
* Aggregate cost for federal income tax purposes is $116,610,743.
** Non-income producing security.
+ Portfolio securities are included in a country based upon their underlying
credit exposure as determined by Aberdeen Asset Management Inc., the
Sub-Advisor.
ADR American Depository Receipt
ARS Argentine Peso
BRL Brazilian Real
CNY China Renminbi
COP Colombian Peso
EGP Egyptian Pound
EUR Euro Dollar
GDR Global Depository Receipt
GDP Gross Domestic Product
IDR Indonesian Rupiah
MXN Mexican Peso
PEN Peruvian New Sol
RUB Russian Rouble
TRY Turkish Lira
USD United States Dollar
UYU Uruguayan Peso
ZAR South African Ran

See Notes to Financial Statements. Page 11

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
SCHEDULE OF FORWARD FOREIGN CURRENCY CONTRACTS
DECEMBER 31, 2006

FORWARD FOREIGN CURRENCY CONTRACTS TO BUY
CONTRACTS TO RECEIVE
----------------------------------------------------------------------
NET
UNREALIZED
IN APPRECIATION
EXPIRATION LOCAL VALUE IN EXCHANGE OF CONTRACTS
DATE CURRENCY* U.S. $ FOR U.S. $ U.S. DOLLARS
- ---------- -------------------------- ---------- ----------- -----------------

01/25/07 BRL 2,670,000 $1,245,130 $1,238,117 $ 7,013
01/25/07 COP 708,000,000 315,547 305,832 9,715
01/25/07 IDR 9,860,000,000 1,093,811 1,079,956 13,855
01/25/07 ZAR 6,830,000 970,726 877,605 93,121
-----------------
$ 123,704
-----------------

FORWARD FOREIGN CURRENCY CONTRACTS TO SELL
CONTRACTS TO DELIVER
----------------------------------------------------------------------
NET
UNREALIZED
IN DEPRECIATION
EXPIRATION LOCAL VALUE IN EXCHANGE OF CONTRACTS
DATE CURRENCY* U.S. $ FOR U.S. $ U.S. DOLLARS
- ---------- -------------------------- ---------- ----------- -----------------

01/25/07 BRL 11,640,000 $5,419,624 $5,333,333 $ (86,291)
01/25/07 COP 9,900,000,000 4,412,315 4,184,277 (228,038)
01/25/07 EUR 770,000 1,017,849 971,778 (46,071)
01/25/07 IDR 19,500,000,000 2,163,217 2,098,579 (64,638)
01/25/07 MXN 34,000,000 3,143,529 3,130,686 (12,843)
01/25/07 TRY 3,500,000 2,446,339 2,314,279 (132,060)
01/25/07 ZAR 13,000,000 1,847,647 1,668,870 (178,777)
01/25/07 ZAR 11,000,000 1,563,394 1,487,753 (75,641)
01/25/07 ZAR 6,800,000 966,461 917,308 (49,153)
-----------------
$ (873,512)
-----------------
Net Unrealized Depreciation of Forward Foreign Currency Contracts......................... $ (749,808)
=================
<FN>
* Please see page 11 for currency descriptions.
</FN>

Page 12 See Notes to Financial Statements.

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
STATEMENT OF ASSETS AND LIABILITIES
DECEMBER 31, 2006

ASSETS
Investments, at value
Cost ($116,000,170)............................................................................. $ 126,162,101
Cash .............................................................................................. 1,299,940
Foreign currency (Cost $221,280)................................................................... 222,858
Unrealized appreciation of forward foreign currency contracts...................................... 123,704
Prepaid expenses................................................................................... 11,419
Receivables:
Investment securities sold.................................................................... 96,305
Interest...................................................................................... 1,837,418
Dividends..................................................................................... 76,374
-------------
Total Assets.................................................................................. 129,830,119
-------------
LIABILITIES:
Unrealized depreciation of forward foreign currency contracts...................................... 873,512
Payables:
Outstanding loan.............................................................................. 7,000,000
Investment advisory fees...................................................................... 109,064
Audit and legal fees.......................................................................... 92,523
Printing fees................................................................................. 86,752
Custodian fees................................................................................ 48,936
Interest and fees due on loan................................................................. 42,851
Investment securities purchased............................................................... 38,598
Administrative fees........................................................................... 10,906
Transfer agent fees........................................................................... 5,516
Accrued expenses and other liabilities............................................................. 2,136
-------------
Total Liabilities............................................................................. 8,310,794
-------------
NET ASSETS......................................................................................... $ 121,519,325
=============
NET ASSETS CONSIST OF:
Accumulated net investment loss.................................................................... $ (235,718)
Accumulated net realized loss on investments sold and foreign currency transactions................ (26,212)
Net unrealized appreciation of investments and foreign currency transactions....................... 9,436,984
Par value.......................................................................................... 59,052
Paid-in capital.................................................................................... 112,285,219
-------------
Net Assets......................................................................................... $ 121,519,325
=============
NET ASSET VALUE, per Common Share (par value $0.01 per Common Share)............................... $ 20.58
=============
Number of Common Shares outstanding (unlimited number of Common Shares has been authorized)........ 5,905,236
=============

See Notes to Financial Statements. Page 13

PAGE FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
STATEMENT OF OPERATIONS
FOR THE PERIOD ENDED DECEMBER 31, 2006*

INVESTMENT INCOME:
Interest (net of foreign withholding tax of $2,398)................................................ $ 2,045,689
Dividends (net of foreign withholding tax of $21,488).............................................. 523,650
-------------
Total investment income....................................................................... 2,569,339
-------------
EXPENSES:
Investment advisory fees........................................................................... 407,510
Audit and legal fees............................................................................... 93,195
Printing fees...................................................................................... 88,145
Custodian fees..................................................................................... 71,582
Interest and fees on outstanding loan payable...................................................... 42,851
Administration fees................................................................................ 40,751
Trustees' fees and expenses........................................................................ 20,045
Transfer agent fees................................................................................ 18,533
Other.............................................................................................. 80,189
-------------
Total expenses................................................................................ 862,801
-------------
NET INVESTMENT INCOME.............................................................................. 1,706,538
-------------
NET REALIZED AND UNREALIZED GAIN (LOSS):
Net realized gain (loss) on:
Investments..................................................................................... 325,560
Forward foreign currency contracts.............................................................. (260,208)
Foreign currencies.............................................................................. (176,514)
-------------
Net realized gain (loss)........................................................................... (111,162)
-------------
Net change in unrealized appreciation (depreciation) on:
Investments..................................................................................... 10,161,931
Forward foreign currency contracts.............................................................. (749,808)
Foreign currencies.............................................................................. 24,861
-------------
Net change in unrealized appreciation depreciation ................................................ 9,436,984
-------------
Net realized and unrealized gain (loss)............................................................ 9,325,822
-------------
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS.................................... $ 11,032,360
=============
<FN>
- -----------------------------------------------------------------------
* Initial seed date of July 14, 2006. The Fund commenced operations on August 29, 2006.
</FN>

Page 14 See Notes to Financial Statements.

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

PERIOD
ENDED
12/31/2006*
---------------

OPERATIONS:
Net investment income................................................................. $ 1,706,538
Net realized gain (loss).............................................................. (111,162)
Net change in unrealized appreciation (depreciation).................................. 9,436,984
-------------
Net increase in net assets resulting from operations.................................. 11,032,360

DISTRIBUTIONS TO SHAREHOLDERS FROM:
Net investment income................................................................. (1,857,306)
Return of capital..................................................................... (209,527)
-------------
Total distributions to shareholders................................................... (2,066,833)

CAPITAL TRANSACTIONS:
Net proceeds from sale of 5,905,236 Common Shares..................................... 112,790,008
Offering costs........................................................................ (236,210)
-------------
Total capital transactions............................................................ 112,553,798
-------------
Net increase (decrease) in net assets................................................. 121,519,325

NET ASSETS:
Beginning of period................................................................... --
-------------
End of period ........................................................................ $ 121,519,325
=============
Accumulated net investment loss at end of period...................................... $ (235,718)
=============
<FN>
- -----------------------------------------------------------------------
* Initial seed date of July 14, 2006. The Fund commenced operations on August 29, 2006.
</FN>

See Notes to Financial Statements. Page 15

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
STATEMENT OF CASH FLOWS
FOR THE PERIOD ENDED DECEMBER 31, 2006*

CASH FLOWS FROM OPERATING ACTIVITIES:
Net increase in net assets resulting from operations..................... $ 11,032,360
Adjustments to reconcile net increase in net assets resulting
from operations to net cash provided by operating activities:
Changes in assets and liabilities:
Increase in investments, at value**................................... (126,162,101)
Increase in net unrealized depreciation of forward foreign currency contracts 749,808
Increase in interest receivable....................................... (1,837,418)
Increase in dividends receivable...................................... (76,374)
Increase in receivable for investment securities sold................. (96,305)
Increase in prepaid expenses.......................................... (11,419)
Increase in interest and fees due on loan............................. 42,851
Increase in payable for investment securities purchased............... 38,598
Increase in investment advisory fees payable.......................... 109,064
Increase in audit and legal fees payable.............................. 92,523
Increase in printing fees payable..................................... 86,752
Increase in administrative fees payable............................... 10,906
Increase in transfer agent fees payable............................... 5,516
Increase in custodian fees payable.................................... 48,936
Increase in accrued expenses and other liabilities.................... 2,136
--------------
CASH USED BY OPERATING ACTIVITIES........................................ $ (115,964,167)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from Common Shares sold (net of offering costs).............. 112,553,798
Distributions to shareholders from net investment income ............. (1,857,306)
Distributions to shareholders from return of capital ................. (209,527)
Proceeds from issuance of loan........................................ 7,000,000
--------------
CASH PROVIDED BY FINANCING ACTIVITIES ................................... 117,486,965
--------------
Increase in cash and foreign currency ***................................ 1,522,798
Cash and foreign currency at beginning of period ........................ --
--------------
CASH AND FOREIGN CURRENCY AT END OF PERIOD............................... $ 1,522,798
==============
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
Cash paid during the year for interest................................... $ 0
==============
<FN>
- -----------------------------------------------------------------------
* Initial seed date of July 14, 2006. The Fund commenced operations on August 29, 2006.
** Includes net change in unrealized appreciation (depreciation on investments of $10,161,931.
*** Includes net change in unrealized appreciation (depreciation) of foreign currency of $(24,861).
</FN>

Page 16 See Notes to Financial Statements.

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

PERIOD
ENDED
12/31/2006*
--------------

Net asset value, beginning of period............................. $ 19.10(a)
--------------
INCOME FROM INVESTMENT OPERATIONS:
Net investment income............................................ 0.29
Net realized and unrealized gain (loss) on investments........... 1.58
--------------
Total from investment operations................................. 1.87
--------------
DISTRIBUTIONS PAID TO SHAREHOLDERS FROM:
Net investment income............................................ (0.31)
Return of capital................................................ (0.04)
--------------
Total from distributions......................................... (0.35)
--------------
Common Share offering costs charged to paid-in capital........... (0.04)
--------------
Net asset value, end of period................................... $ 20.58
==============
Market value, end of period...................................... $ 19.03
==============
TOTAL RETURN BASED ON NET ASSET VALUE (B)+....................... 9.74%
==============
TOTAL RETURN BASED ON MARKET VALUE (C)+.......................... (3.10)%
==============
RATIOS TO AVERAGE NET ASSETS/SUPPLEMENTAL DATA:
Net assets, end of period (in 000's) ............................ $ 121,519
Ratio of total expenses to average net assets excluding
interest expense ............................................. 2.05%**
Ratio of total expenses to average net assets ................... 2.16%**
Ratio of net investment income to average net assets ............ 4.27%**
Portfolio turnover rate ......................................... 40%

INDEBTEDNESS:
Loan outstanding (in 000's)...................................... $ 7,000
Asset Coverage per $1,000 of indebtedness (d).................... $ 18,360
<FN>
- --------------------------------------------------
* Initial seed date of July 14, 2006. The Fund commenced operations on August 29, 2006.
** Annualized
(a) Net of sales load of $0.90 per Common Share on initial offering.
(b) Total return based on net asset value is the combination of reinvested
dividend distributions and reinvested capital gains distributions, if any,
at prices obtained by the Dividend Reinvestment Plan, and changes in net
asset value per share and does not reflect sales load.
(c) Total return based on market value is the combination of reinvested
dividend distributions and reinvested capital gains distributions, if any,
at prices obtained by the Dividend Reinvestment Plan, and changes in Common
Share market price per share, all based on Common Share market price per
share.
(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.
+ Total return is not annualized for periods less than one year.
</FN>

See Notes to Financial Statements. Page 17

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

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
DECEMBER 31, 2006

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 average daily gross asset
value of the Fund (including assets attributable to the Fund's Preferred Shares,
if any, and the principal amount of any borrowings) minus the sum of the Fund's
accrued and unpaid dividends on any outstanding Preferred Shares and accrued
liabilities (other than the principal amount of any borrowings incurred of
commercial paper or notes issued by the Fund). There can be no assurance that
the Fund's investment objective will be achieved.

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 requires management to make
estimates and assumptions that affect the reported amounts and disclosures in
the financial statements. Actual results could differ from those estimates.

A. PORTFOLIO VALUATION:

The net asset value ("NAV") of the Common Shares of the Fund is computed based
upon the value of the Fund's portfolio and other assets less accrued
liabilities. The NAV is determined as of the close of regular session trading on
the NYSE, normally 4:00 p.m. Eastern time, on each day the NYSE is open for
trading. Domestic debt securities and foreign securities are priced using data
reflecting the earlier closing of the principal markets for those securities.
The Fund calculates NAV per Common Share by subtracting the Fund's liabilities
(including accrued expenses, dividends payable and any borrowings of the Fund)
and the liquidation value of any outstanding Preferred Shares, if any, from the
Fund's Total Assets (the value of the securities and other investments the Fund
holds plus cash or other assets, including interest accrued but not yet
received) and dividing the result by the total number of Common Shares
outstanding.

The Fund's investments are valued daily at market value or, in the absence of
market value with respect to any portfolio securities, at fair value according
to procedures adopted by the Fund's Board of Trustees. A majority of the Fund's
assets are valued using market information supplied by third parties. In
addition, structured products, including currency-linked notes, and
credit-linked notes, as well as interest rate swaps and credit default swaps,
are valued using a pricing service or quotes provided by the selling dealer or
financial institution. 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, or if events occurring after the
close of the principal markets for particular securities (e.g., domestic debt
and foreign securities), but before the Fund values its assets, would materially
affect NAV, First Trust Advisors L.P. ("First Trust") may use a fair value
method to value the Fund's securities and 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.

B. FORWARD FOREIGN CURRENCY CONTRACTS:

Forward foreign currency contracts are agreements to exchange one currency for
another at a future date and at a specified price. The Fund may use 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 the Statement of Assets and Liabilities.
Realized and unrealized gains and losses are included in 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 up to the
entire contract amount, which may exceed the net unrealized value shown in the
Schedule of Forward Foreign Currency Contracts.

C. 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
on the accrual basis, including amortization of premiums and accretion of
discounts.

Page 18

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

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
DECEMBER 31, 2006

Securities purchased or sold on a when-issued or delayed-delivery basis may be
settled a month or more after the trade date; interest income on such securities
is not accrued until settlement date. The Fund maintains liquid assets with a
current value at least equal to the amount of its when-issued or
delayed-delivery purchase commitments.

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 which result from changes in foreign currency exchange rates have been
included in "Net change in unrealized appreciation (depreciation) on foreign
currencies" 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 fluctuations in exchange rates between the
initial purchase trade date and subsequent sale trade date is included in "Net
realized gain (loss) on foreign currencies" on the Statement of Operations.

E. DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS:

The Fund will distribute to holders of its Common Shares level quarterly
dividends/distributions after payment of interest and 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. The Fund's final
distribution for each calendar year will include any remaining net investment
company taxable income undistributed during the year, as well as all net capital
gains realized during the year. If the Fund recognizes a long-term capital gain,
it will be required to allocate such gain between the Common Shares and
Preferred Shares, if any, issued by the Fund in proportion to the total
dividends paid for the year. Distributions will automatically be reinvested into
additional Common Shares pursuant to the Fund's Dividend Reinvestment Plan
unless cash distributions are elected by the shareholder.

Distributions from income and capital gains are determined in accordance with
income tax regulations, which may differ from accounting principles generally
accepted in the United States of America. These differences are primarily due to
differing treatments of income and gains on various investment securities held
by the Fund, timing differences and differing characterization of distributions
made by the Fund. Permanent differences incurred during the period ended
December 31, 2006, resulting in book and tax accounting differences, have been
reclassified at year end to reflect an increase to accumulated net investment
loss by $84,950 and a decrease in accumulated net realized losses on investments
sold by $84,950. Net assets were not affected by this reclassification.

The tax character of distributions paid during the period ended December 31,
2006, was as follows:

Distributions paid from:

Ordinary Income................................ $ 1,857,306
Return of Capital.............................. 209,527

As of December 31, 2006, the components of distributable earnings on a tax basis
were as follows:

Net Unrealized Appreciation.................... $ 9,175,054

F. INCOME TAXES:

The Fund intends to qualify as a regulated investment company by complying with
the requirements under Subchapter M of the Internal Revenue Code of 1986, as
amended, and by 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.

G. EXPENSES:

The Fund pays all expenses directly related to its operations.

Page 19

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
DECEMBER 31, 2006

H. ORGANIZATION AND OFFERING COSTS:

Organization costs consisted of costs incurred to establish the Fund and enable
it to legally conduct business. These costs included filing fees, listing fees,
legal services pertaining to the organization of the business and audit fees
relating to the initial registration and auditing the initial statement of
assets and liabilities, among other fees. Offering costs consisted of legal fees
pertaining to the Fund's shares offered for sale, registration fees,
underwriting fees, and printing of the initial prospectus, among other fees.
First Trust and Aberdeen Asset Management Inc. have paid all organization
expenses and all offering costs of the Fund (other than sales load) that
exceeded $0.04 per Common Share. The Fund's share of Common Share offering costs
of $236,210 during the period ended December 31, 2006, were recorded as a
reduction of the proceeds from the sale of Common Shares.

I. NEW ACCOUNTING PRONOUNCEMENTS:

In July 2006, the Financial Accounting Standards Board (FASB) issued FASB
Interpretation No. 48 (FIN 48), "Accounting for Uncertainty in Income Taxes."
This pronouncement provides guidance on the recognition, measurement,
classification, and disclosures related to uncertain tax positions, along with
any related interest and penalties. FIN 48 is effective for fiscal years
beginning after December 15, 2006. At this time, management is evaluating the
implications of FIN 48 and its impact on the financial statements, which has not
yet been determined.

In addition, in September 2006, Statement of Financial Accounting Standards No.
157 Fair Value Measurements ("SFAS 157") was issued by the FASB and is effective
for fiscal years beginning after November 15, 2007. SFAS 157 defines fair value,
establishes a framework for measuring fair value and expands disclosures about
fair value measurements. Management is currently evaluating the impact the
adoption of SFAS 157 could have on the Fund's financial statement disclosures.

3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS

First Trust is a limited partnership with one limited partner, Grace Partners of
DuPage L.P., and one general partner, The Charger Corporation. First Trust
serves as investment advisor to the Fund pursuant to an Investment Management
Agreement. First Trust is responsible for the ongoing monitoring of the Fund's
investment portfolio, managing the Fund's business affairs and 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.

Aberdeen Asset Management Inc. (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 an annual portfolio management fee
calculated at an annual rate of 0.50% of Managed Assets that is paid monthly by
First Trust out of its investment advisory fee.

PFPC Inc. ("PFPC"), an indirect, majority-owned subsidiary of The PNC Financial
Services Group, Inc., serves as the Fund's Administrator and Transfer Agent in
accordance with certain fee arrangements. PFPC Trust Company, also an indirect,
majority-owned subsidiary of The PNC Financial Services Group, Inc., serves as
the Fund's Custodian in accordance with certain fee arrangements.

The Fund pays each Trustee who is not an officer or employee of First Trust or
any of its affiliates (the "Independent Trustees") an annual retainer of
$10,000, which includes compensation for all board and committee meetings.
Trustees are also reimbursed for travel and out-of-pocket expenses in connection
with all meetings.

Page 20

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
DECEMBER 31, 2006

4. PURCHASES AND SALES OF SECURITIES

Cost of purchases and proceeds from sales of securities, other than U.S.
government obligations and short-term obligations, for the period ended December
31, 2006, were $152,871,715 and $37,296,660, respectively.

As of December 31, 2006, the aggregate gross unrealized appreciation for all
securities in which there was an excess of value over tax cost was $9,785,836
and the aggregate gross unrealized depreciation for all securities in which
there was an excess of tax cost over value was $234,478.

5. COMMON SHARES

As of December 31, 2006, 5,905,236 of $0.01 par value Common Shares were issued.
An unlimited number of Common Shares has been authorized for the Fund's Dividend
Reinvestment Plan.

COMMON SHARE TRANSACTIONS WERE AS FOLLOWS:

PERIOD ENDED
DECEMBER 31, 2006
-----------------
SHARES AMOUNT
Proceeds from shares sold........... 5,905,236 $ 112,790,008
Offering costs...................... -- (236,210)
--------- -------------
5,905,236 $ 112,553,798
========= =============

6. PREFERRED SHARES OF BENEFICIAL INTEREST

The Fund's Declaration of Trust authorizes the issuance of preferred shares of
beneficial interest, (the "Preferred Shares") with rights as determined by the
Board of Trustees without the approval of Common Shareholders. As of December
31, 2006, no Preferred Shares had been issued.

7. REVOLVING LOAN AGREEMENT

The Fund has entered into a revolving loan agreement among the Fund and certain
primary and secondary lenders, which provides for a credit facility to be used
as leverage for the Fund. The 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 $28,000,000. The initial borrowing on this line of credit was taken on
November 20, 2006, with a balance of $7,000,000 outstanding through December 31,
2006. The interest rate on this borrowing was 5.925%. The Fund also pays a
commitment fee of 0.325% per year, which is included in "Interest and fees on
outstanding loan payable" on the Statement of Operations.

8. CONCENTRATION OF 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.

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

Page 21

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
DECEMBER 31, 2006

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.

9. SUBSEQUENT EVENT

The Board of Trustees of the Fund adopted a compensation policy pursuant to
which, effective January 1, 2007, the Independent Trustees are paid an annual
retainer of $10,000 for each investment company of the First Trust fund complex
up to a total of 14 investment companies (the "Trustees Compensation I") and an
annual retainer of $7,500 for each subsequent investment company added to the
First Trust Fund Complex (the "Trustees Compensation II" and together with
Trustees Compensation I, the "Aggregate Trustee Compensation"). The Aggregate
Trustee Compensation is divided equally among each of the investment companies
in the First Trust Fund Complex. No additional meeting fees are paid in
connection with Board or committee meetings. Trustees are also reimbursed for
travel and out-of-pocket expenses in connection with all meetings.

Additionally, Thomas R. Kadlec is paid annual compensation of $10,000 to serve
as the Lead Trustee and Niel B. Nielson is paid annual compensation of $5,000 to
serve as the chairman of the Audit Committee of each of the investment companies
in the First Trust Fund Complex. Such additional compensation to Messrs. Kadlec
and Nielson is paid by the investment companies in the First Trust Fund Complex
and the fees are divided equally among those investment companies.

CHANGE IN POLICY

The Fund is currently permitted to engage in currency hedging transactions only
for portfolio hedging transactions involving portfolio positions. At a meeting
held on February 21, 2007, the Board of Trustees of the Fund adopted a policy to
permit the Fund to engage in currency transactions to hedge interest rate and
currency risks associated with the Fund's borrowings. This change in policy was
not required to be, and was not, approved by the shareholders of the Fund. The
new policy may also be changed by the Board of Trustees without shareholder
approval. The new policy will be effective on April 29, 2007.

Page 22

- --------------------------------------------------------------------------------
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
- --------------------------------------------------------------------------------

TO THE BOARD OF TRUSTEES AND SHAREHOLDERS OF FIRST TRUST/ABERDEEN EMERGING
OPPORTUNITY FUND

We have audited the accompanying statement of assets and liabilities of First
Trust/Aberdeen Emerging Opportunity Fund (the "Fund"), including the portfolio
of investments, as of December 31, 2006, and the related statement of
operations, changes in net assets, cash flows and the financial highlights for
the period from August 29, 2006 (commencement of operations) to December 31,
2006. These financial statements and financial highlights are the responsibility
of the Fund's management. Our responsibility is to express an opinion on these
financial statements and financial highlights based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements and financial highlights are free of material misstatement. The Fund
is not required to have, nor were we engaged to perform, an audit of its
internal control over financial reporting. Our audits included consideration of
internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the Fund's internal control over
financial reporting. Accordingly, we express no such opinion. An audit also
includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements, assessing the accounting principles
used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. Our procedures included confirmation
of securities owned as of December 31, 2006, by correspondence with the Fund's
custodian and broker; where replies were not received, we performed other
auditing procedures. We believe that our audits provide a reasonable basis for
our opinion.

In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of the
Fund as of December 31, 2006, the results of its operations, changes in its net
assets, cash flows, and the financial highlights for the period from August 29,
2006 (commencement of operations) to December 31, 2006, in conformity with
accounting principles generally accepted in the United States of America.

/S/DELOITTE & TOUCHE LLP

Chicago, Illinois
February 21, 2007

Page 23

- --------------------------------------------------------------------------------
ADDITIONAL INFORMATION - UNAUDITED
- --------------------------------------------------------------------------------

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
DECEMBER 31, 2006

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 PFPC
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 PFPC Inc., as 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 (800) 331-1710, in
accordance with such reasonable requirements as the Plan Agent and 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 PFPC 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 located at http://www.sec.gov.

Page 24

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

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
DECEMBER 31, 2006

PORTFOLIO HOLDINGS

The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission ("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 1-800-SEC-0330.

TAX INFORMATION

The Fund hereby designates as qualified dividend income distributions 9.75% of
the ordinary income (including short-term capital gain), for the year ended
December 31, 2006.

If the Fund meets the requirements of Section 853 of the Code, the Fund may
elect to pass through to its shareholders credits for foreign taxes paid. The
total amount of income received by the Fund from sources within foreign
countries and possessions of the United States is $2,318,930 (representing a
total of $0.39 per share). The total amount of taxes paid to such countries is
$23,886 (representing a total of $0.004 per share).

NYSE CERTIFICATION INFORMATION

In accordance with Section 303A-12 of the New York Stock Exchange ("NYSE")
Listed Company Manual, the Fund's President has certified to the NYSE that, as
of August 14, 2006, he was not aware of any violation by the Fund of NYSE
corporate governance listing standards. In addition, the Fund's reports to the
SEC on Forms N-CSR and N-Q contain certifications by the Fund's principal
executive officer and principal financial officer that relate to the Fund's
public disclosure in such reports and are required by Rule 30a-2 under the 1940
Act.

BY-LAW AMENDMENTS

On June 12, 2006, and again on December 11, 2006, the Board of Trustees of the
Fund approved certain changes to the By-Laws of the Fund that may have the
effect of delaying or preventing a change of control of the Fund, including the
implementation of a staggered Board of Trustees. These changes were not required
to be, and were not, approved by the Fund's Shareholders. To receive a copy of
the revised By-Laws, investors may call the Fund at (800) 988-5891.

ADVISORY AGREEMENTS

BOARD CONSIDERATIONS REGARDING APPROVAL OF INVESTMENT MANAGEMENT AND
SUB-ADVISORY CONTRACTS

The Trustees unanimously approved the Investment Management Agreement (the
"AGREEMENT") between First Trust Advisors L.P. ("FIRST TRUST") and First
Trust/Aberdeen Emerging Opportunity Fund (the "FUND") at a meeting held on June
12, 2006. The Board of Trustees determined that the Agreement is in the best
interests of the Fund and that the compensation arrangement set forth in the
Agreement is fair and reasonable in light of the nature, extent and quality of
the services to be provided by First Trust and such other matters as the
Trustees considered to be relevant in the exercise of their reasonable business
judgment.

To reach this determination, the Trustees considered their duties under the
Investment Company Act of 1940 (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 Trustees in voting on such
agreements. The Independent Trustees received advice from independent legal
counsel. The Trustees also applied their business judgment to determine whether
the arrangement between the Fund and First Trust was a reasonable business
arrangement from the Fund's perspective as well as from the perspective of its
shareholders. In reviewing such arrangement, the Board of Trustees considered
factors such as the nature, quality and extent of services to be provided by
First Trust under the Agreement and the fairness of the fee to be charged,
whether the fee level reflects any economies of scale, and the profitability
expected to be realized by First Trust under the Agreement.

The Trustees considered the nature, quality and extent of services to be
provided by First Trust, including the overall administration of the Fund and
First Trust's ability to oversee Aberdeen Asset Management, Inc. ("ABERDEEN"),
the Fund's proposed sub advisor. The Board noted that First Trust serves as
investment manager and Aberdeen serves as sub advisor to the First
Trust/Aberdeen Global Opportunity Income Fund, and that the services provided by
First Trust to that fund were satisfactory. The Board considered the experience
and skills of the personnel primarily responsible for providing services to the
Fund and noted the compliance program that had been developed by First Trust. In
light of these considerations and their overall familiarity with First Trust,
the Trustees concluded that the nature, quality and extent of services to be
provided by First Trust to the Fund are expected to be satisfactory.

Page 25

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
DECEMBER 31, 2006

The Trustees reviewed data prepared by Lipper Inc. ("LIPPER"), an independent
source, showing the proposed management fee and estimated expense ratio of the
Fund compared to those of a peer group of 13 closed end emerging market debt
funds, including 11 funds using some form of leverage. The Trustees also
considered the Fund's proposed management fee and estimated expense ratio as
compared to a second peer group of seven closed end funds, including three funds
currently using or intending to use leverage, as selected by First Trust using
data compiled by Lipper. The Trustees noted that the Fund's management fee was
slightly higher than the median of the Lipper group and also was above the
median of the First Trust-selected peer group, and that the anticipated expense
ratio was the highest in the Lipper peer group and above the median in the First
Trust-selected peer group. The Trustees noted that in light of the small number
of funds in each peer group and the differences between the Fund and the other
funds in each peer group, including the Fund's significant investment in equity
securities, the Fund's management fee was within an acceptable range of the peer
group and consistent with reasonable expectations in light of the nature,
quality and extent of services to be provided by First Trust. The Trustees noted
that First Trust does not provide services to any institutional clients that
have similar investment objectives and policies to the Fund, but does serve as
investment advisor to the First Trust/Aberdeen Global Opportunity Income Fund.
The Trustees noted that the proposed management fee for the Fund was the same as
the management fee for First Trust/Aberdeen Global Opportunity Income Fund. On
the basis of the information provided, the Trustees concluded that the Fund's
management fee was reasonable and appropriate in light of the nature, quality
and extent of services to be provided by First Trust.

The Trustees noted that First Trust has continued to invest in personnel and
infrastructure but had not identified any economies of scale that may be
realized by the Fund and indicated that, because the Fund is a closed end fund
and is not expected to issue additional shares other than pursuant to its
dividend reinvestment plan, First Trust believed that any discussion of
economies of scale was not meaningful. The Trustees concluded that the
management fee reflects an appropriate level of sharing of any economies of
scale. The Trustees took the costs to be borne by First Trust in connection with
its services to be performed under the Agreement into consideration and noted
that First Trust was unable to estimate the profitability of the Agreement to
First Trust. The Trustees considered that First Trust had identified as a fall
out benefit to First Trust and First Trust Portfolios L.P. their exposure to
investors and brokers who, in the absence of the Fund, may have had no dealings
with First Trust. Based on all of the factors considered, the Trustees concluded
that it was in the best interests of the Fund to approve the Agreement,
including the fee to be charged for the services thereunder. No single factor
was determinative in the Board's analysis.

At the June 12, 2006 meeting, the Trustees also approved the Investment
Sub-Advisory Agreement (the "SUB-ADVISORY AGREEMENT") among the Fund, First
Trust and Aberdeen, after considering the factors discussed above, as well as
the following information. The Trustees considered the nature, quality and
extent of services to be provided by Aberdeen under the Sub-Advisory Agreement.
They received a presentation from representatives of Aberdeen on the services
Aberdeen would provide to the Fund. Since the Fund is newly-organized, the Board
did not consider investment performance of the Fund; however, the Trustees did
consider the performance of the Aberdeen Emerging Markets Equity Composite and
the Aberdeen Emerging Markets Debt Composite over various periods and compared
to relevant benchmarks. The Trustees noted Aberdeen's representation that the
Fund would be managed similarly to the Composites. The Trustees also considered
the quality of services provided by Aberdeen to the First Trust/Aberdeen Global
Opportunity Income Fund, and noted that it was satisfactory. The Trustees
concluded that the nature, quality and extent of services to be provided by
Aberdeen to the Fund are expected to be satisfactory. The Trustees considered
the proposed sub-advisory fee rate and how it related to the overall management
fee structure of the Fund. The Trustees considered that the sub-advisory fee
rate was negotiated at arm's length between First Trust and Aberdeen, an
unaffiliated third party, that the sub-advisory fee rate was the same as that
paid by First Trust to Aberdeen for serving as sub advisor to the First
Trust/Aberdeen Global Opportunity Income Fund, and that First Trust compensates
Aberdeen from its fee. The Trustees also considered information provided by
Aberdeen as to the fees it charges to other clients, including four other funds
managed by it. The Trustees noted that the fees for these funds were lower than
the proposed sub-advisory fee for the Fund, but considered Aberdeen's
representation that because of differences in investment strategy, these funds
are not directly comparable to the Fund. Based on the information provided, the
Trustees concluded that the sub-advisory fee was reasonable. In considering the
overall fee structure for the Fund, the Trustees considered Aberdeen's
representation that because it will manage the Fund in a similar fashion to
other accounts it will be able to achieve economies of scale through
relationships with brokers, administrative systems and other efficiencies and
that while it expects internal costs to rise, it continues to expect to
experience the benefits of economies of scale. The Trustees also considered data
provided by Aberdeen as to the expected profitability of the Sub-Advisory
Agreement to Aberdeen. The Trustees noted the inherent limitations in this
profitability analysis, but noted that the profitability of the Sub-Advisory
Agreement to Aberdeen appeared to be not unreasonable in light of the services
to be provided to the Fund. The Trustees noted that Aberdeen does not maintain
any soft-dollar arrangements and that Aberdeen indicated that it expects to
benefit from having its name associated with the management of the Fund and the
greater prominence this generates for Aberdeen. Based on all of the factors
considered, the Trustees concluded that it was in the best interests of the Fund
to approve the Sub-Advisory Agreement, including the fee to be charged for the
services thereunder. No single factor was determinative in the Board's analysis.

Page 26

- --------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (UNAUDITED)
- --------------------------------------------------------------------------------

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
DECEMBER 31, 2006

Information pertaining to the Trustees and Officeres* of the Fund is set forth
below:

NUMBER OF OTHER
PORTFOLIOS TRUSTEESHIPS/
NAME, D.O.B., ADDRESS AND TERM OF OFFICE AND PRINCIPAL OCCUPATION(S) IN FUND COMPLEX DIRECTORSHIPS
POSITION(S) WITH THE FUND LENGTH OF TIME SERVED DURING PAST 5 YEARS OVERSEEN BY TRUSTEE HELD BY TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------

- --------------------------------------------------------------------------------------------------------------------------------
INDEPENDENT TRUSTEES
- --------------------------------------------------------------------------------------------------------------------------------

Richard E. Erickson, o One year term Physician; 34 portfolios None
Trustee D.O.B. 04/51 o 6 months served President, Wheaton
c/o First Trust Orthopedics;
Advisors L.P. 1001 Co-owner and
Warrenville Road Co-Director, Sports
Suite 300 Lisle, IL Med Center for
60532 Fitness; Limited
Partner, Gundersen
Real Estate
Partnership

Thomas R. Kadlec, o One year term Vice President and Chief 34 portfolios None
Trustee D.O.B. 11/57 o 6 months served Financial Officer (1990 to
c/o First Trust present), ADM Investor
Advisors L.P. 1001 Services, Inc. (Futures
Warrenville Road Commission Merchant);
Suite 300 Lisle, IL Registered Representative
60532 (2000 to present), Segerdahl &
Company, Inc., an NASD member
(Broker-Dealer); President,
ADM Derivatives, Inc. (May
2005 to present)

Robert F. Keith, Trustee o One year term President, Hibs 22 portfolios None
D.O.B. 11/56 c/o First o 6 months served Enterprises (Financial
Trust Advisors L.P. 1001 and Management
Warrenville Road Suite Consulting) (2003 to
300 Lisle, IL 60532 present); Aramark Service
Master Management (2001
to 2003); President and
Chief Operating Officer,
Service Master Management
Services (1998 to 2003)

Niel B. Nielson, Trustee o One year term President, Covenant 34 portfolios Director of Good News
D.O.B. 03/54c/o First o 6 months served College (June 2002 to Publisher-Crossway Books;
Trust Advisors L.P. 1001 present); Pastor, College Covenant Transport Inc.
Warrenville Road Suite Church in Wheaton (1997
300 Lisle, IL 60532 to June 2002)

Page 27

- --------------------------------------------------------------------------------
BOARD OF TRUSTEES AND OFFICERS (UNAUDITED) - (CONTINUED)
- --------------------------------------------------------------------------------

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
DECEMBER 31, 2006

- --------------------------------------------------------------------------------------------------------------------------------
INTERESTED TRUSTEE
- --------------------------------------------------------------------------------------------------------------------------------

James A. Bowen, Trustee o One year Trustee President, First Trust 34 portfolios Trustee of Wheaton
President, Chairman of term and indefinite Advisors L.P. and First College
the Board and CEO officer term Trust Portfolios L.P.;
D.O.B. 09/55 1001 o 6 months served Chairman of the Board,
Warrenville Road BondWave LLC and
Suite 300 Stonebridge Advisors LLC
Lisle, IL 60532

- --------------------------------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES
- --------------------------------------------------------------------------------------------------------------------------------

Mark R. Bradley, o Indefinite term Chief Financial Officer, N/A N/A
Treasurer, Controller, o 6 months served Managing Director, First
Chief Financial Officer, Trust Advisors L.P. and
Chief Accounting Officer First Trust Portfolios
D.O.B. 11/571001 L.P.; Chief Financial
Warrenville RoadSuite Officer, BondWave LLC and
300Lisle, IL 60532 Stonebridge Advisors LLC

Kelley Christensen o Indefinite term Assistant Vice President N/A N/A
Vice President o Since December of First Trust Portfolios
D.O.B. 09/70 10, 2006 L.P. and First Trust
1001 Warrenville Road Advisors L.P.
Suite 300
Lisle, IL 60532

James M. Dykas o Indefinite term Vice President, First N/A N/A
Assistant Treasurer o 6 months served Trust Advisors L.P. and
D.O.B. 01/66 First Trust Portfolios
1001 Warrenville Road L.P. (January 2005 to
Suite 300 present); Executive
Lisle, IL 60532 Director, Van Kampen
Asset Management and
Morgan Stanley Investment
Management (1999-2005)

Christopher R. Fallow o Indefinite term Assistant Vice President N/A N/A
Assistant Vice President o Since December of First Trust Portfolios
D.O.B. 04/79 10, 2006 L.P. and First Trust
1001 Warrenville Road Advisors L.P.
Suite 300
Lisle, IL 60532

Page 28

FIRST TRUST/ABERDEEN EMERGING OPPORTUNITY FUND
DECEMBER 31, 2006

- --------------------------------------------------------------------------------------------------------------------------------
OFFICERS WHO ARE NOT TRUSTEES - (CONTINUED)
- --------------------------------------------------------------------------------------------------------------------------------

W. Scott Jardine, o Indefinite term General Counsel, First N/A N/A
Secretary and Chief o 6 months served Trust Advisors L.P. and
Compliance Officer First Trust Portfolios
D.O.B. 05/60 L.P.; Secretary, BondWave
1001 Warrenville Road LLC and Stonebridge
Suite 300 Advisors LLC
Lisle, IL 60532

Daniel J. Lindquist o Indefinite term Senior Vice President, N/A N/A
Vice President o 6 months served First Trust Advisors
D.O.B. 02/70 L.P.; Vice President,
1001 Warrenville Road First Trust Portfolios
Suite 300 L.P. (April 2004 to
Lisle, IL 60532 present); Chief Operating
Officer, Mina Capital
Management, LLC (January
2004-April 2004); Chief
Operating Officer,
Samaritan Asset
Management Services, Inc.
(April 2000-January 2004)

Kristi A. Maher o Indefinite term Assistant General N/A N/A
Assistant Secretary o 6 months served Counsel, First Trust
D.O.B. 12/66 Advisors L.P. and First
1001 Warrenville Road Trust Portfolios L.P.
Suite 300 (March 2004 to present);
Lisle, IL 60532 Associate, Chapman and
Cutler LLP (1995-2004)
<FN>
- ------------------------------
* The term "officer" means the president, vice president, secretary, treasurer,
controller or any other officer who performs a policy making function.
</FN>

Page 29

ITEM 2. CODE OF ETHICS.

(a) The registrant, as of the end of the period covered by this report, has
adopted a code of ethics that applies to the registrant's principal
executive officer, principal financial officer, principal accounting
officer or controller, or persons performing similar functions,
regardless of whether these individuals are employed by the registrant
or a third party.

(c) There have been no amendments, during the period covered by this
report, to a provision of the code of ethics that applies to the
registrant's principal executive officer, principal financial officer,
principal accounting officer or controller, or persons performing
similar functions, regardless of whether these individuals are employed
by the registrant or a third party, and that relates to any element of
the code of ethics definition enumerated in paragraph (b) of this
item's instructions.

(d) The registrant has not, during the period covered by this report,
granted any waivers, including an implicit waiver, from a provision of
the code of ethics that applies to the registrant's principal executive
officer, principal financial officer, principal accounting officer or
controller, or persons performing similar functions, regardless of
whether these individuals are employed by the registrant or a third
party, that relates to one or more of the items set forth in paragraph
(b) of this item's instructions.

ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.

As of the end of the period covered by the report, the Registrant's board of
trustees has determined that Thomas R. Kadlec and Robert F. Keith are qualified
to serve as audit committee financial experts serving on its audit committee and
that each of them is "independent," as defined by Item 3 of Form N-CSR.

ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.

(a) AUDIT FEES (REGISTRANT) -- The aggregate fees billed from the
inception of the Registrant on July 14, 2006 through December 31, 2006 for
professional services rendered by the principal accountant for the audit of the
Registrant's annual financial statements or services that are normally provided
by the accountant in connection with statutory and regulatory filings or
engagements were $15,500.

(b) AUDIT-RELATED FEES (REGISTRANT) -- The aggregate fees billed from
the inception of the Registrant on July 14, 2006 through December 31, 2006 for
assurance and related services by the principal accountant that are reasonably
related to the performance of the audit of the Registrant's financial statements
and are not reported under paragraph (a) of this Item were $0.

AUDIT-RELATED FEES (INVESTMENT ADVISER) -- The aggregate fees
billed from the inception of the Registrant on July 14, 2006 through December
31, 2006 for assurance and related services by the principal accountant that are
reasonably related to the performance of the audit of the Registrant's financial
statements and are not reported under paragraph (a) of this Item were $0.

(c) TAX FEES (REGISTRANT) -- The aggregate fees billed from the
inception of the Registrant on July 14, 2006 through December 31, 2006 for
professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning to the Registrant were $0.

TAX FEES (INVESTMENT ADVISER) -- The aggregate fees billed from
the inception of the Registrant on July 14, 2006 through December 31, 2006 for
professional services rendered by the principal accountant for tax compliance,
tax advice, and tax planning to the Registrant's adviser were $0.

(d) ALL OTHER FEES (REGISTRANT) -- The aggregate fees billed from the
inception of the Registrant on July 14, 2006 through December 31, 2006 for
products and services provided by the principal accountant to the Registrant,
other than the services reported in paragraphs (a) through (c) of this Item were
$0.

ALL OTHER FEES (INVESTMENT ADVISER) -- The aggregate fees billed
from the inception of the Registrant on July 14, 2006 through December 31, 2006
for products and services provided by the principal accountant to the
Registrant's investment adviser, other than services reported in paragraphs (a)
through (c) of this Item were $0.

(e)(1) Disclose the audit committee's pre-approval policies and procedures
described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.

Pursuant to its charter and its Audit and Non-Audit Services
Pre-Approval Policy both amended as of December 10, 2006, the Audit Committee
(the "COMMITTEE") is responsible for the pre-approval of all audit services and
permitted non-audit services (including the fees and terms thereof) to be
performed for the Registrant by its independent auditors. The Chairman of the
Committee authorized to give such pre-approvals on behalf of the Committee up to
$25,000 and report any such pre-approval to the full Committee.

The Committee is also responsible for the pre-approval of the
independent auditor's engagements for non-audit services with the Registrant's
adviser (not including a sub-adviser whose role is primarily portfolio
management and is sub-contracted or overseen by another investment adviser) and
any entity controlling, controlled by or under common control with the
investment adviser that provides ongoing services to the Registrant, if the
engagement relates directly to the operations and financial reporting of the
Registrant, subject to the DE MINIMIS exceptions for non-audit services
described in Rule 2-01 of Regulation S-X. If the independent auditor has
provided non-audit services to the Registrant's adviser (other than any
sub-adviser whose role is primarily portfolio management and is sub-contracted
with or overseen by another investment adviser) and any entity controlling,
controlled by or under

common control with the investment adviser that provides ongoing services to the
Registrant that were not pre-approved pursuant to its policies, the Committee
will consider whether the provision of such non-audit services is compatible
with the auditor's independence.

(e)(2) The percentage of services described in each of paragraphs (b) through
(d) for the Registrant and the Registrant's investment adviser of this
Item that were approved by the audit committee pursuant to the
pre-approval exceptions included in paragraph (c)(7)(i)(c) or paragraph
(c)(7)(ii) of Rule 2-01 of Regulation S-X are as follows:

(b) 0%

(d) 0%

(f) The percentage of hours expended on the principal accountant's
engagement to audit the registrant's financial statements for the most
recent fiscal year that were attributed to work performed by persons
other than the principal accountant's full-time, permanent employees
was less than fifty percent.

(g) The aggregate non-audit fees billed by the registrant's accountant for
services rendered to the registrant, and rendered to the registrant's
investment adviser (not including any sub-adviser whose role is
primarily portfolio management and is subcontracted with or overseen by
another investment adviser), and any entity controlling, controlled by,
or under common control with the adviser that provides ongoing services
to the Registrant from the inception of the Registrant on July 14, 2006
through December 31, 2006 were $0 for the Registrant and $25,000 for
the Registrant's investment adviser.

(h) On December 10, 2006, the Registrant's audit committee of its Board of
Trustees determined that the provision of non-audit services that were
rendered to the Registrant's investment adviser (not including any
sub-adviser whose role is primarily portfolio management and is
subcontracted with or overseen by another investment adviser), and any
entity controlling, controlled by, or under common control with the
investment adviser that provides ongoing services to the Registrant
that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule
2-01 of Regulation S-X is compatible with maintaining the principal
accountant's independence.

ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.

(a) The Registrant has a separately designated audit committee consisting of
all the independent trustees of the Registrant. The members of the audit
committee are: Thomas R. Kadlec, Niel B. Nielson, Richard E. Erickson and
Robert F. Keith.

ITEM 6. SCHEDULE OF INVESTMENTS.

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.

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

The Proxy Voting Policies are attached herewith.

ABERDEEN U.S. REGISTERED ADVISERS
PROXY VOTING POLICIES AND PROCEDURES
AS OF FEBRUARY 8, 2006

The following are proxy voting policies and procedures ("Policies and
Procedures") adopted by affiliated investment advisers registered with the U.S.
Securities and Exchange Commission ("SEC") under the Investment Advisers Act of
1940, as amended ("Advisers Act"), that are subsidiaries of Aberdeen Asset
Management PLC ("AAM"); including, specifically, Aberdeen Asset Management Inc.,
a Delaware Corporation, ("Aberdeen US"), Aberdeen Asset Management Asia Limited,
a Singapore Corporation ("Aberdeen Singapore"), Aberdeen Asset Management
Limited, an Australian Corporation ("Aberdeen AU"), and Aberdeen Asset
Management Investment Services Limited ("AAMISL"), (collectively referred to
herein as "Aberdeen Advisers" and each an "Aberdeen Adviser") (collectively with
AAM, "Aberdeen"). These Policies and Procedures address proxy voting
considerations under U.S. law and regulation and under Canadian securities laws.
These Policies and Procedures do not address the laws or requirements of other
jurisdictions.

Pursuant to a Memorandum of Understanding ("MOU"), Aberdeen Asset Managers
Limited ("Aberdeen UK"), a non-US registered adviser, provides advisory
resources to certain U.S. clients of Aberdeen Singapore and Aberdeen AU. In
addition, Aberdeen UK provides advisory resources to certain U.S. clients of
Aberdeen US pursuant to another MOU. Under these MOUs, the affiliates of the
Aberdeen Advisers may provide various portfolio management resources, including
substantive advice on voting proxies for certain equity securities. To the
extent that Aberdeen UK provides advisory services to any clients of Aberdeen US
or to U.S. clients of Aberdeen Singapore or Aberdeen AU, Aberdeen UK will be
subject to the control and supervision of the registered adviser and will follow
these Policies and Procedures as part of providing such advisory services. These
Policies and Procedures are adopted to ensure compliance by the Aberdeen
Advisers with Rule 206(4)-6 under the Advisers Act and other applicable
fiduciary obligations under rules and regulations of the SEC and interpretations
of its staff with respect to proxies for voting securities held by client
portfolios.

Clients may consist of investment companies registered under the Investment
Company Act of 1940, as amended ("1940 Act") ("Funds" and each a "Fund"), and
other U.S. residents as well as non-U.S. registered funds or clients. Any
Aberdeen Adviser located in the United States follows these Policies and
Procedures for each of its respective clients as required under the Advisers Act
and other applicable law, unless expressly directed by a client in writing to
refrain from voting that client's proxies or to vote in accordance with the
client's proxy voting policies and procedures. Aberdeen Advisers who advise or
subadvise the Funds follow both these Policies and Procedures and the proxy
voting policies and procedures adopted by the Funds and their respective Boards
of Directors. Aberdeen Advisers located outside the U.S. may provide proxy
voting services to their non-U.S. based clients in accordance with the
jurisdiction in which the client is located. Aberdeen US, Aberdeen Singapore and
Aberdeen AU will provide proxy voting services to Canadian investment funds in
accordance with National Instrument 81-106 - Investment Fund Continuous
Disclosure.

I. DEFINITIONS

A. "Best interest of clients". Clients' best economic interests over the long
term that is, the common interest that all clients share in seeing the
value of a common investment increase over time. Clients may have differing
political or social interests, but their best economic interest is
generally uniform.

B. "Material conflict of interest". Circumstances when an Aberdeen Adviser or
any member of senior management, portfolio manager or portfolio analyst
knowingly does business with a particular proxy issuer or closely
affiliated entity, which may appear to create a material conflict between
the interests of the Aberdeen Adviser and the interests of its clients in
how proxies of that issuer are voted. A material conflict of interest might
also exist in unusual circumstances when Aberdeen has actual knowledge of a
material business arrangement between a particular proxy issuer or closely
affiliated entity and an affiliate of an Aberdeen Adviser.

II. GENERAL VOTING POLICIES

A. Client's Best Interest. These Policies and Procedures are designed and
implemented in a way that is reasonably expected to ensure that proxies are
voted in the best interests of clients. Proxies are voted with the aim of
furthering the best economic interests of clients, promoting high levels of
corporate governance and adequate disclosure of company policies,
activities and returns, including fair and equal treatment of stockholders.

B. Shareholder Activism. Aberdeen Advisers seek to develop relationships with
the management of portfolio companies to encourage transparency and
improvements in the treatment of employees, owners and stakeholders. Thus,
Aberdeen Advisers may engage in dialogue with the management of portfolio
companies with respect to pending proxy voting issues.

C. Case-by-Case Basis. These Policies and Procedures are guidelines. Each vote
is ultimately cast on a case-by-case basis, taking into consideration the
contractual obligations under the advisory agreement or comparable
document, and all other relevant facts and circumstances at the time of the
vote. Aberdeen Advisers may cast proxy votes in favor of management
proposals or seek to change the views of management, considering specific
issues as they arise on their merits. Aberdeen Advisers may also join with
other investment managers in seeking to submit a shareholder proposal to a
company or to oppose a proposal submitted by the company. Such action may
be based on fundamental, social, environmental or human rights grounds.

D. Individualized. These Policies and Procedures are tailored to suit
Aberdeen's advisory business and the types of securities portfolios
Aberdeen Advisers manage. To the extent that clients (e.g., investment
companies, corporations, pension plans) have adopted their own procedures,
Aberdeen Advisers may vote the same securities differently depending upon
clients' directions.

E. Material Conflicts of Interest. Material conflicts are resolved in the best
interest of clients. When a material conflict of interest between an
Aberdeen Adviser and its respective client(s) is identified, the Aberdeen
Adviser will choose among the procedures set forth in Section IV.B.2.
below, to resolve such conflict.

F. Limitations. The circumstances under which Aberdeen may take a limited role
in voting proxies, include the following:

1. No Responsibility. Aberdeen Advisers will not vote proxies for client
accounts in which the client contract specifies that Aberdeen will not
vote. Under such circumstances, the clients' custodians are instructed
to mail proxy material directly to such clients.

2. Limited Value. Aberdeen Advisers may abstain from voting a client proxy
if the effect on shareholders' economic interests or the value of the
portfolio holding is indeterminable or insignificant. Aberdeen Advisers
may also abstain from voting the proxies of portfolio companies held in
their passively managed funds. Proxies with respect to securities that
have been sold before the date of the shareholders meeting and are no
longer held by a client generally will not be voted.

3. Unjustifiable Costs. Aberdeen may abstain from voting a client proxy
for cost reasons (e.g., non-U.S. securities).

4. Securities Lending Arrangements. If voting securities are part of a
securities lending program, Aberdeen may be unable to vote while the
securities are on loan.

5. Share Blocking. Certain jurisdictions may impose share blocking
restrictions at various times which may prevent Aberdeen from
exercising its voting authority.

6. Special Considerations. Aberdeen's responsibilities for voting proxies
are determined generally by its obligations under each advisory
contract or similar document. If a client requests in writing that an
Aberdeen Adviser vote its proxy in a manner inconsistent with these
Policies and Procedures, Aberdeen may follow the client's direction or
may request that the client vote the proxy directly.

G. Sources of Information. Aberdeen may conduct research internally and/or use
the resources of an independent research consultant. Aberdeen may consider
legislative materials, studies of corporate governance and other proxy
voting issues, and/or analyses of shareholder and management proposals by a
certain sector of companies, e.g., Fortune 500 companies.

H. Subadvisers. To the extent that an Aberdeen Adviser may rely on
subadvisers, whether affiliated or unaffiliated, to manage any client
portfolio on a discretionary basis, the Aberdeen Adviser will delegate
responsibility for voting proxies to the subadviser. However, such
subadvisers will be required either to follow these Policies and Procedures
or to demonstrate that their proxy voting policies and procedures are
consistent with these Policies and Procedures or otherwise implemented in
the best interests of Aberdeen clients.

I. Availability of Policies and Procedures. Aberdeen Advisers will provide
clients with a copy of these Policies and Procedures, as revised from time
to time, upon request.

J. Disclosure of Vote. As disclosed in Part II of each Aberdeen Adviser's Form
ADV, a client may obtain information on how its proxies were voted by
requesting such information from its Aberdeen Adviser. Aberdeen Advisers do
not generally disclose client proxy votes to third parties, other than as
required for Funds, unless specifically requested, in writing, by the
client.

III. SPECIFIC VOTING POLICIES

A. General Philosophy.

o Support existing management on votes on the financial statements of a
company and the election of the Board of Directors;

o Vote for the acceptance of the accounts unless there are grounds to
suspect that either the accounts as presented or audit procedures used,
do not present an accurate picture of company results; and

o Support routine issues such as the appointment of independent auditors,
allocation of income and the declaration of stock (scrip) dividend
proposals provided there is a cash alternative.

B. Anti-takeover Measures. Aberdeen Advisers vote on anti-takeover measures on
a case-by-case basis taking into consideration such factors as the
long-term financial performance of the target company relative to its
industry competition. Key measures of performance will include the growth
rates for sales, operating income, net income and total shareholder
returns. Other factors which will be considered include margin analysis,
cash flow and debt levels.

C. Proxy Contests for Control. Aberdeen Advisers vote on proxy contests for
control on a case-by-case basis taking into consideration such factors as
long-term financial performance of the target company relative to its
industry, management's track record, background to the proxy contest,
qualifications of director nominees, evaluation of what each side is
offering shareholders as well as the likelihood that the proposed
objectives and goals can be met, and stock ownership positions.

D. Contested Elections. Aberdeen Advisers vote on contested elections on a
case-by-case basis taking into consideration such factors as the
qualifications of all director nominees. Aberdeen Advisers also consider
the independence of board and key committee members and the corporate
governance practices of the company.

E. Executive compensation proposals. Aberdeen Advisers consider such proposals
on a case-by-case basis taking into consideration such factors as executive
pay and spending perquisites, particularly in conjunction with sub-par
performance and employee layoffs.

F. Shareholder Proposals. Aberdeen Advisers consider such proposals on a
case-by-case basis. Aberdeen Advisers support those proposals which will
improve the company's corporate governance or business profile at a
reasonable cost, but may oppose proposals which result in significant cost
being incurred with little or no benefit to the company or its
shareholders.

IV. PROXY VOTING PROCEDURES

This section applies to each Aberdeen Adviser except to the extent that certain
procedures are identified as applicable only to a specific Aberdeen Adviser.

A. Obtain Proxy. Registered owners of record, e.g., trustees or custodian
banks, that receive proxy materials from the issuer or its information
agent, are instructed to sign physical proxy cards in blank and forward
directly to the relevant Aberdeen Adviser's designated proxy administrator
("PA"). Proxies may also be delivered electronically by custodians using
proxy services such as ProxyEdge. Each proxy received is matched to the
securities to be voted.

B. Material Conflicts of Interest.

1. Identify the existence of any material conflicts of interest relating
to the securities to be voted or the issue at hand. Portfolio managers
and research analysts ("Analysts") and senior management of each
Aberdeen Adviser have an affirmative duty to disclose to the relevant
proxy committees any personal conflicts such as officer or director
positions held by them, their spouses or close relatives in the
portfolio company or attempts by the portfolio company to exert
influence over such person with respect to their vote. Conflicts based
on business relationships or dealings of affiliates of any Aberdeen
Adviser will only be considered to the extent that the Aberdeen Adviser
has actual knowledge of such business relationships.

2. When a material conflict of interest between an Aberdeen Adviser's
interests and its clients' interests appears to exist, the Aberdeen
Adviser may choose among the following options to eliminate such
conflict: (1) vote in accordance with these Policies and Procedures if
it involves little or no discretion; (2) vote as recommended by a third
party service if the Aberdeen Adviser utilizes such a service; (3)
"echo vote" or "mirror vote" the proxies in the same proportion as the
votes of other proxy holders that are not Aberdeen clients; (4) if
possible, erect information barriers around the person or persons
making voting decisions sufficient to insulate the decision from the
conflict; (5) if practical, notify affected clients of the conflict of
interest and seek a waiver of the conflict; or (6) if agreed upon in
writing with the client, forward the proxies to affected clients
allowing them to vote their own proxies.

C. Analysts. The PA for each Aberdeen Adviser will ensure that each proxy
statement is directed to the appropriate Analyst. If a third party
recommendation service has been retained, the relevant PA will forward the
proxy statement to the Analyst with the recommendation highlighted. The
Analyst will determine whether to vote as recommended by the service
provider or to recommend an alternative and shall advise the PA. The
Analyst may consult with the PA as necessary. If the Analyst recommends
voting against the third party recommendation, he or she is responsible for
documenting the reasons for such recommendation and that no conflict of
interest influenced such recommendation. If no third party recommendation
service is utilized or if no recommendation is provided, the Analyst is
responsible for documenting the rationale for his or her vote
recommendation.

D. Vote. The following describes the breakdown of responsibilities between the
designated PA and the Proxy Committee ("PC") of each Aberdeen Adviser in
voting portfolio securities and the extent to which the Aberdeen Advisers
rely on third party service providers.

1. Aberdeen US Clients

The designated PA for Aberdeen US ("PA-US"), and the designated PA for
Aberdeen UK ("PA-UK"), are responsible for ensuring that votes for Aberdeen US
clients are cast and cast in accordance with these Policies and Procedures. The
PA-US is primarily responsible for administering proxy votes for the funds which
are sub-advised by Aberdeen US, the US closed-end Funds for which Aberdeen
Singapore is the Manager, and the Canadian investment funds.

Responsibility for considering the substantive issues relating to any
vote and for deciding how shares will be voted resides with the relevant Analyst
whether located in Aberdeen US, Aberdeen UK, Aberdeen AU or Aberdeen Singapore.
Under Aberdeen-US's MOU with Aberdeen Singapore, the relevant Analyst for Far
East equity securities will generally reside in Aberdeen Singapore.

In the event that a material conflict of interest is identified by any
Analyst, whether in Aberdeen US, Aberdeen UK, Aberdeen AU, Aberdeen Singapore,
or AAMISL, decisions on how to vote will be referred to the Aberdeen US proxy
committee ("PC-US/UK"). Under Aberdeen US's MOU with Aberdeen UK, the PC-US/UK
is headquartered in Scotland, and includes the Chief Investment Officer or
Deputy Chief Investment Officer, the head of the Socially Responsible Investing
("SRI") Team and a member of the Compliance team.,. The PC-US/UK meets as needed
to consider material conflicts of interest or any other items raising unique
issues. If the PC-US/UK determines that there is no material conflict of
interest, the vote recommendation will be forwarded to the appropriate proxy
administrator, either the PA-US or PA-UK. If a material conflict of interest is
identified, the PC-US/UK will follow the conflict of interest procedures set
forth in Section IV.B.2., above.

Aberdeen US has engaged ProxyEdge, a third party service provider, to
cast votes electronically for certain clients and to maintain records of such
votes electronically. The Phoenix Funds, sub-advised by Aberdeen US, require
electronic voting through ProxyEdge. Custodians for certain other clients also
provide the PA-US with access to ProxyEdge. Pursuant to the MOU, Aberdeen UK
votes proxies for certain U.S. clients of Aberdeen US. Aberdeen UK has engaged
Institutional Shareholder Services ("ISS"), a third party service provider, to
provide (1) notification of impending votes; (2) research into non-routine
votes, including shareholder resolutions; (3) voting recommendations which may
be viewed on-line; and (4) web-based voting. In the absence of any material
conflict of interest, Aberdeen US may either vote in accordance with the ISS
recommendation or decline to follow the ISS recommendation based on its own view
of the agenda item provided that decisions to vote contrary to the ISS
recommendation are documented as set forth in Section IV.C., above. For clients
on the ISS system, votes are automatically entered in accordance with ISS
recommendations unless the PA-UK expressly changes the vote prior to the voting
deadline with appropriate analyst documentation. In the event of a material
conflict of interest, Aberdeen US will follow the procedures outlined in Section
IV.B.2, above.

2. Aberdeen Singapore Clients

Aberdeen AU and Aberdeen Singapore are responsible for deciding how to
vote for the US closed-end Funds and the Canadian investment funds and will
instruct the PA-US Aberdeen US accordingly. The PA-US shall ensure that the
votes are cast and cast in accordance with the relevant Proxy Voting Policy and
Procedure of the relevant Fund. The PA-US uses ProxyEdge to electronically cast
votes for the Funds and to maintain electronic records of the votes cast.

Responsibility for considering the substantive issues relating to any
Fund vote and for deciding how the shares will be voted resides with relevant
equity and/or fixed income Analyst. The relevant analyst may be a member of the
Fund portfolio management team in Aberdeen Singapore, Aberdeen AU, Aberdeen UK,
or AAMISL In the event that a material conflict of interest is identified,
decisions on how to vote will be referred to the proxy committee ("PC-Asia")
located in Singapore and Australia, comprised of a representative from each of
equity fund management, fixed income fund management and compliance teams
respectively. The PC-Asia meets as needed to consider a material conflict of
interest or any other items raising unique issues. If the PC-Asia determines
there is no material conflict of interest, the vote recommendation will be
forwarded to the PA-US to be cast. If a material conflict of interest is
identified, the PC-Asia will follow the conflict of interest procedures set
forth in Section IV.B.2., above, and in the Aberdeen Funds Proxy Voting Policy
and Procedures.

E. Review. Each designated PA is responsible for ensuring that proxy materials
are received in a timely manner and reconciled against holdings on the
record date of client accounts over which the

Aberdeen Adviser has voting authority to ensure that all shares held on the
record date, and for which a voting obligation exists, are voted.

V. DOCUMENTATION, RECORDKEEPING AND REPORTING REQUIREMENTS

A. Documentation. The Aberdeen PAs are responsible for:

1. Implementing and updating these Policies and Procedures;

2. Overseeing the proxy voting process;

3. Consulting with portfolio managers/analysts for the relevant portfolio
security; and

4. Maintaining manual proxy voting records, if any, and overseeing and
reviewing voting execution and recordkeeping by third party providers
such as ISS and ProxyEdge.

B. Record Keeping.

1. Each Aberdeen Adviser maintains or procures the maintenance of records
of all proxies it has voted. As permitted by Rule 204-2(c), electronic
proxy statements and the record of each vote cast by each client
account of Aberdeen US will be maintained by either ISS and Proxy Edge,
depending on the client account. Similarly, electronic proxy statements
and the record of each vote cast by each U.S. client account of
Aberdeen Singapore will be maintained by Proxy Edge.

A US Fund's proxy voting record must be filed with the SEC on Form
N-PX. Form N-PX must be completed and signed in the manner required,
containing a fund's proxy voting record for the most recent
twelve-month period ended June 30th (beginning August 31, 2004). If an
Aberdeen Adviser delegates this reporting responsibility to a third
party service provider such as ISS or Proxy Edge, it will ensure that
the third party service provider files Form N-PX accordingly. Aberdeen
US shall obtain and maintain undertakings from both ISS and Proxy Edge
to provide it with copies of proxy voting records and other documents
relating to its clients' votes promptly upon request. Aberdeen
Advisers, ISS and Proxy Edge may rely on the SEC's EDGAR system to keep
records of certain proxy statements if the proxy statements are
maintained by issuers on that system (e.g., large U.S.-based issuers).

2. As required by Rule 204-2(c), such records will also include: (a) a
copy of the Policies and Procedures; (b) a copy of any document created
by the Aberdeen Adviser that was material to making a decision on how
to vote proxies on behalf of a client or that memorializes the basis
for that decision; and (c) each written client request for proxy voting
records and the Aberdeen Adviser's written response to any (written or
oral) client request for such records.

3. Duration. Proxy voting books and records will be maintained in an
easily accessible place for a period of five years, the first two in an
appropriate office of the Aberdeen Adviser.

C. Reporting. For US Funds, Aberdeen US, Aberdeen AU, Aberdeen Singapore, and
AAMISL will initially inform clients of these Policies and Procedures by
summary disclosure in Part II of their respective Forms ADV. Upon receipt
of a client's request for more information, Aberdeen US, Aberdeen AU,
Aberdeen Singapore, and AAMISL will provide to the client a copy of these
Policies and Procedures and/or, in accordance with the client's stated
requirements, how the client's proxies were voted during the period
requested subsequent to the adoption of these Policies and Procedures.

Such periodic reports, other than those required for the US closed-end
Funds, will not be made available to third parties absent the express
written request of the client. However, to the extent that any Aberdeen
Adviser may serve as a subadviser to another adviser to a Client, such
Aberdeen Adviser will be deemed to be authorized to provide proxy-voting
records on such Client accounts to such other adviser.

For Canadian investment funds, Aberdeen US, Aberdeen AU and Aberdeen
Singapore will assist in preparing annual proxy voting records for the
period ending June 30 of each year and will post an annual proxy voting
record on each Canadian investment fund's website no later than August 31
of each year. Upon receipt of a client or securityholder's request,
Aberdeen US, Aberdeen AU or Aberdeen Singapore will make available a copy
of these Policies and Procedures and the Canadian investment fund's proxy
voting record, without charge, to any client or securityholder upon a
request made by the client or securityholder after August 31.

D. Review of Policies and Procedures. These Policies and Procedures will be
subject to review on a periodic basis as deemed appropriate by the Aberdeen
Advisers. Any questions regarding the Policies and Procedures should be
directed to the Compliance Department of the respective Aberdeen Adviser.
Each Compliance Department maintains information regarding the PA and the
PC for the respective Aberdeen Adviser.

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

(A)(1) IDENTIFICATION OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS AND
DESCRIPTION OF ROLE OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBERS

Aberdeen Asset Management Inc. ("Aberdeen") acts as the Registrant's
sub-adviser. Devan Kaloo is head of Emerging Markets Equity and is responsible
for the London based GEM Equity Team which manages Latin America and Europe,
Middle East and Africa equities. Mr. Kaloo also has oversight of global emerging
market input from the Asia research team based in Singapore, with whom he works
closely. Joanne Irvine is head of GEM Equity Team ex Asia, and she specializes
in the emerging markets of Europe, Africa and the Middle East. Mark Butler acts
as Senior Investment Manager, GEM Equity Team, and specializes in the emerging
markets of Europe, Middle East and Africa. Hugh Young is a Managing Director of
Aberdeen Asset Management, Inc ("Aberdeen") and is the head of equities globally
and a member of the executive committee responsible for the day-to-day
management of Aberdeen Asset Management PLC. Peter Hames is Investment Director
of Aberdeen Asia, where he has principal responsibility for the day-to-day
management of all regional portfolios for Aberdeen Asia. Mr. Hames also has
oversight responsibilities for a nine member Asian ex-Japan equities team, 14
investment managers who provide local market input, and for specialist country
portfolios from offices across the region. Brett Diment is head of Emerging
Market Debt and is responsible for the day-to-day management of the emerging
market debt team and portfolios. In addition to those listed above, Mark
Gordon-James, Edwin Gutierrez, Nima Tayebi and Max Wolman are additional
portfolio managers of the Registrant.

NAME TITLE Length of BUSINESS EXPERIENCE PAST 5 YEARS
----- ------ --------------------------------
SERVICE

1. Devan Kaloo Head of Emerging 7 years Joining Aberdeen via the acquisition of Murray
Markets Equity for the Johnstone in 2000, Mr. Kaloo was responsible for
Aberdeen Group the Asian ex Japan region as well as regional
portfolios within emerging market mandates and
technology stocks. Mr. Kaloo took his current
position in 2005.

2. Joanne Irvine Head of GEM Equity 11 years Joining Aberdeen in 1996 in a group development
Team ex Asia role, Ms. Irvine has held her current position
since 1997.

3. Mark Butler Senior Investment 7 years Since joining Aberdeen in 2000, Mr. Butler has
Manager, GEM Equity held his current position.
Team

4. Mark Gordon-James Investment Manager, 3 years Since joining Aberdeen in 2004, Mr. Gordon-James
GEM Equity Team has held his current position. Previously, Mr.
Gordon-James worked with the emerging markets
team of Merrill Lynch Investment Managers.

5. Hugh Young Managing Director, 22 years Mr. Young has held his current position since
Aberdeen Asia 1992.

6. Peter Hames Investment Director, 17 years Mr. Hames has held his current position since
Aberdeen Asia 1992.

7. Brett Diment Head of Emerging 2 years Since joining Aberdeen via the acquisition of
Market Debt Deutsche Asset Management's London and
Philadelphia fixed income business in 2005, Mr.
Diment has held the role of Head of Emerging
Markets. Prior to joining Aberdeen, Mr. Diment
was the Head of the Deutsche Bank global emerging
markets debt team since 1999.

8. Edwin Gutierrez Portfolio Manager, 2 years Since joining Aberdeen via the acquisition of
Emerging Market Debt Deutsche Asset Management's London and
Philadelphia fixed income business in 2005, Mr.
Gutierrez has held the role of Fund Manager.
Previously, Mr. Gutierrez was an emerging markets
fixed-income portfolio manager at Deutsche.

9. Nima Tayebi Portfolio Manager, 2 years Since joining Aberdeen via the acquisition of
Emerging Market Debt Deutsche Asset Management's London and
Philadelphia fixed income business in 2005, Mr.
Tayebi has held the role of Fund Manager.
Previously, Mr. Tayebi held the same role since
2001 at Deutsche.

10. Max Wolman Portfolio Manager, 6 years Joining Aberdeen in 2001, Mr. Wolman initially
Emerging Market Debt specialized in currency and domestic debt
analysis, but is now responsible for wider
emerging market debt analysis including external
and corporate issuers. Mr. Wolman is also a member
of Aberdeen's EM Debt investment committee.

(A)(2) OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBER
AND POTENTIAL CONFLICTS OF INTEREST

OTHER ACCOUNTS MANAGED BY PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM MEMBER

The information in the table below is as of December 31, 2006.

No. of
Accounts Total Assets in
Total where Accounts where
Name of Portfolio Manager No. of Advisory Fee Advisory Fee is
or Accounts is Based on Based on
TEAM MEMBER TYPE OF ACCOUNTS*** Managed TOTAL ASSETS PERFORMANCE PERFORMANCE
----------- ------------------- ------------ ----------- -----------

1. Devan Kaloo Registered Investment Companies: 1 $112.0m 0 $0
Other Pooled Investment Vehicles: 7 $1,731.3m 0 $0
Other Accounts: 8 $866.8m 0 $0
2. Joanne Irvine Registered Investment Companies: 1 $112.0m 0 $0
Other Pooled Investment Vehicles: 7 $1,731.3m 0 $0
Other Accounts: 8 $866.8m 0 $0
3. Mark Butler Registered Investment Companies: 1 $112.0m 0 $0
Other Pooled Investment Vehicles: 7 $1,731.3m 0 $0
Other Accounts: 8 $866.8m 0 $0
4. Mark Gordon-James Registered Investment Companies: 1 $112.0m 0 $0
Other Pooled Investment Vehicles: 7 $1,731.3m 0 $0
Other Accounts: 8 $866.8m 0 $0
5. Hugh Young Registered Investment Companies: 0 $0 0 $0
Other Pooled Investment Vehicles: 46 $16,996.2m* 4 $576.34m**
Other Accounts: 84 $12,391.2m* 11 $1,947.64m**
6. Peter Hames Registered Investment Companies: 0 $0 0 $0
Other Pooled Investment Vehicles: 46 $16,996.2m* 4 $576.34m**
Other Accounts: 84 $12,391.2m* 11 $1,947.64m**
7. Brett Diment Registered Investment Companies: 4 $609.1m 0 $0
Other Pooled Investment Vehicles: 4 $1,139.3m 0 $0
Other Accounts: 11 $946.5m 0 $0
8. Edwin Gutierrez Registered Investment Companies: 4 $609.1m 0 $0
Other Pooled Investment Vehicles: 4 1,139.3m 0 $0
Other Accounts: 11 $946.5m 0 $0
9. Nima Tayebi Registered Investment Companies: 4 $609.1m 0 $0
Other Pooled Investment Vehicles: 4 $1,139.3m 0 $0
Other Accounts: 11 $946.5m 0 $0
10. Max Wolman Registered Investment Companies: 4 $609.1m 0 $0
Other Pooled Investment Vehicles: 4 $1,139.3m 0 $0
Other Accounts: 11 $946.5m 0 $0
<FN>
* TOTAL ASSETS HAVE BEEN TRANSLATED TO US DOLLARS AT AN EXCHANGE RATE OF
0.6520.
** TOTAL ASSETS HAVE BEEN TRANSLATED TO US DOLLARS AT AN EXCHANGE RATE OF
0.6520 AND ARE BASED ON THE ASIA PACIFIC PORTION ONLY.
*** EXAMPLES FOR TYPES OF ACCOUNTS: 1) Other Registered Investment Companies:
Any investment vehicle which is registered with the SEC, such as mutual funds
of registered hedge funds; 2) Other Pooled Investment Vehicles: Any
unregistered account for which investor assets are pooled together, such as an
unregistered hedge fund; and 3) Other Accounts: Any accounts managed not
covered by the other two categories, such as privately managed accounts.
</FN>

POTENTIAL CONFLICTS OF INTERESTS

To date, Aberdeen has identified the following as potential conflicts:
fair investment allocations, proxy voting and employee trading - Aberdeen
currently has processes and procedures in place to mitigate these conflicts and
does not feel that there are any material conflicts. Any conflicts are
identified by Compliance via Aberdeen's dynamic Monitoring Program and addressed
in the compliance program appropriately prior to a client being accepted by
Aberdeen.

(A)(3) COMPENSATION STRUCTURE OF PORTFOLIO MANAGER(S) OR MANAGEMENT TEAM
MEMBERS

The Aberdeen Group recognizes the importance of compensation in
attracting and retaining talent and has structured remuneration to include an
attractive base salary, a discretionary bonus that is directly linked to one's
contribution to the overall success of the Aberdeen Group member and a long term
incentive plan for key staff members comprised of a mixture of cash, options,
and shares. Overall compensation packages are designed to be competitive
relative to investment management industry standards.

The compensation policy has been designed to deliver additional rewards
through appropriate incentive schemes, both annual and long term. These are
directly linked to performance at both a corporate and an individual level. The
policy seeks to reward performance in a manner which aligns the interests of
clients, shareholders and executives.

Each Aberdeen Group member recognizes that any remuneration policy must
be sufficiently flexible to take account of any changes in the business
environment. In accordance with this need for flexibility, the Aberdeen Group
takes into account the overall competitiveness of the total remuneration package
of all senior executives including some portfolio managers. When justified by
performance, the `at risk' performance elements will form the most significant
element of total remuneration for executive directors and senior employees.

The base salary is determined by prevailing market conditions and the
compensation for similar positions across the industry. The Aberdeen Group uses
industry compensation surveys as a tool in determining each portfolio manager's
base salary.

The Aberdeen Group's policy is to recognize corporate and individual
achievements each year through an appropriate bonus scheme. The aggregate
incentive compensation pool each year is determined by the Board of the parent
company, Aberdeen Asset Management PLC, and is dependent on each member of the
Aberdeen Group's overall performance and profitability. The pool is comprised of
a base level plus an agreed proportion of each member of the Aberdeen Group's
profitability.

Staff performance is reviewed formally once a year, with mid-term
reviews. The review process looks at all of the ways in which an individual has
contributed to the Aberdeen Group, and specifically, in the case of portfolio
managers, to the investment team. Discretionary bonuses are based on a
combination of both the team and the individual's performance. Overall
participation in team meetings, generation of original research ideas and
contribution to presenting the team externally are also evaluated. Discretionary
bonuses are not formally laid down and generally range from 10% to 50% of annual
salary for portfolio managers.

In the calculation of a portfolio manager's bonus, the Aberdeen Group
takes into consideration investment matters (which include the performance of
funds, adherence to the company investment process, and quality of company
meetings) as well as more subjective issues such as team participation and
effectiveness at client presentations. The split between the two will vary but
generally around 80% of bonus will be determined by investment related matters,
the remaining 20% by more subjective issues. Performance for each fund is judged
against the benchmark as established in the prospectus. Portfolio manager
performance on investment matters is judged over all of the accounts the
portfolio manager contributes to and is documented in the appraisal process. A
combination of the team's and individual's performance is considered.

Although performance is not a substantial portion of a portfolio
managers compensation, the Aberdeen Group also recognizes that fund performance
can often be driven by factors outside one's control, such as (irrational)
markets, and as such pays attention to the effort by portfolio managers to
ensure integrity of our core process by sticking to disciplines and processes
set, regardless of momentum and `hot' themes. Short-terming is thus discouraged
and trading-oriented managers will thus find it difficult to thrive in the
Aberdeen Group environment. Additionally, if any of the aforementioned undue
risks were to be taken by a portfolio manager, not only would the portfolio
manager be in breach of the Aberdeen Group member's Code of Ethics, but any such
trend would be identified via its dynamic compliance monitoring system.

As part of the effective remuneration package, a long term incentive
plan is used to structure the package so as to retain, motivate, and reward key
staff members with a view to improving performance and thereby increasing the
value of the Aberdeen Group for the benefit of shareholders. Long-term incentive
plans can be either cash or share based and typically vest over a three year
period.

The Aberdeen Group offers a meritocracy and a very flat management
structure. The culture of the company is entrepreneurial, and enthusiastic,
hard-working and talented employees are given plenty of opportunity to prove
themselves and obtain a high level of job satisfaction.

The Aberdeen Group does not "tie in" portfolio managers with long-term
and restrictive contractual obligations, however. The Aberdeen Group aims to
retain key individuals primarily through the provision of competitive
compensation and other benefits. It is the policy of each Aberdeen Group member
to mitigate the effects of any individual leaving the company by ensuring that
portfolios are managed on a team basis.

(A)(4) DISCLOSURE OF SECURITIES OWNERSHIP

The information below is as of December 31, 2006:

NAME DOLLAR RANGE OF FUND SHARES BENEFICIALLY OWNED1
---- ----------------------------------------------

Devan Kaloo $0
Joanne Irvine $0
Mark Butler $0
Mark Gordon-James $0
Hugh Young $0
Peter Hames $0
Brett Diment $0
Edwin Gutierrez $0
Nima Tayebi $0
Max Wolman $0

(B) Not applicable.

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) Code of ethics, or any amendment thereto, that is the subject of
disclosure required by Item 2 is attached hereto.

(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/ JAMES A. BOWEN
-------------------------------------------------------
James A. Bowen, Chairman of the Board, President and
Chief Executive Officer
(principal executive officer)

Date FEBRUARY 22, 2007
----------------------------------------------------------------------------

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

Date FEBRUARY 22, 2007
----------------------------------------------------------------------------

By (Signature and Title)* /S/ MARK R. BRADLEY
-------------------------------------------------------
Mark R. Bradley, Treasurer, Controller, Chief
Financial Officer and Chief Accounting Officer
(principal financial officer)

Date FEBRUARY 22, 2007
----------------------------------------------------------------------------

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