Edgar Filing: TEMPLETON DRAGON FUND INC

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF
REGISTERED MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-08394

TEMPLETON DRAGON FUND, INC.
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(Exact name of registrant as specified in charter)

500 EAST BROWARD BLVD., SUITE 2100, FORT LAUDERDALE, FL 33394-3091
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(Address of principal executive offices) (Zip code)

CRAIG S. TYLE, ONE FRANKLIN PARKWAY, SAN MATEO, CA 94403-1906
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(Name and address of agent for service)

Registrant's telephone number, including area code: 954/527-7500
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Date of fiscal year end: 12/31
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Date of reporting period: 9/30/07
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ITEM 1. SCHEDULE OF INVESTMENTS.

Templeton Dragon Fund, Inc.

QUARTERLY STATEMENT OF INVESTMENTS
SEPTEMBER 30, 2007

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CONTENTS

Statement of Investments ................................................. 3

Notes to Statement of Investments ........................................ 7

[LOGO](R)
FRANKLIN TEMPLETON
INVESTMENTS

Franklin o TEMPLETON o Mutual Series

Quarterly Statement of Investments | 1

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Templeton Dragon Fund, Inc.

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2007 (UNAUDITED)

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COUNTRY SHARES VALUE
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COMMON STOCKS 98.7%
AIR FREIGHT & LOGISTICS 0.1%
Sinotrans Ltd., H ................................................ China 3,017,000 $ 1,847,194
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AUTO COMPONENTS 2.0%
Cheng Shin Rubber Industry Co. Ltd. .............................. Taiwan 10,519,391 23,852,763
Norstar Founders Group Ltd. ...................................... Hong Kong 13,376,000 5,041,087
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28,893,850
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AUTOMOBILES 1.8%
a Brilliance China Automotive Holdings Ltd. ........................ China 2,230,000 613,831
Chongqing Changan Automobile Co. Ltd., B ......................... China 1,283,003 1,637,079
Dongfeng Motor Corp., H .......................................... China 27,354,000 24,031,002
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26,281,912
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COMMERCIAL BANKS 9.9%
Bank of China Ltd., H ............................................ China 15,400,000 8,240,326
b Bank of China Ltd., H, 144A ...................................... China 20,840,000 11,151,194
China Construction Bank Corp., H ................................. China 48,581,000 44,304,007
b China Construction Bank Corp., H, 144A ........................... China 38,097,000 34,743,002
a Chinatrust Financial Holding Co. Ltd. ............................ Taiwan 11,281,896 8,279,498
HSBC Holdings PLC ................................................ United Kingdom 626,498 11,459,076
b Industrial and Commercial Bank of China, H, 144A ................. China 31,104,000 21,804,346
Mega Financial Holding Co. Ltd. .................................. Taiwan 2,989,000 1,886,729
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141,868,178
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COMMUNICATIONS EQUIPMENT 0.7%
D-Link Corp. ..................................................... Taiwan 3,128,301 7,764,436
ZTE Corp., H ..................................................... China 304,000 1,601,245
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9,365,681
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COMPUTERS & PERIPHERALS 4.2%
Acer Inc. ........................................................ Taiwan 3,636,360 6,406,947
Advantech Co. Ltd. ............................................... Taiwan 1,727,219 5,117,882
Asustek Computer Inc. ............................................ Taiwan 12,971,755 39,469,749
Compal Electronics Inc. .......................................... Taiwan 2,233,110 2,524,951
a Lite-On IT Corp. ................................................. Taiwan 4,220,760 3,931,702
Lite-On Technology Corp. ......................................... Taiwan 1,988,514 3,107,529
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60,558,760
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DISTRIBUTORS 1.7%
China Resources Enterprise Ltd. .................................. Hong Kong 5,818,000 24,695,509
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DIVERSIFIED TELECOMMUNICATION SERVICES 2.0%
China Netcom Group Corp. (Hong Kong) Ltd. ........................ China 1,456,000 3,895,427
China Telecom Corp. Ltd., H ...................................... China 32,240,000 24,300,934
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28,196,361
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Quarterly Statement of Investments | 3

Templeton Dragon Fund, Inc.

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2007 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
ELECTRIC UTILITIES 2.9%
Cheung Kong Infrastructure Holdings Ltd. ......................... Hong Kong 11,060,000 $ 41,540,173
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ELECTRICAL EQUIPMENT 1.1%
BYD Co. Ltd., H .................................................. China 1,193,500 8,911,585
Phoenixtec Power Co. Ltd. ........................................ Taiwan 6,741,945 6,528,128
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15,439,713
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ELECTRONIC EQUIPMENT & INSTRUMENTS 0.9%
AU Optronics Corp. ............................................... Taiwan 6,856,845 11,829,029
Yorkey Optical International Cayman Ltd. ......................... China 6,405,000 1,622,990
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13,452,019
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FOOD & STAPLES RETAILING 11.4%
Dairy Farm International Holdings Ltd. ........................... Hong Kong 34,636,578 162,791,917
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FOOD PRODUCTS 0.7%
a COFCO International Ltd. ......................................... China 3,628,000 2,305,284
Luzhou Bio-Chem Technology Ltd. .................................. Singapore 2,503,000 800,246
People's Food Holdings Ltd. ...................................... China 3,045,000 2,930,841
Uni-President Enterprises Corp. .................................. Taiwan 1,717,231 2,630,965
Xiwang Sugar Holdings Co. Ltd. ................................... Hong Kong 2,940,000 1,505,084
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10,172,420
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HOTELS RESTAURANTS & LEISURE 0.4%
NagaCorp Ltd. .................................................... Cambodia 17,265,000 5,418,596
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HOUSEHOLD DURABLES 0.0% c
Samson Holding Ltd. .............................................. Hong Kong 1,860,000 528,732
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INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 3.9%
Datang International Power Generation Co. Ltd., H ................ China 33,630,000 38,628,572
Guangdong Electric Power Development Co. Ltd., B ................. China 8,604,300 9,108,476
Huadian Power International Corp. Ltd., H ........................ China 8,404,000 5,383,264
Huaneng Power International Inc., H .............................. China 1,454,000 2,008,626
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55,128,938
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INDUSTRIAL CONGLOMERATES 5.4%
Citic Pacific Ltd. ............................................... Hong Kong 6,638,000 42,349,594
Shanghai Industrial Holdings Ltd. ................................ China 6,850,000 34,186,341
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76,535,935
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INSURANCE 0.6%
China Life Insurance Co. Ltd., H ................................. China 1,452,000 8,339,085
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IT SERVICES 0.5%
SinoCom Software Group Ltd. ...................................... China 2,374,000 488,575
Travelsky Technology Ltd., H ..................................... China 5,674,000 6,079,455
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6,568,030
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4 | Quarterly Statement of Investments

Templeton Dragon Fund, Inc.

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2007 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
MACHINERY 1.9%
China Infrastructure Machinery Holdings Ltd. ..................... Hong Kong 716,000 $ 1,657,738
China International Marine Containers (Group) Co. Ltd., B ........ China 11,818,895 25,387,718
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27,045,456
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MEDIA 0.1%
b Next Media Ltd., 144A ............................................ Hong Kong 4,974,000 1,407,534
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METALS & MINING 0.3%
Aluminum Corp. of China Ltd., H .................................. China 1,028,000 2,955,296
a,b Fosun International, 144A ........................................ China 585,000 927,036
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3,882,332
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OIL, GAS & CONSUMABLE FUELS 25.4%
a,b China Coal Energy Co., H, 144A ................................... China 1,367,000 4,061,728
China Petroleum and Chemical Corp., H ............................ China 103,150,000 128,830,528
China Shenhua Energy Co. Ltd., H ................................. China 6,448,000 38,732,206
CNOOC Ltd. ....................................................... China 24,902,000 41,831,914
b CNOOC Ltd., 144A ................................................. China 14,270,000 23,971,625
a,b Hidili Industry International Development, 144A .................. China 29,000 46,105
PetroChina Co. Ltd., H ........................................... China 58,400,000 110,723,716
Yanzhou Coal Mining Co. Ltd., H .................................. China 7,680,000 15,805,620
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364,003,442
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PHARMACEUTICALS 0.1%
Tong Ren Tang Technologies Co. Ltd., H ........................... China 679,000 1,537,138
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REAL ESTATE 1.3%
Cheung Kong (Holdings) Ltd. ...................................... Hong Kong 1,167,000 19,243,728
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REAL ESTATE MANAGEMENT & DEVELOPMENT 0.1%
a,b Country Garden Holdings Co., 144A ................................ China 744,000 1,265,129
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SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 4.0%
MediaTek Inc. .................................................... Taiwan 380,000 6,846,637
Novatek Microelectronics Corp. Ltd. .............................. Taiwan 2,125,673 9,249,136
a Semiconductor Manufacturing International Corp. .................. China 30,520,000 3,611,626
Sunplus Technology Co. Ltd. ...................................... Taiwan 3,628,419 6,882,155
Taiwan Semiconductor Manufacturing Co. Ltd. ...................... Taiwan 15,447,914 30,105,327
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56,694,881
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SPECIALTY RETAIL 0.1%
I.T. Ltd. ........................................................ Hong Kong 5,772,000 1,321,529
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TEXTILES, APPAREL & LUXURY GOODS 0.5%
Tack Fat Group International Ltd. ................................ Hong Kong 19,824,000 2,855,878
Tainan Enterprises Co. Ltd. ...................................... Taiwan 1,657,443 2,440,329
Weiqiao Textile Co. Ltd., H ...................................... China 801,000 1,504,235
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6,800,442
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Quarterly Statement of Investments | 5

Templeton Dragon Fund, Inc.

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2007 (UNAUDITED) (CONTINUED)

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COUNTRY SHARES VALUE
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COMMON STOCKS (CONTINUED)
TRANSPORTATION INFRASTRUCTURE 2.9%

Cosco Pacific Ltd. ............................................................. China 3,354,000 $ 10,612,764
Hopewell Holdings Ltd. ......................................................... Hong Kong 5,876,000 28,040,517
a,b Rickmers Maritime, 144A ........................................................ Singapore 2,904,000 3,166,507
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41,819,788
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WIRELESS TELECOMMUNICATION SERVICES 11.8%
China Mobile Ltd. .............................................................. China 9,820,000 160,794,140
Taiwan Mobile Co. Ltd. ......................................................... Taiwan 6,292,764 8,561,321
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169,355,461
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TOTAL COMMON STOCKS (COST $541,649,463) ........................................ 1,411,999,863
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SHORT TERM INVESTMENT (COST $6,075,480) 0.4%
MONEY MARKET FUND 0.4%
d Franklin Institutional Fiduciary Trust Money Market Portfolio, 4.95% ........... United States 6,075,480 6,075,480
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TOTAL INVESTMENTS (COST $547,724,943) 99.1% .................................... 1,418,075,343
OTHER ASSETS, LESS LIABILITIES 0.9% ............................................ 12,752,260
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NET ASSETS 100.0% .............................................................. $ 1,430,827,603
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a Non-income producing for the twelve months ended September 30, 2007.

b Security was purchased pursuant to Rule 144A under the Securities Act of 1933
and may be sold in transactions exempt from registration only to qualified
institutional buyers or in a public offering registered under the Securities Act
of 1933. These securities have been deemed liquid under guidelines approved by
the Fund's Board of Directors. At September 30, 2007, the aggregate value of
these securities was $102,544,206, representing 7.17% of net assets.

c Rounds to less than 0.1% of net assets.

d The Franklin Institutional Fiduciary Trust Money Market Portfolio is managed
by an affiliate of the Fund's investment manager. The rate shown is the
annualized seven-day yield at period end.

6 | See Notes to Statement of Investments.
| Quarterly Statement of Investments

Templeton Dragon Fund, Inc.

NOTES TO STATEMENT OF INVESTMENTS (UNAUDITED)

1. ORGANIZATION

Templeton Dragon Fund, Inc. (the Fund) is registered under the Investment
Company Act of 1940, as amended, as a non-diversified, closed-end investment
company.

2. SECURITY VALUATION

Securities listed on a securities exchange or on the NASDAQ National Market
System are valued at the last quoted sale price or the official closing price of
the day, respectively. Over-the-counter securities and listed securities for
which there is no reported sale are valued within the range of the most recent
quoted bid and ask prices. Securities that trade in multiple markets or on
multiple exchanges are valued according to the broadest and most representative
market. Investments in open-end mutual funds are valued at the closing net asset
value.

Foreign securities are valued as of the close of trading on the foreign stock
exchange on which the security is primarily traded, or the NYSE, whichever is
earlier. If no sale is reported at that time, the foreign security will be
valued within the range of the most recent quoted bid and ask prices. The value
is then converted into its U.S. dollar equivalent at the foreign exchange rate
in effect at the close of the NYSE on the day that the value of the foreign
security is determined.

The Fund has procedures to determine the fair value of individual securities and
other assets for which market prices are not readily available or which may not
be reliably priced. Methods for valuing these securities may include:
fundamental analysis, matrix pricing, discounts from market prices of similar
securities, or discounts applied due to the nature and duration of restrictions
on the disposition of the securities. Due to the inherent uncertainty of
valuations of such securities, the fair values may differ significantly from the
values that would have been used had a ready market for such investments
existed. Occasionally, events occur between the time at which trading in a
security is completed and the close of the NYSE that might call into question
the availability (including the reliability) of the value of a portfolio
security held by the Fund. The investment manager monitors price movements
following the close of trading in foreign stock markets through a series of
country specific market proxies (such as baskets of American Depository
Receipts, futures contracts and exchange traded funds). These price movements
are measured against established trigger thresholds for each specific market
proxy to assist in determining if an event has occurred. If such an event
occurs, the securities may be valued using fair value procedures, which may
include the use of independent pricing services. All security valuation
procedures are approved by the Fund's Board of Directors.

Quarterly Statement of Investments | 7

Templeton Dragon Fund, Inc.

NOTES TO STATEMENT OF INVESTMENTS (UNAUDITED) (CONTINUED)

3. INCOME TAXES

At September 30, 2007, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:

Cost of investments .......................................... $ 547,869,997
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Unrealized appreciation ...................................... $ 877,141,151
Unrealized depreciation ...................................... (6,935,805)
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Net unrealized appreciation (depreciation) ................... $ 870,205,346
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4. NEW ACCOUNTING PRONOUNCEMENTS

In September 2006, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 157, "Fair Value Measurement" (SFAS 157), which defines fair
value, establishes a framework for measuring fair value, and expands disclosures
about fair value measurements. SFAS 157 is effective for fiscal years beginning
after November 15, 2007, and interim periods within those fiscal years. The Fund
believes the adoption of SFAS 157 will have no material impact on its financial
statements.

For information on the Fund's policy regarding other significant accounting
policies, please refer to the Fund's most recent semiannual or annual
shareholder report.

8 | Quarterly Statement of Investments

ITEM 2. CONTROLS AND PROCEDURES.

(a) EVALUATION OF DISCLOSURE CONTROLS AND PROCEDURES. The Registrant maintains
disclosure controls and procedures that are designed to ensure that information
required to be disclosed in the Registrant's filings under the Securities
Exchange Act of 1934 and the Investment Company Act of 1940 is recorded,
processed, summarized and reported within the periods specified in the rules and
forms of the Securities and Exchange Commission. Such information is accumulated
and communicated to the Registrant's management, including its principal
executive officer and principal financial officer, as appropriate, to allow
timely decisions regarding required disclosure. The Registrant's management,
including the principal executive officer and the principal financial officer,
recognizes that any set of controls and procedures, no matter how well designed
and operated, can provide only reasonable assurance of achieving the desired
control objectives.

Within 90 days prior to the filing date of this Quarterly Schedule of Portfolio
Holdings on Form N-Q, the Registrant had carried out an evaluation, under the
supervision and with the participation of the Registrant's management, including
the Registrant's principal executive officer and the Registrant's principal
financial officer, of the effectiveness of the design and operation of the
Registrant's disclosure controls and procedures. Based on such evaluation, the
Registrant's principal executive officer and principal financial officer
concluded that the Registrant's disclosure controls and procedures are
effective.

(b) CHANGES IN INTERNAL CONTROLS. There have been no significant changes in the
Registrant's internal controls or in other factors that could significantly
affect the internal controls subsequent to the date of their evaluation in
connection with the preparation of this Quarterly Schedule of Portfolio Holdings
on Form N-Q.

ITEM 3. EXHIBITS.

(a) Certification pursuant to Section 30a-2 under the Investment Company Act of
1940 of Jimmy D. Gambill, Chief Executive Officer - Finance and Administration,
and Galen G. Vetter, Chief Financial Officer.

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.

TEMPLETON DRAGON FUND, INC.

By /s/JIMMY D. GAMBILL
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Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date November 27, 2007

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

By /s/JIMMY D. GAMBILL
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Jimmy D. Gambill
Chief Executive Officer - Finance and Administration
Date November 27, 2007

By /s/GALEN G. VETTER
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Galen G. Vetter
Chief Financial Officer
Date November 27, 2007