FORM N-Q
QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF
REGISTERED MANAGEMENT INVESTMENT COMPANY
Investment Company Act file number 811-08394
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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: 3/31/08
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ITEM 1. SCHEDULE OF INVESTMENTS.
TEMPLETON DRAGON FUND, INC.
QUARTERLY STATEMENT OF INVESTMENTS
MARCH 31, 2008
CONTENTS
Statement of Investments ........................................... 3
Notes to Statement of Investments .................................. 7
[FRANKLIN TEMPLETON INVESTMENTS LOGO]
Franklin - TEMPLETON - Mutual Series
Quarterly Statement of Investments | 1
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TEMPLETON DRAGON FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 2008 (UNAUDITED)
COUNTRY SHARES/UNITS VALUE
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COMMON STOCKS AND OTHER EQUITY INTERESTS 98.4%
AIR FREIGHT & LOGISTICS 0.1%
Sinotrans Ltd., H .............................................. China 3,017,000 $ 872,055
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AUTO COMPONENTS 2.4%
Cheng Shin Rubber Industry Co. Ltd. ............................ Taiwan 11,111,391 22,561,385
Norstar Founders Group Ltd. .................................... Hong Kong 13,376,000 3,986,578
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26,547,963
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AUTOMOBILES 1.3%
Dongfeng Motor Corp., H ........................................ China 27,354,000 12,299,145
Great Wall Motor Co. Ltd., H ................................... China 1,712,000 1,651,694
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13,950,839
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COMMERCIAL BANKS 9.0%
Bank of China Ltd., H .......................................... China 35,481,000 15,132,823
(a) Bank of China Ltd., H, 144A .................................... China 20,840,000 8,888,364
China Construction Bank Corp., H ............................... China 70,434,000 52,570,789
(a) Industrial and Commercial Bank of China, H, 144A ............... China 31,104,000 21,657,162
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98,249,138
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COMMUNICATIONS EQUIPMENT 0.4%
D-Link Corp .................................................... Taiwan 1,524,240 2,513,062
ZTE Corp., H. .................................................. China 488,000 2,297,629
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4,810,691
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COMPUTERS & Peripherals 5.2%
Acer Inc. ...................................................... Taiwan 3,636,360 6,509,954
Advantech Co. Ltd. ............................................. Taiwan 1,727,219 4,081,164
Asustek Computer Inc. .......................................... Taiwan 13,327,755 39,035,449
Lite-On IT Corp. ............................................... Taiwan 5,531,720 4,714,896
Lite-On Technology Corp. ....................................... Taiwan 1,988,514 2,313,291
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56,654,754
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DISTRIBUTORS 1.9%
China Resources Enterprise Ltd. ................................ Hong Kong 5,818,000 18,685,285
(b) Dah Chong Hong Holdings Ltd. ................................... Hong Kong 4,454,520 1,499,299
(a,b) Dah Chong Hong Holdings Ltd., 144A ............................. Hong Kong 550,000 185,119
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20,369,703
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DIVERSIFIED TELECOMMUNICATION SERVICES 2.2%
China Netcom Group Corp. (Hong Kong) Ltd. ...................... China 1,456,000 4,189,820
China Telecom Corp. Ltd., H .................................... China 32,240,000 20,211,608
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24,401,428
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ELECTRIC UTILITIES 4.1%
Cheung Kong Infrastructure Holdings Ltd. ....................... Hong Kong 11,060,000 44,400,838
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Quarterly Statement of Investments | 3
TEMPLETON DRAGON FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 2008 (UNAUDITED) (CONTINUED)
COUNTRY SHARES/UNITS VALUE
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COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
ELECTRICAL EQUIPMENT 0.2%
BYD Co. Ltd., H ................................................ China 1,107,700 $ 2,034,905
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ELECTRONIC EQUIPMENT & Instruments 1.3%
AU Optronics Corp. ............................................. Taiwan 6,856,845 11,891,787
Yorkey Optical International Cayman Ltd.. ...................... China 9,347,000 2,221,416
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14,113,203
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ENERGY EQUIPMENT & Services 0.1%
(b) Honghua Group Ltd. ............................................. China 3,353,000 1,085,476
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FOOD & Staples Retailing 13.5%
Dairy Farm International Holdings Ltd. ......................... Hong Kong 33,219,078 147,824,897
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FOOD PRODUCTS 0.8%
(b) China Foods Ltd. ............................................... China 5,320,000 3,007,117
People's Food Holdings Ltd. .................................... China 3,031,000 2,290,456
Uni-President Enterprises Corp. ................................ Taiwan 1,229,231 1,822,386
Xiwang Sugar Holdings Co. Ltd. ................................. Hong Kong 3,638,000 1,275,885
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8,395,844
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HOTELS, RESTAURANTS & Leisure 0.3%
NagaCorp Ltd. .................................................. Cambodia 17,265,000 3,748,343
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INDEPENDENT POWER PRODUCERS & Energy Traders 2.2%
Datang International Power Generation Co. Ltd., H .............. China 29,806,000 15,813,928
Guangdong Electric Power Development Co. Ltd., B ............... China 8,604,300 4,819,346
Huadian Power International Corp. Ltd., H. ..................... China 8,404,000 2,094,468
Huaneng Power International Inc., H ............................ China 1,454,000 1,103,921
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23,831,663
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INDUSTRIAL CONGLOMERATES 5.0%
Citic Pacific Ltd. ............................................. Hong Kong 6,638,000 28,140,849
Shanghai Industrial Holdings Ltd. .............................. China 6,850,000 25,871,638
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54,012,487
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INSURANCE 0.2%
China Life Insurance Co. Ltd., H ............................... China 523,000 1,797,262
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IT SERVICES 0.3%
Travelsky Technology Ltd., H ................................... China 5,087,000 3,783,784
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MACHINERY 1.9%
China Infrastructure Machinery Holdings Ltd. ................... Hong Kong 1,449,000 1,081,510
China International Marine Containers (Group) Co. Ltd., B ...... China 11,778,895 20,125,293
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21,206,803
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4 | Quarterly Statement of Investments
TEMPLETON DRAGON FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 2008 (UNAUDITED) (CONTINUED)
COUNTRY SHARES/UNITS VALUE
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COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
MEDIA 0.2%
Next Media Ltd. ............................................. Hong Kong 614,000 $ 239,788
(a) Next Media Ltd., 144A ....................................... Hong Kong 4,974,000 1,942,520
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2,182,308
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METALS & Mining 0.1%
Aluminum Corp. of China Ltd., H ............................. China 952,000 1,538,522
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OIL, GAS & CONSUMABLE FUELS 23.0%
(a) China Coal Energy Co., H, 144A............................... China 891,000 1,552,113
China Petroleum and Chemical Corp., H ....................... China 97,904,000 83,764,631
China Shenhua Energy Co. Ltd., H ............................ China 6,448,000 25,761,517
CNOOC Ltd.................................................... China 24,902,000 36,789,009
(a) CNOOC Ltd., 144A ............................................ China 13,283,000 19,623,661
PetroChina Co. Ltd., H ...................................... China 57,624,000 71,954,122
Yanzhou Coal Mining Co. Ltd., H ............................. China 7,984,000 11,302,854
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250,747,907
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PHARMACEUTICALS 0.1%
Tong Ren Tang Technologies Co. Ltd., H ...................... China 679,000 912,405
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REAL ESTATE 1.5%
Cheung Kong (Holdings) Ltd. ................................. Hong Kong 1,167,000 16,566,057
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REAL ESTATE MANAGEMENT & DEVELOPMENT 0.2%
(b) Soho China Ltd. ............................................. China 1,783,500 1,200,578
(a,b) Soho China Ltd., 144A ....................................... China 764,000 514,293
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1,714,871
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SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 4.6%
MediaTek Inc. ............................................... Taiwan 380,000 5,002,139
Novatek Microelectronics Corp. Ltd. ......................... Taiwan 2,848,673 10,405,854
(b) Semiconductor Manufacturing International Corp. ............. China 30,520,000 2,117,212
Sunplus Technology Co. Ltd .................................. Taiwan 3,628,419 4,483,731
Taiwan Semiconductor Manufacturing Co. Ltd. ................. Taiwan 13,506,914 28,047,727
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50,056,663
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SPECIALTY RETAIL 0.1%
I.T. Ltd. ................................................... Hong Kong 1,196,000 333,409
Sa Sa International Holdings Ltd ............................ Hong Kong 2,430,000 905,295
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1,238,704
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TEXTILES, APPAREL & LUXURY GOODS 0.5%
Tack Fat Group International Ltd. ........................... Hong Kong 19,824,000 1,757,221
Tainan Enterprises Co. Ltd. ................................. Taiwan 1,657,443 2,263,596
Weiqiao Textile Co. Ltd., H ................................. China 801,000 1,029,007
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5,049,824
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Quarterly Statement of Investments | 5
TEMPLETON DRAGON FUND, INC.
STATEMENT OF INVESTMENTS, MARCH 31, 2008 (UNAUDITED) (CONTINUED)
COUNTRY SHARES/UNITS VALUE
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COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
TRANSPORTATION INFRASTRUCTURE 2.8%
Cosco Pacific Ltd. ............................................... China 3,354,000 $ 6,540,649
Hopewell Holdings Ltd ............................................ Hong Kong 5,876,000 ,306,184
(a) Rickmers Maritime, 144A. ......................................... Singapore 2,904,000 2,152,284
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30,999,117
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WIRELESS TELECOMMUNICATION SERVICES 12.9%
China Mobile Ltd. ................................................ China 8,905,000 132,473,343
Taiwan Mobile Co. Ltd. ........................................... Taiwan 4,294,831 8,268,260
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140,741,603
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TOTAL COMMON STOCKS AND OTHER EQUITY INTERESTS
(COST $515,387,630) .............................................. 1,073,840,057
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SHORT TERM INVESTMENT (COST $14,913,907) 1.4%
MONEY MARKET FUND 1.4%
(c) Franklin Institutional Fiduciary Trust Money Market Portfolio,
2.50%............................................................. United States 14,913,907 14,913,907
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TOTAL INVESTMENTS (COST $530,301,537) 99.8% ...................... 1,088,753,964
OTHER ASSETS, LESS LIABILITIES 0.2% .............................. 2,241,398
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NET ASSETS 100.0% ................................................ $ 1,090,995,362
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(a) 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 March 31, 2008, the
aggregate value of these securities was $56,515,516 representing 5.18%
of net assets.
(b) Non-income producing for the twelve months ended March 31, 2008.
(c) 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. (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 March 31, 2008, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
Cost of investments $ 530,446,591
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Unrealized appreciation $ 587,376,438
Unrealized depreciation (29,069,065)
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Net unrealized appreciation (depreciation) $ 558,307,373
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4. NEW ACCOUNTING PRONOUNCEMENT
In March 2008, the Financial Accounting Standards Board (FASB) issued FASB
Statement No. 161, "Disclosures about Derivative Instruments and Hedging
Activities, an amendment of FASB Statement No. 133" (SFAS 161), which expands
disclosures about derivative investments and hedging activities. SFAS 161 is
effective for fiscal years beginning after November 15, 2008, and interim
periods within those fiscal years. The Fund is currently evaluating the impact,
if any, of applying the various provisions of SFAS 161.
5. FAIR VALUE MEASUREMENTS
The Fund adopted FASB issued FASB Statement No. 157, "Fair Value Measurement"
(SFAS 157), on January 1, 2008. SFAS 157 defines fair value, establishes a
framework for measuring fair value, and expands disclosures about fair value
measurements. The Fund has determined that the implementation of SFAS 157 did
not have a material impact on the Fund's financial statements.
SFAS 157 establishes a fair value hierarchy that distinguishes between market
data obtained from independent sources (observable inputs) and the Fund's own
market assumptions (unobservable inputs). These inputs are used in determining
the value of the Fund's investments and are summarized in the following fair
value hierarchy:
- Level 1 - quoted prices in active markets for identical securities
- Level 2 - other significant observable inputs (including quoted prices for
similar securities, interest rates, prepayment speed, credit risk, etc.)
- Level 3 - significant unobservable inputs (including the Fund's own
assumptions in determining the fair value of investments)
8 | Quarterly Statement of Investments
TEMPLETON DRAGON FUND, INC.
NOTES TO STATEMENT OF INVESTMENTS (UNAUDITED) (CONTINUED)
5. FAIR VALUE MEASUREMENTS (CONTINUED)
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities.
As of March 31, 2008, all of the Fund's investments in securities carried at
fair value were in Level 1 inputs.
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.
Quarterly Statement of Investments | 9
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 Galen G. Vetter, Chief Executive Officer - Finance and Administration,
and Laura F. Fergerson, Chief Financial Officer and Chief Accounting 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/GALEN G. VETTER
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Galen G. Vetter
Chief Executive Officer -
Finance and Administration
Date May 27, 2008
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/GALEN G. VETTER
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Galen G. Vetter
Chief Executive Officer -
Finance and Administration
Date May 27, 2008
By /s/LAURA F. FERGERSON
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Laura F. Fergerson
Chief Financial Officer and
Chief Accounting Officer
Date May 27, 2008