Edgar Filing: TEMPLETON DRAGON FUND INC

FORM N-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF
REGISTERED MANAGEMENT INVESTMENT COMPANIES

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: 9/30/06
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ITEM 1. SCHEDULE OF INVESTMENTS.

Templeton Dragon Fund, Inc.

QUARTERLY STATEMENT OF INVESTMENTS
SEPTEMBER 30, 2006

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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, 2006 (UNAUDITED)

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COUNTRY SHARES VALUE
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COMMON STOCKS 95.3%
AIR FREIGHT & LOGISTICS 0.1%
Sinotrans Ltd., H .......................................................... China 3,017,000 $ 1,033,982
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AIRLINES 0.4%
Air China Ltd., H .......................................................... China 7,486,000 3,228,609
a Air China Ltd., H, 144A .................................................... China 1,364,000 588,274
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3,816,883
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AUTO COMPONENTS 1.5%
Cheng Shin Rubber Industry Co. Ltd. ........................................ Taiwan 10,923,563 10,689,321
Norstar Founders Group Ltd. ................................................ China 7,852,000 2,610,396
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13,299,717
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AUTOMOBILES 0.3%
Brilliance China Automotive Holdings Ltd. .................................. China 680,000 105,614
Chongqing Changan Automobile Co. Ltd., B ................................... China 4,384,169 2,234,107
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2,339,721
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CAPITAL MARKETS 0.5%
Yuanta Core Pacific Securities Co. ......................................... Taiwan 6,533,290 4,350,923
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COMMERCIAL BANKS 11.0%
a,b Bank of China Ltd., H, 144A ................................................ China 20,840,000 8,961,255
China Construction Bank, H ................................................. China 7,894,000 3,414,706
a China Construction Bank, H, 144A ........................................... China 38,097,000 16,479,612
a,b China Merchants Bank Co. Ltd., H, 144A ..................................... China 2,118,000 2,985,071
Chinatrust Financial Holding Co. Ltd. ...................................... Taiwan 15,631,896 11,661,366
HSBC Holdings PLC .......................................................... United Kingdom 1,985,377 36,212,905
Mega Financial Holding Co. Ltd. ............................................ Taiwan 27,217,000 19,276,311
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98,991,226
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COMMUNICATIONS EQUIPMENT 0.4%
D-Link Corp. ............................................................... Taiwan 3,604,962 3,810,742
ZTE Corp., H ............................................................... China 64,000 236,591
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4,047,333
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COMPUTERS & PERIPHERALS 3.3%
Acer Inc. .................................................................. Taiwan 4,216,621 7,144,441
Advantech Co. Ltd. ......................................................... Taiwan 1,803,865 5,192,037
Asustek Computer Inc. ...................................................... Taiwan 4,932,049 11,574,153
LITE-ON IT Corp. ........................................................... Taiwan 2,197,760 1,924,948
Lite-On Technology Corp. ................................................... Taiwan 2,821,424 3,480,978
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29,316,557
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CONSTRUCTION MATERIALS 0.2%
Anhui Conch Cement Co. Ltd., H ............................................. China 1,072,000 2,121,805
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Quarterly Statement of Investments | 3

Templeton Dragon Fund, Inc.

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2006 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
DISTRIBUTORS 2.9%
China Resources Enterprise Ltd. ................................................ China 10,658,000 $ 23,092,687
Test-Rite International Co. Ltd. ............................................... Taiwan 5,246,760 2,804,822
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25,897,509
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DIVERSIFIED TELECOMMUNICATION SERVICES 1.3%
China Telecom Corp. Ltd., H .................................................... China 32,240,000 11,669,989
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ELECTRIC UTILITIES 3.8%
Cheung Kong Infrastructure Holdings Ltd. ....................................... Hong Kong 11,060,000 33,858,664
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ELECTRICAL EQUIPMENT 0.8%
BYD Co. Ltd., H ................................................................ China 1,193,500 3,446,921
Phoenixtec Power Co. Ltd. ...................................................... Taiwan 3,811,945 4,173,452
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7,620,373
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ELECTRONIC EQUIPMENT & INSTRUMENTS 1.0%
Delta Electronics Inc. ......................................................... Taiwan 3,275,268 9,397,477
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FOOD & STAPLES RETAILING 14.1%
Dairy Farm International Holdings Ltd. ......................................... Hong Kong 39,811,578 126,600,818
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FOOD PRODUCTS 0.5%
Uni-President Enterprises Corp. ................................................ Taiwan 5,455,030 4,794,363
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HOTELS RESTAURANTS & LEISURE 0.6%
Hongkong and Shanghai Hotels Ltd. .............................................. Hong Kong 4,358,838 5,539,011
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HOUSEHOLD DURABLES 0.1%
Samson Holding Ltd. ............................................................ China 1,982,000 954,028
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INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 3.4%
Datang International Power Generation Co. Ltd., H .............................. China 26,502,000 19,900,355
Guangdong Electric Power Development Co. Ltd., B ............................... China 13,956,700 6,861,322
Huadian Power International Corp. Ltd., H ...................................... China 8,404,000 2,383,991
Huaneng Power International Inc., H ............................................ China 1,454,000 1,048,883
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30,194,551
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INDUSTRIAL CONGLOMERATES 4.4%
Citic Pacific Ltd. ............................................................. China 7,081,000 21,813,841
LG Corp. ....................................................................... South Korea 174,970 5,084,994
Shanghai Industrial Holdings Ltd. .............................................. China 6,540,000 12,356,966
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39,255,801
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INSURANCE 1.0%
China Life Insurance Co. Ltd., H ............................................... China 4,609,000 9,016,085
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IT SERVICES 0.4%
Travelsky Technology Ltd., H ................................................... China 2,837,000 3,575,997
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4 | Quarterly Statement of Investments

Templeton Dragon Fund, Inc.

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2006 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
MACHINERY 1.8%
China International Marine Containers (Group) Co. Ltd., B .................... China 10,913,619 $ 13,756,457
Yungtay Engineering Co. Ltd. ................................................. Taiwan 5,686,000 2,893,660
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16,650,117
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MEDIA 0.3%
a Next Media Ltd., 144A ........................................................ Hong Kong 4,974,000 2,713,445
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METALS & MINING 0.1%
Aluminum Corp. of China Ltd., H .............................................. China 1,028,000 653,168
China Oriental Group Co. Ltd. ................................................ China 392,000 78,494
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731,662
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OFFICE ELECTRONICS 0.1%
Kinpo Electronics Inc. ....................................................... Taiwan 1,557,234 538,518
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OIL, GAS & CONSUMABLE FUELS 17.8%
China Petroleum and Chemical Corp., H ........................................ China 103,150,000 64,082,714
China Shenhua Energy Co. Ltd., H ............................................. China 6,448,000 10,378,841
CNOOC Ltd. ................................................................... China 18,177,000 15,119,016
a CNOOC Ltd., 144A ............................................................. China 14,270,000 11,869,305
PetroChina Co. Ltd., H ....................................................... China 45,320,000 48,748,384
a PetroChina Co. Ltd., H, 144A ................................................. China 9,200,000 9,895,965
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160,094,225
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PHARMACEUTICALS 0.1%
Tong Ren Tang Technologies Co. Ltd., H ....................................... China 628,000 1,086,615
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REAL ESTATE 4.9%
Cheung Kong (Holdings) Ltd. .................................................. Hong Kong 2,575,000 27,648,367
Hang Lung Group Ltd. ......................................................... Hong Kong 3,138,042 8,076,058
Henderson Investment Ltd. .................................................... Hong Kong 4,554,000 8,218,729
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43,943,154
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SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 4.5%
Elan Microelectronics Corp. .................................................. Taiwan 2,082,338 827,023
Faraday Technology Corp. ..................................................... Taiwan 1,150,143 1,799,378
Realtek Semiconductor Corp. .................................................. Taiwan 263,550 323,965
Samsung Electronics Co. Ltd. ................................................. South Korea 10,780 7,564,513
Sunplus Technology Co. Ltd. .................................................. Taiwan 6,903,006 6,588,191
Taiwan Semiconductor Manufacturing Co. Ltd. .................................. Taiwan 13,202,911 23,805,913
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40,908,983
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TEXTILES, APPAREL & LUXURY GOODS 0.5%
Tack Fat Group International Ltd. ............................................ Hong Kong 21,144,000 2,252,639
Tainan Enterprises Co. Ltd. .................................................. Taiwan 1,883,104 2,388,715
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4,641,354
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Quarterly Statement of Investments | 5

Templeton Dragon Fund, Inc.

STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2006 (UNAUDITED) (CONTINUED)

COMMON STOCKS (CONTINUED)
TRANSPORTATION INFRASTRUCTURE 2.1%
Cosco Pacific Ltd. ........................................................... China 3,354,000 $ 6,707,441
b Hainan Meilan International Airport Co. Ltd., H .............................. China 2,994,000 1,364,289
Hopewell Holdings Ltd. ....................................................... Hong Kong 3,764,000 10,725,780
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18,797,510
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WIRELESS TELECOMMUNICATION SERVICES 11.1%
China Mobile (Hong Kong) Ltd. ................................................ China 13,122,000 92,722,186
Taiwan Mobile Co. Ltd. ....................................................... Taiwan 7,047,764 6,747,633
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99,469,819
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TOTAL COMMON STOCKS (COST $488,452,194) ...................................... 857,268,215
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SHORT TERM INVESTMENTS (COST $40,253,335) 4.4%
MONEY MARKET FUND 4.4%
c Franklin Institutional Fiduciary Trust Money Market Portfolio, 4.95% ......... United States 40,253,335 40,253,335
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TOTAL INVESTMENTS (COST $528,705,529) 99.7% .................................. 897,521,550
OTHER ASSETS, LESS LIABILITIES 0.3% .......................................... 2,270,173
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NET ASSETS 100.0% ............................................................ $899,791,723
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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 September 30,
2006, the aggregate value of these securities was $53,492,927,
representing 5.95% of net assets.

b Non-income producing for the twelve months ended September 30, 2006.

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)

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

1. INCOME TAXES

At September 30, 2006, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:

Cost of investments ............................... $529,608,463
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Unrealized appreciation ........................... $375,092,496
Unrealized depreciation ........................... (7,179,409)
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Net unrealized appreciation (depreciation) ........ $367,913,087
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For information on the Fund's policy regarding valuation of investments and
other significant accounting policies, please refer to the Fund's most recent
semiannual or annual shareholder report.

Quarterly Statement of Investments | 7

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) Certifications pursuant to Section 30a-2 of 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, 2006

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, 2006

By /s/GALEN G. VETTER
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Galen G. Vetter
Chief Financial Officer
Date November 27, 2006