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: 9/30/08
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ITEM 1. SCHEDULE OF INVESTMENTS.
Templeton Dragon Fund, Inc.
QUARTERLY STATEMENT OF INVESTMENTS
SEPTEMBER 30, 2008
CONTENTS
Statement of Investments .................................................... 3
Notes to Statement of Investments ........................................... 7
(FRANKLIN TEMPLETON INVESTMENTS(R) LOGO)
Franklin - TEMPLETON - Mutual Series
Quarterly Statement of Investments | 1
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Templeton Dragon Fund, Inc.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2008 (UNAUDITED)
COUNTRY SHARES/UNITS VALUE
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COMMON STOCKS AND OTHER EQUITY INTERESTS 98.3%
AIR FREIGHT & LOGISTICS 0.1%
Sinotrans Ltd., H ..................................................... China 4,063,000 $ 793,666
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AUTO COMPONENTS 2.1%
Cheng Shin Rubber Industry Co. Ltd. ................................... Taiwan 12,778,099 15,297,896
Norstar Founders Group Ltd. ........................................... Hong Kong 13,376,000 2,323,502
(a) Zhejiang Glass Co. Ltd., H ............................................ China 1,884,000 474,250
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18,095,648
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AUTOMOBILES 1.7%
(a) Chongqing Changan Automobile Co. Ltd., B .............................. China 4,395,302 1,032,015
Dongfeng Motor Corp., H ............................................... China 27,354,000 10,066,045
Great Wall Motor Co. Ltd., H .......................................... China 2,496,000 1,052,784
Jiangling Motors Corp. Ltd., B ........................................ China 3,818,520 2,513,712
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14,664,556
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COMMERCIAL BANKS 8.4%
Bank of China Ltd., H ................................................. China 56,321,000 21,823,289
China Construction Bank Corp., H ...................................... China 50,251,000 33,526,901
(b) Industrial and Commercial Bank of China, H, 144A ...................... China 27,510,000 16,624,972
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71,975,162
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COMMUNICATIONS EQUIPMENT 0.3%
ZTE Corp., H .......................................................... China 590,337 2,235,833
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COMPUTERS & PERIPHERALS 4.8%
Acer Inc. ............................................................. Taiwan 3,245,905 5,513,126
Advantech Co. Ltd. .................................................... Taiwan 1,813,561 3,489,087
Asustek Computer Inc. ................................................. Taiwan 14,656,504 28,935,308
Lite-On IT Corp. ...................................................... Taiwan 6,206,598 3,529,630
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41,467,151
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DISTRIBUTORS 2.1%
China Resources Enterprise Ltd. ....................................... Hong Kong 5,818,000 14,204,392
Dah Chong Hong Holdings Ltd. .......................................... Hong Kong 16,316,520 3,375,589
(b) Dah Chong Hong Holdings Ltd., 144A .................................... Hong Kong 550,000 113,785
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17,693,766
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DIVERSIFIED TELECOMMUNICATION SERVICES 1.1%
China Netcom Group Corp. (Hong Kong) Ltd. ............................. China 844,000 1,868,780
China Telecom Corp. Ltd., H ........................................... China 18,936,000 7,770,302
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9,639,082
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ELECTRIC UTILITIES 4.9%
Cheung Kong Infrastructure Holdings Ltd. .............................. Hong Kong 9,037,000 42,050,077
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ELECTRICAL EQUIPMENT 0.1%
BYD Co. Ltd., H ....................................................... China 556,700 931,649
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Quarterly Statement of Investments | 3
Templeton Dragon Fund, Inc.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2008 (UNAUDITED) (CONTINUED)
COUNTRY SHARES/UNITS VALUE
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COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
ELECTRONIC EQUIPMENT & INSTRUMENTS 0.2%
Yorkey Optical International Cayman Ltd. .............................. China 10,531,000 $ 1,752,415
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FOOD & STAPLES RETAILING 19.0%
Beijing Jingkelong Supermarket Chain Group Co. Ltd., H ................ China 1,870,000 821,836
Dairy Farm International Holdings Ltd. ................................ Hong Kong 32,157,478 161,805,013
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162,626,849
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FOOD PRODUCTS 0.8%
China Foods Ltd. ...................................................... China 9,716,000 3,085,641
China Huiyuan Juice Group Ltd. ........................................ China 806,000 997,217
People's Food Holdings Ltd. ........................................... China 3,031,000 1,013,594
Uni-President Enterprises Corp. ....................................... Taiwan 1,290,692 1,162,063
Xiwang Sugar Holdings Co. Ltd. ........................................ Hong Kong 3,638,000 937,896
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7,196,411
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HOTELS, RESTAURANTS & LEISURE 0.4%
NagaCorp Ltd. ......................................................... Cambodia 17,265,000 3,285,656
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INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 2.8%
Datang International Power Generation Co. Ltd., H ..................... China 29,806,000 16,635,247
Guangdong Electric Power Development Co. Ltd., B ...................... China 10,224,960 3,978,765
Huadian Power International Corp. Ltd., H ............................. China 8,404,000 2,109,071
Huaneng Power International Inc., H ................................... China 1,454,000 966,575
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23,689,658
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INDUSTRIAL CONGLOMERATES 3.8%
Citic Pacific Ltd. .................................................... Hong Kong 5,726,000 16,735,926
Shanghai Industrial Holdings Ltd. ..................................... China 6,850,000 15,656,386
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32,392,312
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INSURANCE 0.2%
China Life Insurance Co. Ltd., H ...................................... China 523,000 1,948,135
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IT SERVICES 0.3%
Travelsky Technology Ltd., H .......................................... China 5,087,000 2,526,526
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MACHINERY 1.5%
China International Marine Containers (Group) Co. Ltd., B ............. China 11,778,895 7,786,599
Lonking Holdings Ltd. ................................................. Hong Kong 2,433,000 1,810,827
Mirle Automation Corp. ................................................ Taiwan 679,000 498,018
Shin Zu Shing Co. Ltd. ................................................ Taiwan 714,637 2,944,214
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13,039,658
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MARINE 0.1%
Sinotrans Shipping Ltd. ............................................... Hong Kong 2,026,000 639,209
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4 | Quarterly Statement of Investments
Templeton Dragon Fund, Inc.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2008 (UNAUDITED) (CONTINUED)
COUNTRY SHARES/UNITS VALUE
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COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
MEDIA 0.1%
Next Media Ltd. ....................................................... Hong Kong 5,588,000 $ 1,365,300
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METALS & MINING 0.1%
Aluminum Corp. of China Ltd., H ....................................... China 952,000 579,489
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OIL, GAS & CONSUMABLE FUELS 23.2%
(b) China Coal Energy Co., H, 144A ........................................ China 891,000 941,854
China Petroleum and Chemical Corp., H ................................. China 97,904,000 77,259,974
China Shenhua Energy Co. Ltd., H ...................................... China 6,125,500 15,023,627
CNOOC Ltd. ............................................................ China 35,637,000 40,029,828
PetroChina Co. Ltd., H ................................................ China 55,370,000 57,472,630
Yanzhou Coal Mining Co. Ltd., H ....................................... China 7,984,000 8,231,783
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198,959,696
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PAPER & FOREST PRODUCTS 0.2%
Nine Dragons Paper Holdings Ltd. ...................................... China 4,104,000 1,535,090
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PHARMACEUTICALS 0.1%
Tong Ren Tang Technologies Co. Ltd., H ................................ China 679,000 579,652
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REAL ESTATE MANAGEMENT & DEVELOPMENT 4.4%
Cheung Kong (Holdings) Ltd. ........................................... Hong Kong 1,105,000 12,516,571
Hopewell Holdings Ltd. ................................................ Hong Kong 6,568,000 23,849,952
Soho China Ltd. ....................................................... China 4,206,500 1,421,436
(b) Soho China Ltd., 144A ................................................. China 764,000 258,166
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38,046,125
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SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 4.2%
MediaTek Inc. ......................................................... Taiwan 383,800 3,969,911
Novatek Microelectronics Corp. Ltd. ................................... Taiwan 2,875,766 4,283,837
(a) Semiconductor Manufacturing International Corp. ....................... China 6,395,000 193,514
Sunplus Technology Co. Ltd. ........................................... Taiwan 181,362 84,013
Taiwan Semiconductor Manufacturing Co. Ltd. ........................... Taiwan 16,295,661 27,260,618
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35,791,893
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SOFTWARE 0.1%
Kingdee International Software Group Co. Ltd., fgn. ................... Hong Kong 4,140,000 798,010
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SPECIALTY RETAIL 0.0%(c)
I.T Ltd. .............................................................. Hong Kong 1,152,000 139,861
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TEXTILES, APPAREL & LUXURY GOODS 0.2%
(a, d)Tack Fat Group International Ltd. ..................................... Hong Kong 19,824,000 --
Tainan Enterprises Co. Ltd. ........................................... Taiwan 1,657,443 1,029,933
Weiqiao Textile Co. Ltd., H ........................................... China 1,113,000 545,978
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1,575,911
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Quarterly Statement of Investments | 5
Templeton Dragon Fund, Inc.
STATEMENT OF INVESTMENTS, SEPTEMBER 30, 2008 (UNAUDITED) (CONTINUED)
COUNTRY SHARES/UNITS VALUE
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COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
TRANSPORTATION INFRASTRUCTURE 0.7%
Cosco Pacific Ltd. .................................................... China 3,972,000 $ 4,558,215
(b) Rickmers Maritime, 144A ............................................... Singapore 2,904,000 1,703,093
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6,261,308
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WIRELESS TELECOMMUNICATION SERVICES 10.3%
China Mobile Ltd. ..................................................... China 8,311,500 83,252,246
Taiwan Mobile Co. Ltd. ................................................ Taiwan 2,972,831 4,753,258
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88,005,504
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TOTAL COMMON STOCKS AND OTHER EQUITY INTERESTS
(COST $486,416,372) ................................................ 842,281,258
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SHORT TERM INVESTMENTS (COST $3,461,767) 0.4%
MONEY MARKET FUNDS 0.4%
(e) Franklin Institutional Fiduciary Trust Money Market Portfolio, 1.98% .. United States 3,461,767 3,461,767
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TOTAL INVESTMENTS (COST $489,878,139) 98.7% ........................... 845,743,025
OTHER ASSETS, LESS LIABILITIES 1.3% ................................... 10,916,692
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NET ASSETS 100.0% ..................................................... $856,659,717
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(a) Non-income producing for the twelve months ended September 30, 2008.
(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,
2008, the aggregate value of these securities was $19,641,870, representing
2.29% of net assets.
(c) Rounds to less than 0.1% of net assets.
(d) Security has been deemed illiquid because it may not be able to be sold
within seven days. At September 30, 2008, the value of this security was
$0.
(e) 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.
See Notes to Statement of Investments.
6 | Quarterly Statement of Investments
Templeton Dragon Fund, Inc.
NOTES TO STATEMENT OF INVESTMENTS (UNAUDITED)
1. ORGANIZATION
Templeton Dragon Fund (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, 2008, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
Cost of investments ........................................ $490,023,193
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Unrealized appreciation .................................... $416,863,416
Unrealized depreciation .................................... (61,143,584)
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Net unrealized appreciation (depreciation) ................. $355,719,832
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4. FAIR VALUE MEASUREMENTS
The Fund adopted Financial Accounting Standards Board (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)
The inputs or methodology used for valuing securities are not an indication of
the risk associated with investing in those securities.
The following is a summary of the inputs used as of September 30, 2008, in
valuing the Fund's assets carried at fair value:
LEVEL 1 LEVEL 2 LEVEL 3 TOTAL
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ASSETS:
Investments in
Securities......... $6,747,423 $838,995,602 $-- $845,743,025
8 | Quarterly Statement of Investments
Templeton Dragon Fund, Inc.
NOTES TO STATEMENT OF INVESTMENTS (UNAUDITED) (CONTINUED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
At September 30, 2008, the reconciliation of assets in which significant
unobservable inputs (Level 3) were used in determining fair value, is as
follows:
INVESTMENTS
IN SECURITIES
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Beginning Balance - January 2008 .............................. $ --
Net realized gain (loss) ................................... --
Net change in unrealized appreciation (depreciation) ....... (1,016,029)
Net purchases (sales) ...................................... --
Transfers in and/or out of Level 3 ............................ 1,016,029
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Ending Balance ................................................ $ --
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Net change in unrealized appreciation (depreciation)
attributable to assets still held at end of period ......... $(1,016,029)
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5. NEW ACCOUNTING PRONOUNCEMENT
In March 2008, 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 and interim periods beginning
after November 15, 2008. The Fund is currently evaluating the impact, if any, of
applying the various provisions of SFAS 161.
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 November 25, 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 November 25, 2008
By /s/LAURA F. FERGERSON
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Laura F. Fergerson
Chief Financial Officer and
Chief Accounting Officer
Date November 25, 2008