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: 3/31/09
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ITEM 1. SCHEDULE OF INVESTMENTS.
Templeton Dragon Fund, Inc.
QUARTERLY STATEMENT OF INVESTMENTS
MARCH 31, 2009
CONTENTS
Statement of Investments.................................................... 3
Notes to Statement of Investments........................................... 7
(FRANKLIN TEMPLETON INVESTMENS(R) LOGO)
Franklin - TEMPLETON - Mutual Series
Quarterly Statement of Investments | 1
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Templeton Dragon Fund, Inc.
STATEMENT OF INVESTMENTS, MARCH 31, 2009 (UNAUDITED)
COUNTRY SHARES/UNITS VALUE
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COMMON STOCKS AND OTHER EQUITY INTERESTS 98.8%
AIR FREIGHT & LOGISTICS 0.1%
Sinotrans Ltd., H ........................................... China 4,063,000 $ 629,073
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AUTO COMPONENTS 1.7%
Cheng Shin Rubber Industry Co. Ltd. ......................... Taiwan 12,778,099 12,369,546
(a) Norstar Founders Group Ltd. ................................. Hong Kong 13,376,000 --
(b) Zhejiang Glass Co. Ltd., H .................................. China 2,154,000 352,958
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12,722,504
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AUTOMOBILES 2.9%
(b) Chongqing Changan Automobile Co. Ltd., B .................... China 4,395,302 1,678,624
Denway Motors Ltd. .......................................... China 2,008,000 777,245
Dongfeng Motor Corp., H ..................................... China 27,354,000 14,152,667
Great Wall Motor Co. Ltd., H ................................ China 2,496,000 1,014,444
Jiangling Motors Corp. Ltd., B .............................. China 3,818,520 3,241,859
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20,864,839
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BEVERAGES 0.3%
Yantai Changyu Pioneer Wine Co. Ltd., B ..................... China 529,490 1,926,549
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COMMERCIAL BANKS 8.0%
Bank of China Ltd., H ....................................... China 35,777,000 11,863,426
(c) Bank of China Ltd., H, 144A ................................. China 9,420,000 3,123,612
China Construction Bank Corp., H ............................ China 50,251,000 28,527,943
Industrial and Commercial Bank of China Ltd., H ............. China 27,510,000 14,304,370
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57,819,351
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COMMUNICATIONS EQUIPMENT 0.4%
ZTE Corp., H ................................................ China 788,737 3,210,737
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COMPUTERS & PERIPHERALS 3.5%
Acer Inc. ................................................... Taiwan 3,245,905 4,878,183
Advantech Co. Ltd. .......................................... Taiwan 1,813,561 2,517,128
Asustek Computer Inc. ....................................... Taiwan 14,656,504 15,397,211
Lite-On IT Corp. ............................................ Taiwan 6,206,598 2,807,464
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25,599,986
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CONSTRUCTION MATERIALS 0.0%(d)
(b) Asia Cement China Holdings Corp. ............................ China 389,500 211,072
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DISTRIBUTORS 1.7%
China Resources Enterprise Ltd. ............................. Hong Kong 5,818,000 9,007,993
Dah Chong Hong Holdings Ltd. ................................ Hong Kong 18,751,520 2,975,875
(c) Dah Chong Hong Holdings Ltd., 144A .......................... Hong Kong 550,000 87,285
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12,071,153
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Quarterly Statement of Investments | 3
Templeton Dragon Fund, Inc.
STATEMENT OF INVESTMENTS, MARCH 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY SHARES/UNITS VALUE
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COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
DIVERSIFIED TELECOMMUNICATION SERVICES 1.7%
China Telecom Corp. Ltd., H ................................. China 18,476,000 $ 7,628,357
China Unicom (Hong Kong) Ltd. ............................... China 4,430,752 4,733,483
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12,361,840
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ELECTRIC UTILITIES 4.4%
Cheung Kong Infrastructure Holdings Ltd. .................... Hong Kong 7,952,000 31,806,153
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ELECTRICAL EQUIPMENT 0.1%
Dongfang Electric Co. Ltd., H ............................... China 354,000 791,087
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ENERGY EQUIPMENT & SERVICES 0.0%(d)
Honghua Group Ltd. .......................................... China 2,026,000 300,615
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FOOD & STAPLES RETAILING 19.0%
Beijing Jingkelong Supermarket Chain Group Co. Ltd., H ...... China 2,070,000 745,157
Dairy Farm International Holdings Ltd. ...................... Hong Kong 31,063,578 136,990,379
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137,735,536
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FOOD PRODUCTS 1.4%
China Foods Ltd. ............................................ China 16,322,000 6,317,827
People's Food Holdings Ltd. ................................. China 3,574,000 1,151,425
(b) Uni-President China Holdings Ltd. ........................... Taiwan 2,340,000 712,526
Uni-President Enterprises Corp. ............................. Taiwan 1,290,692 1,045,942
Xiwang Sugar Holdings Co. Ltd. .............................. Hong Kong 6,972,000 1,043,490
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10,271,210
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HOTELS, RESTAURANTS & LEISURE 0.2%
NagaCorp Ltd. ............................................... Cambodia 17,265,000 1,559,329
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INDEPENDENT POWER PRODUCERS & ENERGY TRADERS 2.8%
Datang International Power Generation Co. Ltd., H ........... China 34,592,000 15,219,596
Guangdong Electric Power Development Co. Ltd., B ............ China 10,224,960 3,891,856
Huaneng Power International Inc., H ......................... China 1,454,000 964,274
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20,075,726
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INDUSTRIAL CONGLOMERATES 2.6%
Shanghai Industrial Holdings Ltd. ........................... China 6,850,000 18,957,932
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INSURANCE 1.9%
China Life Insurance Co. Ltd., H ............................ China 4,134,000 13,708,082
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IT SERVICES 0.3%
Travelsky Technology Ltd., H ................................ China 5,574,000 2,560,295
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LEISURE EQUIPMENT & PRODUCTS 0.2%
Yorkey Optical International Cayman Ltd. .................... China 11,491,000 1,527,102
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4 | Quarterly Statement of Investments
Templeton Dragon Fund, Inc.
STATEMENT OF INVESTMENTS, MARCH 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY SHARES/UNITS VALUE
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COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
MACHINERY 1.6%
China International Marine Containers (Group) Co. Ltd., B ... China 10,565,295 $ 6,679,605
Lonking Holdings Ltd. ....................................... China 3,020,000 1,835,274
Shin Zu Shing Co. Ltd. ...................................... Taiwan 985,637 3,427,293
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11,942,172
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MARINE 0.1%
Sinotrans Shipping Ltd. ..................................... Hong Kong 3,090,500 769,590
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MEDIA 0.1%
Next Media Ltd. ............................................. Hong Kong 5,588,000 584,002
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METALS & MINING 0.3%
Angang Steel Co. Ltd., H .................................... China 840,000 850,789
(e) China Steel Corp. ........................................... Taiwan 1,292,000 845,216
Zijin Mining Group Co. Ltd., H .............................. China 498,000 354,684
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2,050,689
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OIL, GAS & CONSUMABLE FUELS 22.6%
China Coal Energy Co., H .................................... China 891,000 657,577
China Petroleum and Chemical Corp., H ....................... China 97,904,000 62,654,922
China Shenhua Energy Co. Ltd., H ............................ China 7,079,500 15,948,503
CNOOC Ltd. .................................................. China 35,637,000 35,313,067
PetroChina Co. Ltd., H ...................................... China 52,788,000 42,091,729
Yanzhou Coal Mining Co. Ltd., H ............................. China 9,996,000 7,196,702
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163,862,500
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PHARMACEUTICALS 0.1%
Tong Ren Tang Technologies Co. Ltd., H ...................... China 679,000 796,355
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REAL ESTATE MANAGEMENT & DEVELOPMENT 4.4%
Cheung Kong (Holdings) Ltd. ................................. Hong Kong 954,000 8,216,233
Hopewell Holdings Ltd. ...................................... Hong Kong 7,088,000 18,610,635
Soho China Ltd. ............................................. China 11,126,500 4,479,053
(c) Soho China Ltd., 144A ....................................... China 764,000 307,554
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31,613,475
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SEMICONDUCTORS & SEMICONDUCTOR EQUIPMENT 4.5%
MediaTek Inc. ............................................... Taiwan 383,800 3,607,844
Novatek Microelectronics Corp. Ltd. ......................... Taiwan 2,875,766 4,355,809
Taiwan Semiconductor Manufacturing Co. Ltd. ................. Taiwan 16,295,661 24,682,392
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32,646,045
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SOFTWARE 0.5%
Kingdee International Software Group Co. Ltd., fgn. ......... Hong Kong 12,774,000 1,648,162
(b) Shanda Interactive Entertainment Ltd., ADR .................. China 52,600 2,079,278
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3,727,440
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Quarterly Statement of Investments | 5
Templeton Dragon Fund, Inc.
STATEMENT OF INVESTMENTS, MARCH 31, 2009 (UNAUDITED) (CONTINUED)
COUNTRY SHARES/UNITS VALUE
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COMMON STOCKS AND OTHER EQUITY INTERESTS (CONTINUED)
TEXTILES, APPAREL & LUXURY GOODS 0.4%
Anta Sports Products Ltd. ................................... China 1,944,000 $ 1,279,203
Tainan Enterprises Co. Ltd. ................................. Taiwan 1,657,443 884,035
Weiqiao Textile Co. Ltd., H ................................. China 1,556,000 461,754
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2,624,992
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TRANSPORTATION INFRASTRUCTURE 1.1%
Cosco Pacific Ltd. .......................................... China 6,710,000 6,623,035
Hopewell Highway Infrastructure Ltd. ........................ Hong Kong 708,800 399,648
(c) Rickmers Maritime, 144A (Trust Units) ....................... Singapore 2,904,000 658,720
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7,681,403
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WIRELESS TELECOMMUNICATION SERVICES 9.9%
China Mobile Ltd. ........................................... China 7,731,500 67,334,961
Taiwan Mobile Co. Ltd. ...................................... Taiwan 2,972,831 4,305,721
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71,640,682
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TOTAL COMMON STOCKS AND OTHER EQUITY INTERESTS
(COST $478,112,585) ...................................... 716,649,516
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SHORT TERM INVESTMENTS (COST $6,986,168) 0.9%
MONEY MARKET FUNDS 0.9%
(f) Franklin Institutional Fiduciary Trust Money Market
Portfolio, 0.13% ......................................... United States 6,986,168 6,986,168
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TOTAL INVESTMENTS (COST $485,098,753) 99.7% ................. 723,635,684
OTHER ASSETS, LESS LIABILITIES 0.3% ......................... 1,865,850
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NET ASSETS 100.0% ........................................... $725,501,534
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See Abbreviations on page 9.
(a) Security has been deemed illiquid because it may not be able to be sold
within seven days.
(b) Non-income producing.
(c) 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 Trustees. At March 31, 2009, the
aggregate value of these securities was $4,177,171, representing 0.58% of
net assets.
(d) Rounds to less than 0.1% of net assets.
(e) A portion or all of the security purchased on a delayed delivery basis.
(f) 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 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. Occasionally, events may impact the availability or
reliability of foreign exchange rates used to convert to the U.S. dollar
equivalent value. If such an event occurs, the foreign exchange rate will be
valued at fair value using procedures established and approved by the Fund's
Board of Directors.
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, 2009, the cost of investments and net unrealized appreciation
(depreciation) for income tax purposes were as follows:
Cost of investments .............................. $485,907,375
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Unrealized appreciation .......................... $312,929,323
Unrealized depreciation .......................... (75,201,014)
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Net unrealized appreciation (depreciation) ....... $237,728,309
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4. FAIR VALUE MEASUREMENTS
Financial Accounting Standards Board (FASB) Statement No. 157 "Fair Value
Measurement" 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 March 31, 2009, 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......... $723,328,130 $307,554 $-- $723,635,684
8 | Quarterly Statement of Investments
Templeton Dragon Fund, Inc.
NOTES TO STATEMENT OF INVESTMENTS (UNAUDITED) (CONTINUED)
4. FAIR VALUE MEASUREMENTS (CONTINUED)
At March 31, 2009, 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 1, 2009 ............................... $ 952,764
Net realized gain (loss) ....................................... --
Net change in unrealized appreciation (depreciation) ........... (1,259,860)
Net purchases (sales) .......................................... --
Transfers in and/or out of Level 3 ............................. 307,096
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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 ............. $(1,259,860)
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5. NEW ACCOUNTING PRONOUNCEMENTS
In April 2009, FASB issued FASB Staff Position FSP FAS 157-4, "Determining Fair
Value When the Volume and Level of Activity for the Asset or Liability Have
Significantly Decreased and Identifying Transactions That Are Not Orderly" (FSP
FAS 157-4), which provides additional guidance when the volume and level of
activity for the asset or liability measured at fair value have significantly
decreased. Additionally, FSP FAS 157-4 amends FSAS 157 expanding disclosure
requirements by reporting entities surrounding the major categories of assets
and liabilities carried at fair value. FSP FAS 157-4 is effective for interim
and annual periods ending after June 15, 2009. The Fund is currently evaluating
the impact, if any, of applying FSP FAS 157-4.
ABBREVIATIONS
SELECTED PORTFOLIO
ADR - American Depository Receipt
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 Laura F. Fergerson, Chief Executive Officer - Finance and
Administration, and Mark H. Otani, 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/LAURA F. FERGERSON
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Laura F. Fergerson
Chief Executive Officer - Finance
and Administration
Date May 27, 2009
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/LAURA F. FERGERSON
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Laura F. Fergerson
Chief Executive Officer - Finance
and Administration
Date May 27, 2009
By /s/MARK H. OTANI
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Mark H. Otani
Chief Financial Officer and
Chief Accounting Officer
Date May 27, 2009