Quarterly Statement of Investments | See Notes to 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 closed-end investment company.

2. FINANCIAL INSTRUMENT VALUATION

The Fund's investments in securities and other financial instruments are carried at fair value daily. Fair
value is the price that would be received to sell an asset or paid to transfer a liability in an orderly
transaction between market participants on the measurement date. Under procedures approved by the
Fund’s Board of Trustees (the Board), the Fund’s administrator, investment manager and other affiliates
have formed the Valuation and Liquidity Oversight Committee (VLOC). The VLOC provides
administration and oversight of the Fund's valuation policies and procedures, which are approved annually
by the Board. Among other things, these procedures allow the Fund to utilize independent pricing services,
quotations from securities and financial instrument dealers, and other market sources to determine fair
value.

Equity securities listed on an 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. Foreign equity 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. 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 security is determined.
Over-the-counter securities 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. Certain equity securities are valued based upon fundamental characteristics or
relationships to similar securities. Investments in open-end mutual funds and non-registered money market
funds are valued at the closing net asset value.

The Fund has procedures to determine the fair value of securities and other financial instruments for which
market prices are not reliable or readily available. Under these procedures, the VLOC convenes on a
regular basis to review such securities and considers a number of factors, including significant
unobservable valuation inputs, when arriving at fair value. The VLOC primarily employs a market-based
approach which may use related or comparable assets or liabilities, recent transactions, market multiples,
book values, and other relevant information for the investment to determine the fair value of the
investment. An income-based valuation approach may also be used in which the anticipated future cash
flows of the investment are discounted to calculate fair value. Discounts may also be applied due to the
nature or duration of any restrictions on the disposition of the investments. Due to the inherent uncertainty
of valuations of such investments, the fair values may differ significantly from the values that would have
been used had an active market existed. The VLOC employs various methods for calibrating these
valuation approaches including a regular review of key inputs and assumptions, transactional back-testing
or disposition analysis, and reviews of any related market activity.

Trading in securities on foreign securities stock exchanges and over-the-counter markets may be completed
before the daily close of business on the NYSE. Occasionally, events occur between the time at which
trading in a foreign security is completed and the close of the NYSE that might call into question the
reliability of the value of a portfolio security held by the Fund. As a result, differences may arise between

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