TEMPLETON DRAGON FUND INC, N-30B-2, 1995-08-31

TEMPLETON DRAGON FUND INC
N-30B-2, 1995-08-31

Previous: EVERGREEN LEADERS TRUST, N-1A EL/A, 1995-08-31

Next: TCW DW GLOBAL CONVERTIBLE TRUST, 497, 1995-08-31

<PAGE>

Templeton Dragon Fund, Inc.

[PHOTO] Dr. Mobius has been living overseas since earning his
Ph.D. in economics and political science at
J. Mark Mobius, Ph.D. Massachusetts Institute of Technology in 1964. During
President his extensive travels, he has acquired a thorough
Templeton Dragon knowledge of the business practices and customs that are
Fund, Inc. unique to developing nations. Together with his team of
- --------------------- Templeton analysts, Dr. Mobius currently oversees more
than $6 billion in emerging markets investments for the
Templeton Group of Funds.

- --------------------------------------------------------------------------------
Mutual Funds, annuities, and other investment products:

. are not FDIC insured;

. are not deposits or obligations of, or guarantee by, any financial
institution;

. are subject to investment risks, including possible loss of the principal
amount invested.
- --------------------------------------------------------------------------------

- --------------------------------------------------------------------------------
Your Fund's Objective

The Templeton Dragon Fund, Inc. seeks long-term capital appreciation by
investing at least 45% of its total assets in the equity securities of "China
companies."
- --------------------------------------------------------------------------------

August 18, 1995

Dear Shareholder:

This update for the quarter ended June 30, 1995, includes your Fund's long-term
performance, a listing of its investments, and a brief discussion by Dr. Mark
Mobius on a topic of current interest. On July 25, 1995, the Fund's Board of
Directors approved changing the Fund's non-fundamental investment policy to
authorize investments in equity securities of Taiwanese companies. Please keep
in mind that this summary is one of four reports you will receive during the
Fund's fiscal year.

Next quarter, you will receive the annual report, which is more comprehensive.
It will include a discussion of the

1
<PAGE>

financial markets and a summary of the Fund's performance and investment
direction during the fiscal year. The portfolio manager's outlook and the Fund's
financial statements and investment portfolio will also be included.

If you have any questions regarding this report, you may call the Franklin
Templeton Fund Information Department, toll free, at 1-800/342-5236.

- --------------------------------------------------------------------------------
Templeton Dragon Fund

Cumulative Total Returns*
Period ended June 30, 1995

<TABLE>
<CAPTION>
Since
Inception
(9/21/94)
<S> <C>
Based on change
in net asset value 4.11%

Based on change
in market price -18.5%
</TABLE>

*Cumulative total return represents the change in value of an investment over
the specified periods. These calculations assume reinvestment of all
distributions and capital gains at net asset value or at market price on the
reinvestment date. Past performance is not predictive of future results.

Investing in geographically concentrated developing markets involves special
considerations, which may include increased risks related to market and currency
volatility, adverse social and political developments, and the relatively small
size and lesser liquidity of these markets. While short-term volatility can be
disconcerting, declines of as much as 40% to 50% are not unusual in emerging
markets. For example, the Hong Kong market has increased 1000% in the last 15
years, but has suffered nine declines of more than 20% during that time.
- --------------------------------------------------------------------------------

A Closer Look at China by Dr. Mark Mobius.

Dear Shareholder:

It's hard to argue with Deng Xiaoping's overall economic record. During his time
in power, he's opened his country's doors to the world, and the world has
responded with foreign investment at record levels. In the process, he has paved
the way for the likely emergence of a 21st Century economic giant. Today, the
ultimate architect of all this progress sits in Beijing, an ailing 90-year-old
man widely believed to be in his final days. Although the political succession
issue has not been clearly defined, we can make some educated guesses regarding
what can be expected in the near term. One thing is clear: It may be extremely
difficult for China to sink back into a Communist centralist state. The
capitalist, entrepreneurial cat has been let out of the bag and it will probably
be impossible to get it back in. Despite the astounding growth of recent years,
I believe that China has only begun to scratch the surface of its economic
potential.

I can well remember my early years in the Far East, when China was cut off from
the rest of the world, keeping itself on the sidelines while Japan, Hong Kong,
Singapore, Taiwan, Korea and the other Pacific Rim economies were

2
<PAGE>

starting their rapid economic ascents. When Mao died in 1976, it still had
virtually no contact with the international business community. Even after Deng
began his market-oriented reforms in 1978, it took several years for the world
to notice an across-the-board impact. But once Beijing began to unleash, rather
than suppress, the legendary natural entrepreneurship of its people, Gross
National Product (GNP) growth skyrocketed and began to average two-digit
numbers, the highest of all major countries in the world. Imagine a situation
where people talk about the economy "slowing down" when it is growing by 10.5% a
year! That's actually the case in China so far this year, where current growth
has dipped a bit from 12.8% in 1992, 13.4% in 1993 and 11.8% in 1994 -- figures
which were probably so high as to be unsustainable in the first place.

Deng's policies have made China the developing world's single largest recipient
of direct foreign investment, with a total of $90 billion attracted over the
last decade. Although the country was doing well in this regard prior to 1992,
these investments rose appreciably that year, as the economic fallout from the
1989 Tienanmen Square massacres finally subsided and Deng gave his blessing to
Chinese business. Direct foreign investment in China -- and by that I mean
utilized, not just pledged -- rose from $4.4 billion to $11.2 billion between
1991 and 1992, then to $25.8 billion in 1993. 1994's figure was an astounding
$28.8 billion, which means China received about half the total volume of fixed
investment that all private investors put into factories, machinery, and other
industrial needs in all the emerging markets of the world. Add to this the
approximately $2.5 billion in equity that Chinese companies raised
internationally from private portfolio investors through placement of shares on
the B (Shanghai and Shenzhen), H (Hong Kong) and N (New York) exchanges, and
China's overall 1994 foreign investment total reaches $31.3 billion. That's
larger than the entire GDPs of some developing nations.

Although some of that external capital (we don't know exactly how much) was
actually domestic Chinese money being recycled through Hong Kong for tax
reasons, these are impressive numbers by any standard. And they may be just the
tip of the iceberg, considering China's market of 1.2 billion people, natural
resource base, strong educational traditions, rising consumer culture, rapidly
growing technological sophistication, natural links with the influential Chinese
community in the rest of Asia, and the unleashing of a liberal, entrepreneurial
wave after so many years of economic oppression and central planning.

<PAGE>

[MAP APPEARS HERE]

Despite the exciting economic environment of the first half of the 1990s, China
still has not made many of the fundamental reforms that other emerging markets
have adopted. That's why, given the uncertainty of what form of political
leadership will follow Deng, and what its economic policies will be, the coming
months are so important.

What are the big differences between China and other emerging markets? For one
thing, the central bank has no autonomy. It is firmly under the aegis of the
ruling State Council, and thus does not have the independence it needs to set a
non-political monetary policy. Like almost everything else of importance in the
Chinese economy, commercial banking remains in state hands and thus in a state
of extreme inefficiency with loans seemingly made on the basis of political
rather than commercial considerations. The People's Construction Bank of China,
the Agricultural Bank of China, the Bank of China, and the Industrial and
Commercial Bank of China, four specialized governmental lenders, dominate

4
<PAGE>

the national financial system and are often subject to political considerations.

In many other developing countries, privately owned banks are among the key blue
chips listed on the local exchanges and appear in our portfolios, but this is
not yet possible in China. Although Beijing took some initial steps last year
towards making the big banks operate on a more commercial basis, it will
probably take several years before the impact of these reforms is felt. In the
meantime, we have to invest in China without the benefit of a fully convertible
currency, something that so many other emerging markets in Asia, Latin America
and elsewhere have wisely adopted in recent years.

A broader and more aggressive privatization program is another important
ingredient I find missing in China. Although the role of the local, private
sector has risen considerably in recent years, the big, state-owned enterprises
still account for 70% of all fixed-capital investment in China and employ nearly
half of the industrial labor force. Vice-Premier Zhu Rongji, the top reformer in
the government, has said that 40% of the enterprises lost money last year, which
means the big banks that lend them money must be feeling the impact. If this is
the case, I wouldn't be surprised if the Chinese learn something from the recent
experience of Russia, where we saw such a serious problem when people finally
take note of the uncollectible debts that these big behemoths owe each other.

At this time, government entities or former government entities are practically
the only listed Chinese equities foreigners can buy. Although many of these
companies have first-class products and impressive management, experience in
other parts of the world has shown us that privatization is inevitable. It's
difficult, however, to imagine how complex a task this would be in the world's
most populous country. Government enterprises play an important social welfare
role in China, giving large numbers of employees housing, health care and steady
jobs even when this may not be economically viable. Reforming these enterprises
would involve increased urban unemployment. For now, the government seems
willing to accept high inflation as the cost of not incurring the political
consequences of such action. But time may be running out.

Acceptance into the new World Trade Organization (WTO) would also tend to be a
big plus for China's

5
<PAGE>

reformers and companies since it would lower trade barriers for both imports and
exports and apply new pressure for competitiveness. When China was allowed to
join the World Bank and the International Monetary Fund (IMF) in 1980, those
multilateral institutions gained a vital tool for influencing the reform
process. The WTO could play a similar role in the late 1990s and beyond --
especially now that the U.S. appears to be willing to relax its long-standing
objections on this issue so long as China keeps improving its record on the
vital issue of intellectual property rights protection.

These are just some of the crucial decision areas facing China at a time of
impending leadership change. If its new leaders keep up or accelerate the
momentum already established, China's economic picture could improve
substantially. Although no one can know for sure what will happen, we are
excited about investment opportunities there, and will continue to apply our
disciplined, value-oriented selection process in whatever new environment
emerges in our efforts to seek the best possible results for our shareholders.

Sincerely,

/s/ J. Mark Mobius

J. Mark Mobius, Ph.D.
President
Templeton Dragon Fund, Inc.

6
<PAGE>

Templeton Dragon Fund, Inc.
Investment Portfolio, June 30, 1995 (unaudited)

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMON STOCKS: 73.8%
- -------------------------------------------------------------------------------
Appliances & Household Durables: 1.5%
Hualing Holdings Ltd. H.K. 2,332,000 $ 322,474
Luks Industrial Co. Ltd. H.K. 12,076,000 1,295,340
Semi-Tech (Global) Co. Ltd. H.K. 4,347,000 6,994,255
Shanghai Narcissus Electric
Appliances Co. Ltd., B Chn 4,641,200 1,206,712
Shanghai Vacuum Electron Devices
Co. Ltd., B Chn 3,463,212 706,495
Shenzhen Huafa Electronics Co.
Ltd., B Chn 1,126,000 225,555
Shenzhen Konka Electronic Group Co.
Ltd., B Chn 2,058,000 997,377
------------
11,748,208
- -------------------------------------------------------------------------------
Automobiles: 0.9%
Jardine International Motor
Holdings Ltd. H.K. 7,165,000 7,037,401
- -------------------------------------------------------------------------------
Banking: 9.0%
HSBC Holdings PLC H.K. 5,214,000 66,878,118
JCG Holdings Ltd. H.K. 4,708,000 3,103,053
------------
69,981,171
- -------------------------------------------------------------------------------
Broadcasting & Publishing: 0.7%
Leefung-Asco Printers Holdings Ltd. H.K. 5,083,000 821,131
Ming Pao Enterprise Corp. Ltd. H.K. 6,803,000 3,604,681
South Sea Development Co. Ltd. H.K. 27,413,000 1,346,241
------------
5,772,053
- -------------------------------------------------------------------------------
Building Materials & Components: 0.5%
K Wah International Holdings Ltd. H.K. 9,887,000 1,750,522
Shanghai Yaohua Pilkington Glass, B Chn 2,105,800 2,105,800
------------
3,856,322
- -------------------------------------------------------------------------------
Chemicals: 0.5%
Shanghai Chlor-Alkali Chemical Co.
Ltd., B Chn 5,796,000 1,344,672
Shanghai Pechemical Co. Ltd., H Chn 4,480,000 1,404,017
Shenzhen Petrochemical (Group)
Shareholding Co. Ltd., B Chn 526,000 152,950
Zhuhai Sez Lizhu Pharmaceutical, B Chn 2,610,000 1,150,211
------------
4,051,850
- -------------------------------------------------------------------------------
Construction & Housing: 4.6%
Hopewell Holdings Ltd. H.K. 38,372,000 32,481,661
Wai Kee Holdings Ltd. H.K. 17,962,000 3,412,358
------------
35,894,019
- -------------------------------------------------------------------------------
</TABLE>

7
<PAGE>

Templeton Dragon Fund, Inc.
Investment Portfolio, June 30, 1995 (unaudited) (cont.)

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Electrical & Electronics: 0.6%
China Treasure Telecomunications
Holdings Ltd. H.K. 20,512,000 $ 1,047,099
G.P. Batteries International Ltd. Sing. 900,000 2,205,000
Gold Peak Industries (Holdings)
Ltd. H.K. 1,107,000 472,111
Great Wall Electronic International
Ltd. H.K. 9,622,000 833,149
Tsann Kuen Enterprise Co. Ltd., B Chn 546,000 137,950
------------
4,695,309
- -------------------------------------------------------------------------------
Electronic Components & Instruments: 0.2%
S. Megga International Holdings
Ltd. H.K. 18,862,000 1,267,575
- -------------------------------------------------------------------------------
Financial Services: 1.6%
Guoco Group Ltd. H.K. 493,000 2,300,047
Min Xin Holdings H.K. 11,196,000 2,286,138
Peregrine Investments Holdings Ltd. H.K. 2,066,000 2,937,011
Sun Hung Kai & Co. Ltd. H.K. 14,294,000 5,357,156
------------
12,880,352
- -------------------------------------------------------------------------------
Food & Household Products: 1.2%
C.P. Pokphand Co. Ltd. H.K. 10,994,000 3,871,727
Fairwood Holdings Ltd. H.K. 13,212,000 1,314,746
Golden Resources Development
International Ltd. H.K. 7,340,000 645,041
Vitasoy International Holdings Ltd. H.K. 9,364,000 3,721,252
------------
9,552,766
- -------------------------------------------------------------------------------
Health & Personal Care: 0.3%
China Pharmaceutical Enterprise &
Investment Corp. Ltd. H.K. 25,345,000 2,653,138
- -------------------------------------------------------------------------------
Industrial Components: 0.2%
Shanghai Refrigerator Compressor
Co. Ltd., B Chn 1,050,000 375,900
Shanghai Rubber Belt Co. Ltd., B Chn 807,936 116,343
Shanghai Tyre & Rubber Co. Ltd., B Chn 4,870,000 1,461,000
------------
1,953,243
- -------------------------------------------------------------------------------
Leisure & Tourism: 0.5%
Glynhill International Ltd. H.K. 10,442,000 384,602
Hongkong & Shanghai Hotels Ltd. H.K. 1,961,000 2,420,268
Shanghai Jin Jiang Tower Co. Ltd.,
B Chn 2,675,954 856,305
------------
3,661,175
- -------------------------------------------------------------------------------
</TABLE>

8
<PAGE>

Templeton Dragon Fund, Inc.
Investment Portfolio, June 30, 1995 (unaudited) (cont.)

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Machinery & Engineering: 0.8%
China Textile Machinery Co. Ltd., B Chn 776,000 $ 100,880
Guangzhou Shipyard International
Co. Ltd., H Chn 7,590,000 3,187,922
Shanghai Erfangji Textile Machinery
Co. Ltd., B Chn 5,655,000 836,940
Shanghai Industrial Sewing Machine
Corp. Chn 9,514,700 1,750,705
Shanghai Steel Tube Co. Ltd., B Chn 5,088,600 865,062
------------
6,741,509
- -------------------------------------------------------------------------------
Merchandising: 2.0%
Dickson Concepts (International)
Ltd. H.K. 10,380,000 6,204,283
Fortei Holdings Ltd. H.K. 3,978,000 226,204
Joyce Boutique Holdings Ltd. H.K. 4,048,000 873,654
Le Saunda Holdings Ltd. H.K. 3,616,000 266,370
LI & Fung Ltd. H.K. 4,516,000 3,385,045
Linkful International Holdings Ltd. H.K. 2,211,000 142,870
Wo Kee Hong Holdings Ltd. H.K. 17,787,000 4,137,688
Yaohan Hongkong Corp. Ltd. H.K. 4,000,000 325,674
------------
15,561,788
- -------------------------------------------------------------------------------
Miscellaneous Materials & Commodities: 0.2%
Luoyang Glass Co. Ltd., H Chn 3,301,000 1,674,433
- -------------------------------------------------------------------------------
Multi-Industry: 21.8%
Cheung Kong Holdings Ltd. H.K. 10,449,000 51,719,701
China Southern Glass Co. Ltd., B Chn 1,902,000 1,204,451
Dairy Farm International Holdings
Ltd. H.K. 12,967,000 11,151,620
Jardine Matheson Holdings Ltd. H.K. 3,632,400 26,698,140
Jardine Strategic Holdings Ltd. H.K. 6,892,625 22,194,253
Jardine Strategic Holdings Ltd.,
wts. H.K. 349,625 153,835
Lai Sun Garment International Ltd. H.K. 4,992,000 5,193,414
Shenzhen Gintian Industrial Co.
Ltd., B Chn 226,000 93,463
Shenzhen Tellus Machinery &
Electronics Co. Ltd., B Chn 148,000 30,794
Stelux International Holdings Ltd. H.K. 7,848,000 2,307,400
Swire Pacific Ltd., B H.K. 13,760,000 16,715,862
Wheelock & Co. Ltd. H.K. 19,649,000 32,630,677
------------
170,093,610
- -------------------------------------------------------------------------------
Real Estate: 19.9%
China Overseas Land & Investment
Ltd. H.K. 18,245,000 3,654,753
Hang Lung Development Co. Ltd. H.K. 21,177,000 33,662,940
Hang Lung Development Co. Ltd.,
wts. H.K. 535,000 91,958
Lai Sun Development Co. Ltd. H.K. 71,630,000 8,794,296
New World Development Co. Ltd. H.K. 15,783,000 52,522,972
</TABLE>

9
<PAGE>

Templeton Dragon Fund, Inc.
Investment Portfolio, June 30, 1995 (unaudited) (cont.)

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Real Estate (cont.)
Shanghai Jinqiao Export Processing
Zone Development, B Chn 3,468,700 $ 1,664,976
Shanghai Lujiaxui Finance & Trade
Zone Dev. Stock Co. Ltd., B Chn 1,929,000 1,354,158
Shanghai Outer Gaoqiao Free Trade
Zone Develop. Co., B Chn 1,571,000 662,962
Shenzhen Properties & Resources
Develop. (Group) Ltd., B Chn 2,908,000 958,334
Shenzhen Vanke Co. Ltd., B Chn 3,086,000 1,076,818
Sun Hung Kai Properties Ltd. H.K. 6,306,000 46,656,479
Tian An China Investments Co. Ltd. H.K. 27,670,000 4,291,142
------------
155,391,788
- -------------------------------------------------------------------------------
Recreation, Other Consumer Goods: 1.0%
Fu Hui Jewellery Co. (H.K.) Ltd. H.K. 7,710,000 448,383
KTP Holdings Ltd. H.K. 7,484,000 889,824
Shanghai Forever Bicycle Co. Ltd.,
B Chn 3,752,000 532,784
Shanghai Phoenix Bicycle Co. Ltd.,
B Chn 822,300 177,617
Shanghai Wingsung Stationery Co.
Ltd., B Chn 200,000 39,000
Shenzhen China Bicycles Co. Ltd., B Chn 1,478,000 477,526
Yue Yuen Industrial (Holdings) Ltd. H.K. 20,828,000 5,060,436
------------
7,625,570
- -------------------------------------------------------------------------------
Telecommunications: 0.1%
Shanghai Posts & Telecommunications
Equipment Co., B Chn 50,000 29,900
- -------------------------------------------------------------------------------
Textiles & Apparel: 1.1%
Goldlion Holdings Ltd. H.K. 13,711,000 4,341,279
Laws International Holdings Ltd. H.K. 11,398,000 1,988,588
Shanghai Lian Hua Fibre Corp., B Chn 96,000 23,040
Top Form International Ltd. H.K. 16,937,000 1,575,983
Tungtex (Holdings) Co. Ltd. H.K. 2,600,000 487,219
Victor Onward Textile Industrial
Co. Ltd., B Chn 74,000 15,493
------------
8,431,602
- -------------------------------------------------------------------------------
Transportation: 0.3%
Chiwan Wharf Holdings Ltd., B Chn 2,234,000 1,111,543
Cross Harbour Tunnel Co. Ltd. H.K. 535,000 1,030,202
------------
2,141,745
- -------------------------------------------------------------------------------
</TABLE>

10
<PAGE>

Templeton Dragon Fund, Inc.
Investment Portfolio, June 30, 1995 (unaudited) (cont.)

11
<PAGE>

Templeton Dragon Fund, Inc.
Financial Highlights, June 30, 1995 (unaudited)

- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET ASSET VALUE
TOTAL NET ASSETS PER SHARE
------------------------- ----------------
<S> <C> <C> <C> <C>
Net Asset Value:
Beginning of period, April 1, 1995 $754,226,863 $ 13.97
Net investment income $ 9,007,915 $ 0.17
Distribution from net investment
income (7,020,922) (0.13)
Net realized and unrealized gain
from security transactions 24,224,947 0.44
----------- -------
Net increase in net asset value 26,211,940 0.48
------------ -------
End of period, June 30, 1995 $780,438,803 $ 14.45
============ =======
</TABLE>
- ---

This report is sent to the shareholders of Templeton Dragon Fund, Inc. for
their information. It is not a prospectus, circular, or representation intended
for use in the purchase or sale of shares of the Fund or of any securities men-
tioned in the report.

12
<PAGE>

Templeton Dragon Fund, Inc.

- --------------------------------------------------------------------------------
TRANSFER AGENT

Chemical Mellon Shareholder Services Securities Transfer Services 450 West 33rd
Street New York, NY 10001 800-526-0801

SHAREHOLDER INFORMATION

Weekly comparative net asset value and market price information about Templeton
Dragon Fund, Inc. shares is published each Monday in The Wall Street Journal,
weekly in Barron's and each Saturday in The New York Times and other newspapers
in a table called "Publicly Traded Funds." The Fund's New York Stock Exchange
trading symbol is TDF.

For current information about the net asset value, call 1-800-292-9293.

If any shareholder is not receiving copies of the Reports to Shareholders be-
cause shares are registered in a broker's name or in a custodian's name, he or
she can write and request that his or her name be added to the Fund's mailing
list, by writing Templeton Dragon Fund, Inc., 700 Central Avenue, St. Peters-
burg, FL 33701.

13
<PAGE>

Notes
-----

<PAGE>

The Franklin Templeton Group

- --------------------------------------------------------------------------------
To receive a free brochure and prospectus, which contain more complete informa-
tion, including charges and expenses on each of the funds listed below, call
Franklin Fund Information, toll free, at 1-800-DIAL-BEN (1-800-342-5236) or
Templeton Fund Information at 1-800-292-9293. Please read the prospectus care-
fully before you invest or send money.

TEMPLETON
FAMILY OF FUNDS
Franklin
Templeton Japan
Fund
Templeton
American Trust
Templeton
Americas
Government
Securities Fund
Templeton
Developing
Markets Trust
Templeton
Foreign Fund
Templeton
Global
Infrastructure
Fund
Templeton
Global
Opportunities
Trust
Templeton
Growth Fund
Templeton
Growth and
Income Fund
Templeton
Income Fund
Templeton Money
Fund
Templeton Real
Estate
Securities Fund
Templeton
Smaller
Companies
Growth Fund
Templeton World
Fund

FRANKLIN GROUP OF FUNDS(R)
FRANKLIN
GLOBAL/
INTERNATIONAL
FUNDS
Franklin Global
Health Care
Fund
Franklin Global
Government
Income Fund
Franklin Global
Utilities Fund
Franklin
International
Equity Fund
Franklin
Pacific Growth
Fund

FUNDS SEEKING CAPITAL GROWTH
Franklin
California
Growth Fund
Franklin
DynaTech Fund
Franklin Equity
Fund
Franklin Gold
Fund
Franklin Growth
Fund
Franklin Rising
Dividends Fund
Franklin Small
Cap Growth Fund

FUNDS SEEKING GROWTH AND
INCOME
Franklin
Balance Sheet
Investment Fund
Franklin
Convertible
Securities Fund
Franklin Income
Fund
Franklin Equity
Income Fund
Franklin
Utilities Fund

FUNDS SEEKING HIGH CURRENT
INCOME
Franklin's AGE
High Income
Fund
Franklin
Investment
Grade Income
Fund
Franklin
Premier Return
Fund
Franklin U.S.
Government
Securities Fund

FUNDS SEEKING TAX-FREE
INCOME
Franklin
Federal Tax-
Free Income
Fund
Franklin High
Yield Tax-Free
Income Fund
Franklin
California High
Yield Municipal
Fund
Franklin
Alabama Tax-
Free Income
Fund
Franklin
Arizona Tax-
Free Income
Fund
Franklin
California Tax-
Free Income
Fund
Franklin
Colorado Tax-
Free Income
Fund
Franklin
Connecticut
Tax-Free Income
Fund
Franklin
Florida Tax-
Free Income
Fund
Franklin
Georgia Tax-
Free Income
Fund
Franklin Hawaii
Municipal Bond
Fund
Franklin
Indiana Tax-
Free Income
Fund
Franklin
Kentucky Tax-
Free Income
Fund
Franklin
Louisiana
Tax-Free
Income Fund
Franklin
Maryland Tax-
Free Income
Fund
Franklin
Missouri Tax-
Free Income
Fund
Franklin New
Jersey Tax-
Free Income
Fund
Franklin New
York Tax-Free
Income Fund
Franklin
North
Carolina Tax-
Free Income
Fund
Franklin
Oregon Tax-
Free Income
Fund
Franklin
Pennsylvania
Tax-Free
Income Fund
Franklin
Puerto Rico
Tax-Free
Income Fund
Franklin
Texas Tax-
Free Income
Fund
Franklin
Virginia Tax-
Free Income
Fund
Franklin
Washington
Municipal
Bond Fund

FUNDS SEEKING TAX-FREE
INCOME THROUGH INSURED
PORTFOLIOS
Franklin
Insured Tax-
Free Income
Fund
Franklin
Arizona
Insured Tax-
Free Income
Fund
Franklin
California
Insured Tax-
Free Income
Fund
Franklin
Florida
Insured Tax-
Free Income
Fund
Franklin
Massachusetts
Insured Tax-
Free Income
Fund
Franklin
Michigan
Insured Tax-
Free Income
Fund
Franklin
Minnesota
Insured Tax-
Free Income
Fund
Franklin New
York Insured
Tax-Free
Income Fund
Franklin Ohio
Insured Tax-
Free Income
Fund

FUNDS SEEKING HIGH CURRENT
INCOME AND STABILITY OF
PRINCIPAL
Franklin
Adjustable
Rate
Securities
Fund
Franklin
Adjustable
U.S.
Government
Securities
Fund
Franklin
Short-
Intermediate
U.S.
Government
Securities
Fund

FUND SEEKING HIGH AFTER-TAX
INCOME FOR CORPORATIONS
Franklin
Corporate
Qualified
Dividend Fund

MONEY MARKET FUNDS SEEKING
SAFETY OF PRINCIPAL AND
INCOME
Franklin
Money Fund
Franklin
Federal Money
Fund
Franklin Tax-
Exempt Money
Fund
Franklin
California
Tax-Exempt
Money Fund
Franklin New
York Tax-
Exempt Money
Fund
IFT Franklin
U.S. Treasury
Money Market
Portfolio

FUNDS FOR
NON-U.S. INVESTORS
FRANKLIN PARTNERS FUNDS(R)
Franklin Tax-
Advantaged
High Yield
Securities
Fund
Franklin Tax-
Advantaged
International
Bond Fund
Franklin Tax-
Advantaged
U.S.
Government
Securities
Fund

To ensure the highest quality of service, telephone calls to or from our serv-
ice departments may be monitored, recorded and accessed. These calls can be de-
termined by the presence of a regular beeping tone.
<PAGE>

------------------------------------------------------------------------------
TEMPLETON DRAGON
FUND, INC.

700 Central Avenue
St. Petersburg,
Florida 33701-3628

Investors should be aware that the value of investments made for the Fund may
go up as well as down and that the Investment Manager may make errors in
selecting securities for the Fund's portfolio. Like any investment in
securities, the Fund's portfolio will be subject to the risk of loss from
market, currency, economic, political, and other factors. The Fund and
Fund investors are not protected from such losses by the Investment Manager.
Therefore, investors who cannot accept the risk of such losses should not
invest in shares of the Fund.

To ensure the highest quality of service, telephone calls to or from our
service departments may be monitored, recorded, and accessed. These calls can
be determined by the presence of a regular beeping tone.

- -------------------------------------------------------------------------------

[LOGO OF RECYCLED PAPER APPEARS HERE] TLTDF Q95 06/95

TEMPLETON
DRAGON
FUND, INC.

First Quarter Report
June 30, 1995

[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]