<PAGE>
Templeton Dragon Fund, Inc.
Dr. Mobius has been living overseas since earning
[PHOTO APPEARS HERE]
his Ph.D. in economics and political science at
J. Mark Mobius, Ph.D.
President Massachusetts Institute of Technology in 1964.
Templeton Dragon Fund, Inc.
During his extensive travels, he has acquired a
- ---------------------------
thorough knowledge of the business practices and
customs that are unique to developing nations. Together with his team of
Templeton analysts, Dr. Mobius currently oversees more than $7 billion in
emerging markets investments for the Templeton Group of Funds.
- --------------------------------------------------------------------------------
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."
- --------------------------------------------------------------------------------
February 15, 1996
Dear Shareholder:
This update for the quarter ended December 31, 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. 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 financial markets and a summary of the
Fund's performance and investment direction during the fiscal year. The
manager's outlook and the Fund's financial statements and investment portfolio
will also be included.
1
<PAGE>
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*
Periods ended 12/31/95
Since
Inception
One-Year (9/21/94)
Based on change
in net asset value 11.27% 7.68%
Based on change
in market price 19.45% -6.66%
*Cumulative total returns show the change in value of an investment over the
periods indicated. These calculations assume reinvestment of all distributions
and capital gains, either at net asset value or at market price on the reinvest-
ment date, in accordance with the dividend reinvestment plan. 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 584% in the last 15
years, but has suffered six declines of more than 20% during that time. (Source:
Bloomberg. Based on quarterly percentage change over 15 years ended December 31,
1995.)
- --------------------------------------------------------------------------------
THE FOLLOWING LETTER WAS
WRITTEN BY DR. MOBIUS
AFTER A TRIP TO CHINA IN MID-1995.
Dear Shareholder:
As you travel around China, the description that most often springs to mind is
"messy." The streets are full of dust, and windows are caked with grime. In this
country where everything was owned for so long by the state, there seems to be
no pride of ownership. But not all the mess can be blamed on a lack of pride.
Much of it results from rapid development. Hazy cement dust on new highways,
land being readied for a factory or office tower, and an abundance of unsightly
cranes and steel reinforcing rods all indicate the tremendous potential
presently being unlocked in China.
In the coastal areas we visited during the first part of this trip, development
was proceeding at a fast pace. As we drove to the hotel in Nanjing it was clear
that the city was experiencing a construction boom. The glass-encased lobby of
our hotel, which was built in 1982, was huge, featuring a free-floating red
marble ball revolving in a fountain. The building was well maintained and the
service was even
2
<PAGE>
[MAP OF CHINA APPEARS HERE]
better than in Shanghai, which is regarded as the most "international" of
China's cities. I tried out my Mandarin but was quickly met with responses in
good English.
We drove from Nanjing to Maanshan City, where we visited Maanshan Iron & Steel
Company Limited, which produced 2.91 million tons of pig iron, 2.41 million tons
of crude steel and 2.07 million tons of steel products in 1994. Although demand
for steel products has decreased due to the implementation by the Chinese
government of macro-economic adjustments, the company's management has responded
actively to changing market conditions, and is, we believe, well positioned for
an eventual pick-up in demand for its products. Dalian, another coastal city,
also appeared to be a big construction site, with lots of 20-, 30- and 40-story
buildings being erected.
However, it is not just China's coastal areas which are undergoing rapid change
and development. The inland province of Sichuan is one of China's main
agricultural areas and supports 10% of the country's population. Once a province
of peasants and land lords, Sichuan now boasts two important cities: Chongqing
and Chengdu. An urban center more
3
<PAGE>
than 2,000 years ago, and the capital of kingdoms in the region for a number of
years, Chengdu is a bustling city with street hawkers, huge department stores,
and a population of about three million people. At the end of the main
thoroughfare is a huge statue of Chairman Mao, with his hand raised in blessing.
From Chengdu, we travelled two hours by car to Mianyang, 124 miles north of
Chengdu. The road between Chengdu and Mianyang is like a washboard with
intervals of nice, cement-paved highway. When we arrived there, we saw a 50-
story skyscraper under construction on the outskirts of the city. We had been
told to expect the worst in this remote part of China, but were ushered into
lavishly decorated suites complete with American-made whirlpool baths.
Notwithstanding this, the interior decoration and quality, as in other parts of
China, leave much to be desired.
Mianyang, like so many other cities in China, is being rebuilt and redeveloped,
with a number of high-rise towers under way. At the entrance to the city, we
passed an industrial zone where some factories were complete and more were under
construction. Since it has a reputation as an electronics center and center of
high-tech military work, it is not surprising that Mianyang is being promoted as
a high-tech zone. While in town, we visited Sichuan Changhong Electric Co.,
Ltd., a manufacturer of TV sets which produces three million units annually and
has 17% of the national market. The company, which has ties to Siemens and
Philips, already has sales branches in all the provinces and it plans to further
expand into coastal cities and overseas markets with its brand name.
After leaving Mianyang, we went to Deyang, to visit Dongfang Electrical
Machinery Co., Ltd., a major manufacturer of steam turbine generators and hydro
turbine generators, whose "H" shares, listed on the Hong Kong Stock Exchange,
are potential investments for the Fund.
Chongqing, Sichuan's other main city, was the Chinese capital during World War
II. It is in the Southeast part of Sichuan Province and hangs on the deep gorges
made by the Yangtze and Jialing Rivers. Sometimes referred to as one of the
"three furnaces" of China (the others are Wuhan and Nanjing), it gets hot here
in the summer, and when we stepped off the plane, we really felt the heat.
4
<PAGE>
Chongqing's airport is quite unusual and beautiful, in a strange sort of way.
The control tower is like an onion standing on its stem. It has few straight
corners and curves around the site like a white caterpillar. The architect must
have admired Salvador Dali's paintings because he gave an other-worldly feeling
to the building. It is done in white tiles and has blue windows in the hallway.
Driving into the city, we saw that Chongqing has not escaped China's building
boom. As we crossed the Jialing River bridge, we counted no fewer than 12 cranes
on top of high rise buildings. Chongqing is the home town of Qingling Motors
Company Limited, a company engaged in the production, assembly and sale of Isuzu
light-duty trucks, pickup trucks and minibuses. Through its long-standing and
close relationship with Isuzu, it has access to the most up-to-date
international technology.
The construction we noticed throughout our trip is one indication of the
progress of China's reform program. While some aspects of this process may not
appeal to all foreign investors, there's no doubting the government's general
commitment to economic development and expansion of trade. If it continues, the
country's economic picture could improve substantially, which may be good news
for investors in the Templeton Dragon Fund. Although it's impossible to predict
the future, we are optimistic about potential long-term investment opportunities
in China and will continue to utilize our disciplined, value oriented approach
in our efforts to achieve the best possible results for our shareholders.
Of course, investing in an emerging market such as China involves special
considerations, which may include risks related to the relatively small size and
lesser liquidity of this market, adverse social and political developments, and
market and currency volatility. 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 584% in the last 15
years, but has suffered six declines of more than 20% during that time.*
Sincerely,
/s/ J. Mark Mobius
J. Mark Mobius, Ph.D.
President
Templeton Dragon Fund, Inc.
* Source: Bloomberg. Based on quarterly percentage change over 15 years ended
December 31, 1995.
5
<PAGE>
Templeton Dragon Fund, Inc.
Investment Portfolio, December 31, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS: 85.1%
- -------------------------------------------------------------------------------
Appliances & Household Durables: 2.1%
Foshan Electrical and Lighting
Co. Ltd., B Chn. 700,000 $ 470,740
Hualing Holdings Ltd. H.K. 5,868,000 705,754
Luks Industrial Co. Ltd. H.K. 12,076,000 1,233,759
Semi-Tech (Global) Co. Ltd. H.K. 5,580,302 8,984,773
Shanghai Narcissus Electric
Appliances Co. Ltd., B Chn. 8,701,200 1,479,204
Shanghai Shangling Electric
Appliance, B Chn. 1,804,000 1,104,048
Shanghai Vacuum Electron Devices
Co. Ltd., B Chn. 5,396,092 1,251,893
Shenzhen Huafa Electronics Co.
Ltd., B Chn. 1,184,000 202,884
Shenzhen Konka Electronic Group
Co. Ltd., B Chn. 2,120,000 1,082,962
Tsann Kuen Enterprise Co. Ltd.,
B Chn. 546,000 105,917
------------
16,621,934
- -------------------------------------------------------------------------------
Automobiles: 1.6%
Jardine International Motor
Holdings Ltd. H.K. 8,015,000 9,121,500
Qing Ling Motors Co. Ltd., H Chn. 12,000,000 3,491,756
------------
12,613,256
- -------------------------------------------------------------------------------
Banking: 10.1%
HSBC Holdings PLC H.K. 5,268,392 79,715,728
- -------------------------------------------------------------------------------
Broadcasting & Publishing: 0.2%
Leefung-Asco Printers Holdings
Ltd. H.K. 8,221,000 1,169,492
- -------------------------------------------------------------------------------
Building Materials & Components: 0.9%
China Southern Glass Co. Ltd., B Chn. 4,747,000 1,964,488
K Wah International Holdings
Ltd. H.K. 14,200,045 2,130,236
K Wah International Holdings
Ltd., wts. H.K. 988,700 31,326
Shanghai Yaohua Pilkington
Glass, B Chn. 3,686,800 3,244,384
------------
7,370,434
- -------------------------------------------------------------------------------
Chemicals: 1.5%
Shanghai Chlor-Alkali Chemical
Co. Ltd., B Chn. 10,050,000 2,552,700
Shanghai Pechemical Co. Ltd., H Chn. 30,148,000 8,674,982
Shenzhen Petrochemical (Group)
Shareholding Co. Ltd., B Chn. 885,192 194,611
------------
11,422,293
- -------------------------------------------------------------------------------
Construction & Housing: 4.1%
Hopewell Holdings Ltd. H.K. 50,615,021 29,128,593
Wai Kee Holdings Ltd. H.K. 24,868,000 3,119,555
------------
32,248,148
- -------------------------------------------------------------------------------
</TABLE>
6
<PAGE>
Templeton Dragon Fund, Inc.
Investment Portfolio, December 31, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Electrical & Electronics: 0.7%
China Treasure Telecomunications
Holdings Ltd. H.K. 19,650,000 $ 876,722
China Treasury Telecomunications
Holdings Ltd., wts. H.K. 3,930,000 35,577
G.P. Batteries International Ltd. Sing. 900,000 2,169,000
Gold Peak Industries (Holdings)
Ltd. H.K. 676,000 334,394
GP Batteries International Ltd.,
wts. Sing. 225,000 153,000
Great Wall Electronic
International Ltd. H.K. 13,282,000 979,081
Shanghai Automation
Instrumentation Co., B Chn. 4,511,000 825,513
------------
5,373,287
- -------------------------------------------------------------------------------
Electronic Components & Instruments: 0.1%
S. Megga International Holdings
Ltd. H.K. 18,862,000 707,401
- -------------------------------------------------------------------------------
Financial Services: 1.8%
JCG Holdings Ltd. H.K. 3,445,000 2,517,200
Min Xin Holdings H.K. 11,196,000 1,592,706
Peregrine Investments Holdings
Ltd. H.K. 4,756,000 6,150,663
Sun Hung Kai & Co. Ltd. H.K. 16,294,000 3,476,896
------------
13,737,465
- -------------------------------------------------------------------------------
Food & Household Products: 0.9%
C.P. Pokphand Co. Ltd. H.K. 1,789,000 717,220
Fairwood Holdings Ltd. H.K. 14,768,000 1,126,818
Golden Resources Development
International Ltd. H.K. 10,138,000 930,874
Shanghai New Asia Group Co. Ltd.,
B Chn. 311,800 164,630
Vitasoy International Holdings
Ltd. H.K. 10,354,000 4,418,778
------------
7,358,320
- -------------------------------------------------------------------------------
Health & Personal Care: 0.2%
China Pharmaceutical Enterprise &
Investment Corp. Ltd. H.K. 7,289,000 904,939
Zhuhai Sez Lizhu Pharmaceutical,
B Chn. 2,610,000 860,718
------------
1,765,657
- -------------------------------------------------------------------------------
Industrial Components: 0.3%
Shanghai Refrigerator Compressor
Co. Ltd., B Chn. 1,221,720 434,932
Shanghai Rubber Belt Co. Ltd., B Chn. 807,936 131,694
Shanghai Tyre & Rubber Co. Ltd.,
B Chn. 7,739,000 1,594,234
------------
2,160,860
- -------------------------------------------------------------------------------
Leisure & Tourism: 0.7%
Glynhill International Ltd. H.K. 22,556,000 490,062
Hongkong & Shanghai Hotels Ltd. H.K. 1,961,000 2,840,375
Shanghai Jin Jiang Tower Co.
Ltd., B Chn. 8,182,954 2,307,593
------------
5,638,030
- -------------------------------------------------------------------------------
</TABLE>
7
<PAGE>
Templeton Dragon Fund, Inc.
Investment Portfolio, December 31, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Machinery & Engineering: 1.1%
China Textile Machinery Co. Ltd.,
B Chn. 3,948,000 $ 631,680
Guangzhou Shipyard International
Co. Ltd., H Chn. 10,530,000 2,669,098
Northeast Electric Transmission &
Transformation H.K. 2,168,000 353,273
Shanghai Erfangji Textile
Machinery Co. Ltd., B Chn. 20,014,656 2,842,081
Shanghai Industrial Sewing
Machine Corp. Chn. 9,514,700 1,541,381
Shanghai Steel Tube Co. Ltd., B Chn. 5,088,600 712,404
------------
8,749,917
- -------------------------------------------------------------------------------
Merchandising: 4.5%
Dairy Farm International Holdings
Ltd. H.K. 20,118,904 18,509,392
Dickson Concepts (International)
Ltd. H.K. 10,864,000 10,115,849
Fortei Holdings Ltd. H.K. 3,978,000 149,191
Joyce Boutique Holdings Ltd. H.K. 6,855,000 1,595,732
Le Saunda Holdings Ltd. H.K. 3,616,000 299,287
LI & Fung Ltd. H.K. 1,157,897 1,033,235
Linkful International Holdings
Ltd. H.K. 2,211,000 154,405
Wo Kee Hong Holdings Ltd. H.K. 22,409,000 3,506,614
Yaohan Hongkong Corp. Ltd. H.K. 4,000,000 212,092
------------
35,575,797
- -------------------------------------------------------------------------------
Metals & Mining: 0.3%
Maanshan Iron & Steel Co. Ltd., H Chn. 19,076,000 2,664,349
- -------------------------------------------------------------------------------
Miscellaneous Materials & Commodities: 0.2%
Luoyang Glass Co. Ltd., H Chn. 4,331,000 1,114,606
- -------------------------------------------------------------------------------
Multi-Industry: 22.4%
Cheung Kong Holdings Ltd. H.K. 10,449,000 63,646,673
Jardine Matheson Holdings Ltd. H.K. 3,673,313 25,162,194
Jardine Strategic Holdings Ltd. H.K. 8,123,625 24,858,293
Jardine Strategic Holdings Ltd.,
wts. H.K. 349,625 111,880
Lai Sun Garment International
Ltd. H.K. 7,023,000 6,811,833
Shenzhen Gintian Industrial Co.
Ltd., B Chn. 599,200 205,351
Shenzhen Tellus Machinery &
Electronics Co. Ltd., B Chn. 162,800 23,580
Stelux International Holdings
Ltd. H.K. 8,274,000 2,118,658
Swire Pacific Ltd., B H.K. 13,145,000 16,404,688
WBL Corp. Ltd. Sing. 83,000 192,464
Wheelock & Co. Ltd. H.K. 21,431,000 36,723,020
------------
176,258,634
- -------------------------------------------------------------------------------
</TABLE>
8
<PAGE>
Templeton Dragon Fund, Inc.
Investment Portfolio, December 31, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- -------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- -------------------------------------------------------------------------------
Real Estate: 24.0%
China Overseas Land & Investment
Ltd. H.K. 30,733,000 $ 5,405,351
Hang Lung Development Co. Ltd. H.K. 23,035,000 36,641,513
Hang Lung Development Co. Ltd.,
wts. H.K. 535,000 80,259
Lai Sun Development Co. Ltd. H.K. 79,990,000 9,620,524
New World Development Co. Ltd. H.K. 15,783,000 68,785,917
Shanghai Jinqiao Export
Processing Zone Development, B Chn. 8,338,200 3,118,487
Shanghai Lujiaxui Finance & Trade
Zn Dev Stock Co. Ltd, B Chn. 9,559,000 5,429,512
Shanghai Outer Gaoqiao Free Trade
Zone Develop. Co., B Chn. 1,571,000 574,986
Shenzhen Properties & Resources
Develop. (Group) Ltd., B Chn. 3,473,800 696,332
Shenzhen Vanke Co. Ltd., B Chn. 4,184,900 1,542,446
South Sea Development Co. Ltd. H.K. 46,054,000 1,435,372
Sun Hung Kai Properties Ltd. H.K. 6,306,000 51,581,571
Tian An China Investments Co.
Ltd. H.K. 27,670,000 3,435,267
------------
188,347,537
- -------------------------------------------------------------------------------
Recreation, Other Consumer Goods: 1.1%
Fu Hui Jewellery Co. (H.K.) Ltd. H.K. 7,710,000 299,127
KTP Holdings Ltd. H.K. 15,374,000 516,940
Phoenix Co. Ltd. Chn. 5,322,300 883,502
Shanghai Forever Bicycle Co.
Ltd., B Chn. 3,752,000 521,528
Shanghai Wingsung Stationery Co.
Ltd., B Chn. 200,000 39,200
Shenzhen China Bicycles Co.
(Holdings) Ltd., B Chn. 4,442,400 729,628
Yue Yuen Industrial (Holdings)
Ltd. H.K. 20,662,000 5,477,801
------------
8,467,726
- -------------------------------------------------------------------------------
Textiles & Apparel: 1.4%
Goldlion Holdings Ltd. H.K. 10,974,000 8,018,506
Laws International Holdings Ltd. H.K. 17,288,000 1,542,673
Shanghai Lian Hua Fibre Corp., B Chn. 296,000 50,320
Top Form International Ltd. H.K. 16,937,000 898,050
Tungtex (Holdings) Co. Ltd. H.K. 2,600,000 268,995
Victor Onward Textile Industrial
Co. Ltd., B Chn. 81,400 11,580
------------
10,790,124
- -------------------------------------------------------------------------------
Transportation: 0.9%
China Merchants Shekou Port
Service Co. Ltd., B Chn. 1,776,000 643,104
Chiwan Wharf Holdings Ltd., B Chn. 6,634,000 2,496,597
Cross Harbour Tunnel Co. Ltd. H.K. 644,000 1,220,123
Shanghai Dazhong Taxi
Shareholding Co. Ltd., B Chn. 3,614,000 2,761,096
------------
7,120,920
- -------------------------------------------------------------------------------
</TABLE>
9
<PAGE>
Templeton Dragon Fund, Inc.
Investment Portfolio, December 31, 1995 (unaudited) (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
<C> <S> <C> <C> <C>
- ------------------------------------------------------------------------------
COMMON STOCKS (CONT.)
- ------------------------------------------------------------------------------
Utilities Electrical & Gas: 3.9%
Guangdong Electric Power
Development Co Ltd, B,
144A Chn. 3,380,000 $ 1,617,329
Hongkong Electric Holdings
Ltd. H.K. 6,410,000 21,014,355
Shandong Huaneng Power Chn. 886,000 5,980,500
Wing Shan International
Ltd. H.K. 21,654,000 2,240,310
------------
30,852,494
- ------------------------------------------------------------------------------
Wholesale & International Trade: 0.1%
East Asiatic Co. (Hong
Kong) Ltd. (The) H.K. 7,520,000 894,717
------------
TOTAL COMMON STOCKS 668,739,126
- ------------------------------------------------------------------------------
<CAPTION>
PRINCIPAL IN
LOCAL CURRENCY*
- ------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
SHORT TERM INVESTMENTS: 17.5%
- ------------------------------------------------------------------------------
U.S. Treasury Bills, 4.25%
to 5.34% with
maturities to 2/22/96 U.S. 137,817,000 137,154,120
- ------------------------------------------------------------------------------
TOTAL INVESTMENTS: 102.6% 805,893,246
OTHER ASSETS, LESS LIABILITIES: (2.6%) (20,089,752)
------------
TOTAL NET ASSETS: 100.0% $785,803,494
============
</TABLE>
* CURRENCY OF COUNTRY INDICATED.
10
<PAGE>
Templeton Dragon Fund, Inc.
Financial Highlights, December 31, 1995 (unaudited)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
NET ASSET VALUE
TOTAL NET ASSETS PER SHARE
-------------------------- -----------------
<S> <C> <C> <C> <C>
Net Asset Value:
Beginning of period, October 1,
1995 $795,847,280 $ 14.74
Net investment income $ 6,483,989 $ .12
Distribution from net
investment income (21,332,802) (.40)
Net gain from security and
foreign currency transactions 4,805,027 .09
------------ -------
Net decrease in net asset value (10,043,786) (.19)
------------ --------
End of period, December 31,
1995 $785,803,494 $ 14.55
============ ========
</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.
11
<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.
12
<PAGE>
NOTES
-----
<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.
TEMPLETON
DRAGON
FUND, INC.
Third Quarter Report
December 31, 1995
[LOGO OF FRANKLIN TEMPLETON APPEARS HERE]
[LOGO OF RECYCLED PAPER APPEARS HERE]
TLTDF Q95 02/96
- --------------------------------------------------------------------------------
