NAME OF REGISTRANT:
Templeton Dragon Fund
File No. 811-8874

EXHIBIT ITEM No. 77I(e): Legal Proceedings

REGULATORY MATTERS

On February 4, 2004, the Securities Division of the Office of the Secretary of
the Commonwealth of Massachusetts filed an administrative complaint against
Franklin Resources, Inc. and certain of its subsidiaries (the "Company"),
alleging violations of the Massachusetts Uniform Securities Act. The complaint
arises from activity that occurred in 2001 during which time an officer of a
Company subsidiary was negotiating an agreement with an investor relating to
investments in a mutual fund and a hedge fund.

The Fund, in addition to other entities within Franklin Templeton Investments,
including the Company and other funds, has been named in .shareholder class
actions related to the matter described above. The Fund's management believes
that the claims made in the lawsuit are without merit and it intends to defend
vigorously against the allegations. It is anticipated that the Fund may be named
in additional similar civil actions related to the matter described above.

In addition, as part of ongoing investigations by the U.S. Securities and
Exchange Commission (the "SEC"), the U.S. Attorney for the Northern District of
California, the New York Attorney General, the California Attorney General, the
U.S. Attorney for the District of Massachusetts, the Florida Department of
Financial Services, and the Commissioner of Securities and the Attorney General
of the State of West Virginia, relating to certain practices in the mutual fund
industry, including late trading, market timing and sales compensation
arrangements, the Company and its subsidiaries, as well as certain current or
former executives and employees of the Company, have received requests for
information and/or subpoenas to testify or produce documents. The Company and
its current employees are providing documents and information in response to
these requests and subpoenas. In addition, the Company has responded to requests
for similar kinds of information from regulatory authorities in some of the
foreign countries where the Company conducts its global asset management
business.

The Staff of the SEC has informed the Company that it intends to recommend that
the Commission authorize an action against an affiliate of the Fund's adviser
and a senior executive officer relating to the frequent trading issues that are
the subject of the SEC's investigation. These issues were previously disclosed
as being under investigation by government authorities and the subject of an
internal inquiry by the Company in its Annual Report on Form 10-K and on its
public website. The Company currently is in discussions with the SEC Staff in an
effort to resolve the issues raised in their investigation. Such discussions
are preliminary and the Fund management has been advised that the Company cannot
predict the likelihood of whether those discussions will result in a settlement
and, if so, the terms of such settlement. The impact, if any, of these matters
on the Fund is uncertain at this time. If the Company finds that it bears
responsibility for any unlawful or improper conduct, it has committed to making
the Fund or its shareholders whole, as appropriate.