NAME OF REGISTRANT:
TEMPLETON DRAGON FUND, INC.
FILE NO. 811-08874

EXHIBIT ITEM NO. 77(E): LEGAL PROCEEDINGS


REGULATORY MATTERS

MASSACHUSETTS ADMINISTRATIVE PROCEEDING
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")
claiming violations of the Massachusetts Uniform Securities Act ("Massachusetts
Act") with respect to an alleged arrangement to permit market timing (the "Mass.
Proceeding"). On February 17, 2004, the Company filed an answer denying all
violations of the Massachusetts Act.

U.S. SECURITIES AND EXCHANGE COMMISSION (SEC) SETTLEMENT
On August 2, 2004, the Company announced that an agreement had been reached by
an affiliate of the Fund's investment manager with the SEC that resolved the
issues resulting from the SEC's investigation of market timing activity. The SEC
issued an "order instituting administrative and cease-and-desist proceedings
pursuant to sections 203(e) and 203(k) of the Investment Advisers Act of 1940
and sections 9(b) and 9(f) of the Investment Company Act of 1940, making
findings and imposing remedial sanctions and a cease and desist order" (the
"Order"). The SEC's Order concerns the activities of a limited number of third
parties that ended in 2000 and those that are the subject of the Mass.
Proceeding described above.

Under the terms of the SEC's Order, pursuant to which an affiliate of the Fund's
investment manager neither admits nor denies any wrongdoing, an affiliate of the
Fund's investment manager has agreed to pay $50 million, of which $20 million is
a civil penalty, to be distributed to certain fund shareholders in accordance
with a plan to be developed by an Independent Distribution Consultant. At this
time, it is unclear whether shareholders of all funds will receive distributions
or whether all shareholders of any particular fund will receive distributions.
The SEC Order also requires an affiliate of the Fund's investment manager to,
among other things, enhance and periodically review compliance policies and
procedures.

OTHER GOVERNMENTAL INVESTIGATIONS
As part of ongoing investigations by 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, the West
Virginia Attorney General, the Vermont Department of Banking, Insurance,
Securities, and Health Care Administration and the National Association of
Securities Dealers, relating to certain practices in the mutual fund industry,
including late trading, market timing and payments to securities dealers who
sell fund shares, 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 has
been 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 also informed the Company that it is considering
recommending a civil action or proceeding against an affiliate of the Fund's
investment manager and Franklin Templeton Distributors, Inc. concerning payments
to securities dealers who sell fund shares (commonly referred to as "revenue
sharing"). The staff of the California Attorney General's Office (CAGO) also has
advised the Company that it is authorized to bring a civil action against
Franklin Resources, Inc. and Franklin Templeton Distributors, Inc. arising from
the same events. Even though the Company currently believes that the charges the
SEC staff and CAGO staff are contemplating are unwarranted, it also believes
that it is in the best interest of the Company and fund shareholders to resolve
these issues voluntarily, to the extent the Company can reasonably do so.

OTHER LEGAL PROCEEDINGS
The Company, in addition to other entities within Franklin Templeton
Investments, including certain of its subsidiaries, other funds, and current and
former officers, employees, and directors have been named in multiple lawsuits
in different federal courts in Nevada, California, Illinois, New York and
Florida, alleging violations of various federal securities laws and seeking,
among other things, monetary damages and costs. Specifically, the lawsuits claim
breach of duty with respect to alleged arrangements to permit market timing
and/or late trading activity, or breach of duty with respect to the valuation of
the portfolio securities of certain funds managed by Company subsidiaries,
resulting in alleged market timing activity. The majority of these lawsuits
duplicate, in whole or in part, the allegations asserted in the Mass. Proceeding
detailed above. The lawsuits are styled as class actions or derivative actions
on behalf of either the named funds or the Company.

In addition, the Company and its subsidiaries, as well as certain current and
former officers, employees, and directors have been named in multiple lawsuits
alleging violations of various securities laws and pendent state law claims
relating to the disclosure of directed brokerage payments and/or payment of
allegedly excessive commissions and advisory fees. These lawsuits are styled as
class actions and derivative actions.

The Company's management strongly believes that the claims made in each of these
lawsuits are without merit and intends to vigorously defend against them.

The Company cannot predict with certainty the eventual outcome of the foregoing
Mass. Proceeding, other governmental investigations or other legal proceedings.
The impact, if any, of these matters on the Fund is uncertain at this time. If
the Company determines that it bears responsibility for any unlawful or
inappropriate conduct that caused losses to the Fund, it is committed to making
the Fund or its shareholders whole, as appropriate.