<PAGE>
Templeton Russia Fund
Dr. Mobius has been living overseas since earning his Ph.D. in economics and
political science at Massachusetts Institute of Technology in 1964. During his
extensive travels, he has acquired a thorough knowledge of the business
practices and customs that are unique to emerging markets. Together with his
team of Templeton analysts, Dr. Mobius currently oversees more than $8 billion
in emerging markets investments for the Templeton Group of Funds.
[PHOTO OF DR. MARK MOBIUS APPEARS HERE]
J. Mark Mobius, Ph.D.
President
Templeton Russia Fund
Your Fund's Objective:
The Templeton Russia Fund seeks long-term capital appreciation through equity
investments in "Russia companies."
May 16, 1996
Dear Shareholder:
We are pleased to bring you the first annual report for the Templeton Russia
Fund, which covers the nine-and-one-half months from the Fund's inception on
June 15, 1995, through March 31, 1996.
During this time, the Russian government took several steps to improve the
country's economy. In December 1995, the Duma, Russia's parliament, passed a
budget for 1996 that included non-inflationary financing for the deficit. In
March 1996, President Yeltsin signed decrees allowing private ownership of land
and permitting long-term housing mortgages. And throughout the period, the
Russian central bank kept a tight grip on monetary growth in an effort to reduce
inflation. In support of these
1
<PAGE>
policies, the International Monetary Fund granted Russia a three-year loan for
US$10.2 billion in February 1996. Then, in March, Germany announced a US$2.7
billion official credit package for Russia, and the Paris Club, an organization
of private and government bankers in developed countries, reached a preliminary
agreement with Russia on a 20-25 year rescheduling of US$38 billion of sovereign
debt.
Despite these positive developments, the Russian stock market drifted downward
13.74% (as measured in U.S. dollars) during the reporting period. The victory
of the Communist Party in the December 1995 parliamentary election and the lack
of renewed Russian commitment to privatization sent negative messages to the
stock market. Uncertainty about President Yeltsin's leadership also raised
investors' concerns when, in January, he bowed to public pressure and dismissed
his foreign affairs minister and deputy prime minister, both of whom were
perceived to be in favor of economic reforms. Within this environment, the Fund
produced a total return of -8.73% in market-price terms for the period, as shown
in the Performance Summary on page 5.
Under communism, capital spending and infrastructure development in Russia
slowed markedly, and Russia now
Templeton Russia Fund
Portfolio Breakdown on 3/31/96
Based on Total Net Assets
[PIE CHART APPEARS HERE]
<TABLE>
<S> <C>
Utilities - Electric & Gas 19.0%
Energy Sources 16.0%
Telecommunications 8.3%
Multi-Industry 6.2%
Metals & Mining 3.5%
Merchandising 2.3%
Transportation 1.5%
Automobiles 1.0%
Short-Term Obligations &
Other Net Assets 42.2%
</TABLE>
needs foreign investment to help pay for its economic growth and restructuring.
We have moved cautiously into the Russian stock market, searching for stocks
that we believed were selling at less than their true worth. In conducting our
search, we analyzed the financial health, and historical and prospective
performance of many companies by looking at scores of performance measures, and
assessed their management. External factors such as the political, economic,
technological and social environments, were also taken into account.
Since we were able to discover a number of potential bargains during the
reporting period, our exposure to equities
2
<PAGE>
rose from 46.7% of total net assets on September 30, 1995 to 57.8% on March 31,
1996. Investments in the utilities sector accounted for 19% of the Fund's total
net assets, the energy sector represented 16%, and companies in the
telecommunications sector comprised 8.3%. Among the positions held by the Fund,
each of which represented 5% or more of total net assets, were: Rao Edinaya
Energeticheskaya Sistema, Russia's dominant electric utility; Rostelekom,
Russia's leading intercity and international telecommunications provider; and
Mosenergo, an electricity supplier to the Moscow area.
Looking forward, we are optimistic about potential investment opportunities in
Russia. Economic growth appears to be gaining momentum; the Russian Daily
Review forecasts that inflation may fall to 39% in 1996, from 131% in 1995; and,
in our opinion, an election win for President Yeltsin in June might give a boost
to the Russian stock market. We believe that, if the Russian political
situation becomes better understood and economic news is positive, investor
sentiment should gradually turn upward, and the Fund may share in the rewards
that come with market-friendly reforms.
This discussion reflects the strategies we employed for the Fund during the
period under review, and includes
<TABLE>
<CAPTION>
[BAR CHART APPEARS HERE]
- ----------------------------------------------------
Templeton Russia Fund
Top 10 Holdings on 3/31/96
Based on Total Net Assets
% of Total
Company, Industry Net Assets
- ----------------------------------------------------
<S> <C>
Rao Edinaya Energeticheskaya Sistema
Utilities - Electric & Gas 7.5%
- ----------------------------------------------------
Rostelekom
Telecommunications 6.9%
- ----------------------------------------------------
Lukoil-Holdings
Multi-Industry 6.2%
- ----------------------------------------------------
Irkutskenergo
Utilities - Electric & Gas 5.9%
- ----------------------------------------------------
Mosenergo
Utilities - Electric & Gas 5.5%
- ----------------------------------------------------
Chernogoneft
Energy Sources 5.4%
- ----------------------------------------------------
Komineft
Energy Sources 3.9%
- ----------------------------------------------------
Krasnoyarsk Aluminum Plant
Metals & Mining 3.5%
- ----------------------------------------------------
Purneftegaz
Energy Sources 3.0%
- ----------------------------------------------------
Tomskneft
Energy Sources 2.4%
- ----------------------------------------------------
</TABLE>
For a detailed listing of portfolio holdings, please see page 7 of this report.
our opinions as of the close of the period. Since economic and market
conditions are constantly changing, our strategies, and our evaluations,
conclusions and decisions regarding portfolio holdings, may change as new
circumstances arise. Although past performance of a specific investment or
sector cannot guarantee future performance, such information can be useful in
analyzing securities we purchase or sell for the Fund.
3
<PAGE>
It should be remembered, of course, that investing in any emerging market means
tolerating a certain amount of volatility, and in some cases, severe market
corrections. Investing in Russia is no exception. It involves special
considerations not typically associated with investing in the United States
securities markets, a high degree of risk, and should be considered highly
speculative. These risks include, but are not limited to, political, economic,
and legal uncertainties, market and currency volatility, delays in settling
portfolio transactions, risk of loss arising from Russia's underdeveloped
systems of share registration and transfer, and the pervasive crime and
corruption in the Russian economic system, as well as adverse social and
political developments. Thank you for investing in the Templeton Russia Fund. We
appreciate your support and welcome your comments.
Sincerely,
/s/ J. Mark Mobius
J. Mark Mobius, Ph.D.
President
Templeton Russia Fund, Inc.
4
<PAGE>
Performance Summary
In market-price terms, the Templeton Russia Fund produced a total return of
- -8.73% for the nine-and-a-half month reporting period ended March 31, 1996.
Based on the change in actual net asset value (in contrast to market price),
total return was -19.47% for the same period. Total return assumes reinvest-
ment of dividends in accordance with the dividend reinvestment plan.
Shareholders received income distributions of 6.5 cents ($0.065) per share.
On March 31, 1996, the Fund's closing price on the New York Stock Exchange was
$13.625 compared with the initial offering price of $15.00 per share on June 15,
1995. The net asset value fell from $14.10 to $11.30 during the same period.
We believe it is important to maintain a long-term investment perspective, and
encourage shareholders to view their investments in a similar manner. Past
performance is not predictive of future results.
The Fund's investment manager is waiving a portion of its fees, which reduces
operating expenses and increases total return to shareholders. Without these
reductions, the Fund's total return would have been lower. The Fund's manager
has agreed to reduce its fee by one half during the fiscal quarter following any
of the first eight fiscal quarters in which the average closing price of the
Fund's shares on the New York Stock exchange is less than the $15 initial
offering price.
- --------------------------------------------------------------------------------
Templeton Russia Fund
<TABLE>
<CAPTION>
Cumulative Total Returns*
Period ended March 31, 1996
Since
Inception
(6/15/95)
<S> <C>
Based on change
in net asset value -19.47%
Based on change
in market price -8.73%
</TABLE>
* Past performance is not predictive of future results.
5
<PAGE>
Templeton Russia Fund, Inc.
Financial Highlights
- --------------------------------------------------------------------------------
PER SHARE OPERATING PERFORMANCE (For a share outstanding throughout the period)
<TABLE>
<CAPTION>
JUNE 15, 1995
(COMMENCEMENT OF
OPERATIONS) TO
MARCH 31, 1996
----------------
<S> <C>
Net asset value, beginning of period $ 14.10
--------
Income from investment operations:
Net investment income .15
Net realized and unrealized loss (2.78)
--------
Total from investment operations (2.63)
Underwriting expenses deducted from capital (.10)
Distributions to shareholders from net investment income (.07)
--------
Change in net asset value (2.80)
--------
Net asset value, end of period $ 11.30
========
TOTAL RETURN*
Based on market value per share (8.73)%
Based on net asset value per share (19.47)%
RATIOS/SUPPLEMENTAL DATA
Net assets, end of period (000) $ 59,942
Ratio of expenses, inclusive of fee waiver, to average net
assets 2.00%**
Ratio of net investment income to average net assets 1.54%**
Portfolio turnover rate .50%
</TABLE>
*NOT ANNUALIZED FOR PERIODS OF LESS THAN ONE YEAR.
**ANNUALIZED.
SEE NOTES TO FINANCIAL STATEMENTS.
6
<PAGE>
Templeton Russia Fund, Inc.
Investment Portfolio, March 31, 1996
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
INDUSTRY ISSUE COUNTRY SHARES VALUE
- ----------------------------------------------------------------------------
<C> <S> <C> <C> <C>
COMMON STOCKS: 57.8%
- ----------------------------------------------------------------------------
Aerospace & Military Technical Systems:
0.1%
*Perm Motor Rus. 690,000 $ 18,975
- ----------------------------------------------------------------------------
Automobiles: 1.0%
*Kamaz Rus. 546,200 600,820
- ----------------------------------------------------------------------------
Energy Sources: 16.0%
*Chernogorneft Rus. 530,000 3,243,600
*Komineft Rus. 1,547,047 2,320,570
*Orenburgneft Rus. 672,185 537,748
*Purneftegaz Rus. 1,397,365 1,816,575
*Samotlorneft Rus. 168,945 236,523
*Tomskneft Rus. 556,895 1,447,927
-----------
9,602,943
- ----------------------------------------------------------------------------
Merchandising: 2.3%
*GUM Trade House Rus. 202,212 1,390,207
- ----------------------------------------------------------------------------
Metals & Mining: 3.5%
*Krasnoyarsk Aluminum Plant Rus. 199,800 2,097,900
- ----------------------------------------------------------------------------
Multi-Industry: 6.1%
*Lukoil-Holdings Rus. 772,000 3,639,980
- ----------------------------------------------------------------------------
Telecommunications: 8.3%
*Rostelekom Rus. 4,607,500 4,146,750
*Saint Petersburg City Telephone
Network Rus. 108,235 811,763
-----------
4,958,513
- ----------------------------------------------------------------------------
Transportation: 1.5%
*Primorsk Shipping Rus. 414,000 921,150
- ----------------------------------------------------------------------------
Utilities Electric & Gas: 19.0%
*Irkutskenergo Rus. 77,400,000 3,560,400
*Lenenergo Rus. 1,094,400 69,494
*Mosenergo Rus. 13,798,000 3,297,722
*Rao Edinaya Energeticheskaya
Sistema Rus. 149,349,200 4,480,476
-----------
11,408,092
-----------
TOTAL COMMON STOCKS (cost $49,468,931) 34,638,580
- ----------------------------------------------------------------------------
</TABLE>
7
<PAGE>
Templeton Russia Fund, Inc.
Investment Portfolio, March 31, 1996 (cont.)
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
PRINCIPAL IN
LOCAL
INDUSTRY ISSUE COUNTRY CURRENCY** VALUE
- -------------------------------------------------------------------------------
<C> <S> <C> <C> <C>
CORPORATE BOND: 0.1% (cost $72,720)
- -------------------------------------------------------------------------------
*Lukoil Holdings zero coupon,
4/06/96 Rus. 100 $ 87,000
- -------------------------------------------------------------------------------
SHORT TERM OBLIGATIONS: 43.7%
- -------------------------------------------------------------------------------
Deutsche Bank Inc., 5.437%,
4/01/96 U.S. 1,760,000 1,760,000
Federal Farm Credit Bank, 5.27%
to 5.29% with maturities to
7/1/96 U.S. 6,200,000 6,192,796
Federal Home Loan Bank, 5.27% to
5.42% with maturities to 4/25/96 U.S. 4,550,000 4,545,051
Federal Home Loan Mortgage Corp.,
4.98% to 5.30% with maturities
to 5/15/96 U.S. 11,510,000 11,490,269
Federal National Mortgage Assn.,
5.04% to 5.27% with maturities
to 5/30/96 U.S. 2,225,000 2,210,587
-----------
SHORT TERM OBLIGATIONS (cost $26,200,896) 26,198,703
- -------------------------------------------------------------------------------
TOTAL INVESTMENTS: 101.6% (cost
$75,742,547) 60,924,283
OTHER ASSETS, LESS LIABILITIES: (1.6%) (981,958)
-----------
TOTAL NET ASSETS: 100.0% $59,942,325
===========
</TABLE>
*NON-INCOME PRODUCING.
**CURRENCY OF COUNTRIES INDICATED.
SEE NOTES TO FINANCIAL STATEMENTS.
8
<PAGE>
Templeton Russia Fund, Inc.
Financial Statements
- --------------------------------------------------------------------------------
STATEMENT OF ASSETS AND LIABILITIES
March 31, 1996
<TABLE>
<S> <C>
Assets:
Investments in
securities, at value
(identified cost
$75,742,547) $ 60,924,283
Cash 179
Interest receivable 33,493
Unamortized organization
costs 90,781
------------
Total assets 61,048,736
------------
Liabilities:
Payables:
Investment securities
purchased 874,014
Organization and
registration expenses 62,528
Accrued expenses 169,869
------------
Total liabilities 1,106,411
------------
Net assets, at value $ 59,942,325
============
Net assets consist of:
Undistributed net
investment income $ 457,394
Net unrealized
depreciation (14,818,264)
Accumulated net realized
loss (767)
Net capital paid in on
shares of capital stock 74,303,962
------------
Net assets, at value $ 59,942,325
============
Shares outstanding (Note
3) 5,302,678
============
Net asset value per share
($59,942,325 / 5,302,678) $ 11.30
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
STATEMENT OF OPERATIONS
for the period June 15, 1995 (commencement of operations) to March 31, 1996
<TABLE>
<S> <C> <C>
Interest income $ 1,846,821
Expenses:
Management fees (Note 4) $ 439,282
Administrative fees (Note 4) 141,622
Transfer agent fees 27,312
Custodian fees 231,968
Reports to shareholders 13,976
Audit fees 40,000
Legal fees (Note 4) 24,998
Registration and filing fees 94,522
Directors' fees and expenses 10,676
Amortization of organization costs 16,719
Other 4,041
------------
Total expenses 1,045,116
------------
Net investment income 801,705
Realized and
unrealized loss:
Net realized loss on investments (767)
Net unrealized depreciation on investments (14,818,264)
------------
Net realized and unrealized loss (14,819,031)
------------
Net decrease in net assets resulting from
operations $(14,017,326)
============
</TABLE>
9
<PAGE>
Templeton Russia Fund, Inc.
Financial Statements (cont.)
- --------------------------------------------------------------------------------
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
JUNE 15, 1995
(COMMENCEMENT
OF OPERATIONS) TO
MARCH 31, 1996
-----------------
<S> <C>
Increase (decrease) in net assets:
Operations:
Net investment income $ 801,705
Net realized loss on investments (767)
Net unrealized depreciation (14,818,264)
------------
Net decrease in net assets resulting from operations (14,017,326)
Distributions to shareholders from net investment income (344,311)
Capital share transactions (Note 3) 74,203,951
------------
Net increase in net assets 59,842,314
Net assets:
Beginning of period 100,011
------------
End of period $ 59,942,325
============
</TABLE>
SEE NOTES TO FINANCIAL STATEMENTS.
10
<PAGE>
Templeton Russia Fund, Inc.
Notes to Financial Statements
- --------------------------------------------------------------------------------
1. SUMMARY OF ACCOUNTING POLICIES
Templeton Russia Fund, Inc. (the Fund) is a Maryland corporation and a closed-
end, non-diversified management investment company registered under the Invest-
ment Company Act of 1940. The Fund seeks to achieve its objectives by investing
in equity securities of Russia or Russian related companies. The following sum-
marizes the Fund's significant accounting policies.
a. Securities Valuations:
Securities listed or traded on a recognized national or foreign exchange or
NASDAQ are valued at the last reported sales prices on the principal exchange
on which the securities are traded. Over-the-counter securities and listed se-
curities for which no sale is reported are valued at the mean between the last
current bid and asked prices. Securities for which market quotations are not
readily available are valued at fair value as determined by management and ap-
proved in good faith by the Board of Directors.
b. Foreign Currency Transactions:
Portfolio securities and other assets and liabilities denominated in foreign
currencies are translated into U.S. dollars based on the rate of exchange of
such currencies against U.S. dollars on the date of valuation. Purchases and
sales of portfolio securities and income items denominated in foreign curren-
cies are translated into U.S. dollar amounts on the respective dates of such
transactions. When the Fund purchases or sells foreign securities it customar-
ily enters into a foreign exchange contract to minimize foreign exchange risk
between the trade date and the settlement date of such transactions.
The Fund does not isolate that portion of the results of operations resulting
from changes in foreign exchange rates on investments from the fluctuations
arising from changes in market prices of securities held. Such fluctuations are
included with the net realized and unrealized gain or loss from investments.
Reported net realized foreign exchange gains or losses arise from sales of for-
eign currencies, currency gains or losses realized between the trade and set-
tlement dates on securities transactions, the differences between the amounts
of dividends, interest, and foreign withholding taxes recorded on the Fund's
books, and the U.S. dollar equivalent of the amounts actually received or paid.
Net unrealized foreign exchange gains and losses arise from changes in the
value of assets and liabilities other than investments in securities at the end
of the fiscal period, resulting from changes in the exchange rates.
c. Income Taxes:
It is the Fund's policy to comply with the requirements of the Internal Revenue
Code applicable to regulated investment companies and to distribute all of its
taxable income to its shareholders. Therefore, no provision has been made for
income taxes.
d. Security Transactions, Investment Income, Distributions and Expenses:
Security transactions are accounted for on a trade date basis. Dividend income
is recorded on the ex-dividend date. Certain dividend income on foreign securi-
ties is recorded as soon as information is available to the Fund. Interest in-
come and estimated expenses are accrued daily. Distributions to shareholders,
which are determined in accordance with income tax regulations, are recorded on
the ex-dividend date.
e. Unamortized Organization Costs:
Organization costs are being amortized on a straight line basis over five
years.
f. Accounting Estimates:
The preparation of financial statements in accordance with generally accepted
principles requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities at the date of the financial
statements and the amounts of income and expense during the reporting period.
Actual results could differ from those estimates.
11
<PAGE>
Templeton Russia Fund, Inc.
Notes to Financial Statements (cont.)
- --------------------------------------------------------------------------------
2. MARKET AND GEOGRAPHIC RISK CONSIDERATIONS
Investing in equity securities of Russian companies includes certain risks not
typically associated with investing in countries with more developed securities
markets, such as political, economic and legal uncertainties, delays in set-
tling portfolio transactions and the risk of loss from Russia's underdeveloped
systems of share registration and transfer.
3. TRANSACTIONS IN SHARES OF CAPITAL STOCK
On June 15, 1995, the Fund completed its initial public offering of 4.6 million
shares of its common stock. Proceeds paid to the Fund amounted to $64,400,000
after deduction of underwriting commissions as well as offering, expenses of
$460,000. On July 7, 1995, the Fund completed a subsequent offering of 690,000
shares of its common stock resulting in additional proceeds of $9,729,000.
At March 31, 1996, there were 100,000,000 shares of capital stock authorized
($.01 par value).
During the period ended March 31, 1996, 5,585 shares were issued for $74,951
from reinvested distributions.
4. INVESTMENT MANAGEMENT FEES AND OTHER TRANSACTIONS WITH AFFILIATES
Certain officers of the Fund are also directors or officers of Templeton Asset
Management Limited (TAML) and Templeton Global Investors, Inc. (TGII), the
Fund's investment manager and administrative manager, respectively.
The Fund pays monthly an investment management fee to TAML equal, on an annual
basis, to 1.25% of the average weekly net assets of the Fund. The Fund pays
TGII monthly fees of 0.25% per annum of the Fund's average weekly net assets of
which 0.20% is paid to Princeton Administrators L.P., an affiliate of Merrill
Lynch, Pierce, Fenner & Smith Incorporated, for sub-administrative services.
TAML has agreed to reduce its fees by one half during the fiscal quarter fol-
lowing the fiscal period ending September 30, 1995 and any of the succeeding
eight full fiscal quarters in which the average closing price of the Fund's
shares on the New York Stock Exchange is less than the $15 initial offering
price. Such reduction in fees amounted to $195,049 for the period ended March
31, 1996.
An officer of the Fund is a partner of Dechert Price & Rhoads, legal counsel
for the Fund, which firm received $24,998 for services subsequent to the public
offering.
5. PURCHASES AND SALES OF SECURITIES
Purchases and sales of securities (excluding short-term securities) for the pe-
riod ended March 31, 1996 were $49,693,796 and $120,200, respectively. The cost
of securities for federal income tax purposes is the same as that shown in the
Investment Portfolio. Realized gains and losses are reported on an identified
cost basis.
At March 31, 1996, the aggregate gross unrealized appreciation and depreciation
of portfolio securities, based on cost for federal income tax purposes, was as
follows:
<TABLE>
<S> <C>
Unrealized appreciation $ 387,908
Unrealized depreciation (15,206,172)
------------
Net unrealized depreciation $(14,818,264)
============
</TABLE>
12
<PAGE>
Templeton Russia Fund, Inc.
Independent Auditor's Report
- --------------------------------------------------------------------------------
The Board of Directors and Shareholders
Templeton Russia Fund, Inc.
We have audited the accompanying statement of assets and liabilities, including
the investment portfolio, of Templeton Russia Fund, Inc. as of March 31, 1996,
and the related statement of operations, the statement of changes in net assets
and the financial highlights for the period from June 15, 1995 (commencement of
operations) to March 31, 1996. These financial statements and financial high-
lights are the responsibility of the Fund's management. Our responsibility is
to express an opinion on these financial statements and financial highlights
based on our audit.
We conducted our audit in accordance with generally accepted auditing stan-
dards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements and financial high-
lights are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the financial
statements. Our procedures included confirmation of securities owned as of
March 31, 1996, by correspondence with the custodian and brokers. An audit also
includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement pre-
sentation. We believe that our audit provides a reasonable basis for our opin-
ion.
In our opinion, the financial statements and financial highlights referred to
above present fairly, in all material respects, the financial position of Tem-
pleton Russia Fund, Inc. as of March 31, 1996, the results of its operations,
the changes in its net assets and the financial highlights for the period indi-
cated, in conformity with generally accepted accounting principles.
/s/ McGladrey & Pullen, LLP
New York, New York
April 26, 1996
13
<PAGE>
Templeton Russia Fund, Inc.
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT PLAN
The Fund offers a Dividend Reinvestment Plan (the "Plan") with the following
features: . If shares of the Fund are held in the shareholder's name, the
shareholder will automatically be a participant in the Plan unless he elects to
withdraw. If the shares are registered in the name of a broker-dealer or other
nominee (i.e., in "street name"), the broker-dealer or nominee will elect to
participate in the Plan on the shareholder's behalf unless the shareholder in-
structs them otherwise, or unless the reinvestment service is not provided by
the broker-dealer or nominee. . Participants should contact Chemical Mellon Se-
curities Trust Company, Dividend Reinvestment Services, P.O. Box 750, Pitts-
burgh, PA 15230, to receive the Plan brochure. . To receive dividends or dis-
tributions in cash, the shareholder must notify Chemical Mellon Securities
Trust Company ("Mellon") or the institution in whose name the shares are held.
Mellon must receive written notice within 10 business days before the record
date for the distribution. . Whenever the Fund declares dividends in either
cash or common stock of the Fund, if the market price is equal to or exceeds
net asset value but not less than 95% of the then current market price of the
Fund's shares. If the market price is lower than net asset value and if divi-
dends and/or capital gains distributions are payable only in cash, the partici-
pant will receive shares purchased on the New York Stock Exchange. . The auto-
matic reinvestment of dividends and/or capital gains does not relieve the par-
ticipant of any income tax which may be payable on dividends or distributions.
. The participants may withdraw from the Plan without penalty at any time by
written notice to Mellon. Upon withdrawal, the participant will receive, with-
out charge, stock certificates issued and in the participant's name for all
full shares; or, if the participant's wishes, Mellon will sell the partici-
pant's shares and send the proceeds, net of any brokerage commissions. A $5.00
fee is charged by Mellon upon any cash withdrawal or termination. . Whenever
shares are purchased on the New York Stock Exchange, each participant will pay
a pro rata portion of brokerage commissions. Brokerage commissions will be de-
ducted from amounts to be invested.
14
<PAGE>
Templeton Russia Fund, Inc.
- --------------------------------------------------------------------------------
TRANSFER AGENT
Chemical Mellon Shareholder Services
Securities Transfer Services
450 West 33rd Street, 15th Floor
New York, NY 10001
800-526-0801
SHAREHOLDER INFORMATION
Weekly comparative net asset value and market price information about Templeton
Russia 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". Daily market prices for the Fund's
shares are published in the New York Stock Exchange Composite Transactions sec-
tion of newspapers under the designation "TempltnTRF". The Fund's New York
Stock Exchange trading symbol is TRF.
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 Russia Fund, Inc., 700 Central Avenue, St. Peters-
burg, FL 33701.
15
<PAGE>
TEMPLETON RUSSIA FUND, INC.
700 Central Avenue
St. Petersburg,
Florida 33701-3628
Auditors
McGladrey & Pullen, LLP
555 Fifth Avenue
New York, New York 10017-2416
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
RUSSIA
FUND, INC.
Annual Report
March 31, 1996
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