AMENDED AND RESTATED DISTRIBUTION AGREEMENT

            THIS AGREEMENT made as of the 31st day of December, 1998.


A M O N G:

            TEMPLETON EMERGING MARKETS FUND ("TEMF"),
            TEMPLETON CANADIAN BOND FUND ("TCBF"),
            TEMPLETON INTERNATIONAL STOCK FUND ("TISF"),
            TEMPLETON CANADIAN STOCK FUND ("TCSF"),
            TEMPLETON GLOBAL SMALLER COMPANIES FUND ("TGSCF"),
            TEMPLETON GLOBAL BOND FUND ("TGBF"),
            TEMPLETON TREASURY BILL FUND ("TTBF"),
            TEMPLETON GLOBAL BALANCED FUND ("TGBAF"),
            TEMPLETON INTERNATIONAL BALANCED FUND ("TIBF"),
            TEMPLETON CANADIAN ASSET ALLOCATION FUND ("TCAAF"),
            MUTUAL BEACON FUND ("MBF"),
            FRANKLIN U.S. SMALL CAP GROWTH FUND ("FSCF") AND
            TEMPLETON BALANCED FUND ("TBF"), by their manager/trustee Templeton
            Management Limited, a corporation incorporated under the laws of the
            Province of Ontario with its registered office at Suite 2101,
            1 Adelaide Street East, Toronto, Ontario

            (hereinafter referred to as the "Trustee")


                                                            OF THE FIRST PART;


                                     -and-


            TEMPLETON  GROWTH FUND, LTD., a corporation  incorporated  under the
            laws of Canada with its registered  office at Suite 2101, 1 Adelaide
            Street East, Toronto, Ontario

            (hereinafter referred to as the "TGF" or the "Corporate Fund")


                                                           OF THE SECOND PART;



<PAGE>

                                     -and-

            TEMPLETON MANAGEMENT LIMITED, a corporation incorporated under the
            laws of the Province of Ontario with its registered office at Suite
            2101, 1 Adelaide Street West, Toronto, Ontario

            (hereinafter referred to as the "Manager"),

                                                            OF THE THIRD PART;

                                     -and-

            FEP CAPITAL,  L.P., a limited  partnership  formed under the laws of
            the State of Texas,  and having an office at 201 Main  Street,  Fort
            Worth, Texas 76102

            (hereinafter referred to as "FEP"),

                                                           OF THE FOURTH PART.


RECITALS:

(1)   Each of the Trust Funds (as hereinafter defined) are open-end mutual fund
      trusts established under the laws of Ontario by the Declarations (as
      hereinafter defined).

(2)   Pursuant to the Declarations and the Management Agreements, the Manager is
      the manager-trustee and principal distribution agent of each of the Trust
      Funds and, accordingly, may from time to time in its discretion appoint or
      remove distribution agents for each of the Trust Funds.

(3)   The Corporate Fund is an open-end mutual fund corporation incorporated by
      letters patent under the laws of Canada. TML acts as the principal
      distributor of the shares of the Corporate Fund pursuant to the TGF
      Distribution Agreement (as hereinafter defined) and may from time to time
      in its discretion delegate its functions to other distribution agents.

(4)   The Trustee, on behalf of each of the Trust Funds (as hereinafter
      defined), the Corporate Fund, the Manager and FEP entered into a
      distribution agreement dated as of the 31st day of December, 1997 whereby
      the Manager, as principal distributor for the Trust Funds and the
      Corporate Fund, retained FEP to arrange for the distribution of the
      Deferred Charge Securities (as hereinafter defined) on the terms and
      conditions set out therein.
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                                       3


(5)   The parties wish to amend and restate the Distribution Agreement dated
      December 31, 1997 to reflect certain agreed amendments to the terms and
      conditions thereof.

AGREEMENT:

      NOW THEREFORE THIS AGREEMENT WITNESSES that in consideration of the mutual
covenants contained herein and other good and valuable consideration, the
receipt and sufficiency of which are hereby acknowledged, the parties agree as
follows:

                                    ARTICLE 1

                                   DEFINITIONS

1.1 DEFINITIONS. Whenever used in this Agreement and the schedules, unless there
is something inconsistent in the subject matter or context, the following words
and terms shall have the following meaning:

      "Account  Rate" means the lesser of: (i) the senior  debt rate of FEP; and
      (ii) LIBOR plus 1.50%.

      "Additional Fund" means any other open-end mutual fund created or
      reorganized by, or the management and distribution rights of which are
      acquired by the Manager, from time to time, which distributes its
      Securities generally on the same basis (including fee structure) as the
      Funds and the Securities of which the Manager, at its option, permits
      investors to purchase immediately with the proceeds of redemption of
      Deferred Charge Securities without payment of a redemption fee in respect
      of such redemptions added to this Agreement, or any closed-end fund added
      to this Agreement, in accordance with the provisions of section 10.1
      hereof.

      "Adjustment Account" in respect of a Quarterly Pool, means the amount of
      the Monthly Fees paid or payable to FEP in respect of the period beginning
      on the first day of the Quarterly Pool and ending on the Sales Cutoff Date
      accrued daily at the Account Rate from the Sales Cutoff Date to the
      Anniversary of the Sales Cutoff.

      "Adverse Effect" when used alone or in conjunction with other terms means
      the occurrence or existence of any act, circumstance, condition, event,
      fact, or combination of the foregoing which, in the reasonable judgement
      of FEP, creates a significant probability of any material adverse effect
      upon (i) the timing or amount of any payment of any Fees; or (ii) the
      timely receipt by FEP of any Fees; or (iii) the Manager or any of the
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                                       4


      Funds' ability to pay or perform their obligations under this Agreement in
      a timely manner; or (iv) the remedies and other rights of FEP under this
      Agreement.

      "Advisory Agreements" means the investment management agreements between
      each of the Funds and the applicable portfolio manager as described in
      Schedule "A" hereto as supplemented or amended from time to time.

      "Affiliate" has the meaning provided to that term under the Securities Act
      (Ontario).

      "Agreement" means this Agreement, as the same may from time to time be
      amended, supplemented, waived or modified.

      "Anniversary of the Sale Cutoff Date" means, in respect of any particular
      Quarterly Pool, the date which is 7 years following the Sale Cutoff Date
      in respect of that Quarterly Pool or, in respect of any particular
      Quarterly Pool which is subject to a DCA Takeout Transaction, the date
      determined by FEP which is 7 years or less following the Sale Cutoff Date
      in respect of that Quarterly Pool.

      "Base Amount" means, on an annualized basis, in respect of each Quarterly
      Pool, .96% for each month in each of the first six years and .92% for each
      month in the remaining seventh year, except in respect of securities of
      TTBF forming part of such Quarterly Pool for which the base amount shall
      be .50% for each month in each of the seven years.

      "Business Day" means any day, other than a Saturday, Sunday or any
      statutory holiday in the province of Ontario, on which banks are generally
      open for business in Toronto, Ontario.

      "Calculated Percentage" means in respect of any Quarterly Pool in any
      month, the Base Amount plus, in the case of all Funds other than TTBF, the
      Free Redemption Adjustment provided that the maximum Calculated Percentage
      shall be 1.10%.

      "Closing" means the completion of the transactions contemplated by this
      Agreement, the assignment of the Fees to FEP and the delivery of
      additional documentation required by this Agreement.

      "Closing Date" means such date as the parties agree is the date upon which
      Closing shall take place.

      "Closing Time" means 10:00 a.m. on the Closing Date or such other time on
      the Closing Date as the parties may agree as the time at which the Closing
      shall take place.
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                                       5


      "Collection Account" means a bank account of FEP maintained at
      Toronto-Dominion Bank, with respect to which the Manager shall have no
      access or control.

      "Collections" means (a) all amounts paid or payable under the Program
      Documents in respect of the Fees including, without limitation, amounts
      payable in respect of Purchase Events, and (b) all proceeds of the
      foregoing, except that "Collections" shall not include amounts paid or
      payable pursuant to sections 9.1 and 11.9.

      "Constating Documents" means collectively the Declarations and/or the
      letters patent of the Corporate Fund and the Management Agreements.

      "Conversion Feature" means, with respect to a Security, a mandatory or
      elective provision (including, without limitation, a provision which
      permits or requires such Security to be converted into a Security of a
      different class, but excluding the free redemption amount or privilege
      offered by a Fund) which may result in a reduction or termination of any
      amount owing from any Fund or any securityholder in respect of the Fees
      relating to such Security at some time in the future prior to the
      redemption thereof.

      "Corporate Fund" or "TGF" means Templeton Growth Fund, Ltd.

      "DCA Takeout Transaction" shall mean any transaction whereby the economic
      value, or any portion thereof, of all fees payable to FEP hereunder shall
      be transferred, assigned, sold or removed from the balance sheet of FEP,
      to another entity as consideration for payment thereof.

      "Declarations" means collectively the declarations of trust for each of
      the Trust Funds as supplemented, amended or restated from time to time and
      "Declaration" means any one of them.

      "Deferred Charge" means, with respect to any Fund, the deferred charge
      payable, either directly or by withholding from the proceeds of the
      redemption of the Securities of such Fund, by the securityholders of such
      Fund on any redemption of Securities of such Fund in accordance with the
      applicable Constating Documents and the Prospectus Documents relating to
      such Fund.

      "Deferred Charge Security" means each Security in respect of which Fund
      investors do not pay a sales charge at the time of purchase, but rather
      are required to pay a Deferred Charge in certain circumstances.

      "Distributed Securities" has the meaning given to that term in section
      4.1.
<PAGE>
                                       6


      "Eligible Fee" means a Fee which (a) constitutes an "account" as such term
      is defined in the personal property security legislation of all
      jurisdictions the laws of which are applicable for determining whether the
      interests created by the Program Documents are perfected; (b) (i)
      constitutes a legal, valid and binding obligation of the obligor thereof
      which is not subject to any dispute, offset, counterclaim or defence
      whatsoever (it being understood that the mere fact that a Purchase Event
      may occur in the future with respect to any such Fee shall not in itself
      cause such Fee to not constitute an Eligible Fee prior to the time such
      Purchase Event occurs), and (ii) which is not subject to any adverse
      claim; and (c) does not contravene any applicable law.

      "Factor" shall mean the number corresponding to the current Quarterly Pool
      as set out in Schedule D.

      "Fees" means all fees payable to FEP under any Program Document.

      "FEP Balance Sheet Carrying Value" means, with respect to a Quarterly Pool
      as of any date, the value of all Fees receivable by FEP in respect of such
      Quarterly Pool as reflected on the balance sheet of FEP determined in
      accordance with GAAP.

      "FEP Event of Termination" means each of the following events:

      (a)   any Fund shall fail to make or cause to be made in the manner and
            when due any payment to be made or to be caused to be made by it
            under any Program Document and the failure of such payment has an
            Adverse Effect;

      (b)   the Manager or any Fund shall fail to perform or observe any other
            material term, covenant or agreement on its part to be performed or
            observed under any Program Document;

      (c)   any representation or warranty made or deemed made by the Manager or
            a Fund or any of their respective officers or directors under or in
            connection with any Program Document shall have been false,
            incorrect or misleading in any material respect when made or deemed
            made and which gives rise to an Adverse Effect;

      (d)   any provision of any Program Document to which the Manager or any
            Fund is a party shall cease to be a legal, valid and binding
            obligation of any such Person enforceable in accordance with its
            terms or any such Person shall so assert in writing;

      (e)   there shall have occurred an Insolvency Event;
<PAGE>
                                       7


      (f)   FRI shall cease to own, directly or indirectly, at least 80% of the
            issued and outstanding equity securities of the Manager;

      (g)   there shall have occurred any change in accounting, governmental or
            other legislation, regulation or policy which will have an Adverse
            Effect; and

      (h)   the occurrence of a Purchase Event;

      (i)   the termination of the joint venture agreement respecting Lightning
            among FEP Capital II LLC and TGH Holdings Limited and Lightning
            pursuant to section 14 of that agreement.

      "Free Redemption Adjustment" means, in respect of all Quarterly Pools in
      any particular quarter, the amount calculated by:

      (a)   multiplying the total dollar value of redemptions, other than
            redemptions of TTBF, made without the payment of a Deferred Charge
            (other than a redemption where the redemption proceeds are invested
            immediately in Distributed Securities of one or more other Funds) in
            the previous quarter in respect of the first Quarterly Pool by 4 and
            then by the Factor;

      (b)   adding to the amount determined in (a) above, the additional
            separate amounts determined by applying the formula in (a) above to
            each of the successive Quarterly Pools in respect of that previous
            quarter; and

      (c)   dividing the sum determined in (b) above by the average daily net
            asset value of all Quarterly Pools for that previous quarter.

      "free redemption entitlement" has the meaning given to that term in
      section 4.4.

      "FRI" means Franklin Resources, Inc., the indirect parent company of the
      Manager.

      "Funds" means collectively the Trust Funds, the Corporate Fund and any
      Additional Fund which becomes a party to this Agreement and "Fund" means
      any one of them.

      "GAAP" means generally accepted accounting principles in Canada (in the
      case of the Funds and the Manager) or the United States of America (in the
      case of FEP), as in effect from time to time, consistently applied.

      "Insolvency Event" means any of the following occurrences:
<PAGE>
                                       8



      (a)   the Manager or a Fund shall generally not pay its obligations as
            such obligations become due or shall admit in writing its inability
            to pay its obligations generally or shall make a general assignment
            for the benefit of creditors; or

      (b)   any  proceeding  shall be instituted by or against the Manager or a
            Fund seeking to adjudicate it a bankrupt or insolvent,  or seeking
            liquidation,  winding-up, reorganization,  arrangement,  adjustment,
            protection, relief or composition of it or its  obligations  or
            proposal to its creditors  under any laws relating to bankruptcy,
            insolvency  or  reorganization  or relief of debtors or seeking the
            entry of an order for relief or the appointment of a receiver,
            trustee, custodian or other similar official for it or for any
            substantial  part of its property  and, in the case of any such
            proceedings  instituted  against it (but not instituted by it), such
            proceedings  shall remain undismissed or unstayed for a period of 60
            days; or

      (c)   a court or other governmental authority or agency having
            jurisdiction  in the premises  shall enter a decree or order (i) for
            the  appointment  of a receiver, liquidator,  assignee,  trustee or
            sequestrator (or other similar official) of the Manager or a Fund of
            any  material  part of its  property or for the winding up or
            liquidation of its affairs and such decree shall remain in force
            undischarged and unstayed for a period of 60 days; or (ii)  for  the
            sequestration or attachment of any material part of the property of
            the Manager or a Fund without its  unconditional  return to the
            possession of the Manager or a Fund or its  unconditional  release
            from such sequestration or attachment within 60 days thereafter; or

      (d)   the Manager or a Fund shall take any action to authorize  any of the
            actions set forth above.

      "Joint Venture" means the joint venture between FEP and FRI and/or their
      respective Affiliates or associates which may be created for the purposes
      of funding the payment of sales commissions in respect of deferred charge
      securities sold globally.

      "Joint Venture Assumption Date" means, the date that the Joint Venture
      assumes the obligations of FEP under this Agreement;

      "LIBOR" means, at any date, a rate per annum equal to the rate of interest
      per annum at which deposits in Canadian dollars for a period of 30 days
      are offered to leading banks in the London interbank market at 11:00 a.m.
      (London time) and determined on the basis of the provisions set forth
      below:


      (a)   On the applicable date, FEP will determine the interest rate for
            deposits in Canadian dollars for a 30 day period on the British
            Bankers' Association Official BBA LIBOR Fixings page on Bloomberg
<PAGE>
                                       9


            ("BBAM") as of 11:00 a.m. (London time) on such date or if such page
            on such service ceases to display such information, such other page
            as may replace it on that service for the purpose of display of such
            information. If such rate does not appear on the BBAM page, then the
            rate will be determined in accordance with clause (b) below.

      (b)   If the BBAM page shall be unavailable, LIBOR shall be determined on
            the basis of the rate of interest per annum at which deposits in
            Canadian dollars are offered by The Chase Manhattan Bank to leading
            banks in London.

      "Lien" means any mortgage, pledge, hypothecation, assignment, deposit
      arrangement, encumbrance, lien or security interest (statutory or other)
      or preference, priority or other security agreement or preferential
      arrangement of any kind or nature whatsoever or other charge or
      encumbrance, including the retained security title of a conditional vendor
      or lessor.

      "Management Agreements" means the management and distribution agreements
      between each of MBF and FSCF and the Manager, as supplemented or amended
      from time to time.

      "Manager Event of Termination" means each of the following events:

      (a)   any change in accounting, governmental or other legislation,
            regulation or policy which will materially and adversely affect the
            accounting or tax treatment of the distribution arrangement under
            the Program Documents to the Manager; and

      (b)   any failure by FEP to pay the Selling Commissions when due under
            this Agreement.

      "Manager Report" has the meaning given to that term in section 3.7.

      "Master Trust" means any trust or other special purpose entity or Person
      to which any interest in any of the Fees relating to any Fund or the right
      to receive any Collections with respect thereto has been transferred in
      connection with a Takeout Transaction.

      "Master Trust Transfer Agreement" means any agreement pursuant to which
      any interest in the Fees is transferred to a Master Trust.

      "Material Contracts" has the meaning given to that term in section 5.1(p).

      "Monthly Fee" has the meaning given to that term in section 4.1.

<PAGE>
                                       10


      "Multiple Material Errors" means errors in the calculation of amounts due
      to and adverse to FEP in excess of 5% of any amounts payable, which errors
      occur in excess of three times during the term of this Agreement excluding
      any and all errors (other than those caused by bad faith or fraud on the
      part of the Manager) occurring prior to the first year anniversary date of
      this Agreement.

      "Net Asset Value" means, with respect to any Fund or any Security, as of
      the date any determination thereof is made, the meaning given that term in
      the Constating Documents or Program Documents of such Fund.

      "Original Charge Securities" has the meaning given that term in the
      definition of "Quarterly Pool".

      "Person" means any individual, partnership, limited partnership, joint
      venture, syndicate, sole proprietorship, company or corporation, with or
      without share capital, unincorporated association, trust, trustee,
      executor, administrator or other legal personal representative, regulatory
      body or governmental agency, authority or entity, however designated or
      constituted.

      "Permitted Designee" means (a) any Person designated by FEP or any Master
      Trust, as the case may be, which may be The Chase Manhattan Bank or
      Constellation Financial Management Company, L.L.C. or any Affiliate of the
      foregoing, and (b) any other Person designated by FEP or any Master Trust,
      as the case may be, (i) which is not actively engaged in the sponsorship
      or management of any other mutual fund in Canada, and (ii) which has
      agreed to be bound by confidentiality undertakings in substance comparable
      to those contained in this Agreement.

      "Program Documents" means this Agreement, the Constating Documents, the
      TGF Distribution Agreement, the Advisory Agreements, the Prospectus
      Documents, the Material Contracts, any Master Trust Transfer Agreement and
      the other agreements, documents, certificates and instruments entered into
      or delivered in connection herewith and therewith, as the same may from
      time to time be amended, supplemented, waived or modified.

      "Prospectus Documents" means, with respect to a Fund, the most recent
      simplified prospectus and annual information form for such Fund as more
      particularly described in Schedule A hereto as amended or supplemented
      from time to time.

      "Purchase Event" means any of the following events:
<PAGE>
                                       11


      (a)   any Fund shall fail to make or cause to be made in the manner and
            when due any payment to FEP or deposit required to be made or to be
            caused to be made by it under any Program Document and such failure
            shall have an Adverse Effect;

      (b)   the Manager or any Fund shall fail to perform or observe in any
            respect any other covenant on its part required to be performed or
            observed under any Program Document and such failure shall have an
            Adverse Effect;

      (c)   any representation or warranty made by the Manager or a Fund under
            or in connection with any Program Document shall have been false,
            incorrect or misleading in any respect when made and such inaccuracy
            shall have an Adverse Effect;

      (d)   there shall have occurred an change in the financial condition of
            the Manager which would prevent the Manager from performing its
            obligations under this Agreement which has an Adverse Effect; or

      (e)   if, as a result of any action or inaction by the Manager or a Fund,
            any provision of this Agreement ceases to be a legal, valid and
            binding obligation of the Manager or a Fund and causes an Adverse
            Effect.

      "Quarterly Pool" means, in respect of any calendar quarter, (i) each
      Deferred Charge Security issued in that quarter for which FEP has arranged
      distribution and has paid the Selling Commission ("Original Charge
      Security"), (ii) each Deferred Charge Security of a Fund issued upon the
      immediate investment of proceeds realized on the redemption of an Original
      Charge Security or Transfer Security (as hereinafter defined) or
      Reinvested Security (as hereinafter defined) in a Deferred Charge Security
      of another Fund ("Transfer Security"), and (iii) each Deferred Charge
      Security issued upon the automatic reinvestment of income and capital
      gains distributions upon an Original Charge Security, Transfer Security or
      another Reinvested Security (as hereinafter defined) or any Security of a
      Fund issued upon the immediate reinvestment of proceeds realized on the
      redemption of a Reinvested Security in a Security of another Fund (a
      "Reinvested Security").

      "Reinvested Security" has the meaning given to that term in the definition
      of "Quarterly Pool" as modified by section 4.1.

      "Sale Cutoff Date" means, with respect to any particular Quarterly Pool,
      the last Business Day of the calendar quarter during which FEP arranged
      for the distribution of Original Charge Securities forming part of the
      Quarterly Pool and paid the Selling Commissions in respect of such
      Quarterly Pool.

<PAGE>
                                       12


      "Securities" means collectively the units of the Trust Funds and the
      shares of the Corporate Fund and "Security" means any one of them.

      "Selling Commission" has the meaning given to that term in section 3.6(b).

      "Subscription Price" means with respect to any Deferred Charge Security at
      any particular time, the gross purchase price of such Deferred Charge
      Security established by the Constating Documents or Program Documents of
      the applicable Fund.

      "Takeout Transaction" means any transaction including a DCA Takeout
      Transaction (excluding any transaction transferring the parties interest
      under this Agreement to the Joint Venture) pursuant to which FEP, or any
      Master Trust which obtains such interest directly or indirectly from FEP,
      sells or otherwise transfers, participates or causes to be sold,
      transferred or participated interests in the Fees relating to any Fund
      (including, without limitation, the right to receive any portion of any
      Collections) to any Person, including a Master Trust which publicly or
      privately sells debt instruments and/or certificates or other instruments
      representing ownership interests in such Master Trust or interest in any
      Fees relating to any Fund (including, without limitation, any right to
      receive any portion of any Collections).

      "Termination Date" means December 31, 2001, subject to suspension or
      termination as set forth in section 3.1, or such later date as shall be
      agreed to in writing by the parties hereto, except that the Termination
      Date may be deemed to have occurred on an earlier date pursuant to section
      8.

      "TGF Distribution Agreement" means the distribution agreement between TGF
      and the Manager, as supplemented, amended or restated from time to time.

      "Transfer Securities" has the meaning given to that term in the definition
      of "Quarterly Pool".

      "Trust Funds" means, collectively TEMF, TCBF, TISF, TCSF, TGSCF, TGBF,
      TTBF, TGBAF, TIBF, TCAAF, MBF, FSCF and TBF, and "Trust Fund" means any
      one of them.

      "TTBF Account" in respect of a Quarterly Pool, means an amount equal to
      the Monthly Fee paid or payable to FEP in respect of Distributed
      Securities and Reinvested Securities of TTBF that form part of such
      Quarterly Pool accrued daily at the Account Rate from the Sales Cutoff
      Date to the Anniversary of the Sales Cutoff Date.

<PAGE>
                                       13


                                    ARTICLE 2

                              CLOSING ARRANGEMENTS

2.1 THE  CLOSING.  The  transactions  contemplated  by this  Agreement  shall be
completed  at the  Closing  Time at the offices of the counsel to FEP or at such
other location as may be agreed to by the parties.

                                    ARTICLE 3

                               DISTRIBUTION RIGHTS

3.1 APPOINTMENT OF FEP. Upon and subject to the terms and conditions hereof the
Manager, with the knowledge and consent of each of the Funds as evidenced by
their signatures hereto, hereby grants FEP the right to arrange for the
distribution of Deferred Charge Securities in each of the provinces and
territories of Canada in return for the compensation described in this
Agreement, and FEP hereby accepts such grant. The right of FEP to arrange for
the distribution of Deferred Charge Securities shall commence on trade date
January 12, 1998, or such other date as is mutually agreeable to the parties,
and shall continue until December 31, 2000, subject to suspension and
termination at any time in the circumstances described in this Agreement. Until
terminated in accordance with the terms of this Agreement, FEP's distribution
right is exclusive during the distribution period described above, other than
during a suspension period, during which the Manager may arrange for the
distribution of Deferred Charge Securities through any other Person, including
the Manager. It is acknowledged and agreed by the parties hereto that FEP's
distribution right does not extend to sales of Securities which are not Deferred
Charge Securities and that FEP shall not receive any remuneration of any kind in
respect of such Securities.

3.2 DISTRIBUTION THROUGH REGISTERED DEALERS. FEP will arrange for the
distribution of Deferred Charge Securities only through registered dealers
approved by the Manager, and FEP will not itself directly or indirectly sell any
Securities of the Funds. All Deferred Charge Securities will be sold at a price
equal to the Net Asset Value per Security at the time of purchase, without a
sales charge to investors. The Manager will advise FEP upon the execution hereof
and regularly as required thereafter so long as FEP is entitled hereunder to
arrange for the distribution of Deferred Charge Securities, of the names of all
registered dealers approved by the Manager as dealers through whom the Deferred
Charge Securities may be sold.

      The Manager, as transfer agent for the Funds, agrees not to knowingly
accept purchase orders from Persons with respect to the sale of Deferred Charge
Securities in any jurisdiction in which the Deferred Charge Securities are not
registered, qualified for sale or otherwise exempt from the need to qualify for
sale under applicable securities legislation. In respect of these Deferred
<PAGE>
                                       14


Charge Securities which are unknowingly accepted by the Manager, as transfer
agent for the Funds, such Deferred Charge Securities will be subject to this
Agreement unless the trade in such Securities is subsequently reversed, in which
case such Deferred Charge Securities shall not be subject to this Agreement and
the Manager, as transfer agent for the Funds, will forthwith, following the
trade reversal and out of the proceeds of the trade reversal, refund to FEP the
amount of the Selling Commissions paid by it in respect of such Securities.

3.3 REJECTION OF PURCHASE ORDERS. The Manager may reject purchase orders for
Deferred Charge Securities received from a registered dealer during the term of
this Agreement only in accordance with the terms stated in the Constating
Documents of the Funds and/or the TGF Distribution Agreement.

3.4 REGISTRATION OF PURCHASES. After receipt and acceptance of a purchase order
together with an amount equal to the purchase price for each Deferred Charge
Security purchased, the Manager will promptly forward the purchase order to the
registrar of the appropriate Fund (if the Manager is not itself the registrar of
the Fund) for registration of the purchaser as a holder of a Security or
Securities of that Fund and shall deposit the purchase price to the credit of
that Fund.

3.5 AUTHORITY OF THE MANAGER. The Manager shall have the exclusive right to
approve or disapprove of the registered dealers through which the Deferred
Charge Securities will be distributed, to determine the Funds' distribution and
marketing policies and procedures and, pursuant to section 10.2 of this
Agreement, to suspend or terminate the offering of Securities of one or more of
the Funds at any time.

3.6 SERVICES OF FEP. The primary purpose of this Agreement is to ensure that
satisfactory arrangements exist for the distribution of the Deferred Charge
Securities and to provide a mechanism for the payment of Selling Commissions to
registered dealers who distribute Deferred Charge Securities. Subject to its
rights of termination as provided herein, FEP will provide the following
services to the Manager and the Funds during the period in which FEP has the
right to arrange for distribution of Deferred Charge Securities:

      (a)   making all necessary  arrangements  for the  distribution of the
            Deferred Charge Securities through registered dealers approved by
            the Manager;

      (b)   paying the  selling  commission  (equal to 5% of the  Subscription
            Price of the Deferred  Charge  Securities  and if any  non-Canadian
            jurisdiction  imposes  a withholding on the payment of the selling
            commission,  the amount of the payment shall  be  increased  by  the
            amount  necessary  so  that  the  payment  net of withholding  tax
            equals 5% of the Subscription Price of the Deferred Charge Security)
            (the "Selling  Commission") due to registered  dealers upon receipt
            of notice  from the  Manager  of  accepted  purchase  orders  for
            Original  Charge Securities.  The  parties  agree  that  FEP's
<PAGE>
                                       15


            obligation  to  pay  the Selling Commission in respect of a Deferred
            Charge Security shall arise on the trade date, notwithstanding  that
            FEP is only required to make actual payment of the Selling
            Commission in respect of such purchase on the settlement date;

      (c)   maintaining proper and adequate business records of its operations
            in order to properly monitor the Deferred Charge Securities for
            which it arranged distribution and the amount of the Selling
            Commissions paid;

      (d)   providing  confirmation  to the Manager and the Funds when requested
            as to the due and timely payment of Selling Commissions; and

      (e)   providing an annual review of the Funds' operations which shall
            include annual redemption analysis, portfolio risk analysis, income
            and balance sheet risk analysis together with annual meetings of FEP
            clients to exchange distribution, product development and other
            related information.

      FEP, the Manager and the Funds acknowledge that the Manager shall continue
to arrange for the distribution of Deferred Charge Securities pursuant to the
Constating Documents and the TGF Distribution Agreement, in the case of the
Corporate Fund, and that, except as expressly provided by this Agreement, FEP
shall have no obligation to perform any duties or functions or make any
payments, carried out or made by the Manager under the Constating Documents or
the TGF Distribution Agreement.

3.7 MANAGER REPORT. On or before 10 Business Days after the end of each month,
the Manager shall provide FEP or a Permitted Designee with a report (a "Manager
Report") as of the last day of such month which shall set forth, among other
things, the Manager's determination of (a) the Selling Commissions paid or
payable by FEP in respect of Deferred Charge Securities distributed during such
month, (b) the amount of Fees paid or payable in respect of such month and the
Deferred Charge Securities attributable to such Fees, (c) the computation of the
amount of such Fees in reasonable detail, and (d) the amount of the Adjustment
Accounts and the TTBF Accounts in reasonable detail. The parties agree to use
their commercially reasonable best efforts to finalize as soon as possible and
in any event not later than March 31, 1998 the form of the Manager Report which
is acceptable to both parties.

3.8 MATERIAL ERRORS. If Multiple Material Errors occur, FEP shall provide the
Manager with written notice of such occurrence, following which the Manager
shall have 15 days to cure such errors. In the event all such errors are not
cured within such period, FEP may terminate its obligations to pay Selling
Commissions at any time thereafter upon 60 days prior written notice to the
Manager.

<PAGE>
                                       16

                                    ARTICLE 4

                         PAYMENT AND ASSIGNMENT OF FEES

4.1 MONTHLY FEE. For its services in arranging for the distribution of Deferred
Charge Securities which form a Quarterly Pool, FEP shall receive a monthly fee
(the "Monthly Fee") in each calendar month in respect of each Quarterly Pool
equal to the Calculated Percentage in respect of that Quarterly Pool for that
quarter multiplied by the daily average Net Asset Value of all Distributed and
Reinvested Securities forming part of such Quarterly Pool multiplied by 30 and
divided by 360.

      The Monthly Fee will be accrued daily on each Valuation Date (as defined
in the Constating Document of each Fund) of each Fund. The Monthly Fee will be
paid to FEP net of any taxes required to be withheld, at the same time as the
Manager is paid a management fee by a Fund and, in any event, within ten days
after the end of each calendar month.

      The Monthly Fee shall continue to be payable to FEP in respect of each
Deferred Charge Security forming part of a Quarterly Pool for the lesser of: (i)
the period that such Deferred Charge Security remains outstanding, and (ii) the
Anniversary of the Sale Cutoff Date, subject to extension pursuant to section
4.8, notwithstanding that FEP's appointment as exclusive distributor has expired
or has been suspended or terminated.

      Each Fund and the Manager hereby agrees with FEP that they will not, at
any time while FEP is entitled to receive payment of any fee under this Article,
consent to or agree to a reduction in the management fee payable by any Fund to
the Manager or any alteration in the manner or as to the time of calculation of
such management fee or effect any action, amendment or change of any nature
whatsoever if such reduction, alteration, action, amendment or change could have
the effect of preventing FEP from receiving the full amount of the Monthly Fee
to which it is entitled under this section, or materially adversely affect the
timing of the receipt of such payment.

      All Original Charge Securities and Transfer Securities are collectively
referred to in this Agreement as "Distributed Securities". Distributed
Securities and Reinvested Securities shall include any Securities that are
issued upon the consolidation or subdivision of any Distributed Securities or
Reinvested Securities, respectively. For greater certainty, Transfer Securities
and Reinvested Securities shall be deemed to be issued on the same date as the
Original Charge Securities to which they relate. In the case of the TTBF,
Distributed Securities and Reinvested Securities will be deemed to include any
net income (including any net realized capital gains) which has accrued in
respect of such Securities for the purpose of calculating the Monthly Fee
payable pursuant to this section. Distributed Securities of the TTBF Fund will
be deemed to include such accrued amounts for the purpose of calculating any
Deferred Charges as described in this Article 4.
<PAGE>
                                       17


4.2   ASSIGNMENT OF MANAGEMENT FEES.

      (a)   To provide for the payment to FEP of the Monthly Fee payable
            pursuant to section 4.1, the Manager hereby:

               (i)  irrevocably and  unconditionally  and absolutely  assigns to
                    FEP its right to receive  payment from,  and all moneys paid
                    or payable by, each Fund of that  portion of the  management
                    fee  payable  by such Fund to the  Manager  under the Fund's
                    Constating  Document and the TGF Distribution  Agreement (in
                    the case of TGF) which  shall be equal to the  Monthly  Fee,
                    for the  lesser of:  (i) the  period  that such  Distributed
                    Securities and Reinvested Securities remain outstanding, and
                    (ii) the  Anniversary  of the Sale  Cutoff Date and, if such
                    period is  extended  pursuant  to section  4.8,  during such
                    period of extension; and

               (ii) irrevocably and unconditionally  authorizes and directs each
                    Fund  to pay to  FEP  that  portion  of the  management  fee
                    payable   under  that   Constating   Document  and  the  TGF
                    Distribution  Agreement  (in the case of TGF) which has been
                    assigned to FEP pursuant to  subparagraph  (i) above (net of
                    any taxes  required to be  withheld) at the same time as the
                    Manager is paid the  balance of the  management  fee by such
                    Fund pursuant to the applicable  Constating Document for the
                    Fund and the TGF Distribution Agreement (in the case of TGF)
                    and in any  event  within  ten  days  after  the end of each
                    calendar month.

      (b)   Each of the Funds hereby:

               (i)  consents  to  and  accepts  notice  of  the  assignment  and
                    direction  pursuant to paragraph  (a) above and  irrevocably
                    agrees  to  make  payments  to FEP in  accordance  with  the
                    foregoing  assignment  and direction  without  regard to any
                    equities  which  may exist or any  claims or rights  which a
                    Fund may assert against the Manager or any other Person from
                    time to time,  provided  however that any goods and services
                    tax  payable by the Funds in respect of that  portion of the
                    management  fee  which  is paid to FEP  shall be paid to the
                    Manager  or  remitted   directly  to  Revenue   Canada,   as
                    applicable; and

               (ii) waives any right of set-off,  counterclaim  or  deduction of
                    any kind which it may have against the Manager in respect of
                    that portion of the  applicable  management  fee assigned to
                    FEP  pursuant  to  paragraph  (a) above  provided  that this
                    waiver  shall not  constitute a release of any claim which a
                    Fund may have against the Manager from time to time.
<PAGE>
                                       18


      (c)   FEP agrees and acknowledges that its only recourse in the event of
            non-payment by a Fund of the Monthly Fee shall be against such Fund
            and the assets of such Fund and FEP further agrees and acknowledges
            that FEP shall have no recourse against the assets of the Manager
            for such non-payment of the Monthly Fee.

4.3   [intentionally deleted]

4.4 DEFERRED CHARGES. The Manager and each Fund represents and warrants to FEP
that a Deferred Charge applies to all Distributed Securities of the Fund which
are redeemed within six years of their date of issue, or deemed date of issue,
except (i) on redemptions where the redemption proceeds realized are immediately
invested in Distributed Securities of one or more of the other Funds (excluding
any Distributed Securities redeemed to pay to the investor's dealer a transfer
fee in respect of such transaction); and (ii) on redemptions pursuant to the
free redemption amount privilege described below. The Manager and each Fund
further represents that the Deferred Charge, expressed as a percentage of the
Subscription Price per Distributed Security of the Fund being redeemed, declines
over time from the date of issue, or deemed date of issue, of the Distributed
Security as follows:

             If Redeemed During the Following    Deferred
             Periods After the Date of           Charge
             ISSUE OR DEEMED DATE OF ISSUE       PERCENTAGE

             During the 1st year                 6.0%
             During the 2nd year                 5.5%
             During the 3rd year                 5.0%
             During the 4th year                 4.5%
             During the 5th year                 4.0%
             During the 6th year                 3.0%
             Thereafter                           Nil


      An investor in a Fund will be permitted to redeem in each calendar year
without the redemption charge described above, Deferred Charge Securities of a
Fund having a Net Asset Value of up to the aggregate of (i) 10% of the Net Asset
Value as at December 31 of the prior calendar year of Deferred Charge Securities
purchased by such investor in such Fund after February 28, 1993 and before the
current calendar year, plus (ii) 10% of the cost of Deferred Charge Securities
purchased by the investor in such Fund in the then current calendar year (the
"free redemption entitlement"). The free redemption entitlement is not
cumulative and any unexercised entitlement cannot be carried forward to future
years. An investor in a Fund may request that distributions of a Fund's net
income or capital gains be paid to the investor in cash rather than the receipt
of Reinvested Units of that Fund. The amount of any distributions paid in cash
and the value of Reinvested Units of a Fund redeemed by the investor in the
<PAGE>
                                       19


calendar year shall be deducted from the investor's free redemption amount. If
an investor transfers all or part of his investment in a Fund to another Fund,
any unexercised free redemption amount attributable to the Deferred Charge
Securities redeemed to effect the transfer will also be transferred on a
proportionate basis.

      The Funds and the Manager represent and warrant to FEP that, for the
purpose of calculating the Deferred Charge payable to FEP, Deferred Charge
Securities will be redeemed in the following order:

      (a)   Reinvested Securities will be redeemed first;

      (b)   Distributed  Securities  redeemed pursuant to the free redemption
            amount will be redeemed second;

      (c)   Deferred Charge Securities of a Fund issued first, or deemed to be
            issued first, will be redeemed third; and

      (d)   Where an investor holds both Deferred Charge Securities and
            securities of the Funds acquired on a front-load basis, the investor
            is required to elect which category of security the investor is
            redeeming upon redemption.

      Each Fund and the Manager hereby agrees with FEP that they will not, at
any time while FEP is entitled to receive payment of any amount under this
Agreement, consent to or agree to a reduction in the Deferred Charge for
Distributed Securities or any alteration in the manner or as to the time of
calculation of the Deferred Charge or effect any action, amendment or change of
any nature whatsoever if the effect of such reduction, alteration, action,
amendment or change would be to reduce the amounts payable to FEP or materially
adversely affect the timing of the receipt of such amounts payable pursuant to
this Article 4. In the event of the termination of a Fund, FEP shall be entitled
to receive any applicable Deferred Charges in respect of the outstanding
Distributed Securities of that Fund.

4.5 DEFERRED CHARGE PAYMENTS. In addition to the Monthly Fee payable to FEP
pursuant to section 4.1 and in consideration for its services hereunder, FEP
shall also be entitled to receive any Deferred Charge paid by securityholders on
the redemption of their Distributed Securities (net of any taxes required to be
withheld). The Deferred Charges will be calculated and collected by the Manager,
in its capacity as transfer agent for the Funds, on each Valuation Date and will
be payable to FEP monthly within ten days after the end of the calendar month or
in the event of termination of a Fund, immediately prior to the termination of
the Fund. Such amount shall continue to be payable to FEP on the redemption of
each Distributed Security notwithstanding that FEP's appointment as exclusive
distributor been suspended, has expired or has been terminated.
<PAGE>
                                       20

4.6   ASSIGNMENT OF DEFERRED CHARGES.

      (a)   To provide for the payment to FEP of the Deferred Charges payable
            pursuant to section 4.5, the Manager hereby:

               (i)  irrevocably and  unconditionally  and absolutely  assigns to
                    FEP its right to receive  payment from,  and all moneys paid
                    or payable by, each securityholder of Distributed Securities
                    and Reinvested  Securities of that portion of the redemption
                    proceeds payable to the Manager in respect of the redemption
                    of such Securities under the Funds' Constating Documents and
                    TGF Distribution Agreement; and

               (ii) irrevocably and unconditionally  authorizes and directs each
                    Fund to pay to FEP that portion of the  redemption  proceeds
                    payable  under the  applicable  Constating  Document  or TGF
                    Distribution  Agreement  which  has  been  assigned  to  FEP
                    pursuant  to  subparagraph  (i)  above  (net  of  any  taxes
                    required to be  withheld) at the same time as the Manager is
                    paid  the   management   fee  pursuant  to  the   applicable
                    Constating  Document or TGF  Distribution  Agreement for the
                    Fund and in any event  within  ten days  after the  calendar
                    month.

      (b)   Each of the Funds hereby:

               (i)  consents  to  and  accepts  notice  of  the  assignment  and
                    direction  pursuant to paragraph  (a) above and  irrevocably
                    agrees  to  make  payments  to FEP in  accordance  with  the
                    foregoing  assignment  and direction  without  regard to any
                    equities  which  may exist or any  claims or rights  which a
                    Fund may assert against the Manager or any other Person from
                    time to time; and

               (ii) waives any right of set-off,  counterclaim  or  deduction of
                    any kind which it may have  against the Manager or any other
                    Person in  respect  of the  applicable  redemption  proceeds
                    assigned to FEP  pursuant to  paragraph  (a) above  provided
                    that this waiver shall not constitute a release of any claim
                    which a Fund may  have  against  the  Manager  or any  other
                    Person from time to time.

      (c)   FEP agrees and acknowledges that its only recourse in the event of
            non-payment of the Deferred Charges shall be against the applicable
            Fund and the assets of such Fund and FEP further agrees and
            acknowledges that FEP shall have no recourse against the assets of
            the Manager for such non-payment of the Deferred Charges.
<PAGE>
                                       21


4.7 COLLECTION ACCOUNT. The Manager shall cause all Collections payable by each
Fund to be deposited directly by each Fund into the Collection Account without
any intermediate commingling of such amounts with the assets of the Manager or
any Affiliate. No amounts other than the Collections shall be deposited to the
Collection Account.

4.8 CONTINUATION OF MONTHLY FEES. On the Anniversary of the Sale Cutoff Date in
respect of each Quarterly Pool, if the TTBF Account in respect of such Quarterly
Pool is greater than the Adjustment Account in respect of such Quarterly Pool,
then the Monthly Fee payable in respect of such Quarterly Pool shall continue to
be payable to FEP until such date as such Monthly Fees paid to FEP during such
extension period equal the difference in such TTBF Account and such Adjustment
Account as at such Anniversary of the Sale Cutoff Date.

                                    ARTICLE 5

                         REPRESENTATIONS AND WARRANTIES

5.1 MANAGER'S AND FUNDS' REPRESENTATIONS AND WARRANTIES. The Manager and each of
the Funds represent and warrant (but only as to itself) to FEP:

      (a)   ORGANIZATION  AND GOOD  STANDING - The Manager and each of the Funds
            have been duly  incorporated  or  created,  as the case  may be, are
            organized, validly existing and  up-to-date  in all material filings
            and registrations required under the laws of Canada and each
            province and territory thereof where such filings or  registrations
            are necessary  for the conduct of its  business,  and have all
            necessary  power, authority and capacity to own  their  respective
            properties and assets and to carry on the business in which they are
            now engaged.

      (b)   DISTRIBUTION OF FUND SECURITIES - The Securities of each of the
            Funds are offered for sale to the public on a continuous basis in
            each of the provinces and territories of Canada pursuant to the
            Prospectus Documents. All material information and statements
            contained in the Prospectus Documents of each of the Funds are true
            and correct and contain no misrepresentation (as defined in the
            Securities Act (Ontario)).

      (c)   COMPLIANCE WITH LAWS - The Manager and each of the Funds are in
            compliance in all material respects with all applicable laws,
            including but not limited to, applicable securities laws.


      (d)   LICENSES AND REGISTRATIONS - The Manager and each of the Funds have
            received all approvals, licences, registrations and authorizations
            necessary for the conduct of their respective businesses as they are
            now conducted, all of which are in full force and effect; no
<PAGE>
                                       22


            violations thereof have been recorded; and no proceeding is pending
            or threatened which could result in the revocation or limitation
            thereof and neither the Funds nor the Manager is aware of any basis
            upon which the same may be revoked.

      (e)   COMPLIANCE WITH CONSTATING DOCUMENTS - The Manager and, to the best
            of the Manager's knowledge after due inquiry, each of the portfolio
            managers appointed by the Manager in respect of the portfolios of
            each of the Funds have complied with the investment objectives,
            policies and restrictions of each of the Funds as provided in their
            respective Constating Documents, the Advisory Agreements and the
            Prospectus Documents.

      (f)   CONSENTS AND APPROVALS - There are no consents,  approvals, orders
            or authorizations of  any  Person  or  registrations,  declarations,
            notices, filings or recordings with any Person required to be
            obtained or made by the Manager or any of the Funds in connection
            with the transactions contemplated by this Agreement, the execution
            and delivery of this Agreement or the performance of any of the
            terms and conditions  of this  Agreement  other than the consent of
            the board of directors of the Corporate Fund and the Manager, in its
            own capacity and in its capacity as the manager of each of the Funds
            and the trustee of each of the Trust Funds.

      (g)   RIGHT TO ASSIGN - The Manager has good and marketable title to the
            Fees assigned and transferred to FEP under this Agreement free and
            clear of any Lien (other than the rights of FEP under this
            Agreement) and has the right to assign such Fees to FEP. Each of the
            Fees is an Eligible Fee.

      (h)   FINANCIAL  STATEMENTS - (i) The financial statements of each of the
            Funds and the balance sheet of the Manager have been prepared in
            accordance with GAAP; and (ii) the  financial  statements  of the
            Funds present fairly the financial position and investment
            portfolios of each of the Funds as of the respective dates  thereof
            and the changes in each Fund's net assets for the period covered  by
            those  statements  and the  treatment  of  management  fees,  legal,
            audit, custodian,  safekeeping  fees,  interest,  operating  and
            administrative  costs payable by each of the Funds.

      (i)   ABSENCE OF UNDISCLOSED LIABILITIES - Except to the extent reflected
            or reserved against in the financial statements of the Funds or
            otherwise disclosed herein or except as incurred in the ordinary and
            normal course of the business of each of the Funds, none of the
            Funds has any outstanding indebtedness or any liabilities or
            obligations (whether direct or indirect, current or long-term,
            accrued, absolute, contingent or otherwise).
<PAGE>
                                       23


      (j)   TAX  MATTERS - None of the Funds is in  default  in filing  any tax
            returns  or reports  required  to be  filed as of the date of this
            Agreement  covering  any Canadian  federal,  provincial,  municipal
            or local taxes,  assessments or other imposts in respect of its
            respective  capital,  income,  business or  property. Each of the
            Trust Funds has  qualified and continues to qualify as a mutual fund
            trust under the Income Tax Act (Canada).  The  Corporate  Fund has
            qualified and continues  to  qualify  as a mutual  fund  corporation
            under the Income Tax Act (Canada).

      (k)   LITIGATION  - There  is no suit,  action,  litigation,  inquiry,
            investigation, arbitration or proceeding,  including  appeals and
            applications  to review,  in progress or, to the knowledge of the
            Manager,  threatened or pending  against or relating to the Funds or
            the Manager or affecting  their respective  properties or businesses
            which might materially  adversely affect  properties,  businesses,
            future  prospects  or  financial  condition of the Funds or the
            Manager or which might prevent or restrict the  distribution  to the
            public of the  Securities in each  jurisdiction  in which the
            Securities are qualified for  distribution  or which may seek to
            prevent the consummation of the  transactions  contemplated by this
            Agreement or seek any  determination  or ruling which may materially
            and adversely  affect the  performance  of the Manager or any of the
            Funds under the Agreement or could give rise to an  Adverse  Effect.
            There is not  presently outstanding against any of the Funds any
            judgement,  decree, injunction, rule or order   of   any   court,
            governmental   department,    commission,    agency, instrumentality
            or arbitrator.

      (l)   ACCURACY OF BOOKS AND RECORDS - The books and records, financial and
            otherwise, of each of the Funds and the balance sheet and books and
            records of the Manager (only in respect of the Fees) fairly and
            correctly set out and disclose in all material respects the
            financial position of each of the Funds and the Manager as of the
            date of this Agreement and all material transactions (subject to the
            qualifications as to the Manager's books and records) have been
            accurately recorded in those books and records.

      (m)   ACCURACY OF INFORMATION PROVIDED - All information provided by or on
            behalf of the Manager and the Funds on or prior to the date hereof
            to FEP or any agent thereof for purposes of or in connection with
            this Agreement or the transactions contemplated by this Agreement
            are true, correct and complete in all material  respects and no such
            information contains any material  misrepresentation or material
            omission to state therein matters necessary to make the statements
            made therein not misleading in any material respect in light of the
            circumstances  in which were made.
<PAGE>
                                       24


      (n)   DUE AUTHORIZATION, EXECUTION AND DELIVERY - This Agreement has been
            duly authorized, executed and delivered by the Manager and each of
            the Funds and is a valid and binding obligation of the Manager and
            each of the Funds enforceable in accordance with its terms, subject,
            however, to limitations with respect to enforcement imposed by law
            in connection with bankruptcy or similar proceedings and to the
            extent that equitable remedies, such as specific performance and
            injunction, are in the discretion of the court from which they are
            sought.

      (o)   ABSENCE OF CONFLICTING AGREEMENTS - Neither the Manager nor any of
            the Funds is a party to, bound or affected by or subject to any
            indenture, mortgage, lease, agreement, instrument, charter or by-law
            provision, statute, regulation order, judgement, decree or law which
            would be violated, contravened or breached by or under which any
            default would occur as a result of the execution and delivery of
            this Agreement or the performance of any of the terms of this
            Agreement or which could have an Adverse Effect.

      (p)   MATERIAL CONTRACTS - Except for the contracts and agreements (the
            "Material Contracts") listed in Schedule A, none of the Funds nor
            the Manager is a party to or bound by any presently existing oral
            or written contracts or a commitment which is material in respect
            of this Agreement and the transactions  contemplated  herein. The
            Material  Contracts are in  compliance  in all material  respects
            with applicable law, are in full force and effect, unamended, and
            no material  default exists in respect of any of them on the part
            of any of the  parties  and there  exists no set of facts  which,
            after  notice  or lapse of time or both,  would  constitute  such
            material  default.  Each of the  Funds  and the  Manager  has the
            capacity  to  perform  all their  respective  obligations  in the
            Material Contracts.  Each of the Material Contracts has been duly
            executed by the  signatories  thereto and constitutes a valid and
            binding  obligation  of  each  of  such  signatories  enforceable
            against them in accordance  with its respective  terms,  free and
            clear of any mortgage, pledge, lien, charge, security interest or
            encumbrance or rights of others.

      (q)   NO SECURITY AGREEMENT - No security agreement, equivalent security
            or lien instrument or, to the Manager's or any of the Funds'
            knowledge, any financing statement, other than the financing
            statements covering all or any part of the fees payable by the Funds
            to the Manager or the Fees payable to FEP under this Agreement, has
            been entered into or is on file or on record in any jurisdiction,
            except such as may be filed, recorded or made or contemplated by
            this Agreement or as provided in Schedule B hereto.

      (r)   PRINCIPAL PLACE OF BUSINESS, NAME - The Manager and the Funds'
            principal place of business and chief executive office and the place
            where its records are kept is at the address first written above or
<PAGE>
                                       25

            such other address of which FEP has received notice pursuant to
            section 11.7. The full legal name of the Manager and of each Fund
            (including any French form, any combined English/French form and any
            other form) is set forth on Schedule C.

      (s)   SECURITY ATTRIBUTES - The Securities of each of the Funds have the
            attributes described in the Prospectus Documents and, other than the
            ability to transfer and redeem Securities free of any Deferred
            Charge as described in the Prospectus Documents, no Security of any
            Fund has the benefit of any Conversion Feature.

      (t)   INSOLVENCY - Since December 31, 1996, there has not occurred a
            Insolvency Event with respect to the Manager or any of the Funds.

      (u)   DEFERRED CHARGES PAYABLE UPON TERMINATION - In the event of a
            termination of a Fund, a Deferred Charge as provided in this
            Agreement shall be payable in respect of each Distributed Security
            of such Fund outstanding for a period of 6 years or less from its
            date of issue or deemed date of issue.

      (v)   INFORMATION CORRECT - All information in respect of the payment of
            Selling Commissions relating to each Fund to be set forth in each
            Manager Report will be true and correct in all material respects.

5.2 FEP'S REPRESENTATIONS AND WARRANTIES.  FEP hereby represents and warrants to
the Manager and each of the Funds that:

      (a)   ORGANIZATION AND GOOD STANDING - FEP has been duly formed and
            organized as a limited partnership under the laws of the State of
            Texas and is validly existing, is up-to-date in all material filings
            and registrations required under the laws of the United States and
            has all necessary power, authority and capacity to own its property
            and assets and to carry on the business in which it is now engaged.

      (b)   RESIDENCE - FEP and all of the partners of FEP are resident in the
            United States for purposes of the Internal Revenue Code of 1986 and
            the Canada-United States Income Tax Convention, 1980 and are
            non-residents of Canada for the purposes of the Income Tax Act
            (Canada).

      (c)   G.S.T.  - FEP is not a registrant under the  Excise Tax Act (Canada)
            for the purposes of the goods and services tax.

      (d)   DUE AUTHORIZATION, EXECUTION AND DELIVERY - This Agreement has been
            duly authorized, executed and delivered by FEP and is a valid and
            binding obligation of FEP enforceable in accordance with its terms,
<PAGE>
                                       26

            subject, however, to limitations with respect to enforcement imposed
            by law in connection with bankruptcy or similar proceedings and, to
            the extent that equitable remedies such as specific performance and
            injunction are in the discretion of the court from which they are
            sought.

      (e)   ABSENCE OF CONFLICTING AGREEMENTS - FEP is not a party to, bound or
            affected by or subject to any indenture, mortgage, lease, agreement,
            instrument, charter or by-law, provision, statute, regulation,
            order, judgement, decree or law which would be violated, contravened
            or breached by, or under which any default would occur as a result
            of, the execution and delivery by it of this Agreement or the
            performance by it of any of the terms of this Agreement.

      (f)   LITIGATION  - There  is no  suit,  action,  litigation,  inquiry,
            investigation,  arbitration or proceeding,  including appeals and
            applications to review in progress, pending or threatened against
            or relating to FEP or affecting  its  property or business  which
            may materially  adversely affect its property,  business,  future
            prospects  or  financial  condition  or  which  could  materially
            adversely  affect the performance or obligations of FEP under, or
            the validity or  enforceability  of this Agreement or which could
            give  rise to any  adverse  effect  on  FEP's  ability  to pay or
            perform any of its material obligations under this Agreement.

      (g)   FINANCIAL CAPACITY - FEP has the financial capability and resources
            to perform its obligations under this Agreement, including the
            payment of all Selling Commissions due to registered dealers
            pursuant to Article 4 of this Agreement.

5.3 NON-WAIVER. No investigation made by or on behalf of any party at any time
shall have the effect of waiving, diminishing the scope of or otherwise
affecting any representation or warranty made by any other party in or pursuant
to this Agreement. No waiver by any party of any condition, in whole or in part,
shall operate as a waiver of any other condition.

5.4 NATURE AND SURVIVAL OF REPRESENTATIONS AND WARRANTIES. All statements
contained in any certificate or other document delivered by or on behalf of a
party pursuant to or in connection with the transactions contemplated by this
Agreement shall be deemed to be made by that party under this Agreement.

      All representations and warranties, covenants and agreements on the part
of each of the parties contained in this Agreement or in any certificate or
other document delivered pursuant to this Agreement shall survive the Closing
and shall survive for the duration of this Agreement.

<PAGE>
                                       27


                                    ARTICLE 6

                              CONDITIONS PRECEDENT

6.1 FEP'S CONDITIONS TO CLOSING. The obligation of FEP to complete the
transactions contemplated by this Agreement shall be subject to the satisfaction
of, or compliance with, at or before the Closing Time, each of the following
conditions precedent (each of which is acknowledged to be inserted for the
exclusive benefit of FEP and may be waived by it in whole or in part by notice
in writing to the Manager):

      (a)   TRUTH AND  ACCURACY  OF  REPRESENTATIONS  AND  WARRANTIES  OF THE
            MANAGER AND THE FUNDS AT CLOSING  TIME - All the  representations
            and  warranties  of the Manager and the Funds made in or pursuant
            to this  Agreement  shall be true  and  correct  in all  material
            respects  as at the  Closing  Time and with the same effect as if
            made  at  and  as at  the  Closing  Time.  FEP  shall  receive  a
            certificate from the Manager and each of the Funds confirming the
            truth  and   correctness   in  all   material   respects  of  the
            representations and warranties of the Manager and the Funds.

      (b)   RECEIPT OF CLOSING DOCUMENTATION - All documentation  relating to
            the  assignment  of Fees  payable  to FEP  and  the  transactions
            contemplated  by this  Agreement,  including a legal opinion from
            counsel to the Manager and the Funds,  shall be  satisfactory  to
            FEP  and  its   counsel.   FEP  shall   receive   copies  of  all
            documentation  or other  evidences it may  reasonably  request in
            order  to  establish  the   consummation   of  the   transactions
            contemplated  by this  Agreement  and the taking of all corporate
            proceedings in connection  with this Agreement in compliance with
            these conditions in form (as to certification  and otherwise) and
            substance satisfactory to FEP and its counsel.

      (c)   MATERIAL ADVERSE CHANGE - No material adverse change in the
            condition or operations of the business, assets or financial
            condition of the Funds or the Manager shall have occurred including
            any change in the fundamental investment objective of a Fund, and no
            Adverse Effect shall have occurred.

      (d)   PERFORMANCE OF OBLIGATIONS - The Manager and each of the Funds shall
            have performed or complied with, in all respects, all obligations,
            covenants and agreements in this Agreement to be performed or
            complied with by the Closing Time.


      (e)   CONSENTS,   AUTHORIZATIONS  AND  REGISTRATIONS  -  All  consents,
            approvals,  orders and  authorizations of any Person in Canada or
            elsewhere  including,  without  limitation,  the  approval of the
            board of directors of the Corporate Fund and the Manager,  in its
            own capacity  and in its capacity as the manager,  of each of the
<PAGE>
                                       28


            Funds  and  trustee  of  each of the  Trust  Funds,  required  in
            connection  with  the  completion  of  any  of  the  transactions
            contemplated by this Agreement,  the execution of this Agreement,
            the Closing or the performance of any of the terms and conditions
            of this  Agreement  shall  have been  obtained  at or before  the
            Closing Time.

      (f)   MANAGER AND TRUSTEE OF THE FUNDS - The Manager shall, at the date of
            this Agreement and at the Closing Time, be the manager of each of
            the Funds and the trustee of each of the Trust Funds.

      (g)   PPSA SEARCH REPORTS - FEP shall have received certified copies of
            search  reports  under  applicable   personal  property  security
            legislation  dated  reasonably  near the Closing Date listing all
            effective financing  statements which name the Manager (under its
            respective  present  name or any  previous  names) or any Fund as
            debtor and which are filed in the  jurisdictions in which filings
            are required to be made pursuant to section 6.1(i)  together with
            copies of such  financing  statements,  none of which (other than
            those in  favour  of FEP)  will  cover any of the Fees due to FEP
            under this Agreement.

      (h)   RELEASE OF EXISTING SECURITY INTERESTS - The Manager shall have
            caused FEP to receive duly executed copies of proper discharge
            statements, if any, necessary to release all security interests and
            other rights of any Person in the Fees due to FEP under this
            Agreement.

      (i)   DULY REGISTERED FINANCING STATEMENTS - FEP shall have received
            confirmation of the registration of financing statements under the
            personal property security legislation of all jurisdictions FEP may
            deem reasonably necessary or desirable in order to perfect its
            interest in the Fees payable to it as contemplated by this
            Agreement, each of which shall be in form, scope and substance
            satisfactory to FEP.

      (j)   FINANCIAL STATEMENTS - FEP or its Permitted Designee shall have
            received copies of the Manager's audited balance sheet as at
            September 30, 1997 together with the auditors' report thereon.

      (k)   EVENT OF TERMINATION - The Manager and the Funds are in compliance
            with section 6.2(c).


6.2 FEP'S CONDITIONS TO PAYMENT OF SELLING COMMISSIONS FROM TIME TO TIME. The
obligation of FEP to arrange for the distribution of Deferred Charge Securities
and to pay Selling Commissions under this Agreement from time to time shall be
subject to the satisfaction of, or compliance with, each of the following
conditions precedent (each of which is acknowledged to be inserted for the
<PAGE>
                                       29


exclusive benefit of FEP and may be waived by it in whole or in part by notice
in writing to the Manager) at each such time:

      (a)   TRUTH AND ACCURACY OF REPRESENTATIONS AND WARRANTIES OF THE MANAGER
            AND THE FUNDS - The representations and warranties of the Manager
            and the Funds made in or pursuant to sections 5.1 (a), (b), (c),
            (d), (e), (g), (h), (i), (j), (k), (l), (m), (o), (p), (q), (t) and
            (v) shall be true and correct in all material respects as of the
            time of arranging for the distribution of Deferred Charge Securities
            and payment of such Selling Commissions and with the same effect as
            if made at the time of payment of Selling Commissions.

      (b)   MANAGER AND TRUSTEE OF THE FUNDS - The Manager or an Affiliate of
            the Manager shall, at the time of payment of such Selling
            Commissions, be the manager of each of the Funds and trustee of each
            of the Trust Funds.

      (c)   EVENT OF TERMINATION - Both  immediately  before and  immediately
            after  giving  effect to the payment of a Selling  Commission  on
            such date by FEP, no FEP Event of  Termination  (or event  which,
            with the passage of time or the giving of notice,  or both, would
            constitute an Event of  Termination) in respect of the Manager or
            any of the Funds shall have occurred and be  continuing  provided
            that, for purposes of this section,  FEP Event of Termination (g)
            shall  not be  deemed to have  occurred  until the 60 day  notice
            period provided for in section 8.1 has expired.

      (d)   DISTRIBUTION RIGHTS - The Manager shall have delivered all Manager's
            Reports required to be delivered on or prior to such date pursuant
            to this Agreement, which shall be in form and substance reasonably
            satisfactory to FEP or its Permitted Designee.

      (e)   PERFORMANCE OF OBLIGATIONS - The Manager and each of the Funds shall
            have performed or complied with, in all material respects, all
            obligations, covenants and agreements in this Agreement to be
            performed or complied with.

The delivery of the Manager Report from time to time shall constitute a
representation and warranty by the Manager that, on the date of such delivery,
the conditions set forth in section 6.2 have been fulfilled, except as
specifically agreed to in writing by FEP.

6.3 MANAGER AND FUNDS' CONDITIONS. The obligations of the Manager and each of
the Funds to complete the transactions contemplated by this Agreement shall be
subject to the satisfaction of, or compliance with, at or before the Closing
Time, each of the following conditions precedent (each of which is acknowledged
to be inserted for the exclusive benefit of the Manager and the Funds and may be
waived by them in whole or in part by notice in writing to FEP):
<PAGE>
                                       30

      (a)   TRUTH AND ACCURACY OF REPRESENTATIONS OF FEP AT CLOSING TIME - All
            the representations and warranties of FEP made in or pursuant to
            this Agreement shall be true and correct in all material respects as
            at the Closing Time with the same effect as if made at and as at the
            Closing Time.

      (b)   PERFORMANCE OF OBLIGATIONS - FEP shall have performed or complied
            with, in all material respects, all obligations, covenants and
            agreements in this Agreement to be performed or complied with by the
            Closing Date.

      (c)   MATERIAL ADVERSE EFFECT - No material adverse change in the
            condition or operation of the business, assets or financial
            condition of FEP shall have occurred which would adversely affect
            its ability to pay or to perform its obligations under this
            Agreement.

      (d)   CONSENTS, AUTHORIZATIONS AND REGISTRATIONS - All consents,
            approvals, orders and authorizations of any Person or government
            authority in Canada or elsewhere including, without limitation, the
            approval of the board of directors of FEP, required in connection
            with the contemplation of any of the transactions contemplated by
            this Agreement, the execution of this Agreement, the closing or
            performance of any of the terms and conditions of this Agreement
            shall have been obtained on or before the Closing Time.

                                   ARTICLE 7

                                   COVENANTS

7.1 COVENANTS OF THE MANAGER AND THE FUNDS. Each of the Manager and the Funds
covenant and agree (but only as to itself) with FEP to the extent applicable
that prior to the termination of this Agreement:

      (a)   COMPLIANCE WITH MATERIAL  CONTRACTS - Each of the Manager and the
            Funds, and the Manager shall use commercially  reasonable efforts
            to cause each  portfolio  manager  of each of the Funds to,  duly
            comply  with  all  applicable   laws  in  the  conduct  of  their
            respective  businesses,  to  maintain  and keep in full force and
            effect all licences,  registrations and authorizations  necessary
            to  conduct  their  respective   businesses  and  to  fulfil  all
            obligations  on its part to be performed  under or in  connection
            with this  Agreement,  the Advisory  Agreements  and the Material
            Contracts  to which it is a party  unless  the  failure  to do so
            would not have an Adverse Effect.
<PAGE>
                                       31


      (b)   TERMINATION OF THE FUNDS - The Manager and each of the Funds shall,
            subject to the discharge of their respective fiduciary duties, not
            take any action, omit to take any action or initiate any proceeding
            which may, indirectly or directly, trigger the termination or
            wind-up of a Fund pursuant to any of the Material Contracts if such
            termination or wind-up has an Adverse Effect upon FEP.

      (c)   MAINTENANCE OF BOOKS AND RECORDS - Each of the Manager and the Funds
            shall keep proper books and records in accordance with normal
            business practice in which full and appropriate entries shall be
            made of all transactions in relation to its business activity which
            relate in any manner to the transactions contemplated by this
            Agreement.

            The Manager shall cause its auditors to review the Manager's books
            and records relating to the payment of the Selling Commissions and
            the calculation of Fees and the Manager shall provide and shall
            cause its auditors to provide written affirmation as to the accuracy
            of those books and records in respect of the matters relating to the
            payment of Selling Commissions and the Fees no later than June 30,
            1998 and thereafter within 90 days following the end of the
            Manager's fiscal year. The standards relating to the review of such
            books and records must be acceptable to the Manager's and FEP's
            auditors as complying with Canadian and U.S. generally accepted
            accounting standards. The Manager shall pay all reasonable expenses
            incurred by FEP in reviewing the Manager's books and records and
            such written affirmation.

      (d)   DISCLOSURE  OF  MATERIAL  CHANGES - Each of the  Manager  and the
            Funds shall  promptly  give written  notice to FEP (i) of any FEP
            Event of Termination or event which,  with the passage of time or
            the giving of notice or both,  would  constitute  an FEP Event of
            Termination;  (ii) any material  litigation or  proceedings  with
            respect to the Manager, any portfolio manager of any of the Funds
            or the  Funds or any of their  respective  assets  or  properties
            which,  if  adversely  determined,  could give rise to an Adverse
            Effect;  (iii) the failure of any  representation  or warranty of
            the Manager or any of the Funds contained in this Agreement to be
            true and correct in all  material  respects as of the date given;
            or (iv) the failure of any of the Manager or the Funds to perform
            any obligation which is required to be performed by it under this
            Agreement  in any  material  respect on a timely  basis;  (v) any
            material change in the management or structure of the Funds.


      (e)   FURTHER  INSTRUMENTS  AND DOCUMENTS - Each of the Manager and the
            Funds shall  promptly  at its expense  execute and deliver to FEP
            such  further  instruments  and  documents  and take such further
            action as FEP may from time to time  reasonably  request in order
            to further carry out the intent and purpose of this Agreement and
<PAGE>
                                       32


            to  establish  and  protect the rights,  interests  and  remedies
            created or intended to be created  hereby and thereby  including,
            without  limitation,  the execution  and delivery,  recording and
            filing  of  financing  statements  under  the  personal  property
            securities legislation of any applicable  jurisdiction,  provided
            however, that the Manager and the Funds shall not be obligated to
            execute and deliver such  further  instruments  and  documents if
            they would thereby incur any material  obligations or liabilities
            not contemplated by this Agreement.

      (f)   RIGHTS OF  INSPECTION  - Each of the  Manager  and the Fund shall
            permit FEP or any Permitted Designee reasonably acceptable to the
            Manager and the Funds to visit and inspect the properties, files,
            books and  records  of the  Manager  relating  to the Fees,  this
            Agreement, the transactions contemplated hereby and the financial
            condition,  results of operations, cash flows of the Funds and to
            discuss the foregoing with the officers,  partners, employees and
            accountants of the Manager,  all at such reasonable  times during
            reasonable  business  hours  and as often  as FEP may  reasonably
            request.

      (g)   MAINTENANCE OF PROSPECTUS - Each of the Funds and the Manager shall
            maintain the Prospectus Documents in order to qualify the Securities
            of the Funds for sale to the public in full force and effect so that
            the Deferred Charge Securities may be offered for sale to the public
            in all of the provinces and territories of Canada during the period
            in which FEP has the right to arrange for the distribution of
            Deferred Charge Securities hereunder.

      (h)   PRESERVATION OF  RELATIONSHIPS - The Manager shall, and shall use
            commercially   reasonable   efforts  to,  and  use   commercially
            reasonable  efforts to cause the portfolio managers for the Funds
            to, in each case,  consistent with past practice,  preserve their
            relationships with each Fund, including without limitation, those
            arrangements  relating to  distribution,  management,  investment
            management and  administration of the Funds; and not to terminate
            or take  any  action  or omit to take  any  action  which  would,
            indirectly  or directly,  trigger the  termination  of a Material
            Contract. For greater certainty, the foregoing sentence shall not
            prevent the Manager from (i) terminating a Material Contract when
            the Manager,  acting  reasonably,  considers such action to be in
            the best  interests of a Fund or the Funds;  or (ii)  assigning a
            Material Contract to an Affiliate,  provided that such assignment
            does not result in an Adverse Effect.

      (i)   DELIVERY OF LENDER NOTICES - The Manager and the Funds shall deliver
            to FEP a copy of all notices or waivers of default, delivered by any
            lenders to the Funds and of all agreements and amendments entered
            into with such lenders.

<PAGE>
                                       33


      (j)   CHANGE TO INVESTMENT OBJECTIVE OF A FUND - In the event, the
            investment objective of a Fund is amended and such amendment has a
            material impact upon the Fees received by FEP, then the Manager and
            such Fund agree to amend the Monthly Fee payable to FEP under this
            Agreement in light of such material impact.

      (k)   PAYMENT OF FUNDS - If the Manager or any designee or agent thereof
            shall receive any of the Fees from a Fund, the Manager or such
            designee or agent shall hold such Fees in trust for FEP
            (acknowledging that such Fees do not constitute property of the
            Manager) and immediately following receipt of any such Fees, the
            Manager shall, or shall cause such Person to, remit the same to FEP
            in the form received and ensure that such amounts are not commingled
            with other funds.

      (l)   PROVISION  OF  INFORMATION  - All  information  provided by or on
            behalf of the  Manager or the Funds  after the date hereof to FEP
            or any Permitted  Designee for purposes of or in connection  with
            this Agreement, or the transactions  contemplated hereby, will be
            true,  correct and complete in all respects  material to the Fees
            and the  transactions  contemplated by this Agreement and no such
            information  will  contain  any  material   misrepresentation  or
            material  omission to state  therein  matters  necessary  to make
            statements  therein not misleading in any respect material to the
            Fees and the transactions contemplated by this Agreement in light
            of the  circumstances in which they are made,  provided that this
            covenant shall apply only to such misrepresentations or omissions
            as would give rise to an Adverse Effect.

      (m)   STATUS OF FEES - Except to the extent expressly permitted by this
            Agreement, neither the Manager or the Funds shall permit to exist
            any Lien on or attempt to transfer or grant a security interest in
            any interest in any Fees.

      (n)   NOTICE RESPECTING  PRINCIPAL OFFICE, NAME - The Manager shall not
            move its chief executive  office,  principal place of business or
            the place where it keeps its records concerning the Fees from the
            office  specified in section 5.1(r) or change its name (including
            any French form, any combined  English/French  form and any other
            form) or the name  under or by  which it  conducts  its  business
            unless  the  Manager  shall  have  given to FEP not less  than 15
            Business  Days' prior  written  notice of its intention to do so,
            and of any new location or new name.

            The Manager and the Funds shall not take any action or omit to take
            any action that will have an Adverse Effect upon FEP's interest in
            the Fees under personal property security legislation and each of
            such parties agrees that it will do all such things as are
            reasonably necessary to permit FEP to maintain the priority
            registration of its financing statements respecting its interest in
            the Fees under the personal property security legislation.
<PAGE>
                                       34


      (o)   PROVISION OF BALANCE SHEET - The Manager shall furnish to FEP:

               (i)  its balance  sheet as soon as available and no later than 90
                    days  after the end of its  fiscal  year.  An opinion of the
                    independent  auditors  of the  Manager  will  accompany  its
                    balance  sheet  confirming  that such balance sheet has been
                    prepared in  accordance  with GAAP and fairly  presents  the
                    financial condition;

               (ii) as soon as  available,  and in no event  later  than 90 days
                    after the end of each semi-annual period of its fiscal year,
                    the  balance  sheet  referred to in clause (i) above for the
                    semi-annual  period  which shall be  prepared in  accordance
                    with GAAP but need not be audited;

               (iii)together with each  delivery of the balance  sheet  pursuant
                    to  clause  (i)  above a  certificate  signed  by any of its
                    senior  financial  officers  certifying  in  their  official
                    capacity only and not personally as to the absence of an FEP
                    Event of Termination as of the date thereof; and

               (iv) promptly such other information as FEP may from time to time
                    reasonably request.

      (p)   FEE  PAYMENT  BY A FUND - If at any time  after  the date of this
            Agreement an Insolvency Event occurs, the Manager or an Affiliate
            of the Manager is no longer the manager of a Fund or is no longer
            the trustee of a Trust Fund, such Fund agrees that from and after
            such date such Fund  shall  continue  to be  responsible  for and
            shall  continue to pay to FEP the amounts  required to be paid to
            FEP under this Agreement and such Fund, and the Manager shall use
            its  best  efforts  to  cause  any  successor  manager,  trustee,
            receiver-manager  or such  other  Person,  as the case may be, to
            enter into any necessary  agreement to provide for the continuing
            provision of the service of FEP and the uninterrupted  payment of
            the Fees to FEP as provided for in this Agreement.

      (q)   MAINTENANCE  OF FEES - Each Fund and the  Manager  hereby  agrees
            with FEP that they will not, at any time while FEP is entitled to
            receive payment of any amount hereunder, consent to or agree to a
            reduction in the Deferred  Charge for  Distributed  Securities or
            any  alteration in the manner or as to the time of calculation of
            the Deferred Charge or effect any action,  amendment or change of
            any  nature   whatsoever   if  the  effect  of  such   reduction,
            alteration,  action,  amendment  or change would be to reduce the
            amounts payable to FEP or materially  adversely affect the timing
            of the receipt of such amounts payable pursuant to Article 4.

<PAGE>
                                       35


      (r)   MANAGER AND TRUSTEE OF THE FUNDS - The Manager shall, at the date of
            this Agreement and at the Closing Time, be the manager of each of
            the Funds and the trustee of each of the Trust Funds.

      (s)   PAYMENT OF TAXES - Each of the Manager and the Funds shall cause to
            be paid and discharged all taxes, assessments and other charges or
            levies of any authority imposed upon it or upon any of its income or
            assets, prior to the day on which penalties are attached thereto, if
            the failure to pay and discharge such tax assessment or other
            charges or levies could give rise to an Adverse Effect.

      (t)   PROTECTION OF FEP'S RIGHTS - Each of the Manager and the Funds shall
            use commercially reasonable efforts consistent with past practice to
            protect the interests of FEP under this Agreement for so long as FEP
            is entitled to any Fees under this Agreement.

      (u)   CORPORATE RESTRUCTURING - Neither the Manager or any of the Funds
            shall (i) sell or otherwise  dispose of all or substantially  all
            of its assets;  (ii)  consolidate or merge with or enter into any
            agreement  to do so with  another  Person;  (iii)  acquire all or
            substantially  all the assets of another Person; or (iv) permit a
            majority of the interest in the capital  distribution  or profits
            of it to be  acquired by any Person;  unless,  in all cases,  the
            Manager provides to FEP reasonable written notice consistent with
            the  disclosure  obligations  it  would  have if it were a public
            company and provided that (i) immediately  after giving effect to
            such   consolidation,   merger,   sale,   disposition   or  other
            transaction,  the  corporation  or  other  entity  formed  by  or
            surviving any such consolidation,  merger or other transaction or
            to which such sale or disposition  shall have been made,  whether
            the  Manager  or the  Funds,  as the case may be,  or such  other
            entity  (the  "Surviving  Entity")  shall  not be in  default  in
            performance  or  observation  of any of the terms,  covenants and
            conditions of any Program  Document to be kept or performed by it
            or any  indebtedness  or  financing  transaction  for itself that
            would have an Adverse  Effect;  (ii) the  Surviving  Entity shall
            expressly assume the due and punctual performance and observation
            of all  covenants and  conditions of the Program  Documents to be
            performed  or  observed  by the  predecessor  entity,  if any, by
            agreement  reasonably  satisfactory in form and substance to FEP;
            and (iii) FEP shall  have  satisfied  itself as to the  continued
            perfection and priority of its security interest in the Fees.

      (v)   BOARD OF DIRECTORS FOR THE FUNDS - The Manager and each of the Funds
            shall provide 60 days' prior written notice to FEP of any proposed
            introduction of a board of directors for any of the Funds.
<PAGE>
                                       36


      (w)   CLIENT AND PORTFOLIO REPORTING - The Manager shall provide client
            and portfolio  reporting to FEP. Client reporting will consist of
            the administration  package of reports on monthly  securityholder
            activity   derived  from  the  Funds'  transfer  agent's  system.
            Portfolio  reporting  will  consist  of a monthly  balance  sheet
            (statement of condition)  inclusive of price and securities (with
            CUSIP   numbers)   reported  to  FEP  in  respect  of  each  Fund
            separately.  The portfolio  reports shall be in substantially the
            same  form  as  those   currently   generated  by  the  Manager's
            accountants daily.

7.2 COVENANTS OF FEP. FEP covenants and agrees with each of the Manager and the
Funds to the extent applicable that prior to the termination of this Agreement:

      (a)   SERVICES RENDERED OUTSIDE CANADA - FEP shall not and shall not
            permit any of its employees to render in Canada the services of
            arranging for the distribution of Deferred Charge Securities or any
            other service for which it receives a fee under the Program
            Documents.

      (b)   PROVISION OF FEP BALANCE SHEET - FEP shall furnish to the Manager:

               (i)  its balance  sheet as soon as available and no later than 90
                    days  after the end of its  fiscal  year.  An opinion of the
                    independent auditors of FEP will accompany its balance sheet
                    confirming  that such  balance  sheet has been  prepared  in
                    accordance  with  GAAP and  fairly  presents  the  financial
                    condition;

               (ii) as soon as  available,  and in no event  later  than 90 days
                    after the end of each semi-annual  period of its fiscal year
                    prior to the Termination Date, the balance sheet referred to
                    in clause (i) above for the  semi-annual  period which shall
                    be prepared in accordance with GAAP but need not be audited;

               (iii)together with each  delivery of the balance  sheet  pursuant
                    to clause  (i)  above,  a  certificate  signed by any of its
                    senior  financial  officers  certifying  in  their  official
                    capacity  only and not  personally  as to the  absence  of a
                    Manager's Event of Termination as of the date thereof.
<PAGE>
                                       37


                                    ARTICLE 8

                     TERMINATION EVENTS AND PURCHASE EVENTS

8.1 FEP TERMINATION EVENTS. The obligation of FEP to arrange for the
distribution of Deferred Charge Securities and to pay the Selling Commissions
pursuant to Article 3.6 may be terminated by FEP if a FEP Event of Termination
shall occur and be continuing. Such termination shall be effected by the giving
of written notice to the Manager giving the Manager 15 Business Days (60 days in
the case of FEP Event of Termination (g)) to cure such breach during which
period FEP shall not have the right to suspend its obligation to arrange for the
distribution of Deferred Charge Securities and to pay Selling Commissions. If
such breach continues uncured, at the expiration of such notice period, FEP may
give a second written notice to the Manager declaring that the Termination Date
has occurred (in which case the Termination Date shall be deemed to have
occurred on the date such second notice is given). The parties agree that in
respect of FEP Event of Termination (g), the parties shall use their respective
commercially reasonable efforts during such 60 day notice period to restructure
the distribution arrangement contemplated by the Program Documents to attempt to
accommodate and facilitate the continued arrangement notwithstanding such
change.

8.2   PURCHASE EVENTS.

      (a)   If any Purchase Event shall occur and be continuing, FEP may,
            without prejudice to any other rights and remedies which FEP may
            have under or in connection with this Agreement or any other Program
            Document or under applicable law, waive the Purchase Event.

      (b)   FEP may by written notice to the Manager require that the Manager or
            the Funds use their respective commercially reasonable efforts to
            cure the Purchase Event within 15 Business Days after receipt of
            such notice, and, if the Manager or the Funds do not so cure such
            Purchase Event within such cure period, FEP may elect any one of the
            following courses of action:

               (i)  waive the breach;

               (ii) sue the Manager or the Funds for damages; or

               (iii)grant the Manager or a Person  acceptable to the Manager and
                    FEP, acting  reasonably,  the option to purchase FEP's right
                    to Fees for an amount equal to 110% of the FEP Balance Sheet
                    Carrying  Value as of the  expiration of the cure period set
                    forth above.


      (c)   Upon receipt of any payment under section 8.2(b) (iii), FEP shall
            execute and deliver to the replacement  party(s) such instruments
            relating to the Fees as the  replacement  party(s) or its counsel
            may  reasonably  request to convey to the  replacement  party(s),
            without  representation  or  warranty  of any kind  (other than a
<PAGE>
                                       38


            warranty  that FEP is conveying  such interest in the Fees as was
            conveyed to it by the Manager free and clear of any Liens),  such
            interest, if any, as FEP shall then have in the Fees, except that
            FEP shall not be obligated to execute and deliver any  instrument
            if it  would,  as a  result,  incur any  material  obligation  or
            liability not  contemplated  by this  Agreement.  Upon receipt of
            such payment, FEP shall not be entitled to indemnification  under
            section 9.1 other than with respect to  Liabilities  alleged by a
            Person other than the Funds and the Manager.

      (d)   If the Manager elects not to purchase the Fees and FEP pursues such
            remedies as it may have related to the circumstances that gave rise
            to such Purchase Event, the parties hereto acknowledge that, due to
            the difficulty that FEP may have proving the amount of monetary
            damage that it will have suffered or may in the future suffer as a
            result of such circumstances, an equitable remedy for such injury
            may be appropriate.

8.3   MANAGER SUSPENSION AND TERMINATION RIGHTS.

      (a)   MANAGER'S  TERMINATION  RIGHT.  Provided  that  a  FEP  Event  of
            Termination has not occurred and is continuing,  the right of FEP
            to arrange for the distribution of Deferred Charge  Securities of
            the Funds under this  Agreement  may be terminated by the Manager
            if FEP fails to pay Selling Commissions pursuant to Article 3 and
            such failure is continuing.  Such termination  shall be effective
            by the giving of written  notice to FEP by the Manager giving FEP
            15 Business  Days to cure such  breach  during  which  period the
            Manager shall not have any right to terminate FEP's  distribution
            right.  If such breach  continues  uncured,  at the expiration of
            such notice period,  the Manager may give a second written notice
            to FEP declaring that the Termination Date has occurred (in which
            case a  Termination  Date shall be deemed to have occurred on the
            date such second notice is given).

      (b)   MANAGER'S PURCHASE EVENT. If a Manager Event of Termination shall
            occur and be continuing, the Manager or its designee may, with or
            without the consent of FEP, upon 60 days' notice, purchase all of
            FEP's  right,  title  and  interest  in and to all the Fees for a
            price equal to the FEP Balance Sheet Carrying Value in respect of
            each Quarterly Pool. Upon receipt of any such payment,  FEP shall
            execute  and  deliver  to  the  Manager  or  its  designee   such
            instruments  relating  to the Fees as the  Manager or its counsel
            may  reasonably   request  to  convey  to  the  Manager   without
            representation  or  warranty  of any kind  (other than a warranty
            that it owns such  interest in the Fees as was  conveyed to it by
            the Manager free and clear of all Liens), such interest,  if any,
            as FEP shall then have in the Fees,  except that FEP shall not be
            obligated to execute and deliver any instrument if it would, as a
            result,   incur  any  material   obligation   or  liability   not
            contemplated by the Program Documents to which it is a party. The
<PAGE>
                                       39


            parties   agree  that,   in  respect  of  the  Manager  Event  of
            Termination   (a),  the  parties   shall  use  their   respective
            commercially  reasonable efforts during such 60 day notice period
            to restructure the distribution  arrangement  contemplated by the
            Program  Documents to attempt to  accommodate  and facilitate the
            continued arrangement notwithstanding such change.

      (c)   MANAGER'S SUSPENSION RIGHTS. The Manager may at any time and from
            time to time suspend FEP's right to arrange for the distribution of
            Deferred Charge Securities, for a maximum period of 12 calendar
            months per suspension, provided that, in respect of each suspension:

               (i)  it  provides  to FEP not  less  than 60 days  prior  written
                    notice of the suspension; and

               (ii) the  suspension  period  may  only  commence  on  the  first
                    business day of a calendar month following the expiry of the
                    notice period;

            and provided that in respect of the termination of an existing
            suspension period and the recommencement of FEP's distribution right
            under the Agreement:

               (i)  not less  than 60 days  written  notice is  provided  by the
                    Manager  to FEP  prior  to  the  expiry  of  the  applicable
                    suspension period; and

               (ii) following the termination of an existing  suspension period,
                    FEP's  distribution  right  shall be for a minimum  of three
                    months.

            The parties acknowledge and agree that FEP shall be entitled to
            terminate this Agreement at any time following the end of a 12
            calendar month suspension period if the Manager has not provided
            written notice to FEP of the Manager's intent to recommence FEP's
            distribution right 60 days prior to the end of the suspension
            period.

            In addition to its rights of suspension as provided above, the
            Manager, may, at any time, terminate FEP's right to arrange for the
            distribution of Deferred Charge Securities in respect of any future
            Quarterly Pool by providing 90 days prior written notice to FEP.


8.4 COSTS AND EXPENSES OF FEP. All costs and expenses incurred by FEP in
connection with the enforcement of this Agreement against the Manager or the
Funds resulting from an FEP Event of Termination or a Purchase Event shall be
paid by the Manager or the Funds forthwith on demand therefor by FEP. The
<PAGE>
                                       40


payment obligations of the Manager and the Funds under this section shall be
several.

8.5 COSTS AND EXPENSES OF MANAGER. All costs and expenses incurred by the
Manager in connection with the enforcement of this Agreement against FEP
resulting from a Manager Event of Termination shall be paid by FEP forthwith on
demand therefor by the Manager.

                                    ARTICLE 9

                                 INDEMNIFICATION

9.1 INDEMNIFICATION OF FEP. The Manager and each of the Funds severally agree to
indemnify and hold harmless FEP, each of its partners and each of their
respective Affiliates and their respective officers, directors, employees,
agents and advisers (an "Indemnified Party") from and against any and all
claims, damages, losses, liabilities, expenses, obligations, penalties, actions,
suits, judgements and disbursements or any kind or nature whatsoever (including
without limitation the reasonable fees and disbursements of counsel and expert
witnesses (collectively but without duplication the "Liabilities")) that may be
incurred by, asserted or awarded against any Indemnified Party, in each case
arising out of or relating to or by reason of any one or more of the following:

      (a)   preparation for, or defence of, any investigation, litigation or
            proceeding arising out of or relating to any of the Prospectus
            Documents, this Agreement or the transactions contemplated hereby;

      (b)   any  failure  or  alleged  failure  by the  Manager  or a Fund to
            perform  any of  its  obligations  contained  in  this  Agreement
            promptly and fully;

      (c)   any failure or alleged failure of any representation or warranty
            made or deemed made by the Manager or a Fund contained in this
            Agreement which has an Adverse Effect;

      (d)   any failure or alleged failure to provide to FEP good and marketable
            title under applicable personal property securities legislation to
            the Fees;

      (e)   the failure of this Agreement or the Program  Documents to comply
            with law; and

      (f)   any non-fulfilment of any condition precedent or covenant on the
            part of the Manager or any of the Funds under this Agreement whether
            before or after the Closing,
<PAGE>
                                       41


provided that the Manager and the Funds shall not be required to indemnify any
Indemnified Party in respect of any Liability if and to the extent that such
Liability results from one or more of the following:

      (g)   the negligence or wilful  misconduct of an  Indemnified  Party or
            any other Person for whom an Indemnified Party acts; or

      (h)   the failure of the Indemnified Party to perform any of its covenants
            set forth in this Agreement or any failure of any of the
            representations and warranties of the Indemnified Party to be true
            and correct.

The parties acknowledge and agree the Manager shall only be responsible pursuant
to this section to the extent of its obligations under the Agreement and its
sole liability under this section shall be limited to any liability resulting
from the Manager's failure to perform its obligations under this Agreement.

9.2 INDEMNIFICATION OF MANAGER AND THE FUNDS. FEP agrees to indemnify and hold
harmless the Manager and the Funds, each of its partners and each of their
respective affiliates and their respective officers, directors, employees,
agents, advisers of any Person controlling any of the foregoing (an "Indemnified
Party") from and against any and all claims, damages, losses, liabilities,
expenses, obligations, penalties, actions, judgements and disbursements of any
kind or nature whatsoever (including without limitation the reasonable fees and
disbursements of counsel and expert witnesses (collectively but without
duplication the "Liabilities")) that may be incurred by, asserted or awarded
against any Indemnified Party, in each case arising out of or relating to or by
reason of any one or more of the following:

      (a)   failure  or  alleged  failure  by  FEP  to  perform  any  of  its
            obligations contained in this Agreement promptly and fully;

      (b)   the imposition of withholding  tax under Canadian tax laws on the
            payment of Fees to FEP or under U.S.  tax laws on the  payment of
            Selling  Commissions  or any other  payment made by FEP under the
            Program Documents;

provided that FEP shall not be required to indemnify any Indemnified Party in
respect of any Liability if and to the extent that such Liability resulted from
one of the following:


      (c)   the negligence or wilful misconduct of an Indemnified Party or any
            other Person for whom an Indemnified Party acts other than any
            negligence or wilful misconduct relating to the failure to withhold
            or remit tax under Canadian tax laws; or
<PAGE>
                                       42


      (d)   the failure of the Indemnified Party to perform any of its covenants
            set forth in this Agreement or any failure of any of the
            representations and warranties of the Indemnified Party to be true
            and correct.


                                   ARTICLE 10

                                ADDITIONAL FUNDS

10.1  ADDITIONAL FUNDS.

      (a)   The Manager shall add Additional Funds to the Funds in respect of
            which FEP's distribution  right extends.  The Manager shall cause
            each Additional Fund to become a party to this Agreement as fully
            and effectually as if it had been an original  signatory  hereto.
            Each of the  remaining  parties  hereto shall execute and deliver
            such  amendments to this  Agreement as shall be necessary to give
            effect to this section. Subject to compliance with the foregoing,
            each such  Additional  Fund shall be deemed to be a "Fund" within
            the  meaning  hereof  and  the  mutual  fund  securities  of such
            Additional Funds which are sold on a deferred-charge  basis shall
            be deemed to be "Deferred Charge  Securities"  within the meaning
            hereof and the terms and  conditions of this  Agreement  shall be
            applicable to such Additional Funds.

            The Manager agrees not to permit any Distributed Security to become
            a Transfer Security of an Additional Fund, until such Additional
            Fund becomes a party to this Agreement.

      (b)   The  Manager  may add to the  Funds in  respect  of  which  FEP's
            distribution  right  extends,   any  open-end  mutual  fund,  the
            management and  distribution  rights of which are acquired from a
            third  party  from  time to  time.  The  Manager  shall  add such
            open-end fund to FEP's distribution right if the Manager provides
            for an exchange privilege to investors allowing the transfer from
            such  open-end  funds to the Funds.  If the Manager  elects or is
            required to add such open-end fund to FEP's  distribution  right,
            such Fund shall be  considered  an  Additional  Fund and shall be
            treated and subject to the  conditions  noted above in  paragraph
            (a).

      (c)   The Manager may add to the Funds in respect of which FEP's
            distribution right extends, any closed-end fund created or
            reorganized by the Manager if FEP and the Manager agree as to an
            appropriate fee structure in respect of such Fund. If an agreement
            as to an appropriate fee structure is reached, such Fund shall be
<PAGE>
                                       43


            considered an "Additional Fund" and shall be treated and subject to
            the conditions noted above in paragraph (a).

      (d)   The Manager shall provide notice to FEP of any Additional Fund on or
            about the time when the Manager files the preliminary prospectus for
            the Additional Fund.


10.2 CHANGE IN MARKET CONDITIONS. During any period or periods when, in the
reasonable opinion of the Manager, the state of the financial markets becomes
such that it would be impracticable or unprofitable to offer or to continue to
offer the Deferred Charge Securities for sale to the public, or if any event has
occurred or situation developed which renders it inexpedient or unprofitable to
offer or to continue to offer the Deferred Charge Securities for sale to the
public, the Funds and the Manager shall be under no obligation to offer or to
continue to offer the Deferred Charge Securities for sale to the public. Any
such discontinuation in the offering of Deferred Charge Securities will not have
any effect on the obligation of the Manager and the Funds to pay FEP the
remuneration to which it is entitled under Article 4 or to continue to qualify
outstanding Distributed Securities under applicable securities legislation, to
the extent necessary to give effect to the provisions of this Agreement.

                                   ARTICLE 11

                                     GENERAL

11.1 AMENDMENT OF AGREEMENT. This Agreement may be amended from time to time
only by written consent of the Funds, the Manager and FEP.

11.2 TERMINATION OF FEP AS EXCLUSIVE DISTRIBUTOR. If FEP is unable to carry out
its obligations hereunder (which may occur if FEP is unable to pay Selling
Commissions for all of the Original Charge Securities sold during the period of
its appointment as distributor under this Agreement), the Manager may terminate
FEP's exclusive right to arrange for distribution of Deferred Charge Securities
and may: (i) pay Selling Commissions directly; (ii) enter into agreements with
other parties to pay Selling Commissions; or (iii) limit, by allotment or
otherwise, sales of Deferred Charge Securities.

11.3 RESIGNATION BY FEP. FEP may resign as distributor on not less than 365
days' prior notice to the Funds and the Manager provided such notice may not be
provided prior to the date which is six months from the date of this Agreement.
In such event, FEP shall thereafter have no entitlement to arrange for the
distribution of Deferred Charge Securities but shall be entitled to continue to
receive payment of the Fees payable pursuant to Article 4.
<PAGE>
                                       44

11.4  ASSIGNMENT

      (a)   This  Agreement  shall be binding upon,  and inure to the benefit
            of, the parties hereto and their respective  permitted successors
            and  permitted  assigns;  provided,   however,  that,  except  as
            permitted  under  paragraph  11.4(c),  section  7.1(u)  or  to an
            Affiliate of the  Manager,  the Manager may not assign its rights
            or  obligations  hereunder  or  in  connection  herewith  or  any
            interest  herein  or under  any other  Program  Document  or with
            respect to any Fees or the proceeds  thereof  without FEP's prior
            written  consent,  such consent not to be unreasonably  withheld;
            and provided further that, except as provided in sections 11.4(b)
            and  11.4(c),  FEP shall not  assign  its  rights or  obligations
            hereunder  or under any other  Program  Document or in respect of
            any Fees or the  proceeds  thereof,  without  the  prior  written
            consent  of the  Manager,  such  consent  not to be  unreasonably
            withheld.


      (b)   The rights and  obligations of FEP under this Agreement  shall be
            assignable in connection with any merger,  consolidation  or sale
            or  disposition of all or  substantially  all of the assets of or
            the general and limited partnership or corporate interests in FEP
            with or to another  entity,  provided that the  surviving  entity
            shall (i) be a corporation  or other entity  organized  under the
            laws of any  country in Europe,  the United  States of America or
            any State  thereof  or of Canada or any  province  thereof,  (ii)
            expressly assume the due and punctual  performance and observance
            of all covenants and  conditions of this  Agreement and all other
            Program  Documents  to  be  performed  or  observed  by  FEP,  by
            agreement  reasonably  satisfactory  in form and substance to the
            Manager and (iii) prior to the Termination Date, have a net worth
            prior to the Termination  Date at least equal to that of FEP, and
            access to funding  sources  for  purposes  of making  payments of
            Selling Commissions hereunder equivalent in an amount to those to
            which  FEP  had  access,   immediately   prior  to  such  merger,
            consolidation or sale or disposition of assets or interests.  FEP
            shall have the right,  subject to  section  11.4(d)  and (e),  to
            assign  to any  Person,  as a part  of and in  connection  with a
            Takeout  Transaction,  its right,  title and interest in the Fees
            and the proceeds  thereof;  provided that FEP shall not assign to
            any Person any other right, title or interest of FEP hereunder or
            under any other Program Document (including,  without limitation,
            the  benefit  of  the   representations  and  warranties  of,  or
            indemnification  agreed  to,  by the  Manager  contained  in this
            Agreement or any other  Program  Document).  Notwithstanding  the
            foregoing,  FEP may  (i)  pledge  all of its  rights  under  this
            Agreement  or any other  Program  Document  to a major  financial
            institution  as  security  for  money  borrowed,   or  (ii)  make
            representations  or warranties  and grant  indemnities to another
            Person,   as  a  part  of  and  in  connection   with  a  Takeout
            Transaction, which are similar to the representations, warranties
            and indemnities agreed to by the Manager in this Agreement or any
            other Program Document.
<PAGE>
                                       45

      (c)   The parties agree and consent to the assignment of their respective
            rights and obligations under this Agreement to the Joint Venture.

      (d)   In the event that a Takeout Transaction is proposed which would
            involve the offering by prospectus of securities in Canada then:

               (i)  FEP shall give the Manager  notice of such proposed  Takeout
                    Transaction;

               (ii) the Manager shall then have 30 days from the receipt of such
                    notice to give FEP  notice of the  intent of the  Manager or
                    one of its  Affiliates  to  file  a  preliminary  prospectus
                    within  30 days of the  date of the  Manager's  notice  with
                    respect  to an  offering  relating  to  the  funding  of the
                    payment of Selling Commissions in respect of Deferred Charge
                    Securities;

               (iii)if the  Manager  does  not  give  notice  within  the 30 day
                    period  described  in (ii)  above,  or if the Manager or its
                    Affiliate does not file a preliminary  prospectus  within 30
                    days  of  giving  its  notice,  then  the  proposed  Takeout
                    Transaction may proceed;

               (iv) in any other case, the proposed Takeout Transaction will not
                    proceed  until the earlier of: (A) the first  closing of the
                    offering described in (ii) above, and (B) 12 months from the
                    date of the Manager's notice.

      (e)   FEP shall not have the right to assign any of its rights under this
            Agreement to any of the top five mutual fund management companies in
            Canada and the U.S., as measured by the net asset value of funds
            under management published as at the end of each calendar year by
            the Investment Funds Institute of Canada and the Investment
            Companies Institute, as applicable. This exclusion shall not apply
            to Affiliates or associates of such fund companies that are not
            involved in the management and distribution of retail investment
            funds.

11.5 LIABILITY. FEP shall not be liable for any error of judgment or for any
loss suffered by any Fund or the Manager in connection with the matters to which
this Agreement relates, except a loss resulting from misfeasance, bad faith or
negligence on its part in the performance of, or reckless disregard by it of,
its obligations hereunder.


11.6 CONFIDENTIALITY. Unless otherwise required by applicable law, the Manager,
the Funds and FEP agree to maintain the confidentiality of this Agreement (and
all drafts thereof), the transactions contemplated hereby and all confidential,
material, non-public information concerning the other parties to this Agreement,
which information has been provided by such party by another party and was not
also available to such party through other means (collectively, "Confidential
<PAGE>
                                       46


Information"); provided that nothing in this section shall prohibit disclosure
of Confidential Information by any such Person as follows:

      (a)   pursuant  to an  order  under  applicable  law or  pursuant  to a
            subpoena or other legal process;

      (b)   to the officers, directors, partners, employees, legal counsel or
            auditors of, or lenders to, such Person, who shall also be
            instructed to maintain it as confidential;

      (c)   in the case of any Fund, to any then current directors or trustees
            of such Fund, Fund counsel, independent accountants or officers, who
            shall also be instructed to maintain it as confidential;

      (d)   to any permitted assignee or permitted pledgee of all or any portion
            of such Person's right, title or interest in this Agreement or the
            Fees, provided that such permitted assignee or pledgee agrees in
            writing delivered to and for the benefit of all parties to this
            Agreement to be bound by the terms of this section; or

      (e)   to any proposed permitted assignee or permitted pledgee of all or
            any portion of such  Person's  right,  title and interest in this
            Agreement  or the Fees,  provided  that such Person  advises such
            proposed  permitted  assignee  or pledgee  in  writing  that such
            Confidential Information is confidential,  non-public information
            and requests  that such  proposed  permitted  assignee or pledgee
            keep it  confidential  and use it only for purposes of evaluating
            the proposed  assignment  or pledge and such  proposed  permitted
            assignee or pledgee agrees in a writing  delivered to and for the
            benefit  of all  parties  to this  Agreement  to be  bound by the
            provisions of this section and  provided,  further that FEP shall
            not disclose  such  Confidential  Information  to any assignee or
            pledgee  pursuant to clause (d) above or this clause (e) which is
            or  is  an  affiliate  of  an   investment   adviser,   principal
            underwriter,  administrator  or  subadvisor  to  any  registered,
            open-end management investment company.

      Notwithstanding anything to the contrary contained herein, FEP shall keep,
and shall use its commercially reasonable efforts to cause its officers,
directors, partners, employees, advisers, legal counsel, auditors, lenders and
affiliates to keep, confidential all Confidential Information concerning the
Funds delivered or made available by the Manager or the Funds to FEP or such
other Persons, including without limitation the Fund Documents (to the extent
not publicly available), shareholder records, shareholder transaction records
and information concerning the composition of their respective portfolios, and
information concerning the financial condition of the Manager of its parent (and
FEP shall not, and shall cause each of the foregoing other Persons not to, use
such information to sell securities to or purchase securities from any such Fund
<PAGE>
                                       47


or other investment company or recommend such trading to any other Person on the
basis of such information).

11.7 NOTICE. Any notice which is required or permitted to be given under this
Agreement may be given in writing by delivery in person or by ordinary prepaid
mail by addressing the same to the party to whom it is to be given at the
address first written above or at such other address as such party may designate
by notice in the foregoing manner. Any notice so given shall be deemed to have
been given on the day it is personally delivered or on the day which is five
days after it is mailed, as the case may be.

11.8 DISPUTE RESOLUTION. Any dispute relating to the Program Documents,
including the method or the calculation of the payments, shall be negotiated in
good faith by the parties. If any dispute cannot be resolved, any party may give
written notice to the other parties that the arbitration proceedings described
below shall apply to all or a specified part of the issues in dispute.

      Upon receipt of the notice referred to in the preceding paragraph, the
parties shall attempt to agree on an arbitrator and, if they are unable to agree
within 10 Business Days, FEP shall name an arbitrator who is a partner of
PricewaterhouseCoopers or such other accounting firm retained by the Manager, or
who is a partner of any nationally recognized accounting firm in Canada agreed
to by the Manager. The arbitrator shall be given access to all materials and
information reasonably requested by him for such purpose. The rules and
procedures to be followed in the arbitration proceedings shall be determined by
the arbitrator in his discretion. To the extent not inconsistent with this
Agreement, the arbitration shall be governed by the International Commercial
Arbitrations Act (Ontario). The arbitrator's determination of all matters in
dispute shall be final and binding on all parties and shall not be subject to
appeal by any party. The fees and expenses of the arbitrator shall be determined
by the arbitrator.

      Any amount determined to be payable by one party to another shall be
payable with interest calculated at an annual rate on interest reported by Chase
Bank Canada as its "prime rate", for the period commencing from the date such
payment was originally due to the date payment actually is made.

11.9 TAXES. The Manager or the Funds, as applicable, shall pay any present or
future sales or excise taxes, excluding FEP's income taxes, imposed under
Canadian legislation upon the supply of services by FEP under this Agreement
(hereinafter referred to as "Sales Taxes"). In addition, the Manager or the
Funds, as applicable, shall pay any present or future stamp or documentary taxes
or any other excise or property taxes, charges or similar levies which arise
under Canadian legislation from any payment made by or on behalf of the Funds,
hereunder or from the execution or delivery of, or otherwise with respect to,
this Agreement or any other Program Document to which the Manager, the Funds or
any of their respective Affiliates is a party (hereinafter referred to as "Other
Taxes"). FEP shall be entitled to indemnification under section 9.1 for the full
<PAGE>
                                       48

amount of Sales Taxes or Other Taxes (including, without limitation, any Sales
Taxes or Other Taxes imposed by any Canadian jurisdiction on amounts payable
under this section 11.9) paid by the Manager or the Funds and any liability
(including penalties, interest and expenses) arising therefrom or with respect
thereto, whether or not such Sales Taxes or Other Taxes were correctly or
legally asserted.

11.10 SEPARATE LIABILITY OF FUNDS. The liability and obligations of each Fund to
the Manager and FEP hereunder  shall be separate and distinct from the liability
and obligations of each of the other Funds with the result that no Fund shall be
liable  or   responsible   for  the  action  or  inaction  of  any  other  Fund.
Notwithstanding the foregoing and notwithstanding  that the Manager may cease to
be the manager of any Fund,  each of the Funds  agrees that it shall  provide to
FEP and the Manager  such  information  as may be required  from time to time to
determine the amount of the Fees payable pursuant to Article 4.

11.11 HEADINGS. In this Agreement, the headings are for convenience of reference
only, do not form a part of this Agreement and are not to be considered in the
interpretation of this Agreement. References to Articles, sections, paragraphs,
subparagraphs and clauses are to Articles, sections, paragraphs, subparagraphs
and clauses of this Agreement.

11.12 GENDER AND NUMBER. In this Agreement, words importing the masculine gender
include the feminine and neuter genders, words importing persons include all
Persons, and words in the singular include the plural, and vice versa, wherever
the context requires.

11.13 SEVERABILITY. Every provision of this Agreement is intended to be
severable. If any term or provision hereof is illegal or invalid for any reason
whatsoever, such illegality shall not affect the validity of the remainder of
this Agreement.

11.14 FURTHER ACTS. The parties hereto agree to execute and deliver any such
further and other documents and perform and cause to be performed such further
and other acts and things as may be necessary or desirable in order to give full
effect to this Agreement and every part thereof. Without limiting the generality
of the foregoing, each of the Funds agrees that it will provide to the other
Funds, the Manager and FEP such information as to date of issue and issue price
of its Deferred Charge Securities and such other information as shall be
required to facilitate the calculating of any amounts which are payable
hereunder.

11.15 CURRENCY.  All dollar amounts referred to in this Agreement or required to
be paid hereunder, are in Canadian funds.

11.16 INTEREST RATE EQUIVALENCE. For the purposes of the Interest Act (Canada),
where in this Agreement a rate of interest is to be calculated on the basis of a
year of 360 or 365 days, the yearly rate of interest to which the said rate is
equivalent is the said rate multiplied by the number of days in the calendar
<PAGE>
                                       49

year commencing on the first day of the period for which such calculation is
made and divided by 360 or 365 (as applicable).

11.17 COUNTERPARTS, FACSIMILE EXECUTION. This Agreement may be executed in
several counterparts, each of which when so executed shall be deemed to be an
original and such counterparts together shall constitute one and the same
instrument, which shall be sufficiently evidenced by any such original
counterpart. This Agreement may be executed and delivered by facsimile and will
be considered duly executed and delivered by the parties so executing delivery
on the day of its transmission by facsimile in executed form to the other
parties. A party so executing by way of facsimile shall promptly deliver to each
other party an originally signed counterpart.

11.18 ENTIRE  AGREEMENT.  This Agreement  constitutes the entire agreement among
the parties  pertaining to the subject  matter hereof and  supersedes  all prior
agreements, understandings, negotiations and the parties.

11.19 APPLICABLE LAW. This Agreement shall be governed by and interpreted in
accordance with the laws of the Province of Ontario and the laws of Canada
applicable therein and the courts of the Province of Ontario shall have
exclusive jurisdiction with respect to this Agreement.

11.20 ENUREMENT. This Agreement is binding upon and enures to the benefit of the
parties hereto and their respective successors and permitted assigns.



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<PAGE>

      IN WITNESS WHEREOF the parties have duly executed this Agreement.

                  TEMPLETON EMERGING MARKETS FUND, TEMPLETON CANADIAN BOND FUND,
                  TEMPLETON INTERNATIONAL STOCK FUND, TEMPLETON CANADIAN STOCK
                  FUND, TEMPLETON GLOBAL SMALLER COMPANIES FUND, TEMPLETON
                  GLOBAL BOND FUND, TEMPLETON TREASURY BILL FUND, TEMPLETON
                  GLOBAL BALANCED FUND, TEMPLETON INTERNATIONAL BALANCED FUND,
                  TEMPLETON CANADIAN ASSET ALLOCATION FUND, MUTUAL BEACON FUND,
                  FRANKLIN U.S. SMALL CAP GROWTH FUND AND TEMPLETON BALANCED
                  FUND, by its manager and trustee, Templeton Management Limited


                  Per: /s/ Michael Mezei
                       -----------------
                       Vice-President and General Counsel

                       /s/ James Cook
                       Vice President and Chief Financial Officer





                  TEMPLETON GROWTH FUND, LTD.


                  Per: /s/ Michael Mezei
                       -----------------
                       Assistant Secretary

                       /s/ James Cook
                       Treasurer





                  TEMPLETON MANAGEMENT LIMITED


                  Per: /s/ Michael Mezei
                       -----------------
                       Vice-President and General Counsel

                       /s/ James Cook
                       Vice President and Chief Financial Officer



<PAGE>

                  FEP Capital, L.P.

                        By: FEP Holdings, L.P.,
                              its General Partner

                        By: FEP Genpar, L.P.,
                              General Partner of
                              FEP Holdings, L.P.

                        By: FW Group Genpar, Inc.
                              General Partner of
                              FEP Genpar, L.P.


                              By:  /s/ David G. Brown
                                   ------------------
                                   David G. Brown
                                   President of FW Group
                                   Genpar, Inc.