ADVISORY AGREEMENT

                              Templeton Funds, Inc.
                       (on behalf of Templeton World Fund)

        THIS ADVISORY AGREEMENT made as of December 21, 1999 by and between
TEMPLETON GLOBAL ADVISERS LIMITED ("TGAL"), a corporation existing under the
laws of Bahamas, and TEMPLETON ASSET MANAGEMENT LIMITED ("TAML"), a corporation
existing under the laws of Singapore.

                                   WITNESSETH

        WHEREAS, TGAL and TAML are each registered as an investment adviser
under the Investment Advisers Act of 1940, as amended (the "Advisers Act"), and
engaged in the business of supplying investment management services, as an
independent contractor;

        WHEREAS, TGAL, pursuant to an investment management agreement, has been
retained to render investment advisory services to Templeton World Fund (the
"Fund"), a series of Templeton Funds, Inc. (the "Company"), an investment
management company registered with the U.S. Securities and Exchange Commission
(the "SEC") pursuant to the Investment Company Act of 1940, as amended (the
"1940 Act"); and

      WHEREAS,  Jeffrey A. Everett,  Executive  Vice  President of TGAL and lead
portfolio manager for the Fund, will temporarily be residing in Hong Kong during
which time he will be employed by TAML and TGAL wishes to enter into this
agreement with TAML to enable Mr. Everett to continue to perform his
responsibilities as lead portfolio manager of the Fund during his employment
with TAML.

NOW, THEREFORE, in consideration of the covenants and the mutual promises
hereinafter set forth, the parties hereto, intending to be legally bound hereby,
mutually agree as follows:

     1. TGAL hereby  retains TAML and TAML hereby  accepts such  engagement,  to
furnish certain  investment  advisory services with respect to the assets of the
Fund, as more fully set forth herein.

          (a) Subject to the overall policies, control, direction and review of
the Company's Board of Directors (the "Board") and to the instructions and
supervision of TGAL, TAML agrees to provide certain investment advisory
services with respect to securities and investments and cash equivalents in
the Fund. TGAL will continue to have full responsibility for all investment
advisory services provided to the Fund. TGAL acknowledges that the only
services that TAML will provide under this agreement are the portfolio
management services of Jeffrey Everett while he remains employed by TAML.
Nothing in this agreement grants to TGAL any right to receive any research
undertaken by TAML's Emerging Markets Group.

          (b) Both TAML and TGAL may place all purchase and sale orders on
behalf of the Fund. The placement of these orders will take place exclusively in
Nassau, Bahamas, Singapore or Hong Kong.

          (c) Unless otherwise instructed by TGAL or the Board, and subject to
the provisions of this Agreement and to any guidelines or limitations specified
from time to time by TGAL or by the Board, TAML shall report daily all
transactions effected by TAML on behalf of the Fund to TGAL and to other
entities as reasonably directed by TGAL or the Board.
<PAGE>

          (d) For the term of this  Agreement,  TGAL shall  provide the Board at
least quarterly, in advance of the regular meetings of the Board, a report of
its activities hereunder on behalf of the Fund and its proposed strategy for the
next quarter, all in such form and detail as requested by the Board. Jeffrey
Everett shall also be available to attend such meetings of the Board as the
Board may reasonably request.

          (e) In performing its services under this Agreement, TAML shall adhere
to the Fund's investment objective, policies and restrictions as contained in
the Fund's Prospectus and Statement of Additional Information, and in the
Company's Articles of Incorporation, and to the investment guidelines most
recently established by TGAL and shall comply with the provisions of the 1940
Act and the rules and regulations of the SEC thereunder in all material respects
and with the provisions of the United States Internal Revenue Code of 1986, as
amended, which are applicable to regulated investment companies.

          (f) In carrying out its duties hereunder, TAML shall comply with all
reasonable instructions of the Fund or TGAL in connection therewith. Such
instructions may be given by letter, telex, telefax or telephone confirmed by
telex, by the Board or by any other person authorized by a resolution of the
Board, provided a certified copy of such resolutions has been supplied to TAML.

     2. In  performing  the services  described  above,  TAML shall use its best
efforts to obtain for the Fund the most favorable price and execution available.
Subject to prior  authorization  of  appropriate  policies and procedures by the
Board,  TAML may, to the extent  authorized  by law and in  accordance  with the
terms of the Fund's  Prospectus and Statement of Additional  Information,  cause
the Fund to pay a broker who provides  brokerage and research services an amount
of commission for effecting a portfolio investment  transaction in excess of the
amount of  commission  another  broker  would have  charged for  effecting  that
transaction,  in recognition of the brokerage and research  services provided by
the broker. To the extent authorized by applicable law, TAML shall not be deemed
to have acted  unlawfully or to have breached any duty created by this Agreement
or otherwise solely by reason of such action.

     3.   (a) TGAL shall pay to TAML a fee equal to 60% of the  advisory  fee
paid to TGAL by the Fund, which fee shall be payable in the U.S. dollar
equivalent of such Hong Kong currency dollar amount on the first business day of
each month as compensation for the services to be rendered and obligations
assumed by TAML during the preceding month. The advisory fee under this
Agreement shall be payable on the first business day of the first month
following the effective day of this Agreement and shall be reduced by the amount
of any  advance  payments made by TGAL relating to the previous month.

          (b) If this  Agreement  is  terminated  prior to the end of any month,
the  monthly  fee shall be  prorated  for the portion of any month in which this
Agreement is in effect which is not a complete month according to the proportion
which the  number of  calendar  days in the month  during  which the Agreement
is in effect bears to the total number of calendar  days in the month, and shall
be payable within 10 days after the date of termination.

     4. It is understood that the services provided by TAML are not to be deemed
exclusive.  TGAL  acknowledges  that TAML may have investment  responsibilities,
render  investment  advice to, or perform other investment  advisory services to
other  Investment  companies  and clients,  which may invest in the same type of
securities as the Fund (collectively, "Clients"). TGAL agrees that TAML may give
advice or exercise  investment  responsibility  and take such other  action with
respect to such  Clients  which may differ  from  advice  given or the timing or
nature of action taken with respect to the Fund. In providing services, TAML may
use  information  furnished by others to TGAL and TAML in providing  services to
other such Clients.

                                       2
<PAGE>

     5. TGAL agrees to use its best  efforts in  performing  the  services to be
provided by it pursuant to this Agreement.

     6. During the term of this Agreement,  TAML will pay all expenses  incurred
by it in connection  with the services to be provided by it under this Agreement
other than the cost of  securities  (including  brokerage  commissions,  if any)
purchased for the Fund. The Fund and TGAL will be  responsible  for all of their
respective expenses and liabilities.

     7. TAML shall, unless otherwise expressly provided and authorized,  have no
authority to act for or represent  TGAL or the Fund in any way, or in any way be
deemed an agent for TGAL or the Fund.

     8. TAML will treat  confidentially  and as  proprietary  information of the
Fund all records and other information  relative to the Fund and prior,  present
or potential shareholders, and will not use such records and information for any
purpose other than  performance of its  responsibilities  and duties  hereunder,
except after prior  notification  to and approval in writing by the Fund,  which
approval shall not be  unreasonably  withheld and may not be withheld where TAML
may be exposed to civil or criminal  contempt  proceedings for failure to comply
when requested to divulge such information by duly constituted  authorities,  or
when so requested by the Fund.

     9. This Agreement  shall become  effective on the date that Jeffrey Everett
becomes  employed by TAML and shall  continue in effect  until  Jeffrey  Everett
ceases to be employed by TAML for  whatever  reason.  The term of Mr.  Everett's
temporary employment with TAML and the term of this agreement is not expected to
exceed six months  beginning  January  25,  2000 (but may be extended by TAML if
necessary).

     10.  (a) Notwithstanding the foregoing, this Agreement may be terminated at
any time,  without the payment of any  penalty,  by the Board upon not less than
sixty (60) days' written  notice to TGAL and TAML,  and by TGAL or TAML upon not
less than sixty (60) days' written notice to the other party

          (b) This Agreement shall terminate automatically in the event of any
transfer or assignment thereof, as defined in the 1940 Act, and in the event of
any act or event that terminates the Investment Advisory Agreement between TGAL
and the Fund.

     11.  (a) In the absence of willful misfeasance, bad faith, gross
negligence, or reckless disregard of its obligations or duties hereunder on the
part of TAML, neither TAML nor any of its directors, officers, employees or
affiliates shall be subject to liability to TGAL or the Fund or to any
shareholder of the Fund for any error of judgement or mistake of law or any
other act or omission in the course of, or connected  with,  rendering  services
hereunder or for any losses that may be sustained in the purchase, holding or
sale of any security by the Fund.

          (b) Notwithstanding paragraph 11(a), to the extent that TGAL is found
by a court of competent jurisdiction, or the SEC or any other regulatory agency
to be liable to the Fund or any shareholder (a "liability"), for any acts
undertaken by TAML pursuant to authority delegated as described in Paragraph
1(a), TAML shall indemnify TGAL and each of its affiliates, officers, directors
and employees (each a "Franklin Indemnified Party") harmless from, against, for
and in respect of all losses, damages, costs and expenses incurred by a Franklin
Indemnified Party with respect to such liability, together with all legal and
other expenses reasonably incurred by any such Franklin Indemnified Party, in
connection with such liability.

                                       3
<PAGE>

          (c) No provision of this Agreement shall be construed to protect any
director or officer of TGAL or TAML from liability in violation of Sections l
7(h) or (i), respectively, of the 1940 Act.

     12. In compliance  with the  requirements of Rule 31a-3 under the 1940 Act,
TAML  hereby  agrees that all records  which it  maintains  for the Fund are the
property of the Fund and further agrees to surrender promptly to the Fund, or to
any third party at the Fund's  direction,  any of such  records  upon the Fund's
request.  TAML further agrees to preserve for periods  prescribed by Rule 31 a-2
under the 1940 Act the records required to be maintained by Rule 31a-1 under the
1940 Act.

     13. Upon  termination of TAML's  engagement  under this Agreement or at the
Fund's  direction,  TAML shall  forthwith  deliver to the Fund,  or to any third
party at the Fund's  direction,  all  records,  documents  and books of accounts
which  are in the  possession  or  control  of  TAML  and  relate  directly  and
exclusively to the performance by TAML of its obligations  under this Agreement;
provided,  however,  that TAML shall be permitted to keep such records or copies
thereof for such  periods of time as are  necessary  10 comply  with  applicable
laws, in which case TAML shall provide the Fund or a designated third party with
copies of such retained  documents unless providing such copies would contravene
such rules, regulations and laws.

         Termination of this Agreement or TAML's engagement  hereunder shall be
without  prejudice to the rights and liabilities  created  hereunder prior to
such termination.

     14. If any provision of this  Agreement  shall be held or made invalid by a
court  decision,  statute,  rule or  otherwise,  in whole or in part,  the other
provisions  hereof  shall  remain in full force and effect.  Invalid  provisions
shall, in accordance with the intent and purpose of this Agreement,  be replaced
by such  valid  provisions  which in their  economic  effect  come as closely as
legally possible to such invalid provisions.

     15. TGAL will furnish to TAML properly certified or authenticated copies of
the  resolutions of the board  authorizing the appointment of TAML and approving
this Agreement as soon as such copies are available.

     16. Any notice or other communication required to be given pursuant to this
Agreement  shall be in writing  and given by personal  delivery or by  facsimile
transmission  and shall be effective  upon receipt.  Notices and  communications
shall be given:

         (iii)   to TAML:

                 7 Temasek Boulevard #38-03
                 Suntec Tower One
                 Singapore 038987

                 Facsimile:  011-65-338-7677

         (iv)    to TGAL:

                 Box N-7759
                 Lyford Cay
                 Nassau, Bahamas

                 Facsimile:  242-362-4308

                                       4
<PAGE>

     17. This Agreement  shall be interpreted in accordance with the laws of the
State of Florida.

     18.  TAML  acknowledges  that is has  received  notice of and  accepts  the
limitations  of  the  Company's  liability  as set  forth  in  its  Articles  of
Incorporation.  TAML agrees that the Company's  obligations  hereunder  shall be
limited to the assets of the Fund, and that TAML shall not seek satisfaction of
any such  obligation  from any  shareholders  of the Fund nor from any  trustee,
officer, employee or agent of the Company.

IN WITNESS  WHEREOF,  the parties  hereto have caused this  Agreement to be duly
executed by their duly authorized officers and their respective  corporate seals
to be hereunto duly affixed and attested.

                                      TEMPLETON ASSET MANAGEMENT LIMITED

                                      By:/s/ Gregory E. McGowen
                                         --------------------------------
                                         Gregory E. McGowan, Director



                                      TEMPLETON GLOBAL ADVISERS LIMITED

                                      By: /s/ Mark G. Holowesko
                                         --------------------------------
                                         Mark G. Holowesko, President