Document:

DATED 31 JANUARY 2000

                      (1) TEMPLETON GLOBAL STRATEGY FUNDS

                     (2) TEMPLETON GLOBAL ADVISORS LIMITED

                   (3) TEMPLETON GLOBAL STRATEGIC SERVICES SA

                     (4) LIGHTNING FINANCE COMPANY LIMITED

         --------------------------------------------------------------

                AMENDED AND RESTATED COMMISSION PAYING AGREEMENT

         ---------------------------------------------------------------

                            MATHESON ORMSBY PRENTICE
                                30 HERBERT STREET
                                    DUBLIN 2
                                    IRELAND

                           J:\WP\PMY\LUXAMENDAGR3.DOC

<PAGE>

                              INDEX

ARTICLE 1..................................................2
  Definitions..............................................2
ARTICLE 2.................................................10
  Closing Arrangements....................................10
ARTICLE 3.................................................10
  Commission Payment......................................10
ARTICLE 4.................................................12
  Payment of Fees.........................................12
ARTICLE 5.................................................14
  Representations and Warranties..........................14
ARTICLE 6.................................................18
  Conditions Precedent....................................18
ARTICLE 7.................................................21
  Covenants...............................................21
ARTICLE 8.................................................24
  Termination Events......................................24
ARTICLE 9.................................................26
  Indemnification.........................................26
ARTICLE 10................................................27
  Additional Sub-Funds....................................27
ARTICLE 11................................................27
  General.................................................27
SCHEDULE A................................................35
SCHEDULE B................................................36
SCHEDULE C................................................37
SCHEDULE D................................................38
SCHEDULE E................................................45

<PAGE>

THIS AGREEMENT made  on    31 January 2000

BETWEEN:

TEMPLETON GLOBAL STRATEGY FUNDS a societe  d'investissement  a capital variable,
incorporated  under  the  laws of the  Grand-Duchy  of  Luxembourg,  having  its
registered office at 26 boulevard Royale, L-2449, Luxembourg, (the "Fund");

TEMPLETON  GLOBAL ADVISORS  LIMITED  (formerly  known as Templeton,  Galbraith &
Hansberger  Limited),  a company incorporated under the laws of the Commonwealth
of the Bahamas and having its registered office at Nassau,  Bahamas,  ("TGAL" or
the "Principal Distributor");

TEMPLETON GLOBAL STRATEGIC  SERVICES SA, a Societe Anonyme,  incorporated  under
the laws of the Grand-Duchy of Luxembourg and having its registered office at 26
boulevard Royale, L-2449, Luxembourg ("TGSS" );

AND

LIGHTNING FINANCE COMPANY LIMITED,  a limited liability company  incorporated in
Ireland and having its registered office at Chase Manhattan House,  IFSC, Dublin
1, Ireland ("LFL").

WHEREAS:

A     The Fund has been  incorporated  as an investment  fund for the investment
      and  reinvestment  of its assets in certain types of  securities,  as more
      fully described in its Articles of Incorporation.

B     The Fund, pursuant to a distribution agreement dated as of 6 November 1990
      made  between the Fund and  Templeton,  Galbraith  and  Hansberger  Ltd, a
      company  incorporated under the laws of the Cayman Islands ("TGH Cayman"),
      appointed  TGH Cayman as principal  distributor  of the shares issued from
      time to time in the capital of the Fund (the  "Shares")  for all countries
      outside of the United States of America (the "Distribution Agreement").

C     TGH Cayman,  pursuant to an assignment  dated 30 October 1992 made between
      the Fund, TGH Cayman and the Principal Distributor, assigned its title and
      interest in the  Distribution  Agreement to the Principal  Distributor and
      the Principal  Distributor  thereby  assumed the obligations of TGH Cayman
      under the  Distribution  Agreement as if the  Principal  Distributor  were
      named in the  Distribution  Agreement  as a party  thereto  in lieu of TGH
      Cayman.

D     Pursuant to the Addendum to the Distribution  Agreement (the "Distribution
      Agreement  Addendum") dated 1 July 1999 between the Fund and the Principal
      Distributor  (which  has taken  effect as and from the 1 July  1999),  the
      Principal   Distributor   has  been  granted  the  right  to  receive  all
      conditional deferred sales charges and servicing charges in respect of the
      Shares.

E     Pursuant to a  distribution  controller  agreement made as of 1 October
      1995  between the  Principal  Distributor  and TGSS (the  "Distribution
      Controller  Agreement"),  the Principal  Distributor  appointed TGSS as
      distribution   controller   of  the  Fund  (in   such   capacity,   the
      "Distribution   Controller").   It  was  agreed  in  the   Distribution
      Controller  Agreement  that TGSS would  receive  certain fees in return
<PAGE>

      for  co-ordinating the distribution of the Shares and providing certain
      other associated services.

F     Pursuant  to  a  letter  (the  "Fees   Side-Letter")  from  the  Principal
      Distributor  to TGSS  (which is stated to take  effect as of 29 July 1994)
      the  Principal  Distributor  granted to TGSS the right to receive  certain
      conditional  deferred  sales charges and other charges in connection  with
      the class of Shares which, up until 1 July 1999, were known as the Class B
      Shares  and which are now  known as the  Class Bx  Shares  (the  "Class Bx
      Shares").

G     With effect  from 1 July 1999 and as more  particularly  described  in the
      addendum  dated June 1999 to the  prospectus  of the Fund dated  September
      1997 (as  amended,  varied or  supplemented  from time to time by  various
      instruments  including the addendum)  (the  "Prospectus"),  a new class of
      Shares named Class B Shares (the "New B Shares")  will be  introduced  for
      certain Sub-Funds.

H     On the terms and  subject  to the  conditions  set out in a  Commission
      Paying  Agreement and letter agreement in relation thereto each dated 1
      July 1999 and each among the parties hereto  (together the  "Commission
      Paying  Agreement"),  pursuant to which the Fund with the knowledge and
      consent of TGAL and TGSS  requested  LFL to perform,  in respect of the
      New B Shares,  certain  services in connection with the distribution of
      the New B Shares  (including  the  payment of Selling  Commissions  (as
      defined in Article 1.1)).  In return,  the Fund,  pursuant to the terms
      of the  Commission  Paying  Agreement,  agreed to pay certain  fees (as
      more particularly  described in the Commission Paying Agreement) to LFL
      (and TGAL and TGSS  agreed to waive  any  entitlement  they may have to
      such  fees) for each New B Share in  respect  of which  LFL has  become
      obligated  to pay a Selling  Commission  and any related  Transfer  and
      Reinvested  Shares.  The Fund's  obligation to pay the appropriate fees
      in respect of a New B Share and any  related  Transfer  and  Reinvested
      Shares  commenced on the Trade Date for which LFL is obligated to pay a
      Selling Commission in respect of that New B Share.

I     The  parties  hereto  wish to amend  and  restate  the  Commission  Paying
      Agreement  upon the terms and  subject to the  conditions  set out in this
      Agreement  and,  with effect from the date  hereof,  this  Agreement  will
      supersede the Commission  Paying Agreement which shall  automatically  and
      without  further  act or  document  terminate  upon the  execution  by the
      parties hereto of this 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:
<PAGE>

                                    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, words and
     terms shall have the meanings  given to them in this Article 1.1 and in the
     recitals hereto:

     "Additional Sub-Fund" means any new or existing Sub-Fund which commences to
     issue New B Shares.

     "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
     LFL,  creates a  significant  probability  of any (a)  adverse  effect  (or
     material  adverse effect,  where such occurrence is caused by a computer or
     operations  error) upon (i) the timing or amount of any payment of any Fee;
     or (ii) the timely  receipt by LFL of any Fees;  or (b) a material  adverse
     effect upon (i) the Funds's, TGAL's or TGSS's ability to pay or perform its
     obligations  under this  Agreement in a timely  manner or (ii) the remedies
     and other rights of LFL under this Agreement.

     "Advisory Agreements" means the investment management agreements in respect
     of each of the  Sub-Funds  between the Fund and the  applicable  investment
     advisor as described in Schedule A as  supplemented or amended from time to
     time.

     "Affiliate" has the meaning  provided to that term under the Securities and
     Exchange Act of 1933 of the United States of America.

     "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
     Monthly Pool,  the date which is 6 years  following the Sale Cutoff Date in
     respect of that Monthly Pool.

     "Approved  Dealers"  means  dealers in respect of the Shares as approved by
     TGAL or its duly appointed agents.

     "Articles  of  Incorporation"  means the articles of  incorporation  of the
     Fund.

     "Business  Day" means a day on which the Fund is valued in accordance  with
     the Prospectus Documents.

     "Closing"  means the completion of the  transactions  contemplated  by this
     Agreement  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 12:00 p.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.

     "Collection  Account"  means a bank account of LFL  maintained at The Chase
     Manhattan  Bank at account number  323-13-43-35,  with respect to which the
     Fund, TGSS and TGAL shall have no access or control.
<PAGE>

     "Collections"  means (a) all  amounts  paid or  payable  under the  Program
     Documents  in respect of the Fees and (b) all  proceeds  of the  foregoing,
     except  that  "Collections"  shall  not  include  amounts  paid or  payable
     pursuant to Article 9.1.

     "Commission  Payer"  means LFL acting in its capacity as  commission  payer
     hereunder.

     "Deferred Sales Charge" means,  with respect to any Sub-Fund,  the deferred
     sales charge payable,  either directly or by withholding  from the proceeds
     of the redemption of Shares of such Sub-Fund,  by the  shareholders of such
     Sub-Fund on any  redemption of Shares of such  Sub-Fund in accordance  with
     the Prospectus Documents relating to such Sub-Fund.

     "Deferred  Sales Charge  Share" means each New B Share issued after July 1,
     1999 by a New B Share  Sub-Fund in respect of which a Deferred Sales Charge
     is payable.

     "Distributed  Shares"  means  collectively,  the Original  Charge Shares
     and the Transfer Shares.

     "Distribution   Agreements"  means  the  distribution  services  agreements
     between  each of the Fund,  TGAL,  TGSS and TGH Cayman  (including  without
     limitation,   the  Distribution   Agreement,   the  Distribution  Agreement
     Addendum,  the Distribution  Controller Agreement and the Fees Side-Letter)
     as supplemented or amended from time to time.

     "Distributor  Report"  means a monthly  report to be prepared by TGSS which
     shall set forth,  among other things TGSS's  determination,  as of the last
     Business Day of such month, of (a) the Selling  Commissions paid or payable
     by LFL in respect of Deferred Sales Charges Shares  distributed during such
     month,  (b) the amount of Fees paid or payable in respect of such month and
     the Deferred  Sales  Charge  Shares  attributable  to such Fees and (c) the
     computation of the amount of such Fees in reasonable detail.

     "Distributors" means TGAL and TGSS and "Distributor" means any one of them.

     "Eligible  Fee" means a Fee which (a) (i)  constitutes  a legal,  valid and
     binding  obligation  of the  obligor  thereof  which is not  subject to any
     dispute,  offset,  counterclaim or defence whatsoever and (ii) which is not
     subject to any adverse  claim;  and (b) does not  contravene any applicable
     law.

     "External  Reinvested  Share" is a  Reinvested  Share which is a share of a
     Sub-Fund which is not a New B Share Sub-Fund.

     "External  Share" means a Share issued by a Sub-Fund,  which is not a New B
     Share Sub-Fund,  upon the immediate  investment of proceeds realised on the
     redemption of a Distributed  Share or another External Share (and any other
     Share issued upon the consolidation or subdivision of an External Share).

     "Fees" means all amounts  payable to LFL under this Agreement and any other
     Program Document.

     "Free  Exchange"  shall mean the  exchange of Shares of one  Sub-Fund for a
     Transfer Share or an External Share of another Sub-Fund.

     "Free  Redemption"  means a redemption  of  Distributed  Shares or External
     Shares where the obligation of the shareholder of such  Distributed  Shares
     or External Shares to pay the applicable  Deferred Sales Charge is relieved
     or deferred in whole or in part.
<PAGE>

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

     "Fund Event of Termination" means:

     (a)  any change (or proposed  change as agreed between the parties  hereto)
          in accounting, governmental or other legislation, regulation or policy
          (i) which will  materially and adversely  affect the accounting or tax
          treatment of the  arrangements  under the Program  Documents to any of
          the Fund,  TGSS or TGAL or (ii) as a result of which TGAL, TGSS or the
          Fund will become  liable,  under  Article  11.8,  to pay any amount or
          amounts which,  but for such change,  it would not have been liable to
          pay;

     (b)  the occurrence of an LFL Insolvency Event; or

     (c)  a suit,  litigation  or  regulatory  proceeding  which has a  material
          adverse  effect on the  ability of LFL to  perform or comply  with its
          obligations hereunder.

     "GAAP" means generally accepted accounting principles in Luxembourg (in the
     case of the Fund), or the United States of America (in the case of LFL), as
     in  effect  from  time to  time  and  consistently  applied  (except  where
     specified otherwise).

     "Insolvency Event" means any of the following occurrences:

     (a)  TGSS, TGAL or the 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 TGSS,  TGAL or the
          Fund  seeking  to  adjudicate  it in  whole  or in  part  bankrupt  or
          insolvent,   or  seeking  liquidation,   winding-up,   reorganisation,
          arrangement,  adjustment,  protection,  relief or composition of it or
          its  obligations or proposal to its creditors  under any laws relating
          to bankruptcy,  insolvency or  reorganisation  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 TGAL,  TGSS or the 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 TGSS,  TGAL or the Fund without its
          unconditional  return to the  possession of TGSS,  TGAL or the Fund or
          its unconditional release from such sequestration or attachment within
          60 days thereafter; or

     (d)  TGAL,  TGSS or the Fund shall take any action to authorise  any of the
          actions set forth above.
<PAGE>

     "Liabilities"  means  claims,  damages,  losses,   liabilities,   expenses,
     obligations,  penalties, actions, suits, judgments and disbursements of any
     kind or nature whatsoever  (including,  without limitation,  the reasonable
     fees and disbursements of counsel).

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

     (a)  the Fund,  TGAL or TGSS  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 shall
          continue unremedied for 10 Business Days following notice thereof from
          LFL to the entity  obligated  to make such  payment and the failure of
          such payment has an Adverse Effect;

     (b)  TGSS,  TGAL or the 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 following TGSS, TGAL or the Fund's
          (as the case may be)  actual  knowledge  thereof  or receipt of notice
          from LFL, whichever is the earlier;

     (c)  any  representation  or warranty made or deemed made by TGSS,  TGAL or
          the 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 material  provision of any Program Document to which TGSS, TGAL or
          the  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;

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

     (g)  there shall have occurred any change (or proposed  change as agreed by
          the parties hereto) in accounting,  governmental or other legislation,
          regulation or policy which would have an Adverse Effect;

     (h)  the  termination of the Joint Venture  Agreement  dated  September 11,
          1998 as  amended  respecting  LFL  among  FEP  Capital  II LLC and TGH
          Holdings Limited and LFL pursuant to Article 14 of that agreement; and

     (i)  a suit,  litigation  or  regulatory  proceeding  which has a  material
          adverse  effect on the  ability  of any of the  Fund,  TGAL or TGSS to
          perform or comply with its obligations hereunder.

     "LFL Insolvency Event" means any of the following occurrences:

     (a)  LFL 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
<PAGE>

     (b)  any  proceeding  shall be  instituted  by or  against  LFL  seeking to
          adjudicate it in whole or in part  bankrupt or  insolvent,  or seeking
          liquidation,    winding-up,    court    protection,    reorganisation,
          arrangement,  adjustment,  protection,  relief or composition of it or
          its  obligations or proposal to its creditors  under any laws relating
          to bankruptcy,  insolvency or  reorganisation  or relief of debtors or
          seeking  the entry of an order  for  relief  or the  appointment  of a
          receiver,  trustee, examiner,  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, examiner, assignee, trustee or sequestrator
          (or  other  similar  official)  of  LFL 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 LFL without its  unconditional  return to the
          possession of LFL or its unconditional release from such sequestration
          or attachment within 60 days thereafter; or

     (d)  LFL shall take any action to  authorise  any of the  actions set forth
          above.

     "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.

     "Master Trust" means any trust or other special purpose entity or Person to
     which  any  interest  in any of  the  Fees  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.

     "Monthly  Fee" means,  in respect of each Monthly Pool, a monthly fee equal
     to 0.975% (on an annual  basis) of the  average  daily Net Asset  Value for
     that month of all  Distributed  and Reinvested  Shares and External  Shares
     forming part of such Monthly Pool divided by twelve.

     "Monthly Pool" means, with respect to any Sub-Fund and any calendar month:

     (i)  each  Original  Charge  Share  issued  by such  Sub-Fund  during  such
          calendar month;

     (ii) Transfer   Shares  of  such   Sub-Fund   issued  upon  the   immediate
          reinvestment of proceeds realised on the redemption of (a) an Original
          Charge Share of another  Sub-Fund  issued by such Sub-Fund  during the
          calendar month described in clause (i) above;  (b) a Reinvested  Share
          (that is not an External  Reinvested Share) of another Sub-Fund issued
          in respect of Deferred Sales Charge Shares described in clause (ii)(a)
          above or this  clause  (ii)(b);  or (c) a  Transfer  Share of  another
          Sub-Fund which relates to a Deferred  Sales Charge Share  described in
          clause (ii)(a) or (ii)(b) above or this clause (ii)(c);
<PAGE>

     (iii)Deferred  Sales  Charge  Shares  of  such  Sub-Fund  issued  upon  the
          automatic  reinvestment of income and capital gains distributions with
          respect to Deferred Sales Charge Shares of such Sub-Fund  described in
          clauses (i) or (ii) above, or this clause (iii); and

     (iv) External Shares or External  Reinvested  Shares of such Sub-Fund which
          are derived  (directly  or  indirectly)  from a Deferred  Sales Charge
          Share formerly  included in the Monthly Pool of a New B Share Sub-Fund
          whose Sale Cutoff Date occurred in such calendar month,

      provided  always that each  Deferred  Sales Charge Share of such  Sub-Fund
      will be  allocated  to a Monthly Pool in  accordance  with the  allocation
      procedures in Schedule D.

     "Multiple  Material  Errors" means errors in the calculation of amounts due
     to and adverse to LFL in excess of 10% 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 TGSS or TGAL) occurring prior to the first year anniversary date of
     this Agreement.

     "Net Asset Value" means,  with respect to any Sub-Fund or any Share,  as of
     the date any determination  thereof is made, the meaning given to that term
     in the Prospectus Documents.

     "New B Share  Sub-Funds"  means,  at any  time,  the  Sub-Funds  listed  in
     Schedule  C  together  with any  Sub-Funds  that  have  become  New B Share
     Sub-Funds in accordance with Article 10.

     "Original Charge Share" means, in respect of any calendar month, a Deferred
     Sales  Charge  Share issued in that month for which LFL is obligated to pay
     the Selling  Commission (and the term "Original  Charge Share" includes any
     Shares issued upon the  consolidation  or subdivision of an Original Charge
     Share).

     "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 LFL or any Master
     Trust, as the case may be, which may be The Chase Manhattan Bank,  Deutsche
     Bank,  Bank of New  York or  Constellation  Financial  Management  Company,
     L.L.C.  or  any  Affiliate  of  the  foregoing,  or (b)  any  other  Person
     designated by LFL 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 the United States,  Canada or Europe in the reasonable  judgment of TGSS
     (such judgment not to be unreasonably withheld or delayed),  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 Articles of  Incorporation,
     the  Advisory  Agreements,   the  Prospectus  Documents,  the  Distribution
     Agreements, 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.
<PAGE>

     "Prospectus  Documents"  means, with respect to the Fund and each Sub-Fund,
     the most recent  prospectus  and addenda  thereto filed in connection  with
     registration  in  Luxembourg as more  particularly  described in Schedule A
     hereto as amended or supplemented from time to time.

     "Reinvested  Share" means a Deferred Sales Charge Share or any Share issued
     upon  the   automatic   reinvestment   of  income   and/or   capital  gains
     distributions  upon an Original Charge Share, a Transfer Share or any Share
     which has derived  directly or indirectly  (through  reinvestment of income
     and/or  capital  gains) from an Original  Charge Share or a Transfer  Share
     (and the term  "Reinvested  Share" also includes any Shares issued upon the
     consolidation  or  subdivision  of a Reinvested  Share) or any Share issued
     upon the immediate  investment of proceeds  realised on the redemption of a
     Reinvested Share of a New B Share Fund.

     "Sale Cutoff Date" means, with respect to any particular  Monthly Pool, the
     last  Business Day of the calendar  month during which LFL arranged for the
     payment of  commissions  of  Original  Charge  Shares  forming  part of the
     Monthly Pool and became obligated to pay the Selling Commissions in respect
     of such Monthly Pool.

     "Selling Commission" means, in respect of a Deferred Sales Charge Share, 4%
     of the Subscription Price of such Deferred Sales Charge Share.

     "Sub-Funds" means the sub-funds of the Fund (including, without limitation,
     those sub-funds in Schedule C).

     "Subscription  Price" means with respect to any Deferred Sales Charge Share
     at any  particular  time,  the gross  purchase price of such Deferred Sales
     Charge  Share  in the  applicable  currency  of the  relevant  New B  Share
     Sub-Fund established by the Prospectus Documents.

     "Substantial  Funds" means,  at any time, any New B Share Sub-Fund or group
     of New B Share  Sub-Funds  which, at such time, have an aggregate Net Asset
     Value  equal to thirty per cent (30%) or more of the total Net Asset  Value
     of all the New B Share Sub-Funds taken together at such time.

     "Takeout  Transaction" means any transaction  pursuant to which LFL, or any
     Master Trust which obtains such interest  directly or indirectly  from LFL,
     sells  or  otherwise   transfers,   participates  or  causes  to  be  sold,
     transferred  or  participated  interests in the Fees  relating to any New B
     Share Sub-Fund  (including,  without  limitation,  the right to receive any
     portion of any  Collections)  to any Person,  including a Master Trust or a
     subsidiary  or  Affiliate  of LFL 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 (including,  without
     limitation, any right to receive any portion of any Collections).

     "Termination Date" means 30 June 2002, subject to termination or suspension
     as set forth in  Article  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 Article 8.

     "Trade  Date" means,  in respect of the  purchase of Deferred  Sales Charge
     Shares, the relevant Valuation Day of such Shares.
<PAGE>

     "Transfer  Share"  means a Deferred  Sales  Charge  Share  issued  upon the
     immediate  investment of proceeds realised on the redemption of an Original
     Charge Share, or another Transfer Share in a Deferred Sales Charge Share of
     another  New B Share  Sub-Fund  provided  that  the term  "Transfer  Share"
     includes any Deferred Sales Charge Share issued upon the  consolidation  or
     subdivision of a Transfer Share.

     "Valuation  Day" means a day on which the Fund is  accepting  subscriptions
     for Deferred Sales Charge Shares.

                                    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 LFL or at
     such other location as may be agreed to by the parties.

                                    ARTICLE 3

                               COMMISSION PAYMENT

3.1  APPOINTMENT  OF LFL. Upon and subject to the terms and  conditions  hereof,
     the Fund,  with the  knowledge and consent of TGAL and TGSS as evidenced by
     their signatures hereto, hereby appoints LFL as Commission Payer in respect
     of the  Deferred  Sales Charge  Shares in any country  where it is legal to
     distribute  the Fund and LFL will pay or  procure  the  payment  of Selling
     Commissions to Approved Dealers as and from 1 July 1999 up to and including
     30 June 2002,  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,  LFL will be the  exclusive  Commission
     Payer with respect to such  Deferred  Sales Charge Shares during the period
     described  above. It is acknowledged  and agreed by the parties hereto that
     LFL's  obligations  do not extend to sales of Shares which are not Deferred
     Sales Charge Shares and that LFL shall not receive any  remuneration of any
     kind in respect of such Shares.

3.2  DISTRIBUTION THROUGH APPROVED DEALERS. LFL will pay the Selling Commissions
     based on sales of  Deferred  Sales  Charge  Shares  only  through  Approved
     Dealers, and LFL will not itself directly or indirectly promote,  market or
     sell any Shares or accept  orders for the purchase of Shares.  All Deferred
     Sales  Charge  Shares  will be sold at a price equal to the Net Asset Value
     per  Share at the time of  purchase,  without  a sales  charge  payable  by
     investors.  TGSS will advise LFL upon the execution hereof and regularly as
     required  thereafter  so  long  as  LFL  is  entitled  hereunder  to act as
     Commission  Payer and receive  fees  hereunder of the names of all Approved
     Dealers through whom the Deferred Sales Charge Shares may be sold.
<PAGE>

     The  Distributors  agree not to  knowingly  accept  purchase  orders  from
     Persons  with respect to the sale of Deferred  Sales Charge  Shares in any
     jurisdiction in which the Deferred Sales Charge Shares are not registered,
     qualified  for sale or otherwise  exempt from the need to qualify for sale
     under applicable securities  legislation.  In respect of any such purchase
     orders which are unknowingly  accepted by the  Distributors,  the Deferred
     Sales Charge  Shares sold  pursuant to such orders will be subject to this
     Agreement  unless the trade in such Shares is  subsequently  reversed,  in
     which case such Deferred  Sales Charge Shares shall not be subject to this
     Agreement  and the  Distributors,  will  forthwith,  following  the  trade
     reversal and out of the proceeds of the trade reversal,  refund to LFL the
     amount of the Selling  Commissions  paid by it, if any, in respect of such
     Shares.

3.3  REJECTION OF PURCHASE ORDERS. Each of the Fund and TGAL may reject purchase
     orders for Deferred  Sales Charge Shares  received from an Approved  Dealer
     during the term of this Agreement only in accordance  with the terms stated
     in the Prospectus Documents.

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 Sales
     Charge Share  purchased,  TGSS will  promptly  register the  purchaser as a
     holder of the  purchased  Share or Shares and shall  deposit  the  purchase
     price to the credit of the Fund.

3.5  SERVICES OF LFL.  The primary  purpose of this  Agreement is to ensure that
     satisfactory  arrangements exist for the distribution of the Deferred Sales
     Charge  Shares  and to  provide a  mechanism  for the  payment  of  Selling
     Commissions  to  Approved  Dealers who  distribute  Deferred  Sales  Charge
     Shares.  Subject to its rights of termination as provided herein,  LFL will
     provide the following  services to the Distributors and the Fund during the
     period in which LFL acts as  Commission  Payer in  accordance  with Article
     3.1:

     (a)  paying the Selling Commissions in respect of the Deferred Sales Charge
          Shares;  the parties  agree that LFL's  obligation  to pay the Selling
          Commission in respect of a Deferred  Sales Charge Share shall arise on
          the Trade Date for such Deferred  Sales Charge Share,  notwithstanding
          that  LFL is only  required  to make  actual  payment  of the  Selling
          Commission in respect of such purchase on the settlement date for such
          Deferred Sales Charge Share;

     (b)  maintaining  proper and adequate business records of its operations in
          order to properly  monitor the Deferred  Sales Charge Shares for which
          it pays Selling  Commissions and the amount of the Selling Commissions
          paid; and

     (c)  providing confirmation to the Distributors and the Fund when requested
          as to the due and timely payment of Selling Commissions.

     LFL, the Distributors and the Fund acknowledge that the Distributors shall
     continue to arrange for the  distribution  of Deferred Sales Charge Shares
     pursuant to the Program Documents and that,  except as expressly  provided
     by this  Agreement,  LFL shall have no obligation to perform any duties or
     functions or make any payments carried out or made by the Distributors.

3.6  DISTRIBUTOR  REPORT.  On or before 10  Business  Days after the end of each
     month,  TGSS shall  provide LFL or a Permitted  Designee with a Distributor
     Report.  The parties agree to finalise as soon as possible and in any event
     not later than August 31, 1999 the form of the Distributor  Report which is
     acceptable to both parties.
<PAGE>

                                    ARTICLE 4

                                 PAYMENT OF FEES

4.1  MONTHLY  FEE. For its services in paying  Selling  Commissions  on sales of
     Original  Charge Shares  included in a Monthly Pool,  the Fund shall pay to
     LFL the  Monthly  Fee in  respect  of each  Monthly  Pool and TGAL and TGSS
     hereby  waive any  entitlement  they may have,  whether  under the  Program
     Documents or otherwise, to each such Monthly Fee payable hereunder.

     The Monthly  Fee will be accrued  daily on each  Valuation  Day and will be
     paid to LFL  within  ten days  after the end of each  calendar  month.  The
     Monthly Fee shall continue to be payable to LFL in respect of each Deferred
     Sales Charge Share,  External  Share or External  Reinvested  Share forming
     part of a Monthly Pool for the lesser of (i) the period that such  Deferred
     Sales Charge Share,  External Share or External Reinvested Share remains in
     issue;  and (ii) the  Anniversary of the Sale Cutoff Date,  notwithstanding
     that LFL's  appointment  as exclusive  Commission  Payer has expired or has
     been suspended or terminated.

4.2  DEFERRED  SALES  CHARGES.  Each of TGAL,  TGSS and the Fund  represents and
     warrants to LFL that a Deferred  Sales  Charge  applies to all  Distributed
     Shares of a New B Share Sub-Fund and all External Shares which are redeemed
     within five years of their date of issue,  or deemed date of issue,  except
     on  redemptions  where the  redemption  proceeds  realised are  immediately
     invested  in  Distributed  Shares  of one or more of the  other New B Share
     Sub-Funds or in External  Shares).  Each of TGAL, TGSS and the Fund further
     represents and warrants to LFL that the Deferred Sales Charge, expressed as
     a percentage of the lower of the current Net Asset Value or the issue price
     when  purchased per  Distributed  Share or External  Share being  redeemed,
     declines over time from the date of issue,  or deemed date of issue, of the
     Distributed Share or External Share as follows:

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

           During the 1st year                  4.0%
           During the 2nd year                  3.0%
           During the 3rd year                  2.0%
           During the 4th year                  1.0%
           During the 5th year                  1.0%
           Thereafter                           Nil

     Each of TGAL,  TGSS and the Fund  represents and warrants to LFL that, for
     the purpose of  calculating  the  Deferred  Sales  Charge  payable to LFL,
     Deferred Sales Charge Shares will be redeemed in the following order:

     (a)  Reinvested Shares will be redeemed first; and

     (b)  Distributed  Shares  (or  External  Shares  derived  therefrom)  of  a
          Sub-Fund issued first, or deemed to be issued first,  will be redeemed
          second.

     In the event of the termination of any Sub-Fund,  LFL shall be entitled to
     receive  any   applicable   Deferred  Sales  Charges  in  respect  of  the
<PAGE>

     outstanding  Distributed Shares or External Shares of that Sub-Fund unless
     such Shares become Transfer Shares or External Shares of another Sub-Fund.

     Notwithstanding the foregoing provisions,  LFL agrees and accepts that, if
     at any time, the Luxembourg  supervisory authority compels the Fund not to
     levy any  Deferred  Sales  Charge as a result  of,  inter  alia,  material
     changes to or liquidation  or merger of Sub-Funds or for whatsoever  other
     reason,  the Fund will not be liable for the payment of any Deferred Sales
     Charge which would otherwise normally be payable.

4.3  DEFERRED SALES CHARGE  PAYMENTS.  In addition to the Monthly Fee payable to
     LFL  pursuant  to  Article  4.1  and  in  consideration  for  its  services
     hereunder,  LFL shall also be entitled to receive any Deferred Sales Charge
     paid by  shareholders  on the  redemption  of their  Distributed  Shares or
     External  Shares.  The  Deferred  Sales  Charges  will  be  calculated  and
     collected  by  TGSS,   its   successors  or  assigns  in  its  capacity  as
     Distribution  Controller  for the  Fund on each  Valuation  Day and will be
     payable  by the Fund to LFL  monthly  within  ten days after the end of the
     calendar month or in the event of  termination  of a Sub-Fund,  immediately
     prior to the termination of the Sub-Fund.  Such amount shall continue to be
     payable  to LFL on the  redemption  of  each  Distributed  Share  and  each
     External  Share  notwithstanding  that (a) LFL's  appointment  hereunder as
     exclusive  Commission  Payer has been  suspended,  has  expired or has been
     terminated or b) TGAL or TGSS has been  terminated as the Fund's  Principal
     Distributor or Distribution Controller, respectively.

4.4   FREE REDEMPTIONS

     In  addition  to all  other  amounts  payable  to  LFL  pursuant  to  this
     Agreement,  promptly  following  each  Free  Redemption  the  Fund  or the
     Distributors  or both of them  shall  pay to LFL an  amount  equal  to the
     maximum  Deferred  Sales Charge that would have been payable in connection
     with such redemption if such redemption had not been a Free Redemption.

4.5  RIGHT OF ACTION

     (a)  The  Fund  hereby  irrevocably  and  unconditionally   authorises  and
          instructs  TGAL  and  TGSS to take  all  necessary  steps  to  recover
          (whether by legal  proceedings  or  otherwise)  any amounts  which may
          become  due and  owing  by a  shareholder  to the Fund in  respect  of
          Deferred  Sales Charges  (including by  withholding  or deducting such
          amounts from any amounts  payable by the Fund to such a  shareholder).
          TGAL and TGSS hereby undertake to keep the Fund advised of any actions
          they may take pursuant to this provision.

     (b)  Each of TGSS and TGAL hereby covenants, in favour of LFL and the Fund,
          that it will diligently take all steps reasonably necessary to recover
          and pay to LFL any such  amounts as referred to in (a) above which are
          payable to LFL.

     (c)  LFL agrees and acknowledges that its only right of action in the event
          of non-payment of the Fees shall be against the Fund and the assets of
          the Fund  attributable  to the relevant  Sub-Fund in relation to which
          the relevant Fees are due and LFL further agrees and acknowledges that
          LFL shall have no recourse  against the assets of the  Distributors or
          other Sub-Funds for such non-payment of the Fees.

4.6  COLLECTION ACCOUNT. All Collections payable by the Fund are to be deposited
     directly by or on behalf of the Fund into the  Collection  Account  without
     any  intermediate  commingling  of such  amounts  with  the  assets  of the
<PAGE>

     Distributors  or any Affiliate of either of them. No amounts other than the
     Collections shall be deposited to the Collection Account.

4.7  ACCRUAL OF LFL'S ENTITLEMENT TO FEES

     Notwithstanding any other provision of this Agreement,  the parties hereto
     acknowledge  and agree that LFL's  entitlement to receive  Monthly Fees in
     respect of a Deferred  Sales Charge Share shall accrue at the same time as
     the  obligation  of LFL to pay, the Selling  Commission in respect of that
     Deferred  Sales Charge Share.  LFL's  entitlement  to receive the Deferred
     Sales Charge  payable by a shareholder  on the redemption of a Distributed
     Share shall  accrue at the same time as the  obligation  of LFL to pay, in
     respect of that  Deferred  Sales Charge Share,  the Selling  Commission in
     respect of (i) (where such Distributed  Share is an Original Charge Share)
     that Distributed Share or (ii) (where such Distributed Share is a Transfer
     Share) the Original Charge Share to which such Distributed Share relates.

4.8  MATERIAL ERRORS

     If Multiple  Material  Errors  occur,  LFL shall provide TGSS with written
     notice of such occurrence, following which TGSS shall have 60 days to cure
     such errors  during  which  period LFL shall have the right to suspend its
     obligation to pay Selling  Commissions.  If such breach continues uncured,
     at the  expiration of such notice  period,  LFL may give a second  written
     notice to the Fund  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), provided that if such Multiple Material
     Errors  occur  only in respect  of a New B Share  Sub-Fund  or New B Share
     Sub-Funds which are not Substantial  Funds (in either case),  LFL may only
     terminate its obligations in respect of such Sub-Fund or Sub-Funds (as the
     case may be). Where LFL  terminates its  obligations in respect of a New B
     Share Sub-Fund or New B Share Sub-Funds  which are not  Substantial  Funds
     (in either case) then the Fund,  TGAL,  or TGSS shall either (i) take such
     actions as LFL may  reasonably  request  so as to  preserve  the  economic
     return to LFL in respect of such terminated Sub-Fund or Sub-Funds (so that
     LFL receives a return equal to the return it would have  received had such
     Multiple Material Errors not occurred); or (ii) demonstrate to LFL that it
     can  accurately  track  the  relevant  New B  Shares  of  such  terminated
     Sub-Fund.  In the event  that such  errors  are  cured  within  the 60 day
     period,  then LFL shall promptly pay all Selling Commissions in respect of
     the sales of Deferred  Sales  Charge  Shares  which  occurred  during such
     period.

                                    ARTICLE 5

                         REPRESENTATIONS AND WARRANTIES

5.1  DISTRIBUTORS  AND  FUND'S  REPRESENTATIONS  AND  WARRANTIES.  Except  where
     otherwise  indicated,  each of  TGSS,  TGAL  and the  Fund  represents  and
     warrants to LFL:

     (a)  ORGANISATION - It has been duly  incorporated or created,  as the case
          may be, and is  organised,  validly  existing  and  up-to-date  in all
          material  filings  and  registrations   required  under  the  laws  of
          Luxembourg,  the Commonwealth of the Bahamas (in the case of TGAL) and
          each country where such filings or registrations are necessary for the
          conduct of its business, and it has all necessary power, authority and
          capacity to own its properties and assets and to carry on the business
          in which it is now engaged.
<PAGE>

     (b)  DISTRIBUTION  OF NEW B SHARES - The New B Shares are  offered for sale
          to the  public  on a  continuous  basis  pursuant  to  the  Prospectus
          Documents.  All material  information and statements  contained in the
          Prospectus  Documents  with  respect  to the New B Shares are true and
          correct  in  all   material   respects   and   contain   no   material
          misrepresentation.

     (c)  COMPLIANCE  WITH LAWS - It is in compliance  in all material  respects
          with all  applicable  laws,  including but not limited to,  applicable
          securities laws.

     (d)  LICENSES AND REGISTRATIONS - It has received all approvals,  licences,
          registrations  and  authorisations  necessary  for the  conduct of its
          businesses as they are now  conducted,  all of which are in full force
          and  effect;  no  violations  thereof  have  been  recorded;   and  no
          proceeding  is  pending  or  threatened  which  could  result  in  the
          revocation or limitation thereof.

     (e)  INVESTMENT  ADVISER  COMPLIANCE  - To the  best  of the  Distributors'
          knowledge,   after  due  inquiry,  each  of  the  investment  advisers
          appointed in respect of the New B Share  Sub-Funds  has complied  with
          the investment  objectives,  policies and  restrictions  of such New B
          Share  Sub-Funds  as provided in the  Articles of  Incorporation,  the
          Advisory Agreements and the Prospectus Documents.

     (f)  CONSENTS AND APPROVALS - There are no consents,  approvals,  orders or
          authorisations of any Person or registrations,  declarations, notices,
          filings or recordings  with any Person required to be obtained or made
          by it (and which have not been so obtained or made) in connection with
          the  transactions  contemplated by this  Agreement,  the execution and
          delivery of this  Agreement or the  performance  by the Fund,  TGSS or
          TGAL of any of the terms and conditions of this Agreement.

     (g)  FINANCIAL  STATEMENTS - The financial statements of the Fund have been
          prepared  in  accordance  with GAAP and present  fairly the  financial
          position  of the  Fund  as of the  respective  dates  thereof  and the
          changes in the  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 the Fund.

     (h)  ABSENCE OF UNDISCLOSED LIABILITIES - Except to the extent reflected or
          reserved against in the financial  statements of the Fund or otherwise
          disclosed  herein or except as incurred in the ordinary  course of the
          business of the Fund, the Fund has no outstanding  indebtedness or any
          liabilities or  obligations  (whether  direct or indirect,  current or
          long-term, accrued, absolute, contingent or otherwise).

     (i)  TAX  MATTERS - The Fund is not in default in filing any tax returns or
          reports required to be filed as of the date of this Agreement covering
          any  relevant   national,   provincial,   municipal  or  local  taxes,
          assessments  or other  imposts  in  respect  of its  capital,  income,
          business  or  property  (where  such  default  could  have an  Adverse
          Effect).

     (j)  LITIGATION  -  There  is  no  suit,   action,   litigation,   inquiry,
          investigation,   arbitration  or  proceeding,  including  appeals  and
          applications to review,  in progress or, to its knowledge,  threatened
          or pending  against or relating to it or affecting  its  properties or
          businesses which could have an Adverse Effect.  There is not presently
          outstanding  against it any  judgement,  decree,  injunction,  rule or
<PAGE>

          order  of any  court,  governmental  department,  commission,  agency,
          instrumentality or arbitrator which could have an Adverse Effect.

     (k)  ACCURACY OF BOOKS AND RECORDS - The books and records,  financial  and
          otherwise,  of the Fund fairly and  correctly  set out and disclose in
          all  material  respects the  financial  position of the Fund as of the
          date of  this  Agreement  and  all  material  transactions  have  been
          accurately recorded in those books and records.

     (l)  ACCURACY OF INFORMATION  PROVIDED - To the best of its knowledge,  all
          information  provided by or on behalf of the  Distributors,  the Fund,
          FRI or its  Affiliates  to LFL or any agent thereof for purposes of or
          in connection with this Agreement or the transactions  contemplated by
          this Agreement is true, correct and complete in all material respects.

     (m)  DUE  AUTHORISATION,  EXECUTION AND DELIVERY - This  Agreement has been
          duly  authorised,  executed and  delivered  by it and the  obligations
          expressed  to be assumed by it in this  Agreement  are legal and valid
          obligations  binding on it and  enforceable  against it in  accordance
          with the terms hereof,  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.

     (n)  ABSENCE OF  CONFLICTING  AGREEMENTS  - It 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 of this Agreement or the  performance of any of
          the terms of this Agreement or which could have an Adverse Effect.

     (o)  MATERIAL  CONTRACTS - Except for the  Material  Contracts  it is not 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.  It has the capacity to perform all
          its  respective  obligations  in the Material  Contracts.  Each of the
          Material  Contracts  has been duly  executed by it and  constitutes  a
          valid  and  binding  obligation  of  it  enforceable   against  it  in
          accordance  with the terms  thereof,  free and clear of any  mortgage,
          pledge,  lien,  charge,  security interest or encumbrance or rights of
          others.

     (p)  NO  SECURITY  AGREEMENT  -  To  the  best  of  the  knowledge  of  the
          Distributors,  no  security  agreement,  equivalent  security  or lien
          instrument or any financing statement,  has been entered into or is on
          file or on record in respect of the  Deferred  Sales  Charges  (or any
          part thereof) in any jurisdiction.

     (q)  PRINCIPAL  PLACE OF BUSINESS,  NAME - Its principal  place of business
          and the  place  where its  records  are kept is at the  address  first
          written above or such other  address of which LFL has received  notice
          pursuant to Article 11.6.
<PAGE>

     (r)  INSOLVENCY - Since 1 July,  1999, there has not occurred an Insolvency
          Event with respect to the Fund, TGSS or TGAL.

     (s)  INFORMATION  CORRECT - All  information  in respect of the  payment of
          Selling Commissions to be set forth in each Distributor Report will be
          true and correct in all  material  respects  (this  warranty  shall be
          given by TGSS and its successors or assigns only).

     (t)  REGISTRATION  OF FUND - The Fund  continues to be  registered  as (and
          qualify   as)  a  societe   d'investissement   a   capital   variable,
          incorporated under the laws of the Grand-Duchy of Luxembourg.

     (u)  ROLE OF TGAL AND TGSS - TGAL  shall be the  Principal  Distributor  in
          accordance  with the  Distribution  Agreement  and  TGSS  shall be the
          Distribution Controller in accordance with the Distribution Controller
          Agreement.

     Each of the  representations  and warranties  contained in this Article 5.1
     are made severally by TGSS, TGAL and the Fund (each a "Representing Party")
     and accordingly,  a Representing  Party shall not be responsible to LFL for
     any misrepresentation on the part of another Representing Party.

5.2  LFL'S REPRESENTATIONS AND WARRANTIES. LFL hereby represents and warrants to
     TGSS, TGAL and the Fund that:

      (a)  ORGANISATION  AND  GOOD  STANDING  - LFL has  been  duly  formed  and
           organised as a limited liability company  incorporated in Ireland 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)  AUTHORISATION,  EXECUTION AND DELIVERY - This Agreement has been duly
           authorised,  executed and delivered by LFL and is a valid and binding
           obligation of LFL 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.

      (c)  ABSENCE OF  CONFLICTING  AGREEMENTS - LFL 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.

     (d)  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 LFL 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  LFL  under,   or  the  validity  or
          enforceability  of this  Agreement  or which  could  give  rise to any
          adverse  effect on LFL's ability to pay or perform any of its material
          obligations under this Agreement.
<PAGE>

     (e)  COMPLIANCE  WITH LAWS - It is in compliance  in all material  respects
          with all laws that are applicable to it.

     (f)  LICENSES AND REGISTRATIONS - It has received all approvals,  licences,
          registrations  and  authorisations  necessary  for the  conduct of its
          businesses as they are now  conducted,  all of which are in full force
          and  effect;  no  violations  thereof  have  been  recorded;   and  no
          proceeding  is  pending  or  threatened  which  could  result  in  the
          revocation or limitation thereof.

     (g)  CONSENTS AND APPROVALS - There are no consents,  approvals,  orders or
          authorisations  of any Person  required under laws applicable to it or
          registrations,  declarations,  notices, filings or recordings with any
          Person  required  to be  obtained  or  made  by it  pursuant  to  laws
          applicable  to it (and  which  have not been so  obtained  or made) 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.

     (h)  INSOLVENCY  - Since  July 1,  1999,  there  has  not  occurred  an LFL
          Insolvency Event.

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.

                                    ARTICLE 6

                              CONDITIONS PRECEDENT

6.1  LFL'S  CONDITIONS  TO  CLOSING.  The  obligation  of  LFL 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 LFL and may be waived by it in whole
     or in part by notice in writing to TGSS, TGAL and the Fund):

     (a)  TRUTH  AND  ACCURACY  OF   REPRESENTATIONS   AND   WARRANTIES  OF  THE
          DISTRIBUTORS  AND THE FUND AT CLOSING  TIME - All the  representations
          and warranties of the Distributors and the Fund 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
<PAGE>

          the Closing Time. LFL shall receive a certificate  from TGSS, TGAL and
          the Fund confirming the truth and correctness in all material respects
          of the representations and warranties of the each of them.

     (b)  RECEIPT OF CLOSING  DOCUMENTATION - All documentation  relating to the
          transactions contemplated by this Agreement,  including legal opinions
          from counsel to the  Distributors  and the Fund, shall be satisfactory
          to LFL and its  counsel,  both acting  reasonably.  LFL shall  receive
          copies  of all  documentation  or  other  evidence  it may  reasonably
          request in order to establish  the  consummation  of the  transactions
          contemplated  by  this  Agreement  and  the  taking  of all  corporate
          proceedings and action in connection with this Agreement in compliance
          with these conditions in form (as to certification  and otherwise) and
          substance satisfactory to LFL and its counsel.

     (c)  MATERIAL  ADVERSE  CHANGE - Since  September  30,  1998,  no  material
          adverse change in the condition or operations of the business,  assets
          or financial  condition of the Fund shall have occurred  including any
          change in the fundamental  investment objective of a Sub-Fund,  and no
          Adverse Effect shall have occurred.

     (d)  PERFORMANCE OF OBLIGATIONS - The  Distributors and the Fund 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,  AUTHORISATIONS AND REGISTRATIONS - All consents, approvals,
          orders and  authorisations  of any Person  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)  ROLE OF TGAL  AND  TGSS - At the  date  of this  Agreement  and at the
          Closing Time,  TGAL shall be the Principal  Distributor  in accordance
          with the terms of the  Distribution  Agreement  and TGSS  shall be the
          Distribution   Controller  in   accordance   with  the  terms  of  the
          Distribution Controller Agreement.

     (g)  EVENT OF  TERMINATION - The condition set out in Article  6.2(c) shall
          be satisfied.

6.2  LFL'S  CONDITIONS TO PAYMENT OF SELLING  COMMISSIONS FROM TIME TO TIME. The
     obligation of LFL 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 exclusive  benefit of LFL and may be waived by it in whole
     or in part by notice in  writing  to TGAL,  TGSS and the Fund) at each such
     time:

     (a)  TRUTH  AND  ACCURACY  OF   REPRESENTATIONS   AND   WARRANTIES  OF  THE
          DISTRIBUTORS AND THE FUND - The  representations and warranties of the
          Distributors  and the Fund made in or pursuant to this Agreement shall
          be true and correct in all material respects as of the time of payment
          of such Selling Commissions and with the same effect as if made at the
          time of payment of such Selling Commissions.
<PAGE>

     (b)  ROLE OF TGAL AND TGSS - TGAL  shall be the  Principal  Distributor  in
          accordance with the terms of the Distribution Agreement and TGSS shall
          be the  Distribution  Controller in  accordance  with the terms of the
          Distribution Controller Agreement.

     (c)  EVENT OF TERMINATION - Both immediately  before and immediately  after
          giving  effect to the payment of a Selling  Commission on such date by
          LFL, no LFL Event of Termination (or event which,  with the passage of
          time or the giving of notice,  or both,  would constitute an LFL Event
          of  Termination)  in  respect  of TGAL,  TGSS or the Fund  shall  have
          occurred and be continuing.

     (d)  DISTRIBUTOR  REPORTS  - TGSS  shall  have  delivered  all  Distributor
          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 LFL or its Permitted Designee.

     (e)  PERFORMANCE OF OBLIGATIONS - The  Distributors and the Fund 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 each of them.

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

6.3  DISTRIBUTOR AND FUND  CONDITIONS.  The obligations of the  Distributors and
     the Fund 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  Distributors
     and the Fund and may be waived by all of them in whole or in part by notice
     in writing to LFL):

     (a)  TRUTH AND ACCURACY OF REPRESENTATIONS OF LFL AT CLOSING TIME - All the
          representations  and  warranties  of LFL 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  - LFL 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 - As of December 31, 1998 no material adverse
          change  in the  condition  or  operation  of the  business,  assets or
          financial  condition of LFL shall have occurred which would  adversely
          affect its  ability to pay or to perform  its  obligations  under this
          Agreement.

     (d)  CONSENTS,  AUTHORISATIONS AND REGISTRATIONS - All consents, approvals,
          orders  and  authorisations  of any  Person  or  government  authority
          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.
<PAGE>

     (e)  FINANCIAL  CAPABILITY - LFL shall have the  financial  capability  and
          resources to perform its obligations  under this Agreement,  including
          the  payment  of  all  Selling  Commissions  due to  Approved  Dealers
          pursuant  to Article 4 hereof  provided  always that in the event that
          this  condition (e) is not satisfied  because LFL is in the process of
          being wound-up or has otherwise  ceased to carry on its businesses (or
          where the LFL Event of  Termination  set out in paragraph  (g) of that
          definition   occurs)  then  in  any  such  case,  the  Fund  and  each
          Distributor  acknowledges  and agrees that it shall not be entitled to
          take any action  (whether by way of court  proceedings  or  otherwise)
          against LFL arising out of the failure to satisfy this condition (e).

6.4  DOCUMENTS  TO BE DELIVERED TO LFL.  TGSS shall  procure that the  documents
     listed in Schedule E (which shall be in form and substance  satisfactory to
     TGSS and LFL) are delivered to LFL within 30 days of the date hereof.

                                    ARTICLE 7

                                    COVENANTS

7.1   COVENANTS OF THE  DISTRIBUTORS  AND THE FUND. Each of the Distributors and
      the Fund  covenants  and agrees  (but only as to  itself)  with LFL to the
      extent applicable that prior to the termination of this Agreement:

     (a)  COMPLIANCE WITH ADVISORY  AGREEMENTS - Each of the Distributors  shall
          conduct annual reviews with each investment advisor under the Advisory
          Agreements in order to ensure that such investment advisor has kept in
          full force and effect  and  intends to keep in full force and  effect,
          all licences,  registrations and  authorisations  necessary to conduct
          its respective  business  under the  applicable  terms in the relevant
          Advisory Agreement.

     (b)  TERMINATION OF A NEW B SHARE SUB-FUND - Each of the  Distributors  and
          the Fund shall not,  unless  compelled  to do so (i) by any  competent
          regulatory  authority;  or (ii) pursuant to any applicable law, at any
          time while LFL is entitled to receive payment of any amount hereunder,
          take any action,  omit to take any action or initiate  any  proceeding
          which  may,   indirectly   or  directly,   trigger  the   termination,
          reorganisation  or  winding-up  of a  New B  Share  Sub-Fund  if  such
          termination,  reorganisation  or  winding-up  has  an  Adverse  Effect
          without the prior consent of LFL, such consent not to be  unreasonably
          withheld.

     (c)  MAINTENANCE  OF BOOKS AND RECORDS - Each of the  Distributors  and the
          Fund 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.

     (d)  DISCLOSURE OF MATERIAL CHANGES - Each of the Distributors and the Fund
          (upon  becoming  aware  thereof) shall promptly give written notice to
          LFL of (i) any LFL  Event  of  Termination  or event  which,  with the
          passage of time or the giving of notice or both,  would  constitute an
          LFL Event of Termination;  (ii) any material litigation or proceedings
          with  respect  to TGSS,  TGAL,  any  investment  adviser of any of the
          Sub-Funds or the Fund 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 any of the
<PAGE>

          Distributors  or the Fund  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  Distributors  or the  Fund  to  perform  any
          obligation  which  is  required  to  be  performed  by it  under  this
          Agreement  in any  material  respect  on a timely  basis;  and (v) any
          material change in the management or structure of the Fund.

     (e)  FURTHER  INSTRUMENTS  AND  DOCUMENTS - Each of the TGSS,  TGAL and the
          Fund shall  promptly  at its  expense  execute and deliver to LFL such
          further  instruments and documents and take such further action as LFL
          may from time to time reasonably request in order to further carry out
          the intent and purpose of this  Agreement and to establish and protect
          the rights,  interests and remedies  created or intended to be created
          hereby and thereby,  provided  however,  that TGSS,  TGAL and the Fund
          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 TGSS,  TGAL and the Fund shall permit
          LFL or any Permitted Designee reasonably acceptable to it to visit and
          inspect the  properties,  files,  books and records of the Fund (other
          than those subject to  confidentiality  rules under Luxembourg  laws),
          TGAL and TGSS relating to the Fees, this Agreement,  the  transactions
          contemplated hereby and the financial condition, results of operations
          and  cash  flows of the Fund and to  discuss  the  foregoing  with the
          officers,  partners,  employees, legal advisers and accountants of the
          Fund,  TGAL and TGSS, all at such reasonable  times during  reasonable
          business hours and as often as LFL may reasonably request.

     (g)  MAINTENANCE  OF  PROSPECTUS  -  Insofar  as  reasonably  within  their
          respective  control and except with the consent of LFL,  such  consent
          not to be unreasonably  withheld or delayed,  each of the Fund and the
          Distributors shall maintain the Prospectus Documents in full force and
          effect so that the  Deferred  Sales  Charge  Shares may be offered for
          sale to the public in the relevant jurisdictions where such Shares are
          being sold  during the period in which LFL has the  obligation  to pay
          Selling  Commissions in respect of the  distribution of Deferred Sales
          Charge Shares hereunder.

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

     (i)  CHANGE TO  INVESTMENT  OBJECTIVE  OF A NEW B SHARE  SUB-FUND  - In the
          event  that the  investment  objective  of a New B Share  Sub-Fund  is
          amended (or will be amended) and such  amendment  will have a material
          adverse  effect  upon (a) the  timing or amount of any  payment of any
          Fee, (b) the timely receipt by LFL of any Fees, (c) the ability of the
          Fund,  TGAL or TGSS to pay or perform its  obligations  hereunder in a
          timely  manner or (d) the  remedies and other rights of LFL under this
          Agreement,  then each of TGSS,  TGAL and the Fund  agree  (subject  to
          approval by the Luxembourg  supervisory  authority) to consult in good
          faith  with LFL for a  period  of 60 days  from  the time  that LFL is
          notified  of such  amendment  or  potential  amendment  with a view to
          reaching  agreement on a method of amending the Monthly Fee payable to
          LFL under this  Agreement (or otherwise  amending or varying the terms
          of the  agreements  between  them and LFL) in  order to  preserve  the
          economic  return to LFL as if such amendment had not occurred (or were
          not to occur, in the case of a potential amendment).
<PAGE>

     (j)  PAYMENT  OF FUNDS - If either  TGAL or TGSS or any  designee  or agent
          thereof shall receive any of the Fees from the Fund, it shall hold (or
          procure that such  designee or agent holds) such Fees in trust for LFL
          (acknowledging  that such Fees do not  constitute  its  property)  and
          immediately  following  receipt of any such Fees,  it shall,  or shall
          cause  such  designee  or agent to,  remit the same to LFL in the form
          received  and ensure that such amounts are not  commingled  with other
          funds.

     (k)  PROVISION OF INFORMATION - All information provided by or on behalf of
          TGSS, TGAL or the Fund including information provided by FRI or one of
          its Affiliates after the date hereof to LFL 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,  provided that this  covenant  shall apply only to
          such  misrepresentations or omissions as would give rise to an Adverse
          Effect.

     (l)  STATUS  OF FEES - Except to the  extent  expressly  permitted  by this
          Agreement,  none of TGSS,  TGAL or the Fund shall  permit to exist any
          Lien on or attempt to  transfer  or grant a security  interest  in any
          interest in any Fees.

     (m)  FEE  PAYMENT  BY THE  FUND - If at any  time  after  the  date of this
          Agreement an Insolvency Event occurs or TGAL (or its Affiliate) ceases
          to be the Principal  Distributor or TGSS (or its Affiliate)  ceases to
          be the Distribution Controller,  the Fund agrees that as and from such
          date the Fund shall continue to be responsible  for and shall continue
          to pay to LFL the amounts required to be paid by the Fund to LFL under
          this  Agreement  and the Fund shall cause the  successor  Distribution
          Controller or Principal Distributor, as appropriate, to become a party
          to this  Agreement  and (if  requested  by LFL)  to  agree  to  become
          responsible for the payment of amounts payable to LFL hereunder.

     (n)  MAINTENANCE  OF FEES - Other than to permit Free  Redemptions  or Free
          Exchanges as contemplated by the Prospectus  Documents of the relevant
          Sub-Fund on the date  hereof,  each of the Fund,  TGSS and TGAL hereby
          agrees with LFL that it will not, without the prior written consent of
          LFL,  unless  compelled  to do so  (i)  by  any  competent  regulatory
          authority or (ii)  pursuant to any  applicable  law, at any time while
          LFL is entitled to receive payment of any amount hereunder, consent to
          or agree to a reduction in the Deferred  Sales Charge for  Distributed
          Shares  or  any  alteration  in  the  manner  or as  to  the  time  of
          calculation  of the  Deferred  Sales  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 LFL or  adversely  affect  the timing of the
          receipt  of such  amounts  payable  pursuant  to  Article  4.  For the
          avoidance of doubt, the provisions of this Article 7.1(n) restrict the
          ability of Fund, TGSS and TGAL to make retroactive  changes (including
          changes in respect of New B Shares which have already been issued) but
          will not  prevent  any of them  from  making  prospective  changes  in
          respect of the offering of New B Shares which are not Transfer Shares,
          Reinvested  Shares and with respect to which LFL has no  obligation to
          pay Selling Commissions.

     (o)  PAYMENT OF TAXES - Each of the  Distributors  and the Fund 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.
<PAGE>

     (p)  CLIENT  AND  NEW B  SHARE  SUB-FUND  REPORTING  - TGSS  shall  provide
          shareholder and portfolio reporting to LFL. Shareholder reporting will
          consist   of  the   administration   package  of  reports  on  monthly
          shareholder  activity derived from the Fund's transfer agent's system.
          Portfolio reporting will consist of a monthly balance sheet (statement
          of  condition)  inclusive of price and shares (with CUSIP and/or SIDOL
          numbers)  reported  to LFL in  respect  of each  New B Share  Sub-Fund
          separately.  The portfolio  reports shall be in substantially the same
          form  as  those  currently  generated  by  TGSS's  accountants  daily,
          provided  always  that  TGSS  shall not be  required  to  provide  any
          information to LFL under this Article where such provision  would,  in
          the reasonable opinion of TGSS, be in breach of any applicable laws of
          Luxembourg relating to data protection.

7.2  COVENANT OF LFL. LFL covenants  and agrees with each of TGSS,  TGAL and the
     Fund  to the  extent  applicable  that  prior  to the  termination  of this
     Agreement it will provide such  information  as each of them may reasonably
     request from time to time.

7.3  COMPLIANCE  WITH  LUXEMBOURG  LAW.  Nothing  contained in Article 7.1 shall
     prevent  the Fund from  acting (a) in  accordance  with the terms of future
     instructions  from the  Luxembourg  supervisory  authorities  or (b)  where
     compelled  to do so  pursuant  to  the  Articles  of  Incorporation  or any
     applicable law or (c) in accordance with the terms of any resolution of the
     shareholders  of the Fund (where  such  resolution  has been  proposed by a
     shareholder or  shareholders  in either case not affiliated with any of the
     parties hereto).

                                    ARTICLE 8

                               TERMINATION EVENTS

8.1  LFL  TERMINATION   EVENTS.  The  obligation  of  LFL  to  pay  the  Selling
     Commissions  pursuant to Article 3 may be terminated by LFL if an LFL Event
     of Termination  shall occur and be continuing.  Such  termination  shall be
     effected  by the  giving  of  written  notice  to the  Fund and each of the
     Distributors,  declaring an LFL Event of  Termination  to have occurred (in
     which case the Termination  Date shall be deemed to have occurred as of the
     date such  notice is given  pursuant  to the  provisions  of Article  11.6)
     provided that upon the occurrence of any event (without the requirement for
     the passage of time or the giving of notice, or both) described in Articles
     (e) and (h) of the definition of LFL Event of Termination,  the Termination
     Date shall be deemed to have automatically occurred;

     and  provided  further  that,  in the case of the  occurrence  of an event
     described in Articles (a), (b), (c), (d) and (i) if (1) such event affects
     only New B Share Sub-Funds which are not Substantial Funds, and (2) EITHER
     the Fund and/or the  Distributors  or either of them is able to  segregate
     the  Deferred  Sales  Charges  related  to Shares  affected  by such event
     (including  any Shares of other  Sub-Funds into which such Shares may have
     been  exchanged  in Free  Exchanges)  in respect of which LFL has not paid
     Selling  Commissions  from the Deferred Sales Charges related to Shares of
     the  affected  New B  Share  Sub-Funds  and  any  unaffected  New B  Share
     Sub-Funds  in respect of which LFL has paid Selling  Commissions  (and any
     Shares  of any  other  Sub-Funds  into  which  such  New B  Shares  may be
     exchanged  in Free  Exchanges)  and the Fund's  ability to  segregate  the
     Deferred  Sales  Charges as  described  in above is certified to LFL by an
     independent   accounting  firm  of  international   standing,   reasonably
     acceptable to LFL, OR the Fund, the  Distributors  and LFL reach agreement
     upon an allocation  procedure  which will preserve the economic  return to
<PAGE>

     LFL (as if such event had not  occurred),  THEN such Event of  Termination
     will only relate to LFL's  obligations  hereunder  related to the affected
     New B Shares Fund(s),  and such Event of Termination will not affect LFL's
     obligations   hereunder  with  respect  to  the  unaffected  New  B  Share
     Sub-Funds;

     and provided  further that upon the  occurrence of any event  described in
     Articles (d) and (i) of the  definition of LFL Event of  Termination,  the
     Termination  Date shall be deemed to have occurred as of the date which is
     six (6) months  from the date such  notice is  effective  pursuant  to the
     provisions of Article 11.6; and The parties agree that upon the occurrence
     of any event  described in Articles  (d), and (i) of the  definition of an
     LFL  Event  of  Termination,   the  parties  shall  use  their  respective
     commercially  reasonable  efforts  during  such six (6)  month  period  to
     restructure  the  distribution  arrangements  contemplated  by the Program
     Documents  in  order  to  attempt  to   accommodate   and  facilitate  the
     continuance of such arrangements notwithstanding such change.

8.2  FUND TERMINATION RIGHTS.

     (a)  Provided  that a LFL  Event of  Termination  has not  occurred  and is
          continuing,  LFL's role as exclusive  Commission Payer with respect to
          the  Deferred   Sales  Charge  Shares  under  this  Agreement  may  be
          terminated  by the  Fund  if LFL  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 LFL by the Fund
          giving LFL 15 Business  Days to cure such breach  during  which period
          the Fund shall not have any right to terminate LFL's role as exclusive
          Commission Payer. If such breach continues uncured,  at the expiration
          of such notice  period,  the Fund may give a second  written notice to
          LFL 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)  If a Fund Event of  Termination  shall occur and be  continuing,  TGSS
          shall  promptly  notify LFL in writing (and the other parties  hereto)
          thereof and the parties hereto shall, during the period of 60 Business
          Days after such  notification  (the "Discussion  Period"),  consult in
          order to mitigate the effect of such circumstances.  If, at the end of
          that  period,  the parties  have not reached  agreement on a method of
          mitigation,  the Fund may terminate LFL's role as exclusive Commission
          Payer and the  Termination  Date  shall be deemed to occur on the date
          such notice is given.  On the date of receipt of such  notification by
          LFL, LFL shall be entitled to suspend its  obligations  to pay Selling
          Commissions  hereunder  as and from such  date.  In the event that the
          parties hereto subsequently agree on a method of mitigation during the
          applicable  Discussion Period, then LFL shall promptly pay all Selling
          Commissions  in respect of the sales of Deferred  Sales Charge  Shares
          which occurred during such period.

8.3  COSTS  AND  EXPENSES  OF LFL.  All costs and  expenses  incurred  by LFL in
     connection with the enforcement of this Agreement  against the Distributors
     or the Fund  shall be paid by the  Distributors  or the Fund  forthwith  on
     demand  therefor by LFL. The obligations of the  Distributors  and the Fund
     under this Article 8.3 shall be several.

8.4  COSTS AND EXPENSES OF TGSS AND THE FUND. All costs and expenses incurred by
     TGSS in connection  with the  enforcement of this Agreement  against LFL as
     set out in Article 8.2(a) shall be paid by LFL forthwith on demand therefor
     by TGSS.
<PAGE>

8.5  TRANSACTION  EXPENSES.  LFL shall reimburse each of TGSS, TGAL and the Fund
     for all reasonable costs and expenses  (including legal fees) together with
     any  VAT  thereon   incurred  by  each  of  them  in  connection  with  the
     negotiation,  preparation  and  execution  of  this  Agreement,  any  other
     document   referred  to  in  this  Agreement  and  the  completion  of  the
     transactions herein contemplated.

                                    ARTICLE 9

                                 INDEMNIFICATION

9.1  Each of the  Distributors  on their own  behalf  and on behalf of the Fund,
     separately  and not jointly,  agrees to indemnify and hold harmless LFL and
     each of its Affiliates and their respective officers, directors, employees,
     agents,  advisors of, and any Person controlling any of the foregoing (each
     an  "Indemnified  Party")  from  and  against  (collectively,  but  without
     duplication) any and all Liabilities that may be incurred by or asserted or
     awarded against an Indemnified Party, in each case arising out of, relating
     to or by reason  of,  any claim  brought  by any Person not a party to this
     Agreement  in  connection  with  the   transactions   contemplated   hereby
     (including,  without  limitation,  any act or omission of or breach of this
     Agreement by the Fund);  PROVIDED,  HOWEVER,  the Distributors shall not be
     required to indemnify any Indemnified  Party in respect of any Liability if
     and  to  the  extent  such  Liability  resulted  primarily  from  (i)  such
     Indemnified Party's gross negligence or willful misconduct,  or (ii) in the
     case of an  Indemnified  Party which is LFL,  any failure of LFL to perform
     its covenants if any, set forth herein or in the other Program Documents to
     which it is a party,  or any  failure of any of LFL's  representations  and
     warranties,  if any, set forth herein or in the other Program  Documents to
     which  it  is a  party,  to  be  true  and  correct  as of  the  time  such
     representation or warranty spoke.  Furthermore,  the Distributors shall not
     be  required  to  indemnify  any  Indemnified  Party in  respect of (a) any
     liability  under  applicable  securities  laws  arising  out  of a  Takeout
     Transaction,  except to the extent such  liability  is  attributable  to or
     would not have  occurred but for (i) the violation at the time of, or prior
     to, such Takeout  Transaction of any covenant,  representation  or warranty
     made by the  Distributors  or the Funds  contained in this Agreement or any
     other Program Document,  or (ii) any information  furnished by or on behalf
     of the  Distributors  or the Fund being false or misleading in any material
     respect,  or (b) any  Liabilities  arising  as a  result  of a claim  by an
     Indemnified Party against the Distributors or as a result of a claim by the
     Distributors  against an Indemnified  Party where it is determined that the
     position  of the  Distributors  in  respect of such claim is correct in all
     material respects.

9.2  LFL agrees to indemnify and hold harmless  TGAL,TGSS and the Fund,  each of
     their  Affiliates  and their  respective  officers,  directors,  employees,
     agents,  advisors  of, and any  Person  controlling  any of, the  foregoing
     (collectively, the "Templeton Indemnitees") from and against (collectively,
     but without duplication) any and all Liabilities that may be incurred by or
     asserted or awarded  against a Templeton  Indemnitee,  in each case arising
     out of,  relating to or by reason of, any claim brought by any person not a
     party to this Agreement in connection  with the  transactions  contemplated
     hereby;  PROVIDED,  however,  LFL  shall not be  required  to  indemnify  a
     Templeton  Indemnitee  in  respect  of any  Liability  to the  extent  such
     Liability resulted from (i) such Templeton Indemnitee's gross negligence or
     willful misconduct, or (ii) in the case of a Templeton Indemnitee that is a
     party to any Program Document,  any failure of such Templeton Indemnitee to
     perform its covenants  set forth in the Program  Documents to which it is a
     party or any failure of any of its representations and warranties set forth
     in the Program  Documents  to which it is a party to be true and correct in
     all material respects at the time such representation or warranty spoke.
<PAGE>

9.3  ACTUAL   LOSSES.   For  the  purposes  of  this  Article  9,  each  party's
     indemnification  obligations  hereunder  shall be in  respect  of only such
     Liabilities that are reasonably  forseeable as likely to arise by reason of
     the occurrence of the relevant event in respect of which indemnification is
     sought and, for the avoidance of doubt, such indemnification obligations do
     not extend to cover  indirect  or  consequential  losses of any party.  The
     parties  agree that it is  expected  that LFL will (a) enter  into  hedging
     transactions in order to hedge the risks associated with the Deferred Sales
     Charges, the Selling Commissions and the other transactions contemplated by
     this  Agreement,  and  (b)  rely  on the  representations,  warranties  and
     covenants  provided  herein in making  representations  and  warranties  in
     Takeout  Transactions,  and that losses  related to the foregoing are, with
     the exception of losses in hedging  transactions which are not attributable
     to a breach of the representations,  warranties and covenants given herein,
     a  reasonably  foreseeable  result  of  any  breach  by  the  Fund  or  the
     Distributors  of this  Agreement  or other  Program  Document to which is a
     party.

                                   ARTICLE 10

                              ADDITIONAL SUB-FUNDS

10.1 ADDITIONAL SUB-FUNDS.
     (a)  In the event that the Fund adds an  Additional  Sub-Fund  LFL shall be
          given the  opportunity to serve as the exclusive  Commission  Payer to
          such  Additional  Sub-Fund.  If LFL  agrees  to  act as the  exclusive
          Commission Payer to such Additional Sub-Fund,  then the parties hereto
          agree  that such  Additional  Sub-Fund  shall be deemed to be a "New B
          Share Sub-Fund" within the meaning hereof and the New B Shares of such
          Additional  Sub-Fund  which are sold on a deferred  sales charge basis
          shall be  deemed  to be  "Deferred  Sales  Charge  Shares"  and "New B
          Shares" within the meaning hereof and the terms and conditions of this
          Agreement shall be applicable to such Additional Sub-Fund. Each of the
          parties  hereto  shall  execute and deliver  such  amendments  to this
          Agreement as shall be  necessary to give effect to this Article  10.1.
          If an  Additional  Sub-Fund is added but does not become a New B Share
          Sub-Fund,  then  the  allocation  procedures  at  Schedule  D shall be
          amended so as to  allocate  External  Shares and  External  Reinvested
          Shares and the charges relating thereto to Monthly Pools.

     (b)  The Fund  shall  provide  notice  to LFL on or about the time when the
          Fund  files  a  prospectus   supplement  or  prospectus  addendum  (as
          appropriate) for a New B Share Sub-Fund.

                                   ARTICLE 11

                                     GENERAL

11.1 AMENDMENT OF  AGREEMENT.  This  Agreement  may be amended from time to time
     only by written consent of the Fund, TGSS, TGAL and LFL.

11.2 TERMINATION OF LFL AS EXCLUSIVE COMMISSION PAYER. If LFL is unable to carry
     out its  obligations  hereunder  (which  may  occur if LFL is unable to pay
     Selling  Commissions  for all of the Original Charge Shares sold during the
     period of its appointment as Commission Payer under this  Agreement),  TGSS
     may terminate LFL's exclusive right to pay Selling Commissions and may: (i)
     pay Selling  Commissions  directly;  (ii) enter into  agreements with other
<PAGE>

     parties  to pay  Selling  Commissions;  or (iii)  limit,  by  allotment  or
     otherwise, sales of Deferred Sales Charge Shares.

11.3 ASSIGNMENT

     (a)  This Agreement shall be binding upon, and inure to the benefit of, the
          parties hereto and their respective  permitted successors and assigns;
          provided  however that except in the case of TGSS or TGAL,  where such
          assignment is to an Affiliate of TGSS or TGAL (as the case may be) and
          where such Affiliate  assignee is of equal  financial  standing to the
          assignor, each of the Fund, TGAL and TGSS 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 LFL's prior written consent, such consent not
          to be  unreasonably  withheld;  and provided  further that,  except as
          provided in Articles  11.3(b)  and  11.3(c),  LFL shall be entitled to
          assign its rights or obligations  hereunder or under any other Program
          Document or in respect of any Fees or the proceeds  thereof,  provided
          it gives TGSS, TGAL and the Fund 30 days notice (the "Notice  Period")
          If LFL does not,  within the Notice  Period,  receive a notice stating
          that consent is withheld,  it shall be deemed to have the authority to
          effect such an assignment.  It shall be reasonable for the Fund,  TGAL
          and TGSS to refuse to give its  consent  under  this  Article  11.3(a)
          where, in its reasonable opinion,  its obligations or liabilities will
          be increased or otherwise adversely affected.

     (b)  The  rights  and  obligations  of LFL 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 LFL with or
          to another entity,  provided that the surviving  entity shall (i) be a
          corporation or other entity organised 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 LFL, by agreement reasonably  satisfactory in form and substance to
          TGSS and the Fund; and (iii) prior to the Termination Date, have a net
          worth prior to the Termination Date at least equal to that of LFL, and
          access to funding  sources for purposes of making  payments of Selling
          Commissions  hereunder  equivalent  in an amount to those to which LFL
          had access, immediately prior to such merger, consolidation or sale or
          disposition of assets or interests.

          Notwithstanding  any other  provision of this  agreement  (apart from
          Article  11.3(c)  below),  LFL may, at any time (provided that it has
          given 30 Business  Days' notice to the Fund,  TGAL and TGSS),  assign
          (whether  absolutely  or by way of security) all or any of its rights
          and benefits  under this  Agreement or any other Program  Document to
          any  Person  (and  the  Fund,  TGAL and TGSS  will,  as  appropriate,
          acknowledge receipt of any such notice and comply with the directions
          as to payment set out in such notice) and,  without  prejudice to the
          generality of the  foregoing,  LFL may (i) pledge or otherwise  grant
          security over all of its rights or benefits  under this  Agreement or
          any  other  Program  Document  to a major  financial  institution  as
          security for money borrowed;  (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
<PAGE>

          representations,  warranties and  indemnities  agreed to by the Fund,
          TGSS and TGAL in this  Agreement or any other  Program  Document;  or
          (iii) assign the right to receive the proceeds of any indemnification
          provided hereunder.

     (c)  LFL 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
          each  of  Europe,   Canada  and  the  U.S.  (and  TGSS  shall,  acting
          reasonably,  determine the  identities of such  companies from time to
          time).  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.

11.4 LIABILITY.  LFL shall not be liable  for any error of  judgment  or for any
     loss  suffered  by the  Fund or the  Distributors  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.

11.5 CONFIDENTIALITY.  Unless otherwise  required by applicable law, TGSS, TGAL,
     the Fund and LFL 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 Information");  provided that nothing in this
     Article 11.5 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 the Fund,  to any then  current  directors of the 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 Article 11.5; 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 Article 11.5.

     Notwithstanding anything to the contrary contained herein, LFL shall keep,
     and shall use its commercially  reasonable  efforts to cause its officers,
<PAGE>

     directors, partners, employees, advisers, legal counsel, auditors, lenders
     and  affiliates  to  keep,   confidential  all  Confidential   Information
     concerning the Fund  delivered or made available by the TGSS,  TGAL or the
     Fund  to LFL or such  other  Persons,  including  without  limitation  the
     Program  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 TGSS, TGAL or their parents (and LFL shall not,
     and shall  cause  each of the  foregoing  other  Persons  not to, use such
     information  to sell shares to or  purchase  shares from the Fund or other
     investment  company or  recommend  such trading to any other Person on the
     basis of such information).

11.6 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  set out below or at such  other  address as such party may
     designate by notice in the foregoing manner:

     (a)  in the case of LFL:
          c/o Chase Manhattan  (Ireland) plc,  Georges Dock, 1 IFSC,  Dublin
          1, Ireland
          Fax No: 00 353 1 6125777

     (b)  in the case of the Fund:
          26, boulevard Royal, L-2449, Luxembourg
          Attn:  General Manager
          Fax No: 00 352 4666 6711

     (c)  in the case of TGAL:
          PO Box N-7759, Nassau, Bahamas
          Attn:  Corporate Secretary
          Fax No: 001 242 3624 308

     (d)  in the case of TGSS:
          26, boulevard Royal, L-2449, Luxembourg
          Attn:  General Manager
          Fax No: 00 352 4666 6711

     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. All such notices shall be copied to:

          Franklin Resources Inc
          777 Mariners Island Boulevard
          San Mateo
          CA 94404
          USA
          Attn:  General Counsel
          Fax No:  001 650 5257279

          and to

          Constellation Financial Management Company, LLC
          52 Vanderbilt Avenue, 13th Floor
          New York, NY  10017
          USA
          Attn: David Steinmetz
<PAGE>

          and to

          Templeton Global Investors Limited
          Saltire Court
          20 Castle Terrace
          Edinburgh EH1 2EH
          Attn: Company Secretary

11.7 OVERDUE  AMOUNTS.  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  Manhattan  Bank as its "prime  rate",  for the
     period commencing from the date such payment was originally due to the date
     payment actually is made.

11.8 TAXES.

     (a)  The Distributors or the Fund, as applicable,  shall pay any present or
          future  sales,  value added or excise  taxes,  excluding  LFL's income
          taxes, imposed upon the supply of services by LFL under this Agreement
          (hereinafter   referred  to  as  "Sales  Taxes").  In  addition,   the
          Distributors  or the Fund,  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  Luxembourg
          legislation  from  any  payment  made  by or on  behalf  of  the  Fund
          hereunder or from the  execution  or delivery  of, or  otherwise  with
          respect to this  Agreement or any other Program  Document to which the
          Distributors,  the Fund or any of  their  respective  Affiliates  is a
          party  (hereinafter  referred  to as  "Other  Taxes").  LFL  shall  be
          entitled  to  indemnification  for the full  amount of Sales  Taxes or
          Other Taxes (including  without  limitation,  any Sales Taxes or Other
          Taxes imposed on amounts  payable under this section  11.8(a)) paid by
          the Fund or either  Distributor (as the case may be) 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.

     (b)  LFL  shall  pay (and  indemnifies  TGSS,  TGAL  and the Fund  (each an
          "Indemnitee") in respect of) any present or future sales,  value-added
          or excise taxes,  excluding each  Indemnitee's  income taxes,  imposed
          upon the payments to be made by LFL under Article 3.1. In addition LFL
          shall pay any  present  or future  stamp or  documentary  taxes or any
          other excise or property taxes,  charges or similar levies which arise
          from any payments to be made by it hereunder.

     (c)  LFL shall pay (and indemnifies  TGSS, TGAL and the Fund in respect of)
          any  withholding  taxes that may become payable in connection with the
          payments to be made by LFL of Selling  Commissions to Approved Dealers
          pursuant to Article 3.1 hereof and LFL shall gross up any such payment
          so as to ensure  that,  after  making  all  required  deductions,  the
          Approved  Dealers  receive the full amount of the Selling  Commissions
          due to such Approved Dealers. Furthermore, the Fund shall pay the full
          amounts deducted to the relevant taxation authority or other authority

     (d)  The Fund shall pay any  withholding  taxes that may become  payable in
          connection with any and all payments to be made by the Fund under this
          Agreement and the Fund shall gross up any such payment so as to ensure
          that,  after  making all required  deductions,  LFL receives an amount
          equal to the amounts it would have  received  had no  deductions  been
          made and the Fund shall pay the full amounts  deducted to the relevant
          taxation  authority  or other  authority.  Notwithstanding  any  other
          provisions of this  Agreement,  in the event that the Fund is required
          to withhold any such taxes, it shall do so without any recourse by, or
<PAGE>

          claim against, the Fund by LFL. In the event that the Fund is assessed
          a  deficiency  by any taxing  authority  in respect of its  failure to
          withhold any such taxes,  then the Fund shall be permitted to withhold
          any such  deficiency  from any current or future payments or transfers
          to be made by it to LFL under this  Agreement  until  such  deficiency
          (but not including any interest and penalties  thereon) is paid by LFL
          and LFL shall have no recourse or claim  against  Fund with respect to
          any such payments or withholdings.

11.9 SEPARATE   LIABILITY  OF  FUND.  Save  where  otherwise  provided  in  this
     Agreement,  the liability and obligations of the Fund to TGAL, TGSS and LFL
     hereunder shall be separate and distinct from the liability and obligations
     of TGAL and TGSS,  and the Fund shall be not be liable or  responsible  for
     the action or  inaction  of TGAL and TGSS.  Notwithstanding  the  foregoing
     regardless of whether TGSS ceases to be the Distribution Controller or not,
     the  Fund  agrees  that  it  shall  provide  to LFL,  TGSS  and  TGAL  such
     information as may be required from time to time to determine the amount of
     the Fees payable pursuant to Article 4.

11.10 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.

11.11 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.

11.12 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.

11.13 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,  the Fund agrees that it
      will provide to TGSS,  TGAL and LFL such  information  as to date of issue
      and  issue  price of its  Deferred  Sales  Charge  Shares  and such  other
      information  as shall be required to  facilitate  the  calculating  of any
      amounts which are payable hereunder.

11.14 CURRENCY. All amounts referred to in this Agreement or required to be paid
      hereunder shall be paid in the base currency of the applicable Sub-Fund.

11.15 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.

11.16 ENTIRE  AGREEMENT.  This Agreement  constitutes the entire agreement among
      the parties  pertaining to the subject matter hereof and supersedes,  with
<PAGE>

      effect   from  the  date  of  this   Agreement,   all  prior   agreements,
      understandings  and negotiations  between the parties  including,  without
      limitation,  the Commission  Paying Agreement and those provisions only of
      the Fees  Side-Letter,  the  Distribution  Agreement and the  Distribution
      Agreement  Addendum which  expressly  conflict with the provisions of this
      Agreement. For the avoidance of doubt, the remaining provisions of each of
      the Fees  Side-Letter,  the  Distribution  Agreement and the  Distribution
      Agreement  Addendum which do not expressly conflict with the provisions of
      this Agreement shall remain in full force and uuvaried effect.

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

11.18 INSTRUCTIONS.  Any  instructions  to be given by LFL in the performance of
      its duties  hereunder  in respect of any of the matters  referred to in or
      contemplated by this Agreement ("Proper  Instructions")  shall be written,
      cabled,  telecopied or telexed  instructions and signed or purported to be
      signed by such  person  or  persons  as LFL  shall  from time to time have
      authorised  in writing to give the  particular  class of  instructions  in
      question.  Different  persons may be authorised to give  instructions  for
      different   purposes  and  such  persons  may  also  include  officers  of
      corporations other than LFL so authorised by LFL. For the purposes of this
      Agreement,  LFL shall furnish the other parties  hereto with a schedule of
      the names of the persons  authorised  from time to time  (either  alone or
      with others as specified) to give instructions  together with specimens of
      their  signatures.  LFL shall also furnish the other parties hereto with a
      certified  copy of a  resolution  of the  Directors  of LFL as  conclusive
      evidence of the  authority of any such person to act and the other parties
      hereto shall be entitled to rely on such resolution and authority as being
      in full force and effect until receipt of written notice to the contrary.

11.19 LAW AND JURISDICTION.

     (a)  This Agreement  shall be governed by and construed in accordance  with
          the laws of Ireland.

     (b)  Each of the  parties  hereto  irrevocably  agree  that the  courts  of
          Ireland shall have  non-exclusive  jurisdiction  to hear and determine
          any suit,  action or proceeding  and to settle any disputes  which may
          arise  out of or in  connection  with  this  Agreement  and  for  such
          purposes hereby irrevocably submit to the jurisdiction of such courts.

     (c)  Each party  irrevocably  waives any objection which it may have now or
          in the future to the courts of Ireland being nominated for the purpose
          of Article 11.19(b) and agrees not to claim that any such court is not
          a convenient or appropriate forum.

     (d)  Each of the Fund,  TGAL and TGSS  hereby  irrevocably  authorises  and
          appoints  Matsack Trust Limited as its process agent to accept service
          of all legal process  arising out of or connected  with this Agreement
          and service on Matsack Trust Limited (or any substitute  process agent
          appointed  in  accordance  with  this  Article)  shall be deemed to be
          service  on the  Fund,  TGAL or TGSS (as the case may be).  If for any
          reason  Matsack  Trust  Limited  (or  any  substitute   process  agent
          appointed in accordance with this Article 11.19 (d)) ceases to be able
          to act as process  agent or no longer has an address in Ireland,  each
          of the  Fund,  TGAL  or  TGSS  irrevocably  undertakes  to  appoint  a
          substitute  process agent  resident in Ireland and advise LFL thereof.
          Failing  such  appointment  each of the  Fund,  TGAL  or  TGSS  hereby
<PAGE>

          authorises  the Agent to  appoint an Agent on its  behalf.  Nothing in
          this Article  11.19 (d) shall affect the right to serve legal  process
          in any other manner permitted by law.

ACKNOWLEDGEMENT BY THE FUND AND TGSS

Without prejudice to the execution of the Agreement by the parties hereto,  each
of the Fund and TGSS expressly and specifically confirm their agreement with the
provisions of clause  11.19(b) of this Agreement for the purpose of article 1 of
the Protocol  annexed to the Convention on  jurisdiction  and the enforcement of
judgements in civil and  commercial  matters signed at Brussels on 27 September,
1968 as amended by the Convention of Lugano and San-Sebastian.

--------------------------------          ------------------------------

TEMPLETON GLOBAL STRATEGY                 TEMPLETON GLOBAL STRATEGIC
SERVICES SA FUNDS                         SERVICES SA FUNDS

AS WITNESS  WHEREOF the duly  authorised  representatives  of the parties hereto
have caused this  Agreement  to be duly  executed  the day and year first herein
written.

<PAGE>

                                   SCHEDULE A

                               ADVISORY AGREEMENTS

1.    Investment Management Agreement dated February 2, 1995 between the
      Fund and Templeton Investment Management Limited.

2.    Investment Management Agreement dated July 7, 1997 between the Fund
      and Franklin Mutual Advisers Inc.

3.    Investment  Management  Agreement dated February 15, 1996 between the Fund
      and  Franklin  Advisers  Inc (as  amended by an  amendment  between  those
      parties dated March 1, 1996).

4.    Investment Management Agreement dated February 2, 1995 between the
      Fund and Templeton Investment Management (Singapore) Pte. Ltd.

5.    Investment Management Agreement between the Fund and Templeton
      Galbraith & Hansberger Ltd (now TGSS).

                              PROSPECTUS DOCUMENTS

1.    The prospectus in relation to the Fund dated September 1997.

2.    The addenda thereto dated January 1, 1999 and January 8 1999
respectively.

<PAGE>

                                   SCHEDULE B

                            Intentionally left blank

<PAGE>

                                   SCHEDULE C

Templeton Global Growth Fund
Franklin Mutual Beacon Fund
Franklin U.S. Equity Fund
Templeton Emerging Markets Fund
Franklin Templeton High Yield Fund
Franklin Templeton U.S. Government Fund
Templeton Emerging Markets Fixed Income Fund
Templeton U.S. Dollar Liquid Reserve Fund

<PAGE>

                                   SCHEDULE D

                              ALLOCATION PROCEDURES

Deferred  Sales  Charge  Shares  shall  be  allocated  among  Monthly  Pools  in
accordance with the procedures set forth in these Allocation Procedures.

The parties agree that if (i) the  Sub-Funds or the  Sub-Funds'  transfer  agent
becomes able to supply records which  accurately  track Free Shares and Transfer
Shares to the Commission  Shares from which they were derived and the Fund, TGSS
or TGAL develops an alternative  allocation methodology which uses such tracking
information  (the "Alternate  Methodology")  and (ii) LFL reasonably  determines
that such  methodology  is at least as reliable and accurate as the  methodology
described below, then the parties agree that such Alternate  Methodology will be
substituted  for the  foregoing and this Schedule D will be amended to reflect a
mutually agreeable description of such Alternate Methodology.

Defined terms used in this Schedule D and not otherwise defined in this Schedule
D shall have the meanings  assigned to such terms.  As used herein the following
terms shall have the meanings indicated:

"COMMISSION SHARE" shall mean, in respect of any New B Share Sub-Fund,  each New
B Share of such  Sub-Fund  which  is  issued  under  circumstances  which  would
normally  give  rise to an  obligation  of the  holder  of such  Share  to pay a
Deferred  Sales  Charge  upon  redemption  of  such  Share,  including,  without
limitation,  any  Share  of  such  Sub-Fund  issued  in  connection  with a Free
Exchange,  and any such Share shall not cease to be a Commission  Share prior to
the  redemption  (including a redemption in connection  with a Free Exchange) or
conversion of such Share even though the  obligation  to pay the Deferred  Sales
Charge shall have expired or conditions for waivers thereof shall exist.

"DEFERRED SALES CHARGE" or "DSC" shall mean any deferred sales charge payable by
the holder of a Share of any  Sub-Fund  upon  redemption  of such Share,  either
directly or by withholding from the proceeds of such redemption.

"FREE  EXCHANGE"  shall mean the issuance of a Transfer Share upon the immediate
investment  of proceeds  realized on the  redemption  of a  Commission  Share of
another New B Share Sub-Fund.

"FREE SHARE" shall mean, in respect of any New B Share Sub-Fund, each Reinvested
Share of such Sub-Fund.

"MONTHLY POOL" shall mean, with respect to any Sub-Fund and any calendar month:

           (i)  each Original Charge Share issued by such Sub-Fund during
                such calendar month;

           (ii) Transfer  Shares  of such  Sub-Fund  issued  upon the  immediate
                reinvestment  of proceeds  realized on the  redemption of (a) an
                Original  Charge  Share  of  another  Sub-Fund  issued  by  such
                Sub-Fund  during  the  calendar  month  described  in clause (i)
                above;  (b) a  Reinvested  Share of another  Sub-Fund  issued in
                respect of Deferred Sales Charge Shares described in clause (ii)
                (a) above or this  clause  (ii)(b);  or (c) a Transfer  Share of
                another  Sub-Fund which relates to a Deferred Sales Charge Share
<PAGE>

                described  in clause  (ii)(a)  or (ii)(b)  above or this  clause
                (ii)(c); and

          (iii) Free  Shares  of  such  Sub-Fund   issued  upon  the   automatic
                reinvestment  of income  and capital  gains  distributions  with
                respect  to  Deferred  Sales  Charge  Shares  of  such  Sub-Fund
                described in clauses (i) or (ii) above, or this clause (iii).

"NET ASSET  VALUE"  shall mean,  with respect to any Share of a Sub-Fund and any
date of  determination,  the net asset value of such Share on such date computed
in the manner such value is  required  to be  computed  by such  Sub-Fund in its
reports to its shareholders.

"NON-OMNIBUS  COMMISSION  SHARE"  shall  mean  a  Commission  Share  that  is  a
Non-Omnibus Share.

"NON-OMNIBUS FREE SHARE" shall mean a Free Share that is a Non-Omnibus Share.

"NON-OMNIBUS SHARE" shall mean a Share that is not an Omnibus Share.

"OMNIBUS  COMMISSION  SHARE"  shall mean a  Commission  Share that is an Omnibus
Share.

"OMNIBUS FREE SHARE" shall mean a Free Share that is an Omnibus Share.

"OMNIBUS  SHARE"  shall  mean,  with  respect to any  Sub-Fund,  a Share of such
Sub-Fund  held in the name of a broker  dealer  street  account  on the  records
maintained by the Sub-Fund's Transfer Agent.

"SHARE" shall mean any Deferred Charge Share of any New B Share Sub-Fund.

ATTRIBUTION  OF SHARES:  Shares of each Sub-Fund  outstanding  from time to time
shall  be  attributed  to  Monthly  Pools  in  accordance   with  the  following
procedures:

1     NON-OMNIBUS SHARES

     (a)  COMMISSION SHARES

           Each  Sub-Fund's  Transfer Agent  maintains  records with which it is
           able to determine  the  original  issuance  date of each  outstanding
           Non-Omnibus  Commission Share, or in the case of a Transfer Share, of
           the Original  Charge Share from which such Transfer  Share is derived
           through  one or more  Free  Exchanges.  Using  such  data,  LFL  will
           attribute the following  Commission  Shares  outstanding from time to
           time to the  Monthly  Pool having its Sale Cutoff Date in a specified
           month:  (i)  Original  Charge  Shares sold  (whether or not  settled)
           during  such  month,  and (ii)  Transfer  Shares  which were  derived
           through one or more Free Exchanges  from Original  Charge Shares sold
           (whether or not settled)  during such month,  in each case determined
           in accordance with the records maintained by the Transfer Agent.
<PAGE>

     (b)  FREE SHARES

           Non-Omnibus  Free Shares of a Sub-Fund to be attributed among Monthly
           Pools  pursuant to this Section 1(b) will be  attributed by LFL using
           records  maintained  by  LFL  in  accordance  with  this  Section  1.
           information  supplied  by  such  Sub-Fund's  Transfer  Agent  and the
           following methodology:

           (1)  NON-OMNIBUS FREE SHARE ISSUANCES.  Non-Omnibus Free Shares
                --------------------------------
                issued on any day during any calendar month by such Sub-Fund
                shall be attributed:

                (i)  To Monthly Pools  originated prior to the month in question
                     using the following formula:

                          FS *          CSFS
                                --------------------------
                                  TCSFS + [NMCS * DD/DM]

                (ii) To the Monthly Pool originated during the month in question
                     using the following formula:

                          FS *          NMCS                    DD
                                --------------------------   *  ----
                                   TCSFS + [NMCS  * DD/DM]      DM

                (iii) For this purpose:

                          FS   =    The  number  of  Non-Omnibus  Free  Shares
                                    issued on such day during  such month  based
                                    on   information   provided  by  the  Fund's
                                    Transfer Agent.

                          CSFS =    The  number  of  Non-Omnibus   Commission
                                    Shares   and    Non-Omnibus    Free   Shares
                                    attributed  to such Monthly Pool in question
                                    and  outstanding as of the close of business
                                    on  the  last  business  day  of  the  month
                                    preceding the month in question.

                          TCSFS =   The total number of Non-Omnibus Commission
                                    Shares   and    Non-Omnibus    Free   Shares
                                    outstanding  as of the close of  business on
                                    the  last  day of the  month  preceding  the
                                    month in question.

                          NMCS =    The  number  of  Non-Omnibus   Commission
                                    Shares   attributed   to  the  Monthly  Pool
                                    originated  during the month in question and
                                    outstanding  as of the close of  business on
                                    the last business day of such month.
<PAGE>

                          DD   =    The  number  of  days  in  the  month  in
                                    question   prior   to  and   including   the
                                    ex-dividend  date  for  the  payment  of the
                                    dividend or other  distribution  giving rise
                                    to the issuance of Free Shares in question.

                          DM   =    The  number  of  days  in  the  month  in
                                    question.

           (2)  NON-OMNIBUS  FREE SHARE  CONVERSIONS.  The number of Non-Omnibus
                Free Shares of a Sub-Fund deemed  converted  during any calendar
                month will equal the sum of (i) the number of  Non-Omnibus  Free
                Shares of such  Sub-Fund  attributed as of the close of business
                on the last  business day preceding the month in question to the
                Monthly  Pool the  Anniversary  of the Sale Cutoff Date of which
                occurs  during such month,  plus (ii) the number of  Non-Omnibus
                Free Shares of such  Sub-Fund  attributed  to such  Monthly Pool
                with respect to the month in question pursuant to clause 1(b)(1)
                above.

           (3)  NON-OMNIBUS  FREE SHARE  REDEMPTIONS AND EXCHANGES.  Net changes
                during  any  calendar  month in the number of  Non-Omnibus  Free
                Shares of a Sub-Fund  that have not been  allocated  pursuant to
                clause  1(b)(1) or 1(b)(2) above (which  changes will  primarily
                result from  redemptions  or exchanges of such Shares)  shall be
                attributed  to Monthly  Pools as of the end of such month  using
                the following methodology:

                (i)  The aggregate amount of such changes during such month will
                     be computed as follows:

                             FSRE = FSO - FSI + FSC

                             where:

                          FSRE  =   The change during such  calendar  month in
                                    the number of outstanding  Non-Omnibus  Free
                                    Shares of the Sub-Fund in question  that has
                                    not  been   allocated   pursuant  to  clause
                                    1(b)(1) or 1(b)(2) above.

                          FSO   =   The  number  of  Non-Omnibus  Free  Shares
                                    outstanding  on the last business day of the
                                    calendar  month in question minus the number
                                    of  Non-Omnibus  Free Shares  outstanding on
                                    the  last  business  day  of  the  preceding
                                    calendar month.

                          FSI   =   The  number  of  Non-Omnibus  Free  Shares
                                    issued  during  the  month in  question  and
                                    attributed  to  Monthly  Pools  pursuant  to
                                    clause 1(b)(1) above.
<PAGE>

                          FSC   =   The  number  of  Non-Omnibus  Free  Shares
                                    deemed   converted   during   the  month  in
                                    question  and  attributed  to Monthly  Pools
                                    pursuant to clause 1(b)(2) above.

                     (ii) The aggregate amount of FSRE during such month will be
                          attributed to Monthly Pools as follows:

                          FSRE X      FS
                                    ----
                                     TFS

                          where:

                          FSRE  =   The amount of FSRE determined as
                                    provided in clause (i) above.

                          FS    =   The  number  of  Non-Omnibus  Free  Shares
                                    attributed  to such  Monthly  Pool as of the
                                    last  business  day  of the  calendar  month
                                    preceding the month in question.

                          TFS   =   The  total  number  of  Non-Omnibus  Free
                                    Shares  as of the last  business  day of the
                                    calendar   month   preceding  the  month  in
                                    question.

2     Omnibus Shares.

(a)   Alternative Methodologies.

      If the  conditions to broker  dealer  attribution  of Omnibus  Shares of a
      Sub-Fund  have been  satisfied,  then the Omnibus  Shares of such Sub-Fund
      will be attributed pursuant to Section 2(b).

      If the  conditions to broker  dealer  attribution  of Omnibus  Shares of a
      Sub-Fund have not been satisfied, then the Omnibus Shares of such Sub-Fund
      will be attributed pursuant to Section 2(c).

      The  conditions  to  broker  dealer  attribution  of  Omnibus  Shares of a
      Sub-Fund  will  have been  satisfied  if  certain  broker  dealer(s)  (the
      "Specified Broker Dealer(s)") can provide reliable data with which LFL can
      attribute  Omnibus  Shares  held  by the  Specified  Broker  Dealer(s)  to
      specific  Monthly  Pools using the  methodology  described in Section 1 as
      though all  references  in Section 1 to the  Transfer  Agent,  Non-Omnibus
      Shares,  Non-Omnibus  Commission  Shares and Non-Omnibus  Free Shares were
      references to the Specified  Broker  Dealer(s),  Omnibus  Shares,  Omnibus
      Commission Shares and Omnibus Free Shares, respectively.
<PAGE>

(b)   IF BROKER DEALER DATA IS AVAILABLE.

           If the conditions to broker dealer attribution of Omnibus Shares of a
           Sub-Fund have been  satisfied,  then the aggregate  number of Omnibus
           Shares attributed to each Monthly Pool as of the last business day of
           a calendar month shall equal:

           OSSBD X   TOS
                   -------
                    TOSSBD

           where:

           OSSBD     =    The number of Omnibus Shares of such
                          Sub-Fund held by the Specified Broker Dealer(s)
                          as of the last business day of the calendar month
                          in question and attributed to such Monthly Pool
                          using the methodology described in Section 1 with
                          respect to such Sub-Fund and the data supplied by
                          such Specified Broker Dealer(s) but without using
                          data supplied by the Sub-Fund's Transfer Agent.

           TOS       =    The total  number of  Omnibus  Shares as of the last
                          business  day  of  the  calendar   month  in  question
                          according to the Sub-Fund's Transfer Agent's records.

           TOSSBD    =    The total  number of  Omnibus  Shares as of the last
                          business day of the calendar month in question held by
                          the  Specified  Broker  Dealer(s)   according  to  the
                          Specified Broker Dealer(s)'s records.

           (c)  IF BROKER DEALER DATA IS NOT AVAILABLE.

           If the conditions to broker dealer attribution of Omnibus Shares of a
           Sub-Fund  have  not been  satisfied,  then the  aggregate  number  of
           Omnibus  Shares  attributed  to  each  Monthly  Pool  as of the  last
           business day of a calendar month shall equal:

           TOS X    NOS
                   ------
                    TNOS

           where:

           TOS      =     The total  number of  Omnibus  Shares as of the last
                          business  day  of  the  calendar   month  in  question
                          according to the Sub-Fund's Transfer Agent's records.

           NOS      =     The  number  of  Non-Omnibus  Shares  as of the last
                          business  day  of  the  calendar   month  in  question
                          attributed to the Monthly Pool in question.

           TNOS     =     The  total  number of  Non-Omnibus  Shares as of the
                          last business day of the calendar month in question.

<PAGE>

                                   SCHEDULE E

1.    An opinion of Luxembourg counsel.

2.    Certified  copies  of the  Articles  of  Incorporation  of the  Fund and a
      resolution of the board of directors of the Fund wherein, inter alia, they
      authorise the execution of this Agreement by the Fund and the  performance
      of its obligations hereunder.

3.    Certified copies of the Prospectus Documents, the Advisory Agreements,
      the Distribution Agreement, the Distribution Agreement Addendum, the
      Distribution Controller Agreement and the Fees Side-Letter.

<PAGE>

SIGNED for and on behalf of
LIGHTNING  FINANCE  COMPANY  LIMITED
by
Signature:   ____________________________

Print Name:  ____________________________

Title:       ____________________________
             DULY AUTHORISED OFFICER

in the presence of:

Signature:   _____________________________

Witness Name:_____________________________

Address:     _____________________________

SIGNED for and on behalf of
TEMPLETON GLOBAL STRATEGY FUNDS
by
Signature:   ____________________________

Print Name:  ____________________________

Title:       ____________________________
             DULY AUTHORISED OFFICER

in the presence of:

Signature:   _____________________________

Witness Name:_____________________________

Address:     _____________________________

<PAGE>

SIGNED for and on behalf of
TEMPLETON  GLOBAL  ADVISORS  LIMITED
by
Signature:   ____________________________

Print Name:  ____________________________

Title:       ____________________________
             DULY AUTHORISED OFFICER

in the presence of:

Signature:   _____________________________

Witness Name:_____________________________

Address:     _____________________________

SIGNED for and on behalf of
TEMPLETON GLOBAL STRATEGIC SERVICES S.A.

by

Signature:   ____________________________

Print Name:  ____________________________

Title:       ____________________________
             DULY AUTHORISED OFFICER

in the presence of:

Signature:   _____________________________

Witness Name:_____________________________

Address:     _____________________________PARTICIPATION AGREEMENT
                                as of May 1, 2000
              Franklin Templeton Variable Insurance Products Trust
                      Franklin Templeton Distributors, Inc.
                       CUNA Mutual Life Insurance Company

                                    CONTENTS

 SECTION    SUBJECT MATTER

      1.    Parties and Purpose
      2.    Representations and Warranties
      3.    Purchase and Redemption of Trust Portfolio Shares
      4.    Fees, Expenses, Prospectuses, Proxy Materials and Reports
      5.    Voting
      6.    Sales Material, Information and Trademarks
      7.    Indemnification
      8.    Notices
      9.    Termination
      10.   Miscellaneous

                           SCHEDULES TO THIS AGREEMENT

      A.    The Company
      B.    Accounts of the Company
      C.    Available Portfolios and Classes of Shares of the Trust;
            Investment Advisers
      D.    Contracts of the Company
      E.    Other Portfolios Available under the Contracts
      F.    Rule 12b-1 Plans of the Trust
      G.    Addresses for Notices
      H.    Shared Funding Order

1.    PARTIES AND PURPOSE

      This agreement (the "Agreement") is between certain portfolios, specified
below and in Schedule C, of Franklin Templeton Variable Insurance Products
Trust, an open-end management investment company organized as a business trust
under Massachusetts law (the "Trust"), Franklin Templeton Distributors, Inc., a
California corporation which is the principal underwriter for the Trust (the
"Underwriter," and together with the Trust, "we" or "us") and the insurance
company identified on Schedule A ("you"), on your own behalf and on behalf of
<PAGE>

each segregated asset account maintained by you that is listed on Schedule B, as
that schedule may be amended from time to time ("Account" or "Accounts").

      The purpose of this Agreement is to entitle you, on behalf of the
Accounts, to purchase the shares, and classes of shares, of portfolios of the
Trust ("Portfolios") that are identified on Schedule C, solely for the purpose
of funding benefits of your variable life insurance policies or variable annuity
contracts ("Contracts") that are identified on Schedule D. This Agreement does
not authorize any other purchases or redemptions of shares of the Trust.

2.    REPRESENTATIONS AND WARRANTIES

      2.1   REPRESENTATIONS AND WARRANTIES BY YOU

      You represent and warrant that:

            2.1.1 You are an insurance company duly organized and in good
standing under the laws of your state of incorporation.

            2.1.2 All of your directors, officers, employees, and other
individuals or entities dealing with the money and/or securities of the Trust
are and shall be at all times covered by a blanket fidelity bond or similar
coverage for the benefit of the Trust, in an amount not less than $5 million.
Such bond shall include coverage for larceny and embezzlement and shall be
issued by a reputable bonding company. You agree to make all reasonable efforts
to see that this bond or another bond containing such provisions is always in
effect, and you agree to notify us in the event that such coverage no longer
applies.

            2.1.3 Each Account is a duly organized, validly existing segregated
asset account under applicable insurance law and interests in each Account are
offered exclusively through the purchase of or transfer into a "variable
contract" within the meaning of such terms under Section 817 of the Internal
Revenue Code of 1986, as amended ("Code") and the regulations thereunder. You
will use your best efforts to continue to meet such definitional requirements,
and will notify us immediately upon having a reasonable basis for believing that
such requirements have ceased to be met or that they might not be met in the
future.

            2.1.4 Each Account either: (i) has been registered or, prior to any
issuance or sale of the Contracts, will be registered as a unit investment trust
under the Investment Company Act of 1940 ("1940 Act"); or (ii) has not been so
registered in proper reliance upon an exemption from registration under Section
3(c) of the 1940 Act; if the Account is exempt from registration as an
investment company under Section 3(c) of the 1940 Act, you will use your best
efforts to maintain such exemption and will notify us immediately upon having a
reasonable basis for believing that such exemption no longer applies or might
not apply in the future.

            2.1.5 The Contracts or interests in the Accounts: (i) are or, prior
to any issuance or sale will be, registered as securities under the Securities
Act of 1933, as amended (the "1933 Act"); or (ii) are not registered because
they are properly exempt from registration under Section 3(a)(2) of the 1933 Act
or will be offered exclusively in transactions that are properly exempt from

                                       2
<PAGE>

registration under Section 4(2) or Regulation D of the 1933 Act, in which case
you will make every effort to maintain such exemption and will notify us
immediately upon having a reasonable basis for believing that such exemption no
longer applies or might not apply in the future.

            2.1.6 The Contracts: (i) will be sold by broker-dealers, or their
registered representatives, who are registered with the Securities and Exchange
Commission ("SEC") under the Securities and Exchange Act of 1934, as amended
(the "1934 Act") and who are members in good standing of the National
Association of Securities Dealers, Inc. (the "NASD"); (ii) will be issued and
sold in compliance in all material respects with all applicable federal and
state laws; and (iii) will be sold in compliance in all material respects with
state insurance suitability requirements and NASD suitability guidelines.

            2.1.7 The Contracts currently are and will be treated as annuity
contracts or life insurance contracts under applicable provisions of the Code
and you will use your best efforts to maintain such treatment; you will notify
us immediately upon having a reasonable basis for believing that any of the
Contracts have ceased to be so treated or that they might not be so treated in
the future.

            2.1.8 The fees and charges deducted under each Contract, in the
aggregate, are reasonable in relation to the services rendered, the expenses
expected to be incurred, and the risks assumed by you.

            2.1.9 You will use shares of the Trust only for the purpose of
funding benefits of the Contracts through the Accounts.

            2.1.10 Contracts will not be sold outside of the United States.

            2.1.11 With respect to any Accounts which are exempt from
registration under the 1940 Act in reliance on 3(c)(1) or Section 3(c)(7)
thereof:

                  2.1.11.1    the principal underwriter for each such Account
                              and any subaccounts thereof is a registered
                              broker-dealer with the SEC under the 1934 Act;

                  2.1.11.2    the shares of the Portfolios of the Trust are and
                              will continue to be the only investment securities
                              held by the corresponding subaccounts; and

                  2.1.11.3    with regard to each Portfolio, you, on behalf of
                              the corresponding subaccount, will:

                              (a)   vote such shares held by it in the same
                                    proportion as the vote of all other holders
                                    of such shares; and

                              (b)   refrain from substituting shares of another
                                    security for such shares unless the SEC has

                                       3
<PAGE>

                                    approved such substitution in the manner
                                    provided in Section 26 of the 1940 Act.

      2.2   REPRESENTATIONS AND WARRANTIES BY THE TRUST

      The Trust represents and warrants that:

            2.2.1 It is duly organized and in good standing under the laws of
the State of Massachusetts.

            2.2.2 All of its directors, officers, employees and others dealing
with the money and/or securities of a Portfolio are and shall be at all times
covered by a blanket fidelity bond or similar coverage for the benefit of the
Trust in an amount not less that the minimum coverage required by Rule 17g-1 or
other regulations under the 1940 Act. Such bond shall include coverage for
larceny and embezzlement and be issued by a reputable bonding company.

            2.2.3 It is registered as an open-end management investment company
under the 1940 Act.

            2.2.4 Each class of shares of the Portfolios of the Trust is
registered under the 1933 Act.

            2.2.5 It will amend its registration statement under the 1933 Act
and the 1940 Act from time to time as required in order to effect the continuous
offering of its shares.

            2.2.6 It will comply, in all material respects, with the 1933 and
1940 Acts and the rules and regulations thereunder.

            2.2.7 It is currently qualified as a "regulated investment company"
under Subchapter M of the Code, it will make every effort to maintain such
qualification, and will notify you immediately upon having a reasonable basis
for believing that it has ceased to so qualify or that it might not so qualify
in the future.

            2.2.8 The Trust will use its best efforts to comply with the
diversification requirements for variable annuity, endowment or life insurance
contracts set forth in Section 817(h) of the Code, and the rules and regulations
thereunder, including without limitation Treasury Regulation 1.817-5. Upon
having a reasonable basis for believing any Portfolio has ceased to comply and
will not be able to comply within the grace period afforded by Regulation
1.817-5, the Trust will notify you immediately and will take all reasonable
steps to adequately diversify the Portfolio to achieve compliance.

                                       4
<PAGE>

            2.2.9 It currently intends for one or more classes of shares (each,
a "Class") to make payments to finance its distribution expenses, including
service fees, pursuant to a plan ("Plan") adopted under rule 12b-1 under the
1940 Act ("Rule 12b-1"), although it may determine to discontinue such practice
in the future. To the extent that any Class of the Trust finances its
distribution expenses pursuant to a Plan adopted under rule 12b-1, the Trust
undertakes to comply with any then current SEC interpretations concerning rule
12b-1 or any successor provisions.

      2.3   REPRESENTATIONS AND WARRANTIES BY THE UNDERWRITER

      The Underwriter represents and warrants that:

            2.3.1 It is registered as a broker dealer with the SEC under the
1934 Act, and is a member in good standing of the NASD.

            2.3.2 Each investment adviser listed on Schedule C (each, an
"Adviser") is duly registered as an investment adviser under the Investment
Advisers Act of 1940, as amended, and any applicable state securities law.

            2.4   WARRANTY AND AGREEMENT BY BOTH YOU AND US

      We received an order from the SEC dated November 16, 1993 (file no.
812-8546), which was amended by a notice and an order we received on September
17, 1999 and October 13, 1999, respectively (file no. 812-11698) (collectively,
the "Shared Funding Order," attached to this Agreement as Schedule H). The
Shared Funding Order grants exemptions from certain provisions of the 1940 Act
and the regulations thereunder to the extent necessary to permit shares of the
Trust to be sold to and held by variable annuity and variable life insurance
separate accounts of both affiliated and unaffiliated life insurance companies
and qualified pension and retirement plans outside the separate account context.
You and we both warrant and agree that both you and we will comply with the
"Applicants' Conditions" prescribed in the Shared Funding Order as though such
conditions were set forth verbatim in this Agreement, including, without
limitation, the provisions regarding potential conflicts of interest between the
separate accounts which invest in the Trust and regarding contract owner voting
privileges. In order for the Trust's Board of Trustees to perform its duty to
monitor for conflicts of interest, you agree to inform us of the occurrence of
any of the events specified in condition 2 of the Shared Funding Order to the
extent that such event may or does result in a material conflict of interest as
defined in that order.

3.    PURCHASE AND REDEMPTION OF TRUST PORTFOLIO SHARES

      3.1 We will make shares of the Portfolios available to the Accounts for
the benefit of the Contracts. The shares will be available for purchase at the
net asset value per share next computed after we (or our agent) receive a
purchase order, as established in accordance with the provisions of the then
current prospectus of the Trust. Notwithstanding the foregoing, the Trust's
Board of Trustees ("Trustees") may refuse to sell shares of any Portfolio to any
person, or may suspend or terminate the offering of shares of any Portfolio if
such action is required by law or by regulatory authorities having jurisdiction
or if, in the sole discretion of the Trustees, they deem such action to be in
the best interests of the shareholders of such Portfolio. Without limiting the

                                       5
<PAGE>

foregoing, the Trustees have determined that there is a significant risk that
the Trust and its shareholders may be adversely affected by investors whose
purchase and redemption activity follows a market timing pattern, and have
authorized the Trust, the Underwriter and the Trust's transfer agent to adopt
procedures and take other action (including, without limitation, rejecting
specific purchase orders) as they deem necessary to reduce, discourage or
eliminate market timing activity. You agree to cooperate with us to assist us in
implementing the Trust's restrictions on purchase and redemption activity that
follows a market timing pattern.

      3.2 We agree that shares of the Trust will be sold only to life insurance
companies which have entered into fund participation agreements with the Trust
("Participating Insurance Companies") and their separate accounts or to
qualified pension and retirement plans in accordance with the terms of the
Shared Funding Order. No shares of any Portfolio will be sold to the general
public.

      3.3 You agree that all net amounts available under the Contracts shall be
invested in the Trust or in your general account. Net amounts available under
the Contracts may also be invested in an investment company other than the Trust
if: (i) such other investment company, or series thereof, has investment
objectives or policies that are substantially different from the investment
objectives and policies of the Portfolios; or (ii) you give us forty-five (45)
days written notice of your intention to make such other investment company
available as a funding vehicle for the Contracts; or (iii) such other investment
company is available as a funding vehicle for the Contracts at the date of this
Agreement and you so inform us prior to our signing this Agreement (a list of
such investment companies appears on Schedule E to this Agreement); or (iv) we
consent in writing to the use of such other investment company.

      3.4 You shall be the designee for us for receipt of purchase orders and
requests for redemption resulting from investment in and payments under the
Contracts ("Instructions"). The Business Day on which such Instructions are
received in proper form by you and time stamped by the close of trading will be
the date as of which Portfolio shares shall be deemed purchased, exchanged, or
redeemed as a result of such Instructions. Instructions received in proper form
by you and time stamped after the close of trading on any given Business Day
shall be treated as if received on the next following Business Day. You warrant
that all orders, Instructions and confirmations received by you which will be
transmitted to us for processing on a Business Day will have been received and
time stamped prior to the Close of Trading on that Business Day. Instructions we
receive after 9 a.m. Eastern Time shall be processed on the next Business Day.
"Business Day" shall mean any day on which the New York Stock Exchange is open
for trading and on which the Trust calculates its net asset value pursuant to
the rules of the SEC and its current prospectus.

      3.5 We shall calculate the net asset value per share of each Portfolio on
each Business Day, and shall communicate these net asset values to you or your
designated agent on a daily basis as soon as reasonably practical after the
calculation is completed (normally by 6:30 p.m. Eastern time).

                                       6
<PAGE>

      3.6 You shall submit payment for the purchase of shares of a Portfolio on
behalf of an Account no later than the close of business on the next Business
Day after we receive the purchase order. Payment shall be made in federal funds
transmitted by wire to the Trust or to its designated custodian.

      3.7 We will redeem any full or fractional shares of any Portfolio, when
requested by you on behalf of an Account, at the net asset value next computed
after receipt by us (or our agent) of the request for redemption, as established
in accordance with the provisions of the then current prospectus of the Trust.
We shall make payment for such shares in the manner we establish from time to
time, but in no event shall payment be delayed for a greater period than is
permitted by the 1940 Act. Payments for the purchase or redemption of shares by
you may be netted against one another on any Business Day for the purpose of
determining the amount of any wire transfer on that Business Day.

      3.8 Issuance and transfer of the Portfolio shares will be by book entry
only. Stock certificates will not be issued to you or the Accounts. Portfolio
shares purchased from the Trust will be recorded in the appropriate title for
each Account or the appropriate subaccount of each Account.

      3.9 We shall furnish, on or before the ex-dividend date, notice to you of
any income dividends or capital gain distributions payable on the shares of any
Portfolio. You hereby elect to receive all such income dividends and capital
gain distributions as are payable on shares of a Portfolio in additional shares
of that Portfolio, and you reserve the right to change this election in the
future. We will notify you of the number of shares so issued as payment of such
dividends and distributions.

4.    FEES, EXPENSES, PROSPECTUSES, PROXY MATERIALS AND REPORTS

      4.1 We shall pay no fee or other compensation to you under this Agreement
except as provided on Schedule F, if attached.

      4.2 We shall prepare and be responsible for filing with the SEC, and any
state regulators requiring such filing, all shareholder reports, notices, proxy
materials (or similar materials such as voting instruction solicitation
materials), prospectuses and statements of additional information of the Trust.
We shall bear the costs of preparation and filing of the documents listed in the
preceding sentence, registration and qualification of the Trust's shares of the
Portfolios.

      4.3 We shall use reasonable efforts to provide you, on a timely basis,
with such information about the Trust, the Portfolios and each Adviser, in such
form as you may reasonably require, as you shall reasonably request in
connection with the preparation of disclosure documents and annual and
semi-annual reports pertaining to the Contracts.

      4.4 At your request, we shall provide you with camera ready copy, in a
form suitable for printing, of a copy of portions of the Trust's current
prospectus, annual report, semi-annual report and other shareholder
communications, including any amendments or supplements to any of the foregoing,
pertaining specifically to the Portfolios. We shall delete information relating
to series of the Trust other than the Portfolios to the extent practicable. We
shall provide you with a copy of the Trust's current statement of additional

                                       7
<PAGE>

information, including any amendments or supplements, in a form suitable for you
to duplicate. You shall bear the costs of furnishing these documents (including
printing and mailing) to Contract owners or others.

       4.5 We shall provide you, at our expense, with copies of any
Trust-sponsored proxy materials in such quantity as you shall reasonably require
for distribution to Contract owners who are invested in a designated subaccount.
You shall bear the costs of distributing proxy materials (or similar materials
such as voting solicitation instructions) to Contract owners.

      4.6 You assume sole responsibility for ensuring that the Trust's
prospectuses, shareholder reports and communications, and proxy materials are
delivered to Contract owners in accordance with applicable federal and state
securities laws.

5.    VOTING

      5.1 All Participating Insurance Companies shall have the obligations and
responsibilities regarding pass-through voting and conflicts of interest
corresponding to those contained in the Shared Funding Order.

      5.2 If and to the extent required by law, you shall: (i) solicit voting
instructions from Contract owners; (ii) vote the Trust shares in accordance with
the instructions received from Contract owners; and (iii) vote Trust shares for
which no instructions have been received in the same proportion as Trust shares
of such Portfolio for which instructions have been received; so long as and to
the extent that the SEC continues to interpret the 1940 Act to require
pass-through voting privileges for variable contract owners. You reserve the
right to vote Trust shares held in any Account in your own right, to the extent
permitted by law.

      5.3 So long as, and to the extent that, the SEC interprets the 1940 Act to
require pass-through voting privileges for Contract owners, you shall provide
pass-through voting privileges to Contract owners whose Contract values are
invested, through the Accounts, in shares of one or more Portfolios of the
Trust. We shall require all Participating Insurance Companies to calculate
voting privileges in the same manner and you shall be responsible for assuring
that the Accounts calculate voting privileges in the manner established by us.
With respect to each Account, you will vote shares of each Portfolio of the
Trust held by an Account and for which no timely voting instructions from
Contract owners are received in the same proportion as those shares held by that
Account for which voting instructions are received. You and your agents will in
no way recommend or oppose or interfere with the solicitation of proxies for
Portfolio shares held to fund the Contracts without our prior written consent,
which consent may be withheld in our sole discretion.

6.    SALES MATERIAL, INFORMATION AND TRADEMARKS

      6.1 For purposes of this Section 6, "Sales literature or other Promotional
material" includes, but is not limited to, portions of the following that use
any logo or other trademark related to the Trust, or Underwriter or its
affiliates, or refer to the Trust: advertisements (such as material published or
designed for use in a newspaper, magazine or other periodical, radio,
television, telephone or tape recording, videotape display, signs or billboards,
motion pictures, electronic communication or other public media), sales

                                       8
<PAGE>

literature (i.e., any written communication distributed or made generally
available to customers or the public, including brochures, circulars, research
reports, market letters, form letters, seminar texts, reprints or excerpts or
any other advertisement, sales literature or published article or electronic
communication), educational or training materials or other communications
distributed or made generally available to some or all agents or employees in
any media, and disclosure documents, shareholder reports and proxy materials.

       6.2 You shall furnish, or cause to be furnished to us or our designee, at
least one complete copy of each registration statement, prospectus, statement of
additional information, private placement memorandum, retirement plan disclosure
information or other disclosure documents or similar information, as applicable
(collectively "Disclosure Documents"), as well as any report, solicitation for
voting instructions, Sales literature or other Promotional materials, and all
amendments to any of the above that relate to the Contracts or the Accounts
prior to its first use. You shall furnish, or shall cause to be furnished, to us
or our designee each piece of Sales literature or other Promotional material in
which the Trust or an Adviser is named, at least fifteen (15) Business Days
prior to its proposed use. No such material shall be used unless we or our
designee approve such material and its proposed use.

       6.3 You and your agents shall not give any information or make any
representations or statements on behalf of the Trust or concerning the Trust,
the Underwriter or an Adviser, other than information or representations
contained in and accurately derived from the registration statement or
prospectus for the Trust shares (as such registration statement and prospectus
may be amended or supplemented from time to time), annual and semi-annual
reports of the Trust, Trust-sponsored proxy statements, or in Sales literature
or other Promotional material approved by the Trust or its designee, except as
required by legal process or regulatory authorities or with the written
permission of the Trust or its designee.

       6.4 We shall not give any information or make any representations or
statements on behalf of you or concerning you, the Accounts or the Contracts
other than information or representations contained in and accurately derived
from Disclosure Documents for the Contracts (as such Disclosure Documents may be
amended or supplemented from time to time), or in materials approved by you for
distribution, including Sales literature or other Promotional materials, except
as required by legal process or regulatory authorities or with your written
permission.

      6.5 Except as provided in Section 6.2, you shall not use any designation
comprised in whole or part of the names or marks "Franklin" or "Templeton" or
any logo or other trademark relating to the Trust or the Underwriter without
prior written consent, and upon termination of this Agreement for any reason,
you shall cease all use of any such name or mark as soon as reasonably
practicable.

7.    INDEMNIFICATION

      7.1   INDEMNIFICATION BY YOU

                                       9
<PAGE>

            7.1.1 You agree to indemnify and hold harmless the Underwriter, the
Trust and each of its Trustees, officers, employees and agents and each person,
if any, who controls the Trust within the meaning of Section 15 of the 1933 Act
(collectively, the "Indemnified Parties" and individually the "Indemnified
Party" for purposes of this Section 7) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with your written
consent, which consent shall not be unreasonably withheld) or expenses
(including the reasonable costs of investigating or defending any alleged loss,
claim, damage, liability or expense and reasonable legal counsel fees incurred
in connection therewith) (collectively, "Losses"), to which the Indemnified
Parties may become subject under any statute or regulation, or at common law or
otherwise, insofar as such Losses are related to the sale or acquisition of
shares of the Trust or the Contracts and

                  7.1.1.1 arise out of or are based upon any untrue statements
      or alleged untrue statements of any material fact contained in a
      Disclosure Document for the Contracts or in the Contracts themselves or in
      sales literature generated or approved by you on behalf of the Contracts
      or Accounts (or any amendment or supplement to any of the foregoing)
      (collectively, "Company Documents" for the purposes of this Section 7), or
      arise out of or are based upon the omission or the alleged omission to
      state therein a material fact required to be stated therein or necessary
      to make the statements therein not misleading, provided that this
      indemnity shall not apply as to any Indemnified Party if such statement or
      omission or such alleged statement or omission was made in reliance upon
      and was accurately derived from written information furnished to you by or
      on behalf of the Trust for use in Company Documents or otherwise for use
      in connection with the sale of the Contracts or Trust shares; or

                  7.1.1.2 arise out of or result from statements or
      representations (other than statements or representations contained in and
      accurately derived from Trust Documents as defined below in Section 7.2)
      or wrongful conduct of you or persons under your control, with respect to
      the sale or acquisition of the Contracts or Trust shares; or

                  7.1.1.3 arise out of or result from any untrue statement or
      alleged untrue statement of a material fact contained in Trust Documents
      as defined below in Section 7.2 or the omission or alleged omission to
      state therein a material fact required to be stated therein or necessary
      to make the statements therein not misleading if such statement or
      omission was made in reliance upon and accurately derived from written
      information furnished to the Trust by or on behalf of you; or

                  7.1.1.4 arise out of or result from any failure by you to
      provide the services or furnish the materials required under the terms of
      this Agreement;

                  7.1.1.5 arise out of or result from any material breach of any
      representation and/or warranty made by you in this Agreement or arise out
      of or result from any other material breach of this Agreement by you; or

                  7.1.1.6 arise out of or result from a Contract failing to be
      considered a life insurance policy or an annuity Contract, whichever is

                                       10
<PAGE>

      appropriate, under applicable provisions of the Code thereby depriving the
      Trust of its compliance with Section 817(h) of the Code.

            7.1.2 You shall not be liable under this indemnification provision
with respect to any Losses to which an Indemnified Party would otherwise be
subject by reason of such Indemnified Party's willful misfeasance, bad faith, or
gross negligence in the performance of such Indemnified Party's duties or by
reason of such Indemnified Party's reckless disregard of obligations and duties
under this Agreement or to the Trust or Underwriter, whichever is applicable.
You shall also not be liable under this indemnification provision with respect
to any claim made against an Indemnified Party unless such Indemnified Party
shall have notified you in writing within a reasonable time after the summons or
other first legal process giving information of the nature of the claim shall
have been served upon such Indemnified Party (or after such Indemnified Party
shall have received notice of such service on any designated agent), but failure
to notify you of any such claim shall not relieve you from any liability which
it may have to the Indemnified Party against whom such action is brought
otherwise than on account of this indemnification provision. In case any such
action is brought against the Indemnified Parties, you shall be entitled to
participate, at your own expense, in the defense of such action. Unless the
Indemnified Party releases you from any further obligations under this Section
7.1, you also shall be entitled to assume the defense thereof, with counsel
satisfactory to the party named in the action. After notice from you to such
party of the your election to assume the defense thereof, the Indemnified Party
shall bear the fees and expenses of any additional counsel retained by it, and
you will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.

            7.1.3 The Indemnified Parties will promptly notify you of the
commencement of any litigation or proceedings against them in connection with
the issuance or sale of the Trust shares or the Contracts or the operation of
the Trust.

      7.2   INDEMNIFICATION BY THE UNDERWRITER

            7.2.1 The Underwriter agrees to indemnify and hold harmless you, and
each of your directors and officers and each person, if any, who controls you
within the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" and individually an "Indemnified Party" for purposes of this Section
7.2) against any and all losses, claims, damages, liabilities (including amounts
paid in settlement with the written consent of the Underwriter, which consent
shall not be unreasonably withheld) or expenses (including the reasonable costs
of investigating or defending any alleged loss, claim, damage, liability or
expense and reasonable legal counsel fees incurred in connection therewith)
(collectively, "Losses") to which the Indemnified Parties may become subject
under any statute, at common law or otherwise, insofar as such Losses are
related to the sale or acquisition of the shares of the Trust or the Contracts
and:

                  7.2.1.1 arise out of or are based upon any untrue statements
      or alleged untrue statements of any material fact contained in the
      Registration Statement, prospectus or sales literature of the Trust (or
      any amendment or supplement to any of the foregoing) (collectively, the
      "Trust Documents") or arise out of or are based upon the omission or the

                                       11
<PAGE>

      alleged omission to state therein a material fact required to be stated
      therein or necessary to make the statements therein not misleading,
      provided that this agreement to indemnify shall not apply as to any
      Indemnified Party if such statement or omission of such alleged statement
      or omission was made in reliance upon and in conformity with information
      furnished to us by or on behalf of you for use in the Registration
      Statement or prospectus for the Trust or in sales literature (or any
      amendment or supplement) or otherwise for use in connection with the sale
      of the Contracts or Trust shares; or

                  7.2.1.2 arise out of or as a result of statements or
      representations (other than statements or representations contained in the
      Disclosure Documents or sales literature for the Contracts not supplied by
      the Underwriter or persons under its control) or wrongful conduct of the
      Trust, Adviser or Underwriter or persons under their control, with respect
      to the sale or distribution of the Contracts or Trust shares; or

                  7.2.1.3 arise out of any untrue statement or alleged untrue
      statement of a material fact contained in a Disclosure Document or sales
      literature covering the Contracts, or any amendment thereof or supplement
      thereto, or the omission or alleged omission to state therein a material
      fact required to be stated therein or necessary to make the statement or
      statements therein not misleading, if such statement or omission was made
      in reliance upon information furnished to you by or on behalf of the
      Trust; or

                  7.2.1.4 arise as a result of any failure by us to provide the
      services and furnish the materials under the terms of this Agreement
      (including a failure, whether unintentional or in good faith or otherwise,
      to comply with the qualification representation specified above in Section
      2.2.7 and the diversification requirements specified above in Section
      2.2.8; or

                  7.2.1.5 arise out of or result from any material breach of any
      representation and/or warranty made by the Underwriter in this Agreement
      or arise out of or result from any other material breach of this Agreement
      by the Underwriter; as limited by and in accordance with the provisions of
      Sections 7.2.2 and 7.2.3 hereof.

            7.2.2 The Underwriter shall not be liable under this indemnification
provision with respect to any Losses to which an Indemnified Party would
otherwise be subject by reason of such Indemnified Party's willful misfeasance,
bad faith, or gross negligence in the performance of such Indemnified Party's
duties or by reason of such Indemnified Party's reckless disregard of
obligations and duties under this Agreement or to you or the Accounts, whichever
is applicable.

            7.2.3 The Underwriter shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Underwriter in writing within a
reasonable time after the summons or other first legal process giving
information of the nature of the claim shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Underwriter of
any such claim shall not relieve the Underwriter from any liability which it may
have to the Indemnified Party against whom such action is brought otherwise than
on account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Underwriter will be entitled to
participate, at its own expense, in the defense thereof. Unless the Indemnified

                                       12
<PAGE>

Party releases the Underwriter from any further obligations under this Section
7.2, the Underwriter also shall be entitled to assume the defense thereof, with
counsel satisfactory to the party named in the action. After notice from the
Underwriter to such party of the Underwriter's election to assume the defense
thereof, the Indemnified Party shall bear the expenses of any additional counsel
retained by it, and the Underwriter will not be liable to such party under this
Agreement for any legal or other expenses subsequently incurred by such party
independently in connection with the defense thereof other than reasonable costs
of investigation.

            7.2.4 You agree promptly to notify the Underwriter of the
commencement of any litigation or proceedings against you or the Indemnified
Parties in connection with the issuance or sale of the Contracts or the
operation of each Account.

      7.3   INDEMNIFICATION BY THE TRUST

            7.3.1 The Trust agrees to indemnify and hold harmless you, and each
of your directors and officers and each person, if any, who controls you within
the meaning of Section 15 of the 1933 Act (collectively, the "Indemnified
Parties" for purposes of this Section 7.3) against any and all losses, claims,
damages, liabilities (including amounts paid in settlement with the written
consent of the Trust, which consent shall not be unreasonably withheld) or
litigation (including legal and other expenses) to which the Indemnified Parties
may become subject under any statute, at common law or otherwise, insofar as
such losses, claims, damages, liabilities or expenses (or actions in respect
thereof) or settlements result from the gross negligence, bad faith or willful
misconduct of the Board or any member thereof, are related to the operations of
the Trust, and arise out of or result from any material breach of any
representation and/or warranty made by the Trust in this Agreement or arise out
of or result from any other material breach of this Agreement by the Trust; as
limited by and in accordance with the provisions of Sections 7.3.2 and 7.3.3
hereof. It is understood and expressly stipulated that neither the holders of
shares of the Trust nor any Trustee, officer, agent or employee of the Trust
shall be personally liable hereunder, nor shall any resort be had to other
private property for the satisfaction of any claim or obligation hereunder, but
the Trust only shall be liable.

            7.3.2 The Trust shall not be liable under this indemnification
provision with respect to any losses, claims, damages, liabilities or litigation
incurred or assessed against any Indemnified Party as such may arise from such
Indemnified Party's willful misfeasance, bad faith, or gross negligence in the
performance of such Indemnified Party's duties or by reason of such Indemnified
Party's reckless disregard of obligations and duties under this Agreement or to
you, the Trust, the Underwriter or each Account, whichever is applicable.

            7.3.3 The Trust shall not be liable under this indemnification
provision with respect to any claim made against an Indemnified Party unless
such Indemnified Party shall have notified the Trust in writing within a
reasonable time after the summons or other first legal process giving

                                       13
<PAGE>

information of the nature of the claims shall have been served upon such
Indemnified Party (or after such Indemnified Party shall have received notice of
such service on any designated agent), but failure to notify the Trust of any
such claim shall not relieve the Trust from any liability which it may have to
the Indemnified Party against whom such action is brought otherwise than on
account of this indemnification provision. In case any such action is brought
against the Indemnified Parties, the Trust will be entitled to participate, at
its own expense, in the defense thereof. Unless the Indemnified Party releases
the Trust from any further obligations under this Section 7.3, the Trust also
shall be entitled to assume the defense thereof, with counsel satisfactory to
the party named in the action. After notice from the Trust to such party of the
Trust's election to assume the defense thereof, the Indemnified Party shall bear
the fees and expenses of any additional counsel retained by it, and the Trust
will not be liable to such party under this Agreement for any legal or other
expenses subsequently incurred by such party independently in connection with
the defense thereof other than reasonable costs of investigation.

            7.3.4 You agree promptly to notify the Trust of the commencement of
any litigation or proceedings against you or the Indemnified Parties in
connection with this Agreement, the issuance or sale of the Contracts, with
respect to the operation of the Account, or the sale or acquisition of shares of
the Trust.

8.    NOTICES

Any notice shall be sufficiently given when sent by registered or certified mail
to the other party at the address of such party set forth in Schedule G below or
at such other address as such party may from time to time specify in writing to
the other party.

9.    TERMINATION

      9.1 This Agreement may be terminated by any party in its entirety or with
respect to one, some or all Portfolios for any reason by sixty (60) days advance
written notice delivered to the other parties. This Agreement shall terminate
immediately in the event of its assignment by any party without the prior
written approval of the other parties, or as otherwise required by law.

      9.2 This Agreement may be terminated immediately by us upon written notice
to you if:

            9.2.1 you notify the Trust or the Underwriter that the exemption
      from registration under Section 3(c) of the 1940 Act no longer applies, or
      might not apply in the future, to the unregistered Accounts, or that the
      exemption from registration under Section 4(2) or Regulation D promulgated
      under the 1933 Act no longer applies or might not apply in the future, to
      interests under the unregistered Contracts; or

            9.2.2 either one or both of the Trust or the Underwriter
      respectively, shall determine, in their sole judgment exercised in good
      faith, that you have suffered a material adverse change in your business,
      operations, financial condition or prospects since the date of this
      Agreement or are the subject of material adverse publicity; or

                                       14
<PAGE>

            9.2.3 you give us the written notice specified above in Section 3.3
      and at the same time you give us such notice there was no notice of
      termination outstanding under any other provision of this Agreement;
      provided, however, that any termination under this Section 9.2.3 shall be
      effective forty-five (45) days after the notice specified in Section 3.3
      was given.

      9.3 If this Agreement is terminated for any reason, except as required by
the Shared Funding Order or pursuant to Section 9.2.1, above, we shall, at your
option, continue to make available additional shares of any Portfolio and redeem
shares of any Portfolio pursuant to all of the terms and conditions of this
Agreement for all Contracts in effect on the effective date of termination of
this Agreement. If this Agreement is terminated as required by the Shared
Funding Order, its provisions shall govern.

      9.4 The provisions of Sections 2 (Representations and Warranties) and 7
(Indemnification) shall survive the termination of this Agreement. All other
applicable provisions of this Agreement shall survive the termination of this
Agreement, as long as shares of the Trust are held on behalf of Contract owners
in accordance with Section 9.3, except that we shall have no further obligation
to sell Trust shares with respect to Contracts issued after termination.

      9.5 You shall not redeem Trust shares attributable to the Contracts (as
opposed to Trust shares attributable to your assets held in the Account) except:
(i) as necessary to implement Contract owner initiated or approved transactions;
(ii) as required by state and/or federal laws or regulations or judicial or
other legal precedent of general application (hereinafter referred to as a
"Legally Required Redemption"); or (iii) as permitted by an order of the SEC
pursuant to Section 26(b) of the 1940 Act. Upon request, you shall promptly
furnish to us the opinion of your counsel (which counsel shall be reasonably
satisfactory to us) to the effect that any redemption pursuant to clause (ii)
above is a Legally Required Redemption. Furthermore, except in cases where
permitted under the terms of the Contracts, you shall not prevent Contract
owners from allocating payments to a Portfolio that was otherwise available
under the Contracts without first giving us ninety (90) days notice of your
intention to do so.

10.   MISCELLANEOUS

      10.1 The captions in this Agreement are included for convenience of
reference only and in no way define or delineate any of the provisions of this
Agreement or otherwise affect their construction or effect.

      10.2 This Agreement may be executed simultaneously in two or more
counterparts, all of which taken together shall constitute one and the same
instrument.

      10.3 If any provision of this Agreement shall be held or made invalid by a
court decision, statute, rule or otherwise, the remainder of the Agreement shall
not be affected thereby.

      10.4 This Agreement shall be construed and its provisions interpreted
under and in accordance with the laws of the State of California. It shall also
be subject to the provisions of the federal securities laws and the rules and

                                       15
<PAGE>

regulations thereunder, to any orders of the SEC on behalf of the Trust granting
it exemptive relief, and to the conditions of such orders. We shall promptly
forward copies of any such orders to you.

      10.5 The parties to this Agreement acknowledge and agree that all
liabilities of the Trust arising, directly or indirectly, under this Agreement,
of any and every nature whatsoever, shall be satisfied solely out of the assets
of the Trust and that no Trustee, officer, agent or holder of shares of
beneficial interest of the Trust shall be personally liable for any such
liabilities.

      10.6 The parties to this Agreement agree that the assets and liabilities
of each Portfolio of the Trust are separate and distinct from the assets and
liabilities of each other Portfolio. No Portfolio shall be liable or shall be
charged for any debt, obligation or liability of any other Portfolio.

      10.7 Each party to this Agreement shall cooperate with each other party
and all appropriate governmental authorities (including without limitation the
SEC, the NASD, and state insurance regulators) and shall permit such authorities
reasonable access to its books and records in connection with any investigation
or inquiry relating to this Agreement or the transactions contemplated hereby.

      10.8 Each party to this Agreement shall treat as confidential all
information reasonably identified as confidential in writing by any other party
to this Agreement, and, except as permitted by this Agreement or as required by
legal process or regulatory authorities, shall not disclose, disseminate, or use
such names and addresses and other confidential information until such time as
they may come into the public domain, without the express written consent of the
affected party to this Agreement. Without limiting the foregoing, no party to
this Agreement shall disclose any information that such party has been advised
is proprietary, except such information that such party is required to disclose
by any appropriate governmental authority (including, without limitation, the
SEC, the NASD, and state securities and insurance regulators).

      10.9 The rights, remedies and obligations contained in this Agreement are
cumulative and are in addition to any and all rights, remedies and obligations,
at law or in equity, which the parties to this Agreement are entitled to under
state and federal laws.

      10.10 The parties to this Agreement acknowledge and agree that this
Agreement shall not be exclusive in any respect, except as provided above in
Section 3.3.

      10.11 Neither this Agreement nor any rights or obligations created by it
may be assigned by any party without the prior written approval of the other
parties.

      10.12 No provisions of this Agreement may be amended or modified in any
manner except by a written agreement properly authorized and executed by both
parties.

                                       16
<PAGE>

      IN WITNESS WHEREOF, each of the parties have caused their duly authorized
officers to execute this Agreement.

      The Company:          CUNA MUTUAL LIFE INSURANCE COMPANY

                            By: /s/ Michael S. Daubs
                                ---------------------
                            Name:  Michael S. Daubs
                            Title: Senior Vice President, Chief Investment
                                   Officer

      The Trust:            FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST

      Only on behalf of
      each Portfolio listed
      on Schedule C hereof

                            By: /s/ Karen L. Skidmore
                                ---------------------
                            Name:  Karen L. Skidmore
                            Title: Assistant Vice President

      The Underwriter:      FRANKLIN TEMPLETON DISTRIBUTORS, INC.

                            By: /s/ Philip J. Kearns
                                ---------------------
                            Name:  Philip J. Kearns
                            Title: Vice President

                                       17
<PAGE>

                                   SCHEDULE A

                                   THE COMPANY

CUNA Mutual Life Insurance Company
5910 Mineral Point Road
Madison, WI 53701-0391

A life insurance company organized under Iowa law.

                                       18
<PAGE>

                                   SCHEDULE B

                             ACCOUNTS OF THE COMPANY

1.    Name:                         CUNA Mutual Life Variable Annuity Account
      Date Established:             12-14-1993
      SEC Registration Number:      811- 08260

2.    Name:                         CUNA Mutual Life Group Variable Annuity
                                    Account
      Date Established:             08-16-1983
      SEC Registration Number:      N/A

3.    Name:                         CUNA Mutual Life Variable Account
      Date Established:             08-16-1983
      SEC Registration Number:      811- 03915

                                       19
<PAGE>

                                   SCHEDULE C

  AVAILABLE PORTFOLIOS AND CLASSES OF SHARES OF THE TRUST; INVESTMENT ADVISERS

FRANKLIN TEMPLETON VARIABLE
INSURANCE PRODUCTS TRUST                  INVESTMENT ADVISER
------------------------------            ------------------
Templeton Developing Markets              Templeton Asset Management Ltd.
  Securities Fund

                                       20
<PAGE>

<TABLE>
<CAPTION>

                                   SCHEDULE D

                            CONTRACTS OF THE COMPANY

-------------------------------------------------------------------------------------
                      CONTRACT 1            CONTRACT 2            CONTRACT 3
-------------------------------------------------------------------------------------
<S>                <C>                   <C>                    <C>

CONTRACT/PRODUCT   Members Variable      CU Pension Saver       MEMBERS Variable
NAME               Annuity               Group Annuity          Universal Life

                                         UltraSaver Group
                                         Annuity

                                         CU UltraSaver Group
                                         Annuity
-------------------------------------------------------------------------------------
REGISTERED (Y/N)   Yes                   No                     Yes

-------------------------------------------------------------------------------------
SEC REGISTRATION   033-73738             N/A                    033-19718
NUMBER

-------------------------------------------------------------------------------------
REPRESENTATIVE     1676                  01-GA-2-0390           190D
FORM NUMBERS

-------------------------------------------------------------------------------------
SEPARATE ACCOUNT   CUNA Mutual Life      CUNA Mutual Life       CUNA Mutual Life
NAME/DATE          Variable Annuity      Group Variable         Variable Account
ESTABLISHED        Account (December     Annuity Account        (August 16, 1983)
                   14, 1993)             (August 16, 1983)
-------------------------------------------------------------------------------------
SEC REGISTRATION   811-08260             N/A                    811-03915
NUMBER

-------------------------------------------------------------------------------------
-------------------------------------------------------------------------------------
PORTFOLIOS AND     Templeton Developing  Templeton Developing   Templeton Developing
CLASSES            Markets Securities    Markets Securities     Markets Securities
                   Fund Class 2          Fund Class 2           Fund Class 2
-------------------------------------------------------------------------------------

</TABLE>

                                       21
<PAGE>
<TABLE>
<CAPTION>
                                SCHEDULE D CONT.

                            CONTRACTS OF THE COMPANY

-------------------------------------------------------------------------------------
                      CONTRACT 4            CONTRACT 5            CONTRACT 6
-------------------------------------------------------------------------------------
<S>                <C>
CONTRACT/PRODUCT   MEMBERS Variable
NAME               Universal Life

-------------------------------------------------------------------------------------
REGISTERED (Y/N)   Yes

-------------------------------------------------------------------------------------
SEC REGISTRATION   033-81499
NUMBER

-------------------------------------------------------------------------------------
REPRESENTATIVE     99-VUL
FORM NUMBERS

-------------------------------------------------------------------------------------
SEPARATE ACCOUNT   CUNA Mutual Life
NAME/DATE          Variable Account
ESTABLISHED        (August 16, 1983)

-------------------------------------------------------------------------------------
SEC REGISTRATION   811-03915
NUMBER

-------------------------------------------------------------------------------------
PORTFOLIOS AND     Templeton Developing
CLASSES            Markets Securities
                   Fund Class 2
-------------------------------------------------------------------------------------

</TABLE>

                                       22
<PAGE>

                                   SCHEDULE E

                 OTHER PORTFOLIOS AVAILABLE UNDER THE CONTRACTS

1.    Investment Company:     CIMCO Ultra Series Fund

      Portfolios:             Money Market Fund
                              Bond Fund
                              Balanced Fund
                              Growth & Income Stock Fund
                              Capital Appreciation Stock Fund

2.    Investment Company:     MFS Variable Insurance Trust

      Portfolios:             World Governments Fund
                              Emerging Growth Fund

3.    Investment Company:     T. Rowe Price International Series, Inc.

      Portfolio:              International Stock Fund

4.    Investment Company:     Oppenheimer Variable Account Funds

      Portfolio:              High Income Fund

                                       23
<PAGE>

                                   SCHEDULE F

                                       24
<PAGE>

                                   SCHEDULE G

                              ADDRESSES FOR NOTICES

      To the Company:       CUNA Mutual Life Insurance Company
                            5910 Mineral Point Road
                            Madison, WI 53701-0391

                            Attention: Associate General Counsel

      To the Trust:         Franklin Templeton Variable Insurance Products Trust
                            777 Mariners Island Boulevard
                            San Mateo, California 94404

                            Attention:  Karen L. Skidmore, Assistant Vice
                                        President

      To the Underwriter:   Franklin Templeton Distributors, Inc.
                            777 Mariners Island Boulevard
                            San Mateo, California 94404

                            Attention:  Philip J. Kearns, Vice President

                                       25
<PAGE>

                                   SCHEDULE H

                              SHARED FUNDING ORDER

                 Templeton Variable Products Series Fund, et al.

                               File No. 812-11698

                       SECURITIES AND EXCHANGE COMMISSION

                              Release No. IC-24018

                               1999 SEC LEXIS 1887

                               September 17, 1999

ACTION: Notice of application for an amended order of exemption pursuant to
Section 6(c) of the Investment Company Act of 1940 (the "1940 Act") from the
provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act and Rules
6e-2(b)(15) and 6e-3(T)(b)(15) thereunder.

TEXT: Summary of Application: Templeton Variable Products Series Fund (the
"Templeton Trust"), Franklin Templeton Variable Insurance Products Trust
(formerly Franklin Valuemark Funds) (the "VIP Trust," and together with the
Templeton Trust, the "Funds"), Templeton Funds Annuity Company ("TFAC") or any
successor to TFAC, and any future open-end investment company for which TFAC or
any affiliate is the administrator, sub-administrator, investment manager,
adviser, principal underwriter, or sponsor ("Future Funds") seek an amended
order of the Commission to (1) add as parties to that order the VIP Trust and
any Future Funds and (2) permit shares of the Funds and Future Funds to be
issued to and held by qualified pension and retirement plans outside the
separate account context.

   Applicants: Templeton Variable Products Series Fund, Franklin Templeton
Variable Insurance Products Trust, Templeton Funds Annuity Company or any
successor to TFAC, and any future open-end investment company for which TFAC or
any affiliate is the administrator, sub-administrator, investment manager,
adviser, principal underwriter, or sponsor (collectively, the "Applicants").

   Filing Date: The application was filed on July 14, 1999, and amended and
restated on September 17, 1999.

   Hearing or Notification of Hearing: An order granting the application will be
issued unless the Commission orders a hearing. Interested persons may request a
hearing by writing to the Secretary of the Commission and serving Applicants
with a copy of the request, personally or by mail. Hearing requests should be
received by the Commission by 5:30 p.m., on October 12, 1999, and should be
accompanied by proof of service on the Applicants in the form of an affidavit

                                       26
<PAGE>

or, for lawyers, a certificate of service. Hearing requests should state the
nature of the writer's interest, the reason for the request, and the issues
contested. Persons who wish to be notified of a hearing may request notification
by writing to the Secretary of the Commission.

   Addresses: Secretary, Securities and Exchange Commission, 450 Fifth Street,
NW, Washington, D.C. 20549-0609.

   Applicants: Templeton Variable Products Series Fund and Franklin Templeton
Variable Insurance Products Trust, 777 Mariners Island Boulevard, San Mateo,
California 94404, Attn: Karen L. Skidmore, Esq.

   For Further Information Contact: Kevin P. McEnery, Senior Counsel, or Susan
M. Olson, Branch Chief, Office of Insurance Products, Division of Investment
Management, at (202) 942-0670.

   Supplementary Information: The following is a summary of the application. The
complete application is available for a fee from the SEC's Public Reference
Branch, 450 Fifth Street, N.W., Washington, D.C. 20549-0102 (tel.(202)942-8090).

   Applicants' Representations:

   1. Each of the Funds is registered under the 1940 Act as an open-end
management investment company and was organized as a Massachusetts business
trust. The Templeton Trust currently consists of eight separate series, and the
VIP Trust consists of twenty-five separate series. Each Fund's Declaration of
Trust permits the Trustees to create additional series of shares at any time.
The Funds currently serve as the underlying investment medium for variable
annuity contracts and variable life insurance policies issued by various
insurance companies. The Funds have entered into investment management
agreements with certain investment managers ("Investment Managers") directly or
indirectly owned by Franklin Resources, Inc. ("Resources"), a publicly owned
company engaged in the financial services industry through its subsidiaries.

   2. TFAC is an indirect, wholly owned subsidiary of Resources. TFAC is the
sole insurance company in the Franklin Templeton organization, and specializes
in the writing of variable annuity contracts. The Templeton Trust has entered
into a Fund Administration Agreement with Franklin Templeton Services, Inc. ("FT
Services"), which replaced TFAC in 1998 as administrator, and FT Services
subcontracts certain services to TFAC. FT Services also serves as administrator
to all series of the VIP Trust. TFAC and FT Services provide certain
administrative facilities and services for the VIP and Templeton Trusts.

   3. On November 16, 1993, the Commission issued an order granting exemptive
relief to permit shares of the Templeton Trust to be sold to and held by
variable annuity and variable life insurance separate accounts of both
affiliated and unaffiliated life insurance companies (Investment Company Act
Release No. 19879, File No. 812-8546) (the "Original Order"). Applicants
incorporate by reference into the application the Application for the Original
Order and each amendment thereto, the Notice of Application for the Original
Order, and the Original Order, to the extent necessary, to supplement the
representations made in the application in support of the requested relief.

                                       27
<PAGE>

Applicants represent that all of the facts asserted in the Application for the
Original Order and any amendments thereto remain true and accurate in all
material respects to the extent that such facts are relevant to any relief on
which Applicants continue to rely. The Original Order allows the Templeton Trust
to offer its shares to insurance companies as the investment vehicle for their
separate accounts supporting variable annuity contracts and variable life
insurance contracts (collectively, the "Variable Contracts"). Applicants state
that the Original Order does not (i) include the VIP Trust or Future Funds as
parties, nor (ii) expressly address the sale of shares of the Funds or any
Future Funds to qualified pension and retirement plans outside the separate
account context including, without limitation, those trusts, plans, accounts,
contracts or annuities described in Sections 401(a), 403(a), 403(b), 408(b),
408(k), 414(d), 457(b), 501(c)(18) of the Internal Revenue Code of 1986, as
amended (the "Code"), and any other trust, plan, contract, account or annuity
that is determined to be within the scope of Treasury Regulation
1.817.5(f)(3)(iii) ("Qualified Plans").

   4. Separate accounts owning shares of the Funds and their insurance company
depositors are referred to in the application as "Participating Separate
Accounts" and "Participating Insurance Companies," respectively. The use of a
common management investment company as the underlying investment medium for
both variable annuity and variable life insurance separate accounts of a single
insurance company (or of two or more affiliated insurance companies) is referred
to as "mixed funding." The use of a common management investment company as the
underlying investment medium for variable annuity and/or variable life insurance
separate accounts of unaffiliated insurance companies is referred to as "shared
funding."

   Applicants' Legal Analysis:

   1. Applicants request that the Commission issue an amended order pursuant to
Section 6(c) of the 1940 Act, adding the VIP Trust and Future Funds to the
Original Order and exempting scheduled premium variable life insurance separate
accounts and flexible premium variable life insurance separate accounts of
Participating Insurance Companies (and, to the extent necessary, any principal
underwriter and depositor of such an account) and the Applicants from Sections
9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules 6e-2(b)(15) and
6e-3(T)(b)(15) (and any comparable rule) thereunder, respectively, to the extent
necessary to permit shares of the Funds and any Future Funds to be sold to and
held by Qualified Plans. Applicants submit that the exemptions requested are
appropriate in the public interest, consistent with the protection of investors,
and consistent with the purposes fairly intended by the policy and provisions of
the 1940 Act.

   2. The Original Order does not include the VIP Trust or Future Funds as
parties nor expressly address the sale of shares of the Funds or any Future
Funds to Qualified Plans. Applicants propose that the VIP Trust and Future Funds
be added as parties to the Original Order and the Funds and any Future Funds be
permitted to offer and sell their shares to Qualified Plans.

   3. Section 6(c) of the 1940 Act provides, in part, that the Commission, by
order upon application, may conditionally or unconditionally exempt any person,
security or transaction, or any class or classes of persons, securities or
transactions from any provisions of the 1940 Act or the rules or regulations
thereunder, if and to the extent that such exemption is necessary or appropriate

                                       28
<PAGE>

in the public interest and consistent with the protection of investors and the
purposes fairly intended by the policy and provisions of the 1940 Act.

   4. In connection with the funding of scheduled premium variable life
insurance contracts issued through a separate account registered under the 1940
Act as a unit investment trust ("UIT"), Rule 6e-2(b)(15) provides partial
exemptions from various provisions of the 1940 Act, including the following: (1)
Section 9(a), which makes it unlawful for certain individuals to act in the
capacity of employee, officer, or director for a UIT, by limiting the
application of the eligibility restrictions in Section 9(a) to affiliated
persons directly participating in the management of a registered management
investment company; and (2) Sections 13(a), 15(a) and 15(b) of the 1940 Act to
the extent that those sections might be deemed to require "pass-through" voting
with respect to an underlying fund's shares, by allowing an insurance company to
disregard the voting instructions of contractowners in certain circumstances.

   5. These exemptions are available, however, only where the management
investment company underlying the separate account (the "underlying fund")
offers its shares "exclusively to variable life insurance separate accounts of
the life insurer, or of any affiliated life insurance company." Therefore, Rule
6e-2 does not permit either mixed funding or shared funding because the relief
granted by Rule 6e-2(b)(15) is not available with respect to a scheduled premium
variable life insurance separate account that owns shares of an underlying fund
that also offers its shares to a variable annuity or a flexible premium variable
life insurance separate account of the same company or of any affiliated life
insurance company. Rule 6e-2(b)(15) also does not permit the sale of shares of
the underlying fund to Qualified Plans.

   6. In connection with flexible premium variable life insurance contracts
issued through a separate account registered under the 1940 Act as a UIT, Rule
6e-3(T)(b)(15) also provides partial exemptions from Sections 9(a), 13(a), 15(a)
and 15(b) of the 1940 Act. These exemptions, however, are available only where
the separate account's underlying fund offers its shares "exclusively to
separate accounts of the life insurer, or of any affiliated life insurance
company, offering either scheduled contracts or flexible contracts, or both; or
which also offer their shares to variable annuity separate accounts of the life
insurer or of an affiliated life insurance company." Therefore, Rule 6e-3(T)
permits mixed funding but does not permit shared funding and also does not
permit the sale of shares of the underlying fund to Qualified Plans. As noted
above, the Original Order granted the Templeton Trust exemptive relief to permit
mixed and shared funding, but did not expressly address the sale of its shares
to Qualified Plans.

   7. Applicants note that if the Funds were to sell their shares only to
Qualified Plans, exemptive relief under Rule 6e-2 and Rule 6e-3(T) would not be
necessary. Applicants state that the relief provided for under Rule 6e-2(b)(15)
and Rule 6e-3(T)(b)(15) does not relate to qualified pension and retirement
plans or to a registered investment company's ability to sell its shares to such
plans.

   8. Applicants state that changes in the federal tax law have created the
opportunity for each of the Funds to increase its asset base through the sale of
its shares to Qualified Plans. Applicants state that Section 817(h) of the
Internal Revenue Code of 1986, as amended (the "Code"), imposes certain
diversification standards on the assets underlying Variable Contracts. Treasury

                                       29
<PAGE>

Regulations generally require that, to meet the diversification requirements,
all of the beneficial interests in the underlying investment company must be
held by the segregated asset accounts of one or more life insurance companies.
Notwithstanding this, Applicants note that the Treasury Regulations also contain
an exception to this requirement that permits trustees of a Qualified Plan to
hold shares of an investment company, the shares of which are also held by
insurance company segregated asset accounts, without adversely affecting the
status of the investment company as an adequately diversified underlying
investment of Variable Contracts issued through such segregated asset accounts
(Treas. Reg. 1.817-5(f)(3)(iii)).

   9. Applicants state that the promulgation of Rules 6e-2(b)(15) and
6e-3(T)(b)(15) under the 1940 Act preceded the issuance of these Treasury
Regulations. Thus, Applicants assert that the sale of shares of the same
investment company to both separate accounts and Qualified Plans was not
contemplated at the time of the adoption of Rules 6e-2(b)(15) and
6e-3(T)(b)(15).

   10. Section 9(a) provides that it is unlawful for any company to serve as
investment adviser or principal underwriter of any registered open-end
investment company if an affiliated person of that company is subject to a
disqualification enumerated in Section 9(a)(1) or (2). Rules 6e-2(b)(15) and
6e-3(T)(b)(15) provide exemptions from Section 9(a) under certain circumstances,
subject to the limitations on mixed and shared funding. These exemptions limit
the application of the eligibility restrictions to affiliated individuals or
companies that directly participate in the management of the underlying
portfolio investment company.

   11. Applicants state that the relief granted in Rule 6e-2(b)(15) and
6e-3(T)(b)(15) from the requirements of Section 9 limits, in effect, the amount
of monitoring of an insurer's personnel that would otherwise be necessary to
ensure compliance with Section 9 to that which is appropriate in light of the
policy and purposes of Section 9. Applicants submit that those Rules recognize
that it is not necessary for the protection of investors or the purposes fairly
intended by the policy and provisions of the 1940 Act to apply the provisions of
Section 9(a) to the many individuals involved in an insurance company complex,
most of whom typically will have no involvement in matters pertaining to
investment companies funding the separate accounts.

   12. Applicants to the Original Order previously requested and received relief
from Section 9(a) and Rules 6e-2(b)(15) and 6e-3(T)(b)(15) to the extent
necessary to permit mixed and shared funding. Applicants maintain that the
relief previously granted from Section 9(a) will in no way be affected by the
proposed sale of shares of the Funds to Qualified Plans. Those individuals who
participate in the management or administration of the Funds will remain the
same regardless of which Qualified Plans use such Funds. Applicants maintain
that more broadly applying the requirements of Section 9(a) because of
investment by Qualified Plans would not serve any regulatory purpose. Moreover,
Qualified Plans, unlike separate accounts, are not themselves investment
companies and therefore are not subject to Section 9 of the 1940 Act.

   13. Applicants state that Rules 6e-2(b)(15)(iii) and 6e-3(T)(b)(15)(iii)
provide exemptions from the pass-through voting requirement with respect to
several significant matters, assuming the limitations on mixed and shared
funding are observed. Rules 6e-2(b)(15)(iii)(A) and 6e-3(T)(b)(15)(iii)(A)
provide that the insurance company may disregard the voting instructions of its

                                       30
<PAGE>

contractowners with respect to the investments of an underlying fund or any
contract between a fund and its investment adviser, when required to do so by an
insurance regulatory authority (subject to the provisions of paragraphs
(b)(5)(i) and (b)(7)(ii)(A) of the Rules). Rules 6e-2(b)(15)(iii)(B) and
6e-3(T)(b)(15)(iii)(A)(2) provide that the insurance company may disregard
contractowners' voting instructions if the contractowners initiate any change in
such company's investment policies, principal underwriter, or any investment
adviser (provided that disregarding such voting instructions is reasonable and
subject to the other provisions of paragraphs (b)(5)(ii) and (b)(7)(ii)(B) and
(C) of the Rules).

   14. Applicants assert that Qualified Plans, which are not registered as
investment companies under the 1940 Act, have no requirement to pass-through the
voting rights to plan participants. Applicants state that applicable law
expressly reserves voting rights to certain specified persons. Under Section
403(a) of the Employment Retirement Income Security Act ("ERISA"), shares of a
fund sold to a Qualified Plan must be held by the trustees of the Qualified
Plan. Section 403(a) also provides that the trustee(s) must have exclusive
authority and discretion to manage and control the Qualified Plan with two
exceptions: (1) when the Qualified Plan expressly provides that the trustee(s)
are subject to the direction of a named fiduciary who is not a trustee, in which
case the trustees are subject to proper directions made in accordance with the
terms of the Qualified Plan and not contrary to ERISA; and (2) when the
authority to manage, acquire or dispose of assets of the Qualified Plan is
delegated to one or more investment managers pursuant to Section 402(c)(3) of
ERISA. Unless one of the two above exceptions stated in Section 403(a) applies,
Qualified Plan trustees have the exclusive authority and responsibility for
voting proxies. Where a named fiduciary to a Qualified Plan appoints an
investment manager, the investment manager has the responsibility to vote the
shares held unless the right to vote such shares is reserved to the trustees or
the named fiduciary. Where a Qualified Plan does not provide participants with
the right to give voting instructions, Applicants do not see any potential for
material irreconcilable conflicts of interest between or among variable contract
holders and Qualified Plan investors with respect to voting of the respective
Fund's shares. Accordingly, Applicants state that, unlike the case with
insurance company separate accounts, the issue of the resolution of material
irreconcilable conflicts with respect to voting is not present with respect to
such Qualified Plans since the Qualified Plans are not entitled to pass-through
voting privileges.

   15. Even if a Qualified Plan were to hold a controlling interest in one of
the Funds, Applicants believe that such control would not disadvantage other
investors in such Fund to any greater extent than is the case when any
institutional shareholder holds a majority of the voting securities of any
open-end management investment company. In this regard, Applicants submit that
investment in a Fund by a Qualified Plan will not create any of the voting
complications occasioned by mixed funding or shared funding. Unlike mixed or
shared funding, Qualified Plan investor voting rights cannot be frustrated by
veto rights of insurers or state regulators.

   16. Applicants state that some of the Qualified Plans, however, may provide
for the trustee(s), an investment adviser (or advisers), or another named
fiduciary to exercise voting rights in accordance with instructions from
participants. Where a Qualified Plan provides participants with the right to
give voting instructions, Applicants see no reason to believe that participants
in Qualified Plans generally or those in a particular Qualified Plan, either as
a single group or in combination with participants in other Qualified Plans,

                                       31
<PAGE>

would vote in a manner that would disadvantage Variable Contract holders. In
sum, Applicants maintain that the purchase of shares of the Funds by Qualified
Plans that provide voting rights does not present any complications not
otherwise occasioned by mixed or shared funding.

   17. Applicants do not believe that the sale of the shares of the Funds to
Qualified Plans will increase the potential for material irreconcilable
conflicts of interest between or among different types of investors. In
particular, Applicants see very little potential for such conflicts beyond that
which would otherwise exist between variable annuity and variable life insurance
contractowners.

   18. As noted above, Section 817(h) of the Code imposes certain
diversification standards on the underlying assets of variable contracts held in
an underlying mutual fund. The Code provides that a variable contract shall not
be treated as an annuity contract or life insurance, as applicable, for any
period (and any subsequent period) for which the investments are not, in
accordance with regulations prescribed by the Treasury Department, adequately
diversified.

   19. Treasury Department Regulations issued under Section 817(h) provide that,
in order to meet the statutory diversification requirements, all of the
beneficial interests in the investment company must be held by the segregated
asset accounts of one or more insurance companies. However, the Regulations
contain certain exceptions to this requirement, one of which allows shares in an
underlying mutual fund to be held by the trustees of a qualified pension or
retirement plan without adversely affecting the ability of shares in the
underlying fund also to be held by separate accounts of insurance companies in
connection with their variable contracts (Treas. Reg. 1.817-5(f)(3)(iii)). Thus,
Applicants believe that the Treasury Regulations specifically permit "qualified
pension or retirement plans" and separate accounts to invest in the same
underlying fund. For this reason, Applicants have concluded that neither the
Code nor the Treasury Regulations or revenue rulings thereunder presents any
inherent conflict of interest.

   20. Applicants note that while there are differences in the manner in which
distributions from Variable Contracts and Qualified Plans are taxed, these
differences will have no impact on the Funds. When distributions are to be made,
and a Separate Account or Qualified Plan is unable to net purchase payments to
make the distributions, the Separate Account and Qualified Plan will redeem
shares of the Funds at their respective net asset value in conformity with Rule
22c-1 under the 1940 Act (without the imposition of any sales charge) to provide
proceeds to meet distribution needs. A Qualified Plan will make distributions in
accordance with the terms of the Qualified Plan.

   21. Applicants maintain that it is possible to provide an equitable means of
giving voting rights to Participating Separate Account contractowners and to
Qualified Plans. In connection with any meeting of shareholders, the Funds will
inform each shareholder, including each Participating Insurance Company and
Qualified Plan, of information necessary for the meeting, including their
respective share of ownership in the relevant Fund. Each Participating Insurance
Company will then solicit voting instructions in accordance with Rules 6e-2 and
6e-3(T), as applicable, and its participation agreement with the relevant Fund.
Shares held by Qualified Plans will be voted in accordance with applicable law.
The voting rights provided to Qualified Plans with respect to shares of the

                                       32
<PAGE>

Funds would be no different from the voting rights that are provided to
Qualified Plans with respect to shares of funds sold to the general public.

   22. Applicants have concluded that even if there should arise issues with
respect to a state insurance commissioner's veto powers over investment
objectives where the interests of contractowners and the interests of Qualified
Plans are in conflict, the issues can be almost immediately resolved since the
trustees of (or participants in) the Qualified Plans can, on their own, redeem
the shares out of the Funds. Applicants note that state insurance commissioners
have been given the veto power in recognition of the fact that insurance
companies usually cannot simply redeem their separate accounts out of one fund
and invest in another. Generally, time-consuming, complex transactions must be
undertaken to accomplish such redemptions and transfers. Conversely, the
trustees of Qualified Plans or the participants in participant-directed
Qualified Plans can make the decision quickly and redeem their interest in the
Funds and reinvest in another funding vehicle without the same regulatory
impediments faced by separate accounts or, as is the case with most Qualified
Plans, even hold cash pending suitable investment.

   23. Applicants also state that they do not see any greater potential for
material irreconcilable conflicts arising between the interests of participants
under Qualified Plans and contractowners of Participating Separate Accounts from
possible future changes in the federal tax laws than that which already exist
between variable annuity contractowners and variable life insurance
contractowners.

   24. Applicants state that the sale of shares of the Funds to Qualified Plans
in addition to separate accounts of Participating Insurance Companies will
result in an increased amount of assets available for investment by the Funds.
This may benefit variable contractowners by promoting economies of scale, by
permitting increased safety of investments through greater diversification, and
by making the addition of new portfolios more feasible.

   25. Applicants assert that, regardless of the type of shareholders in each
Fund, each Fund's Investment Manager is or would be contractually and otherwise
obligated to manage the Fund solely and exclusively in accordance with that
Fund's investment objectives, policies and restrictions as well as any
guidelines established by the Board of Trustees of such Fund (the "Board"). The
Investment Manager works with a pool of money and (except in a few instances
where this may be required in order to comply with state insurance laws) does
not take into account the identity of the shareholders. Thus, each Fund will be
managed in the same manner as any other mutual fund. Applicants therefore see no
significant legal impediment to permitting the sale of shares of the Funds to
Qualified Plans.

   26. Applicants state that the Commission has permitted the amendment of a
substantially similar original order for the purpose of adding a party to the
original order and has permitted open-end management investment companies to
offer their shares directly to Qualified Plan in addition to separate accounts
of affiliated or unaffiliated insurance companies which issue either or both
variable annuity contracts or variable life insurance contracts. Applicants
state that the amended order sought in the application is identical to precedent
with respect to the conditions Applicants propose should be imposed on Qualified
Plans in connection with investment in the Funds.

                                       33
<PAGE>

   Applicants' Conditions:

   If the requested amended order is granted, Applicants consent to the
following conditions:

   1. A majority of the Board of each Fund shall consist of persons who are not
"interested persons" thereof, as defined by Section 2(a)(19) of the 1940 Act,
and the rules thereunder and as modified by any applicable orders of the
Commission, except that if this condition is not met by reason of the death,
disqualification or bona fide resignation of any Board Member or Members, then
the operation of this condition shall be suspended: (a) for a period of 45 days
if the vacancy or vacancies may be filled by the remaining Board Members; (b)
for a period of 60 days if a vote of shareholders is required to fill the
vacancy or vacancies; or (c) for such longer period as the Commission may
prescribe by order upon application.

   2. The Board will monitor their respective Fund for the existence of any
material irreconcilable conflict among the interests of the Variable Contract
owners of all Separate Accounts investing in the Funds and of the Qualified Plan
participants investing in the Funds. The Board will determine what action, if
any, shall be taken in response to such conflicts. A material irreconcilable
conflict may arise for a variety of reasons, including: (a) an action by any
state insurance regulatory authority; (b) a change in applicable federal or
state insurance, tax or securities laws or regulations, or a public ruling,
private letter ruling, no-action or interpretive letter, or any similar action
by insurance, tax or securities regulatory authorities; (c) an administrative or
judicial decision in any relevant proceeding; (d) the manner in which the
investments of the Funds are being managed; (e) a difference in voting
instructions given by variable annuity contract owners, variable life insurance
contract owners, and trustees of Qualified Plans; (f) a decision by an insurer
to disregard the voting instructions of Variable Contract owners; or (g) if
applicable, a decision by a Qualified Plan to disregard the voting instructions
of Qualified Plan participants.

   3. Participating Insurance Companies, the Investment Managers, and any
Qualified Plan that executes a fund participation agreement upon becoming an
owner of 10 percent or more of the assets of an Fund (a "Participating Qualified
Plan"), will report any potential or existing conflicts of which it becomes
aware to the Board of any relevant Fund. Participating Insurance Companies, the
Investment Managers and the Participating Qualified Plans will be responsible
for assisting the Board in carrying out its responsibilities under these
conditions by providing the Board with all information reasonably necessary for
the Board to consider any issues raised. This responsibility includes, but is
not limited to, an obligation by each Participating Insurance Company to inform
the Board whenever voting instructions of Contract owners are disregarded and,
if pass-through voting is applicable, an obligation by each Participating
Qualified Plan to inform the Board whenever it has determined to disregard
Qualified Plan participant voting instructions. The responsibility to report
such information and conflicts, and to assist the Board, will be contractual
obligations of all Participating Insurance Companies investing in the Funds
under their agreements governing participation in the Funds, and such agreements
shall provide that these responsibilities will be carried out with a view only
to the interests of the Variable Contract owners. The responsibility to report
such information and conflicts, and to assist the Board, will be contractual
obligations of all Participating Qualified Plans under their agreements
governing participation in the Funds, and such agreements will provide that

                                       34
<PAGE>

their responsibilities will be carried out with a view only to the interests of
Qualified Plan participants.

   4. If it is determined by a majority of the Board of a Fund, or by a majority
of the disinterested Board Members, that a material irreconcilable conflict
exists, the relevant Participating Insurance Companies and Participating
Qualified Plans will, at their own expense and to the extent reasonably
practicable as determined by a majority of the disinterested Board Members, take
whatever steps are necessary to remedy or eliminate the material irreconcilable
conflict, which steps could include: (a) in the case of Participating Insurance
Companies, withdrawing the assets allocable to some or all of the Separate
Account s from the Fund or any portfolio thereof and reinvesting such assets in
a different investment medium, including another portfolio of an Fund or another
Fund, or submitting the question as to whether such segregation should be
implemented to a vote of all affected Variable Contract owners and, as
appropriate, segregating the assets of any appropriate group (i.e., variable
annuity contract owners or variable life insurance contract owners of one or
more Participating Insurance Companies) that votes in favor of such segregation,
or offering to the affected Variable Contract owners the option of making such a
change; (b) in the case of Participating Qualified Plans, withdrawing the assets
allocable to some or all of the Qualified Plans from the Fund and reinvesting
such assets in a different investment medium; and (c) establishing a new
registered management investment company or managed Separate Account. If a
material irreconcilable conflict arises because of a decision by a Participating
Insurance Company to disregard Variable Contract owner voting instructions, and
that decision represents a minority position or would preclude a majority vote,
then the insurer may be required, at the Fund's election, to withdraw the
insurer's Separate Account investment in such Fund, and no charge or penalty
will be imposed as a result of such withdrawal. If a material irreconcilable
conflict arises because of a Participating Qualified Plan's decision to
disregard Qualified Plan participant voting instructions, if applicable, and
that decision represents minority position or would preclude a majority vote,
the Participating Qualified Plan may be required, at the Fund's election, to
withdraw its investment in such Fund, and no charge or penalty will be imposed
as a result of such withdrawal. The responsibility to take remedial action in
the event of a determination by a Board of a material irreconcilable conflict
and to bear the cost of such remedial action will be a contractual obligation of
all Participating Insurance Companies and Participating Qualified Plans under
their agreements governing participation in the Funds, and these
responsibilities will be carried out with a view only to the interest of
Variable Contract owners and Qualified Plan participants.

   5. For purposes of Condition 4, a majority of the disinterested Board Members
of the applicable Board will determine whether or not any proposed action
adequately remedies any material irreconcilable conflict, but in no event will
the relevant Fund or the Investment Managers be required to establish a new
funding medium for any Contract. No Participating Insurance Company shall be
required by Condition 4 to establish a new funding medium for any Variable
Contract if any offer to do so has been declined by vote of a majority of the
Variable Contract owners materially and adversely affected by the material
irreconcilable conflict. Further, no Participating Qualified Plan shall be
required by Condition 4 to establish a new funding medium for any Participating
Qualified Plan if (a) a majority of Qualified Plan participants materially and
adversely affected by the irreconcilable material conflict vote to decline such
offer, or (b) pursuant to governing Qualified Plan documents and applicable law,

                                       35
<PAGE>

the Participating Qualified Plan makes such decision without a Qualified Plan
participant vote.

   6. The determination of the Board of the existence of a material
irreconcilable conflict and its implications will be made known in writing
promptly to all Participating Insurance Companies and Participating Qualified
Plans.

   7. Participating Insurance Companies will provide pass-through voting
privileges to Variable Contract owners who invest in registered Separate
Accounts so long as and to the extent that the Commission continues to interpret
the 1940 Act as requiring pass-through voting privileges for Variable Contract
owners. As to Variable Contracts issued by unregistered Separate Accounts,
pass-through voting privileges will be extended to participants to the extent
granted by issuing insurance companies. Each Participating Insurance Company
will also vote shares of the Funds held in its Separate Accounts for which no
voting instructions from Contract owners are timely received, as well as shares
of the Funds which the Participating Insurance Company itself owns, in the same
proportion as those shares of the Funds for which voting instructions from
contract owners are timely received. Participating Insurance Companies will be
responsible for assuring that each of their registered Separate Accounts
participating in the Funds calculates voting privileges in a manner consistent
with other Participating Insurance Companies. The obligation to calculate voting
privileges in a manner consistent with all other registered Separate Accounts
investing in the Funds will be a contractual obligation of all Participating
Insurance Companies under their agreements governing their participation in the
Funds. Each Participating Qualified Plan will vote as required by applicable law
and governing Qualified Plan documents.

   8. All reports of potential or existing conflicts received by the Board of a
Fund and all action by such Board with regard to determining the existence of a
conflict, notifying Participating Insurance Companies and Participating
Qualified Plans of a conflict, and determining whether any proposed action
adequately remedies a conflict, will be properly recorded in the minutes of the
meetings of such Board or other appropriate records, and such minutes or other
records shall be made available to the Commission upon request.

   9. Each Fund will notify all Participating Insurance Companies that separate
disclosure in their respective Separate Account prospectuses may be appropriate
to advise accounts regarding the potential risks of mixed and shared funding.
Each Fund shall disclose in its prospectus that (a) the Fund is intended to be a
funding vehicle for variable annuity and variable life insurance contracts
offered by various insurance companies and for qualified pension and retirement
plans; (b) due to differences of tax treatment and other considerations, the
interests of various Contract owners participating in the Fund and/or the
interests of Qualified Plans investing in the Fund may at some time be in
conflict; and (c) the Board of such Fund will monitor events in order to
identify the existence of any material irreconcilable conflicts and to determine
what action, if any, should be taken in response to any such conflict.

   10. Each Fund will comply with all provisions of the 1940 Act requiring
voting by shareholders (which, for these purposes, will be the persons having a
voting interest in the shares of the Funds), and, in particular, the Funds will
either provide for annual shareholder meetings (except insofar as the Commission

                                       36
<PAGE>

may interpret Section 16 of the 1940 Act not to require such meetings) or comply
with Section 16(c) of the 1940 Act, although the Funds are not the type of trust
described in Section 16(c) of the 1940 Act, as well as with Section 16(a) of the
1940 Act and, if and when applicable, Section 16(b) of the 1940 Act. Further,
each Fund will act in accordance with the Commission's interpretation of the
requirements of Section 16(a) with respect to periodic elections of Board
Members and with whatever rules the Commission may promulgate with respect
thereto.

   11. If and to the extent Rules 6e-2 or 6e-3(T) under the 1940 Act is amended,
or proposed Rule 6e-3 under the 1940 Act is adopted, to provide exemptive relief
from any provision of the 1940 Act or the rules promulgated thereunder, with
respect to mixed or shared funding on terms and conditions materially different
from any exemptions granted in the order requested in the application, then the
Funds and/or Participating Insurance Companies and Participating Qualified
Plans, as appropriate, shall take such steps as may be necessary to comply with
such Rules 6e-2 and 6e-3(T), as amended, or proposed Rule 6e-3, as adopted, to
the extent that such Rules are applicable.

   12. The Participating Insurance Companies and Participating Qualified Plans
and/or the Investment Managers, at least annually, will submit to the Board such
reports, materials or data as the Board may reasonably request so that the Board
may fully carry out obligations imposed upon it by the conditions contained in
the application. Such reports, materials and data will be submitted more
frequently if deemed appropriate by the Board. The obligations of the
Participating Insurance Companies and Participating Qualified Plans to provide
these reports, materials and data to the Board, when the Board so reasonably
requests, shall be a contractual obligation of all Participating Insurance
Companies and Participating Qualified Plans under their agreements governing
participation in the Funds.

   13. If a Qualified Plan should ever become a holder of ten percent or more of
the assets of a Fund, such Qualified Plan will execute a participation agreement
with the Fund that includes the conditions set forth herein to the extent
applicable. A Qualified Plan will execute an application containing an
acknowledgment of this condition upon such Qualified Plan's initial purchase of
the shares of any Fund.

   Conclusion:

   Applicants assert that, for the reasons summarized above, the requested
exemptions are appropriate in the public interest and consistent with the
protection of investors and the purposes fairly intended by the policy and
provisions of the 1940 Act.

   For the Commission, by the Division of Investment Management, pursuant to
delegated authority.

                                       37
<PAGE>

                 Templeton Variable Products Series Fund, et al.

                               File No. 812-11698

                       SECURITIES AND EXCHANGE COMMISSION

                              Release No. IC-24079

                               1999 SEC LEXIS 2177

                                October 13, 1999

ACTION:  Order Granting Exemptions

TEXT: Templeton Variable Products Series Fund ("Templeton Trust"), Franklin
Templeton Variable Insurance Products Trust ("VIP Trust"), Templeton Funds
Annuity Company ("TFAC") or any successor to TFAC, and any future open-end
investment company for which TFAC or any affiliate is the administrator,
sub-administrator, investment manager, adviser, principal underwriter, or
sponsor ("Future Funds") filed an application on July 14, 1999, and an amendment
on September 17, 1999 seeking an amended order of the Commission pursuant to
Section 6(c) of the Investment Company Act of 1940 ("1940 Act") exempting them
from the provisions of Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act and
Rules 6e-2(b)(15) and 6e-3(T)(b)(15). The prior order (Rel. No. IC-19879)
granted exemptive relief to permit shares of the Templeton Trust to be sold to
and held by variable annuity and variable life insurance separate accounts of
both affiliated and unaffiliated life insurance companies. The proposed relief
would amend the prior order to add as parties to that order the VIP Trust and
any Future Funds and to permit shares of the Templeton Trust, the VIP Trust, and
Future Funds to be issued to and held by qualified pension and retirement plans
outside the separate account context.

   A notice of the filing of the application was issued on September 17, 1999
(Rel. No.IC-24018). The notice gave interested persons an opportunity to request
a hearing and stated that an order granting the application would be issued
unless a hearing should be ordered. No request for a hearing has been filed, and
the Commission has not ordered a hearing.

   The matter has been considered, and it is found that granting the requested
exemptions is appropriate in the public interest and consistent with the
protection of investors and the purposes intended by the policy and provisions
of the 1940 Act.

   Accordingly,

   IT IS ORDERED, pursuant to Section 6(c) of the 1940 Act, that the requested
exemptions from Sections 9(a), 13(a), 15(a) and 15(b) of the 1940 Act, and Rules
6e-2(b)(15) and 6e-3(T)(b)(15) thereunder, be, and hereby are, granted,
effective forthwith.

<PAGE>

   For the Commission, by the Division of Investment Management, pursuant to
delegated authority.

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