EX-99.H(8) PART AGRE 24 exh8.txt COPY OF AMENDED AND RESTATED PARTICIPATION AGREEMENT DATED AUGUST 1, 2005, BY AND BETWEEN FRANKLIN TEMPLETON VARIABLE INSURANCE PRODUCTS TRUST, FRANKLIN/TEMPLETON DISTRIBUTORS, INC., AMERICAN CENTURION LIFE ASSURANCE COMPANY, AMERICAN ENTERPRISE LIFE Exhibit (h)(8) AMENDED AND RESTATED PARTICIPATION AGREEMENT as of August 1, 2005 Franklin Templeton Variable Insurance Products Trust Franklin/Templeton Distributors, Inc. American Centurion Life Assurance Company American Enterprise Life Insurance Company IDS Life Insurance Company IDS Life Insurance Company of New York Ameriprise Financial Services, Inc. (formerly American Express Financial Advisors Inc.) 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. [this schedule is not used] F. Rule 12b-1 Plans of the Trust G. Addresses for Notices H. Shared Funding Order 1. PARTIES AND PURPOSE ------------------- THIS AMENDED AND RESTATED PARTICIPATION AGREEMENT (the "Agreement") supersedes and replaces the Participation Agreement, dated as of May 1, 2000, together with all subsequent amendments ("Prior Agreement"), by and between certain portfolios and classes of Franklin Templeton Variable Insurance Products Trust specified in Schedule C of the Prior Agreement, Franklin/Templeton Distributors, Inc. and the insurance companies identified in Schedule A of the Prior Agreement on their own behalf and behalf of each segregated asset account listed in Schedule B of the Prior Agreement. This Agreement is between certain portfolios and classes thereof, 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 companies identified on Schedule A ("you") and your distributor, on your own behalf and on behalf of 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 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 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; 3 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 approved such substitution in the manner provided in Section 26 of the 1940 Act. 2.1.12 As covered financial institutions we, only with respect to Portfolio shareholders, and you each undertake and agree to comply, and to take full responsibility in complying with any and all applicable laws, regulations, protocols and other requirements relating to money laundering including, without limitation, the International Money Laundering Abatement and Anti-Terrorist Financing Act of 2001 (Title III of the USA PATRIOT 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 than 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. 4 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. 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 5 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 AVAILABILITY OF TRUST PORTFOLIO SHARES 3.1.1 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, or you as our designee) receive a purchase order, as established in accordance with the provisions of the then current prospectus of the Trust. All orders are subject to acceptance by us and by the Portfolio or its transfer agent, and become effective only upon confirmation by us. 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. 3.1.2 Without limiting the other provisions of this Section 3.1, among other delegations by the Trustees, the Trustees have determined that there is a significant risk that the Trust and its shareholders may be adversely affected by investors with short term trading activity and/or whose purchase and redemption activity follows a market timing pattern as defined in the prospectus for the Trust, 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 in whole or in part) as they deem necessary to reduce, discourage, restrict or eliminate such trading and/or market timing activity. The Board has adopted the Market Timing Trading Policy and Additional Policies that are described in the Trust's prospectus. We agree to give you advance written notice of material changes to the Market Timing Trading Policy and you agree that you will not willfully violate that policy. You have adopted and implemented, and will continue to maintain and enforce, your own policies and procedures that are described in your Contract prospectuses and are reasonably designed to prevent harmful short term and/or excessive trading. You agree to make reasonable efforts to cooperate and assist us in implementing the Market Timing Trading Policy and its goals. Your assistance will include, but not be limited to, promptly providing information to us concerning the source of specified trading activity, the identity of specific broker/dealers or registered representatives acting on behalf of contract owners with regard to specified trading activity, and providing advance notice, to the extent reasonably practicable, of any large anticipated trading. 3.1.3 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 6 in accordance with the terms of the Shared Funding Order. No shares of any Portfolio will be sold to the general public. 3.2 This subsection 3.2 is not used. 3.3 PURCHASE AND REDEMPTION 3.3.1 You are hereby appointed as our designee for the sole purpose of receiving from Contract owners purchase and exchange orders and requests for redemption resulting from investment in and payments under the Contracts that pertain to subaccounts that invest in Portfolios ("Instructions"). "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. "Close of Trading" shall mean the close of trading on the New York Stock Exchange, generally 4:00 p.m. Eastern Time. You represent and warrant that all Instructions transmitted to us for processing on or as of a given Business Day ("Day 1") shall have been received in proper form and time stamped by you prior to the Close of Trading on Day 1. Such Instructions shall receive the share price next calculated following the Close of Trading on Day 1, provided that we receive such Instructions from you before 9:30 a.m. Eastern Time on the next Business Day ("Day 2"). You represent and warrant that Instructions received in proper form and time stamped by you after the Close of Trading on Day 1 shall be treated by you and transmitted to us as if received on Day 2. Such Instructions shall receive the share price next calculated following the Close of Trading on Day 2. You represent and warrant that you have, maintain and periodically test, procedures and systems in place reasonably designed to prevent Instructions received after the Close of Trading on Day 1 from being executed with Instructions received before the Close of Trading on Day 1. All Instructions we receive from you after 9:30 a.m. Eastern Time on Day 2 shall be processed by us on the following Business Day and shall receive the share price next calculated following the Close of Trading on Day 2. 3.3.2 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). 3.3.3 You shall submit payment for the purchase of shares of a Portfolio on behalf of an Account in federal funds transmitted by wire to the Trust or to its designated custodian, which must receive such wires no later than the close of the Reserve Bank, which is 6:00 p.m. Eastern Time, on the Business Day following the Business Day as of which such purchases orders are made. 3.3.4 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 or you as our designee) 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. 7 3.3.5 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. 3.3.6 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. 3.3.7 Each party to this Agreement agrees that, in the event of a material error resulting from incorrect information or confirmations relating to this Section 3, the parties will seek to comply in all material respects with the provisions of applicable federal securities laws. 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 option, we shall provide you, at our expense, with either: (i) for each Contract owner who is invested through the Account in a subaccount corresponding to a Portfolio ("designated subaccount"), one copy of each of the following documents on each occasion that such document is required by law or regulation to be delivered to such Contract owner who is invested in a designated subaccount: 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 ("Designated Portfolio Documents"); or (ii) a camera ready copy of such Designated Portfolio Documents in a medium agreed to by the parties and from which information relating to series of the Trust other than the Portfolios has been deleted to the extent practicable. In connection with clause (ii) of this paragraph, we will pay for proportional printing costs for such Designated Portfolio Documents in order to provide one copy for each Contract owner who is invested in a designated subaccount on each occasion that such document is required by law or regulation to be delivered 8 to such Contract owner, and provided reasonable and appropriate documentation is provided and reasonably approved by us. We shall provide you with a copy of the Trust's current statement of additional information, including any amendments or supplements, in a form suitable for you to duplicate. The expenses of furnishing, including mailing, to Contract owners the documents referred to in this paragraph shall be borne by you. For each of the documents provided to you in accordance with clause (i) of this paragraph 4.4, we shall provide you, upon your request and at your expense, additional copies. In no event shall we be responsible for the costs of printing or delivery of Designated Portfolio Documents to potential or new Contract owners or the delivery of Designated Portfolio Documents to existing contract owners. 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. We will provide such materials in a reasonable time for you to comply with such 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. 9 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 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 ten (10) 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, including naming you as a Trust shareholder, 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 10 this Agreement for any reason, you shall cease all use of any such name or mark as soon as reasonably practicable. 6.6 You shall furnish to us ten (10) Business Days prior to its first submission to the SEC or its staff, any request or filing for no-action assurance or exemptive relief pertaining to, or affecting, the Trust, the Underwriter or any of the Portfolios. 7. INDEMNIFICATION --------------- 7.1 INDEMNIFICATION BY YOU 7.1.1 You agree to indemnify and hold harmless the Underwriter, the Trust and each person, if any, who controls the Trust within the meaning of Section 15 of the 1933 Act and any Trustee, officer, employee or agent of the foregoing (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 11 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 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 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 person, if any, who controls you within the meaning of Section 15 of the 1933 Act and any director, officer, employee or agent of the foregoing (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 12 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 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 13 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 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 person, if any, who controls you within the meaning of Section 15 of the 1933 Act and any director, officer, employee or agent of the foregoing (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 14 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 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, or by nationally recognized overnight courier services, 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 Immediate Terminations. 9.2.1 This Agreement may be terminated immediately by us upon written notice to you if: 15 9.2.1.1 (i) you breach any of the representations and warranties made in this Agreement; or (ii) you inform us that any of such representations and warranties may no longer be true or might not be true in the future; or (iii) any of such representations and warranties were not true on the effective date of this Agreement, are at any time no longer true, or have not been true during any time since the effective date of this Agreement; or 9.2.1.2 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. 9.2.2 This Agreement may be terminated immediately by you upon written notice to us if: 9.2.2.1 (i) the Trust or the Underwriter breaches any of the representations and warranties made in this Agreement; or (ii) the Trust or the Underwriter informs you that any of such representations and warranties may no longer be true or might not be true in the future; or (iii) any of such representations and warranties were not true on the effective date of this Agreement, are at any time no longer true, or have not been true during any time since the effective date of this Agreement; or (iv) the Internal Revenue Service has formally declared that the Trust fails to meet the diversification requirements specified in Section 817(h) of the Code and any regulations thereunder; or 9.2.2.2 you shall determine, in your sole judgment exercised in good faith, that the Trust or the Underwriter has suffered a material adverse change in its business, operations, financial condition or prospects since the date of this Agreement or is the subject of material adverse publicity. 9.3 If this Agreement is terminated with respect to any Portfolio(s) for any reason except as required by the Shared Funding Order, we shall, at your option and pursuant to the terms and conditions of this Agreement, continue to make available additional shares of any Portfolio for any or all Contracts or Accounts existing on the effective date of termination of this Agreement, provided that such further sale is not prohibited by law, regulation, applicable regulatory body, or action by the Trust's Board of Trustees. Further, if the Trust's Board of Trustees, in the exercise of its fiduciary duties, determines that such termination is a necessary and appropriate remedy for a material breach of this Agreement that has or could have a material adverse impact on a Portfolio, including a violation of laws, or determines such termination is appropriate upon liquidation of a Portfolio, the Trust may redeem, at its option in kind or for cash, the Portfolio shares held by the Accounts on the effective date of termination of this Agreement; provided further that any such liquidation of a Portfolio will not occur prior to up to six (6) months following written notice to you, and during this time, the Trust will cooperate reasonably in effecting a transfer of assets to another underlying fund pursuant to either an exchange offer, SEC substitution order, SEC no-action letter, or other legal and appropriate 16 means. 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), 7 (Indemnification) and 10.8 (Use and Disclosure of Confidential Information) 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, you shall not prevent Contract owners from allocating payments to any Portfolio that has been available under a Contract without first giving us ninety (90) days advance written 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 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 17 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 Use and Disclosure of Confidential Information Notwithstanding anything to the contrary contained in this Agreement, and in addition to and not in lieu of other provisions in this Agreement: 10.8.1 Confidential Information includes without limitation all information regarding your customers or the customers of any of your subsidiaries, affiliates, or licensees; or the accounts, account numbers, names, addresses, social security numbers or any other personal identifier of such customers; or any information derived therefrom. 10.8.2 Neither the Trust nor the Underwriter may use or disclose Confidential Information for any purpose other than to carry out the purpose for which Confidential Information was provided to the Trust and/or the Underwriter as set forth in the Agreement, and agree to cause all employees, agents and representatives of the Trust and the Underwriter, or any other party to whom the Trust and/or the Underwriter may provide access to or disclose Confidential Information to limit the use and disclosure of Confidential Information to that purpose. 10.8.3 The Trust and the Underwriter agree to implement appropriate measures designed to ensure the security and confidentiality of Confidential Information, to protect such information against any anticipated threats or hazards to the security or integrity of such information, and to protect against unauthorized access to, or use of, Confidential Information that could result in substantial harm or inconvenience to any of your customers or any of your subsidiaries, affiliates, or licensees; the Trust and the Underwriter further agree to cause all agents, representatives or subcontractors of the Trust and the Underwriter, or any other party to whom the Trust and/or the Underwriter may provide access to or disclose Confidential Information to implement appropriate measures designed to meet the objectives set forth in this paragraph. 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. 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. 18 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. IN WITNESS WHEREOF, each of the parties have caused their duly authorized officers to execute this Agreement. The Trust: Franklin Templeton Variable Insurance ONLY ON BEHALF OF EACH ------------------------------------- PORTFOLIO LISTED ON Products Trust SCHEDULE C HEREOF. -------------- By: --------------------------------------- Name: Karen L. Skidmore Title: Assistant Vice President The Underwriter: Franklin/Templeton Distributors, Inc. ------------------------------------- By: --------------------------------------- Name: Robert C. Hays Title: Senior Vice President The Company: American Centurion Life Assurance Company, ------------------------------------------ American Enterprise Life Insurance Company, ------------------------------------------- IDS Life Insurance Company, and ------------------------------- IDS Life Insurance Company of New York -------------------------------------- By: --------------------------------------- Name: Gumer C. Alvero Title: President of American Enterprise Life Insurance Company, Executive Vice President - Annuities of IDS Life Insurance Company, and Vice President - Annuities of American Centurion Life Assurance Company and IDS Life Insurance Company of New York Attest: By: --------------------------------------- Name: Laura M. Imholte Title: Assistant Secretary 19 Distributor for the Company: Ameriprise Financial Services, Inc. By: --------------------------------------- Name: Gumer C. Alvero Title: Vice President - General Manager Annuities Attest: By: --------------------------------------- Name: Laura M. Imholte Title: Assistant Secretary 20 SCHEDULE A THE COMPANY AND ITS DISTRIBUTOR THE COMPANY American Centurion Life Assurance Company 20 Madison Avenue Extension Albany, New York 12203 Organized as a life insurance company under New York law. American Enterprise Life Insurance Company 829 Ameriprise Financial Center Minneapolis, Minnesota 55474 Organized as a life insurance company under Indiana law. IDS Life Insurance Company 70100 Ameriprise Financial Center Minneapolis, Minnesota 55474 Organized as a life insurance company under Minnesota law. IDS Life Insurance Company of New York 20 Madison Avenue Extension Albany, New York 12203 Organized as a life insurance company under New York law. THE DISTRIBUTOR Ameriprise Financial Services, Inc. 1765 Ameriprise Financial Center Minneapolis, Minnesota 55474 Organized as a corporation under Delaware law. A SCHEDULE B ACCOUNTS OF THE COMPANY 1. Name: IDS Life Variable Account 10 Date Established: August 23, 1995 SEC Registration Number: 811-07355 2. Name: IDS Life of New York Variable Annuity Account (formerly IDS Life of New York Flexible Portfolio Annuity Account) Date Established: April 17, 1996 SEC Registration Number: 811-07623 3. Name: IDS Life Variable Life Separate Account Date Established: October 16, 1985 SEC Registration Number: 811-04298 4. Name: IDS Life of New York Account 8 Date Established: September 12, 1985 SEC Registration Number: 811-05213 5. Name: American Enterprise Variable Annuity Account Date Established: July 15, 1987 SEC Registration Number: 811- 07195 6. Name: American Enterprise Variable Life Account Date Established: July 15, 1987 SEC Registration Number: 811-09515 7. Name: ACL Variable Annuity Account 2 Date Established: October 12, 1995 SEC Registration Number: 811-07511 B SCHEDULE C AVAILABLE PORTFOLIOS AND CLASSES OF SHARES OF THE TRUST; INVESTMENT ADVISERS
Franklin Templeton Variable Insurance Products Trust Investment Adviser ---------------------------------------------------- ------------------ Franklin Income Securities Fund, Class 2 Franklin Advisers, Inc. Franklin Real Estate Fund, Class 2 Franklin Advisers, Inc. Franklin Rising Dividends Fund, Class 2 Franklin Advisory Services, LLC Franklin Small-Mid Cap Growth Securities Fund, Class 2 Franklin Advisers, Inc. Franklin Small Cap Value Securities Fund, Class 2 Franklin Advisory Services, LLC Mutual Shares Securities Fund, Class 2 Franklin Mutual Advisors, LLC Templeton Developing Markets Securities Fund, Class 1 Templeton Asset Management, Ltd. Templeton Developing Markets Securities Fund, Class 2 Templeton Asset Management, Ltd. Templeton Foreign Securities Fund, Class 2 Templeton Investment Counsel, LLC Templeton Global Income Securities Fund, Class 2 Templeton Investment Counsel, LLC Templeton Growth Securities Fund, Class 2 Templeton Global Advisors Limited
C SCHEDULE D CONTRACTS OF THE COMPANY
--------------------------------------------------------------------------------------------------------------------------------- PRODUCT NAME SEPARATE ACCOUNT NAME # INSURANCE REGISTERED Y/N REGISTERED Y/N CLASSES OF SHARES AND PORTFOLIOS COMPANY 1933 ACT #, STATE FORM ID 1940 ACT # --------------------------------------------------------------------------------------------------------------------------------- 1. American RiverSource(SM) Endeavor Select(SM) ACL Variable Annuity Class 2 Shares: Centurion Variable Annuity (New York) Account 2 --------------- Life Yes Yes Franklin Income Securities Fund Assurance 333-101051 811-07511 Franklin Rising Dividends Securities Fund Company 273640-NY Franklin Small Mid-Cap Growth Securities Fund Mutual Shares Securities Fund Templeton Global Income Securities Fund Templeton Growth Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 2. American RiverSource(SM) Innovations(SM) Select ACL Variable Annuity Class 2 Shares: Centurion Variable Annuity Account 2 --------------- Life Yes Yes Franklin Income Securities Fund Assurance 333-00519 811-07511 Franklin Rising Dividends Fund Company 272877-NY Franklin Small-Mid Cap Growth Securities Fund Mutual Shares Securities Fund Templeton Global Income Securities Fund Templeton Growth Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 3. American RiverSource(SM) Innovations(SM) Variable ACL Variable Annuity Class 2 Shares: Centurion Annuity (New York) Account 2 --------------- Life Yes Yes Franklin Real Estate Fund Assurance 333-101051 811-07511 Franklin Small-Mid Cap Growth Securities Company 272250, 272551, 272252 and 272253 Fund Franklin Small Cap Value Securities Fund Mutual Shares Securities Fund Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 4. American Evergreen Essential(SM) Variable Annuity American Enterprise Class 2 Shares: Enterprise Yes Variable Annuity --------------- Life 333-92297 Account Mutual Shares Securities Fund Insurance 240343 Yes Company 811-7195 --------------------------------------------------------------------------------------------------------------------------------- 5. American Evergreen New Solutions Select Variable American Enterprise Class 2 Shares: Enterprise Annuity Variable Annuity --------------- Life Yes Account Franklin Income Securities Fund Insurance 333-92297 Yes Franklin Rising Dividends Fund Company 272646 and 272877 and state variations 811-7195 Franklin Small-Mid Cap Growth Securities thereof Fund Mutual Shares Securities Fund Templeton Global Income Securities Fund Templeton Growth Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 6. American Evergreen New Solutions Variable Annuity American Enterprise Class 2 Shares: Enterprise Yes Variable Annuity --------------- Life 333-92297 Account Franklin Small Cap Value Securities Fund Insurance 240343 and state variations thereof Yes Mutual Shares Securities Fund Company 811-7195 Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- D-1 --------------------------------------------------------------------------------------------------------------------------------- PRODUCT NAME SEPARATE ACCOUNT NAME # INSURANCE REGISTERED Y/N REGISTERED Y/N CLASSES OF SHARES AND PORTFOLIOS COMPANY 1933 ACT #, STATE FORM ID 1940 ACT # --------------------------------------------------------------------------------------------------------------------------------- 7. American Evergreen Pathways(SM) Select Variable American Enterprise Class 2 Shares: Enterprise Annuity Variable Annuity --------------- Life Yes Account Franklin Income Securities Fund Insurance 333-73958 Yes Franklin Rising Dividends Fund Company 272876 and state variations thereof 811-7195 Franklin Small-Mid Cap Growth Securities Fund Mutual Shares Securities Fund Templeton Global Income Securities Fund Templeton Growth Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 8. American Evergreen Pathways(SM) Variable Annuity American Enterprise Class 2 Shares: Enterprise Yes Variable Annuity --------------- Life 333-73958 Account Franklin Small Cap Value Securities Fund Insurance 271496 and 271491 and state variations Yes Mutual Shares Securities Fund Company thereof 811-7195 Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 9. American Evergreen Privilege(SM) Variable Annuity American Enterprise Class 2 Shares: Enterprise Yes Variable Annuity --------------- Life 333-73958 Account Mutual Shares Securities Fund Insurance 271496 and 271491 and state variations Yes Company thereof 811-7195 ---------------------------------------------------------------------------------------------------------------------------------- 10. American Innovations(SM) Classic Variable Annuity American Enterprise Class 2 Shares: Enterprise Yes Variable Annuity --------------- Life 333-92297 Account Franklin Real Estate Fund Insurance 240343 and state variations thereof Yes Franklin Small Cap Value Securities Fund Company 811-7195 Franklin Small-Mid Cap Growth Securities Fund Mutual Shares Securities Fund Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 11. American RiverSource(SM) AccessChoice Select(SM) American Enterprise Class 2 Shares: Enterprise Variable Annuity Variable Annuity --------------- Life Yes Account Franklin Income Securities Fund Insurance 333-92297 Yes Franklin Rising Dividends Securities Fund Company 272876 and state variations thereof 811-07195 Franklin Small Mid-Cap Growth Securities Fund Mutual Shares Securities Fund Templeton Global Income Securities Fund Templeton Growth Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 12. American RiverSource(SM) Endeavor Select(SM) American Enterprise Class 2 Shares: Enterprise Variable Annuity Variable Annuity --------------- Life Yes Account Franklin Income Securities Fund Insurance 333-92297 Yes Franklin Rising Dividends Securities Fund Company 272646 and state variations thereof 811-07195 Franklin Small Mid-Cap Growth Securities Fund Mutual Shares Securities Fund Templeton Global Income Securities Fund Templeton Growth Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 13. American RiverSource(SM) FlexChoice(SM) Select American Enterprise Class 2 Shares: Enterprise Variable Annuity Variable Annuity --------------- Life Yes Account Franklin Income Securities Fund Insurance 333-73958 Yes Franklin Rising Dividends Fund Company 272876 and state variations thereof 811-7195 Franklin Small-Mid Cap Growth Securities Fund Mutual Shares Securities Fund Templeton Global Income Securities Fund Templeton Growth Securities Fund --------------------------------------------------------------------------------------------------------------------------------- D-2 --------------------------------------------------------------------------------------------------------------------------------- PRODUCT NAME SEPARATE ACCOUNT NAME # INSURANCE REGISTERED Y/N REGISTERED Y/N CLASSES OF SHARES AND PORTFOLIOS COMPANY 1933 ACT #, STATE FORM ID 1940 ACT # --------------------------------------------------------------------------------------------------------------------------------- 14. American RiverSource(SM) FlexChoice(SM) Variable American Enterprise Class 2 Shares of: Enterprise Annuity Variable Annuity ------------------ Life Yes Account Franklin Small-Mid Cap Growth Securities Insurance 333-73958 Yes Fund Company 271491 and 271496 and state variations 811-7195 Franklin Small Cap Value Securities Fund thereof Mutual Shares Securities Fund Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 15. American RiverSource(SM) Galaxy Premier Variable American Enterprise Class 2 Shares: Enterprise Annuity Variable Annuity --------------- Life Yes Account Franklin Small-Mid Cap Growth Securities Insurance 333-82149 Yes Fund Company 44170 and state variations thereof 811-7195 Mutual Shares Securities Fund Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 16. American RiverSource(SM) Innovations Variable American Enterprise Class 2 Shares: Enterprise Annuity Variable Annuity --------------- Life Yes Account Franklin Real Estate Fund Insurance 333-92297 Yes Securities Franklin Small-Mid Cap Growth Company 240343 and state variations thereof 811-7195 Fund Franklin Small Cap Value Securities Fund Mutual Shares Securities Fund Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 17. American RiverSource(SM) Innovations(R) Classic American Enterprise Class 2 Shares: Enterprise Select Variable Annuity Variable Annuity --------------- Life Yes Account Franklin Income Securities Fund Insurance 333-92297 Yes Franklin Rising Dividends Fund Company 272646 and 272877 and state variations 811-7195 Franklin Small-Mid Cap Growth Securities thereof Fund Mutual Shares Securities Fund Templeton Global Income Securities Fund Templeton Growth Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 18. American RiverSource(SM) Innovations(R) Select American Enterprise Class 2 Shares: Enterprise Variable Annuity Variable Annuity --------------- Life Yes Account Franklin Income Securities Fund Insurance 333-92297 Yes Franklin Rising Dividends Fund Company 272646 and 272877 and state variations 811-7195 Franklin Small-Mid Cap Growth Securities thereof Fund Mutual Shares Securities Fund Templeton Global Income Securities Fund Templeton Growth Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 19. American RiverSource(SM) New Solutions Variable American Enterprise Class 2 Shares: Enterprise Annuity(SM) Variable Annuity --------------- Life Yes Account Franklin Small-Mid Cap Growth Securities Insurance 333-92297 Yes Fund Company 240343 and state variations thereof 811-7195 Mutual Shares Securities Fund Templeton Developing Markets Securities Fund Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 20. American RiverSource(SM) Pinnacle Variable American Enterprise Class 2 Shares: Enterprise Annuity(SM) Variable Annuity --------------- Life Yes Account Franklin Small-Mid Cap Growth Securities Insurance 333-82149 Yes Fund Company 44170 and state variations thereof 811-7195 Franklin Small Cap Value Securities Fund Mutual Shares Securities Fund Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- D-3 --------------------------------------------------------------------------------------------------------------------------------- PRODUCT NAME SEPARATE ACCOUNT NAME # INSURANCE REGISTERED Y/N REGISTERED Y/N CLASSES OF SHARES AND PORTFOLIOS COMPANY 1933 ACT #, STATE FORM ID 1940 ACT # --------------------------------------------------------------------------------------------------------------------------------- 21. American RiverSource(SM) Signature One Select American Enterprise Class 2 Shares: Enterprise Variable Annuity Variable Annuity --------------- Life Yes Account Franklin Income Securities Fund Insurance 333-85567 Yes Franklin Rising Dividends Fund Company 272876 and state variations thereof 811-7195 Franklin Small-Mid Cap Growth Securities Fund Mutual Shares Securities Fund Templeton Global Income Securities Fund Templeton Growth Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 22. American RiverSource(SM) Signature One Variable American Enterprise Class 2 Shares: Enterprise Annuity(SM) Variable Annuity --------------- Life Yes Account Franklin Real Estate Fund Insurance 333-85567 Yes Mutual Shares Securities Fund Company 240180 and state variations thereof 811-7195 Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 23. American RiverSource(SM) Signature Variable American Enterprise Class 2 Shares: Enterprise Annuity(SM) Variable Annuity --------------- Life Yes Account Franklin Real Estate Fund Insurance 333-74865 Yes Mutual Shares Securities Fund Company 43431 and state variations thereof 811-7195 Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 24. American RiverSource(SM) Signature Variable American Enterprise Class 2 Shares: Enterprise Select Annuity(R) Variable Annuity --------------- Life Yes Account Franklin Income Securities Fund Insurance 333-74865 Yes Franklin Rising Dividends Fund Company 272876 and state variations thereof 811-7195 Franklin Small-Mid Cap Growth Securities Fund Mutual Shares Securities Fund Templeton Global Income Securities Fund Templeton Growth Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 25. American RiverSource(SM) Signature Variable American Enterprise Class 2 Shares: Enterprise Universal Life(SM) Variable Life Account --------------- Life Yes Yes Franklin Real Estate Fund Insurance 333-84121 811-09515 Mutual Shares Securities Fund Company 37022 and state variations thereof Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 26. American Wells Fargo Advantage Choice Variable American Enterprise Class 2 Shares: Enterprise Annuity Variable Annuity --------------- Life Yes Account Franklin Income Securities Fund Insurance 333-73958 Yes Franklin Real Estate Fund Company 44209 and 44210 and state variations 811-7195 Franklin Small-Mid Cap Growth Securities thereof Fund Franklin Small Cap Value Securities Fund Mutual Shares Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 27. American Wells Fargo Advantage(R) Builder Select American Enterprise Class 2 Shares: Enterprise Variable Annuity Variable Annuity --------------- Life Yes Account Franklin Income Securities Fund Insurance 333-85567 Yes Franklin Real Estate Fund Company 272876 and state variations thereof 811-7195 Templeton Global Income Securities Fund ---------------------------------------------------------------------------------------------------------------------------------- 28. American Wells Fargo Advantage(R) Choice Select American Enterprise Class 2 Shares: Enterprise Variable Annuity Variable Annuity --------------- Life Yes Account Franklin Income Securities Fund Insurance 333-73958 Yes Franklin Real Estate Fund Company 272876 and state variations thereof 811-7195 Templeton Global Income Securities Fund --------------------------------------------------------------------------------------------------------------------------------- D-4 --------------------------------------------------------------------------------------------------------------------------------- PRODUCT NAME SEPARATE ACCOUNT NAME # INSURANCE REGISTERED Y/N REGISTERED Y/N CLASSES OF SHARES AND PORTFOLIOS COMPANY 1933 ACT #, STATE FORM ID 1940 ACT # --------------------------------------------------------------------------------------------------------------------------------- 29. American Wells Fargo Advantage(R) Select Variable American Enterprise Class 2 Shares: Enterprise Annuity Variable Annuity --------------- Life Yes Account Franklin Income Securities Fund Insurance 333-92297 Yes Franklin Real Estate Fund Company 272646 and 272877 and state variations 811-7195 Templeton Global Income Securities Fund thereof --------------------------------------------------------------------------------------------------------------------------------- 30. American Wells Fargo Advantage(SM) Builder American Enterprise Class 2 Shares: Enterprise Variable Annuity Variable Annuity --------------- Life Yes Account Franklin Income Securities Fund Insurance 333-85567 Yes Franklin Real Estate Fund Company 44209 and state variations thereof 811-7195 Franklin Small-Mid Cap Growth Securities Fund Mutual Shares Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 31. American Wells Fargo Advantage(SM) Variable American Enterprise Class 2 Shares: Enterprise Annuity Variable Annuity --------------- Life Yes Account Franklin Income Securities Fund Insurance 333-85567 Yes Franklin Real Estate Fund Company 44209 and state variations thereof 811-7195 Franklin Small-Mid Cap Growth Securities Fund Franklin Small Cap Value Securities Fund Mutual Shares Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 32. IDS Life IDS Life Flexible Portfolio Annuity IDS Life Variable Class 1 Shares: Insurance Yes Account 10 --------------- Company 33-62407 Yes Templeton Developing Markets Securities 31030, 31031, 31032-IRA and state 811-07355 Fund variations thereof --------------------------------------------------------------------------------------------------------------------------------- 33. IDS Life RiverSource(SM) Retirement Advisor IDS Life Variable Class 2 Shares: Insurance Advantage Plus(SM) Variable Annuity Account 10 --------------- Company Yes Yes Franklin Real Estate Fund 31043A and state variations thereof 811-07355 Franklin Small Cap Value Securities Fund Mutual Shares Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 34. IDS Life RiverSource(SM) Retirement Advisor IDS Life Variable Class 2 Shares: Insurance Advantage(SM) Variable Annuity and Account 10 --------------- Company RiverSource(SM) Retirement Advisor Yes Franklin Real Estate Fund Advantage(sm) Variable Annuity - Band 3 811-07355 Franklin Small Cap Value Securities Fund Yes Mutual Shares Securities Fund 333-79311 31043, 31044, 31045-IRA, 31046, 31047, 31048-IRA and state variations thereof --------------------------------------------------------------------------------------------------------------------------------- 35. IDS Life RiverSource(SM) Retirement Advisor IDS Life Variable Class 2 Shares: Insurance Select Plus(SM) Variable Annuity Account 10 --------------- Company Yes Yes Franklin Real Estate Fund 131041A and state variations thereof 811-07355 Franklin Small Cap Value Securities Fund Mutual Shares Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 36. IDS Life RiverSource(SM) Retirement Advisor IDS Life Variable Class 2 Shares: Insurance Select(SM) Variable Annuity Account 10 --------------- Company Yes Yes Franklin Real Estate Fund 333-79311 811-07355 Franklin Small Cap Value Securities Fund 131041, 131042 and 131043 and state Mutual Shares Securities Fund variations thereof --------------------------------------------------------------------------------------------------------------------------------- D-5 --------------------------------------------------------------------------------------------------------------------------------- PRODUCT NAME SEPARATE ACCOUNT NAME # INSURANCE REGISTERED Y/N REGISTERED Y/N CLASSES OF SHARES AND PORTFOLIOS COMPANY 1933 ACT #, STATE FORM ID 1940 ACT # --------------------------------------------------------------------------------------------------------------------------------- 37. IDS Life RiverSource(SM) Retirement Advisor IDS Life Variable Class 2 Shares: Insurance Variable Annuity(R) and American Express Account 10 --------------- Company Retirement Advisor Variable Annuity(R) - Yes Franklin Real Estate Fund Band 3 811-07355 Franklin Small Cap Value Securities Fund Yes Templeton Foreign Securities Fund 333-79311 31043, 31044, 31045-IRA, 31046, 31047, 31048-IRA and state variations thereof --------------------------------------------------------------------------------------------------------------------------------- 38. IDS Life RiverSource(SM) Single Premium Variable IDS Life Variable Life Class 2 Shares: Insurance Life Separate Account --------------- Company Yes Yes Franklin Real Estate Fund 333-83456 811-4298 Franklin Small Cap Value Securities Fund 132019 and state variations thereof Mutual Shares Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 39. IDS Life RiverSource(SM) Succession Select IDS Life Variable Class 2 Shares: Insurance Variable Life Insurance(SM) Life Separate Account --------------- Company Yes Yes Franklin Real Estate Fund 33-62457 811-4298 Franklin Small Cap Value Securities Fund 30090 and state variations thereof Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 40. IDS Life RiverSource(SM) Variable Second-To-Die IDS Life Variable Life Class 2 Shares: Insurance Life Insurance(SM) Separate Account --------------- Company Yes Yes Franklin Real Estate Fund 33-62457 811-4298 Franklin Small Cap Value Securities Fund 30090 and state variations thereof Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 41. IDS Life RiverSource(SM) Variable Universal Life IDS Life Variable Life Class 2 Shares of: Insurance III(SM) Separate Account ------------------ Company Yes Yes Franklin Real Estate Fund 333-69777 811-4298 Franklin Small Cap Value Securities Fund 30061 and state variations thereof Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 42. IDS Life RiverSource(SM) Variable Universal Life IDS Life Variable Life Class 2 Shares: Insurance Insurance(SM) Separate Account --------------- Company Yes Yes Franklin Real Estate Fund 33-11165 811-4298 Franklin Small Cap Value Securities Fund 30060 and state variations thereof Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 43. IDS Life RiverSource(SM) Variable Universal Life IDS Life Variable Life Class 2 Shares: Insurance IV and American Express(R) Variable Separate Account --------------- Company Universal Life IV -- Estate Series Yes Franklin Real Estate Fund Yes 811-4298 Franklin Small Cap Value Securities Fund 333-69777 Mutual Shares Securities Fund 30061 and state variations thereof --------------------------------------------------------------------------------------------------------------------------------- 44. IDS Life IDS Life of New York Flexible Portfolio IDS Life of New York Class 1 Shares: Insurance Annuity Variable Annuity --------------- Company of Yes Account Templeton Developing Markets Securities New York 333-03867 Yes Fund 31036, 31037, 31038-IRA and 31039-SEP 811-07623 --------------------------------------------------------------------------------------------------------------------------------- D-6 --------------------------------------------------------------------------------------------------------------------------------- PRODUCT NAME SEPARATE ACCOUNT NAME # INSURANCE REGISTERED Y/N REGISTERED Y/N CLASSES OF SHARES AND PORTFOLIOS COMPANY 1933 ACT #, STATE FORM ID 1940 ACT # --------------------------------------------------------------------------------------------------------------------------------- 45. IDS Life IDS Life of New York Succession IDS Life of New York Class 2 Shares: Insurance Select(SM) Variable Life Insurance Account 8 --------------- Company of 333-42257 Yes Franklin Real Estate Fund New York 39090C 811-5213 Franklin Small Cap Value Securities Fund Mutual Shares Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 46. IDS Life IDS Life of New York Variable IDS Life of New York Class 2 Shares: Insurance Second-To-Die Life Insurance Account 8 --------------- Company of Yes Yes Franklin Real Estate Fund New York 333-42257 811-5213 Franklin Small Cap Value Securities Fund 30090 Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 47. IDS Life IDS Life of New York Variable Universal IDS Life of New York Class 2 Shares of: Insurance Life III Account 8 ------------------ Company of Yes Yes Franklin Real Estate Fund New York 333-44644 811-5213 Franklin Small Cap Value Securities Fund 39061 Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 48. IDS Life IDS Life of New York Variable Universal IDS Life of New York Class 2 Shares: Insurance Life Insurance Account 8 --------------- Company of Yes Yes Franklin Real Estate Fund New York 33-15290 811-5213 Franklin Small Cap Value Securities Fund 30060 Templeton Foreign Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 49. IDS Life IDS Life of New York Variable Universal IDS Life of New York Class 2 Shares: Insurance Life IV and IDS Life of New York Account 8 --------------- Company of Variable Universal Life IV - Estate Yes Franklin Real Estate Fund New York Series 811-5213 Franklin Small Cap Value Securities Fund Yes Mutual Shares Securities Fund 333-44644 39061C --------------------------------------------------------------------------------------------------------------------------------- 50. IDS Life RiverSource(SM) Retirement Advisor IDS Life of New York Class 2 Shares: Insurance Advantage(SM) Variable Annuity (New York) Variable Annuity --------------- Company of Yes Account Franklin Real Estate Fund New York 333-91691 Yes Franklin Small Cap Value Securities Fund 31053; 31054; 31055-SEP 811-07623 Mutual Shares Securities Fund 31056-IRA --------------------------------------------------------------------------------------------------------------------------------- 51. IDS Life RiverSource(SM) Retirement Advisor IDS Life of New York Class 2 Shares: Insurance Select(SM) Variable Annuity (New York) Variable Annuity --------------- Company of Yes Account Franklin Real Estate Fund New York 333-91691 Yes Franklin Small Cap Value Securities Fund 139035, 139036, 139037 and 139038 811-07623 Mutual Shares Securities Fund --------------------------------------------------------------------------------------------------------------------------------- 52. IDS Life RiverSource(SM) Retirement Advisor IDS Life of New York Class 2 Shares: Insurance Variable Annuity(R) (New York) Variable Annuity --------------- Company of Yes Account Franklin Real Estate Fund New York 333-91691 Yes Franklin Small Cap Value Securities Fund 31053; 31054; 31055-SEP 811-07623 Templeton Foreign Securities Fund 31056-IRA ---------------------------------------------------------------------------------------------------------------------------------
D-7 SCHEDULE E THIS SCHEDULE IS NOT USED E SCHEDULE F RULE 12b-1 PLANS COMPENSATION SCHEDULE --------------------- Each Portfolio named below shall pay the following amounts pursuant to the terms and conditions referenced below under its Class 2 Rule 12b-1 Distribution Plan, stated as a percentage per year of Class 2's average daily net assets represented by shares of Class 2. PORTFOLIO NAME MAXIMUM ANNUAL PAYMENT RATE -------------- --------------------------- Franklin Income Securities Fund 0.25% Franklin Real Estate Fund 0.25% Franklin Rising Dividends Fund 0.25% Franklin Small-Mid Cap Growth Securities Fund 0.25% Franklin Small Cap Value Securities Fund 0.25% Mutual Shares Securities Fund 0.25% Templeton Developing Markets Securities Fund 0.25% Templeton Foreign Securities Fund 0.25% Templeton Global Income Securities Fund 0.25% Templeton Growth Securities Fund 0.25% AGREEMENT PROVISIONS -------------------- If the Company, on behalf of any Account, purchases Trust Portfolio shares ("Eligible Shares") which are subject to a Rule 12b-1 plan adopted under the 1940 Act (the "Plan"), the Company may participate in the Plan. To the extent the Company or its affiliates, agents or designees (collectively "you") provide any activity or service which is primarily intended to assist in the promotion, distribution or account servicing of Eligible Shares ("Rule 12b-1 Services") or variable contracts offering Eligible Shares, the Underwriter, the Trust or their affiliates (collectively, "we") may pay you a Rule 12b-1 fee. "Rule 12b-1 Services" may include, but are not limited to, printing of prospectuses and reports used for sales purposes, preparing and distributing sales literature and related expenses, advertisements, education of dealers and their representatives, and similar distribution-related expenses, furnishing personal services to owners of Contracts which may invest in Eligible Shares ("Contract Owners"), education of Contract Owners, answering routine inquiries regarding a Portfolio, coordinating responses to Contract Owner inquiries regarding the Portfolios, maintaining such accounts or providing such other enhanced services as a Trust Portfolio or Contract may require, or providing other services eligible for service fees as defined under NASD rules. Your acceptance of such compensation is your acknowledgment that eligible services have been rendered. All Rule 12b-1 fees, shall be based on the value of Eligible Shares owned by the Company on behalf of its Accounts, and shall be calculated on the basis and at the rates set forth in the Compensation Schedule stated above. The aggregate annual fees paid pursuant to each Plan shall not exceed the amounts stated as the "annual maximums" in the Portfolio's prospectus, unless an increase is approved by shareholders as provided in the Plan. These maximums shall be a specified percent of the value of a Portfolio's F-1 net assets attributable to Eligible Shares owned by the Company on behalf of its Accounts (determined in the same manner as the Portfolio uses to compute its net assets as set forth in its effective Prospectus). The Rule 12b-1 fee will be paid to you within thirty (30) days after the end of the three-month periods ending in January, April, July and October. You shall furnish us with such information as shall reasonably be requested by the Trust's Boards of Trustees ("Trustees") with respect to the Rule 12b-1 fees paid to you pursuant to the Plans. We shall furnish to the Trustees, for their review on a quarterly basis, a written report of the amounts expended under the Plans and the purposes for which such expenditures were made. The Plans and provisions of any agreement relating to such Plans must be approved annually by a vote of the Trustees, including the Trustees who are not interested persons of the Trust and who have no financial interest in the Plans or any related agreement ("Disinterested Trustees"). Each Plan may be terminated at any time by the vote of a majority of the Disinterested Trustees, or by a vote of a majority of the outstanding shares as provided in the Plan, on sixty (60) days' written notice, without payment of any penalty. The Plans may also be terminated by any act that terminates the Underwriting Agreement between the Underwriter and the Trust, and/or the management or administration agreement between Franklin Advisers, Inc. and its affiliates and the Trust. Continuation of the Plans is also conditioned on Disinterested Trustees being ultimately responsible for selecting and nominating any new Disinterested Trustees. Under Rule 12b-1, the Trustees have a duty to request and evaluate, and persons who are party to any agreement related to a Plan have a duty to furnish, such information as may reasonably be necessary to an informed determination of whether the Plan or any agreement should be implemented or continued. Under Rule 12b-1, the Trust is permitted to implement or continue Plans or the provisions of any agreement relating to such Plans from year-to-year only if, based on certain legal considerations, the Trustees are able to conclude that the Plans will benefit each affected Trust Portfolio and class. Absent such yearly determination, the Plans must be terminated as set forth above. In the event of the termination of the Plans for any reason, the provisions of this Schedule F relating to the Plans will also terminate. Because the Rule 12b-1 fees paid to you pursuant to the Plans may be reduced or terminated at any time and we are not liable for, and will not offset any reduction or termination in such fees, you agree to consider whether or not your selling agreements with persons or entities through whom you intend to distribute the Contracts should provide that compensation paid to them may be reduced if such Rule 12b-1 fees are reduced or terminated. Any obligation assumed by the Trust pursuant to this Agreement shall be limited in all cases to the assets of the Trust and no person shall seek satisfaction thereof from shareholders of the Trust. You agree to waive payment of any amounts payable to you by Underwriter under a Plan until such time as the Underwriter has received such fee from the Trust. The provisions of the Plans shall control over the provisions of the Participation Agreement, including this Schedule F, in the event of any inconsistency. You agree to provide complete disclosure as required by all applicable statutes, rules and regulations of all rule 12b-1 fees received from us in the prospectus of the Contracts. F-2 SCHEDULE G ADDRESSES FOR NOTICES To the Company: American Centurion Life Assurance Company IDS Life Insurance Company of New York 1765 Ameriprise Financial Center Minneapolis, Minnesota 55474 Attention: Vice President - Annuities American Enterprise Life Insurance Company 1765 Ameriprise Financial Center Minneapolis, Minnesota 55474 Attention: President IDS Life Insurance Company 1765 Ameriprise Financial Center Minneapolis, Minnesota 55474 Attention: Executive Vice President - Annuities To the Distributor: Ameriprise Financial Services, Inc. General Counsel's Office 1765 Ameriprise Financial Center Minneapolis, Minnesota 55474 To the Trust: Franklin Templeton Variable Insurance Products Trust One Franklin Parkway, Bldg. 920, 2nd Floor San Mateo, California 94403 Attention: Karen L. Skidmore, Assistant Vice President To the Underwriter: Franklin/Templeton Distributors, Inc. 140 Fountain Parkway, 8th Floor St. Petersburg, FL 33716 Attention: Peter D. Jones, President If to the Trust or Underwriter With a copy to: Franklin Templeton Investments One Franklin Parkway, Bldg. 920, 2nd Floor San Mateo, California 94403 Attention: General Counsel G 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 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. H-1 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. 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) H-2 (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 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 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 H-3 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 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 H-4 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, 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. H-5 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 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. 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 H-6 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 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 H-7 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, 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 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 H-8 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. H-9 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. For the Commission, by the Division of Investment Management, pursuant to delegated authority. H-10