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Korea; the Commission de Surveillance du Secteur Financier in Luxembourg; the Malaysian SecuritiesCommission; the Comision Nacional Bancaria y de Valores in Mexico; the Autoriteit Financiële Markten inThe Netherlands; the Polish Securities and Exchange Commission; the Monetary Authority of Singapore;the Comisión Nacional del Mercado de Valores in Spain; the Finansinspektionen in Sweden; the SwissFederal Banking Commission; the Taiwan Securities and Futures Bureau, the Ministry of Finance and theCommerce Department, Ministry of Economic Affairs in Taiwan; the Dubai Financial Services Authority inthe United Arab Emirates; the Financial Services Authority in the United Kingdom; and the State SecuritiesCommission of Vietnam.The Advisers Act imposes numerous obligations on certain of our subsidiaries registered with the SECas investment advisers, including record keeping, operating and marketing requirements, disclosureobligations and prohibitions on fraudulent activities. The Investment Company Act imposes similarobligations on the investment companies that are advised by our subsidiaries. The SEC is authorized toinstitute proceedings and impose sanctions for violations of the Advisers Act and the Investment CompanyAct, ranging from fines and censure to termination of an investment adviser’s registration.The Company and many of the investment companies advised by our various subsidiaries are subjectto federal securities laws and state securities and corporate laws, including those affecting corporategovernance, such as the Sarbanes-Oxley Act of 2002 and rules adopted by the SEC. As a NYSE-listedcompany, we are also subject to the rules of the NYSE, including its corporate governance standards. Thefederal securities laws have also been augmented by other measures, including the USA Patriot Act of 2001.FINRA Conduct Rules limit the amount of aggregate sales charges that may be paid in connection withthe purchase and holding of investment company shares sold through broker/dealers. The effect of the ruleis to limit the amount of fees that could be paid pursuant to a fund’s Rule 12b-1 Plan to FTDI, our principalunderwriting and distribution subsidiary in the United States, which earns underwriting commissions on thedistribution of fund shares in the United States.Following the acquisition of Fiduciary Trust in April 2001, Franklin registered as a bank holdingcompany under the BHC Act and became subject to supervision, regulation and examination by the FRB.Franklin also elected to become a financial holding company in 2001. Under FRB policy, a bank holdingcompany, including a financial holding company, is expected to act as a source of financial strength to eachof its banking subsidiaries. In addition, bank holding companies should pay cash dividends on commonstock only out of income available from the previous fiscal year and only if prospective earnings retention isconsistent with anticipated future needs and financial condition.The FRB also has adopted a system of risk-based capital guidelines to evaluate the capital adequacy ofmost bank holding companies, including Franklin. Under these guidelines, Franklin and our bankingsubsidiaries must meet specific capital adequacy requirements that involve quantitative measures of our assets,liabilities and certain off-balance sheet items as calculated under regulatory accounting practices. To beconsidered “well capitalized” under the FRB capital guidelines, a bank holding company or bank mustmaintain a minimum Tier 1 leverage ratio of five percent, a minimum Tier 1 risk-based capital ratio of sixpercent and a minimum total risk-based capital ratio of ten percent. As of September 30, 2009, our Tier 1leverage, Tier 1 risk-based capital and total risk-based capital ratios were 75%, 97% and 97%. In addition,both Fiduciary Trust and FTB&T were well capitalized as of September 30, 2009. A depository institutiongenerally is prohibited from making capital distributions, including paying dividends, or paying managementfees to a holding company if the institution would thereafter be undercapitalized. Moreover, undercapitalizedinstitutions may not accept, renew or roll over brokered deposits. Bank regulators are required to take promptcorrective action to resolve any problems associated with insured depository institutions, such as FiduciaryTrust and FTB&T, if they become undercapitalized. The GLB Act, however, generally prohibits the FRB fromimposing similar capital requirements on regulated non-bank subsidiaries of a financial holding company.20