THE WORLD MARKETS COMPANY PLC DESCRIPTION OF SERVICES AND CONFLICTS OF INTEREST DISCLOSURE STATEMENT MARCH 1, 2015

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1 THE WORLD MARKETS COMPANY PLC DESCRIPTION OF SERVICES AND CONFLICTS OF INTEREST DISCLOSURE STATEMENT MARCH 1, 2015 The World Markets Company plc (the World Markets Company ) provides a global foreign exchange rate benchmark service, offering spot, forward, and non-deliverable forward foreign exchange benchmark rates at fixed points throughout the global trading day. The World Markets Company is a wholly owned subsidiary of State Street Bank and Trust Company ( State Street ), and State Street, directly and through its affiliates, is also a principal market maker in foreign exchange. The World Markets Company strives to maintain an open and ongoing dialogue with its subscribers about the potential conflicts of interest associated with the offering of its foreign exchange benchmark rates service. This document is intended to describe generally the benchmark rate service offered by the World Markets Company and actual or potential conflicts of interest that we have identified that may arise in connection with the offering of the benchmark rate service or in connection with the ownership of the World Markets Company by State Street. Our client service representatives are available to answer or arrange an answer to any questions you may have regarding the benchmark rate service or your particular arrangements with the World Markets Company. You also have access to additional information about the benchmark service offered by the World Markets Company at While the World Markets Company has attempted to identify in this document the material conflicts of interest that may arise in connection with the offering of the benchmark rate service or in connection with the ownership of the World Markets Company by State Street, the World Markets Company may have failed to identify all such actual or potential conflicts of interest, and other conflicts of interests may arise in the future. Your use of the benchmark rate service offered by the World Markets Company will be deemed to constitute your consent for the World Markets Company to provide such benchmark rate service to you even though the actual or potential conflicts of interest identified herein in relation to such services may exist. WHAT ARE THE SERVICES OFFERED BY THE WORLD MARKETS COMPANY? The World Markets Company provides a global foreign exchange rate benchmark service, offering spot, forward and non-deliverable forward benchmark rates (each, a benchmark rate ) for specific currency pairs at fixed points throughout the global trading day. The most actively traded (i.e., most liquid) spot currency pairs for which the World Markets Company establishes a benchmark rate are referred to as the trade currencies, because these benchmark rates are established primarily using actual trade execution and order data from identified third party global foreign exchange trading platforms. The remaining spot currency pairs, as well as all deliverable and nondeliverable forward currency pairs, are called non-trade or quote currencies, meaning that the World Markets Company establishes these benchmark rates primarily using the indicative bid and offer rates from identified third party global foreign exchange platforms. The global platforms from which the World Markets Company obtains trade execution, order and indicative bid and offer rate data are collectively referred to herein as the data providers. As of the date of this disclosure statement, the data providers for the trade and quote currencies are

2 Reuters Limited ( Thomson Reuters ), EBS Dealing Resources Limited ( EBS ) and, in certain limited circumstances, Currenex, Inc., a wholly owned subsidiary of State Street. The World Markets Company has the discretion, at any time and from time to time without notice, to change the entity or entities that are acting as data providers for any particular currency pair or to otherwise change the number of such entities that are used to source trade execution, order or indicative bid and offer rate data to calculate the benchmark rate for any particular currency pair. The World Markets Company provides a more detailed description of the benchmark rates and the methodology used to calculate these benchmark rates at ARE THE FOREIGN EXCHANGE BENCHMARK RATES PUBLISHED BY THE WORLD MARKETS COMPANY SUITABLE FOR THE PURPOSES FOR WHICH THEY ARE USED? The foreign exchange benchmark rates calculated and published by the World Markets Company are designed to generally reflect the foreign exchange market at the time of each benchmark fix, and are not intended as a composite picture of all foreign exchange transaction activity at that time or any other time. The foreign exchange benchmark rates calculated and published by the World Markets Company are used by subscribers for a range of purposes, including, but not limited to equity and bond index calculations, financial reporting (i.e., conversion of global currency holdings into a base rate), foreign exchange trade execution benchmark pricing, creation and settlement of financial instruments, portfolio valuations and performance measurements, and as the conversion rate in certain financial products. Each subscriber should independently determine whether the use of a benchmark rate, and in particular a benchmark rate calculated pursuant to the methodology employed by the World Markets Company, is appropriate for the intended objective of that subscriber. The methodology used by the World Markets Company may produce results consistent with one subscriber s objective but not another s. For example, the World Markets Company does not take transaction size into account when calculating its foreign exchange benchmark rates. Accordingly, subscribers that use the foreign exchange benchmark rates primarily for valuing financial instruments may be impacted differently by this methodology decision than subscribers that use the foreign exchange benchmark rates in circumstances where the size of the foreign exchange transaction is relevant, such as establishing the price at which foreign exchange transactions are to be executed with their clients. There may be foreign exchange benchmark rates that are designed for more specific purposes and that, accordingly, may have characteristics that are more tailored for your specific objectives. There recently has been increased scrutiny with respect to foreign exchange benchmark rates and market practices relating to their use in the foreign exchange market, which has resulted in and may continue to result in increased regulatory guidance that may impact the methodology (e.g., the number and quality of the data providers or benchmark fixing window, as defined below) by which the benchmark rates are calculated by the World Markets Company. In response to such regulatory guidance, we may be required or otherwise voluntarily elect to alter the methodology by which the benchmark rates are calculated in a way that may not be beneficial for all subscribers. The World Markets Company does not provide any advice to subscribers as to the appropriateness of its foreign exchange benchmark rates for a particular purpose or that its methodology is the best, or even an appropriate, methodology for any particular purpose for which a benchmark rate might be used. The World Markets Company also may, on its own initiative or in response to future regulatory requirements, introduce new foreign exchange benchmark rates or discontinue all or a portion of its benchmark rate service, alter the methodology by which its foreign exchange benchmark rates are calculated and validated or change, or increase or decrease, the number of data - 2 -

3 providers from which trade execution, order and indicative bid and offer rates are sourced, any or all of which may present unique risks to a subscriber depending on that subscriber s intended use of the foreign exchange benchmark rates. In light of the ability of the World Markets Company to discontinue its benchmark rate service, in whole or in part, and to alter the methodology by which its foreign exchange benchmark rates are calculated and validated, including by changing or increasing or decreasing the number of data providers, as well as the operational risks associated with calculating and publishing any foreign exchange benchmark rate, subscribers are solely responsible for assessing and understanding the potential impact of those considerations and risks on their own operations or valuations and the potential need for alternative foreign exchange benchmark rates during periods when the foreign exchange benchmark rates published by the World Markets Company are not available for whatever reason or when a change in the methodology by which they are calculated renders them unsuitable for the intended objective of that subscriber. For example, if a subscriber is using our foreign exchange benchmarks rates to value a financial instrument or to present comparability of data at different times or to evaluate trends over a period of time, any change in the methodology or in the quality or number of data providers may produce benchmark rates that would be different than the benchmark rates determined using the prior methodology or data providers, which could materially impact the valuation of any financial instrument or any comparison or trend analysis. The World Markets Company is not responsible for considering the interests of subscribers individually or as a group in determining whether to make any such change and shall not be liable for any disruption to or financial impact on a subscriber s business due to any delay in or cessation of publishing, or any unavailability of, any of its foreign exchange benchmark rates, any changes to the methodology by which those foreign exchange benchmark rates are calculated and validated or any unsuitability of the foreign exchange benchmark rates for the intended objective of that subscriber. There are subscribers that may have a financial or other interest in understanding the methodology by which the foreign exchange benchmark rates are calculated and validated by the World Markets Company and, accordingly, may attempt to influence or propose changes to that methodology to their advantage (e.g., by, advocating for a longer or shorter period over which we source actual trade execution and order data or by advocating for more or less sources of data used to calculate the benchmark rates). The interests of these subscribers may not align with and may be adverse to the interests of other subscribers, and such efforts, if successful, may result in benchmark rates that are unsuitable for the intended objective of a particular subscriber. WHAT ARE POTENTIAL CONFLICTS OF INTEREST THAT MAY ARISE AS A RESULT OF THE AFFILIATION BETWEEN THE WORLD MARKETS COMPANY AND STATE STREET? The World Markets Company is a wholly owned subsidiary of State Street and potential conflicts of interest may arise from this affiliation with State Street and its affiliates. Some examples of these actual and potential conflicts of interest include those described below. Currenex, Inc. Currenex is an electronic trading platform for foreign exchange offered and operated by Currenex, Inc. and State Street Global Markets International Limited (together with Currenex, Inc., Currenex ), each of which are direct or indirect wholly owned subsidiaries of State Street. Although the World Markets Company and Currenex are separate legal entities and are managed within separate divisions within State Street, they are under the same parent entity and are therefore affiliated with one another. The World Markets Company generally uses data from independent third parties to calculate - 3 -

4 and validate the benchmark rates. Currenex, however, currently serves as a secondary source of actual trade execution and order data in connection with the calculation and validation of the benchmark rates for three trade currency pairs: EUR/CHF, EUR/USD and USD/JPY. The benchmark rates published by the World Markets Company on any business day for these three currency pairs may therefore be based on data supplied by Currenex. The use of Currenex as a secondary source of actual trade execution and order data for any currency pair may create a competitive advantage for Currenex over other foreign exchange trading platforms as market participants, including the principal foreign exchange trading desks operated by our affiliates, seeking to replicate the benchmark rate for one of these currency pairs may elect to trade on Currenex instead of another foreign exchange platform whose data is not used by the World Markets Company to calculate the benchmark rates for these currency pairs. State Street will benefit, financially and otherwise, to the extent market participants increase their trading activities on Currenex. In addition, the World Markets Company pays Currenex a fee for the use of its trade execution and order data for these three currency pairs. Furthermore, Currenex determines which entities to include or exclude as participants on its electronic trading platform (whether for administrative, credit risk or other reasons), and those determinations will impact the pool of trade execution and order data available to the World Markets Company for use in the calculation and validation of the benchmark rates for the three currency pairs discussed above or any other currency pair for which the World Markets Company may rely on Currenex in the future as a source of data in connection with the calculation and validation of its benchmark rates. Currenex is not a trading participant on its own electronic trading platform. Currently, the servers that the World Markets Company uses to calculate its benchmark rates and store historical benchmark rate data are located within the same data center where the servers for Currenex are located. There are certain information technology employees of State Street have access to both sets of servers. State Street Foreign Exchange Sales and Trading. State Street provides principal foreign exchange execution services to institutional investor clients, including investment managers. State Street uses the benchmark rates published by the World Markets Company as a benchmark for determining the exchange rates for a variety of foreign exchange transactions entered into with its institutional clients. While the World Markets Company and the principal foreign exchange dealing and market making business units are organized under different divisions within State Street, they ultimately fall under the same parent entity and are therefore affiliated with one another. The benchmark rates published by the World Markets Company are calculated based on (i) with respect to trade currencies, actual trade execution and order data, and (ii) with respect to quote currencies, indicative bid and offer rates, in each case sourced from either Thomson Reuters, EBS or, in certain circumstances, Currenex. As described above, Currenex is an affiliated trading platform of both State Street and the World Markets Company. State Street, through its principal foreign exchange trading desk, enters into foreign exchange transactions and may otherwise provide firm or indicative bids and offers on each of the above-referenced foreign exchange electronic trading platforms. If State Street has agreed with one or more of its institutional clients to enter into foreign exchange transactions with respect to a trade currency at or based on a benchmark rate published by the World Markets Company, State Street may, as part of its strategy to hedge the market risk exposure arising from these foreign exchange transactions, attempt to replicate the benchmark rate for that currency pair by entering into foreign exchange transactions during the period (the benchmark fixing window ) in which the World Markets Company calculates and validates that benchmark rate. Some of these hedging foreign exchange transactions may be entered into on the platform - 4 -

5 of the data provider from which the World Markets Company sources the actual trade execution and order data used to calculate the relevant benchmark rate. In these circumstances, the benchmark rates published by the World Markets Company may be based, in part, on actual foreign exchange transactions entered into, or firm or indicative bids and offers, provided by, State Street on these foreign exchange trading platforms. In addition, it is highly likely that other principal foreign exchange dealers engage in similar hedging activity with respect to their benchmark orders, which may increase significantly the volume of foreign exchange transactions executed prior to and during a particular benchmark fixing window, which in turn may materially impact the benchmark rate calculated and published by the World Markets Company as well as the volatility of overall foreign exchange markets around that benchmark fixing window. The amount of the profit or loss that State Street recognizes in connection with benchmark orders will depend to a significant extent on how effective it is in hedging its market risk exposure against the relevant benchmark rate. In the course of capturing and validating data used to calculate the benchmark rates with respect to the trade currencies, the World Markets Company captures actual trade execution and order data from the relevant data provider but does not capture the identity of the underlying counterparties to the executed transaction or of the entity submitting the order data. On the other hand, in the course of capturing and validating data used to calculate the benchmark rates with respect to the quote currencies, the World Markets Company captures both the indicative bid or ask quotations and the identity of each financial entity submitting the indicative quotations. There would be a conflict of interest if an employee of the World Markets Company responsible for reviewing and validating the underlying data used to calculate any of the benchmark rates with respect to the quote currencies fails to properly apply the same level of scrutiny over data supplied by State Street or any other affiliate as it would apply to any third party financial entity submitting indicative quotations. Custody and Accounting. State Street offers a global custody and asset servicing business that includes, among others, the following services: (i) transaction processing and settlement for equities, foreign exchange and other asset classes, (ii) custody and recordkeeping of assets, (iii) investment analytics, and (iv) reporting, including daily and monthly fund pricing. The custody and asset servicing business uses the foreign exchange benchmark rates published by the World Markets Company to, among other things, price financial instruments held in custody and to calculate and report daily and monthly net asset valuations and to value cash settlements of foreign exchange transactions. Although the World Markets Company and the global custody and asset servicing businesses are managed in separate divisions within State Street, they ultimately fall under the same parent entity and are therefore affiliated with one another. The use of the foreign exchange benchmark rates calculated and published by the World Markets Company by the custody and asset servicing businesses within State Street is, in many circumstances, specifically directed by the customer. These benchmark rates are, however, integral to the custody and asset servicing businesses fund valuation procedures and are the default benchmark rates for certain other processes where customer direction is not required. Accordingly, because of the financial, operational and other resources that would be necessary to integrate other third party benchmark rates into their fund valuation and other processes, the custody and asset servicing businesses within State Street have an incentive to continue to use and recommend the benchmark rates calculated by the World Markets Company over other third party benchmark rates. The significant use of the foreign exchange benchmark rates published by the World Markets Company for purposes of fund valuation and similar purposes broadens the range of subscribers to whom the World Markets Company may market its benchmark - 5 -

6 rate services. In particular, this use benefits the World Markets Company because many financial entities that use these benchmark rates for fund valuation or similar purposes also seek to execute their related foreign exchange transactions at or based on the same benchmark rates in order to reduce tracking errors related to their foreign exchange activities. This would require the principal foreign exchange dealers that execute these transactions to continue to license the benchmark rates from the World Markets Company. State Street also receives fees from many of its clients within custody and in other business lines based on the net asset value of that client s assets under management at State Street. This compensation structure creates an incentive for State Street to attempt to influence the World Markets Company to, among other possible actions, exclude actual trade execution and order data that would result in a lower valuation of the assets of one or more clients of State Street. Affiliates, Generally. The World Markets Company publishes selected information concerning the methodology by which it calculates its foreign exchange benchmark rates. It does not, however, publicly disclose and otherwise treats as confidential and proprietary, among other things, the actual trade execution, order and indicative bid and offer rate data used to calculate the benchmark rate for any particular currency pair or the specific methodology for the selection of any such data. The calculation of the benchmark rates also includes several validation processes whereby employees of the World Markets Company review and compare the captured trade execution, order and indicative bid and offer rate data, as well as the calculated benchmark rates, against pre-determined tolerance thresholds. These validation processes also are considered confidential and proprietary and are not publicly disclosed. The foregoing information would potentially be valuable to any entity seeking to hedge its market exposure by replicating the benchmark rate for a currency pair when executing transactions with its clients at or based on the benchmark rates published by the World Markets Company. As indicated above, the principal foreign exchange trading desk of State Street executes foreign exchange transactions with its institutional clients at or based on the benchmark rates published by the World Markets Company and, accordingly, would potentially benefit from access to any or all of such confidential and proprietary information. The World Markets Company maintains policies and procedures reasonably designed to identify, monitor and manage these conflicts of interest and to protect against any confidential and proprietary information being shared with any subscriber or any other third party. If these policies and procedures were not effective, State Street, as well as any other third party subscriber, could use such confidential and proprietary information in a manner that potentially could (i) create a material advantage in managing its market risk positions with respect to foreign exchange transactions entered into with its clients at or based on the benchmark rates or (ii) influence the calculation of the foreign exchange benchmark rates published by the World Markets Company and, consequently, potentially disadvantage other subscribers and market participants that execute foreign exchange transactions at or based on those benchmark rates. The subscribers that rely on the benchmark rates published by the World Market Company, including any business or entity owned or operated by State Street or one of its affiliates, may seek to obtain access to the benchmark rates prior to the time the World Markets Company makes them available to subscribers through its normal distribution channels. The World Markets Company maintains policies and procedures reasonably designed to make the foreign exchange benchmark rates available to all distribution channels at the same time and to avoid preferential access to the benchmark rates or disclosure to any subscriber of the proprietary and confidential methodology and validation processes used to calculate the benchmark - 6 -

7 rates beyond what is publicly available. The nature of the methodology and validation processes used to calculate the benchmark rates may result in some benchmark rates taking longer to calculate than others. The World Markets Company seeks to avoid distributing any benchmark rate for the same tenor (e.g., spot) until all benchmark rates for that tenor have been finalized. Similarly, the subscribers that rely on these benchmark rates, including any business or entity owned or operated by State Street or one of its affiliates, may seek to improperly influence the methodology by which a benchmark rate is calculated or to influence the benchmark calculation process itself. The World Markets Company maintains policies and procedures reasonably designed to identify, monitor and manage conflicts of interest, although there is a risk that those policies and procedures may not effective in identifying and managing all conflicts of interest or instances of improper influence in relation to the World Markets Company and the benchmark rate service. WHAT ARE THE CONFLICTS OF INTEREST THAT MAY ARISE BETWEEN THE WORLD MARKETS COMPANY OR ANY OF ITS SUBSCRIBERS AND ITS DATA PROVIDERS? The World Markets Company currently sources transaction and other data that is used in the calculation of its benchmark rates from three data providers, namely, Thomson Reuters, EBS and Currenex. Currenex is an affiliate of the World Markets Company, while the other two data providers are independent third party trading platforms. The World Markets Company has a licensing agreement with each of these data providers and pays a fee or revenue share to each of them for the use of their trade execution, order and indicative bid and offer rate data. The World Markets Company has several validation processes that it believes are designed to identify and appropriately address off market rates in the course of calculating a benchmark rate. The World Markets Company, however, has established the current methodology for calculating and validating the foreign exchange benchmark rates based upon its own judgment as to the measures and thresholds that are appropriate and without regulatory direction as to a set of rules for monitoring or surveying the trading activity that takes place on any of its data providers platforms for manipulative or disruptive behavior. The information that the World Markets Company obtains from its data providers is not sufficient to determine whether any third party participating on the data providers platforms is engaging in manipulative or disruptive behavior or otherwise engaging in conduct that could adversely impact market participants in the foreign exchange market. The World Markets Company relies primarily on its data providers to monitor for manipulative and other disruptive behavior on their platforms that may impact the quality of the transaction and other data provided to the World Markets Company for use in the calculation of the benchmark rates and to otherwise comply with relevant regulations and best practices in these areas, although any such monitoring by these data providers likely will be focused on the specific trading platform services offered by the relevant data provider and not the integrity of the foreign exchange benchmark rates published by the World Markets Company. In light of the financial benefit obtained by these data providers for providing the transaction and other data used by the World Markets Company in calculating the benchmark rates, as well as any potential additional revenue arising from increased trading activity on their platforms due to their status as data providers to the World Markets Company, these platform operators might not communicate to the World Markets Company concerns relating to the operation of their platform, including concerns relating to manipulative or other disruptive behavior by their subscribers. The World Markets Company relies on these platform operators technology to source the relevant transaction and other data that is used to calculate the benchmark rates. If there is an - 7 -

8 issue with the completeness or quality of the data sourced from these data providers, the integrity and reliability of the benchmark rates calculated by the World Markets Company may be impacted. Moreover, if there is a problem with the platform operators technology, the World Markets Company could experience a delay in receiving the relevant data from the platform or degradation in the quality of the data being received. Thomson Reuters and EBS are also competitors with State Street and certain of its affiliates. Thomson Reuters and EBS are therefore in a position to prioritize their other commercial interests over those of the World Markets Company. There would be a conflict of interest if this were to happen. Thomson Reuters and EBS also have broader relationships with State Street that may benefit from their unique position as a data provider to the World Markets Company. For example, Reuters and EBS could attempt to leverage their relationship with the World Markets Company to negotiate favorable pricing or contract terms for other services provided by or to State Street. WHAT ARE THE CONFLICTS OF INTEREST THAT MAY ARISE BETWEEN THE WORLD MARKETS COMPANY OR ANY OF ITS SUBSCRIBERS AND THOMSON REUTERS THAT ARE UNIQUE TO THOMSON REUTERS AS A DATA PROVIDER? The World Markets Company is the administrator of the benchmark rate and has primary responsibility for all aspects of the benchmark determination process, including the development, calculation, and distribution of the benchmark rates. The World Markets Company sources transaction and other data from Thomson Reuters. In addition, the World Markets Company relies on Thomson Reuters to distribute the benchmark rates to those subscribers with whom Thomson Reuters has entered into direct licensing arrangements. If there is a failure in the distribution technology within Thomson Reuters those subscribers may receive the benchmark rates (i) at a later time than other subscribers that have direct licensing arrangements with the World Markets Company or (ii) with inaccuracies not experienced by subscribers receiving the benchmark rates directly through the other distribution channels used by the World Markets Company. The licensing arrangement between the World Markets Company and Thomson Reuters permits each party to independently market and license the benchmark rates to subscribers. These licensing arrangements are ultimately negotiated documents and subscribers may negotiate different rights and obligations for the use of the same foreign exchange benchmark rates depending on the licensor and the form of license agreement negotiated. The World Markets Company, for example, generally disclaims liability for any and all direct and indirect losses arising from its provision, and subscribers use, of the foreign exchange benchmark rates. The World Markets Company does not assume any liability for any representations and warranties made by Thomson Reuters, either orally or in the licensing arrangements with its subscribers. Thomson Reuters may, from time to time, act as a technical advisor to the World Markets Company, its board of directors and its executive management team. In its role as technical advisor, Thomson Reuters may have access to proprietary and confidential information about the methodology and validation processes used in calculating the benchmark rate and, accordingly, may be in a position to influence critical decisions concerning the benchmark rates, including, but not limited to, the foregoing methodology and validation processes. ARE THERE OTHER RISKS THAT MAY ARISE IN CONNECTION WITH THE USE OF THE BENCHMARK RATES? Market and Liquidity Risks. Each benchmark rate fluctuates over time in accordance with rates of the underlying trade execution, order or indicative bid and offer rate data used by the World Markets Company as input data for the calculation of the benchmark rate for a particular - 8 -

9 currency pair, and the value of a financial instrument or contract that references a particular benchmark rate may be affected accordingly. Furthermore, an illiquid market during any given benchmark fix period could materially reduce the volume or quality of data sourced by the World Markets Company from a particular data provider for use in the calculation of the benchmark rates. For example, where there is insufficient liquidity on the trading venue from which the World Markets Company receives input data for the trade currencies, the benchmark rates calculated on the basis of such input data may not be representative of equivalent exchange rates on other trading venues or in other markets or at any other time of the day. temporarily unable to calculate and publish a benchmark rate as a result of events outside the reasonable control of the World Markets Company. In addition, the spot benchmark rates for the quote currencies are calculated based on indicative bid and offer rates, as opposed to observable transaction execution data or binding or committed orders on a trading platform. These quote currencies generally are considered currencies for which there is a less active market. Accordingly, these indicative bid and offer rates are ultimately based on the judgment of the institutions submitting that information to the relevant data provider and may not be reflective of rates at which market participants are able to enter into an arm s length foreign exchange transaction. In some instances, the number of institutions contributing indicative bid and offer rates with respect to a particular quote currency pair may be as few as one. Legal and Regulatory Risks. There is a risk that certain entities may be restricted, or may in future become restricted, in their ability to use the benchmark rates due to legal or regulatory restrictions applying in their jurisdiction. Operational Risks. Notwithstanding any operational safeguards implemented by the World Markets Company, there is a risk that a given benchmark rate cannot be calculated in accordance with the required methodology or that the World Markets Company becomes - 9 -