Table of Contents

  **UNITED STATES SECURITIES AND EXCHANGE COMMISSION****Washington, D.C. 20549****Form 10-K****For Annual and Transition Reports Pursuant toSections 13 or 15(d)****of the Securities Exchange Act of 1934**   (Mark One)  þ     **ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE    SECURITIES EXCHANGE ACT OF 1934**   **For the fiscal year ended December 31, 2004** **o** **TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE    SECURITIES EXCHANGE ACT OF 1934****Commission file number 001-31555****Interactive Data Corporation***(Exact name of registrant as specified in its charter)*   **Delaware** **13-3668779***(State or other jurisdiction of* *(I.R.S. Employer**Incorporation or organization)* *Identification No.)***22 Crosby Drive****Bedford, Massachusetts 01730***(Address of principal executive offices)***Registrant’s telephone number, including area code:****(781) 687-8800****Securities registered pursuant to Section 12(b) of theAct:**   **Title of Each Class** **Name of Each Exchange on Which Registered**       common stock, $.01 par value per share     New York Stock Exchange**Securities registered pursuant to Section 12(g) of theAct: None**     Indicate by check mark whether the registrant: (1) hasfiled all reports required to be filed by Section 13 or15(d) of the Securities Exchange Act of 1934 during thepreceding 12 months (or for such shorter period that theregistrant was required to file such reports), and (2) hasbeen subject to such filing requirements for the past90 days.     Yes þ          No o     Indicate by check mark if disclosure of delinquent filerspursuant to Item 405 of Regulation S-K is notcontained herein, and will not be contained, to the best ofregistrant’s knowledge, in definitive proxy or informationstatements incorporated by reference in Part III of thisForm 10-K or any amendment to thisForm 10-K.     o     Indicate by check whether the registrant is an accelerated filer(as defined in Exchange ActRule 12b-2).     Yes þ          No o     The aggregate market value of the registrant’s voting andnonvoting common stock held by non-affiliates (without admittingthat any person whose shares are not included in suchcalculation is an affiliate for any other purpose) computed byreference to the price at which the common stock was last sold,as of the last business day of the registrant’s mostrecently completed second fiscal quarter was $600,889,834.     As of February 28, 2005, the registrant had93,353,899 shares of common stock outstanding.**Documents Incorporated by Reference**     Certain information required in Part III of this AnnualReport on Form  10-K is incorporated by reference fromthe registrant’s Proxy Statement for the Annual Meeting ofStockholders to be held on May 19, 2005.  

**TABLE OF CONTENTS**            **Page**     ** PART I**  1       Item 1.      Business  1       Item 2.      Properties  12       Item 3.      Legal Proceedings  12       Item 4.      Submission of Matters to a Vote of Security    Holders  13  ** PART II**  13       Item 5.      Market for Registrant’s Common Equity,    Related Stockholder Matters and Issuer Purchases of Equity    Securities  13       Item 6.      Selected Financial Data  14       Item 7.      Management’s Discussion and Analysis    of Financial Condition and Results of Operations  15       Item 7A.      Quantitative and Qualitative Disclosures    about Market Risk  36       Item 8.      Financial Statements and Supplementary    Data  38       Item 9.      Changes In and Disagreements With    Accountants on Accounting and Financial Disclosure  70       Item 9A.      Controls and Procedures  70  ** PART III**  70       Item 10.      Directors and Executive Officers of the    Registrant  70       Item 11.      Executive Compensation  71       Item 12.      Security Ownership of Certain Beneficial    Owners and Management and Related Stockholder Matters  71       Item 13.      Certain Relationships and Related    Transactions  71       Item 14.      Principal Accountant Fees and Services  71             **PART IV**  72       Item 15.      Exhibits and Financial Statement    Schedules  72  Ex-10.7 Form of Option Grant Certificate (Non-Executives) Ex-10.8 Form of Option Grant Certificate (Executives) Ex-10.20 Amend.#2 to Management Services Agreement Ex-10.21 Amend.#3 to Management Services Agreement Ex-10.22 Amend.#4 to Management Services Agreement Ex-21 Subsidiaries of the registrant Ex-23 Consent of PricewaterhouseCoopers LLP Ex-31.1 Section 302 Certification of CEO Ex-31.2 Section 302 Certification of CFO Ex-32.1 Section 906 Certification of CEO Ex-32.2 Section 906 Certification of CFO
i

Table of Contents
**PART I****Item 1.*****Business*****Overview**     We are a leading global provider of financial and businessinformation to financial institutions and active traders. Weoffer our services to our customers through two businesssegments: Institutional Services and Active Trader Services.     For service revenue, income from operations and identifiableassets and their relevant percentages for each of our segments,and service revenue and long-lived assets by geographic region,please refer to Note 13 in the Notes to the ConsolidatedFinancial Statements in Item 8 of this Annual Report on Form10-K.***Institutional Services***     The Institutional Services segment of our business primarilytargets banks, brokerage firms, mutual fund companies, insurancecompanies, money management firms, financial informationproviders, and other third-party redistribution partners byproviding services that may be used in determining portfolio andindividual security valuations, processing transactions,preparing account statements and other reports, addressingregulatory compliance requirements, and conducting investmentresearch and analysis. The Institutional Services segment iscomposed of three businesses:     *FT Interactive Data.* Through our FT Interactive Databusiness, institutional customers obtain historical andend-of-day pricing, evaluations, dividend, corporate actions anddescriptive information for approximately 3.5 millionsecurities, commodities, and derivative instruments that aretraded around the world. Financial institutions regard theseservices as critical to their business activities includingportfolio and security valuations, processing transactions,regulatory compliance, back-office operations, and researchinginvestment decisions for determining whether and when to buy andsell securities. We collect, edit, generate, maintain, anddeliver data on a wide range of equity and fixed incomesecurities, commodities, and derivative instruments in order tomeet the information needs of our institutional customers.     *CMS BondEdge.* Through our CMS BondEdge business, fixedincome portfolio managers, quantitative research analysts andinstitutional brokers use sophisticated analytics forrisk/return analysis, assistance with their regulatory reportingand investment decision evaluation.     *ComStock®*. Through our ComStock business, financialinstitutions, financial information providers and informationmedia companies obtain real-time and delayed financial marketinformation covering more than 2 million securitiesincluding equities, derivatives, futures, fixed incomesecurities and foreign exchange rates sourced from over 350stock exchanges and other sources worldwide.***Active Trader Services***     The Active Trader Services segment of our business (formerlyreferred to in our periodic reports as the Retail Servicessegment) targets active traders, which includes individualinvestors and professional traders. We elected to change thename of this segment from Retail to Active Trader because webelieve the name, Active Trader, more accurately describes thecustomer base for our real-time financial market information andrelated decision support tools. Active traders typically maketheir own investment decisions, trade frequently and earn asubstantial portion of their income from trading. The ActiveTrader Services segment is composed of one business:     *eSignal®*. Through our eSignal business, activetraders and individual investors obtain real-time financialmarket information and utilize decision support tools to assistin their analysis of securities traded on all major markets inthe United States as well as a number of international markets.     Across each of our businesses, regardless of business segment,many of our services are provided on a flat fee subscriptionbasis; others are provided on a usage basis, and some are acombination of a flat minimum fee
1

Table of Contents
with additional amounts charged for usage above an establishedlevel. We have historically achieved high customer retentionrates, particularly from our institutional client base. Througha broad range of business alliances, many of the world’sbest-known financial service and software companies access ourservices in support of their trading, analysis, portfoliomanagement and valuation activities. At the core of our businessare our customer relationships, business alliances, extensivedatabases, in-depth services, technical know-how and technologyinfrastructure resources.     Interactive Data Corporation was incorporated in 1992 under thelaws of the state of Delaware. On February 29, 2000, DataBroadcasting Corporation merged with Interactive DataCorporation. This merger brought together the businesses of DataBroadcasting Corporation, which included the eSignal and CMSBondEdge businesses, with the historical and end-of-day pricing,evaluation and information businesses now known as FTInteractive Data. The core FT Interactive Data business has beenin the financial data business for over 35 years.     Since this merger, we have continued to evaluate acquisitioncandidates with technologies, capabilities, service offeringsand customer relationships that complement our core strengthsand add to our established businesses. In 2002, we acquiredcertain assets from Merrill Lynch, Pierce, Fenner &Smith Incorporated used in its Securities Pricing Servicebusiness. In 2003, we acquired from The McGraw-Hill Companies,Inc. the stock of S&P ComStock, Inc., and the non-US assetsof certain related businesses in the United Kingdom, France,Australia, Singapore and Hong Kong, collectively referred to asComStock, enabling us to provide real-time information regardingsecurities traded around the world to our institutional clients.In 2003, we also acquired the client base of HyperFeedTechnologies, Inc., through which we expanded the client basefor our ComStock services. In September 2004, we acquired theassets of FutureSource®, LLC, and its subsidiaries, orFutureSource, a leading provider of real-time futures andcommodities data, which we believe further complements andexpands eSignal’s business of providing real-time financialmarket information and decision support tools.**Market for Financial Data*****Institutional Services***     To support the numerous complex tasks they perform, financialinstitutions typically require timely delivery of high-qualitydata obtained from multiple sources. Among other things, dataobtained from external data vendors like us is used: • *As input to be considered as part of a determination of the    valuation of individual securities held in an investment    portfolio.* The valuation of such securities is important for    mutual funds, pension funds, and money managers. For example,    each US mutual fund has a regulatory obligation to determine the    fund’s net asset value each trading day. The net asset    value is used to set the price per share for all investments    into and redemptions from that mutual fund for that day. While    we do not and, as a regulatory matter, cannot set mutual fund    net asset values, many mutual funds consider our data as one    important part of their own daily valuation determinations.  • *In support of back office operations.* Financial    institutions require trading activity information in order to    settle purchases and sales of securities and to prepare account    statements for themselves and their clients. In addition,    financial institutions may utilize securities information    provided by third parties for consideration as they perform the    activities required to meet the various regulatory requirements    to which they are subject. We believe that the importance of    these services will continue to increase as regulatory    requirements expand and as the financial services industry moves    toward faster and more automated settlement processing.  • *In research as an aid for determining whether and when to buy    and sell securities.* Retail brokerage firms, investment    management firms, banks, and other types of financial services    firms desire both real-time and historical data to assist in    their investment decisions. Our data is one of many inputs that    may be considered as part of the ongoing research and investment    activities of financial institutions and other entities in the    business of investment research and analytics.
2

Table of Contents
***Active Trader Services***     Active traders utilize real-time data and analytical tools fromexternal data vendors like us for the following: • *In research as an aid for determining whether and when to buy    and sell securities.* Active traders use real-time and    historical data to assist in their investment decisions. Our    data and analytical tools are used by active traders to help    formulate, validate and execute their trading strategies.**Market Challenges**     Regardless of business segment, and across each of ourbusinesses, there are numerous challenges associated withobtaining, aggregating, storing, evaluating and distributingfinancial and business information regarding globally tradedsecurities. These challenges include:     *Infrequently Traded Securities.* Many securities,particularly fixed income securities, are difficult to valuebecause they trade infrequently. The generation and delivery ofthese opinions of value represent a significant market withinthe financial services industry.     *Aggregation of Multiple Sources.* The information requiredby financial institutions comes from many sources, includingsecurities exchanges and other financial markets in NorthAmerica, Europe, Asia Pacific and elsewhere in the world.Aggregating this data requires establishing relationships witheach of these sources to acquire this data in order to create aglobal technical infrastructure capable of collecting the sourcedata and incorporating the source data into a uniform datastructure.     *Reliability.* The distance, speed and volume of data movedon a daily basis creates significant operational, financial andquality challenges. Identifying and minimizing source or othererrors in reporting, collecting, aggregating, storing anddistributing financial information is a unique challenge.     *Know-how.* Extensive expertise and technical know-howregarding the financial data industry are required toeffectively obtain, store, evaluate and distribute the volumeand diversity of financial and business information needed tooperate in the financial services industry. The expertise andknow-how required are highly-specialized, diffuse and are notreadily obtainable or transferable.     To assist in addressing these challenges, financial servicesindustry participants commonly purchase services from companiesthat specialize in providing financial and business informationto multiple customers in a cost-effective manner.**Services**     We offer our services to two primary business markets, financialinstitutions and active traders. Our businesses address therequirements of both financial institutions and active tradersby reliably providing timely information regarding a broadspectrum of securities. We have established relationships withnumerous key domestic and international financial markets anddata providers to obtain the source data. We have developedproprietary methods of receiving and packaging the source data,and we utilize proprietary methodologies to offer evaluatedprices for certain fixed income and international equitysecurities. We employ teams of professionals who work to enhancethe quality and completeness of the data that we deliver to ourcustomers. In most cases, we also use our proprietary techniquesand extensive data expertise to refine and package the dataprior to delivering it to customers. We target financialinstitutions and active traders through our InstitutionalServices and Active Trader Services segments, respectively.***Institutional Services***     Our FT Interactive Data, CMS BondEdge and ComStock businessesservice the informational needs of financial institutions.
3

Table of Contents
*FT Interactive Data*     FT Interactive Data is our largest business, accounting for$320.8 million, or 66.2%, of our service revenue in 2004.Services delivered by FT Interactive Data provide financialinstitutions with information on approximately 3.5 millionsecurities, commodities, and derivative instruments that aretraded around the world. In addition to information concerninglisted securities, FT Interactive Data specializes in hard tovalue, unlisted fixed income securities and hard to obtaininformation from emerging markets.     FT Interactive Data covers approximately 2.5 millionunexpired fixed income securities, including: •     corporate, government, municipal and agency fixed income    securities, pass-through securities and structured finance    securities issued by North American issuers; and  •     convertibles, debentures, Eurobonds, government and corporate    bonds and loan capital issued by foreign issuers.     FT Interactive Data’s proprietary evaluated pricingmethodologies combine modeling techniques, information frommarket sources and a team of skilled evaluators to take accountof market conditions and specific price-impacting events inorder to provide a good faith opinion of the price a buyer inthe marketplace would pay for a given fixed income security(typically in an institutional round lot position) in a currentsale. In addition to evaluated pricing services, FT InteractiveData provides call and sinking fund, call announcement,descriptive data, interest payment, original issue discount, andreorganization data relating to these securities.     FT Interactive Data’s coverage of equity and derivativesecurities includes securities traded around the world. Theinformation regarding these securities includes pricing,evaluation, capitalization changes and dividends, descriptivedata, earnings and shares outstanding information, andreorganization announcements. In addition to providing customerswith end-of-day data regarding covered securities, this businessoffers clients access to analytic tools and its extensivedatabase containing historical and descriptive information.     Institutional customers of FT Interactive Data receive amajority of their data through Internet-based applications andcomputer-to-computer links. FT Interactive Data designs its datafeeds to be compatible with third-party software applicationsand standard industry protocols in order to allow institutionalcustomers to integrate these data feeds into their technologyinfrastructures.     FT Interactive Data also produces proprietary evaluations forselect international equities. In the third quarter of 2002, thebusiness launched the Fair Value Information Service. Thisservice, which to date has been primarily targeted at US-basedmutual fund companies, is designed to provide users with datathey can consider in determining whether the local closing pricefor an international equity is stale as of 4:00 p.m.Eastern Time and, if so, in estimating the price for thatsecurity at 4:00 p.m. Eastern Time in a liquid market inview of the information available at that time. This service isdesigned as a tool for US mutual funds as they undertake to: •     meet their obligations to address the statutory mandate that    funds determine the fair value of portfolio securities when    market quotations are not readily available; and  •     reassure long-term fund investors that appropriate procedures    are being utilized to help safeguard the investors’    interests against market timers and short-term traders.*CMS BondEdge*     CMS BondEdge accounted for $32.1 million, or 6.6%, of ourservice revenue in 2004. Our CMS BondEdge business is a leadingprovider of fixed income analytical tools and models toportfolio managers, quantitative research analysts andinstitutional brokers. CMS BondEdge services are used to assistinstitutional investors in managing risks and understanding theperformance of diversified fixed income portfolios. The CMSBondEdge services include interest rate and credit riskmanagement tools, as well as regulatory reporting and compliancetools. In addition, customers can simulate various marketenvironments to help
4

Table of Contents
forecast performance results. Customers are typicallyinstitutional fixed income portfolio managers who invest in orsell taxable fixed income securities, particularly those thatrequire specialized modeling.     CMS BondEdge services are desktop Windows®-based. Theservices interface with many of the major third-party accountingand asset/liability software packages designed to reduceduplicate data entry and to facilitate improved accuracy andefficiency within an organization. CMS BondEdge clients areprovided access to daily market data updates via the Internet toassist in the creation of high quality analytic calculations andreports. These services are offered via an array of deliveryoptions, including: •     client-server (BondEdge®);  •     ASP/ Internet accessible (eBondEdge®);  •     enterprise-wide/local area network, or LAN, wide area network,    or WAN, solutions (BondEdge ES); and  •     service bureau, an outsource option that enables CMS BondEdge to    assist customers in the performance of certain fixed income    portfolio analysis activities.     CMS BondEdge continues to invest in expanding the functionalityand features of its services, as well as customizing itsofferings for international markets. In 2004, CMS BondEdge begandeveloping a new BondEdge offering that aims to enable clientsto integrate its analytical values in other softwareapplications. In addition, in response to increased demand forfixed income performance attribution tools globally, developmentwork commenced to add a sector/returns-based-attributionapproach into BondEdge.     Windows® is a registered trademark of Microsoft Corporation.*ComStock*     ComStock accounted for $62.9 million, or 13.0%, of ourservice revenue in 2004. Our ComStock business, which focuses ondelivering real-time and delayed information to institutionalcustomers, on-line media portals and other redistributionpartners, provides coverage for over 2 million securitiesin virtually all asset classes traded worldwide. ComStock’ssuite of services ranges from a real-time global market datafeedto fully customized and hosted market data services.     The ComStock XpressFeed service is a real-time, high-speed,global market data feed, integrating real-time data from over350 stock exchanges and other sources worldwide, covering inexcess of 2 million financial instruments. XpressFeed hasbroad coverage of the US marketplace, as well as extensiveinternational coverage, including markets in Europe, AsiaPacific, Latin America, South America and Africa. The real-timedata includes content regarding: •     Equities;  •     Market depth and Electronic Communication Network, or ECN, data;  •     Corporate bonds;  •     Commodities and options;  •     Mutual funds and money markets;  •     Fixed income instruments;  •     Foreign exchange rates; and  •     US and international news coverage from a range of sources.     In addition to real-time content, the ComStock XpressFeedservice offers comprehensive related information including: •     Global fundamental data;  •     Corporate actions records;
5

Table of Contents
 •     Historical data; and  •     Analytical tools and capabilities.     ComStock offers a variety of delivery methods, including leasedline, satellite and virtual private network. In addition,ComStock continues to invest in the development of softwareinterfaces that facilitate integration with various third-partyand in-house applications and tools utilized by institutionalclients.     The eFinanceSolutionstmservices within the ComStock business represent a suite ofmodular, global market data components, leveragingComStock’s breadth and depth of market data with a flexibleWeb services architecture. Comprising support tools, analyticalcontent, and market data, eFinance Solutions are capable ofbeing customized to meet the needs of financial services users,from consumer portals to front-office and back-officeprofessionals. Built on a flexible infrastructure, the eFinanceSolutions content management platform is designed to allowintegration of proprietary and third party data and to meet therobust performance requirements of the financial servicesindustry.***Active Trader Services***     Our eSignal business services the needs of active traders.*eSignal*     eSignal accounted for $55.1 million, or 11.4%, of ourservice revenue in 2004. eSignal provides streaming, real-timefinancial market information and decision support tools toactive traders including individual investors and professionaltraders. The financial data available to eSignal subscribersincludes equities, options, derivatives data, single stockfutures, indices, market depth from the NASDAQ Stock Market, theNew York Stock Exchange, the Chicago Mercantile Exchange, andthe Chicago Board of Trade, as well as ECN and foreign exchangemarket information, fixed income data, mutual fund data, andmoney market data for over 1 million securities. Inaddition, eSignal subscribers receive access to decision supporttools including historical databases, technical charting,customizable analytics, back testing, portfolio tracking, andnews and commentary.     The information is delivered via eSignal’s internallyengineered and operated network with advanced IP multicastbackbone and multiple, geographically dispersed server farms.eSignal services include eSignal, Advanced GET,MarketCentertmLIVE, eSignal Pro, TahoeChartstm,eSignal MarketScannertmand Advanced GETScannertm.In the first quarter of 2004, eSignal reintroduced QuoTrek®to its product line, a real-time quotes, charts and newsapplication for wireless devices, such as personal digitalassistants, or PDAs, and cellular phones. With the acquisitionof the assets of FutureSource, eSignal now markets FutureSourceofferings, which include FutureSource Workstation, FutureSourceXtra and FutureSource IFS.     In 2004, eSignal finalized the phase out, which began in 2001,of its satellite broadcast-based services. As a result,broadcast-based technology services declined significantlyyear-to-year over the past few years, declining 81.5% from 2003to 2004, 58.6% from 2002 to 2003, and 55.9% from 2001 to 2002,as customers migrated to alternative delivery sources, includingeSignal’s Internet-based services.**Marketing Strategy**     Regardless of business segment, many of our services areprovided on a flat fee subscription basis; others are providedon a usage basis, and some are a combination of a flat minimumfee with additional amounts charged for usage above anestablished level. Through the FT Interactive Data, CMS BondEdgeand ComStock businesses, our Institutional Services segment hashistorically maintained high renewal rates, with annual renewalrates of approximately 95% during 2004. Through the eSignalbusiness, our Active Trader
6

Table of Contents
Services segment has historically experienced lower renewalrates. The specific marketing strategies within ourInstitutional Services and Active Trader Services segments areas follows:***Institutional Services***     Each of the core Institutional Services we supply is typicallymarketed through separate dedicated sales forces within FTInteractive Data, ComStock and CMS BondEdge. These institutionalsales teams possess specialized industry and product expertise.They provide on-site and remote demonstrations of our servicesand interact directly with our customers and prospects. Ourinstitutional sales forces are supported by promotionalcampaigns including public relations, direct mail, targetedtrade shows and advertising in trade publications. In 2005, weintend to continue to work closely with all clients, includingour largest institutional clients, to identify new salesopportunities and better leverage and coordinate selling effortsby our separate, dedicated sales forces.***Active Trader Services***     Active Trader Services are marketed by eSignal throughadvertising, marketing alliances, third-party developerrelationships, seminars, trade shows, email, direct mail andincentives for referrals. In addition, eSignal has developedmarketing alliances with online brokers that marketeSignal’s Internet-delivered services to their customers.eSignal also invites third-party software developers to writetrading system software that is compatible with eSignal’ssystems and asks trading educators to consider use of eSignalservices in their seminars. In addition to direct sales,distribution channel partners have been an important source ofnew subscribers in recent years.**Customers*****Institutional Services***     The Institutional Services segment of our business primarilytargets banks, brokerage firms, mutual fund companies, insurancecompanies, money management firms, financial informationredistributors and other third-party redistribution partners.     Our FT Interactive Data business supplies data directly toseveral thousand institutional customers, including banks,brokerage firms and investment management firms. This businessalso contracts with redistributors and outsourcing organizationsto sub-license or redistribute data typically to medium andsmall institutions, and individual investors. Unlike theinstitutional customers described above, these redistributorsand outsourcing organizations typically use their own deliverysystems or serve as an interface between their clients’ andFT Interactive Data’s delivery systems to redistributeand/or process the data provided by FT Interactive Data.     Our CMS BondEdge business targets portfolio managers,quantitative research analysts and institutional brokers in thefixed income institutional investor market. As of the end of thefourth quarter of 2004, approximately 500 institutionalinvestment firms, banks, insurance companies and brokeragehouses based primarily in North America subscribed to CMSBondEdge services.     Our ComStock business targets financial institutions, financialinformation redistributors, and online media portals. As of theend of the fourth quarter of 2004, ComStock had over 2,400direct customers.***Active Trader Services***     Active Trader Services are sold by our eSignal business. eSignalprimarily targets active traders, which includes individualinvestors and professional traders. As of the end of the fourthquarter of 2004, eSignal had over 43,700 direct subscriptionterminals, which included approximately 6,500 FutureSourceterminals. The target market for eSignal consists primarily ofactive traders who make their own investment decisions, tradefrequently and earn a substantial portion of their income fromtrading.
7

Table of Contents
**Competition**     The market for providing financial and business information isintensely competitive, regardless of business segment. Webelieve that our ability to compete across each of ourbusinesses depends on a number of common factors, including: •     the timeliness, reliability, quality and breadth of coverage of    our services compared with those of our competitors;  •     our ability to expand our data content offerings to meet the    current and evolving needs of our customers;  •     our ability to launch new services to both expand and strengthen    our customer base; and  •     the quality of our customer service and support.***Institutional Services***     Competition within our Institutional Services segment rangesfrom large, established suppliers of news and financial data tosmaller, more specialized vendors. The main competitors withrespect to our institutionally oriented FT Interactive Data andComStock businesses are large global suppliers of news andfinancial data, including Bloomberg, Thomson Financial, ReutersGroup plc, Standard and Poor’s, Telekurs Financial, andsimilar data producers and smaller data vendors that competeagainst us in specific geographic regions and niche markets. Wealso face competition from customers self-sourcing financialdata and news directly from brokers, exchanges and newsservices. We believe the primary competitive factors withrespect to these services are value-added features, coverage ofsecurities, reliability, and timeliness of data delivery andcustomer support.     As a specialty service, CMS BondEdge, which provides analyticalsoftware primarily to fixed income portfolio managers, competesagainst other financial services analytical software companiessuch as The Yield Book, Inc., which is a wholly owned subsidiaryof Citigroup Capital Markets, Wilshire Associates Incorporatedand Derivative Solutions Inc., and faces competition frombrokerage firms developing software solutions internally or withthe assistance of outside consultants. We believe the primarycompetitive factors with respect to these services are thedealer independence of the provider, a comprehensive andintegrated global database of fixed income securities,mortgage-backed and structured finance assets as well as modelsfor over-the-counter and derivative holdings, advanced modelinganalytics to evaluate fixed income securities individually or ina portfolio context, complete and flexible reportingcapabilities, and customer support.***Active Trader Services***     Within our Active Trader Services segment of our business,eSignal competes against numerous competitors including TownsendAnalytics, Thomson Financial, TradeStation, DTN Market Access,Inc., CQG, Inc. and others. We believe the principal competitivefactors in the industry include data availability, reliable andtimely delivery, ease of use, compatibility with third-partysoftware packages, and price.**Technology Infrastructure**     Our technology infrastructure and operations support both theInstitutional Services and Active Trader Services segments ofour business and are designed to facilitate the reliable andefficient processing and delivery of data to our customers. Bydesign, our systems contain multiple layers of redundancy toenhance system performance, including maintaining, processingand storing data at multiple data centers. In our eSignal andComStock businesses, user connections are load balanced betweenour data centers and, in the event of a site failure, equipmentproblem or regional disaster, the remaining centers have thecapacity to handle the additional load.     We are in the process of a major project to streamline andupgrade our data collection and delivery infrastructure. As partof this project, we plan to consolidate seven separate datacenters and related facilities in the United States into twomajor independent data centers as well as enhance the backup andresiliency for
8

Table of Contents
our North American businesses. In 2003, we signed a lease for anearly 50,000 square foot technology center in Boxborough,Massachusetts. This facility became operational in mid-2004. Wehave since consolidated activities from our New York, New York,Salt Lake City, Utah, Hightstown, New Jersey and Waltham,Massachusetts facilities into the new Boxborough, Massachusettsdata center, which serves as our East Coast data center. Inmid-2004, we began planning to expand our current West Coastdata center in Hayward, California. Throughout 2005, we plan tocontinue migrating activities from our other data centers toBoxborough and Hayward, respectively.     We are focused on maintaining an infrastructure that allows usto provide data using various delivery methods designed to meetthe needs of our customers. Our institutional customers receivea majority of their data through dedicated private networks,Internet-based applications, global satellite networks, andcomputer-to-computer links. We design our data feeds to becompatible with third-party software and standard industryprotocols in order to allow our institutional customers tointegrate our data feeds into their technology infrastructures.Information is distributed to our active trader customersprimarily via the Internet and directly to wireless mobiledevices.**Intellectual Property**     We maintain a portfolio of intellectual property, includingregistered and common law trademarks and service marks,copyrights and patents. We have rights to approximately 50trademarks and service marks. We place significant emphasis onour branding and consider our trademark and service markportfolio to be an important part of our ongoing brandingcampaign. In addition, we own the copyrights to our internallydeveloped software applications and data delivery services. Wecurrently have three United States patents issued and one UnitedStates patent application pending. The three United Statespatents expire in 2007, 2011 and 2012, respectively. No singletrademark, service mark, copyright, or patent, if lost, wouldmaterially adversely affect our operations or financial resultsas a whole.     License agreements, both as licensor with our customers and aslicensee with suppliers of data, are important to our business.The termination of any license with a major data supplier, suchas the New York Stock Exchange and other similar financialmarkets, would materially disrupt our operations.     We have rights to use the “FT” brand in conjunctionwith our institutional activities on a global basis under alicense with The Financial Times Limited, an affiliate ofPearson plc, or Pearson. As of February 28, 2005, Pearsonindirectly owns approximately 60% of our outstanding commonstock. This license’s initial five-year term ends in March2006. Thereafter the license automatically renews for subsequentone-year terms unless terminated. We do not believe thecessation of our rights under this license would materiallyadversely affect our operations or financial results as a whole.**Geographic Areas**     Through subsidiaries and affiliates, we conduct business innumerous countries outside the United States. Our internationalbusinesses are subject to risks customarily encountered inforeign operations, including fluctuations in foreign currencyexchange rates and controls, import and export controls, andother laws, policies and regulations of foreign governments.During the past three fiscal years, our service revenue bygeographic region was as follows:                **2004** **2003** **2002**         **(In thousands)**    United States $382,392  $344,869  $300,627     United Kingdom  60,246   62,783   51,273     All other European Countries and Canada  35,229   28,871   18,141     Asia  6,698   6,167   4,974                Total $484,565  $442,690  $375,015           
9

Table of Contents
     During the past three fiscal years, long-lived assets bygeographic region are as follows:                **2004** **2003** **2002**         **(In thousands)**    United States $568,435  $564,631  $466,356     United Kingdom  134,363   124,275   77,886     Asia  2,654   2,579   1,965                Total $705,452  $691,485  $546,207           **Employees**     We had approximately 1,800 employees as of March 1, 2005.We believe that our relations with our employees are good.**Regulation**     DBC Securities Inc., one of our subsidiaries, was registered asa broker-dealer with the Securities and Exchange Commission, orSEC, and various state securities commissions and was alsosubject to regulation by the National Association of SecuritiesDealers, Inc., of which it is a member. In the fourth quarter of2004, DBC Securities, Inc. filed a notice of withdrawal fromregistration as a broker-dealer and ceased doing business as ofDecember 31, 2004. We plan to dissolve this subsidiary in2005.     FT Interactive Data Corporation, one of our subsidiaries, isregistered with the SEC as an investment adviser and is subjectto regulation under the Investment Advisers Act of 1940.     Our FT Interactive Data Australia subsidiary is licensed by theAustralian Securities & Investment Commission, or ASIC,to provide certain financial services in Australia under theCorporations Act 2001.**Internet Address, SEC Reports and NYSE Reports**     We maintain a website with the address www.interactivedata.com.We are not including the information contained on our website asa part of, or incorporating it by reference into, this AnnualReport on Form 10-K. We make available free of chargethrough our website our Annual Reports on Form 10-K,Quarterly Reports on Form 10-Q and Current Reports onForm 8-K, and amendments to these reports, as soon asreasonably practicable after we electronically file suchmaterial with, or furnish such material to, the SEC. We alsoinclude on our website our code of business conduct and ethics,corporate governance guidelines and the charters for each of themajor committees of our board of directors. In addition, weintend to disclose on our website any amendments to, or waiversfrom, our code of business conduct and ethics that are requiredto be publicly disclosed pursuant to rules of the SEC and theNew York Stock Exchange.     We submitted our 2004 annual Section 12(a)CEO Certification with the New York Stock Exchange. TheCertification was not qualified in any respect.**Executive Officers of the Registrant**       **Name** **Age** **Office Held with Company**         Stuart J. Clark  57      President and Chief Executive Officer    Steven G. Crane  48      Executive Vice President and Chief Financial Officer    Andrea H. Loew  47      Vice President, General Counsel and Corporate Secretary    John L. King  54      Chief Operating Officer of FT Interactive Data    Raymond L. D’Arcy  52      President, Data Delivery Products, FT Interactive Data
10

Table of Contents
     *Stuart J. Clark* has served as our president andchief executive officer and a member of our board of directorssince February 29, 2000, and has been employed in the financialinformation industry since 1968. Prior to his current positionwith us, he served as president of Interactive Data Corporation(as it existed prior to its merger with Data BroadcastingCorporation) since 1995. From 1993 to 1995, Mr. Clark was adirector of UK-based Financial Times Information, with specificresponsibility for the Market Data Division. Prior to 1993, Mr.Clark led the Market Data Division of Extel Financial Limited,which was acquired by Pearson plc’s Financial Times Groupin December 1993.     *Steven G. Crane* has served as our executive vicepresident and chief financial officer since November 30, 1999.From October 1997 through November 30, 1999, Mr. Craneserved as vice president and chief financial officer of VideoServices Corporation, a company listed on the American StockExchange. From 1996 to 1997, Mr. Crane was the owner ofATE, Inc., a provider of packaging related equipment tointernational bottling companies. From 1990 to 1995,Mr. Crane was a division CFO for Pepsi-Cola International.     *Andrea H. Loew* has served as our vice president,general counsel and corporate secretary since February 29, 2000.From September 1996 until February 29, 2000, Ms. Loewserved as vice president, general counsel and corporatesecretary of Interactive Data Corporation (as it existed priorto its merger with Data Broadcasting Corporation). Priorthereto, Ms. Loew was a partner in Eckert, Seamans, Cherin &Mellott, LLC and before that an associate at Choate, Hall &Stewart LLP.     *John L. King* has served as our chief operatingofficer of FT Interactive Data since April 1999. From 1997 toApril 1999, Mr. King served as the managingdirector/president of Financial Times Group’s ExtelFinancial Ltd. Division. Prior thereto, Mr. King served asvice president, IDSI services for Interactive Data Corporation(as it existed prior to its merger with Data BroadcastingCorporation).     *Raymond L. D’Arcy* has served as our presidentof Data Delivery Products for FT Interactive Data since January2001. From 1999 to 2001, Mr. D’Arcy served as seniorvice president of global sales, marketing and customer supportfor Interactive Data Corporation (as it existed prior to itsmerger with Data Broadcasting Corporation) and from 1996 to 1999as Vice President of North American Sales, Marketing andCustomer Support. Prior thereto, Mr. D’Arcy served asFT Interactive Data’s regional sales director for EasternNorth America for ten years.
11

Table of Contents
**Item 2.*****Properties***     We own no real estate but lease the following principalfacilities for use as corporate headquarters, sales offices anddata centers:                       **Current**    **Operating** **Square** **Annual**  **Location** **Unit/Segment** **Feet** **Rental Rate** **Expiration Date**             Akron, OH  Active Trader   4,110  $76,032   September 2006     Bedford, MA Institutional and Corporate  80,348  $1,546,078   July 2006     Boston, MA  Institutional   11,910  $357,300   March 2010     Boxborough, MA Corporate, Institutional and Active Trader  48,817  $231,881   September 2018     Channel Islands, UK  Institutional   2,301  $103,527   October 2011     Chicago, IL  Institutional   4,646  $95,135   September 2011     Chicago, IL  Active Trader   3,840  $79,040   October 2007     Dublin, Ireland  Institutional   15,902  $347,227   February 2012     Edinburgh, Scotland  Institutional   5,200  $140,153   August 2006     Fort Lauderdale, FL  Active Trader   1,210  $26,217   August 2006     Harrison, NY  Institutional   37,760  $682,875   October 2006     Hayward, CA  Active Trader   60,158  $1,072,354   June 2013     Hong Kong, PRC  Institutional   301  $77,193   December 2005     Houston, TX  Active Trader   2,486  $43,505   June 2007     Lombard, IL  Active Trader   27,674  $508,524   May 2006     London, England  Institutional   65,000  $1,775,908   April 2010     London, England  Active Trader   6,088  $191,990   August 2005     Luxembourg  Institutional   2,500  $144,669   December 2006     Melbourne, Australia  Institutional   4,828  $65,001   November 2005     Newport Beach, CA  Institutional   600  $25,650   October 2005     New York, NY  Institutional   87,304  $2,111,212   May 2013     New York, NY  Institutional   27,386  $936,601   November 2009     New York, NY  Active Trader   11,572  $344,280   June 2012     Santa Monica, CA  Institutional   22,877  $657,714   November 2012     Singapore  Institutional   2,530  $59,377   October 2006     Waltham, MA  Institutional   32,535  $561,143   September 2005     West Orange, NJ  Corporate   2,201  $49,522   January 2008      We believe our facilities are in good condition and are suitableand adequate for our current and currently planned operations.     If we are unable to renew any of the leases that are due toexpire in 2005 or 2006, we believe that suitable replacementproperties are available on commercially reasonable terms.**Item 3.*****Legal Proceedings***     We are involved in ordinary, routine litigation from time totime in the ordinary course of business with a portion of thedefense and/or settlement costs in some such cases being coveredby various commercial liability insurance policies.
12

Table of Contents
**Item 4.*****Submission of Matters to a Vote of Security Holders***     No matters were submitted to a vote of security holders duringthe fourth quarter of 2004.**PART II****Item 5.*                          Marketfor Registrant’s Common Equity, Related Stockholder Mattersand Issuer Purchases of Equity Securities*****Market Information**     Our common stock trades on the New York Stock Exchange under thetrading symbol “IDC”.     The following table sets forth, for the periods indicated, thehigh and low sale prices per share of our common stock duringeach of the quarters set forth below as reported on the New YorkStock Exchange:            **High** **Low**         2004:             Quarter Ended March 31 $18.50  $16.40      Quarter Ended June 30 $18.77  $16.25      Quarter Ended September 30 $19.28  $16.80      Quarter Ended December 31 $22.17  $18.24             **High** **Low**         2003:             Quarter Ended March 31 $14.23  $12.74      Quarter Ended June 30 $18.00  $13.64      Quarter Ended September 30 $17.35  $15.40      Quarter Ended December 31 $17.59  $15.47 **Stockholders**     As of February 28, 2005, there were 93,353,899 outstandingshares of our common stock held by 1,309 holders of record.**Dividends**     We currently retain earnings, if any, to finance the developmentof our business. Future determinations by our board of directorsto pay dividends on our common stock would be based primarilyupon our financial condition, results of operations and businessrequirements. Dividends, if any, would be payable in the solediscretion of our board of directors out of the funds legallyavailable therefor.     We have not paid cash dividends on our common stock during thelast two fiscal years.**Issuer Purchases of Equity Securities**     On September 28, 2004, we announced in a press release andalso in a Current Report on Form 8-K that our Board ofDirectors had authorized the repurchase of up to 1,000,000 ofour outstanding shares of common stock. Repurchases may be madein the open market or in privately negotiated transactions fromtime to time, subject to market conditions and other factors andin compliance with applicable legal requirements. We use
13

Table of Contents
cash on hand to fund repurchases under the program. We are notobligated to acquire any particular amount of common stock as aresult of the program, which may be suspended at any time at ourdiscretion.                         **(d) Maximum**        **Number (or**        **Approximate Dollar**      **(c) Total Number of** **Value) of Shares (or**      **Shares (or Units)** **Units) that May Yet**  **(a) Total Number of** **(b) Average Price** **Purchased as Part of** **Be Purchased Under**  **Shares (or Units)** **Paid per Share** **Publicly Announced** **the Plans or****Period** **Purchased(1)** **(or Unit)** **Plans or Programs** **Programs**             October 1, 2004–October 31, 2004  0 shares   N/A   0 shares   1,000,000 shares     November 1, 2004–November 30, 2004  90,000 shares  $20.38   90,000 shares   910,000 shares     December 1, 2004–December 31, 2004  55,000 shares  $20.87   55,000 shares   855,000 shares     Total  145,000 shares  $20.57   145,000 shares   855,000 shares  (1)     No shares have been purchased by us other than through our    publicly announced stock repurchase program.**Item 6.*****Selected Financial Data***     The following selected historical consolidated financialinformation for each of the years ended December 31, 2000through 2004 has been derived from our consolidated financialstatements and represents the historical consolidated financialinformation of FT Interactive Data prior to the merger ofInteractive Data Corporation and Data Broadcasting Corporationon February 29, 2000 and the combined company sinceFebruary 29, 2000. For additional information see“Management’s Discussion and Analysis of FinancialCondition and Results of Operations” included inItem 7. The information set forth below is qualified byreference to and should be read in conjunction with ourConsolidated Financial Statements and related notes included inItem 8 of this Annual Report on Form 10-K.                         **As of and for the Year Ended December 31,**     **2004** **2003** **2002** **2001** **2000**             **(In thousands, except per share amounts)**    Service revenue $484,565  $442,690  $375,015  $340,002  $314,138     Income (loss) from operations(1)  125,869   115,349   98,232   25,653   (3,091)    Net income (loss)(2)  80,271   72,201   60,733   4,312   (143,472)    Net income (loss) per common share                          Basic  0.86   0.78   0.67   0.05   (1.68)      Diluted  0.84   0.76   0.65   0.05   (1.68)    Weighted average common shares                         Basic  93,152   92,319   91,159   90,844   85,560      Diluted  95,525   94,450   93,730   92,510   85,560     Total assets  1,025,673   910,322   765,227   697,983   742,090     Stockholders’ equity  857,756   762,531   662,743   582,667   622,512     Cash dividends declared per common share  —   —   —   0.29   —  (1)     Income (loss) from operations in 2000 and 2001 includes    amortization of goodwill of $33,142 and $37,535, respectively.    Beginning in 2002, the amortization of goodwill was no longer    required. (2)     Results for 2000 include equity in the losses from    MarketWatch.com, Inc., or MarketWatch, of $67,229 and an other    than temporary loss in MarketWatch.com, Inc. of $141,844.
14

Table of Contents
**Item 7.                      *Management’sDiscussion and Analysis of Financial Condition and Results ofOperations***     The following discussion should be read in conjunction with“Item 6. Selected Financial Data” and ourconsolidated financial statements included herein inItem 8. Amounts in the tables including footnotes to thetables are shown in thousands, except for per share information.**Overview**     We are a leading global provider of financial and businessinformation to financial institutions and active traders. Weoffer our services through four businesses, three within theInstitutional Services segment, and one within the Active TraderServices segment:**Institutional Services** • **FT Interactive Data**provides historical and end-of-day    pricing, evaluations, dividend, corporate actions and    descriptive information for approximately 3.5 million    securities, commodities, and derivative instruments that are    traded around the world.  • **CMS BondEdge** provides sophisticated analytics to fixed    income portfolio managers, quantitative research analysts and    institutional brokers for risk/return analysis, assistance with    their regulatory reporting and investment decision evaluations.     During 2003, we added a third business line, ComStock, to theInstitutional Services segment by making two strategicacquisitions.     On February 28, 2003, we acquired from The McGraw-HillCompanies, Inc., or McGraw-Hill, the stock of S&P ComStock,Inc. and the assets of certain ComStock related businesses inthe United Kingdom, France, Australia, Singapore and Hong Kong,collectively referred to as Comstock, for $115,972,000. Wefunded this acquisition from our existing cash resources.     On October 31, 2003, we acquired the consolidated marketdata feed client contracts from HyperFeed Technologies, Inc., orHyperFeed, for $8,500,000, consisting of payments of $7,625,000with the balance to be paid at the end of 24 months ifagreed upon milestones are reached, offset by cash acquired of$1,011,000. Because certain milestones have not been met, thepurchase price of the HyperFeed contracts has been adjusteddownward to $8,375,000. Our remaining payments total $750,000.We funded this acquisition from our existing cash resources. Weare currently migrating the HyperFeed customers from theHyperFeed production platform to our existing ComStockproduction platform. This migration is expected to be concludedby the third quarter of 2005.     These two acquired businesses form the third business within theInstitutional Services segment: • **ComStock**® provides financial institutions, financial    information providers and information media companies with    real-time and delayed financial market information covering more    than 2 million securities including equities, derivatives,    futures, fixed income securities and foreign exchange rates    sourced from over 350 stock exchanges and other sources    worldwide.**Active Trader Services**     In the Active Trader Services segment we have one business,which was recently supplemented by the acquisition of the assetsof FutureSource®, LLC and its subsidiaries, or FutureSource: • **eSignal**® provides active traders with real-time    financial market information and decision support tools to    assist in their analysis of securities traded on all major    markets in the US as well as a number of international markets.     On September 1, 2004, we acquired the assets ofFutureSource, a privately held provider of real-time futures,commodities and foreign exchange markets data. This acquisitionenables us to provide global coverage of futures and commoditiesdata. The price paid in cash for the assets was $18,000,000,offset by cash
15

Table of Contents
acquired of $317,000. We are in the process of integrating theassets of FutureSource into our eSignal business. We funded thisacquisition from existing cash resources.     Across each of our businesses, regardless of business segment,many of our services are provided on a flat fee subscriptionbasis; others are provided on a usage basis, and some are acombination of a flat minimum fee with additional amountscharged for usage above an established level. We havehistorically achieved high customer retention rates,particularly from our institutional client base. Through a broadrange of business alliances, many of the world’s best-knownfinancial service and software companies utilize our services insupport of their trading, analysis, portfolio management, andvaluation activities. At the core of our business are ourcustomer relationships, business alliances, broad databases,extensive product and technical know-how and technologyinfrastructure resources. We also continue to evaluate potentialstrategic acquisitions.**Development of Business**     Prior to February 29, 2000, our business related primarilyto the delivery of historical and end-of-day financial data toinstitutional customers through what is now our FT InteractiveData business. On February 29, 2000, Data BroadcastingCorporation merged with Interactive Data Corporation (now knownas FT Interactive Data), referred to as the Merger. This Mergerbrought together the businesses of Data Broadcasting Corporation(now known as Interactive Data Corporation), which includedeSignal and CMS BondEdge, with the businesses of InteractiveData Corporation (now known as FT Interactive Data). Uponcompletion of the Merger, we issued 56,424,000 shares ofour common stock to Pearson Longman, Inc., or Pearson Longman,which, through a series of other entities, is wholly owned byPearson plc. The shares held by Pearson Longman weresubsequently transferred to Pearson DBC Holdings, Inc., anotherwholly owned subsidiary of Pearson Longman. As a result of thistransaction, approximately 60% of our shares are held indirectlyby Pearson. In connection with the Merger, we also acquired a34.4% ownership stake in MarketWatch.com, Inc., which wesubsequently sold at a loss in January 2001 to Pearson for$26,900,000. We distributed the proceeds from such sale as adividend to our shareholders in 2001. On January 31, 2002,we acquired the Securities Pricing Services, or SPS, of MerrillLynch, Pierce, Fenner & Smith Incorporated, or MerrillLynch, for approximately $48,000,000. We acquired ComStock fromMcGraw-Hill for approximately $115,972,000 on February 28,2003. We acquired the consolidated market data feed clientcontracts from HyperFeed for $8,500,000 on October 31,2003. The price for these HyperFeed client contracts consist ofpayments of $7,625,000, with the balance to be paid over24 months if agreed upon milestones are reached. Becausecertain milestones have not been met, the purchase price of theHyperFeed contracts has been adjusted downward to $8,375,000.Our remaining payments total $750,000.     On September 1, 2004, we acquired the assets ofFutureSource. The price paid in cash for the assets was$18,000,000, offset by cash acquired of $317,000.     As a result of these acquisitions, our results of operations for2004 include the activities of our FT Interactive Data, CMSBondEdge, ComStock and eSignal businesses, the results of theHyperFeed customer contracts and four months of the results ofFutureSource. Our 2003 results of operations, in addition to theFT Interactive Data, CMS BondEdge and eSignal businesses,include ten months of activities for ComStock and two months ofactivities resulting from the acquisition of the HyperFeedcustomer contracts. Our 2002 results of operations include theactivities of our FT Interactive Data, CMS BondEdge and eSignalbusinesses.**Business and Market Trends**     In 2004, market conditions for our primary market, the financialservices industry, showed improvement over the prior yearalthough they still remained challenging. Modest increases inspending by institutional customers for market data serviceswere balanced by ongoing cost containment initiatives. FTInteractive Data, the largest business within the InstitutionalServices segment, continued to generate new business with bothexisting and new customers, particularly within the US market.We also saw signs of improvement within FT InteractiveData’s business in the European market with higher levelsof new sales and fewer cancellations during the second half of2004. Overall contract cancellations, primarily arising frommergers and acquisitions within our customer base, andrenegotiation of service levels and fees declined compared withthe prior year,
16

Table of Contents
although these actions continued to constrain revenue growth. Webelieve that much of the data we supply is mission critical toour customers and critical for their operations regardless ofmarket conditions; however, we are affected, at least in part,by the continuing cost pressures being experienced by our clientbase. If the data we provided were not mission critical, webelieve the difficult market conditions would have affected usmore adversely.     There has been and continues to be a trend in North America formajor financial institutions to outsource their back officeoperations to service bureaus and custodian banks. We haveestablished relationships with, and are a major data supplierto, many service bureaus and custodian banks, and have benefitedand expect to continue to benefit from their growth. Anothertrend occurring over the past decade in North America is theconsolidation of financial institutions both within and acrossthe financial services industry. When institutions merge, theyfrequently look to gain synergies by combining their operations,including the elimination of redundant data sources. This hascontributed to some of the higher than normal cancellationlevels we experienced in 2003 through the first half of 2004;additional consolidation activity has the potential to adverselyimpact revenue in the future.     Growth in the FT Interactive Data market is dependent, in largepart, on our ability to continue the expansion of our datacontent offerings to meet the current and evolving needs of ourcustomers. This includes being able to respond to changes in thefinancial markets as well as to regulatory and competitivepressures. This also includes continuing to expand the coverageof premium priced fixed income data sets and the launch of newservices such as our Fair Value Information Service, the latterof which is currently primarily oriented toward US mutual funds.In addition, we will continue to seek to expand our market sharein Europe, although we expect current difficult marketconditions will slow this effort as customers take more time tomake purchase decisions than they historically have taken.     The CMS BondEdge business continued to grow throughout 2004,although it experienced many of the same pressures as FTInteractive Data. The CMS BondEdge business is dependent onactivity levels primarily in the US financial markets and thefinancial performance of the major financial institutions. Ifthe financial markets continue to improve, we would expect thiscould translate into more favorable operating businessconditions for CMS BondEdge. CMS BondEdge will continue toinvest in enhancing its services for international markets andunbundling its analytics to allow for greater integration withother vendors’ services and to better serve largeinstitutions who have moved to centralized data warehouseapproaches.     The ComStock business, which was acquired in February 2003,continued to experience strong price pressures, with customersremaining focused on cost containment. We anticipate that marketconditions for real-time data services will remain challengingin 2005. ComStock will continue to enhance its offerings andfocus on opportunities to expand its business with institutionalcustomers in 2005.     In the Active Trader Services segment, the eSignal businesscontinues to strengthen its position as a leading financial dataprovider primarily for active traders. Subscriptions foreSignal’s array of Internet-based services continued togrow through both direct and indirect sales distributionchannels. The eSignal business is primarily dependent on growthin online trading accounts among active investors. The businesswas supplemented by the purchase on September 1, 2004 ofthe assets of FutureSource, a privately held provider ofreal-time futures, commodities and foreign exchange marketsdata. This acquisition enables us to provide global coverage offutures and commodities data. As previously disclosed, thebroadcast-based service was closed down at the end of April 2004.
17

Table of Contents
**Results of Operations****Selected Financial Data**                **For the Years Ended December 31,**     **2004** **2003** **2002**         **(Amounts in thousands, except**  **for per share information)**    SERVICE REVENUE $484,565  $442,690  $375,015     COSTS AND EXPENSES:                Cost of Services  156,646   141,631   110,321     Selling, General & Administrative  161,313   149,129   133,225     Depreciation  18,521   16,807   14,500     Amortization  22,216   19,774   18,737     Total Costs and Expenses  358,696   327,341   276,783     INCOME FROM OPERATIONS  125,869   115,349   98,232     Other income, net  2,522   1,100   1,989     INCOME BEFORE INCOME TAXES  128,391   116,449   100,221     Income tax expense  48,120   44,248   39,488     NET INCOME $80,271  $72,201  $60,733     NET INCOME PER SHARE                 Basic $0.86  $0.78  $0.67      Diluted $0.84  $0.76  $0.65     Weighted average shares outstanding:                 Basic  93,152   92,319   91,159      Diluted  95,525   94,450   93,730 **2004 versus 2003****Service Revenue**                   **%**  **2004** **2003** **Change**         **(In thousands)**    Institutional Services                FT Interactive Data $320,755  $309,324   +3.7%    CMS BondEdge  32,063   30,488   +5.2%    ComStock  62,920   54,093   +16.3%    Other  3,615   3,507   +3.1%    Foreign Exchange  10,109   —   —     Institutional Services Total  429,462   397,412   +8.1%    Active Trader Services                eSignal  47,183   43,426   +8.7%    FutureSource  7,577   —   —     Broadcast  343   1,852   (81.5)%    Active Trader Services Total  55,103   45,278   +21.7%    TOTAL SERVICE REVENUE $484,565  $442,690   +9.5%
18

Table of Contents
**Total Service Revenue**     Total service revenue increased from $442,690,000 in 2003 to$484,565,000 in 2004, an increase of $41,875,000 or 9.5%. TheComStock business, which was acquired at the end of February2003, and the HyperFeed customer contracts, which we acquired atthe end of October 2003, contributed $62,920,000 to servicerevenue in 2004 and $54,093,000 to service revenue in 2003. TheFutureSource business, which was acquired on September 1,2004, contributed service revenue of $7,577,000 in 2004. Foreignexchange had a favorable impact of $10,109,000 to servicerevenue in the institutional services segment in 2004 mainly dueto the weakness of the US dollar against the UK pound sterling.The average rate for the US dollar against the UK pound sterlingwas $1.832 in 2004, compared with $1.635 in 2003.***Institutional Services***     Service revenue within the Institutional Services segmentincreased from $397,412,000 in 2003 to $429,462,000 in 2004, anincrease of $32,050,000, or 8.1%, including service revenue of$62,920,000 in 2004 and $54,093,000 in 2003 from the ComStockbusiness and the HyperFeed customer contracts. As noted above,foreign exchange had a favorable impact of $10,109,000, mainlydue to the weakness of the US dollar against the UK poundsterling to service revenue within the Institutional Servicessegment in 2004.     Service revenue for the FT Interactive Data business increasedfrom $309,324,000 in 2003 to $320,755,000 in 2004 an increase of$11,431,000, or 3.7%. The main growth for the FT InteractiveData business came from North America, which produced servicerevenue growth of 7.4% due to strong sales from the Fair ValueInformation Service and increased demand for evaluated pricingservices combined with moderate price increases on annualservice contracts. The European business of FT Interactive Datadeclined by 7.7% in 2004 from 2003 with the majority of thedecline due to the closure of the Index Services business at theend of 2003, which generated $4,157,000 of service revenue in2003, coupled with new sales being more than offset by highlevels of contract cancellations and renegotiations. However,the European business experienced service revenue growth of12.0% in the final quarter of 2004 compared with the finalquarter of 2003. The Asia Pacific business of FT InteractiveData declined by 4.3% in 2004, with growth in the Australianmarket being more than offset by declines in Hong Kong,Singapore and Japan.     The CMS BondEdge business grew service revenue by $1,575,000 or5.2%, from $30,488,000 in 2003 to $32,063,000 in 2004, primarilydue to strong subscription sales and higher usage-based servicerevenue.     The ComStock business increased service revenue from $54,093,000in 2003 to $62,920,000 in 2004, an increase of $8,827,000, or16.3%. The service revenue growth at ComStock was affected bytwo factors. In 2004, the business included a full12 months of results from ComStock, which was acquired atthe end of February 2003. In addition ComStock acquired theHyperFeed customer contracts at the end of October 2003, whichcontributed $10,366,000 of service revenue in 2004 compared with$1,741,000 in 2003. The core ComStock business continued toexperience strong price pressures associated with intensecompetition and customer focus on cost containment.     In the fourth quarter of 2004, we reversed service revenue of$6,828,000 and $5,622,000 in direct costs with an associatedreduction of $1,206,000 in income from operations. This servicerevenue, direct costs and income from operations were recognizedin prior periods and were primarily attributable toComStock-related services delivered to one internationalcustomer. The reversal was due to the fact that while we wereproviding services to, and receiving payment from the customer,there was no definitive service contract in place. A definitivecontract was executed with this customer in the first quarter of2005 and thus, the service revenue, direct costs and income fromoperations that were reversed in the fourth quarter of 2004 willbe recognized in the first quarter of 2005. This adjustment didnot have a material impact on our prior period results.***Active Trader Services***     Within the Active Trader Services segment, service revenue grewfrom $45,278,000 in 2003 to $55,103,000 in 2004, an increase of$9,825,000, or 21.7%, including service revenue of $7,577,000 in2004 from the assets of FutureSource, which we acquired onSeptember 1, 2004. Underlying service revenue within the
19

Table of Contents
Active Trader Services segment in 2004 increased mainly due to ahigher number of direct subscribers which grew from 31,851 in2003 to 37,157 in 2004, an increase of 5,306, or 16.7%. This waspartially offset by a lower average net subscription fee coupledwith lower broadcast-related service revenue which declined from$1,852,000 in 2003 to $343,000 in 2004, a decline of $1,509,000or 81.5%, due to the closure of the broadcast business in thesecond quarter of 2004.**Service Revenue by Geographic Region**           **2004** **2003**       **(In thousands)**    United States $382,392  $344,869     United Kingdom  60,246   62,783     All other European Countries and Canada  35,229   28,871     Asia  6,698   6,167     TOTAL SERVICE REVENUE $484,565  $442,690 **Total Costs and Expenses**     Total costs and expenses for the Institutional Services segmentfor 2004 and 2003 include the costs and expenses of FTInteractive Data, ComStock and CMS BondEdge. Total costs andexpenses for the Active Trader Services segment for 2004 and2003 include the costs and expenses of eSignal, thebroadcast-based services business which was closed in the secondquarter of 2004, and the business arising out of the assets ofFutureSource which we acquired on September 1, 2004. Totalcosts and expenses for the Corporate and unallocated segmentinclude costs and expenses related to corporate, general andadministrative activities, costs associated with our data centerconsolidation initiative, and intangible asset amortization.**Cost of Services**     Cost of services, exclusive of depreciation, are composed mainlyof personnel related expenses, communication and dataacquisition costs and expenditures associated with software andhardware maintenance agreements. The start up costs associatedwith our data center consolidation are included in selling,****general & administrative expenses in 2004 and 2003.The costs associated with our new East Coast data center will beclassified as cost of services when the center becomes fullyoperational, which we expect to occur in 2005.                   **%**  **2004** **2003** **Change**         **(In thousands)**    Institutional Services $131,664  $121,391   +8.5%    Active Trader Services  21,902   20,240   +8.2%    Foreign Exchange  3,080   —   —     TOTAL COST OF SERVICES $156,646  $141,631   +10.6%     Cost of services increased by $15,015,000 or 10.6%, from$141,631,000 in 2003 to $156,646,000 in 2004. The ComStockbusiness, which was acquired at the end of February 2003, andthe HyperFeed customer contracts, which we acquired at the endof October 2003, contributed $36,017,000 to cost of services in2004 and $24,263,000 to cost of services in 2003. TheFutureSource business contributed cost of services of $2,893,000in 2004. Foreign exchange increased cost of services by$3,080,000 in 2004 mainly due to the weakness of the US dollaragainst the UK pound sterling referred to above. Cost ofservices as a percentage of revenue increased from 32.0% in 2003to 32.3% in 2004.***Institutional Services***     Cost of services within the Institutional Services segmentincreased from $121,391,000 in 2003 to $131,664,000 in 2004, anincrease of $10,273,000, or 8.5%, including cost of services of$36,017,000 in 2004
20

Table of Contents
and $24,263,000 in 2003 from the ComStock business and theHyperFeed customer contracts. Foreign exchange increasedInstitutional Services cost of services by $3,080,000 in 2004.Underlying cost of services within the Institutional Servicessegment decreased by $1,481,000 during 2004 due to thecompletion of various cost savings initiatives includingproduction systems integration projects, closure of a small datacenter in New York, and the benefit of renegotiations for someof our supplier contracts as we signed global data supplyarrangements for all our businesses.***Active Trader Services***     Within the Active Trader Services segment, cost of servicesincreased by $1,662,000, or 8.2%, from $20,240,000 in 2003 to$21,902,000 in 2004, including cost of services of $2,893,000 in2004 from the assets of FutureSource. Underlying cost ofservices declined by $1,231,000 primarily due to the closure ofthe broadcast-based services business in April 2004.**Selling, General & Administrative Expenses**     Selling, general and administrative expenses are composed mainlyof personnel-related, outside professional services, advertisingand marketing, occupancy-related and commissions to thirdparties. Data center consolidation initiative related expensesexcept for depreciation which is shown separately, are includedin selling, general and administrative expenses in 2004, will beclassified as cost of services in 2005, when we expect the newEast Coast data center to be fully operational.               **2004** **2003** **% Change**         **(In thousands)**    Institutional Services $113,768  $117,166   (2.9)%    Active Trader Services  19,047   14,981   +27.1%    Corporate and unallocated  24,294   16,982   +43.1%    Foreign Exchange  4,204   —   —     TOTAL SG&A $161,313  $149,129   +8.2%     Selling, general and administrative expenses increased by$12,184,000, or 8.2%, from $149,129,000 in 2003 to $161,313,000in 2004. The ComStock business contributed $16,880,000 toselling, general and administrative expenses in 2004 and$18,066,000 to selling, general and administrative expenses in2003. The FutureSource business contributed selling, general andadministrative expenses of $3,559,000 in 2004. Foreign exchangeincreased selling, general and administrative expenses by$4,204,000 in 2004 mainly due to the weakness of the US dollaragainst the UK pound sterling referred to above. Selling,general and administrative expenses as a percentage of revenuedecreased from 33.7% in 2003 to 33.3% in 2004.***Institutional Services***     Selling, general and administrative expenses within theInstitutional Services segment decreased from $117,166,000 in2003 to $113,768,000 in 2004, a decrease of $3,398,000, or 2.9%,including selling, general and administrative expenses of$16,880,000 in 2004 and $18,066,000 in 2003 from the ComStockbusiness. This decrease in selling, general and administrativeexpenses for ComStock is, as previously described, due to thereversal of commissions to third parties totaling $5,622,000which we recognized in prior periods and were attributable toservices delivered to one international customer. Foreignexchange increased Institutional Services selling, general andadministrative expenses by $4,204,000 in 2004. Underlyingselling, general and administrative expenses within theInstitutional Services segment decreased by $2,212,000 due tothe benefit of renegotiations for some of our supplier contractsas we signed global data supply arrangements for all ourbusinesses coupled with the closure of the Index Servicesbusiness at the end of 2003. This is partially offset byincreased sales-related commission costs associated with thehigher sales growth across our businesses and higher staffingand consulting expenditures for various regulatory complianceprojects including compliance with the provisions of theSarbanes-Oxley Act and related SEC rules and the InvestmentAdvisers Act.
21

Table of Contents
***Active Trader Services***     Within the Active Trader Services segment, selling, general andadministrative expenses increased by $4,066,000, or 27.1%, from$14,981,000 in 2003 to $19,047,000 in 2004, including selling,general and administrative expenses of $3,559,000 in 2004 fromthe assets of FutureSource. Underlying selling, general andadministrative expenses increased by $507,000 primarily due tohigher advertising and marketing expenses related to the launchof new services.***Corporate and Unallocated***     Selling, general and administrative expenses within theCorporate and unallocated segment increased from $16,982,000 in2003 to $24,294,000 in 2004, an increase of $7,312,000, or43.1%, due to costs associated with our data centerconsolidation initiative and higher staffing and consulting andaudit expenditures mainly related to compliance with theprovisions of the Sarbanes-Oxley Act and related SEC rules. Datacenter consolidation initiative related expenses, which areincluded in selling,****general and administrative expensesin 2004, will be classified as cost of services in 2005 when thenew East Coast data center will be fully operational.**Depreciation**               **2004** **2003** **% Change**         **(In thousands)**    Institutional Services $12,857  $12,966   (0.8)%    Active Trader Services  3,682   3,568   +3.2%    Corporate and unallocated  1,522   273   +457.5%    Foreign Exchange  460   —   —     TOTAL DEPRECIATION $18,521  $16,807   +10.2%     Depreciation expense increased by $1,714,000, or 10.2%, from$16,807,000 in 2003 to $18,521,000 in 2004. The ComStockbusiness and the HyperFeed customer contracts contributed$3,041,000 to depreciation expense in 2004 and $2,440,000 todepreciation expense in 2003. The FutureSource businesscontributed depreciation expense of $202,000 in 2004. Foreignexchange increased depreciation expense by $460,000 in 2004mainly due to the weakness of the US dollar against the UK poundsterling referred to above.***Institutional Services***     Depreciation expense within the Institutional Services segmentdecreased from $12,966,000 in 2003 to $12,857,000 in 2004, adecrease of $109,000, or 0.8%, including depreciation expense of$3,041,000 in 2004 and $2,440,000 in 2003 related to assetsacquired with the ComStock business and the HyperFeed customercontracts. Foreign exchange increased Institutional Servicesdepreciation expense by $460,000 in 2004 mainly due to theweakness of the US dollar against the UK pound sterling referredto above. Underlying depreciation within the InstitutionalServices segment expense decreased by $710,000 due to the normalexpiration of asset lives in the second half of 2003 and during2004.***Active Trader Services***     Within the Active Trader Services segment, depreciation expenseincreased by $114,000, or 3.2%, from $3,568,000 in 2003 to$3,682,000 in 2004, including depreciation expense of $202,000in 2004 from the assets of FutureSource. Underlying depreciationexpense within the Active Trader Services segment decreased by$88,000 primarily due to normal expiration of asset lives in thesecond half of 2003 and during 2004.***Corporate and Unallocated***     Depreciation expense within the Corporate and unallocatedsegment increased from $273,000 in 2003 to $1,522,000 in 2004,an increase of $1,249,000, or 457.5%, due to the phasedimplementation during 2004 of our new East Coast data center.
22

Table of Contents
***Amortization***               **2004** **2003** **% Change**         **(In thousands)**    Corporate and unallocated $22,216  $19,774   +12.4%    TOTAL AMORTIZATION $22,216  $19,774   +12.4%     We do not allocate intangible amortization expense to ouroperating segments due to the fact that our chief operatingdecision maker does not use this information in evaluating theoperations for each of our segments. (See Note 13 in theNotes to the Consolidated Financial Statements in Item 8 of thisAnnual Report on Form 10-K for discussion of our segments).Within the Corporate and unallocated segment, amortizationexpense associated with acquired intangible assets increasedfrom $19,774,000 in 2003 to $22,216,000 in 2004, an increase of$2,442,000, or 12.4%. The assets we acquired with the ComStockbusiness and the HyperFeed customer contracts contributed$8,128,000 to amortization expense in 2004 and $5,981,000 toamortization expense in 2003. The FutureSource assetscontributed amortization expense of $347,000 in 2004. Underlyingamortization expense declined by $52,000 due to the normalexpiration of intangible asset lives during 2004.**Other Condensed Consolidated Financial Information**     Income from operations increased from $115,349,000 in 2003 to$125,869,000 in 2004, an increase of $10,520,000, or 9.1%. Theincrease in income from operations was due to the higheroperating results discussed above.     Other income increased from $1,100,000 in 2003 to $2,522,000 in2004, an increase of $1,422,000, or 129.3%, mainly due to higherinterest income from a higher average cash balance andmarginally higher interest rates.     Income before taxes increased from $116,449,000 in 2003 to$128,391,000 in 2004, an increase of $11,942,000, or 10.3%,reflecting the higher income from operations and other income.     Our effective tax rate declined from 38.0% in 2003 to 37.5% in2004, primarily resulting from initiatives instituted in 2003and a shift in geographic income to lower tax rate jurisdictions.     We generated net income of $72,201,000 in 2003 compared with netincome of $80,271,000 in 2004. This improvement was primarilydue to higher income from operations in 2004 as compared with2003 as discussed above.     We generated basic net income per share of $0.78 and diluted netincome per share of $0.76 in 2003, as compared with basic netincome per share of $0.86 and diluted net income per share of$0.84 in 2004 due to higher net income, partially offset by ahigher number of weighted average shares outstanding.     Weighted average basic shares outstanding increased by 0.9% in2004 and weighted average diluted shares increased by 1.1% in2004 due to options exercised in the past 12 months and theissuance of shares under our 2001 Employee Stock Purchase Plan,partially offset by repurchases under our publicly announcedstock repurchase plan.
23

Table of Contents
**2003 versus 2002*****Service Revenue***               **2003** **2002** **% Change**         **(In thousands)**    Institutional Services                FT Interactive Data $302,743  $297,395   +1.8%    CMS BondEdge  30,488   29,643   +2.9%    ComStock  54,093   —   —     Other  3,507   3,957   (11.4)%    Foreign Exchange  6,581   —   —     Institutional Services Total  397,412   330,995   +20.1%    Active Trader Services                eSignal  43,426   39,542   +9.8%    Broadcast  1,852   4,478   (58.6)%    Active Trader Services Total  45,278   44,020   +2.9%    TOTAL SERVICE REVENUE $442,690  $375,015   +18.0%**Total Service Revenue**     Total service revenue increased from $375,015,000 in 2002 to$442,690,000 in 2003, an increase of $67,675,000, or 18.0%. TheComStock business and the HyperFeed customer contractscontributed $54,093,000 of service revenue in 2003. Foreignexchange contributed $6,581,000 to service revenue in 2003. Thiswas mainly due to the weakness of the US dollar against the UKpound sterling. The average rate for the US dollar against theUK pound sterling was $1.635 in 2003 compared with $1.503 in2002.***Institutional Services***     Service revenue within the Institutional Services segmentincreased from $330,995,000 in 2002 to $397,412,000 in 2003 anincrease of $66,417,000, or 20.1%, including service revenue of$54,093,000 in 2003 from the ComStock business and the HyperFeedcustomer contracts. Foreign exchange contributed $6,581,000 toservice revenue within the Institutional Services segment in2003.     Service revenue for the FT Interactive Data business increasedfrom $297,395,000 in 2002 to $302,743,000 in 2003, an increaseof $5,348,000, or 1.8%. The main growth for the FT InteractiveData business came from North America, where despite difficultmarket conditions and a higher than historical level ofcancellations, service revenue grew by 3.1%. The increase wasdriven primarily by the continued success of the sale ofevaluated pricing services helped by the introduction of theFair Value Information Service and moderate price increases. TheEuropean business of FT Interactive Data declined by 2.9% from2002 to 2003 with new sales being more than offset by a highlevel of cancellations and customer requests for servicedowngrades. The Asia Pacific business of FT Interactive Datagrew by 8.6%, with the main growth coming from Australia. In theother Asia Pacific markets of Hong Kong and Singapore, servicerevenue was relatively flat.     The CMS BondEdge business grew service revenue by $845,000, or2.9%, as it continued to see a slowdown in new business as aresult of customer reluctance to commit to new services due toeconomic conditions.     The ComStock business contributed $54,093,000 of service revenueduring the ten months of 2003. Progress was made in promotingthe ComStock real time feed service to the FT Interactive Datacustomer base. Following the acquisition of HyperFeed’scustomer contracts, the ComStock business began migrating thiscustomer base from the HyperFeed production platform to theexisting ComStock production platform.
24

Table of Contents
     Other service revenue declined by 11.4% from 2003, which mainlyrepresented a slow-down in our real time foreign exchange databusiness which has now been integrated with the ComStockbusiness.***Active Trader Services***     Within the Active Trader Services segment, service revenue forthe eSignal business grew by $1,258,000, or 2.9%, from$44,020,000 in 2002 to $45,278,000 in 2003, which included a58.6% or $2,626,000 decline in the broadcast business from$4,478,000 in 2002 to $1,852,000 in 2003. Underlying servicerevenue for the Internet-delivered services, other thanbroadcast, increased by $3,884,000 due to the number of directsubscribers increasing by 12.7% in the year to approximately32,000, partially offset by lower average net subscription fees.**Service Revenue by Geographic Region**           **2003** **2002**       **(In thousands)**    United States $344,869  $300,627     United Kingdom  62,783   51,273     All other European Countries and Canada  28,871   18,141     Asia  6,167   4,974     TOTAL SERVICE REVENUE $442,690  $375,015 **Total Costs and Expenses**     Total costs and expenses for the Institutional Services segmentfor 2003 include the costs and expenses of FT Interactive Data,ComStock and CMS BondEdge and total costs and expenses for theInstitutional Services segment for 2002 include the costs andexpenses of FT Interactive Data and CMS BondEdge. Total costsand expenses for the Active Trader Services segment for 2003 and2002 include the costs and expenses of eSignal and the broadcastbusiness. Total costs and expenses for the Corporate andunallocated segment include costs and expenses related tocorporate, general and administrative activities, costsassociated with our data center consolidation initiative andintangible asset amortization.**Cost of Services**     Cost of services expenses, exclusive of depreciation, arecomposed mainly of personnel related expenses, communication anddata acquisition costs, and expenditures associated withsoftware and hardware maintenance agreements.               **2003** **2002** **% Change**         **(In thousands)**    Institutional Services $119,314  $89,874   +32.8%    Active Trader Services  20,240   20,447   (1.0)%    Foreign Exchange  2,077   —   —     TOTAL COST OF SERVICES $141,631  $110,321   +28.4%     Cost of services expenses increased by $31,310,000, or 28.4%,from $110,321,000 in 2002 to $141,631,000 in 2003. The ComStockbusiness and the HyperFeed customer contracts contributed$24,263,000 to cost of services expenses in 2003. Foreignexchange increased cost of services expenses by $2,077,000 in2003 mainly due to the weakness of the US dollar against the UKpound sterling referred to above. Cost of services as apercentage of revenue increased from 29.4% in 2002 to 32.0% in2003.***Institutional Services***     Cost of services within the Institutional Services segmentincreased from $89,874,000 in 2002 to $119,314,000 in 2003, anincrease of $29,440,000, or 32.8%, including cost of services of$24,263,000 in 2003
25

Table of Contents
from the ComStock business and the HyperFeed customer contracts.Foreign exchange increased the Institutional Services segmentcost of services by $2,077,000 in 2003. Underlying cost ofservices within the Institutional Services segment increased by$5,177,000 due to investments in increasing the breadth andquality of our evaluated pricing data and operations partiallyoffset by synergies achieved from integration of the SPSoperations with those of FT Interactive Data.***Active Trader Services***     Within the Active Trader Services segment, cost of servicesdecreased by $207,000, or 1.0%, from $20,447,000 in 2002 to$20,240,000 in 2003 primarily due to the wind down of thebroadcast business during 2003 partially offset by investment inproduct development resources.**Selling, General & Administrative Expenses**     Selling, general and administrative expenses are comprisedmainly of personnel-related, outside professional services,advertising and marketing, occupancy-related and commissions tothird parties.               **2003** **2002** **% Change**         **(In thousands)**    Institutional Services $113,814  $102,984   +10.5%    Active Trader Services  14,981   16,202   (7.5)%    Corporate and unallocated  16,982   14,039   +21.0%    Foreign Exchange  3,352   —   —     TOTAL SG&A $149,129  $133,225   +11.9%     Selling, general and administrative expenses increased by$15,904,000, or 11.9%, from $133,225,000 in 2002 to $149,129,000in 2003. The ComStock business contributed $18,066,000 toselling, general and administrative expenses in 2003. Foreignexchange increased selling, general and administrative expensesby $3,352,000 in 2003 mainly due to the weakness of the USdollar against the UK pound sterling referred to above. Selling,general and administrative expenses as a percentage of revenuedecreased from 35.5% in 2002 to 33.7% in 2003.***Institutional Services***     Selling, general and administrative expenses within theInstitutional Services segment increased from $102,984,000 in2002 to $113,814,000 in 2003, an increase of $10,830,000, or10.5%, including selling, general and administrative expenses of$18,066,000 in 2003 from the ComStock business. Foreign exchangeincreased the Institutional Services segment selling, generaland administrative expenses by $3,352,000 in 2003. Underlyingselling, general and administrative expenses within theInstitutional Services segment decreased by $7,236,000 due tosynergies achieved from merging the SPS operations into the FTInteractive Data business coupled with the write-off of somecapitalized development costs in Europe in 2002. Offsettingthese savings were restructuring charges totaling $3,311,000,related to the first stage in the consolidation of our US datacenters, severance relating to our decision to outsource some ofour European data collection to a lower cost site, and costsrelated to the closure of our Index Services unit.***Active Trader Services***     Within the Active Trader Services segment, selling, general andadministrative expenses decreased by $1,221,000, or 7.5%, from$16,202,000 in 2002 to $14,981,000 in 2003 due mainly to acharge of $673,000 for unoccupied office space in 2002 coupledwith lower property tax reserve requirements in 2003.***Corporate and Unallocated***     Selling, general and administrative expenses within theCorporate and unallocated segment increased from $14,039,000 in2002 to $16,982,000 in 2003, an increase of $2,943,000, or21.0%, due to a charge of $1,368,000 in 2003 related to thewrite down of the carrying value of a 5% interest we held in acompany that
26

Table of Contents
we spun off in 2000 coupled with a reserve of $1,000,000 in 2003to provide for the settlement to shareholders related to a civilaction with shareholders of two Heartland Group high-yieldmunicipal bond funds.**Depreciation**               **2003** **2002** **% Change**         **(In thousands)**    Institutional Services $12,641  $10,170   +24.3%    Active Trader Services  3,568   4,015   (11.1)%    Corporate and unallocated  273   315   (13.3)%    Foreign Exchange  325   —   —     TOTAL DEPRECIATION $16,807  $14,500   +15.9%     Depreciation expense increased by $2,307,000, or 15.9%, from$14,500,000 in 2002 to $16,807,000 in 2003. The ComStockbusiness and the HyperFeed customer contracts contributed$2,440,000 to depreciation expense in 2003. Foreign exchangeincreased the Institutional Services segment depreciationexpense by $325,000 in 2003 mainly due to the weakness of the USdollar against the UK pound sterling referred to above.***Institutional Services***     Depreciation expense within the Institutional Services segmentincreased from $10,170,000 in 2002 to $12,641,000 in 2003, anincrease of $2,471,000, or 24.3%, including depreciation expenseof $2,440,000 in 2003 related to assets acquired with theComStock business, and the HyperFeed customer contracts. Foreignexchange increased the Institutional Services segmentdepreciation expense by $325,000 in 2003 mainly due to theweakness of the US dollar against the UK pound sterling referredto above. Underlying depreciation within the InstitutionalServices segment expense was essentially flat for 2003 ascompared with 2002.***Active Trader Services***     Within the Active Trader Services segment, depreciation expensedecreased by $447,000, or 11.1%, from $4,015,000 in 2002 to$3,568,000 in 2003 primarily due to normal expiration of assetlives in the second half of 2002 and during 2003.***Corporate and Unallocated***     Depreciation expense within the Corporate and unallocatedsegment in 2003 of $273,000 was slightly lower than in 2002. Inaddition, the majority of capital expenditures related to thedata center consolidation initiative occurred in the finalquarter of 2003, and the impact did not affect operating resultsuntil 2004.**Amortization**               **2003** **2002** **% Growth**         **(In thousands)**    Corporate and unallocated $19,774  $18,737   +5.5%    TOTAL AMORTIZATION $19,774  $18,737   +5.5%***Corporate and Unallocated***     We do not allocate intangible amortization expense to ouroperating segments due to the fact that our chief operatingdecision maker does not use this information in evaluating theoperations for each of our segments (see Note 13 in theNotes to the Consolidated Financial Statements in Item 8 ofthis Annual Report on Form 10-K for discussion of oursegments). Within the Corporate and unallocated segment,amortization expense increased from $18,737,000 in 2002 to$19,774,000 in 2003, an increase of $1,037,000, or 5.5%. TheComStock business and the HyperFeed customer contractscontributed $5,981,000 to amortization expense in 2003.Underlying amortization expense declined by $4,944,000 due tocertain intangibles relating to previous
27

Table of Contents
acquisitions and some intangibles created at the time of themerger of Data Broadcasting Corporation and Interactive DataCorporation in 2000 becoming fully amortized. (See Note 3in the Notes to the Consolidated Financial Statements inItem 8 of this Annual Report on Form 10-K).**Other Condensed Consolidated Financial Information**     Income from operations increased from $98,232,000 in 2002 to$115,349,000 in 2003, an increase of $17,117,000 or 17.4%. Theincrease in income from operations was due to the higheroperating results discussed above.     Other income decreased from $1,989,000 in 2002 to $1,100,000 in2003, reflecting a decline in interest rates and lower investedcash following the acquisition of ComStock and HyperFeed’scustomer contracts. Both of these were acquired using existingcash resources.     Income before taxes increased from $100,221,000 in 2002 to$116,449,000 in 2003, an increase of $16,228,000 or 16.2%,reflecting the higher income from operations being partiallyoffset by lower other income.     Our effective tax rate declined from 39.4% in 2002 to 38.0% in2003, primarily attributable to initiatives instituted in 2003.     We generated net income of $60,733,000 in 2002 compared with netincome of $72,201,000 in 2003, an increase of $11,468,000, or18.9%. This improvement was primarily due to the higher incomefrom operations in 2003 as compared with 2002, discussed above.     We generated basic net income per share of $0.67 and diluted netincome per share of $0.65 in 2002, as compared with basic netincome per share of $0.78 and diluted net income per share of$0.76 in 2003, due to a higher net income partially offset by ahigher number of weighted average shares outstanding.     Weighted average basic shares outstanding increased by 1.3% in2003 and weighted average diluted shares increased by 0.8% in2003 due to options exercised in 2003 as well as a higher levelof stock options outstanding in 2003, partially offset byrepurchases under our stock repurchase plan.**Liquidity and Capital Resources****Operating Activities**     Cash provided by operating activities was $121,702,000,$109,554,000 and $84,380,000, in 2004, 2003, and 2002,respectively. The increase from 2003 to 2004 of $12,148,000 wasdue in part to an increase in net income of $8,070,000, higherdepreciation and amortization of $4,156,000, an increase of$1,644,000 on deferred income taxes and higher non-cash items of$730,000. Partially offsetting these positive items was adecline in our working capital of $2,454,000 which was primarilydue to higher bonuses paid to management in 2004 as compared tothose paid in 2003.     The increase from 2002 to 2003 of $25,174,000 was due in partfrom an increase in net income of $11,468,000, higherdepreciation and amortization of $3,344,000, higher non cashitems of $1,636,000 representing a charge of $1,368,000 relatedto a 5% interest in a company that we spun off in 2000 and theintroduction of a deferred stock compensation plan to certainexecutives and members of the board of directors, coupled withimproved working capital of $12,099,000. Partially offsettingthese positive items was a lower tax benefit from the exerciseof employee stock options of $1,097,000. The improvement of$12,099,000 in working capital was mainly due to lower pensioncharges and funding for the UK and US pension plans, higheraccrued expenses for bonuses and data center consolidation costsassociated with our new Boxborough, Massachusetts Data Center,and a benefit from a higher 2003 tax provision being onlypartially offset by higher income tax payments.
28

Table of Contents
**Investing Activities**     Capital expenditures increased from $21,503,000 in 2003 to$23,898,000 in 2004, due mainly to activities associated withthe data center consolidation initiative, including thecompletion of the build out and the purchase of additionalequipment and technical infrastructure for the new East Coastdata center in Boxborough, Massachusetts and also thedevelopment of internal use software to consolidate our multiplereal time data collection plants in the future. Capitalexpenditures increased from $13,561,000 in 2002 to $21,503,000in 2003 due mainly to the build out of the new East Coast datacenter. We expect capital expenditures to continue to grow in2005 as we continue the consolidation of our data centers andimprove the resiliency and disaster recovery abilities of allour businesses through the expansion of our West Coast datacenter in Hayward, California. In addition, we anticipateinvesting additional capital resource to enhance our real-timeinfrastructure in order to address the increased market volumes,especially in the US options markets. In 2005, we expect tospend $24,000,000 to $26,000,000 on capital expenditures.     In January 2002, we acquired the SPS business from MerrillLynch. The consideration was $48,000,000 in cash, paid from theexisting cash resources.     In February 2003, we acquired Comstock from McGraw-Hill for$115,972,000 in cash. We funded this acquisition from existingcash resources. In October 2003, we also acquired theconsolidated market data feed client contracts from HyperFeedfor $8,500,000, consisting of an initial payment of $7,375,000with the balance to be paid over 24 months as agreed uponmilestones are reached, offset by cash acquired of $1,011,000.Because certain milestones were not met, the purchase price ofthe HyperFeed contracts has been adjusted downward to$8,375,000. Our remaining payments total $750,000. We fundedthis acquisition from existing cash resources. In September2004, we acquired the assets of FutureSource for $18,000,000 incash, offset by cash acquired of $317,000. We funded thisacquisition from existing cash resources. In addition, as partof our efforts to improve the rate of return on invested cash,we purchased $2,371,000 of municipal bonds whose maturity isless than 180 days.**Financing Activities**     In 2004, we utilized $17,328,000 to repurchase 945,000outstanding shares of common stock. Also in 2004, we received$12,935,000 from the exercise of options topurchase 1,157,000 shares of common stock and theissuance of 124,000 shares of common stock in connectionwith our employee stock purchase plan.     In 2003, we utilized $1,330,000 to repurchase 100,000outstanding shares of common stock. Also in 2003, we received$9,925,000 from the exercise of options topurchase 1,195,000 shares of common stock and theissuance of 118,000 shares of common stock in connectionwith our employee stock purchase plan.     In 2002, we utilized $1,377,000 to repurchase 100,000outstanding shares of common stock. Also in 2002, we received$10,411,000 from the exercise of options topurchase 1,404,000 shares of common stock and theissuance of 50,000 shares of common stock in connectionwith our employee stock purchase plan.     Management believes that the cash and cash equivalents andexpected cash flows generated by operating activities will besufficient to meet our cash needs for the foreseeable future. Wecurrently have no long-term debt.**Income Taxes**     Our effective income tax rate was an expense of 37.5%, 38.0%,and 39.4% in 2004, 2003 and 2002, respectively. The differencebetween the effective tax rate and the statutory federal rate of35% for these years is due primarily to state and local taxesand the effect on non-US operations taxed at lower rates.     We recognize future tax benefits or expenses attributable to ourtaxable temporary differences and net operating loss carryforwards. Recognition of deferred tax assets is subject to ourdetermination that realization is more likely than not. Based ontaxable income projections, we believe that the recordeddeferred tax assets will be realized.
29

Table of Contents
     The American Jobs Creation Act of 2004, or the Act, became lawon October  22, 2004. The Act covers a wide range ofbusiness tax issues and contains a number of changes to theInternal Revenue Code that may impact us and our accounting forincome taxes in 2005. We are in the process of evaluating theeffect that the Act may have on our financial position,operating results and cash flows in the future.**Off-Balance Sheet Arrangements**     We have no off-balance sheet arrangements, as defined inRegulation S-K, Item 303(a)(4)(ii).**Related Parties Transactions**     We are a party to a management services agreement with Pearsonthat became effective as of February 29, 2000. Pearson,through a subsidiary, owns approximately 60% of our issued andoutstanding common stock. This agreement governs the provisionof services by either company (and each company’ssubsidiaries) to the other and renews annually.     Pursuant to the agreement, Pearson provides certain services tous and we provide certain services to Pearson. The servicesprovided by Pearson afford us administrative convenience and webelieve the terms of such services are more favorable to us thanif we had negotiated similar arrangements with non-affiliatedthird parties. The services provided by Pearson includeadministering 401(k), travel, employee health benefit plans andinsurance plans in the United States and United Kingdom, use ofa back up disaster recovery site, and billing, accounts payable,accounts receivable, computer and accounting system support,financial accounting, tax and payroll services related tocertain of our subsidiaries, primarily in the United Kingdom.The services provided by us to Pearson include the provision offinancial data. A majority of the charges for services to andfrom Pearson and its affiliates are at cost. Prior to enteringinto any service arrangement with Pearson, we assess whether itwould be more advantageous to obtain such services from a thirdparty. The independent committee of our board of directors,which currently consists of four directors, none of whom areemployees of Pearson, approved the management services agreementon our behalf. There was no material effect on our financialcondition or results of operations as a result of entering intothe agreement. If Pearson’s services were to be terminated,we would be required to seek equivalent services in the openmarket at potentially increased costs. The management servicesagreement is amended from time to time by mutual agreement toaddress changes in the terms or services provided to or on ourbehalf. The Independent Committee approves any suchmodifications. From time to time, we assess the ongoingrelationships between us and Pearson, and if we determine thatit would be more advantageous to secure any such servicesoutside of Pearson, we pursue doing so.     In addition, in the ordinary course of business, we are involvedin transactions with certain businesses that are owned by oraffiliated with Pearson. Certain of our businesses licensemarket data and related services at commercial rates to certainbusinesses owned by or affiliated with Pearson and also acquirea range of services related to specific financial market indicesfrom certain businesses owned by or affiliated with Pearson. Webelieve that the terms and conditions of these transactions arefair and reasonable. Certain of our businesses purchaseadvertising at discounted rates and other promotional servicesfrom certain businesses owned by or affiliated with Pearson.     Any amounts payable or receivable to and from Pearson or Pearsonaffiliates are classified as an affiliate transaction on thebalance sheet. For the years ended December 31, 2004, 2003and 2002, we recorded revenue of $2,563,000, $2,711,000 and$2,238,000, respectively, for services provided to Pearson. Forthe years ended December 31, 2004, 2003 and 2002, werecorded expense of $3,658,000, $3,115,000, and $2,902,000,respectively, for these services received from Pearson.     In 2001, we entered into a trademark license agreement withPearson’s Financial Times Group authorizing us to use the“FT” and “Financial Times” trademarks andlogos in our business. The license grants us the right to usethe FT and Financial Times brands for a five-year period for oneUK pound sterling with an automatic renewal thereafter, unlessterminated. The license is subject to quality control standards,restrictions on sublicensing the trademarks to third parties andcertain other restrictions. The independent committee of ourboard of directors approved this agreement on our behalf.
30

Table of Contents
     In the third quarter of 2004, we recorded a capital contributionfrom Pearson of $1,962,000 for an adjustment to a liabilityattributed to a former affiliate of Pearson that was sold in1999, prior to the Merger. This adjustment had no impact on ournet income or on Pearson’s ownership percentage of ourissued and outstanding common stock. In the fourth quarter of2004, we recorded a capital contribution from Pearson of$1,889,000, which represented the final settlement of certainemployee benefit matters for which ultimate payment was notrequired.**Critical Accounting Policies and Estimates**     Our discussion and analysis of our financial condition andresults of operations is based upon our consolidated financialstatements, which have been prepared in accordance withaccounting principles generally accepted in the United States.For a detailed discussion on the application of these and otheraccounting policies, see Note 1 in the Notes to theConsolidated Financial Statements in Item 8 of this AnnualReport on Form 10-K.     The preparation of these financial statements requires us tomake estimates and judgments that affect the reported amounts ofassets, liabilities, revenue and expenses, and relateddisclosure of contingent assets and liabilities. On an on-goingbasis, we evaluate our estimates, including those related torevenue recognition, goodwill and intangible assets, accruedliabilities and income taxes. We base our estimates onhistorical experience and on various other assumptions that arebelieved to be reasonable under the circumstances, the resultsof which form the basis for making judgments about the carryingvalues of assets and liabilities that are not readily apparentfrom other sources. Actual results may differ from theseestimates under different assumptions or conditions.     We believe the following critical accounting policies requireour most significant judgments and estimates used in thepreparation of our consolidated financial statements:***Revenue Recognition***     Revenue is recognized over contractual periods as services areperformed. Amounts recognized as revenue are determined basedupon contractually agreed upon fee schedules with our customers.We account for subscription revenue received in advance ofservice being performed by deferring such amounts until therelated services are performed. From time to time, we arerequired to adjust revenue associated with incorrect billingsand data accessed inadvertently by customers. We maintain areserve for these adjustments based upon historical experienceand believe that the reserve established as of December 31,2004 is adequate.***Goodwill***     Goodwill is recorded in connection with business acquisitionsand represents the excess purchase price over the fair value ofidentifiable net assets at the acquisition date. OnJanuary 1, 2002, we adopted Financial Accounting StandardNo. 142, “Goodwill and Other Intangible Assets”,or FAS 142. As a result of the adoption of this standard,we ceased recording amortization expense associated with ourgoodwill.     FAS 142 requires an impairment test of goodwill assigned toour reporting units to be performed on an annual basis orwhenever events or circumstances indicate an impairment mayexist. Each impairment test is based upon a comparison of thefair value of the reporting unit, determined using a discountedcash flow model to the net book value of the reporting unit.Projections used in these analyses are consistent with thoseused by our management to run the company and make capitalallocation decisions. If impairment is indicated due to the bookvalue being in excess of the fair value, the goodwill is writtendown to its implied fair value.***Intangible Assets***     Intangible assets include securities databases, computersoftware, covenants not to compete, and customer lists arisingprincipally from acquisitions. Such intangibles are valued onthe acquisition dates based on a combination of replacement costand comparable purchase methodologies by a third party appraiserand are amortized over periods ranging from two to twenty fiveyears. The carrying amount of these balances is
31

Table of Contents
evaluated periodically by us in relation to the operatingperformance and fair value of the underlying assets. Adjustmentsare recorded if we determine that the fair value is less thanbook value.***Accrued Liabilities***     We maintain balances for certain accrued liabilities as theyrelate to employee costs such as medical costs and other costssuch as data charges, communications and royalties. Theseamounts are based upon management’s best estimates andjudgment based upon historical experience and on various otherassumptions that are believed to be reasonable under thecircumstances.***Income Taxes***     We determine our income tax expense in each of the jurisdictionsin which we operate. The income tax expense includes an estimateof the current tax expense as well as a deferred tax expense,which results from the determination of temporary differencesarising from the different treatment of items for book and taxpurposes.     We recognize future tax benefits or expenses attributable to ourtaxable temporary differences and net operating loss carryforwards. We recognize our deferred tax assets to the extentthat the recoverability of these assets satisfy the “morelikely than not” recognition criteria in Statement ofFinancial Accounting Standards No. 109 “Accounting forIncome Taxes”. Based upon projections of future book andtaxable income, we believe that the recorded tax assets will berealized.     We currently provide income taxes on the earnings of foreignsubsidiaries and associated companies to the extent theseearnings are currently taxable or expected to be remitted. Taxeshave not been provided on approximately $49,000,000 ofaccumulated foreign unremitted earnings, which are expected toremain invested indefinitely.**Commitments and Contingencies**     We have no outstanding debt. We meet our existing workingcapital and capital expenditure needs from our existingoperating cash flow.     We have obligations under non-cancelable operating leases forreal estate, equipment and distribution agreements for satelliteand cable space and FM radio channels. Certain of the leasesinclude renewal options and escalation clauses. Real estateleases are for our corporate headquarters, sales offices, majoroperating units and data centers.     Future operating lease obligations, as of December 31,2004, are summarized in the chart below.                       **Payment Due by Period**       **Less Than**   **More Than****Contractual Obligations** **Total** **1 Year** **1-3 Years** **3-5 Years** **5 Years**             **(In thousands)**    Operating Lease Obligations $67,702  $13,116  $19,228  $16,829  $18,529     Total $67,702  $13,116  $19,228  $16,829  $18,529      We expect to satisfy our lease obligations from our existingcash flow. Our key operating locations operate in facilitiesunder long-term leases, the earliest of which will expire in2005. We believe we will be able to successfully negotiate keyoperating leases and/or find alternative locations for ourfacilities without significant interruption to the business.**Inflation**     Although management believes that inflation has not had amaterial effect on the results of operations during the pastthree years, there can be no assurance that results ofoperations will not be affected by inflation in the future.
32

Table of Contents
**Seasonality and Market Activity**     Historically, we have not experienced any material seasonalfluctuations in our business and we do not expect to experienceseasonal fluctuations in the future. However, financialinformation market demand is largely dependent upon activitylevels in the securities markets. The lower activity levels as aresult of the downturn in the financial markets impacted revenuein the first half of 2004. In the event that the US orinternational financial markets were to suffer a prolongeddownturn that results in a significant decline in investoractivity in trading securities, our sales and revenue could beadversely affected. The degree of such consequences isuncertain. Our exposures in the US in this area could bemitigated in part by our service offerings in non-US markets.**Recently Issued Accounting Pronouncements*****Share-Based Payment***     On December 16, 2004, the Financial Accounting StandardsBoard issued Financial Accounting Standard No. 123(R),“Share-Based Payment”, or FAS 123(R).FAS 123(R) revises Financial Accounting StandardNo. 123, “Accounting for Stock-BasedCompensation” and requires companies to expense the fairvalue of employee stock options and other forms of stock-basedcompensation. FAS 123(R) supersedes Accounting PrinciplesBoard Opinion No. 25, “Accounting for Stock Issued toEmployees” and amends Financial Accounting StandardNo. 95, “Statement of Cash Flows”.FAS 123(R) must be adopted no later than periods beginningafter June 15, 2005 and we expect to adopt FAS 123(R)on the effective date. We expect that the adoption of thisstandard to have a material impact on our net income andearnings per share. We are required to adopt SFAS 123(R) inthe third quarter of 2005. The pro forma disclosures previouslypermitted under SFAS 123 no longer will be an alternativeto financial statement recognition. See Note 1 in the Notesto the Consolidated Financial Statements in Item 8 of thisAnnual Report on Form 10-K for the pro forma net income andnet income per share amounts, for the years 2002 through 2004,as if we had used a fair value based method similar to themethods required under SFAS 123(R) to measure compensationexpense for employee stock incentive awards.**Information Regarding Forward-Looking Statements**     From time to time, including in this Annual Report onForm 10-K and our annual report to shareholders, we mayissue forward-looking statements relating to such matters asanticipated financial performance, business prospects, strategy,plans, critical accounting policies, technological developments,new services, consolidation activities, research and developmentactivities, regulatory, market and industry trends and similarmatters. The Private Securities Litigation Reform Act of 1995and federal securities laws provide safe harbors forforward-looking statements. We note that a variety of factors,including known and unknown risks and uncertainties as well asincorrect assumptions, could cause our actual results andexperience to differ materially from the anticipated results orother expectations expressed in such forward-looking statements.The factors that may affect the operations, performance,development and results of our business include the following:     *A decline in activity levels in the securities markets couldlower demand for our services.* Our business is dependentupon the health of the financial markets as well as thefinancial health of the participants in those markets. Some ofthe financial data and information market demand is dependentupon activity levels in the securities markets while otherdemand is static and is not dependent on activity levels. In theevent that the US or international financial markets suffer aprolonged downturn that results in a significant decline ininvestor activity, our revenue levels could be materiallyadversely affected. We have experienced higher than normalcancellations or downgrades as a result of the cost cuttingpressures evident in the financial services sector in recentyears and such cancellations or downgrades may continue.     *Consolidation of financial services within and acrossindustries could lower demand for our services.* Asconsolidation occurs and synergies are achieved, the number ofpotential customers for our services decreases. Thisconsolidation has two forms: consolidations within an industry,such as banking, and across industries, such as consolidationsof insurance, banking and brokerage companies. When twocompanies that separately subscribe to or use our servicescombine, they may terminate or reduce duplicative subscriptionsfor our
33

Table of Contents
services or if they are billed on a usage basis, usage maydecline due to synergies created by the business combination. Weexperienced higher than normal cancellations in recent years asa result of this trend and these consolidations andcancellations may continue. A large number of cancellations, orlower utilization resulting from consolidations, could have amaterial adverse effect on our revenue.     *The continuing impact of cost-cutting pressures across thefinancial services industry could cause lower demand for ourservices.* Many customers within the financial servicesindustry are striving to reduce their operating costs. Toachieve this goal, customers may seek to reduce their spendingon market data services and related analytical tools. Ifcustomers elect to reduce their spending with us, our results ofoperations could be materially adversely affected.Alternatively, customers may use other strategies to reducetheir overall spending on market data services, either byconsolidating their spending with a fewer number of vendors orby selecting vendors with lower-cost offerings. If customerselect to consolidate their spending on market data services withother vendors and not us, or if we cannot price our services asaggressively as the competition, our results of operations couldbe materially adversely affected.     *We compete against companies with greater financialresources.* We operate in highly competitive markets in whichwe compete with other distributors of financial and businessinformation and related services. We expect competition tocontinue to be rigorous. Some of our competitors and potentialcompetitors have significantly greater financial, technical andmarketing resources than we have. These competitors may be ableto expand product offerings and data content more effectively,and to respond more rapidly than us to new or emergingtechnologies, changes in the industry or changes in customerneeds. They may also be in a position to devote greaterresources to the development, promotion and sale of theirproducts. Increased competition in the future could limit ourability to maintain or increase our market share or maintain ourmargins, and could have a material adverse effect on ourbusiness, financial condition or operating results.     *New product offerings by competitors or new technologiescould cause our services to become obsolete.* We operate inan industry that is characterized by rapid and significanttechnological change, frequent new services, data content andcoverage enhancements, and evolving industry standards. Withoutthe timely introduction of new services and data content andcoverage enhancements, our services could become technologicallyobsolete or inadequate over time, in which case our revenue andoperating results would suffer. We expect our competitors tocontinue to improve the performance of their current services,to enhance data content and coverage and to introduce newservices and technologies. These competitors may adapt morequickly to new technologies, changes in the industry and changesin customers’ requirements than we can. If we fail toadequately anticipate customers’ needs and technologicaltrends accurately, we will be unable to introduce new servicesinto the market and our ability to compete would be materiallyadversely impacted. Further, if we are unsuccessful atdeveloping and introducing new services that are appealing tocustomers, with acceptable prices and terms, or if any such newservices are not made available in a timely manner, our abilityto compete would be materially adversely impacted. In both casesour ability to generate revenue could suffer and our businessand operating results could be materially adversely affected. Wewill need to successfully enhance or add to current services inorder to effectively expand into new geographic areas. Inaddition, new services, data content and coverage that we maydevelop and introduce may not achieve market acceptance; lack ofmarket acceptance would result in lower revenue.     *If we are unable to maintain relationships with key suppliersand providers of market data, we would not be able to provideour services to our customers.* We depend on key suppliersfor the data we provide to our customers. Some of this data isexclusive to particular suppliers, such as national stockexchanges, and cannot be obtained from other suppliers. In othercases, although the data may be available from secondarysources, the secondary source may not be as adequate or reliableas the primary or preferred source, or we may not be able toobtain replacement data from an alternative supplier withoutundue cost and expense, if at all. We generally obtain data vialicense agreements. The disruption of any license agreement witha major data supplier, such as the New York Stock Exchange,could disrupt our operations and lead to an adverse impact onour results of operations.     *A prolonged outage at one of our data centers could result inreduced revenue and the loss of customers.* Our customersrely on us for time-sensitive, up-to-date data that is reliablydelivered. Our business is
34

Table of Contents
dependent on our ability to rapidly and efficiently processsubstantial quantities of data and transactions on ourcomputer-based networks and systems. Our computer operations andthose of our suppliers and customers are vulnerable tointerruption by fire, natural disaster, power loss,telecommunications failure, terrorist attacks, acts of war,Internet failures, computer viruses and other events beyond ourreasonable control. We maintain back-up facilities for each ofour major data centers to seek to minimize the risk that anysuch event will disrupt operations. In addition, we maintaininsurance for such events. However, the business interruptioninsurance we carry may not be sufficient to compensate us fullyfor losses or damages that may occur as a result of such events.Any such losses or damages incurred by us could have a materialadverse effect on our business. Although we seek to minimizethese risks through security measures, controls and back-up datacenters, there can be no assurance that such efforts will besuccessful or effective.     *Our inability to maintain relationships with service bureausand custodian banks would decrease our revenue.* Part of ourstrategy is to serve as a major data supplier to service bureausand custodian banks and thereby to benefit from the trend ofmajor financial institutions in North America outsourcing theirback office operations to such entities. While we believe theimportance of back office operations will continue to increase,if this trend shifts or any of these relationships are disruptedor are terminated, our results of operations could be materiallyadversely impacted.     *We may fail to derive the anticipated benefits from ouracquisitions.* A significant part of our growth strategy hasbeen and continues to be growth through strategic acquisition.The success of any acquisition depends in part on our ability tointegrate the acquired business or assets. Successfulintegration of a business involves the integration of some orall of the following: sales, employees, operating systems,operating procedures and information technology systems. We maynot be able to effectively integrate and manage the operationsof any acquired business. In addition, the process ofintegrating acquired businesses or assets may involve unforeseendifficulties. Integrating any newly acquired businesses mayrequire a disproportionate amount of management’s attentionand financial and other resources, and detract from theresources remaining for our pre-existing businesses. Further, wemay not be able to maintain or improve the historical financialperformance of acquired businesses. Finally, we may not fullyderive all of the anticipated benefits from our acquisitions,for example, supply cost synergies or reduced operating costsdue to centralized or shared technical infrastructure.     *We may not be able to attract and retain key personnel.*We depend on our ability to attract and retain qualifiedpersonnel to operate and expand our business and we may not beable to retain the services of our key personnel. Our ability toreplace any key personnel who resigns may be difficult and maytake an extended period of time because of the limited number ofsenior individuals in the financial information industry withthe breadth of skills and experiences required to operate andsuccessfully expand a business such as ours or perform some ofthe key business functions we require. Competition to hire fromthis limited pool is intense, and we may not be able to hire orretain these personnel.     *We may not be able to efficiently and effectively consolidateour data centers.* We are in the process of streamlining andconsolidating our seven data centers, as well as ticker planttechnologies and related facilities in the US into twoindependent data centers. The costs associated with thisconsolidation may be greater than we anticipate and we mayexperience unexpected delays as we continue this consolidationprocess. Delays in achieving this consolidation, and themigration of activities from other data centers, may increaseour cost of services and capital expenditures. In addition, theconsolidation may not result in enhanced operational efficiency,resiliency and other benefits to the degree we anticipate, if atall.     *We are subject to regulatory oversight and we provideservices to financial institutions that are subject tosignificant regulatory oversight, and any investigation of us orour clients relating to our services could be expensive, timeconsuming and harm our reputation.* The securities laws andother regulations that govern our activities and the activitiesof our customers are complex. Compliance with these regulationsmay be reviewed by federal agencies, including the SEC, stateauthorities and other governmental entities both in the UnitedStates and foreign countries. Any investigation by a regulatoryagency of one of our clients or us, whether or not founded,could cause us to incur substantial costs and distract ourmanagement from our business. To the extent any of our customersbecome the subject of a regulatory investigation or a civillawsuit
35

Table of Contents
due to actual or alleged violations of one or more of theirregulatory obligations, we could become subject to intensescrutiny. The intense scrutiny could involve an examination ofwhether the services we provided to the customer during the timeperiod of the alleged violation were related to or hadcontributed in any manner to the commission of the violation. Wemay be required to expend a significant amount of resourcesexplaining and/or defending the services we provided. Inaddition, the negative publicity associated with any publicinvestigation could adversely affect our ability to attractand/or retain clients.     *Certain of our subsidiaries are subject to complexregulations and licensing requirements.* Our FT InteractiveData subsidiary is a registered investment adviser with the SECand is subject to significant regulatory obligations under theInvestment Advisers Act of 1940. The securities laws and otherregulations that govern FT Interactive Data’s activities asa registered investment adviser are complex. If we were to everlose our investment adviser status, we could no longer operatethose portions of our business that require us to qualify as aninvestment adviser. Recently, the financial services industry,and in particular the mutual fund industry, has receivednegative publicity, which has led to increased legislation,regulation, review of industry practices and private litigation.As the regulatory obligations applicable to investment advisersincrease, our compliance costs likewise increase. Similarly, ourFT Interactive Data Australia subsidiary is licensed by theAustralian Securities & Investment Commission, or ASIC,to provide certain financial services in Australia under theCorporations Act 2001. The financial services laws and otherregulations that govern their activities are complex. If we wereto lose this license, the subsidiary could no longer operatethose portions of our business in Australia that require thelicense to be held. In addition, in order to offer new financialservices or products we could be required to extend the licenseauthorizations, which is at the discretion of ASIC. Theinability to provide one or more of our services would adverselyimpact revenue and could have a material adverse affect on ourbusiness and results of operation.     *Pearson has the ability to control us.* Pearson indirectlyholds approximately 60% of our issued and outstanding commonstock. Accordingly, Pearson has the ability to exert significantinfluence over our management and our affairs, including theability to elect all of the directors and to approve ordisapprove any corporate actions submitted to a vote of ourstockholders.     The foregoing discussion of risks, uncertainties, andassumptions is by no means complete but is designed to highlightimportant factors that may impact our results of operation andour business.**Item 7A.*****Quantitative and Qualitative Disclosures about Market    Risk***     A portion of our business is conducted outside the United Statesthrough our foreign subsidiaries and branches. We haveoperations in Europe, primarily the United Kingdom, andoperations in Asia Pacific located in Australia, Hong Kong andSingapore, with the primary operations in Australia. We haveforeign currency exposure related to our operations ininternational markets where we transact business in foreigncurrencies and, accordingly, we are subject to exposure fromadverse movements in foreign currency exchange rates. Ourforeign subsidiaries maintain their accounting records in theirlocal currencies. Consequently, changes in currency exchangerates may impact the translation of foreign statements ofoperations into US dollars, which may in turn affect ourconsolidated statements of operations. Our primary exposure toforeign currency exchange rate risks rest with the UK poundsterling to US Dollar exchange rate due to the significant sizeof our operations in the United Kingdom. For example, in 2004and 2003 respectively, favorable foreign exchange rates added$10,109,000 and $6,581,000 respectively, to our service revenue.
36

Table of Contents
     The service revenue for the past three years and long-livedassets for the past three years, by geographic region, is asfollows:                 **2004** **2003** **2002**         **(In thousands)**    Service Revenue                 Europe $93,998  $89,990  $67,913      Asia  6,698   6,167   4,974                 Total $100,696  $96,157  $72,887               Long-Lived Assets                 Europe $134,363  $124,275  $77,886      Asia  2,654   2,579   1,965                 Total $137,017  $126,854  $79,851                We do not enter into any hedging or derivative arrangements andwe do not hold any market risk sensitive instruments forinvestment or other purposes.     We currently invest excess cash balances in money marketaccounts and municipal bonds. These accounts are largelyinvested in US Government obligations, investment gradecommercial paper and high credit quality municipal obligations;accordingly, we are exposed to market risk related to changes ininterest rates. We believe that the effect, if any, ofreasonable near-term changes in interest rates on our financialposition, results of operations, and cash flows will not bematerial.
37

Table of Contents
**Item 8.*****Financial Statements and Supplementary Data***        **Page**       Index to Consolidated Financial Statements:         Report of Independent Registered Public    Accounting Firm  39      Consolidated Statements of Operations and    Comprehensive Income for the years ended December 31, 2004,    2003 and 2002  41      Consolidated Balance Sheets as of    December 31, 2004 and 2003  42      Consolidated Statements of Cash Flows for    the years ended December 31, 2004, 2003 and 2002  43      Consolidated Statements of    Stockholders’ Equity for the years ended December 31,    2004, 2003 and 2002  44      Notes to Consolidated Financial    Statements  45      Quarterly Financial Information    (Unaudited)  68     Index to Financial Statement Schedule:          Schedule II Valuation and Qualifying    Accounts  69 
38

Table of Contents
**Report of Independent Registered Public Accounting Firm****To the Board of Directors and Shareholders of InteractiveData Corporation**     We have completed an integrated audit of Interactive DataCorporation’s 2004 consolidated financial statements and ofits internal control over financial reporting as ofDecember 31, 2004 and audits of its 2003 and 2002consolidated financial statements in accordance with thestandards of the Public Company Accounting Oversight Board(United States). Our opinions, based on our audits, arepresented below.**Consolidated financial statements and financial statementschedule**     In our opinion, the consolidated financial statements listed inthe index appearing under Item 15(a)(1) present fairly, inall material respects, the financial position of InteractiveData Corporation and its subsidiaries at December 31, 2004and 2003, and the results of their operations and their cashflows for each of the three years in the period endedDecember 31, 2004 in conformity with accounting principlesgenerally accepted in the United States of America. In addition,in our opinion, the financial statement schedule listed in theindex appearing under Item 15(a)(2) presents fairly, in allmaterial respects, the information set forth therein when readin conjunction with the related consolidated financialstatements. These financial statements and the financialstatement schedule are the responsibility of the Company’smanagement. Our responsibility is to express an opinion on thesefinancial statements based on our audits. We conducted ouraudits of these statements in accordance with the standards ofthe Public Company Accounting Oversight Board (United States).Those standards require that we plan and perform the audit toobtain reasonable assurance about whether the financialstatements are free of material misstatement. An audit offinancial statements includes examining, on a test basis,evidence supporting the amounts and disclosures in the financialstatements, assessing the accounting principles used andsignificant estimates made by management, and evaluating theoverall financial statement presentation. We believe that ouraudits provide a reasonable basis for our opinion.**Internal control over financial reporting**     Also, in our opinion, management’s assessment, included inthe accompanying Management’s Annual Report on InternalControl Over Financial Reporting appearing under Item 9A,that the Company maintained effective internal control overfinancial reporting as of December 31, 2004 based oncriteria established in *Internal Control —Integrated Framework*issued by the Committee of SponsoringOrganizations of the Treadway Commission (COSO), is fairlystated, in all material respects, based on those criteria.Furthermore, in our opinion, the Company maintained, in allmaterial respects, effective internal control over financialreporting as of December 31, 2004, based on criteriaestablished in *Internal Control — IntegratedFramework*issued by the COSO. The Company’s managementis responsible for maintaining effective internal control overfinancial reporting and for its assessment of the effectivenessof internal control over financial reporting. Our responsibilityis to express opinions on management’s assessment and onthe effectiveness of the Company’s internal control overfinancial reporting based on our audit. We conducted our auditof internal control over financial reporting in accordance withthe standards of the Public Company Accounting Oversight Board(United States). Those standards require that we plan andperform the audit to obtain reasonable assurance about whethereffective internal control over financial reporting wasmaintained in all material respects. An audit of internalcontrol over financial reporting includes obtaining anunderstanding of internal control over financial reporting,evaluating management’s assessment, testing and evaluatingthe design and operating effectiveness of internal control, andperforming such other procedures as we consider necessary in thecircumstances. We believe that our audit provides a reasonablebasis for our opinions.     A company’s internal control over financial reporting is aprocess designed to provide reasonable assurance regarding thereliability of financial reporting and the preparation offinancial statements for external purposes in accordance withgenerally accepted accounting principles. A company’sinternal control over financial reporting includes thosepolicies and procedures that (i) pertain to the maintenanceof records that, in reasonable detail, accurately and fairlyreflect the transactions and dispositions of the assets of thecompany;
39

Table of Contents
(ii) provide reasonable assurance that transactions arerecorded as necessary to permit preparation of financialstatements in accordance with generally accepted accountingprinciples, and that receipts and expenditures of the companyare being made only in accordance with authorizations ofmanagement and directors of the company; and (iii) providereasonable assurance regarding prevention or timely detection ofunauthorized acquisition, use, or disposition of thecompany’s assets that could have a material effect on thefinancial statements.     Because of its inherent limitations, internal control overfinancial reporting may not prevent or detect misstatements.Also, projections of any evaluation of effectiveness to futureperiods are subject to the risk that controls may becomeinadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.     /s/ PRICEWATERHOUSECOOPERS    LLP    Boston, MassachusettsMarch 16, 2005
40

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****CONSOLIDATED STATEMENTS OF OPERATIONS****AND COMPREHENSIVE INCOME**                 **Year Ended December 31,**     **2004** **2003** **2002**         **(In thousands, except per share data)**    SERVICE REVENUE $484,565  $442,690  $375,015     COSTS AND EXPENSES                 Cost of services  156,646   141,631   110,321      Selling, general and administrative  161,313   149,129   133,225      Depreciation  18,521   16,807   14,500      Amortization  22,216   19,774   18,737                 Total costs and expenses  358,696   327,341   276,783               INCOME FROM OPERATIONS  125,869   115,349   98,232     Other income, net  2,522   1,100   1,989               INCOME BEFORE INCOME TAXES  128,391   116,449   100,221     Income tax expense  48,120   44,248   39,488               NET INCOME $80,271  $72,201  $60,733               Other comprehensive income (loss)                 Foreign currency translation adjustment  10,679   14,983   8,004      Additional minimum pension liability  391   —   (2,685)              COMPREHENSIVE INCOME $91,341  $87,184  $66,052               Weighted average shares outstanding:                 Basic  93,152   92,319   91,159      Diluted  95,525   94,450   93,730     NET INCOME PER SHARE:                 Basic $0.86  $0.78  $0.67      Diluted $0.84  $0.76  $0.65 The accompanying notes are an integral part of theseconsolidated financial statements.
41

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****CONSOLIDATED BALANCE SHEETS**             **December 31,**     **2004** **2003**       **(In thousands,**  **except for share data)****ASSETS**    Cash and cash equivalents $207,908  $131,639     Marketable securities  2,371   —     Accounts receivable, net of allowance for doubtful accounts of    $7,256 and $6,467 at 2004 and 2003, respectively  88,295   75,785     Prepaid expenses and other current assets  15,809   6,773     Deferred income taxes  5,838   4,640              Total current assets  320,221   218,837     Property and equipment, net  54,854   46,193     Goodwill  480,444   462,323     Intangible assets, net  169,338   182,305     Other assets  816   664              Total Assets $1,025,673  $910,322         **LIABILITIES AND STOCKHOLDERS’ EQUITY**    Current Liabilities:             Accounts payable, trade $15,943  $9,877      Accrued liabilities  67,276   62,311      Payables to affiliates  1,552   1,279      Income taxes payable  10,672   12,948      Deferred revenue  40,774   30,336              Total current liabilities  136,217   116,751      Deferred tax liabilities  29,583   29,204      Other liabilities  2,117   1,836              Total Liabilities  167,917   147,791     Commitments and contingencies (Note 9)            Stockholders’ Equity:             Preferred stock, $.01 par value, 5,000,000 shares    authorized; no shares issued or outstanding at December 31,    2004 and December 31, 2003  —   —      Common stock $0.01 par value, 200,000,000 shares    authorized; 96,292,583 issued and 93,147,583 outstanding at    December 31, 2004 and 95,011,707 issued and 92,811,707    outstanding at December 31, 2003  963   950      Additional paid-in capital  823,211   801,448      Treasury Stock, at cost, 3,145,000 and 2,200,000 shares, at    December 31, 2004 and 2003, respectively  (44,308)  (26,980)     Accumulated earnings (deficit)  58,074   (22,197)     Accumulated other comprehensive income  21,437   10,367      Deferred stock based compensation  (1,621)  (1,057)             Total Stockholders’ Equity  857,756   762,531              Total Liabilities and Stockholders’ Equity $1,025,673  $910,322        The accompanying notes are an integral part of theseconsolidated financial statements.
42

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****CONSOLIDATED STATEMENTS OF CASH FLOWS**                **Year Ended December 31,**     **2004** **2003** **2002**         **(In thousands)****Cash flows provided by (used in) operating activities:**                Net income $80,271  $72,201  $60,733     Adjustments to reconcile net income to net cash provided by    operating activities:                 Depreciation and amortization  40,737   36,581   33,237      Tax benefit from exercise of stock options and employee stock    purchase plan  3,778   3,776   4,873      Deferred income taxes  1,101   (543)  1,733     Other non-cash items  2,622   1,892   256     Changes in operating assets and liabilities, net:                 Accounts receivable, net  (8,529)  (13,910)  (6,518)     Prepaid expenses and other assets  (8,221)  932   (1,635)     Accounts and taxes payable and payable to affiliates, net  2,972   1,609   (5,556)     Accrued expenses and other liabilities  (1,698)  1,071   (556)     Deferred revenue  8,669   5,945   (2,187)              NET CASH PROVIDED BY OPERATING ACTIVITIES  121,702   109,554   84,380           **Cash flows provided by (used in) investing activities:**                 Purchase of fixed assets  (23,898)  (21,503)  (13,561)     Acquisition of business  (17,683)  (122,336)  (48,000)     Purchase and sale of marketable securities  (2,371)  —   —      Other investing activities  —   506   680               NET CASH (USED IN) INVESTING ACTIVITIES  (43,952)  (143,333)  (60,881)          **Cash flows provided by (used in) financing activities:**                 Proceeds from exercise of stock options and employee stock    purchase plan  12,935   9,925   10,411      Purchase of treasury stock  (17,328)  (1,330)  (1,377)              NET CASH PROVIDED BY (USED IN) FINANCING ACTIVITIES  (4,393)  8,595   9,034     Effect of change in exchange rates on cash and cash equivalents  2,912   3,580   2,188               NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS  76,269   (21,604)  34,721     CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD  131,639   153,243   118,522               CASH AND CASH EQUIVALENTS AT END OF PERIOD $207,908  $131,639  $153,243               Supplemental disclosure of cash flow information:                 Cash paid for taxes $(42,924) $(37,066) $(33,484)     Cash received for interest $2,464  $1,123  $2,031 The accompanying notes are an integral part of theseconsolidated financial statements.
43

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY**                                                 **Accumulated**      **Common Stock** **Treasury**       **Other**        **Stock** **Treasury** **Additional** **Deferred** **Comprehensive** **Accumulated** **Total**  **Number of**   **Number of** **Stock** **Paid In** **Compensation** **Income** **Earnings** **Stockholders’**  **Shares** **Par Value** **Shares** **Cost** **Capital** **Cost** **(Loss)** **(Deficit)** **Equity**                           **(In thousands)**            Balance, December 31, 2001  92,245  $922   2,000  $(24,273) $771,084  $   $(9,935) $(155,131) $582,667     Exercise of stock options  1,404   14   —   —   9,799   —   —   —   9,813     Issuance of stock in connection with employee stock purchase plan  50   1   —   —   597   —   —   —   598     Tax benefit from exercise of stock options and employee stock    purchase plan  —   —   —   —   4,873   —   —   —   4,873     Exercise of extended stock options                  117   —           117     Purchase of treasury stock  —   —   100   (1,377)  —   —   —   —   (1,377)    Other comprehensive income  —   —   —   —   —   —   5,319   —   5,319     Net income  —   —   —   —   —   —   —   60,733   60,733                                 Balance, December 31, 2002  93,699  $937   2,100  $(25,650) $786,470  $—  $(4,616) $(94,398) $662,743                                 Exercise of stock options  1,195   12   —   —   8,580   —   —   —   8,592     Issuance of stock in connection with employee stock purchase plan  118   1   —   —   1,332   —   —   —   1,333     Tax benefit from exercise of stock options and employee stock    purchase plan  —   —   —   —   3,776   —   —   —   3,776     Purchase of treasury stock  —   —   100   (1,330)  —   —   —   —   (1,330)    Deferred stock-based compensation  —   —   —   —   1,290   (1,290)  —   —   —     Amortization of deferred stock-based compensation  —   —   —   —   —   233   —   —   233     Other comprehensive income  —   —   —   —   —   —   14,983   —   14,983     Net income      —   —   —   —   —   —   72,201   72,201                                 Balance, December 31, 2003  95,012  $950   2,200  $(26,980) $801,448  $(1,057) $10,367  $(22,197) $762,531                                 Exercise of stock options  1,157   12   —   —   11,125   —   —   —   11,137     Issuance of stock in connection with employee stock purchase plan  124   1   —   —   1,797   —   —   —   1,798     Tax benefit from exercise of stock options and employee stock    purchase plan  —   —   —   —   3,778   —   —   —   3,778     Purchase of treasury stock  —   —   945   (17,328)  —   —   —   —   (17,328)    Deferred stock-based compensation  —   —   —   —   1,212   (1,212)  —   —   —     Amortization of deferred stock-based compensation  —   —   —   —   —   648   —   —   648     Capital contributions by affiliates  —   —   —   —   3,851   —   —   —   3,851     Other comprehensive income  —   —   —   —   —   —   11,070   —   11,070     Net income      —   —   —   —   —   —   80,271   80,271                                 Balance, December 31, 2004  96,293  $963   3,145  $(44,308) $823,211  $(1,621) $21,437  $58,074  $857,756                             The accompanying notes are an integral part of theseconsolidated financial statements.
44

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIAL STATEMENTS****1.****Summary of Significant Accounting Policies*****Nature of Business***     Interactive Data Corporation (the “Company”) is aleading global provider of financial and business information tofinancial institutions and active traders. The Company offersits services to its customers through two business segments:Institutional Services and Active Trader Services.     The Institutional Services segment of our business primarilytargets banks, brokerage firms, mutual fund companies, insurancecompanies, money management firms, financial informationproviders, and other third-party redistribution partners byproviding services that may be used in determining portfolio andindividual security valuations, processing transactions,preparing account statements and other reports, addressingregulatory compliance requirements, and conducting investmentresearch and analysis. The Institutional Services segment iscomposed of three businesses: FT Interactive Data, CMS BondEdgeand ComStock.     The Active Trader Services segment of our business targetsactive traders, which includes individual investors andprofessional traders, by providing real-time financial marketinformation and related decision support tools. Active traderstypically make their own investment decisions, trade frequentlyand earn a substantial portion of their income from trading. TheActive Trader Services segment is composed of one business:eSignal.     On February 29, 2000, Data Broadcasting Corporationcompleted a merger (“the Merger”) with InteractiveData Corporation (now known as FT Interactive Data Corporation),a wholly owned subsidiary of Pearson Longman, Inc.(“Pearson Longman”). Pearson Longman, through a seriesof other entities, is wholly owned by Pearson plc(“Pearson”). Upon completion of the Merger, theCompany issued 56,424,000 shares of its common stock toPearson Longman that resulted in the ownership by PearsonLongman of approximately 60% of the Company. Interactive DataCorporation prior to the Merger is referred to herein as FTInteractive Data Corporation, which continues to be theCompany’s major institutional services business. The Mergerwas accounted for as a reverse merger as discussed inNote 3 to the consolidated financial statements. The sharesof the Company held by Pearson Longman were subsequentlytransferred to Pearson DBC Holdings, Inc., another wholly ownedsubsidiary of Pearson Longman.     The Company’s common stock commenced trading on the NewYork Stock Exchange under the trading symbol “IDC” onDecember 10, 2002. Prior to December  10, 2002,the Company’s common stock traded on the Nasdaq NationalMarket under the trading symbol “IDCO”.***Principles of Consolidation***     The consolidated financial statements include the results of theCompany and all majority-owned subsidiaries. All significantintercompany accounts and transactions have been eliminated.***Reclassifications***     Certain prior year amounts have been reclassified to conformwith the current year’s presentation. Thesereclassifications had no effect on the Company’s results ofoperations.***Cash and Cash Equivalents***     Cash and cash equivalents include cash on hand and temporarycash investments. At December 31, 2004 and 2003, cash andcash equivalents included money market and other cashequivalents of $140,017,000 and $88,081,000, respectively.
45

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)*****Marketable Securities***     Investments consist of high-grade municipal bonds that are morethan 90 days in maturity but less than one year. Allmarketable securities have been classified as available-for-saleand are carried at fair market value. Unrealized gains or losseson the Company’s available-for-sale securities are includedin other comprehensive income as a component ofshareholders’ equity.     Marketable securities by security type at December 31, 2004were as follows:                 **Unrealized** **Estimated**  **Cost** **Losses** **Fair Value**         **(In thousands)**    Municipal Bonds $2,371   —  $2,371 ***Fair Value of Financial Instruments***     The carrying amount of cash, cash equivalents, marketablesecurities, trade receivables and trade payables approximatestheir fair value because of the short maturity of theseinvestments.***Revenue Recognition***     Revenue is recognized over contractual periods as services areperformed. Amounts recognized as revenue for services performedare determined based upon contractually agreed upon feeschedules with the Company’s customers. The Companyaccounts for subscription revenue received in advance ofproviding services by deferring such amounts until the relatedservices are performed.***Accounts Receivable, Concentration of Credit Risk and    Uncertainties***     The Company is subject to credit risk through trade receivables.Credit risk with respect to trade receivables is mitigated bythe diversification of the Company’s operations, as well asits large client base and its geographical dispersion. No singlecustomer accounts for more than 10% of revenue or more than 10%of accounts receivable for any period presented. Ongoing creditevaluations of customers’ financial conditions areperformed although collateral is not required. The Companymaintains reserves for potential credit losses and such losses,in the aggregate, have not exceeded management’s previouslyestablished estimates.     In addition, the Company has temporary cash investments. AtDecember 31, 2004 approximately $140,017,000 of cashequivalents were deposited in money market accounts, commercialpaper and municipal bonds, all of which have maturities of threemonths or less. These accounts are largely invested in USGovernment obligations and investment grade commercial paper,thereby limiting credit risk. At December 31, 2004, theCompany believes that it had no significant concentrations ofcredit risk.***Income Taxes***     Deferred tax assets and liabilities are determined based ondifferences between the financial reporting and the tax basis ofassets and liabilities and are measured by applying enacted taxrates and laws to taxable years in which such differences areexpected to reverse. Income taxes are generally not provided onundistributed earnings of foreign subsidiaries because theseearnings are considered by the Company to be permanentlyreinvested.***Goodwill***     Goodwill is recorded in connection with business acquisitionsand represents the excess of the purchase price over the fairvalue of identifiable net assets at the acquisition date. InJanuary 2002, the Company adopted Statement of FinancialAccounting Standard No. 142, “Goodwill and OtherIntangible Assets”
46

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**(“SFAS 142”). As a result of the adoption of thisstandard, the Company ceased recording amortization expenseassociated with its goodwill.     SFAS 142 requires an impairment test for the Company’sreporting units be performed on an annual basis or wheneverevents or circumstances indicate an impairment may exist. Eachimpairment test is based upon a comparison of the fair value ofthe reporting unit to the book value of the related assets. Ifimpairment is indicated due to the net book value being inexcess of the fair value of the reporting unit, the goodwill iswritten down to its implied fair value.***Other Intangible Assets***     Other intangible assets include securities databases, computersoftware, covenants not to compete, and customer lists arisingprincipally from acquisitions. Such intangibles are valued onthe acquisition dates based on a combination of replacementcost, comparable purchase methodologies and discounted cashflows by a third party appraiser and are amortized over straightlines, which approximate the economic consumption, for periodsranging from two to twenty five years.***Property and Equipment***     Fixed assets are recorded at cost. Equipment is depreciatedusing the straight-line method over its estimated useful life ofthree to eight years. Leasehold improvements are amortized usingthe straight-line method over the terms of the respective leasesor useful lives, whichever is shorter. Maintenance and repairsare charged to operations as incurred. Retirements, sales anddisposals of assets are recorded by removing the cost andaccumulated depreciation from the asset and accumulateddepreciation accounts with the resulting gain or loss reflectedin income.     Capitalized software costs include costs incurred in connectionwith the development of software and purchased software. Thesecosts relate to software used by subscribers to access, manageand analyze information in the Company’s databases.Capitalized costs associated with internally developed softwareis amortized over the estimated economic life, which ranges fromthree to five years.***Impairment of Long-Lived Assets***     The Company reviews long-lived assets whenever events orcircumstances indicate that the carrying value of the assets maynot be recovered over their remaining useful lives. If animpairment is indicated, the Company compares the fair value ofthe related asset, generally determined using a discounted cashflow methodology, to the carrying value of the asset and recordsan impairment charge to the extent that fair value is lower thanthe carrying value of the asset.***Translation of Foreign Currencies***     The functional currency of certain businesses within theconsolidated financial statements is the local currency. Assetsand liabilities of foreign companies are translated into USdollars at exchange rates in effect at the balance sheet date;income and expense items and cash flows are translated ataverage exchange rates for the period. Cumulative nettranslation adjustments are included in stockholder’sequity as other comprehensive income. Gains and losses resultingfrom foreign currency transactions, not significant in amount,are included in the results of operations as selling, generaland administrative expense or revenue depending on the nature ofthe transaction.***Use of Estimates***     The preparation of the consolidated financial statements inconformity with accounting principles generally accepted in theUnited States of America requires the extensive use ofmanagement’s estimates and
47

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**assumptions that affect the reported amounts of assets andliabilities and disclosure of contingent assets and liabilitiesat the consolidated financial statement date. Actual resultscould differ from those estimates.***Restructuring Charges***     In 2002, the Company recorded restructuring charges in the UKand US. These restructuring charges totaled $3,320,000 and wereprimarily related to employee severance. As of December 31, 2004the remaining restructuring accrual is $348,000 and consists oflease termination costs. The Company expects to complete themajority of these payments by December 31, 2005. In 2003, theCompany recorded restructuring charges in the UK and US. Theserestructuring charges totaled $3,310,000 and were primarilyrelated to severance, lease termination costs and the closure ofthe Company’s Index Services business in Edinburgh,Scotland. As of December 31, 2004, the remaining restructuringaccrual that pertains to the 2003 charges is $604,000 andconsists of lease termination costs. The Company expects tocomplete the majority of these payments by December 31, 2005.During 2004, the Company recorded restructuring charges of$1,791,000 relating primarily to employee severance costs whichare included in selling, general and administrative expenses. Asof December 31, 2004, the remaining restructuring accrualpertaining to the 2004 charges is $553,000. The Company expectsto complete the majority of these payments by December 31, 2005.     As of December 31, 2004, the remaining restructuringaccruals are comprised of the following:                   **Employee Severance** **Lease Terminations** **Other** **Total**             **(In thousands)**        January 1, 2002 $—  $—  $—  $—     2002 Additions  2,297   673   350   3,320     2002 Payments/ Adjustments  (626)  —   (221)  (847)    December 31, 2002  1,671   673   129   2,473     2003 Additions  2,161   888   261   3,310     2003 Payments/ Adjustments  (1,789)  (234)  (390)  (2,413)    December 31, 2003  2,043   1,327   —   3,370     2004 Additions  1,754   37   —   1,791     2004 Payments/ Adjustments  (3,281)  (375)  —   (3,656)    December 31, 2004 $516  $989  $—  $1,505 ***Research and Development Costs***     Expenditures for research and development are expensed asincurred. The Company expensed approximately $3,185,000,$2,726,000 and $2,481,000 in research and development costsduring the years ended December 31, 2004, 2003 and 2002,respectively, primarily related to the development of newservices.***Advertising Costs***     Advertising expenditures consists of print media, radio,television, direct marketing and trade shows. All advertisingexpenses are charged to income during the period incurred andtotaled $5,582,000, $4,786,000 and $5,216,000 for the yearsended December 31, 2004, 2003 and 2002, respectively.***Stock-Based Compensation***     The Company follows Accounting Principles Board OpinionNo. 25, “Accounting for Stock Issued toEmployees” (“APB No. 25”) and relatedguidance, in accounting for its employee stock option andemployee stock purchase plans, rather than the fair value methodof accounting provided under Statement of Financial AccountingStandards No. 123, “Accounting for Stock-BasedCompensation” (“SFAS No. 123”). UnderAPB No. 25, the Company accounts for its employee stockoptions using the intrinsic value method. Under
48

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**this method, the Company does not recognize compensation expenseon stock options granted to employees when the exercise price ofeach option is equal to or greater than the market price of theunderlying stock on the date of the grant.     The following pro forma information presents the Company’snet income and basic and diluted net income per share for theyears ended December 31, 2004, 2003 and 2002 as ifcompensation cost had been measured under the fair value methodof SFAS No. 123, for the employee stock option andemployee stock purchase plan.                **Year Ended December 31,**     **2004** **2003** **2002**         **(In thousands, except per share data)**    Net income as reported $80,271  $72,201  $60,733     Stock-based compensation included in net income, net of related    tax effects  389   140   —     Deduct: Total stock based employee compensation expense    determined under fair value based method for all awards net of    related tax effects  (11,120)  (9,498)  (11,060)              Pro forma, net income $69,540  $62,843  $49,673     Earnings per share:                 Basic — as reported $0.86  $0.78  $0.67      Basic — pro forma $0.75  $0.68  $0.54      Diluted — as reported $0.84  $0.76  $0.65      Diluted — pro forma $0.73  $0.67  $0.53      See Note 7 for further details on the fair valuemethodology employed and the assumptions made by the Company todetermine the above pro forma effects of SFAS No. 123.The effects of applying SFAS No. 123 in this pro formadisclosure are not indicative of future amounts. Additionalawards in future years are anticipated.***Earnings per Share***     The Company calculates its earnings per share in accordance withStatement of Financial Accounting Standard No. 128,“Earnings per Share”. Below is a reconciliation of theweighted average number of common shares outstanding.     Stock options to purchase approximately 0, 1,842,000 and2,564,000 shares of common stock were outstanding duringthe years ended December 31, 2004, 2003, and 2002,respectively, but were not included in the calculation ofdiluted net income per share because the options’ exerciseprices were greater than the average market price of theCompany’s common stock during those years. Additionally,61,000 deferred stock units were outstanding during 2004(Note 7) and were also excluded from the calculation ofdiluted net
49

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**income per share as they were antidilutive. Although these stockoptions and deferred stock units were antidilutive in fiscal2004, 2003 and 2002 they may be dilutive in future years’calculations.                **For the Twelve Months Ended**  **December 31, 2004**       **Weighted Average**    **Income** **Shares** **Per-Share**  **(Numerator)** **(Denominator)** **Amount**         **(In thousands, except per share amount)**    Net income- basic $80,271   93,152  $0.86     Effect of dilutive securities:                 Stock options  —   2,358   (.02)     Deferred stock units  —   15   —               Net income-diluted $80,271   95,525  $0.84                           **For the Twelve Months Ended**  **December 31, 2003**       **Weighted Average**    **Income** **Shares** **Per-Share**  **(Numerator)** **(Denominator)** **Amount**         **(In thousands, except per share amount)**    Net income-basic $72,201   92,319  $0.78     Effect of dilutive securities:                 Stock options  —   2,131   (.02)              Net income-diluted $72,201   94,450  $0.76                           **For the Twelve Months Ended**  **December 31, 2002**       **Weighted Average**    **Income** **Shares** **Per-Share**  **(Numerator)** **(Denominator)** **Amount**         **(In thousands, except per share amount)**    Net income- basic $60,733   91,159  $0.67     Effect of dilutive securities:                 Stock options  —   2,571   (.02)              Net income-diluted $60,733   93,730  $0.65           **2.****New Accounting Pronouncements*****Revenue Recognition***     On December 17, 2003, the SEC issued SEC Staff AccountingBulletin No. 104, “Revenue Recognition”(“SAB 104”), which supersedes a portion of SECStaff Accounting Bulletin No. 101, “RevenueRecognition in Financial Statements”(“SAB 101”). The primary purpose of SAB 104is to rescind accounting guidance contained in SAB 101related to multiple element revenue arrangements, which wassuperseded as a result of the issuance of Emerging Issues TaskForce (“EITF”) Issue No. 00-21,“Accounting for Revenue Arrangements with MultipleDeliverables” (“EITF No. 00-21”). While thewording of SAB 104 has changes to reflect the issuance ofEITF No. 00-21, the revenue recognition principles ofSAB 101 remain largely unchanged by the issuance ofSAB 104. The adoption of SAB 104 did not have amaterial impact on our consolidated results of operations,financial position or cash flows.
50

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)*****Accounting for Preexisting Relationships between Parties    to a Business Combination***     In September 2004, the FASB issued EITF Issue No. 04-1Summary No. 1, Supplement No, 2, “Accounting forPreexisting Relationships between Parties to a BusinessCombination,” which establishes whether a consummation of abusiness combination between two parties that have a preexistingrelationship should be evaluated to determine if a settlement ofthe preexisting relationship exists and the accounting for thepreexisting relationship. This EITF issue states that a businesscombination between two parties that have a preexistingrelationship could be viewed as a multi-element transaction withone element being the business combination and the other elementbeing the settlement of the preexisting relationship. This EITFissue is to be applied to business combinations beginning afterOctober 13, 2004. The Company does not expect the adoptionof EITF 04-1 to have any impact on its financial positionor results of operations.***Exchanges of Nonmonetary Assets***     On December 16, 2004, the FASB issued Statement ofFinancial Accounting Standard No. 153, “Exchanges ofNonmonetary Assets” (“SFAS 153”) whichamends Accounting Principles Board Opinion No. 29,“Accounting for Nonmonetary Transactions(“APB 29”). APB 29 is based on the principlethat nonmonetary asset exchanges should be recorded and measuredat the fair value of the assets exchanged, with certainexceptions. SFAS 153 amends APB 29 to eliminate thefair-value exception for nonmonetary exchanges of similarproductive assets and replace it with a general exception fornonmonetary exchanges that do not have commercial substance. Itis effective for nonmonetary asset exchanges occurring in fiscalperiods beginning after June 15, 2005. The Company does notexpect the adoption of this standard to have a material impacton its results.***Share-Based Payment***     On December 16, 2004, FASB issued Statement of FinancialAccounting Standard No. 123(R), “Share-BasedPayment” (“SFAS 123(R)”). SFAS 123(R)revises Financial Accounting Standard No. 123,“Accounting for Stock-Based Compensation” and requirescompanies to expense the fair value of employee stock optionsand other forms of stock-based compensation. SFAS 123(R)supersedes Accounting Principles Board Opinion No. 25,“Accounting for Stock Issued to Employees” and amendsFinancial Accounting Standard No. 95, “Statement ofCash Flows”. SFAS 123(R) must be adopted no later thanperiods beginning after June 15, 2005 and the Companyexpects to adopt SFAS 123(R) on the effective date. TheCompany expects that the adoption of SFAS 123(R) to have amaterial impact on its net income and earnings per share. We arerequired to adopt SFAS 123(R) in the third quarter of 2005.The pro forma disclosures previously permitted underSFAS 123 no longer will be an alternative to financialstatement recognition. See Note 1 in the Notes to theConsolidated Financial Statements in Item 8 of the AnnualReport on Form 10-K for the pro forma net income and netincome per share amounts, for the years 2002 through 2004, as ifwe had used a fair value based method similar to the methodsrequired under SFAS 123(R) to measure compensation expensefor employee stock incentive awards.**3.****Mergers and Acquisitions**     On February 29, 2000, Data Broadcasting Corporation (nowknown as Interactive Data Corporation) completed the Merger withInteractive Data Corporation (now known as FT Interactive Data),a wholly owned subsidiary of Pearson Longman. Pearson Longman,through a series of other entities, is wholly owned by Pearson.Upon completion of the Merger, the Company issued56,424,000 shares of its common stock to Pearson Longmanthat resulted in the ownership by Pearson Longman ofapproximately 60% of the Company. Interactive Data Corporationprior to the Merger is referred to herein as FT Interactive DataCorporation, which continues to be the Company’s majorinstitutional services business.     The Merger was accounted for as a reverse acquisition. Theshares of the Company held by Pearson Longman were subsequentlytransferred to Pearson DBC Holdings, Inc., another wholly ownedsubsidiary of
51

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**Pearson Longman. Accordingly, the historical financialstatements of FT Interactive Data Corporation are the historicalfinancial statements of the Company.     Assets acquired totaled $565,373,000 and included cash,goodwill, an investment in MarketWatch.com, Inc. and intangibleassets. Liabilities acquired totaled $127,079,000 and includedaccounts payable, accrued expenses and deferred tax liabilities.     Intangible assets are being amortized between two and elevenyears. Accrued professional costs include investment banking,accounting and legal services. As of December 31, 2000, allaccrued professional costs had been paid. Accrued acquisitioncosts include severance, relocation and lease termination costs.As of December 31, 2004, accrued acquisition costsremaining were $240,000. An additional $3,000,000 of acquisitioncosts were funded by Pearson and treated as additional goodwilland a capital contribution.     Accrued acquisition costs are comprised of the following:                   **Employee** **Lease**      **Severance** **Terminations** **Other** **Total**             **(In thousands)**      Balance, December 31, 2000 $2,835  $1,585  $335  $4,755     2001 payments/adjustments  1,245   702   145   2,092                  Balance, December 31, 2001  1,590   883   190   2,663     2002 payments  1,008   883   190   2,081                  Balance, December 31, 2002  582   —   —   582     2003 payments/adjustments  314   —   —   314                  Balance, December 31, 2003  268   —   —   268     2004 payments/adjustments  28   —   —   28                  Balance, December 31, 2004 $240  $—  $ —  $240                   On January 31, 2002, the Company, through its FTInteractive Data Corporation subsidiary, acquired certain assetsfrom Merrill Lynch, Pierce, Fenner & Smith Incorporatedused in its Securities Pricing Service (“SPS”)business. The price paid in cash for the assets was $48,000,000and was funded from the operating cash of the Company. Inaddition, FT Interactive Data Corporation incurred acquisitioncosts of $1,088,000, consisting of severance costs and legal andaccounting services. As of December 31, 2004, allacquisition costs have been fully paid.     The acquisition was accounted for using the purchase method ofaccounting in accordance with Statement of Financial AccountingStandard No. 141, “Business Combinations”(“SFAS 141”). The purchase price has beenassigned to the assets acquired based on their fair values asdetermined by management with the assistance of an independentthird party appraiser. The intangible asset, customer lists, isbeing amortized over a fourteen-year period. The Company’sfinancial statements include the results of operations of SPSsubsequent to the acquisition date.
52

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**     The acquisition was accounted for as follows (in thousands):           Assets         Customer lists $30,100      Fixed assets  772      Goodwill  17,768      Deferred tax assets  448       $49,088      Liabilities         Accrued acquisition costs $1,088           Total Purchase Price $48,000      On February 28, 2003, the Company acquired from TheMcGraw-Hill Companies, Inc. (“McGraw-Hill”), the stockof S&P ComStock, Inc. and the assets of certain relatedMcGraw-Hill businesses in the United Kingdom, France, Australia,Singapore and Hong Kong (“ComStock”). This acquisitionprovided the Company direct access to real-time market data frommore than 350 stock exchanges and other sources worldwide. Theacquisition also expanded the Company’s real-time data feedservices, and provided the Company with the opportunity tomarket ComStock’s content and services to several thousandinstitutional customers worldwide. The price paid in cash forthe stock and the assets was $115,972,000 and was funded fromthe operating cash of the Company. In addition, the Companyincurred acquisition costs of $1,027,000, consisting of employeeseverance costs and legal and accounting service fees. As ofDecember 31, 2004, all acquisition costs have been fullypaid.     The acquisition was accounted for using the purchase method ofaccounting in accordance with SFAS 141. The purchase pricehas been assigned to the assets acquired and liabilities assumedbased on their estimated fair values as determined by managementwith the assistance of an independent third party appraiser. Theintangible assets are being amortized over a period ranging fromtwo to twenty-five years. The Company’s financialstatements include the results of operations of ComStocksubsequent to the acquisition date.     The acquisition was accounted for as follows (in thousands):          Assets         Accounts receivable, net $7,700      Prepaid expenses and other current assets  877      Fixed assets  3,902      Customer lists  30,900      Service contracts  16,700      Trademarks  1,700      Computer software/technology  20,400      Goodwill  69,419       $151,598      Liabilities         Accrued liabilities $5,161      Deferred revenue  2,257      Deferred tax liabilities, net  27,181      Accrued acquisition costs  1,027       $35,626         Total Purchase Price $115,972     
53

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**     On October 31, 2003, the Company acquired the consolidatedmarket data feed client contracts from HyperFeed Technologies,Inc. for $8,375,000, consisting of payments of $7,625,000 withthe balance of $750,000 to be paid at the end of 24 monthsif agreed upon milestones are reached, offset by cash acquiredof $1,011,000. The Company funded this acquisition from itsexisting cash resources. The Company’s financial statementsinclude the results of the market data feed client contractssubsequent to the acquisition date. The acquisition wasaccounted for as follows (in thousands):          Assets         Cash $1,011      Accounts receivable  579      Prepaid expenses  29      Customer lists  6,960      Service contract  665       $9,244     Liabilities         Deferred revenue $983      Customer deposits  636       $1,619         Total Purchase Price $7,625          On September 1, 2004, the Company acquired the assets ofFutureSource, LLC (“FutureSource”), a privately heldleader in the real-time futures, commodities and foreignexchange markets data. This acquisition enables the Company toprovide global coverage of futures and commodities data. TheCompany intends to integrate FutureSource into its eSignaldivision. The price paid in cash for the assets was $18,000,000,offset by cash acquired of $317,000 and was funded from theoperating cash of the Company. The current allocation of thepurchase price may be adjusted by a working capital adjustmentwhich will be determined in the first quarter of 2005. Inaddition, the Company accrued acquisition costs of $2,038,000,consisting of employee severance costs, legal and accountingservices, and certain lease termination costs. As ofDecember 31, 2004, $360,000 of the acquisition costs hasbeen paid. The Company expects the majority of the remainingcosts to be paid by December 31, 2005.     The acquisition was accounted for using the purchase method ofaccounting in accordance with FAS 141. The purchase pricehas been assigned to the assets acquired and liabilities assumedbased on their estimated fair values as determined by managementwith the assistance of an independent third party appraiser. Theintangible assets are being amortized over a period ranging fromsix to nine years. The Company’s financial statementsinclude the results of operations of FutureSource subsequent tothe acquisition date.
54

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**     The acquisition was accounted for as follows but may be adjustedby a working capital adjustment which will be determined in thefirst quarter of 2005 (in thousands):          Assets         Cash $317      Accounts receivable  2,059      Prepaid expenses and other current assets  371      Deferred tax asset  819      Fixed assets  790      Goodwill  12,776      Customer lists  3,000      Trademarks  500      Computer software/technology  5,500      Other assets  166       $26,298     Liabilities         Accounts payable $2,522      Accrued liabilities  1,682      Deferred revenue  1,792      Other liabilities  264      Accrued acquisition costs  2,038       $8,298     Total Purchase Price $18,000 **4.****Property and Equipment**     Property and equipment consisted of the following atDecember 31:                **Useful Life** **2004** **2003**           **(In thousands)**    Computer and communication equipment  3-5 years  $102,876  $78,709     Leasehold improvements  Life of lease   23,767   25,835     Furniture and fixtures  3-10 years   30,687   17,504     Purchased and capitalized software  3-5 years   29,203   15,035                  186,533   137,083      Less accumulated depreciation      (131,679)  (90,890)                $54,854  $46,193                In 2004, the Company capitalized $5,994,000 related to thedevelopment of internal use software. In 2004, amortizationexpense associated with the internally developed software was$2,204,000. At December 31, 2004, the remaining book valueof the software developed for internal use was $9,932,000. Also,in 2002, the Company wrote off $2,800,000 of capitalizeddevelopment projects in Europe, as a result of theCompany’s decision to cancel these projects.     Depreciation expense was $18,521,000, $16,807,000 and$14,500,000 for the years ended December 31, 2004, 2003 and2002, respectively.
55

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)****5.****Goodwill and Intangible Assets**     Intangible assets consist of the following:                                 **December 31, 2004** **December 31, 2003**  **Weighted**      **Average** **Gross**   **Gross**    **Amortization** **Carrying** **Accumulated** **Net Book** **Carrying** **Accumulated** **Net Book**  **Period** **Value** **Amortization** **Value** **Value** **Amortization** **Value**                     **(In thousands)**     **(In thousands)**      Non-compete agreements  2.9 years  $87,500  $(87,500) $—  $87,500  $(87,500) $—     Securities database  3.5 years   10,792   (10,792)  —   10,792   (10,792)  —     Computer software  7.2 years   68,386   (47,098)  21,288   62,886   (42,744)  20,142     Customer lists  11.4 years   211,460   (80,772)  130,688   208,336   (64,292)  144,044     Service Contracts  24.0 years   17,365   (1,974)  15,391   17,240   (727)  16,513     Trademarks  13.4 years   2,200   (229)  1,971   1,700   (94)  1,606                           Total     $397,703  $(228,365) $169,338  $388,454  $(206,149) $182,305                            Estimated amortization expense of intangible assets is asfollows (in thousands):         For year ending 12/31/05 $20,976     For year ending 12/31/06 $20,822     For year ending 12/31/07 $20,426     For year ending 12/31/08 $20,347     For year ending 12/31/09 $20,347      The changes in the carrying amount of goodwill for the yearsended December 31, 2004 and 2003 are as follows (inthousands):         Balance as of January 1, 2003 $381,790     Goodwill acquired during year  72,036     Purchase accounting adjustments  (4,271)    Impact of change in foreign exchange rates  12,768         Balance as of December 31, 2003 $462,323     Goodwill acquired during the year  12,776     Purchase accounting adjustments  (3,079)    Impact of change in foreign exchange rates  8,424         Balance as of December 31, 2004 $480,444          The Company does not allocate goodwill to its operating segmentsdue to the fact that the Company’s chief operating decisionmaker does not use this information in evaluating the operationsfor each of the Company’s segments. (See Note 13 forfurther discussions of the Company’s segments).
56

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)****6.****Accrued Liabilities**     Accrued expenses consist of the following at December 31:           **2004** **2003**       **(In thousands)**    Bonus $13,831  $10,039     Employee related costs  18,922   20,000     Commissions  3,449   1,849     Professional services  4,033   4,247     Acquisition costs (Note 3)  1,918   615     Data center costs  74   3,670     Property costs  4,563   2,667     Royalties  4,065   5,749     Sales taxes  2,942   3,062     Data and communication charges  8,569   5,085     Other  4,910   5,328          $67,276  $62,311        **7.****Stock Based Compensation*****Employee Stock Purchase Plan***     In 2001, the Company adopted the 2001 Employee Stock PurchasePlan for all eligible employees worldwide (the “2001ESPP”). The 2001 ESPP allows employees to purchase stock ata discounted price at specific times. During the twelve monthsended December 31, 2004, employees purchased approximately124,000 shares at an average share price of $14.48. AtDecember 31, 2004, 1,708,000 shares were reserved forfuture issuance under the 2001 ESPP.***Employee Stock Option Plan***     In 2000, the Company adopted the 2000 Long Term Incentive Plan(the “2000 Plan”). Under the 2000 Plan, theCompensation Committee of the Board of Directors can grantstock-based awards representing up to 20% of the total number ofshares of common stock outstanding at the date of grant. Asoriginally approved by shareholders, the 2000 Plan had notermination date. On February 24, 2004, the 2000 Plan wasamended to include a termination date of February 22, 2010.The 2000 Plan provides for the discretionary issuance ofstock-based awards to directors, officers, and employees of theCompany, as well as persons who provide consulting or otherservices to the Company. Except with regard to eligibledirectors, the exercise price of options granted to eligibleparticipants under the 2000 Plan is determined at the discretionof the Compensation Committee. The board of directors determinesthe exercise price of options granted to eligible directors. Theexercise price for all options granted to date has been equal tothe market price of the underlying shares at the date of grant.Options expire ten years from the date of grant and generallyvest over a three to four year period.
57

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**     Stock option activity for the years ended December 31,2004, 2003 and 2002 was as follows:              **Weighted**    **Average**  **Options** **Exercise Price**       **(In thousands)**      Outstanding, December 31, 2002  8,619  $10.43      Granted  2,107   16.40      Exercised  (1,195)  7.20      Canceled  (173)  12.36            Outstanding, December 31, 2003  9,358  $12.15             Granted  1,937   17.48      Exercised  (1,157)  9.59      Canceled  (306)  13.32            Outstanding, December 31, 2004  9,832  $13.46            Exercisable, December 31, 2004  5,321  $11.41             The following table summarizes information about stock optionsoutstanding and exercisable at December 31, 2004.     Range of option exercise prices:                   **Outstanding** **Exercisable**         **Weighted**   **Weighted**    **Average**   **Average**    **Exercise**   **Exercise**  **Options** **Price** **Options** **Price**           **(In thousands)**   **(In thousands)**      $2.88 to $4.31 (Avg. life: 4.30 years)  64  $3.28   64  $3.28     $4.41 to $6.53 (Avg. life: 4.50 years)  287   4.96   287   4.96     $7.69 to $10.66 (Avg. life: 6.30 years)  3,398   8.72   2,854   8.70     $12.50 to $18.71 (Avg. life: 8.40 years)  6,083   16.62   2,116   16.18                 9,832       5,321                       As discussed in Note 1, the Company applies APB No. 25in accounting for stock based employee compensation and,accordingly, no compensation cost has been recognized for itsemployee stock option plans or employee stock purchase plan inthe consolidated financial statements.     The fair value of stock options issued under the 2000 Plan wasestimated as of the date of grant using a Black-Scholes optionpricing model with the following assumptions:               **2004** **2003** **2002**           Risk free interest rate  3.45%  2.00%  3.87%    Expected life (in years)  4.00   4.00   4.00     Volatility  32%  61%  77%    Expected dividend yield  0%  0%  0%    Weighted average fair value $7.50  $8.09  $9.52 
58

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**     The fair value of stock issued under the 2001 ESPP and includedin the above pro-forma analysis was estimated as of thebeginning date of the offering period using a Black-Scholesoption pricing model with the following assumptions:               **2004** **2003** **2002**           Risk free interest rate  1.03%  1.20%  1.78%    Expected life (in years)  0.49   0.50   0.47     Volatility  20%  25%  39%    Expected dividend yield  0%  0%  0%    Weighted average fair value $3.24  $2.64  $3.75 ***Deferred Stock Compensation***     The Company has awarded deferred stock compensation to certainexecutives and members of the Board of Directors under the 2000Plan. In 2003, the Company awarded 76,000 deferred stock unitsto certain executives. In 2004, the Company awarded 69,000deferred stock units to certain executives and members of theBoard of Directors. Under the 2000 Plan, the shares areavailable for distribution, at no cost, to these individuals atthe end of a three-year vesting period. The total deferredcompensation cost related to these grants is $2,502,000, whichis included in stockholders’ equity and will be amortizedover the three-year vesting period. In 2003 and 2004, theCompany recorded expense associated with these grants of$233,000 and $648,000, respectively. The remaining unamortizeddeferred compensation cost at December 31, 2004 is$1,621,000.**8.****Stockholders’ Equity**     In addition to the Company’s common stock, the Company mayissue up to 5,000,000 preferred shares, $0.01 par value pershare, with terms determined by the Board of Directors, withoutany further action by the stockholders of the Company. AtDecember 31, 2004, no such stock has been issued.     In August 2002, the Company’s Board of Directors authorizeda stock repurchase program of up to 1,000,000 of theCompany’s outstanding shares of common stock. During 2004,the Company repurchased 800,000 shares of outstandingcommon stock and completed the buyback under this program. Inthe third quarter of 2004, the Company’s Board of Directorsauthorized a new stock repurchase program to purchase up to1,000,000 of the Company’s outstanding shares of commonstock. As of December 31, 2004, the Company repurchased145,000 shares of outstanding common stock under this newprogram and repurchased a total of 945,000 shares ofoutstanding common stock in 2004.**9.****Commitments and Contingencies**     The Company has obligations under non-cancelable operatingleases for real estate, equipment and distribution agreementsfor satellite and cable space and FM radio channels. Certain ofthe leases include renewal options and escalation clauses. Realestate leases are for the Company’s corporate headquarters,sales offices, major operating units and data centers.
59

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**     Future operating lease commitments and obligations, as ofDecember 31, 2004, are summarized in the chart below.                       **Payment Due by Period**       **Less Than**   **More Than****Contractual Obligations** **Total** **1 Year** **1-3 Years** **3-5 years** **5 Years**             **(In thousands)**    Operating Lease Obligations $67,702  $13,116  $19,228  $16,829  $18,529     Total $67,702  $13,116  $19,228  $16,829  $18,529      The Company expects to satisfy its lease obligations from itsexisting cash flow. The Company’s key operating locationsoperate in facilities under long-term leases, the earliest ofwhich will expire in 2005. The Company believes it will be ableto successfully negotiate key operating leases and/or findalternative locations for its facilities without significantinterruption to the business.     Rental expense was $13,872,000, $14,251,000 and $10,491,000 forthe years ended December 31, 2004, 2003 and 2002,respectively.     The Company is involved in ordinary, routine litigation fromtime to time in the ordinary course of business with a portionof the defense and/or settlement costs in some such cases beingcovered by various commercial liability insurance policies. Wedo not expect that the outcome of any of these matters will havea material adverse impact on our financial condition or resultsof operations.**10.****Income Taxes**     The components of income before income taxes are as follows forthe years ended December 31:               **2004** **2003** **2002**         **(In thousands)**    Domestic $100,558  $98,085  $83,035     Foreign  27,833   18,364   17,186               Total $128,391  $116,449  $100,221                Income tax expense (benefit) consists of the following for theyears ended December 31:                **2004** **2003** **2002**         **(In thousands)**    Current:                 Federal $30,114  $31,653  $25,142      State  8,863   9,194   7,600      Foreign  10,054   5,763   4,426              49,031   46,610   37,168               Deferred:                 Federal  766   (1,803)  1,317      State  (1)  (334)  336      Foreign  (1,676)  (225)  667              (911)  (2,362)  2,320             $48,120  $44,248  $39,488           
60

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)****Income Taxes**     Deferred tax assets and liabilities are determined based ondifferences between the financial reporting and the tax basis ofassets and liabilities and are measured by applying enacted taxrates and laws to taxable years in which such differences areexpected to reverse. Income taxes are generally not provided onundistributed earnings of foreign subsidiaries because theseearnings are considered by the Company to be permanentlyreinvested. The components of the Company’s deferred incometax assets (liabilities) recognized in the financial statementsare as follows at December 31:         **Asset/ (Liability)** **2004** **2003**       **(In thousands)****Current deferred tax:**            Accrued expenses $6,199  $3,930     Depreciation  (2,698)  (1,751)    Other  63   1,033     Accounts receivable allowance  2,274   1,428           5,838   4,640 **Long term deferred tax:**            Deferred compensation  1,374   504     Other intangible assets  (6,551)  (6,371)    Non compete agreements  17,618   20,007     Net operating loss carryforwards  3,584   4,560     Customer lists  (39,376)  (45,611)    Sale of business  6,619   6,619     Software development cost  (4,147)  —     Asset impairment  560   —           (20,319)  (20,292)    Valuation allowance  (9,264)  (8,912)          (29,583)  (29,204)           Total $(23,745) $(24,564)            The long-term deferred tax asset of $6,619,000 was recordedconcurrently with the sale of MarketWatch.com, Inc. to Pearsonin 2000, which will ultimately result in a capital loss whensold by Pearson to an unrelated party. The realization of thistax asset is not within the control of the Company and as such afull valuation allowance has been provided against this asset.     The Company has $1,499,000 of federal net operating losscarryforwards that were obtained in the acquisition of DataBroadcasting Corporation that will expire in 2007. InternalRevenue Service (“IRS”) regulations and certain stateregulations limit the usage of the net operating losscarryforwards. The Company believes that based upon theforecasted future taxable income, these net operating losscarryforwards will be fully utilized. In addition, the Companyhas $2,085,000 of state net operating loss carryforwards, thatwill expire in 2007, against which the Company has provided afull valuation allowance since the utilization of thecarryforward is dependent upon state tax limitations.     The increase in the valuation allowance of $352,000 is primarilyattributable to the additional reserve on the impairment of aninvestment that will result in a future capital loss when sold.The valuation allowance was established due to the uncertaintyof the timing of recognizing the capital loss for tax purposesin future tax periods.
61

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**     Income taxes computed using the federal statutory income taxrates differ from the Company’s effective tax rateprimarily due to the following:               **Years Ended**  **December 31,**     **2004** **2003** **2002**           Statutory US federal tax rate  35.0%  35.0%  35.0%    State taxes, net of federal tax benefit  4.5   4.9   5.1     Foreign income taxed at different statutory rates  (2.7)  (2.0)  (.9)    Other, net  0.7   0.1   0.2               Effective tax rate  37.5%  38.0%  39.4%               The Company currently provides income taxes on the earnings offoreign subsidiaries and associated companies to the extentthese earnings are currently taxable or expected to be remitted.Taxes have not been provided on approximately $49,000,000 ofaccumulated unremitted earnings, which are expected to remaininvested indefinitely.**11.****Retirement Plans*****Pearson, Inc. Savings and Investment Plan***     The Company’s US employees are eligible to participate in aPearson subsidiary’s US 401(k) Plan (the “401(k)Plan”). The 401(k) Plan allows all employees to makecontributions of a specified percentage of their compensation,which is subject to a 50% employer match. The 401(k) Planadditionally allows certain employees to contribute amountsabove the specified percentage, which are not subject to anyemployer match. Contributions made by the Company for the 401(k)Plan are determined as a percentage of covered salary andamounted to $4,373,000, $3,307,000 and $2,774,000 for the yearsended December 31, 2004, 2003 and 2002, respectively.     In 2002, the Company introduced an additional discretionary401(k) contribution. This contribution is expected to beequivalent to 1.25% of eligible employee compensation and forthe year ended December 31, 2002, the Company recorded anexpense of $1,100,000 for this benefit. The Company made thiscontribution in the second quarter of 2003. In 2003, the Companyrecorded an expense of $1,322,000 for this benefit and thecontribution was made in February 2004. In 2004, the Companyrecorded an expense of $1,382,000 for this benefit and thecontribution will be made in March 2005.***Pearson, Inc. Pension Plan***     Pearson Inc., a Pearson US subsidiary, sponsors a definedbenefit plan (the “Pension Plan”) for Pearson’sUS employees and the Pension Plan also includes certain of theCompany’s US employees. Pension costs are actuariallydetermined. The Company funds pension costs attributable to itsemployees to the extent allowable under IRS regulations. In2001, the Company froze the benefits associated with thisPension Plan. There was no gain or loss recorded as a result ofthe curtailment. In 2002, the valuation date for the PensionPlan was changed from September to December. There was nomaterial impact to the financial results of the Company as aresult of this change.
62

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**     Presented below is certain financial information relating to theCompany’s participation in the Pension Plan:     Obligations and Funded Status:           **Year Ended**  **December 31,**     **2004** **2003**       **(In thousands)**    Change in benefit obligation:            Benefit obligation at beginning of year $9,361  $8,502     Service cost  —   —     Interest cost  518   543     Amendments  —   32     Actuarial loss  1   653     Benefits paid  (565)  (369)           Benefit obligation at end of year $9,315  $9,361     Change in plan assets:            Fair value of plan assets at beginning of year $5,625  $4,111     Actual return on plan assets  658   980     Employer contribution  1,070   902     Benefits paid  (565)  (368)           Fair value of plan assets at end of period $6,788  $5,625            Reconciliation of funded status:            Benefit obligation at end of year $9,315  $9,361     Fair value of plan assets at end of period  6,788   5,625     Funded status at end of period  2,527   3,736     Unrecognized prior service (benefit)  (31)  (33)    Unrecognized net actuarial gain  (2,263)  (2,695)           Net amount recognized $233  $1,008     Amounts recognized in the statement of financial position    consist of:            Accrued benefit cost  2,527   3,736     Intangible assets  (31)  (33)    Accumulated other comprehensive loss  (2,263)  (2,695)           Net amount recognized $233  $1,008 
63

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**               **Year Ended**  **December 31,**     **2004** **2003** **2002**         **(In thousands)**    Components of net periodic benefit cost:                Service cost $—  $—  $137     Interest cost  518   543   446     Expected return on plan assets  (481)  (340)  (282)    Amortization of prior service costs  2   3   (1)    Recognized actuarial loss  121   147   —               Net periodic benefit cost $160  $353  $300      The accumulated benefit obligation for all defined benefitpension plans was $9,315,000, $9,361,000 and $8,500,000 atDecember 31, 2004, 2003 and 2002, respectively.     Information for pension plans with an accumulated benefitobligation in excess of plan assets:           **Year Ended**  **December 31,**     **2004** **2003**       **(In thousands)**    Projected benefit obligation $9,315  $9,361     Accumulated benefit obligation  9,315   9,361     Fair value of plan assets  6,788   5,625     Additional Information:                       **Year Ended**  **December 31,**     **2004** **2003** **2002**         **(In thousands)**    Increase/(decrease) in minimum liability included in other    comprehensive income $391  $—  $(2,695)     Weighted average assumptions used to determine benefitobligations at December 31:           **Year Ended**  **December 31,**     **2004** **2003**         Discount rate  5.85%  6.10%    Rate of compensation increase  4.50%  4.50%     Weighted average assumptions used to determine net periodicbenefit cost for years ended December 31:           **Year Ended**  **December 31,**     **2004** **2003**         Discount rate  6.10%  6.75%    Expected return on plan assets  8.50%  8.50%    Rate of compensation increase  4.50%  4.50%     The Company’s expected long-term rate of return on planassets is reviewed annually, taking into consideration our assetallocation, historical returns on the types of assets held andthe current economic environment.
64

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**     Plan Assets:     The desired investment objective is a long-term nominal rate ofreturn on assets. The target rate of return for the Plan hasbeen based on an analysis of historical returns supplementedwith an economic and structural review for each asset class.Investments will be diversified within asset classes with theintent to minimize the risk of large losses to the Plan. Theportfolio may be composed of mutual funds, hedge funds, privateequity funds and other asset classes.     The Company’s pension plan weighted-average assetallocation at December 31, 2004 and 2003 by asset categoryare as follows:            **Year Ended**  **December 31,**     **2004** **2003**         Equity securities  63%  62%    Debt securities  37%  38%            Total  100%  100%            It is the Company’s intention to meet the pensionobligations as they come due. The Company employs advisors toassist it in the determination of optimum asset allocation.     The expected cash flows from the Pension Plan for the years 2005through 2014 is as follows:     **Year** **Total**     **(In thousands)**    2005 $807     2006  794     2007  922     2008  909     2009  587     2010 through 2014  3,101      The expected contribution to the Pension Plan in 2005 is$986,000.***Foreign Pension Plans***     Pearson and its subsidiaries maintain certain multi-employerpension plans for which certain non-US employees of the Companyare eligible to participate. The Company accounts for itsparticipation in this multi-employer plan by recording a pensionexpense in its current year results. The pension expenseincurred by the Company related to these plans for the yearsended December 31, 2004, 2003 and 2002 was $2,590,000,$3,281,000 and $2,242,000, respectively.**12.****Related Party Transactions**     The Company is a party to a management services agreement withPearson that became effective as of February 29, 2000.Pearson, through a subsidiary, owns approximately 60% of theCompany’s issued and outstanding common stock. Thisagreement governs the provision of services by either company(and each company’s subsidiaries) to the other and renewsannually.     Pursuant to the agreement, Pearson provides certain services tothe Company and the Company provides certain services toPearson. The services provided by Pearson afford the Companyadministrative convenience and the Company believes the terms ofsuch services are more favorable to the Company than if theCompany
65

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**had negotiated similar arrangements with non-affiliated thirdparties. The services provided by Pearson include administering401(k), travel, employee health benefit plans and insuranceplans in the United States and United Kingdom, use of a back updisaster recovery site, and billing, accounts payable, accountsreceivable, computer and accounting system support, financialaccounting, tax and payroll services related to certain of oursubsidiaries, primarily in the United Kingdom. The servicesprovided by the Company to Pearson include the provision offinancial data. A majority of the charges for services to andfrom Pearson and its affiliates are at cost. Prior to enteringinto any service arrangement with Pearson, the Company assesseswhether it would be more advantageous to obtain such servicesfrom a third party. The independent committee of our board ofdirectors, which currently consists of four directors, none ofwhom are employees of Pearson, approved the management servicesagreement on the Company’s behalf. There was no materialeffect on the Company’s financial condition or results ofoperations as a result of entering into the agreement. IfPearson’s services were to be terminated, the Company wouldbe required to seek equivalent services in the open market atpotentially increased costs. The management services agreementis amended from time to time by mutual agreement to addresschanges in the terms or services provided to or on theCompany’s behalf. The independent committee approves anysuch modifications. From time to time, the Company assesses theongoing relationships between the Company and Pearson, and ifthe Company determines that it would be more advantageous tosecure any such services outside of Pearson, the Company pursuesdoing so.     In addition, in the ordinary course of business, the Company isinvolved in transactions with certain businesses that are ownedby or affiliated with Pearson. Certain of the Company’sbusinesses license market data and related services atcommercial rates to certain businesses owned by or affiliatedwith Pearson and also acquire a range of services related tospecific financial market indices from certain businesses ownedby or affiliated with Pearson. The Company believes that theterms and conditions of these transactions are fair andreasonable. Certain of the Company’s businesses purchaseadvertising at discounted rates and other promotional servicesfrom certain businesses owned by or affiliated with Pearson.     In 2001, the Company entered into a trademark license agreementwith Pearson’s Financial Times Group authorizing theCompany to use the “FT” and “FinancialTimes” trademarks and logos in its business. The licensegrants the Company the right to use the FT and Financial Timesbrands for a five-year period for one UK pound sterling with anautomatic renewal thereafter, unless terminated. The license issubject to quality control standards, restrictions onsublicensing the trademarks to third parties and certain otherrestrictions. The independent committee of our board ofdirectors approved this agreement on the Company’s behalf.     Any amounts payable or receivable to and from Pearson or Pearsonaffiliates are classified as an affiliate transaction on thebalance sheet. For the years ended December 31, 2004, 2003and 2002, we recorded revenue of $2,563,000, $2,711,000 and$2,238,000, respectively, for services provided to Pearson. Forthe years ended December 31, 2004, 2003 and 2002, theCompany recorded expense of $3,658,000, $3,115,000 and$2,902,000, respectively, for these services received fromPearson.     In the third quarter of 2004, the Company recorded a capitalcontribution from Pearson of $1,962,000 for an adjustment to aliability attributed to a former affiliate of Pearson that wassold in 1999, prior to the Merger. This adjustment had no impacton the Company’s net income or on Pearson’s ownershippercentage of the Company’s issued and outstanding commonstock. In the fourth quarter of 2004, the Company recorded acapital contribution from Pearson of $1,889,000, whichrepresented the final settlement of certain employee benefitmatters for which ultimate payment was not required.**13.****Segment Information**     The Company operates in two reportable segments by providingfinancial and business information to Institutional and ActiveTrader investors worldwide. The Company evaluates its segmentson the basis of service revenue and operating income (loss) fromoperations.
66

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****NOTES TO CONSOLIDATED FINANCIALSTATEMENTS — (Continued)**     Segment financial information is as follows:                             **2004** **%** **2003** **%** **2002** **%**                   **(In thousands)**        Service revenue:                             Institutional Services $429,462   89% $397,412   90% $330,995   88%     Active Trader Services  55,103   11%  45,278   10%  44,020   12%                         Total $484,565   100% $442,690   100% $375,015   100%                       Income (loss) from operations:                             Institutional Services $163,429   130% $145,889   126% $127,967   130%     Active Trader Services  10,472   8%  6,489   6%  3,356   3%     Corporate and unallocated(1)  (48,032)  (38)%  (37,029)  (32)%  (33,091)  (33%)                         Total $125,869   100% $115,349   100% $98,232   100%                       Identifiable assets:                             Institutional Services $762,309   74% $676,346   74%             Active Trader Services  14,792   1%  11,640   1%             Corporate and unallocated  248,572   25%  222,336   25%                                 Total $1,025,673   100% $910,322   100%                            (1)     Corporate and unallocated loss from operations for the periods    ended December 31 primarily consists of intangible asset    amortization and corporate, general and administrative expenses.     The Company’s geographic distribution is as follows:                 **2004** **2003** **2002**         **(In thousands)**    Service revenue:                 United States $382,392  $344,869  $300,627      United Kingdom  60,246   62,783   51,273      All other European Countries and Canada  35,229   28,871   18,141      Asia  6,698   6,167   4,974                 Total $484,565  $442,690  $375,015               Long-lived assets:                 United States $568,435  $564,631          United Kingdom  134,363   124,275          Asia  2,654   2,579                     Total $705,452  $691,485               
67

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****QUARTERLY FINANCIAL INFORMATION (UNAUDITED)****(In thousands, except per share data)**     The following table presents selected unaudited financialinformation for the eight quarters in the period endedDecember 31, 2004. The results for any quarter are notnecessarily indicative of future quarterly results and,accordingly, period-to-period comparisons should not be reliedupon as an indication of future performance.                       **Quarters Ended** **Year Ended**    **December 31,**  **March 31,** **June 30,** **September 30,** **December 31,** **2004**               Service revenue $117,630  $118,875  $122,884  $125,176  $484,565     Total costs and expenses  88,276   88,543   89,260   92,617   358,696     Income from operations  29,354   30,332   33,624   32,559   125,869     Other income, net  380   552   622   968   2,522     Income tax expense  11,373   11,814   12,482   12,451   48,120     Net income  18,361   19,070   21,764   21,076   80,271     Net income per share Basic $0.20  $0.20  $0.23  $0.23  $0.86     Net income per share Diluted $0.19  $0.20  $0.23  $0.22  $0.84                        **Quarters Ended** **Year Ended**    **December 31,**  **March 31,** **June 30,** **September 30,** **December 31,** **2003**               Service revenue $99,477  $111,460  $111,334  $120,419  $442,690     Total costs and expenses  70,329   82,824   82,253   91,935   327,341     Income from operations  29,148   28,636   29,081   28,484   115,349     Other income, net  510   208   193   189   1,100     Income tax expense  11,418   11,105   11,271   10,454   44,248     Net income  18,240   17,739   18,003   18,219   72,201     Net income per share Basic $0.20  $0.19  $0.19  $0.20  $0.78     Net income per share Diluted $0.19  $0.19  $0.19  $0.19  $0.76 
68

Table of Contents
**INTERACTIVE DATA CORPORATION AND SUBSIDIARIES****For the Years Ended December 31, 2004, 2003, and 2002****Schedule II Valuation and Qualifying Accounts**                        **Balance at**   **Charged to**   **Balance**  **Beginning**   **Other**   **at End of****Description** **of Period** **Additions** **Accounts** **Write Offs** **Period**             **(In thousands)**    Allowance for doubtful accounts                         Year Ended December 31, 2004 $6,467  $7,257  $(783)(A) $5,685  $7,256      Year Ended December 31, 2003  4,950   3,936   294 (A)  2,713   6,467      Year Ended December 31, 2002  5,739   9,257   261 (A)  10,307   4,950      (A) Currency translation adjustments for foreign entitiesand purchase accounting adjustment associated with anacquisition.                        **Balance at**   **Charged to**   **Balance**  **Beginning**   **Other**   **at End of****Description** **of Period** **Additions** **Accounts** **Write Offs** **Period**               **(In thousands)**        Valuation Allowance                         Year Ended December 31, 2004 $8,912  $560   —  $208  $9,264      Year Ended December 31, 2003  10,484   —   —   1,572   8,912      Year Ended December 31, 2002  11,681(B)  157   —   1,354   10,484      (B) Includes $5,204,000 of valuation allowance againstdeferred tax asset on state net operating losses.
69

Table of Contents
**Item 9.*****Changes In and Disagreements With Accountants on    Accounting and Financial Disclosure***     None.**Item 9A.*****Controls and Procedures***     *Evaluation of Disclosure Controls and Procedures.* Ourmanagement, with the participation of our Chief ExecutiveOfficer, or CEO, and Chief Financial Officer, or CFO, evaluatedthe effectiveness of our disclosure controls and procedures (asdefined in Rules 13a-15(e) and 15d-15(e) under theSecurities Exchange Act of 1934, or the Exchange Act), as ofDecember 31, 2004. Based on this evaluation, our CEO andCFO concluded that, as of December 31, 2004, our disclosurecontrols and procedures were (1) designed to ensure thatmaterial information relating to us, including our consolidatedsubsidiaries, is made known to our CEO and CFO by others withinthose entities, particularly during the period in which thisreport was being prepared and (2) effective, in that theyprovide reasonable assurance that information required to bedisclosed by us in the reports that we file or submit under theExchange Act is recorded, processed, summarized and reportedwithin the time periods specified in the SEC’s rules andforms.     *Management’s Annual Report on Internal Control OverFinancial Reporting.* Our management is responsible forestablishing and maintaining adequate internal control overfinancial reporting, as such term is defined in Exchange ActRule 13a-15(f). Internal control over financial reportingcannot provide absolute assurance of achieving financialreporting objectives because of its inherent limitations.Internal control over financial reporting is a process thatinvolves human diligence and compliance and is subject to lapsesin judgment and breakdowns resulting from human failures.Internal control over financial reporting also can becircumvented by collusion or improper management override.Because of such limitations, there is a risk that materialmisstatements may not be prevented or detected on a timely basisby internal control over financial reporting. However, theseinherent limitations are known features of the financialreporting process. Therefore, it is possible to design into theprocess safeguards to reduce, though not eliminate, the risk.Also, projections of any evaluation of effectiveness to futureperiods are subject to the risk that controls may becomeinadequate because of changes in conditions, or that the degreeof compliance with the policies or procedures may deteriorate.     Under the supervision and with the participation of ourmanagement, including our CEO and CFO, we have conducted anevaluation of the effectiveness of our internal control overfinancial reporting as of December 31, 2004, based upon theframework in Internal Control-Integrated Framework issued by theCommittee of Sponsoring Organizations of the TreadwayCommission. Based on this evaluation, management has concludedthat our internal control over financial reporting was effectiveas of December 31, 2004.     Management’s assessment of the effectiveness of ourinternal control over financial reporting as ofDecember 31, 2004 has been audited byPricewaterhouseCoopers LLP, an independent registered publicaccounting firm, as stated in their report which is included inItem 8 of this Annual Report on Form 10-K.     *Changes in Internal Control Over Financial Reporting.* Nochange in our internal control over financial reporting occurredduring the fiscal quarter ended December 31, 2004 that hasmaterially affected, or is reasonably likely to materiallyaffect, our internal control over financial reporting.**Item 9B.     *****Other Information***     None.**PART III****Item 10.*****Directors and Executive Officers of the Registrant***     That portion of our definitive Proxy Statement appearing underthe captions “Election of Directors —Nominees” and “Section 16(a) Beneficial OwnershipReporting Compliance” to be filed with the SEC and to beused in connection with our 2005 Annual Meeting of Stockholdersis hereby incorporated by reference.
70

Table of Contents
**Item 11.*****Executive Compensation***     That portion of our definitive Proxy Statement appearing underthe caption “Executive Compensation” to be filed withthe SEC and to be used in connection with our 2005 AnnualMeeting of Stockholders is hereby incorporated by reference.**Item 12.*****Security Ownership of Certain Beneficial Owners and    Management and Related Stockholder Matters***     That portion of our definitive Proxy Statement appearing underthe caption “Security Ownership of Certain BeneficialOwners and Management” to be filed with the SEC and to beused in connection with our 2005 Annual Meeting of Stockholdersis hereby incorporated by reference.**Equity Compensation Plan Information**     The following provides certain aggregate information withrespect to all of our equity compensation plans in effect as ofDecember 31, 2004:                   **Number of Securities**      **Remaining Available**      **for Future Issuance**  **Number of Securities**   **under Equity**  **to be Issued upon** **Weighted Average** **Compensation Plans**  **Exercise of** **Exercise Price of** **(Excluding Securities**  **Outstanding Options,** **Outstanding Options,** **Reflected in First****Plan Category** **Warrants and Rights** **Warrants and Rights** **Column)**           Equity Compensation Plans Approved by Securityholders(1)  9,832,055  $13.46   8,797,462(2)    Equity Compensation Plans not Approved by Securityholders  —   —   —     Total  9,832,055  $13.46   8,797,462(2) (1)     These plans consist of our 2000 Long Term Incentive Plan, as    amended, the Data Broadcasting Corporation Stock Option Plan, as    amended, our 2001 Employee Stock Purchase Plan, as amended, and    our UK Savings Related Share Option Plan. (2)     Represents shares of common stock reserved for issuance under    our 2001 Employee Stock Purchase Plan and the UK Savings Related    Share Option and shares available for future issuance under our    2000 Long Term Incentive Plan. The number of shares available    under our 2000 Long Term Incentive Plan is adjusted from time to    time. Under such plan, the compensation committee of board of    directors can grant stock based awards representing up to 20% of    the total number of shares of our common stock outstanding at    the date of grant.**Item 13.*****Certain Relationships and Related Transactions***     That portion of our definitive Proxy Statement appearing underthe caption “Related Party Transactions” and“Employment Agreements, Termination of Employment andChange in Control Arrangements” to be filed with the SECand to be used in connection with our 2005 Annual Meeting ofStockholders is hereby incorporated by reference.**Item 14.*****Principal Accountant Fees and Services***     That portion of our definitive Proxy Statement appearing underthe caption “Principal Accountant Fees and Services”to be filed with the SEC and to be used in connection with our2005 Annual Meeting of Stockholders is hereby incorporated byreference.
71

Table of Contents
**PART IV****Item 15.*****Exhibits and Financial Statement Schedules*** (a). *The following documents are filed as part of this annual    report:*          1. Financial Statements           The financial statements and report of an independent registered    public accounting firm required by this item are included in    Part II, Item 8.           2. Financial Statement Schedule           Schedule II, Valuation and Qualifying Accounts, is included    in Part II, Item 8.           All other schedules are omitted because they are not applicable    or not required, or because the required information is shown    either in the financial statements or in the notes thereto. (b). *Exhibits**          The exhibits to this Form 10-K are listed below.     **Exhibit**  **Number** **Description of Exhibits**    2.1     Agreement and Plan of Merger, dated as of November 14,    1999, among Data Broadcasting Corporation, Pearson Longman,    Inc., Detective Merger-Sub, Inc. and Interactive Data    Corporation. (Exhibit 99.5.1 to registrant’s Current    Report on Form 8-K filed on November 22, 1999.)  2.2     Amendment No. 1 to Agreement and Plan of Merger, dated as    of January 10, 2000, among Data Broadcasting Corporation,    Pearson Longman, Inc., Detective Merger-Sub, Inc. and    Interactive Data Corporation. (Appendix B to    registrant’s Schedule 14A filed on January 11,    2000.)  2.3     Agreement, dated as of December 27, 2000, among Data    Broadcasting Corporation and Pearson Overseas Holdings Limited.    (Exhibit 99.1 to registrant’s Current Report on    Form 8-K filed on January 23, 2001.)  2.4     Asset Sale and Purchase Agreement, dated as of December 31,    2001, between Merrill Lynch, Pierce, Fenner & Smith    Incorporated and FT Interactive Data Corporation, as amended.    (Exhibit 2.4 to registrant’s Annual Report on    Form 10-K for the fiscal year ended December 31,    2001.) (Confidential treatment granted as to certain portions.)  2.5     Stock and Asset Purchase Agreement, dated as of January 16,    2003, by and among The McGraw-Hill Companies, Inc.,    Standard & Poor’s Information Services (Australia)    Pty Ltd., McGraw-Hill International (UK) Ltd., and    McGraw-Hill International Enterprises, Inc. and Interactive Data    Corporation. (Exhibit 2.1 to registrant’s Current    Report on Form 8-K filed on March 14, 2003.)    (Confidential treatment granted as to certain portions.)  3.1     Restated Certificate of Incorporation of Interactive Data    Corporation. (Exhibit 3.1 to registrant’s Quarterly    Report on Form 10-Q for the fiscal quarter ended    September 30, 2002.)  3.2     Bylaws of Interactive Data Corporation, as amended.    (Exhibit 3.2 to registrant’s Form 8-A filed on    June 15, 1992.)  10.1     Registration Rights Agreement, dated as of June 25, 1992,    between Financial News Network, Inc., on the one hand, and Allan    R. Tessler and Alan J. Hirschfield, on the other hand.    (Exhibit 28.5 to registrant’s Current Report on    Form 8-K filed on June 30, 1992.)  10.2     Data Broadcasting Corporation Stock Option Plan, as amended    through September 13, 1994. (Exhibit 10.2 to    registrant’s Annual Report on Form  10-K for the    fiscal year ended December 31, 2000.)**  10.3     Interactive Data Corporation 2000 Long-Term Incentive Plan.    (Exhibit 10.3 to registrant’s Annual Report on    Form 10-K for the fiscal year ended December 31,    2000.)**  10.4     2001 Amendment to Interactive Data Corporation 2000 Long-Term    Incentive Plan. (Exhibit 10.2 to registrant’s    Quarterly Report on Form 10-Q for the fiscal quarter ended    September 30, 2002.)**
72

Table of Contents
     **Exhibit**  **Number** **Description of Exhibits**     10.5     2004 Amendment to Interactive Data Corporation 2000 Long-Term    Incentive Plan. (Exhibit 10.5 to registrant’s Annual    Report on Form 10-K for the fiscal year ended    December 31, 2003.)**  10.6     Form of Option Grant Certificate under Interactive Data    Corporation 2000 Long-Term Incentive Plan for Non-Employee    Directors. (Exhibit 99.2 to registrant’s Current Report on    Form 8-K filed on February 28, 2005.)**  10.7     Form of Option Grant Certificate under Interactive Data    Corporation 2000 Long-Term Incentive Plan for Non-Executives.**  10.8     Form of Option Grant Certificate under Interactive Data    Corporation 2000 Long-Term Incentive Plan for Executives.**  10.9     Forms of 2003 and 2004 Deferred Stock Unit Grant for Executive    Officers and Non-Employee Directors. (Exhibit 10.21 to    registrant’s Quarterly Report on Form 10-Q for the    fiscal quarter ended September 30, 2004.)**  10.10     Form of Deferred Stock Unit Grant for Non-Employee Director.    (Exhibit 99.3 to registrant’s Current Report on    Form 8-K filed on February 28, 2005.) **  10.11     Interactive Data Corporation Compensation Plan for Non-Employee    Directors (Exhibit 99.1 to registrant’s Current Report    on Form 8-K filed February 28, 2005.)  10.12     Letter Agreement, dated November 14, 1999, between Data    Broadcasting Corporation and Alan J. Hirschfield.    (Exhibit 10.4 to registrant’s Annual Report on    Form 10-K for the fiscal year ended December 31,    2000.)**  10.13     Letter Agreement, dated November 14, 1999, between Data    Broadcasting Corporation and Allan R. Tessler.    (Exhibit 10.5 to registrant’s Annual Report on    Form 10-K for the fiscal year ended    December 31,2000.)**  10.14     Trade Mark License Agreement, dated March 7, 2001, between    Data Broadcasting Corporation and The Financial Times Limited.    (Exhibit 10.7 to registrant’s Annual Report on    Form 10-K for the fiscal year ended December 31, 2000.)  10.15     Interactive Data Corporation 2001 Employee Stock Purchase Plan.    (Exhibit 10.8 to registrant’s Annual Report on    Form 10-K for the fiscal year ended December 31,    2001.)**  10.16     2001 Amendment to Interactive Data Corporation 2001 Employee    Stock Purchase Plan. (Exhibit 10.9 to registrant’s    Annual Report on Form 10-K for the fiscal year ended    December 31, 2001.)**  10.17     Rules of the Interactive Data Corporation UK Savings Related    Share Option Plan. (Exhibit 10.10 to registrant’s    Annual Report on Form 10-K for the fiscal year ended    December 31, 2001.)**  10.18     Management Services Agreement, dated as of November 29,    2001, between Pearson plc and Interactive Data Corporation.    (Exhibit 10.11 to registrant’s Annual Report on    Form 10-K for the fiscal year ended December 31, 2001.)  10.19     Amendment No. 1 to Management Services Agreement, dated    October 3, 2002. (Exhibit 10.1 to registrant’s    Quarterly Report on Form 10-Q for the fiscal quarter ended    September 30, 2002.)  10.20     Amendment No. 2 to Management Services Agreement, dated    September 16, 2004.  10.21     Amendment No. 3 to Management Services Agreement dated    September 16, 2004.  10.22     Amendment No. 4 to Management Services Agreement dated    September 16, 2004.  10.23     The Pearson Reward Plan. (Exhibit 10.12 to    registrant’s Annual Report on Form 10-K for the fiscal    year ended December 31, 2001.)**  10.24     The Pearson 1988 Executive Share Option Plan.    (Exhibit 10.13 to registrant’s Annual Report on    Form 10-K for the fiscal year ended December 31,    2001.)**  10.25     Rules of the Pearson plc 1992 United States Executive Share    Option Plan. (Exhibit 10.14 to registrant’s Annual    Report on Form 10-K for the fiscal year ended    December 31, 2001.)**  10.26     The Pearson 1998 Executive Share Option Plan.    (Exhibit 10.15 to registrant’s Annual Report on    Form 10-K for the fiscal year ended December 31,    2001.)**
73

Table of Contents
     **Exhibit**  **Number** **Description of Exhibits**     10.27     Pearson plc Annual Bonus Share Matching Plan.    (Exhibit 10.16 to registrant’s Annual Report on    Form 10-K for the fiscal year ended December 31,    2001.)**  10.28     Pearson, Inc. Excess Savings and Investment Plan.    (Exhibit 10.17 to registrant’s Annual Report on    Form 10-K for the fiscal year ended December 31,    2001.)**  10.29     Pearson, Inc. Supplemental Executive Retirement Plan.    (Exhibit 10.18 to registrant’s Annual Report on    Form 10-K for the fiscal year ended December 31,    2001.)**  10.30     Interactive Data Corporation 2004 Executive Management Bonus    Plan (Exhibit 99.1 to registrant’s Current Report on    Form 8-K filed March 14, 2005.)**  21      Subsidiaries of the registrant.  23      Consent of PricewaterhouseCoopers LLP.  31.1     Certification of Chief Executive Officer pursuant to Exchange    Act Rules 13a-14(a) or 15d-14(a), as adopted pursuant to    Section 302 of Sarbanes-Oxley Act of 2002.  31.2     Certification of Chief Financial Officer pursuant to Exchange    Act Rules 13a-14(a) or 15d-14(a), as adopted pursuant to    Section 302 of Sarbanes-Oxley Act of 2002.  32.1     Certification of Chief Executive Officer pursuant to    18 U.S.C. Section 1350, as adopted pursuant to    Section 906 of Sarbanes-Oxley Act of 2002. (furnished)  32.2     Certification of Chief Financial Officer pursuant to    18 U.S.C. Section 1350, as adopted pursuant to    Section 906 of Sarbanes-Oxley Act of 2002. (furnished)  *     Exhibits followed by a parenthetical reference are previously    filed and incorporated by reference from the document described.**     Management contract or compensation plan or arrangement.
74

Table of Contents
**SIGNATURES**     Pursuant to the requirements of Section 13 or 15(d) of theSecurities Exchange Act of 1934, the registrant has duly causedthis report to be signed on its behalf by the undersigned,thereunto duly authorized. Interactive Data    Corporation     By:     /s/ Stuart J. Clark           Stuart J. Clark *Chief Executive Officer*March 16, 2005     Pursuant to the requirements of the Securities Exchange Act of1934, this report has been signed below by the following personson behalf of the registrant and in the capacities indicated, asof March 16, 2005.       **Signature** **Title**            /s/ Stuart J. Clark