UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

Form 10-K

For Annual and Transition Reports Pursuant to Sections 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)

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 the Act:

Securities registered pursuant to Section 12(g) of the Act: None

      Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.     Yes þ          No o

      Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.     o

      Indicate by check whether the registrant is an accelerated filer (as defined in Exchange Act Rule 12b-2).     Yes þ          No o

      The aggregate market value of the registrant’s voting and nonvoting common stock held by non-affiliates (without admitting that any person whose shares are not included in such calculation is an affiliate for any other purpose) computed by reference to the price at which the common stock was last sold, as of the last business day of the registrant’s most recently completed second fiscal quarter was $600,889,834.

      As of February 28, 2005, the registrant had 93,353,899 shares of common stock outstanding.

Documents Incorporated by Reference

      Certain information required in Part III of this Annual Report on Form  10-K is incorporated by reference from the registrant’s Proxy Statement for the Annual Meeting of Stockholders to be held on May 19, 2005.

TABLE OF CONTENTS

PART I

Overview

      We are a leading global provider of financial and business information to financial institutions and active traders. We offer our services to our customers through two business segments: Institutional Services and Active Trader Services.

      For service revenue, income from operations and identifiable assets 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 Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

      The Institutional Services segment of our business primarily targets banks, brokerage firms, mutual fund companies, insurance companies, money management firms, financial information providers, and other third-party redistribution partners by providing services that may be used in determining portfolio and individual security valuations, processing transactions, preparing account statements and other reports, addressing regulatory compliance requirements, and conducting investment research and analysis. The Institutional Services segment is composed of three businesses:

      FT Interactive Data. Through our FT Interactive Data business, institutional customers obtain 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. Financial institutions regard these services as critical to their business activities including portfolio and security valuations, processing transactions, regulatory compliance, back-office operations, and researching investment decisions for determining whether and when to buy and sell securities. We collect, edit, generate, maintain, and deliver data on a wide range of equity and fixed income securities, commodities, and derivative instruments in order to meet the information needs of our institutional customers.

      CMS BondEdge. Through our CMS BondEdge business, fixed income portfolio managers, quantitative research analysts and institutional brokers use sophisticated analytics for risk/return analysis, assistance with their regulatory reporting and investment decision evaluation.

      ComStock®. Through our ComStock business, financial institutions, financial information providers and information media companies obtain 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.

      The Active Trader Services segment of our business (formerly referred to in our periodic reports as the Retail Services segment) targets active traders, which includes individual investors and professional traders. We elected to change the name of this segment from Retail to Active Trader because we believe the name, Active Trader, more accurately describes the customer base for our real-time financial market information and related decision support tools. Active traders typically make their own investment decisions, trade frequently and earn a substantial portion of their income from trading. The Active Trader Services segment is composed of one business:

      eSignal®. Through our eSignal business, active traders and individual investors obtain real-time financial market information and utilize decision support tools to assist in their analysis of securities traded on all major markets in the 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 subscription basis; others are provided on a usage basis, and some are a combination of a flat minimum fee

with additional amounts charged for usage above an established level. We have historically achieved high customer retention rates, particularly from our institutional client base. Through a broad range of business alliances, many of the world’s best-known financial service and software companies access our services in support of their trading, analysis, portfolio management and valuation activities. At the core of our business are our customer relationships, business alliances, extensive databases, in-depth services, technical know-how and technology infrastructure resources.

      Interactive Data Corporation was incorporated in 1992 under the laws of the state of Delaware. On February 29, 2000, Data Broadcasting Corporation merged with Interactive Data Corporation. This merger brought together the businesses of Data Broadcasting Corporation, which included the eSignal and CMS BondEdge businesses, with the historical and end-of-day pricing, evaluation and information businesses now known as FT Interactive Data. The core FT Interactive Data business has been in the financial data business for over 35 years.

      Since this merger, we have continued to evaluate acquisition candidates with technologies, capabilities, service offerings and customer relationships that complement our core strengths and add to our established businesses. In 2002, we acquired certain assets from Merrill Lynch, Pierce, Fenner & Smith Incorporated used in its Securities Pricing Service business. In 2003, we acquired from The McGraw-Hill Companies, Inc. the stock of S&P ComStock, Inc., and the non-US assets of certain related businesses in the United Kingdom, France, Australia, Singapore and Hong Kong, collectively referred to as ComStock, enabling us to provide real-time information regarding securities traded around the world to our institutional clients. In 2003, we also acquired the client base of HyperFeed Technologies, Inc., through which we expanded the client base for our ComStock services. In September 2004, we acquired the assets of FutureSource®, LLC, and its subsidiaries, or FutureSource, a leading provider of real-time futures and commodities data, which we believe further complements and expands eSignal’s business of providing real-time financial market information and decision support tools.

Market for Financial Data

      To support the numerous complex tasks they perform, financial institutions typically require timely delivery of high-quality data obtained from multiple sources. Among other things, data obtained from external data vendors like us is used:

      Active traders utilize real-time data and analytical tools from external data vendors like us for the following:

Market Challenges

      Regardless of business segment, and across each of our businesses, there are numerous challenges associated with obtaining, aggregating, storing, evaluating and distributing financial and business information regarding globally traded securities. These challenges include:

      Infrequently Traded Securities. Many securities, particularly fixed income securities, are difficult to value because they trade infrequently. The generation and delivery of these opinions of value represent a significant market within the financial services industry.

      Aggregation of Multiple Sources. The information required by financial institutions comes from many sources, including securities exchanges and other financial markets in North America, Europe, Asia Pacific and elsewhere in the world. Aggregating this data requires establishing relationships with each of these sources to acquire this data in order to create a global technical infrastructure capable of collecting the source data and incorporating the source data into a uniform data structure.

      Reliability. The distance, speed and volume of data moved on a daily basis creates significant operational, financial and quality challenges. Identifying and minimizing source or other errors in reporting, collecting, aggregating, storing and distributing financial information is a unique challenge.

      Know-how. Extensive expertise and technical know-how regarding the financial data industry are required to effectively obtain, store, evaluate and distribute the volume and diversity of financial and business information needed to operate in the financial services industry. The expertise and know-how required are highly-specialized, diffuse and are not readily obtainable or transferable.

      To assist in addressing these challenges, financial services industry participants commonly purchase services from companies that specialize in providing financial and business information to multiple customers in a cost-effective manner.

Services

      We offer our services to two primary business markets, financial institutions and active traders. Our businesses address the requirements of both financial institutions and active traders by reliably providing timely information regarding a broad spectrum of securities. We have established relationships with numerous key domestic and international financial markets and data providers to obtain the source data. We have developed proprietary methods of receiving and packaging the source data, and we utilize proprietary methodologies to offer evaluated prices for certain fixed income and international equity securities. We employ teams of professionals who work to enhance the quality and completeness of the data that we deliver to our customers. In most cases, we also use our proprietary techniques and extensive data expertise to refine and package the data prior to delivering it to customers. We target financial institutions and active traders through our Institutional Services and Active Trader Services segments, respectively.

      Our FT Interactive Data, CMS BondEdge and ComStock businesses service the informational needs of financial institutions.

      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 financial institutions with information on approximately 3.5 million securities, commodities, and derivative instruments that are traded around the world. In addition to information concerning listed securities, FT Interactive Data specializes in hard to value, unlisted fixed income securities and hard to obtain information from emerging markets.

      FT Interactive Data covers approximately 2.5 million unexpired fixed income securities, including:

      FT Interactive Data’s proprietary evaluated pricing methodologies combine modeling techniques, information from market sources and a team of skilled evaluators to take account of market conditions and specific price-impacting events in order to provide a good faith opinion of the price a buyer in the marketplace would pay for a given fixed income security (typically in an institutional round lot position) in a current sale. In addition to evaluated pricing services, FT Interactive Data provides call and sinking fund, call announcement, descriptive data, interest payment, original issue discount, and reorganization data relating to these securities.

      FT Interactive Data’s coverage of equity and derivative securities includes securities traded around the world. The information regarding these securities includes pricing, evaluation, capitalization changes and dividends, descriptive data, earnings and shares outstanding information, and reorganization announcements. In addition to providing customers with end-of-day data regarding covered securities, this business offers clients access to analytic tools and its extensive database containing historical and descriptive information.

      Institutional customers of FT Interactive Data receive a majority of their data through Internet-based applications and computer-to-computer links. FT Interactive Data designs its data feeds to be compatible with third-party software applications and standard industry protocols in order to allow institutional customers to integrate these data feeds into their technology infrastructures.

      FT Interactive Data also produces proprietary evaluations for select international equities. In the third quarter of 2002, the business launched the Fair Value Information Service. This service, which to date has been primarily targeted at US-based mutual fund companies, is designed to provide users with data they can consider in determining whether the local closing price for an international equity is stale as of 4:00 p.m. Eastern Time and, if so, in estimating the price for that security at 4:00 p.m. Eastern Time in a liquid market in view of the information available at that time. This service is designed as a tool for US mutual funds as they undertake to:

      CMS BondEdge accounted for $32.1 million, or 6.6%, of our service revenue in 2004. Our CMS BondEdge business is a leading provider of fixed income analytical tools and models to portfolio managers, quantitative research analysts and institutional brokers. CMS BondEdge services are used to assist institutional investors in managing risks and understanding the performance of diversified fixed income portfolios. The CMS BondEdge services include interest rate and credit risk management tools, as well as regulatory reporting and compliance tools. In addition, customers can simulate various market environments to help

forecast performance results. Customers are typically institutional fixed income portfolio managers who invest in or sell taxable fixed income securities, particularly those that require specialized modeling.

      CMS BondEdge services are desktop Windows®-based. The services interface with many of the major third-party accounting and asset/liability software packages designed to reduce duplicate data entry and to facilitate improved accuracy and efficiency within an organization. CMS BondEdge clients are provided access to daily market data updates via the Internet to assist in the creation of high quality analytic calculations and reports. These services are offered via an array of delivery options, including:

      CMS BondEdge continues to invest in expanding the functionality and features of its services, as well as customizing its offerings for international markets. In 2004, CMS BondEdge began developing a new BondEdge offering that aims to enable clients to integrate its analytical values in other software applications. In addition, in response to increased demand for fixed income performance attribution tools globally, development work commenced to add a sector/returns-based-attribution approach into BondEdge.

      Windows® is a registered trademark of Microsoft Corporation.

      ComStock accounted for $62.9 million, or 13.0%, of our service revenue in 2004. Our ComStock business, which focuses on delivering real-time and delayed information to institutional customers, on-line media portals and other redistribution partners, provides coverage for over 2 million securities in virtually all asset classes traded worldwide. ComStock’s suite of services ranges from a real-time global market datafeed to 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 over 350 stock exchanges and other sources worldwide, covering in excess of 2 million financial instruments. XpressFeed has broad coverage of the US marketplace, as well as extensive international coverage, including markets in Europe, Asia Pacific, Latin America, South America and Africa. The real-time data includes content regarding:

      In addition to real-time content, the ComStock XpressFeed service offers comprehensive related information including:

      ComStock offers a variety of delivery methods, including leased line, satellite and virtual private network. In addition, ComStock continues to invest in the development of software interfaces that facilitate integration with various third-party and in-house applications and tools utilized by institutional clients.

      The eFinance Solutions^tm services within the ComStock business represent a suite of modular, global market data components, leveraging ComStock’s breadth and depth of market data with a flexible Web services architecture. Comprising support tools, analytical content, and market data, eFinance Solutions are capable of being customized to meet the needs of financial services users, from consumer portals to front-office and back-office professionals. Built on a flexible infrastructure, the eFinance Solutions content management platform is designed to allow integration of proprietary and third party data and to meet the robust performance requirements of the financial services industry.

      Our eSignal business services the needs of active traders.

      eSignal accounted for $55.1 million, or 11.4%, of our service revenue in 2004. eSignal provides streaming, real-time financial market information and decision support tools to active traders including individual investors and professional traders. The financial data available to eSignal subscribers includes equities, options, derivatives data, single stock futures, indices, market depth from the NASDAQ Stock Market, the New York Stock Exchange, the Chicago Mercantile Exchange, and the Chicago Board of Trade, as well as ECN and foreign exchange market information, fixed income data, mutual fund data, and money market data for over 1 million securities. In addition, eSignal subscribers receive access to decision support tools including historical databases, technical charting, customizable analytics, back testing, portfolio tracking, and news and commentary.

      The information is delivered via eSignal’s internally engineered and operated network with advanced IP multicast backbone and multiple, geographically dispersed server farms. eSignal services include eSignal, Advanced GET, MarketCenter^tm LIVE, eSignal Pro, Tahoe Charts^tm, eSignal Market Scanner^tm and Advanced GET Scanner^tm. In the first quarter of 2004, eSignal reintroduced QuoTrek® to its product line, a real-time quotes, charts and news application for wireless devices, such as personal digital assistants, or PDAs, and cellular phones. With the acquisition of the assets of FutureSource, eSignal now markets FutureSource offerings, which include FutureSource Workstation, FutureSource Xtra 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 significantly year-to-year over the past few years, declining 81.5% from 2003 to 2004, 58.6% from 2002 to 2003, and 55.9% from 2001 to 2002, as customers migrated to alternative delivery sources, including eSignal’s Internet-based services.

Marketing Strategy

      Regardless of business segment, many of our services are provided on a flat fee subscription basis; others are provided on a usage basis, and some are a combination of a flat minimum fee with additional amounts charged for usage above an established level. Through the FT Interactive Data, CMS BondEdge and ComStock businesses, our Institutional Services segment has historically maintained high renewal rates, with annual renewal rates of approximately 95% during 2004. Through the eSignal business, our Active Trader

Services segment has historically experienced lower renewal rates. The specific marketing strategies within our Institutional Services and Active Trader Services segments are as follows:

      Each of the core Institutional Services we supply is typically marketed through separate dedicated sales forces within FT Interactive Data, ComStock and CMS BondEdge. These institutional sales teams possess specialized industry and product expertise. They provide on-site and remote demonstrations of our services and interact directly with our customers and prospects. Our institutional sales forces are supported by promotional campaigns including public relations, direct mail, targeted trade shows and advertising in trade publications. In 2005, we intend to continue to work closely with all clients, including our largest institutional clients, to identify new sales opportunities and better leverage and coordinate selling efforts by our separate, dedicated sales forces.

      Active Trader Services are marketed by eSignal through advertising, marketing alliances, third-party developer relationships, seminars, trade shows, email, direct mail and incentives for referrals. In addition, eSignal has developed marketing alliances with online brokers that market eSignal’s Internet-delivered services to their customers. eSignal also invites third-party software developers to write trading system software that is compatible with eSignal’s systems and asks trading educators to consider use of eSignal services in their seminars. In addition to direct sales, distribution channel partners have been an important source of new subscribers in recent years.

Customers

      The Institutional Services segment of our business primarily targets banks, brokerage firms, mutual fund companies, insurance companies, money management firms, financial information redistributors and other third-party redistribution partners.

      Our FT Interactive Data business supplies data directly to several thousand institutional customers, including banks, brokerage firms and investment management firms. This business also contracts with redistributors and outsourcing organizations to sub-license or redistribute data typically to medium and small institutions, and individual investors. Unlike the institutional customers described above, these redistributors and outsourcing organizations typically use their own delivery systems or serve as an interface between their clients’ and FT Interactive Data’s delivery systems to redistribute and/or process the data provided by FT Interactive Data.

      Our CMS BondEdge business targets portfolio managers, quantitative research analysts and institutional brokers in the fixed income institutional investor market. As of the end of the fourth quarter of 2004, approximately 500 institutional investment firms, banks, insurance companies and brokerage houses based primarily in North America subscribed to CMS BondEdge services.

      Our ComStock business targets financial institutions, financial information redistributors, and online media portals. As of the end of the fourth quarter of 2004, ComStock had over 2,400 direct customers.

      Active Trader Services are sold by our eSignal business. eSignal primarily targets active traders, which includes individual investors and professional traders. As of the end of the fourth quarter of 2004, eSignal had over 43,700 direct subscription terminals, which included approximately 6,500 FutureSource terminals. The target market for eSignal consists primarily of active traders who make their own investment decisions, trade frequently and earn a substantial portion of their income from trading.

Competition

      The market for providing financial and business information is intensely competitive, regardless of business segment. We believe that our ability to compete across each of our businesses depends on a number of common factors, including:

      Competition within our Institutional Services segment ranges from large, established suppliers of news and financial data to smaller, more specialized vendors. The main competitors with respect to our institutionally oriented FT Interactive Data and ComStock businesses are large global suppliers of news and financial data, including Bloomberg, Thomson Financial, Reuters Group plc, Standard and Poor’s, Telekurs Financial, and similar data producers and smaller data vendors that compete against us in specific geographic regions and niche markets. We also face competition from customers self-sourcing financial data and news directly from brokers, exchanges and news services. We believe the primary competitive factors with respect to these services are value-added features, coverage of securities, reliability, and timeliness of data delivery and customer support.

      As a specialty service, CMS BondEdge, which provides analytical software primarily to fixed income portfolio managers, competes against other financial services analytical software companies such as The Yield Book, Inc., which is a wholly owned subsidiary of Citigroup Capital Markets, Wilshire Associates Incorporated and Derivative Solutions Inc., and faces competition from brokerage firms developing software solutions internally or with the assistance of outside consultants. We believe the primary competitive factors with respect to these services are the dealer independence of the provider, a comprehensive and integrated global database of fixed income securities, mortgage-backed and structured finance assets as well as models for over-the-counter and derivative holdings, advanced modeling analytics to evaluate fixed income securities individually or in a portfolio context, complete and flexible reporting capabilities, and customer support.

      Within our Active Trader Services segment of our business, eSignal competes against numerous competitors including Townsend Analytics, Thomson Financial, TradeStation, DTN Market Access, Inc., CQG, Inc. and others. We believe the principal competitive factors in the industry include data availability, reliable and timely delivery, ease of use, compatibility with third-party software packages, and price.

Technology Infrastructure

      Our technology infrastructure and operations support both the Institutional Services and Active Trader Services segments of our business and are designed to facilitate the reliable and efficient processing and delivery of data to our customers. By design, our systems contain multiple layers of redundancy to enhance system performance, including maintaining, processing and storing data at multiple data centers. In our eSignal and ComStock businesses, user connections are load balanced between our data centers and, in the event of a site failure, equipment problem or regional disaster, the remaining centers have the capacity to handle the additional load.

      We are in the process of a major project to streamline and upgrade our data collection and delivery infrastructure. As part of this project, we plan to consolidate seven separate data centers and related facilities in the United States into two major independent data centers as well as enhance the backup and resiliency for

our North American businesses. In 2003, we signed a lease for a nearly 50,000 square foot technology center in Boxborough, Massachusetts. This facility became operational in mid-2004. We have since consolidated activities from our New York, New York, Salt Lake City, Utah, Hightstown, New Jersey and Waltham, Massachusetts facilities into the new Boxborough, Massachusetts data center, which serves as our East Coast data center. In mid-2004, we began planning to expand our current West Coast data center in Hayward, California. Throughout 2005, we plan to continue migrating activities from our other data centers to Boxborough and Hayward, respectively.

      We are focused on maintaining an infrastructure that allows us to provide data using various delivery methods designed to meet the needs of our customers. Our institutional customers receive a majority of their data through dedicated private networks, Internet-based applications, global satellite networks, and computer-to-computer links. We design our data feeds to be compatible with third-party software and standard industry protocols in order to allow our institutional customers to integrate our data feeds into their technology infrastructures. Information is distributed to our active trader customers primarily via the Internet and directly to wireless mobile devices.

Intellectual Property

      We maintain a portfolio of intellectual property, including registered and common law trademarks and service marks, copyrights and patents. We have rights to approximately 50 trademarks and service marks. We place significant emphasis on our branding and consider our trademark and service mark portfolio to be an important part of our ongoing branding campaign. In addition, we own the copyrights to our internally developed software applications and data delivery services. We currently have three United States patents issued and one United States patent application pending. The three United States patents expire in 2007, 2011 and 2012, respectively. No single trademark, service mark, copyright, or patent, if lost, would materially adversely affect our operations or financial results as a whole.

      License agreements, both as licensor with our customers and as licensee with suppliers of data, are important to our business. The termination of any license with a major data supplier, such as the New York Stock Exchange and other similar financial markets, would materially disrupt our operations.

      We have rights to use the “FT” brand in conjunction with our institutional activities on a global basis under a license with The Financial Times Limited, an affiliate of Pearson plc, or Pearson. As of February 28, 2005, Pearson indirectly owns approximately 60% of our outstanding common stock. This license’s initial five-year term ends in March 2006. Thereafter the license automatically renews for subsequent one-year terms unless terminated. We do not believe the cessation of our rights under this license would materially adversely affect our operations or financial results as a whole.

Geographic Areas

      Through subsidiaries and affiliates, we conduct business in numerous countries outside the United States. Our international businesses are subject to risks customarily encountered in foreign operations, including fluctuations in foreign currency exchange rates and controls, import and export controls, and other laws, policies and regulations of foreign governments. During the past three fiscal years, our service revenue by geographic region was as follows:

      During the past three fiscal years, long-lived assets by geographic region are as follows:

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 as a broker-dealer with the Securities and Exchange Commission, or SEC, and various state securities commissions and was also subject to regulation by the National Association of Securities Dealers, Inc., of which it is a member. In the fourth quarter of 2004, DBC Securities, Inc. filed a notice of withdrawal from registration as a broker-dealer and ceased doing business as of December 31, 2004. We plan to dissolve this subsidiary in 2005.

      FT Interactive Data Corporation, one of our subsidiaries, is registered with the SEC as an investment adviser and is subject to regulation under the Investment Advisers Act of 1940.

      Our FT Interactive Data Australia subsidiary is licensed by the Australian Securities & Investment Commission, or ASIC, to provide certain financial services in Australia under the Corporations 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 as a part of, or incorporating it by reference into, this Annual Report on Form 10-K. We make available free of charge through our website our Annual Reports on Form 10-K, Quarterly Reports on Form 10-Q and Current Reports on Form 8-K, and amendments to these reports, as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the SEC. We also include on our website our code of business conduct and ethics, corporate governance guidelines and the charters for each of the major committees of our board of directors. In addition, we intend to disclose on our website any amendments to, or waivers from, our code of business conduct and ethics that are required to be publicly disclosed pursuant to rules of the SEC and the New York Stock Exchange.

      We submitted our 2004 annual Section 12(a) CEO Certification with the New York Stock Exchange. The Certification was not qualified in any respect.

Executive Officers of the Registrant

      Stuart J. Clark has served as our president and chief executive officer and a member of our board of directors since February 29, 2000, and has been employed in the financial information industry since 1968. Prior to his current position with us, he served as president of Interactive Data Corporation (as it existed prior to its merger with Data Broadcasting Corporation) since 1995. From 1993 to 1995, Mr. Clark was a director of UK-based Financial Times Information, with specific responsibility 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 Group in December 1993.

      Steven G. Crane has served as our executive vice president and chief financial officer since November 30, 1999. From October 1997 through November 30, 1999, Mr. Crane served as vice president and chief financial officer of Video Services Corporation, a company listed on the American Stock Exchange. From 1996 to 1997, Mr. Crane was the owner of ATE, Inc., a provider of packaging related equipment to international 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. Loew served as vice president, general counsel and corporate secretary of Interactive Data Corporation (as it existed prior to its merger with Data Broadcasting Corporation). Prior thereto, 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 operating officer of FT Interactive Data since April 1999. From 1997 to April 1999, Mr. King served as the managing director/president of Financial Times Group’s Extel Financial Ltd. Division. Prior thereto, Mr. King served as vice president, IDSI services for Interactive Data Corporation (as it existed prior to its merger with Data Broadcasting Corporation).

      Raymond L. D’Arcy has served as our president of Data Delivery Products for FT Interactive Data since January 2001. From 1999 to 2001, Mr. D’Arcy served as senior vice president of global sales, marketing and customer support for Interactive Data Corporation (as it existed prior to its merger with Data Broadcasting Corporation) and from 1996 to 1999 as Vice President of North American Sales, Marketing and Customer Support. Prior thereto, Mr. D’Arcy served as FT Interactive Data’s regional sales director for Eastern North America for ten years.

      We own no real estate but lease the following principal facilities for use as corporate headquarters, sales offices and data centers:

      We believe our facilities are in good condition and are suitable and adequate for our current and currently planned operations.

      If we are unable to renew any of the leases that are due to expire in 2005 or 2006, we believe that suitable replacement properties are available on commercially reasonable terms.

      We are involved in ordinary, routine litigation from time to time in the ordinary course of business with a portion of the defense and/or settlement costs in some such cases being covered by various commercial liability insurance policies.

      No matters were submitted to a vote of security holders during the fourth quarter of 2004.

PART II

Item 5.                          Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities

Market Information

      Our common stock trades on the New York Stock Exchange under the trading symbol “IDC”.

      The following table sets forth, for the periods indicated, the high and low sale prices per share of our common stock during each of the quarters set forth below as reported on the New York Stock Exchange:

Stockholders

      As of February 28, 2005, there were 93,353,899 outstanding shares of our common stock held by 1,309 holders of record.

Dividends

      We currently retain earnings, if any, to finance the development of our business. Future determinations by our board of directors to pay dividends on our common stock would be based primarily upon our financial condition, results of operations and business requirements. Dividends, if any, would be payable in the sole discretion of our board of directors out of the funds legally available therefor.

      We have not paid cash dividends on our common stock during the last two fiscal years.

Issuer Purchases of Equity Securities

      On September 28, 2004, we announced in a press release and also in a Current Report on Form 8-K that our Board of Directors had authorized the repurchase of up to 1,000,000 of our outstanding shares of common stock. Repurchases may be made in the open market or in privately negotiated transactions from time to time, subject to market conditions and other factors and in compliance with applicable legal requirements. We use

cash on hand to fund repurchases under the program. We are not obligated to acquire any particular amount of common stock as a result of the program, which may be suspended at any time at our discretion.

      The following selected historical consolidated financial information for each of the years ended December 31, 2000 through 2004 has been derived from our consolidated financial statements and represents the historical consolidated financial information of FT Interactive Data prior to the merger of Interactive Data Corporation and Data Broadcasting Corporation on February 29, 2000 and the combined company since February 29, 2000. For additional information see “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in Item 7. The information set forth below is qualified by reference to and should be read in conjunction with our Consolidated Financial Statements and related notes included in Item 8 of this Annual Report on Form 10-K.

Item 7.                      Management’s Discussion and Analysis of Financial Condition and Results of Operations

      The following discussion should be read in conjunction with “Item 6. Selected Financial Data” and our consolidated financial statements included herein in Item 8. Amounts in the tables including footnotes to the tables are shown in thousands, except for per share information.

Overview

      We are a leading global provider of financial and business information to financial institutions and active traders. We offer our services through four businesses, three within the Institutional Services segment, and one within the Active Trader Services segment:

Institutional Services

      During 2003, we added a third business line, ComStock, to the Institutional Services segment by making two strategic acquisitions.

      On February 28, 2003, we acquired from The McGraw-Hill Companies, Inc., or McGraw-Hill, the stock of S&P ComStock, Inc. and the assets of certain ComStock related businesses in the United Kingdom, France, Australia, Singapore and Hong Kong, collectively referred to as Comstock, for $115,972,000. We funded this acquisition from our existing cash resources.

      On October 31, 2003, we acquired the consolidated market data feed client contracts from HyperFeed Technologies, Inc., or HyperFeed, for $8,500,000, consisting of payments of $7,625,000 with the balance to be paid at the end of 24 months if agreed upon milestones are reached, offset by cash acquired of $1,011,000. Because certain milestones have not been met, the purchase price of the HyperFeed contracts has been adjusted downward to $8,375,000. Our remaining payments total $750,000. We funded this acquisition from our existing cash resources. We are currently migrating the HyperFeed customers from the HyperFeed production platform to our existing ComStock production platform. This migration is expected to be concluded by the third quarter of 2005.

      These two acquired businesses form the third business within the Institutional Services segment:

Active Trader Services

      In the Active Trader Services segment we have one business, which was recently supplemented by the acquisition of the assets of FutureSource®, LLC and its subsidiaries, or FutureSource:

      On September 1, 2004, we acquired the assets of FutureSource, a privately held provider of real-time futures, commodities and foreign exchange markets data. This acquisition enables us to provide global coverage of futures and commodities data. The price paid in cash for the assets was $18,000,000, offset by cash

acquired of $317,000. We are in the process of integrating the assets of FutureSource into our eSignal business. We funded this acquisition from existing cash resources.

      Across each of our businesses, regardless of business segment, many of our services are provided on a flat fee subscription basis; others are provided on a usage basis, and some are a combination of a flat minimum fee with additional amounts charged for usage above an established level. We have historically achieved high customer retention rates, particularly from our institutional client base. Through a broad range of business alliances, many of the world’s best-known financial service and software companies utilize our services in support of their trading, analysis, portfolio management, and valuation activities. At the core of our business are our customer relationships, business alliances, broad databases, extensive product and technical know-how and technology infrastructure resources. We also continue to evaluate potential strategic acquisitions.

Development of Business

      Prior to February 29, 2000, our business related primarily to the delivery of historical and end-of-day financial data to institutional customers through what is now our FT Interactive Data business. On February 29, 2000, Data Broadcasting Corporation merged with Interactive Data Corporation (now known as FT Interactive Data), referred to as the Merger. This Merger brought together the businesses of Data Broadcasting Corporation (now known as Interactive Data Corporation), which included eSignal and CMS BondEdge, with the businesses of Interactive Data Corporation (now known as FT Interactive Data). Upon completion of the Merger, we issued 56,424,000 shares of our common stock to Pearson Longman, Inc., or Pearson Longman, which, through a series of other entities, is wholly owned by Pearson plc. The shares held by Pearson Longman were subsequently transferred to Pearson DBC Holdings, Inc., another wholly owned subsidiary of Pearson Longman. As a result of this transaction, approximately 60% of our shares are held indirectly by Pearson. In connection with the Merger, we also acquired a 34.4% ownership stake in MarketWatch.com, Inc., which we subsequently sold at a loss in January 2001 to Pearson for $26,900,000. We distributed the proceeds from such sale as a dividend to our shareholders in 2001. On January 31, 2002, we acquired the Securities Pricing Services, or SPS, of Merrill Lynch, Pierce, Fenner & Smith Incorporated, or Merrill Lynch, for approximately $48,000,000. We acquired ComStock from McGraw-Hill for approximately $115,972,000 on February 28, 2003. We acquired the consolidated market data feed client contracts from HyperFeed for $8,500,000 on October 31, 2003. The price for these HyperFeed client contracts consist of payments of $7,625,000, with the balance to be paid over 24 months if agreed upon milestones are reached. Because certain milestones have not been met, the purchase price of the HyperFeed contracts has been adjusted downward to $8,375,000. Our remaining payments total $750,000.

      On September 1, 2004, we acquired the assets of FutureSource. 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 for 2004 include the activities of our FT Interactive Data, CMS BondEdge, ComStock and eSignal businesses, the results of the HyperFeed customer contracts and four months of the results of FutureSource. Our 2003 results of operations, in addition to the FT Interactive Data, CMS BondEdge and eSignal businesses, include ten months of activities for ComStock and two months of activities resulting from the acquisition of the HyperFeed customer contracts. Our 2002 results of operations include the activities of our FT Interactive Data, CMS BondEdge and eSignal businesses.

Business and Market Trends

      In 2004, market conditions for our primary market, the financial services industry, showed improvement over the prior year although they still remained challenging. Modest increases in spending by institutional customers for market data services were balanced by ongoing cost containment initiatives. FT Interactive Data, the largest business within the Institutional Services segment, continued to generate new business with both existing and new customers, particularly within the US market. We also saw signs of improvement within FT Interactive Data’s business in the European market with higher levels of new sales and fewer cancellations during the second half of 2004. Overall contract cancellations, primarily arising from mergers and acquisitions within our customer base, and renegotiation of service levels and fees declined compared with the prior year,

although these actions continued to constrain revenue growth. We believe that much of the data we supply is mission critical to our customers and critical for their operations regardless of market conditions; however, we are affected, at least in part, by the continuing cost pressures being experienced by our client base. If the data we provided were not mission critical, we believe the difficult market conditions would have affected us more adversely.

      There has been and continues to be a trend in North America for major financial institutions to outsource their back office operations to service bureaus and custodian banks. We have established relationships with, and are a major data supplier to, many service bureaus and custodian banks, and have benefited and expect to continue to benefit from their growth. Another trend occurring over the past decade in North America is the consolidation of financial institutions both within and across the financial services industry. When institutions merge, they frequently look to gain synergies by combining their operations, including the elimination of redundant data sources. This has contributed to some of the higher than normal cancellation levels we experienced in 2003 through the first half of 2004; additional consolidation activity has the potential to adversely impact revenue in the future.

      Growth in the FT Interactive Data market is dependent, in large part, on our ability to continue the expansion of our data content offerings to meet the current and evolving needs of our customers. This includes being able to respond to changes in the financial markets as well as to regulatory and competitive pressures. This also includes continuing to expand the coverage of premium priced fixed income data sets and the launch of new services such as our Fair Value Information Service, the latter of which is currently primarily oriented toward US mutual funds. In addition, we will continue to seek to expand our market share in Europe, although we expect current difficult market conditions will slow this effort as customers take more time to make 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 FT Interactive Data. The CMS BondEdge business is dependent on activity levels primarily in the US financial markets and the financial performance of the major financial institutions. If the financial markets continue to improve, we would expect this could translate into more favorable operating business conditions for CMS BondEdge. CMS BondEdge will continue to invest in enhancing its services for international markets and unbundling its analytics to allow for greater integration with other vendors’ services and to better serve large institutions who have moved to centralized data warehouse approaches.

      The ComStock business, which was acquired in February 2003, continued to experience strong price pressures, with customers remaining focused on cost containment. We anticipate that market conditions for real-time data services will remain challenging in 2005. ComStock will continue to enhance its offerings and focus on opportunities to expand its business with institutional customers in 2005.

      In the Active Trader Services segment, the eSignal business continues to strengthen its position as a leading financial data provider primarily for active traders. Subscriptions for eSignal’s array of Internet-based services continued to grow through both direct and indirect sales distribution channels. The eSignal business is primarily dependent on growth in online trading accounts among active investors. The business was supplemented by the purchase on September 1, 2004 of the assets of FutureSource, a privately held provider of real-time futures, commodities and foreign exchange markets data. This acquisition enables us to provide global coverage of futures and commodities data. As previously disclosed, the broadcast-based service was closed down at the end of April 2004.

Results of Operations

Selected Financial Data

2004 versus 2003

Service Revenue

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%. The ComStock business, which was acquired at the end of February 2003, and the HyperFeed customer contracts, which we acquired at the end of October 2003, contributed $62,920,000 to service revenue in 2004 and $54,093,000 to service revenue in 2003. The FutureSource business, which was acquired on September 1, 2004, contributed service revenue of $7,577,000 in 2004. Foreign exchange had a favorable impact of $10,109,000 to service revenue in the institutional services segment in 2004 mainly due to the weakness of the US dollar against the UK pound sterling. The average rate for the US dollar against the UK pound sterling was $1.832 in 2004, compared with $1.635 in 2003.

      Service revenue within the Institutional Services segment increased from $397,412,000 in 2003 to $429,462,000 in 2004, an increase of $32,050,000, or 8.1%, including service revenue of $62,920,000 in 2004 and $54,093,000 in 2003 from the ComStock business and the HyperFeed customer contracts. As noted above, foreign exchange had a favorable impact of $10,109,000, mainly due to the weakness of the US dollar against the UK pound sterling to service revenue within the Institutional Services segment in 2004.

      Service revenue for the FT Interactive Data business increased from $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 Interactive Data business came from North America, which produced service revenue growth of 7.4% due to strong sales from the Fair Value Information Service and increased demand for evaluated pricing services combined with moderate price increases on annual service contracts. The European business of FT Interactive Data declined by 7.7% in 2004 from 2003 with the majority of the decline due to the closure of the Index Services business at the end of 2003, which generated $4,157,000 of service revenue in 2003, coupled with new sales being more than offset by high levels of contract cancellations and renegotiations. However, the European business experienced service revenue growth of 12.0% in the final quarter of 2004 compared with the final quarter of 2003. The Asia Pacific business of FT Interactive Data declined by 4.3% in 2004, with growth in the Australian market being more than offset by declines in Hong Kong, Singapore and Japan.

      The CMS BondEdge business grew service revenue by $1,575,000 or 5.2%, from $30,488,000 in 2003 to $32,063,000 in 2004, primarily due to strong subscription sales and higher usage-based service revenue.

      The ComStock business increased service revenue from $54,093,000 in 2003 to $62,920,000 in 2004, an increase of $8,827,000, or 16.3%. The service revenue growth at ComStock was affected by two factors. In 2004, the business included a full 12 months of results from ComStock, which was acquired at the end of February 2003. In addition ComStock acquired the HyperFeed customer contracts at the end of October 2003, which contributed $10,366,000 of service revenue in 2004 compared with $1,741,000 in 2003. The core ComStock business continued to experience strong price pressures associated with intense competition 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 associated reduction of $1,206,000 in income from operations. This service revenue, direct costs and income from operations were recognized in prior periods and were primarily attributable to ComStock-related services delivered to one international customer. The reversal was due to the fact that while we were providing services to, and receiving payment from the customer, there was no definitive service contract in place. A definitive contract was executed with this customer in the first quarter of 2005 and thus, the service revenue, direct costs and income from operations that were reversed in the fourth quarter of 2004 will be recognized in the first quarter of 2005. This adjustment did not have a material impact on our prior period results.

      Within the Active Trader Services segment, service revenue grew from $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 in 2004 from the assets of FutureSource, which we acquired on September 1, 2004. Underlying service revenue within the

Active Trader Services segment in 2004 increased mainly due to a higher number of direct subscribers which grew from 31,851 in 2003 to 37,157 in 2004, an increase of 5,306, or 16.7%. This was partially offset by a lower average net subscription fee coupled with lower broadcast-related service revenue which declined from $1,852,000 in 2003 to $343,000 in 2004, a decline of $1,509,000 or 81.5%, due to the closure of the broadcast business in the second quarter of 2004.

Service Revenue by Geographic Region

Total Costs and Expenses

      Total costs and expenses for the Institutional Services segment for 2004 and 2003 include the costs and expenses of FT Interactive Data, ComStock and CMS BondEdge. Total costs and expenses for the Active Trader Services segment for 2004 and 2003 include the costs and expenses of eSignal, the broadcast-based services business which was closed in the second quarter of 2004, and the business arising out of the assets of FutureSource which we acquired on September 1, 2004. Total costs and expenses for the Corporate and unallocated segment include costs and expenses related to corporate, general and administrative activities, costs associated with our data center consolidation initiative, and intangible asset amortization.

Cost of Services

      Cost of services, exclusive of depreciation, are composed mainly of personnel related expenses, communication and data acquisition costs and expenditures associated with software and hardware maintenance agreements. The start up costs associated with 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 be classified as cost of services when the center becomes fully operational, which we expect to occur in 2005.

      Cost of services increased by $15,015,000 or 10.6%, from $141,631,000 in 2003 to $156,646,000 in 2004. The ComStock business, which was acquired at the end of February 2003, and the HyperFeed customer contracts, which we acquired at the end of October 2003, contributed $36,017,000 to cost of services in 2004 and $24,263,000 to cost of services in 2003. The FutureSource business contributed cost of services of $2,893,000 in 2004. Foreign exchange increased cost of services by $3,080,000 in 2004 mainly due to the weakness of the US dollar against the UK pound sterling referred to above. Cost of services as a percentage of revenue increased from 32.0% in 2003 to 32.3% in 2004.

      Cost of services within the Institutional Services segment increased from $121,391,000 in 2003 to $131,664,000 in 2004, an increase of $10,273,000, or 8.5%, including cost of services of $36,017,000 in 2004

and $24,263,000 in 2003 from the ComStock business and the HyperFeed customer contracts. Foreign exchange increased Institutional Services cost of services by $3,080,000 in 2004. Underlying cost of services within the Institutional Services segment decreased by $1,481,000 during 2004 due to the completion of various cost savings initiatives including production systems integration projects, closure of a small data center in New York, and the benefit of renegotiations for some of our supplier contracts as we signed global data supply arrangements for all our businesses.

      Within the Active Trader Services segment, cost of services increased 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 in 2004 from the assets of FutureSource. Underlying cost of services declined by $1,231,000 primarily due to the closure of the broadcast-based services business in April 2004.

Selling, General & Administrative Expenses

      Selling, general and administrative expenses are composed mainly of personnel-related, outside professional services, advertising and marketing, occupancy-related and commissions to third parties. Data center consolidation initiative related expenses except for depreciation which is shown separately, are included in selling, general and administrative expenses in 2004, will be classified as cost of services in 2005, when we expect the new East Coast data center to be fully operational.

      Selling, general and administrative expenses increased by $12,184,000, or 8.2%, from $149,129,000 in 2003 to $161,313,000 in 2004. The ComStock business contributed $16,880,000 to selling, general and administrative expenses in 2004 and $18,066,000 to selling, general and administrative expenses in 2003. The FutureSource business contributed selling, general and administrative expenses of $3,559,000 in 2004. Foreign exchange increased selling, general and administrative expenses by $4,204,000 in 2004 mainly due to the weakness of the US dollar against the UK pound sterling referred to above. Selling, general and administrative expenses as a percentage of revenue decreased from 33.7% in 2003 to 33.3% in 2004.

      Selling, general and administrative expenses within the Institutional Services segment decreased from $117,166,000 in 2003 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 ComStock business. This decrease in selling, general and administrative expenses for ComStock is, as previously described, due to the reversal of commissions to third parties totaling $5,622,000 which we recognized in prior periods and were attributable to services delivered to one international customer. Foreign exchange increased Institutional Services selling, general and administrative expenses by $4,204,000 in 2004. Underlying selling, general and administrative expenses within the Institutional Services segment decreased by $2,212,000 due to the benefit of renegotiations for some of our supplier contracts as we signed global data supply arrangements for all our businesses coupled with the closure of the Index Services business at the end of 2003. This is partially offset by increased sales-related commission costs associated with the higher sales growth across our businesses and higher staffing and consulting expenditures for various regulatory compliance projects including compliance with the provisions of the Sarbanes-Oxley Act and related SEC rules and the Investment Advisers Act.

      Within the Active Trader Services segment, selling, general and administrative 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 from the assets of FutureSource. Underlying selling, general and administrative expenses increased by $507,000 primarily due to higher advertising and marketing expenses related to the launch of new services.

      Selling, general and administrative expenses within the Corporate and unallocated segment increased from $16,982,000 in 2003 to $24,294,000 in 2004, an increase of $7,312,000, or 43.1%, due to costs associated with our data center consolidation initiative and higher staffing and consulting and audit expenditures mainly related to compliance with the provisions of the Sarbanes-Oxley Act and related SEC rules. Data center consolidation initiative related expenses, which are included in selling, general and administrative expenses in 2004, will be classified as cost of services in 2005 when the new East Coast data center will be fully operational.

Depreciation

      Depreciation expense increased by $1,714,000, or 10.2%, from $16,807,000 in 2003 to $18,521,000 in 2004. The ComStock business and the HyperFeed customer contracts contributed $3,041,000 to depreciation expense in 2004 and $2,440,000 to depreciation expense in 2003. The FutureSource business contributed depreciation expense of $202,000 in 2004. Foreign exchange increased depreciation expense by $460,000 in 2004 mainly due to the weakness of the US dollar against the UK pound sterling referred to above.

      Depreciation expense within the Institutional Services segment decreased from $12,966,000 in 2003 to $12,857,000 in 2004, a decrease of $109,000, or 0.8%, including depreciation expense of $3,041,000 in 2004 and $2,440,000 in 2003 related to assets acquired with the ComStock business and the HyperFeed customer contracts. Foreign exchange increased Institutional Services depreciation expense by $460,000 in 2004 mainly due to the weakness of the US dollar against the UK pound sterling referred to above. Underlying depreciation within the Institutional Services segment expense decreased by $710,000 due to the normal expiration of asset lives in the second half of 2003 and during 2004.

      Within the Active Trader Services segment, depreciation expense increased by $114,000, or 3.2%, from $3,568,000 in 2003 to $3,682,000 in 2004, including depreciation expense of $202,000 in 2004 from the assets of FutureSource. Underlying depreciation expense within the Active Trader Services segment decreased by $88,000 primarily due to normal expiration of asset lives in the second half of 2003 and during 2004.

      Depreciation expense within the Corporate and unallocated segment increased from $273,000 in 2003 to $1,522,000 in 2004, an increase of $1,249,000, or 457.5%, due to the phased implementation during 2004 of our new East Coast data center.

      We do not allocate intangible amortization expense to our operating segments due to the fact that our chief operating decision maker does not use this information in evaluating the operations for each of our segments. (See Note 13 in the Notes to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for discussion of our segments). Within the Corporate and unallocated segment, amortization expense associated with acquired intangible assets increased from $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 ComStock business and the HyperFeed customer contracts contributed $8,128,000 to amortization expense in 2004 and $5,981,000 to amortization expense in 2003. The FutureSource assets contributed amortization expense of $347,000 in 2004. Underlying amortization expense declined by $52,000 due to the normal expiration 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%. The increase in income from operations was due to the higher operating results discussed above.

      Other income increased from $1,100,000 in 2003 to $2,522,000 in 2004, an increase of $1,422,000, or 129.3%, mainly due to higher interest income from a higher average cash balance and marginally 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% in 2004, primarily resulting from initiatives instituted in 2003 and a shift in geographic income to lower tax rate jurisdictions.

      We generated net income of $72,201,000 in 2003 compared with net income of $80,271,000 in 2004. This improvement was primarily due to higher income from operations in 2004 as compared with 2003 as discussed above.

      We generated basic net income per share of $0.78 and diluted net income per share of $0.76 in 2003, as compared with basic net income per share of $0.86 and diluted net income per share of $0.84 in 2004 due to higher net income, partially offset by a higher number of weighted average shares outstanding.

      Weighted average basic shares outstanding increased by 0.9% in 2004 and weighted average diluted shares increased by 1.1% in 2004 due to options exercised in the past 12 months and the issuance of shares under our 2001 Employee Stock Purchase Plan, partially offset by repurchases under our publicly announced stock repurchase plan.

2003 versus 2002

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%. The ComStock business and the HyperFeed customer contracts contributed $54,093,000 of service revenue in 2003. Foreign exchange contributed $6,581,000 to service revenue in 2003. This was mainly due to the weakness of the US dollar against the UK pound sterling. The average rate for the US dollar against the UK pound sterling was $1.635 in 2003 compared with $1.503 in 2002.

      Service revenue within the Institutional Services segment increased from $330,995,000 in 2002 to $397,412,000 in 2003 an increase of $66,417,000, or 20.1%, including service revenue of $54,093,000 in 2003 from the ComStock business and the HyperFeed customer contracts. Foreign exchange contributed $6,581,000 to service revenue within the Institutional Services segment in 2003.

      Service revenue for the FT Interactive Data business increased from $297,395,000 in 2002 to $302,743,000 in 2003, an increase of $5,348,000, or 1.8%. The main growth for the FT Interactive Data business came from North America, where despite difficult market conditions and a higher than historical level of cancellations, service revenue grew by 3.1%. The increase was driven primarily by the continued success of the sale of evaluated pricing services helped by the introduction of the Fair Value Information Service and moderate price increases. The European business of FT Interactive Data declined by 2.9% from 2002 to 2003 with new sales being more than offset by a high level of cancellations and customer requests for service downgrades. The Asia Pacific business of FT Interactive Data grew by 8.6%, with the main growth coming from Australia. In the other Asia Pacific markets of Hong Kong and Singapore, service revenue was relatively flat.

      The CMS BondEdge business grew service revenue by $845,000, or 2.9%, as it continued to see a slowdown in new business as a result of customer reluctance to commit to new services due to economic conditions.

      The ComStock business contributed $54,093,000 of service revenue during the ten months of 2003. Progress was made in promoting the ComStock real time feed service to the FT Interactive Data customer base. Following the acquisition of HyperFeed’s customer contracts, the ComStock business began migrating this customer base from the HyperFeed production platform to the existing ComStock production platform.

      Other service revenue declined by 11.4% from 2003, which mainly represented a slow-down in our real time foreign exchange data business which has now been integrated with the ComStock business.

      Within the Active Trader Services segment, service revenue for the eSignal business grew by $1,258,000, or 2.9%, from $44,020,000 in 2002 to $45,278,000 in 2003, which included a 58.6% or $2,626,000 decline in the broadcast business from $4,478,000 in 2002 to $1,852,000 in 2003. Underlying service revenue for the Internet-delivered services, other than broadcast, increased by $3,884,000 due to the number of direct subscribers increasing by 12.7% in the year to approximately 32,000, partially offset by lower average net subscription fees.

Service Revenue by Geographic Region

Total Costs and Expenses

      Total costs and expenses for the Institutional Services segment for 2003 include the costs and expenses of FT Interactive Data, ComStock and CMS BondEdge and total costs and expenses for the Institutional Services segment for 2002 include the costs and expenses of FT Interactive Data and CMS BondEdge. Total costs and expenses for the Active Trader Services segment for 2003 and 2002 include the costs and expenses of eSignal and the broadcast business. Total costs and expenses for the Corporate and unallocated segment include costs and expenses related to corporate, general and administrative activities, costs associated with our data center consolidation initiative and intangible asset amortization.

Cost of Services

      Cost of services expenses, exclusive of depreciation, are composed mainly of personnel related expenses, communication and data acquisition costs, and expenditures associated with software and hardware maintenance agreements.

      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 ComStock business and the HyperFeed customer contracts contributed $24,263,000 to cost of services expenses in 2003. Foreign exchange increased cost of services expenses by $2,077,000 in 2003 mainly due to the weakness of the US dollar against the UK pound sterling referred to above. Cost of services as a percentage of revenue increased from 29.4% in 2002 to 32.0% in 2003.

      Cost of services within the Institutional Services segment increased from $89,874,000 in 2002 to $119,314,000 in 2003, an increase of $29,440,000, or 32.8%, including cost of services of $24,263,000 in 2003

from the ComStock business and the HyperFeed customer contracts. Foreign exchange increased the Institutional Services segment cost of services by $2,077,000 in 2003. Underlying cost of services within the Institutional Services segment increased by $5,177,000 due to investments in increasing the breadth and quality of our evaluated pricing data and operations partially offset by synergies achieved from integration of the SPS operations with those of FT Interactive Data.

      Within the Active Trader Services segment, cost of services decreased 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 the broadcast business during 2003 partially offset by investment in product development resources.

Selling, General & Administrative Expenses

      Selling, general and administrative expenses are comprised mainly of personnel-related, outside professional services, advertising and marketing, occupancy-related and commissions to third parties.

      Selling, general and administrative expenses increased by $15,904,000, or 11.9%, from $133,225,000 in 2002 to $149,129,000 in 2003. The ComStock business contributed $18,066,000 to selling, general and administrative expenses in 2003. Foreign exchange increased selling, general and administrative expenses by $3,352,000 in 2003 mainly due to the weakness of the US dollar against the UK pound sterling referred to above. Selling, general and administrative expenses as a percentage of revenue decreased from 35.5% in 2002 to 33.7% in 2003.

      Selling, general and administrative expenses within the Institutional Services segment increased from $102,984,000 in 2002 to $113,814,000 in 2003, an increase of $10,830,000, or 10.5%, including selling, general and administrative expenses of $18,066,000 in 2003 from the ComStock business. Foreign exchange increased the Institutional Services segment selling, general and administrative expenses by $3,352,000 in 2003. Underlying selling, general and administrative expenses within the Institutional Services segment decreased by $7,236,000 due to synergies achieved from merging the SPS operations into the FT Interactive Data business coupled with the write-off of some capitalized development costs in Europe in 2002. Offsetting these savings were restructuring charges totaling $3,311,000, related to the first stage in the consolidation of our US data centers, severance relating to our decision to outsource some of our European data collection to a lower cost site, and costs related to the closure of our Index Services unit.

      Within the Active Trader Services segment, selling, general and administrative expenses decreased by $1,221,000, or 7.5%, from $16,202,000 in 2002 to $14,981,000 in 2003 due mainly to a charge of $673,000 for unoccupied office space in 2002 coupled with lower property tax reserve requirements in 2003.

      Selling, general and administrative expenses within the Corporate and unallocated segment increased from $14,039,000 in 2002 to $16,982,000 in 2003, an increase of $2,943,000, or 21.0%, due to a charge of $1,368,000 in 2003 related to the write down of the carrying value of a 5% interest we held in a company that

we spun off in 2000 coupled with a reserve of $1,000,000 in 2003 to provide for the settlement to shareholders related to a civil action with shareholders of two Heartland Group high-yield municipal bond funds.

Depreciation

      Depreciation expense increased by $2,307,000, or 15.9%, from $14,500,000 in 2002 to $16,807,000 in 2003. The ComStock business and the HyperFeed customer contracts contributed $2,440,000 to depreciation expense in 2003. Foreign exchange increased the Institutional Services segment depreciation expense by $325,000 in 2003 mainly due to the weakness of the US dollar against the UK pound sterling referred to above.

      Depreciation expense within the Institutional Services segment increased from $10,170,000 in 2002 to $12,641,000 in 2003, an increase of $2,471,000, or 24.3%, including depreciation expense of $2,440,000 in 2003 related to assets acquired with the ComStock business, and the HyperFeed customer contracts. Foreign exchange increased the Institutional Services segment depreciation expense by $325,000 in 2003 mainly due to the weakness of the US dollar against the UK pound sterling referred to above. Underlying depreciation within the Institutional Services segment expense was essentially flat for 2003 as compared with 2002.

      Within the Active Trader Services segment, depreciation expense decreased by $447,000, or 11.1%, from $4,015,000 in 2002 to $3,568,000 in 2003 primarily due to normal expiration of asset lives in the second half of 2002 and during 2003.

      Depreciation expense within the Corporate and unallocated segment in 2003 of $273,000 was slightly lower than in 2002. In addition, the majority of capital expenditures related to the data center consolidation initiative occurred in the final quarter of 2003, and the impact did not affect operating results until 2004.

Amortization

      We do not allocate intangible amortization expense to our operating segments due to the fact that our chief operating decision maker does not use this information in evaluating the operations for each of our segments (see Note 13 in the Notes to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for discussion of our segments). 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%. The ComStock business and the HyperFeed customer contracts contributed $5,981,000 to amortization expense in 2003. Underlying amortization expense declined by $4,944,000 due to certain intangibles relating to previous

acquisitions and some intangibles created at the time of the merger of Data Broadcasting Corporation and Interactive Data Corporation in 2000 becoming fully amortized. (See Note 3 in the Notes to the Consolidated Financial Statements in Item 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%. The increase in income from operations was due to the higher operating results discussed above.

      Other income decreased from $1,989,000 in 2002 to $1,100,000 in 2003, reflecting a decline in interest rates and lower invested cash following the acquisition of ComStock and HyperFeed’s customer contracts. Both of these were acquired using existing cash 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 partially offset by lower other income.

      Our effective tax rate declined from 39.4% in 2002 to 38.0% in 2003, primarily attributable to initiatives instituted in 2003.

      We generated net income of $60,733,000 in 2002 compared with net income of $72,201,000 in 2003, an increase of $11,468,000, or 18.9%. This improvement was primarily due to the higher income from operations in 2003 as compared with 2002, discussed above.

      We generated basic net income per share of $0.67 and diluted net income per share of $0.65 in 2002, as compared with basic net income 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 a higher number of weighted average shares outstanding.

      Weighted average basic shares outstanding increased by 1.3% in 2003 and weighted average diluted shares increased by 0.8% in 2003 due to options exercised in 2003 as well as a higher level of stock options outstanding in 2003, partially offset by repurchases 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 was due in part to an increase in net income of $8,070,000, higher depreciation 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 a decline in our working capital of $2,454,000 which was primarily due to higher bonuses paid to management in 2004 as compared to those paid in 2003.

      The increase from 2002 to 2003 of $25,174,000 was due in part from an increase in net income of $11,468,000, higher depreciation and amortization of $3,344,000, higher non cash items of $1,636,000 representing a charge of $1,368,000 related to a 5% interest in a company that we spun off in 2000 and the introduction of a deferred stock compensation plan to certain executives and members of the board of directors, coupled with improved working capital of $12,099,000. Partially offsetting these positive items was a lower tax benefit from the exercise of employee stock options of $1,097,000. The improvement of $12,099,000 in working capital was mainly due to lower pension charges and funding for the UK and US pension plans, higher accrued expenses for bonuses and data center consolidation costs associated with our new Boxborough, Massachusetts Data Center, and a benefit from a higher 2003 tax provision being only partially offset by higher income tax payments.

Investing Activities

      Capital expenditures increased from $21,503,000 in 2003 to $23,898,000 in 2004, due mainly to activities associated with the data center consolidation initiative, including the completion of the build out and the purchase of additional equipment and technical infrastructure for the new East Coast data center in Boxborough, Massachusetts and also the development of internal use software to consolidate our multiple real time data collection plants in the future. Capital expenditures increased from $13,561,000 in 2002 to $21,503,000 in 2003 due mainly to the build out of the new East Coast data center. We expect capital expenditures to continue to grow in 2005 as we continue the consolidation of our data centers and improve the resiliency and disaster recovery abilities of all our businesses through the expansion of our West Coast data center in Hayward, California. In addition, we anticipate investing additional capital resource to enhance our real-time infrastructure in order to address the increased market volumes, especially in the US options markets. In 2005, we expect to spend $24,000,000 to $26,000,000 on capital expenditures.

      In January 2002, we acquired the SPS business from Merrill Lynch. The consideration was $48,000,000 in cash, paid from the existing cash resources.

      In February 2003, we acquired Comstock from McGraw-Hill for $115,972,000 in cash. We funded this acquisition from existing cash resources. In October 2003, we also acquired the consolidated market data feed client contracts from HyperFeed for $8,500,000, consisting of an initial payment of $7,375,000 with the balance to be paid over 24 months as agreed upon milestones are reached, offset by cash acquired of $1,011,000. Because certain milestones were not met, the purchase price of the HyperFeed contracts has been adjusted downward to $8,375,000. Our remaining payments total $750,000. We funded this acquisition from existing cash resources. In September 2004, we acquired the assets of FutureSource for $18,000,000 in cash, offset by cash acquired of $317,000. We funded this acquisition from existing cash resources. In addition, as part of our efforts to improve the rate of return on invested cash, we purchased $2,371,000 of municipal bonds whose maturity is less than 180 days.

Financing Activities

      In 2004, we utilized $17,328,000 to repurchase 945,000 outstanding shares of common stock. Also in 2004, we received $12,935,000 from the exercise of options to purchase 1,157,000 shares of common stock and the issuance of 124,000 shares of common stock in connection with our employee stock purchase plan.

      In 2003, we utilized $1,330,000 to repurchase 100,000 outstanding shares of common stock. Also in 2003, we received $9,925,000 from the exercise of options to purchase 1,195,000 shares of common stock and the issuance of 118,000 shares of common stock in connection with our employee stock purchase plan.

      In 2002, we utilized $1,377,000 to repurchase 100,000 outstanding shares of common stock. Also in 2002, we received $10,411,000 from the exercise of options to purchase 1,404,000 shares of common stock and the issuance of 50,000 shares of common stock in connection with our employee stock purchase plan.

      Management believes that the cash and cash equivalents and expected cash flows generated by operating activities will be sufficient to meet our cash needs for the foreseeable future. We currently 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 difference between the effective tax rate and the statutory federal rate of 35% for these years is due primarily to state and local taxes and the effect on non-US operations taxed at lower rates.

      We recognize future tax benefits or expenses attributable to our taxable temporary differences and net operating loss carry forwards. Recognition of deferred tax assets is subject to our determination that realization is more likely than not. Based on taxable income projections, we believe that the recorded deferred tax assets will be realized.

      The American Jobs Creation Act of 2004, or the Act, became law on October  22, 2004. The Act covers a wide range of business tax issues and contains a number of changes to the Internal Revenue Code that may impact us and our accounting for income taxes in 2005. We are in the process of evaluating the effect 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 in Regulation S-K, Item 303(a)(4)(ii).

Related Parties Transactions

      We are a party to a management services agreement with Pearson that became effective as of February 29, 2000. Pearson, through a subsidiary, owns approximately 60% of our issued and outstanding common stock. This agreement governs the provision of services by either company (and each company’s subsidiaries) to the other and renews annually.

      Pursuant to the agreement, Pearson provides certain services to us and we provide certain services to Pearson. The services provided by Pearson afford us administrative convenience and we believe the terms of such services are more favorable to us than if we had negotiated similar arrangements with non-affiliated third parties. The services provided by Pearson include administering 401(k), travel, employee health benefit plans and insurance plans in the United States and United Kingdom, use of a back up disaster recovery site, and billing, accounts payable, accounts receivable, computer and accounting system support, financial accounting, tax and payroll services related to certain of our subsidiaries, primarily in the United Kingdom. The services provided by us to Pearson include the provision of financial data. A majority of the charges for services to and from Pearson and its affiliates are at cost. Prior to entering into any service arrangement with Pearson, we assess whether it would be more advantageous to obtain such services from a third party. The independent committee of our board of directors, which currently consists of four directors, none of whom are employees of Pearson, approved the management services agreement on our behalf. There was no material effect on our financial condition or results of operations as a result of entering into the agreement. If Pearson’s services were to be terminated, we would be required to seek equivalent services in the open market at potentially increased costs. The management services agreement is amended from time to time by mutual agreement to address changes in the terms or services provided to or on our behalf. The Independent Committee approves any such modifications. From time to time, we assess the ongoing relationships between us and Pearson, and if we determine that it would be more advantageous to secure any such services outside of Pearson, we pursue doing so.

      In addition, in the ordinary course of business, we are involved in transactions with certain businesses that are owned by or affiliated with Pearson. Certain of our businesses license market data and related services at commercial rates to certain businesses owned by or affiliated with Pearson and also acquire a range of services related to specific financial market indices from certain businesses owned by or affiliated with Pearson. We believe that the terms and conditions of these transactions are fair and reasonable. Certain of our businesses purchase advertising at discounted rates and other promotional services from certain businesses owned by or affiliated with Pearson.

      Any amounts payable or receivable to and from Pearson or Pearson affiliates are classified as an affiliate transaction on the balance sheet. For the years ended December 31, 2004, 2003 and 2002, we recorded revenue of $2,563,000, $2,711,000 and $2,238,000, respectively, for services provided to Pearson. For the years ended December 31, 2004, 2003 and 2002, we recorded 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 with Pearson’s Financial Times Group authorizing us to use the “FT” and “Financial Times” trademarks and logos in our business. The license grants us the right to use the FT and Financial Times brands for a five-year period for one UK pound sterling with an automatic renewal thereafter, unless terminated. The license is subject to quality control standards, restrictions on sublicensing the trademarks to third parties and certain other restrictions. The independent committee of our board of directors approved this agreement on our behalf.

      In the third quarter of 2004, we recorded a capital contribution from Pearson of $1,962,000 for an adjustment to a liability attributed to a former affiliate of Pearson that was sold in 1999, prior to the Merger. This adjustment had no impact on our net income or on Pearson’s ownership percentage of our issued and outstanding common stock. In the fourth quarter of 2004, we recorded a capital contribution from Pearson of $1,889,000, which represented the final settlement of certain employee benefit matters for which ultimate payment was not required.

Critical Accounting Policies and Estimates

      Our discussion and analysis of our financial condition and results of operations is based upon our consolidated financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States. For a detailed discussion on the application of these and other accounting policies, see Note 1 in the Notes to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K.

      The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of assets, liabilities, revenue and expenses, and related disclosure of contingent assets and liabilities. On an on-going basis, we evaluate our estimates, including those related to revenue recognition, goodwill and intangible assets, accrued liabilities and income taxes. We base our estimates on historical experience and on various other assumptions that are believed to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

      We believe the following critical accounting policies require our most significant judgments and estimates used in the preparation of our consolidated financial statements:

      Revenue is recognized over contractual periods as services are performed. Amounts recognized as revenue are determined based upon contractually agreed upon fee schedules with our customers. We account for subscription revenue received in advance of service being performed by deferring such amounts until the related services are performed. From time to time, we are required to adjust revenue associated with incorrect billings and data accessed inadvertently by customers. We maintain a reserve for these adjustments based upon historical experience and believe that the reserve established as of December 31, 2004 is adequate.

      Goodwill is recorded in connection with business acquisitions and represents the excess purchase price over the fair value of identifiable net assets at the acquisition date. On January 1, 2002, we adopted Financial Accounting Standard No. 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 our goodwill.

      FAS 142 requires an impairment test of goodwill assigned to our reporting units to be performed on an annual basis or whenever events or circumstances indicate an impairment may exist. Each impairment test is based upon a comparison of the fair value of the reporting unit, determined using a discounted cash flow model to the net book value of the reporting unit. Projections used in these analyses are consistent with those used by our management to run the company and make capital allocation decisions. If impairment is indicated due to the book value being in excess of the fair value, the goodwill is written down to its implied fair value.

      Intangible assets include securities databases, computer software, covenants not to compete, and customer lists arising principally from acquisitions. Such intangibles are valued on the acquisition dates based on a combination of replacement cost and comparable purchase methodologies by a third party appraiser and are amortized over periods ranging from two to twenty five years. The carrying amount of these balances is

evaluated periodically by us in relation to the operating performance and fair value of the underlying assets. Adjustments are recorded if we determine that the fair value is less than book value.

      We maintain balances for certain accrued liabilities as they relate to employee costs such as medical costs and other costs such as data charges, communications and royalties. These amounts are based upon management’s best estimates and judgment based upon historical experience and on various other assumptions that are believed to be reasonable under the circumstances.

      We determine our income tax expense in each of the jurisdictions in which we operate. The income tax expense includes an estimate of the current tax expense as well as a deferred tax expense, which results from the determination of temporary differences arising from the different treatment of items for book and tax purposes.

      We recognize future tax benefits or expenses attributable to our taxable temporary differences and net operating loss carry forwards. We recognize our deferred tax assets to the extent that the recoverability of these assets satisfy the “more likely than not” recognition criteria in Statement of Financial Accounting Standards No. 109 “Accounting for Income Taxes”. Based upon projections of future book and taxable income, we believe that the recorded tax assets will be realized.

      We currently provide income taxes on the earnings of foreign subsidiaries and associated companies to the extent these earnings are currently taxable or expected to be remitted. Taxes have not been provided on approximately $49,000,000 of accumulated foreign unremitted earnings, which are expected to remain invested indefinitely.

Commitments and Contingencies

      We have no outstanding debt. We meet our existing working capital and capital expenditure needs from our existing operating cash flow.

      We have obligations under non-cancelable operating leases for real estate, equipment and distribution agreements for satellite and cable space and FM radio channels. Certain of the leases include renewal options and escalation clauses. Real estate leases are for our corporate headquarters, sales offices, major operating units and data centers.

      Future operating lease obligations, as of December 31, 2004, are summarized in the chart below.

      We expect to satisfy our lease obligations from our existing cash flow. Our key operating locations operate in facilities under long-term leases, the earliest of which will expire in 2005. We believe we will be able to successfully negotiate key operating leases and/or find alternative locations for our facilities without significant interruption to the business.

Inflation

      Although management believes that inflation has not had a material effect on the results of operations during the past three years, there can be no assurance that results of operations will not be affected by inflation in the future.

Seasonality and Market Activity

      Historically, we have not experienced any material seasonal fluctuations in our business and we do not expect to experience seasonal fluctuations in the future. However, financial information market demand is largely dependent upon activity levels in the securities markets. The lower activity levels as a result of the downturn in the financial markets impacted revenue in the first half of 2004. In the event that the US or international financial markets were to suffer a prolonged downturn that results in a significant decline in investor activity in trading securities, our sales and revenue could be adversely affected. The degree of such consequences is uncertain. Our exposures in the US in this area could be mitigated in part by our service offerings in non-US markets.

Recently Issued Accounting Pronouncements

      On December 16, 2004, the Financial Accounting Standards Board issued Financial Accounting Standard No. 123(R), “Share-Based Payment”, or FAS 123(R). FAS 123(R) revises Financial Accounting Standard No. 123, “Accounting for Stock-Based Compensation” and requires companies to expense the fair value of employee stock options and other forms of stock-based compensation. FAS 123(R) supersedes Accounting Principles Board Opinion No. 25, “Accounting for Stock Issued to Employees” and amends Financial Accounting Standard No. 95, “Statement of Cash Flows”. FAS 123(R) must be adopted no later than periods beginning after June 15, 2005 and we expect to adopt FAS 123(R) on the effective date. We expect that the adoption of this standard to have a material impact on our net income and earnings per share. We are required to adopt SFAS 123(R) in the third quarter of 2005. The pro forma disclosures previously permitted under SFAS 123 no longer will be an alternative to financial statement recognition. See Note 1 in the Notes to the Consolidated Financial Statements in Item 8 of this Annual Report on Form 10-K for the pro forma net income and net income per share amounts, for the years 2002 through 2004, as if we had used a fair value based method similar to the methods required under SFAS 123(R) to measure compensation expense for employee stock incentive awards.

Information Regarding Forward-Looking Statements

      From time to time, including in this Annual Report on Form 10-K and our annual report to shareholders, we may issue forward-looking statements relating to such matters as anticipated financial performance, business prospects, strategy, plans, critical accounting policies, technological developments, new services, consolidation activities, research and development activities, regulatory, market and industry trends and similar matters. The Private Securities Litigation Reform Act of 1995 and federal securities laws provide safe harbors for forward-looking statements. We note that a variety of factors, including known and unknown risks and uncertainties as well as incorrect assumptions, could cause our actual results and experience to differ materially from the anticipated results or other 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 could lower demand for our services. Our business is dependent upon the health of the financial markets as well as the financial health of the participants in those markets. Some of the financial data and information market demand is dependent upon activity levels in the securities markets while other demand is static and is not dependent on activity levels. In the event that the US or international financial markets suffer a prolonged downturn that results in a significant decline in investor activity, our revenue levels could be materially adversely affected. We have experienced higher than normal cancellations or downgrades as a result of the cost cutting pressures evident in the financial services sector in recent years and such cancellations or downgrades may continue.

      Consolidation of financial services within and across industries could lower demand for our services. As consolidation occurs and synergies are achieved, the number of potential customers for our services decreases. This consolidation has two forms: consolidations within an industry, such as banking, and across industries, such as consolidations of insurance, banking and brokerage companies. When two companies that separately subscribe to or use our services combine, they may terminate or reduce duplicative subscriptions for our

services or if they are billed on a usage basis, usage may decline due to synergies created by the business combination. We experienced higher than normal cancellations in recent years as a result of this trend and these consolidations and cancellations may continue. A large number of cancellations, or lower utilization resulting from consolidations, could have a material adverse effect on our revenue.

      The continuing impact of cost-cutting pressures across the financial services industry could cause lower demand for our services. Many customers within the financial services industry are striving to reduce their operating costs. To achieve this goal, customers may seek to reduce their spending on market data services and related analytical tools. If customers elect to reduce their spending with us, our results of operations could be materially adversely affected. Alternatively, customers may use other strategies to reduce their overall spending on market data services, either by consolidating their spending with a fewer number of vendors or by selecting vendors with lower-cost offerings. If customers elect to consolidate their spending on market data services with other vendors and not us, or if we cannot price our services as aggressively as the competition, our results of operations could be materially adversely affected.

      We compete against companies with greater financial resources. We operate in highly competitive markets in which we compete with other distributors of financial and business information and related services. We expect competition to continue to be rigorous. Some of our competitors and potential competitors have significantly greater financial, technical and marketing resources than we have. These competitors may be able to expand product offerings and data content more effectively, and to respond more rapidly than us to new or emerging technologies, changes in the industry or changes in customer needs. They may also be in a position to devote greater resources to the development, promotion and sale of their products. Increased competition in the future could limit our ability to maintain or increase our market share or maintain our margins, and could have a material adverse effect on our business, financial condition or operating results.

      New product offerings by competitors or new technologies could cause our services to become obsolete. We operate in an industry that is characterized by rapid and significant technological change, frequent new services, data content and coverage enhancements, and evolving industry standards. Without the timely introduction of new services and data content and coverage enhancements, our services could become technologically obsolete or inadequate over time, in which case our revenue and operating results would suffer. We expect our competitors to continue to improve the performance of their current services, to enhance data content and coverage and to introduce new services and technologies. These competitors may adapt more quickly to new technologies, changes in the industry and changes in customers’ requirements than we can. If we fail to adequately anticipate customers’ needs and technological trends accurately, we will be unable to introduce new services into the market and our ability to compete would be materially adversely impacted. Further, if we are unsuccessful at developing and introducing new services that are appealing to customers, with acceptable prices and terms, or if any such new services are not made available in a timely manner, our ability to compete would be materially adversely impacted. In both cases our ability to generate revenue could suffer and our business and operating results could be materially adversely affected. We will need to successfully enhance or add to current services in order to effectively expand into new geographic areas. In addition, new services, data content and coverage that we may develop and introduce may not achieve market acceptance; lack of market acceptance would result in lower revenue.

      If we are unable to maintain relationships with key suppliers and providers of market data, we would not be able to provide our services to our customers. We depend on key suppliers for the data we provide to our customers. Some of this data is exclusive to particular suppliers, such as national stock exchanges, and cannot be obtained from other suppliers. In other cases, although the data may be available from secondary sources, the secondary source may not be as adequate or reliable as the primary or preferred source, or we may not be able to obtain replacement data from an alternative supplier without undue cost and expense, if at all. We generally obtain data via license agreements. The disruption of any license agreement with a major data supplier, such as the New York Stock Exchange, could disrupt our operations and lead to an adverse impact on our results of operations.

      A prolonged outage at one of our data centers could result in reduced revenue and the loss of customers. Our customers rely on us for time-sensitive, up-to-date data that is reliably delivered. Our business is

dependent on our ability to rapidly and efficiently process substantial quantities of data and transactions on our computer-based networks and systems. Our computer operations and those of our suppliers and customers are vulnerable to interruption by fire, natural disaster, power loss, telecommunications failure, terrorist attacks, acts of war, Internet failures, computer viruses and other events beyond our reasonable control. We maintain back-up facilities for each of our major data centers to seek to minimize the risk that any such event will disrupt operations. In addition, we maintain insurance for such events. However, the business interruption insurance we carry may not be sufficient to compensate us fully for losses or damages that may occur as a result of such events. Any such losses or damages incurred by us could have a material adverse effect on our business. Although we seek to minimize these risks through security measures, controls and back-up data centers, there can be no assurance that such efforts will be successful or effective.

      Our inability to maintain relationships with service bureaus and custodian banks would decrease our revenue. Part of our strategy is to serve as a major data supplier to service bureaus and custodian banks and thereby to benefit from the trend of major financial institutions in North America outsourcing their back office operations to such entities. While we believe the importance of back office operations will continue to increase, if this trend shifts or any of these relationships are disrupted or are terminated, our results of operations could be materially adversely impacted.

      We may fail to derive the anticipated benefits from our acquisitions. A significant part of our growth strategy has been and continues to be growth through strategic acquisition. The success of any acquisition depends in part on our ability to integrate the acquired business or assets. Successful integration of a business involves the integration of some or all of the following: sales, employees, operating systems, operating procedures and information technology systems. We may not be able to effectively integrate and manage the operations of any acquired business. In addition, the process of integrating acquired businesses or assets may involve unforeseen difficulties. Integrating any newly acquired businesses may require a disproportionate amount of management’s attention and financial and other resources, and detract from the resources remaining for our pre-existing businesses. Further, we may not be able to maintain or improve the historical financial performance of acquired businesses. Finally, we may not fully derive all of the anticipated benefits from our acquisitions, for example, supply cost synergies or reduced operating costs due 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 qualified personnel to operate and expand our business and we may not be able to retain the services of our key personnel. Our ability to replace any key personnel who resigns may be difficult and may take an extended period of time because of the limited number of senior individuals in the financial information industry with the breadth of skills and experiences required to operate and successfully expand a business such as ours or perform some of the key business functions we require. Competition to hire from this limited pool is intense, and we may not be able to hire or retain these personnel.

      We may not be able to efficiently and effectively consolidate our data centers. We are in the process of streamlining and consolidating our seven data centers, as well as ticker plant technologies and related facilities in the US into two independent data centers. The costs associated with this consolidation may be greater than we anticipate and we may experience unexpected delays as we continue this consolidation process. Delays in achieving this consolidation, and the migration of activities from other data centers, may increase our cost of services and capital expenditures. In addition, the consolidation may not result in enhanced operational efficiency, resiliency and other benefits to the degree we anticipate, if at all.

      We are subject to regulatory oversight and we provide services to financial institutions that are subject to significant regulatory oversight, and any investigation of us or our clients relating to our services could be expensive, time consuming and harm our reputation. The securities laws and other regulations that govern our activities and the activities of our customers are complex. Compliance with these regulations may be reviewed by federal agencies, including the SEC, state authorities and other governmental entities both in the United States and foreign countries. Any investigation by a regulatory agency of one of our clients or us, whether or not founded, could cause us to incur substantial costs and distract our management from our business. To the extent any of our customers become the subject of a regulatory investigation or a civil lawsuit

due to actual or alleged violations of one or more of their regulatory obligations, we could become subject to intense scrutiny. The intense scrutiny could involve an examination of whether the services we provided to the customer during the time period of the alleged violation were related to or had contributed in any manner to the commission of the violation. We may be required to expend a significant amount of resources explaining and/or defending the services we provided. In addition, the negative publicity associated with any public investigation could adversely affect our ability to attract and/or retain clients.

      Certain of our subsidiaries are subject to complex regulations and licensing requirements. Our FT Interactive Data subsidiary is a registered investment adviser with the SEC and is subject to significant regulatory obligations under the Investment Advisers Act of 1940. The securities laws and other regulations that govern FT Interactive Data’s activities as a registered investment adviser are complex. If we were to ever lose our investment adviser status, we could no longer operate those portions of our business that require us to qualify as an investment adviser. Recently, the financial services industry, and in particular the mutual fund industry, has received negative publicity, which has led to increased legislation, regulation, review of industry practices and private litigation. As the regulatory obligations applicable to investment advisers increase, our compliance costs likewise increase. Similarly, our FT Interactive Data Australia subsidiary is licensed by the Australian Securities & Investment Commission, or ASIC, to provide certain financial services in Australia under the Corporations Act 2001. The financial services laws and other regulations that govern their activities are complex. If we were to lose this license, the subsidiary could no longer operate those portions of our business in Australia that require the license to be held. In addition, in order to offer new financial services or products we could be required to extend the license authorizations, which is at the discretion of ASIC. The inability to provide one or more of our services would adversely impact revenue and could have a material adverse affect on our business and results of operation.

      Pearson has the ability to control us. Pearson indirectly holds approximately 60% of our issued and outstanding common stock. Accordingly, Pearson has the ability to exert significant influence over our management and our affairs, including the ability to elect all of the directors and to approve or disapprove any corporate actions submitted to a vote of our stockholders.

      The foregoing discussion of risks, uncertainties, and assumptions is by no means complete but is designed to highlight important factors that may impact our results of operation and our business.

      A portion of our business is conducted outside the United States through our foreign subsidiaries and branches. We have operations in Europe, primarily the United Kingdom, and operations in Asia Pacific located in Australia, Hong Kong and Singapore, with the primary operations in Australia. We have foreign currency exposure related to our operations in international markets where we transact business in foreign currencies and, accordingly, we are subject to exposure from adverse movements in foreign currency exchange rates. Our foreign subsidiaries maintain their accounting records in their local currencies. Consequently, changes in currency exchange rates may impact the translation of foreign statements of operations into US dollars, which may in turn affect our consolidated statements of operations. Our primary exposure to foreign currency exchange rate risks rest with the UK pound sterling to US Dollar exchange rate due to the significant size of our operations in the United Kingdom. For example, in 2004 and 2003 respectively, favorable foreign exchange rates added $10,109,000 and $6,581,000 respectively, to our service revenue.

      The service revenue for the past three years and long-lived assets for the past three years, by geographic region, is as follows:

      We do not enter into any hedging or derivative arrangements and we do not hold any market risk sensitive instruments for investment or other purposes.

      We currently invest excess cash balances in money market accounts and municipal bonds. These accounts are largely invested in US Government obligations, investment grade commercial paper and high credit quality municipal obligations; accordingly, we are exposed to market risk related to changes in interest rates. We believe that the effect, if any, of reasonable near-term changes in interest rates on our financial position, results of operations, and cash flows will not be material.

Report of Independent Registered Public Accounting Firm

To the Board of Directors and Shareholders of Interactive Data Corporation

      We have completed an integrated audit of Interactive Data Corporation’s 2004 consolidated financial statements and of its internal control over financial reporting as of December 31, 2004 and audits of its 2003 and 2002 consolidated financial statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Our opinions, based on our audits, are presented below.

Consolidated financial statements and financial statement schedule

      In our opinion, the consolidated financial statements listed in the index appearing under Item 15(a)(1) present fairly, in all material respects, the financial position of Interactive Data Corporation and its subsidiaries at December 31, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 2004 in conformity with accounting principles generally accepted in the United States of America. In addition, in our opinion, the financial statement schedule listed in the index appearing under Item 15(a)(2) presents fairly, in all material respects, the information set forth therein when read in conjunction with the related consolidated financial statements. These financial statements and the financial statement schedule are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

Internal control over financial reporting

      Also, in our opinion, management’s assessment, included in the accompanying Management’s Annual Report on Internal Control Over Financial Reporting appearing under Item 9A, that the Company maintained effective internal control over financial reporting as of December 31, 2004 based on criteria established in Internal Control — Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO), is fairly stated, in all material respects, based on those criteria. Furthermore, in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2004, based on criteria established in Internal Control — Integrated Framework issued by the COSO. The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting. Our responsibility is to express opinions on management’s assessment and on the effectiveness of the Company’s internal control over financial reporting based on our audit. We conducted our audit of internal control over financial reporting in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. An audit of internal control over financial reporting includes obtaining an understanding of internal control over financial reporting, evaluating management’s assessment, testing and evaluating the design and operating effectiveness of internal control, and performing such other procedures as we consider necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinions.

      A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company;

(ii) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

      Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

Boston, Massachusetts

March 16, 2005

INTERACTIVE DATA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF OPERATIONS

AND COMPREHENSIVE INCOME

The accompanying notes are an integral part of these consolidated financial statements.

INTERACTIVE DATA CORPORATION AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS

The accompanying notes are an integral part of these consolidated financial statements.

INTERACTIVE DATA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

The accompanying notes are an integral part of these consolidated financial statements.

INTERACTIVE DATA CORPORATION AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY