William J. Ward, CPA - Director Interactive Data Pricing and Reference Data, Inc.

1. Fair Value Measurements for the Financial Services Industry: FAS 157 and Security EvaluationsPresented to The New York State Society of CPAsSeptember 24, 2008 William J. Ward, CPA - Director Interactive Data Pricing and Reference Data, Inc. Confidential

2. Agenda • Role of Pricing Service • Evaluations as input to fair value process • So what is an evaluation? FAS 157 • Overview • Key Concepts • Key Relationships • The Hierarchy • Observable vs. Unobservable Interactive Data’s research and response • Greatest concern: hierarchy • Approach: “Bucketing” • Early client response: Level 2

3. Fixed Income Evaluated Pricing • Fixed Income: An evaluation represents our good faith opinion, based on the information available to us at the time, as to what a buyer in the marketplace would pay for a security (typically in an institutional round lot position) in a current sale. • Standard Inputs: benchmark yields, reported trades, broker/dealer quotes, issuer spreads, two-sided markets, benchmark securities, bids, offers and reference data. Interactive Data also monitors market indicators, industry and economic events.

4. Fair Value Information Service for International Equities • An evaluation which is an estimate of the price that would prevail in a liquid market for an international, exchange-traded equity given information available at the time of evaluation, e.g. close of the New York Stock Exchange or London Stock Exchange

5. The Current Environment: The Four Horsemen of the Apocalypse?

6. The Current Environment • Sub-prime mortgage market turmoil. • FAS 157. • Failing auctions for Auction Rate Securities. • Bond insurer difficulties. • Recession fears. • Growing concerns about inflation. • Election year uncertainties. • Increased use of interest rate and credit derivatives. • Emergence of ECNs (electronic communication networks).

7. FAS 157 Overview • Adopted by FASB in September 2006, effective for financial statements for fiscal years and interim reporting periods beginning after November 15, 2007. • Defines “Fair Value”, establishes a framework for measuring fair value and expands disclosures about fair value measurements. • This framework includes a three level hierarchy of inputs used in fair value measurements. • Requires higher level of understanding on the part of financial statement preparers as to the inputs and processes used to determine valuations. • Guidance is principle-based as opposed to rules-based.

8. FAS 157: Some Key Concepts • Exit Price • Principal (or most advantageous) Market • Market Participants • Bid, Mean, Ask • Disclosure Hierarchy

9. FAS 157: Key Relationships Security Owners Investment Managers Sub-advisors Broker / Dealers Accounting & Financial Reporting Clearing / Custodial Firms Pricing Vendors Regulators Auditors

10. The Hierarchy for FAS 157 Disclosure Requirements • Level 1: Quoted prices (unadjusted) in active markets for identical assets • Level 2: Inputs.... that are observable for the asset or liability, either directly or indirectly • Level 3: Unobservable inputs for the asset or liability

11. A Quasi-Deep Question If a tree falls in a forest and no one was there to hear it, did it make a sound?

12. A Quasi-deep FAS 157 Corollary If a broker quotes a bond in a person to person phone call, is that quote observable?

13. A Step Deeper into Observable vs. Unobservable • “Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability…” • “The reporting entity need not identify specific market participants. Rather, the reporting entity should identify characteristics that distinguish market participants generally…” • Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability…”

14. FAS 157: Interactive Data’s Research and Response Client feedback • Strong support for “bucketed” by asset class approach • Vendor fixed income evaluations generally considered level 2 • Discussion of observable vs. unobservable inputs Interactive Data Position & Observations • Pricing vendor role is to provide information, not make fair value hierarchy determinations • Our evaluation methodology is based on market information • We have provided additional information on inputs to our evaluation process “Summary of Inputs by Asset Class” • Received positive response from clients, auditors and industry • We are making efforts to enhance information provided

15. Limitations • This presentation contains confidential and proprietary information and/or trade secrets of Interactive Data Pricing and Reference Data, Inc.. • This document is provided for informational purposes only. The information contained in this document is subject to change and does not constitute any form of warranty, representation, or undertaking. Nothing herein should in any way be deemed to alter the legal rights and obligations contained in agreements between Interactive Data Pricing and Reference Data and its clients relating to any of the products or services described herein. Nothing herein is intended to constitute legal advice. • Interactive Data Pricing and Reference Data makes no warranties whatsoever, either express or implied, as to merchantability, fitness for a particular purpose, or any other matter. Without limiting the foregoing, Interactive Data Pricing and Reference Data makes no representation or warranty that any data or information (including, but not limited to, evaluations) supplied to or by it are complete or free from errors, omissions or defects. • Evaluated pricing is provided in the U.S. through Interactive Data Pricing and Reference Data, Inc. and internationally through Interactive Data (Europe) Ltd. and Interactive Data (Australia) Pty Ltd. Interactive Data(SM) and the Interactive Data logo are service marks of Interactive Data Corporation. Other products, services or company names mentioned herein are the property of, and may be the service mark or trademark of, their respective owners. © 2008 Interactive Data Pricing and Reference Data, Inc.