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2	Harold McGraw III Chairman, President and CEO The McGraw-Hill Companies
3	“Safe Harbor” Statement Under The Private Securities Litigation Reform Act of 1995 This presentation includes certain forward-looking statements about the Company’s businesses and our prospects, new products, sales, expenses, tax rates, cash flows, prepublication investments and operating and capital requirements. Such forward-looking statements include, but are not limited to: the strength and sustainability of the U.S. and global economy; the duration and depth of the current recession; Educational Publishing’s level of success in 2009 adoptions and in open territories and enrollment and demographic trends; the level of educational funding; the strength of School Education including the testing market, Higher Education, Professional and International publishing markets and the impact of technology on them; the level of interest rates and the strength of the economy, profit levels and the capital markets in the U.S. and abroad; the level of success of new product development and global expansion and strength of domestic and international markets; the demand and market for debt ratings, including collateralized debt obligations (“CDO”), residential and commercial mortgage and asset-backed securities and related asset classes; the continued difficulties in the credit markets and their impact on Standard & Poor’s and the economy in general; the regulatory environment affecting Standard & Poor’s; the level of merger and acquisition activity in the U.S. and abroad; the strength of the domestic and international advertising markets; the strength and the performance of the domestic and international automotive markets; the volatility of the energy marketplace; the contract value of public works, manufacturing and single-family unit construction; the level of political advertising; and the level of future cash flow, debt levels, manufacturing expenses, distribution expenses, prepublication, amortization and depreciation expense, income tax rates, capital, technology, restructuring charges and other expenditures and prepublication cost investment. Actual results may differ materially from those in any forward-looking statements because any such statements involve risks and uncertainties and are subject to change based upon various important factors, including, but not limited to, worldwide economic, financial, political and regulatory conditions; currency and foreign exchange volatility; the health of debt and equity markets, including interest rates, credit quality and spreads, the level of liquidity, future debt issuances including residential and commercial mortgage-backed securities and CDOs backed by residential mortgages and related asset classes; the implementation of an expanded regulatory scheme affecting Standard & Poor’s ratings and services; the level of funding in the education market (both domestically and internationally); the pace of recovery in advertising; continued investment by the construction, automotive, computer and aviation industries; the successful marketing of new products, and the effect of competitive products and pricing.
4	Maintaining a strong financial position 2009 priorities: Preserving liquidity and maintaining a strong balance sheet Debt: Low and mostly long term First major repayment not due until 2012 Dividend: Increased in 2009 36 consecutive years of dividend increases
5	Maintaining a strong financial position Continue to return cash to shareholders through dividends and share repurchases $9.1 billion returned to shareholders since 1996 2009 free cash flow: Projecting $430 million to $450 million after investments, dividend Comparable to 2008 level—despite projection for lower operating results
6	Federal stimulus funding benefiting key markets Education: Targeted for more than $100 billion in federal stimulus funding Helping restore K-12 and higher education budget cuts and Title I and special education programs Financial Services: Government actions calming financial markets Sentiment changing in credit markets as spreads tighten Term Asset-Backed Securities Loan Facility (TALF) and similar programs stimulating activity
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8	Sizing up the education market for 2009 Growth in U.S. college market Expect 3% to 4% growth in college and university market Enrollments are growing El-hi market under pressure Could see 15% to 20% decline in el-hi market
9	Digital products will contribute to growth in higher education Growing range of digital offerings: McGraw-Hill Connect, a homework management series with online resources ALEKS, a unique math tutorial program LearnSmart, new course-specific online instructional sites “Experiential” products Anatomy and Physiology Revealed enables virtual dissections in human anatomy classes SimNet enables allied health students to interact with virtual patients in situations they will face in the future
10	How federal funding benefits U.S. college market Targeted funds for U.S. higher education: $17.1 billion for Pell Grant awards $200 million for work-study programs $2,500 tax credit for tuition and related expenses, including course materials
11	How federal funding benefits the el-hi market New funding starting April 1: $6.1 billion for IDEA, the special education program $5.0 billion for Title I, programs for disadvantaged students $32.5 billion of the State Fiscal Stabilization Fund made available to state governors
12	How federal funding benefits the el-hi market More funds available later in 2009, including: Another $6.1 billion for IDEA Another $5.0 billion for Title I $16.1 billion from the State Fiscal Stabilization Fund $3.0 billion for school improvements under Title 1, Part A $5.0 billion from a “Race to the Top” Fund from the Secretary of Education
13	Federal funding expectations remain high Tracking the flow of funds down to the local school district level is challenging McGraw-Hill is well positioned to benefit when spending decisions are made Impossible to quantify impact of stimulus funding on the education market Our current projections do not reflect any benefit from the federal funding
14	Federal stimulus is going to have an impact Here’s what we know so far: Some of these funds will be used to retain teachers, as well as for a number of other purposes Many of our customers anticipate using some of their stimulus dollars to buy instructional materials While these are encouraging signs, we can’t base our forecast on anecdotal evidence
15	Outlook for 2009-2011 state new adoption market El-hi market down 13.3% through March 2009 2009 state new adoption market forecast: $550 million to $600 million Florida and California districts postponing 2009 purchases Confident our School Education Group can still capture 30% of the 2009 state new adoption market
16	Outlook for 2009-2011 state new adoption market 2010 state new adoption calendar could top $1 billion Reading and literature in Texas and K-12 math in Florida 2011: State new adoption calendar could be even larger
17	Investing in digital content For the el-hi market: Multimedia packages Digital components are integrated into virtually every el-hi instructional program Interactive, online student editions are growing rapidly Content-specific software for interactive whiteboards attracts teachers
18	Investing in digital content For the college market: More than 95% of our college textbooks—and all of the current frontlist titles—can be downloaded as e-books through CourseSmart Steady growth in faculty and student interest in e-books Computers continue to be the preferred e-book vehicle for college texts Exploring potential for materials offered via e-readers, MP3 players, and other devices
19	Investing in digital content For professional markets: More than 3,000 digital titles for sale through Amazon’s Kindle, and many titles formatted for other e-readers Digital downloads to iPods, iPhones, and other hand-held devices for a variety of content Growing lineup of online, subscription-based products for medicine, engineering, and science Providing information anytime, anywhere is enriching and improving learning
20	Summing up for McGraw-Hill Education Before the benefits of federal stimulus package: 15% to 20% decline in 2009 for el-hi market 3% to 4% growth in 2009 for U.S. college market For the segment in 2009: 7% to 8% decline in revenue 300 to 400 basis point decline in margin, excluding 2008 restructuring charges Implies low single-digit decline in expenses and an operating margin of 9% to 10%
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22	Five key issues facing Financial Services Timing of market recovery Strength of market recovery Resilience of the portfolio Regulatory outlook Legal situation
23	2009 outlook for S&P Credit Market Services Transaction revenue 1Q 2009: Declined 18.3% 2009: Expect 10% to 12% decline Forecast based on: Easier comparisons later in the year A pick up in the market as various f ederal stimulus packages for credit markets take hold The economy improving later this year
24	2009 outlook for S&P Credit Market Services The recovery will be uneven Investment-grade corporate issuance will lead the way Structured finance market will take longer to recover
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28	2009 outlook for S&P Credit Market Services New issue volume typically slows in the first month of each quarter Normally picks up in second or third month of each quarter Beginning to see the impact of federal stimulus in the asset-backed securities market TALF program used auto lease, student loans and equipment asset-backed securities as collateral Pipeline for issuance of TALF-eligible loans in June looks very good New issuance peaked in 2Q 2008, so 2009 comparisons for this period will be challenging
29	2009 outlook for S&P Credit Market Services Non-transaction revenue is resilient: Expect only a slight decline in 2009 1Q 2009: Off 3.8% and accounted for 72% of ratings’ total revenue Decrease due to foreign currency and a year-over-year decline in fees from cancelled transactions 2Q 2009: Year-over-year decline in fees for cancelled transactions expected to peak Modest price increases a factor in durability of revenue 12.1% increase in worldwide corporate issuance in the first four months this year versus 2008
30	2009 outlook for S&P Investment Services Anticipate growth of non-ratings business 1Q 2009: Produced 36% of the segment’s revenue 2009: Expect single-digit revenue growth
31	2009 outlook for S&P Investment Services Capital IQ continues to make progress Index business proving resilience despite decline in assets under management in exchange-traded funds based on S&P indices Underscores diverse revenue stream S&P has successfully created for index services Sales of data Increases in license fees for mutual funds Growth of over-the-counter derivatives
32	S&P launches more new indices S&P continues to launch new products and services S&P GSCI indices key to 22 new exchange-traded commodity products for trading on Deutsche Bourse In April, expanded index family with S&P Forward Interest Rate Arbitrage Index Series Allows investors to compare the effectiveness of interest-rate based investment strategies Assets under management in exchange-traded funds based on S&P indices were $173 billion at end of April 18% decline year-over-year, but up 9.1% sequentially since end of March
33	A dialogue with regulators, policymakers, market participants Europeans recently created a new system for registration and regulation of rating agencies CESR (Committee of European Regulators) will issue guidelines which may take effect in early 2010 More will be required of S&P and other credit rating agencies Regulation is manageable and creates a level playing field In U.S., more work to be done with the SEC and Congress
34	A dialogue with regulators, policymakers, market participants European regulatory actions will lead to a more globally consistent approach to ratings Six key requirements: Transparency Prevention of conflicts Quality Breadth of coverage Market scrutiny Investor choice
35	A dialogue with regulators, policymakers, market participants In an increasingly global marketplace, sound regulatory oversight will contribute to restoring investor confidence in ratings and capital markets We continue to work toward that goal
36	S&P’s developing analyst certification program to strengthen ratings process Working with the New York University Stern School of Business to develop the curriculum American College Testing will independently administer and score the certification exams
37	S&P’s developing analyst certification program to strengthen ratings process Two levels to certification program: Knowledge of capital markets and S&P’s criteria and methodology for credit analysis Requires specific asset class analysis All S&P analysts must pass both levels to act as a primary credit analyst and vote in a ratings committee
38	New legislative proposals on municipal finance Key provisions for NRSROs: Require NRSROs to issue and maintain ratings on a single scale S&P already uses single ratings scale across major asset classes Preserve critical provision of existing law prohibiting regulation of substance (analysis, procedures, methodologies) of how NRSROs determine ratings
39	Assessing legal risk Oral arguments in connection with motions to dismiss pending cases will be scheduled over the next several months First oral argument on a motion to dismiss the Oddo Lawsuit was held on May 13 Can’t predict when judge will announce a decision
40	Assessing legal risk Three broad categories of law suits: Underwriter claims based on Securities Act of 1933 MHP has already been removed from three lawsuits McGraw-Hill shareholder claims or “stock drop” suits Motion for dismissal has been filed State law claims Cases assert fraud claims Continue to assess the legal risk as low
41	Summing up for Financial Services For 2009: Slight decline in revenue Margin decline of 250 to 300 basis points, excluding 2008 restructuring charges Low single-digit growth in expenses Implied operating margin of approximately 38%
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43	Outlook for Information & Media Continued strength in global energy markets Platts’ real-time information and price assessments help fuel energy markets in oil, natural gas, and power Adding subscribers here and abroad Print and broadcast advertising still soft
44	Readership solid, advertising soft at Business Week Ad pages down 38.5% through April as measured by Publishers Information Bureau 14 issues in 2009 versus 16 in 2008 Readership is solid Maintaining average annualized subscription price No problem delivering our rate base of 900,000 Award-winning editorial 2009 awards include three from Society of American Business Editors and Writers and Overseas Press Club award for best business reporting abroad
45	Outlook for Information & Media Problems in the automobile industry affect J.D. Power and Associates and Broadcasting Local, national time sales soft at TV stations 2008’s solid performance in political advertising makes 2009 comparisons more challenging
46	Summing up for Information & Media Revenue to decline by 5% to 6% in 2009 200 to 300 basis point decline in operating margin, excluding 2008 restructuring charges
47	Summing up for The McGraw-Hill Companies Guidance for 2009: Revenue to decline 4% to 5% EPS in $2.20 to $2.30 range Operating margins for 2009 will reflect adoption of SFAS 160
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