1	3Q 2007 Earnings Call October 18, 2007 Presenters: Harold McGraw III Chairman, President and CEO Robert J. Bahash Executive Vice President and CFO Donald S. Rubin Senior Vice President, Investor Relations
2	Donald S. Rubin Senior Vice President, Investor Relations 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, 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; Educational Publishing’s level of success in 2007 adoptions and in open territories and enrollment and demographic trends; the level of educational funding; the strength of School Education, Higher Education, Professional and International publishing markets and the impact of technology on them; the level of interest rates and the strength of the economic recovery, 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 mortgage and asset-backed securities and related asset classes; 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 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, product-related 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 capital and equity markets, including future interest rate changes and concerns regarding the credit quality of subprime mortgages adversely impacting future debt issuances of U.S. residential mortgage backed securities and CDOs backed by subprime 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, computer and aviation industries; the successful marketing of new products, and the effect of competitive products and pricing.
4	Harold McGraw III Chairman, President and CEO The McGraw-Hill Companies
5	On course to produce double-digit EPS growth in 2007 EPS 3Q 2007: Increased 26.4% to $1.34 vs. $1.06 last year 3Q 2006 diluted EPS included a $0.03 restructuring charge Net income 3Q 2007: Grew by 18.2% to $452.0 million Revenue 3Q 2007: Increased 9.8% to $2.2 billion
6	McGraw-Hill Education Financial Services Information & Media
7	More progress at McGraw-Hill Education 3Q 2007 segment results Revenue + 9.9% to $1.2 billion Operating profit Increased by 16.1% to $411.1 million - Includes pre-tax gain of $4.1 million on divestiture of product line for parochial schools - 3Q 2006 had $5.6 million pre-tax restructuring charge Operating margin 35.0%, up from 33.1% in 3Q 2006
8	More progress at McGraw-Hill Education in 3Q School Education Group Revenue + 11.2% to $670.8 million Higher Education, Professional and International Group Revenue + 8.1% to $505.1 million
9	How we strengthened the School Education Group Reorganized basal operations in 2006 to improve competitive position Strengthened sales, marketing and product development Stepped up new product introductions to take advantage of opportunities in expanding market
10	Reorganization is paying off in increased market share 2006: Competed for about 80% of available dollars in state new adoption market Took a 20% share of a $685 million market 2007: Competed in virtually the entire state new adoption market which is growing 14% to 20% ($780 to $820 million) Taking industry-leading market share of 32%
11	Solid results in K–5 and 6–12 for School Education Group Led all competitors in California and South Carolina for K–8 science and 6–8 math in Texas Placed first in all six states adopting elementary music Treasures, K–5 reading program, led market in Indiana and competed well in Oregon and Tennessee 30%+ capture rates in both K–5 and 6–12 state new adoption markets Result of a reorganized and better-led team
12	Breadth of product offering: A key to success Added market share with spectrum of products Reform-based Everyday Mathematics New Mexico: Took leading share in K–5 math adoption Open territory: Sold well in urban and suburban markets Non-academic programs capture significant business in small but profitable markets: Health Business education Technical and vocational education Family and consumer science
13	Open territory: Growing more slowly than expected Anecdotal evidence of non-discretionary costs rising more rapidly than funding Substantial increases in transportation, heating and cooling costs for districts We are examining trends in more depth to gain greater insight into changes taking place Market down 1.4% after eight months 4Q orders could produce uptick in 2007
14	Supplemental market: Soft all year Products not clearly correlated with state standards are losing ground to new core curriculum programs What’s growing: New standards-based programs with extensive ancillary materials supplanting supplemental titles New demand for intervention programs Success with Kaleidoscope literacy and Number Worlds math programs
15	Outpacing the competition Strength in state new adoption market will offset some softness in non-adoption states Expect el-hi market to grow 3% to 5% in 2007 vs. 5% to 7% originally forecasted Expect slower growth in open territory, which had been expected to grow 4% in 2007 School Education Group Expects to outperform market for the year Outpacing competition in state new adoption market and open territory
16	Better results in testing Performance in custom and off-the-shelf products has improved Won new summative contract in Indiana and 5-year renewal in West Virginia Gains in formative market for Acuity, our new testing product Won 5-year, $80 million contract with New York City
17	State new adoption market looks robust for rest of decade
18	HPI Group continues to make progress International markets Strong school sales in Canada and Spain Solid higher education sales in Europe, Asia and India
19	More progress in U.S. college and university market Business and Economics imprint set the pace in 3Q with solid gains in four key disciplines Now expect market to grow 5% – 6% in 2007 We expect to keep pace with industry Originally expected market to grow about 4% in 2007
20	Digital products contributing to growth CourseSmart debuts this fall A new college publisher cooperative e-book and e-commerce website Enables instructors to evaluate textbooks and related material in one location Students offered a lower cost alternative plus functionality of the Web McGraw-Hill’s Higher Education group is starting with 148 e-books
21	Online offerings for professionals growing here and abroad Increasing institutional sales with two new verticals introduced this year Access Emergency Medicine Access Pharmacy Our professional books are making best-seller lists Rules for Renegades on four best-seller lists
22	Outlook for McGraw-Hill Education Solid third quarter performance and market share gains in elementary-high school market Good growth in higher education in U.S. and abroad Digital products continue to gain traction in higher education and professional markets Now expect: El-hi market to grow 3% to 5% U.S. college and university to grow 5% to 6% Operating margin for the segment will improve for the year
23	McGraw-Hill Education Financial Services Information & Media
24	Financial Services 3Q 2007 segment results Revenue +12.5% to $759.6 million Operating profit +17.3% to $346.7 million Operating margin 45.6%, up from 43.8% last year
25	Resilient portfolio kept S&P growing in 3Q Strong performers included: International credit ratings Double-digit growth Now 41.6% of ratings revenue Non-traditional ratings and services Double-digit growth Now 25.7% of ratings revenue Corporate and government ratings Financial information products and services
26	3Q issuance illustrates trajectory of business
27	3Q issuance illustrates trajectory of business
28	3Q issuance illustrates trajectory of business
29	Challenging 4Q comparisons for structured finance
30	Encouraged by prospects in asset-backed market Credit card issuance continues to show some strength Reasons for optimism: Scheduled refinancing Increased credit card utilization by consumers Solid issuance of auto loans as banks redeploy capital to fixed-rate, short-term auto loans instead of mortgage products
31	Pick up in commercial mortgage-backed securities more problematic Commercial real estate fundamentals remain strong… But activity has been chilled by subprime problems in residential market Widening spreads have kept investors on sidelines Reduced demand for new issuance
32	How a diversified and resilient portfolio delivers results Weaker U.S. structured finance will be at least partially offset by continuing strength in: Investment-grade corporates International markets Non-traditional ratings and services Annual contracts and surveillance fees Financial information products and services Vigorous expense management
33	Reasons for optimism in corporate market Investment-grade corporate issuance setting new records Industrial issuance will be driven by: Favorable financing environment M&A activity Investments in capital expenditures Financial services issuance will be driven by many of same factors, as well as balance sheet restructurings
34	Reasons for optimism in corporate market Spreads remain historically tight Rates remain low Expect a 10% to 11% increase in 2008 in potential refundings 4Q 2007: $47.9 billion of U.S. corporate debt to mature or be called 2008: Another $250.7 billion is potentially refundable New issuance calendar looks strong in coming months
35	Expanding financial information and index services Trading started in 3Q 2007 of six new ETFs based on S&P indices Including S&P’s first in fixed income space — S&P National Municipal Bond Index, sponsored by Barclays Global Investors 133 ETFs now based on S&P indices More are in the pipeline Making good progress licensing clients for S&P GSCI index, our new commodities index
36	Expanding financial information and index services Capital IQ product continues to grow rapidly Adding new clients Expanding its base with existing customers New modules increasing demand for Capital IQ Portfolio management tools Expect more innovation and more expansion in international markets
37	The outlook for credit markets Too soon to start making projections for 2008 A calm is returning to global credit markets Fragile stability is setting in More focus on credit quality going forward Benefits of securitization will remain strong after current turbulence has dissipated Liquidity Economic capital reduction Tradeability
38	The outlook for credit markets Timing of Fed rate cut S&P’s economist David Wyss thinks Fed rate cut will be in December, more likely January 2008 Chances of rate cut later this month have faded with 3Q growth appearing stronger than expected Housing recession has a way to go Wyss predicts housing prices will fall nationally by 11% peak to trough, with another 6% to 8% still to come No rebound expected until end of 2008 Areas hardest hit could experience price declines of 15% or more
39	Regulatory update SEC designated Standard & Poor’s an NRSRO in September SEC commenced an examination of rating agencies’ policies and procedures under U.S. Credit Rating Agency Reform Act of 2006 S&P is cooperating with SEC in connection with this examination
40	Regulatory update We will continue to work with various entities to answer questions about our policies and procedures SEC Regulators in Europe U.S. Congress
41	Regulatory update We don’t believe any pending legal, governmental or self-regulatory proceeding will result in a material adverse effect on our financial conditions or our operations
42	Outlook for Financial Services Summary A solid performance in third quarter despite tough market environment Worsening conditions for structured finance in 4Q, but rest of business remains strong Double-digit top- and bottom-line performance for the full year Margin expansion for the full year
43	McGraw-Hill Education Financial Services Information & Media
44	Information & Media 3Q 2007 segment results Revenue + 2.1% to $252.4 million Operating profit + 35.8% to $18.6 million - Pre-tax restructuring charge of $5.8 million in 3Q 2006 Operating margin 7.4%, up from 5.5% in 3Q 2006
45	Information & Media A segment in transition We are working to overcome softness in advertising with increased sales of higher-value information products and services delivered online
46	A segment in transition 3Q revenue in Broadcasting Group declined by 7.8% in non-election year 3Q revenue for Business-to-Business Group up 3.2% BusinessWeek’s ad pages off 24.6% in 3Q Growth from information products and services Key contributors: Pricing and news for oil, natural gas, and power from Platts Expansion of J.D. Power and Associates’ international research and proprietary studies Products and services delivered online to construction industry
47	BusinessWeek’s new look introduced in October Offering smart perspectives from around the world along side stories developed by BusinessWeek
48	Building on BusinessWeek’s healthy circulation Goal: Solidify BusinessWeek’s leadership as multi-platform global business media organization and build on healthy circulation statistics Newsstand sales up 25% in first half Key indicator of editorial vitality Average price per subscriber is up 1% Overall, circulation is steady
49	Outlook for Information & Media Summary A segment in transition Advertising remains soft Growth in online information products
50	On course to produce double-digit EPS growth in 2007 2007: Still expect improved operating margins for Financial Services and McGraw-Hill Education
51	On course to produce double-digit EPS growth in 2007 Guidance excludes: $0.04 charge for elimination of restoration stock option program in 1Q 2006 $0.06 charge for restructuring in second half of 2006 $0.03 gain from divestiture of mutual fund data business at Financial Services in 1Q 2007 On a GAAP basis, inclusive of these items, the 2007 earnings growth would be even stronger Management believes the non-GAAP financial measures provide more useful information to investors due to the unusual nature of the excluded items
52	Updating guidance for 4Q 2007 Financial Services faces toughest comparisons of the year in 4Q 4Q 2006: 22.1% revenue growth 4Q 2007: Expect a high single-digit decline in revenue and some margin contraction McGraw-Hill Education 4Q 2007: In a seasonally small quarter, expect decline in operating profit and margin compression 4Q 2007: Corporation’s revenues and earnings will not match last year’s results
53	Outlook for The McGraw-Hill Companies Summary 4Q 2007: Reduced revenue and earnings vs. last year 2007: Double-digit EPS growth 2007: Margin expansion for the year in Financial Services and McGraw-Hill Education
54	Robert J. Bahash Executive Vice President and Chief Financial Officer The McGraw-Hill Companies
55	30 million shares repurchased in 2007 3Q 2007: 10.5 million shares repurchased for $616 million 2007: $1.9 billion in nine months for 30 million shares. Average of $63.00 per share
56	A commitment to advancing total shareholder value Since 1996, MHP returned $8.0 billion to shareholders through dividends and share repurchases Includes more than $2.1 billion returned in first nine months of 2007
57	More shares remain in repurchase authorization program Capacity: 35 million shares left in new program authorized by Board in January 2007
58	Reduced fully-diluted weighted average shares outstanding 3Q 2007: 337.7 million shares 12.6 million share decrease vs. 2Q 2007 23.2 million share decrease vs. 3Q 2006
59	An increase in debt in 3Q 3Q 2007: $879 million net debt position, up from $636 million at end of 2Q As of September 30: On a gross basis, debt position is approximately $1.3 billion offset by $453 million in cash, primarily foreign holdings Debt reflects mix of short-term borrowings, primarily in commercial paper, with balance in extendible commercial notes and money market loans
60	Outlook for interest expense 3Q 2007: $15.4 million net interest expense More than double the $7.5 million in 3Q 2006 due to increased borrowing 2007: Expected in the range of $39-41 million Slightly lower than previous estimate of $40-42 million
61	A decrease in corporate expenses 3Q 2007: Down $9.5 million or 20.1%, compared to a year ago 3Q 2006 included $4.1 million of restructuring charges Excluding the $4.1 million charge, 3Q 2007 corporate expense decreased $5.4 million vs. same period last year Decrease primarily driven by: Lower incentive compensation accruals A one-time gain from the sale of an equity investment
62	Items influencing 3Q comparisons 3Q 2007: Sold a non-strategic product line within K–12 business Resulted in pre-tax gain of $4.1 million 3Q 2006: Pre-tax restructuring charges of $15.4 million, or $0.03 per share Primarily for employee severance in McGraw-Hill Education, Information & Media and at Corporate
63	Increase in tax rate for 3Q 3Q 2007: Effective tax rate 37.5%, vs. 37.2% in same period last year
64	Outlook for prepublication investments 3Q 2007: $76.9 million, vs. $64.3 million for same period last year 2007: Continue to expect $310 million
65	Growth in capital expenditures for property and equipment 3Q 2007: $63.0 million, vs. $24.6 million for same period last year New data center is expected to be completed in first half of 2008 Making technology investments to digitize products and services 2007: Still expect $250 million
66	Outlook for non-cash items Amortization of prepublication costs 3Q 2007: $110.5 million, vs. $103.3 million in same period last year 2007: Now expect $250 million, down slightly from previous estimate of $260 million
67	Outlook for non-cash items Depreciation 3Q 2007: $26.2 million, vs. $26.9 million in same period last year 2007: Now expect $120 million, down from previous estimate of $130 million due to change in timing of capital expenditures in 2007
68	Outlook for non-cash items Amortization of intangibles 3Q 2007: $11.7 million, vs. $12.1 million in same period last year 2007: Continue to expect $50 million
69	Another increase in unearned revenue Unearned revenue 3Q 2007: Just over $1 billion Up from $883.6 million in prior year, a 13.7% increase Revenue will be largely recognized over next twelve months Softer revenue forecast for 4Q 2007 is likely to impact unearned revenue growth in fourth quarter
70	3Q 2007 Earnings Call October 18, 2007
71	3Q 2007 Earnings Call October 18, 2007 Replay Options (Available from October 18-25) Telephone Domestic: 888-567-0387 International: +1-402-998-1761 No password required Internet Go to www.mcgraw-hill.com/investor_relations Click on the Earnings Announcement link under Investor Presentation Webcasts