1	2Q 2007 Earnings Call July 24, 2007 Presenters: Harold McGraw III Chairman, President and CEO Robert J. Bahash Executive Vice President and CFO Vickie Tillman Executive Vice President, Standard & Poor’s 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 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 level of education technology investments; 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, pension expense, distribution expenses, postal rates, 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	More progress toward achieving double-digit earnings growth in 2007 EPS 2Q 2007: Increased 31.7% to $0.79 Revenue 2Q 2007: Increased 12.5% to $1.7 billion Margin improvement in all three segments
6	Favorable economic outlook Inflation remains moderate at 2.2% U.S. GDP now growing at 2.1% for 2007 David Wyss, S&P’s chief economist, believes housing prices knocked 1 percentage point off GDP growth in 2007 Losses may not hit peak until late 2008 or early 2009 Non-residential construction continues to do well State budgets in good shape, which is good for education
7	McGraw-Hill Education Financial Services Information & Media
8	More progress at McGraw-Hill Education 2Q 2007 segment results Revenue + 5.8% to $647.3 million Operating profit Increased by 18.6% to $80.4 million Operating margin 12.4%
9	More progress at McGraw-Hill Education in 2Q School Education Group Revenue + 3.3% to $403.3 million Higher Education, Professional and International Group Revenue + 10.3% to $244.0 million
10	Great time to be in educational publishing We are building for a promising future Contrast with industry in flux: Changes in ownership Changes in organization Consolidation reduces number of major competitors from four to three in el-hi market We expect to gain share in 2007 in el-hi and U.S. college and university markets
11	Strengthened our School Education Group Created a single, well-coordinated K-12 team last Fall under direction of most experienced and successful managers We’re improving our performance in both K-5 and 6-12 markets
12	Strengthened our School Education Group Broad and deep product line-up is helping us perform well in academic and non-academic subjects Achieving high market share in non-academic subjects Health Business education Technical and vocational education Family and consumer science
13	2007 state new adoption market: 10 to 15% increase over last year
14	Participating in more of the addressable market in 2007 2006: Competed for about 80% of available dollars in state new adoption market 2007: We have products for virtually the entire state new adoption market We expect to take more than 30% of available dollars in total state new adoption market Math and science offer biggest opportunities this year
15	Drivers of 2Q el-hi revenue Results driven by 6-12 Texas math K-12 California science K-8 South Carolina science Optimistic about performance of Treasures Competing well in Indiana, Tennessee and Oregon Picking up new business in second year of California’s K-8 social studies adoption Outlook promising in 6-12 literature and reading market in Indiana, Oregon, Tennessee, and West Virginia
16	The outlook in open territory Won major adoptions in large urban markets Most small- and medium-sized districts don’t order until 3Q We expect open territory market to grow about 4% this year New edition of Everyday Mathematics will help us achieve open territory goals Generating new business in Philadelphia, New York City, Seattle We should be a leader in K-5 New Mexico adoption
17	Outlook for supplemental market Market has been soft this year but supplemental tends to be a second-half business We have created a strong line-up to meet need for targeted skills-based intervention programs Needed for both elementary and 6-12 students
18	Mixed results in testing Softness in custom and shelf products in 2Q Getting traction with Acuity, our new formative testing product Suite of diagnostic and predictive benchmark assessments Won 5-year, $80 million arrangement with New York City—largest formative contract awarded in U.S. Also selected by Indianapolis, IN and Mesa, AZ Acuity Algebra selected by RAND Corporation for five-year study being funded by U.S. Department of Education
19	Off to good start in U.S. college and university market Three major imprints performing well Science, Engineering and Math Business and Economics Humanities, Social Sciences and Languages Digital products producing incremental revenue Homework management products give students access to interactive online textbooks New iPod and MP3 compatible features in media-enhanced texts proving popular with students
20	Progress in professional markets 2Q 2007 benefited from publication of 10^th edition of Encyclopedia of Science and Technology, issued every five years 20-volume work is selling well here and abroad Other best-sellers in professional markets Harrison’s Manual of Medicine, 16^th Edition The Millionaire Maker’s Guide to Creating a Cash Machine for Life Nursing Spectrum Drug Handbook 2008 Current Medical Diagnosis and Treatment, 2007, 46^th Edition
21	Outlook for McGraw-Hill Education A solid year is taking shape in education El-hi market expected to grow 5% to 7% U.S. college and university expected to grow about 4% We expect to outperform in both markets We anticipate margin expansion for the segment for the full year
22	McGraw-Hill Education Financial Services Information & Media
23	Financial Services 2Q 2007 segment results Revenue +21.2% to $821.0 million Operating profit +27.9% to $401.4 million Operating margin 48.9%
24	Many contributors to success in second quarter Unique blend of fixed income and equity services reduce our dependency on any single asset class Financial Services’ strong and growing position in international markets Growing array of new services in both fixed income and equity markets Durability of powerful growth trends in our markets Securitization, globalization, privatization and disintermediation
25	How a diversified and resilient portfolio delivers results International markets grew at double-digit rate 38.9% of ratings revenue in 2Q, up from 36.6% for same period a year ago U.S. corporates set a new record for issuance for second quarter in a row U.S. investment-grade up 33.0% High-yield up 42.6% Public finance grew solidly because of new money issuance and refundings
26	How a diversified and resilient portfolio delivers results Structured finance globally strong despite 12.4% decline in dollar volume issuance in U.S. residential mortgage-backed securities Strength in European residential mortgage-backed securities Solid performances in all asset classes in Europe
27	How a diversified and resilient portfolio delivers results Commercial mortgage-backed securities market grew solidly here and abroad U.S. CDO market met our expectations; issuance grew 58% in 2Q Asset-backed securities market saw more modest gains
28	How a diversified and resilient portfolio delivers results Ratings and services not directly linked to public new issuance also grew at double-digit rate in 2Q Accounted for 22.6% of ratings revenue in 2Q compared to 24.1% in same period last year Bank loans a key driver
29	How a diversified and resilient portfolio delivers results Capital IQ product continues to grow rapidly Approximately 2,000 clients—a 29% increase over prior year Acquisition of ClariFi strengthens our position Good growth in data and information market from: Compustat RatingsDirect RatingsXpress
30	How a diversified and resilient portfolio delivers results $178.6 billion in assets under management in ETFs based on S&P indices at end of June 2007 20.9% increase compared to June 2006 127 ETFs linked to S&P indices 30 launched so far this year S&P/Citigroup Indices form backbone for creating new customized indices, benchmarks
31	Continuing to leverage index products and services Successfully licensing recently acquired commodity indices from Goldman Sachs Morgan Stanley Barclays Bank Deutsche Bank National Bank of Canada UBS Wachovia Cargill Pipeline is growing
32	Outlook for Financial Services We expect low double-digit growth in second half Tougher comparisons in 4Q
33	Outlook for U.S. corporate issuance Corporate issuance off to strong start in 2007 Large new-issue calendar Attractive financing environment
34	Outlook for U.S. public finance Dollar volume issuance started on an upswing at start of year We expect somewhat slower growth for balance of 2007
35	Outlook for U.S. residential mortgage-backed securities market Dollar volume issuance off 11.6% in first half Further decline in second half Dollar volume issuance could decline by 15% to 20% in 2007 Potential deals on hold as issuers reprice to new criteria and gauge market’s appetite for RMBS
36	Outlook for U.S. commercial mortgage-backed securities market Market up 36.8% in first half, driven by low interest rates and strong commercial real estate fundamentals Pipeline is robust
37	Outlook for U.S. asset-backed securities market Dollar volume issuance up 22.5% in first half Pipeline looks solid
38	Outlook for U.S. collateralized debt obligations Soared last year and off to fast start in 2007 Expect more growth in CDO market in second half, but at rates well below blistering pace established in third and fourth quarters last year
39	Outlook for European structured finance Pipeline looks very good Expect solid second half with all asset classes showing strength with the toughest comparison coming in 4Q
40	More progress from data, information and indices We expect a solid second half in 2007
41	Outlook for Financial Services Summary Continued strength overseas More growth in structured market Solid prospects in the corporate market Growing contributions from data, information and indices Low double-digit growth in second half, tougher comparison in 4Q Margin expansion for the full year
42	Federal court reaffirms strong legal protection for rating agencies From June 2007 decision: “Imposing such liability would open the floodgates of litigation against credit rating agencies by disappointed investors and creditors and chill the agencies from vital and vigorous participation in the ratings process and the marketplace, where the free flow of information and conflicting views ideally establish reliability.”
43	Vickie Tillman Executive Vice President Standard & Poor’s
44	Standard & Poor’s analysis of credit markets More than a year ago, S&P identified the deterioration in RMBS securities backed by subprime loans credit quality and began signaling the market In June, S&P signaled potential emerging issues with the collateralized loan obligations The covenant-lite juggernaut is raising CLO risks
45	Standard & Poor’s analysis of credit markets S&P does not structure or engineer transactions nor does it arbitrate on which deals can or cannot proceed S&P guidelines and criteria are publicly available 4. Tightening criteria may have an adverse impact on market share Nevertheless, S&P adjusts criteria to reflect how changing conditions impact credit risk to maintain an excellent track record
46	Standard & Poor’s analysis of credit markets Performance of S&P’s structured finance ratings has been exceptionally strong 0.87% average five-year default rate for investment-grade structured finance securities 15.42% average five-year default rate for speculative-grade structured securities
47	Standard & Poor’s analysis of credit markets In April 2006, S&P identified heightened credit exposure of affordability products with layering of multiple risk factors in loan programs S&P adjusted its assumptions
48	Standard & Poor’s analysis of credit markets S&P’s concern: Duration and severity of issues affecting future credit performance Need sufficient time and data to see how collateral pools are performing S&P’s recent actions on RMBS transactions are a continuation of applying adjusted assumptions to delinquency default and loss trends
49	Standard & Poor’s analysis of credit markets Actions in July: S&P downgraded 562 classes of S&P-rated RMBS transactions backed by first lien subprime loans between 4Q 2005 and 4Q 2006 $6.3 billion in securities represent only 1.1% of the total first lien loans S&P downgraded 418 classes of S&P-rated RMBS transactions backed by closed-end second liens Represent $3.8 billion, or 6.1% of this class
50	Standard & Poor’s analysis of credit markets Result of first lien subprime downgrades 74 synthetic CDOs downgraded 19 classes of cash flow and hybrid CDOs placed on CreditWatch negative An additional 33 tranches from 8 U.S. cash flow and hybrid CDOs ($1.76 billion) placed on CreditWatch negative Result of second lien subprime downgrades 17 classes of cash flow and hybrid CDOs placed on CreditWatch negative
51	Standard & Poor’s analysis of credit markets Downgrades on first lien subprime collateral did not impact any AAA ratings Eight classes of AAA second lien RMBS downgraded No ratings fell below investment-grade S&P will monitor these issues and take further ratings actions as deemed appropriate
52	Standard & Poor’s analysis of credit markets Keeping market informed of S&P decisions Provided S&P’s approach for rating new CDOs containing RMBS securities backed by non-prime collateral Currently reviewing RMBS transactions backed by Alt-A and net interest margin collateral Will be completed in next several weeks
53	Standard & Poor’s analysis of credit markets Keeping market informed of S&P decisions Monitoring transactions issued after January 2007 under new assumptions Will take such rating actions as we deem appropriate as more loss data becomes available Loans made prior to January 2005 are not at same level or risk as those made since then
54	Standard & Poor’s analysis of credit markets Our role: Provide an independent opinion on creditworthiness based on demonstrable facts May put S&P at odds with market sentiment S&P takes longer term view and does what it believes is right for the market
55	McGraw-Hill Education Financial Services Information & Media
56	Information & Media 2Q 2007 segment results Revenue + 4.7% to $249.9 million Operating profit + 13.1% to $14.7 million Operating margin 5.9%
57	Business-to-Business Group Revenue grew 7.9% in 2Q to $223.1 million Group includes our best-known brands J.D. Power and Associates Platts BusinessWeek McGraw-Hill Construction Aviation Week Key contributors Sweets transformation Growth in Platts’ news and pricing services for oil, natural gas and power markets
58	Listening to the Voice of the Customer J.D. Power and Associates benefited from: New studies in financial services and healthcare sectors Increased penetration from existing studies
59	The transformation of Information & Media BusinessWeek’s global print edition off 20.0% in 2Q, according to Publishers Information Bureau BusinessWeek.com continues to expand New Company Insight Center is utilizing Capital IQ’s extensive database of company fundamental data Search traffic has been growing steadily
60	Broadcasting Group Revenue declined by 16.0% to $26.8 million in 2Q Non-election year Automotive off sharply 3Q pacing is currently off 4% May see political advertising in second half
61	Outlook for Information & Media Summary A soft year in advertising Growth in information services Margin expansion for the full year
62	Summing up for The McGraw-Hill Companies
63	Outlook for The McGraw-Hill Companies Summary We expect to achieve goal of double-digit earnings growth in 2007, even though growth rate will probably slow during second half as compared to very strong first-half performance We expect low double-digit growth from Financial Services in second half, tougher comparisons will make fourth quarter more challenging Some operating margin compression may occur in our segments in second half We still expect improved operating margins in all three segments for full year
64	Robert J. Bahash Executive Vice President and Chief Financial Officer The McGraw-Hill Companies
65	Increased share repurchase authorization for 2007 New 2007 repurchase authorization: Up to 30 million shares In April, Board of Directors approved an increase of up to an additional 15 million shares 2Q 2007: 6.3 million shares repurchased for $431.6 million 19.5 million shares repurchased in first half Capacity: Half a million shares remaining in 2006 buyback program 45 million shares in new program authorized by Board in January 2007
66	A commitment to advancing total shareholder value Since 1996, returned $7.3 billion to MHP shareholders through dividends and share repurchases Includes more than $1.4 billion returned in first half of 2007
67	Reduced fully-diluted weighted average shares outstanding 2Q 2007: 350.3 million shares 15.2 million share decrease compared to 2Q 2006 11.2 million share decrease compared to 1Q 2007
68	Ramped up our borrowings Increased borrowing to fund additional share repurchases and seasonal cash requirements 2Q 2007: $636 million net debt position, up from $178 million at end of first quarter As of June 30: On a gross basis, debt position is $994.5 million offset by $358.1 million in cash, primarily foreign holdings Debt reflects diversified mix of short-term borrowings in the commercial paper, extendible commercial note, and money market loan markets
69	Outlook for interest expense 2Q 2007: $12.1 million net interest expense A $3.5 million increase compared to last year due to increased borrowing If we complete full 30 million share repurchase program for 2007, will be in a net debt position at year end 2007: Expected in the range of $40-42 million Higher than previous estimate of $24-26 million, due primarily to additional 15 million in assumed share repurchases
70	Revenue recognition and transformation of Sweets Transformed Sweets from a primarily print catalog into a bundled print and online service in 2006 Associated accounting change benefits year-over-year comparison for Information & Media segment 2Q 2007 results reflect: $6.5 million of incremental revenue $5.8 million of incremental operating profit
71	Corporate expenses 2Q 2007: Increased $6.9 million or 20.1%, compared to a year ago Categories within corporate expense that increased: New Business Process Management program Incentive compensation Corporate advertising Vacant space from downsizing
72	Outlook for tax rate 2Q 2007: Effective tax rate 37.5% 2007: We expect to maintain this rate for balance of year
73	Outlook for prepublication investments 2Q 2007: $75.2 million, compared to $63.5 million for same period last year 2007: Continue to expect $310 million
74	Growth in capital expenditures for property and equipment 2Q 2007: $60.7 million, compared to $20.5 million for same period last year Construction of new data center is underway Making technology investments to digitize our products and services 2007: Continue to expect $250 million
75	Outlook for non-cash items Amortization of prepublication costs 2Q 2007: $56.8 million, compared to $53.0 million in same period last year Ramped up publishing schedule last year in anticipation of strong el-hi adoptions 2007: Continue to expect $260 million
76	Outlook for non-cash items Depreciation 2Q 2007: $28.8 million, compared to $28.3 million in same period last year 2007: Continue to expect $130 million, reflecting higher level of capital expenditures in 2007 and full year of depreciation from 2006 capital expenditures
77	Outlook for non-cash items Amortization of intangibles 2Q 2007: $11.5 million, compared to $12.1 million in same period last year 2007: Continue to expect $50 million
78	Increase in unearned revenue Unearned revenue 2Q 2007: Grew to over $1 billion Up from $893 million in prior year, an approximate 15% increase Increase would have been larger excluding a mutual fund data business that was divested in March 2007
79	2Q 2007 Earnings Call July 24, 2007
80	2Q 2007 Earnings Call July 24, 2007 Replay Options (Available from July 24-31) Telephone Domestic: 866-511-5160 International: +1-203-369-1959 No password required Internet Go to www.mcgraw-hill.com/investor_relations Click on the Earnings Announcement link under Investor Presentation Webcasts