1	4Q 2007 Earnings Call January 24, 2008 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 2008 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 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 mortgage and asset-backed securities and related asset classes; the regulatory environment affecting Standard & Poor’s; 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, 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	Outlook for U.S. economy Federal Reserve cut interest rates by 75 basis points on January 22 David Wyss, S&P’s chief economist, thinks odds of U.S. slipping into recession is 50/50 Wyss thinks peak of economic growth occurred last November and trough will come this September/October Housing recession will be with us all year Prices won’t bottom until end of 2008 Expects more rate cuts by Fed as early as March
6	McGraw-Hill Education Financial Services Information & Media
7	McGraw-Hill Education 2007 segment results Revenue + 7.2% to $2.7 billion Operating profit Increased by 21.5% to $400.0 million - Includes 4Q 2007 pre-tax restructuring charge of $16.3 million - Reflects $5.6 million pre-tax restructuring charge in 3Q 2006 - Reflects 10.4 million pre-tax restructuring charge in 4Q 2006 Operating margin 14.8%, up from 13.0% in 2006
8	Better than expected 4Q 2007 performance at McGraw-Hill Education 4Q 2007 segment results Revenue + 4.3% to $550.9 million Operating profit Loss of $791,000 - Includes restructuring charge (excluding restructuring charge, operating profit increased 5.0%) Operating margin Declined, but unchanged compared to 2006 if restructuring charges excluded
9	Strong performance at the School Education Group School Education Group 2007 revenue + 6.8% to $1.4 billion 4Q revenue + 6.0% to $197.9 million
10	Sustained growth in the School Education Group Achieved 2007 results through new products and services and reorganized school team Healthy state new adoption calendar in 2008 Expect market to grow 10% to 15% to $900 to $950 million We will be competing in virtually the entire market We are well positioned for the biggest opportunities in 2008 California K-8 math Florida K-5 reading Texas K-5 math Success with elementary program in 2007 will benefit us in 2008 Programs tend to include consumable materials and items that generate residual orders in subsequent years
11	Competing with a broad spectrum of products Compete in academic and non-academic curriculum areas Strong market shares contribute to our results each year Art and music Family and consumer science Technical and vocational education Health Business education Achieving steady growth with intervention programs Educators seek well-designed research-based materials for students needing extra help to reach grade-level goals Florida and California adopted intervention programs for purchase in 2008 Made lists in both states
12	Intervention programs contributing to our success Strong line-up of skills-based intervention programs includes: Number Worlds Language for Learning Reading Success Science Snapshots Treasures’ satellite programs are also generating incremental revenue Triumphs for intervention Treasure Chest for English-language learners
13	Outlook for open territory: Wild card for 2008 Open territory expected to grow 1% to 2% Factors affecting growth: Very likely pent up demand for new basal programs and intervention materials Limited increases in federal funding and local/state budget levels We expect overall el-hi market to grow 4% to 5% in 2008
14	Testing improved in 2007; expect more progress in 2008 Gains in 2007 for custom and off-the-shelf revenue We expect more progress in 2008 Public’s insistence on accountability has not abated Recently-enacted Federal education budget will keep all of No Child Left Behind’s major programs intact, including state accountability testing Acuity, our formative assessment program, is used at district level in many states across the country Won 5-year, $80 million contract with New York City Statewide adoptions in Indiana and West Virginia in 4Q 2007
15	Testing improved in 2007; expect more progress in 2008 States and districts are expected to increase their expenditures on formative and English-language learner testing Our LAS Links assessment program is very successful in the English-language learner market We will continue to invest in technology to: Create innovative testing products Improve efficiencies in developing, delivering and scoring McGraw-Hill assessments
16	Growth in the HPI Group in 2007 Higher Education, Professional and International Group 2007 revenue + 7.6% to $1.3 billion 4Q revenue + 3.4% to $353.0 million
17	Digital transformation is moving rapidly in higher education and professional markets Digital product revenue grew substantially faster than traditional products in 2007; expect same in 2008 Expect college and university market to grow 3% to 4% in 2008 Think we can do better Digital products will be one of the keys Continuing to invest in ongoing digital transformation of content and tools for: Course management Online instruction courses eBooks
18	Digital transformation is moving rapidly in higher education and professional markets Demand for digitally-delivered products most advanced in professional world Our digital subscription revenue continues to grow faster than conventional product sales as we expand our offerings in science, medicine and engineering
19	Outlook for McGraw-Hill Education 6% to 8% top-line growth in 2008 Margins may decline 50 to 100 basis points due to accelerating investments in technology Increased prepublication amortization
20	McGraw-Hill Education Financial Services Information & Media
21	Financial Services 2007 segment results Revenue +10.9% to $3.0 billion Operating profit +13.1% to $1.4 billion - Includes a pre-tax gain of $17.3 million on mutual fund business divestiture and an $18.8 million pre-tax restructuring charge Operating margin 44.6%, up from 43.8% last year
22	How the U.S. new issue market shifted in 2007
23	New issuance illustrates trajectory of 4Q business
24	Financial Services 4Q 2007 segment results Revenue - 7.2% to $736.7 million Operating profit - 22.8% to $263.4 million - Including restructuring charge, or 17.2% excluding charge Operating margin 35.8% including restructuring charge, or 38.3% excluding charge
25	Outlook for Financial Services in 2008
26	Combination of steps to produce growth for segment in 2008 Financial Services will: Manage costs very tightly Take advantage of opportunities in Financial Services’ diversified portfolio Steps will help us hold operating margin decline in 2008 to between 125 and 225 basis points
27	Benefiting from the diversity of Financial Services’ portfolio Standard & Poor’s Investment Services Revenue grew by 15.6% in 4Q 2007 and by 16.3% in 2007 to $782 million Produced 26% of Financial Services’ 2007 revenue We expect another year of growth in Investment Services Growing family of liquid and investable indices Capital IQ, Compustat, ClariFI
28	Diversity within Credit Market Services Ratings business is diversified Geography Fee structure Product mix Ratings is not all about structured finance or U.S. new issuance
29	Capitalizing on diversified sources of revenue
30	Importance of international revenue and overseas growth
31	Growth in non-traditional ratings will be important in 2008
32	Revenue vs. new issuance in 4Q 2007
33	Diversification of Financial Services Start 2008 with $790 million of deferred revenue High expectations for Standard & Poor’s Investment Services, which produces 25.7% of segment’s revenue International rating revenue now represents more than 40% of Credit Market Services’ revenue Should continue to grow, offsetting a decline in domestic ratings in 2008
34	Why S&P will grow in 2008 Non-traditional products and services expected to continue growing in 2008 Now represent just over 25% of Credit Market Services’ revenue We expect a bigger contribution from non-transaction portion of Credit Market Services Surveillance fees Annual contracts Subscriptions
35	Corporates will continue to grow in 2008 Interest rates remain low Will help drive debt-financed strategic merger and acquisition deals, as well as investments in infrastructure Companies will have more maturing debt to refinance Corporate investment-grade bond maturities in 2008 estimated to be over $600 billion, up from $483 billion in 2007 Financing conditions remain favorable overseas
36	Facing challenges in the structured finance market Predominantly a transaction-based market New dollar volume issuance in the U.S. structured finance market decreased by 22.2% in 2007 We expect conditions to be challenging for most of 2008 Residential mortgage issuance is expected to decline significantly due to: Adverse conditions in housing market Tightening lending standards Shift to agency origination 2007 market U.S. RMBS dollar volume fell by 40.4% in 2007; expected to decline significantly in 2008 European RMBS issuance grew by 53.2% Total European structured market increased by 33.3%
37	Outlook for new issue market U.S. CMBS market Tumbled 56% in 4Q 2007; finished up 6.8% for 2007 Outlook uncertain as pension funds and insurance companies have stayed on sidelines U.S. CDO market Finished up 1.4% in 2007 Expect significant decline in 2008 U.S. CDO issuance
38	Outlook for new issue market U.S. asset-backed securities market Better prospects Should see increases as credit card receivables replace home equity loans and as issuers of auto loans tap this market
39	Information products will benefit S&P Credit Market Services Strong demand for two key S&P products: RatingsDirect RatingsXpress
40	Difficult time in credit markets Headline risk will continue in 2008 on the regulatory and legal fronts Although lack of legal/factual merit is not deterring critics, we are confident that S&P will be part of the solution emerging over the coming months
41	Regulatory update S&P continues to work closely with regulators here and abroad Working on important initiatives that will be made public shortly Will underscore our efforts to strengthen ratings process and better serve markets
42	Outlook for Financial Services Summary Diversity more important than ever in 2008 Revenue will grow 2% to 4% Operating margin will decline no more than 125 to 225 basis points Slow growth in first half, followed by pickup in second half
43	McGraw-Hill Education Financial Services Information & Media
44	Information & Media 2007 segment results Revenue + 3.6% to $1.0 billion Operating profit + 27.2% to $63.5 million - Pre-tax restructuring charge of $6.7 million in 4Q 2007 - Reflects 3Q 2006 $5.7 million pre-tax restructuring charge - Reflects 4Q 2006 $3.0 million pre-tax restructuring charge Operating margin 6.2%, up from 5.1% in 2006
45	Information & Media 4Q 2007 segment results Revenue + 3.6% to $282.1 million Operating profit - 6.1% to $20.2 million - Pre-tax restructuring charge of $6.7 million in 4Q 2007 - Operating profit increased 9.8% excluding charge Operating margin 7.2%, compared to 7.9% in 4Q 2006
46	Information & Media Transformation in this segment is vitally important Progress was achieved in 2007 Expect to do so again in 2008
47	Business-to-Business Group 2007 revenue increased 6.2% 4Q revenue increased 6.3% BusinessWeek’s ad pages off 21.8% in 4Q and 18.2% for 2007 Providing higher-value information was key to our performance News and pricing services delivered online to world energy market Improved market penetration of studies and proprietary services from J.D. Power and Associates Growth in Asia-Pacific markets
48	Decline at Broadcasting Group Revenue declined in non-political year 2007 revenue declined 14.6% 4Q revenue in declined by 14.9% Expect to see big rebound in 2008, a political year
49	We expect advertising to stabilize at BusinessWeek Holding rate base at 900,000 Increasing ad rates by 4% over 2007 One-year subscription price will remain at $59.97
50	Will continue to migrate to higher value-added opportunities Online syndicated studies from J.D. Power and Associates Growth of subscription-based products in the energy markets
51	Outlook for Information & Media Summary 6% to 8% top line growth in 2008 Increased political advertising at Broadcasting More growth in online information products Improved operating margin
52	Outlook for The McGraw-Hill Companies McGraw-Hill Education and Information & Media 2008 revenue growth of 6% to 8% Financial Services 2008 revenue growth of 2% to 4%
53	Outlook for 2008 Financial Services Diversity and breadth of portfolio will be significant factor in 2008 performance Growth in S&P’s Investment Services and other ratings markets will partially offset negative impact on segment’s operating margin from fall-off in structured finance Segment’s operating margin may decline between 125 and 225 basis points Continued uncertainty in financial markets could impact this forecast
54	Outlook for 2008 McGraw-Hill Education We expect operating profit to grow in low single-digit range because of substantial increase in prepublication costs and investments in technology Operating margin may decline 50 to 100 basis points Information & Media Anticipate improvement in operating margin
55	Expect to produce another year of earnings growth in 2008 Expect earnings per share to increase 3% to 5% Net income will decline slightly, reflecting increased interest expense for share buybacks 2008 guidance excludes: $0.08 restructuring charge in 4Q 2007 $0.03 gain from divestiture of mutual fund data business in 2007
56	Outlook for The McGraw-Hill Companies Summary We got off to a very fast start in 2007, so comparisons in the first half of 2008 will be very challenging We expect a better performance in the second half and to finish 2008 on an upswing
57	Robert J. Bahash Executive Vice President and Chief Financial Officer The McGraw-Hill Companies
58	37 million shares repurchased in 2007 4Q 2007 7 million shares repurchased for $322.7 million 2007 37 million shares repurchased for $2.2 billion
59	A commitment to advancing total shareholder value Since 1996, MHP returned $8.4 billion to shareholders through dividends and share repurchases Includes approximately $2.5 billion returned in 2007
60	More shares remain in repurchase program Capacity: 28 million shares left in the 2007 repurchase program authorized by Board Last October, the Board signaled its approval for the repurchase of remaining shares over time
61	Board will review dividend on January 30th Cash dividend has increased annually for 34 consecutive years Since 1974, the dividend has grown at a compound rate of 10.4%
62	Reduced fully-diluted weighted average shares outstanding 4Q 2007: 330.8 million shares 7 million share decrease vs. 3Q 2007 33.4 million share decrease vs. 4Q 2006
63	Shift from cash to debt position due to share repurchases 4Q 2007: $801.4 million net debt position, down from $878.8 million at end of 3Q On a gross basis, debt at year-end is approximately $1.2 billion, offset by $396.1million in cash – primarily foreign holdings Compares to $353.5 million cash position at end of 2006 Change is due to share repurchases
64	Shift from cash to debt position due to share repurchases Issued $1.2 billion of unsecured senior notes in November 2007 Spread evenly across 5-, 10-, and 30-year tranches Ended 2007 with no commercial paper outstanding Plan to enter the market in 2008 due to the seasonal nature of our businesses
65	Outlook for interest expense 2007: $40.6 million net interest expense 4Q 2007: $11.9 million compared to $70,000 in 4Q 2006 2008: Expected to increase to $80 to $100 million range
66	An increase in corporate expenses 4Q 2007: $46.0 million, a $5.2 million increase compared to a year ago Includes $1.9 million pre-tax restructuring charge 4Q 2006 included a $2.7 million pre-tax restructuring charge Increase primarily driven by: Increased incentive compensation Expenses related to operating efficiency programs and other corporate business process improvements 2008: Expect low single-digit increase
67	The outlook for McGraw-Hill Education in 2008 Increase of approximately $45 million in pre-publication amortization due to significant prepublication investments Increased investments for digital transformation El-hi: More technology required in products Testing: Must invest to keep products at the cutting edge, launch new ones, and improve efficiency to take pressure off the margins Higher Education: Today’s students accustomed to laptops, desktops, iPods and high bandwidth connectivity Global Medical Information: More than 50% of content is accessed digitally We anticipate $18 million in costs for this segment in 2008 related to migration to our new state-of-the-art data center
68	The outlook for McGraw-Hill Education in 2008 McGraw-Hill Education’s 2008 operating margin may decline 50 to 100 basis points No longer expect to achieve 20% operating margin by 2010 Remain focused on various efforts to improve operating margin at Education A $16.3 million pre-tax restructuring charge for severance in 4Q
69	Growth in unearned revenue 2007: Approximately $1.1 billion, a 10.4% year-over-year growth $790 million, or 73% of unearned revenue, comes from S&P’s surveillance and fee structures and data and information products Expect growth to moderate in 2008 given slower revenue growth forecast Revenue will be largely recognized over next twelve months
70	Outlook for tax rate 2007: Effective tax rate 37.5% vs. 37.2% in 2006 2008: Expect rate to be approximately the same as 2007 on full-year basis
71	Increasing prepublication investments 4Q 2007: $89.4 million 2007: $299 million Lower than initial projections due to timing and some operating efficiencies 2008: Expect $300 to $310 million Reflects necessary investments to take advantage of strong adoption opportunities
72	Growth in capital expenditures for property and equipment 4Q 2007: $83.2 million 2007: $229.6 million, compared to $126.6 million in 2006 Driven by technology investments to digitize products and services Migration to new data center begins in April and will take approximately one year to complete Total migration costs in $40 million range 2008: Expect CapEx of approximately $170 million Normal replacement expenditures Software and technology equipment for data center Continued investments for creation of new and enhanced products and services
73	Outlook for non-cash items Amortization of prepublication costs 4Q 2007: $44.8 million 2007: $240.2 million 2008: Expect approximately $285 million, a $45 million increase
74	Outlook for non-cash items Depreciation 4Q 2007: $28.7 million 2007: $112.6 million 2008: Expect approximately $125 million Completion of data center Purchase of new technology equipment for center Other increases in property and equipment
75	Outlook for non-cash items Amortization of intangibles 4Q 2007: $13.6 million 2007: $48.4 million 2008: Expect approximately $52 million
76	Measuring 2007 free cash flow
77	Outlook for free cash flow in 2008 2008: Anticipate range of $850-$900 million, about equal to 2007 Guidance reflects: Lower net income Continued investments Prudent management of working capital Cash outflow for 2007 restructuring actions, which will be largely offset by savings from these actions
78	4Q 2007 Earnings Call January 24, 2008
79	4Q 2007 Earnings Call January 24, 2008 Replay Options (Available from Jan 24-31) Telephone Domestic: 888-566-0568 International: +1-203-369-3064 No password required Internet Go to www.mcgraw-hill.com/investor_relations Click on the Earnings Announcement link under Investor Presentation Webcasts