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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; 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	World searching for solutions to current economic difficulties Housing prices continue to slide Probably won’t hit bottom until early 2010 Unemployment continuing to rise Spreads remain wide with light lending activity Steeper decline expected for U.S. GDP 4Q 2008: Possibly a 5.9% drop 1Q 2009: 5.8% projected decline
5	Will economy bottom out in next six months? Economists expect economy to find bottom in next six months with help of stimulus package, The American Recovery and Reinvestment Act Existing and prospective programs designed to: Stimulate spending Revive credit and housing markets Provide relief to the states Boost construction activity Help restore educational funding
6	U.S. government supports nearly the entire funding mix
7	Growing global support for credit markets Bank of England and European Central Bank also have important initiatives All this activity may underpin Federal Reserve’s forecasts for economic growth in 2010 Fed currently projecting a rise in real GDP of 2.5% to 3.3% over 4Q 2009, which is forecasted to decline 0.5% to 1.3% In light of economic uncertainty, MHP focused on: Managing costs Maintaining liquidity
8	Maintaining a strong financial position Reduced prepublication investments in 2009: At $225 million, $29 million less than 2008 2009 free cash flow: Projecting $430 million to $450 million Comparable to 2008 level, despite projection for lower operating results
9	Maintaining a strong financial position MHP’s free cash flow includes payment of dividends To calculate free cash flow, MHP starts with Cash Provided by Operations and subtracts: Prepublication investments Purchase of property and equipment Additions to technology projects Dividends MHP has cash to fund operations, make investments, pay down debt and return cash to shareholders
10	Returning cash to shareholders: A consistent dividend record
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12	Improved outlook for education funding Strong political and public support for improvement in el-hi education $106 billion for education in new federal stimulus package McGraw-Hill Education’s analysis: Both direct and indirect benefits
13	How the $106 billion will be distributed
14	Potential benefits for McGraw-Hill Education
15	Potential benefits for McGraw-Hill Education
16	U.S. Secretary of Education promises swift distribution of funds
17	Potential impact of new funding on the elementary-high school market
18	Outlook for 2009 state new adoption market 2009 state new adoption market still estimated at $675 million to $725 million More dollars available in 2010 and 2011 Only two significant changes to 2009 schedule Florida: Eliminated K-12 music South Carolina: Reduced math from K-12 to K-5 but planning to buy 6-12 math in 2010
19	Outlook for 2009 state new adoption market California and Florida remain key adoption states Florida: New adoption opportunity is in 6-12 literature California: Buying K-5 reading and second year of math adoption California’s new budget includes $355 million for instructional materials in fiscal year 2009 and $340 million in 2010 Situation could improve; funding from stimulus plan is not reflected in California’s new budget
20	In the field, annual product selection process is moving ahead normally Regional meetings organized by state education departments are proceeding normally Allow listed publishers to present their programs to local educators Meetings fairly well attended and generating follow-up presentations from our sales reps
21	Need more clarity on impact of stimulus before changing 2009 forecasts Still early days in 2009 el-hi school market Education markets will benefit from stimulus but we will stay with original forecasts in 2009 for now Elementary-secondary: 10% to 15% decline U.S. college and university market: 3% to 4% growth
22	Investing in digital content and data management for growth Growing appetite to acquire 21st century skills Confluence of content, technology and distribution is improving our ability to meet demand By providing information anytime and anywhere, we can enrich and improve learning while increasing access and mobility New digital offerings help us benefit from this trend Individualized online tutoring Lecture capture service Assessment placement tools enabling schools to determine most appropriate courses for entering students
23	New ways to “connect" college students and instructors New platform bridges printed page with online interactive environment Integrates an eBook, study tools and assessments all in one place Offered in 18 disciplines for 2009
24	New ways to “connect" college students and instructors “The Art of Public Speaking” by Stephen Lucas, the leading textbook in its field Interactive features enhance the print version
25	Current material integrated into print and online Print and online materials are updated frequently to incorporate current speeches to better engage students Chapter 5, “Analyzing the Audience” is correlated to a speech by Barack Obama
26	Current material integrated into print and online
27	Current material integrated into print and online Connect Lucas is updated to include latest speeches Adds timeliness to class discussion
28	Speech Capture benefits students and instructors Students upload video recordings of their speeches Instructors watch online and insert comments at precise points Students can view instructors’ critiques all in one place
29	The power of convergence Leveraging content and distribution Enriches the learning experience Enables instructors to create, administer and grade assignments completely online
30	Summing up for McGraw-Hill Education Federal funds may alleviate pressure on state and local education funding 10% to 15% decline in 2009 for el-hi market 3% to 4% growth in 2009 for U.S. college market For the segment in 2009: Low single-digit decline in revenue 300 to 400 basis point decline in margin, excluding 2008 restructuring charges, implies an operating margin of 9% to 10%
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32	Maintaining guidance for Financial Services Segment: Expect revenue to grow 1.5% to 2% in 2009 High single-digit growth at S&P Investment Services Slight decline in revenue at S&P Credit Market Services
33	2009 outlook for S&P Credit Market Services Non-transaction revenue: Expect to grow 1% to 2% Resilient revenue stream; accounted for 73% of ratings’ total 2008 revenue Nearly 90% is recurring revenue (surveillance fees, annual contracts and subscriptions) Grew in 2008 2009: Growth will be helped by modest price increases Transaction revenue: Expected to decline 10% to 12% 2008: Declined 55% 2009: Expect better comparisons in second half of year 18% of segment’s 2008 revenue from S&P Credit Market Services’ transactions
34	2009 outlook for S&P Investment Services 2009 revenue increase depends on continued growth in: Index services Sales of new products and services Modest price increases
35	2009 outlook for Financial Services Segment operating margin expected to decline 250 to 300 basis points, excluding impact of 2008 restructuring charges Implies expense increase of approximately 6%, resulting in operating margin between 37.7% and 38.2% Strengthening dollar will negatively impact growth in 2009 Foreign exchange rates mainly affect Credit Market Services’ revenue Guidance based on current foreign exchange rate projections
36	2009 outlook for Financial Services On constant currency basis: Segment revenue projected to increase approximately 5% to 6% Expenses will increase approximately 10% reflecting: Full-year impact of 2008 hiring, mostly overseas Continued investments in fast-growing businesses, but at reduced rate Increased stock-based compensation Benefits of 2008 restructuring actions will partially offset the increased expenses
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40	Strategic goal: An S&P index for all investments
41	More new indices, ETFs launched in January Introduced four new non-correlated indices in January: S&P Risk Control Indices/Euro – S&P 500 VIX Futures Index S&P Financial Trends Indicator – S&P CDS index series Three new exchanged-traded funds based on S&P indices listed in January: iShares S&P/Citigroup International Treasury Bond iShares S&P/Citigroup 1-3 year International Treasury Bond Horizons AlphaPro Managed S&P RTSX 60 (Canada)
42	Growth at S&P’s financial data and analytics business January release of Capital IQ includes: Embargoed brokerage research UK share registry data FDIC bank/branch mapping tool Fixed income summary page
43	A dialogue with regulators, policymakers, market participants S&P’s president Deven Sharma outlined 10 goals at CESR (Committee of European Regulators) conference on February 23 Ratings should be independently derived, credible and unbiased Regulators should conduct robust periodic inspections of how ratings firms comply with policies for managing potential conflicts of interest Ratings methodologies, processes and policies should be highly transparent Meaning and use of ratings should be clear, including level of risk inherent in a rating
44	A dialogue with regulators, policymakers, market participants Ratings on new and complex securities should be differentiated either through separate rating scales, or as S&P is doing, by providing information about risk characteristics of these securities Issuers of structured securities should be required to disclose public information about collateral pools that is currently provided to ratings firm confidentially Ratings policies should be applied clearly and consistently to minimize surprises when and if a rating is changed There should be transparency of communication between issuers and rating firms
45	A dialogue with regulators, policymakers, market participants Ratings performance statistics should be publicly disclosed, including comparability of ratings across asset classes and geographies There should be competitive market for ratings with more varying views on credit quality from qualified providers
46	The goal: Sound, internationally consistent regulation Our outreach program will continue around the world We expect some resolution of regulatory issues in Europe this spring Full text of Sharma’s remarks at www.standardandpoors.com
47	Assessing legal risk at Financial Services Three broad categories of law suits Underwriter claims based on Securities Act of 1933 Purchasers of subprime RMBS assert S&P is liable as an “underwriter” or “seller” S&P is not an underwriter or seller of securities
48	Assessing legal risk at Financial Services Three broad categories of law suits McGraw-Hill shareholder claims Includes a class action under Section 10(b) of Securities Exchange Act Motion for dismissal has been filed State law claims Cases assert state-law claims, including fraud claims McGraw-Hill has moved to dismiss allegations, asserting First Amendment protection for its rating opinions
49	Summing up for Financial Services Growth in non-transaction revenue at S&P Credit Market Services Growth in S&P Investment Services Slow start to 2009 Low single-digit revenue growth, probably 1.5% to 2% Margin decline of 250 to 300 basis points, excluding 2008 restructuring charges
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51	Information & Media: Benefits from new federal stimulus package Worth $130 billion to McGraw-Hill Construction’s customers Will stimulate more construction activity for the next three years 2009: Adds 7.6% to market, bringing total construction to $494 billion 2010: Adds 10.6% to market, bringing total construction to $542 billion
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54	McGraw-Hill Construction will capitalize on stimulus package Funding reinforces core strength as an industry leader Dodge: Tracking construction project leads Sweets: Finding building products Stimulus package also makes green projects more important
55	McGraw-Hill Construction will capitalize on stimulus package McGraw-Hill Construction has been pioneering “green” MHC tracks green projects and green market opportunities Award winning editorial content of green project and product information (e.g., GreenSource) Stimulus green drivers: Renovation and green the primary focus: $27+ billion Investment in renewable energy and conservation: $23+ billion Residential energy efficiency
56	Outlook for Information & Media segment Too soon to change forecast for this segment We expect revenue to decline in the low single digits despite continued growth at Platts Advertising environment is challenging and auto market is in turmoil Broadcasting group faces tough comparisons to 2008 given strong political advertising We expect operating margin to decline 200 to 300 basis points, excluding 2008 restructuring charges Implies 7.5% to 8.5% margin with expenses flat, largely due to benefits of 2008 restructuring actions
57	Summing up for Information & Media Low single-digit decline in revenue 200 to 300 basis point decline in operating margin, excluding restructuring charges in 2008 Growth in information products will be offset by declines in advertising Need to see when stimulus package will benefit McGraw-Hill Construction
58	Summing up for The McGraw-Hill Companies Expect 2009 to get off to slow start Forecast for 2009 unchanged Consolidated 2009 revenue to decline 1% to 2% compared to 2008 EPS in range of $2.20 to $2.30, but before any benefits of new federal stimulus and financial markets rescue package
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