Second                       Second
                                      Quarter          %           Quarter
                                       2009         Decrease        2008

              Revenue              $ 1,465,180       (12.4 )%   $ 1,673,225
              Operating profit*    $   311,784       (21.7 )%   $   398,217

              % Operating margin          21.3 %                       23.8 %

* Operating profit is income before taxes on income, interest expense and corporate expense.

• Second quarter revenue and operating profit declined for all three operating segments.

• Financial Services revenue and operating profit declined 8.4% and 8.8%, respectively, largely due to continued weakness in Credit Market Services. A modest decrease in Investment Services was driven by declines in investment research products, index services and the impact of foreign exchange rates, partially mitigated by growth at Capital IQ.

• McGraw-Hill Education revenue and operating profit declined 17.2% and 70.1%, respectively, primarily due to softness at School Education Group partially offset by an increase in revenue at Higher Education.

• Information & Media revenue and operating profit declined 11.5% and 41.8%, respectively, driven by both Business-to-Business Group and Broadcasting where current economic weakness continues to drive declines in advertising. These decreases were partially offset by growth in Platts.

• Foreign exchange rates had an unfavorable impact on revenue and operating profit of $37.2 million and $4.8 million, respectively.

• Product revenue and expenses consist of the McGraw-Hill Education and the Information & Media segments, and represents educational and information products, primarily books, magazine circulations and syndicated study programs.

• Product revenue decreased 17.1% or $108.3 million, primarily due to McGraw-Hill Education, driven by softness at School Education Group and the unfavorable impact of foreign exchange.

• Product operating expenses decreased 3.6% or $10.0 million, primarily due to McGraw-Hill Education decreased sales and a change in sales mix. Amortization of prepublication costs increased $5.1 million or 7.7% driven by timing of the adoption cycle.

• Product selling and general expenses decreased 14.0% or $38.6 million, primarily due to McGraw-Hill Education's ongoing cost saving initiatives.

• Product margin decreased 880 basis points to 3.8% for the second quarter of 2009 primarily due to the decline in McGraw-Hill Education revenues driven by softness at School Education Group.

• McGraw-Hill Education revenue declines were partially offset by reduced expenses due to lower sales, a change in sales mix and cost saving initiatives.

• Service revenue and expenses consist of the Financial Services segment, the service assessment contracts of the McGraw-Hill Education segment and the remainder of the Information & Media segment, primarily related to information-related services and advertising.

• Service revenue decreased 9.6% or $99.7 million, primarily due to Financial Services and the unfavorable impact of foreign exchange.

• Financial Services service revenue decreased primarily due to Credit Market Services, where continuing declines in structured finance were partially mitigated by increases in credit ratings-related information products such as RatingsXpress and RatingsDirect.

• Information & Media service revenue declined as current economic weakness continues to drive a decline in advertising spending. This was partially offset by growth in Platts services as the increased volatility in crude oil and other commodity prices drove the continued need for market information.

• Cancellation of McGraw-Hill Education assessment contracts contributed to this decline.

• Service operating expenses decreased 14.8% or $54.7 million, primarily due to cost reduction initiatives across the Company.

• Service selling and general expenses decreased 9.7% or $33.1 million, primarily due to the benefit of cost reduction initiatives across the Company.

• Service margin increased 210 basis points to 33.7% for the second quarter of 2009 primarily due to cost saving initiatives at all three segments.

• Total expenses in the second quarter of 2009 decreased 10.7% or $139.7 million driven primarily by decreased sales and a change in sales mix at McGraw-Hill Education and reduced selling & general expenses due to cost saving initiatives.

• During the second quarter of 2009, the Company initiated a restructuring plan that included a realignment of select business operations within the McGraw-Hill Education segment to further strengthen their position in the market by creating a market focused organization that enhances its ability to address the changing needs of their customers. Additionally, the Company continued to implement restructuring plans related to a limited number of business operations across the Company to contain costs and mitigate the impact of the current and expected future economic conditions. The Company recorded a pre-tax restructuring charge of $24.3 million, consisting primarily of employee severance costs related to a workforce reduction of approximately 550 positions. In addition, during the second quarter of 2009, the Company revised its estimate for previously recorded restructuring charges and reversed approximately $9.1 million. The net pre-tax charge recorded was $15.2 million ($9.7 million after-tax, or $0.03 per diluted share).

• During the second quarter of 2008, the Company restructured a limited number of business operations in its Financial Services and McGraw-Hill Education segments to more efficiently serve its markets and strengthen its long-term growth prospects. The Company incurred a pre-tax restructuring charge of $23.7 million ($14.8 million after-tax, or $0.05 per diluted share), which consisted primarily of severance costs related to a workforce reduction of 395 positions.

• In May 2009, the Company sold its Vista Research, Inc. business which was part of the Financial Services segment. During the second quarter of 2009, the Company recognized a pre-tax loss of $13.8 million ($8.8 million after-tax, or $0.03 per diluted share), recorded as other loss. This business was selected for divestiture, as it no longer fit within the Company's strategic plans. This divestiture will enable the Financial Services segment to focus on its core business of providing independent research, ratings, data indices and portfolio services. The impact of this divestiture on comparability of results is immaterial.

• Net interest expense decreased 9.1% to $18.5 million primarily due to a decrease in interest expense on commercial paper borrowings.

• For the quarters ended June 30, 2009 and 2008, the effective tax rate was 36.4% and 37.0%, respectively. The Company expects the effective tax rate to be at 36.4% for the remainder of the year absent the impact of events such as intervening audit settlements, changes in federal, state or foreign law and changes in the geographical mix of the Company's pre-tax income. The effective tax rates include the impact of the adoption of Statement of Financial Accounting Standard ("SFAS") No. 160 "Noncontrolling Interests in Consolidated Financial Statements an amendment of ARB No. 51," ("SFAS No. 160"). This resulted in a change to the calculated effective tax rate for both the current and prior periods.

• Net income attributable to the Company for the quarter decreased 22.7% or $48.2 million. Diluted earnings per common share decreased 21.2% to $0.52 from $0.66 in 2008.

• Effective January 1, 2009, the Company adopted SFAS No. 160. SFAS No. 160 amends Accounting Research Bulletin No. 51, "Consolidated Financial Statements," to establish accounting and reporting standards for any noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. SFAS No. 160 clarifies that a noncontrolling interest in a subsidiary should be reported as a component of equity in the consolidated financial statements and requires disclosure, on the face of the consolidated statement of income, of the amounts of consolidated net income attributable to the parent and to the noncontrolling interests. Certain prior year amounts have been reclassified for comparability purposes in accordance with the requirements of SFAS No. 160.

Risks and Uncertainties
The world financial markets have been experiencing extreme volatility. These difficult conditions have impacted the businesses and results of operations of the Company and we do not expect these conditions to improve in the near term.
• In the McGraw-Hill Education segment, the weakening global economy has resulted in declines in educational spending which have impacted our results of operations.

• In the Financial Services segment, difficulties in the credit markets and shrinking investor confidence in the capital markets have resulted in a significant decline in global debt issuance which has impacted our results of operations in Credit Market Services.

• In the Information & Media segment, the general weakening of the economy has resulted in declines in advertising and consumer and business spending.

Segment Review
McGraw-Hill Education

                                                      Second                     Second
                                                      Quarter         %          Quarter
                                                       2009        Decrease       2008

 Revenue
 School Education Group                             $ 338,568       (22.7 )%   $ 438,194
 Higher Education, Professional and International     216,621        (6.9 )%     232,652

 Total revenue                                      $ 555,189       (17.2 )%   $ 670,846

 Operating profit                                   $  21,008       (70.1 )%   $  70,276

 % Operating margin                                       3.8 %                     10.5 %

Revenue and Operating Profit
• In the second quarter of 2009, revenue for the McGraw-Hill Education segment decreased 17.2% or $115.7 million from the prior year while operating profit decreased 70.1% or $49.3 million.

• School Education Group ("SEG") revenue declined for the quarter, a decrease driven primarily by lower state adoption sales. Reduced potential in the state new adoption market was coupled with reduced spending in the open territory and in the supplemental market as schools tightened their budgets in response to the continuing decline of state and local tax revenues in most regions.

• K-12 basal sales declined significantly in the adoption states. In the second quarter of 2008, SEG realized strong sales of K-5 reading in Florida, K-8 math and science in California, K-5 math in Texas, and various subjects in smaller states such as Alabama. The 2009 state new adoption market was expected to be smaller because Texas was not scheduled to buy new materials and because other states, including Alabama, planned to adopt in categories offering less revenue potential for the industry. The biggest opportunities were expected to be offered by 6-12 literature in Florida and K-8 reading and math in California, but economic problems have sharply limited 2009 purchasing in both states.

• K-12 sales in the open territory declined to a lesser extent, as reduced opportunities in many parts of the country were partially offset by quarter-over-quarter gains in areas such as Illinois, where SEG's secondary products captured a strong share of the state's annual textbook purchasing program.

• K-12 supplementary sales also declined, with growth in intervention products being offset by lower demand for backlist products.

• Non-custom or "shelf" testing revenue declined, despite a sales gain for the LAS Links product line.

• Formative assessment revenue increased driven by new adoptions, renewals, and expanded implementations of SEG's successful Acuity program.

• Custom testing revenue declined due to a California contract that is ending and declines in the scope of work on other contracts in comparison to the prior-year quarter.

• Higher Education revenue increased for both print and digital product driven by strong new publication lists at all four imprints, new digital offerings to support print sales, improved sales coverage in key regions and higher enrollments in the current academic year.

• Key titles contributing to the second quarter performance included Sanderson, Computers in the Medical Office, 6/e, Lucas, The Art of Public Speaking, 10/e, Shier, Hole's Human Anatomy and Physiology, 12/e, Saladin, Anatomy and Physiology, 5/e, and Mader, Biology, 10/e.

• Digital revenue growth was driven by the continued success of the Homework Management product line, which included new releases on the improved and enhanced Connect platform.

• Revenue in the professional market declined versus the prior-year quarter as book sales reflected the continuing weakness in the retail environment. Digital subscriptions had a favorable impact on the results for the quarter while digital licensing declined slightly.

• International revenue decreased for the quarter, with strong demand for higher education products across most markets offset by lower school sales in some regions as well as softness in professional sales and the unfavorable impact of foreign exchange.

• Operating margin declined primarily due to decreased revenues partially offset by a decline in selling and general expenses. Operations benefited from ongoing cost saving initiatives, lower operating expenses related to decreased sales, and a change in sales mix.

• During the second quarter of 2009, the McGraw-Hill Education segment initiated a restructuring plan that included a realignment of select business operations within the segment to further strengthen their position in the market by creating a market focused organization that enhances its ability to address the changing needs of their customers. The restructuring charge consisted primarily of employee severance costs related to the reduction of approximately 340 positions. In addition, during the second quarter of 2009, the McGraw-Hill Education segment reversed accruals for previously recorded restructuring charges due to revised estimates. The net pre-tax restructuring charge recorded was $11.6 million. During the second quarter of 2008, the McGraw-Hill Education segment incurred a pre-tax restructuring charge of $8.5 million consisting of employee severance costs related to the reduction of approximately 150 positions.

• Foreign exchange rates had a $10.1 million unfavorable impact on revenue but had an immaterial impact on operating profit for the quarter.

Industry Highlights and Outlook
• The total available state new adoption market in 2009 is estimated at between $500 million and $550 million, depending on state funding availability. This compares with approximately $980 million in 2008. The 2009 estimate reflects lower anticipated purchasing rates in Florida and California due to state budget constraints as well as the impact of other announced adoption postponements. This estimate is dependent on several still to be determined fiscal year 2010 education budgets in key states, including California, as well as the impact of the federal stimulus funding on instructional materials purchasing.

• Total U.S. PreK-12 enrollment for 2008-2009 is estimated at 56 million students, up 0.3% from 2007-2008, according to the National Center for Education Statistics.

• The year's key adoption opportunities are K-8 reading and math in California, K-12 reading in Georgia, K-12 science in Tennessee, K-12 social studies in Indiana, K-5 math in North Carolina, and 6-12 reading/literature in Florida. The Florida adoption was originally expected to offer one of the year's largest markets, but the state has relaxed regulations that would have required districts to buy new literature programs, giving them flexibility to spend their instructional materials funds for other purposes. As a result, it appears that industry sales there will fall far short of projections. Postponements of district-level adoptions will likely also limit market potential in other states, notably California, where the state has withheld more than $4 billion in scheduled allocations to school districts year to date pending enactment of a budget, now overdue, for the fiscal year that began on July 1, 2009.

• The Company expects to perform well with reading in California and Louisiana; math in California and South Carolina; science in Tennessee; and social studies in Indiana.

• The U.S. Department of Education has begun releasing the first round of federal stimulus funding. The distribution of funding earmarked for IDEA and Title 1 programs has varied by state with some funding being held up at the state level. Eligible school districts should receive the bulk of their distributions for special education programs and Title 1 programs for disadvantaged students in the second half of the year. These funds may be used for instructional materials, among other purposes. The states are receiving first-round distributions from the State Fiscal Stabilization Fund ("SFSF") on varying schedules depending on the submission and approval dates of their educational spending plans. While each state's use of its SFSF funding will be somewhat different, the Company may benefit from increased spending on instructional materials or testing programs from this source.

• According to statistics compiled by the Association of American Publishers ("AAP"), total net basal and supplementary sales of elementary and secondary instructional materials were down by 18% through May 2009 compared to the same period in 2008. Basal sales in adoption states and open territory for the industry decreased 21.9% compared to prior year. In the supplemental market, industry sales were down 8.9% versus prior year. The supplementary market has been declining in recent years, in large part because basal programs are increasingly comprehensive, offering integrated ancillary materials that reduce the need for separate supplemental products.

• Refer to the Risks and Uncertainties included in the "Consolidated Review" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.

Financial Services

                                         Second                     Second
                                         Quarter         %          Quarter
                                          2009        Decrease       2008

              Revenue
              Credit Market Services   $ 457,404        (9.9 )%   $ 507,896
              Investment Services        216,384        (4.9 )%     227,581

              Total Revenue            $ 673,788        (8.4 )%   $ 735,477

              Operating profit         $ 276,354        (8.8 )%   $ 303,142

              % Operating margin            41.0 %                     41.2 %

Revenue and Operating Profit
• Credit Market Services revenue decreased as the result of continuing declines in structured finance and the impact of foreign exchange rates. These declines were partially mitigated by increases in corporate industrial credit ratings, credit ratings-related information products such as RatingsXpress and RatingsDirect and other credit risk solutions products.

• Continued decreases in issuance volumes in Europe of residential mortgage-backed securities ("RMBS"), and in the U.S. of commercial mortgage-backed securities ("CMBS"), and in both the U.S. and Europe of collateralized debt obligations ("CDO") and asset-backed securities ("ABS") continued to contribute to the decrease in revenue. These declines more than offset the revenue benefit resulting from strong U.S. high yield corporate issuance.

• Growth in information products was driven by continued increased customer demand for value-added solutions.

• Revenue derived from non-transaction related sources includes surveillance fees, annual contracts, subscription, and rating fees earned relating to cancelled transactions ("breakage fees"). For the second quarter of 2009, non-transaction related revenue decreased slightly compared to the second quarter of 2008 primarily as the result of lower breakage fees. Non-transaction related revenue represented 67.9% of total Credit Market Services revenue for the second quarter of 2009 compared to 63.1% for the second quarter of 2008. The increase of non-transaction related revenue as a proportion of total Credit Market Services revenue is attributable to the decline in transaction related revenue during the second quarter of 2009.

• Investment Services revenue decreased as a result of the declines in investment research products, index services and the impact of foreign exchange rates. These declines were partially mitigated by growth in Capital IQ.

• Decreases in revenue related to investment research products was driven by lower demand for equity research products and funds management ratings in Europe.

• In May 2009, the Company sold its Vista Research Inc. business which was part of the Financial Services segment. For the quarter ended June 30, 2009, the Company recognized a pre-tax loss of $13.8 million ($8.8 million after-tax or $0.03 per diluted share), recorded as other loss. This business was selected for divestiture, as it no longer fit within the Company's strategic plans. This divestiture will enable the Financial Services segment to focus on its core business of providing independent research, ratings, data indices and portfolio services. The impact of this divestiture on comparability of results is immaterial.

• Decreases in revenue from index services driven by reductions in index license fees relating to over-the-counter derivatives and lower assets under management for exchange-traded funds products, partially offset by increased customer demand for index data.

• The number of Capital IQ clients at June 30, 2009 increased 14.2% from the prior year and 5.2% from December 31, 2008.

• During the second quarter of 2009, the Financial Services segment incurred a restructuring charge consisting of employee severance costs related to the reduction of approximately 85 positions which, net of reversal of accruals for previously recorded restructuring charges due to revised estimates, resulted in a pre-tax benefit of $0.4 million. During the second quarter of 2008, the Financial Services segment incurred a pre-tax restructuring charge of $15.2 million consisting primarily of employee severance costs related to the reduction of approximately 250 positions.

• Foreign exchange rates had an unfavorable impact on revenue and operating profit of $26.0 million and $8.0 million, respectively.

Issuance Volumes
The Company monitors issuance volumes as an indicator of trends in transaction
revenue streams within Credit Market Services. The following table depicts
changes in issuance levels as compared to prior year, based on Harrison Scott
Publications and Standard & Poor's internal estimates (Harrison Scott
Publications/S&P). Revenue was adversely impacted by the declines in issuance
volumes of structured finance products in both the U.S. and Europe.

                                                            Second Quarter
                                                        Compared to Prior Year
      Structured Finance                                  U.S.           Europe
      Residential Mortgage-Backed Securities               169.3 %        -85.0 %
      Commercial Mortgage-Backed Securities                -87.6 %        214.7 %
      Collateralized Debt Obligations                      -84.1 %        -99.8 %
      Asset-Backed Securities                              -25.8 %        -84.7 %
      Total New Issue Dollars (Structured Finance)         -23.9 %        -87.9 %

• Although CMBS issuance in Europe reflects a large percentage gain compared to the prior year's quarter, this gain resulted entirely from the consummation of only one transaction during the second quarter of 2009. Both CDO and CMBS asset classes continue to experience lack of investor demand and relatively illiquid secondary trading markets in both the U.S. and Europe.

• Although ABS issuance in the U.S. declined in the second quarter compared to the same period of the prior year, issuance increased significantly from the first quarter of 2009 as the U.S. ABS market benefited from the Term Asset-Backed Liquidity Facility ("TALF") created by the U.S. Federal Reserve Bank. In contrast, ABS issuance in Europe was at low levels.

• Strong issuance of U.S. RMBS resulted from increased repackaging of existing mortgage-backed securities (re-REMIC issuance). Europe did not experience similar re-REMIC activity.

                                                        Second Quarter
                                                    Compared to Prior Year
           Corporate Issuance                         U.S.           Europe
           High Yield Issuance                          82.6 %        -66.5 %
           Investment Grade                            -35.0 %        -10.8 %
           Total New Issue Dollars (Corporate)         -26.0 %        -11.8 %

• Debt issuance in the industrial sector was higher in both the U.S. and Europe resulting from issuers seeking to increase their liquidity positions and to refinance maturing debt.

• U.S. high yield issuance experienced large gains from the same period of the prior year both in terms of dollar par value issuance volume and the number of transactions.

• Refer to the Risks and Uncertainties included in the "Consolidated Review" section of this Management's Discussion and Analysis of Financial Condition and Results of Operations.

Outlook
During the second quarter of 2009, the corporate bond market continued to build upon the momentum started in the first quarter of 2009 and maintained strong issuance levels. Global investment grade corporate issuance remained strong in the second quarter. The second quarter recovery in the U.S. resulted in a greater number of high yield issuers accessing the market and issuing larger dollar amounts of debt. However, many sectors of the global credit markets, especially the structured finance market, continue to experience liquidity issues. In both Europe and the U.S., the CDO and CMBS markets continue to be . . .