(Dollars in thousands, except per share amounts or as noted)

Results of Operations - Comparing Three Months Ended September 30, 2009 and 2008
Revenue and Operating Profit

                                       Third                        Third
                                      Quarter          %           Quarter
                                       2009         Decrease        2008

              Revenue              $ 1,875,903        (8.4 )%   $ 2,048,541
              Operating profit*    $   583,865       (11.9 )%   $   662,617

              % Operating margin          31.1 %                       32.3 %

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

• Third quarter revenue declined for all three of our operating segments and operating profit decreased for McGraw-Hill Education and Financial Services, but increased for Information & Media.

o McGraw-Hill Education revenue and operating profit declined 11.6% and 15.9%, respectively, primarily due to lower state adoption sales at our School Education Group. 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.

o Financial Services revenue and operating profit declined 2.2% and 10.1%, respectively. Declines were largely due to continued weakness in structured finance, investment research products and index services. These declines were partially mitigated by growth in corporate ratings, credit-ratings related information products such as RatingsXpress and RatingsDirect, other credit risk solutions products and growth in our Capital IQ business.

o Information & Media revenue declined 10.1% driven by advertising weakness across all of our media properties and reduced sales in our automotive studies. Partially offsetting these declines was an increase in our global energy and other commodities products and services. Operating profit increased 29.3% for the segment primarily as a result of restructuring charges in the prior year.

o Foreign exchange rates had an unfavorable impact on revenue and operating profit of $21.6 million and $6.3 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.

o Product revenue decreased 10.8% or $123.2 million, primarily driven by lower state adoption sales coupled with reduced spending in the open territory. Revenue was also impacted unfavorably by foreign exchange.

o Product operating expenses decreased 3.4% or $15.4 million, due to decreased sales, partially offset by an increase in amortization of prepublication costs of $2.6 million or 2.1% driven by timing of the adoption cycle.

o Product selling and general expenses decreased 16.7% or $50.7 million, primarily due to ongoing cost saving initiatives.

o Product margin decreased 160 basis points to 31.8% primarily due to the decline in product revenues at our School Education Group and the unfavorable impact of foreign exchange.

† Revenue declines were partially offset by reduced expenses due to lower sales 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.

o Service revenue decreased 5.4% or $49.4 million.

† The decrease was primarily due to continued weakness in structured finance, declines in investment research products, index services and advertising weakness across our media properties as well as the impact of foreign exchange rates.

† These declines were partially mitigated by growth in corporate ratings, credit-ratings related information products such as RatingsXpress and RatingsDirect, other credit risk solutions

products, growth in our Capital IQ business and growth in our global energy and other commodities services.

o Service operating expenses decreased 1.3% or $3.8 million, primarily due to cost reduction initiatives.

o Service selling and general expenses increased slightly, primarily driven by the impact of increased incentive compensation accrual compared to the prior year.

o Service margin decreased 340 basis points to 31.3% primarily due to revenue decreases partially offset by overall cost reduction initiatives.

• Total expenses decreased 5.4% or $75.7 million driven primarily by decreased sales and cost saving initiatives.

• An increase in incentive compensation expense of $68.3 million impacted our operating profit comparisons. The increase is attributable to the reversals in 2008 of stock-based compensation for multiple grant years and of other incentive compensation to reflect our projected payouts. Incentive compensation increases are as follows:

o McGraw-Hill Education - $13.0 million

o Financial Services - $32.1 million

o Information & Media - $5.7 million

o Corporate - $17.5 million

• On October 13, 2009, we entered into an agreement to divest BusinessWeek, which is part of our Information & Media segment. This business was selected for divestiture as it no longer fit within our strategic plans. The transaction is expected to close during the fourth quarter of 2009 and is projected to result in a pre-tax gain of $9.3 million ($5.9 million after tax or $0.02 per diluted share).

• During the third quarter of 2008, we restructured a limited number of our business operations to contain costs and mitigate the impact of economic conditions. We incurred a pre-tax restructuring charge of $23.4 million ($14.6 million after-tax, or $0.05 per diluted share), which consisted primarily of severance costs related to a workforce reduction of approximately 270 positions.

• Net interest expense decreased 19.0% to $17.8 million primarily due to a decrease in interest expense on commercial paper borrowings.

• For the quarters ended September 30, 2009 and 2008, the effective tax rate was 36.4% and 37.1%, respectively. We expect 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 our pre-tax income. The effective tax rates include the impact of the adoption Financial Accounting Standards Board Accounting Standards Codification ("FASB ASC") 810-10-65-1 "Consolidation," ("FASB ASC 810-10-65-1") which requires separate presentation of noncontrolling interests on our financial statements. This resulted in a change to the calculated effective tax rate for both the current and prior periods.

• Net income for the quarter decreased 13.9% or $54.1 million. Diluted earnings per common share decreased 13.0% to $1.07 from $1.23 in 2008.

• Effective January 1, 2009, we adopted FASB ASC 810-10-65-1 which establishes accounting and reporting standards for any noncontrolling interest in a subsidiary and for the deconsolidation of a subsidiary. FASB ASC 810-10-65-1 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 FASB ASC 810-10-65-1.

Risks and Uncertainties
• 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

                                                              Third                                 Third
                                                             Quarter               %               Quarter
                                                              2009             Decrease             2008

Revenue
School Education Group                                    $   501,270            (19.6 )%       $   623,526
Higher Education, Professional and International              498,745             (1.8 )%           507,826

Total revenue                                             $ 1,000,015            (11.6 )%       $ 1,131,352

Operating profit                                          $   298,142            (15.9 )%       $   354,718

% Operating margin                                               29.8 %                                31.4 %

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

o K-12 basal sales declined significantly in the adoption states. In the third 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.

o 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 for products such as SEG's Direct Instruction line, which includes the Reading Mastery elementary series, and Everyday Mathematics.

o K-12 supplementary sales also declined, with strong growth in intervention products being offset by the continuing decline in demand for SEG's backlist products, many of which are being phased out.

o Non-custom or "shelf" testing declined in the quarter, which is a seasonally slow period for sales of these assessments.

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

o Custom testing 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 sales 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.

o Key titles contributing to the third quarter performance included McConnell, Economics, 18/e, Shier, Hole's Human Anatomy and Physiology, 12/e, Lucas, The Art of Public Speaking, 10/e, Saladin, Anatomy and Physiology, 5/e, Garrison, Managerial Accounting, 13/e and Mader, Biology, 10/e.

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

• Sales 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.

• International sales 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 and lower operating expenses related to decreased sales.

• The third quarter of 2008 included reductions in incentive compensation expense, as further described in the "Consolidated Review" section of this Managements Discussion and Analysis of Financial Condition and Results of Operations.

• During the third quarter of 2008, the McGraw-Hill Education segment incurred a pre-tax restructuring charge of $5.4 million consisting of employee severance costs related to the reduction of approximately 90 positions.

• Foreign exchange rates had an unfavorable impact on revenue and operating profit of $11.4 million and $4.9 million, respectively.

Industry Highlights and Outlook
• The total available state new adoption market in 2009 is currently estimated at between $500 million and $510 million, a reduction from earlier estimates. This compares with approximately $980 million in 2008. The revised 2009 estimate reflects lower purchasing rates in Florida and California due to state budget constraints as well as the impact of other announced adoption postponements.

• Total U.S. PreK-12 enrollment for 2009-2010 is estimated at approximately 56 million students, up 0.2% from 2008-2009, 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 earlier in the year the state 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, industry sales in Florida have fallen far short of projections. Similarly, local adoption activity in California dropped sharply in July following the enactment of a new fiscal-year budget together with measures suspending the requirement that districts purchase new basal materials within two years of their approval by the state. Absent that change, districts would have been required to complete purchasing of K-8 math in 2009 and K-8 reading in 2010.

• Despite the reduction in the overall California market, SEG's K-5 reading and math programs have both been successful in securing available business there. Other successful state adoption campaigns have included science in Tennessee, social studies in Indiana, and math in South Carolina and Kentucky.

• The U.S. Department of Education released the first round of incremental stimulus funding for IDEA programs (special education) and Title 1 programs (disadvantaged students) to the states in April, while the second round was released in late September. It does not appear that the first-round distribution had a strong impact on third-quarter instructional materials spending, partly because of the time required for the funding to make its way to the local districts and then through the districts' decision-making processes and partly because the initial funding was urgently needed in many districts to retain teaching positions for the fall and meet other expenses not covered by reduced state budget allocations. More of the first-round funding, together with a greater proportion of second-round funding, should reach the instructional materials market in the fourth quarter and in 2010. The states have received first- and second-round distributions from the State Fiscal Stabilization Fund ("SFSF") on varying schedules depending on the approval dates of their educational spending plans, and because each plan is different it is very difficult to assess their impact on the market in 2009.

• 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 21.4% through August 2009 compared to the same period in 2008. Basal sales in adoption states and open territory for the industry decreased 26.1% compared to prior year. In the supplemental market, industry sales were up 2.2% versus prior year, the first indication that this market may be stabilizing after decreasing steadily over several years. Although it is too early to draw conclusions, the improvement could indicate that the steady sales growth of intervention materials is beginning to offset the continuing decline in demand for more traditional products. Stimulus funding may have contributed to this result, but the trend has been under way for some time as

schools increasingly implement programs designed to help them meet their No Child Left Behind ("NCLB") performance improvement goals.

• Reference is made 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

                                         Third            %            Third
                                        Quarter      Increase /       Quarter
                                         2009        (Decrease)        2008

             Revenue
             Credit Market Services   $ 426,070            0.7 %    $ 423,247
             Investment Services        210,914           (7.6 )%     228,211

             Total revenue            $ 636,984           (2.2 )%   $ 651,458

             Operating profit         $ 256,183          (10.1 )%   $ 285,052

             % Operating margin            40.2 %                        43.8 %

Revenue and Operating Profit
• Revenue from Credit Market Services, which provides independent global credit ratings, credit risk evaluations, and ratings-related information and products, increased slightly. The revenue increase was mainly due to growth in corporate ratings, credit ratings-related information products such as RatingsXpress and RatingsDirect and other credit risk solutions products. The revenue increase was reduced by continued weakness in structured finance and the impact of foreign exchange rates.

o Growth in U.S. and European corporate industrial debt issuance and to a lesser extent in European sovereign and U.S. residential mortgage-backed securities ("RMBS") contributed to our revenue increase at Credit Market Services. Partially offsetting these increases were declines in issuance of both U.S. and European asset-backed securities ("ABS") and collateralized debt obligations ("CDO"), which were affected by continued weakness in global market conditions.

o Ratings-related information products increased driven by year-over-year growth in customer demand.

o Revenue derived from our non-transaction related sources includes surveillance fees, annual contracts, subscription, and rating fees earned relating to cancelled transactions ("breakage fees"). For the third quarter of 2009, our non-transaction related revenue decreased slightly compared to the third quarter of 2008 primarily as the result of lower breakage fees. Our non-transaction related revenue represented 70.0% of total Credit Market Services revenue for the third quarter of 2009 compared to 71.6% for the third quarter of 2008. The decrease of our non-transaction related revenue as a proportion of total Credit Market Services revenue is attributable to the increase in transaction related revenue during the third quarter of 2009.

• Revenue from Investment Services, which provides comprehensive value-added financial data, information, indices and research, decreased in the quarter. The revenue decline was a result of the reductions in investment research products, index services and the impact of foreign exchange rates. Our overall revenue decrease was mitigated by growth in our Capital IQ business.

o The decrease in investment research products was impacted by the divestiture of Vista Research Inc. in May 2009 as well as by the expiration of the Independent Equity Research (IER) settlement at the end of July. Despite the expiration of the IER settlement, we have signed contracts with some of the large banks to continue providing research for their customers.

o Index services decreased due to reductions in index license fees relating to both exchange-traded and over-the-counter derivatives.

o The number of Capital IQ clients at September 30, 2009 increased 10.5% from the prior year and 7.5% from December 31, 2008.

• The third quarter of 2008 included reductions in incentive compensation expense, as further described in the "Consolidated Review" section of this Managements Discussion and Analysis of Financial Condition and Results of Operations.

• During the third quarter of 2008, our Financial Services segment incurred a pre-tax restructuring charge of $4.1 million consisting primarily of employee severance costs related to the reduction of approximately 40 positions.

• Foreign exchange rates had an unfavorable impact on 2009 revenue and operating profit of $10.1 million and $3.1 million, respectively.

Issuance Volumes
We monitor issuance volumes as an indicator of trends in transaction revenue
streams within Credit Market Services. The following tables depict changes in
issuance levels as compared to prior year, based on Thomson Financial, Harrison
Scott Publications and Standard & Poor's internal estimates. In the U.S.,
revenue was adversely impacted by the declines in issuance volumes of structured
finance products. Although issuance volumes in Europe were up in total, revenue
was adversely impacted by the asset class mix of those transactions.

                                                            Third Quarter
                                                       Compared to Prior Year
    Structured Finance                                 U.S.             Europe
    Residential Mortgage-Backed Securities (RMBS)         138.3 %           150.5 %
    Commercial Mortgage-Backed Securities (CMBS)              *             162.5 %
    Collateralized Debt Obligations (CDO)                 -98.8 %           -74.0 %
    Asset-Backed Securities (ABS)                         -20.7 %           -46.6 %

    Total New Issue Dollars (Structured Finance)          -23.2 %            30.8 %

* No issuance in this asset class in the prior year

• Challenging market conditions and weak investor demand continued to restrict issuance in the structured finance markets in the U.S. and Europe.

• RMBS and CMBS issuance comparisons reflect the very low level of issuance in the prior year. U.S. RMBS issuance growth resulted from the continued restructuring of existing mortgage-backed securities (re-REMIC issuance). European RMBS issuance increased in the third quarter mainly due to the increased issuance of covered bonds resulting from the beginning of the European Central Bank's covered bond stimulus program. Covered bonds are mortgage-backed securities that provide funding to commercial banks through secured debt instruments collateralized by a pool of residential mortgage loans that remain on the issuer's balance sheet. The European Central Bank intends to purchase up to EUR 60 billion of covered bonds for the period July 2009 to June 2010.

• Modest increases in U.S. CMBS issuance compares to no issuance in the prior year. The growth in CMBS issuance in Europe reflects the very low levels of issuance in the prior year. Both the US and European CMBS markets continue to lack liquidity.

• Both the U.S. and European CDO markets continue to experience lack of investor demand and relatively illiquid secondary trading markets.

• Although U.S. ABS issuance decreased compared to the prior year, the U.S. market continues to benefit from the Term Asset-Backed Liquidity Facility ("TALF)", created by the U.S. Federal Reserve Bank and declining credit spreads. In contrast, ABS issuance in Europe remains at relatively low levels.

                                                       Third Quarter
                                                  Compared to Prior Year
         Corporate Issuance                       U.S.             Europe
         High Yield Issuance                         491.3 %           226.2 %
         Investment Grade                             63.3 %            36.8 %

         Total New Issue Dollars (Corporate)          92.7 %            39.8 %

• Although high yield issuance comparisons reflect very low issuance levels in the prior year for both the U.S. and European markets, the current period reflects very strong issuance, in terms of par value and number of transactions, especially compared to the levels typically experienced in a third quarter period. A substantial contraction in credit spreads facilitated issuance.

• Both U.S. and European investment grade issuance continues to be robust with issuers seeking to increase their liquidity positions and to refinance both current and future maturing debt. Continued credit spread tightening provides an attractive financing environment for issuers.

• Reference is made 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.

Industry Highlights and Outlook
Through the third quarter of 2009, the corporate bond market continued to build upon the momentum started in the first half of the year resulting from continued credit spread tightening thereby maintaining strong issuance levels. Global high yield grade corporate issuance experienced large gains as a greater number of high yield issuers accessed the market and issued larger dollar amounts of debt. However, the structured finance market continues to experience liquidity issues. In Europe and the U.S., the CDO and CMBS markets continue to be illiquid with very little new issuance and secondary market trading volume. The U.S. RMBS and European RMBS markets have benefited in the short-term from increased re-REMIC and covered bond issuance respectively, but the longer term outlook for these markets remain uncertain as it is dependent upon a recovery in the respective . . .