S&P Global Inc. — Annual Report 2009

Jun 29, 2009

11-K 1 c87405e11vk.htm FORM 11-K Form 11-K PAGEBREAK

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SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 11-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (fee required)

For the fiscal year ended December 31, 2008

OR

o TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (no fee required)

For the transition period from to

Commission file number 1-1023

The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

(Full title of the plan)

The McGraw-Hill Companies, Inc. 1221 Avenue of the Americas New York, NY 10020

(Name of issuer of the securities held pursuant to the plan and address of its principal executive office.)

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

THE MCGRAW HILL COMPANIES, INC.

Date: June 29, 2009

By: /s/ Marty Martin Name: Marty Martin Title: Vice President, Employee Benefits

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Financial Statements and Supplemental Schedule

The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries Years Ended December 31, 2008 and 2007 With Report of Independent Registered Public Accounting Firm

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The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

Financial Statements and Supplemental Schedule

December 31, 2008 and 2007

Contents

Report of Independent Registered Public Accounting Firm	1
Financial
Statements
Statements of Net Assets Available for Benefits	2
Statements of Changes in Net Assets Available for Benefits	3
Notes to Financial Statements	4
Supplemental Schedule
Schedule H, Line 4(i) — Schedule of Assets (Held at End of Year)	18
Exhibit 23

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Report of Independent Registered Public Accounting Firm

The Pension Investment Committee The McGraw-Hill Companies, Inc.

We have audited the accompanying statements of net assets available for benefits of The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries as of December 31, 2008 and 2007, and the related statements of changes in net assets available for benefits for the years then ended. These financial statements are the responsibility of the Plan’s management. Our responsibility is to express an opinion on these financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. We were not engaged to perform an audit of the Plan’s internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Plan’s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the net assets available for benefits of the Plan at December 31, 2008 and 2007, and the changes in its net assets available for benefits for the years then ended, in conformity with US generally accepted accounting principles.

Our audits were performed for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplemental schedule of assets (held at end of year) as of December 31, 2008, is presented for purposes of additional analysis and is not a required part of the financial statements but is supplementary information required by the Department of Labor’s Rules and Regulations for Reporting and Disclosure under the Employee Retirement Income Security Act of 1974. This supplemental schedule is the responsibility of the Plan’s management. The supplemental schedule has been subjected to the auditing procedures applied in our audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole.

June 24, 2009

/s/ Ernst & Young LLP Ernst & Young LLP

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The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

Statements of Net Assets Available for Benefits

(In Thousands)

	December 31, — 2008	2007
Interest in The McGraw-Hill Companies, Inc. Savings
Plans Pooled Trust Fund at fair value:
S&P 500 Index Account	$ 239,267	$	422,162
The McGraw-Hill Companies, Inc. Stock Account	93,173		181,011
Stable Assets Account	392,360		289,583
Retirement Assets I Account	169,062		293,504
International Equity Account	89,178		200,429
Special Equity Account	59,217		111,234
Retirement Assets III Account	90,900		109,004
Money Market Account	112,250		81,827
Core Equity Account	43,414		79,658
Retirement Assets II Account	56,142		76,062
S&P 400 Index Account	20,809		25,371
S&P 600 Index Account	11,420		11,777
Total plan assets in Trust Fund	1,377,192		1,881,622
Self Directed Accounts	12,828		13,838
Collateral received for securities loaned	82,168		127,862
Contributions receivable:
Employer	36,670		30,445
Employee	2,055		—
Loan interest	16		—
Participants’ loans	5,260		4,991
Forfeiture account	3		—
Total plan assets at fair value	1,516,192		2,058,758
Liabilities:
Obligation for collateral received for securities loaned	(85,465	)	(127,862	)
Net assets available for benefits, at fair value	1,430,727		1,930,896
Adjustment from fair value to contract value for fully
benefit-responsive investment contracts	8,907		(3,570	)
Net assets available for benefits	$ 1,439,634	$	1,927,326

See accompanying notes.

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The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

Statements of Changes in Net Assets Available for Benefits

(In Thousands)

	Year Ended December 31, — 2008		2007
Investment (loss) gain:
Net investment (loss) gain from The McGraw-Hill
Companies, Inc. Savings Plans Pooled Trust Fund	$ (526,077	)	$ 55,405
Net investment (loss) gain from self directed accounts	(3,986	)	670
Participant loan interest	385		356
Total investment (loss) gain	(529,678	)	56,431
Additions:
Contributions:
Employer	81,656		74,989
Employee	92,249		93,921
Plan transfers (Note 4)	1,220		2,125
Merger of assets (Note 4)	596		—
Total additions	175,721		171,035
Deductions:
Benefit payments and withdrawals	(133,735	)	(170,912	)
Net (decrease) increase	(487,692	)	56,554
Net assets available for benefits:
Beginning of year	1,927,326		1,870,772
End of year	$ 1,439,634		$ 1,927,326

See accompanying notes.

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The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

Notes to Financial Statements

December 31, 2008

1. Plan Description

The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries (the Plan) is a defined contribution plan sponsored by The McGraw-Hill Companies, Inc. (the Company). The Plan has a beneficial interest in The McGraw-Hill Companies, Inc. Savings Plans Pooled Trust Fund (the Pooled Trust). The Pooled Trust consists of the S&P 400 Index Account, S&P 500 Index Account, S&P 600 Index Account, Stable Assets Account, Retirement Assets I Account, Retirement Assets II Account, Retirement Assets III Account, McGraw-Hill Companies Stock Account, Money Market Account, Special Equity Account, Core Equity Account and International Equity Account (the Investment Accounts). In addition to the Investment Accounts in the Pooled Trust, the Plan allows participants to maintain Self Directed Accounts.

The following is a summary of benefit guidelines. A more detailed description is contained in the Plan documents.

The Plan is a defined contribution plan. Employees of participating units have immediate eligibility, as long as the employee has completed the enrollment process.

Participants may contribute to the Plan up to 25% of their Plan earnings, limited to $15,500 in both 2008 and 2007. Plan contribution amounts allowable are limited pursuant to Sections 401(k), 401(m) and 415 of the Internal Revenue Code (the Code).

Plan earnings include base earnings and certain other forms of compensation as provided under the Plan. Plan earnings were limited to $230,000 in 2008 and $225,000 in 2007.

The Company matches 100% of the first 3% of tax-deferred compensation contributed to the plan and 50% of the next 3%. Effective January 1, 2008 the Plan was amended to limit after tax contributions by highly compensated employees to 4% of earnings.

The assets of the Plan may be invested in the twelve Investment Accounts as well as the Self Directed Accounts. Participants can elect to designate, in 1% increments, their investment preference(s). There is no limit to the number of investment allocation changes for future allocations. The first eight changes or reallocations of existing balances, in any calendar year, are permitted at no charge. A $10 charge is assessed to the participant’s account for each additional change or reallocation of existing balances, if the balance is reallocated more than eight times per year.

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The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

Notes to Financial Statements (continued)

1. Plan Description (continued)

Employee contributions to the Plan are nonforfeitable. Effective January 1, 2001, contributions by the employer are fully vested immediately. Employer profit sharing contributions attributable to the 2007 plan year and subsequent plan years shall vest 20% after two years of continuous service and 20% after each year thereafter, with full vesting after five years. Profit sharing contributions also vest upon the participant’s attainment of age 65, if still employed by the Company or upon the participant’s death, if still employed by the Company. Employer profit sharing contributions attributable to 2006 plan year and prior years will be 100% vested upon completion of five years of continuous service or upon attainment of age 65 or death while in service. Continuous Plan participation includes all years of participation plus any waiting periods before being eligible to join the Plan.

Benefits forfeited by non-vested participants upon termination of employment are used to reduce Company contributions to the Plan. Forfeitures for 2008 and 2007 were approximately $983,000 and $840,000, respectively.

The Plan provides for withdrawal of after-tax employee contributions. The Plan also provides for financial hardship withdrawals and hardship loans of a participant’s tax-deferred and vested Company contributions under defined circumstances.

The Plan also provides that a participant who makes an election regarding the Investment Accounts, upon exercising withdrawal or loan rights, receives a pro-rata distribution from the elected Investment Accounts.

The Plan is subject to the provisions of the Employee Retirement Income Security Act of 1974, as amended (ERISA). While the Company has not expressed any intent to discontinue or to terminate the Plan, it is free to do so at any time subject to the provisions of ERISA. Upon termination of the Plan, the account balances of all participants become nonforfeitable.

Profit Sharing

The Company will make profit sharing contributions from consolidated net profits for each plan year as the Company’s Board of Directors may determine at its discretion. This amount can be up to a maximum of 2.5% of eligible compensation up to the Social Security wage base and 5% of eligible compensation in excess of the Social Security wage base. The Company contributed $31,555,000 and $30,445,000 to the Plan in 2008 and 2007, respectively.

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The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies

Investment Valuation

All earnings and net appreciation or depreciation of the Pooled Trust Investment Accounts, other than the Self Directed Accounts and the Stable Assets Account, are allocated to the Plan daily based upon the Plan’s share of the Investment Accounts’ fair market value at the end of the previous day.

Investments in the Self Directed Accounts are credited with earnings/charged with losses and expenses based on the performance of the individual investments within these accounts.

As described in Financial Accounting Standards Board (FASB) issued FASB Staff Position AAG INV-1 and SOP 94-4-1, Reporting of Fully Benefit-Responsive Investment Contracts Held by Certain Investment Companies Subject to the AICPA Investment Company Guide and Defined-Contribution Health and Welfare and Pension Plans (the FSP), investment contracts held by a defined contribution plan are required to be reported at fair value. However, contract value is the relevant measurement attribute for that portion of the net assets available for benefits of a defined contribution plan attributable to fully benefit-responsive investment contracts because contract value is the amount participants would receive if they were to initiate permitted transactions under the terms of the Plan. As required by the FSP, the Statement of Net Assets Available for Benefits adjusts the fair value of the investment contracts from fair value to contract value.

Investments in the Stable Assets Account are benefit responsive. Contract value represents contributions made under the contract, plus interest at the contract rate, less withdrawals under the contract. Short-term investments are valued at cost, which approximates fair value. All other investments held by the Plan are reported at fair value, as determined based on quoted market prices.

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The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Under the terms of its trust agreement, the Plan engaged in an authorized form of security lending activities commencing October 1, 2007. The Plan had previously engaged in securities lending within certain mutual funds and commingled funds. At December 31, 2008 the fair value of securities on loan and the collateral held at The Northern Trust Company were approximately $84,215,000 and $82,168,000, respectively. At December 31, 2007 the fair value of securities on loan and the collateral held at The Northern Trust Company were approximately $129,051,000 and $127,862,000, respectively. Investment income or loss from securities lending was approximately ($96,000) and $170,000 in 2008 and 2007, respectively, and is included in the net gain or loss from the Master Trust. Collateral held consists of cash, letters of credit, and government securities. Securities are loaned at the master trust level and are presented at the plan level based upon the Plan’s approximate interest in the Investment Accounts. The securities on loan are reflected in the Statement of Net Assets Available for Benefits.

In September 2006, the FASB issued Statement No. 157, Fair Value Measurements (SFAS No. 157), which defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a framework for measuring fair value. SFAS No. 157 establishes a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability as of the measurement date. SFAS No. 157 expands disclosures about instruments measured at fair value. SFAS No. 157 applies to other accounting pronouncements that require or permit fair value measurements and, accordingly, SFAS No. 157 does not require any new fair value measurements. Adopting SFAS No. 157 did not have a material impact on the Plan’s Statements of Net Assets Available for Benefits and Statements of Changes in Net Assets Available for Benefits.

The three levels are defined as follows:

• Level 1 — inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets.

• Level 2 — inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

• Level 3 — inputs to the valuation methodology are unobservable and significant to the fair value measurement.

A financial instrument’s categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement.

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The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

The following table sets forth by level within the fair value hierarchy the Master Trust’s investments at fair value, as of December 31, 2008:

	Assets at Master Trust Level — Level 1	Level 2	Level 3	Total
	(In Thousands)
Corporate common stock	$ 258,192	$ —	$ —	$ 258,192
Corporate preferred stock	705	—	—	705
Foreign preferred stock	3,507	—	—	3,507
Foreign common stock	118,431	—	—	118,431
Common collective trust	—	283,442	—	283,442
The McGraw-Hill Companies, Inc. common stock*	97,594	—	—	97,594
Real estate		—	88	88
Corporate debt	120,731	—	—	120,731
Mutual funds	195,767	—	—	195,767
Stable Assets Account:
J.P. Morgan # AMCGRAW01	87,506	—	—	87,506
Bank of America # 00-030	87,601	—	—	87,601
Monumental Life Ins #MDA00938	87,548	—	—	87,548
Deutsche Bank Natixis Financial Products,
Inc. #1018-01	97,473	—	—	97,473
Total Master Trust Assets	$ 1,155,055	$ 283,442	$ 88	$ 1,438,585

• Indicates party-in-interest to the Plan.

	Assets at Plan Level — Level 1	Level 2	Level 3	Total
	(In Thousands)
Self-directed accounts	$ 12,828	$ —	$ —	$ 12,828
Loan fund	—	—	5,260	5,260
Total plan assets outside Master Trust	$ 12,828	$ —	$ 5,260	$ 18,088

The following table is a rollforward of the asset balances for financial instruments classified by the Company within Level 3 of the valuation hierarchy defined above:

Fair value December 31, 2007	Loan fund — $ 4,991
Issuances	1,955
Net settlements	(1,690	)
Transfers in	4
Fair value December 31, 2008	$ 5,260

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The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

There were no material gains, losses, purchases, sales, issuances, settlements, or transfers during the 2008 plan year for real estate assets.

Investment Income

Investment income is recorded on an accrual basis.

Contributions

Contributions from employees are accrued when the Company makes payroll deductions. Contributions from the Company are accrued in the period in which they become obligations of the Company.

Administration of the Plan

The Plan is administered by the Vice-President, Employee Benefits (the Plan Administrator) who is responsible for carrying out the provisions of the Plan. The appointment was approved by the Board of Directors of the Company.

The investments for the Plan, excluding investments in the Self Directed Accounts, are directed by the Pension Investment Committee and by outside investment managers. The Pension Investment Committee is appointed by the Board of Directors of the Company and the outside investment managers are appointed by the Pension Investment Committee.

The Plan is responsible for its administrative expenses. The Company may reimburse the Plan for these expenses at its discretion. During 2008 and 2007, the administrative expenses of the Investment Accounts were allocated to all plans participating in the respective Investment Accounts and deducted from the net investment income allocated to the participating plans.

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The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

Notes to Financial Statements (continued)

2. Summary of Significant Accounting Policies (continued)

Federal Income Tax Status

The Plan received a determination letter from the Internal Revenue Service dated September 26, 2002 stating that the Plan, as amended, is qualified under Section 401(a) of the Code and, therefore, the related trust is exempt from taxation. Once qualified, the Plan is required to operate in conformity with the Code to maintain its qualification. The Plan Administrator has indicated that it will take all actions necessary to maintain the qualified status of the Plan. An application for a new determination letter has been submitted to the IRS and a response is pending.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates.

3. Investments

The investments of the Plan and the Standard & Poor’s 401(k) Savings and Profit Sharing Plan for Represented Employees (together, the Participating Plans), are pooled for investment purposes in the Pooled Trust under the agreement entered into with The Northern Trust Company (Northern Trust). At both December 31, 2008 and 2007, the Plan’s interest in the net assets of the Master Trust was approximately 95.7%.

The Plan invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect participants’ account balances and the amounts reported in the statements of net assets available for benefits.

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The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

Notes to Financial Statements (continued)

3. Investments (continued)

At December 31, 2008 and 2007, the Plan’s approximate interest in the twelve Investment Accounts was as follows:

2008	2007
Retirement Assets I Account	96.94 %	96.39 %
Retirement Assets II Account	97.55	97.56
Retirement Assets III Account	97.46	97.00
Stable Assets Account	93.98	94.14
Money Market Account	96.14	95.57
S&P 400 Index Account	94.93	95.42
S&P 500 Index Account	95.89	95.80
S&P 600 Index Account	95.24	95.65
The McGraw-Hill Companies, Inc. Stock Account	95.51	95.09
Special Equity Account	97.53	97.06
International Equity Account	96.96	96.14
Core Equity Account	96.85	96.58

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The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

Notes to Financial Statements (continued)

3. Investments (continued)

The following table is a summary, at fair value, of the net assets of the Master Trust investment accounts on December 31, 2008 and 2007:

	2008
	(In Thousands)
Assets
Investments:
Corporate common stock	$ 258,192	$	495,965
Corporate preferred stock	705		1,472
Foreign preferred stock	3,507		5,350
Foreign common stock	118,431		171,228
Common collective trust	283,442		614,299
The McGraw-Hill Companies, Inc. common stock*	97,594		189,144
Real estate	88		—
Corporate debt	120,731		156,764
Mutual funds	195,767		41,850
Stable Assets Account:
J.P. Morgan # AMCGRAW01, 4.32% and 5.73% at
December 31, 2008 and 2007, respectively	87,506		68,102
STW Transmerica #A76787	—		66,948
Bank of America # 00-030, 4.32% and 5.73% at
December 31, 2008 and 2007, respectively	87,601		68,098
Monumental Life Ins #MDA00938, 2.58% and 5.47% at
December 31, 2008 and 2007, respectively	87,548		—
Deutsche Bank Natixis Financial Products, Inc #
1018-01, 4.43% and 4.89% at December 31, 2008
and 2007 respectively	97,473		84,867
	1,438,585		1,964,087
Receivables
Dividends and interest receivable	5		3,009
Total receivables	5		3,009
Liabilities
Accrued investment management expenses	(128	)	(2,125	)
Due to broker on pending trades	(503	)	(1,424	)
Total liabilities	(631	)	(3,549	)
Net assets of the Master Trust, at fair value	1,437,959		1,963,546
Adjustments from fair value to contract value for fully
benefit responsive investment contracts	9,477		(3,792	)
Net assets of the Master Trust	$ 1,447,436	$	1,959,755

• Indicates party-in-interest to the Plan.

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The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

Notes to Financial Statements (continued)

3. Investments (continued)

Common stock, preferred stock, U.S. government securities and corporate debt instruments in the above accounts with an aggregate fair value of approximately $87,272,000 and $133,508,000 were loaned under the security lending agreement at December 31, 2008 and 2007, respectively.

Investment income for the Master Trust is as follows:

	Year Ended December 31, — 2008		2007
	(In Thousands)
Investment income
Net (depreciation) appreciation in fair value
of investments:
U.S. Government securities	$ (45	)	$ 997
Corporate common stock (includes foreign)	(313,063	)	(52,910	)
Corporate preferred stock	(5,052	)	70
Mutual funds	(68,582	)	36,264
Corporate debt	(10,046	)	13,460
Common collective trusts	(170,268	)	25,502
State, municipal and other	883		19
Interest & dividend income	22,142		45,572
Net investment (loss) income	(544,031	)	68,974
Expenses
Administrative and other expenses	(2,124	)	(8,643	)
Total investment (loss) income	$ (546,155	)	$ 60,331

Guaranteed Investment Contracts

The J.P. Morgan contract, the Bank of America contract, the STW Transamerica contract, the Monumental Life Insurance contract and the Deutsche Bank Natixis contract are book value liquidity agreements which, in conjunction with the underlying bond portfolios covered by each contract, comprise the synthetic Guaranteed Investment Contracts (the GICs). In exchange for an annual fee, each book value liquidity agreement issuer guarantees to reimburse the Stable Assets.

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The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

Notes to Financial Statements (continued)

3. Investments (continued)

Account for the shortfall, if any, between the portfolio’s market value and principal and accrued interest in the event of participant initiated distributions from the synthetic GIC. The synthetic GICs crediting interest rate resets quarterly and is based upon the yield, duration and market value of the underlying bond portfolio. Each of the book value liquidity agreements is subject to an early termination penalty, which could reduce the crediting interest rate guarantee for the quarter in which a premature termination occurs.

The weighted average yield for the Account for the years ended December 31, 2008 and 2007 was 6.07% and 5.38%, respectively.

The rate at which interest is accrued to the contract balance of the Account for the years ended December 31, 2008 and 2007 was 3.74% and 5.37%, respectively.

The total fair value of the synthetic GICs was approximately $360,128,000 and $288,015,000 as of December 31, 2008 and 2007, respectively.

The fair value of the synthetic GIC contracts was calculated using the following methodology:

1. The difference between the indicative replacement cost and the current annual fee multiplied by the notional dollar amount of the contract was calculated.

2. Future quarterly payments for the duration of the agreement that resulted from any difference identified immediately above, other than zero, were determined.

3. Any difference in future payments were discounted by the published Bloomberg USD US Bank -AA- rated credit curve, as of the end of the year, and totaled.

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The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

Notes to Financial Statements (continued)

3. Investments (continued)

Derivative Financial Instruments

The Plan’s investment managers use short selling and derivative instruments, including futures contracts, forward contracts, and options, to reduce market risk and enhance returns on the investments. At December 31, 2008, the fair value of outstanding derivative contracts and short positions within the Master Trust was $3,416,000, and was included in the Plan’s net assets. There were no derivative contracts at December 31, 2007.

Self-Directed Accounts

Self-Directed Accounts, also known as Mutual Fund Investment Window Accounts, became available during 2006. The accounts allow individual participants to gain access to up to 9,500 mutual funds. These funds are not reviewed or monitored by The McGraw-Hill Companies, Inc. Pension Investment Committee. A summary of net assets at fair value, at December 31, 2008 and 2007 follows:

	2008
	(In Thousands)
Investments:
Money markets	$ 3,219	$	2,823
Mutual funds	9,477		11,076
Total investments	12,696		13,899
Cash	183		139
Due to broker on pending trades, net	(51	)	(200	)
Net assets available to participating plans	$ 12,828	$	13,838

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The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

Notes to Financial Statements (continued)

3. Investments (continued)

A summary of the net investment loss of the Self Directed Accounts for the years ended December 31, 2008 and 2007 follows:

	2008		2007
	(In Thousands)
Dividend and interest income	$ 580		$ 721
Net realized and unrealized loss on investments
Mutual funds	(4,566	)	(51	)
Net investment (loss) gain	$ (3,986	)	$ 670

4. Merger and Plan to Plan Transfers

Effective January 1, 2008 the assets and liabilities of the Sengent 401(k) Plan (also called The ClariFI 401(k) Plan) and the trust thereunder were merged into the Plan. The amount of net assets transferred into the Plan was approximately $596,000.

Employees transferred to and from this Plan and the Standard & Poor’s 401(k) Savings and Profit Sharing Plan for Represented Employees, which resulted in net transfers in of approximately $1,220,000 and $2,125,000 in 2008 and 2007, respectively.

5. Differences Between Financial Statements and Form 5500

GICs and synthetic GICs are reported at fair value for Form 5500 purposes. For financial statement purposes, such items are recorded at gross fair value and adjusted to net contract value. Amounts allocated to withdrawing participants are recorded on the Form 5500 for benefits payments that have been processed and approved for payment prior to year-end but not paid as of that date. Such differing treatments result in a reconciling item between the total net assets available for benefits recorded on the Form 5500 and the total net assets available for benefits included in the accompanying financial statements.

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Supplemental Schedule

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The 401(k) Savings and Profit Sharing Plan of The McGraw-Hill Companies, Inc. and Its Subsidiaries

EIN #13-1026995 — Plan Number #002

Schedule H, Line 4(i) — Schedule of Assets (Held at End of Year)

December 31, 2008

Identity of Issuer, Borrower,		Current
Lessor or Similar Party	Description of Investment	Value
Participant loans	Interest rates ranging from 5.0% - 13.23%, maturing through July 15, 2033	$ 5,259,771
Self directed accounts	Presented at fair value	12,828,355
Collateral received for
securities loaned	Presented at fair value	82,167,803

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EXHIBIT INDEX

| Exhibit
No. | Description |
| --- | --- |
| 23 | Consent of Independent Registered Public Accounting Firm |

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