S&P Global Inc. — Annual Report 2008

Feb 27, 2009

10-K 1 y74743e10vk.htm FORM 10-K 10-K PAGEBREAK

Table of Contents

UNITED STATES SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

þ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the fiscal year ended December 31, 2008

or

o TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission file number 1-1023

THE MCGRAW-HILL COMPANIES, INC.

(Exact name of registrant as specified in its charter)

New York	13-1026995
State or other jurisdiction of	(I.R.S. Employer
incorporation or organization	Identification No.)

1221 AVENUE OF THE AMERICAS, NEW YORK, N.Y.	10020
(Address of principal executive offices)	(Zip Code)

Registrant’s telephone number, including area code (212) 512-2000

Securities registered pursuant to Section 12(b) of the Act:

Title of each class	Name of each exchange on which registered
Common Stock — $1 par value	New York Stock Exchange

Securities registered pursuant to section 12(g) of the Act:

NONE

(Title of class)

(Title of class)

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. þ Yes o No

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. o Yes þ No

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. þ Yes o No

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§ 229.405 of this chapter) is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. o

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer þ Accelerated filer o Non-accelerated filer o (Do not check if a smaller reporting company) Smaller reporting company o

Indicate by check mark whether the Registrant is a shell company (as defined in Rule 12-b-2 of the Act). o Yes þ No

The aggregate market value of voting stock held by non-affiliates of the Registrant as of the last business day of the second fiscal quarter ended June 30, 2008, was $12,743,463,262, based on the closing price of the common stock as reported on the New York Stock Exchange of $40.12 per common share. For purposes of this calculation, it is assumed that directors, executive officers and beneficial owners of more than 10% of the registrant outstanding stock are affiliates.

The number of shares of common stock of the Registrant outstanding as of February 13, 2009 was 314,412,208 shares.

Part I, Part II and Part III incorporate information by reference from the Annual Report to Shareholders for the year ended December 31, 2008. Part III incorporates information by reference from the definitive proxy statement mailed to shareholders March 20, 2009 for the annual meeting of shareholders to be held on April 29, 2009.

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TABLE OF CONTENTS

Item
	PART I
1.	Business	1
1a.	Risk Factors	2
1b.	Unresolved Staff Comments	4
2.	Properties	5
3.	Legal Proceedings	6
4.	Submission of Matters to a Vote of Security Holders	10
	Executive Officers of the Registrant	10
	PART II
5.	Market for the Registrant’s Common Stock and Related Stockholder Matters and Issuer Purchases of Equity Securities	11
6.	Selected Financial Data	11
7.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	12
7a.	Quantitative and Qualitative Disclosure about Market Risk	12
8.	Consolidated Financial Statements and Supplementary Data	12
9.	Changes in and Disagreements with Accountants on Accounting and Financial Disclosure	12
9a.	Controls and Procedures	12
9b.	Other Information	13
	PART III
10.	Directors and Executive Officers of the Registrant	13
11.	Executive Compensation	13
12.	Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters	13
13.	Certain Relationships and Related Transactions	14
14.	Principal Accounting Fees and Services	14
	PART IV
15.	Exhibits and Financial Statement Schedules	14
	Index to Financial Statements, Financial Statement Schedules and Exhibits	15
	Supplementary Schedule	16
	Signatures	17
	Exhibit Index and Exhibits	20
EX-10.3: AMENDED AND RESTATED 2002 STOCK INCENTIVE PLAN
EX-12: COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
EX-13: 2008 ANNUAL REPORT TO SHAREHOLDERS
EX-21: SUBSIDIARIES OF THE REGISTRANT
EX-23: CONSENT OF ERNST & YOUNG LLP
EX-31.1: CERTIFICATION
EX-31.2: CERTIFICATION
EX-32: CERTIFICATION

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PART I

Item 1. Business

| The McGraw-Hill Companies, Inc. (the Registrant or the Company), incorporated in
December 1925, is a leading global information services provider serving the
financial services, education and business information markets with a wide range of
information products and services. Additional markets include energy, automotive,
construction, aerospace and defense, broadcasting, and marketing information
services. The Company serves its customers through a broad range of distribution
channels, including printed books, magazines and newsletters, online via Internet
Websites and digital platforms, through wireless and traditional on-air broadcasting,
and through a variety of conferences and trade shows. |
| --- |
| The Registrant’s 21,649 employees are located worldwide. They perform the vital
functions of analyzing the nature of changing demands for information and of
channeling the resources necessary to fill those demands. By virtue of the numerous
copyrights and licensing, trademark, and other agreements which are essential to such
a business, the Registrant is able to collect, compile, and disseminate this
information. The Company’s books and magazines are printed by third parties. The
Registrant’s principal raw material is paper, and the Registrant has assured sources
of supply, at competitive prices, adequate for its business needs. |
| Descriptions of the Company’s principal products, broad services and markets, and
significant achievements are hereby incorporated by reference from Exhibit (13),
pages 22 and 23, containing textual material of the Registrant’s 2008 Annual Report
to Shareholders. |
| The Registrant has an investor kit available online and in print that includes the
current (and prior years) Annual Report, Proxy Statement, Form 10-Qs, Form 10-K, all
filings through EDGAR with the Securities and Exchange Commission, the current
earnings release and information with respect to the Dividend Reinvestment and
Direct Stock Purchase Program. For online access go to
www.mcgraw-hill.com/investor_relations and click on Digital Investor Kit. Requests
for printed copies, free of charge, can be e-mailed to
investor_relations@mcgraw-hill.com or mailed to Investor Relations, The McGraw-Hill
Companies, Inc., 1221 Avenue of the Americas, New York, NY 10020-1095. You can call
Investor Relations toll free at 866-436-8502. International callers may dial
212-512-2192. |
| The Registrant has adopted a Code of Ethics for the Company’s Chief Executive
Officer and Senior Financial Officers that applies to its chief executive officer,
chief financial officer, and chief accounting officer. To access such code, go to
the Corporate Governance section of the Company’s Investor Relations Web site at
www.mcgraw-hill.com/investor_relations. Any waivers that may in the future be
granted from such Code will be posted at such Web site address. In addition to its
Code of Ethics for the Chief Executive Officer and Senior Financial Officers noted
above, the following topics may be found on the Registrant’s Web site at the above
Web site address: |

•	Code of Business Ethics for all employees;
•	Corporate Governance Guidelines;
•	Audit Committee Charter;
•	Compensation Committee Charter; and
•	Nominating and Corporate Governance Committee Charter.

| The foregoing documents are also available in print, free of charge, to any
shareholder who requests them. Requests for printed copies may be e-mailed to
corporate_secretary@mcgraw-hill.com or mailed to the Corporate Secretary, The
McGraw-Hill Companies, Inc., 1221 Avenue of the Americas, New York, NY 10020-1095. |
| --- |
| You may also read and copy materials that the Company has filed with the Securities
and Exchange Commission (“SEC”) at the SEC’s public reference room located at 450
Fifth Street, N.W., Room 1024, Washington, D.C. 20549. Please call the Commission at
1-800-SEC-0330 for further information on the public reference room. In addition, the
Company’s filings with the Commission are available to the public on the Commission’s
Web site at www.sec.gov. Several years of SEC filings are also available at the
Company’s Investor Relations Web site. Go to www.mcgraw-hill.com/investor_relations
and click on the SEC Filings link. |

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| Certifications |
| --- |
| The Company has filed the required certifications under Section 302 of the
Sarbanes-Oxley Act of 2002 as Exhibits (31.1) and (31.2) to its Annual Report on Form
10-K for the fiscal year ended December 31, 2008. In addition the Company has filed
the required certifications under Section 906 of the Sarbanes-Oxley Act of 2002 as
Exhibit (32) to its Annual Report on Form 10-K for the fiscal year ended December 31,
2008. After the 2009 Annual Meeting of Shareholders, the Company intends to file with
the New York Stock Exchange (“NYSE”) the CEO certification regarding the Company’s
compliance with the NYSE’s corporate governance listing standards as required by NYSE
rule 303A.12. Last year, the Company filed this CEO certification with the NYSE on
May 8, 2008. |
| Information as to Operating Segments |
| The relative contribution of the operating segments of the Registrant and its
subsidiaries to operating revenue, operating profit, long-lived assets and geographic
information for the three years ended December 31, 2008, are included in Exhibit
(13), on pages 63 and 64 in the Registrant’s 2008 Annual Report to Shareholders and
is hereby incorporated by reference. |

Item 1a. Risk Factors

As required, the Company is providing the following cautionary statements which identify factors that could cause the Company’s actual results to differ materially from historical and expected results. It is not possible to foresee or identify all such factors. Investors should not consider this list an exhaustive statement of all risks and uncertainties.

•	Growth Rates
	The Company’s ability to grow depends upon a number of uncertain events including
economic conditions, the outcome of the Company’s strategies of expanding its
penetration in global markets, introduction of new products and services, and
acquisitions. Difficulties, delays or failure of the Company’s strategies could
cause the future growth of the Company to differ materially from its historical
growth.
•	Changes in the Volume of Debt Securities Issued in Domestic and/or Global
Capital Markets and Changes in Interest Rates and Other Volatility in the Financial
Markets
	The Company’s results could be adversely affected by a reduction in the volume of
debt securities issued in domestic and/or global capital markets. Unfavorable
financial or economic conditions that either reduce investor demand for debt
securities or reduce issuers’ willingness or ability to issue such securities could
reduce the number and dollar volume of debt issuance for which Standard & Poor’s
provides ratings services. In addition, increases in interest rates or credit
spreads, volatility in financial markets or the interest rate environment,
significant political or economic events, defaults of significant issuers and other
market and economic factors may negatively impact the general level of debt issuance,
the debt issuance plans of certain categories of borrowers, and/or the types of
credit-sensitive products being offered. A sustained period of market decline or
weakness could have a material adverse effect on the Company. The Company’s results
could also be adversely affected because of public statements or actions by market
participants, government officials and others who may be advocates of increased
regulation, regulatory scrutiny or litigation.
•	Changes in Educational Funding
	The Company’s U.S. educational textbook and testing businesses may be adversely
affected by changes in state educational funding as a result of changes in
legislation, both at the federal and state level, changes in the state procurement
process and changes in the condition of the local, state or U.S. economy. While in
the past few years the availability of state and federal funding for elementary and
high school education had improved due to legislative mandates such as No Child Left
Behind (“NCLB”) and Reading First, future changes in federal funding and the state
and local tax base could create an unfavorable environment, leading to budget issues
resulting in a decrease in educational funding.
•	Cyclical Nature of Customers’ Businesses
	A significant portion of the Company’s sales are to customers in educational markets.
The School Education Group and the industry it serves are influenced strongly by the
magnitude and timing of state adoption opportunities. Approximately 20 states
currently use an adoption process to purchase textbooks. In the remaining states,
known as “open territories”, textbooks are purchased independently by local districts
or individual schools. The Company’s internal estimate indicates that the 2009 el-hi
market overall is expected to decline 10% to 15%. In addition, despite
the size of the market, there is no guarantee that the Company will be successful in
the state new adoption market or in open territories.

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•	Changes in the Global Advertising Markets / Affiliation Agreements
	Although advertising’s impact on the McGraw-Hill Companies is less than 5% of
revenue, advertising is still a significant source of revenue in the Information &
Media segment. In general, demand for advertising tends to correlate with changes in
the level of economic activity in the United States and in the markets the Company
serves. In addition, world, national and local events may affect advertising demand.
Competition from other forms of media such as other magazines, broadcasters and Web
sites, affects the Company’s ability to attract and retain advertisers. In addition,
significant changes in the Company’s network affiliation agreements could affect the
profitability of the Company’s broadcasting operations.
•	Possible Loss of Market Share or Revenue Through Competition or Regulation
	The markets for credit ratings as well as research, investment and advisory services
are very competitive. The Financial Services segment competes domestically and
internationally on the basis of a number of factors, including quality of ratings,
research and investment advice, client service, reputation, price, geographic scope,
range of products and services, and technological innovation. In addition, in some
of the countries in which Standard & Poor’s competes, governments may provide
financial or other support to locally-based rating agencies and may from time to time
establish official credit rating agencies, credit ratings criteria or procedures for
evaluating local issuers. The financial services industry is also subject to the
potential for increasing regulation in the United States and abroad. The businesses
conducted by the Financial Services segment are in certain cases regulated under the
U.S. Credit Rating Agency Reform Act of 2006, Investment Advisers Act of 1940, the
U.S. Securities Exchange Act of 1934, the National Association of Securities Dealers
and/or the laws of the states or other jurisdictions in which they conduct business.
In the past several years the U.S. Congress, the Securities and Exchange Commission
(“SEC”), the European Commission, through the Committee of European Securities
Regulators (“CESR”) and the International Organization of Securities Commissions
(“IOSCO”), a global group of securities commissioners, have been reviewing the role
of rating agencies and their processes and the need for greater oversight or
regulations concerning the issuance of credit ratings or the activities of credit
rating agencies. Local, national and multinational bodies have considered and adopted
other legislation and regulations relating to credit rating agencies from time to
time and are likely to continue to do so in the future. The Company does not believe
that any new or currently proposed legislation, regulations or judicial
determinations would have a materially adverse effect on its financial condition or
results of operations. However, new legislation, regulations or judicial
determinations applicable to credit rating agencies in the United States and abroad
could affect the competitive and financial position of Standard & Poor’s ratings
services. Additional information on the SEC’s activities regarding rating agencies
is provided in the Management’s Discussion and Analysis section of the Company’s 2008
Annual Report to Shareholders.
•	Broadcasting Regulations
	The Company’s broadcast stations are subject to regulatory developments that may
affect their future profitability. All television stations are subject to Federal
Communication Commission (“FCC”) regulation. Television stations broadcast under
licenses that are generally granted and renewed for a period of eight years. The FCC
regulates television station operations in several ways, including, but not limited
to, employment practices, political advertising, indecency and obscenity, sponsorship
identification, children’s programming, issue-responsive programming, signal
carriage, ownership, and engineering, transmissions, antenna and other technical
matters.
•	Introduction of New Products or Technologies
	The Company operates in highly competitive markets that are subject to rapid change,
and the Company must continue to invest and adapt to remain competitive. There are
substantial uncertainties associated with the Company’s efforts to develop new
products and services for the markets it serves. The Company makes significant
investments in new products and services that may not be profitable and even if they
are profitable, operating margins for new products and businesses may be lower than
the margins the Company has experienced historically. The Company also could
experience threats to its existing businesses from the rise of new competitors due to
the rapidly changing environment within which the Company operates. The Company
relies on its information technology environment and certain critical databases,
systems and applications to support key product and service offerings. The Company
believes it has appropriate policies, processes and internal controls to ensure the
stability of its information technology, provide security from unauthorized access to
its systems and maintain business continuity. The Company’s operating results may be
adversely impacted by unanticipated system failures or data corruption.
•	Operating Costs and Expenses
	The Company’s major expense categories include employee compensation and printing,
paper, and distribution costs for product-related manufacturing. The Company offers
its employees competitive salary and benefit packages in order to attract and retain
the quality employees required to grow and expand its businesses. Compensation costs
are influenced by general economic factors, including those affecting the cost of
health insurance and postretirement benefits, and any trends specific to the employee
skill sets the Company requires. In addition, the Company’s reported earnings may be
adversely affected by changes in pension costs and funding requirements due to poor

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| | investment returns and/or changes in pension regulations. Paper prices fluctuate
based on the worldwide demand and supply for paper in general and for the specific
types of paper used by the Company. The Company’s overall paper price increase is
currently limited due to negotiated price reductions, long-term agreements, and
short-term price caps for a portion of paper purchases that are not protected by
long-term agreements. The Company’s books and magazines are printed by third
parties. The Company typically has multi-year contracts for the production of books
and magazines, a practice which reduces price fluctuations over the contract term.
Any significant increase in these costs could adversely affect the Company’s results
of operations. The Company makes significant investments in information technology
data centers and other technology initiatives. Additionally, the Company makes
significant investments in the development of programs for the el-hi market place.
Although the Company believes it is prudent in its investment strategies and
execution of its implementation plans, there is no assurance as to the ultimate
recoverability of these investments. |
| --- | --- |
| • | Protection of Intellectual Property Rights The Company’s products comprise intellectual property delivered through a variety of
media, including print, broadcast and digital. The ability to achieve anticipated
results depends in part on the Company’s ability to defend its intellectual property
against infringement. The Company’s operating results may be adversely affected by
inadequate legal and technological protections for intellectual property and
proprietary rights in some jurisdictions and markets. |
| • | Exposure to Litigation The Company is involved in legal actions and claims arising from its business
practices, as discussed in the Management’s Discussion and Analysis section of the
Company’s Annual Report to Shareholders, and faces the risk that additional actions
and claims will be filed in the future. Due to the inherent uncertainty of the
litigation process, the resolution of any particular legal proceeding or change in
applicable legal standards could have a material effect on the Company’s financial
position and results of operations. |
| • | Risk of Doing Business Abroad As the Company expands its operations overseas, it faces the increased risks of doing
business abroad, including inflation, fluctuation in interest rates and currency
exchange rates, changes in applicable laws and regulatory requirements, export and
import restrictions, tariffs, nationalization, expropriation, limits on repatriation
of funds, civil unrest, terrorism, unstable governments and legal systems, and other
factors. Adverse developments in any of these areas could cause actual results to
differ materially from historical and/or expected operating results. |
| • | Consolidation of Customers The Company’s investment services businesses have a customer base which is largely
comprised of members from the financial services industry. The current challenging
business environment and the consolidation of customers resulting from mergers and
acquisitions in the financial services industry can result in reductions in the
number of firms and workforce which can impact the size of our customer base. |

Item 1b. Unresolved Staff Comments

None.

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Item 2. Properties

The Registrant leases office facilities at 235 locations: 109 are in the United States. In addition, the Registrant owns real property at 22 locations, of which 10 are in the United States. The principal facilities of the Registrant are as follows:

	Owned — or	Square — Feet
Locations	Leased	(thousands)	Segment
Domestic
New York, NY
55 Water Street	Leased	1,071	Financial Services
2 Penn Plaza	Leased	408	Various Segments
1221 Avenue of the Americas	Leased	420	Corporate Headquarters
			Various Segments
Blacklick, OH
Book Distr. Ctr.	Owned	558	McGraw-Hill Education
Office	Owned	73	McGraw-Hill Education
Ashland, OH	Leased	602	McGraw-Hill Education
Groveport, OH	Leased	506	McGraw-Hill Education
Columbus, OH
Orion Place	Owned	170	McGraw-Hill Education
Easton Commons	Leased	69	McGraw-Hill Education
East Windsor, NJ	Owned
Office		333	Various Segments
Data Center		258	Various Segments
Warehouse		285	Vacant
Delran, NJ	Leased	108	McGraw-Hill Education
DeSoto, TX	Leased
Book Distr. Ctr.		382	McGraw-Hill Education
Assembly Plant		418	McGraw-Hill Education
Monterey, CA	Owned	215	McGraw-Hill Education
Westlake Village, CA	Leased	93	Information & Media
Mather, CA	Leased	56	McGraw-Hill Education
San Francisco, CA	Leased	53	Various Segments
San Diego, CA	Owned	43	Information & Media
Dubuque, IA
Chavenelle Drive	Leased	331	McGraw-Hill Education
Bell Street	Owned	139	McGraw-Hill Education
Chicago, IL	Leased	152	Various Segments

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	Owned — or	Square — Feet
Locations	Leased	(thousands)	Segment
Burr Ridge, IL	Leased	137	McGraw-Hill Education
Centennial, CO	Owned	132	Various Segments
Denver, CO	Owned	88	Information & Media
Indianapolis, IN
North Michigan Road	Leased	127	McGraw-Hill Education
81 st Street	Leased	66	McGraw-Hill Education
North Meridian Street	Owned	54	Information & Media
Washington, DC	Leased	68	Various Segments
Norcross, GA	Leased	66	McGraw-Hill Education
Lake Mary, FL	Leased	58	McGraw-Hill Education
Troy, MI	Leased	54	Information & Media
Boston, MA	Leased	42	Financial Services
Bothell, WA	Leased	39	McGraw-Hill Education
Foreign
Canary Wharf, England	Leased	266	Various Segments
Maidenhead, England	Leased	83	Various Segments
Wooburn, England	Leased	45	McGraw-Hill Education
Mexico City, Mexico	Leased	103	McGraw-Hill Education
Whitby, Canada	Owned
Office		94	McGraw-Hill Education
Book Distr. Ctr.		82	McGraw-Hill Education
Madrid, Spain	Leased	97	McGraw-Hill Education
Jurong, Singapore	Owned	91	McGraw-Hill Education
Singapore, Singapore	Leased	40	McGraw-Hill Education
Mumbai, India	Leased	109	Financial Services
New Delhi, India	Leased	52	McGraw-Hill Education
Frankfurt, Germany	Leased	39	Various Segments

Item 3. Legal Proceedings

A writ of summons was served on The McGraw-Hill Companies, SRL and on The McGraw-Hill Companies, SA (both indirect subsidiaries of the Company) (collectively, “Standard & Poor’s”) on September 29, 2005 and October 7, 2005, respectively, in an action brought in the Tribunal of Milan, Italy by Enrico Bondi (“Bondi”), the Extraordinary Commissioner of Parmalat Finanziaria S.p.A. and Parmalat S.p.A. (collectively, “Parmalat”). Bondi has brought numerous other lawsuits in both Italy and the United States against entities and individuals who had dealings with Parmalat. In this suit, Bondi claims that Standard & Poor’s, which had issued investment grade ratings

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on Parmalat until shortly before Parmalat’s collapse in December 2003, breached its duty to issue an independent and professional rating and negligently and knowingly assigned inflated ratings in order to retain Parmalat’s business. Alleging joint and several liability, Bondi claims damages of euros 4,073,984,120 (representing the value of bonds issued by Parmalat and the rating fees paid by Parmalat) with interest, plus damages to be ascertained for Standard & Poor’s alleged complicity in aggravating Parmalat’s financial difficulties and/or for having contributed in bringing about Parmalat’s indebtedness towards its bondholders, and legal fees. The Company believes that Bondi’s allegations and claims for damages lack legal or factual merit. Standard & Poor’s filed its answer, counterclaim and third-party claims on March 16, 2006 and will continue to vigorously contest the action. The next hearing in this matter is scheduled to be held in October 2009.

| In a separate proceeding, the prosecutor’s office in Parma, Italy is conducting an
investigation into the bankruptcy of Parmalat. In June 2006, the prosecutor’s office
issued a Note of Completion of an Investigation (“Note of Completion”) concerning
allegations, based on Standard & Poor’s investment grade ratings of Parmalat, that
individual Standard & Poor’s rating analysts conspired with Parmalat insiders and
rating advisors to fraudulently or negligently cause the Parmalat bankruptcy. The
Note of Completion was served on eight Standard & Poor’s rating analysts. While not
a formal charge, the Note of Completion indicates the prosecutor’s intention that the
named rating analysts should appear before a judge in Parma for a preliminary
hearing, at which hearing the judge will determine whether there is sufficient
evidence against the rating analysts to proceed to trial. No date has been set for
the preliminary hearing. On July 7, 2006, a defense brief was filed with the Parma
prosecutor’s office on behalf of the rating analysts. The Company believes that
there is no basis in fact or law to support the allegations against the rating
analysts, and they will be vigorously defended by the subsidiaries involved. |
| --- |
| On August 9, 2007, a pro se action titled Blomquist v. Washington Mutual, et al. , was
filed in the District Court for the Northern District of California alleging various
state and federal claims against, inter alia, numerous mortgage lenders, financial
institutions, government agencies and credit rating agencies. The Complaint also
asserts claims against the Company and Mr. Harold McGraw III, the CEO of the Company
in connection with Standard & Poor’s ratings of subprime mortgage-backed securities.
On July 23, 2008, the District Court dismissed all claims asserted against the
Company and Mr. McGraw, on their motion, and denied plaintiff leave to amend as
against them. No appeal was perfected within the time permitted. |
| On August 28, 2007, a putative shareholder class action titled Reese v. Bahash was
filed in the District Court for the District of Columbia, and was subsequently
transferred to the Southern District of New York. The Company and its CEO and CFO
are currently named as defendants in the suit, which alleges claims under the federal
securities laws in connection with alleged misrepresentations and omissions made by
the defendants relating to the Company’s earnings and S&P’s business practices. On
November 3, 2008, the District Court denied Lead Plaintiff’s motion to lift the
discovery stay imposed by the Private Securities Litigation Reform Act in order to
obtain documents S&P submitted to the SEC during the SEC’s examination. The Company
filed a motion to dismiss the Second Amended Complaint on February 3, 2009 and
expects that motion to be fully submitted by May 4, 2009. The Company believes the
litigation to be without merit and intends to defend against it vigorously. |
| In May and June 2008, three purported class actions were filed in New York State
Supreme Court, New York County, naming the Company as a defendant. The named
plaintiff in one action is New Jersey Carpenters Vacation Fund and the New Jersey
Carpenters Health Fund is the named plaintiff in the other two. All three actions
have been successfully removed to the United States District Court for the Southern
District of New York. The first case relates to certain mortgage-backed securities
issued by various HarborView Mortgage Loan Trusts, the second relates to certain
mortgage-backed securities issued by various NovaStar Mortgage Funding Trusts, and
the third case relates to an offering by Home Equity Mortgage Trust 2006-5. The
central allegation against the Company in each of these cases is that Standard &
Poor’s issued inappropriate credit ratings on the applicable mortgage-backed
securities in alleged violation of Section 11 of the Securities Exchange Act of 1933.
In each, plaintiff seeks as relief compensatory damages for the alleged decline in
value of the securities as well as an award of reasonable costs and expenses.
Plaintiff has sued other parties, including the issuers and underwriters of the
securities, in each case as well. The Company believes the litigations to be without
merit and intends to defend against them vigorously. |
| On July 11, 2008, plaintiff Oddo Asset Management filed an action in New York State
Supreme Court, New York County, against a number of defendants, including the
Company. The action, titled Oddo Asset Management v.
Barclays Bank PLC , arises out of plaintiff’s investment in two structured investment
vehicles, or SIV-Lites, that plaintiff alleges suffered losses as a result of
violations of law by those who created, managed, arranged, and issued credit ratings
for those investments. The central allegation against the Company is that it aided
and abetted breaches of fiduciary duty by the collateral managers of the two
SIV-Lites by allegedly falsely confirming the credit ratings it had previously given
those investments. Plaintiff seeks compensatory and punitive damages plus reasonable
costs, expenses, and attorneys fees. Motions to dismiss the Complaint were filed on
October 31, 2008 by the Company and |

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| the other Defendants, which are sub judice . The
Company believes the litigation to be without merit and intends to defend against it
vigorously. |
| --- |
| On July 30, 2008, the Connecticut Attorney General filed suit against the Company in
the Superior Court of the State of Connecticut, Judicial District of Hartford,
alleging that Standard & Poor’s breached the Connecticut Unfair Trade Practices Act
by assigning lower credit ratings to bonds issued by states, municipalities and other
public entities as compared to corporate debt with similar or higher rates of
default. The plaintiff seeks a variety of remedies, including injunctive relief, an
accounting, civil penalties, restitution, disgorgement of revenues and profits and
attorneys fees. On August 29, 2008, the Company removed this case to the United
States District Court, District of Connecticut; on September 29, 2008, plaintiff
filed a motion to remand; and, on October 20, 2008, the Company filed a motion to
dismiss the Complaint for improper venue. The Company believes the litigation to be
without merit and intends to defend against it vigorously. |
| On August 25, 2008, plaintiff Abu Dhabi Commercial Bank filed an action in the
District Court for the Southern District of New York against a number of defendants,
including the Company. The action, titled Abu Dhabi Commercial Bank v. Morgan
Stanley Incorporated, et al. , arises out of plaintiff’s investment in certain
structured investment vehicles (“SIVs”). Plaintiff alleges various common law causes
of action against the defendants, asserting that it suffered losses as a result of
violations of law by those who created, managed, arranged, and issued credit ratings
for those investments. The central allegation against the Company is that Standard &
Poor’s issued inappropriate credit ratings with respect to the SIVs. Plaintiff seeks
compensatory and punitive damages plus reasonable costs, expenses, and attorneys
fees. On November 5, 2008, a motion to dismiss was filed by the Company and the
other Defendants for lack of subject matter jurisdiction, but the matter is presently
in abeyance pending limited third-party discovery on jurisdictional issues. The
Company believes the litigation to be without merit and intends to defend against it
vigorously. |
| On September 10, 2008, a putative shareholder class action titled Patrick Gearren, et
al. v. The McGraw-Hill Companies, Inc., et al. was filed in the District Court for
the Southern District of New York against the Company, its Board of Directors, its
Pension Investment Committee and the administrator of its pension plans. The
Complaint alleges that the defendants breached fiduciary duties to participants in
the Company’s ERISA plans by allowing participants to continue to invest in Company
stock as an investment option under the plans during a period when plaintiffs allege
the Company’s stock price to have been artificially inflated. The Complaint also
asserts that defendants breached fiduciary duties under ERISA by making certain
material misrepresentations and non-disclosures in plan communications and the
Company’s SEC filings. An Amended Complaint was filed January 5, 2009. The Company,
which has not yet answered or responded to the Amended Complaint, believes the
litigation to be without merit and intends to defend against it vigorously. |
| On September 26, 2008, a putative class action was filed in the Superior Court of New
Jersey, Bergen County, titled Kramer v. Federal National Mortgage Association
(“Fannie Mae”), et al. , against a number of defendants including the Company. The
central allegation against the Company is that Standard & Poor’s issued inappropriate
credit ratings on certain securities issued by defendant Federal National Mortgage
Association in alleged violation of Section 12(a)(2) of the Securities Exchange Act
of 1933. Plaintiff seeks as relief compensatory damages, as well as an award of
reasonable costs and expenses, and attorneys fees. On October 27, 2008, the Company
removed this case to the United States District Court, District of New Jersey. The
Judicial Panel for Multidistrict Litigation has transferred 19 lawsuits involving
Fannie Mae, including this case, to Judge Lynch in the United States District Court
for the Southern District of New York for pretrial purposes. The Company believes
the litigation to be without merit and intends to defend against it vigorously. |
| On November 20, 2008, a putative class action was filed in New York State Supreme
Court, New York County titled Tsereteli v. Residential Asset Securitization Trust
2006-A8 (“the Trust”), et al. , asserting Section 11 and Section 12(a)(2) of the
Securities Exchange Act of 1933 claims against the Trust, Credit Suisse Securities
(USA) LLC, Moody’s and the Company with respect to mortgage-backed securities issued
by the Trust. On December 8, 2008, Defendants removed the case to the United States District Court for the Southern
District of New York. Defendants’ time to respond to the Complaint is stayed pending
the selection of a lead plaintiff. The Company believes the litigation to be without
merit and intends to defend against it vigorously. |
| On December 2, 2008, a putative class action was filed in California Superior Court
titled Public Employees’ Retirement System of Mississippi v. Morgan Stanley, et al. ,
asserting Section 11 and Section 12(a)(2) of the Securities Exchange Act of 1933
claims against the Company, Moody’s and various Morgan Stanley trusts relating to
mortgage-backed securities issued by the trusts. On December 31, 2008, Defendants
removed the case to the United States District Court for the Central District of
California. On January 30, 2009, plaintiff filed a motion to |

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| remand and, on the same
date, the defendants filed a motion to transfer the action to the Southern District
of New York. The Company believes the litigation to be without merit and intends to
defend against it vigorously. |
| --- |
| An action was brought in the Civil Court of Milan, Italy on December 5, 2008, titled Loconsole, et al. v. Standard & Poor’s Europe Inc. in which 30 purported investors
claim to have relied upon Standard & Poor’s ratings of Lehman Brothers. Responsive
papers are due in early April 2009. The Company believes the litigation to be
without merit and intends to defend against it vigorously. |
| On January 8, 2009, a complaint was filed in the District Court for the Southern
District of New York titled Teamsters Allied Benefit Funds v. Harold McGraw III, et
al. , asserting nine claims, including causes of action for securities fraud, breach
of fiduciary duties and other related theories, against the Board of Directors and
several officers of the Company. The claims in the complaint are premised on the
alleged role played by the Company’s directors and officers in the issuance of
“excessively high ratings” by Standard & Poor’s and subsequent purported
misstatements or omissions in the Company’s public filings regarding the financial
results and operations of the ratings business. The Company believes the litigation
to be without merit and intends to defend against it vigorously. |
| On January 20, 2009, a putative class action was filed in the Superior Court of the
State of California, Los Angeles County titled IBEW Local 103 v. IndyMac MBS, Inc.,
et al ., asserting claims under the federal securities laws on behalf of a purported
class of purchasers of certain issuances of mortgage-backed securities. The
Complaint asserts claims against the trusts that issued the securities, the
underwriters of the securities and the rating agencies that issued credit ratings for
the securities. With respect to the rating agencies, the Complaint asserts a single
claim under Section 12 of the Securities Exchange Act of 1933. Plaintiff seeks as
relief compensatory damages for the alleged decline in value of the securities, as
well as an award of reasonable costs and expenses. The Company believes the
litigation to be without merit and intends to defend against it vigorously. |
| On January 21, 2009, the National Community Reinvestment Coalition (“NCRC”) filed a
complaint with the U.S. Department of Housing and Urban Development Office of Fair
Housing and Equal Opportunity (“HUD”) against Standard & Poor’s Ratings Services.
The Complaint asserts claims under the Fair Housing Act of 1968 and alleges that
S&P’s issuance of credit ratings on securities backed by subprime mortgages had a
“disproportionate adverse impact on African Americans and Latinos, and persons living
in African-American and Latino communities.” NCRC seeks declaratory, injunctive, and
compensatory relief, and also requests that HUD award a civil penalty against the
Company. The Company believes that the Complaint is without merit and intends to
defend against it vigorously. |
| On January 26, 2009, a pro se action titled Grassi v. Moody’s, et al. , was filed in
the Superior Court of California, Placer County, against Standard & Poor’s and two
other rating agencies, alleging negligence and fraud claims, in connection with
ratings of securities issued by Lehman Brothers Holdings Inc. Plaintiff seeks as
relief compensatory and punitive damages. The Company believes the litigation to be
without merit and intends to defend against it vigorously. |
| On January 29, 2009, a putative class action was filed in the District Court for the
Southern District of New York titled Boilermaker-Blacksmith National Pension Trust v.
Wells Fargo Mortgage-Backed Securities 2006 AR1 Trust, et al , asserting claims under
the federal securities laws on behalf of a purported class of purchasers of certain
issuances of mortgage-backed securities. The Complaint asserts claims against the
trusts that issued the securities, the underwriters of the securities and the rating
agencies that issued credit ratings for the securities. With respect to the rating
agencies, the Complaint asserts claims under Sections 11 and 12(a)(2) of the
Securities Exchange Act of 1933. Plaintiff seeks as relief compensatory damages for
the alleged decline in value of the securities, as well as an award of reasonable
costs and expenses. The Company believes the litigation to be without merit and
intends to defend against it vigorously. |
| On February 6, 2009, a putative class action was filed in the District Court for the
Southern District of New York titled Public Employees’ Retirement System of Mississippi
v. Goldman Sachs Group, Inc., et al. , asserting Section 11 and Section 12(a)(2) of the
Securities Exchange Act of 1933 claims against the Company, Moody’s, Fitch and Goldman
Sachs relating to mortgage-backed securities. The Company believes the litigation to be
without merit and intends to defend against it vigorously. |
| The Company has been added as a defendant to a case title Pursuit Partners, LLC v. UBS AG
et al. , pending in the Superior Court of Connecticut, Stamford. Plaintiffs allege
various Connecticut statutory and common law causes of action against the rating agencies
and UBS relating to their purchase of CDO Notes. Plaintiffs seek compensatory and
punitive damages, treble damages under Connecticut law, plus costs, expenses, and
attorneys fees. The Company believes the litigation to be without merit and intends to
defend against it vigorously. |
| The Company has been named as a defendant in a putative class action filed in February 2009 in the
District Court for the Southern District of New York titled Public Employees’ Retirement System of
Mississippi v. Merrill Lynch et al. , asserting Section 11 and Section 12(a)(2) of the Securities
Exchange Act of 1933 claims against Merrill Lynch, various issuing trusts, the Company, Moody’s and
others relating to mortgage-backed securities. The Company believes the litigation to be without
merit and intends to defend against it vigorously. |
| The Company has been named as a defendant in an amended complaint filed in February 2009 in a
matter titled In re Lehman Brothers Mortgage-Backed Securities Litigation pending in the District
Court for the Southern District of New York, asserting claims under Sections 11, 12 and 15 of the
Securities Exchange Act of 1933 against various issuing trusts, the Company, Moody’s and others
relating to mortgage-backed securities. The Company believes the litigation to be without merit
and intends to defend against it vigorously. |

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In addition, in the normal course of business both in the United States and abroad, the Company and its subsidiaries are defendants in numerous legal proceedings and are involved, from time to time, in governmental and self-regulatory agency proceedings, which may result in adverse judgments, damages, fines or penalties. Also, various governmental and self-regulatory agencies regularly make inquiries and conduct investigations concerning compliance with applicable laws and regulations. Based on information currently known by the Company’s management, the Company does not believe that any pending legal, governmental or self-regulatory proceedings or investigations will result in a material adverse effect on its financial condition or results of operations.

Item 4. Submission of Matters to a Vote of Security Holders

No matters were submitted to a vote of Registrant’s security holders during the last quarter of the period covered by this Report.

Executive Officers of the Registrant

Name		Position
Harold McGraw III	60	Chairman of the Board, President and Chief Executive Officer
Robert J. Bahash	63	Executive Vice President and Chief Financial Officer
Bruce D. Marcus	60	Executive Vice President and Chief Information Officer
David L. Murphy	63	Executive Vice President, Human Resources
D. Edward Smyth	59	Executive Vice President, Corporate
Affairs and Executive Assistant to the Chairman, President and Chief
Executive Officer
Kenneth M. Vittor	59	Executive Vice President and General Counsel

All of the above executive officers of the Registrant have been full-time employees and officers of the Registrant for more than five years except for Mr. Marcus and Mr. Smyth.

Mr. Marcus, prior to becoming an officer of the Registrant on January 19, 2005, was Senior Vice President, Enterprise Systems, with responsibility for systems development across the Company. Prior to that, he was Vice President, Business Operations and Technology for Platts.

Mr. Smyth, prior to becoming an officer of the Registrant on February 17, 2009, served as Chief Administrative Officer and Senior Vice President of Corporate and Government Affairs for H.J. Heinz Company. Prior to joining Heinz, Mr. Smyth spent fifteen years as a senior Irish diplomat.

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PART II

Item 5. Market for the Registrant’s Common Stock and Related

Stockholder Matters and Issuer Purchases of Equity Securities

On February 13, 2009, the closing price of the Registrant’s common stock was $23.87 per share as reported on the New York Stock Exchange. The approximate number of record holders of the Registrant’s common stock as of February 13, 2009 was 4,906.

	2008
Dividends per share of common stock:
$0.22 per quarter in 2008	$ 0.88
$0.205 per quarter in 2007	$ 0.82

On January 31, 2007 the Board of Directors approved a stock repurchase program authorizing the purchase of up to 45 million shares, which was approximately 12.7% of the total shares of the Company’s outstanding common stock as of January 31, 2007. As of December 31, 2007, 28.0 million shares remained available under the 2007 repurchase program. In 2008, the Company repurchased 10.9 million shares. As of December 31, 2008, 17.1 million shares remained available under the 2007 repurchase program. The repurchase program has no expiration date. The repurchased shares may be used for general corporate purposes, including the issuance of shares in connection with the exercise of employee stock options. Purchases under this program may be made from time to time on the open market and in private transactions, depending on market conditions.

The following table provides information on purchases made by the Company of its outstanding common stock during the fourth quarter of 2008 pursuant to the stock repurchase program authorized by the Board of Directors on January 31, 2007 (column c). In addition to purchases under the 2007 stock repurchase program, the number of shares in column (a) includes: 1) shares of common stock that are tendered to the Registrant to satisfy the employees’ tax withholding obligations in connection with the vesting of awards of restricted performance shares (such shares are repurchased by the Registrant based on their fair market value on the vesting date), and 2) shares of the Registrant deemed surrendered to the Registrant to pay the exercise price and to satisfy the employees’ tax withholding obligations in connection with the exercise of employee stock options. There were no other share repurchases during the quarter outside the stock repurchases noted below:

			(c)Total Number of — Shares Purchased as	(d) Maximum Number — of Shares that may
	(a)Total Number of		Part of Publicly	yet be Purchased
	Shares Purchased	(b)Average Price	Announced Programs	Under the Programs
Period	(in millions)	Paid per Share	(in millions)	(in millions)
(Oct. 1 —
Oct. 31, 2008)	—	—	—	17.1
(Nov. 1 —
Nov. 30, 2008)	—	—	—	17.1
(Dec. 1 —
Dec. 31, 2008)	—	—	—	17.1
Total — Qtr	—	—	—	17.1

Information concerning the high and low stock price of the Registrant’s common stock on the New York Stock Exchange is incorporated herein by reference from Exhibit (13), from page 84 of the 2008 Annual Report to Shareholders.

A performance graph that compares the Registrant’s cumulative total shareholder return during the previous five years with a performance indicator of the overall market (i.e., S&P 500), and the Registrant’s peer group is incorporated herein by reference from Exhibit (13), from the inside cover of the 2008 Annual Report to Shareholders.

Item 6. Selected Financial Data

Incorporated herein by reference from Exhibit (13), from the 2008 Annual Report to Shareholders, pages 82 and 83.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations

Incorporated herein by reference from Exhibit (13), from the 2008 Annual Report to Shareholders, pages 22 to 52.

Item 7a. Quantitative and Qualitative Disclosure about Market Risk

Incorporated herein by reference from Exhibit (13), from the 2008 Annual Report to Shareholders, page 51.

Item 8. Consolidated Financial Statements and Supplementary Data

Incorporated herein by reference from Exhibit (13), from the 2008 Annual Report to Shareholders, pages 53 to 81.

Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

None.

Item 9a. Controls and Procedures

Disclosure Controls and Procedures

The Company maintains disclosure controls and procedures that are designed to ensure that information required to be disclosed in the Company’s reports filed with the Securities and Exchange Commission (“SEC”) is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms, and that such information is accumulated and communicated to the Company’s management, including its Chief Executive Officer (“CEO”) and Chief Financial Officer (“CFO”), as appropriate, to allow timely decisions regarding required disclosure.

As of December 31, 2008, an evaluation was performed under the supervision and with the participation of the Company’s management, including the CEO and CFO, of the effectiveness of the design and operation of the Company’s disclosure controls and procedures (as defined in Rules 13a-15(e) under the U.S. Securities Exchange Act of 1934). Based on that evaluation, the Company’s management, including the CEO and CFO, concluded that the Company’s disclosure controls and procedures were effective as of December 31, 2008.

Management’s Annual Report on Internal Control Over Financial Reporting

Pursuant to Section 404 of the Sarbanes-Oxley Act of 2002 (Section 404) and as defined in Rules 13a-15(f) under the U.S. Securities Exchange Act of 1934, management is required to provide the following report on the Company’s internal control over financial reporting:

1. The Company’s management is responsible for establishing and maintaining adequate internal control over financial reporting for the Company.

2. The Company’s management has evaluated the system of internal control using the Committee of Sponsoring Organizations of the Treadway Commission (“COSO”) framework. Management has selected the COSO framework for its evaluation as it is a control framework recognized by the SEC and the Public Company Accounting Oversight Board that is free from bias, permits reasonably consistent qualitative and quantitative measurement of the Company’s internal controls, is sufficiently complete so that relevant controls are not omitted and is relevant to an evaluation of internal controls over financial reporting.

3. Based on management’s evaluation under this framework, we have concluded that the Company’s internal controls over financial reporting were effective as of December 31, 2008. There are no material weaknesses in the Company’s internal control over financial reporting that have been identified by management.

4. The Company’s independent registered public accounting firm, Ernst & Young LLP, have audited the consolidated financial statements of the Company for the year ended December 31, 2008, and have issued their reports on the financial statements and the effectiveness of internal controls over financial reporting. These reports are located on pages 79 and 80 of the 2008 Annual Report to Shareholders.

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Other Matters

There have been no changes in the Company’s internal control over financial reporting during the most recent quarter that have materially affected, or are reasonably likely to materially affect, the Company’s internal control over financial reporting.

Item 9b. Other Information

None.

PART III

Item 10. Directors and Executive Officers of the Registrant

Incorporated herein by reference from the Registrant’s definitive proxy statement dated March 20, 2009 for the annual meeting of shareholders to be held on April 29, 2009.

Item 11. Executive Compensation

Incorporated herein by reference from the Registrant’s definitive proxy statement dated March 20, 2009 for the annual meeting of shareholders to be held on April 29, 2009.

Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters

Incorporated herein by reference from the Registrant’s definitive proxy statement dated March 20, 2009 for the annual meeting of shareholders to be held April 29, 2009.

The following table details the Registrant’s equity compensation plans as of December 31, 2008:

Equity Compensation Plans’ Information

				(c)
				Number of securities
			(b)	remaining available
	(a)		Weighted-average	for future issuance
	Number of securities to		exercise price of	under equity
	be issued upon exercise		outstanding	compensation plans
	of outstanding options,		options, warrants	(excluding securities reflected
Plan Category	warrants and rights		and rights	in column (a))
Equity compensation
plans approved by
security holders	32,721,436		$ 39.8945	20,830,107
Equity compensation
plans not approved
by security holders	0		0	0
Total	32,721,436	(1)	$ 39.8945	20,830,107	(2) (3)

| (1) | Included in this number are 32,469,495 shares to be issued upon
exercise of outstanding options under the Company’s Stock Incentive Plans
and 251,941 deferred units already credited but to be issued under the
Director Deferred Stock Ownership Plan. |
| --- | --- |
| (2) | Included in this number are 304,490 shares reserved for
issuance under the Director Deferred Stock Ownership Plan. The remaining
20,525,617 shares are reserved for issuance under the 2002 Stock Incentive
Plan (the “2002 Plan”) for Performance Stock, Restricted Stock, Other
Stock-Based Awards, Stock Options and Stock Appreciation Rights (“SARs”). |
| (3) | Under the terms of the 2002 Plan, shares subject to an award
(other than a stock option, SAR, or dividend equivalent) or shares paid in
settlement of a dividend equivalent reduce the number of shares available
under the 2002 Plan by one share for each such |

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| share granted or paid;
shares subject to a stock option or SAR reduce the number of shares
available under the 2002 Plan by one-third of a share for each such share
granted. The 2002 Plan stipulates that in no case, as a result of such
share counting, may more than 19,000,000 shares of stock be issued
thereunder. Accordingly, for purposes of setting forth the figures in this
column, the base figure from which issuances of stock awards are deducted,
is deemed to be 19,000,000 shares for the 2002 Plan plus shares reserved
for grant immediately prior to the amendments to the 2002 Plan of April
28, 2004. |
| --- |
| The 2002 Plan is also governed by certain share recapture provisions. The
aggregate number of shares of stock available under the 2002 Plan for
issuance are increased by the number of shares of stock granted as an award
under the 2002 Plan or 1993 Employee Stock Incentive Plan (the “1993
Plan”)(other than stock option, SAR or 1993 Plan stock option awards) or by
one-third of the number of shares of stock in the case of stock option, SAR
or 1993 Plan stock option awards that are, in each case: forfeited, settled
in cash or property other than stock, or otherwise not distributable under an
award under the Plan; tendered or withheld to pay the exercise or purchase
price of an award under the 2002 or 1993 Plans or to satisfy applicable wage
or other required tax withholding in connection with the exercise, vesting or
payment of, or other event related to, an award under the 2002 or 1993 Plan;
or repurchased by the Company with the option proceeds in respect of the
exercise of a stock option under the 2002 or 1993 Plans. |

Item 13. Certain Relationships and Related Transactions

Incorporated herein by reference from the Registrant’s definitive proxy statement dated March 20, 2009 for the annual meeting of shareholders to be held April 29, 2009.

Item 14. Principal Accounting Fees and Services

During the year ended December 31, 2008, Ernst & Young LLP audited the consolidated financial statements of the Corporation and its subsidiaries.

Incorporated herein by reference from the Registrant’s definitive proxy statement dated March 20, 2009 for the annual meeting of shareholders to be held April 29, 2009.

PART IV

Item 15. Exhibits and Financial Statement Schedules

(a)	Financial Statements
	The Index to Financial Statements and Financial Statement Schedule on page 15 is
incorporated herein by reference as the list of financial statements required as
part of this report.
2.	Financial Statement Schedules
	The Index to Financial Statements and Financial Statement Schedule on page 15 is
incorporated herein by reference as the list of financial statements required as
part of this report.
3.	Exhibits
	The exhibits filed as part of this Annual Report on Form 10-K are listed in the
Exhibit Index on pages 20 to 21, immediately preceding such Exhibits, and such
Exhibit Index is incorporated herein by reference.

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The McGraw-Hill Companies, Inc. Index to Financial Statements, Financial Statement Schedules and Exhibits

	Form	Annual Report to
	10-K	Shareholders (page)
Data incorporated by reference from Annual Report to Shareholders:
Report of Management		78
Report of Independent Registered Public Accounting Firm		79
Report of Independent Registered Public Accounting Firm		80
Consolidated balance sheet at December 31, 2008 and 2007		54-55
Consolidated statement of income for each of the three years in the period
ended December 31, 2008		53
Consolidated statement of cash flows for each of the three years in the period
ended December 31, 2008		56
Consolidated statement of shareholders’ equity for each of the three years in the period
ended December 31, 2008		57
Notes to consolidated financial statements		58-77
Quarterly financial information		81
Financial Statement Schedule:
Consolidated
schedule for each of the three years in the period ended December 31, 2008
Schedule II — Reserves for doubtful accounts and sales returns	16
Consent of Independent Registered Public Accounting Firm	Exhibit 23

All other schedules have been omitted since the required information is not present or not present in amounts sufficient to require submission of the schedule, or because the information required is included in the consolidated financial statements or the notes thereto.

The financial statements listed in the above index which are included in the Annual Report to Shareholders for the year ended December 31, 2008 are hereby incorporated by reference in Exhibit (13). With the exception of the pages listed in the above index, the 2008 Annual Report to Shareholders is not to be deemed filed as part of Item 15 (a)(1).

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The McGraw-Hill Companies, Inc.

Schedule II — Reserves for Doubtful Accounts and Sales Returns

(In thousands)

Additions/(deductions)	Balance at — beginning	Charged				Balance — at end
	of year	to income	Deductions			of year
			(A)
Year ended 12/31/08
Allowance for doubtful accounts	$ 70,586	$ 27,098	$	(21,343	)	$ 76,341
Allowance for returns	197,095	(4,751	)	—		192,344
	$ 267,681	$ 22,347	$	(21,343	)	$ 268,685
Year ended 12/31/07
Allowance for doubtful accounts	$ 73,405	$ 14,991	$	(17,810	)	$ 70,586
Allowance for returns	188,515	8,580		—		197,095
	$ 261,920	$ 23,571	$	(17,810	)	$ 267,681
Year ended 12/31/06
Allowance for doubtful accounts	$ 74,396	$ 19,577	$	(20,568	)	$ 73,405
Allowance for returns	187,348	1,167		—		188,515
	$ 261,744	$ 20,744	$	(20,568	)	$ 261,920

(A) Accounts written off, less recoveries.

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Signatures

Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, Registrant has duly caused this Annual Report to be signed on its behalf by the undersigned, thereunto duly authorized.

The McGraw-Hill Companies, Inc.
Registrant

By:
Kenneth M. Vittor
Executive Vice President and General Counsel February 27, 2009

Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on February 27, 2009 on behalf of Registrant by the following persons who signed in the capacities as set forth below under their respective names. Registrant’s board of directors is comprised of twelve members and the signatures set forth below of individual board members, constitute at least a majority of such board.

/s/ Harold W. McGraw III
Harold W. McGraw III
Chairman, President, Chief Executive Officer, and Director

/s/ Robert J. Bahash
Robert J. Bahash
Executive Vice President and Chief Financial Officer

/s/ Emmanuel N. Korakis
Emmanuel N. Korakis
Senior Vice President and Corporate Controller

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/s/ Pedro Aspe
Pedro Aspe
Director

/s/ Sir Winfried F.W. Bischoff
Sir Winfried F.W. Bischoff
Director

/s/ Douglas N. Daft
Douglas N. Daft
Director

/s/ Linda Koch Lorimer
Linda Koch Lorimer
Director

/s/ Robert P. McGraw
Robert P. McGraw
Director

/s/ Hilda Ochoa-Brillembourg
Hilda Ochoa-Brillembourg
Director
/s/ Sir Michael Rake
Sir Michael Rake
Director

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/s/ James H. Ross
James H. Ross
Director
/s/ Edward B. Rust, Jr.
Edward B. Rust, Jr.
Director
/s/ Kurt L. Schmoke
Kurt L. Schmoke
Director
/s/ Sidney Taurel
Sidney Taurel
Director

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Exhibit
Number	Exhibit Index
(3)	Certificate of Incorporation of Registrant, incorporated by reference from Registrant’s
Form 10-K for the fiscal year ended December 31, 1995 and Form 10-Q for the quarter ended
June 30, 1998.
(3)	Amendment to Certificate of Incorporation of Registrant, incorporated by reference from
Registrant’s Form 8-K filed April 27, 2005.
(3)	By-laws of Registrant, incorporated by reference from Registrant’s Form 8-K filed January
31, 2007.
(4.1)	Indenture dated as of November 2, 2007 between the Registrant, as issuer, and The Bank
of New York, as trustee, incorporated by reference from Registrant’s Form 8-K dated
November 2, 2007.
(4.2)	First Supplemental Indenture, dated January 1, 2009, between the Company and The Bank of
New York Mellon, as trustee, incorporated by reference from Registrant’s Form 8-K dated
January 1, 2009.
(10.1)	Form of Indemnification Agreement between Registrant and each of its directors and
certain of its executive officers, incorporated by reference from Registrant’s Form 10-K
for the fiscal year ended December 31, 2004.
(10.2)*	Registrant’s Amended and Restated 1993 Employee Stock Incentive Plan, as amended and
restated as of December 6, 2006, incorporated by reference from Registrant’s Form 10-K for
the fiscal year ended December 31, 2006.
(10.3)*	Registrant’s Amended and Restated 2002 Stock Incentive Plan, as amended and restated as
of January 28, 2009.
(10.4)*	Form of Restricted Performance Share Terms and Conditions, incorporated by reference
from Registrant’s Form 10-K for the fiscal year ended December 31, 2004.
(10.5)*	Form of Restricted Performance Share Award, incorporated by reference from Registrant’s
Form 10-K for the fiscal year ended December 31, 2004.
(10.6)*	Form of Stock Option Award, incorporated by reference from Registrant’s Form 10-K for
the fiscal year ended December 31, 2004.
(10.7)*	Registrant’s Key Executive Short Term Incentive Compensation Plan, as amended and
restated effective as of January 1, 2006, incorporated by reference from Registrant’s Form
10-K for the fiscal year ended December 31, 2006.
(10.8)*	Registrant’s Key Executive Short-Term Incentive Deferred Compensation Plan, as amended
and restated as of January 1, 2008, incorporated by reference from Registrant’s Form 10-K
for the fiscal year ended December 31, 2007.
(10.9)*	Registrant’s Executive Deferred Compensation Plan, incorporated by reference from
Registrant’s Form SE filed March 28, 1991 and in connection with Registrant’s Form 10-K
for the fiscal year ended December 31, 1990.
(10.10)*	Registrant’s Management Severance Plan, as amended and restated as of January 1, 2008,
incorporated by reference from Registrant’s Form 10-K for the fiscal year ended December
31, 2007.
(10.11)*	Registrant’s Executive Severance Plan, as amended and restated as of January 1, 2008,
incorporated by reference from Registrant’s Form 10-K for the fiscal year ended December
31, 2007.
(10.12)*	Registrant’s Senior Executive Severance Plan, as amended and restated as of January 1,
2008, incorporated by reference from Registrant’s Form 10-K for the fiscal year ended
December 31, 2007.
(10.13)	$766,666,666 Three-Year Credit Agreement dated as of September 12, 2008 among the
Registrant, the lenders listed therein, and JP Morgan Chase Bank, as administrative agent,
incorporated by reference from the Registrant’s Form 8-K dated September 12, 2008.
(10.14)	$383,333,333 364-Day Credit Agreement dated as of September 12, 2008, among the
Registrant, the lenders listed therein, and JP Morgan Chase Bank, as administrative agent,
incorporated by reference from the Registrant’s Form 8-K dated September 12, 2008.

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Table of Contents

Exhibit
Number	Exhibit Index
(10.15)	First Amendment to 364-Day McGraw-Hill Credit Agreement, dated January 1, 2009, between
the Registrant and JPMorgan Chase Bank, N.A., as administrative agent, incorporated by
reference from Registrant’s Form 8-K dated January 1, 2009.
(10.16)	Joinder Agreement, dated January 1, 2009, between Standard & Poor’s Financial Services
LLC and JPMorgan Chase Bank, N.A., as administrative agent, incorporated by reference from
Registrant’s Form 8-K dated January 1, 2009.
(10.17)	First Amendment to Three-Year McGraw-Hill Credit Agreement, dated January 1, 2009,
between the Registrant and JPMorgan Chase Bank, N.A., as administrative agent,
incorporated by reference from Registrant’s Form 8-K dated January 1, 2009.
(10.18)	Joinder Agreement, dated January 1, 2009, between Standard & Poor’s Financial Services
LLC and JPMorgan Chase Bank, N.A., as administrative agent, incorporated by reference from
Registrant’s Form 8-K dated January 1, 2009.
(10.19)*	Registrant’s Employee Retirement Plan Supplement, as amended and restated as of
January 1, 2008, incorporated by reference from Registrant’s Form 10-K for the fiscal year
ended December 31, 2007.
(10.20)*	Registrant’s 401(k) Savings and Profit Sharing Supplement, as amended and restated as
of January 1, 2008, incorporated by reference from Registrant’s Form 10-K for the fiscal
year ended December 31, 2007.
(10.21)*	Registrant’s Management Supplemental Death and Disability Benefits Plan, as amended
January 24, 2006, incorporated by reference from Registrant’s Form 10-K for the fiscal
year ended December 31, 2005.
(10.22)*	Registrant’s Senior Executive Supplemental Death, Disability & Retirement Benefits
Plan, as amended and restated as of January 1, 2008, incorporated by reference from
Registrant’s Form 10-K for the fiscal year ended December 31, 2007.
(10.23)*	Registrant’s Director Retirement Plan, incorporated by reference from Registrant’s
Form SE filed March 29, 1990 in connection with Registrant’s Form 10-K for the fiscal year
ended December 31, 1989.
(10.24)*	Resolutions Freezing Existing Benefits and Terminating Additional Benefits under
Registrant’s Directors Retirement Plan, as adopted on January 31, 1996, incorporated by
reference from Registrant’s form 10-K for the fiscal year ended December 31, 1996.
(10.25)*	Registrant’s Director Deferred Compensation Plan, as amended and restated as of
January 1, 2008, incorporated by reference from Registrant’s Form 10-K for the fiscal year
ended December 31, 2007.
(10.26)*	Registrant’s Director Deferred Stock Ownership Plan, as amended and restated as of
January 1, 2008, incorporated by reference from Registrant’s Form 10-K for the fiscal year
ended December 31, 2007.
(12)	Computation of ratio of earnings to fixed charges.
(13)	Registrant’s 2008 Annual Report to Shareholders. Such Report, except for those portions
thereof which are expressly incorporated by reference in this Form 10-K, is furnished for
the information of the Commission and is not deemed “filed” as part of this Form 10-K.
(21)	Subsidiaries of the Registrant.
(23)	Consent of Ernst & Young LLP, Independent Registered Public Accounting Firm.
(31.1)	Annual Certification of the Chief Executive Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
(31.2)	Annual Certification of the Chief Financial Officer pursuant to Section 302 of the
Sarbanes-Oxley Act of 2002.
(32)	Annual Certification of the Chief Executive Officer and the Chief Financial Officer
pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
(99)	Amendment to Rights Agreement, dated as of July 27, 2005, by and between the Registrant
and The Bank of New York, as Rights Agent, incorporated by reference from Form 8-A/A filed
August 3, 2005.

• These exhibits relate to management contracts or compensatory plan arrangements.

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