EXECUTIVE MANAGEMENT BOARD OF DIRECTORS

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1 BOARD OF DIRECTORS Gail Miner, Chairperson Gale Scott, Vice Chairperson Nicholas Benyo, Treasurer Stephen Doran, Secretary Tyler Hicks, Director Deyaniris Mercado, Director Rebecca Sant, Director Amy Shapero, Director Susan Young, Director EXECUTIVE MANAGEMENT Shawn Gilfedder President/Chief Executive Officer Michael Sullivan EVP/Chief Operating Officer Timothy Aitken, CPA VP/Chief Financial Officer

2 CORPORATE HEADQUARTERS McGraw-Hill Employees Federal Credit Union 120 Windsor Center Drive East Windsor, NJ (609) Phone: (800) Fax: (609) BRANCH LOCATIONS 1221 Ave. of the Americas, 2nd Floor New York, NY Fax: (212) S&P Building 55 Water Street, Concourse Level New York, NY Fax: (212) Penn Plaza, 12th Floor New York, NY Fax: (212) TELEPHONE BANKING 24 Hours a Day, 7 Days a Week (609) WEB SITE mcgrawhillefcu.org MCGRAW-HILL EMPLOYEES FEDERAL CREDIT UNION

3 MCGRAW-HILL EMPLOYEES FEDERAL CREDIT UNION 2007 ANNUAL REPORT

4 MESSAGE FROM THE PRESIDENT A great deal has changed at McGraw-Hill Employees Federal Credit Union since our founding in There are some years when a member can simply relax and enjoy the assurance that all is well in the financial world. Then there are years like 2007, when some new terms creep into our vocabulary like Subprime, CDO s and Mark to Market. In fact, it s during these challenging years that the credit union difference really shines. While other financial institutions were dealing with the consequences of some unwise lending practices, our credit union simply held the course. Our loan portfolio bypassed the devastating consequences that some major lenders experienced because of our decision not to participate in subprime lending. We are proud to uphold the highest standards in every aspect of the credit union s operations. The credit quality of our investment portfolio is highly liquid and highly rated (AAA) and we maintain over 20% of our assets in reserves--nearly three times the regulatory requirement. Net Capital, an indication of financial strength, increased $1.6MM during the year to $36.9MM. Member giveback, defined as a ratio of dividends to total income, was just under 36%-- almost 6 full points higher then our peers. This means 36 cents of every dollar earned through your participation was given back to the membership in the form of a dividend. In addition, we assisted the lives of our members by issuing more than $21MM in new mortgages, credit cards, home equities and consumer loans. Overall loan balances to members grew by 12% to a historic $78.2MM. MHEFCU reported a profit of $558k for the year. The decline in net income was in an effort to continue to pay more to your savings and maintain a competitive posture on loan rates. During the year, MHEFCU was asked to transition the employee s health, welfare and retirement programs to one that is individually managed by the credit union. The cost associated with this transition is reflected in the increased operating expense. The result is a program that is structured specifically for a financial institution. In 2007, we were proud to introduce the ScoreCard Rewards Program to our Visa credit and debit cards. Now members can earn Bonus Points on both cards, which can be redeemed for valuable merchandise. We also continued our commitment to member education and community outreach. Financial seminars were offered throughout the year to help members plan for retirement or learn about savings alternatives. In addition, our staff raised over $30k for local charitable organizations will bring exciting technological advances with our Online Banking service, including a new banking platform, online statements, scheduled/recurring transfers and notifications. Convenience will be paramount this year as we plan to introduce Shared Branching, which opens the door to thousands of branches throughout the United States for our members. At 55 Water Street, construction has begun at our new branch location on the concourse level. This will allow us to expand the hours operation and branch access to our members in this building. The changes made in 2007 and the impending changes in 2008 are designed to continue our proud tradition of member service and to position us for further improvements in the years to come. The Board of Directors is committed to utilizing our capital position by taking progressive steps to promote growth in assets and membership. One may ask the question, Why grow? Growth ensures that we will be able to offer the products and services to meet the needs and expectations of future generations. Since having served previously as CFO, I was familiar with the operations of the credit union before I was appointed President/CEO in June of I would like to take this opportunity to acknowledge the many that support the credit union, including the Board of Directors, volunteers and the exceptional individuals that work with me. Most of all, I would like to thank you, our members, for contributing to the continued success of McGraw-Hill Employees Federal Credit Union. Shawn Gilfedder President/CEO

5 STATEMENT OF FINANCIAL CONDITION YEARS ENDED DECEMBER 31, 2007* 2006 ASSETS Cash and cash equivalents $ 12,539,570 $ 19,088,544 Certificates of deposit 14,290,000 1,187,995 Investment securities Securities available-for-sale 65,120,087 88,151,794 Securities held-to-maturity 763,803 Other investments 1,662,080 Loans receivable, net 78,235,561 68,835,850 Accrued interest receivable 1,219,076 1,282,197 Prepaid expenses and other assets 240, ,513 Property and equipment, net 6,237,230 6,608,859 Deferred building costs NCUSIF deposit 1,201,395 1,243,501 Total Assets $ 180,745,148 $ 187,448,056 Liabilities and members' equity Members' shares $ 143,410,203 $ 151,609,472 Accrued expenses and other liabilities 420, ,636 Total Liabilities 143,830, ,180,108 Commitments and contingent liabilities Members' net equity, substantially restricted 36,914,157 35,267,948 Total Liabilities and Members' Equity $ 180,745,148 $ 187,448,056

6 STATEMENT OF INCOME YEARS ENDED DECEMBER 31, 2007* 2006 INTEREST INCOME Interest on loans $ 4,496,786 $ 4,081,346 Interest on investments 5,261,319 5,350,079 Total Interest Income 9,758,105 9,431,425 INTEREST EXPENSE Interest on share accounts 3,735,716 3,226,594 Borrowed funds Total Interest Expense 3,735,797 3,226,668 Provision for loan losses 85,000 49,992 Net Interest Income, After Provision for Loan Losses 5,937,308 6,154,765 NON-INTEREST INCOME Miscellaneous operating income 681, ,339 Gain on sale of interest earning investment 62,344 64,914 Total Non-Interest Income 743, ,253 NON-INTEREST EXPENSE Compensation & benefits 2,862,634 2,703,686 Travel & conference 83,386 60,582 Office occupancy 900, ,180 Office operations 1,141, ,049 Educational & promotional expenses 189, ,341 Loan servicing expense 298, ,520 Professional & outside services 403, ,175 Operating fees 38,283 39,729 Miscellaneous 204, ,944 Total Operating Expense 6,122,534 5,366,206 Net Income $ 558,556 $ 1,577,812 *The amounts for the year ended December 31, 2007 were subject to the procedures outlined in the Supervisory Committee Guide (appendix to NCUA Rules and Regulations, Part 715). The amounts for the year ended December 31, 2006 were based on the opinion audit performed by Wojeski & Company CPAs, P.C.