WATSON WYATT & CO HOLDINGS, S-4, 2000-01-19

WATSON WYATT & CO HOLDINGS
S-4, 2000-01-19

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JANUARY 19, 2000.

REGISTRATION NO. 333-
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM S-4

REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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WATSON WYATT & COMPANY HOLDINGS

(Exact name of registrant as specified in its charter)

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DELAWARE 8742 APPLIED FOR
(State or other jurisdiction of (Primary Standard Industrial (I.R.S. Employer
Incorporation or organization) Classification Code Number) Identification No.)
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6707 DEMOCRACY BOULEVARD, SUITE 800
BETHESDA, MARYLAND 20817
(301) 581-4600
(Address, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
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JOHN J. HALEY
PRESIDENT AND CHIEF EXECUTIVE OFFICER
WATSON WYATT & COMPANY HOLDINGS
6707 DEMOCRACY BOULEVARD, SUITE 800
BETHESDA, MARYLAND 20817
(301) 581-4600
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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Copies to:

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WALTER W. BARDENWERPER, ESQ. JONATHAN M. WAINWRIGHT, ESQ.
JAMES S. MINOGUE, III, ESQ. DIANA R. DE BRITO, ESQ.
DIANE C. SAPIR, ESQ. CADWALADER, WICKERSHAM & TAFT
WATSON WYATT & COMPANY 100 MAIDEN LANE
6707 DEMOCRACY BOULEVARD, SUITE 800 NEW YORK, NEW YORK 10038
BETHESDA, MARYLAND 20817 (212) 504-6000
(301) 581-4600
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE OF THE SECURITIES TO THE
PUBLIC: As soon as practicable after the filing of the certificate of merger
referred to herein.

If the securities being registered on this Form are being offered in
connection with the formation of a holding company and there is compliance with
General Instruction G, check the following box. / /

If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, check the following box and
list the Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /

If this Form is a post-effective amendment filed pursuant to Rule 462(d)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. / /

CALCULATION OF REGISTRATION FEE

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PROPOSED PROPOSED
MAXIMUM MAXIMUM AMOUNT OF
TITLE OF EACH CLASS OF AMOUNT TO BE OFFERING PRICE PER AGGREGATE REGISTRATION
SECURITIES TO BE REGISTERED REGISTERED(1) UNIT OFFERING PRICE(2) FEE
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Class B-1 and Class B-2 common stock, each $103,540,000 $27,334.56
par value $.01 per share
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(1) The amount to be registered is the expected sum of class B-1 common stock
and class B-2 common stock of Watson Wyatt & Company Holdings that will be
issued upon conversion of shares of common stock of Watson Wyatt & Company
in the merger described in this registration statement. Class B-1 and
class B-2 will consist of an approximately equal number of shares.

(2) Estimated under Rule 457(f)(2) solely for the purpose of calculating the
registration fee.
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT
FILES A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT THEREAFTER SHALL BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933 OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION ACTING PURSUANT
TO SECTION 8(A), DETERMINES.

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WATSON WYATT & COMPANY
6707 DEMOCRACY BOULEVARD, SUITE 800
BETHESDA, MD 20817
(301) 581-4600

, 2000

To our stockholders:

You are cordially invited to a special meeting of stockholders of Watson
Wyatt & Company, which will be held at our offices, 6707 Democracy Boulevard,
Suite 800, Bethesda, MD, on , 2000 at 9:00 A.M. At the special
meeting, stockholders will vote on changes to our corporate structure designed
to facilitate our plans to become a publicly traded company. The changes involve
the merger of Watson Wyatt & Company with a newly formed merger subsidiary and
the creation of a holding company, Watson Wyatt & Company Holdings, as further
described below. Stockholders also will be asked to approve a new long-term
incentive (stock option) plan. Finally, stockholders will be asked to vote on an
amendment to Watson Wyatt & Company's existing bylaws which will permit certain
transfers of Watson Wyatt & Company's common stock for estate planning purposes.

We are proposing the merger as a way to reorganize our company and establish
a new holding company in a manner consistent with our becoming a publicly traded
company. The merger (and adoption of the new stock option plan) is contingent on
our moving forward with the public offering. As a result of the merger, you will
receive class B shares of the new holding company in exchange for your current
shares of Watson Wyatt & Company. Watson Wyatt & Company Holdings will own all
of the shares of Watson Wyatt & Company. Associates of Watson Wyatt & Company
will continue to work for Watson Wyatt & Company. Current Watson Wyatt & Company
stockholders will be stockholders of Watson Wyatt & Company Holdings.

Watson Wyatt & Company Holdings also will issue class A common stock.
Immediately after the merger, we intend to offer to the public Watson Wyatt &
Company Holdings' shares of class A common stock. Class A shares and class B
shares will have the same economic and voting rights, but class A shares will
not have restrictions on transfer. Class B-1 and B-2 shares cannot be
transferred, except under limited exceptions, for 12 and 24 months,
respectively, after the public offering.

MERGER PROPOSAL

In order to proceed with the merger and public offering our stockholders
must approve the merger. Under Delaware law the merger requires the approval of
over 50% of the outstanding shares. However, because we want strong stockholder
support to proceed with this transaction, we have decided not to proceed with
the merger unless we receive the affirmative vote of over 50% of the outstanding
shares AND over 80% of the shares actually voting for or against the proposal,
if higher than a majority of the outstanding shares. Our board of directors has
determined that the merger proposal is advisable and in the best interests of
our stockholders, and recommends that you vote FOR the proposal as described in
the enclosed proxy statement/prospectus. The merger will not be effected unless
the initial public offering also is consummated.

STOCK INCENTIVE PROPOSAL

At the special meeting, stockholders will be asked to vote on a proposed new
long term incentive plan to go into effect after the public offering. Adoption
of this plan requires the approval of over 50% of the votes present (in person
or by proxy) at the meeting. Our board of directors has determined that this
proposal is in the best interests of our stockholders and recommends that you
vote FOR the proposal, as described in the enclosed proxy statement/prospectus.
The proposed plan will not be implemented unless the merger is approved and the
initial public offering is consummated.
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BYLAW AMENDMENT PROPOSAL

The last item being presented to the stockholders is a vote on a proposed
amendment to the current bylaws of Watson Wyatt & Company. The proposed
amendment will permit certain stock transfers to facilitate estate-planning that
is not currently accommodated by the current bylaws. This amendment requires the
approval of 80% of the outstanding shares. Our board of directors has determined
that this proposal is in the best interests of our stockholders and recommends
that you vote FOR the proposal, as described in the enclosed proxy
statement/prospectus. If approved, this amendment will be effective whether or
not stockholders approve the merger or the plan.

Your vote is very important. We urge you to vote FOR the proposals.

/s/ John J. Haley
John J. Haley
President and Chief Executive Officer
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WATSON WYATT & COMPANY
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
TO BE HELD ON , 2000

To our stockholders:

A special meeting of stockholders of Watson Wyatt & Company will be held at
6707 Democracy Boulevard, Suite 800, Bethesda, Maryland on , 2000,
at 9:00 A.M., for the following purposes:

- to consider and vote upon a proposal to adopt the Agreement and Plan of
Merger, dated as of , 2000, among Watson Wyatt & Company,
Watson Wyatt & Company Holdings and WW Merger Subsidiary, Inc. Pursuant to
the merger agreement, among other things, the merger subsidiary will merge
into Watson Wyatt & Company, and each share of our currently outstanding
common stock will be converted, at an appropriate exchange ratio, into
shares of class B-1 and class B-2 common stock of Watson Wyatt & Company
Holdings, contingent on the consummation of the public offering of
class A shares by Watson Wyatt & Company Holdings. A copy of the merger
agreement is attached as Annex A and is described in the accompanying
proxy statement/prospectus;

- to consider and vote upon a proposal to adopt the 2000 Long Term Incentive
Plan, contingent on approval of the merger and the consummation of the
public offering;

- to consider and vote upon a proposal to amend the current bylaws of Watson
Wyatt & Company to permit certain transfers of the company's common stock,
under certain circumstances, to trusts created for the benefit of the
stockholder, his or her spouse or descendants to facilitate estate
planning. The effectiveness of this proposal is not contingent upon the
effectiveness of any other proposal; and

- to consider such other matters that properly come before the special
meeting.

A list of stockholders entitled to vote at the special meeting will be
available for inspection by stockholders of record at least ten days prior to
the special meeting at the office of the secretary, 6707 Democracy Boulevard,
Suite 800, Maryland 20817. The board of directors has fixed the close of
business on February , 2000, as the record date for determining holders of our
common stock entitled to notice of and to vote at the special meeting.

BY ORDER OF THE BOARD OF DIRECTORS

/s/ Walter W. Bardenwerper

Walter W. Bardenwerper
Secretary

, 2000
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WE WILL AMEND AND COMPLETE THE INFORMATION IN THIS PROSPECTUS. ALTHOUGH WE ARE
PERMITTED BY US FEDERAL SECURITIES LAWS TO OFFER THESE SECURITIES USING THIS
PROSPECTUS, WE MAY NOT SELL THEM OR ACCEPT YOUR OFFER TO BUY THEM UNTIL THE
DOCUMENTATION FILED WITH THE SEC RELATING TO THESE SECURITIES HAS BEEN DECLARED
EFFECTIVE BY THE SEC. THIS PROSPECTUS IS NOT AN OFFER TO SELL THESE SECURITIES
OR OUR SOLICITATION OF YOUR OFFER TO BUY THESE SECURITIES IN ANY JURISDICTION
WHERE THAT WOULD NOT BE PERMITTED OR LEGAL.
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SUBJECT TO COMPLETION -- , 2000

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[LOGO]

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WATSON WYATT & COMPANY WATSON WYATT & COMPANY HOLDINGS
PROXY STATEMENT PROSPECTUS
FOR SPECIAL MEETING OF STOCKHOLDERS SHARES OF CLASS B COMMON STOCK
TO BE HELD , 2000 (PAR VALUE $0.01)
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- At the special meeting stockholders are being asked to consider and vote
on the proposed merger to effect a holding company structure and certain
other matters.

- This proxy statement/prospectus and the accompanying proxy card are first
being distributed to stockholders of Watson Wyatt & Company on or about
, 2000.

- The date of this proxy statement/ prospectus is , 2000.

- On the effective date of the proposed merger described in this proxy
statement/ prospectus, we will effect a corporate reorganization whereby
Watson Wyatt & Company will become a subsidiary of Watson Wyatt & Company
Holdings. A copy of the Agreement and Plan of Merger is attached to this
proxy statement/prospectus as Annex A.

- Each outstanding share of common stock of Watson Wyatt & Company will be
converted, at an appropriate exchange ratio, into shares of Watson
Wyatt & Company Holdings class B-1 and class B-2 common stock.

- Each holder of Watson Wyatt & Company common stock will receive cash in
lieu of any remaining fractional share interest.

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YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS RELATING TO THE MERGER, THE
RELATED TRANSACTIONS AND OUR BUSINESS. SEE "RISK FACTORS" BEGINNING ON PAGE .
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NEITHER THE SECURITIES AND EXCHANGE COMMSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR HAS DETERMINED IF
THIS PROXY STATEMENT/PROSPECTUS IS TRUTHFUL OR COMPLETE. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
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TABLE OF CONTENTS

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PAGE
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Questions and Answers................. 1
Summary............................... 5
Risk Factors.......................... 10
Where You Can Find More Information... 16
Corporate Information................. 17
Proposal No. 1--Approval of Merger.... 19
The Merger and the Public Offering.... 19
Purpose of the Merger................. 23
Description of Capital Stock,
Certificate of Incorporation and
Bylaws.............................. 23
Proposal No. 2--Approval of 2000 Long
Term Incentive Plan................. 34
Proposal No. 3--Approval of Amendments
to Current Watson Wyatt & Company
Bylaws.............................. 37
General............................... 37
Selected Consolidated Financial
Data................................ 39
Management's Discussion and Analysis
of Financial Condition and Results
of Operations....................... 42
Business.............................. 51
Management............................ 65
Common Stock Purchase Arrangements
Before the Merger and the Public
Offering............................ 72
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PAGE
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Certain Relationships................. 73
Security Ownership of Management and
Others.............................. 73
Legal Matters......................... 74
Transfer Agent and Registrar.......... 74
Submission of Stockholder Proposals... 74
Experts............................... 74
Index to Consolidated Financial
Statements.......................... F-1
Annex A--Form of Agreement and Plan of
Merger.............................. A-1
Annex B--Form of Certificate of
Incorporation of WW Holdings........ B-1
Annex C--Form of Bylaws of WW
Holdings............................ C-1
Annex D--Form of Long Term Incentive
Plan................................ D-1
Annex E--Amendment to Watson Wyatt &
Company Bylaws...................... E-1
Annex F--Section 262 of Delaware
General Corporation Law--Appraisal
Rights.............................. F-1
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ABOUT THIS PROXY STATEMENT/PROSPECTUS

This proxy statement/prospectus is part of a registration statement that we
have filed with the Securities and Exchange Commission. You should read this
proxy statement/prospectus with the additional information described under the
heading "Where You Can Find More Information."

USE OF TERMINOLOGY

If approved under this proxy statement/prospectus, we will effect a
corporate reorganization in order to create a holding company structure. As part
of this transaction, our current operating company, Watson Wyatt & Company, will
merge with an indirect wholly-owned subsidiary to become a wholly-owned
subsidiary of Watson Wyatt & Company Holdings. We more fully describe the
corporate reorganization in this proxy statement/prospectus under "The Merger
and the Public Offering." Unless the context indicates otherwise, the
information in this proxy statement/prospectus assumes that the corporate
reorganization transactions have been completed. References in this proxy
statement/ prospectus to "Watson Wyatt," "we," "our" and "us" refer both to
Watson Wyatt & Company and its subsidiaries before the merger, and to Watson
Wyatt & Company Holdings and its subsidiaries after the merger. When we need to
distinguish between the two companies, we refer to them by their full names or
to WW&Co. or WW Holdings, respectively. Our shares have been held largely by our
employees, who we refer to as "associates."

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Watson Wyatt & Company only has one class of common stock issued and
outstanding. Watson Wyatt & Company Holdings will have authorized shares of
class A common stock, class B-1 common stock and class B-2 common stock, as well
as authorized shares of preferred stock. As a result of the merger, existing
stockholders of Watson Wyatt & Company will receive an equal number of shares of
class B-1 and class B-2 common stock of Watson Wyatt & Company Holdings for
their shares of common stock of Watson Wyatt & Company. The exact number of
shares of Class B-1 and class B-2 common stock distributed on conversion of
Watson Wyatt & Company shares will depend on market factors, and will be
determined prior to the consummation of the merger. Shares of class A common
stock of Watson Wyatt & Company Holdings will be sold in a public offering and
are identical in all respects to the class B common stock, except that class B
common stock is subject to transfer restrictions. See "Description of Capital
Stock, Certificates of Incorporation and By Laws." No preferred stock will be
issued at this time.

Watson Wyatt & Company markets its services through a global alliance, more
fully described in this proxy statement/prospectus under "Corporate
Information--Watson Wyatt Worldwide Alliance," with Watson Wyatt Partners
(formerly know as R. Watson & Sons), a private partnership organized in the
United Kingdom. The Watson Wyatt Worldwide global alliance maintains 86 offices
in 31 countries and employs over 5,500 employees. Watson Wyatt & Company
operates 60 offices in 18 countries in North America, Latin America and
Asia-Pacific. Watson Wyatt Partners operates 12 offices in the United Kingdom,
Ireland, Africa and the Caribbean. The alliance operates 14 offices in 9
continental European countries, principally through a jointly owned holding
company, Watson Wyatt (Holdings) Europe Limited, which is 25% owned by us and
75% owned by Watson Wyatt Partners.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This proxy statement/prospectus contains forward-looking statements that
involve substantial risks and uncertainties. You can identify these statements
by forward-looking words such as "may," "will," "expect," "anticipate,"
"believe," "estimate," "plan," "intend," "continue" or similar words. You should
read statements that contain these words carefully because they discuss our
future expectations, contain projections of our future results of operations or
of our financial condition or state other "forward-looking" information. This
proxy statement/prospectus also contains third-party estimates regarding the
size and growth of markets.

You should not place undue reliance on these forward-looking statements. The
sections captioned "Risk Factors" and "Management's Discussion and Analysis of
Financial Condition and Results of Operations," as well as any cautionary
language in this proxy statement/prospectus, provide examples of risks,
uncertainties, and events that may cause our actual results to differ materially
from the expectations.

Although we believe that the expectations reflected in the forward-looking
statements are reasonable, we cannot guarantee future results, levels of
activity, performance or achievements. Moreover, neither we nor any other person
assumes responsibility for the accuracy and completeness of the forward-looking
statements. We are under no duty to update any of the forward-looking statements
after the date of this proxy statement/prospectus or to conform these statements
to actual results or to changes in our expectations.

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QUESTIONS AND ANSWERS

- - WHY ARE WE MAKING THESE PROPOSALS?

Our board of directors has carefully considered the advisability of a public
offering of our common stock. They have determined that creating a publicly
traded security will substantially enhance our continuing growth and success
because it will increase our capital resources for internal growth and growth
through acquisitions. In order to have a public offering of our common stock,
however, we need to change our corporate structure. We believe the creation of a
holding company structure is the best method to accomplish our objectives.

- - WHAT WILL I RECEIVE IN THE MERGER?

In the merger, each share of outstanding Watson Wyatt & Company common stock
will convert automatically, at the appropriate exchange ratio, into shares of
Watson Wyatt & Company Holdings class B common stock, split equally between B-1
common shares and B-2 common shares. After the expiration of the applicable
transfer restrictions, the class B common stock automatically will convert to
shares of class A common stock.

- - WILL I BE ABLE TO SELL OR TRANSFER MY CLASS B COMMON STOCK IMMEDIATELY?

Provided you enter into an underwriting agreement with the underwriters, you
will be able to sell up to the equivalent of 500 of your Watson Wyatt & Company
shares (as measured on a pre-converted basis) plus 10% of the remainder of such
shares in the initial public offering. Immediately prior to such sale, your
class B shares will be converted automatically into class A shares.

Following the public offering, Watson Wyatt & Company Holdings' certificate of
incorporation will restrict you from selling or transferring class B-1 common
stock for 12 months after our public offering, and from selling or transferring
class B-2 common stock for 24 months after our public offering. The certificate
of incorporation allows transfers to a limited class of permitted transferees.

- - HOW MUCH STOCK ARE WE SELLING TO THE PUBLIC?

Immediately after the public offering, after giving effect to anticipated sales
of shares by both the company and associates, we expect that roughly 25% of the
outstanding shares of Watson Wyatt & Company Holdings will be in the hands of
the public, while existing stockholders will hold the remaining 75%. The actual
amounts of stock to be sold by us depends upon market conditions present at the
time of the public offering and will be determined by us and our underwriters.

- - WHAT DO WE PLAN TO DO WITH THE PROCEEDS OF THE PUBLIC OFFERING?

At this point, we have not earmarked specific uses for the proceeds. The money
will be used for general corporate purposes. If advisable, we may use a portion
of the proceeds from the sale of shares by us for strategic acquisitions,
although we have not yet identified specific acquisition candidates.

- - HOW AND WHEN WILL WE COMPLETE THE PUBLIC OFFERING?

As soon as our board of directors deems advisable and with the advice of our
underwriters, after the merger is approved we plan to sell shares of Watson
Wyatt & Company Holdings class A common stock to the public in an underwritten
public offering. We expect the public offering will be consummated by
, 2000. Whether or not we move forward with the public offering
depends on many factors, including current market conditions and our operating
performance related to comparable companies. If the merger is not approved, the
public offering will not occur. If the public offering does not occur, we will
not effect the merger.

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- - WHEN WILL THE INITIAL PUBLIC OFFERING PRICE BE DETERMINED, AND WHAT WILL MY
STOCK BE WORTH AFTER THE PUBLIC OFFERING?

The initial public offering price for our class A common stock will be
determined immediately before the initial public offering. Our initial public
offering price would necessarily be higher than the formula book value price
currently determined under our bylaws for us to proceed with the public
offering. We have applied to list the class A common stock on the New York Stock
Exchange. The stock will trade at prices that depend on a number of factors,
including market conditions, our net income and operating performance, and our
performance relative to that of comparable companies with publicly traded stock.
Our stock price may fluctuate based on these factors.

- - WHEN IS THE DEADLINE FOR ME TO TELL THE UNDERWRITERS FOR THE PROPOSED PUBLIC
OFFERING THAT I WOULD LIKE TO BE A SELLING STOCKHOLDER AND HAVE MY SHARES
INCLUDED IN THE REGISTRATION STATEMENT?

We will have sent out preliminary indications of interest at the end of January.
We anticipate that final, binding decisions will have to be made by the date of
the special meeting.

- - WHAT WILL HAPPEN TO ANY BANK OF AMERICA STOCK LOANS?

The current loan documents would require the payment in full of all outstanding
loan amounts at the time of the initial public offering. If you do not want to
pay off all outstanding loans at the time of the initial public offering, Bank
of America has agreed to continue the current loans in force as long as you sign
new loan documentation pledging your class B shares as collateral for your
current loans. You will be required to execute new promissory notes and pledge
agreements, containing the same amortization schedule, maturity and payment
terms as your current loans. You will only be required to pledge those class B
shares that are proportionately equivalent to the number of current shares you
have pledged. At the time the 12 and 24 month restrictions expire, you will be
required to pay down a pro rata portion of your loan balance if you sell pledged
shares.

- - DOES THE BOARD OF DIRECTORS STILL THINK IT IS IMPORTANT FOR ASSOCIATES TO OWN
SHARES?

Yes. Our board believes it is important for associates in the higher salary band
levels to have an investment in our company so that their interests are aligned
with the interests of our other stockholders. We intend to communicate modified
stock ownership guidelines in the near future.

- - WHAT MUST I DO TO GET MY NEW CLASS B COMMON STOCK?

In the merger, your shares will be converted automatically, without any action
on your part, into our holding company's class B common stock.

- - WILL I BE ABLE TO BUY MORE SHARES?

Yes. You will be able to buy shares of our class A common stock in the open
market on the New York Stock Exchange (subject to satisfaction of listing
requirements) at market-determined prices after the public offering. We also
will be establishing a long term incentive (stock option) plan, subject to
approval of the plan and the merger by the stockholders at the special meeting
and contingent on consummation of the initial public offering.

- - WHAT VOTE IS REQUIRED FOR APPROVAL OF THE PROPOSALS?

THE MERGER: A majority of all outstanding shares of our common stock entitled
to vote at the special meeting is required to approve the merger. We are also
requiring that the merger be approved by 80% of the shares actually voting for
or against the proposal, if such amount is higher than a majority of outstanding
shares entitled to vote.

THE 2000 LONG TERM INCENTIVE PLAN: A majority of the shares present at the
meeting, in person or by proxy, is required to approve the long term incentive
plan.

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THE BYLAW AMENDMENT: 80% of all outstanding shares of our common stock entitled
to vote at this special meeting is required to approve the proposed bylaw
amendment which will permit certain transfers of Watson Wyatt & Company's common
stock for estate planning purposes.

- - WHAT WILL HAPPEN TO OUR COMPANY IF THE PUBLIC OFFERING IS NOT CONSUMMATED?

Adoption of the proposed merger and approval of the proposed plan is contingent
on the consummation of the public offering. If the public offering is not
consummated, the proposals regarding the merger and the incentive plan will have
no effect, and we will continue to do business on the same basis that we do
today. The proposal to amend the current Watson Wyatt & Company bylaws to
facilitate estate planning is not contingent upon the effectiveness of the
proposed public offering or the approval of the other proposals. Whether or not
the public offering is consummated, this proposed amendment to the bylaws will
be effective if approved.

- - WHAT WILL MY TAX CONSEQUENCES BE?

The merger, the conversion of your shares into holding company class B common
stock and the public offering of shares by us will not be taxable transactions
for U.S. federal income tax purposes. For U.S. taxpayers, any sale of class A
common stock in the public offering or otherwise will be a taxable transaction
for U.S. federal income tax purposes. Stockholders should consult their
individual tax advisor about tax consequences from any transaction involving
their shares.

- - WHY DOES THE TRANSACTION SEEM SO COMPLICATED?

Although the structure of the transaction seems rather complex, under applicable
law this was actually the simplest way to effect the corporate changes we feel
must occur as we transform ourselves to a publicly traded company.

- - HOW WILL OUR BOARD CHANGE AS A RESULT OF THE PUBLIC OFFERING?

The Watson Wyatt & Company board will continue as the board of the new holding
company. The members' terms will be staggered. Watson Wyatt & Company will have
a small board appropriate for a wholly-owned subsidiary. These changes are
explained in this proxy statement/prospectus. You should review the section of
the proxy statement/prospectus under "Description of Capital Stock, Certificate
of Incorporation and Bylaws--Description of WW Holdings' Certificate of
Incorporation."

- - HOW WILL THE CERTIFICATE OF INCORPORATION OF WATSON WYATT & COMPANY HOLDINGS
BE DIFFERENT FROM OUR CURRENT CERTIFICATE OF INCORPORATION?

The certificate of incorporation will not contain the existing restrictions on
stock transfers and stock ownership and the requirement that stock be priced
based on formula book value. There are other changes that are generally intended
to discourage unsolicited purchase offers of the holding company which are
customary in many public companies. These changes are explained in detail in
other sections of this proxy statement/prospectus.

- - WHAT ARE APPRAISAL RIGHTS?

Appraisal rights are provided for under Delaware law. They are intended to
protect minority stockholders from being forced into a merger transaction by
majority stockholders. By asserting appraisal rights, stockholders who object to
the merger can employ certain procedures under Delaware law to ask the Delaware
Chancery Court to provide an independent valuation of Watson Wyatt & Company
common stock, and Watson Wyatt & Company must repurchase the stock at that
value. However, the valuation would not take into account the proposed
transactions, which in this case includes the merger and the public offering.
You should review the section of this proxy statement/ prospectus under "The
Merger and the Public Offering--Appraisal Rights."

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- - WHEN AND WHERE IS THE SPECIAL MEETING?

The Watson Wyatt & Company special meeting is scheduled to take place at our
company headquarters, 6707 Democracy Boulevard, Suite 800, Bethesda, Maryland on
, 2000 at 9:00 a.m., local time.

- - WHAT DO I NEED TO DO NOW?

It is important that you vote. Please complete, sign and date the enclosed proxy
card and return it promptly in the enclosed postage-paid envelope. If you return
a blank proxy card, we will vote your shares "for" the proposals at the special
meeting.

- - MAY I CHANGE MY VOTE AFTER I HAVE MAILED MY SIGNED PROXY CARD?

You may change your vote at any time before your proxy is voted at the special
meeting. You can do this in one of three ways. First, you can send a written
notice stating that you would like to revoke your proxy. Second, you can
complete and submit a new proxy card. If you choose either of these two methods,
you must submit your notice of revocation or your new proxy card to Watson
Wyatt & Company at 6707 Democracy Boulevard, Suite 800, Bethesda, MD 20817,
Attention: Walter W. Bardenwerper prior to the special meeting. Third, you can
attend the special meeting and vote in person. Simply attending the meeting,
however, will not revoke your proxy; you must vote at the meeting.

- - WHAT DOES OUR BOARD RECOMMEND?

The Watson Wyatt & Company board of directors has determined that the proposed
merger, the 2000 long term incentive plan, and the amendment to the current
bylaws of Watson Wyatt & Company are advisable and in the best interests of
Watson Wyatt & Company and its stockholders and recommends that stockholders
vote FOR each of the proposals.

4
<PAGE>
SUMMARY

THIS SUMMARY IS QUALIFIED BY MORE DETAILED INFORMATION APPEARING IN OTHER
SECTIONS OF THIS PROXY STATEMENT/PROSPECTUS. THE OTHER INFORMATION IS IMPORTANT,
SO PLEASE READ THIS ENTIRE PROXY STATEMENT/ PROSPECTUS CAREFULLY.

We are furnishing this proxy statement/prospectus to you in connection with
our solicitation of proxies at the special meeting. We also are furnishing this
proxy statement/prospectus as a prospectus in connection with the issuance by WW
Holdings of class B common stock as a result of the merger. We are first mailing
this proxy statement/prospectus and the accompanying proxy card on or about
, 2000.

THE SPECIAL MEETING

<TABLE>
<S> <C>
Date and Time........................ 9:00 a.m.

Location............................. 6707 Democracy Boulevard, Suite 800, Bethesda, Maryland
20817.

Record Date.......................... , 2000. Only stockholders of record as of the close of
business on the record date will be entitled to vote at the
special meeting.

Shares Entitled to Vote.............. We had shares of common stock outstanding and
entitled to vote as of the close of business on the record
date. These shares are the only securities that may be voted
at the special meeting. Each share is entitled to one vote
on each proposal.

Quorum............................... Holders of a majority of the issued and outstanding shares
of our common stock, present in person or by proxy, will
constitute a quorum for the transaction of business at the
special meeting.

Votes Required....................... A majority of all shares entitled to vote is required to
approve the merger at the special meeting. In addition, we
are requiring that the merger be approved by 80% of the
shares of common stock actually voting for or against the
proposal, if higher.

A majority of all shares present at the meeting (in person
or by proxy) is required to approve the 2000 long term
incentive plan.

A vote of 80% of shares entitled to vote is required to
amend the bylaws.

Appraisal Rights..................... See "The Merger and the Public Offering--Appraisal Rights"
for a description of the appraisal rights available to
stockholders.
</TABLE>

At the special meeting, stockholders are being asked to vote on three
proposals:

- approval of the creation of a holding company structure, to be
accomplished by the Agreement and Plan of Merger, dated as of ,
2000, among Watson Wyatt & Company, Watson Wyatt & Company Holdings and WW
Merger Subsidiary, Inc. whereby the merger subsidiary will merge into
Watson Wyatt & Company and each share of our currently outstanding common
stock will be converted, at an appropriate exchange ratio, into shares of
class B-1 common stock and shares of class B-2 common stock of Watson
Wyatt & Company Holdings, contingent on the consummation of the public
offering and the merger;

- adoption of the 2000 Long Term Incentive Plan of Watson Wyatt & Company
Holdings, contingent on approval of the merger and consummation of the
public offering; and

- approval of an amendment to the current bylaws of Watson Wyatt & Company
to permit certain transfers of the company's common stock, under certain
circumstances, to trusts created for the benefit of the stockholder, his
or her spouse or descendants to facilitate estate planning. The
effectiveness of this proposal is not contingent upon the effectiveness of
any other proposal.

5
<PAGE>
OUR COMPANY

Founded in 1946, Watson Wyatt & Company is one of the world's leading human
capital consulting firms. We help our clients enhance their business performance
by improving their ability to attract, retain and motivate qualified employees.
We design, develop and implement human resources solutions through our closely
related practice areas, the Benefits Consulting Group, HR Technologies Group and
the Human Capital Group. We are leveraging our position as recognized experts in
employee benefits and human capital consulting to offer our clients web-based
technologies that transform the way they implement and deliver HR programs and
improve communications with their employees. Our eHR-TM- approach provides
clients with HR solutions that combine Internet applications with other emerging
technologies.

We provide human capital consulting services to many Global 2000
corporations as well as emerging growth companies, public institutions and
non-profit organizations. During the past two years, we have provided services
to over 70% of the Fortune 100. Our clients include Apple Computer, Cisco
Systems, General Electric Company, General Motors, IBM and Lockheed Martin
Corporation. Many of our client relationships have existed continuously over
several decades. We generated approximately $570 million in revenues during the
twelve months ended September 30, 1999.

The growing demand for employee benefits and human capital consulting
services is directly related to the size, complexity and rapid changes
associated with human resources programs. Employee salary and benefits costs
represent one of the most significant components of worldwide corporate
spending. In recent years, several industry trends have emerged that have
increased the demand for our services, including:

- growing strategic importance of human capital;

- a technology revolution in HR programs as the Internet, intranets and
other e-business tools enable companies to manage their HR function more
efficiently and effectively;

- changing workforce demographics, such as a shortages of talented employees
and an unprecedented aging of the workforce;

- growing importance of employer-sponsored benefits programs due to limited
baby boomer retirement savings, uncertainty of government-sponsored
programs, and rising healthcare costs;

- record levels of global mergers and acquisitions that require the
integration of diverse corporate cultures and HR programs quickly and
effectively;

- continuing globalization of economies, which requires corporations to
retain human capital consultants with global resources and local
expertise; and

- complex and changing government regulation of employee benefits programs.

OUR COMPETITIVE STRENGTHS

We believe that our extensive history, global presence, dedication to
long-term client relationships and recognized reputation for quality and
innovation provide us with significant competitive advantages. We implement our
strategy through over 3,800 associates in 60 offices located in 18 countries.
Unlike other consulting firms that have large benefits administration operations
or unrelated consulting lines, we focus exclusively on providing human capital
consulting services. We believe that our competitive strengths include:

- our established reputation for providing high quality services;

- our long-standing relationships with blue-chip clients;

- innovative technology-based solutions, including our proprietary eHR-TM-
solutions;

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<PAGE>
- global reach and scale of the Watson Wyatt Worldwide alliance, through 86
offices in 31 countries;

- industry leading research supported by dedicated research and information
centers; and

- our highly educated and accredited consulting staff, including over 400
accredited actuaries, as well as professionals with M.B.A.s, Ph.D.s and
law degrees.

OUR GROWTH STRATEGY

Our strategy is to expand our competitive position by providing
comprehensive, value-added human capital consulting services that help our
clients solve their human resources challenges. We plan to pursue growth by:

- expanding our relationships with existing clients by leveraging ongoing,
recurring engagements to identify and serve additional client needs;

- creating innovative eHR-TM- solutions that provide employees and managers
with access to their HR programs 24 hours a day, 7 days a week;

- leveraging our global resources and local expertise to serve our clients'
growing needs for integrated human resources services throughout the
world;

- developing new client relationships by capitalizing on our recognized
brand name, reputation for quality service, leading research and
innovative eHR-TM- solutions;

- pursuing strategic acquisitions that will expand our human capital
consulting capabilities or provide us with additional geographic execution
capabilities; and

- promoting our entrepreneurial culture by continuing to recruit innovative
individuals.

7
<PAGE>
SUMMARY CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following table summarizes the consolidated financial data for our
business. You should read the following summary consolidated financial data
together with "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and our consolidated financial statements and the related
notes beginning on page F-1 of this proxy statement/prospectus.

<TABLE>
<CAPTION>
THREE MONTHS ENDED
YEAR ENDED JUNE 30, SEPTEMBER 30,
------------------------------- -------------------
1997 1998 1999 1998 1999
<S> <C> <C> <C> <C> <C>
STATEMENT OF INCOME DATA (A):
Continuing operations:
Fees................................... $486,502 $ 512,660 $556,860 $133,985 $146,323
Operating expenses:
Salaries and benefits................ 252,302 268,611 298,925 76,398 79,803
SIBP (b)............................. -- -- 22,600 2,100 6,000
Non-recurring compensation charge
related to formula book value
change (c)......................... -- 69,906 -- -- --
Other operating expenses............. 212,582 217,109 211,535 41,363 48,263
-------- --------- -------- -------- --------
Income (loss) before income taxes and
minority interest.................... $ 21,618 $ (42,966) $ 23,800 $ 14,124 $ 12,257
======== ========= ======== ======== ========
Income (loss) from continuing
operations........................... $ 12,381 $ (56,212) $ 12,135 $ 7,294 $ 6,356
Discontinued operations (d)............ (11,483) (69,906) 8,678 -- --
-------- --------- -------- -------- --------
Net income (loss)...................... $ 898 $(126,118) $ 20,813 $ 7,294 $ 6,356
======== ========= ======== ======== ========
Earnings (loss) per share, continuing
operations, basic and fully
diluted.............................. $ 0.71 $ (3.27) $ 0.80 $ 0.47 $ 0.41
Earnings (loss) per share, basic and
fully diluted........................ $ 0.05 $ (7.34) $ 1.37 $ 0.47 $ 0.41
Weighted average shares outstanding.... 17,438 17,170 15,215 15,377 15,331
</TABLE>

<TABLE>
<CAPTION>
AS OF SEPTEMBER 30, 1999
------------------------
PRO
ACTUAL FORMA(E)
<S> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents................................. $ 13,835 $
Net working capital....................................... 5,672
Total assets.............................................. 304,386
Redeemable common stock................................... 100,282
Total stockholders' equity (deficit)...................... (67,906)
</TABLE>

- ------------------------

(a) We believe that our income as an employee-owned company is not indicative of
the operating performance we will report as a publicly traded company due to
the significant impact of the following two non-recurring compensation
related expenses: (1) supplemental discretionary bonuses accrued under the
Stock Incentive Bonus Plan ("SIBP"), described in more detail in footnote
(b) below and (2) a one-time charge in fiscal year 1998 related to a change
in the way we calculated our formula book value, the price at which we sold
and repurchased our restricted common stock in transactions with our
employees prior to the public offering, described in more detail in footnote
(c) below.

8
<PAGE>
We believe that our results of operations in fiscal years 1998 and 1999 and
the three month periods ended September 30, 1998 and 1999 are more
comparable to, and a better indication of, our performance as a publicly
traded company if they are analyzed excluding the SIBP and the non-recurring
compensation charge described above. The continuing operations loss before
taxes and minority interest of $43.0 million for fiscal year 1998 would have
improved by $69.9 million, and the continuing operations income before taxes
and minority interest of $23.8 million for fiscal year 1999 would have
improved by $22.6 million without these items. Income before taxes and
minority interest from continuing operations for the three years ended
June 30, 1997, 1998 and 1999 would have been $21.6 million, $26.9 million
and $46.4 million, respectively. Income before taxes and minority interest
from continuing operations for the three month periods ended September 30,
1998 and 1999 would have been $16.2 million and $18.3 million, respectively,
if bonuses were accrued under the compensation structure management will
adopt as a publicly traded company.

(b) Beginning in fiscal year 1999, we provided supplemental bonus compensation
to our employee shareholders pursuant to the SIBP in an amount representing
all income in excess of a targeted amount. Following the public offering, we
will terminate the SIBP and replace it with equity based incentives more
customary to publicly traded companies.

(c) As an employee-owned company without a public trading market, we sold and
repurchased shares of common stock in transactions with our employee
shareholders at a formula book value calculated in accordance with our
bylaws. In fiscal year 1998, we recorded a one-time non-cash compensation
charge against continuing operations of $69.9 million to reflect a change in
the method of calculating the formula book value. This change eliminated
from the calculation of formula book value the $69.9 million charge taken
for discontinued operations in fiscal year 1998 to reflect the
discontinuation of our Benefits Administration Outsourcing Business. The
discontinuation is more fully described under "Management's Discussion and
Analysis of Financial Condition and Results of Operations."

(d) As discussed in footnotes (a) and (c) above, in fiscal year 1998 we
discontinued our Benefits Administration Outsourcing Business and recorded a
$69.9 million charge to earnings in the discontinued operations line. The
discontinuation is more fully described under "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Fiscal years
1997 and 1998 also include the operating losses of the Benefits
Administration Outsourcing Business prior to its discontinuation in 1998,
which are reflected in the discontinued operations line. In fiscal year
1999, the discontinued operations credit reflects the reduction of the
expected loss on disposal of the Benefits Administration Outsourcing
Business.

(e) The "Pro Forma" column reflects the exchange of shares under our proposed
corporate reorganization, including the reclassification of the current
redeemable common stock to permanent stockholders' equity.

9
<PAGE>
RISK FACTORS

YOU SHOULD CAREFULLY CONSIDER THE RISK FACTORS RELATING TO THE MERGER, THE
RELATED TRANSACTIONS AND OUR BUSINESS. IF ANY OF THE RISKS DISCUSSED IN THIS
PROXY STATEMENT/PROSPECTUS ACTUALLY OCCUR, OUR BUSINESS, FINANCIAL CONDITION AND
OPERATING RESULTS COULD BE ADVERSELY AFFECTED.

WE MUST CONTINUE TO RECRUIT AND RETAIN QUALIFIED CONSULTANTS TO SUCCEED IN
OUR KNOWLEDGE-INTENSIVE BUSINESS

Our continued success and future growth depend heavily upon our ability to
attract and retain enough highly skilled and motivated consultants. We must meet
these human capital requirements if we are to deliver our sophisticated and
technical services to our clients. We compete against many companies with
greater financial resources both within our industry and in other industries to
attract these qualified individuals.

This competition for personnel may adversely affect our profitability. We
can give no assurance that we will be able to generate sufficient revenue to
offset any additional personnel costs. We also cannot guarantee that we will be
successful in hiring enough consultants to continue our growth.

Historically, our compensation programs have been principally cash-based. We
plan to change our compensation programs upon completing the public offering by
introducing incentive stock options and discontinuing the payment of
supplemental bonuses under our current stock incentive bonus plan ("SIBP"). This
change could adversely affect our ability to retain our consultants if our total
compensation program is not perceived by our consultants as competitive with
those of other firms.

WE DEPEND ON OUR ASSOCIATES; THE LOSS OF KEY CONSULTANTS AND MANAGERS COULD
ADVERSELY AFFECT OUR BUSINESS

Our success largely depends upon the business generation capabilities and
project execution skills of our consultants. In particular, our consultants'
personal relationships with our clients are a critical element of obtaining and
maintaining client engagements. Losing our key consultants for any reason could
adversely affect our ability to secure and complete engagements, which would
adversely affect our results of operations.

In addition, if any of our key consultants were to join an existing
competitor or form a competing company, some of our clients could choose to use
the services of that competitor instead of our services. Clients or other
companies seeking to develop in-house services similar to ours also could hire
our key consultants. Such hiring would not only result in our loss of key
consultants but also could result in the loss of a client relationship or a new
business opportunity. While we require associates who have reached a certain
level within our organization to execute confidentiality and non-competition
agreements, we can give no assurance that we can universally and
cost-effectively enforce these agreements.

COMPETITION COULD RESULT IN LOSS OF OUR MARKET SHARE THAT COULD REDUCE OUR
PROFITABILITY

The markets for our principal services are highly competitive. Our
competitors currently include other human resources consulting and actuarial
firms, as well as the human resources consulting divisions of some public
accounting and consulting firms. Several of our competitors have greater
financial, technical, and marketing resources than we have, which could enhance
their ability to respond more quickly to technological changes, finance
acquisitions and fund internal growth. Also, the consulting practices of the
large international accounting firms, or other competitors who have a larger
presence than we do in particular markets, gain marketing advantages from their
greater name recognition.

10
<PAGE>
Our current and potential competitors have established or may establish
cooperative relationships among themselves or with third parties to increase
their ability to address client needs. New competitors or alliances among
competitors could emerge and gain significant market share. In addition, some of
our competitors may have or may develop a lower cost structure or superior
services that gain greater market acceptance than the services that we offer or
develop.

The ability to tailor services to clients' particular needs traditionally
has been a key selection criterion among buyers of consulting services in our
core businesses. However, these buyers' selection criteria may change and price
could become a more significant factor, thereby adversely affecting our
operating results.

DEMAND FOR OUR SERVICES MAY DECREASE, WHICH COULD ADVERSELY AFFECT OUR
OPERATING RESULTS

We can give no assurance that the demand for our services will continue to
grow or that we will compete successfully with our existing competitors, new
competitors or our clients' internal capabilities. Some of our clients may
decide to develop or use their internal resources to satisfy their needs for
some or all of the services that we provide. Our clients' demand for our
services also may change based on their own needs and financial conditions. When
economic downturns affect particular clients or industry groups, they frequently
reduce their budgets for outside consultants, which could reduce the demand for
our services and increase price competition.

In addition, the demand for many of our core benefits services is affected
by government regulation and taxation of employee benefits plans. This
regulation and taxation drive our clients' needs for compliance-related
services. Significant changes in tax or social welfare policy or regulations
could lead some employers to discontinue their employee benefit plans, thereby
reducing the demand for our services. A simplification of regulations or tax
policy also could reduce the need for our services.

OUR CLIENTS GENERALLY MAY TERMINATE OUR SERVICES AT ANY TIME, WHICH COULD
DECREASE ASSOCIATE UTILIZATION

Our clients generally may terminate our engagements at any time. If a client
reduces the scope of or terminates the use of our services with little or no
notice, our associate utilization may decline. In such cases, we must rapidly
redeploy our associates to other engagements in order to minimize the potential
negative impact on our financial performance. In addition, because much of our
work is project based rather than recurring in nature, our associates'
utilization depends on our ability to continually secure additional engagements.

MANY OF OUR ENGAGEMENTS ARE NOT BASED ON WRITTEN AGREEMENTS, WHICH COULD
RESULT IN DISPUTES WITH OUR CLIENTS

Many of our engagements are not based on formal written agreements. In such
cases, there is a greater risk of misunderstandings with our clients concerning
the scope and terms of our engagement and our liability for unsatisfactory
performance. Disputes could damage our client relationships and result in
unanticipated costs and loss of revenue that could adversely affect our results
of operations.

WE ARE SUBJECT TO MALPRACTICE CLAIMS ARISING FROM OUR WORK, WHICH COULD
ADVERSELY AFFECT OUR REPUTATION AND BUSINESS

Clients and third parties who are dissatisfied with our services or who
claim to suffer damages caused by our services may bring lawsuits against us.
The nature of our work, especially our actuarial services, involves assumptions
and estimates concerning future events, the actual outcome of which we cannot
know with certainty in advance. In addition, we could make computational,
software programming, or data management errors.

11
<PAGE>
Clients may seek to hold us responsible for the financial consequences of
these errors or variances. Given that we frequently work with large pension
funds, relatively small percentage errors or variances could create significant
dollar variances and claims for unfunded liabilities. In most cases, our
exposure to liability on a particular engagement is substantially greater than
the profit opportunity that the engagement generates for us. Although we
maintain professional liability insurance against our malpractice liability
exposure, we self-insure the first $1 million of exposure per occurrence.
Moreover, our insurance policy limits might not be adequate to cover all of our
potential liabilities. Defending lawsuits could require substantial amounts of
management attention, which could affect their focus on operations and could
adversely affect our financial performance. In addition to defense costs and
liability exposure, malpractice claims may produce negative publicity that could
hurt our reputation and business. See "Business--Legal Proceedings."

OUR QUARTERLY REVENUES MAY FLUCTUATE WHILE OUR EXPENSES ARE RELATIVELY FIXED

Quarterly variations in our revenues and operating results occur as a result
of a number of factors, such as:

- the significance of client engagements commenced and completed during a
quarter;

- the seasonality of some specific types of services;

- the number of business days in a quarter, employee hiring and utilization
rates, the clients' ability to terminate engagements without penalty;

- the size and scope of assignments;

- the level of vacation and holidays taken by our associates; and

- general economic conditions.

Because a significant portion of our expenses are relatively fixed, a
variation in the number of client assignments or the timing of the initiation or
the completion of client assignments can cause significant variations in
quarterly operating results and could result in losses. Increases in the number
of professional personnel that are not followed by corresponding increases in
revenues could materially and adversely affect our operating results.

WE DEPEND ON AN ALLIANCE PARTNER FOR OUR BRAND IN THE EUROPEAN MARKET AND
COULD LOSE OUR POSITION IN EUROPE IF OUR ALLIANCE WERE TO TERMINATE

Since 1995 we have marketed our services globally as Watson Wyatt Worldwide
through our alliance with Watson Wyatt Partners. Under the alliance:

- we operate in North America, Latin America and Asia-Pacific;

- Watson Wyatt Partners operates in the United Kingdom, Ireland, Africa and
the Caribbean; and

- Watson Wyatt (Holdings) Europe, of which we own a 25% minority interest,
operates in continental Europe.

If the alliance were to terminate, we could lose our position in Europe,
which could interrupt our global development and impair our ability to deliver
services seamlessly to clients throughout the world. In addition, a termination
could also precipitate a name change, which could result in confusion in our
markets. The alliance agreements generally restrict each party's ability to
enter into each other's geographic markets. The alliance agreements also set out
the rights that we or Watson Wyatt Partners would have to buy each other out of
our respective interests in each other's firm and in the European company (and
thus potentially terminate the alliance) in the event either of us becomes
affiliated with a competitor.

12
<PAGE>
OUR INTERNATIONAL OPERATIONS PRESENT SPECIAL RISKS THAT COULD NEGATIVELY
AFFECT OUR BUSINESS

We conduct a portion of our business from offices outside the United States
which subjects us to foreign financial and business risks, including:

- currency exchange rate fluctuations;

- unexpected increases in duties or taxes;

- new regulatory requirements and/or changes in policies and local laws that
affect the demand for our services or directly affect our foreign
operations;

- unexpected monetary exchange controls;

- the impact of recession in foreign economies; and

- civil disturbance or other catastrophic events that reduce business
activity in other parts of the world.

Any of these factors could have an adverse effect on our results from
operations.

In addition, the management of geographically dispersed operations requires
substantial management resources, resulting in significant ongoing expense. We
have not fully integrated all of our global operations from an administrative
and reporting standpoint. We are developing and implementing additional systems
and management reporting to help us manage our global operations, but we cannot
predict when these systems will be fully operational or how successful they will
be.

POTENTIAL FUTURE ACQUISITIONS AND EXPANSIONS COULD BE DIFFICULT TO INTEGRATE
AND COULD ADVERSELY AFFECT OUR FINANCIAL RESULTS

One of our strategies for growth is the acquisition of complementary
businesses. Currently, we do not have any material acquisitions pending, and we
might not be able to find and consummate acquisitions on terms and conditions
acceptable to us. In addition, any expansion into a new geographic market or
line of business poses risks.

The acquisitions we undertake may involve the following risks:

- diversion of management's attention;

- potential failure to retain key personnel;

- assumption of unanticipated legal liabilities and other problems; and

- additional costs and potential quality control problems arising from the
difficulties involved in the integration of operations and cultures.

Furthermore, growth through acquisitions could adversely affect the results
of our operations if:

- the expenses incurred in integrating an acquisition are greater than
expected;

- anticipated synergies or economies are not realized; or

- unforeseen problems arise in the acquired businesses.

OUR BUSINESS FACES RAPID TECHNOLOGICAL CHANGE AND OUR FAILURE TO QUICKLY
RESPOND TO THIS CHANGE COULD ADVERSELY AFFECT OUR BUSINESS

Increasingly, to remain competitive in our practice areas, we must identify
and offer the most current technologies and methodologies. This is particularly
true of our HR Technologies Group in which our success largely depends upon our
ability to quickly absorb and apply technological advances.

13
<PAGE>
In some cases, significant technology choices and investments are required. If
we do not respond correctly, quickly, or in a cost-effective manner, our
business and operating results might be harmed.

The effort to gain technological expertise and develop new technology-based
solutions in our business requires us to incur significant expenses. If we
cannot offer new technologies as quickly or effectively as our competitors, we
could lose market share. We also could lose market share if our competitors
develop more cost-effective technology-based solutions than we offer or develop.

OUR HR TECHNOLOGIES GROUP HAS PROJECT-RELATED RISKS THAT COULD ADVERSELY
AFFECT OUR FINANCIAL RESULTS

Our HR Technologies Group develops and implements computer software and
system solutions for clients. In securing or carrying out these engagements, we
may encounter inadequate project scope definitions, unforeseen technological and
systems integration problems, unanticipated costs, failures to meet contractual
performance objectives, and other business risks. If we are not successful in
defining, pricing and executing these assignments as planned, we may incur
financial losses.

LIMITED PROTECTION OF OUR PROPRIETARY EXPERTISE, METHODOLOGIES AND SOFTWARE
COULD HARM OUR BUSINESS

To protect our proprietary interests in the software applications developed
and used in our consulting practices, we rely upon a combination of trade
secret, trademark, and copyright laws, and use employee nondisclosure policies
and third-party confidentiality agreements. We cannot guarantee that these
protections are adequate to deter misappropriation of our confidential
information. Moreover, we may be unable to detect the unauthorized use of our
intellectual property and take the necessary steps to enforce our rights. If
employees or third parties misappropriate our proprietary information, our
business could be harmed. Redressing infringements also may consume significant
management time and financial resources.

CHANGE IN ASSOCIATE OWNERSHIP COULD ADVERSELY AFFECT OUR FIRM CULTURE

We currently are predominantly owned by our associates. As owners, our
associates have traditionally been able to influence the direction of the firm,
which promotes an entrepreneurial spirit and motivates individual performance.
The introduction of public stockholders through the sale of class A stock in the
public offering, coupled with the phase-out of class B transfer restrictions,
will cause the percentage of the company owned by associates to decline. A
decline in associate ownership and an increase in non-associate influence could
impact morale which could, in turn, adversely affect our business operations.

FOLLOWING THE MERGER, WE HAVE VARIOUS MECHANISMS IN PLACE THAT MAY PREVENT A
CHANGE IN CONTROL THAT A STOCKHOLDER MIGHT FAVOR

The certificate of incorporation and bylaws of WW Holdings contain
provisions that might discourage, delay or prevent a change in control that a
stockholder might favor, including provisions that:

- authorize the issuance of preferred stock without fixed characteristics
that could be issued by our board of directors to increase the number of
outstanding shares and deter a takeover attempt;

- create a classified board of directors with staggered, three-year terms,
which may lengthen the time required to gain control of our board of
directors;

- require super-majority voting to amend the staggered board and certain
other provisions of our certificate of incorporation;

- provide that only the president or a majority of the board may call a
special meeting of stockholders;

14
<PAGE>
- prohibit stockholder action by written consent, which requires all actions
to be taken at a meeting of the stockholders; and

- provide that board of director vacancies, including new directorships, may
be filled only by the directors then in office.

WW HOLDINGS COULD ISSUE ADDITIONAL SHARES WHICH COULD HAVE A DILUTIVE EFFECT
ON STOCKHOLDERS

At the time of the offering WW Holdings will have authorized
shares of class A common stock. Immediately following the completion of the
public offering, WW Holdings expects to have approximately authorized
but unissued shares of class A common stock. Additional class A common shares
will be issued upon conversion of outstanding shares of class B common stock and
pursuant to employee stock option plans, and may be issued in connection with
acquisitions or other transactions, or offered for sale in future offerings. The
issuance of additional shares of class A common stock could be dilutive and
might adversely affect the market price of WW Holdings common stock.

YEAR 2000 ISSUES COULD ADVERSELY AFFECT OUR BUSINESS

We have provided our clients with software that we have developed and
software-related services. We also use software and information technology
extensively to deliver our consulting services to our clients and operate our
business. We have substantially completed a program designed to identify,
correct, and test Year 2000 problems relating to this software, but we cannot
guarantee that our Year 2000 program will have identified all potential software
problems or that we will have successfully corrected all software problems. In
addition, some software (such as software used for open enrollment in benefit
plans) normally is modified on an annual or periodic basis. In some cases, we
have deferred performing Year 2000 remediation to coincide with the software's
its next scheduled modification. We also have provided software to clients
subject to warranties regarding Year 2000 performance. If we fail to identify or
correct Year 2000 problems in our software, we may incur costs to repair or
replace affected systems. We also may incur liability or unanticipated costs as
a result of errors caused by our software that could have a material adverse
effect on the results of our operations. See "Management's Discussion and
Analysis of Financial Conditions and Results of Operations--Year 2000 Issue."

WE WILL HAVE BROAD DISCRETION REGARDING THE NET PUBLIC OFFERING PROCEEDS

We have not designated the anticipated net proceeds of the public offering
for specific uses. We will have broad discretion regarding the use of the net
proceeds of the public offering, and we may apply the proceeds differently than
stockholders might anticipate. Although we have no plans or agreements regarding
any material acquisitions on the date of this proxy statement/prospectus, we
might use a portion of the net proceeds to fund acquisitions.

ADDITIONAL SHARES BECOMING AVAILABLE FOR SALE COULD ADVERSELY AFFECT THE
PRICE OF WW HOLDINGS STOCK

Transfer restrictions on the class B common stock expire 12 and 24 months
following the public offering. As the transfer restrictions on the class B
common stock expire, subject in the case of affiliates, to the restrictions of
Rule 144 under the Securities Act, those shares automatically will convert into
shares of class A common stock that will be eligible for sale in the public
market. Such shares are owned largely by our current associates, and these
persons might want to sell their shares in the public market immediately after
the transfer restrictions expire. Substantial sales after the transfer
restrictions expire could adversely affect the market value of the class A
common stock and the value of your shares.

15
<PAGE>
WE CANNOT GUARANTEE A LIQUID TRADING MARKET FOR WW HOLDINGS STOCK; WW
HOLDINGS STOCK WILL BE SUBJECT TO MARKET FLUCTUATIONS

Before the public offering, there has been no public market for WW Holdings
common stock and we cannot predict the extent to which investor interest will
lead to the development of an active and liquid trading market for the class A
common stock. The initial public offering price for the shares will be
determined by negotiations between us and the underwriters and may not be
indicative of the market price of the class A common stock that will prevail in
the trading market.

In recent years the securities markets have experienced substantial
volatility, and individual stock prices may fluctuate due to factors that are
often unrelated or disproportionate to a company's operating performance. In
addition, the market price of our class A common stock may be highly volatile
and therefore subject to wide fluctuations in response to such factors as:

- actual or anticipated changes in our future financial performance;

- changes in financial estimates by securities analysts; and

- announcements by our competitors of new services or significant contracts
or acquisitions.

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the U.S. Securities and Exchange Commission ("SEC") a
registration statement on Form S-4 under the Securities Act relating to the
shares of class B common stock being offered by this proxy statement/prospectus.
This proxy statement/prospectus is part of that registration statement and, as
allowed by SEC rules, does not include all of the information you can find in
the registration statement or the exhibits to the registration statement. For
further information about us and the class B common stock offered, see the
registration statement and its exhibits. We have also filed a registration
statement on Form S-3 with the SEC relating to the offering of shares of
class A common stock of Watson Wyatt & Company Holdings.

The SEC allows us to incorporate by reference into this proxy
statement/prospectus the information we file with the SEC. This means that we
can disclose important information to you by referring you to those documents.
The information incorporated by reference is considered to be part of this proxy
statement/prospectus. If we subsequently file updating or superseding
information in a document that is incorporated by reference into this proxy
statement/prospectus, the subsequent information will also become part of this
proxy statement/prospectus and will supersede the earlier information. We are
incorporating by reference the following documents that we have filed with the
SEC:

- our annual report on form 10-K for the fiscal year ended June 30, 1999
(file no. 0-20724);

- our quarterly report on form 10-Q for the quarter ended September 30, 1999
(file no. 0-20724); and

- our proxy statement for the annual meeting of stockholders dated
October 28, 1999.

We also are incorporating by reference into the proxy statement/prospectus
all of our future filings with the SEC under Sections 13(a), 13(c), 14 or 15(d)
of the Exchange Act until the offering under this proxy statement/prospectus is
completed. You may obtain a copy of any or all of our filings which are
incorporated by reference, at no cost, by writing to or telephoning us at the
following address:

Watson Wyatt & Company/Watson Wyatt & Company Holdings
6707 Democracy Boulevard, Suite 800
Bethesda, Maryland 20817
Attention: Secretary
Telephone: (301) 581-4600

16
<PAGE>
You should rely only on the information provided in this proxy
statement/prospectus or incorporated by reference. We have not authorized anyone
to provide you with different information. You should not assume that the
information in this proxy statement/prospectus is accurate as of any date other
than the date on the first page of the proxy statement/prospectus. We are
offering the class B common stock only in jurisdictions where such offers are
permitted. We are not making this offer of securities in any state or country in
which the offer or sale is not permitted.

Watson Wyatt & Company currently files reports and other information with
the SEC, but its common stock, which has been subject to various transfer
restrictions, has not been publicly traded. After the offering under this proxy
statement/prospectus and related public offering, Watson Wyatt & Company
Holdings will continue to file annual, quarterly and special reports, proxy
statements and other information with the SEC. Watson Wyatt & Company's SEC
filings are available at the SEC's web site at http://www.sec.gov. You may read
and copy any filed document at the SEC's public reference rooms in Washington,
D.C. at Judiciary Plaza, 450 Fifth Street, Washington, D.C. 20549, and at the
SEC's regional offices in New York at 7 World Trade Center, 13(th) Floor, New
York, New York 10048, and in Chicago at Suite 400, Northwestern Atrium Center,
14(th) Floor, 500 W. Madison Street, Chicago, Illinois 60661. Please call the
SEC at 1-800-SEC-0330 for further information about the public reference rooms.

CORPORATE INFORMATION

GENERAL INFORMATION

Watson Wyatt & Company was incorporated in Delaware on February 17, 1958.
Including predecessors, we have been in business since 1946. We conducted our
business as The Wyatt Company until changing our corporate name to Watson
Wyatt & Company in connection with the establishment of the Watson Wyatt
Worldwide alliance. Watson Wyatt & Company Holdings was incorporated in Delaware
on January 7, 2000. Upon consummation of the merger, we will effect a corporate
reorganization in order to create a holding company structure. As part of this
transaction, our current operating company, Watson Wyatt & Company, will merge
with an indirect wholly-owned subsidiary to become a wholly-owned subsidiary of
Watson Wyatt & Company Holdings. We more fully describe the merger and related
transactions in this prospectus under "The Merger and the Public Offering."

Our principal executive offices are located at 6707 Democracy Boulevard,
Suite 800, Bethesda, Maryland, 20817-1129, and our telephone number is
(301) 581-4600. We invite you to visit our web site at
http://www.watsonwyatt.com. The information contained on our web site is not
incorporated into this prospectus.

WATSON WYATT WORLDWIDE ALLIANCE

Recognizing our clients' need for a global organization to service their
needs, we established operations throughout Europe in the late 1970s by
acquiring local firms and opening new offices. Responding to the rapidly
increasing globalization of the world economy, we made a strategic decision in
1995 to significantly strengthen our European capabilities and extend our global
reach by entering into an alliance with R. Watson & Sons (now Watson Wyatt
Partners), a leading United Kingdom-based actuarial, benefits and human
resources consulting partnership that was founded in 1878. Since 1995, we have
marketed our services globally under the Watson Wyatt Worldwide brand, sharing
resources, technologies, processes and business referrals.

The Watson Wyatt Worldwide global alliance maintains 86 offices in 31
countries and employs over 5,500 employees. Watson Wyatt & Company operates 60
offices in 18 countries in North America, Latin America and Asia-Pacific. Watson
Wyatt Partners operates 12 offices in the United Kingdom, Ireland, Africa and
the Caribbean. The alliance operates 14 offices in 9 continental European
countries

17
<PAGE>
principally through a jointly owned holding company, Watson Wyatt (Holdings)
Europe Limited, which is 25% owned by us and 75% owned by Watson Wyatt Partners.

To establish the Watson Wyatt Worldwide global alliance, we transferred our
United Kingdom operations to Watson Wyatt Partners in return for a 10% interest
in a defined distribution pool of the partnership. In addition, Watson Wyatt
Partners purchased 300,000 shares (or approximately 2%) of our common stock. The
alliance agreement contains certain buy/sell provisions that provide a mechanism
to maintain Watson Wyatt Partners' ownership of us at a level of between 300,000
shares and 500,000 shares. We also consolidated our individual European
operations into Watson Wyatt (Holdings) Europe Limited. Under the alliance
agreement, we generally will not operate in the United Kingdom, Ireland, Africa
or the Caribbean and Watson Wyatt Partners generally will not operate in North
America, Latin America or Asia-Pacific.

18
<PAGE>
PROPOSAL NO. 1--APPROVAL OF MERGER

THE MERGER AND THE PUBLIC OFFERING

THE MERGER: HOW IT WILL WORK

Initially, Watson Wyatt & Company will own all of the common stock of Watson
Wyatt & Company Holdings, and Watson Wyatt & Company Holdings will own all of
the common stock of WW Merger Subsidiary, Inc. The merger can be broken down
into the following steps:

- WW Merger Subsidiary, Inc. merges into Watson Wyatt & Company.

- Watson Wyatt & Company survives the merger, and WW Merger
Subsidiary, Inc. ceases to exist.

- Each share of Watson Wyatt & Company's outstanding common stock
automatically converts, at an appropriate exchange ratio, into shares of
Watson Wyatt & Company Holdings' class B common stock, split equally
between shares of class B-1 and class B-2, so that current Watson Wyatt &
Company stockholders become the sole holders of the class B common stock
of Watson Wyatt & Company Holdings.

- Each share of WW Merger Subsidiary, Inc. converts into one newly issued
share of common stock of Watson Wyatt & Company. Watson Wyatt & Company
Holdings receives the one share of Watson Wyatt & Company stock.

- Watson Wyatt & Company returns to the capital of Watson Wyatt & Company
Holdings the shares of stock of such company that it owns.

The result will be that our current company, Watson Wyatt & Company, will
become a subsidiary of Watson Wyatt & Company Holdings, and you will own Watson
Wyatt & Company Holdings class B common stock instead of Watson Wyatt & Company
common stock. Watson Wyatt & Company Holdings will have a new certificate of
incorporation and bylaws. The certificate of incorporation and bylaws of Watson
Wyatt & Company will be made appropriate for the company's status as a
subsidiary of Watson Wyatt & Company Holdings. A copy of the merger agreement is
included as ANNEX A to this proxy statement/prospectus.

We will no longer be required to purchase your shares when you leave the
company. Subject to limited exceptions, including the sale of shares in the
public offering, transfers of your class B-1 and B-2 shares will be restricted
for 12 and 24 months, respectively, under the terms of the WW Holdings
certificate of incorporation. See "The Merger and the Public Offering."

MANAGEMENT FOLLOWING THE MERGER

As a practical matter, consummation of the merger will not change our
present officers and directors. The current directors of Watson Wyatt & Company
are also the directors of Watson Wyatt & Company Holdings. After the merger,
Watson Wyatt & Company will have a smaller board than it has now, which is
appropriate for a subsidiary.

WW HOLDINGS' CERTIFICATE OF INCORPORATION

WW Holdings' certificate of incorporation will be different from our current
certificate of incorporation in the following principal ways:

- the certificate of incorporation will authorize class A common stock,
class B-1 common stock, class B-2 common stock and preferred stock; and

- the transferability of the class B common stock will be restricted for a
period of time.

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<PAGE>
There are additional changes in WW Holdings' certificate of incorporation
which are generally intended to discourage unsolicited purchase offers and which
are customary to include public company certificates of incorporation. You
should read "Description of Capital Stock, Certificate of Incorporation and
Bylaws" and WW Holdings' certificate of incorporation, which is included as
ANNEX B to this proxy statement/prospectus.

VOTING RIGHTS; WHAT YOU WILL RECEIVE; TRANSFER RESTRICTIONS

Holders of WW Holdings class A common stock and class B common stock will
have identical voting rights. When we complete the merger, each share of our
outstanding common stock will convert automatically, at the appropriate exchange
ratio, into shares of class B-1 common stock and shares of class B-2 common
stock of WW Holdings. WW Holdings will not issue fractional shares in the
merger. Any fractional shares resulting from the conversion will be paid in cash
in an amount equal to the fair value of the fractional interest.

Provided you enter into an underwriting agreement with the underwriters, you
will be able to sell up to the equivalent of 500 of your present Watson Wyatt &
Company shares (as measured on a pre-converted basis), plus 10% of the remainder
of your shares, in the public offering. Subject to limited exceptions, including
the sale of shares in the public offering you will not be able to sell or
transfer shares of class B common stock to anyone, or convert shares of class B
common stock into class A common stock, until the relevant restricted period
expires. The restricted periods will apply as follows:

- The restrictions for class B-1 common stock will expire 12 months after
our public offering; and

- The restrictions for class B-2 common stock will expire 24 months after
our public offering.

Upon the expiration of the applicable restricted period, your shares of
class B common stock will convert automatically into shares of class A common
stock. Subject to restrictions imposed by the Federal Securities laws on persons
deemed to be our affiliates, stockholders may transfer shares of class A common
stock freely after the applicable restricted period expires. Management,
however, thinks it is important for our associates in higher band levels to have
an investment in our company so that their interests are aligned with the
interests of our other stockholders.

LISTING; THE PUBLIC OFFERING

The class B common stock will not be listed on a national securities
exchange or traded in an organized over-the-counter market. We have applied to
list the class A common stock on the New York Stock Exchange. Listing is subject
to fulfilling all applicable listing requirements.

Soon after the merger is approved, we hope to effect the merger and the
public offering of shares of WW Holdings' class A common stock.

Although we do not expect to determine the initial public offering price for
our class A common stock until immediately prior to the initial public offering,
in order to proceed with the public offering, the initial public offering price
would necessarily be higher than the formula book value price currently
determined under our bylaws. The consummation of the public offering and the
price at which our stock will trade depends on a number of factors, including
market conditions, our net income and performance relative to that of comparable
companies with publicly traded stock.

NOTICE TO CANADIAN STOCKHOLDERS

The WW Holdings class B common stock that will be issued to existing Watson
Wyatt & Company stockholders in the merger will not be qualified for
distribution to the public in Canada. We will file an application with certain
Canadian securities commissions for exemption orders that will allow us to issue
the WW Holdings class B common stock to those stockholders without filing a
prospectus in

20
<PAGE>
Canada or delivering the stock through a Canadian securities dealer. We plan to
obtain these exemption orders prior to the date the merger takes effect, so that
Canadian-resident stockholders will be able to participate in the merger on the
same basis as U.S. stockholders.

We also expect that any exemption orders from the Canadian securities
commissions that are necessary to permit the resale of Watson Wyatt & Company
Holdings common stock through the New York Stock Exchange will be obtained.
Canadian-resident stockholders are encouraged to seek legal advice prior to
reselling shares of WW Holdings class A common stock.

HOW WE WILL EFFECT THE MERGER AND THE PUBLIC OFFERING

If approved, we will effect the merger immediately prior to the consummation
of the public offering. At that time, we will file a certificate of merger with
the Secretary of State of Delaware. The WW Holdings class A stock then will be
sold in the public offering. The portion of your shares you choose to sell in
the public offering will be converted into WW Holdings' class A common stock.

The merger will become effective only if:

- a majority of the outstanding shares of our common stock entitled to vote
at the special meeting approve the merger, and 80% of the shares actually
voting for or against the proposal approve the merger, if such amount is
higher than a majority of outstanding shares entitled to vote; and

- the initial public offering of our class A shares is consummated.

U.S. FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER

The merger, the conversion of your shares into WW Holdings' class B common
stock and the public offering by us will not be taxable transactions to you for
U.S. federal income tax purposes. For U.S. taxpayers, however, any sale of your
class A common stock, in the public offering or otherwise, will be a taxable
transaction to you for U.S. federal income tax purposes. You should read the
section of this proxy statement/prospectus entitled "U.S. Federal Income Tax
Consequences of Merger Transactions to Stockholders." All stockholders should
consult their individual tax advisors about their tax consequences from any
transactions involving your shares.

APPRAISAL RIGHTS

Watson Wyatt & Company is organized under Delaware law. Watson Wyatt &
Company stockholders have the right to dissent from the merger and to receive
payment for their shares in accordance with the terms of Section 262 of the
Delaware General Corporation Law ("DGCL"). The following discussion is a summary
of the Delaware dissenters' rights law. Section 262 of the DGCL is reprinted in
Annex F. Any stockholder wishing to exercise dissenters' rights or preserve the
right to do so should review the statute carefully. Stockholders who do not
comply with the procedures of the statute will lose their dissenters' rights.

If the merger is consummated, a holder of record of WW&Co.'s stock on the
date of making a demand for appraisal, as described below, who (1) continues to
hold those shares through the time of the merger; (2) strictly complies with the
procedures set forth under Section 262 of the DGCL; and (3) has not voted in
favor of the merger will be entitled to have those shares appraised by the
Delaware General Court of Chancery under Section 262 of the DGCL and to receive
payment for the "fair value" of those shares in lieu of the consideration
provided for in the merger agreement. This proxy statement/prospectus is being
sent to all holders of record of WW&Co. stock on the record date for the WW&Co.
special meeting and constitutes notice of the appraisal rights available to
those holders under Section 262. The statutory right of appraisal granted by
Section 262 requires strict compliance with the procedures set forth in
Section 262.

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<PAGE>
A holder of WW&Co.'s stock electing to exercise appraisal rights under
Section 262 must deliver a written demand for appraisal of such stockholder's
shares prior to the vote on the merger. The written demand must identify the
stockholder of record and state the stockholder's intention to demand appraisal
of the stockholder's shares. All demands should be delivered to: Walter W.
Bardenwerper, General Counsel, Vice President and Secretary, 6707 Democracy
Boulevard, Suite 800, Bethesda, MD 20817.

Only a holder of shares of WW&Co. on the date of making a written demand for
appraisal who continuously holds those shares through the time of the merger is
entitled to seek appraisal. Demand for appraisal must be executed by or for the
holder of record, fully and correctly, as the holder's name appears on the books
and records of WW&Co. If WW&Co. stock is owned of record in a fiduciary
capacity, such as by a trustee, the demand should be made in that capacity. An
authorized agent may execute the demand for appraisal for a holder of record.
That agent, however, must identify the record owner or owners and expressly
disclose in the demand that the agent is acting as agent for the record owner or
owners of shares.

Within ten days after the time of the merger, the surviving corporation is
required to send notice of the effectiveness of the merger to each stockholder
who prior to the time of the merger complies with the requirements of
Section 262.

Within 120 days after the time of the merger, the surviving corporation or
any stockholder who has complied with the requirements of Section 262 may
file a petition in the Delaware Court of Chancery demanding a determination of
the fair value of the shares of WW&Co. held by all stockholders seeking
appraisal. A dissenting stockholder must serve a copy of the petition to the
surviving corporation. If no petition is filed by either the surviving
corporation or any dissenting stockholder within the 120-day period, the rights
of all dissenting stockholders to appraisal will cease. Stockholders seeking to
exercise appraisal rights should initiate all necessary action within the time
periods and in the manner prescribed in Section 262. Failure to file the
petition on a timely basis will cause the stockholder's right to an appraisal to
cease.

Within 120 days after the time of the merger, any stockholder who has
complied with subsections (a) and (d) of Section 262 is entitled, upon written
request, to receive from the surviving corporation a statement setting forth the
aggregate number of shares of WW&Co.'s stock not voted in favor of the merger
with respect to which demands for appraisal have been received by WW&Co. and the
number of holders of those shares. The statement must be mailed within 10 days
after the written request has been received by WW&Co. or within 10 days after
expiration of the time for delivery of demands for appraisal under subsection
(d) of Section 262, whichever is later.

If a petition for an appraisal is filed in a timely manner, at the hearing
on the petition, the Delaware Court of Chancery will determine which
stockholders are entitled to appraisal rights and will appraise the shares of
WW&Co. stock owned by those stockholders, determining the fair value of those
shares, exclusive of any element of value arising from the accomplishment or
expectation of the merger, together with a fair rate of interest, to be paid, if
any, upon the amount determined to be the fair value.

Stockholders considering seeking appraisal should consider that the fair
value of their shares determined under Section 262 could be more than, the same
as, or less than, the value of the consideration provided for in the merger
agreement without the exercise of appraisal rights, although the valuation will
not include any value arising in connection with the merger transaction. The
cost of the appraisal proceeding may be determined by the Court of Chancery and
assessed against the parties as the Court deems equitable in the circumstances.
Upon application of a dissenting stockholder, the Court may order that all or a
portion of the expense incurred by any dissenting stockholder in connection with
the appraisal proceeding be charged pro rata against the value of all shares of

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<PAGE>
WW&Co. entitled to appraisal. In the absence of such a determination or
assessment, each party bears its own expenses.

Any stockholder who has demanded appraisal in compliance with Section 262
will not, after the time of the merger, be entitled to vote such stock for any
purpose or receive payment of dividends or other distributions, if any, on the
WW&Co. stock, except for dividends or distributions, if any, payable to
stockholders of record at a date prior to the merger.

A stockholder may withdraw a demand for appraisal and accept the WW Holdings
class B common stock at any time within 60 days after the time of the merger, or
thereafter may withdraw such demand with the written approval of the surviving
corporation. If an appraisal proceeding is properly instituted, such proceeding
may not be dismissed as to any stockholder without the approval of the Delaware
Court of Chancery, and any such approval may be conditioned on the Court of
Chancery's deeming the terms to be just. If, after the merger, a holder of
WW&Co. stock who had demanded appraisal for the holder's shares fails to perfect
or loses his right to appraisal, those shares will be treated under the merger
agreement as if they had been converted as of the time of the merger into WW
Holdings common stock.

In view of the complexity of these provisions of the Delaware statutes, any
WW&Co. stockholder who is considering exercising appraisal rights should consult
a legal advisor.

PURPOSE OF THE MERGER

Our capital structure, certificate of incorporation and bylaws are designed
for our current status as a publicly registered but privately owned company.
Existing transfer restrictions have essentially prevented sales of stock to
non-employees (except affiliates of the Company), and sales and repurchases have
been at formula book value.

The purpose of the merger is to reorganize our company and establish a new
holding company in a manner that facilitates our becoming a publicly-traded
company. Our board of directors has carefully considered the advisability of a
public offering of our common stock. They have determined that creating a
publicly traded security will substantially enhance our continuing growth and
success because it will increase our capital resources for internal growth and
growth through acquisitions.

DESCRIPTION OF CAPITAL STOCK, CERTIFICATE OF INCORPORATION AND BYLAWS

AUTHORIZED CAPITALIZATION

WATSON WYATT & COMPANY HOLDINGS

WW Holdings' capital structure will consist of 100,000,000 authorized
shares, 99,000,000 of which will be authorized common shares and 1,000,000 of
which will be authorized preferred shares. Class A will have authorized
shares, class B-1 will have authorized shares and class B-2 will have
authorized shares. After the merger and the public offering, there will be
about class A, class B-1 and class B-2
shares outstanding. This assumes that the underwriters do not exercise their
over-allotment option in connection with the public offering.

WATSON WYATT & COMPANY

WW&Co.'s current capital structure consists of 25,000,000 authorized shares
of common stock. At the close of business on , 2000
shares of common stock were outstanding and entitled to vote. As a publicly
registered but privately owned company, WW&Co.'s common stock has been subject
to complex resale restrictions.

WW&Co. has restricted ownership of its stock to active employees, outside
directors, persons or entities designated by the board of directors with which
it has a business affiliation, and the employees

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<PAGE>
of such entities. Stock restrictions are embodied in the Watson Wyatt & Company
bylaws and certificate of incorporation. Before any stockholder encumbers or
disposes of any shares the holder must first give WW&Co. notice in writing at
least 120 days prior to the proposed transaction, stating in detail specific
information about the terms, including the proposed consideration to be
received. WW&Co. can then either purchase the stock at formula book value or
designate other eligible purchasers under the bylaws. If WW&Co. or eligible
purchasers do not purchase the stock within the prescribed time period, the
stockholder may proceed in the next 30-days, but the transfer restrictions will
apply to the transferee.

When a stockholder's employment with WW&Co. terminates for any reason
(including retirement, death and voluntary or involuntary termination),
bankruptcy of a stockholder or the imposition of any lien or attachment on
shares of WW&Co. stock (except Bank of America liens), all shares owned by the
stockholder are considered to be offered to the company or designated eligible
purchasers based on the terms of repurchase described above, except that WW&Co.
will be obligated to purchase all shares of stock if the designated eligible
purchasers fail to purchase the shares. The purchase price of the shares is
calculated based on a formula in the bylaws, that produces essentially a
modified book value price. In recent years, WW&Co. has generally repurchased the
shares itself, and has not designated eligible purchasers.

DESCRIPTION OF WW HOLDINGS' CERTIFICATE OF INCORPORATION

This section describes key provisions of WW Holdings' certificate of
incorporation, which is included as Annex B to this proxy statement/prospectus.

- CLASS B TRANSFER RESTRICTIONS. WW Holdings' certificate of incorporation
will not include the transfer restrictions that are contained in our
current certificate of incorporation and bylaws. Instead, transfers of
class B-1 shares will be restricted for a period of 12 months following
the date of the public offering, and transfers of class B-2 shares will be
restricted for a period of 24 months following the date of the public
offering. There are limited exceptions for transfers, including the sale
of shares in the public offering, and transfers to permitted transferees,
including trusts for the benefit of a stockholder, his or her spouse or
descendents to facilitate estate planning.

- CLASSIFIED BOARD OF DIRECTORS. At present, Watson Wyatt & Company's Board
is comprised of a single class of fifteen directors, all of whom are
elected at each annual meeting of stockholders. WW Holdings' certificate
of incorporation will provide for the classification of the board of
directors into three separate classes as nearly equal in number as
possible, with one class being elected each year to serve a staggered
three-year term. Directors initially elected in Class I would serve until
the annual meeting of stockholders in 2001; directors initially elected in
Class II would serve until the annual meeting of stockholders in 2002; and
directors initially elected in Class III would serve until the annual
meetings of stockholders in 2003. Beginning with the election of directors
to be held at the year 2001 annual meeting, each class of directors would
be elected for a three-year term.

- NO STOCKHOLDER ACTION BY WRITTEN CONSENT. WW Holdings' certificate of
incorporation will not allow stockholder action by written consent.

- NO STOCKHOLDER ABILITY TO CALL A SPECIAL MEETING. WW Holdings' certificate
of incorporation will provide that special meetings of our stockholders
may be called only by the board of directors or the president.

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<PAGE>
COMPARISON OF CERTAIN RIGHTS OF THE STOCKHOLDERS OF WATSON WYATT & COMPANY'S
CURRENTLY OUTSTANDING COMMON STOCK TO WW HOLDINGS' CLASS A COMMON STOCK AND
CLASS B COMMON STOCK

<TABLE>
<CAPTION>
OLD WW&CO. WW HOLDINGS WW HOLDINGS
COMMON STOCK CLASS A SHARES CLASS B SHARES
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
PUBLIC MARKET No. Sales limited to Yes. Application has No. When restrictive
associate-stockholder been made for listing periods lapse, class
purchases and sales. on the New York Stock B shares convert
Exchange. Listing is automatically to
subject to fulfilling class A shares.
all applicable
listing requirements.
- --------------------- --------------------- --------------------- ---------------------
VOTING RIGHTS One vote per share on Same. Same.
all matters voted
upon by stockholders.
- --------------------- --------------------- --------------------- ---------------------
TRANSFER RESTRICTION Stockholders cannot No transfer Class B-1 shares may
sell stock to any restrictions (other not be transferred
party without first than restrictions until 12 months after
offering them to required by the our public offering;
WW&Co. or an eligible securities laws). Class B-2 shares may
purchaser. WW&Co. not be transferred
must repurchase until 24 months after
shares on termination our public offering.
of employment. Shares There are limited
are purchased and exceptions for
sold at the current transfers to
formula book value as permitted
defined in the transferees,
bylaws. including trusts for
the benefit of a
stockholder, his or
her spouse or
descendents to
facilitate estate
planning.
- --------------------- --------------------- --------------------- ---------------------
CONVERSION Not convertible. Not convertible. Automatically
converted into class
A common stock upon
expiration of
restricted periods;
convertible to enable
participation in an
underwritten public
offering and other
circumstances,
subject to the
discretion of the
board of directors.
- --------------------- --------------------- --------------------- ---------------------
RIGHTS UPON MERGER, All common stock has Same. Same.
CONSOLIDATION OR same rights.
REORGANIZATION
- --------------------- --------------------- --------------------- ---------------------
</TABLE>

25
<PAGE>

<TABLE>
<CAPTION>
OLD WW&CO. WW HOLDINGS WW HOLDINGS
COMMON STOCK CLASS A SHARES CLASS B SHARES
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
AUTHORIZED SHARES 25,000,000 authorized 99,000,000 authorized 99,000,000 authorized
common shares. common shares, common shares,
classes A and B classes A and B
combined (and an combined (and an
additional 1,000,000 additional 1,000,000
preferred shares). preferred shares).

Par value of $1.00 Par value is $0.01 Par value is $0.01
per share of common per share of common per share of common
stock. stock. stock.
- --------------------- --------------------- --------------------- ---------------------
BOARD OF DIRECTORS One class of Three classes of Same as class A
directors. directors with each shares; directors are
class serving for a elected by holders of
three year term. class A shares and
class B shares,
voting together.

67% of shares
entitled to vote must
vote in favor to
amend the provisions
establishing a
classified board of
directors.
- --------------------- --------------------- --------------------- ---------------------
REMOVAL OF DIRECTORS The certificate of The certificate of Same as class A
incorporation is incorporation shares; directors are
silent. Delaware law requires a vote of removed by holders of
requires a vote of 67% of the shares class A shares and
the majority of entitled to vote to class B shares,
outstanding remove a director; voting together.
stockholders to because board of
remove a director. directors is
classified, such
removal must be for
cause.

Employee directors Same. Same.
must resign from
board at termination
of employment, unless
otherwise approved by
the board.
- --------------------- --------------------- --------------------- ---------------------
VACANCIES ON THE May be filled by May only be filled by Same as class A
BOARD stockholders or directors. shares.
directors.
- --------------------- --------------------- --------------------- ---------------------
</TABLE>

26
<PAGE>

<TABLE>
<CAPTION>
OLD WW&CO. WW HOLDINGS WW HOLDINGS
COMMON STOCK CLASS A SHARES CLASS B SHARES
--------------------- --------------------- ---------------------
<S> <C> <C> <C>
STOCKHOLDER ACTION Stockholders may act The certificate of Same as class A
by written consent. incorporation shares.
requires that
stockholder actions
be taken by the
stockholders at an
annual or special
meeting and not by
written consent.

Special meetings can Special meetings can Same as class A
be called by the be called by the shares.
chairman of the board president or by the
or by the board at board at the request
the request of the of the majority of
majority of a quorum the board.
of the board or at
the request of
stockholders holding
at least 10% of
voting power.

67% of shares Same as class A
entitled to vote must shares.
vote in favor to
amend the provisions
that require
stockholders to take
action only at a
special or annual
meeting or that
permit the president
or board to call
meetings.
- --------------------- --------------------- --------------------- ---------------------
APPROVAL OF MERGERS Vote of majority of Same. Same.
AND SUBSTANTIAL shares entitled to
ASSET SALES vote.
- --------------------- --------------------- --------------------- ---------------------
</TABLE>

DIVIDENDS; SUBDIVISION AND COMBINATIONS

Subject to the rights of the holders of preferred stock, if any, holders of
class A shares and class B shares will be entitled to receive dividends and
other distributions (in cash, stock of any corporation or our property) as the
board of directors may declare from time to time out of legally available assets
or funds, and will share equally on a per share basis in all such dividends and
other distributions. If dividends or other distributions are payable in WW
Holdings' common stock, including distributions pursuant to stock splits or
divisions of common stock, only class A shares will be paid or distributed with
respect to class A shares and only class B shares will be paid or distributed
with respect to class B shares.

Neither class A shares nor our class B shares may be reclassified,
subdivided or combined unless the reclassification, subdivision or combination
occurs simultaneously and in the same proportion for each class.

27
<PAGE>
When the merger becomes effective, all the outstanding class B shares will
be validly issued, fully paid and nonassessable. When the public offering is
completed, all the outstanding class A shares will be validly issued, fully paid
and nonassessable.

PREFERRED STOCK

WW Holdings' board of directors has the authority to issue shares of
preferred stock from time to time on terms that it may determine, to divide
preferred stock into one or more classes or series, and to fix the designations,
voting powers, preferences and relative participating, optional or other special
rights of each class or series, and the qualifications, limitations or
restrictions of each class or series, to the fullest extent permitted by
Delaware law. The issuance of preferred stock could have the effect of
decreasing the market price of WW Holding's stock, impeding or delaying a
possible takeover and adversely affecting the voting and other rights of the
holders of class A common stock and class B common stock.

POTENTIAL ANTI-TAKEOVER EFFECTS OF VARIOUS PROVISIONS OF DELAWARE LAW AND WW
HOLDINGS' CERTIFICATE OF INCORPORATION AND BYLAWS

ANTI-TAKEOVER PROVISIONS GENERALLY

The provisions of WW Holdings' certificate of incorporation and bylaws
described below and the provisions of the Delaware General Corporation Law
described below are referred to in this section as "Protective Provisions." In
general, the purpose of the Protective Provisions is to help ensure that the WW
Holdings' board of directors plays a role in attempts to acquire control of WW
Holdings. In this way, the board can further and protect the interests of WW
Holdings and its stockholders as appropriate under the circumstances. If the
board determines that a sale of control is in their best interests, having the
board involved enhances its ability to maximize the value to be received by the
stockholders upon such a sale.

Although our board believes the Protective Provisions are beneficial to
stockholders, the existence of the Protective Provisions also may tend to
discourage open market purchases by a potential acquirer and some takeover bids.
As a result, WW Holdings' stockholders may be deprived of opportunities to sell
some or all of their shares at prices that are higher than prevailing market
prices. The Protective Provisions in theory may decrease the market price of WW
Holdings common stock by making the stock less attractive to persons who invest
in securities in anticipation of price increases from potential acquisition
attempts. On the other hand, defeating undesirable acquisition offers can be a
very expensive and time-consuming process. To the extent the Protective
Provisions discourage undesirable proposals, WW Holdings may be able to avoid
those expenditures of time and money.

The Protective Provisions may make it more difficult and time consuming for
a potential acquirer and existing stockholders to obtain control of WW Holdings
through replacing the board of directors and management. This is the case even
if a majority of the stockholders believes such replacement is in the best
interests of the company. As a result, the Protective Provisions may tend to
perpetuate the incumbent board of directors and management.

DELAWARE ANTI-TAKEOVER STATUTE

Watson Wyatt & Company is now, and after the merger WW Holdings will be,
subject to Section 203 of the Delaware General Corporation Law. Subject to
specific exceptions, Section 203 prohibits a publicly-held Delaware corporation
from engaging in a "business combination" with an "interested stockholder" for a
period of three years after the date of the transaction in which the person
became an interested stockholder, unless:

- the "business combination," or the transaction in which the stockholder
became an "interested stockholder" is approved by the board of directors
prior to the date the "interested stockholder" attained that status;

28
<PAGE>
- upon consummation of the transaction that resulted in the stockholder
becoming an "interested stockholder," the "interested stockholder" owned
at least 85% of the voting stock of the corporation outstanding at the
time the transaction commenced (excluding those shares owned by persons
who are directors and also officers, and employee stock plans in which
employee participants do not have the right to determine confidentially
whether shares held subject to the plan will be tendered in a tender or
exchange offer); or

- on or subsequent to the date a person became an "interested stockholder,"
the "business combination" is approved by the board of directors and
authorized at an annual or special meeting of stockholders by the
affirmative vote of at least two-thirds of the outstanding voting stock
that is not owned by the "interested stockholder."

"Business combinations" include mergers, asset sales and other transactions
resulting in a financial benefit to the "interested stockholder." Subject to
various exceptions, an "interested stockholder" is a person who, together with
his or her affiliates and associates, owns, or within three years did own, 15%
or more of the corporation's outstanding voting stock. These restrictions could
prohibit or delay the accomplishment of mergers or other takeover or
change-in-control attempts, and, therefore, may discourage acquisition attempts.

The following are various provisions of WW Holding's certificate of
incorporation and bylaws that may be deemed to have an anti-takeover effect and
may delay, defer or prevent a tender offer or takeover attempt that a
stockholder might consider in its best interest, including those attempts that
might result in a premium over the market price for the shares held by
stockholders.

AUTHORIZED CAPITAL STOCK

The WW Holdings' certificate of incorporation authorizes the issuance of up
to 99,000,000 shares of common stock. In the merger, shares of class B-1
common stock, and shares of class B-2 common stock will be issued. WW Holdings
will issue shares of class A common stock in the public offering. After the
merger and public offering, WW Holdings' board of directors may authorize the
issuance of additional shares of common stock without further action by WW
Holdings' stockholders, unless such action is required in a particular case by
applicable laws or regulations or by any stock exchange upon which WW Holdings'
capital stock may be listed. The certificate of incorporation does not provide
preemptive rights to WW Holdings' stockholders.

The authority to issue additional shares of common stock provides WW
Holdings with the flexibility necessary to meet its future needs without the
delay resulting from seeking stockholder approval. The authorized but unissued
shares of common stock will be issuable from time to time for any corporate
purpose, including, without limitation, stock splits, stock dividends, employee
benefit and compensation plans, acquisitions, and public or private sales for
cash as a means of raising capital. Such shares could be used to dilute the
stock ownership of persons seeking to obtain control of WW Holdings. In
addition, the sale of a substantial number of shares of WW Holdings common stock
to persons who have an understanding with WW Holdings concerning the voting of
such shares, or the distribution or declaration of a dividend of shares of WW
Holdings common stock to stockholders, may have the effect of discouraging or
increasing the cost of unsolicited attempts to acquire control of WW Holdings.

WW & Co.'s authorized capital stock consists of 25,000,000 shares of WW &
Co.'s common stock, of which shares were issued and outstanding as of
, 2000. All of these shares will be exchanged for WW Holdings
Class B common stock in the merger.

CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING

The certificate of incorporation provides that WW Holdings' board of
directors is divided into three classes, with each class to be as nearly equal
in number as possible. The directors in each class serve three-year terms of
office.

29
<PAGE>
Because WW Holdings has a classified board of directors, only approximately
one-third of the members of the board are elected each year. Consequently, two
annual meetings are effectively required for WW Holdings stockholders to change
a majority of the members of the board.

Pursuant to the certificate of incorporation, each stockholder generally is
entitled to one vote for each share of WW Holdings stock held and is not
entitled to cumulative voting rights in the election of directors. With
cumulative voting, a stockholder would have the right to cast a number of votes
equal to the total number of such holders' shares multiplied by the number of
directors to be elected. The stockholder would have the right to cast all of
such holder's votes in favor of one candidate or to distribute such holder's
votes in any manner among any number of candidates. Directors are elected by a
plurality of the total votes cast by all stockholders. With cumulative voting,
it may be possible for minority stockholders to obtain representation on the
board of directors. Without cumulative voting, the holders of more than 50% of
the shares of WW Holdings common stock generally have the ability to elect 100%
of the directors. As a result, the holders of the remaining WW Holdings common
stock effectively may not be able to elect any person to the board of directors.
The absence of cumulative voting, therefore, could make it more difficult for a
stockholder who acquires less than a majority of the shares of WW Holdings
common stock to obtain representation on WW Holdings' board of directors.

SPECIAL MEETINGS OF STOCKHOLDERS

WW Holdings' certificate of incorporation and bylaws provide that special
meetings of stockholders may be called at any time, but only by the board of
directors or the president. This provision, combined with other provisions of
the certificate and the restriction on the removal of directors, would prevent a
substantial stockholder from compelling stockholder consideration of any
proposal (such as a proposal for a business combination) over the opposition of
WW Holdings' board of directors. Therefore, such stockholder would not be able
to call a special meeting of stockholders to replace the entire board with
nominees who were in favor of such proposal.

ACTIONS BY STOCKHOLDERS WITHOUT A MEETING

WW Holdings certificate of incorporation provides that any action required
or permitted to be taken by WW Holdings stockholders must be effected at a duly
called meeting of stockholders and may not be effected by any written consent by
the stockholders. These provisions would prevent stockholders from taking
action, including action on a business combination, except at an annual meeting
or special meeting called by the board of directors or the president, even if a
majority of the stockholders were in favor of such action.

REMOVAL OF DIRECTORS

Under the WW Holdings certificate of incorporation, any director or the
entire board of directors may be removed only for cause and only by the
affirmative vote of the holders of at least 67% of WW Holdings voting stock.
However, under the WW Holdings bylaws, employee directors must resign as
directors upon termination of their employment.

LIMITATION ON DIRECTORS' LIABILITY

WW Holdings' certificate of incorporation provides that a director of WW
Holdings will have no personal liability to WW Holdings or its stockholders for
monetary damages for breach of fiduciary duty as a director, except for
liability for any of the following:

- any breach of the director's duty of loyalty to the corporation or its
stockholders;

- acts or omissions not in good faith or that involve intentional misconduct
or a knowing violation of law; and

30
<PAGE>
- under Section 174 of the Delaware General Corporation Law, the payment of
certain unlawful dividends and the making of certain unlawful stock
purchases or redemptions; or

- any transaction from which the director derived an improper personal
benefit.

INDEMNIFICATION

The WW Holdings' certificate of incorporation and bylaws provide that WW
Holdings will indemnify its officers, directors, employees, and agents to the
full extent permitted by the Delaware General Corporation Law subject to very
limited exceptions. Under Section 145 of the Delaware General Corporation Law as
currently in effect, other than in actions brought by or in the right of WW
Holdings, such indemnification would apply if it were determined in the specific
case that the proposed indemnitee acted in good faith and in a manner such
person reasonably believed to be in or not opposed to the best interests of WW
Holdings and, with respect to any criminal proceeding, if such person had no
reasonable cause to believe that the conduct was unlawful. In actions brought by
or in the right of WW Holdings, such indemnification probably would be limited
to reasonable expenses (including attorneys' fees) and would apply if it were
determined in the specific case that the proposed indemnitee acted in good faith
and in a manner such person reasonably believed to be in or not opposed to the
best interests of WW Holdings, except that no indemnification may be made with
respect to any matter as to which such person is adjudged liable to WW Holdings,
unless, and only to the extent that, the court determines upon application that,
in view of all the circumstances of the case, the proposed indemnitee is fairly
and reasonably entitled to indemnification for such expenses as the court deems
proper. To the extent any director, officer, employee, or agent of WW Holdings
has been successful on the merits or otherwise in defense of any action, suit,
or proceedings, as discussed herein, whether civil, criminal, administrative, or
investigative, such person must be indemnified against reasonable expenses
incurred by such person in connection therewith.

WW Holdings will also be expressly authorized to carry directors' and
officers' insurance providing indemnification for its directors, officers and
certain employees for some liabilities.

AMENDING THE CERTIFICATE OF INCORPORATION AND BYLAWS

The Delaware General Corporation Law generally provides that the approval of
a corporation's board of directors and the affirmative vote of a majority of
(1) all shares entitled to vote and (2) the shares of each class of stock
entitled to vote as a class, is required to amend a corporation's certificate of
incorporation, unless the certificate specifies a greater voting requirement.
The WW Holdings' certificate of incorporation states that each of the following
provisions in the certificate of incorporation may be amended only by a vote of
67% of the outstanding shares:

- classification and removal of directors;

- the prohibition on stockholder action by written consent; and

- the ability to call special meetings of stockholders being vested solely
in the board of directors and the president.

The certificate of incorporation also provides that the board of directors
has the power to adopt, amend, or repeal the bylaws.

RIGHTS PLAN

The board of directors has approved implementing a rights plan, although
final terms of the plan have not been determined. It is likely that, under such
plan, WW Holdings stockholders will be issued rights to purchase shares of
preferred stock upon the occurrence of certain events, such as the acquisition
by a person of 15% of the company's outstanding shares. The purpose of this plan
is to ensure that the board is given the opportunity to negotiate with persons
contemplating significant transactions with WW Holdings.

31
<PAGE>
U.S. FEDERAL INCOME TAX CONSEQUENCES OF MERGER TRANSACTION TO STOCKHOLDERS

The following is a discussion of the anticipated material U.S. federal
income tax consequences of the merger that are generally applicable to "U.S.
Holders" of Watson Wyatt & Company shares. For purposes of this discussion, a
U.S. Holder means a beneficial owner of Watson Wyatt & Company stock that is,
for U.S. federal income tax purposes:

- an individual who is a citizen or resident of the United States;

- a corporation, partnership or other business entity created or organized
under the laws of the United States or any state or political subdivision
thereof (including the District of Columbia);

- an estate the income of which is subject to U.S. federal income taxation
regardless of its source; or

- a trust with respect to which a court within the United States is able to
exercise primary supervision over its administration, and one or more
United States persons have the authority to control all of its substantial
decisions.

An individual may, subject to certain exceptions, be deemed to be a resident
of the United States by reason of being present in the United States for at
least 31 days in the calendar year and for an aggregate of at least 183 days
during a three-year period ending in the current calendar year (counting for
such purposes all the days present in the current year, one-third of the days
present in the immediately preceding year, and one-sixth of the days present in
the second preceding year). A "Non-U.S. Holder" is a beneficial owner of Watson
Wyatt & Company shares that is not a U.S. Holder.

This discussion does not deal with all income tax considerations that might
be relevant to particular U.S. Holders of Watson Wyatt & Company stock in light
of their particular circumstances, for example, if we had stockholders who were
dealers in securities, banks, insurance companies or tax-exempt entities,
stockholders who hold their shares as part of a hedging, straddle, conversion or
other risk reduction transaction or stockholders who acquired their shares in
connection with stock option or certain types of stock purchase plans or other
compensatory transactions. Further, this discussion does not address the income
tax considerations relevant to Non-U.S. Holders. In addition, the following
discussion does not address the tax consequences of transactions effectuated
prior to or after the merger (whether or not these transactions are in
connection with the merger), including transactions in which Watson Wyatt shares
were or are acquired or in which Watson Wyatt shares were or are disposed of.
Furthermore, no foreign, state or local tax considerations are addressed in this
proxy statement/prospectus.

This summary is based on interpretations of the Internal Revenue Code of
1986, as amended (the "Code"), regulations issued thereunder, and rulings and
decisions currently in effect (or in some cases proposed), all of which are
subject to change. Any such change may be applied retroactively and may
adversely affect the federal tax consequences described herein. Accordingly,
Watson Wyatt & Company stockholders are urged to consult their tax advisers as
to the specific tax consequences of the merger, including the applicable
federal, state, local and foreign income and estate tax consequences to them of
the merger and applicable tax return reporting requirements.

The following U.S. federal income tax consequences will result from the
merger:

- no gain or loss will be recognized by holders of Watson Wyatt & Company
shares solely as a result of their receipt of new Watson Wyatt & Company
Holdings class B-1 and class B-2 shares in the merger;

- the aggregate tax basis of the new Watson Wyatt & Company Holdings
class B-1 and B-2 shares received in the merger by a Watson Wyatt
stockholder will be the same as the aggregate tax basis of the Watson
Wyatt shares surrendered in exchange for such new class B-1 and B-2
shares;

32
<PAGE>
- for tax purposes, the holding period of the new class B-1 and B-2 shares
received in the merger by a Watson Wyatt & Company stockholder will
include the period during which the stockholder held the shares
surrendered in exchange for such new class B-1 and B-2 shares, so long as
the Watson Wyatt & Company shares are held as a capital asset at the time
of the merger; and

- Watson Wyatt & Company, Watson Wyatt & Company Holdings and WW Merger
Subsidiary, Inc. will not recognize gain or loss solely as a result of the
merger.

Under the applicable regulations, the aggregate tax basis of the Watson
Wyatt shares surrendered by a holder in the merger is allocated among the
Class B-1 and Class B-2 common stock in proportion to the fair market value of
the stock in each such Class.

Holders of Watson Wyatt & Company shares who receive cash in lieu of
fractional shares of Watson Wyatt & Company Holdings class B-1 and class B-2
shares will be treated as having received such fractional shares under the
merger, and then as having exchanged such fractional shares for cash in a
redemption by Watson Wyatt & Company Holdings. The amount of such gain or loss
will be equal to the difference between the ratable portion of the tax basis of
the Watson Wyatt & Company shares exchanged in the merger that is allocated to
such fractional shares and cash received in lieu thereof. Any such capital gain
or loss will constitute long term capital gain or loss if such Watson Wyatt &
Company shares have been held by the holder for more than one year at the time
of the consummation of the merger. Generally, capital gain on assets held by
individuals for more than 12 months will be subject to tax at a rate not to
exceed 20%.

The opinion of counsel assumes:

- the accuracy of the statements and facts concerning the merger set forth
in the merger agreement and in this proxy statement/prospectus;

- that the merger is consummated in the manner contemplated by, and in
accordance with, the terms of the merger agreement and this proxy
statement/prospectus; and

- the accuracy of representations made by Watson Wyatt & Company and Watson
Wyatt & Company Holdings set forth in certificates delivered to counsel.

The parties are not requesting a ruling from the Internal Revenue Service
(the "IRS") in connection with the merger. Statements of law and conclusions of
law in this discussion are the opinions of Cadwalader, Wickersham & Taft,
counsel to Watson Wyatt. The opinion of counsel referred to above does not bind
the IRS or prevent the IRS from adopting a contrary position.

THE OPINION OF CADWALADER, WICKERSHAM & TAFT DOES NOT ADDRESS ANY STATE,
LOCAL, FOREIGN, OR OTHER TAX CONSEQUENCES OF THE MERGER. WATSON WYATT & COMPANY
STOCKHOLDERS SHOULD CONSULT THEIR OWN TAX ADVISORS WITH RESPECT TO THE TAX
CONSEQUENCES OF THE PROPOSED TRANSACTION TO THEM INDIVIDUALLY, INCLUDING TAX
CONSEQUENCES UNDER STATE, LOCAL, OR FOREIGN LAW.

VOTE REQUIRED AND RECOMMENDATION

For the reasons discussed above, our board of directors deems it advisable
and in the best interests of Watson Wyatt to approve the proposed merger of WW
Merger Subsidiary Inc. with and into Watson Wyatt & Company on the terms set
forth in the attached merger agreement.

The vote required to approve the merger is:

- a majority of the outstanding shares of our common stock entitled to vote
at the special meeting; and

- 80% of the shares actually voting for or against the proposal, if such
amount is higher than a majority of outstanding shares entitled to vote.

The persons named in the enclosed proxy intend to vote "FOR" adoption of the
amendment unless otherwise directed.

Approval of the merger is contingent on consummation of the public offering.

33
<PAGE>
PROPOSAL NO. 2--APPROVAL OF 2000 LONG TERM INCENTIVE PLAN

In December 1999 and January 2000, the Compensation and Stock Committee
adopted, and the board of directors ratified, the Watson Wyatt & Company
Holdings 2000 Long Term Incentive Plan (the "incentive plan"). The proposed
incentive plan will be implemented only if the merger and the public offering is
consummated and provides for grants to be made by Watson Wyatt & Company
Holdings, the new holding company that will be created by the merger described
in this proxy statement/prospectus. The incentive plan authorizes the grant of
stock options and stock appreciation rights to eligible employees of Watson
Wyatt and its subsidiaries. The board believes the incentive plan will provide
it with the required flexibility to design long term incentive award programs
which will provide associates with a strong performance incentive and be
adaptable to the changing business environment for associate compensation. The
plan will become effective at the time it is approved by the stockholders,
subject to approval of the proposed merger (Proposal No. 1), and the
effectiveness of the public offering.

The following summary describes all material elements of the incentive plan,
but is not complete. The summary is qualified in its entirety by reference to
the full plan, a copy of which is attached to this proxy statement/prospectus as
ANNEX E.

SUMMARY

PURPOSE OF THE PLAN

The purpose of the incentive plan is to secure for Watson Wyatt and its
stockholders the benefits of the additional incentive inherent in the ownership
of WW Holdings class A common stock by associates of Watson Wyatt and its
subsidiaries who are important to the success and growth of the business of
Watson Wyatt, and to help secure and retain the services of such persons.

EFFECTIVE DATE

The incentive plan will become effective at the time it is approved by the
stockholders, subject to approval of the merger and effectiveness of the public
offering.

ADMINISTRATION

The incentive plan generally will be administered by a committee appointed
by the Board. The plan provides that the members of the committee will consist
solely of two or more directors who are "outside directors," within the meaning
of Section 162(m) of the Internal Revenue Code, and "non-employee directors"
within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934. The
committee will have full and final authority to select the individuals to
receive awards and to grant awards and will have a wide degree of flexibility in
determining the terms and conditions of awards.

ELIGIBILITY

All associates of Watson Wyatt and its subsidiaries are eligible to
participate in the plan. We estimate that about associates of Watson Wyatt and
its subsidiaries will participate in the plan. Because the plan is a
discretionary plan, we currently cannot determine the amount or form of any
award that will be allocated to any individual during the term of the plan.

SHARES SUBJECT TO THE PLAN

The shares that may be issued pursuant to awards granted under the plan will
be shares of class A common stock. The maximum number of shares of class A
common stock that may be issued pursuant to awards granted under the plan is
million shares. The plan also contains customary anti-dilution
provisions.

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<PAGE>
TYPES OF AWARDS

Awards under the incentive plan may include nonqualified stock options and
stock appreciation rights. The exercise price for options granted under the plan
will be not less than 100% of the fair market value of a share of class A common
stock on the date of grant.

An award granted under the plan to a participant will generally include a
provision that accelerates the exercisability upon the occurrence of specified
events, such as the death or disability of the participant while employed by the
Company or its subsidiaries, the occurrence of a change of control of Watson
Wyatt or a dissolution, liquidation, sale of substantially all of the property
and assets of Watson Wyatt or other significant corporate transaction.

MAXIMUM AWARDS ISSUABLE TO INDIVIDUALS

In general, the plan administrator may not, within any calendar year, grant
options to purchase more than 200,000 shares of class A common stock and/or
grant stock appreciation rights covering more than 200,000 shares of class A
common stock to a participant.

AMENDMENTS TO AND TERMINATION OF THE PLAN

Subject to limitations imposed by law and the plan, the board of directors
may amend or terminate the plan at any time and in any manner. No amendment or
termination may deprive the recipient of an award previously granted under the
plan of any rights under the award without his or her consent.

DURATION OF THE PLAN AND OF OPTIONS

The incentive plan will remain in effect until all shares subject to the
plan have been purchased or acquired pursuant to the plan. We may not grant
awards under the plan on or after the tenth anniversary of the plan's adoption.
We may not grant any option under the plan that is exercisable after the 7(th)
anniversary of the date of grant, except that options may be exercised for a
period of one year after the death of a participant while employed by Watson
Wyatt or its subsidiary, even if that period extends beyond such 7(th)
anniversary.

COMPLIANCE WITH SECTION 16(B)

Pursuant to Section 16(b) of the Securities Exchange Act, directors,
executive officers and 10% stockholders of Watson Wyatt will be generally liable
to Watson Wyatt for repayment of any profits realized from any non-exempt
purchase and sale of common stock occurring within a six-month period.
Rule 16b-3 provides an exemption from Section 16(b) liability for some
transactions by an officer or director made pursuant to approval by the board of
directors, a committee composed of outside directors or stockholders. It is
intended that all grants made under the plan would meet the requirements of the
Rule 16b-3 exemption.

U.S. FEDERAL INCOME TAX CONSEQUENCES

The following is a brief description of the U.S. federal income tax
consequences that will generally apply to awards made under the plan, based on
U.S. federal income tax laws in effect on the date of this proxy
statement/prospectus. The exact U.S. federal income tax treatment of awards will
depend on the specific nature of any award.

The grant of a "nonqualified stock option" is generally not a taxable event
for the optionee. Upon exercise of an option, the optionee will generally
recognize ordinary income in an amount equal to the excess of the fair market
value of the shares acquired upon exercise (determined as of the date of
exercise) over the exercise price of the option, and the participant's employer
generally will be entitled to a deduction equal to that amount.

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<PAGE>
Special rules will apply in cases where an optionee pays the exercise price
or applicable withholding tax obligations under the plan by delivering
previously owned shares of class A common stock. This surrender of shares will
result in a non-taxable exchange, with a carryover basis, of a number of shares
acquired equal to the number of shares delivered. The remainder of the shares
acquired are fully taxable to the participant (the full fair market value on the
date of exercise is includable in the participant's gross income), and the
participant will have a basis in those shares equal to the amount included in
income.

In the case of a "stock appreciation right," generally, a participant to
whom such a right is granted recognizes no income at the time of grant. Upon
exercise of the right and receipt of cash (or common stock), the amount received
(or the fair market value of the property received) is ordinary income to the
participant and is deductible by the company.

The terms of specific award agreements may provide for accelerated vesting
or payment of an award in connection with a change of control of WW Holdings. In
that event, and depending upon the individual circumstances of the recipient,
some amounts with respect to the award may be "excess parachute payments" under
the "golden parachute" provisions of the Internal Revenue Code. Pursuant to
these provisions, a recipient will be subject to a 20% excise tax on any "excess
parachute payments" and Watson Wyatt will be denied any deduction with respect
to such a payment.

In some circumstances, the company may be denied a deduction for
compensation (including compensation attributable to the ordinary income
recognized with respect to awards made under the plan) to some officers of
Watson Wyatt to the extent that the compensation to that officer exceeds
$1,000,000 in a given year. Section 162(m) of the Internal Revenue Code limits
an employer's annual deduction for compensation paid to certain executives to
$1,000,000, with certain exceptions. One of those exceptions provides that
"performance-based compensation" is not subject to the deduction limit. It is
our intention that the ordinary income with respect to awards made under this
plan will be fully deductible as performance-based compensation.

Participants should consult their tax advisors with respect to the tax
consequences of the long term incentive plan under state, local or foreign tax
jurisdictions.

VOTE REQUIRED AND RECOMMENDATION

The board of directors has directed that the incentive plan be submitted for
stockholder approval. The affirmative vote of a majority of the shares
represented at the special meeting, in person or by proxy, will be required for
approval. In the absence of approval, the plan will be without effect, and no
grants or awards will be made under the plan.

The board of directors recommends that the stockholders vote "FOR" the
proposed incentive plan. The persons named in the enclosed proxy intend to vote
"FOR" adoption of the plan unless otherwise directed. Even if the incentive plan
is approved by the stockholders, it will not take effect unless the merger is
also approved and the offering takes place.

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<PAGE>
PROPOSAL NO. 3--APPROVAL OF AMENDMENTS TO
CURRENT WATSON WYATT & COMPANY BYLAWS

Under Watson Wyatt & Company's current bylaws, Watson Wyatt shares only may
be transferred to trusts that meet specific requirements set forth in the
bylaws. In most cases, any trust that meets the requirements of the bylaws will
not be an effective vehicle for estate planning. For many associates, their
Watson Wyatt shares represent a significant portion of their total assets. The
board of directors has determined that it is desirable to amend the bylaws prior
to the initial public offering to allow stockholders to accomplish certain
estate planning objectives prior to any increase in share price that may result
in the initial public offering. The board therefore recommends amending the
Watson Wyatt & Company bylaws to allow stockholders to make transfers of the
company's common stock, under certain circumstances, to trusts created for the
benefit of the stockholder, his or her spouse or descendants to facilitate
estate planning and that could result in gift and estate tax savings for the
stockholder. Any stockholder desiring to make such transfers should consult with
their personal advisor regarding their individual tax and estate planning needs.
This proposal is not contingent upon any event or any other proposal.

PROPOSAL

If approved, Sections 9.1, 9.2 and 9.9 of our bylaws will be amended and
restated as set forth in Appendix E to this proxy statement/prospectus. The
statements made in this proxy statement/prospectus with respect to this
amendment to the bylaws should be read in conjunction with and are qualified in
their entirety by reference to ANNEX E.

VOTE REQUIRED AND RECOMMENDATION

Under the terms of the current Watson Wyatt & Company certificate of
incorporation and bylaws, the affirmative vote of 80% of the votes entitled to
be cast is necessary to adopt this proposal.

The board of directors recommends that the stockholders vote "FOR" the
proposed amendment to the bylaws. The persons named in the enclosed proxy intend
to vote "FOR" adoption of the amendment unless otherwise directed.

GENERAL

RECORD DATE; VOTING RIGHTS; VOTES REQUIRED FOR APPROVAL

Our board has fixed the close of business on February , 2000 as the record
date for determining stockholders entitled to receive notice of and to vote at
the special meeting. Only stockholders of record as of the close of business on
the record date will be entitled to vote at the special meeting.

We had shares of common stock outstanding and entitled to vote as of the
close of business on the record date. These shares are the only securities that
may be voted at the special meeting. Each share is entitled to one vote.

Holders of a majority of the issued and outstanding shares of our common
stock, present in person or by proxy, will constitute a quorum for the
transaction of business at the special meeting.

Votes Required:

- A majority of all shares entitled to vote is required to approve the
merger at the special meeting. In addition, we are requiring that the
merger also be approved by 80% of shares actually voting for or against
the proposal, if higher.

- A majority of the shares present at the meeting (in person or by proxy) is
required to approve the 2000 long term incentive plan.

37
<PAGE>
- A vote of 80% of shares entitled to vote is required to amend the bylaws
to permit certain stock transfers to facilitate estate planning.

Abstentions with regard to all matters are counted as shares present for
purposes of determining whether a quorum exists. With one exception as described
in the following sentence, abstentions will have the effect of a negative vote.
With regard to the merger proposal, an abstention will have the effect of a
negative vote insofar as approval of the merger requires the vote of a majority
of the outstanding shares entitled to vote, but will not have any effect with
respect to the requirement that the merger be approved by at least 80% of the
shares actually voting for or against the proposal.

COSTS OF SOLICITATION

We will pay the expenses of printing, assembling and mailing this proxy
statement/prospectus. In addition to the initial distribution of the proxies,
associates may assist with the solicitation of proxies personally, by telephone,
electronically or by facsimile. Also, we have made arrangements with our
independent auditors, PricewaterhouseCoopers LLP, for assistance with the
solicitation process. PricewaterhouseCoopers LLP will solicit proxies by
telephone and by electronic communication at an estimated cost of $ .

VOTING AND REVOCATION OF PROXIES

All shares represented by valid proxies we receive before the special
meeting will be voted by the board-appointed proxies at the special meeting as
specified in the proxy, unless the proxy has been previously revoked. If no
specification is made on a proxy with respect to a proposal, the board-
appointed proxies will vote the related shares FOR that proposal.

Management knows of no other matter which may come up for action at the
meeting. Unless you indicate otherwise, your proxy card also will confer
discretionary authority on the board-appointed proxies to vote the shares
represented by the proxy on any matter that is properly presented for action at
the special meeting.

Individual proxies will be counted by PricewaterhouseCoopers LLP in an
effort to ensure the confidentiality and anonymity of each stockholder's votes.
Whether or not you expect to be present at the meeting, you are urged to sign,
date and PROMPTLY return the attached proxy in a sealed envelope to your office
administrator by , 2000 for forwarding to PricewaterhouseCoopers
LLP. PLEASE RETURN YOUR PROXY IN ACCORDANCE WITH THE DIRECTION ON THE BOTTOM OF
THE PROXY FORM.

You have the right to revoke your proxy at any time before it is voted by
giving written notice of revocation to our secretary, by submitting a subsequent
later-dated proxy or by voting in person at the special meeting.

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<PAGE>
SELECTED CONSOLIDATED FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)

The following selected consolidated financial data should be read in
conjunction with the consolidated financial statements and the notes thereto and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" included elsewhere in this proxy statement/prospectus. The balance
sheet data as of June 30, 1998 and 1999 and the statement of operations data for
the years ended June 30, 1997, 1998 and 1999 have been derived from the
consolidated financial statements for such years, which have been audited by
PricewaterhouseCoopers LLP, independent accountants. The balance sheet data as
of June 30, 1995, 1996 and 1997 and the statement of operations data for the
years ended June 30, 1995 and 1996 are derived from the audited consolidated
financial statements for such years that have been restated to reflect our
discontinued operations.

The consolidated financial data as of and for the three months ended
September 30, 1998 and 1999 have been derived from our unaudited consolidated
financial statements, which management believes include all adjustments
(consisting of normal recurring adjustments) necessary for a fair presentation.
Results for the three months ended September 30, 1999 are not necessarily
indicative of results that may be achieved for the full year.

<TABLE>
<CAPTION>
THREE MONTHS
YEAR ENDED JUNE 30, ENDED SEPT. 30,
----------------------------------------------------- -------------------
1995 1996 1997 1998 1999 1998 1999
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENTS OF OPERATIONS DATA (A):
Continuing operations:
Fees............................................... $465,788 $475,298 $486,502 $ 512,660 $556,860 $133,985 $146,323
Operating expenses:
Salaries and benefits............................ 250,507 250,103 252,302 268,611 298,925 76,398 79,803
SIBP (b)......................................... 22,600 2,100 6,000
Non-recurring compensation charge related to
formula book value change (c).................. -- -- -- 69,906 -- -- --
Occupancy & communications....................... 71,173 60,566 72,155(d) 62,061 62,915 14,521 14,742
Professional and subcontracted services.......... 43,613 42,450 48,827 49,907 47,863 8,714 9,796
Other............................................ 25,135 23,637 23,871 26,779 29,753 2,846 7,274
-------- -------- -------- --------- -------- -------- --------
390,428 376,756 397,155 477,264 462,056 104,579 117,615
General & administrative expenses.................. 41,313 38,656 45,696 51,759 56,578 11,160 13,178
Depreciation & amortization........................ 21,103 25,541 22,094 24,994 15,248 3,853 4,907
-------- -------- -------- --------- -------- -------- --------
452,844 440,953 464,945 554,017 533,882 119,592 135,700
-------- -------- -------- --------- -------- -------- --------
Income (loss) from operations...................... 12,944 34,345 21,557 (41,357) 22,978 14,393 10,623
Other:
Net interest income.............................. 1,343 1,441 1,462 901 944 124 1,036
Net interest (expense)........................... (1,507) (930) (1,506) (2,768) (2,646) (553) (390)
Income (loss) from affiliates.................... (576) (820) 105 258 2,524 160 988
-------- -------- -------- --------- -------- -------- --------
Income (loss) before income taxes and minority
interest......................................... 12,204 34,036 21,618 (42,966) 23,800 14,124 12,257
Income taxes....................................... 6,369 14,071 9,070 13,134 11,448 6,830 5,919
Minority interest.................................. (127) (130) (167) (112) (217) -- 18
Cumulative effect of change in accounting for
postemployment benefits, net of tax benefit of
$1,000........................................... (800) -- -- -- -- -- --
-------- -------- -------- --------- -------- -------- --------
Income (loss) from continuing operations........... 4,908 19,835 12,381 (56,212) 12,135 7,294 6,356
Discontinued operations (e)........................ (4,059) (10,480) (11,483) (69,906) 8,678 -- --
-------- -------- -------- --------- -------- -------- --------
Net income (loss).................................. $ 849 $ 9,355 $ 898 $(126,118) $ 20,813 $ 7,294 $ 6,356
======== ======== ======== ========= ======== ======== ========
Earnings (loss) per share, continuing operations,
basic and fully diluted.......................... $ 0.25 $ 1.07 $ 0.71 $ (3.27) $ 0.80 $ 0.47 $ 0.41
Earnings (loss) per share, basic and fully
diluted.......................................... $ 0.05 $ 0.51 $ 0.05 $ (7.34) $ 1.37 $ 0.47 $ 0.41
Weighted average shares outstanding................ 19,248 18,516 17,438 17,170 15,215 15,377 15,331
</TABLE>

39
<PAGE>

<TABLE>
<CAPTION>
AS OF JUNE 30,
---------------------------------------------------- AS OF SEPT.
1995 1996 1997 1998 1999 30, 1999
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash and cash equivalents........................ $ 11,860 $ 21,694 $ 26,257 $ 13,405 $ 35,985 $ 13,835
Net working capital.............................. 49,826 18,788 21,307 23,748 11,692 5,672
Total assets..................................... 286,622 320,819 331,778 268,310 313,960 304,386
Notes payable and book overdrafts................ -- -- 408 11,666 248 31,562
Redeemable common stock.......................... 86,275 90,214 96,091 96,296 107,631 100,282
Total stockholders' (deficit) (f)................ (6,562) (5,832) (12,205) (84,510) (74,351) (67,906)
Shares outstanding............................... 19,130 18,262 18,130 15,917 16,112 15,012
</TABLE>

- ------------------------------

We believe that our results of operations in fiscal years 1998 and 1999 and
the three month periods ended September 30, 1998 and 1999 are more
comparable to, and a better indication of, our performance as a publicly
traded company if they are analyzed excluding the SIBP and the non-recurring
compensation charge described above. The continuing operations loss before
taxes and minority interest of $43.0 million for fiscal year 1998 would have
improved by $69.9 million, and the continuing operations income before taxes
and minority interest of $23.8 million for fiscal year 1999 would have
improved by $22.6 million without these items. Income before taxes and
minority interest from continuing operations for the three years ended
June 30, 1997, 1998 and 1999 would have been $21.6 million, $26.9 million
and $46.4 million, respectively. Income before taxes and minority interest
from continuing operations for the three month periods ended September 30,
1998 and 1999 would have been $16.2 million and $18.3 million, respectively,
if bonuses were accrued under the compensation structure management will
adopt as a publicly traded company.

(d) Results of operations for fiscal year 1997 were reduced by a $12.1 million
sublease loss due to the relocation of the corporate and certain operating
offices.

40
<PAGE>
(e) As discussed in footnotes (a) and (c) above, in fiscal year 1998 we
discontinued our Benefits Administration Outsourcing Business and recorded a
$69.9 million charge to earnings in the discontinued operations line. The
discontinuation is more fully described under "Management's Discussion and
Analysis of Financial Condition and Results of Operations." Fiscal years
1995 through 1998 also include the operating losses of the Benefits
Administration Outsourcing Business prior to its discontinuation in 1998,
which are reflected in the discontinued operations line. In fiscal year
1999, the discontinued operations credit reflects the reduction of the
expected loss on disposal of the Benefits Administration Outsourcing
Business.

(f) The increase in deficit from June 30, 1997 to June 30, 1998 includes the
discontinued operations charge of $69.9 million mentioned in note (e) above.

41
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

THE FOLLOWING SECTION SHOULD BE READ IN CONJUNCTION WITH OUR CONSOLIDATED
FINANCIAL STATEMENTS AND RELATED NOTES BEGINNING ON PAGE F-1 OF THIS PROXY
STATEMENT/PROSPECTUS. IN ADDITION TO HISTORICAL INFORMATION, THIS DISCUSSION AND
ANALYSIS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS, UNCERTAINTIES
AND ASSUMPTIONS THAT COULD CAUSE ACTUAL RESULTS TO DIFFER MATERIALLY FROM
MANAGEMENT'S EXPECTATIONS. FACTORS THAT COULD CAUSE DIFFERENCES INCLUDE THOSE
DISCUSSED IN "RISK FACTORS."

OVERVIEW

Watson Wyatt & Company is a global provider of human capital consulting
services. We operate on a geographic basis from 60 offices in 18 countries
throughout North America, Asia-Pacific and Latin America. We provide services in
three principal practice areas: employee benefits, human resources technologies
and human capital consulting.

Although we operate globally as an alliance with our affiliates, our
revenues and operating expenses reflect solely the results of operations of
Watson Wyatt & Company. Our share of the results of our affiliates, recorded
using the equity method of accounting, is reflected in the "Income/loss from
affiliates" line. Our principal affiliates are Watson Wyatt Partners, in which
we hold a 10% interest in a defined distribution pool, and Watson Wyatt Holdings
(Europe) Limited, a holding company through which we conduct continental
European operations. We own 25% of Watson Wyatt Holdings (Europe) Limited and
Watson Wyatt Partners owns the remaining 75%.

We derive substantially all of our revenue from fees for consulting
services, which generally are billed at standard hourly rates or on a fixed-fee
basis. Clients are typically invoiced on a monthly basis with revenue recognized
as services are provided. For the most recent three fiscal years, fees from U.S.
consulting operations have comprised approximately 80% of consolidated revenues.
No single client accounted for more than 3% of our consolidated revenues.

Our most significant expenses are salaries and benefits costs (including
bonuses), which typically comprise over 60% of total costs of providing
services. In addition to payroll and related benefits and taxes, salaries and
benefits also include incentive bonus expense, which is linked to our operating
performance. Other significant costs of providing services include office rent
and related costs, communications and professional and subcontracted services.

Beginning in fiscal year 1999, we provided supplemental bonus compensation
to our employee shareholders pursuant to the Stock Incentive Bonus Plan ("SIBP")
in an amount representing all income in excess of a targeted amount. Following
the public offering, we will terminate the SIBP and replace it with equity-based
incentives more customary to publicly traded companies. Our results of
operations for fiscal year 1999 and the three months ended September 30, 1999
include expenses for supplemental bonuses accrued under the SIBP of
$22.6 million and $6.0 million, respectively.

In addition, as an employee-owned company without a public trading market,
we sold and repurchased shares of common stock in transactions with our employee
shareholders at a formula book value calculated in accordance with our bylaws.
In fiscal year 1998, we recorded a one-time non-cash compensation charge against
continuing operations of $69.9 million to reflect a change in the method of
calculating the formula book value. This change eliminated from the calculation
of formula book value the $69.9 million charge taken for discontinued operations
in fiscal year 1998 to reflect the discontinuation of our Benefits
Administration Outsourcing Business. The discontinuation is more fully described
under the section "Fiscal Year Ended June 30, 1998 Compared to Fiscal Year ended
June 30, 1997--Discontinued Operations."

We believe that our income as an employee-owned company is not indicative of
the operating performance we will report as a publicly traded company. We
believe that our results of operations in fiscal years 1998 and 1999 and the
three month periods ended September 30, 1998 and 1999 are more

42
<PAGE>
comparable to, and a better indication of, our performance as a publicly traded
company if they are analyzed excluding the SIBP and the non-recurring
compensation charge described above. The continuing operations loss before taxes
and minority interest of $43.0 million for fiscal year 1998 would have improved
by $69.9 million, and the continuing operations income before taxes and minority
interest of $23.8 million for fiscal year 1999 would have improved by
$22.6 million without these items. Income before taxes and minority interest
from continuing operations for the three years ended June 30, 1997, 1998 and
1999 would have been $21.6 million, $26.9 million and $46.4 million,
respectively. Income before taxes and minority interest from continuing
operations for the three month periods ended September 30, 1998 and 1999 would
have been $16.2 million and $18.3 million, respectively, if bonuses were accrued
under the compensation structure management will adopt as a publicly traded
enterprise.

THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE MONTHS ENDED
SEPTEMBER 30, 1998.

REVENUES. Fees for the three months ended September 30, 1999 totaled
$146.3 million, compared to $134.0 million for the three months ended
September 30, 1998, an increase of $12.3 million, or 9%. Revenue growth is
attributable to improved performance in our U.S. East and U.S. Central Regions,
primarily from increased billable hours in the Benefits Consulting Group.

COMPENSATION AND BENEFITS. Salaries and employee benefit expenses for the
three months ended September 30, 1999 were $79.8 million, an increase of
$3.4 million, or 4%, from $76.4 million in the three months ended September 30,
1998. The increase is attributable to a $5.3 million rise in compensation to
associates, related to a 4% increase in headcount, partially offset by a
$1.9 million reduction in pension expense from higher expected plan asset
returns. The accrued SIBP for the three months ended September 30, 1999 was
$6.0 million compared with $2.1 million for the three months ended
September 30, 1998. Both accruals were calculated in accordance with our
current, pre-offering, practice of distributing all income in excess of a
targeted amount. Under the equity-based compensation structure we plan to
implement as a publicly traded company, the results of operations for the three
months ended September 30, 1999 and 1998 would not have included the accrual for
an SIBP of $6.0 million or $2.1 million, respectively.

OCCUPANCY AND COMMUNICATIONS. Occupancy and communications expenses during
the three months ended September 30, 1999 totaled $14.7 million, an increase of
$0.2 million, or 1%, from $14.5 million in the three months ended September 30,
1998.

PROFESSIONAL AND SUBCONTRACTED SERVICES. Professional and subcontracted
services increased by $1.1 million, or 13%, from the three months ended
September 30, 1998, reflecting increased recruiting and independent contractor
costs.

OTHER. Other costs of providing services were $7.3 million for the three
months ended September 30, 1999, an increase of $4.4 million from the three
months ended September 30, 1998. The difference is mainly attributable to the
inclusion in the three months ended September 30, 1998 of a $3.7 million pre-tax
gain from the sale of our defined contribution daily record keeping software.
The remainder of the difference can be attributed to increased general office
and travel expenses.

GENERAL AND ADMINISTRATIVE. General and administrative ("G&A") expenses for
the three months ended September 30, 1999 were $13.2 million, a $2.0 million, or
18%, increase from the three months ended September 30, 1998. This increase is
primarily the result of a $1.1 million increase in professional services
($0.7 million of which is due to timing differences associated with the accrual
of fees for legal and auditing services), a $0.6 million increase in salaries
and benefits of the G&A functions and a $0.3 million increase in technological
support for the consulting practices.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization expense of
$4.9 million for the three months ended September 30, 1999 represents an
increase of $1.1 million from the three months

43
<PAGE>
ended September 30, 1998. This increase is due to a higher depreciable capital
base and higher intangibles related to an acquisition made late in the first
quarter of fiscal year 1999.

INTEREST INCOME. Interest income increased $0.9 million from the three
months ended September 30, 1998. This increase can be attributed to the receipt
of interest of $0.5 million related to a federal tax refund as well as to
interest income of $0.4 million earned during the quarter on a higher average
investment balance.

INCOME FROM AFFILIATES. Income from affiliates was $1.0 million for the
three months ended September 30, 1999 compared with $0.2 million for the three
months ended September 30, 1998. The increase reflects significantly improved
business operations in both continental Europe and the United Kingdom.

PROVISION (BENEFIT) FOR INCOME TAXES. Income taxes for the three months
ended September 30, 1999 were $5.9 million compared to $6.8 million for the
three months ended September 30, 1998 due to lower income before income taxes
and minority interest. Our effective tax rate of 48% at September 30, 1999
remained unchanged from the prior year. Our tax rate is affected by differing
foreign tax rates in various tax jurisdictions. We have not recorded a tax
benefit on certain foreign net operating loss carryovers and foreign deferred
expenses unless it is more likely than not that a benefit will be realized.

NET INCOME. Net income for the three months ended September 30, 1999 was
$6.4 million compared with $7.3 million for the three months ended
September 30, 1998. These results reflect the above mentioned items related to
the SIBP and the gain on sale of software.

FISCAL YEAR ENDED JUNE 30, 1999 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1998

REVENUES. Fee revenue from continuing operations reached $556.9 million in
fiscal year 1999, an increase of $44.2 million from $512.7 million in fiscal
year 1998. This represents a 9% growth in revenue. This increase occurred
primarily in our U.S. East, U.S. Central and Asia-Pacific consulting regions. In
North America, our retirement and group and health care practices and HR
Technologies Group experienced strong revenue growth and our Human Capital Group
revenues declined modestly amid a reorganization of the practice. Revenues for
fiscal year 1999 also reflect the sale late in fiscal year 1998 of our North
American risk and insurance consulting practice and our exit from the defined
contribution record keeping business, as well as the acquisition in the first
quarter of fiscal year 1999 of selected units of KPMG's benefits consulting
business.

COMPENSATION AND BENEFITS. For fiscal year 1999, salaries and employee
benefits expenses were $298.9 million, an increase of $30.3 million, or 11%,
from fiscal year 1998. This increase is due primarily to a 6% increase in
headcount, and annual increases in compensation and benefits. In fiscal year
1999, we accrued, for the first time, a supplemental bonus under our SIBP of
$22.6 million, which amounts were paid in January 2000.

OCCUPANCY AND COMMUNICATIONS. Occupancy and communications expense
increased $0.9 million or 1% in fiscal year 1999. This low percentage increase
reflects our adoption of an office space standard as well as our success in
negotiating advantageous leases of office space.

PROFESSIONAL AND SUBCONTRACTED SERVICES. Professional and subcontracted
services were $47.9 million for fiscal year 1999, a decrease of $2.0 million, or
4%, from fiscal year 1998 due to reduced corporate expenses.

OTHER. Other costs of providing services increased $3.0 million in fiscal
year 1999, which is mainly attributable to increased travel.

44
<PAGE>
GENERAL AND ADMINISTRATIVE. General and administrative expenses for fiscal
year 1999 were $56.6 million, an increase of $4.8 million, or 9%, from fiscal
year 1998 due to the increased cost of providing technology support to core
consulting areas and Year 2000 readiness costs.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization decreased
$9.7 million in fiscal year 1999 to $15.2 million. This decrease is due to
higher amortization of internally developed software in fiscal year 1998 of
$11.6 million, primarily due to a reevaluation and subsequent reduction of the
useful lives of the related products. Without this item in fiscal year 1998,
depreciation and amortization expense increased $1.9 million in fiscal year 1999
related to purchases of capital assets.

INCOME FROM AFFILIATES. Income from affiliates was $2.5 million in fiscal
year 1999 compared to $0.3 million in fiscal year 1998. The increase reflects
heightened synergies and focus within our affiliated European operations as well
as improved business operations in the United Kingdom.

PROVISION (BENEFIT) FOR INCOME TAXES. Income before income taxes, minority
interest and discontinued operations was $23.8 million in fiscal year 1999,
which, considering taxes of $11.4 million, reflects an effective tax rate of 48%
compared to 49% in fiscal year 1998, without the effect of the fiscal year 1998
non-recurring compensation charge.

DISCONTINUED OPERATIONS. In fiscal year 1999, we further resolved our
future obligations related to the discontinuation of our Benefits Administration
Outsourcing Business and reduced the expected loss on disposal by $8.7 million,
net of taxes. We believe we have adequate provisions for any remaining costs
related to the discontinuation.

NET INCOME (LOSS). We generated net income in fiscal year 1999 of
$20.8 million compared to a net loss in fiscal year 1998 of $126.1 million.
Continuing operations income before income taxes and minority interest in fiscal
year 1999 of $23.8 million compares to the loss of $43.0 million in fiscal year
1998, which includes the $69.9 million non-recurring compensation charge related
to the change in formula book value for stock repurchases. The fiscal year 1999
results reflect growth in our common stock value of 10% and higher bonuses at
the discretion of our board of directors, reflecting significantly improved
operating performance.

FISCAL YEAR ENDED JUNE 30, 1998 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1997

REVENUES. Fee revenue from continuing operations reached $512.7 million in
fiscal year 1998, an increase of $26.2 million, or 5%, from $486.5 million in
fiscal year 1997. This increase occurred primarily in our U.S. East, U.S.
Central and U.S. West regions, offsetting a decline in the Asia-Pacific region,
and is due to the realization of billing rate increases. In North America, the
retirement practice, Human Capital Group, and HR Technologies Group experienced
strong revenue growth.

COMPENSATION AND BENEFITS. For fiscal year 1998, salaries and employee
benefits expenses were $268.6 million excluding the $69.9 million non-cash
non-recurring compensation charge described below, an increase of $16.3 million
or 6% from fiscal year 1997. This is due primarily to a 2% increase in headcount
and annual salary increases.

OCCUPANCY AND COMMUNICATIONS. Occupancy and communications expenses
decreased $10.1 million in fiscal year 1998. We relocated our corporate office
to a lower-cost suburban location in 1997, recognizing sublease losses of
$12.1 million. Excluding these lease losses, occupancy and communications
increased $2.0 million or 3%, with the largest growth occurring in
telecommunications expenses.

PROFESSIONAL AND SUBCONTRACTED SERVICES. Professional and subcontracted
services were $49.9 million for fiscal year 1998, an increase of $1.1 million,
or 2%, from fiscal year 1997.

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<PAGE>
OTHER. Other costs of providing services increased $2.9 million in fiscal
year 1998 due to increased travel and local office promotion expenses.

GENERAL AND ADMINISTRATIVE. General and administrative expenses for fiscal
year 1998 were $51.8 million, an increase of $6.1 million or 13% from fiscal
year 1997 due to increased spending on business strategy initiatives and higher
corporate advertising and promotional expenses.

DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased
$2.9 million in fiscal year 1998 to $25.0 million. This increase is primarily
due to our decision to accelerate the amortization of internally developed
software in fiscal year 1998 by $6.8 million based upon a reevaluation and
subsequent reduction of the useful lives of the related products. Without this
acceleration, depreciation and amortization expense declined 18% due to the
decreased base of capital assets.

PROVISION (BENEFIT) FOR INCOME TAXES. Loss before income taxes, minority
interest and discontinued operations was $43.0 million in fiscal year 1998. This
loss reflects the $69.9 million non-cash non-recurring special compensation
charge described below, which is permanently non-deductible. The effective tax
rate was 49%, after considering the nondeductible nature of the special
compensation charge, compared to 42% in fiscal year 1997. The increase in the
effective tax rate is due to changes in income in various tax jurisdictions with
differing tax rates, particularly foreign jurisdictions, and lower tax credits.

DISCONTINUED OPERATIONS. In the early 1990's we entered the employee
benefits administration outsourcing business and we took on certain long-term
contracts in this area. In 1996, recognizing the significant capital
requirements needed for expansion in this area, we formed a joint venture
("Wellspring") with State Street Bank and Trust Company. In 1996 and 1997,
Wellspring continued to require significant cash outlays and suffered
development and implementation delays. The combination of Wellspring's financial
performance, which failed to meet our expectations, as well as a strategy
evaluation that concluded that benefits administration outsourcing did not
leverage our consulting strengths, led the board of directors to approve a plan
of discontinuation of the Benefits Administration Outsourcing Business in fiscal
year 1998, the financial effect of which is further described below.

NET INCOME (LOSS). Although we incurred a net loss in fiscal year 1998 of
$126.1 million compared to net income in fiscal year 1997 of $0.9 million, these
results include aggregate charges totaling $139.8 million on an after-tax basis
for the special compensation charge and the discontinued operations charge.
Fiscal year 1997 results include $11.5 million in after-tax charges for the
results of operations of the Benefits Administration Outsourcing Business, prior
to its discontinuation in fiscal year 1998.

The charges totalling $139.8 million in fiscal year 1998 were both
associated with our discontinued operations in fiscal year 1998. The
discontinuation of our Benefits Administration Outsourcing Business resulted in
a $69.9 million loss net of taxes due to the withdrawal from this line of
business and is reported as a discontinued operation. Included in this amount is
the $6.8 million loss from operations prior to discontinuance and $63.1 million
for the loss upon exit. The loss upon exit includes the write-off of our
investment in Wellspring Resources, net capitalized software development costs
for the Retained Clients (as defined in Note 16 of Notes to the Consolidated
Financial Statements) and a provision for the completion of any obligations to
clients, vendors or our former joint venture partner.

In connection with the discontinuation, we changed our bylaws to modify the
formula book value repurchase price of our stock to exclude the effect of the
discontinued operations from the formula book value calculation. The applicable
accounting rules required us to take a $69.9 million non-cash, non-recurring
compensation charge for this. This charge was reported as a special compensation
expense as a component of continuing operations. The charge was measured by the
difference between what the formula book value per share was at June 30, 1998
and what it would have been at that date

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<PAGE>
without the modification. The non-cash charge had no effect on our liquidity or
capital resources but significantly reduced our income from continuing
operations.

LIQUIDITY AND CAPITAL RESOURCES.

Cash and cash equivalents at September 30, 1999 totaled $13.8 million,
compared to $36.0 million at June 30, 1999 and $13.4 million at June 30, 1998.
The decrease in cash from June 30, 1999 to September 30, 1999 is mainly
attributable to the timing of the payment of corporate taxes and the purchases
of capital assets during the first quarter of fiscal year 2000. The increase in
cash from June 30, 1998 to June 30, 1999 was the result of our stock sale during
fiscal year 1999 (we held no such sale in fiscal year 1998) and from reduced
operating and close down costs associated with the discontinuation of the
Benefits Administration Outsourcing Business. We had no borrowings outstanding
under our line of credit as of September 30, 1999 or June 30, 1999, and
$9.0 million outstanding at June 30, 1998.

CASH USED FOR / PROVIDED BY OPERATING ACTIVITIES. For the three months
ended September 30, 1999, we had operating cash outflows of $40.6 million,
compared to $19.0 million for the three months ended September 30, 1998. The
increase in cash outflows resulted mainly from the payment of higher accrued
bonuses and corporate taxes in fiscal year 2000 than were paid in fiscal year
1999. Further, the allowance for doubtful accounts increased $2.8 million from
June 30, 1999 to September 30, 1999. This increase is typical of our historical
patterns, where the receivables and allowance are substantially reduced at year
end from an increased emphasis on collections. Both the receivable balances and
the related allowance increase in the first quarter of the following year. The
number of months revenues represented by accounts receivable outstanding was 1.7
at September 30, 1999 compared to 1.6 at September 30, 1998.

Net cash provided by operating activities was $54.5 million for fiscal year
1999, an increase of $33.3 million over cash provided in fiscal year 1998. The
increase was due primarily to the $43.2 million increase in accounts payable and
accrued liabilities from fiscal year 1999 operating expenses that will be paid
in fiscal year 2000. This increase was augmented by the $13.0 million decrease
in the cash needed in the closedown of discontinued operations. The increase in
receivables from clients of $14.4 million decreased cash that would have been
provided by operations. The deferred income tax asset increased $7.3 million in
fiscal year 1999 in conjunction with the increase in accounts payable and
accrued liabilities, compared with a $2.0 million increase in fiscal year 1998.

CASH USED IN INVESTING ACTIVITIES. Cash used in investing activities was
$5.0 million for the three months ended September 30, 1999, versus $7.3 million
for the same prior period in fiscal year 1999. The decrease in cash usage was
due to lower contingency payments associated with fiscal year 1999 acquisitions,
net of lower distributions from our affiliates. For fiscal year 1999, uses of
cash for investing activities decreased $8.7 million from fiscal year 1998,
principally due to reduced cash needs of the discontinued operations.

CASH FROM FINANCING ACTIVITIES. Cash flows provided by financing activities
were $23.5 million for the three months ended September 30, 1999, versus
$26.7 million in the preceding fiscal year. The decrease reflects a lower level
of borrowings and book overdrafts and higher repurchases of redeemable common
stock. For full fiscal year 1999, we paid down our outstanding debt and net
stock activity had virtually no impact on cash used by financing activities in
fiscal year 1999.

We have a $120.0 million senior secured revolving credit facility that
matures on June 29, 2003. Of the $95.0 million of the credit facility that is
allocated for operating needs, $92.8 million was available as of September 30,
1999 and $2.2 million of availability has been allocated to support outstanding
letters of credit.

We rely primarily on funds from operations and short-term borrowings for
liquidity. We believe that we have access to ample financial resources to
finance anticipated growth, meet commitments to

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<PAGE>
affiliates, as well as support ongoing operations. Anticipated commitments of
funds are estimated at $24.0 million for the remainder of fiscal year 2000,
mainly for computer hardware purchases and for office relocations and
renovations. We expect operating cash flows to provide for these cash needs.

Our foreign operations do not materially impact liquidity or capital
resources. At June 30, 1999, $14.4 million of the total cash balance of
$36.0 million was held outside of North America, which we have the ability to
readily access, if necessary. There are no significant repatriation restrictions
other than local or U.S. taxes associated with repatriation. The foreign
operations in total are substantially self-sufficient for their working capital
needs. Due to the nature of our operations (billing and collecting for services
within each country in the country's local currency), we historically have had
moderate foreign currency transaction risk. We have not implemented a formal
hedging policy or program. Any foreign currency risk would be primarily
associated with our investments in our non-U.S. subsidiaries. This risk is
mitigated by our intention to leave the investments in place rather than
repatriating them.

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<PAGE>
QUARTERLY RESULTS OF OPERATIONS

The following table sets forth unaudited quarterly financial data for the
periods indicated. We obtained this information from unaudited quarterly
consolidated financial statements which, in our opinion, include all adjustments
(consisting of normal recurring adjustments) necessary to present fairly the
financial results for the periods. Results of operations for any previous
quarters do not necessarily indicate results that may be achieved in any future
period.

<TABLE>
<CAPTION>
QUARTERS ENDED
---------------------------------------------------------------------------------------------------
SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30, DEC. 31, MAR. 31, JUNE 30, SEPT. 30,
1997 1997 1998 1998 1998 1998 1999 1999 1999
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS
DATA:
Fees........................ $125,553 $127,717 $124,558 $134,832 $133,985 $140,358 $135,573 $146,944 $146,323
Cost of providing services:
Salaries and benefits..... 64,207 65,460 70,293 68,651 76,398 72,470 70,977 79,080 79,803
SIBP...................... -- -- -- -- 2,100 5,500 6,900 8,100 6,000
Non-recurring compensation
charge related to
formula book value
change.................. -- -- -- 69,906 -- -- -- -- --
Occupancy and
communications.......... 15,219 15,588 15,422 15,832 14,521 15,433 16,412 16,549 14,742
Professional and
subcontracted
services................ 11,177 14,896 11,626 12,208 8,714 13,338 11,573 14,238 9,796
Other..................... 7,000 7,624 6,666 5,489 2,846 8,740 9,303 8,864 7,274
-------- -------- -------- -------- -------- -------- -------- -------- --------
97,603 103,568 104,007 172,086 104,579 115,481 115,165 126,831 117,615
General & administrative
expenses.................. 10,378 13,330 12,849 15,202 11,160 16,692 14,194 14,532 13,178
Depreciation &
amortization.............. 4,687 4,534 5,576 10,197 3,853 3,971 3,996 3,428 4,907
-------- -------- -------- -------- -------- -------- -------- -------- --------
112,668 121,432 122,432 197,485 119,592 136,144 133,355 144,791 135,700
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss) from
operations................ 12,885 6,285 2,126 (62,653) 14,393 4,214 2,218 2,153 10,623
Other:
Interest income........... 249 237 119 296 124 404 127 289 1,036
Interest expense.......... (409) (1,017) (1,168) (174) (553) (1,168) (473) (452) (390)
Income (loss) from
affiliates................ (99) 95 (215) 477 160 865 583 916 988
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before income
taxes and minority
interest.................. 12,626 5,600 862 (62,054) 14,124 4,315 2,455 2,906 12,257
Income taxes................ 5,811 2,672 470 4,181 6,830 2,087 1,530 1,001 5,919
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss) before
minority interest......... 6,815 2,928 392 (66,235) 7,294 2,228 925 1,905 6,338
Minority interest........... (44) (97) 86 (57) -- (85) 54 (186) 18
-------- -------- -------- -------- -------- -------- -------- -------- --------
Income (loss) from
continuing operations..... 6,771 2,831 478 (66,292) 7,294 2,143 979 1,719 6,356
Discontinued operations,
net....................... (1,630) (3,808) (73,316) 8,848 -- 8,678 -- -- --
-------- -------- -------- -------- -------- -------- -------- -------- --------
Net income (loss)........... $ 5,141 $ (977) $(72,838) $(57,444) $ 7,294 $ 10,821 $ 979 $ 1,719 $ 6,356
======== ======== ======== ======== ======== ======== ======== ======== ========
Earnings (loss) per share,
continuing operations,
basic and fully diluted... $ 0.38 $ 0.16 $ 0.03 $ (4.10) $ 0.47 $ 0.15 $ 0.07 $ 0.11 $ 0.41
Earnings (loss) per share,
basic and fully diluted... $ 0.29 $ (0.06) $ (4.30) $ (3.55) $ 0.47 $ 0.74 $ 0.07 $ 0.11 $ 0.41
</TABLE>

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<PAGE>
YEAR 2000 ISSUE

We have substantially completed a program to address the Year 2000 issue as
it affects our business and we believe that the Year 2000 issue is not likely to
have a material adverse effect on our business, results of operations, or
financial condition. Nevertheless, since the effects of the Year 2000 issue are
likely to be unpredictable, we do not expect that our Year 2000 compliance
program will eliminate all risk to us associated with the Year 2000 issue.

We believe that the most significant risk facing us in connection with the
Year 2000 issue relates to software provided by us for use by, or on behalf of,
our clients. This software has been provided principally by the HR Technologies
Group (including benefit administration software and call center services) and
the retirement practice (principally spreadsheet-based benefit calculators). The
risks presented include the possibility of errors or contractual liability
caused by non-compliant software that is not identified or corrected and the
costs of replacing or repairing client systems. Testing and remediation have
been completed on approximately 80% of such systems. Virtually all of the
systems not yet repaired are used to support open enrollment in benefits plans
and any required Year 2000 remediation will be performed as a part of
modifications to such systems before they are next used.

Our cost to address Year 2000 compliance issues exceeded $4.0 million for
fiscal year 1999. Our principal expenditures were for repair and testing of
internal and client software, costs associated with our Year 2000 compliance
program and costs of outside consultants. We expect that our costs for Year 2000
compliance will be lower in fiscal year 2000. Funds for costs associated with
our Year 2000 compliance efforts will come from operating cash flows for all
areas of our operations and will be expensed as incurred.

50
<PAGE>
BUSINESS

INTRODUCTION

Founded in 1946, Watson Wyatt & Company is one of the world's leading human
capital consulting firms. We help our clients enhance their business performance
by improving their ability to attract, retain and motivate qualified employees.
As leading economies worldwide become more services oriented, human capital has
become increasingly important to companies and organizations. The heightened
competition for skilled employees, unprecedented changes in workforce
demographics and rising employee-related costs have increased the importance of
effective human capital management. We help our clients address these issues by
combining our expertise in human capital management with web-based technologies
in order to improve the design and implementation of various human resources, or
HR, programs, including compensation, retirement and healthcare plans.

The Internet is dramatically accelerating the transition of human capital
management to a more strategic role within organizations. Through the use of
web-based technologies, we help our clients transform the way they implement and
deliver HR programs and improve communications with their employees. We help our
clients develop electronic networks that provide employees and managers with
greater access to their HR programs, allowing them to obtain HR-related
information and perform HR-related functions 24 hours a day, 7 days a week. We
refer to this electronic-based approach as eHR.-TM-

The rapid expansion of our eHR-TM- services is a natural outgrowth of our
longstanding leadership in employee benefits and human capital consulting. We
design, develop and implement HR solutions through the following three closely
interrelated practice areas:

BENEFITS CONSULTING GROUP

- Retirement plans, including pension and 401(k) plans

- Healthcare, disability and other group benefits plans

- Actuarial services

- Investment consulting services to pension plans

HR TECHNOLOGIES GROUP

- eHR-TM- solutions

- Integrated HR delivery channels

- Employee self-service applications

- HR call center solutions

- Benefit administration systems and retirement planning tools

HUMAN CAPITAL GROUP

- Strategies to align workforces with business objectives

- Strategies for attracting, retaining and motivating employees

- Organizational effectiveness services

- Compensation plans, including executive compensation and stock option
programs

Our clients include many Global 2000 corporations as well as emerging growth
companies, public institutions and non-profit organizations. During the past two
years, we have provided services to over 70% of the Fortune 100. Our clients
include Apple Computer, Cisco Systems, General Electric Company, General Motors,
IBM and Lockheed Martin Corporation. Many of our client relationships have
existed continuously over several decades.

We believe that our extensive history, global presence, dedication to
long-term client relationships and recognized reputation for quality and
innovation provide us with significant competitive advantages. Our strategy is
distinguished by our exclusive focus on delivering value-added consulting
services that help our clients anticipate, identify and capitalize on emerging
opportunities in human capital management. We implement this strategy through
over 3,800 associates in 60 offices located in 18

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<PAGE>
countries. We generated approximately $570 million in revenues during the twelve
months ended September 30, 1999.

Watson Wyatt & Company markets its services through a global alliance, more
fully described in this proxy statement/prospectus under "Corporate
Information--Watson Wyatt Worldwide Alliance," with Watson Wyatt Partners
(formerly R. Watson & Sons), a private partnership organized in the United
Kingdom. The Watson Wyatt Worldwide global alliance maintains 86 offices in 31
countries and employs over 5,500 employees. Watson Wyatt & Company operates 60
offices in 18 countries in North America, Latin America and Asia-Pacific. Watson
Wyatt Partners operates 12 offices in the United Kingdom, Ireland, Africa and
the Caribbean. The alliance operates 14 offices in 9 continental European
countries principally through a jointly owned holding company, Watson Wyatt
(Holdings) Europe Limited, which is 25% owned by us and 75% owned by Watson
Wyatt Partners.

HUMAN RESOURCES CONSULTING INDUSTRY

OVERVIEW

The growing demand for employee benefits and human capital consulting
services is directly related to the size, complexity and rapid changes
associated with human resources programs. Employee salary and benefits costs
represent one of the most significant components of worldwide corporate
spending. In the U.S. alone, companies spend over $5 trillion annually on the
direct costs of human capital such as compensation and benefits. In 1998, U.S.
employers contributed over $120 billion to pension and profit sharing plans, and
the assets of U.S. retirement plans exceeded $8 trillion.

Employers, regardless of geography or industry, are facing unprecedented
challenges involving the management of their people. Changing technology,
critical skill shortages, and an aging population in many developed countries
have increased competition for talented employees. At the same time, employees'
expectations relating to compensation, benefits and other HR services are
growing. Employers must address these challenges effectively in order to remain
competitive.

Our industry is comprised of major HR consulting firms, such as Watson Wyatt
Worldwide, William M. Mercer, Towers Perrin and Hewitt Associates. In addition
to these firms, the industry includes smaller benefits and compensation firms
and the HR consulting divisions of diversified professional service firms, such
as the Big 5 accounting firms, Andersen Consulting, EDS, and Booz-Allen &
Hamilton. The global HR consulting industry is highly fragmented. There are
approximately 950 firms providing HR-related consulting services, with the four
major HR consulting firms accounting for approximately 40% of total industry
revenue.

INDUSTRY TRENDS

We believe that we are in a position to capitalize on a number of favorable
trends that will contribute to the growth of the HR consulting industry,
including:

GROWING STRATEGIC IMPORTANCE OF HUMAN CAPITAL

In today's knowledge-based economy, businesses are increasingly recognizing
that the effective management of human capital contributes to increased
shareholder value. As a result, companies are increasingly looking to HR
consulting firms to help them align their human capital programs with their
business strategies.

TECHNOLOGY REVOLUTION IN HR PROGRAMS

The Internet, corporate intranets and other e-business tools enable
companies to deliver HR information and services to employees more efficiently
and effectively than ever before. Many companies are moving to what we call an
eHR-TM- model that uses technology to produce more flexible

52
<PAGE>
and employee-friendly solutions such as online benefits enrollment. Companies
increasingly are looking to firms with expertise in human capital and
information technology to transform their HR processes.

CHANGING WORKFORCE DEMOGRAPHICS

As human capital becomes more important to business success, companies in
many developed countries today are faced with a critical shortage of talented
employees and an unprecedented aging of the workforce. These trends, along with
the changing mobility and needs of workers, are prompting companies to engage
experienced human capital consulting firms to redesign employee compensation and
benefits plans and to fundamentally rethink their workforce strategies so that
they can effectively attract and retain employees.

GROWING IMPORTANCE OF EMPLOYER-SPONSORED BENEFITS PROGRAMS

Assets in retirement plans are growing rapidly, and the need for effective
management of these plans--in terms of structuring benefits, managing
liabilities and maximizing the plans' value in attracting and retaining
employees--has never been greater. The combined effect of limited retirement
savings of baby boom employees, concerns regarding the continuing viability of
government-sponsored retirement and healthcare programs, and rising healthcare
costs increases the importance of benefits programs to both employers and
employees.

RECORD LEVEL OF MERGERS AND ACQUISITIONS

Mergers and acquisitions throughout the world are occurring at unprecedented
rates, prompting the need to combine corporate cultures and human resources
programs quickly and effectively. Mergers and acquisitions are becoming
increasingly complex and cross-border. It is frequently noted that when business
combinations fail, it is often due to inadequate integration of human resources.
As a result, companies are expected to increasingly use human capital
consultants to assist them with pre-merger planning and post-merger integration.

CONTINUING GLOBALIZATION OF ECONOMIES

As business becomes more global, corporations are seeking human capital
consultants with global resources and local expertise on benefits and human
resources issues. These companies are looking to HR consulting firms to help
them develop and implement global benefits and HR policies and establish
consistency in worldwide reporting and quality control.

COMPLEX AND CHANGING REGULATORY ENVIRONMENT

Employee benefits programs in most industrialized countries are subject to
complex government regulations. These regulations change as governments address
social and economic policy issues and as private employers implement changes in
plan designs. Employers throughout the world are increasingly seeking human
capital consultants to assist them with plan design, compliance and regulatory
advice.

COMPETITIVE STRENGTHS

Unlike other consulting firms that have large benefits administration
operations or unrelated consulting practice lines, we focus exclusively on
providing human capital consulting services. We believe that our competitive
strengths include:

REPUTATION FOR QUALITY

We are recognized as one of the world's highest quality consulting firms.
For example, in a recent independent study conducted by THE WALL STREET JOURNAL
of its subscribers, we placed first in the consulting industry in terms of
delivering value to clients and first among our human resources consulting peers
for overall quality of reputation.

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<PAGE>
LONG-STANDING RELATIONSHIPS WITH BLUE-CHIP CLIENTS

We have built long-term relationships with many of the world's most
prestigious corporations. In many cases these relationships have existed
continuously for several decades. During the past two years, we have provided
consulting services to over 70% of the Fortune 100, and we provide the actuarial
consulting services for the three largest corporate defined benefits pension
plans in the United States.

INNOVATIVE TECHNOLOGY-BASED SOLUTIONS

We helped pioneer the use of the Internet to improve employers' delivery of,
and employees' access to, HR information. Using our eHR-TM- approach, we design
systems for clients that enable them to offer cost-effective employee service
delivery solutions such as web-based self-service and call centers. Over the
past decade, we have invested extensively in proprietary technology to develop
solutions to our clients' human resources needs.

GLOBAL REACH AND SCALE

We believe that our global presence through the Watson Wyatt Worldwide
alliance is among the most extensive in the human capital consulting business,
spanning 86 offices in 31 countries. We have a strong presence in major markets
across the United States, and the Watson Wyatt Worldwide alliance provides us
with significant depth in Europe. In Asia, we have leading positions in several
markets including Hong Kong and Japan. We were the first international human
capital consulting firm to open a wholly-owned operation in China, and we are
building scale in other markets in order to meet the growing demands of our
local and multinational clients.

INDUSTRY-LEADING RESEARCH

Our pioneering research is a core part of our brand identity, account
penetration strategy and consulting process. Our research on changing
demographics in major economies is helping companies prepare for the impact of
these changes on costs, productivity and the ability to attract and retain
talented workers. We operate research and information centers in Bethesda and
Toronto that are staffed with more than 80 economists, analysts and attorneys
who conduct research and inform clients on legislative and regulatory
developments. We also produce proprietary studies and groundbreaking white
papers on topics such as executive pay, healthcare quality and costs, integrated
disability management, employee communications and workplace attitudes.

HIGHLY EDUCATED AND ACCREDITED CONSULTING STAFF

Watson Wyatt consultants are trusted advisors and experts in their fields.
Our consultants include over 400 accredited actuaries, as well as professionals
with M.B.A.s, Ph.D.s and law degrees. Our consultants frequently testify before
government and regulatory agencies, are regularly quoted in the business press
and have authored leading HR-related books. Recent books by our consultants
include THE REAL DEAL: THE HISTORY AND FUTURE OF SOCIAL SECURITY, HEALTH OF
NATIONS: AN INTERNATIONAL PERSPECTIVE ON U.S. HEALTH CARE REFORM, THE COMPLETE
GUIDE TO MERGERS & ACQUISITIONS, HEALTHCARE.COM: RX FOR REFORM, CEO PAY AND
SHAREHOLDER VALUE, and FUNDAMENTALS OF PRIVATE PENSIONS.

GROWTH STRATEGY

In an environment that is characterized by changing workforce demographics,
rapid advances in technology and growing recognition of the importance of human
capital, our strategy is to expand our competitive position by providing
comprehensive, value-added human capital consulting services that help our
clients solve their human capital challenges. We plan to pursue growth by:

EXPANDING OUR RELATIONSHIPS WITH EXISTING CLIENTS

We believe there is significant opportunity to increase our share of our
clients' consulting expenditures by leveraging our recurring engagements. We
utilize dedicated account managers to

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identify and refer additional consulting opportunities, and we believe that our
ability to provide integrated services will enable us to secure additional
business from our existing client base.

CREATING INNOVATIVE EHR-TM- SOLUTIONS

Our clients are increasingly demanding integrated, flexible approaches to
provide HR benefits information and access to their employees 24 hours per day,
7 days per week. With our expertise in human capital consulting and information
technology, including web-based applications, we are well positioned to develop
innovative and integrated solutions to meet these client needs.

LEVERAGING OUR GLOBAL CAPABILITIES

Multinational corporations increasingly require a total services capability,
regardless of where they operate. By drawing upon our global resources and local
execution capabilities, we are well positioned to serve our clients' growing
needs for integrated human resources services throughout the world.

DEVELOPING NEW CLIENT RELATIONSHIPS

Our recognized brand name and global reputation for quality service, leading
research and innovation enable us to promote our consulting services effectively
to new clients. We also believe that there are significant opportunities to
develop new relationships by proposing innovative, high-value projects, such as
our eHR-TM- solutions, to corporations and other major employers.

PURSUING STRATEGIC ACQUISITIONS

We will continue to explore strategic opportunities to expand our human
capital consulting capabilities or to expand geographically. Our recent
acquisition of selected units of KPMG's benefits consulting business provided us
with additional senior consultants in New York, Boston, Dallas and Cleveland, as
well as additional Fortune 500 clients.

PROMOTING OUR ENTREPRENEURIAL CULTURE

We seek associates who strive to be innovators and to add value to their
clients' businesses through effective human capital programs and technologies.
Our training and compensation programs are aimed toward developing in our
consultants the specialized skills to advance our clients' interests.

CONSULTING SERVICES

We focus our consulting services into three practice groups: Benefits
Consulting, HR Technologies and Human Capital.

BENEFITS CONSULTING GROUP

Our Benefits Consulting Group is our largest and most established practice,
with a franchise dating to 1946. This group consists of over 1,600 consultants
and works with clients to create cost-effective benefits programs that help
attract, retain and motivate a talented workforce. We strive to provide tailored
benefits programs for our clients, and we base our recommendations on extensive
research. Our Benefits Consulting Group, which consists of Retirement
Consulting, Investment Consulting, and Group & Health Care Consulting, accounted
for approximately 66% of our North American consulting revenue in fiscal year
1999.

RETIREMENT CONSULTING

We are one of the world's most respected advisers on retirement plans, and
we provide actuarial and consulting services for large defined benefit ("DB")
and defined contribution ("DC") retirement plans. Our consultants work with
clients to provide realistic assessments of the impact that the change

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in workforce demographics will have on their retirement plans, corporate cash
flow requirements, and retiree benefits adequacy and security.

In North America, and increasingly throughout much of the developed world,
retirement security is provided through funded pension plans, most of which are
either DB or DC plans. A typical DB plan is characterized by employer
contributions and a specified future benefit to the employee. These plans
typically involve large asset pools, complex calculations to determine employer
costs and funding requirements and sophisticated analysis to match liabilities
and assets over long periods of time. These plans are commonly referred to as
pension plans. A typical DC retirement plan is characterized by employee
contributions, possible employer matching contributions and an unspecified
future benefit paid to the employee which will ultimately be based on investment
returns. In the United States, the most common example of a DC plan is a 401(k)
plan.

Our target market for DB plans consists of plans with more than 1,000
participants. Our consultants provide actuarial services to many of the world's
largest retirement plans, including the three largest corporate-sponsored DB
plans in the United States. Our DB services include:

<TABLE>
<S> <C>
- STRATEGIC PLAN DESIGN - FINANCIAL REPORTING

- ACTUARIAL SERVICES - VALUATION AND DIAGNOSTIC SOFTWARE AND SYSTEMS

- FUNDING RECOMMENDATIONS - ASSISTANCE WITH MERGING, DIVESTING AND ACQUIRING
PLANS

- MULTINATIONAL ASSET POOLING CONSULTING
</TABLE>

We also represent major corporations in designing and implementing DC plans,
especially 401(k) plans in the United States. We assist clients with the
selection of asset managers and administrators and in communicating with their
employees concerning enrollment, plan provisions and investment alternatives.

In both the DB and DC areas, we emphasize research-based consulting to
design innovative retirement programs that align our clients' workforces with
their business strategies. We believe that we have been at the forefront of
innovation in the retirement consulting industry. We have introduced innovations
such as:

- PENSION EQUITY PLAN---an alternative retirement plan that combines the
lump sum portability of DC and cash balance plans desired by younger
workers with a benefits formula based on the final few years of earnings,
providing benefits security typical to a traditional DB plan that older
and long-service employees seek;

- FLEX PENSION PLUS-TM---a tax-effective Canadian supplemental retirement
plan for attracting and retaining key employees;

- PREPARE!-TM---a web-based tool that enables employees to model different
savings and retirement income scenarios;

- WATSON WYATT 401(K) VALUE INDEX-TM---a tool that looks beyond cost to
identify the total value that employers and their employees derive from
their 401(k) plans;

- PHASED RETIREMENT PROGRAMS--a combination of programs that help clients
attract and retain older workers by enabling them to balance work/life
needs through a gradual transition to retirement;

- CLIENTSITE-TM---a relationship management tool that allows web-based
communication between our clients and associates that can be updated
globally and instantaneously; and

- ELECTRONIC ACTUARY/ELECTRA-TM---a tool that performs immediate "what if"
scenarios so that different plan designs can be modeled and priced
interactively with clients.

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To support our retirement consulting services, we invest heavily in
state-of-the-art technology, software, and systems to ensure seamless
consistency and efficiency of service delivery in all our offices worldwide,
which we believe provide us with a source of considerable competitive advantage.
We also maintain extensive proprietary databases, COMPARISON-TM- and
BenTRACK,-TM- that enable our clients to track and benchmark benefits plan
provisions in the United States and throughout the world, respectively.

INVESTMENT CONSULTING

Together with our retirement consulting services, we offer investment
consulting services that help private and public sector clients throughout the
world maximize the return on their retirement plan assets, develop governance
policies and strategies, and design investment structures to successfully manage
financial liabilities within the context of their overall business objectives.
Our services include:

- asset/liability modeling and asset allocation studies;

- governance and investment policy development;

- investment structure analysis;

- investment manager selection and evaluation; and

- performance evaluation and monitoring.

GROUP AND HEALTH CARE CONSULTING

Health care premiums paid by US. employers are rising annually at
approximately 10%. In this environment, we help our clients with the design,
financing, administration and communication of medical, disability and other
group benefits plans. Clients seek our services to assist them in an environment
that is characterized by escalating costs, employee dissatisfaction with health
care programs and multiple vendor relationships. Our primary objective is to
establish a link between each element of an employers' benefits programs and its
desired cost, employee satisfaction and productivity goals. Our services
include:

- plan design;

- actuarial services;

- vendor management services;

- on- and off-shore funding analysis;

- benefits pricing;

- assistance with plan changes relating to mergers, acquisitions and
divestitures; and

- integrated disability management.

Our approach to group benefits consulting is research-based and makes use of
sophisticated consulting tools such as:

- PREVIEW-TM---a medical benefits modeling system which accurately and
quickly models medical claims under alternative plan designs, covered
populations and managed care delivery systems;

- HEALTH PLAN VALUE LIBRARY-TM---software tools and a database of
information on the cost, quality and accessibility of health plans that
are used to screen and evaluate health plans; and

- AUTO-RFP-TM---a powerful software application that organizes and eases the
administrative process of gathering and evaluating RFP responses from
health care vendors.

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<PAGE>
HR TECHNOLOGIES GROUP

Our HR Technologies Group helps clients select and implement technologies
that enhance the delivery of benefits and related information to employees. Our
HR Technologies Group consists of approximately 350 consultants and represented
approximately 14% of our North American consulting revenue in fiscal year 1999.

As human resources programs become more complex and important for recruiting
and retaining employees, organizations are seeking flexible, adaptable and
cost-effective solutions for providing benefits information access to their
employees. To address these challenges, we are uniquely positioned to provide
our clients with eHR-TM- solutions, which are a network of integrated HR-related
data, tools and transactions. We help organizations that have adopted Internet
applications for external business strategies to employ similar advanced
technologies for internal applications such as HR. Our services include
assisting clients to implement employee self-service solutions, retirement plan
administration systems, benefits enrollment, training programs, time and
attendance systems and applicant tracking systems.

Using our proprietary consulting methodology of "Discover, Invent and
Deliver," our consultants work with clients to evaluate existing HR
infrastructure and business strategy, identify the best sources of people,
process and technology, and design and implement tailored solutions. These
solutions frequently involve the development of web-based employee self-service
applications, the implementation of interactive call centers and the integration
of existing legacy systems. We also offer hosting services for companies who
prefer to access applications from our servers rather than host on their own
intranets. In addition, we deliver state-of-the-art solutions in health and
welfare enrollment, pension administration, compensation planning and retirement
planning.

HUMAN CAPITAL GROUP

Our Human Capital Group, which consists of over 300 consultants, helps
clients achieve competitive advantage by aligning their workforce with their
business strategy. This includes helping clients develop and implement
strategies for attracting, retaining and motivating their employees to maximize
the return on their investment in human capital. Our Human Capital Group
represented approximately 9% of our North American consulting revenue in fiscal
year 1999. Our Human Capital Group focuses in three principal areas:

STRATEGIC REWARDS

We help align an organization's rewards--including compensation, stock
programs, incentives, recognition programs and flexible work arrangements--with
its business strategies, cultural values, work design and human resources
strategy. We work together with our Benefits Consulting Group to develop optimal
total compensation solutions for our clients.

ORGANIZATION EFFECTIVENESS

We help clients build high-performance organizations by working with them to
clarify and implement business strategy, recognizing the impact of employee
attitudes and commitment, as well as effective team and leadership development,
on business success. We provide a wide array of organization diagnostic
services--employee and customer surveys, human capital audits and cultural
assessments--as well as leadership development services that include assessment,
coaching, workshops and team building. We also provide process management
services to help organizations achieve their desired vision, strategy and
culture.

EXECUTIVE COMPENSATION

We counsel executives and boards of directors on executive pay programs,
including cash compensation, stock options and stock purchase plans, and on ways
to align pay-for-performance plans throughout the organization in order to
increase shareholder value.

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We believe that we are recognized as innovators in the area of human capital
consulting and have introduced such innovations such as the WATSON WYATT HUMAN
CAPITAL INDEX,-TM- a proprietary tool for demonstrating the relationship between
the effectiveness of an organization's human capital practices and the creation
of superior shareholder returns. In support of our human capital consulting we
also maintain databases of employee attitudes for client organization
comparison. Our WorkUSA-Registered Trademark-/WorkCanada-TM- database is
regarded as the most up-to-date survey in existence on the attitudes of North
American workers. Through our People Management Resources division, we also
provide an online best practices database of more than 300 in-depth case studies
covering key people practices, such as culture development, staffing and
selection, leadership development, and employee communication.

OTHER CONSULTING SERVICES

While we focus our consulting services in the three areas described above,
one of our primary strengths is our ability to draw upon consultants from our
different practices to deliver integrated services to meet the needs of our
clients. Examples include:

MERGER & ACQUISITION SERVICES

Recognizing that many business combinations fail because of "people
problems," we help clients achieve better transactional success by assisting
with faster integration, cost containment, increased customer focus and greater
productivity. We assemble multi-disciplinary teams to provide key services that
include due diligence of pension and benefits plans, company cultures and human
resources strategies; integration of human resources processes and practices;
and enterprise-wide project management.

EMPLOYEE COMMUNICATIONS CONSULTING

We also have one of the leading communications consulting groups in the
human resources consulting industry--a team that has won numerous awards for
innovative and effective communications. Our consultants combine strong creative
skills with technical excellence on human resources issues and solid research on
employee attitudes and communication effectiveness. We conduct communications
audits, research and focus groups, and provide communications planning and
implementation. In addition, our consultants assist employers in complying with
disclosure requirements.

WATSON WYATT DATA SERVICES

Watson Wyatt Data Services is a leading provider of global compensation,
benefits and employment practices information recognized as the industry
standard and often studied and cited by many of our clients and competitors. In
the United States, we publish and market the most extensive library of reports
on human resources issues, and more than 5,000 organizations participate in one
or more of our annual surveys. Our databases contain compensation information
for more than one million employees in virtually every industry sector and major
metropolitan area. Outside of the United States, our worldwide alliance offers
more than 70 remuneration, benefits and employment practice references guides,
covering more than 50 countries and 6 continents. In addition to our annual
survey references, we also offer many reference works intended to assist
practitioners in creating or maintaining programs in a variety of subject areas
such as variable pay, performance management, and personnel policies.

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<PAGE>
REPRESENTATIVE CLIENT SOLUTIONS

Some recent examples of our work with clients are described below:

EHR-TM- RE-ENGINEERING

- ENGAGEMENT: Assist a global oil field services company on a five-year,
multi-phased approach to transform a traditional personnel department into
a comprehensive eHR-TM- business unit.

- CHALLENGE: Our client's personnel function in North America was hindered
by decentralized administration practices, different benefits and payroll
systems for each product line and location, manual procedures for
processing benefits and services, and limited use of technology in
delivering services to employees. As a result, personnel managers and
employees expended significant time and effort contacting benefits
managers and obtaining benefits data, retirement and loan projections, and
performing benefits related transactions.

- APPROACH: We formulated a strategy to develop web-based, employee
self-service systems to deliver HR services, transactions, and
communications via desktop computers and kiosks.

- RESULTS: Our client successfully migrated 98% of its U.S. employees to
web-based benefits enrollment. Today, 16,000 U.S. employees have
self-service access to real-time data, records, and transactions on their
profit sharing plan, pension and 401(k) plans. Through this system
employees can access daily account balances, model loans, and estimate
retirement income. This system also provides for health & welfare
enrollment, administration, and plan documentation. Additional launches
are planned to expand the eHR-TM- solution to regions outside North
America.

RETIREMENT PLAN REDESIGN

- ENGAGEMENT: Help a major natural resources company to design and implement
a new pension plan.

- CHALLENGE: Our client's retirement benefits program, designed in the 1950s
for its workforce at that time, encouraged longevity of service and
granted generous pensions. However, the program became increasingly
unpopular with employees because many had joined the company in
mid-career, and many others chose to leave the company before retirement
age.

- APPROACH: We designed a customized Pension Equity Plan ("PEP"), which
provides a similar level of benefits as the old plan but provides better
rewards to high performers, especially those in mid-career. To protect
employees who had planned their retirement based on the existing program,
we developed an innovative transition plan.

- RESULTS: At no additional cost, the PEP has helped the client attract and
retain more mid-career, high-performing employees while continuing to meet
the expectations of its long-term employees.

MERGER & ACQUISITION INTEGRATION AND DUE DILIGENCE

- ENGAGEMENT: Assist a global industrial company to complete cultural,
benefits and human capital due diligence on several target companies in
Asia-Pacific, including an evaluation of the future financial obligations
of the target's benefits plans, staff retention challenges, and ongoing
employee communications needs.

- CHALLENGE: Our client faced several key issues in evaluating potential
acquisitions, including staff retention, pension liabilities arising from
unfunded pension plans, transformation of the organizational cultures, and
the lack of uniform HR processes and systems.

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<PAGE>
- APPROACH: We conducted a post-transaction audit and review of the
competitiveness of the target companies' compensation and benefits
programs. We then identified position requirements, matched employees
having the desired backgrounds, defined job classifications and developed
salary structures that were consistent with our client's existing system.
We also developed comprehensive communication plans and materials and
designed cross-cultural training for expatriates.

- RESULTS: In addition to assuring a positive reception by the target
companies' employees, we limited potential liabilities, installed formal
HR programs and systems, and maintained compensation and benefits levels
during the ongoing review.

INTEGRATED DISABILITY MANAGEMENT

- ENGAGEMENT: Assist a major manufacturer to design and implement a more
flexible and comprehensive disability management program.

- CHALLENGE: Our client regularly had difficulty fulfilling customers orders
at year end. Our client employed a "just-in-time" inventory system, and
required a full staff to fill its orders, but seemed to suffer from
chronic shortages of product supply. However, an apparent production issue
was determined to be a benefits design issue. The design and reporting
system of the company's paid time off and disability programs were
encouraging employees to take time off at the end of the year.

- APPROACH: After benchmarking other firms in our client's industry, we
devised a more competitive plan design, established a tracking system for
data collection and identified best practices for better connecting all
components of the paid time-off program. We also installed a new data
collection system with the ability to track workplace absences for faster
and more efficient resolution.

- RESULTS: The first year of implementation resulted in total savings of
$800,000. A year later, our client acquired two manufacturing companies.
With the best practice processes already in place, the merging of the
three programs went smoothly, and as a result, our client reported savings
of approximately $11 million in direct and indirect costs.

RETIREMENT PLAN ADMINISTRATION

- ENGAGEMENT: Assist a Fortune 500 company whose pension administration
outsourcing provider was exiting the business.

- CHALLENGE: Our client needed to assess the options of entering into
another outsourcing agreement or moving the pension administration
function to their North American HR service center. After evaluating
alternatives, our client selected a blended solution, leveraging their own
internal call center resources with our expertise in pension technology.

- APPROACH: We designed and built a retirement benefits administration
system that is an integral part of the client's North American HR service
center. The system is located at our site and accessed by the
organization's service center representatives. Employees can also access
the system for numerous self-service functions, including retirement plan
modeling.

- RESULTS: The new "e-business" delivery model has off-loaded a significant
amount of work from benefits administrative staff. The perception of our
client's HR department's role in the organization was also enhanced. The
new system rollout was highly successful, achieving a customer
satisfaction rating of well over 90%.

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SALES AND MARKETING

Our growth strategy starts with ensuring the satisfaction of current clients
through our Account Management program. A key element of this program is an
approach we call CLIENTFIRST.-TM- Using proprietary processes and tools, we work
with clients to define their needs and expectations before an engagement begins
and then continually measure our performance according to the agreed upon
standards. We have approximately 125 Account Managers who focus on ensuring our
clients' satisfaction with current services and on expanding our relationships
across service lines, geographic boundaries and divisions within client
companies.

We also pursue new clients using cross-disciplinary teams of consultants as
well as dedicated business developers to initiate relationships with carefully
selected companies. Our client expansion and new client acquisition efforts are
supported by market research, comprehensive sales training programs, and
extensive marketing databases.

Our sales efforts are also supported by a full array of marketing programs
designed to raise awareness of the Watson Wyatt Worldwide brand and our
reputation within our target markets. These programs promote our thought
leadership on key human resources issues and establish us as the leading human
capital consulting firm to Global 2000 companies.

CLIENTS

We work with major corporations--including over 70% of the Fortune 100 in
the past two years--leading emerging growth companies, government agencies and
not-for-profit institutions in North America, Latin America and Asia-Pacific
across a wide variety of industries. Our client base is broad and geographically
diverse. In fiscal year 1999, our ten largest clients accounted for
approximately 12% of our consolidated revenues and no individual client
represented more than 3% of our consolidated revenues. Representative clients
include:

<TABLE>
<S> <C>
Asea Brown Boveri (ABB) IBM
Apple Computer ICI Americas
Broken Hill Proprietary (BHP) Ingersoll-Rand
Canada Post Jardine Matheson Group
Cisco Systems Mass Transit Railway Corporation (Hong Kong)
General Electric Company Lockheed Martin Corporation
General Motors San Miguel Corporation
</TABLE>

COMPETITION

The human capital consulting business is highly competitive. Although we
believe that there are several barriers to entry, such as the need to assemble
specialized intellectual capital to provide expertise on a global scale, and
that we have developed significant competitive advantages in providing human
resources consulting services, we face intense competition from several
difference sources.

Our current and anticipated competitors include:

- major human resources consulting firms, such as William M. Mercer and
Towers Perrin and the administration/consulting firm Hewitt Associates;

- smaller benefits and compensation consulting firms, such as Buck
Consultants, The Segal Company and Hay Group;

- the human resources consulting practices of public accounting and
consulting firms, such as PricewaterhouseCoopers and Booz, Allen &
Hamilton;

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- information technology consulting firms, such as Andersen Consulting and
Internet/intranet development firms; and

- boutique consulting firms comprised primarily of professionals formerly
associated with the firms mentioned above.

The market for our services is subject to change as a result of regulatory,
legislative, competitive and technological developments and to increased
competition from established and new competitors. We believe that the primary
determinants of selecting a human resources consulting firm include reputation,
ability to provide measurable increases to shareholder value, global scale,
service quality, and the ability to tailor services to a clients' unique needs.
We believe that we compete favorably with respect to these factors. See "Risk
Factors."

EMPLOYEES

Watson Wyatt & Company employs approximately 3,800 associates. None of our
associates is subject to collective bargaining agreements. We believe relations
with associates are good.

FACILITIES

Our principal executive offices are located at 6707 Democracy Boulevard,
Suite 800, Bethesda, Maryland 20817.

We operate in 60 offices in principal markets throughout the world.
Operations are carried out in leased offices under operating leases that
normally do not exceed 10 years in length. We do not anticipate difficulty in
meeting our space needs at lease expiration or if additional space is required
earlier. We also evaluate office relocation on an ongoing basis to meet changing
needs in our markets while minimizing our occupancy expense.

LEGAL PROCEEDINGS

From time to time, we are a party to various lawsuits, arbitrations or
mediations that arise in the ordinary course of business. These disputes
typically involve claims relating to employment matters or the rendering of
professional services. The four matters summarized below involve the most
significant pending or potential claims against us. We believe, based on
currently available information, that the results of all such proceedings, in
the aggregate, will not have a material adverse effect on our financial
condition, but claims which are possible in our business could be material to
our financial results for a particular period, depending, in part, upon the
operating results for that period. See "Risk Factors."

REGINA, SASKATCHEWAN POLICE. The Administrative Board of the Regina Police
Superannuation and Benefit Plan filed an action against us and three individual
employees in 1994 alleging errors in valuation methods, assumptions and
calculations for the Plan during the course of work provided for the Plan since
the 1970s. Discovery is concluded and the exchange of expert reports is
anticipated during 2000. The Administrative Board seeks approximately
$26 million in damages, plus interest.

CITY OF MILWAUKEE, WISCONSIN. The City of Milwaukee Employees Retirement
Board ("ERB") notified us of a potential claim involving an erroneously
calculated cost of living adjustment that was based on a formula provided by the
staff of the ERB. In response to the notice of claim, we filed a declaratory
judgment action against the City of Milwaukee and the ERB in the U.S. District
Court in Chicago. By mutual consent, the parties agreed to dismiss the claim
with leave to reinstate, pending settlement discussions among other parties.

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CONNECTICUT CARPENTERS PENSION FUND. The Connecticut Carpenters Pension
Fund has filed an action against us claiming errors in valuations from 1991
through 1998 that allegedly resulted in understated liabilities. The plaintiffs
are seeking damages of approximately $45 million. The case is in discovery.

CLAIM AGAINST WATSON WYATT PARTNERS. A law firm representing a client based
in Europe has notified Watson Wyatt Partners, our European alliance partner, of
a claim involving alleged errors in the design of a global employee stock option
plan which may include work performed by present or former subsidiaries of
Watson Wyatt & Company.

We carry substantial professional liability insurance with a self-insured
retention of $1 million per occurrence which provides coverage for professional
liability claims. We also carry employment practices liability insurance.

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MANAGEMENT

DIRECTORS AND EXECUTIVE OFFICERS

The following table sets forth the names, ages and positions of the
directors and executive officers of Watson Wyatt & Company as of the date of
this proxy statement/prospectus, all of whom have assumed, or will assume,
identical positions with Watson Wyatt & Company Holdings:

<TABLE>
<CAPTION>
NAME AGE POSITION
<S> <C> <C>
John J. Haley........................ 50 President, Chief Executive Officer and Director
Walter W. Bardenwerper............... 49 Vice President, General Counsel and Secretary
Thomas W. Barratt.................... 57 Vice President, Regional Manager (U.S. Central) and
Director
Jorge V. Bou......................... 57 Vice President, Regional Manager (Latin America)
Paula A. DeLisle..................... 46 Vice President and Director
David B. Friend, M.D................. 43 Vice President, Regional Manager (U.S. East) and
Director
James A. Gargiulo.................... 40 Vice President, Human Resources
Ira T. Kay........................... 49 Vice President, N. America Practice Director-Human
Capital Group and Director
Brian E. Kennedy..................... 56 Vice President, Regional Manager (Canada) and Director
Eric P. Lofgren...................... 49 Vice President, Global Director-Benefits Consulting
Group and Director
David P. Marini...................... 43 Vice President, Global Director-H.R. Technologies Group
Carl D. Mautz........................ 52 Vice President, Chief Financial Officer
Gail E. McKee........................ 40 Vice President and Director
Kevin L. Meehan...................... 55 Vice President and Director
J.P. Orbeta.......................... 38 Vice President, Global Director-Human Capital Group
Sylvester J. Schieber................ 53 Vice President, Director of Research and Information
John A. Steinbrunner................. 49 Vice President and Director
A. Grahame Stott..................... 45 Vice President, Regional Manager (Asia-Pacific) and
Director
Charles P. Wood, Jr.................. 55 Vice President, Regional Manager (U.S. West) and
Director
John J. Gabarro...................... 60 Director
Robert D. Masding.................... 56 Director
R. Michael McCullough................ 61 Director
</TABLE>

JOHN J. HALEY has served as President and Chief Executive Officer since
January 1, 1999 and as a Director since 1992, and is a member of the Partnership
Board of Watson Wyatt Partners. Mr. Haley joined Watson Wyatt in 1977 and prior
to becoming President and Chief Executive Officer was the Global Director of the
Benefits Consulting Group. Mr. Haley is a Fellow of the Society of Actuaries and
is a co-author oF FUNDAMENTALS OF PRIVATE PENSIONS (University of Pennsylvania
Press). He has an A.B. in Mathematics from Rutgers College and studied under a
Fellowship at the Graduate School of Mathematics at Yale University.

WALTER W. BARDENWERPER has served as Vice President and General Counsel
since joining Watson Wyatt in 1987 and has served as Secretary since 1992.
Mr. Bardenwerper was a Director of Watson Wyatt from 1992 to 1997. He serves as
chairman of the Global Quality Committee of Watson Wyatt Worldwide, and is a
director of Professional Consultants Insurance Company. He has a B.A. in
Economics from the University of Virginia and a J.D. from the University of
Virginia Law School.

THOMAS W. BARRATT has served as Vice President and Regional Manager (U.S.
Central) since 1997 and has served as a Director since 1998. Mr. Barratt
rejoined Watson Wyatt in 1994 after serving as the Managing Consultant of the
Detroit office of Towers Perrin from 1987 through 1993. He began his career with
Watson Wyatt in 1976 and was a consultant with the Company through 1986. He has
a B.B.A. from Western Michigan University and was graduated from Northwestern
University's National Trust School in 1966.

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JORGE V. BOU has served as Vice President since 1999 and Regional Manager
(Latin America) since 1998. Prior to joining Watson Wyatt in 1986, Mr. Bou was a
Vice President with the Martin E. Segal Company and was previously with the
American International Group. He has been providing consulting services to
various clients in Latin America since 1969. Mr. Bou is an Associate of the
Society of Actuaries. He has a B.S. in Mathematics from Georgia State
University.

PAULA A. DELISLE has served as Vice President and as a Director since 1997.
Ms. DeLisle joined Watson Wyatt in 1982 and is the Managing Consultant of our
Hong Kong office. Ms. DeLisle is responsible for Watson Wyatt's China
operations, for the Asia-Pacific operations of Watson Wyatt Data Services, and
is a frequent speaker at international conferences on human resources issues in
the Asia-Pacific region. She is the Vice-Chairman of the American Chamber of
Commerce in Hong Kong and is the Hong Kong representative to the Pacific
Economic Cooperation Council's Human Resources Development Task Force. She has a
B.A. from Saint Mary's College and a Master's degree from Loyola University of
Chicago.

DAVID B. FRIEND, M.D. has served as Vice President and Regional Manager
(U.S. East) since 1997 and has served as a Director since 1997. He formerly was
the Practice Director of Watson Wyatt's Group and Health Care Practice. Prior to
joining Watson Wyatt in 1995, Dr. Friend served on the medical staff at Malden
Hospital in Malden, Massachusetts. Prior to attending medical school,
Dr. Friend was an Executive Vice President with High Voltage Engineering.
Dr. Friend is the author of HEALTHCARE.COM: RX FOR REFORM (St. Lucie Press), and
also serves on the Advisory Board of the Schneider Institute for Health Policy
at Brandeis University. He has an A.B. in Economics from Brandeis University, an
M.D. from the University of Connecticut and an M.B.A. from The Wharton School of
the University of Pennsylvania.

JAMES A. GARGIULO has served as Vice President, Human Resources since 1999.
Mr. Gargiulo has been an Account Manager in the Eastern Region for the past two
years. Prior to joining Watson Wyatt in 1997, he was the Regional Director for
the Compensation practice at Aon Corporation and has held various human
resources positions for Salomon Brothers, The Gap, and Banque Paribas.
Mr. Gargiulo has a B.A. in Business Administration from Bernard Baruch College
in New York.

IRA T. KAY has served as Vice President and North America Practice Director
of the Human Capital Group since 1998 and as a Director since 1996. Prior to
joining Watson Wyatt in 1993, Mr. Kay was a Managing Director and served on the
Partnership Management Committee of The Hay Group and prior to that, he was a
Managing Director in the Human Resources Department of Kidder Peabody. Mr. Kay
is the author of CEO PAY AND SHAREHOLDER VALUE (St. Lucie Press). Mr. Kay has a
B.S. in Industrial and Labor Relations from Cornell University and a Ph.D. in
Economics from Wayne State University.

BRIAN E. KENNEDY has served as Vice President and Regional Manager (Canada)
since 1995 and as a Director since 1996. Prior to joining Watson Wyatt in 1995,
Mr. Kennedy spent 18 years with the Alexander Consulting Group, most recently as
Chairman and Chief Executive Officer of Alexander Clay, their U.K. and European
operations.

ERIC P. LOFGREN has served as Vice President, Global Director--Benefits
Consulting Group and as a Director since 1998. Prior to joining Watson Wyatt in
1989, Mr. Lofgren spent seven years with William M. Mercer and seven years at
Mutual of New York. Mr. Lofgren is a recognized authority in the areas of
retirement plan design, the effects of demographics on benefit systems and asset
liability management. He is widely credited with developing the Pension Equity
Plan (PEP), one of the three primary families of defined benefit pension design.
Mr. Lofgren is a Fellow of the Society of Actuaries, and holds a B.A. in
Mathematics from New College in Sarasota, Florida and studied at the Graduate
School of Logic at the University of California at Berkeley.

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DAVID P. MARINI has served as Vice President since 1998 and Global
Director--HR Technologies Group since 1997. Prior to assuming his current
responsibilities, he led several of the firm's technology projects involving
reengineering administrative client services. Prior to joining Watson Wyatt in
1994, Mr. Marini spent 13 years at CIGNA Corporation, most recently as the
President of the Iowa division of Trilog Inc., a wholly-owned subsidiary, and he
was previously a CPA with Coopers & Lybrand. He has a B.S. in business
administration from Western New England College.

CARL D. MAUTZ has served as Vice President and Chief Financial Officer since
February 1999 and previously served as Controller. Prior to joining Watson Wyatt
in 1997, Mr. Mautz served as the Controller for Tactical Defense Systems, Loral
Corporation, which merged into Lockheed Martin Corporation. From 1990 to 1994,
Mr. Mautz held operating and corporate finance positions at Unisys Corporation
and from 1972 to 1984 was a CPA with KPMG Peat Marwick. Mr. Mautz has a B.S. and
an M.A.S. in accounting from the University of Illinois.

GAIL E. MCKEE has served as Vice President and as a Director since 1997.
Prior to joining Watson Wyatt in 1992, Ms. McKee was with the Walt Disney
Company where she served as the Manager of International Compensation and
Benefits from 1991 to 1992. From 1982 to 1990, she was an Account Manager with
Hewitt Associates in New York and Los Angeles. She has a B.A. from the
University of Washington.

KEVIN L. MEEHAN has served as Vice President since 1994 and as a Director
since 1999. Mr. Meehan joined Watson Wyatt in 1983, and has been instrumental in
developing our flexible benefits operations, our Human Resources Technologies
Group and our Account Management system. Mr. Meehan is a frequent speaker on
employee benefits tax and legal issues, and regularly testifies before the IRS,
the Department of Labor and Committees of Congress on employee benefit plan
issues. Mr. Meehan has a B.A. from the College of the Holy Cross and a J.D. from
St. John's University Law School.

J.P. ORBETA has served as Vice President since 1998 and as Global Practice
Leader--Human Capital Group since 1998. Prior to joining Watson Wyatt in
April 1986, Mr. Orbeta was a faculty member of the Mathematics Department and
director of Computer Education and Services at the Ateneo de Manila University.
Mr. Orbeta is a member and Certified Compensation Professional (CCP) of the
American Compensation Association and is the first practitioner in the
Philippines to have earned this designation. He is a member of the Industrial
Relations Committees of the American Chamber of Commerce of the Philippines, the
Personnel Management Association of the Philippines and is currently the
President of the Compensation Management Society of the Philippines. Mr. Orbeta
has a B.S. in Economics from Ateneo de Manila University in the Philippines.

SYLVESTER J. SCHIEBER has served as Vice President and Director of the
Watson Wyatt Research and Information Center (RIC) since 1983, and as a director
of Watson Wyatt from 1989 to 1996. Mr. Schieber joined Watson Wyatt in 1983 as
Director of RIC, and from 1994-1996, he served on the Advisory Council on Social
Security for the Clinton Administration. He is currently serving a six-year term
on the Social Security Advisory Board, for which he was appointed by the U.S.
Senate Majority Leader. Mr. Schieber has served on the Board of the Pension
Research Council of the Wharton School, University of Pennsylvania since 1985.
He has authored or co-authored four books on retirement issues, including
FUNDAMENTALS OF PRIVATE PENSIONS (University of Pennsylvania Press), THE REAL
DEAL: THE HISTORY AND FUTURE OF SOCIAL SECURITY (Yale University Press, 1999),
and he has co-edited four other volumes on a broad range of human resources
issues. Mr. Schieber is a frequent speaker on pension and Social Security policy
issues throughout the world. He has a Ph.D. in Economics from the University of
Notre Dame.

JOHN A. STEINBRUNNER has served as Vice President since 1996 and a Director
since 1996. Mr. Steinbrunner joined Watson Wyatt in 1974 and was formerly the
Retirement Practice Director of the Benefits Consulting Group. Mr. Steinbrunner
continues to consult with major corporate clients on a

67
<PAGE>
variety of strategic benefits issues. He is a Fellow of the Society of Actuaries
and has an M.S. in Mathematics from Case Western Reserve University.

A. GRAHAME STOTT has served as Vice President since 1995 and Regional
Manager (Asia-Pacific) since 1995 and as a Director since 1995. Mr. Stott joined
Watson Wyatt in 1982 and is a member of the Hang Seng Index Advisory Committee,
a past President of the Actuarial Association of Hong Kong and has been a member
of a number of Hong Kong Government working parties in the areas of Social
Security and pension legislation. Mr. Stott, a Fellow of the Faculty of
Actuaries, has a B.Sc. in Mathematics from the University of Manchester
Institute of Science and Technology.

CHARLES P. WOOD, JR. has served as Vice President and Regional Manager (U.S.
West) since 1998 and as a Director since 1999. Mr. Wood joined Watson Wyatt in
1975 and is a specialist in matters relating to Retirement, Group and Health
Care, and Compensation consulting. Mr. Wood, a Fellow of the Society of
Actuaries and the Casualty Actuarial Society, has a B.S. in Engineering Science
and Mathematics from the U.S. Air Force Academy and an S.M. in Applied
Mathematics from Harvard University.

JOHN J. GABARRO has served as a Director since 1999 and was previously a
director from 1995 to 1998. Mr. Gabarro is the UPS Foundation Professor of Human
Resource Management at the Harvard Business School, where he has taught in
Harvard's M.B.A., Advanced Management, and Owner-President Management Programs.
He has also served as faculty chairman of Harvard's International Senior
Management Program and as chairman of its Organization Behavior and Human
Resource Management faculty. Mr. Gabarro is the author of six books, the most
recent of which include BREAKING THROUGH: THE MAKING OF MINORITY EXECUTIVES IN
CORPORATE AMERICA (Harvard, 1999), MANAGING PEOPLE IN ORGANIZATIONS (Harvard,
1992) and THE DYNAMICS OF TAKING CHARGE (Harvard, 1987), which won the 1988 New
Directions in Leadership Award and was named one of the best business books of
the year by THE WALL STREET JOURNAL. Mr. Gabarro is also a recipient of the 1980
McKinsey Foundation Prize, the 1986 Center for Creative Leadership Distinguished
Scholar Colloquium and the 1988 Johnson Smith and Knisely Award for research on
leadership. Mr. Gabarro has an M.B.A. and a Ph.D. from Harvard University.

ROBERT D. MASDING has served as the Senior Partner of Watson Wyatt Partners,
our global alliance partner, since 1995 and as a Director since 1995 upon the
establishment of the global alliance. He joined the predecessor firm to Watson
Wyatt Partners in 1969 and became a partner in 1972. Mr. Masding is a former
Chairman of the International Association of Consulting Actuaries and is a
member of the Professional Affairs Board of the Institute of Actuaries.
Mr. Masding, a Fellow of the Institute of Actuaries, has an M.A. in Mathematics
from Cambridge University.

R. MICHAEL MCCULLOUGH has served as a Director since 1996. Mr. McCullough is
the retired Chairman of Booz, Allen & Hamilton. He joined Booz, Allen & Hamilton
in 1965 as a consultant, was elected a Partner in the firm in 1971, became
Managing Partner of the firm's Technology Center and was elected to the position
of Chairman in 1984. Mr. McCullough is a member of the Boards of Capital Auto
Real Estate Investment Trust, Charles E. Smith Residential Real Estate Trust,
Host Marriott Services and is Chairman of Ecutel, Inc., a private Internet firm.

BOARD OF DIRECTORS

Watson Wyatt & Company directors have been elected at each annual
stockholders' meeting for a one-year term. Of the 15 seats, 12 are filled by
current employees of Watson Wyatt & Company, two are filled by outside
directors, and one by the Senior Partner of Watson Wyatt Partners, Watson
Wyatt & Company's alliance partner. Under the Watson Wyatt & Company bylaws, an
employee stockholder is qualified to hold a directorship only during the term of
his or her employment.

68
<PAGE>
Under the Watson Wyatt & Company Holdings certificate of incorporation, the
15 directorships are to be divided into three classes. At the next regularly
scheduled stockholders' meeting in 2000, stockholders will elect three classes
of directors. The directorships in the first class will expire as of the
stockholders meeting in 2001 and every three years thereafter, the directorships
in the second class will expire as of the stockholders meeting in 2002 and every
three years thereafter, and the directorships in the third class will expire as
of the stockholders meeting in 2003 and every three years thereafter. Pursuant
to separate agreements to be entered into between Watson Wyatt & Company
Holdings and each employee director, the director will be required to resign
from the board upon termination of his or her employment.

COMMITTEES OF THE BOARD OF DIRECTORS

AUDIT COMMITTEE. The Audit Committee assesses and monitors the control of
financial transactions and oversees financial reporting to shareholders and
others. It also reviews (in cooperation with our internal auditors, independent
accountants and management) our internal accounting procedures and controls, and
the adequacy of the accounting services provided by our Finance and
Administration office.

COMPENSATION AND STOCK COMMITTEE. The Compensation and Stock Committee
oversees general compensation policies and practices and makes recommendations
and certain decisions regarding the administration of common stock transactions.

EXECUTIVE COMMITTEE. The Executive Committee oversees and reviews our
long-range corporate and strategic planning. Additionally, it meets throughout
the year between meetings of the board of directors to review, consider and make
decisions affecting general management policies of our company, to approve
significant business decisions not requiring full board approval and to make
recommendations to the executive officers and the board.

FINANCE COMMITTEE. The Finance Committee reviews and considers issues
relating to our capital structure. This includes strategic determinations
regarding the financing of our future growth and development.

HUMAN RESOURCES COMMITTEE. The Human Resources Committee reviews and
considers issues relating to our human resources. This includes working with the
Vice President of Human Resources to review strategy and set priorities for
obtaining, managing and developing our human resources.

PRESIDENT'S PAY COMMITTEE. The President's Pay Committee recommends, for
board of director approval, the compensation of the President and Chief
Executive Officer.

COMPENSATION OF DIRECTORS

Directors who are employees of Watson Wyatt & Company are not compensated
separately for their services as directors or as members of any committee of the
board. Outside directors in fiscal year 1999 were paid a quarterly retainer of
$6,250 plus $1,500 per day for board meetings, $1,000 per day for regular
committee meetings ($750 if held in conjunction with a board meeting), and
$2,000 per day for committee meetings if the outside director chaired that
committee ($1,000 if held in conjunction with a board meeting). Telephone
meetings of less than four hours duration were compensated at 50% of the
applicable per day fee. These fees have been paid in shares of Watson Wyatt &
Company common stock (up to 7,500 shares), and the balance paid in cash. We
established the Voluntary Deferred Compensation Plan to enable outside
directors, at their election, to defer receipt of any or all of their director's
fees until they are no longer serving as a director of the company. We intend to
continue to compensate outside directors for services rendered to WW Holdings.

69
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of our Compensation and Stock Committee for the last completed
fiscal year were: Thomas W. Barratt, Paula A. DeLisle, Ira T. Kay, Kevin L.
Meehan and John A. Steinbrunner. All are officers of the company. The committee
members do not participate in decisions regarding their own compensation. No
interlocking relationship exists between our board of directors or our planned
Compensation and Stock Committee and any member of any other company's board of
directors or their compensation committee, nor has any interlocking relationship
existed in the past.

EXECUTIVE COMPENSATION

For the fiscal year ended June 30, 1999, the compensation of the executive
officers, and all other associates eligible to receive a bonus, was comprised
primarily of three elements: base salary, fiscal year-end bonus, and Stock
Incentive Bonus Plan ("SIBP") payment. The compensation system establishes
target bonuses for all associates eligible to receive a bonus, based on their
compensation band level. Target bonuses range from 5% of base salary for more
junior associates to 70% of base salary for the Chief Executive Officer. After
the end of each fiscal year, the board of directors determines the funding of
the fiscal year-end bonus pool, which may be more or less than 100% of target
bonuses, and associates eligible to receive a bonus are awarded bonuses based on
individual, practice, region and company performance.

In January 2000 we paid SIBP bonuses to eligible associates based on the
SIBP funding level approved by the board, an individual's actual fiscal year
bonus and their actual stock ownership as compared to their target stock
ownership. We will terminate the SIBP following the completion of the public
offering. The following table sets forth annual compensation for the President,
Chief Executive Officer and the other four most highly compensated executive
officers for the fiscal years ended June 30, 1999, 1998 and 1997 by those
persons who were, on June 30, 1999:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
FISCAL TOTAL SALARY/ OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS SIBP(A) BONUS/SIBP COMPENSATION(B) COMPENSATION(C)
<S> <C> <C> <C> <C> <C> <C> <C>
John J. Haley.................... 1999 $543,750 $422,625 $491,000 $1,457,375 -$- $ 25,255
President, 1998 440,000 320,000 -- 760,000 -- 19,300
Chief Executive 1997 403,790 215,000 -- 618,790 -- 17,350
Officer and Director

A.W. Smith, Jr................... 1999 635,000 380,800 432,970 1,448,770 -- 220,120
Chairman and 1998 615,000 375,000 -- 990,000 -- 28,300
Director (retired) 1997 591,230 330,000 -- 921,230 -- 23,950

Eric P. Lofgren.................. 1999 390,000 290,000 260,960 940,960 -- 19,170
Vice President, 1998 331,500 250,000 -- 581,500 -- 15,035
Global Director, 1997 314,500 180,000 -- 494,500 7,500 11,250
Benefits Consulting
Group and Director

Kevin L. Meehan.................. 1999 326,250 300,000 290,425 916,675 -- 17,690
Vice President and 1998 280,150 250,000 -- 530,150 -- 5,110
Director 1997 263,670 180,000 -- 443,670 3,000 10,470

David B. Friend, M.D............. 1999 415,000 315,000 175,270 905,270 -- 21,380
Vice President, 1998 387,500 270,000 -- 657,500 -- 17,125
Eastern Regional 1997 314,167 200,000 -- 514,170 12,000 6,000
Manager and
Director
</TABLE>

(a) In 1996, Watson Wyatt & Company adopted a supplemental bonus plan called the
Stock Incentive Bonus Plan ("SIBP"). Following the public offering, we will
terminate the SIBP and replace it with equity based incentives more
customary to publicly traded companies.

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<PAGE>
(b) "Other Annual Compensation" consists of a cash bonus of $0.50 per share for
each share purchased in 1997 under the Stock Purchase Plan. This bonus was
also available to all participating associates. There were no stock
purchases under the Stock Purchase Plan in 1998. Messrs. Friend, Meehan and
Lofgren were the only named executive officers purchasing shares in 1997
since all others are above the 200,000 share maximum.

(c) "All Other Compensation" consists of the following: (1) for fiscal year 1997
only, a one-time non-compete bonus equal to 5% of each named executive's
fiscal year 1996 bonus; (2) company matching contributions of 50% of the
first 6% of total compensation contributed to our 401(k) plan as a 401(k)
salary deferral by the named executive up to the IRS maximum; (3) an
additional company matching contribution to a non-qualified savings plan of
3% of total compensation above the IRS compensation limit of $160,000 if
individual 401(k) contributions equal the IRS maximum; and (4) for fiscal
year 1999 for Mr. Smith, a payment of $188,140 for accrued, but unused, paid
time-off.

Concurrent with the public offering we will grant options to our associates
pursuant to the long term incentive plan to purchase shares of class A
common stock at an exercise price equal to the public offering price. As part of
this grant, Messrs. Haley, Lofgren, Meehan and Friend will be granted options to
purchase , , , and , respectively.

71
<PAGE>
COMMON STOCK PURCHASE ARRANGEMENTS BEFORE THE MERGER
AND THE PUBLIC OFFERING

STOCK PURCHASE PLAN. To encourage ownership of common stock by associates,
we had historically maintained a Stock Purchase Plan ("SPP"). Under the SPP,
Watson Wyatt & Company regularly sold common stock to associates on or about
March 1 of each year, except in 1998. Historically, ownership of the common
stock has been spread widely among associates, with no individual stockholder
owning more than 2% of the total number of shares outstanding. Prior to 1996, it
was our policy not to sell shares to stockholders who, as a result of such
sales, would have purchased more than 300,000 shares under the SPP. In 1996, we
reduced this number to 200,000.

The SPP permitted associates to borrow up to the full amount of the purchase
price of the common stock from Watson Wyatt's lenders, and Watson Wyatt
guarantees repayment of all such loans. The loans provide for full recourse to
the individual borrower and are secured by a pledge of the stock purchased.
Officers, directors and executive officers had access to this credit facility on
the same basis as other associates. As of January 14, 2000, 3,562,812 shares of
common stock were pledged to Watson Wyatt's lenders to secure loans to
stockholders, representing approximately 24% of the outstanding shares of common
stock. As of the same date, the aggregate amount of outstanding loans was
$14,943,013.77.

PENSION ARRANGEMENTS WITH NAMED EXECUTIVE OFFICER. Watson Wyatt has an
agreement with Dr. Friend to provide a supplemental pension benefit if he
remains continuously employed by the company until June 15, 2000. At the time of
his retirement, Dr. Friend will receive an additional service credit (for the
purposes of calculating benefits only) so that his total service credit will be
calculated as follows: (actual years of service + 1) multiplied by 1.5. In
addition, if, prior to the date on which Dr. Friend would be entitled to receive
an early retirement benefit, there is a change in control of the company and
Dr. Friend leaves the employ of the company within six months of the change in
control, his pension will be calculated as if he had reached early retirement.

Generally executive officers are not parties to employment agreements with
Watson Wyatt. Non-employee directors are paid pursuant to a compensation plan
approved on an annual basis. Executives and other employees in Bands 4 and
higher are required to sign non-competition and confidentiality agreements to
protect the company's proprietary information.

72
<PAGE>
CERTAIN RELATIONSHIPS

On April 1, 1995, we transferred our United Kingdom operations to R.
Watson & Sons (subsequently renamed Watson Wyatt Partners) and received a
beneficial interest and a 10% interest in a defined profit pool of the
partnership. We also transferred our Continental European operations to a newly
formed holding company owned by our company and Watson Wyatt Partners in
exchange for 50.1% of its shares. Effective July 1, 1998, we sold one-half of
our investment in the holding company to Watson Wyatt Partners. Mr. Robert D.
Masding, a senior partner of Watson Wyatt Partners, is a member of our Board of
Directors, and Mr. Haley is a member of the Watson Wyatt Partners Partnership
Board. Watson Wyatt Partners and Watson Wyatt & Company provide various services
to and on behalf of each other in the ordinary course of business.

SECURITY OWNERSHIP OF MANAGEMENT AND OTHERS

The following table sets forth information known to us with respect to
beneficial ownership of Watson Wyatt & Company common stock as of January ,
2000, without giving effect to our corporate reorganization or sales made in
connection with the public offering, of all directors, named officers and
directors and executive officers as a group:

<TABLE>
<CAPTION>
NUMBER PERCENT
NAME OF BENEFICIAL OWNER -------- --------
<S> <C> <C>
John J. Haley............................................... 227,749 1.5 %
Charles P. Wood, Jr......................................... 200,934 1.4
A. Grahame Stott............................................ 134,000 *
Eric P. Lofgren............................................. 109,365 *
John A. Steinbrunner........................................ 103,191 *
Kevin L. Meehan............................................. 100,011 *
Thomas W. Barratt........................................... 89,000 *
Ira T. Kay.................................................. 80,525 *
David B. Friend, M.D........................................ 71,000 *
Paula A. DeLisle............................................ 53,900 *
Brian E. Kennedy............................................ 50,000 *
Gail E. McKee............................................... 27,375 *
John J. Gabarro............................................. 7,500 *
R. Michael McCullough....................................... 7,500 *
Robert D. Masding........................................... 0(a) *
A.W. Smith, Jr.............................................. 0(b) *
All current directors and executive officers as a group ( ) %
</TABLE>

- ------------------------

* Beneficial ownership of 1% or less of all of the outstanding common stock is
indicated with an asterisk.

(a) Watson Wyatt Partners, in which Mr. Masding is Senior Partner, beneficially
owns 363,000 shares (2.4%) of Watson Wyatt & Company common stock. Pursuant
to our alliance agreement, if Watson Wyatt Partners holds more than 400,000
shares of our common stock, it has an option to sell to us any number of
shares that exceed 300,000. We, in turn, have an option to purchase from
Watson Wyatt Partners any number of shares of our common stock in excess of
400,000 shares if Watson Wyatt Partners holds more than 500,000 shares of
our common stock.

(b) Mr. Smith's shares were repurchased in connection with his retirement in
June 1999 in accordance with our bylaws.

73
<PAGE>
LEGAL MATTERS

The validity of the issuance of the shares of class B common stock offered
by this proxy statement/ prospectus will be passed on for us by Cadwalader,
Wickersham & Taft.

TRANSFER AGENT AND REGISTRAR

Watson Wyatt & Company is the Transfer Agent and Registrar of its own common
stock. will be the Transfer Agent and Registrar for Watson Wyatt &
Company Holdings' class A common stock and class B common stock.

SUBMISSION OF STOCKHOLDER PROPOSALS

If the merger and public offering are completed, Watson Wyatt & Company
Holdings expects to hold its 2000 annual meeting on November 16, 2000. If the
public offering is not completed, Watson Wyatt & Company would hold its 2000
annual meeting at such time. If you intend to submit a proposal for inclusion in
the proxy materials for the annual meeting, you must submit the proposal in
writing to Watson Wyatt & Company, Office of the Secretary, 6707 Democracy
Boulevard, Suite 800, Bethesda, Maryland 20817, by June 30, 2000. Securities and
Exchange Commission rules set forth standards as to what stockholder proposals
we are required to include in our proxy statement for an annual meeting.

If a stockholder fails to provide notice prior to September 12, 2000 of such
stockholder's intention to present a proposal at the meeting, then the
board-appointed proxies will be entitled to use their discretionary voting
authority if such proposal is raised at the 2000 annual meeting of stockholders.

EXPERTS

The consolidated financial statements of Watson Wyatt & Company as of
June 30, 1999, and 1998 and for each of the three years in the period ended
June 30, 1999 included in and incorporated by reference this prospectus have
been so included in reliance on the report of PricewaterhouseCoopers LLP,
independent accountants, given on the authority of such firm as experts in
accounting and auditing. The financial statements for Wellspring Resources LLC
as of June 30, 1997, and 1996 and for the year ended June 30, 1997 and the three
months ended June 30, 1996 appearing in Watson Wyatt & Company Annual Report
(Form 10K) for the year then ended June 30, 1999 have been audited by Ernst &
Young LLP, independent auditors, as set forth in their report incorporated
therein and incorporated herein by reference. Such financial statements are
incorporated herein by reference in reliance upon such report given on the
authority of such firm as experts in accounting and auditing.

74
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS

<TABLE>
<CAPTION>
PAGE
------------
<S> <C>
Consolidated Financial Statements of Watson Wyatt & Company

Report of Independent Accountants......................... F-2

Financial Statements:

Consolidated Statements of Operations for each of the
three years
ended June 30, 1999................................... F-3

Consolidated Balance Sheets at June 30, 1999 and 1998... F-4

Consolidated Statements of Cash Flows for each of the
three years
ended June 30, 1999................................... F-5

Consolidated Statements of Changes in Permanent
Shareholders' Equity for each of the three years ended
June 30, 1999......................................... F-6

Notes to the Consolidated Financial Statements.......... F-7 to F-26

Consolidated Statements of Operations for each of the
three month periods
ended September 30, 1999 and September 30, 1998....... F-27

Consolidated Balance Sheets at September 30, 1999 and
June 30, 1999......................................... F-28

Consolidated Statements of Cash Flows for each of the
three month periods
ended September 30, 1999 and September 30, 1998....... F-29

Consolidated Statements of Changes in Permanent
Shareholders' Equity for the three month period ended
September 30, 1999.................................... F-30

Notes to the Consolidated Financial Statements.......... F-31 to F-33
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

To the Board of Directors and
Shareholders of Watson Wyatt & Company

In our opinion, the accompanying consolidated balance sheets and the related
consolidated statements of operations, of changes in permanent shareholders'
equity and of cash flows present fairly, in all material respects, the financial
position of Watson Wyatt & Company and its subsidiaries at June 30, 1999 and
1998, and the results of their operations and their cash flows for each of the
three years in the period ended June 30, 1999, in conformity with accounting
principles generally accepted in the United States. These financial statements
are the responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with auditing standards
generally accepted in the United States which require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit 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 the opinion expressed
above.

PricewaterhouseCoopers LLP

Washington, D.C.
September 8, 1999, except as to the
information presented in Notes 5 and 6,
for which the date is December 9, 1999.

F-2
<PAGE>
WATSON WYATT & COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1999 1998 1997
-------- --------- --------
<S> <C> <C> <C>
Fees........................................................ $556,860 $ 512,660 $486,502
Costs of providing services:
Salaries and employee benefits............................ 298,915 268,611 252,302
Stock incentive bonus..................................... 22,610 -- --
Non-recurring compensation charge (see Note 12)........... -- 69,906 --
Occupancy and communications.............................. 62,915 62,061 72,155
Professional and subcontracted services................... 47,863 49,907 48,827
Other..................................................... 29,753 26,779 23,871
-------- --------- --------
462,056 477,264 397,155
General and administrative expenses......................... 56,578 51,759 45,696
Depreciation and amortization............................... 15,248 24,994 22,094
-------- --------- --------
533,882 554,017 464,945

Income (loss) from operations (see Note 12)................. 22,978 (41,357) 21,557
Other:
Interest income........................................... 944 901 1,462
Interest expense.......................................... (2,646) (2,768) (1,506)
Income from affiliates...................................... 2,524 258 105
-------- --------- --------
Income (loss) before income taxes and minority interest
(see Note 12)............................................. 23,800 (42,966) 21,618

Provision for (benefit from) income taxes:
Current................................................... 18,744 15,116 12,627
Deferred.................................................. (7,296) (1,982) (3,557)
-------- --------- --------
11,448 13,134 9,070
-------- --------- --------
Income (loss) before minority interest (see Note 12)........ 12,352 (56,100) 12,548

Minority interest in net (income) loss of consolidated
subsidiaries.............................................. (217) (112) (167)
-------- --------- --------
Income (loss) from continuing operations (see Note 12)...... 12,135 (56,212) 12,381

Discontinued operations:

Loss from operations of discontinued Outsourcing Business
(less applicable income tax benefit of $0, $5,053 and
$8,181 respectively)...................................... -- (6,821) (11,483)

Adjustment (loss) on disposal of discontinued Outsourcing
Business (1999 adjustment is net of applicable income tax
expense of $6,322; 1998 loss is net of applicable income
tax benefit of $46,715)................................... 8,678 (63,085) --
-------- --------- --------
Net income (loss) (see Note 12)............................. $ 20,813 $(126,118) $ 898
======== ========= ========
Earnings (loss) per share, continuing operations, basic and
fully diluted............................................. $ 0.80 $ (3.27) $ 0.71
======== ========= ========
Earnings (loss) per share, discontinued operations, basic
and fully diluted......................................... $ 0.57 $ (4.07) $ (0.66)
======== ========= ========
Earnings (loss) per share, net income (loss), basic and
fully diluted............................................. $ 1.37 $ (7.34) $ 0.05
======== ========= ========
</TABLE>

See accompanying notes

F-3
<PAGE>
WATSON WYATT & COMPANY

CONSOLIDATED BALANCE SHEETS

(THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
1999 1998
-------- --------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 35,985 $ 13,405
Receivables from clients:
Billed, net of allowances of $3,701 and $2,142............ 72,798 69,671
Unbilled.................................................. 63,068 59,725
-------- --------
135,866 129,396
Income taxes receivable..................................... -- 2,216
Other current assets........................................ 10,834 6,945
-------- --------
Total current assets...................................... 182,685 151,962

Investment in affiliates.................................... 15,306 17,666
Fixed assets................................................ 42,797 37,368
Deferred income taxes....................................... 56,206 48,911
Intangible assets........................................... 7,455 2,412
Other assets................................................ 9,511 9,991
-------- --------
$313,960 $268,310
======== ========

LIABILITIES, REDEEMABLE COMMON STOCK, AND PERMANENT SHAREHOLDERS' EQUITY

Accounts payable and accrued liabilities.................... $152,371 $116,548
Note payable and book overdrafts............................ 248 11,666
Income taxes payable........................................ 18,374 --
-------- --------
Total current liabilities................................. 170,993 128,214
Accrued retirement benefits................................. 77,140 82,528
Deferred rent and accrued lease losses...................... 9,270 12,676
Other noncurrent liabilities................................ 22,608 32,784
Minority interest in subsidiaries........................... 669 322
Redeemable Common Stock--$1 par value: 25,000,000 shares
authorized; 16,112,416 and 15,916,757 issued and
outstanding; at redemption value.......................... 107,631 96,296
Permanent shareholders' equity:
Adjustment for redemption value less than amounts paid in by
shareholders.............................................. 11,420 25,240
Retained deficit............................................ (83,209) (106,834)
Cumulative translation adjustment (other comprehensive
loss)..................................................... (2,562) (2,916)
Commitments and contingencies...............................
-------- --------
$313,960 $268,310
======== ========
</TABLE>

See accompanying notes

F-4
<PAGE>
WATSON WYATT & COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
1999 1998 1997
-------- --------- --------
<S> <C> <C> <C>
Cash flows from (used for) operating activities:
Net income (loss)......................................... $ 20,813 $(126,118) $ 898
Adjustments to reconcile net income (loss) to net cash
provided by operating activities:
Non-cash non-recurring compensation charge.............. -- 69,906 --
Net (adjustment) loss from Discontinued Operations...... (8,678) 69,906 11,483
Provision for doubtful receivables from clients......... 9,503 5,613 6,853
Depreciation............................................ 13,680 12,849 13,816
Amortization of deferred software and development costs
and other intangible assets........................... 1,568 12,143 8,277
Provision for deferred income taxes..................... (7,295) (1,982) (3,557)
Income from affiliates.................................. (2,524) (258) (105)
Minority interest in net income of consolidated
subsidiaries.......................................... 217 112 167
(Increase) decrease in assets (net of discontinued
operations):
Receivables from clients.............................. (25,488) (11,115) (2,794)
Income taxes receivable............................... 2,216 4,558 3,327
Other current assets.................................. (3,889) 342 (351)
Other assets.......................................... 480 76 (1,930)
Increase (decrease) in liabilities (net of discontinued
operations):
Accounts payable and accrued liabilities.............. 54,567 11,318 1,300
Income taxes payable.................................. 12,052 (3,563) (7,799)
Accrued retirement benefits........................... (5,388) (4,169) 5,556
Deferred rent and accrued lease losses................ (3,406) (2,262) 5,034
Other noncurrent liabilities.......................... 1,132 840 687
Other, net.............................................. 514 1,603 656
Discontinued operations, net............................ (5,537) (18,554) 7,530
-------- --------- --------
Net cash provided by operating activities............... 54,537 21,245 49,048
======== ========= ========
Cash flows (used in) from investing activities:
Purchases of fixed assets................................. (19,684) (16,034) (15,548)
Proceeds from sales of fixed assets and investments....... 237 623 446
Acquisitions.............................................. (6,207) -- (1,169)
Investment in software and development costs.............. -- (3,000) (4,554)
Investment in affiliates.................................. 4,220 3,076 (1,385)
Discontinued operations................................... -- (14,750) (20,062)
-------- --------- --------
Net cash used in investing activities................... (21,434) (30,085) (42,272)
-------- --------- --------
Cash flows (used by) from financing activities:
Borrowings and bank overdrafts............................ (11,418) 11,258 --
Issuances of Redeemable Common Stock...................... 15,451 1,005 15,414
Repurchases of Redeemable Common Stock.................... (15,124) (13,141) (16,604)
-------- --------- --------
Net cash used by financing activities................... (11,091) (878) (1,190)
-------- --------- --------
Effect of exchange rates on cash............................ 568 (3,134) (1,023)
-------- --------- --------
Increase (decrease) in cash and cash equivalents............ 22,580 (12,852) 4,563
Cash and cash equivalents at beginning of period............ 13,405 26,257 21,694
-------- --------- --------
Cash and cash equivalents at end of period.................. $ 35,985 $ 13,405 $ 26,257
======== ========= ========
</TABLE>

See accompanying notes

F-5
<PAGE>
WATSON WYATT & COMPANY

CONSOLIDATED STATEMENTS OF CHANGES IN PERMANENT SHAREHOLDERS' EQUITY

(THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
ADJUSTMENT FOR
REDEMPTION
VALUE
CUMULATIVE (GREATER) LESS
RETAINED TRANSLATION THAN AMOUNTS
EARNINGS GAIN PAID IN BY
(DEFICIT) (LOSS) SHAREHOLDERS TOTAL
--------- ----------- -------------- --------
<S> <C> <C> <C> <C>
Balance at June 30, 1996...................... $ 30,677 $ 1,040 $(37,549) $ (5,832)
Comprehensive income:
Net income.................................. 898 -- -- 898
Foreign currency translation adjustment..... -- (204) -- (204)
--------- ------- -------- --------
Total comprehensive income.................... 898 (204) -- 694
Effect of repurchases of 3,258,203 shares of
common stock (various prices per share)..... (6,942) -- 6,942 --
Adjustment of redemption value for change in
formula book value per share................ -- -- (7,067) (7,067)
--------- ------- -------- --------
Balance at June 30, 1997...................... $ 24,633 $ 836 $(37,674) $(12,205)

Comprehensive loss:
Net loss.................................... (126,118) -- -- (126,118)
Foreign currency translation adjustment..... -- (3,752) -- (3,752)
--------- ------- -------- --------
Total comprehensive loss...................... (126,118) (3,752) -- (129,870)
Effect of repurchases of 2,410,425 shares of
common stock (various prices per share)..... (5,349) -- 5,349 --
Adjustment of redemption value for change in
formula book value per share................ -- -- (12,341) (12,341)
Adjustment of redemption value for
non-recurring compensation charge (see Note
12)......................................... -- -- 69,906 69,906
--------- ------- -------- --------
Balance at June 30, 1998...................... $(106,834) $(2,916) $ 25,240 (84,510)

Comprehensive income:
Net income.................................. 20,813 -- -- 20,813
Foreign currency translation adjustment..... -- 354 -- 354
--------- ------- -------- --------
Total comprehensive income.................... 20,813 354 -- 21,167
Effect of repurchases of 2,361,542 shares of
common stock (various prices per share)..... 2,812 -- (2,812) --
Adjustment of redemption value for change in
formula book value per share................ -- -- (11,008) (11,008)
--------- ------- -------- --------
Balance at June 30, 1999...................... $ (83,209) $(2,562) $ 11,420 $(74,351)
========= ======= ======== ========
</TABLE>

See accompanying notes

F-6
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

NATURE OF THE BUSINESS--Watson Wyatt & Company ("Watson Wyatt" or the
"Company"), together with its subsidiaries, is an international company engaged
in the business of providing professional consultative services on a fee basis,
primarily in the human resource areas of employee benefits and compensation, but
also in other areas of specialization such as human capital consulting and human
resource related technology consulting. Substantially all of the Company's stock
is held by or for the benefit of employees. On July 1, 1996, The Wyatt Company
changed its name to Watson Wyatt & Company.

In 1998, the Company discontinued its Benefits Administration Outsourcing
Business as further described in Note 16. The Consolidated Statements of
Operations in 1999 and 1998 reflect the charges recorded for that
discontinuation as well as for the operating results of the discontinued
operations in 1998 and 1997.

USE OF ESTIMATES--Preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities,
disclosures of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates. Estimates
are used when accounting for revenue, allowances for uncollectible receivables,
investments in affiliates, depreciation and amortization, profits on long-term
contracts, asset write-downs, employee benefit plans, taxes, discontinued
operations and Year 2000 costs.

PRINCIPLES OF CONSOLIDATION--The consolidated financial statements of the
Company include the accounts of the Company and its majority-owned and
controlled subsidiaries after elimination of inter-company accounts and
transactions. Investments in affiliated companies over which the Company has the
ability to exercise significant influence are accounted for using the equity
method.

RECLASSIFICATIONS--Certain amounts previously presented have been
reclassified to conform to the current presentation.

CASH AND CASH EQUIVALENTS--The Company considers short-term, highly liquid
investments with original maturities of 90 days or less to be cash equivalents.
Such investments were $21,700,000 at June 30, 1999.

RECEIVABLES FROM CLIENTS--Billed receivables from clients are presented at
their billed amount less an allowance for doubtful accounts. Unbilled
receivables are stated at their estimated net realizable value.

REVENUE RECOGNITION--For consulting services, fees from clients are recorded
as services are performed and are presented net of write-offs and uncollectible
amounts. Revenues from long-term contracts are recognized on the percentage of
completion basis. Anticipated contract losses are recognized as they become
known. Fees for administrative and recordkeeping operations are recognized as
earned by the Company.

INTANGIBLE ASSETS--Intangible assets consist primarily of goodwill related
to the excess cost over net assets of purchased companies. Goodwill is generally
amortized on a straight-line basis over seven to fifteen years. The Company
regularly assesses the recoverability of unamortized goodwill and other
long-lived assets by comparing the probable undiscounted future cash flows with
the net book value of

F-7
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

the underlying assets. Losses so identified are then measured as the difference
between the net book value of the asset and the discounted present value of the
cash flows and are recorded as identified.

EMPLOYEE RECEIVABLES--The Company had outstanding employee receivables
included in other current and noncurrent assets of $2,440,000 and $3,165,000 at
June 30, 1999 and June 30, 1998, respectively, related primarily to employee
relocations.

FOREIGN CURRENCY TRANSLATION--Gains and losses on foreign currency
transactions are recognized currently in the consolidated statements of
operations. Assets and liabilities of the Company's subsidiaries outside the
United States are translated into the reporting currency, the U.S. dollar, based
on exchange rates at the balance sheet date. Revenue and expenses of the
Company's subsidiaries outside the United States are translated into U.S.
dollars at the average exchange rates during the year. Gains and losses on
translation of the Company's equity interests in its subsidiaries outside the
United States are not included in the consolidated statements of operations but
are reported separately and accumulated as the cumulative translation gain or
loss within permanent shareholders' equity in the consolidated balance sheets.
Foreign currency translation gains or losses on inter-company receivables and
payables are generally not recognized because such amounts are usually
considered to be permanent and are not expected to be liquidated.

FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying amount of the Company's
cash and cash equivalents, short-term investments, receivables from clients and
notes and accounts payable and accrued liabilities approximates fair value
because of the short maturity and ready liquidity of those instruments. At
June 30, 1999, the outstanding balance under its revolving credit agreement was
zero, while at June 30, 1998 the Company had $9,000,000 outstanding. The Company
knows of no event of default that would require it to satisfy the guarantees
described in Notes 9 and 15 other than as reflected in the Consolidated
Financial Statements.

CONCENTRATION OF CREDIT RISK--Financial instruments which potentially
subject the Company to concentrations of credit risk consist principally of
certain cash and cash equivalents, short-term investments and receivables from
clients. The Company invests its excess cash with high-credit quality financial
institutions. Concentrations of credit risk with respect to receivables from
clients are limited due to the Company's large number of customers and their
dispersion across many industries and geographic regions.

EARNINGS PER SHARE--The computation of earnings per share is based upon the
weighted average number of shares of Redeemable Common Stock outstanding. The
number of shares (in thousands) used in the computation is 15,215 in fiscal year
1999, 17,170 in fiscal year 1998, and 17,438 in fiscal year 1997 (see Note 10).

COMPREHENSIVE INCOME--In fiscal year 1999, the Company adopted Statement of
Financial Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive
Income." Comprehensive income includes net income and changes in the cumulative
foreign currency translation gain or loss. For the years ended June 30, 1999,
1998 and 1997, comprehensive income (loss) totaled $21,167,000, $(129,870,000),
and $694,000, respectively.

F-8
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 2--CASH FLOW INFORMATION

Net cash provided by operating activities in the consolidated statements of
cash flows includes cash payments for:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Interest expense.................................. $1,889 $ 2,639 $ 1,506
Income taxes paid................................. $5,462 $18,679 $11,947
</TABLE>

NOTE 3--INVESTMENTS IN AFFILIATES

Entities accounted for under the equity method are:

<TABLE>
<CAPTION>
JUNE 30
OWNERSHIP -------------------
INTEREST 1999 1998
--------- -------- --------
<S> <C> <C> <C>
Watson Wyatt Partners........................... 10.0% $ 9,265 $11,040
Watson Wyatt Holdings (Europe) Limited.......... 25.0% 6,041 6,626
Professional Consultants Insurance Company,
Inc........................................... 27.4% -- --
------- -------
Total Investment in Affiliates.................. $15,306 $17,666
======= =======
</TABLE>

On April 1, 1995, the Company transferred its United Kingdom ("U.K.")
operations to Watson Wyatt Partners, formerly R. Watson & Sons ("Watsons"), an
actuarial partnership based in the U.K., and received a beneficial interest in
Watsons and a 10% interest in a defined profit pool of Watsons. The Company also
transferred its Continental European operations to a newly-formed holding
company, Watson Wyatt Holdings (Europe) Limited ("WWHE"), jointly owned and
controlled by the Company and Watsons, in exchange for 50.1% of its shares. The
Company's historical basis in the assets and liabilities carried over. Effective
July 1, 1998, the Company sold one half of its investment in WWHE to Watsons; no
gain or loss was recognized on the transaction.

The Company accounts for its interest in Watsons using the equity method of
accounting because it is an investment in a general partnership. The Company
accounts for its interest in WWHE using the equity method of accounting because
it has the ability to exercise significant influence over the operations of the
entity.

At June 30, 1999, the Company's investment in WWHE and Watsons exceeded the
Company's share of the underlying net assets by $2,257,000 due primarily to the
capitalization of external transaction costs incurred by the Company. This basis
differential is being amortized over periods of 10 to 15 years.

F-9
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 3--INVESTMENTS IN AFFILIATES (CONTINUED)

The Company's pre-tax income from affiliates includes the following:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Equity investment income............................. $2,760 $724 $1,019
Amortization of basis differential................... (236) (466) (914)
------ ---- ------
Income from affiliates............................... $2,524 $258 $ 105
====== ==== ======
</TABLE>

Combined summarized balance sheet information at June 30 for the Company's
affiliates follows:

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Current assets.......................................... $117,717 $118,116
Noncurrent assets....................................... 17,286 10,886
-------- --------
Total assets............................................ $135,003 $129,002
======== ========

Current liabilities..................................... $ 65,171 $ 54,278
Noncurrent liabilities.................................. 30,810 39,344
Shareholders' equity.................................... 39,022 35,380
-------- --------
Total liabilities & shareholders' equity................ $135,003 $129,002
======== ========
</TABLE>

The Company's operating results include its proportionate share of income
from equity investments from the dates of investment. Combined summarized
operating results for the years ended June 30, reported by the affiliates
follow:

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenue....................................... $206,463 $173,012 $166,851
Operating expenses............................ 155,330 135,577 126,338
-------- -------- --------
Income before tax............................. $ 51,133 $ 37,435 $ 40,513
======== ======== ========
Net income.................................... $ 51,116 $ 38,176 $ 39,996
======== ======== ========
</TABLE>

NOTE 4--FIXED ASSETS

Furniture, fixtures, equipment, and leasehold improvements are recorded at
cost, and presented net of accumulated depreciation or amortization. Furniture,
fixtures and equipment are depreciated using straight-line and accelerated
methods over lives ranging from three to seven years. Leasehold improvements are
amortized on a straight-line basis over the shorter of the assets' lives or
lease terms.

F-10
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 4--FIXED ASSETS (CONTINUED)

The components of fixed assets are:

<TABLE>
<CAPTION>
JUNE 30
-------------------
1999 1998
-------- --------
<S> <C> <C>
Furniture, fixtures and equipment....................... $ 96,096 $ 90,727
Leasehold improvements.................................. 27,069 22,294
-------- --------
123,165 113,021
Less: accumulated depreciation and amortization......... (80,368) (75,653)
-------- --------
Net fixed assets........................................ $ 42,797 $ 37,368
======== ========
</TABLE>

NOTE 5--PENSION AND SAVINGS PLANS

In fiscal year 1999, the Company adopted the revised disclosure requirements
of SFAS No. 132, "Employers' Disclosures about Pensions and Other Postretirement
Benefits." SFAS 132 standardized the disclosure of pensions and other
postretirement benefits but did not change the accounting for these benefits.
Prior years' information has been reclassified to conform to the 1999 disclosure
format.

The noncurrent portions of accrued costs related to the Company's principal
retirement plans are:

<TABLE>
<CAPTION>
JUNE 30
-------------------
1999 1998
-------- --------
<S> <C> <C>
Defined benefit retirement plans.......................... $28,149 $35,263
Canadian Separation Allowance Plan........................ 5,953 6,264
Postretirement benefits other than pensions............... 43,038 41,001
------- -------
Accrued retirement benefits............................... $77,140 $82,528
======= =======
</TABLE>

DEFINED BENEFIT PLANS

The Company sponsors both qualified and non-qualified non-contributory
defined benefit pension plans covering substantially all of its associates.
Under the Company's principal plans (U.S., Canada, and Hong Kong), benefits are
based on the number of years of service and the associate's compensation during
the three highest paid consecutive years of service.

Contributions are limited to amounts that are currently deductible for tax
purposes, and the excess of expense over such contributions and direct payments
under non-qualified plan provisions is accrued. As of January 1, 1997, changes
were made to the U.S. pension program. The pension plan definition of
compensation was revised to include overtime and annual bonuses. The pension
benefit formula was changed to integrate with Social Security benefits on a
step-rate basis. The total years of service included in the benefit calculation
were reduced from 28 1/3 years to 25 years.

F-11
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 5--PENSION AND SAVINGS PLANS (CONTINUED)

Net periodic pension cost consists of the following components:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Service cost..................................... $22,976 $18,340 $16,962
Interest cost.................................... 23,909 22,302 19,651
Expected return on plan assets................... (37,437) (31,910) (26,828)
Amortization of transition obligation............ 201 201 199
Amortization of net unrecognized gains........... (5,979) (6,316) (4,740)
Amortization of prior service cost............... 1,841 1,794 1,352
------- ------- -------
Net periodic pension cost........................ 5,511 4,411 6,596
Settlement loss.................................. -- -- 708
------- ------- -------
Net periodic pension cost including
settlements.................................... $ 5,511 $ 4,411 $ 7,304
======= ======= =======
</TABLE>

During fiscal year 1999, the Company acquired a portion of KPMG's actuarial
consulting services. In connection with this transaction, the Company recognized
additional pension expense of $665,000.

The following tables set forth the changes in the projected pension benefit
obligation and fair value of the pension plan assets:

<TABLE>
<CAPTION>
JUNE 30
-------------------
1999 1998
-------- --------
<S> <C> <C>
Benefit obligation at beginning of year................. $353,658 $295,245
Service cost............................................ 22,976 18,340
Interest cost........................................... 23,909 22,302
Participant contributions............................... 54 --
Actuarial losses gains.................................. (8,503) 34,610
Benefit payments........................................ (14,593) (16,042)
Plan amendments......................................... -- 647
Foreign currency adjustment............................. (94) (1,444)
-------- --------
Benefit obligation at end of year....................... $377,407 $353,658
======== ========
</TABLE>

<TABLE>
<CAPTION>
JUNE 30
-------------------
1999 1998
-------- --------
<S> <C> <C>
Fair value of plan assets at beginning of year.......... $381,398 $322,533
Actual return on plan assets............................ 36,473 67,275
Company contributions................................... 7,889 9,311
Participant contributions............................... 54 --
Benefit payments........................................ (14,593) (16,042)
Foreign currency adjustment............................. (119) (1,679)
-------- --------
Fair value of plan assets at end of year................ $411,102 $381,398
======== ========
</TABLE>

F-12
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 5--PENSION AND SAVINGS PLANS (CONTINUED)

The following table sets forth selected information for plans with
accumulated benefit obligations in excess of plan assets:

<TABLE>
<CAPTION>
JUNE 30
-------------------
1999 1998
-------- --------
<S> <C> <C>
Projected benefit obligation.............................. $86,703 $78,519
Accumulated benefit obligation............................ 42,740 38,474
Fair value of plan assets................................. -- --
</TABLE>

The accrued pension benefit cost recognized in our consolidated balance
sheets is computed as follows:

<TABLE>
<CAPTION>
JUNE 30
-------------------
1999 1998
-------- --------
<S> <C> <C>
Funded status at end of year............................ $ 33,695 $ 27,740
Unrecognized prior service cost......................... 9,255 11,101
Unrecognized net gain................................... (75,579) (74,030)
Unrecognized transition obligation...................... 793 993
-------- --------
Net accrued pension liability........................... $(31,836) $(34,196)
======== ========

Prepaid pension benefit cost............................ $ 26,691 $ 13,778
Accrued pension benefit liability....................... (58,527) (47,974)
Intangible assets....................................... -- --
Accumulated other comprehensive income.................. -- --
-------- --------
Net accrued pension liability........................... $(31,836) $(34,196)
======== ========
</TABLE>

Assumptions used in the valuation for the U.S. plan, which comprises the
majority of the principal defined benefit pension plans, include:

<TABLE>
<CAPTION>
JUNE 30
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Discount rate, projected benefit obligation............... 7.0% 6.8% 7.5%
Discount rate, net periodic pension cost.................. 6.8% 7.5% 7.5%
Expected long-term rate of return on assets............... 10.0% 10.0% 10.0%
Rate of increase in compensation levels................... 5.3% 5.8% 5.8%
</TABLE>

DEFINED CONTRIBUTION PLANS

The Company sponsors a savings plan which provides benefits to substantially
all U.S. associates and under which the Company matches employee contributions
at 50% of the first 6% of total pay (which includes base salary, overtime and
annual performance-based bonuses). Vesting of the Company match occurs after
three years for new employees and is 100% for all employees hired before
January 1, 1997. The expense in fiscal years 1999, 1998 and 1997 for the match
was $4.5 million,

F-13
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 5--PENSION AND SAVINGS PLANS (CONTINUED)

$5.1 million and $2.0 million, respectively. Under the plan, the Company also
has the ability to make discretionary profit-sharing contributions. The Company
made no profit sharing contributions during fiscal years 1999, 1998 or 1997. The
Company also sponsors a Canadian Separation Allowance Plan (CSAP) which provides
benefits to substantially all Canadian associates. The CSAP is an unfunded book
reserve arrangement; as such, the amounts due to associates are recorded as a
liability in the consolidated balance sheets of the Company. CSAP expense for
fiscal years 1999, 1998 and 1997 amounted to $377,000, $293,000 and $414,000,
respectively.

NOTE 6--BENEFITS OTHER THAN PENSIONS

HEALTH CARE BENEFITS

The Company sponsors a contributory health care plan that provides
hospitalization, medical and dental benefits to substantially all U.S.
associates. The Company accrues a liability for estimated incurred but
unreported claims based on projected use of the plan as well as paid claims of
prior periods. The liability totaled $2,495,000 at June 30, 1999 and 1998, and
is included in accounts payable and accrued liabilities in the consolidated
balance sheets.

POSTRETIREMENT BENEFITS

The Company provides certain health care and life insurance benefits for
retired associates. The principal plans cover associates in the U.S. and Canada
who have met certain eligibility requirements. The Company's principal plans are
unfunded.

Effective January 1, 1997, premiums paid on the retiree medical plan are
tied to the retiree's years of service. The Company contribution is capped at
200% of 1997 per capita claims cost. Benefits have been redefined to ensure a
retiree benefit comparable to the Watson Wyatt Plan for active employees.

Net periodic postretirement benefit cost consists of the following
components:

F-14
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 6--BENEFITS OTHER THAN PENSIONS (CONTINUED)

The following tables set forth the changes in the accumulated postretirement
benefit obligation, company contributions and benefit payments:

<TABLE>
<CAPTION>
JUNE 30
-------------------
1999 1998
-------- --------
<S> <C> <C>
Benefit obligation at beginning of year................... $32,326 $30,031
Service cost.............................................. 1,898 1,848
Interest cost............................................. 2,178 2,133
Participant contributions................................. 175 189
Actuarial losses/(gains).................................. (563) (883)
Acquisitions/(divestitures)............................... 245 --
Benefit payments.......................................... (1,267) (849)
Foreign currency adjustment............................... (11) (143)
------- -------
Benefit obligation at end of year......................... $34,981 $32,326
======= =======
</TABLE>

<TABLE>
<CAPTION>
JUNE 30
-------------------
1999 1998
-------- --------
<S> <C> <C>
Fair value of plan assets at beginning of year.............. $ -- $ --
Company contributions....................................... 1,092 660
Participant contributions................................... 175 189
Benefit payments............................................ (1,267) (849)
------- -----
Fair value of plan assets at end of year.................... $ -- $ --
======= =====
</TABLE>

The accrued other postretirement benefit cost recognized in our consolidated
balance sheets is computed as follows:

<TABLE>
<CAPTION>
JUNE 30
-------------------
1999 1998
-------- --------
<S> <C> <C>
Funded status at end of year............................ $(34,981) $(32,326)
Unrecognized prior service cost......................... (1,325) (1,451)
Unrecognized net gain................................... (8,763) (8,664)
Unrecognized transition obligation...................... 650 698
-------- --------
Net accrued postretirement liability.................... $(44,419) $(41,743)
======== ========

Prepaid pension benefit cost............................ $ -- $ --
Accrued postretirement benefit liability................ (44,419) (41,743)
Intangible assets....................................... -- --
Accumulated other comprehensive income.................. -- --
-------- --------
Net accrued postretirement liability.................... $(44,419) $(41,743)
======== ========
</TABLE>

F-15
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 6--BENEFITS OTHER THAN PENSIONS (CONTINUED)

Assumptions used in the valuation for the U.S. plan, which comprises the
majority of the principal postretirement plans, include:

<TABLE>
<CAPTION>
JUNE 30
-------------------------------
1999 1998 1997
--------- -------- --------
<S> <C> <C> <C>
Health care cost trend, accumulated benefit
obligation:
Pre-65 benefits
(decreasing to 5.0% for 2004 and thereafter)..... 7.7% 8.4% 9.1%
Post-65 benefits
(decreasing to 5.0% for 2007 and thereafter)..... 7.1% 7.7% 8.3%
Discount rate, accumulated benefit obligation
postretirement benefit........................... 7.0% 6.8% 7.5%
Discount rate, net periodic cost................... 7.0% 6.8% 7.5%
</TABLE>

A one percentage point change in the assumed health care cost trend rates
would have the following effect:

<TABLE>
<CAPTION>
1% INCREASE 1% DECREASE
----------- -----------
<S> <C> <C>
Effect on net periodic postretirement benefit cost in
fiscal 1999......................................... $ 233 $ (283)
Effect on accumulated postretirement benefit
obligation as of June 30, 1999...................... 1,925 (2,189)
</TABLE>

NOTE 7--ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of:

<TABLE>
<CAPTION>
JUNE 30
-------------------
1999 1998
-------- --------
<S> <C> <C>
Accounts payable and accrued liabilities................ $ 53,586 $ 55,865
Accrued salaries and bonuses............................ 68,405 37,567
Current portion of defined benefit retirement plans and
postretirement benefits other than pensions........... 9,948 4,191
Accrued vacation........................................ 13,578 13,300
Advance billings........................................ 6,854 5,625
-------- --------
Total accounts payable and accrued liabilities.......... $152,371 $116,548
======== ========
</TABLE>

NOTE 8--LEASES

The Company leases office space and various computer equipment under
operating lease agreements with terms generally ranging from one to ten years.
The Company has entered into sublease agreements for some of its leased space.
The rental expense was $43,631,000, $43,133,000 and

F-16
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 8--LEASES (CONTINUED)

$42,079,000 for fiscal years 1999, 1998 and 1997, respectively. Sublease income
was $4,208,000, $3,905,000 and $1,702,000 for fiscal years 1999, 1998 and 1997,
respectively.

Future cash outlays for operating lease commitments and cash inflows for
sublease income are:

<TABLE>
<CAPTION>
LEASE SUBLEASE
COMMITMENTS INCOME
----------- --------
<S> <C> <C>
2000................................................... $ 43,771 $3,388
2001................................................... 38,709 3,315
2002................................................... 30,614 2,963
2003................................................... 18,074 115
2004................................................... 14,043 --
thereafter............................................. 25,770 --
-------- ------
$170,981 $9,781
======== ======
</TABLE>

As a result of relocations and the subleasing of excess office space, the
Company recognized lease termination losses of $341,000, $790,000 and
$12,107,000 in fiscal years 1999, 1998 and 1997, respectively.

NOTE 9--NOTE PAYABLE

The Company has a $120,000,000 credit facility with a group of banks at an
interest rate that varies with LIBOR and/or the Prime Rate, plus an annual
commitment fee that varies with the Company's financial leverage and is paid on
the unused portion of the credit facility. No amounts were outstanding under the
revolving portion of the credit facility as of June 30, 1999; $9,000,000 was
outstanding at June 30, 1998. The credit facility requires the Company to
observe certain covenants (including requirements as to minimum net worth and
other financial and restrictive covenants) and is secured by a blanket lien on
all assets. At June 30, 1999 the Company was in compliance with all covenants
under the credit facility. The revolving portion of the credit facility is
scheduled to mature on June 29, 2003.

Of the total credit line, $95,000,000 is available to the Company as
revolving credit for operating needs. The remaining $25,000,000 is available to
secure loans to associates for the purchase of Redeemable Common Stock made
available under the Company's Stock Purchase Program. The Company guarantees
these loans to its shareholders, the aggregate outstanding balances of which
totaled $20,316,000 and $15,617,000 at June 30, 1999 and 1998, respectively.
Shares totaling 4,735,000 and 4,897,000 of the Company's Redeemable Common Stock
were pledged by shareholders to secure these loans at June 30, 1999 and 1998,
respectively.

NOTE 10--REDEEMABLE COMMON STOCK

Substantially all of the Company's Redeemable Common Stock is held by or for
the benefit of its employees and, pursuant to the Company's bylaws, is subject
to certain restrictions. In connection with

F-17
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 10--REDEEMABLE COMMON STOCK (CONTINUED)

these restrictions, the Company has the following rights and obligations
regarding purchases and sales of its common stock:

a) The Company has the first option to purchase, or to designate associates who
are eligible to purchase, any shares offered for sale by a shareholder.
Shares not purchased by the Company or its designees may be sold to
identified transferees, subject to the restrictions contained in the bylaws.

b) Upon the termination of employment, bankruptcy of a shareholder, or the
imposition of a lien or attachment on any stock, the shares held by the
shareholder or subject to attachment are considered to be offered for sale.
In these circumstances, the Company is obligated to purchase any such
shares.

Pursuant to the Company's bylaws, the price for all sales by the Company of
Redeemable Common Stock is the Formula Book Value per share (defined in the
bylaws as "Formula Book Value") of such stock as of the last day of the
preceding year. Amounts paid by the Company to repurchase Redeemable Common
Stock reflect the pro rata appreciation in the Formula Book Value per share from
the last day of the preceding year to the end of the current year and pro rata
dividends paid during the year.

Formula Book Value as used herein means the Net Book Value of the Company's
Redeemable Common Stock as of June 30, 1996, increased or decreased by net
income or losses, and all other Generally Accepted Accounting Principals
("GAAP") basis increases or decreases to Net Book Value occurring after
June 30, 1996, adjusted to (i) spread the economic impact of certain real estate
sublease losses over the remaining life of the sublease, (ii) eliminate annual
changes in the Currency Translation Adjustment occurring after June 30, 1996,
and (iii) eliminate the after tax increases or decreases in Net Book Value
recorded in accordance with GAAP as a result of the discontinuation of the
Benefits Administration Outsourcing Business. The Formula Book Value was $6.68
at June 30, 1999 and $6.05 at June 30, 1998.

F-18
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 10--REDEEMABLE COMMON STOCK (CONTINUED)

The following schedule computes the Formula Book Value per share at
June 30:

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Consolidated net worth[1]................................... $ 36,882 $15,742
Adjustment for the compensation survey items:
50% of consolidated income received from compensation
survey business........................................... 5,915 5,915
Add: Adjustment for after-tax effect of discontinuation of
Benefits Administration Outsourcing Business.............. 61,228 69,906
Add: Adjustment for after-tax effect of lease losses........ 3,606 4,733
-------- -------
Formula Book Value of Redeemable Common Stock............... $107,631 $96,296
======== =======
Number of shares of Redeemable Common Stock outstanding..... 16,112 15,917
======== =======
Formula Book Value per share of Redeemable Common Stock..... $ 6.68 $ 6.05
======== =======
</TABLE>

- ------------------------

[1] After adjusting for currency translation as specified in the Company's
bylaws of $3,602 in 1999 and $3,956 in 1998.

In view of the Company's obligation to repurchase its Redeemable Common
Stock, the Securities and Exchange Commission requires that the redemption value
of outstanding shares be classified as Redeemable Common Stock and not be
portrayed as permanent capital. The changes in this balance for the three years
ended June 30, 1999 were as follows:

<TABLE>
<CAPTION>
NUMBER OF REDEEMABLE
SHARES COMMON STOCK
---------- ------------
<S> <C> <C>
Balance at June 30, 1996.................................... 18,261,963 $ 90,214

Redemption of shares........................................ (3,258,203) (16,604)
Issuance of shares.......................................... 3,126,670 15,414
Adjustment of redemption value for
change in Formula Book Value per share.................... -- 7,067
---------- --------
Balance at June 30, 1997.................................... 18,130,430 $ 96,091

Redemption of shares........................................ (2,410,425) (13,141)
Issuance of shares.......................................... 196,752 1,005
Adjustment of redemption value for
change in Formula Book Value per share.................... -- 12,341
---------- --------
Balance at June 30, 1998.................................... 15,916,757 $ 96,296

Redemption of shares........................................ (2,361,542) (15,124)
Issuance of shares.......................................... 2,557,201 15,451
Adjustment of redemption value for
change in Formula Book Value per share.................... -- 11,008
---------- --------
Balance at June 30, 1999.................................... 16,112,416 $107,631
========== ========
</TABLE>

F-19
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 10--REDEEMABLE COMMON STOCK (CONTINUED)

The Company sponsors a Stock Purchase Plan ("SPP") which allows virtually
all associates to become shareholders. During 1999, the Company received
$15,451,000 from the sale of 2,557,201 shares of stock under the SPP. There was
no formal stock sale in fiscal year 1998, although for the fiscal year ended
June 30, 1998, the Company received $1,005,000 from the sale of 196,752 shares
of stock outside of the SPP. During fiscal year 1997, the Company received
$15,414,000 from the sale of 3,126,670 shares of stock under the SPP. During
1997, the Company paid each associate purchasing stock $0.50 per share,
resulting in expense of $1,300,000.

NOTE 11--INCOME TAXES

The provision for income taxes is based upon reported income before income
taxes and includes deferred income taxes resulting from differences between
assets and liabilities recognized for financial reporting purposes and such
amounts recognized for income tax purposes. The Company measures deferred taxes
by applying currently enacted tax laws, recognizes deferred tax assets if it is
more likely than not that a benefit will be realized, and provides a valuation
allowance on deferred tax assets to the extent that it is more likely than not
that a benefit will not be realized.

The components of the continuing operations income tax provision before
minority interest and discontinued operations include:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Current tax expense:
U.S....................................................... $10,817 $ 9,972 $ 8,370
State and local........................................... 4,050 3,324 2,773
Foreign................................................... 3,877 1,820 1,484
------- ------- -------
18,744 15,116 12,627
------- ------- -------
Deferred tax (benefit) expense:
U.S....................................................... (5,776) (337) (4,188)
State and local........................................... (1,407) (1,706) (1,507)
Foreign................................................... (113) 61 2,138
------- ------- -------
(7,296) (1,982) (3,557)
------- ------- -------
Total provision for income taxes............................ $11,448 $13,134 $ 9,070
======= ======= =======
</TABLE>

F-20
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 11--INCOME TAXES (CONTINUED)

Deferred income tax assets (liabilities) included in the consolidated
balance sheets at June 30, 1999 and June 30, 1998 are comprised of the
following:

<TABLE>
<CAPTION>
JUNE 30
-------------------
1999 1998
-------- --------
<S> <C> <C>
Cash method of accounting for U.S. income tax purposes...... $ -- $(15,561)
Difference between book and tax depreciation................ -- (1,987)
Foreign temporary difference................................ (2,595) (914)
------- --------
Gross deferred tax liabilities............................ (2,595) (18,462)

Cash method of accounting for U.S. income tax purposes...... 3,744 --
Difference between book and tax depreciation................ 3,202 --
Accrued retirement benefits................................. 37,137 39,255
Amortization of deferred rent............................... 5,697 6,794
Foreign temporary difference................................ 6,367 3,092
Foreign net operating loss carryforwards.................... 1,989 4,942
Discontinued operations exit costs.......................... 7,230 19,559
Other....................................................... 317 2
------- --------
Gross deferred tax assets................................. 65,683 73,644
------- --------
Deferred tax assets valuation allowance................... (6,882) (6,271)
------- --------
Net deferred tax asset.................................... $56,206 $ 48,911
======= ========
</TABLE>

The Company has foreign tax credit carryforwards for U.S. tax purposes of
$305,000. At June 30, 1999, the Company has unused loss carryforwards for tax
purposes in various jurisdictions outside the U.S. amounting to $6,352,000, of
which $4,350,000 can be indefinitely carried forward under local statutes. The
majority of the remaining loss carryforwards will expire, if unused, after the
end of fiscal year 2002. The valuation allowance applies to the tax effect of
the foreign net operating loss carryforwards ($1,944,000), the tax effect of
certain foreign temporary expenses ($4,563,000) and foreign tax credit
carryforwards and other items ($375,000) for which realizability is considered
uncertain.

The net change in the valuation allowance of $611,000 in fiscal year 1999
and $2,569,000 in fiscal year 1998 is due primarily to the tax effect of the
change in realizable foreign net operating losses, foreign tax credits and
non-deductible foreign expenses.

Domestic and foreign components of income before taxes, minority interest
and discontinued operations for each of the three years ended June 30 are as
follows:

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Domestic........................................ $15,203 $(47,435) $14,861
Foreign......................................... 8,597 4,469 6,757
------- -------- -------
$23,800 $(42,966) $21,618
======= ======== =======
</TABLE>

F-21
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 11--INCOME TAXES (CONTINUED)

The reported income tax provision for continuing operations differs from the
amounts that would have resulted had the reported income before income taxes
been taxed at the U.S. federal statutory rate. The principal reasons for the
differences between the actual amounts provided and those which would have
resulted from the application of the U.S. federal statutory tax rate are as
follows:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Calculated income tax provision at U.S. federal statutory
tax rate of 35%........................................... $ 8,330 $(15,038) $7,507
Increase (reduction) resulting from:
Non-deductible compensation expense....................... -- 24,467 --
Results of non-U.S. affiliates taxed at other than
statutory rates......................................... (377) (324) (463)
Losses of non-U.S. affiliates for which no current benefit
is available............................................ 881 852 599
State income taxes, net of federal tax benefit............ 1,207 1,618 1,266
Non-deductible amortization and other expenses............ 849 758 700
Tax credits............................................... -- (353) (888)
Other..................................................... 558 1,154 349
------- -------- ------
Income tax provision........................................ $11,448 $ 13,134 $9,070
======= ======== ======
</TABLE>

NOTE 12--NON-RECURRING COMPENSATION CHARGE

In accordance with generally accepted accounting principles, the Company has
recorded a charge against operating results of $69,906,000 in 1998 as
compensation expense. This charge arises because the Company changed the method
of calculation of its Formula Book Value during 1998, through a shareholder
vote, to eliminate from the Formula Book Value calculation the effect of the
charge taken for discontinued operations resulting from the discontinuation of
the Company's Benefits Administration Outsourcing Business.

The non-recurring compensation charge does not represent a call against
Company resources and will not recur unless the Company modifies its Formula
Book Value calculation again. The Company has separately disclosed in the
Statement of Operations the amount of the charge so that readers of the
financial statements may consider its effect on earnings and infrequent nature.
Excluding this charge, income from continuing operations for the Company in 1998
would have been $13,700,000 compared to the reported net loss from continuing
operations.

NOTE 13--SEGMENT INFORMATION

In fiscal year 1999, the Company adopted SFAS No. 131 "Disclosures about
Segments of an Enterprise and Related Information." The Company is primarily
organized geographically and has seven reportable segments:

(1) U.S. East

(2) U.S. Central

(3) U.S. West

F-22
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 13--SEGMENT INFORMATION (CONTINUED)

(4) Asia/Pacific

(5) Canada

(6) Latin America

(7) Data Services

The Company evaluates the performance of its segments and allocates
resources to them based on net operating income. Prior year data has been
restated to be consistent with current year classifications for comparative
purposes.

The table below presents specified information about reported segments as of
and for the year ended June 30, 1999 (in thousands):

<TABLE>
<CAPTION>
U.S. U.S. U.S. ASIA/ LATIN DATA
EAST CENTRAL WEST PACIFIC CANADA AMERICA SERVICES TOTAL
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
External fees............... $150,959 $130,568 $54,496 $44,404 $36,515 $5,691 $12,796 $435,429
Intersegment fees........... 37,738 24,369 18,957 4,284 5,010 1,424 329 92,111
Net operating income........ 45,287 27,087 1,236 7,085 3,488 223 3,736 88,142
Interest expense............ 1,158 856 471 17 300 98 5 2,905
Depreciation &
amortization.............. 5,950 4,414 3,351 1,281 1,186 143 185 16,510
Receivables................. 47,198 39,905 18,730 12,729 12,491 2,527 -- 133,580
Income from affiliates...... 2,524
</TABLE>

The table below presents specified information about reported segments as of
and for the year ended June 30, 1998 (in thousands):

<TABLE>
<CAPTION>
U.S. U.S. U.S. ASIA/ LATIN DATA
EAST CENTRAL WEST PACIFIC CANADA AMERICA SERVICES TOTAL
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
External fees............... $129,337 $125,639 $68,076 $38,429 $36,221 $6,062 $13,004 $416,768
Intersegment fees........... 28,187 15,296 14,210 3,945 4,443 1,153 249 67,483
Net operating income........ 28,286 25,127 10,476 65 4,315 574 3,742 72,585
Interest expense............ 963 710 494 33 314 68 14 2,596
Depreciation &
amortization.............. 5,801 3,758 2,822 1,458 1,077 149 166 15,231
Receivables................. 36,044 33,113 21,375 11,719 11,992 2,097 -- 116,340
Income from affiliates...... 258
</TABLE>

The table below presents specified information about reported segments as of
and for the year ended June 30, 1997 (in thousands):

<TABLE>
<CAPTION>
U.S. U.S. U.S. ASIA/ LATIN DATA
EAST CENTRAL WEST PACIFIC CANADA AMERICA SERVICES TOTAL
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
External fees............... $126,077 $121,613 $63,989 $45,468 $34,743 $5,024 $12,062 $408,976
Intersegment fees........... 17,518 12,739 8,002 2,851 2,789 784 573 45,256
Net operating income........ 18,169 26,797 11,595 5,162 2,595 225 3,146 67,689
Interest expense............ 1,165 799 322 10 262 35 17 2,610
Depreciation &
amortization.............. 5,838 3,555 2,353 1,599 1,006 132 193 14,676
Receivables................. 34,042 32,416 15,134 17,821 10,812 2,345 -- 112,570
Income from affiliates...... 105
</TABLE>

F-23
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 13--SEGMENT INFORMATION (CONTINUED)

Information about interest income and tax expense is not presented as it is
not produced internally.

A reconciliation of the information reported by segment to the consolidated
amounts follows for the years ended June 30:

<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
FEES:
Total segment external and intersegment fees................ $527,540 $484,251 $454,232
Reimbursable expenses not included in segment fees.......... 30,426 28,686 30,091
Other, net.................................................. (1,106) (277) 2,179
-------- -------- --------
Consolidated fees........................................... $556,860 $512,660 $486,502
======== ======== ========
NET OPERATING INCOME:
Total segment income........................................ $ 88,142 $ 72,585 $ 67,689
Non-recurring compensation charge........................... -- (69,906) --
Sublease loss............................................... (341) (790) (12,107)
Income from affiliates...................................... 2,524 258 105
Differences in allocation methods for depreciation, G&A and
pension costs............................................. 1,277 (6,208) 3,913
Gain on sale of business units.............................. 2,723 3,093 --
Discretionary payments...................................... (67,194) (37,400) (34,703)
Other, net.................................................. (3,331) (4,598) (3,279)
-------- -------- --------
Consolidated pretax income (loss) from continuing
operations................................................ $ 23,800 $(42,966) $ 21,618
======== ======== ========
INTEREST EXPENSE:
Total segment expense....................................... $ 2,905 $ 2,596 $ 2,610
Differences in allocation method............................ (259) 172 (1,104)
-------- -------- --------
Consolidated interest expense............................... $ 2,646 $ 2,768 $ 1,506
======== ======== ========
DEPRECIATION & AMORTIZATION:
Total segment expense....................................... $ 16,510 $ 15,231 $ 14,676
Capitalized software amortization, not allocated to
segments.................................................. -- 12,267 9,451
Goodwill amortization, not allocated to segments............ 1,568 549 695
Differences in allocation method and other.................. (2,830) (3,053) (2,728)
-------- -------- --------
Consolidated depreciation and amortization expense.......... $ 15,248 $ 24,994 $ 22,094
======== ======== ========
RECEIVABLES:
Total segment receivables................................... $133,580 $116,340 $112,570
Net valuation differences and receivables of discontinued
operations................................................ 2,286 13,056 11,191
-------- -------- --------
Total billed and unbilled receivables....................... 135,866 129,396 123,761
Assets not reported by segment.............................. 178,094 138,914 208,017
-------- -------- --------
Consolidated assets......................................... $313,960 $268,310 $331,778
======== ======== ========
</TABLE>

F-24
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 13--SEGMENT INFORMATION (CONTINUED)

The following represents total fees and long lived assets information by
geographic area as of and for the years ended June 30:

<TABLE>
<CAPTION>
FEES LONG LIVED ASSETS
------------------------------ ------------------------------
1999 1998 1997 1999 1998 1997
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
United States.......................... $464,521 $424,246 $395,351 $105,481 $ 95,617 $156,692
Foreign................................ 92,339 88,414 91,151 25,794 20,731 17,781
-------- -------- -------- -------- -------- --------
$556,860 $512,660 $486,502 $131,275 $116,348 $174,473
======== ======== ======== ======== ======== ========
</TABLE>

Fee revenue is based on the country of domicile for the legal entity which
originated the fees. Exclusive of the United States, fees from no single country
constituted more than 10% of consolidated revenues. Fees from no single customer
constituted more than 10% of consolidated revenues.

NOTE 14--RELATED PARTY TRANSACTIONS

In connection with the contractual servicing of the Retained Clients (as
defined in Note 16 of this report) which continued through September 1998,
Wellspring provided the services to those clients on behalf of the Company.
Expenses charged to the Company by Wellspring for such services for fiscal 1999,
1998 and 1997 were $11,600,000, $41,811,000 and $40,313,000, respectively. The
Company's obligation to service the Retained Clients ceased in fiscal year 1999
and there were no amounts due to Wellspring at June 30, 1999, compared with
$1,186,000 at June 30, 1998.

NOTE 15--COMMITMENTS AND CONTINGENT LIABILITIES

The Company is a defendant in certain lawsuits arising in the normal course
of business, some of which are in their earliest stages. Management currently
foresees no material liability to the Company resulting from such litigation,
and management believes that the Company carries adequate insurance, above
reasonable deductibles, or has appropriately accrued against any foreseeable
outcome of such litigation.

As of June 30, 1999, the Company and its affiliates had outstanding letters
of credit of $2,225,000.

The Company continues to guarantee certain leases for office premises and
equipment for Wellspring. Minimum remaining payments guaranteed under these
leases at June 30, 1999 total $59,800,000, which expire at various dates through
2007. These leases are also jointly and severally guaranteed by the Company's
former partner in Wellspring, State Street. The estimated loss from the
potential exercise of these guarantees has been included in the loss on disposal
of the Benefits Administration Outsourcing Business.

Anticipated commitments of funds for fiscal year 2000 are estimated at
$30,100,000, which includes expected purchases of fixed assets and an
installment payment during the fiscal year related to the purchase of one
consulting operation. The Company expects operating cash flows to provide for
the Company's cash needs.

F-25
<PAGE>
WATSON WYATT & COMPANY

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)

(TABULAR AMOUNTS IN THOUSANDS OF DOLLARS EXCEPT SHARE AND PERCENTAGE DATA)

NOTE 16--DISCONTINUED OPERATIONS

During the third quarter of fiscal year 1998, the Company discontinued its
Benefits Administration Outsourcing Business, including its investment in its
affiliate Wellspring Resources LLC ("Wellspring"), pursuant to a Redemption,
Restructuring, and Indemnity Agreement ("the Restructuring Agreement") by which
Wellspring redeemed the Company's 50% interest in Wellspring effective April 1,
1998. The restructuring effected, pursuant to the Restructuring Agreement, the
implementation of a discontinuation plan approved by the Company's Board of
Directors on February 18, 1998. Under the Restructuring Agreement, certain
outsourcing contracts retained by the Company when Wellspring was initially
formed in 1996 ("Retained Clients") would continue to be performed until their
respective contract expirations.

In connection with the restructuring, the Company agreed to indemnify
Wellspring for certain costs and losses as a result of services provided by
Wellspring on the Company's behalf. Further, the Company was released from
certain liabilities relating to the Wellspring business in connection with the
redemption.

In 1998, the Company recorded a pre-tax loss on discontinuation of
$109,800,000, which included the $45,200,000 write-off of its investment in
Wellspring, a $14,000,000 write-off of net capitalized software development
costs for the Retained Clients and a $50,600,000 provision for completion of any
obligations to clients, vendors or its former venture partner.

In October 1998, the Company consummated agreements with the remaining
Retained Clients, Wellspring, and its former venture partner to transfer
operating responsibility for these clients to Wellspring, clarifying the
remaining future obligations and costs related to the discontinuation.
Management believes that savings of $25,000,000 compared with initial estimates
made in the third quarter of fiscal 1998 and $15,000,000 from the amount
provided at June 30, 1998 will be realized from these events. The Company
reduced the amount of its provision for losses from disposal of the Benefits
Administration Outsourcing Business in the second quarter of fiscal year 1999. A
credit to income of $15,000,000, less the associated tax expense of $6,322,000,
is reflected in the Consolidated Statement of Operations for fiscal year 1999 in
the line "Adjustment (loss) on disposal of discontinued Outsourcing Business".

F-26
<PAGE>
WATSON WYATT & COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED SEPTEMBER 30,
---------------------------------
1999 1998
--------------- ---------------
(UNAUDITED)
<S> <C> <C>
Fees........................................................ $146,323 $133,985
-------- --------
Costs of providing services:
Salaries and employee benefits............................ 79,803 76,398
Stock incentive bonus..................................... 6,000 2,100
Occupancy and communications.............................. 14,742 14,521
Professional and subcontracted services................... 9,796 8,714
Other..................................................... 7,274 2,846
-------- --------
117,615 104,579

General and administrative expenses......................... 13,178 11,160
Depreciation and amortization............................... 4,907 3,853
-------- --------
135,700 119,592
-------- --------
Income from operations...................................... 10,623 14,393

Other:
Interest income........................................... 1,036 124
Interest expense.......................................... (390) (553)
Income from affiliates...................................... 988 160
-------- --------

Income before income taxes and minority interest............ 12,257 14,124

Provision for income taxes.................................. 5,919 6,830
-------- --------
Income before minority interest............................. 6,338 7,294

Minority interest in net loss of consolidated
subsidiaries.............................................. 18 --
-------- --------
Net Income.................................................. $ 6,356 $ 7,294
======== ========
Earnings per share, basic and fully diluted................. $ 0.41 $ 0.47
======== ========
Weighted average shares of Redeemable Common Stock.......... 15,331 15,377
======== ========
</TABLE>

See accompanying notes

F-27
<PAGE>
WATSON WYATT & COMPANY

CONSOLIDATED BALANCE SHEETS

(THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
SEPTEMBER 30, JUNE 30,
1999 1999
------------- --------
(UNAUDITED)
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 13,835 $ 35,985
Receivables from clients:
Billed, net of allowances of $6,526 and $3,701............ 76,215 72,798
Unbilled.................................................. 70,581 63,068
-------- --------
146,796 135,866
Other current assets........................................ 10,389 10,834
-------- --------
Total current assets...................................... 171,020 182,685
Investment in affiliates.................................... 16,561 15,306
Fixed assets................................................ 40,887 42,797
Deferred income taxes....................................... 56,206 56,206
Intangible assets........................................... 9,804 7,455
Other assets................................................ 9,908 9,511
-------- --------
$304,386 $313,960
======== ========

LIABILITIES, REDEEMABLE COMMON STOCK AND PERMANENT SHAREHOLDERS' EQUITY
Accounts payable and accrued liabilities.................... $125,393 $152,371
Note payable and book overdrafts............................ 31,562 248
Income taxes payable........................................ 8,393 18,374
-------- --------
Total current liabilities................................. 165,348 170,993
Accrued retirement benefits................................. 74,871 77,140
Deferred rent and accrued lease losses...................... 9,078 9,270
Other noncurrent liabilities................................ 22,149 22,608
Minority interest in subsidiaries........................... 564 669
Redeemable Common Stock--$1 par value:
25,000,000 shares authorized; 15,012,350 and 16,112,416
issued and outstanding; at redemption value............... 100,282 107,631
Permanent shareholders' equity:
Adjustment for redemption value less than amounts paid in by
shareholders.............................................. 10,641 11,420
Retained deficit............................................ (76,496) (83,209)
Cumulative translation loss (other comprehensive loss)...... (2,051) (2,562)
Commitments and contingencies...............................
-------- --------
$304,386 $313,960
======== ========
</TABLE>

See accompanying notes

F-28
<PAGE>
WATSON WYATT & COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(THOUSANDS OF U.S. DOLLARS)

<TABLE>
<CAPTION>
THREE MONTHS ENDED
SEPTEMBER 30,
-------------------
1999 1998
-------- --------
(UNAUDITED)
<S> <C> <C>
Cash flows from (used for) operating activities:
Net income................................................ $ 6,356 $ 7,294
Adjustments to reconcile net income to net cash provided
by operating activities:
Provision for doubtful receivables from clients......... 4,169 1,957
Depreciation............................................ 4,519 3,601
Amortization of intangible assets....................... 388 252
Income from affiliates.................................. (988) (160)
Minority interest in net loss of consolidated
subsidiaries.......................................... (18) --
(Increase) decrease in assets (net of discontinued
operations):
Receivables from clients.............................. (15,098) (15,093)
Income taxes receivable............................... -- 2,216
Other current assets.................................. 445 (3,287)
Other assets.......................................... (397) 635
(Decrease) increase in liabilities (net of discontinued
operations):
Accounts payable and accrued liabilities.............. (26,978) (18,828)
Income taxes payable.................................. (9,981) 3,396
Accrued retirement benefits........................... (2,269) (24)
Deferred rent and accrued lease losses................ (192) (635)
Other noncurrent liabilities.......................... 178 489
Other, net.............................................. (72) (108)
Discontinued operations, net............................ (637) (717)
-------- --------
Net cash used for operating activities.................. (40,575) (19,012)
-------- --------
Cash flows (used in) from investing activities:
Purchases of fixed assets................................. (2,645) (2,775)
Acquisitions.............................................. (2,700) (5,671)
Investment in affiliates.................................. 297 1,151
-------- --------
Net cash used in investing activities................... (5,048) (7,295)
-------- --------
Cash flows from (used by) financing activities:
Borrowings and book overdrafts............................ 31,314 32,944
Issuances of Redeemable Common Stock...................... -- --
Repurchases of Redeemable Common Stock.................... (7,771) (6,285)
-------- --------
Net cash from financing activities...................... 23,543 26,659
-------- --------
Effect of exchange rates on cash............................ (70) (165)
-------- --------
(Decrease) increase in cash and cash equivalents............ (22,150) 187
Cash and cash equivalents at beginning of period............ 35,985 13,405
-------- --------
Cash and cash equivalents at end of period.................. $13,835 $ 13,592
======== ========
</TABLE>

See accompanying notes

F-29
<PAGE>
WATSON WYATT & COMPANY

CONSOLIDATED STATEMENTS OF CHANGES IN PERMANENT SHAREHOLDERS' EQUITY

(THOUSANDS OF U.S. DOLLARS)

(UNAUDITED)

<TABLE>
<CAPTION>
ADJUSTMENT FOR
REDEMPTION VALUE
CUMULATIVE LESS THAN AMOUNTS
RETAINED TRANSLATION PAID IN BY
DEFICIT LOSS SHAREHOLDERS TOTAL
-------- ----------- ----------------- --------
<S> <C> <C> <C> <C>
Balance at June 30, 1999...................... $(83,209) $(2,562) $11,420 $(74,351)
Comprehensive Income:
Net income.................................... 6,356 -- -- 6,356
Foreign currency translation adjustment....... -- 511 -- 511
-------- ------- ------- --------
Total Comprehensive Income.................... 6,356 511 -- 6,867
Effect of repurchases of 1,100,066 shares of
common stock................................ 357 -- (357) --
Adjustment of redemption value for change in
Formula Book Value per share................ -- -- (422) (422)
-------- ------- ------- --------
Balance at September 30, 1999................. $(76,496) $(2,051) $10,641 $(67,906)
======== ======= ======= ========
</TABLE>

See accompanying notes

F-30
<PAGE>
WATSON WYATT & COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)

1. The accompanying unaudited consolidated financial statements of Watson
Wyatt & Company and its subsidiaries, (collectively, "Watson Wyatt" or the
"Company"), are presented in accordance with the rules and regulations of
the Securities and Exchange Commission ("SEC") and do not include all of the
disclosures normally required by Generally Accepted Accounting Principles.
In the opinion of management, these statements reflect all adjustments,
consisting only of normal recurring adjustments, which are necessary for a
fair presentation of the consolidated financial statements for the interim
periods. The consolidated financial statements should be read in conjunction
with the audited consolidated financial statements and notes thereto
contained in the Company's Annual Report on Form 10-K for the year ended
June 30, 1999.

The results of operations for the three months ended September 30, 1999 are
not necessarily indicative of the results that can be expected for the
entire fiscal year ending June 30, 2000. The results reflect prorata growth
in share value, anticipated tax rates and potential distributions at the
discretion of the Company's Board of Directors. Certain prior year amounts
have been reclassified to conform to the current year presentation.

2. Under the Company's Bylaws, the Company is obligated to repurchase its
Redeemable Common Stock, except in certain circumstances. Accordingly, the
redemption value of outstanding shares is classified as Redeemable Common
Stock and not as permanent shareholders' equity. Redeemable Common Stock is
equal to the number of shares outstanding multiplied by the Formula Book
Value per share, which was $6.68 per share at September 30, 1999 and
June 30, 1999. Permanent shareholders' equity includes an adjustment for the
difference between the redemption value of the Redeemable Common Stock and
the amounts actually paid or deemed paid by shareholders for the shares.

3. During the three months ended September 30, 1999, the Company repurchased
1,100,066 shares of Redeemable Common Stock. The computation of earnings per
share is based upon the weighted average number of shares of Redeemable
Common Stock outstanding during the period. The number of shares (in
thousands) used in the computation is 15,331 and 15,377 for the three months
ended September 30, 1999 and 1998, respectively.

4. In the third quarter of fiscal year 1998, the Company discontinued its
Benefits Administration Outsourcing Business, including its investment in
its affiliate Wellspring Resources, LLC ("Wellspring"). The Company recorded
an after tax loss of $69.9 million. In October 1998, the Company consummated
agreements with certain clients, Wellspring, and its former venture partner
to transfer operating responsibility for these clients to Wellspring,
clarifying the remaining future obligations and costs related to the
discontinuation. The Company reduced the amount of its provision for losses
from disposal of the Outsourcing Business in the second quarter of fiscal
year 1999 by $8.7 million, net of tax, and believes it has adequate
provisions for any remaining costs. No adjustments to net income were
recorded as a result of the discontinuation during the quarters ended
September 30, 1999 and 1998.

5. The Company has adopted SFAS No. 130 "Reporting Comprehensive Income."
Comprehensive income includes net income and changes in the cumulative
translation gain or loss. For the three months ended September 30, 1999,
comprehensive income totaled $6.9 million compared with $7.3 million for the
three months ended September 30, 1998.

F-31
<PAGE>
WATSON WYATT & COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)

6. In fiscal year 1999, the Company adopted SFAS No. 131 "Disclosures about
Segments of an Enterprise and Related Information." The Company is primarily
organized geographically and has seven reportable segments:

(1) U.S. East
(2) U.S. Central
(3) U.S. West
(4) Asia/Pacific
(5) Canada
(6) Latin America
(7) Data Services

The Company evaluates the performance of its segments and allocates resources to
them based on net operating income. Prior year data has been restated to be
consistent with current year classifications.

The table below presents specified information about reported segments as of and
for the quarter ended September 30, 1999 (in thousands):

<TABLE>
<CAPTION>
U.S. U.S. U.S. ASIA/ LATIN DATA
EAST CENTRAL WEST PACIFIC CANADA AMERICA SERVICES TOTAL
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
External fees................... $41,238 $33,340 $14,883 $12,346 $8,628 $1,219 $3,592 $115,246
Intersegment fees............... 10,550 7,006 4,631 1,079 1,098 346 34 24,744
Net operating income............ 14,700 6,691 2,218 1,778 (22) (282) 1,883 26,966
Receivables..................... 58,459 44,369 18,398 13,552 11,386 2,639 -- 148,803
</TABLE>

The table below presents specified information about reported segments as of and
for the quarter ended September 30, 1998 (in thousands):

<TABLE>
<CAPTION>
U.S. U.S. U.S. ASIA/ LATIN DATA
EAST CENTRAL WEST PACIFIC CANADA AMERICA SERVICES TOTAL
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
External fees................... $34,598 $30,946 $17,253 $11,203 $8,396 $1,006 $3,904 $107,306
Intersegment fees............... 9,458 5,319 4,763 625 1,262 458 92 21,977
Net operating income............ 12,112 6,485 3,705 1,804 470 (118) 1,756 26,214
Receivables..................... 45,819 38,895 24,423 11,286 13,324 1,889 -- 135,636
</TABLE>

Information about interest income and tax expense is not presented as it is not
considered a responsibility of the segments' operating management.

F-32
<PAGE>
WATSON WYATT & COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED) (CONTINUED)

A reconciliation of the information reported by segment to the consolidated
amounts follows for the quarters ended September 30:

<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Fees:
Total segment external and intersegment fees................ $139,990 $129,283
Reimbursable expenses not included in segment fees.......... 6,227 6,001
Other, net.................................................. 106 (1,299)
-------- --------
Consolidated fees........................................... $146,323 $133,985
======== ========
Net Operating Income:
Total segment income........................................ $ 26,966 $ 26,214
Income from affiliates...................................... 988 160
Differences in allocation methods for depreciation, G&A and
pension costs............................................. 2,112 1,833
Gain on sale of business units.............................. -- 3,822
Discretionary payments...................................... (21,198) (15,774)
Other, net.................................................. 3,389 (2,131)
-------- --------
Consolidated pretax income from continuing operations....... $ 12,257 $ 14,124
======== ========
Receivables:
Total segment receivables--billed and unbilled.............. $148,803 $135,636
Net valuation differences and receivables of discontinued
operations................................................ (2,007) 5,155
-------- --------
Total billed and unbilled receivables....................... 146,796 140,791
Assets not reported by segment.............................. 157,590 143,546
-------- --------
Consolidated assets......................................... $304,386 $284,337
======== ========
</TABLE>

F-33
<PAGE>
ANNEX A

FORM OF AGREEMENT AND PLAN OF MERGER

AGREEMENT AND PLAN OF MERGER, dated as of , among Watson
Wyatt & Company ("WW&CO."), Watson Wyatt & Company Holdings ("WW HOLDINGS") and
WW Merger Subsidiary, Inc. ("MERGER SUB"), each a Delaware corporation.

RECITALS

WW&Co. is a corporation duly organized and existing under the laws of the
State of Delaware.

WW Holdings is a corporation duly organized and existing under the laws of
the State of Delaware and a wholly owned subsidiary of WW&Co.

Merger Sub is a corporation duly organized and existing under the laws of
the State of Delaware and a wholly owned subsidiary of WW Holdings.

The respective boards of directors of WW&Co., WW Holdings and Merger Sub
have determined that it is advisable and in the best interests of each
corporation that Merger Sub merge with and into WW&Co. (the "MERGER") on the
terms, and subject to the conditions, of this Agreement and the Delaware General
Corporation Law ("DGCL"). As a result of the Merger and related transactions,
WW&Co. will become a wholly-owned subsidiary of WW Holdings, and the separate
existence of Merger Sub will cease.

The respective boards of directors of WW&Co., WW Holdings and Merger Sub
have been duly advised of the terms and conditions of the Merger and, by
resolutions duly adopted, have authorized, approved and adopted this Agreement.
The stockholders of WW&Co. will approve and adopt this Agreement at a special
meeting of stockholders on , 2000. The sole stockholder of each of
WW Holdings and Merger Sub will approve and adopt this Agreement by written
consent without a meeting.

The parties intend by this Agreement to effect a "reorganization" under
Section 361 of the Internal Revenue Code of 1986, as amended.

NOW, THEREFORE, on the terms, and subject to the conditions, of this
Agreement, WW&Co., WW Holdings and Merger Sub agree as follows.

ARTICLE 1
THE MERGER; RELATED TRANSACTIONS

1.1 EFFECTIVE DATE. As soon as practicable following the satisfaction or
waiver of the conditions set forth in Article 2, the Merger will be consummated
by WW Holdings' filing a certificate of merger (the "CERTIFICATE OF MERGER")
with the Secretary of State of the State of Delaware in accordance with
Section 251 of the DGCL. The Merger will become effective when the Certificate
of Merger is filed or such later time as is set forth in the Certificate of
Merger. The date and time when the Merger becomes effective is called the
"EFFECTIVE DATE."

1.2 MERGER.
(a) On the Effective Date:

(i) Merger Sub will merge with and into WW&Co., and WW&Co. will be the
surviving corporation in the Merger (the "SURVIVING CORPORATION");

(ii) the separate existence of Merger Sub will cease, and the Surviving
Corporation will succeed, without other transfer, to all of the
rights and property of Merger Sub, and will

A-1
<PAGE>
be subject to all of the debts and liabilities of Merger Sub, as
provided for in Section 259 of the DGCL.

(b) On and after the Effective Date, the Surviving Corporation will carry on
its business with the assets of Merger Sub, as well as with the assets of
the Surviving Corporation.

1.3 EFFECT ON WW&CO. AND MERGER SUB CAPITAL STOCK. At the Effective Date,
by virtue of the Merger and without any action on the part of the holders of
capital stock of WW&Co.:

(a) each share of common stock, par value $1.00 per share, of WW&Co. issued
and outstanding immediately before the Effective Date will convert into
the right to receive:

(i) ( ) share of validly issued, fully paid and non-assessable
class B-1 common stock, par value $.01 per share, of WW Holdings; and

(ii) ( ) share of validly issued, fully paid and non-assessable
class B-2 common stock, par value $.01 per share, of WW Holdings;

(b) all such converted shares of WW&Co. common stock will no longer be
outstanding and automatically will be canceled and retired and will cease
to exist. Each holder of a certificate representing any such converted
shares of WW&Co. common stock, or each person listed on the stock
transfer books of WW&Co. as owning any such shares of WW&Co. common
stock, will cease to have any rights with respect to such converted
shares, except the right to receive the shares of class B-1 common stock
and class B-2 common stock of WW Holdings to be issued in consideration
for such shares; and

(c) each share of Merger Sub common stock outstanding immediately before the
Effective Date will convert into one validly issued, fully paid and
non-assessable share of common stock, par value $1.00 per share, of the
Surviving Corporation.

1.4 FRACTIONAL SHARES. No holder of Watson Wyatt & Company common stock on
the Effective Date will receive fractional shares. Instead, any such holder will
receive cash equal to the fair value of such fractional shares or WW&Co. will
arrange for the disposition of such fractional interests.

1.5 CERTIFICATE OF INCORPORATION AND BYLAWS. The certificate of
incorporation of WW&Co. in effect at the Effective Date will be the certificate
of incorporation of the Surviving Corporation until changed or amended as
provided therein or by applicable law.

1.5 COVENANT TO CONTRIBUTE CAPITAL. On the Effective Date, WW&Co. will
contribute to the capital of WW Holdings each issued and outstanding share of
common stock of WW Holdings that is owned by WW&Co. immediately prior to the
Effective Date.

ARTICLE 2
CONDITIONS TO CONSUMMATION OF THE MERGER

2.1 CONDITIONS TO EACH PARTY'S OBLIGATION TO EFFECT THE MERGER. The
respective obligations of each party to effect the Merger are subject to the
satisfaction or waiver, where permissible, prior to the Effective Date, of the
following conditions:

(a) the registration statement filed on Form S-4 with respect to the
issuance of shares of class B common stock of WW Holdings has been
declared effective by the Securities and Exchange Commission (the
"COMMISSION");

(b) more than 50% of the outstanding shares of common stock of WW&Co.
entitled to vote have voted to adopt this Agreement;

A-2
<PAGE>
(c) more than 80% of outstanding shares of common stock of WW&Co. actually
voting for or against the proposal, have voted to adopt this Agreement,
if more than the votes required under clause (b) above;

(d) the registration statement filed on Form S-3 with respect to the
issuance of shares of class A common stock of WW Holdings has been
declared effective by the Commissioner;

(e) no statute, rule, regulation, executive order, decree, injunction or
other order has been enacted, entered, promulgated or enforced by any
court or governmental authority that is in effect and has the effect of
prohibiting the consummation of the Merger; and

(f) all approvals and consents necessary or desirable, if any, in connection
with consummation of the Merger have been obtained.

ARTICLE 3
MISCELLANEOUS

3.1 AMENDMENT; WAIVER. At any time before the Effective Date, WW&Co. and
Merger Sub may, to the extent permitted by the DGCL, by written agreement amend,
modify or supplement any provision of this Agreement.

3.2 ABANDONMENT. At any time before the Effective Date, this Agreement may
be terminated and the Merger may be abandoned by the board of directors of
WW&Co.

3.3 ENTIRE AGREEMENT; ASSIGNMENT. This Agreement constitutes the entire
agreement and supersedes all prior agreements and understandings, both written
and oral, among the parties with respect to the subject matter hereof. Neither
this Agreement nor any right, interest or obligation under this Agreement may be
assigned, in whole or in part, by operation of law or otherwise, without the
prior written consent of the other parties.

3.4 GOVERNING LAW. This Agreement will be governed by and construed in
accordance with the substantive laws of the State of Delaware, regardless of the
laws that might otherwise govern under principles of conflicts of laws
applicable thereto.

3.5 PARTIES IN INTEREST. Nothing in this Agreement, express or implied, is
intended to confer upon any other person any rights or remedies of any nature
whatsoever under or by reason of this Agreement.

3.6 COUNTERPARTS. This Agreement may be executed in one or more
counterparts, each of which will be deemed to be an original, but all of which
will constitute one and the same agreement, and will become effective when one
or more counterparts have been signed by each of the parties and delivered to
the other parties.

A-3
<PAGE>
IN WITNESS WHEREOF, each of the parties has caused this Agreement to be
executed on its behalf by its respective officers thereunto duly authorized, all
as of the date set forth above.

<TABLE>
<S> <C> <C>
WATSON WYATT & COMPANY

By:
----------------------------------------
Name:
Title:

WATSON WYATT & COMPANY HOLDINGS

By:
----------------------------------------
Name:
Title:

WW MERGER SUBSIDIARY, INC.

By:
----------------------------------------
Name:
Title:
</TABLE>

A-4
<PAGE>
ANNEX D

WATSON WYATT & COMPANY HOLDINGS
2000 LONG-TERM INCENTIVE PLAN

1. <*>Purpose.</*> The purpose of the Watson Wyatt & Company Holdings 2000
Long-Term Incentive Plan (the "Plan") is to secure for Watson Wyatt & Company
Holdings and its successors and assigns (the "Company") and its stockholders the
benefits of the additional incentive inherent in the ownership of the Company's
class A common stock, par value $.01 per share (the "Common Stock"), by selected
employees of the Company and its subsidiaries who are important to the success
and growth of the business of the Company and its subsidiaries and to help the
Company and its subsidiaries secure and retain the services of such persons.
Compensation awarded under the Plan is intended to qualify for tax deductibility
pursuant to the requirements of Section 162(m) of the Internal Revenue Code of
1986, as amended from time to time or any successor statute or statutes (the
"Code"), to the extent deemed appropriate by the Committee (as defined in
Paragraph 2.1).

Pursuant to the Plan, such employees will be offered the opportunity to
acquire Common Stock through the grant of options, or to receive similar
economic benefit through the grant of stock appreciation rights (such options
and stock appreciation rights collectively referred to as "Awards"). Options
granted under the Plan will be "nonqualified stock options" for purposes of the
Code. For purposes of the Plan, the terms "parent" and "subsidiary" shall mean
"parent corporation" and "subsidiary corporation," respectively, as such terms
are defined in Sections 424(e) and (f) of the Code; provided, however, that with
respect to any jurisdiction where the Company is prohibited by law from owning
50% of the voting shares of an entity, any entity formed in such jurisdiction
shall be deemed a "subsidiary" if the Company holds the maximum percentage of
voting shares permitted to be held under the laws of such jurisdiction.

2. <*>Committee.</*>

2.1 <*>Administration.</*> The Plan shall be administered by a Committee
appointed by the Board of Directors of the Company (the "Committee"). The
Committee shall consist of two or more directors who are "non-employee
directors", within the meaning of Rule 16b-3 under the Securities Exchange Act
of 1934, as amended (the "Exchange Act"), and "outside directors" within the
meaning of Section 162(m) of the Code. Any vacancy on the Committee, whether due
to action of the Board of Directors or due to any other cause, may be filled,
and shall be filled if required to maintain a Committee of at least two such
persons, by resolution adopted by the Board of Directors.

2.2 <*>Procedures.</*> The Committee shall select one of its members as
Chairman and shall adopt such rules and regulations as it shall deem appropriate
concerning the holding of its meetings and the administration of the Plan. A
majority of the whole Committee shall constitute a quorum, and the acts of a
majority of the members of the Committee present at a meeting at which a quorum
is present, or acts approved in writing by all of the members of the Committee,
shall be the acts of the Committee.

2.3 <*>Interpretation.</*> The Committee shall have full power and
authority to interpret the provisions of the Plan and any agreement evidencing
options granted under the Plan, and to determine any and all questions arising
under the Plan, and its decisions shall be final and binding on all participants
in the Plan.

2.4 <*>Delegation.</*> The Committee may delegate, to the chief executive
officer of the Company, the authority to grant Awards under this Plan in such
circumstances as the Committee shall deem appropriate.

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<PAGE>
3. <*>Shares Subject to Grants.</*>

3.1 <*>Number of Shares.</*> Subject to the provisions of Paragraph 16
(relating to adjustments upon changes in capitalization), the number of shares
of Common Stock with respect to which Awards may be granted under the Plan shall
be shares. If and to the extent that (i) Awards granted under the Plan
terminate, expire or are cancelled without having been exercised, or
(ii) shares of Common Stock are tendered or delivered by a Participant to pay
the option price of an option upon exercise thereof or to satisfy the tax
withholding requirement relating to such exercise, the number of shares of
Common Stock covered by such terminated, expired or cancelled Awards or tendered
or delivered by the Participant shall be added to the number of authorized
shares remaining.

3.2 <*>Character of Shares.</*> Shares of Common Stock delivered under the
Plan may be authorized and unissued Common Stock, issued Common Stock held in
the Company's treasury, or both.

3.3 <*>Reservation of Shares.</*> There shall be reserved at all times for
sale or award under the Plan a number of shares of Common Stock (authorized and
unissued Common Stock, issued Common Stock held in the Company's treasury, or
both) equal to the number of shares provided in Paragraph 3.1 from time to time.

4. <*>Employees Eligible.</*> Awards may be granted under the Plan to any
employee of the Company or any of its subsidiaries (each an "eligible
employee"), or to any prospective employee of the Company or any of its
subsidiaries, conditioned upon, and effective not earlier than, such person's
becoming an eligible employee. Members of the Board of Directors of the Company
who are not employees of the Company or any of its subsidiaries shall also be
eligible to receive grants under the Plan. Notwithstanding the foregoing, in
each calendar year during any part of which the Plan is in effect, no
Participant (as defined below) may be granted Awards relating in the aggregate
to more than 200,000 shares of Common Stock, subject to adjustment as provided
in Paragraph 16.

An individual receiving a grant of an Award under the Plan is hereinafter
referred to as a "Participant." Any reference herein to the "employment" of a
Participant by the Company shall include (i) his or her employment by the
Company or any of its subsidiaries, and (ii) with respect to a Participant who
was not an employee of the Company or any of its subsidiaries at the time of
grant of his or her Award, his or her period of service in the capacity for
which the Award was granted. For all purposes of this Plan, the time at which an
Award is granted shall be deemed to be the effective date of such grant.

5. <*>Grant of Options.</*> The Committee shall determine, within the
limitations of the Plan, the persons to whom options are to be granted, the
number of shares that may be purchased under each option, and the option price.
In determining the persons to whom options shall be granted and the number of
shares to be covered by each option, the Committee shall take into consideration
the person's present and potential contribution to the success of the Company
and its subsidiaries and such other factors as the Committee may deem proper and
relevant. Each option granted under the Plan shall be evidenced by a written
agreement ("Award Agreement") between the Company and the Participant containing
such terms and conditions and in such form, not inconsistent with the provisions
of the Plan, as the Committee shall provide.

6. <*>Option Price.</*> Subject to Paragraph 16, the option price of each
share of Common Stock purchasable under any option granted under the Plan shall
not be less than the fair market value of such share of Common Stock at the time
the option is granted, and may not be changed while such option is outstanding.
The option price of an option issued in a transaction described in
Section 424(a) of the Code shall be an amount which conforms to the requirements
of that Section and the regulations thereunder.

For purposes of this Plan, the "fair market value" of the Common Stock on
any date means (i) if the Common Stock is listed on a national securities
exchange or quotation system, the closing sales

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<PAGE>
price on such exchange or quotation system on such date or, in the absence of
reported sales on such date, the closing sales price on the immediately
preceding date on which sales were reported, (ii) if the Common Stock is not
listed on a national securities exchange or quotation system, the mean between
the bid and offered prices as quoted by the National Association of Securities
Dealers, Inc. Automated Quotation System ("NASDAQ") for such date or (iii) if
the Common Stock is neither listed on a national securities exchange or
quotation system nor quoted by NASDAQ, the fair value as determined by such
other method as the Committee determines in good faith to be reasonable.

7. <*>Stock Appreciation Rights.</*> The Committee, in its sole
discretion, may grant to an eligible employee a stock appreciation right with
respect to a stated number of shares of Common Stock. Each stock appreciation
right granted under the Plan shall be evidenced by an Award Agreement between
the Company and the Participant containing such terms and conditions and in such
form, not inconsistent with the provisions of the Plan, as the Committee shall
provide. A stock appreciation right shall be exercised in the manner provided in
Paragraph 9, and, upon such exercise, the Company shall pay to the Participant
an amount equal to the excess of (i) the fair market value, as of the exercise
date, of the number of shares with respect to which the stock appreciation right
is being exercised over (ii) the fair market value of such shares determined on
the date of grant of such stock appreciation right. Payment upon the exercise of
stock appreciation rights shall be made by the Company in cash to the
Participant as soon as practicable following exercise; provided, however, that
in the discretion of the Committee, such payment may be made by distributing to
the Participant a number of shares of Common Stock having a fair market value,
as of the date of exercise, equal to the amount otherwise payable, with the
value of any fractional shares paid in cash.

8. <*>Exercisability and Duration of Awards.</*>

8.1 <*>Determination of Committee; Acceleration.</*> Each Award granted
under the Plan shall be exercisable at such time or times, or upon the
occurrence of such event or events, and in such amounts, as the Committee shall
specify in the Award Agreement. Subsequent to the grant of an Award which is not
immediately exercisable in full, the Committee, at any time before complete
termination of such option, may accelerate the time or times at which such Award
may be exercised in whole or in part. Notwithstanding the foregoing, unless
provided otherwise in the Award Agreement, an Award shall become exercisable in
full upon the death or disability of the Participant to whom the Award was
granted while he or she is an employee of the Company or any of its
subsidiaries.

8.2 <*>Automatic Termination.</*>

(a) An Award shall terminate and become null and void upon the
expiration of seven years from the date on which such Award was granted (or
upon such later date as may be prescribed by clause (c)(iii), below);

(b) An unexercised Award shall terminate and become null and void upon a
Participant's failure to comply with the requirements of Paragraph 17;

(c) Upon termination of the Participant's employment, an Award shall
automatically and without notice terminate and become null and void to the
extent that the Award is not then exercisable (and has not become
exercisable by reason of such termination). The unexercised portion of any
Award granted under the Plan which is then exercisable (or which has become
exercisable by reason of the termination of employment) shall automatically
and without notice terminate and become null and void upon the earliest to
occur of the following:

(i) The date prescribed in clause (a), above;

(ii) The expiration of three years from the date of termination of
the Participant's employment by reason of retirement, disability, or
other reason specified by the Committee in the Award Agreement;

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<PAGE>
(iii) The expiration of one year following the death of a
Participant, if the Participant's death occurs during his or her
employment by the Company or any of its subsidiaries;

(iv) Subject to (vi) below, the expiration of one year following the
involuntary termination of the Participant's employment;

(v) The voluntary termination of the Participant's employment;

(vi) The termination of the Participant's employment if such
termination constitutes or is attributable to a breach by the Participant
of an employment or consulting agreement with the Company or any of its
subsidiaries, or if the Participant is discharged or his or her services
are terminated for cause; or

(vii) The expiration of such period of time or the occurrence of such
event as the Committee in its discretion may provide upon the granting
thereof.

The Committee shall have the right to determine what constitutes cause for
discharge or termination of services, whether the Participant has been
discharged or his or her services terminated for cause and the date of such
discharge or termination of services, and such determination of the Committee
shall be final and conclusive.

9. <*>Exercise of Awards.</*> Awards granted under the Plan shall be
exercised by the Participant (or by his or her executors or administrators, as
provided in Paragraph 10) as to all or part of the shares covered thereby, by
the giving of written notice of exercise to the Company, specifying the number
of shares to be purchased or the number of shares with respect to which stock
appreciation rights are being exercised, accompanied, in the case of an option,
by payment of the full purchase price for the shares being purchased. Payment of
such purchase price shall be made (a) by check payable to the Company, (b) with
the consent of the Committee, by delivery of shares of Common Stock already
owned by the Participant for at least six months (which may include shares
received as the result of a prior exercise of an option) having a fair market
value (determined as of the date such option is exercised) equal to all or part
of the aggregate purchase price, (c) in accordance with a "cashless exercise"
program established by the Committee in its sole discretion under which if so
instructed by the Participant, shares may be issued directly to the
Participant's broker or dealer upon receipt of the purchase price in cash from
the broker or dealer, (d) by any combination of (a), (b), or (c) above, or
(e) by other means that the Committee deems appropriate. Such notice of
exercise, accompanied by such payment, if applicable, shall be delivered to the
Company at its principal business office or such other office as the Committee
may from time to time direct, and shall be in such form, containing such further
provisions consistent with the provisions of the Plan, as the Committee may from
time to time prescribe. The date of exercise shall be the date of the Company's
receipt of such notice. Upon exercise of an option, the Company shall effect the
transfer of the shares so purchased to the Participant (or such other person
exercising the option pursuant to Paragraph 10 hereof) as soon as practicable.
No Participant or other person exercising an option shall have any of the rights
of a stockholder of the Company with respect to shares subject to an option
granted under the Plan until due exercise and full payment has been made as
provided above. No adjustment shall be made for cash dividends or other rights
for which the record date is prior to the date of such due exercise and full
payment. In no event may any Award granted hereunder be exercised for a fraction
of a share.

Exercise of an Award shall be deemed to be certification by the Participant
that he or she complies with the terms and conditions of the Plan, including
Paragraph 17. Failure to comply with the provisions of Paragraph 17 prior to, or
during the twenty-four (24) months immediately following, exercise of an Award
shall cause such Award to be cancelled and such exercise to be rescinded. The
Company shall notify the Participant, in writing, within thirty (30) months
after such exercise, of any such rescission. Within sixty days after receiving
such a notification, the Participant shall pay to the Company the amount of any
compensation received, or any gain realized, upon the rescinded exercise,

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<PAGE>
either in cash or by returning to the Company shares of Common Stock received by
the Participant upon such exercise.

10. <*>Non-Transferability of Awards.</*> Except as provided herein, no
Award granted under the Plan or any right evidenced thereby shall be
transferable by the Participant other than by will or by the laws of descent and
distribution, and an Award may be exercised, during the lifetime of a
Participant, only by such Participant. Notwithstanding the preceding sentence:
(a) in the event of a Participant's death during his or her employment by the
Company, its parent, if any, or any of its subsidiaries, his or her Awards shall
thereafter be exercisable, during the period specified in Paragraph 8.2(c), by
his or her executors or administrators; and (b) the Participant, with the
approval of the Committee, may transfer Awards for no consideration to or for
the benefit of the Participant's spouse, parents, children (including
stepchildren or adoptive children), grandchildren, or siblings, or to a trust
for the benefit of any of such persons.

11. <*>Withholding Tax.</*> Whenever under the Plan shares of stock are to
be delivered upon exercise of an option, the Company shall be entitled to
require as a condition of delivery that the Participant remit or, in appropriate
cases, agree to remit when due the amount necessary to satisfy all federal,
state and local withholding tax requirements relating thereto. At the option of
the Company, such amount may be remitted by check payable to the Company, in
shares of Common Stock (which may include shares received as the result of a
prior exercise of an option), by the Company's withholding of shares of Common
Stock issuable upon the exercise of the option, or any combination thereof.
Whenever an amount shall become payable to a Participant in connection with the
exercise of a stock appreciation right, the Company shall be entitled to
withhold therefrom the amount necessary to satisfy any federal, state and local
withholding tax requirements relating to such amount.

12. <*>Restrictions on Delivery and Sale of Shares.</*> Each option
granted under the Plan is subject to the condition that if at any time the
Committee, in its discretion, shall determine that the listing, registration or
qualification of the shares covered by such option upon any securities exchange
or under any state or federal law is necessary or desirable as a condition of or
in connection with the granting of such option or the purchase or delivery of
shares thereunder, the delivery of any or all shares pursuant to exercise of the
option may be withheld unless and until such listing, registration or
qualification shall have been effected. The Committee may require, as a
condition of exercise of any option that the Participant represent, in writing,
that the shares received are being acquired for investment and not with a view
to distribution and agree that the shares will not be disposed of except
pursuant to an effective registration statement, unless the Company shall have
received an opinion of counsel satisfactory to the Company that such disposition
is exempt from such requirement under the Securities Act of 1933 (the
"Securities Act"). The Committee may require that the sale or other disposition
of any shares acquired upon exercise of an option hereunder shall be subject to
a right of first refusal in favor of the Company, which right shall permit the
Company to repurchase such shares from the Participant or his or her
representative prior to their sale or other disposition at their then current
fair market value in accordance with such terms and conditions as shall be
specified in the agreement evidencing the grant of the option. The Company may
endorse on certificates representing shares issued upon the exercise of an
option such legends referring to the foregoing representations or restrictions
or any other applicable restrictions on resale as the Company, in its
discretion, shall deem appropriate.

13. <*>Change in Control.</*>

(a) In the event of a Change in Control of the Company, as defined
below, the Committee may, in its sole discretion, provide that any of the
following applicable actions be taken as a result, or in anticipation, of
any such event to assure fair and equitable treatment of Participants:

(i) accelerate the exercisability of any outstanding Awards granted
pursuant to this Plan;

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<PAGE>
(ii) offer to purchase any outstanding options granted pursuant to
this Plan from the holder for its equivalent cash value, as determined by
the Committee, as of the date of the Change in Control; or

(iii) make adjustments or modifications to outstanding Awards as the
Committee deems appropriate to maintain and protect the rights and
interests of the Participants following such Change in Control. In no
event, however, may any option be exercised after the date provided in
Paragraph 8.2(a).

Any such action approved by the Committee shall be conclusive and binding on
the Company, its subsidiaries and all Participants.

(b) "Change in Control" shall mean the occurrence of any of the
following:

(i) the sale, lease, transfer, conveyance or other disposition, in
one or a series of related transactions, of all or substantially all of
the assets of the Company to any "person" or "group" (as such terms are
used in Sections 13(d)(3) and 14(d)(2) of the Exchange Act,

(ii) any person or group is or becomes the "beneficial owner" (as
defined in Rules 13d-3 and 13d-5 under the Exchange Act, except that a
person shall be deemed to have "beneficial ownership" of all shares that
any such person has the right to acquire, whether such right is
exercisable immediately or only after the passage of time), directly or
indirectly, of more than 50% of the total voting power of the voting
stock of the Company, including by way of merger, consolidation or
otherwise, or

(iii) during any period of two consecutive years, individuals who at
that beginning of such period constituted the Board of Directors
(together with any new directors whose election by such Board or whose
nomination for election by the shareholders of the Company was approved
by a majority of the directors of the Company then still in office who
were either directors at the beginning of such period or whose election
or nomination for election was previously so approved) cease for any
reason to constitute a majority of the Board of Directors;

provided that in no event shall the initial public offering of the Common Stock
pursuant to an effective registration statement under the Securities Act be
deemed to constitute a Change in Control.

14. <*>Right to Terminate Employment.</*> Nothing in the Plan or in the
agreement evidencing any Award granted under the Plan shall confer upon any
Participant the right to continue as an employee or a director of the Company or
affect the right of the Company or any of its subsidiaries, to terminate the
Participant's employment at any time, subject, however, to the provisions of any
agreement of employment between the Participant and the Company, its parent, if
any, or any of its subsidiaries.

15. <*>Transfer, Leave of Absence.</*> For purposes of this Plan, neither
(i) a transfer of an employee from the Company to a subsidiary or other
affiliate of the Company, or vice versa, or from one subsidiary or affiliate of
the Company to another, nor (ii) a duly authorized leave of absence, shall be
deemed a termination of employment.

16. <*>Adjustment Upon Changes in Capitalization, etc.</*> In the event of
any stock split, stock dividend, reclassification or recapitalization which
changes the character or amount of the Company's outstanding Common Stock while
any portion of any Award theretofore granted under the Plan is outstanding but
unexercised, the Committee shall make such adjustments in the character and
number of shares subject to such Award and in the option price, as shall be
equitable and appropriate in order to make the Award, as nearly as may be
practicable, equivalent to such Award immediately prior to such change;
PROVIDED, HOWEVER, that no such adjustment shall give any Participant any
additional benefits under his or her Award.

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<PAGE>
If any transaction (other than a change specified in the preceding
paragraph) described in Section 424(a) of the Code affects the Company's Common
Stock subject to any unexercised option theretofore granted under the Plan
(hereinafter for purposes of this Paragraph 16 referred to as the "old option"),
the Board of Directors or any surviving or acquiring corporation may take such
action as it deems appropriate, and in conformity with the requirements of that
Section and the regulations thereunder, to substitute a new option for the old
option, in order to make the new option, as nearly as may be practicable,
equivalent to the old option, or to assume the old option.

If any such change or transaction shall occur, the number and kind of shares
for which Awards may thereafter be granted under the Plan shall be adjusted to
give effect thereto.

17. <*>Cancellation of Awards.</*> Notwithstanding any other provision of
the Plan, unless the agreement governing an Award specifies otherwise, the
Committee may cancel and rescind any unexercised portion of an Award (whether or
not then exercisable) at any time if the Participant is not in compliance with
the following:

(a) For two (2) years after leaving the employ of the Company, a
Participant may not solicit from or perform for any Client (as defined
below) any type of business carried on by the Company at the time his or her
employment terminates and during the two-year period thereafter. In
addition, for two years after leaving the employ of the Company, a
Participant may not hire any employee of the Company or solicit or induce
any such employee to leave the Company to work for a competitor. For
purposes of this paragraph, the term "Client" shall mean (i) any
organization for which the Participant provided services on behalf of the
Company, or (ii) any organization that the Participant solicited and which
subsequently hired the Company (and, in the case of the Company's research
or survey functions, with which the Participant had a personal working
relationship) during the two-year period preceding the Participant's
termination of service with the Company.

(b) Participants shall not, without the prior written consent of the
Company, disclose to anyone outside the Company, or use in other than the
Company's business, any confidential information or material relating to the
business of the Company or its clients, acquired by the Participant either
during or after his or her employment with the Company.

18. <*>Expiration, Amendment and Termination of the Plan.</*> Awards may
be granted under the Plan at any time and from time to time on or prior to the
tenth anniversary of the effective date of the Plan as set forth in
Paragraph 20 (the "Expiration Date"), on which date the Plan will expire except
as to Awards then outstanding under the Plan. Such outstanding Awards shall
remain in effect until they have been exercised, terminated or have expired. The
Plan may be terminated, modified or amended by the Board of Directors at any
time on or prior to the Expiration Date, except with respect to any Awards then
outstanding under the Plan; PROVIDED, HOWEVER, that the approval of the
Company's stockholders will be required for any amendment which (i) increases
the maximum number of shares subject to grants, as specified in Paragraph 3
(unless made pursuant to the provisions of Paragraph 16) or (ii) materially
increases the benefits accruing to participants under the Plan, within the
meaning of Rule 16b-3 promulgated under the Exchange Act.

19. <*>Governing Law.</*> The laws of the State of Delaware will govern
all matters relating to this Plan except to the extent superseded by the laws of
the United States.

20. <*>Effective Date of Plan.</*> The Plan shall be effective upon its
approval by stockholders of the Company, and further subject to the
effectiveness of Watson Wyatt & Company Holdings' proposed public offering.

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<PAGE>
ANNEX E

AMENDMENT TO WATSON WYATT & COMPANY BYLAWS
(NEW LANGUAGE IS UNDERLINED; DELETED LANGUAGE IS CROSSED OUT)

SECTION 9.1 RESTRICTION ON STOCK. Except for <#>(i)</#> transfers to the
Corporation or <#>to trusts, personal holding companies' or other entities</#>
<*>transfers to Persons</*> satisfying the terms and conditions of
Section<*>s</*> 9.2 or 9.3 below, <#>(ii) reversions from trusts described in
Section 9.2 to the grantors thereof or their estates, or (iii) transfers from
personal holding companies or similar entities described in Section 9.2 to the
sole shareholders thereof,</#> no present or future shareholder shall transfer,
whether by way of sale, gift, hypothecation, trust distribution, will, intestacy
or any other disposition, any shares of any class of capital stock ("Stock") in
the Corporation now owned <*>beneficially and of record</*> or hereafter
acquired by such shareholder (including, without limitation, shares of Stock
acquired upon conversion or exchange of other shares of Stock), without first
giving the Corporation prior written notice of his intention to so dispose of
such Stock. Said notice to the Corporation ("Disposition Notice") shall state
the terms and conditions of the proposed disposition, including the names of the
transferees, the purchase price and payment terms, if any, the type of
disposition, and the number of shares to be transferred ("Offered Shares"). A
shareholder giving a Disposition Notice is herein sometimes called an "Offering
Stockholder".

(a) The Corporation shall have the option for a period of thirty days following
the receipt of a Disposition Notice from an Offering Stockholder to buy on
such Closing Date, as is determined by the President or Secretary, part or
all of the Offered Shares at the price per share determined in accordance
with Section 9.5 of this Section 9, provided that the Corporation may buy
less than all of the Offered Shares if the balance of the Offered Shares is
contemporaneously purchased by Eligible Purchasers (or otherwise disposed of
in accordance with these Bylaws) or if the Offering Stockholder elects to
accept offers by the Corporation and/or Eligible Purchasers to purchase less
than all of the Offered Shares and to retain the balance of the Offered
Shares. If the Corporation does not elect to purchase all Offered Shares,
within thirty days after receipt of the Offering Stockholder's Disposition
Notice, it shall forward to the Offering Stockholder a list of the names and
addresses of all Eligible Purchasers together with a description of their
respective rights to purchase Offered Shares not initially purchased by the
Corporation.

The Offering Stockholder shall within fifteen days after receipt of such
list of Eligible Purchasers offer to sell the balance of the Offered Shares
to such Eligible Purchasers in accordance with their respective rights to
purchase set forth in such list.

(b) Elections by Eligible Purchasers to purchase Offered Shares under subsection
(a) hereof shall be by written notice delivered both to the Corporation and
to the Offering Stockholder within thirty days following the receipt of the
offer to sell from the Offering Stockholder as provided in Section 9.1(a)
hereof.

(c) The Corporation shall have the further option to buy or furnish Eligible
Purchasers for any Offered Shares not initially to be purchased by the
Corporation or by Eligible Purchasers under subsections (a) or (b) hereof
within 120 days following receipt by the Corporation of the Disposition
Notice.

(d) The Offered Shares, if any, not purchased under subsections (a), (b), or
(c) of this Section 9.1 may be disposed of within 150 days after receipt by
the Corporation of the Disposition Notice, but only to persons and only on
the terms and conditions set forth in the Disposition Notice. Any Offered
Shares not so transferred within such 150-day period may not thereafter be
transferred, except upon compliance with the terms of this Section 9 of the
Bylaws and as if they had not been previously offered hereunder. Any attempt
to transfer any Stock of the Corporation in

E-1
<PAGE>
contravention of the provisions of this Section 9 shall be null and void and
without legal effect, except that such attempted transfer shall constitute a
continuing offer to sell all such Stock under Section 9.1(a) hereof. The
price at which such Stock may be purchased by the Corporation or Eligible
Purchasers shall be determined pursuant to Section 9.5 of this Section 9;
such Stock will be deemed to have been offered at the date of the attempted
transfer; and, for purposes hereof, such attempted transfer shall be deemed
to constitute the giving of a Disposition Notice under Section 9.1, but
there shall be no limitations on the time periods within which the
Corporation and/or Eligible Purchasers shall be required to exercise their
rights hereunder.

SECTION 9.2 <#>REVOCABLE</#> TRUSTS AND OTHER PERMITTED TRANSFEREES; PERSONAL
HOLDING CORPORATIONS.

(a) Anything in this Section 9 to the contrary notwithstanding, any shareholder
may, with the approval of the Board of Directors or such officer(s) as may
be designated by the Board of Directors for such purpose, transfer any or
all Stock of the Corporation now owned or hereafter acquired by him to a
<#>revocable trust for the sole benefit of himself during his lifetime,
provided that:</#> <*>Permitted Transferee</*>, provided that <*>the terms
of clauses (i), (ii) or (iii), as applicable, are complied with</*>.

(i) <*>in the case of a Permitted Transferee that is a trust,</*>

(A) the trust instrument<*>, by its terms,</*> acknowledges that the
Stock is held subject to the terms and conditions of these Bylaws;

(B) the trust <*>instrument</*>, by its terms, provides that on the first
to occur of:

(1) the termination of the trust;

(2) the ceasing of the shareholder to act as <#>sole trustee of the
trust</#> <*>the person (whether in the capacity as a trustee,
settlor or otherwise) having sole dispositive and voting control
over the Stock held by such trust; or</*>

(3) any event described in Section 9.4 with respect to the
<#>settler</#> shareholder, <*>whether in the capacity as
settlor, trustee or beneficiary of such trust</*>;

all Stock of the Corporation then held by the trust will (i) <*>in
the case of a revocable trust</*>, either revert to the shareholder
or be offered for sale by the same procedure as set forth in
Section 9.1 hereof <*>or (ii) in the case of an irrevocable trust, be
offered for sale by the same procedure as set forth in Section 9.1
hereof</*>

(C) the shareholder is the sole <#>trustee of said trust</#> <*>person
(whether in the capacity as a trustee, settlor or otherwise) having
voting and dispositive control over any Stock held by such trust</*>
and the trust grants to the shareholder and to no other person,
corporation or other entity full powers with respect to all Stock of
the Corporation at any time held by the trust, including powers to
attend all meetings of shareholders, vote <*>or direct the voting
of</*> such shares and give proxies with respect thereto, make all
decisions with respect to the trust's sale or purchase thereof,
including the power to direct the sale of some or all of the Stock of
the Corporation at any time for any reason deemed valid by said
shareholder;

(D) a copy of the trust <*>instrument</*>, as from time to time amended,
is at all times kept on file by the trustee thereof with the
Secretary of the Corporation; and

(E) the trust, by its terms, provides that any amendment that in any way
affects the Stock of the Corporation held by the trust or any of the
provisions relating to such Stock set forth in subparagraphs (i) (A)
through (D) above, must be approved in advance by the President,
Treasurer or Secretary of the Corporation or shall be null and void
and of no effect with respect to such Stock.

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<PAGE>
(ii) <*>in the case of a Permitted Transferee that is a partnership, limited
liability company or similar entity,</*>

<*>(A)</*> <*>the partnership, limited liability company or other
governing agreement acknowledges that the Stock is held subject to
the terms and conditions of these Bylaws;</*>

<*>(B)</*> <*>the partnership, limited liability company or other
governing agreement, by its terms, provides that on the first to
occur of:</*>

<*>(1)</*> <*>the termination of the partnership, limited liability
company or other entity;</*>

<*>(2)</*> <*>the ceasing of the shareholder to Control the
partnership, limited liability company or other entity; or</*>

<*>(3)</*> <*>any event described in Section 9.4 with respect to the
shareholder;</*>

<*>all Stock of the Corporation then held by the partnership, limited
liability company or other entity will either revert to the
shareholder or be offered for sale by the same procedure as set forth
in Section 9.1 hereof;</*>

<*>(C)</*> <*>the partnership, limited liability company or other
governing agreement grants to the shareholder and to no other Person
full powers with respect to disposition of all Stock of the
Corporation at any time held by the partnership, limited liability
company or other entity, including powers to attend all meetings of
partners, members or other owners, as applicable, vote such Stock and
give proxies with respect thereto, make all decisions with respect to
the partnership, limited liability company or other entity's sale or
purchase thereof, including the power to direct the sale of some or
all of the Stock of the Corporation at any time for any reason deemed
valid by said shareholder;</*>

<*>(D)</*> <*>a copy of the partnership, limited liability company or
other governing agreement, as from time to time amended, is at all
times kept on file by the managing or general partner, managing
member or other manager thereof with the Secretary of the
Corporation; and</*>

<*>(E)</*> <*>the partnership, limited liability company or other
governing agreement, by its terms, provides that any amendment that
in any way affects the Stock of the Corporation held by the
partnership, limited liability company or other entity or any of the
provisions relating to such Stock set forth in subparagraphs
(ii) (A) through (D) above, must be approved in advance by the
President, Treasurer or Secretary of the Corporation or shall be null
and void and of no effect with respect to such Stock.</*>

<*>(iii)</*> <*>in the case of a Permitted Transferee that is a
corporation,</*>

<*>(A)</*> <*>One hundred percent (100%) of the stock of such corporation
is owned solely by the shareholder, and/or any spouse of the
shareholder and/or any descendant of the shareholder and no person,
corporation or other entity other than the shareholder shall have any
rights or powers with respect to the Control of such corporation or
the disposition of any Stock of the Corporation at any time held by
such corporation, including, without limitation, any right to attend
meetings of shareholders, vote such shares or give proxies with
respect thereto.</*>

<*>(B)</*> <*>the Articles of Incorporation, Bylaws and any other charter
or governing documents of such corporation contain restrictions on
the transfer of its stock which have substantially the same effect as
the stock transfer restrictions contained in these Bylaws, and are
approved in writing by the General Counsel of the Corporation, are
not amended without such approval, and certified or notarized copies
thereof are at all times kept on file with the Secretary of the
Corporation;</*>

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<PAGE>
<*>(C)</*> <*>all stock certificates of the corporation contain a legend
identifying the existence of such transfer restrictions;</*>

<*>(D)</*> <*>the corporation shall agree in writing with the Corporation
not to issue or allot any additional stock of any class to anyone
other than the shareholder and/or any spouse of the shareholder
and/or descendant of the shareholder;</*>

<*>(E)</*> <*>the shareholder and the corporation agree with the
Corporation in writing, in a form approved by the General Counsel of
the Corporation, that they will abide by all of the terms restricting
the transfer of the Corporation's Stock as set forth in these Bylaws
(as they may be amended from time to time) and that they will take or
cause to be taken all steps which may be required in order to assure
compliance with the stock transfer restrictions contained in these
Bylaws, including an agreement not to transfer the stock of the
corporation; and</*>

<*>(F)</*> <*>the corporation and the shareholder shall agree in writing
with each other and the Corporation that, upon the first to occur
of:</*>

<*>(1)</*> <*>any event described in Section 9.4 with respect to the
shareholder;</*>

<*>(2)</*> <*>the bankruptcy, insolvency, dissolution (either
voluntary or involuntary), sale or merger of the corporation; or
the sale or attempted sale of any of its stock, other than in
accordance with these Bylaws, or its assets, or the imposition of
any lien upon the Stock of the Corporation or other assets owned
by the corporation; or</*>

<*>(3)</*> <*>the amendment of the Articles of Incorporation, Bylaws,
or other charter or governing documents of such corporation,
which amendment is not approved in writing by the General Counsel
of the Corporation, or any breach of any of the provisions of
subparagraphs (iii) (A) through (E) above;</*>

<*>all Stock of the Corporation then owned by the corporation be
deemed to be offered for sale by the same procedure as set forth in
Section 9.1 hereof.</*>

(b) PERSONAL HOLDING CORPORATIONS. Anything in this section 9 to the contrary
notwithstanding, any non-U.S. resident shareholder of the Corporation's
Stock (for purposes of this paragraph, the "Shareholder") may, with the
approval of the Board of Directors or such officer(s) as may be designated
by the Board of Directors for such purpose, transfer any or all Stock of the
Corporation now issued or hereafter acquired by him (or direct the
Corporation to issue Stock allocated by the Corporation to him) to a
personal holding corporation incorporated under the laws of a jurisdiction
outside of the United States which corporation is wholly-owned by such
Shareholder (or such similar entity under the laws of the jurisdiction in
which such Shareholder is domiciled which is wholly-owned by such
Shareholder and which is approved by the General Counsel of the Corporation
in his discretion), provided that:

(i) One hundred percent (100%) of the stock of such personal holding
corporation is owned solely by the Shareholder (or the ownership of such
other similar approved entity is one hundred percent (100%) vested in
the Shareholder) and no person, corporation or other entity other than
the Shareholder shall have any rights or powers with respect to the
ownership, control or direction of any stock of such personal holding
corporation or other similar approved entity or any Stock of the
Corporation at any time held by such personal holding corporation or
other similar approved entity, including, without limitation, any right
to attend meetings of shareholders, vote such shares or give proxies
with respect thereto.

(ii) the Articles of Incorporation, Bylaws and any other charter or
governing documents of such personal holding corporation or other
similar approved entity contain restrictions on the transfer of its
stock which have substantially the same effect as the stock transfer
restrictions

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<PAGE>
contained in these Bylaws, and are approved in writing by the General
Counsel of the Corporation, are not amended without such approval, and
certified or notarized copies thereof are at all times kept on file
with the Secretary of the Corporation;

(iii) all stock certificates of the personal holding corporation (or similar
documents evidencing ownership of such other similar approved entity)
contain a legend identifying the existence of such transfer
restrictions;

(iv) such personal holding corporation or similar approved entity shall
agree in writing with the Corporation not to issue or allot any
additional stock of any class to anyone other than the Shareholder;

(v) the Shareholder and the personal holding corporation or other similar
approved entity agree with the Corporation in writing, in a form
approved by the General Counsel of the Corporation, that they will abide
by all of the terms restricting the transfer of the Corporation's stock
as set forth in these Bylaws (as they may be amended from time to time)
and that they will take or cause to be taken all steps which may be
required in order to assure compliance with the stock transfer
restrictions contained in these Bylaws, including an agreement not to
transfer the stock of the personal holding corporation (or other
evidence of ownership of a similar approved entity); and

(vi) the personal holding corporation (or similar approved entity) and the
Shareholder shall agree in writing with each other and the Corporation
that, upon the first to occur of:

(A) any event described in Section 9.4 with respect to the Shareholder;

(B) the bankruptcy, insolvency, dissolution (either voluntary or
involuntary), sale or merger of the personal holding corporation or
other similar approved entity, or the sale or attempted sale of any
of its stock, other than in accordance with these Bylaws, or its
assets, or the imposition of any lien upon the stock of the
Corporation or other assets owned by the personal holding corporation
or other similar approved entity; or

(C) the amendment of the Articles of Incorporation, Bylaws, or other
charter or governing documents of such personal holding corporation
or other similar approved entity, which amendment is not approved in
writing by the General Counsel of the Corporation, or any breach of
any of the provisions of subparagraphs (i) through (v) of this
subsection;

all Stock of the Corporation then owned by the personal holding
corporation or other similar approved entity will be deemed to be offered
for sale by the same procedure as set forth in Section 9.1 hereof.

SECTION 9.3 EMPLOYEE TRUSTS. Anything in this Section 9 to the contrary
notwithstanding, Stock of the corporation may be owned by one or more trusts
maintained exclusively for the benefit of employees of the corporation and/or
any of its present or future subsidiaries and either qualified under
Section 401(a) or 501(a) of the Internal Revenue Code of 1986 (or any successor
statute), or approved by the Board of Directors of the corporation, provided
that:

(a) upon the occurrence of any event specified in Section 9.4 with respect to
any employee who is then a beneficiary of such trust, the trust shall offer
for sale in accordance with the terms and provisions of Section 9.4 hereof:

(i) all Stock of the Corporation, if any, allocated to the separate account
of such employee under the trust's terms; and

(ii) a pro rata portion of all Stock of the Corporation held by such trust
and not allocated to the separate accounts of beneficiaries, such pro
rata portion to be based upon such actuarial and

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<PAGE>
other considerations as the trustees of the trust and the Board of
Directors of the Corporation shall, in their absolute discretion, deem
appropriate.

SECTION 9.4 DEATH, TERMINATION OF EMPLOYMENT, BANKRUPTCY, LIENS. On the death of
a shareholder, or upon the termination of a shareholder's employment with the
Corporation or any subsidiary of the Corporation, whether said termination be by
retirement, voluntary or involuntary termination, or for any other reason, or
upon the Corporation receiving actual knowledge that a shareholder or any
personal holding corporation or similar approved entity as described in
Section 9.2 has become bankrupt or suffered or permitted the imposition of any
lien or attachment on any Stock of the Corporation owned by such shareholder or
any trust, personal holding company or other similar approved entity holding
Stock for his benefit (except any permitted lien arising from a loan program
established by the Board of Directors to facilitate the financing of purchases
of Stock by Eligible Purchasers), whichever first occurs ("Determination Date"),
all Stock of the Corporation then owned by such shareholder or his
representative or held for his benefit in any trust, personal holding company or
other entity permitted hereunder shall be deemed offered for sale and to
constitute Offered Shares subject to purchase by the same procedure as set forth
in Section 9.1 of this Section 9, excepting that, purchase of such shares shall
occur on such Closing Date (not more than 245 days after the Determination
Date), as the President or Secretary shall determine with payment to be made in
accordance with Section 9.6 hereof. Any of such shares of Stock not elected to
be purchased by the Corporation or by Eligible Purchasers within 245 days after
the Determination Date shall be purchased by the Corporation unless and to the
extent that the Corporation is prohibited from doing so by the DGCL. For
purposes of this Section 9.4, notwithstanding any other provision of this Bylaw,
a shareholder shall be deemed to own all Stock transferred by him to a trust
satisfying the terms and conditions of Section 9.2 hereof and such trust shall
have the same obligations with respect to the sale of such Stock hereunder as
the shareholder would have had if the Stock had not been transferred to said
trust.

SECTION 9.5 PURCHASE PRICE.

(a) The Purchase Price for any Stock of the Corporation shall be determined in
accordance with this Section 9.5, excepting that if a Disposition Notice
given under Section 9.1 indicates an intention to make a bona fide sale of
Stock for value, then the Purchase Price for any Stock which is the subject
of such notice (including Stock which is being offered pursuant to the terms
of Section 9.2 or 9.3) shall equal the price set forth in such notice, if
such price is lower than the Purchase Price determined hereunder.

(b) Except as provided in subparagraph (a) hereof and subject to subparagraph
(e) hereof, the Purchase Price for any Stock purchased by an Eligible
Purchaser on or after July 1, 1996 shall be the Formula Book Value of such
Stock as of the last day of the Corporation's fiscal year coincident with or
next preceding the Closing Date with respect to such purchase.

(c) Except as provided in subparagraph (a) hereof, the Purchase Price for any
Stock purchased by the Corporation hereunder shall be determined as follows
(subject to appropriate adjustment to reflect stock splits, stock dividends,
combinations of shares and similar recapitalizations):

The Purchase Price (P) per share for purchases by the Corporation
with a date of Disposition Notice or a Determination Date on or after
July 1, 1990 shall be determined by the following formula:

P= [B x(l +(r X n/12))] +(d X n/12)

B = Formula Book Value of such Stock as of the last day of the
Corporation's fiscal year coincident with or next preceding the date
of Disposition Notice under Section 9.1 or a Determination Date under
Section 9.4, whichever is applicable;

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<PAGE>
r = the actual percentage increase, if any, in the Formula Book Value
of such Stock as of the last day of the Corporation's fiscal year
during which such Disposition Notice or Determination Date occurs
over the Formula Book Value as of the last day of the Corporation's
prior fiscal year;

n = the number of completed months between (1) the last day of the
Corporation's fiscal year coincident with or next preceding such
Disposition Notice or Determination Date, and (2) the date of such
Disposition Notice or such Determination Date, whichever is
applicable; and

d = The dividend, if any, per share declared for such Stock for the
fiscal year during which such Disposition Notice or Determination
Date occurs (unless the shareholder actually receives the dividend
for such year, in which case d = 0).

(d) If, and only if, the Closing Date for the purchase by the Corporation or an
Eligible Purchaser of any Stock under Section 9.4 hereof is more than thirty
(30) days after the Determination Date, the Corporation will pay the selling
shareholder interest on the amount of the Net Book Value denoted as "B" in
the formula set forth in subparagraph (c) hereof at the Loan Rate (as
described in Section 9.6(b)(iii) hereof) from the Determination Date to the
Closing Date.

(e) Except as provided in subparagraph (a) hereof, with respect to any purchases
of Stock by an Eligible Purchaser from a shareholder other than the
Corporation, the Corporation will pay the selling shareholder an amount
which is equal to "P" minus "B" in the formula set forth in subparagraph
(c) hereof.

SECTION 9.6 PAYMENT.

(a) The Purchase Price for Stock of the Corporation purchased hereunder by an
Eligible Purchaser shall be paid in cash on the Closing Date, subject to
Section 9.5(e) hereof, except as the purchaser and seller may otherwise
agree.

(b.i) Payments by the Corporation of the portion of the Purchase Price
representing the pro rata increase, if any, in the Net Book Value of
the Stock and the pro rata dividend may be made in multiple
installments as may be determined by the President or Secretary from
time-to-time, but no such installment shall be made later than eighteen
(18) months after the Closing Date except as provided in subparagraph
(b)(ii) hereof.

(b.ii) Notwithstanding the provisions of subparagraph (b)(i) hereof, the
Purchase Price for Stock of the Corporation purchased hereunder by the
Corporation may be paid, at the option of the Corporation, (i) all in
cash, or (ii) twenty-five percent (25%) in cash and the balance in a
non-negotiable promissory note of the Corporation payable over a period
of not more than three (3) years following the Closing Date, no part of
such note to be paid in the same calendar year in which the stock is
purchased unless such note is paid in full within such calendar year,
such note to bear interest on the unpaid balance thereof at the Loan
Rate (as hereinafter defined), or (iii) on such other terms as seller
and the Corporation may agree in writing.

(b.iii) "Loan Rate" shall mean the interest rate for Wyatt shareholder loans
in effect at such bank or banks as the Board of Directors, the
President or the President's designee shall have approved for such
loans on the date of issue of a note pursuant to subparagraph
(b)(ii) hereof, or the Determination Date pursuant to Section 9.5(d)
hereof, or 10% per annum, whichever is lower.

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<PAGE>
SECTION 9.7 ENDORSEMENT ON STOCK CERTIFICATES. All certificates representing
Stock of the Corporation shall be conspicuously endorsed with a legend
substantially as follows:

"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE
SUBJECT TO AND MAY NOT BE SOLD, TRANSFERRED, ASSIGNED, HYPOTHECATED OR
OTHERWISE DISPOSED OF EXCEPT UNDER THE CIRCUMSTANCES SPECIFIED IN SECTION 9.
OF THE BYLAWS OF THE CORPORATION, A COPY OF WHICH MAY BE OBTAINED FROM THE
SECRETARY OF WATSON WYATT & COMPANY WHO WILL MAIL A COPY THEREOF WITHOUT
CHARGE TO THE HOLDER HEREOF WITHIN 5 DAYS OF A WRITTEN REQUEST THEREFOR."

SECTION 9.8 [RESERVED]

SECTION 9.9 DEFINITIONS.

(a) The term "Eligible Purchasers", as used herein, shall mean any of the
following persons or entities:

(i) full-time employees or regular part-time employees of the Corporation or
its subsidiaries who satisfy criteria approved from time-to-time by the
Board of Directors;

(ii) a partner engaged full-time in a partnership practice of any affiliate
or subsidiary, if applicable, of the Corporation;

(iii) a director of the Corporation or any subsidiary of the Corporation;

(iv) a corporation, partnership, association, or other entity with which the
Corporation has an affiliated business relationship, as designated from
time to time by the Board of Directors; or

(v) full-time employees or regular part-time employees of any corporation,
partnership, association, or other entity with which the Corporation has
an affiliated business relationship as designated from time to time by
the Board of Directors and who satisfy criteria approved from time to
time by the Board of Directors.

The Board of Directors shall designate which persons in the categories of
persons set forth above shall be deemed to be Eligible Purchasers with
respect to any particular transaction. Designation as an Eligible Purchaser
in connection with any offer and sale shall not create or imply any right to
be so designated in connection with any other offer or sale or, if so
designated, to be designated on the same terms and conditions.

(b) Net Book Value of Common Stock as used herein shall mean the consolidated
net book value (defined as the sum of Redeemable Common Stock and Permanent
Shareholders' Equity on the Corporation's Consolidated Balance Sheet as of
the fiscal year end) of the Common Stock of the Corporation determined, on
an accrual basis, by generally accepted accounting principles ("GAAP")
except that in computing such Net Book Value as of June 30, 1984, or any
subsequent fiscal year end, consolidated assets of the Corporation
consisting of subscriber lists, computer software and data banks used
principally in compensation survey or related businesses carried on by the
Corporation or any subsidiary shall be valued at 50% of the Consolidated
income received by the Corporation in respect of such business during the
fiscal year then ended. Formula Book Value as used herein shall mean the Net
Book Value of the Corporation's Common Stock as of June 30, 1996, increased
or decreased by net income or losses, and all other GAAP basis increases or
decreases to Net Book Value occurring after June 30, 1996, and adjusted to
(i) spread the economic impact of certain real estate sublease losses over
the remaining life of the sublease; and (ii) eliminate annual changes in the
Currency Translation Adjustment ("CTA") occurring after

E-8
<PAGE>
June 30, 1996; and (iii) eliminate the after-tax increases or decreases in
Net Book Value recorded in accordance with GAAP as a result of the
Discontinuation of the Outsourcing Business. The Discontinuation of the
Outsourcing Business as used herein means the discontinuation of the
outsourcing business of the Corporation and Wellspring Resources, LLC
pursuant to the Discontinuation Plan adopted by the Board of Directors of
the Corporation on February 18, 1998, as set forth in the minutes of the
meeting of the Board of Directors of the Corporation held on February 18,
1998. Formula Book Value shall be determined by the independent certified
public accountants of the Corporation from the Corporation's consolidated
financial statement prepared on an accrual basis in accordance with
generally accepted accounting principles as certified by such accountants,
except as described above. Such determinations shall be conclusive and
binding upon the Corporation and all holders of stock.

(c) The term "Closing Date" hereunder shall mean the time established by the
President or Secretary pursuant to Section 9.1, 9.4 or 9.5 hereof.

(d) The term "Corporation" as used herein in Section 9 shall mean the
Corporation, a Subsidiary, or an Affiliate as defined in ARTICLE FOURTEENTH
of the Restated Certificate of Incorporation.

<*>(e)</*> <*>The term "Permitted Transferee" shall mean any of the following:
(i) any revocable trust created for the benefit of the shareholder during
the lifetime of the shareholder of which the shareholder is the only person
(whether in the capacity as a trustee, settlor or otherwise) having voting
and dispositive control over the Stock held by such trust, (ii) any
irrevocable trust created for the benefit of the shareholder and/or any
spouse of the shareholder and/or any descendant of the shareholder (which
term shall include any adopted child or stepchild of the shareholder) of
which the shareholder is the only trustee having voting and dispositive
control over the Stock held by such trust, (iii) any partnership, limited
liability company or similar entity all of the ownership interests in which
are held by the shareholder alone, or by the shareholder and any spouse of
the shareholder and/or any descendant of the shareholder (which term shall
include any adopted child or stepchild of the shareholder) and/or any Person
referred to in clauses (i) and (ii) above, which is Controlled by the
shareholder and (iv) any corporation (including, without limitation, any
subsidiary or sub-subsidiary of any such corporation) which is wholly-owned
directly or indirectly, by the shareholder alone or by the shareholder and
any one or more Persons referred to in clauses (i)--(iii) above and which is
Controlled by the shareholder.</*>

<*>(f)</*> <*>The term "Control" means, with respect to any Person, the power to
direct the management and policies of such Person, directly or indirectly,
whether through the ownership of voting securities or other beneficial
interest, or by contract or otherwise.</*>

<*>(g)</*> <*>The term "Person" means an individual, partnership, corporation,
limited liability company, trust or other entity of whatever nature.</*>

SECTION 9.10 BENEFIT. The rights and restrictions contained herein shall be
binding upon and inure to the benefit of all present and future shareholders of
the Corporation, their heirs, executors, administrators, successors and assigns.

SECTION 9.11 AMENDMENT. Except as provided below, this Section 9 of the Bylaws
of the Corporation may be altered, amended or repealed only upon the affirmative
vote of the holders of Stock possessing at least 80% of the outstanding voting
rights of the capital stock of the Corporation, voting as one aggregate class.
If any such alteration, amendment or repeal affects any class or classes
adversely, then, in addition to the affirmative vote required above, the
affirmative vote of holders of at least a majority of the outstanding shares of
each class so affected, voting separately as a class, shall be required, unless
the effect of such alteration, amendment or repeal is adverse to all classes on
a substantially equivalent basis. Notwithstanding the foregoing, any amendment
to this Section 9 of the Bylaws of the Corporation describing the Purchase Price
of any class of Stock hereafter authorized shall require only

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<PAGE>
such affirmative vote of shareholders as Section 242 of the DGCL, as then in
effect, requires to amend the Corporation's Restated Certificate of
Incorporation to authorize the issuance of such class.

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<PAGE>
ANNEX F

SECTION 262 OF THE DELAWARE GENERAL CORPORATION LAW--APPRAISAL RIGHTS

1. Any stockholder of a corporation of this State who holds shares of stock on
the date of the making of a demand pursuant to subsection (d) of this
section with respect to such shares, who continuously holds such shares
through the effective date of the merger or consolidation, who has otherwise
complied with subsection (d) of this section and who has neither voted in
favor of the merger or consolidation nor consented thereto in writing
pursuant to sec. 228 of this title shall be entitled to an appraisal by the
Court of Chancery of the fair value of the stockholder's shares of stock
under the circumstances described in subsections (b) and (c) of this
section. As used in this section, the word "stockholder" means a holder of
record of stock in a stock corporation and also a member of record of a
nonstock corporation; the words "stock" and "share" mean and include what is
ordinarily meant by those words and also membership or membership interest
of a member of a nonstock corporation; and the words "depository receipt"
mean a receipt or other instrument issued by a depository representing an
interest in one or more shares, or fractions thereof, solely of stock of a
corporation, which stock is deposited with the depository.

(a) Appraisal rights shall be available for the shares of any class or
series of stock of a constituent corporation in a merger or consolidation
to be effected pursuant to sec. 251 (other than a merger effected
pursuant to sec. 251(g) of this title), sec. 252, sec 254, sec. 257, sec.
258, sec. 263 or sec. 264 of this title:

i. Provided, however, that no appraisal rights under this section shall
be available for the shares of any class or series of stock, which
stock, or depository receipts in respect thereof, at the record date
fixed to determine the stockholders entitled to receive notice of
and to vote at the meeting of stockholders to act upon the agreement
of merger or consolidation, were either (i) listed on a national
securities exchange or designated as a national market system
security on an interdealer quotation system by the National
Association of Securities Dealers, Inc. or (ii) held of record by
more than 2,000 holders; and further provided that no appraisal
rights shall be available for any shares of stock of the constituent
corporation surviving a merger if the merger did not require for its
approval the vote of the stockholders of the surviving corporation
as provided in subsection (f) of sec. 251 of this title.

ii. Notwithstanding paragraph (1) of this subsection, appraisal rights
under this section shall be available for the shares of any class
or series of stock of a constituent corporation if the holders
thereof are required by the terms of an agreement of merger or
consolidation pursuant to sections 251, 252, 254, 257, 258, 263 and
264 of this title to accept for such stock anything except:

a) Shares of stock of the corporation surviving or resulting from
such merger or consolidation, or depository receipts in respect
thereof;

b) Shares of stock of any other corporation, or depository receipts
in respect thereof, which shares of stock (or depository receipts
in respect thereof) or depository receipts at the effective date
of the merger or consolidation will be either listed on a
national securities exchange or designated as a national market
system security on an interdealer quotation system by the
National Association of Securities Dealers, Inc. or held of
record by more than 2,000 holders;

c) Cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a. and b. of
this paragraph; or

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<PAGE>
d) Any combination of the shares of stock, depository receipts and
cash in lieu of fractional shares or fractional depository
receipts described in the foregoing subparagraphs a., b. and c.
of this paragraph.

iii. In the event all of the stock of a subsidiary Delaware corporation
party to a merger effected under sec. 253 of this title is not
owned by the parent corporation immediately prior to the merger,
appraisal rights shall be available for the shares of the
subsidiary Delaware corporation.

2. Any corporation may provide in its certificate of incorporation that
appraisal rights under this section shall be available for the shares of any
class or series of its stock as a result of an amendment to its certificate
of incorporation, any merger or consolidation in which the corporation is a
constituent corporation or the sale of all or substantially all of the
assets of the corporation. If the certificate of incorporation contains such
a provision, the procedures of this section, including those set forth in
subsections (d) and (e) of this section, shall apply as nearly as is
practicable.

3. Appraisal rights shall be perfected as follows:

i. If a proposed merger or consolidation for which appraisal rights are
provided under this section is to be submitted for approval at a
meeting of stockholders, the corporation, not less than 20 days
prior to the meeting, shall notify each of its stockholders who was
such on the record date for such meeting with respect to shares for
which appraisal rights are available pursuant to subsection (b) or
(c) hereof that appraisal rights are available for any or all of the
shares of the constituent corporations, and shall include in such
notice a copy of this section. Each stockholder electing to demand
the appraisal of such stockholder's shares shall deliver to the
corporation, before the taking of the vote on the merger or
consolidation, a written demand for appraisal of such stockholder's
shares. Such demand will be sufficient if it reasonably informs the
corporation of the identity of the stockholder and that the
stockholder intends thereby to demand the appraisal of such
stockholder's shares. A proxy or vote against the merger or
consolidation shall not constitute such a demand. A stockholder
electing to take such action must do so by a separate written demand
as herein provided. Within 10 days after the effective date of such
merger or consolidation, the surviving or resulting corporation
shall notify each stockholder of each constituent corporation who
has complied with this subsection and has not voted in favor of or
consented to the merger or consolidation of the date that the merger
or consolidation has become effective; or

ii. If the merger or consolidation was approved pursuant to sec. 228 or
sec. 253 of this title, each constituent corporation, either before
the effective date of the merger or consolidation or within ten
days thereafter, shall notify each of the holders of any class or
series of stock of such constituent corporation who are entitled to
appraisal rights of the approval of the merger or consolidation and
that appraisal rights are available for any or all shares of such
class or series of stock of such constituent corporation, and shall
include in such notice a copy of this section; provided that, if
the notice is given on or after the effective date of the merger or
consolidation, such notice shall be given by the surviving or
resulting corporation to all such holders of any class or series of
stock of a constituent corporation that are entitled to appraisal
rights. Such notice may, and, if given on or after the effective
date of the merger or consolidation, shall, also notify such
stockholders of the effective date of the merger or consolidation.
Any stockholder entitled to appraisal rights may, within 20 days
after the date of mailing of such notice, demand in writing from
the surviving or resulting corporation the appraisal of such
holder's shares. Such demand will be sufficient if it reasonably
informs the corporation of the identity of

F-2
<PAGE>
the stockholder and that the stockholder intends thereby to demand
the appraisal of such holder's shares. If such notice did not
notify stockholders of the effective date of the merger or
consolidation, either (i) each such constituent corporation shall
send a second notice before the effective date of the merger or
consolidation notifying each of the holders of any class or series
of stock of such constituent corporation that are entitled to
appraisal rights of the effective date of the merger or
consolidation or (ii) the surviving or resulting corporation shall
send such a second notice to all such holders on or within 10 days
after such effective date; provided, however, that if such second
notice is sent more than 20 days following the sending of the first
notice, such second notice need only be sent to each stockholder
who is entitled to appraisal rights and who has demanded appraisal
of such holder's shares in accordance with this subsection. An
affidavit of the secretary or assistant secretary or of the
transfer agent of the corporation that is required to give either
notice that such notice has been given shall, in the absence of
fraud, be PRIMA FACIE evidence of the facts stated therein. For
purposes of determining the stockholders entitled to receive either
notice, each constituent corporation may fix, in advance, a record
date that shall be not more than 10 days prior to the date the
notice is given, provided, that if the notice is given on or after
the effective date of the merger or consolidation, the record date
shall be such effective date. If no record date is fixed and the
notice is given prior to the effective date, the record date shall
be the close of business on the day next proceeding the day on
which the notice is given.

(b) Within 120 days after the effective date of the merger or consolidation,
the surviving or resulting corporation or any stockholder who has
complied with subsections (a) and (d) hereof and who is otherwise
entitled to appraisal rights, may file a petition in the Court of
Chancery demanding a determination of the value of the stock of all such
stockholders. Notwithstanding the foregoing, at any time within 60 days
after the effective date of the merger or consolidation, any stockholder
shall have the right to withdraw such stockholder's demand for appraisal
and to accept the terms offered upon the merger or consolidation. Within
120 days after the effective date of the merger or consolidation, any
stockholder who has complied with the requirements of subsections
(a) and (d) hereof, upon written request, shall be entitled to receive
from the corporation surviving the merger or resulting from the
consolidation a statement setting forth the aggregate number of shares
not voted in favor of the merger or consolidation and with respect to
which demands for appraisal have been received and the aggregate number
of holders of such shares. Such written statement shall be mailed to the
stockholder within 10 days after such stockholder's written request for
such a statement is received by the surviving or resulting corporation or
within 10 days after expiration of the period for delivery of demands for
appraisal under subsection (d) hereof, whichever is later.

(c) Upon the filing of any such petition by a stockholder, service of a copy
thereof shall be made upon the surviving or resulting corporation, which
shall within 20 days after such service file in the office of the
Register in Chancery in which the petition was filed a duly verified list
containing the names and addresses of all stockholders who have demanded
payment for their shares and with whom agreements as to the value of
their shares have not been reached by the surviving or resulting
corporation. If the petition shall be filed by the surviving or resulting
corporation, the petition shall be accompanied by such a duly verified
list. The Register in Chancery, if so ordered by the Court, shall give
notice of the time and place fixed for the hearing of such petition by
registered or certified mail to the surviving or resulting corporation
and to the stockholders shown on the list at the addresses therein
stated. Such notice shall also be given by 1 or more publications at
least 1 week before the day of the hearing, in a newspaper of general
circulation published in the City of Wilmington, Delaware or such
publication as the Court deems advisable. The forms of the notices by
mail and by publication

F-3
<PAGE>
shall be approved by the Court, and the costs thereof shall be borne by
the surviving or resulting corporation.

(d) At the hearing on such petition, the Court shall determine the
stockholders who have complied with this section and who have become
entitled to appraisal rights. The Court may require the stockholders who
have demanded an appraisal for their shares and who hold stock
represented by certificates to submit their certificates of stock to the
Register in Chancery for notation thereon of the pendency of the
appraisal proceedings; and if any stockholder fails to comply with such
direction, the Court may dismiss the proceedings as to such stockholder.

(e) After determining the stockholders entitled to an appraisal, the Court
shall appraise the shares, determining their fair value exclusive of any
element of value arising from the accomplishment or expectation of the
merger or consolidation, together with a fair rate of interest, if any,
to be paid upon the amount determined to be the fair value. In
determining such fair value, the Court shall take into account all
relevant factors. In determining the fair rate of interest, the Court may
consider all relevant factors, including the rate of interest which the
surviving or resulting corporation would have had to pay to borrow money
during the pendency of the proceeding. Upon application by the surviving
or resulting corporation or by any stockholder entitled to participate in
the appraisal proceeding, the Court may, in its discretion, permit
discovery or other pretrial proceedings and may proceed to trial upon the
appraisal prior to the final determination of the stockholder entitled to
an appraisal. Any stockholder whose name appears on the list filed by the
surviving or resulting corporation pursuant to subsection (f) of this
section and who has submitted such stockholder's certificates of stock to
the Register in Chancery, if such is required, may participate fully in
all proceedings until it is finally determined that such stockholder is
not entitled to appraisal rights under this section.

(f) The Court shall direct the payment of the fair value of the shares,
together with interest, if any, by the surviving or resulting corporation
to the stockholders entitled thereto. Interest may be simple or compound,
as the Court may direct. Payment shall be so made to each such
stockholder, in the case of holders of uncertificated stock forthwith,
and the case of holders of shares represented by certificates upon the
surrender to the corporation of the certificates representing such stock.
The Court's decree may be enforced as other decrees in the Court of
Chancery may be enforced, whether such surviving or resulting corporation
be a corporation of this State or of any state.

(g) The costs of the proceeding may be determined by the Court and taxed
upon the parties as the Court deems equitable in the circumstances. Upon
application of a stockholder, the Court may order all or a portion of the
expenses incurred by any stockholder in connection with the appraisal
proceeding, including, without limitation, reasonable attorney's fees and
the fees and expenses of experts, to be charged pro rata against the
value of all the shares entitled to an appraisal.

(h) From and after the effective date of the merger or consolidation, no
stockholder who has demanded appraisal rights as provided in subsection
(d) of this section shall be entitled to vote such stock for any purpose
or to receive payment of dividends or other distributions on the stock
(except dividends or other distributions payable to stockholders of
record at a date which is prior to the effective date of the merger or
consolidation); provided, however, that if no petition for an appraisal
shall be filed within the time provided in subsection (e) of this
section, or if such stockholder shall deliver to the surviving or
resulting corporation a written withdrawal of such stockholder's demand
for an appraisal and an acceptance of the merger or consolidation, either
within 60 days after the effective date of the merger or consolidation as
provided in subsection (e) of this section or thereafter with the written
approval of the

F-4
<PAGE>
corporation, then the right of such stockholder to an appraisal shall
cease. Notwithstanding the foregoing, no appraisal proceeding in the
Court of Chancery shall be dismissed as to any stockholder without the
approval of the Court, and such approval may be conditioned upon such
terms as the Court deems just.

(i) The shares of the surviving or resulting corporation to which the shares
of such objecting stockholders would have been converted had they
assented to the merger or consolidation shall have the status of
authorized and unissued shares of the surviving or resulting corporation.

F-5
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS

ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Subsection (a) of Section 145 of the Delaware General Corporation Law (the
"DGCL") empowers a corporation to indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or complete action,
suit or proceeding, whether civil, criminal, administrative or investigative
(other than an action by or in the right of the corporation) by reason of the
fact that he is or was a director, employee or agent of the corporation or is or
was serving at the request of the corporation as a director, officer, employee
or agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by him in connection
with such action, suit or proceeding if he acted in good faith and in a manner
he reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no cause
to believe his conduct was unlawful.

Subsection (b) of Section 145 of the DGCL empowers a corporation to
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action or suit by or in the right of the
corporation to procure a judgment in its favor by reason of the fact that such
person acted in any of the capacities set forth above, against expenses
(including attorneys' fees) actually and reasonably incurred by him in
connection with the defense or settlement of such action or suit if he acted in
good faith and in a manner he reasonably believed to be in or not opposed to the
best interests of the corporation and except that no indemnification may be made
in respect to any claim, issue or matter as to which such person shall have been
adjudged to be liable to the corporation unless and only to the extent that the
Court of Chancery or the court in which such action or suit was brought shall
determine that despite the adjudication of liability such person is fairly and
reasonably entitled to indemnity for such expenses which the court shall deem
proper.

Section 145 of the DGCL further provides that to the extent a director,
officer, employee or agent of a corporation has been successful in the defense
of any action, suit or proceeding referred to in subsections (a) and (b) or in
the defense of any claim, issue or matter therein, he shall be indemnified
against expenses (including attorneys' fees) actually and reasonably incurred by
him in connection therewith; that indemnification or advancement of expenses
provided for by Section 145 shall not be deemed exclusive of any other rights to
which the indemnified party may be entitled; and empowers the corporation to
purchase and maintain insurance on behalf of a director, officer, employee or
agent of the corporation against any liability asserted against him or incurred
by him in any such capacity or arising out of his status as such whether or not
the corporation would have the power to indemnify him against such liabilities
under Section 145.

The Watson Wyatt & Company certificate of incorporation provides, and the
Watson Wyatt & Company Holdings certificate of incorporation will provide that
no director, or person serving on a committee of the board of directors, shall
be personally liable to the company or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability:

- for any breach of that director's duty of loyalty to Watson Wyatt &
Company or its stockholders;

- for acts or omissions not in good faith or which involve intentional
misconduct or a knowing violation of law;

- under Section 174 of the DGCL; or

- for any transaction from which the director derived an improper personal
benefit.

Both certificates of incorporation provide that we must indemnify our
directors, officers and employees against any liability incurred in connection
with any proceeding in which they may be involved as a party or otherwise, by
reason of the fact that he or she is or was a director, officer,

II-1
<PAGE>
employee, or agent of the company or is or was serving at the request of the
company as a director, officer, employee, agent, fiduciary or trustee of another
corporation, partnership, joint venture, trust, employee benefit plan, or other
entity or enterprise, except:

- to the extent that such indemnification against a particular liability is
expressly prohibited by applicable law;

- for a breach of such person's duty of loyalty to Watson Wyatt & Company or
its stockholders;

- for acts or omission not in good faith;

- for intentional misconduct or a knowing violation of law; or

- for any transaction resulting in receipt by such person of an improper
personal benefit.

Such indemnification may include advances of expenses prior to the final
disposition of such proceeding..

ITEM 21. EXHIBITS AND FINANCIAL SCHEDULES

(A) EXHIBITS:

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
- ----------- -----------
<C> <S>
2.1 Form of Agreement and Plan of Merger (included in Annex A to
the proxy statement/prospectus forming a part of this
registration statement)

3.1 Form of certificate of incorporation of the WW Holdings
(included in Annex B to the proxy statement/prospectus
forming a part of this registration statement)*

3.2 Form of bylaws of WW Holdings (included in Annex C to the
proxy statement/prospectus forming a part of this
registration statement)*

4.1 Specimen certificate for the registrant's class A common
stock*

4.2 Specimen certificate of registrant's class B-1 common stock*

4.3 Specimen certificate of registrant's class B-2 common stock*

4.4 Rights plan*

5.1 Opinion of Cadwalader, Wickersham & Taft, counsel to the
Company*

8.1 Opinion of Cadwalader, Wickersham & Taft on tax matters*

10.1 Credit Agreement between Watson Wyatt & Company and
NationsBank, N.A. dated June 30, 1998. (Incorporated by
Reference to Watson Wyatt & Company Form 10K for fiscal year
ended June 30, 1998 (File No. 0-20724))

13 Annual report to security holders*

21.1 Subsidiaries of Watson Wyatt & Company Holdings

23.1 Consent of PricewaterhouseCoopers LLP

23.2 Consent of Ernst & Young LLP

23.3 Consent of Cadwalader, Wickersham & Taft (included in
Exhibit 5.1)*

24.1 Power of Attorney (Included on signature page)

99.1 Form of Proxy
</TABLE>

* To be filed by amendment.

II-2
<PAGE>
(B) FINANCIAL STATEMENT SCHEDULES:

All schedules have been omitted because the information required to be set
forth in those schedules is not applicable or is shown in the combined financial
statements or notes thereto.

ITEM 22. UNDERTAKINGS

Insofar as indemnification for liabilities arising under the Securities Act
of 1933 may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a court of appropriate
jurisdiction the question whether such indemnification by it is against public
policy as expressed in the Securities Act and will be governed by the final
adjudication of such issue.

The undersigned Registrant hereby undertakes that:

(1) For purposes of determining any liability under the Securities Act of
1933, the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in a form of
prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or 497(h)
under the Securities Act shall be deemed to be part of this Registration
Statement as of the time it was declared effective.

(2) For the purposes of determining any liability under the Securities Act
of 1933, each post-effective amendment that contains a form of prospectus shall
be deemed to be a new Registration Statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to be
the initial BONA FIDE offering thereof.

II-3
<PAGE>
SIGNATURES

Pursuant to the requirements of the Securities Act of 1933, the registrant
has duly caused this registration statement to be signed on its behalf by the
undersigned, thereunto duly authorized, on , 2000.

<TABLE>
<S> <C> <C>
WATSON WYATT & COMPANY HOLDINGS

BY: /s/ John J. Haley
--------------------------------------
NAME: JOHN J. HALEY
--------------------------------------
TITLE: PRESIDENT AND CHIEF EXECUTIVE OFFICER
</TABLE>

POWER OF ATTORNEY

KNOW ALL MEN BY THESE PRESENTS, that each person whose signature appears
below hereby constitutes and appoints John J. Haley and Walter Bardenwerper, and
each of them, his true and lawful attorney-in-fact and agent, each acting alone,
with full power of substitution and resubstitution, for him and in his name,
place and stead, in any and all capacities, to sign any and all amendments,
including post-effective amendments, to this Registration Statement, and to file
the same, with all exhibits thereto and all other documents in connection
therewith, with the Securities and Exchange Commission, granting unto said
attorneys-in-fact and agents full power and authority to do and perform each and
every act and thing requisite and necessary to be done, as fully to intent and
purpose as he might or could do in person, and hereby ratifies and confirms all
said attorneys-in-fact and agents, and each of them, or his substitute or
substitutes, may lawfully do or cause to be done by virtue thereof.

Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities indicated below on the dates indicated:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ John J. Haley President and Chief Executive
- ------------------------------------------- Officer
Name: JOHN J. HALEY January 19, 2000

/s/ Carl D. Mautz Chief Financial Officer
- ------------------------------------------- (Principal Financial Officer
Name: CARL D. MAUTZ and Principal Accounting
Officer) January 19, 2000

/s/ Thomas W. Barratt Director
- -------------------------------------------
Name: THOMAS W. BARRATT January 19, 2000

/s/ Paula A. DeLisle Director
- -------------------------------------------
Name: PAULA A. DELISLE January 19, 2000

/s/ David B. Friend, M.D. Director
- -------------------------------------------
Name: DAVID B. FRIEND, M.D. January 19, 2000
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ John J. Gabarro Director
- -------------------------------------------
Name: JOHN J. GABARRO January 19, 2000

/s/ Ira T. Kay Director
- -------------------------------------------
Name: IRA T. KAY January 19, 2000

/s/ Brian E. Kennedy Director
- -------------------------------------------
Name: BRIAN E. KENNEDY January 19, 2000

/s/ Eric P. Lofgren Director
- -------------------------------------------
Name: ERIC P. LOFGREN January 19, 2000

/s/ Robert D. Masding Director
- -------------------------------------------
Name: ROBERT D. MASDING January 19, 2000

/s/ R. Michael McCullough Director
- -------------------------------------------
Name: R. MICHAEL MCCULLOUGH January 19, 2000

/s/ Gail E. McKee Director
- -------------------------------------------
Name: GAIL E. MCKEE January 19, 2000

/s/ Kevin L. Meehan Director
- -------------------------------------------
Name: KEVIN L. MEEHAN January 19, 2000

/s/ John A. Steinbrunner Director
- -------------------------------------------
Name: JOHN A. STEINBRUNNER January 19, 2000

/s/ A. Grahame Stott Director
- -------------------------------------------
Name: A. GRAHAME STOTT January 19, 2000

/s/ Charles P. Wood, Jr. Director
- -------------------------------------------
Name: CHARLES P. WOOD, JR. January 19, 2000
</TABLE>

II-5

<PAGE>

EXHIBIT 21.1

SUBSIDIARIES OF

WATSON WYATT & COMPANY HOLDINGS
as of 1/13/00

<TABLE>
<CAPTION>
Jurisdiction of Name(s) Under Which
Incorporation/ Such Subsidiary Does
Subsidiary Name Organization Business (if different)
- --------------- ---------------- -----------------------
<S> <C> <C>
Watson Wyatt Argentina S.A. Argentina
Watson Wyatt Australia Pty Ltd Australia
Wycomp Pty Ltd Australia
Watson Wyatt S.A. Belgium
G&H Consulting Actuaries B.V. Belgium
Watson Wyatt Brasil Ltda. Brazil
Watson Wyatt Company Limited Canada
Watson Wyatt Consultancy (Shanghai) Ltd. China
Watson Wyatt Colombia S.A. Colombia
Watson Wyatt S.A.R.L. France
Watson Wyatt GmbH Germany
Wyatt Bode Grabner GmbH Germany
Watson Wyatt International Pension Trustees Ltd. Guernsey, Channel Islands
Watson Wyatt Hong Kong Limited Hong Kong
Waston Wyatt Systems Ltd. Hong Kong
Watson Wyatt India Private Limited India
P.T. Watson Wyatt Purbajaga Indonesia
Watson Wyatt ISSO s.r.l. Italy
Watson Wyatt K.K. Japan
Watson Wyatt (Malaysia) Sdn. Bhd. Malaysia
Watson Wyatt Holdings (Mauritius) Limited Mauritius
Wyatt Internacional, S.A. de C.V. Mexico
Watson Wyatt Mexico, S.A. de C.V. Mexico
Watson Wyatt B.V. Netherlands
Watson Wyatt European Region B.V. Netherlands
Watson Wyatt New Zealand Limited New Zealand
Retirement Advisory Services (NZ) Limited New Zealand
Retirement Trustees NZ Limited New Zealand
Watson Wyatt Philippines, Inc. Philippines
Watson Wyatt Puerto Rico, Inc. Puerto Rico
Watson Wyatt Singapore Pte. Ltd. Singapore
Watson Wyatt de Espana, S.A. Spain
Watson Wyatt A.B. Sweden
Watson Wyatt AG Switzerland
Watson Wyatt (Thailand) Ltd. Thailand
Graham & Company Limited U.K.
PCL (1991) Limited U.K.
PCL Limited U.K.
The Wyatt Company (UK) Limited U.K.
The Wyatt Company Holdings Limited U.K.
Watson Wyatt Holdings (Europe) Limited U.K.
Watson Wyatt Limited U.K.
</TABLE>

<PAGE>

<TABLE>
<S> <C> <C>
Wyatt Financial Services Limited U.K.
Wyatt Pension Plan Trustee Limited U.K.
Watson Wyatt & Company U.S. Delaware
WW Merger Subsidiary, Inc. U.S. Delaware
Watson Wyatt Investment Consulting, Inc. U.S. Delaware
Wyatt Data Services, Inc. U.S. Delaware
Watson Wyatt International, Inc. U.S. Nevada
Watson Wyatt & Company II U.S. Nevada
</TABLE>

* All of these subsidiaries do business under their own name or under the
name Watson Wyatt Worldwide.

<PAGE>
Exhibit 23.1

CONSENT OF INDEPENDENT ACCOUNTANTS

We hereby consent to the incorporation by reference in this Registration
Statement on Form S-4 of our report dated September 8, 1999, except as to the
information presented in Notes 5 and 6, for which the date is December 9,
1999, relating to the financial statements, which appears in Watson Wyatt &
Company's Annual Report on Form 10-K for the year ended June 30, 1999 and
which is included in this registration statement. We also consent to the
references to us under the headings "Experts" and "Selected Financial Data"
in such Registration Statement.

PricewaterhouseCoopers LLP

Washington, D.C.
January 19, 2000

<PAGE>

Exhibit 23.2

Consent of Independent Auditors

We consent to the reference to our firm under the caption "Experts" in
the Registration Statement (Form S-4) and related Prospectus of Watson Wyatt
& Company Holdings pertaining to the registration of its Class B-1 and B-2
Common Stock and to the incorporation by reference therein of our report
dated July 18, 1997, with respect to the financial statements of Wellspring
Resources LLC included in Form 10-K of Watson Wyatt & Company for the year
ended June 30, 1999, filed with the Securities and Exchange Commission.

Ernst & Young LLP

Jacksonville, Florida
January 18, 2000

<PAGE>
EXHIBIT 99.1

BOARD APPOINTED PROXY

WATSON WYATT & COMPANY

THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
PROXY FOR SPECIAL MEETING OF STOCKHOLDERS -- , 2000

The undersigned hereby appoints John J. Haley and Walter W. Bardenwerper, and
each of them, as his or her proxies, each with full power of substitution, to
vote all of the undersigned's shares of capital stock of the Company at the
Special Meeting of Stockholders of Watson Wyatt & Company to be held on ,
2000, and at any adjournments thereof, with the same authority as if the
undersigned were personally present, as specified below:

THE DIRECTORS OF THE COMPANY RECOMMEND A VOTE 'FOR' ALL THE PROPOSALS BELOW:

I. / / FOR / / AGAINST / / ABSTAIN Proposal No. 1, regarding the
approval of the merger of Watson Wyatt & Company with the wholly-owned
subsidiary of Watson Wyatt & Company Holdings, WW Merger Subsidiary, Inc.
This proposal is contingent on the consummation of the public offering.

II. / / FOR / / AGAINST / / ABSTAIN Proposal No. 2, regarding the
adoption of the 2000 long term incentive plan. This proposal is
contingent on the approval of the merger proposal and the consummation of
the public offering.

III. / / FOR / / AGAINST / / ABSTAIN Proposal No. 3, regarding the
amendment to the bylaws of Watson Wyatt & Company to permit certain
transfers of the company's common stock, under certain conditions, to
trusts created for the benefit of the stockholder, his or her spouse or
descendants. The effectiveness of this proposal is not contingent upon
the effectiveness of any other proposal.

UNLESS A CONTRARY SPECIFICATION IS MADE, THIS PROXY WILL BE VOTED FOR THE ABOVE
PROPOSALS. THE UNDERSIGNED HEREBY REVOKES ANY PROXY PREVIOUSLY GIVEN AND
ACKNOWLEDGES RECEIPT OF THE NOTICE AND PROXY STATEMENT FOR THE SPECIAL MEETING.

When signing in any representative capacity, please insert your title and attach
papers showing your authority unless already on file with the company.

<TABLE>
<S> <C>
- -------------------------------------------- --------------------------------------------
Signature of Stockholder Watson Wyatt Office

- -------------------------------------------- --------------------------------------------
Please Print Stockholder Name (Legibly) Date Signed
</TABLE>

Stockholders must deliver their signed Proxy (in a sealed envelope) to their
Office Administrator for forwarding to PricewaterhouseCoopers LLP, 1301 K
Street, N.W., Suite 800 West, Washington, D.C. 20005-3333 (Attn: Maura Lyons).
Please mark, sign, date and return this Proxy to your Office Administrator on or
before [ ].