WATSON WYATT & CO HOLDINGS, S-3/A, 2000-09-08

WATSON WYATT & CO HOLDINGS
S-3/A, 2000-09-08
MANAGEMENT CONSULTING SERVICES

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AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON SEPTEMBER 8, 2000

REGISTRATION NO. 333-94973
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549

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AMENDMENT NO. 4
TO
FORM S-3
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)

<TABLE>
<S> <C> <C>
DELAWARE 6719 52-2211537
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Incorporation or Organization) Classification Code Number) Identification Number)
</TABLE>

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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)

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

COPIES TO:

<TABLE>
<S> <C> <C>
JONATHAN M. WAINWRIGHT, ESQ. WALTER W. BARDENWERPER, ESQ. ROBERT F. WALL, ESQ.
DIANA R. DE BRITO, ESQ. JAMES S. MINOGUE, III, ESQ. R. CABELL MORRIS, JR., ESQ.
CADWALADER, WICKERSHAM & TAFT WATSON WYATT & COMPANY HOLDINGS WINSTON & STRAWN
100 MAIDEN LANE 6707 DEMOCRACY BOULEVARD, SUITE 35 W. WACKER DRIVE
NEW YORK, NEW YORK 10038 800 CHICAGO, ILLINOIS 60601
(212) 504-6000 BETHESDA, MARYLAND 20817 (312) 558-5600
(301) 581-4600
</TABLE>

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APPROXIMATE DATE OF COMMENCEMENT OF PROPOSED SALE TO THE PUBLIC: As soon as
practicable after this registration statement becomes effective.

If the only securities being registered in this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the following
box. / /

If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or interest
reinvestment plans, 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, please 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(c)
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 delivery of the prospectus is expected to be made pursuant to Rule 434,
check the following box. / /

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

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 BECOMES EFFECTIVE ON
SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO
SECTION 8(A), DETERMINES.

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<PAGE>
THE INFORMATION IN THIS PRELIMINARY PROSPECTUS IS NOT COMPLETE AND MAY BE
CHANGED. THESE SECURITIES MAY NOT BE SOLD UNTIL THE REGISTRATION STATEMENT FILED
WITH THE SECURITIES AND EXCHANGE COMMISSION IS EFFECTIVE. THIS PRELIMINARY
PROSPECTUS IS NOT AN OFFER TO SELL NOR DOES IT SEEK AN OFFER TO BUY THESE
SECURITIES IN ANY JURISDICTION WHERE THE OFFER OR SALE IS NOT PERMITTED.
<PAGE>

Subject to Completion, Dated September 8, 2000

[LOGO]
Watson Wyatt & Company Holdings
5,600,000 Shares of Class A Common Stock

This is the initial public offering of Watson Wyatt & Company Holdings. We are
offering 2,800,000 shares of our class A common stock. Selling stockholders are
offering an additional 2,800,000 shares of our class A common stock. We will not
receive any of the proceeds from the sale of these shares.

Prior to this offering, there has been no public market for Watson Wyatt's
common stock. We currently estimate that the initial public offering price per
share will be between $11.50 and $13.50. We have applied to list the common
stock on the New York Stock Exchange under the symbol "WW."

SEE "RISK FACTORS" BEGINNING ON PAGE 6 TO READ ABOUT FACTORS YOU SHOULD CONSIDER
BEFORE BUYING SHARES OF OUR COMMON STOCK.

NEITHER THE SECURITIES AND EXCHANGE COMMISSION NOR ANY STATE SECURITIES
COMMISSION HAS APPROVED OR DISAPPROVED OF THESE SECURITIES OR PASSED UPON THE
ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.

<TABLE>
<CAPTION>
PER SHARE TOTAL
<S> <C> <C>
Initial public offering price $ $
Underwriting discount $ $
Proceeds, before expenses, to Watson Wyatt $ $
Proceeds, before expenses, to Selling Stockholders $ $
</TABLE>

We have agreed with the selling stockholders to reimburse the underwriting
discount for their shares. The proceeds to us and to the selling stockholders
have been adjusted accordingly.

If the underwriters sell more than 5,600,000 shares of common stock, the
underwriters have the option to purchase up to an additional 840,000 shares from
selling stockholders at the initial public offering price less the underwriting
discount.

The underwriters expect to deliver the shares to purchasers on ,
2000.

DEUTSCHE BANC ALEX. BROWN

BANC OF AMERICA SECURITIES LLC

ROBERT W. BAIRD & CO.

PROSPECTUS DATED , 2000.
<PAGE>
PROSPECTUS SUMMARY

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

WATSON WYATT

Founded in 1946, Watson Wyatt & Company is a global human capital consulting
firm. We help our clients enhance business performance by improving their
ability to attract, retain and motivate qualified employees. We design, develop
and implement human resources strategies and programs through our closely
related practice areas, the Benefits Consulting Group, HR Technologies Group and
the Human Capital Group. We also offer our clients web-based technologies that
transform the way they implement and deliver HR programs and improve
communications with their employees.

We provide human capital consulting services to many of the world's largest
corporations as well as emerging growth companies, public institutions and
non-profit organizations. Our clients include General Electric Company, General
Motors, IBM and Lockheed Martin Corporation. Many of our client relationships
have existed continuously over several decades. We generated approximately
$624.6 million in revenues during the twelve months ended June 30, 2000, with
net income of approximately $18.5 million during this same period.

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 a significant component 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.

Historically, Watson Wyatt & Company has been an employee owned company.
Immediately following this offering, approximately 83% of the stock of Watson
Wyatt & Company Holdings will be held by our existing stockholders,
substantially all of whom are associates of Watson Wyatt & Company.

1
<PAGE>
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 identifying and
serving their growing needs for integrated HR services throughout the
world;

- creating innovative web-based, or eHR-TM-, programs for delivering HR
services to our clients;

- developing new client relationships by capitalizing on our recognized
brand name, reputation for quality service, extensive and widely-cited
research studies and eHR-TM- methods for implementing HR programs; and

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

2
<PAGE>
THE OFFERING

Class A common stock offered:

By Watson Wyatt & Company Holdings......... 2,800,000 shares

By selling stockholders.................... 2,800,000 shares

Total.................................... 5,600,000 shares

Common stock to be outstanding after the
offering:(a)

Class A.................................... 5,600,000 shares

Class B-1.................................. 13,412,317 shares

Class B-2.................................. 13,412,317 shares
Total.................................... 32,424,633 shares(b)

Use of proceeds.............................. We estimate the net proceeds to us from this
offering to be approximately $29,400,000.

We expect to use these net proceeds for
capital expenditures, working capital and
other general corporate purposes, which may
include the retirement of existing
indebtedness, if any, and possible strategic
acquisitions. We will not receive any
proceeds from the sale of the class A common
stock by the selling stockholders.

Proposed NYSE symbol......................... WW

Risk Factors................................. See "Risk Factors" for a discussion of
factors you should carefully consider before
deciding to invest in shares of our common
stock.
</TABLE>

UNLESS WE SPECIFICALLY STATE OTHERWISE, THE INFORMATION IN THIS PROSPECTUS
(1) ASSUMES THAT OUR CLASS A COMMON STOCK WILL BE SOLD AT $ 12.50 PER SHARE,
WHICH IS THE MIDPOINT OF THE RANGE SET FORTH ON THE COVER PAGE OF THIS
PROSPECTUS, (2) GIVES EFFECT TO OUR CORPORATE REORGANIZATION, AND (3) ASSUMES
THAT THE UNDERWRITERS' OVER-ALLOTMENT OPTION IS NOT EXERCISED.

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

(a) Our class A common stock, class B-1 common stock and class B-2 common stock
are identical except for the transfer restrictions applicable to the
class B-1 common stock and class B-2 common stock.

(b) The number of shares of common stock to be outstanding after the offering
excludes (1) options to purchase 1,600,000 shares of class A common stock to
be granted concurrent with the consummation of this offering at an exercise
price equal to the public offering price, and (2) 2,900,000 shares of
class A common stock reserved for issuance upon exercise of options that may
be granted in the future under our long term incentive plan.

3
<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 prospectus.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------
1998 1999 2000
--------- --------- ---------
<S> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA (A):
Continuing operations:
Revenue.................................................... $ 512,660 $556,860 $624,583
Costs of providing services:
Salaries and benefits.................................... 268,611 298,915 332,339
SIBP (b)................................................. -- 22,610 30,283
Non-recurring compensation charge related to formula book
value change (c)....................................... 69,906 -- --
Professional and subcontracted services.................. 49,907 47,863 49,608
Other expenses........................................... 167,202 163,672 178,510
--------- -------- --------
Income (loss) before income taxes and minority interest.... $ (42,966) $ 23,800 $ 33,843
========= ======== ========
Income (loss) from continuing operations................... $ (56,212) $ 12,135 $ 18,533
Discontinued operations (d)................................ (69,906) 8,678 --
--------- -------- --------
Net income (loss)........................................ $(126,118) $ 20,813 $ 18,533
========= ======== ========
Earnings (loss) per share, continuing operations, basic and
fully diluted............................................ $ (3.27) $ 0.80 $ 1.24
Earnings (loss) per share, basic and fully diluted......... $ (7.34) $ 1.37 $ 1.24
Weighted average shares outstanding........................ 17,170 15,215 15,000
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30, 2000
-----------------------------------------
PRO FORMA
ACTUAL PRO FORMA(E) AS ADJUSTED(F)
--------- ------------ --------------
<S> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents............................. $ 41,410 $ 41,410 $ 70,010
Net working capital................................... 16,177 16,177 45,561
Total assets.......................................... 329,960 329,960 358,560
Redeemable common stock............................... 115,480 -- --
Total stockholders' equity (deficit).................. (74,269) 41,211 70,595
</TABLE>

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(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 our
stock incentive bonus plan, 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 redemption 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.

We believe that our results of operations in fiscal years 1998, 1999 and
2000 are more comparable to, and a better indication of, our performance as
a publicly traded company if they are analyzed excluding the stock incentive
bonus plan and the non-recurring compensation charge described above. The
loss before taxes and minority interest of $43.0 million for fiscal year
1998 would have improved by $69.9 million without the non-recurring
compensation charge. The income before taxes and minority interest of
$23.8 million for fiscal year 1999 and $33.8 million for fiscal year 2000
would have improved by $22.6 million and $30.3 million, respectively, if
bonuses were accrued under the compensation structure management will adopt
as a publicly traded company. Income before taxes and minority interest from
continuing operations for the three years ended June 30, 1998, 1999 and 2000
would have been $26.9 million, $46.4 million and $64.1 million,
respectively.

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<PAGE>
(b) Historically, we have paid incentive bonuses to associates under a fiscal
year-end bonus program. Beginning in fiscal year 1999, in addition to annual
fiscal year-end bonuses, we provided supplemental bonus compensation to our
employee stockholders pursuant to the stock incentive bonus plan in an
amount representing all income in excess of a targeted amount. These amounts
are accrued in the fiscal year to which they relate and are paid in the
following fiscal year. Following the public offering, we will terminate the
stock incentive bonus plan and replace it with equity based incentives more
customary to publicly traded companies.

The proposed Watson Wyatt & Company Holdings 2000 Long Term Incentive Plan
provides for non-qualified stock options with an exercise price equal to
fair market value at the date of the grant and no uncertainties that would
require variable accounting under generally accepted accounting principles.
In a few foreign jurisdictions, where option grants are impractical, we will
grant stock appreciation rights (SARs), which will require recognition of
compensation expense over a vesting period to the extent the market price of
the stock increases. We do not expect that any compensation expense
resulting from the equity based incentive program in effect following the
offering will be material.

(c) As an employee-owned company without a public trading market, we sold and
repurchased shares of our redeemable common stock in transactions with our
employee stockholders at a formula book value, or redemption price,
calculated in accordance with our bylaws and based, in part, on the book
value of the company. 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 redemption value of our
redeemable common stock. This change eliminated from the calculation the
$69.9 million charge taken for discontinued operations in fiscal year 1998
to reflect the discontinuation of our benefits administration outsourcing
business.

(d) As discussed in footnotes (a) and (c) above, in the third quarter of 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 year 1998 also includes the operating losses of the
benefits administration outsourcing business prior to its discontinuation,
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 corporate
reorganization, including the reclassification of the current redeemable
common stock to permanent stockholders' equity.

(f) The "Pro Forma As Adjusted" column reflects the sale of 2,800,000 shares of
class A common stock offered by us, the automatic conversion of all shares
of class B common stock sold by selling stockholders in the offering into
shares of class A common stock, and the application of the estimated net
proceeds to us from this offering.

5
<PAGE>
RISK FACTORS

BEFORE YOU INVEST IN OUR CLASS A COMMON STOCK, YOU SHOULD UNDERSTAND THE
RISKS INVOLVED. YOU SHOULD CAREFULLY CONSIDER THESE RISK FACTORS, AS WELL AS ALL
OF THE OTHER INFORMATION CONTAINED OR INCORPORATED BY REFERENCE IN THIS
PROSPECTUS BEFORE YOU DECIDE TO PURCHASE SHARES OF OUR CLASS A COMMON STOCK. IF
ANY OF THE RISKS DISCUSSED IN THIS PROSPECTUS ACTUALLY OCCUR, OUR BUSINESS,
FINANCIAL CONDITION AND OPERATING RESULTS COULD BE ADVERSELY AFFECTED. AS A
RESULT, THE TRADING PRICE OF OUR CLASS A COMMON STOCK COULD DECLINE AND YOU MAY
LOSE ALL OR PART OF YOUR INVESTMENT.

WE MUST CONTINUE TO RECRUIT AND RETAIN QUALIFIED CONSULTANTS; OUR FAILURE TO DO
SO COULD ADVERSELY AFFECT OUR ABILITY TO COMPETE SUCCESSFULLY.

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. Our failure to recruit and retain adequate
talent could reduce our competitive strength and lead to a deterioration of our
business.

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.

CHANGES IN OUR COMPENSATION PROGRAMS COULD IMPAIR OUR ABILITY TO RETAIN
CONSULTANTS.

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

WE DEPEND ON OUR ASSOCIATES; THE LOSS OF KEY CONSULTANTS AND MANAGERS COULD
DAMAGE OR RESULT IN THE LOSS OF CLIENT RELATIONSHIPS AND 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 consultants and account managers who
manage substantial client relationships or possess substantial experience or
expertise 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.

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.

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.

6
<PAGE>
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.

CLIENTS' CRITERIA FOR SELECTING CONSULTANTS MAY CHANGE.

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 FOR VARIOUS REASONS, INCLUDING A DECLINE IN
A CLIENT'S OR AN INDUSTRY'S FINANCIAL CONDITION OR AN INDUSTRY-SPECIFIC ECONOMIC
DOWNTURN, THAT 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 will 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, PARTICULARLY LONG-STANDING RELATIONSHIPS AND
ENGAGEMENTS INVOLVING STANDARD ANNUAL ACTIVITIES, ARE NOT BASED ON WRITTEN
AGREEMENTS, WHICH COULD RESULT IN DISPUTES WITH OUR CLIENTS.

Many of our engagements, including the majority of those involving
long-standing relationships or standard annual activities such as actuarial
valuations, 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.

OUR FIXED FEE ENGAGEMENTS COULD HURT OUR FINANCIAL RESULTS IF NOT PROPERLY
MANAGED.

We enter into some of our engagements on a negotiated fixed fee basis. If we
do not properly negotiate the price and manage the performance of these
engagements we might incur losses on individual engagements and our overall
financial results would be adversely affected.

7
<PAGE>

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.

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. For example,
possible claims might include:

- a client's assertion that actuarial assumptions used in a pension plan
were unreasonable, leading to plan underfunding;

- a claim arising out of the use of inaccurate data, which could lead to an
underestimation of plan liabilities; and

- a claim that employee benefit plan documents were misinterpreted or plan
amendments were misstated in plan documents, leading to overpayments to
beneficiaries.

Defending lawsuits of this nature or arising out of any of our services
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.

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; in particular,
retirement revenues are more heavily weighted toward the second half of
the fiscal year when annual actuarial valuations are required to be
completed for calendar year end companies and the related services are
performed. In the Human Resources Technologies group, the distribution of
work is concentrated at the end of the first fiscal quarter and through
the second fiscal quarter as there is demand from our clients for
assistance in updating systems and programs used in the annual
re-enrollment of employees in benefit plans, such as flex plans. Much of
the remaining business is project oriented and is thus influenced more by
particular client needs and the availability of our workforce;

- 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.

Approximately 70-75% of our total operating expenses are relatively fixed,
encompassing the majority of occupancy, communications and other expenses,
general and administrative expenses, depreciation and amortization, and salaries
and employee benefits excluding fiscal year-end incentive bonuses. Therefore, 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. Over the
most recent eight fiscal quarters, quarterly income from continuing operations
has fluctuated from $1.0 million to $7.3 million.

8
<PAGE>

WE DEPEND ON WATSON WYATT PARTNERS FOR OUR BRAND IN THE EUROPEAN MARKET AND
COULD LOSE OUR POSITION IN EUROPE IF OUR ALLIANCE AGREEMENTS WERE TO TERMINATE.

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

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

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

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

The alliance agreements with Watson Wyatt Partners generally restrict each
party's ability to enter into each other's geographic markets. If the alliance
agreements 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.

TERMINATION OF OUR RELATIONSHIP WITH WATSON WYATT PARTNERS COULD RESULT IN A
NAME CHANGE.

The alliance agreements set forth the rights we or Watson Wyatt Partners
have to buy each other out of our respective interests in each other's firm and
in Watson Wyatt Holdings (Europe) Limited in the event either of us becomes
affiliated with a competitor. A termination of our alliance with Watson Wyatt
Partners could precipitate a name change, which could result in confusion in our
markets.

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.
This subjects us to foreign financial and business risks, which could arise in
the event of:

- unusual currency exchange rate fluctuations;

- unexpected increases in taxes;

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

- unusual and unexpected monetary exchange controls;

- the impact of unusually severe or protracted recessions 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 of
operations.

OPERATIONAL READINESS OF OUR GLOBAL ADMINISTRATIVE INFRASTRUCTURE MIGHT NOT BE
AS COMPLETE AS REQUIRED TO MANAGE INTERNATIONAL OPERATIONS EFFECTIVELY.

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.

OUR BUSINESS FACES RAPID TECHNOLOGICAL CHANGE AND OUR FAILURE TO RESPOND TO THIS
CHANGE QUICKLY 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 in both generic
applications and, particularly, those which are specifically required to deliver
employee benefits services. In some cases, significant technology choices and
investments

9
<PAGE>
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 technologies in
our business requires us to incur significant expenses and, in some cases, to
implement them globally. 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 technologies 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
systems 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.

We cannot guarantee that trade secret, trademark, and copyright law
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.

OUR ASSOCIATES WILL OWN APPROXIMATELY 83% OF OUR STOCK, AND THEIR INTERESTS MAY
DIFFER FROM THOSE OF OTHER STOCKHOLDERS.

Immediately upon completion of this offering, our associates will continue
to own approximately 83% of our outstanding capital stock. As a result, our
associates will be able to elect the board of directors and generally determine
the outcome of any proposed corporate transaction or other matter submitted to
stockholders for their vote. Our associates' interests in these matters might
differ from those of our non-associate stockholders.

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 stock owned by our associates will have transfer restrictions, which will
expire within two years following this offering. As these transfer restrictions
expire and our associates' stock becomes transferable, associate ownership may
decline. A decline in associate ownership and an increase in non-associate
influence could lower morale which could, in turn, adversely affect our business
operations.

WE HAVE VARIOUS MECHANISMS IN PLACE THAT MAY PREVENT A CHANGE IN CONTROL THAT A
STOCKHOLDER MIGHT FAVOR.

Our certificate of incorporation and bylaws contain provisions that might
discourage, delay or prevent a change in control that a stockholder might favor.
Our certificate of incorporation and bylaws:

- 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;

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

10
<PAGE>
- provide that only the president or our board may call a special meeting of
stockholders;

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

- provide that vacancies on our board of directors, including new
directorships, may be filled only by the directors then in office; and

- require super-majority voting to amend the classified board and these
other provisions of our certificate of incorporation.

WE COULD ISSUE ADDITIONAL SHARES WHICH COULD HAVE A DILUTIVE EFFECT ON
STOCKHOLDERS.

At the time of the offering we will have 69,000,000 authorized shares of
class A common stock. Immediately following the completion of this offering, we
expect to have approximately 63,400,000 authorized but unissued shares of
class A common stock. Additional class A common stock will be issued upon
conversion of outstanding shares of class B common stock and pursuant to
employee stock option plans, and might 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 dilute the value of outstanding
shares, including those purchased in this offering.

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 cannot guarantee that we 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
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.

WE WILL HAVE BROAD DISCRETION REGARDING THE NET OFFERING PROCEEDS.

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

ADDITIONAL SHARES BECOMING AVAILABLE FOR SALE UNDER OUR CERTIFICATE OF
INCORPORATION COULD ADVERSELY AFFECT THE PRICE OF OUR STOCK.

Transfer restrictions on the class B common stock expire 12 and 24 months
following this 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 of 1933, those shares automatically will convert into
shares of class A common stock that will be eligible for sale in the public
market. The Class B shares will be 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. In addition, we cannot guarantee that
the board of directors will not waive the Class B common stock transfer
restrictions or that the underwriters will not waive their requirement that
holders not sell any shares for 180 days following this offering.

The following chart identifies the number of additional class A shares that
will become available for resale at the time the class B 12 and 24 month
restrictions expire:

<TABLE>
<CAPTION>
/ /2000 / /2001 / /2002
-------- ---------- ----------
<S> <C> <C> <C>
Post Merger Shares Eligible for Resale... 0 13,412,317 13,412,317
</TABLE>

11
<PAGE>
USE OF TERMINOLOGY

Immediately before the closing of this offering, 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. Unless the context indicates otherwise, the
information in this prospectus assumes that the corporate reorganization
transactions have been completed. References in this prospectus to "Watson
Wyatt," "we," "our" and "us" refer to both Watson Wyatt & Company and its
subsidiaries, before the merger, and to Watson Wyatt & Company Holdings and its
subsidiaries after the merger. References to "WW Holdings" refer to Watson
Wyatt & Company Holdings. We refer to our employees as associates.

Watson Wyatt Worldwide is the name of our global alliance with Watson Wyatt
Partners.

Watson Wyatt & Company currently files reports and other information with
the SEC, but its redeemable common stock, which has been subject to various
restrictions, has not been publicly traded. After the 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, 13th
Floor, New York, New York 10048, and in Chicago at Suite 400, Northwestern
Atrium Center, 14th 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.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This 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 prospectus also
contains third-party estimates regarding the size and growth of markets.

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 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. We qualify any
forward-looking statements entirely by these cautionary factors.

USE OF PROCEEDS

The net proceeds from the sale of the 2,800,000 shares of class A common
stock offered by us will be approximately $29.4 million, based on the midpoint
of an assumed initial public offering price of $11.50-13.50 per share and after
deducting the underwriting discounts and commissions and offering expenses. We
will not receive any proceeds from the sale of common stock by the selling
stockholders. We have agreed with the selling stockholders to reimburse
underwriting fees payable by them. This amount has been taken into account in
estimating the net proceeds.

The primary purpose of this offering is to create a public market for our
common stock, create a currency for potential acquisitions, facilitate future
access to public markets, and enhance our ability to use our common stock to
attract, retain and provide incentives to our associates.

The proceeds from this offering will be used for capital expenditures,
working capital, and other general corporate purposes, which may include the
retirement of outstanding working capital indebtedness under our revolving
credit facility. Further, although we currently have no agreements

12
<PAGE>
or commitments regarding any acquisitions, a portion of the offering proceeds
could be used for possible strategic acquisitions of complementary businesses,
products, or technologies. Pending the specific application of proceeds from
this offering, any proceeds available after the repayment of outstanding
indebtedness would be invested in short-term high-grade interest-bearing
securities.

At June 30, 2000, we had no debt outstanding. However, any debt outstanding
at the time of completion of this offering would be paid with the net proceeds.
The debt would be for cyclical working capital purposes. It would be comprised
of outstanding draws on our revolving credit facility, which would mature on
June 30, 2003 when the credit facility expires, if not repaid earlier. The
indebtedness bears interest at a rate that varies with LIBOR and/or the prime
rate. The interest rate on our borrowings is 9.5% at June 30, 2000.

DIVIDEND POLICY

We currently intend to retain our future earnings to finance the operation
and expansion of our business and we do not anticipate paying cash dividends on
our common stock in the foreseeable future. Any future determination as to the
payment of dividends will be at the discretion of our board of directors.

13
<PAGE>
CAPITALIZATION

The following table presents our consolidated net cash position and total
capitalization as of June 30, 2000:

- on an actual basis;

- on a pro forma basis giving effect to the exchange of shares under our
proposed corporate reorganization and subsequent reclassification of the
redeemable common stock to stockholders' equity; and

- on a pro forma as adjusted basis to reflect the sale of 2,800,000 shares
of class A common stock being offered in this offering by us at an assumed
initial public offering price of $12.50 per share, the automatic
conversion of all class B common stock sold by the selling shareholders in
the offering to class A common stock, and the application of the estimated
net proceeds to us from the offering.

<TABLE>
<CAPTION>
AS OF JUNE 30, 2000
-------------------------------------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
-------------------------------------
(UNAUDITED)
PRO FORMA
ACTUAL PRO FORMA AS ADJUSTED
---------- ---------- -----------
<S> <C> <C> <C>
Cash and cash equivalents................................. $ 41,410 $ 41,410 $70,010
======== ======== =======
Note payable.............................................. -- -- --
======== ======== =======
Redeemable common stock ($1 par value per share,
25,000,000 shares authorized; 14,805,145 shares issued
and outstanding) (a).................................... 115,480 -- --
======== ======== =======
Stockholders' equity:
Adjustment for redemption value greater than amounts
paid in by stockholders (a)........................... (6,097) -- --
Preferred stock (no par value per share, 1,000,000
shares authorized; no shares issued).................. -- -- --
Class A common stock ($0.01 par value per share,
69,000,000 shares authorized; 5,600,000 shares issued
and
outstanding) (b)...................................... -- 56
Class B-1 common stock ($0.01 par value per share;
15,000,000 shares authorized; 14,805,145 shares issued
and outstanding, pro forma; 13,405,145 shares issued
and outstanding,
pro forma as adjusted)................................ -- 148 134
Class B-2 common stock ($0.01 par value per share;
15,000,000 shares authorized; 14,805,145 shares issued
and outstanding, pro forma; 13,405,145 shares issued
and outstanding, pro forma as adjusted)............... -- 148 134
Additional paid in capital (c).......................... -- 109,087 140,109
Retained deficit (d).................................... (64,223) (64,223) (65,889)
Cumulative translation adjustment (other comprehensive
loss)................................................. (3,949) (3,949) (3,949)
-------- -------- -------
Total stockholders' equity (deficit)...................... (74,269) 41,211 70,595
-------- -------- -------
Total capitalization...................................... $ 41,211 $ 41,211 $70,595
======== ======== =======
</TABLE>

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

(a) All shares of common stock at June 30, 2000 are classified as redeemable
common stock outside of stockholders' equity due to the bylaw provision that
required stock to be repurchased by us upon an associate's termination or
retirement. The difference between the redeemable value, as determined in
accordance with Watson Wyatt & Company's bylaws, and the amounts paid in or
deemed paid in for the stock is identified as the "Adjustment for

14
<PAGE>
redemption value greater than amounts paid in by stockholders" and is
included in the stockholders' equity section of the historical balance
sheet.

Under the terms of the corporate reorganization, all 14,805,145 outstanding
redeemable common shares will be converted into 29,610,290 newly issued
shares of class B-1 and class B-2 common stock, without redemption features.
This is reflected in the "Pro Forma" column. In the "Pro Forma" column, the
total historical cost of the shares is now fully reflected in stockholders'
equity.

(b) The "Pro Forma As Adjusted" number of shares of common stock to be
outstanding excludes (1) options to purchase approximately 1,600,000 shares
of class A common stock to be granted concurrent with the consummation of
this offering at an exercise price equal to the public offering price and
(2) approximately 2,900,000 shares of class A common stock reserved for
issuance upon exercise of options that may be granted in the future under
our stock incentive plan.

(c) The "Pro Forma" column reflects the difference between cash paid in or
deemed paid in for the new outstanding 14,805,145 shares of the class B-1
common stock and 14,805,145 shares of class B-2 common stock and their $0.01
per share par value. The "Pro Forma As Adjusted" column adds to this amount
the issuance of shares of class A common stock in this offering, less the
$0.01 per share par value of each class of stock.

(d) We have decided to reimburse the selling stockholders for the underwriting
discount on the shares sold by them in connection with this offering. The
"Pro Forma as Adjusted" column reflects the resulting after-tax compensation
charge which will decrease our operating results and increase our retained
deficit in the quarter in which we complete this offering.

15
<PAGE>
DILUTION

As of June 30, 2000, after giving effect to our corporate reorganization and
the related termination of the redemption feature of our redeemable common
stock, our pro forma net tangible book value was approximately $32.5 million, or
approximately $1.10 per share. Net tangible book value per share is determined
by dividing our net tangible book value (total net tangible assets less total
liabilities) by 29,610,290 pro forma shares of common stock outstanding. After
giving effect to the sale of 2,800,000 shares of class A common stock in this
offering by us at the midpoint of an assumed initial public offering price of
$11.50-13.50 per share, and after deducting the underwriting discounts and
commissions and offering expenses, our pro forma net tangible book value as of
June 30, 2000 would have been $61.9 million, or $1.91 per share. This represents
an immediate increase in net tangible book value of $0.81 per share to our
stockholders and an immediate dilution in net tangible book value of $10.59 per
share to new investors purchasing shares in this offering. The following table
illustrates this per share dilution:

<TABLE>
<S> <C> <C>
Assumed initial public offering price per share.......... $ 12.50
-------
Net tangible book value per share as of June 30,
2000................................................. $ 1.10
Increase in net tangible book value per share
attributable to the offering......................... 0.81
-------
Net tangible book value per share after this offering.... 1.91
-------
Dilution per share to new stockholders................... $ 10.59
=======
</TABLE>

The following table summarizes, on a pro forma basis as of June 30, 2000,
the number of shares of class A common stock purchased from us, the total
consideration paid to us and the average price per share paid to us by the
existing holders of common stock and by the new stockholders purchasing shares
of class A common stock offered by us (at an assumed initial public offering
price at the midpoint of $11.50-13.50 per share) before deducting the
underwriting discounts and commissions and offering expenses payable by us.

<TABLE>
<CAPTION>
SHARES PURCHASED TOTAL CONSIDERATION
---------------------- ---------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
----------- -------- ------------- -------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders........... 26,810,290 82.7% $ 98,930,000 58.6% $ 3.69
New stockholders................ 5,600,000 17.3 70,000,000 41.4 $12.50
----------- ----- ------------ -----
Total......................... 32,410,290 100.0% $168,930,000 100.0%
=========== ===== ============ =====
</TABLE>

The foregoing table excludes:

- options to purchase 1,600,000 shares of class A common stock to be granted
concurrent with the consummation of this offering at an exercise price
equal to the public offering price

- 2,900,000 shares of class A common stock reserved for issuance upon
exercise of options that may be granted in the future under our stock
option plan.

Additional sales by the selling stockholders in this offering pursuant to
the underwriters' overallotment option, if exercised in full, will reduce the
number of shares held by our existing stockholders to 25,970,290 shares, or
80.1% of the total number of shares outstanding after this offering, and will
increase the number of shares held by new investors to 6,440,000 shares or 19.9%
of the total number of shares of common stock outstanding after this offering.

16
<PAGE>

SELECTED CONSOLIDATED FINANCIAL DATA

The following selected consolidated financial data of Watson Wyatt & Company
Holdings 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
prospectus. The balance sheet data as of June 30, 1999 and 2000 and the
statement of operations data for the years ended June 30, 1998, 1999 and 2000
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, 1996, 1997 and 1998 and the statement of
operations data for the years ended June 30, 1996 and 1997 are derived from the
audited consolidated financial statements for such years that have been restated
to reflect our discontinued operations.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------------------------------
1996 1997 1998 1999 2000
--------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED STATEMENT OF OPERATIONS DATA (A):
Revenue..................................................... $ 475,298 $486,502 $ 512,660 $556,860 $624,583
Costs of providing services:
Salaries and employee benefits............................ 250,103 252,302 268,611 298,915 332,339
Stock incentive bonus plan (b)............................ -- -- -- 22,610 30,283
Non-recurring compensation charge (c)..................... -- -- 69,906 -- --
Professional and subcontracted services................... 42,450 48,827 49,907 47,863 49,608
Occupancy, communications and other....................... 84,203 96,026(d) 88,840 92,668 100,099
General and administrative expenses....................... 38,656 45,696 51,759 56,578 63,596
Depreciation and amortization............................. 25,541 22,094 24,994 15,248 17,878
--------- -------- --------- -------- --------
440,953 464,945 554,017 533,882 593,803

Income (loss) from operations............................... 34,345 21,557 (41,357) 22,978 30,780

Other:
Interest income........................................... 1,441 1,462 901 944 1,823
Interest expense.......................................... (930) (1,506) (2,768) (2,646) (1,876)

Income from affiliates...................................... (820) 105 258 2,524 3,116
--------- -------- --------- -------- --------
Income (loss) before taxes and minority interest............ 34,036 21,618 (42,966) 23,800 33,843

Income taxes................................................ 14,071 9,070 13,134 11,448 15,195
--------- -------- --------- -------- --------
Income (loss) before minority interest...................... 19,965 12,548 (56,100) 12,352 18,648

Minority interest........................................... (130) (167) (112) (217) (115)
--------- -------- --------- -------- --------
Income (loss) from continuing operations.................... 19,835 12,381 (56,212) 12,135 18,533

Discontinued operations, net (e)............................ (10,480) (11,483) (69,906) 8,678 --
--------- -------- --------- -------- --------
Net income (loss)........................................... $ 9,355 $ 898 $(126,118) $ 20,813 $ 18,533
========= ======== ========= ======== ========
Earnings (loss) per share, continuing operations, basic and
fully diluted............................................. $ 1.07 $ 0.71 $ (3.27) $ 0.80 $ 1.24

Earnings (loss) per share, basic and fully diluted.......... $ 0.51 $ 0.05 $ (7.34) $ 1.37 $ 1.24

Weighted average shares outstanding......................... 18,516 17,438 17,170 15,215 15,000
</TABLE>

<TABLE>
<CAPTION>
AS OF JUNE 30,
---------------------------------------------------------
1996 1997 1998 1999 2000
--------- --------- --------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
CONSOLIDATED BALANCE SHEET DATA:
Cash and cash equivalents................................... $ 21,694 $ 26,257 $ 13,405 $ 35,985 $ 41,410
Net working capital......................................... 18,788 21,307 23,748 11,692 16,177
Total assets................................................ 320,819 331,778 268,310 313,960 329,960
Note payable................................................ -- -- 9,000 -- --
Redeemable common stock..................................... 90,214 96,091 96,296 107,631 115,480
Total stockholders' deficit (f)............................. (5,832) (12,205) (84,510) (74,351) (74,269)
Shares outstanding.......................................... 18,262 18,130 15,917 16,112 14,805
</TABLE>

17
<PAGE>
------------------------------

(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 our
stock incentive bonus plan, 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 redemption 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.

(b) Historically, we have paid incentive bonuses to associates under a fiscal
year-end bonus program. Beginning in fiscal year 1999, in addition to annual
fiscal year-end bonuses, we provided supplemental bonus compensation to our
employee shareholders pursuant to the stock incentive bonus plan in an
amount representing all income in excess of a targeted amount. These amounts
are accrued in the fiscal year to which they relate and are paid in the
following year. Following the public offering, we will terminate the stock
incentive bonus plan and replace it with equity based incentives more
customary to publicly traded companies.

The proposed Watson Wyatt & Company Holdings 2000 Long Term Incentive Plan
provides for non-qualified stock options with an exercise price equal to
fair market value at the date of the grant and no uncertainties that would
require variable accounting under generally accepted accounting principles.
In a few foreign jurisdictions, where option grants are impractical, we will
grant stock appreciation rights (SARs) which will require recognition of
compensation expense over a vesting period to the extent the market price of
the stock increases. We do not expect that any compensation expense
resulting from the equity based incentive program in effect following the
offering will be material.

(c) As an employee-owned company without a public trading market, we sold and
repurchased shares of our redeemable common stock in transactions with our
employee shareholders at a formula book value, or redemption price,
calculated in accordance with our bylaws and based, in part, on the book
value of the company. 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 redemption value of our
redeemable common stock. This change eliminated from the calculation of the
$69.9 million charge taken for discontinued operations in fiscal year 1998
to reflect the discontinuation of our benefits administration outsourcing
business.

(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 one operating
office.

(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. 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 Total Stockholders' Deficit from June 30, 1997 to June 30,
1998 includes the discontinued operations charge of $69.9 million mentioned
in note (e) above.

18
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS

OVERVIEW

Watson Wyatt & Company Holdings, including its subsidiaries, 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 Holdings. Our share of the results of our affiliates,
recorded using the equity method of accounting, is reflected in the "Income 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; management believes the approximate percentages are 60% and 40%,
respectively. Clients are typically invoiced on a monthly basis with revenue
recognized as services are provided. For the most recent three fiscal years,
revenue from U.S. consulting operations have comprised approximately 80% of
consolidated revenue. No single client accounted for more than 4% of our
consolidated revenue for any of the most recent three fiscal years.

In delivering consulting services, our principal direct expenses relate to
compensation of personnel. Salaries and employee benefits are comprised of wages
paid to associates, related taxes, benefit expenses such as pension, medical and
insurance costs and fiscal year-end incentive bonuses. In addition, professional
and subcontracted services represent fees paid to external service providers for
legal, marketing and other services, approximately one half of which are
specifically reimbursed by our clients and included in revenue.

Occupancy, communications and other expenses represent expenses for rent,
utilities, supplies and telephone to operate office locations as well as
non-client-reimbursed travel by associates, publications and professional
development. General and administrative expenses include the operational costs
and professional fees paid by corporate management, general counsel, marketing,
human resources, finance, research and technology support.

Historically, we have paid incentive bonuses to associates under a fiscal
year-end bonus program. Beginning in fiscal year 1999, in addition to annual
fiscal year-end bonuses, we have provided supplemental bonus compensation to our
employee shareholders pursuant to our stock incentive bonus plan in an amount
representing all income in excess of a targeted amount. These bonuses are
accrued in the fiscal year to which they relate and are paid in the following
year. Our results of operations for fiscal years 1999 and 2000 include expenses
for supplemental bonuses accrued under the stock incentive bonus plan of
$22.6 million and $30.3 million, respectively.

Following this offering, we will terminate our stock incentive bonus plan
and replace it with equity-based incentives more customary to publicly traded
companies. The proposed Watson Wyatt & Company Holdings 2000 Long Term Incentive
Plan provides for non-qualified stock options with an exercise price equal to
fair market value at the date of the grant and no uncertainties that would
require variable accounting under generally accepted accounting principles. In a
few foreign jurisdictions, where option grants are impractical, we will grant
stock appreciation rights (SARs) which will require recognition of compensation
expense over a vesting period to the extent the market price of the stock
increases. We do not expect that any compensation expense resulting from the
equity based incentive program in effect following the offering will be
material.

During the third quarter of fiscal year 1998, we elected to exit the
benefits administration outsourcing business and to end our participation in
Wellspring Resources, LLC, a joint venture that we had formed in 1996 with State
Street Bank and Trust Company. Wellspring provided benefits administration for
its clients, managing the day-to-day administration, including benefit
calculations,

19
<PAGE>
compliance and reporting, and providing benefit-related customer service to plan
participants through call centers. We chose to exit the business in order to
focus our management attention and corporate resources on our core consulting
business. Pursuant to our restructuring agreement with Wellspring and State
Street Bank and Trust, our 50% interest in Wellspring was redeemed effective
April 1, 1998. In conjunction with this redemption, we recorded an after-tax
charge of $69.9 million in fiscal year 1998. In fiscal year 1999, we reduced the
estimate of the anticipated loss, and consequently reduced the expected loss on
disposal by $8.7 million, net of tax.

As an employee-owned company without a public trading market, we sold and
purchased shares of our redeemable common stock in transactions with our
employees according to the formula book value, or redemption value, which is
based, in part, on the book value of the company. The $69.9 million charge
incurred in fiscal year 1998 in connection with our exit from the benefits
administration outsourcing business reduced our book value and, as such, would
have reduced the redemption value of our redeemable common stock. We altered the
formula for calculating the redemption value of our common stock to eliminate
the effect of the $69.9 million charge. In accordance with generally accepted
accounting principles, this change in the formula resulted in an additional
one-time, non-cash compensation charge of $69.9 million in fiscal year 1998.

Due to the stock incentive bonus plan and non-cash compensation charge
related to the change in stock redemption price described above, 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, 1999 and 2000 are more comparable
to, and a better indication of, our performance as a publicly traded company if
they are analyzed excluding the stock incentive bonus plan and the non-recurring
compensation charge described above. This is because the events giving rise to
these charges are eliminated once the offering is completed, namely, the new
holding company will not have redeemable stock and there will be a new incentive
compensation plan. The continuing operations loss before taxes and minority
interest of $43.0 million for fiscal year 1998 would have improved by
$69.9 million without the non-recurring compensation charge. The continuing
operations income before taxes and minority interest of $23.8 million for fiscal
year 1999 and $33.8 million for fiscal year 2000 would have improved by
$22.6 million and $30.3 million, respectively, if bonuses were accrued under the
compensation structure management will adopt as a publicly traded company.
Income before taxes and minority interest from continuing operations for the
three years ended June 30, 1998, 1999 and 2000 would have been $26.9 million,
$46.4 million and $64.1 million, respectively.

In connection with this offering, we have decided to reimburse the selling
stockholders for the underwriting discount on the shares sold by them in this
offering. In the fiscal quarter in which the offering is completed, our
operating results will be negatively affected by the resulting compensation
charge. We estimate that the reduction in income from operations will be
approximately $2.5 million and the reduction in net income would be
approximately $1.7 million due to this non-recurring compensation charge. If the
underwriters' overallotment option is exercised in full, we estimate that the
total reduction in income from operations will be approximately $3.2 million and
the total reduction in net income would be approximately $2.2 million due to
this non-recurring compensation charge.

20
<PAGE>
RESULTS OF OPERATIONS

The following table sets forth Consolidated Statement of Operations data as
a percentage of revenue for the periods indicated.

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Revenue..................................................... 100.0% 100.0% 100.0%

Costs of providing services:
Salaries and employee benefits............................ 53.2 53.7 52.4
Stock incentive bonus..................................... 4.9 4.1 --
Non-recurring compensation charge......................... -- -- 13.7
Professional and subcontracted services................... 7.9 8.6 9.7
Occupancy, communications and other....................... 16.0 16.7 17.3
General and administrative expenses....................... 10.2 10.1 10.1
Depreciation and amortization............................. 2.9 2.7 4.9
----- ----- -----
95.1 95.9 108.1
----- ----- -----
Income (loss) from operations............................... 4.9 4.1 (8.1)

Other:
Interest income........................................... 0.3 0.2 0.2
Interest expense.......................................... (0.3) (0.5) (0.6)

Income from affiliates...................................... 0.5 0.5 0.1
----- ----- -----
Income (loss) before income taxes and minority interest..... 5.4 4.3 (8.4)
----- ----- -----
Provision for income taxes.................................. 2.4 2.1 2.5
----- ----- -----
Income (loss) before minority interest...................... 3.0 2.2 (10.9)

Minority interest in net income of consolidated
subsidiaries.............................................. -- -- --
----- ----- -----
Income (loss) from continuing operations.................... 3.0 2.2 (10.9)

Discontinued operations:

Loss from operations of discontinued outsourcing business... -- -- (1.4)

Adjustment (loss) on disposal of discontinued outsourcing
business.................................................. -- 1.5 (12.3)
----- ----- -----
Net income (loss)........................................... 3.0% 3.7% (24.6)%
===== ===== =====
</TABLE>

FISCAL YEAR ENDED JUNE 30, 2000 COMPARED TO FISCAL YEAR ENDED JUNE 30, 1999

REVENUE

Revenue from continuing operations was $624.6 million in fiscal year
2000, compared to $556.9 million in the prior year, an increase of
$67.7 million, or 12%. This revenue growth was primarily due to a
$25.5 million, or 14% increase in revenue generated by our U.S. East region, a
$21.2 million, or 14% increase in revenue generated by our U.S. Central region,
a $5.6 million, or 8% increase in our U.S. West region, and a $2.2 million, or
4% increase in other North American regions. The revenue increase in the North
American regions was due primarily to the realization of net billing rate
increases, accounting for approximately $32.1 million, increased chargeable
hours accounting for $10.2 million and improved management of the scope of
projects, resulting in $12.2 million less net fee markdowns in fiscal year 2000
than in fiscal year 1999. In addition, our Asia-Pacific region generated
$11.0 million, or 23% higher revenue than in the previous fiscal year, and our
Latin American region generated $1.0 million, or 14% higher revenue than in the
previous fiscal year. Within North America the following individual lines of
business, not all inclusive, showed the following trends: revenue for our
Benefits Group was $334.3 million in fiscal year 2000, compared to
$307.1 million in fiscal year 1999, an increase of $27.2 million, or 9%; revenue
for our HR Technologies Group was $79.7 million in fiscal year 2000, compared to
$66.3 million in fiscal year 1999, an increase of $13.4 million, or 20%; and
revenue for our Human Capital Group was

21
<PAGE>

$49.7 million in fiscal year 2000, compared to $41.0 million in fiscal year
1999, an increase of $8.7 million, or 21%.

SALARIES AND EMPLOYEE BENEFITS

Salaries and employee benefit expenses for fiscal year 2000 were
$332.3 million, compared to $298.9 million for the previous fiscal year, an
increase of $33.4 million, or 11%. The increase was mainly due to a
$22.4 million increase in compensation expenses, which is partly the result of
annual salary increases averaging 5% and a 5% increase in headcount. The
remainder of the difference was attributable to $7.5 million higher fiscal
year-end bonuses and a $3.2 million increase in other employee benefits. As a
percentage of revenues, salaries and employee benefits decreased to 53.2% from
53.7%. This decrease reflects the overall utilization of our operating
personnel.

STOCK INCENTIVE BONUS PLAN

The accrued bonus under our stock incentive bonus plan for fiscal year
2000 was $30.3 million, compared to $22.6 million for fiscal year 1999, an
increase of $7.7 million, or 34%. As a percentage of revenue, the accrued bonus
under our stock incentive bonus plan increased to 4.9% from 4.1%. The amount of
the bonus is at the discretion of our board of directors.

PROFESSIONAL AND SUBCONTRACTED SERVICES

Professional and subcontracted services used in consulting operations
were $49.6 million for fiscal year 2000, compared to $47.9 million for fiscal
year 1999, an increase of $1.7 million, or 4%. The increase was mainly due to a
$2.5 million increase in international professional services, a $1.2 million
actuarial and strategic consulting expense from a sub-contractor, and
$0.9 million in non-compete payments, partially offset by lower reimbursable
expenses incurred on behalf of clients of $2.3 million and a $1.0 million
insurance claim. As a percentage of revenue, professional services decreased to
7.9% from 8.6%, due primarily to a reduction in the level of outside services
specifically incurred for and reimbursed by clients.

OCCUPANCY, COMMUNICATIONS AND OTHER

Occupancy, communications and other expenses were $100.1 million for
fiscal year 2000, compared to $92.7 million for fiscal year 1999, an increase of
$7.4 million, or 8%. The increase was mainly attributable to the $3.0 million
net gain from the sale of our defined contribution daily record-keeping software
recognized in fiscal year 1999 which reduced expense, a $2.1 million increase in
non-reimbursable travel expenses, an increase in rent expense of $1.0 million
and a $0.5 million increase in telephone expenses. As a percentage of revenue,
occupancy, communications and other expenses decreased to 16.0% from 16.7%, as
we leveraged these expenses over a larger revenue base.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for fiscal year 2000 were
$63.6 million, compared to $56.6 million for fiscal year 1999, an increase of
$7.0 million, or 12%. The increase was mainly attributable to increased legal
expenses of $2.2 million, increased professional services of $2.2 million, a
$1.1 million, or 5% increase in base salaries and $1.2 million in higher
non-client related travel expenses. As a percentage of revenue, general and
administrative expenses increased slightly to 10.2% from 10.1%.

DEPRECIATION AND AMORTIZATION

Depreciation and amortization expense for fiscal year 2000 was
$17.9 million, compared to $15.2 million for fiscal year 1999, an increase of
$2.7 million, or 18%. The increase was mainly due to a $1.4 million increase in
computer hardware depreciation. The remaining increase was due primarily to
higher computer software and furniture, fixtures and equipment purchases during
fiscal year 2000, which account for $0.8 million of the increase, and an
increase in amortization of intangibles of $0.3 million. As a percentage of
revenue, depreciation and amortization expenses increased to 2.9% from 2.7%.

22
<PAGE>

INTEREST INCOME

Interest income for fiscal year 2000 was $1.8 million, compared to
$0.9 million for fiscal year 1999, an increase of $0.9 million, or 100%. The
increase was attributable to the receipt of interest of $0.5 million related to
a federal tax refund and to additional interest income of $0.4 million earned
during the year on a higher average investment balance.

INTEREST EXPENSE

Interest expense for fiscal year 2000 was $1.9 million, compared to
$2.6 million for fiscal year 1999, a decrease of $0.7 million, or 27%. On
average, we borrowed less money against our revolving line of credit during
fiscal year 2000 than in fiscal year 1999.

INCOME FROM AFFILIATES

Income from affiliates for fiscal year 2000 was $3.1 million, compared
to $2.5 million for fiscal year 1999, an increase of $0.6 million, or 24%. The
increase reflects improvement in business operations by our affiliates in
Continental Europe and strong business performance by our United Kingdom
affiliate.

PROVISION FOR INCOME TAXES

Income taxes for fiscal year 2000 were $15.2 million, compared to
$11.4 million for fiscal year 1999. Our effective tax rate was 44.9% for fiscal
year 2000, compared to 48.1% for fiscal year 1999. The change was due to the
utilization of federal and state tax credits, a decrease in operating losses of
certain foreign affiliates and the utilization of tax benefits related to
foreign operating loss carryovers of certain foreign affiliates. Our effective
tax rate was also affected by differing foreign tax rates in various
jurisdictions. We record a tax benefit on foreign net operating loss carryovers
and foreign deferred expenses only if it is more likely than not that a benefit
will be realized.

DISCONTINUED OPERATIONS

During 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 tax.
The discontinuation is essentially completed, with contingencies remaining only
on guaranteed leases for real estate and equipment. We believe that we have
adequate provisions for any remaining costs related to the discontinuation. (See
Notes 14 and 15 of Notes to the Consolidated Financial Statements, for further
discussion of discontinued operations.)

NET INCOME

Net income for fiscal year 2000 was $18.5 million, compared to
$20.8 million in fiscal year 1999, a decrease of $2.3 million, or 11%. As a
percentage of revenue, net income decreased to 3.0% from 3.7%. However, income
from continuing operations in fiscal year 2000 was $6.4 million higher than in
fiscal year 1999, reflecting improved operating performance. This increase was
more than offset by the $8.7 million after-tax adjustment to reduce the loss on
disposal of the discontinued benefits administration outsourcing business
recorded in fiscal year 1999. Income from continuing operations for fiscal year
2000 and 1999 also reflect the stock incentive bonus plan accruals discussed
above.

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

REVENUE

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 9% growth in revenue. This increase is mainly attributable to
increases in our North American regions totaling $36.4 million and a further
$6.3 million, or 15%, increase in our Asia-Pacific region. The individual
regions within North America showed the following trends: U.S. East, a
$31.2 million, or 20% increase; U.S. Central, a $14.0 million, or 10% increase;
and, U.S. West, an $8.8 million, or 11% decline. The net revenue increase in
these regions can be attributed to the realization of net billing rate increases
accounting

23
<PAGE>
for $43.3 million, increased chargeable hours accounting for approximately $22.9
million, offset by net fee markdowns of $19.3 million, and contract losses of
approximately $10.5 million. Within North America the following individual lines
of business, not all inclusive, showed the following trends: revenue for our
Benefits Group was $307.1 million in fiscal year 1999, compared to $271.9
million in fiscal year 1998, an increase of $35.2 million, or 13%, including
$11.5 million of additional revenue from the first fiscal quarter acquisition of
selected units of KPMG's benefits consulting business; revenue for our Human
Capital Group was $41.0 million in fiscal year 1999, compared to $44.5 million
in fiscal year 1998, a decrease of $3.5 million, or 8%, amid a reorganization of
the practice; revenue for our HR Technologies Group was $66.3 million in fiscal
year 1999, compared to $53.6 million in fiscal year 1998, an increase of $12.7
million, or 24%, despite the sale in early fiscal year 1999 of the defined
contribution recordkeeping business which had generated revenue in fiscal year
1998 of $6.0 million; and, no risk and insurance consulting revenues due to our
sale of this practice in late fiscal year 1998, which had generated
$9.2 million in fiscal year 1998 revenue.

SALARIES AND EMPLOYEE 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 increases in
compensation and benefits. As a percentage of revenue, salaries and employee
benefits increased to 53.7% from 52.4%. The increase was primarily driven by the
accrual of relatively higher fiscal year-end incentive bonuses in fiscal year
1999.

STOCK INCENTIVE BONUS PLAN

In fiscal year 1999, we accrued, for the first time, a supplemental
bonus under our stock incentive bonus plan of $22.6 million, which amounts were
paid in January, 2000.

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. As a percentage of revenue, professional services
decreased to 8.6% from 9.7%.

OCCUPANCY, COMMUNICATIONS AND OTHER

Occupancy, communications and other expenses increased $3.8 million, or
4.3% from fiscal year 1998. The increase is primarily due to increased travel,
net of savings achieved through the adoption of an office size standard as well
as our success in negotiating advantageous leases of office space. As a
percentage of revenue, occupancy, communications and other expenses decreased to
16.7% from 17.3%, reflecting the relatively fixed nature of these costs.

GENERAL AND ADMINISTRATIVE EXPENSES

General and administrative expenses for fiscal year 1999 were
$56.6 million, an increase of $4.8 million, or 9%, from fiscal year 1998. The
increase was attributable to $4.8 million for providing technology support to
core consulting areas and $1.6 million for Year 2000 readiness. These increases
were offset by a $1.6 million decrease in marketing expenses for business
strategy initiatives from fiscal year 1998. As a percentage of revenue, general
and administrative expenses remained unchanged from fiscal year 1998 at 10.1%.

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
re-evaluation 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. As a percentage of revenue, depreciation and amortization
expenses decreased to 2.7% from 4.9%, reflecting the higher amortization on
internally developed software in fiscal year 1998 mentioned above.

24
<PAGE>

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 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%. Income tax expense of
$13.1 million in fiscal year 1998 relates to a loss before taxes, minority
interest and discontinued operations of $43.0 million, for an effective tax rate
of (30.6)%. The reason for reporting a tax expense when we had a pretax loss and
the disparity in effective tax rates is the non-recurring compensation charge of
$69.9 million in fiscal year 1998, included in the loss before taxes of
$43.0 million, which is permanently non-deductible for tax purposes.

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. As a percentage of revenue,
net income was 3.7%, compared to a net loss of (24.6)% in fiscal year 1998.
Continuing operations income before income taxes and minority interest of
$23.8 million in fiscal year 1999 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 sales and
repurchases. The fiscal year 1999 results reflect significantly improved
operating performance and the accrual of bonuses under the stock incentive bonus
plan, at the discretion of our board of directors.

LIQUIDITY AND CAPITAL RESOURCES

Our cash and cash equivalents at June 30, 2000 totaled $41.4 million,
compared to $36.0 million at June 30, 1999. The $5.4 million increase in cash
from June 30, 1999 to June 30, 2000 was mainly attributable to cash from
operations of $138.0 million, net of bonus payouts of $67.2 million, tax
payments of $21.7 million, capital asset purchases of $20.2 million, payments to
retirees of $11.9 million and repurchases of redeemable common stock of $9.3
million.

CASH FROM OPERATING ACTIVITIES

Cash from operating activities for fiscal year 2000 was $36.9 million,
compared to cash from operating activities of $52.1 million for fiscal year
1999. However, cash received from our operations increased $36.4 million in
fiscal year 2000. This increase was more than offset by higher bonus payments of
$29.8 million, higher tax payments of $16.3 million, and higher payments to
retirees of $5.5 million.

Cash from operating activities increased in 1999 compared to 1998 by $28.6
million. The increase was primarily due to the $38.6 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 $13.4 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.

25
<PAGE>

CASH USED IN INVESTING ACTIVITIES

Cash used in investing activities for fiscal year 2000 was $21.6
million, compared to $21.4 million for fiscal year 1999. The increase in cash
usage was due to $3.0 million in lower distributions from affiliates and $0.6
million in higher current year fixed asset purchases, partially offset by $3.1
million in lower contingent consideration payments associated with acquisitions
and higher proceeds from the sale of fixed assets and investments of $0.3
million.

In fiscal year 1999, cash used in investing activities decreased
$8.7 million from fiscal year 1998, principally due to reduced cash needs of the
discontinued operations.

CASH USED IN FINANCING ACTIVITIES

Cash used in financing activities were $9.2 million for fiscal year
2000, compared to $8.7 million for fiscal year 1999. This change reflects the
net repayments of $9.0 million against our revolving line of credit and a $5.8
million decrease in repurchases of redeemable common stock, partially offset by
a $15.3 million decrease in issuances of redeemable common stock. The decrease
in issuances occurred because we completed a formal stock sale during fiscal
year 1999 but did not have a formal stock sale during fiscal year 2000.

We used more cash in fiscal year 1999 compared to fiscal year 1998 as we
paid down our outstanding debt. Our 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 30, 2003. Of the $95.0 million of the credit line that is
allocated for operating needs, $2.2 million is unavailable as a result of
support required for letters of credit issued under the credit line. We had no
borrowings outstanding at June 30, 2000 or June 30, 1999. However, during fiscal
year 2000, we made drawings and repayments against our revolving credit facility
for cyclical working capital needs.

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 affiliates, as well as support
ongoing operations. Anticipated commitments of funds are estimated at
$46.6 million for fiscal year 2001, mainly for computer hardware purchases,
office relocations and renovations, development and upgrade of financial and
knowledge management systems, acquisition related payments, and repurchases of
redeemable common stock. We expect operating cash flows to provide for these
cash needs. In future fiscal years, we would expect that our capital needs would
be similar in nature to what we have incurred in the past. Capital expenditures
will be required in conjunction with office lease renewals and relocations
required to support management's growth strategy. Additionally, our consultants
will require access to hardware and software that will support servicing our
clients. In a rapidly changing technological environment, management anticipates
we will need to make continued investments in our knowledge sharing and
financial systems infrastructure. We would expect cash from operations in
conjunction with the anticipated net proceeds from this offering and our
existing credit facility to adequately provide for these cash needs.

Our foreign operations do not materially impact liquidity or capital
resources. At June 30, 2000, $15.8 million of the total cash balance of
$41.4 million was held outside of North America, which we have the ability to
readily utilize, if necessary. There are no significant repatriation
restrictions other than local or U.S. taxes associated with repatriation. Our
foreign operations in total are substantially self-sufficient for their working
capital needs.

MARKET RISK

We are exposed to market risks in the ordinary course of business. These
risks include interest rate risk and foreign currency exchange risk. We have
examined our exposure to these risks and concluded that none of our exposures in
these areas are material to fair values, cash flows or earnings.

26
<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,
1998 1998 1999 1999 1999 1999 2000 2000
--------- --------- --------- --------- --------- --------- --------- ---------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Revenue........................... $133,985 $140,358 $135,573 $146,944 $146,323 $152,411 $157,502 $168,347
Costs of providing services:
Salaries and employee
benefits...................... 76,398 72,470 70,977 79,070 79,803 80,950 85,871 85,715
Stock incentive bonus plan...... 2,100 5,500 6,900 8,110 6,000 9,000 8,200 7,083
Non-recurring compensation
charge........................ -- -- -- -- -- -- -- --
Professional and subcontracted
services...................... 8,714 13,338 11,573 14,238 9,796 15,131 9,082 15,599
Occupancy, communications and
other......................... 17,367 24,173 25,715 25,413 22,016 24,707 26,561 26,815
General and administrative
expenses...................... 11,160 16,692 14,194 14,532 13,178 14,724 16,214 19,480
Depreciation and amortization... 3,853 3,971 3,996 3,428 4,907 4,610 5,483 2,878
-------- -------- -------- -------- -------- -------- -------- --------
119,592 136,144 133,355 144,791 135,700 149,122 151,411 157,570

Income from operations............ 14,393 4,214 2,218 2,153 10,623 3,289 6,091 10,777

Other:
Interest income................. 124 404 127 289 1,036 216 232 339
Interest expense................ (553) (1,168) (473) (452) (390) (698) (431) (357)

Income from affiliates............ 160 865 583 916 988 1,155 481 492
-------- -------- -------- -------- -------- -------- -------- --------
Income before taxes and minority
interest........................ 14,124 4,315 2,455 2,906 12,257 3,962 6,373 11,251

Income taxes...................... 6,830 2,087 1,530 1,001 5,919 1,916 2,806 4,554
-------- -------- -------- -------- -------- -------- -------- --------
Income before minority interest... 7,294 2,228 925 1,905 6,338 2,046 3,567 6,697

Minority interest................. -- (85) 54 (186) 18 158 (9) (282)
-------- -------- -------- -------- -------- -------- -------- --------
Income from continuing
operations...................... 7,294 2,143 979 1,719 6,356 2,204 3,558 6,415

Discontinued operations, net...... -- 8,678 -- -- -- -- -- --
-------- -------- -------- -------- -------- -------- -------- --------
Net income........................ $ 7,294 $ 10,821 $ 979 $ 1,719 $ 6,356 $ 2,204 $ 3,558 $ 6,415
======== ======== ======== ======== ======== ======== ======== ========
Earnings per share, continuing
operations, basic and fully
diluted......................... $ 0.47 $ 0.15 $ 0.07 $ 0.11 $ 0.41 $ 0.15 $ 0.24 $ 0.43

Earnings per share, basic and
fully diluted................... $ 0.47 $ 0.74 $ 0.07 $ 0.11 $ 0.41 $ 0.15 $ 0.24 $ 0.43
</TABLE>

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<PAGE>
YEAR 2000 ISSUE

We have completed a program to ensure that our systems are Year 2000
compliant. To date, the change of our computer systems to the Year 2000 has not
had a material adverse effect on our business, results of operations, or
financial condition. Nevertheless, since the effects of the Year 2000 issue are
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 to our clients. This software
has been provided to clients 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 client errors using our software or contractual
liability to us caused by non-compliant software that is not identified or
corrected and the costs of replacing or repairing client systems, none of which
we expect to have a material effect on our business.

Our overall cost to address Year 2000 compliance issues exceeded
$4.0 million, most of which was spent in 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 anticipate no material cost associated with Year 2000 compliance
in fiscal year 2001.

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<PAGE>
BUSINESS

OVERVIEW

Founded in 1946, Watson Wyatt & Company is a global human capital consulting
firm. We help our clients enhance 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 rapid expansion of the web-based delivery of HR information and
programs, which we refer to as 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 strategies and programs 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-: our web-based delivery of HR information and programs

- Employee self-service applications

- HR call centers

- 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 of the world's largest corporations as well as
emerging growth companies, public institutions and non-profit organizations. We
consult to General Electric Company, General Motors, IBM and Lockheed Martin
Corporation. Many of our client relationships have existed over several decades.

We believe that our extensive history, global presence, dedication to
long-term client relationships and recognized reputation for quality provide us
with significant competitive advantages. We 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 4,000 associates in 60 offices located in 18 countries. We
generated approximately $624.6 million in revenues during the twelve months
ended June 30, 2000, with net income of $18.5 million during this same period.

CORPORATE 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.

Our web site is at http://www.watsonwyatt.com. The information contained on
our web site is not incorporated in this prospectus.

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<PAGE>
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 strengthen our European capabilities significantly 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 85 offices in 30
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 11 offices in the United Kingdom, Ireland and Africa.
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.

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 agreements contain 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
agreements, we generally will not operate in the United Kingdom, Ireland or
Africa, and Watson Wyatt Partners generally will not operate in North America,
Latin America or Asia-Pacific.

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. In the U.S. alone, companies spend
over $5 trillion annually on the direct costs of human capital such as
compensation and benefits, according to the U.S. Department of Commerce, Bureau
of Economic Analysis. 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.

The industry in which we compete directly is comprised of four dominant HR
consulting firms, based on revenues: 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 five 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

Because of our long history and reputation, as well as our experienced
consulting professionals and the services we provide in the field of human
capital consulting, we believe that we are in a

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<PAGE>
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 make HR
processes more flexible and employee-friendly, 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. Our
research indicates 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 several of our direct competitors that also 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 management consulting survey
conducted by THE WALL STREET JOURNAL of its subscribers and published in January
1999, we placed first in the consulting industry in terms of

31
<PAGE>

delivering value to clients and first among our human resources consulting peers
for overall quality of reputation.

LONG-STANDING RELATIONSHIPS WITH BLUE-CHIP CLIENTS. We have built long-term
relationships with many of our clients. In many cases these relationships have
existed continuously for several decades. We provide the actuarial consulting
services for the three largest corporate defined benefits pension plans in the
United States.

TECHNOLOGY-BASED SERVICES. Using our eHR-TM- approach, we design systems
for clients that enable them to offer cost-effective delivery of HR services to
employees, such as web-based self-service and call centers. Over the past
decade, we have invested extensively in proprietary technology to help solve 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 85 offices in 30 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. We have
operated in Asia since 1979 and currently have 16 offices in Asia-Pacific. We
were named HR Consultancy of the Year in Hong Kong for 1998 and 1999 by China
Staff magazine. 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.

EXTENSIVE AND WIDELY-CITED RESEARCH. Our research is extensive and
widely-cited and 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 many
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 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 EHR-TM- SYSTEMS. Our clients are increasingly demanding
integrated, flexible approaches to provide HR benefits information and access to
their employees 24 hours a day, 7 days a week. By combining our human capital
and technical expertise, we help clients implement web-based systems in order to
transform the way they deliver HR services to managers and employees. Our
eHR-TM- approach connects multiple software applications and databases around

32
<PAGE>

web technologies. Through user-friendly interfaces that run on company
intranets, employees can access their HR information directly and perform tasks
ranging from enrolling in benefits plans, to modeling 401(k) investments, to
participating in online career training.

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 and extensive and widely-cited research 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- systems, to
corporations and other major employers.

PURSUING STRATEGIC ACQUISITIONS. We will continue to explore strategic
opportunities to expand our human capital consulting capabilities and to expand
geographically. Our recent acquisitions of selected units of KPMG's benefits
consulting business provided us with additional senior consultants in New York,
Boston, Dallas, Toronto 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 1,700 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 64% of our North American consulting revenue in fiscal year
2000.

RETIREMENT CONSULTING

We believe we are one of the world's most respected advisers on retirement
plans, and we provide actuarial and consulting services for large defined
benefit and defined contribution retirement plans. Our consultants work with
clients to provide realistic assessments of the impact that the change 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 defined benefit or defined contribution plans. A typical defined benefit
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 defined
contribution 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 defined contribution plan is a
401(k) plan.

Our target market for defined benefit 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

33
<PAGE>
the three largest corporate-sponsored defined benefit plans in the United
States. Our defined benefit 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 help companies design and implement defined contribution 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 defined benefit and defined contribution areas, we emphasize
research-based consulting to design retirement programs that align our clients'
workforces with their business strategies. Examples of our products and services
include:

- PENSION EQUITY PLAN--an alternative retirement plan that combines the lump
sum portability of defined contribution 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 defined
benefit 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.

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. We
also maintain extensive proprietary databases, Watson Wyatt 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.

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<PAGE>
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 the responses from
health care vendors to requests for proposals.

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 360 consultants and represented
approximately 15% of our North American consulting revenue in fiscal year 2000.

As human resources programs become more complex and important for recruiting
and retaining employees, organizations are seeking flexible, adaptable and
cost-effective ways to provide benefits information to their employees. We are
well-positioned to help clients address these challenges because of our eHR-TM-
approach, which integrates HR-related data, computer systems and transactions in
a single employee accessible network. 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 applications, 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 approaches. Our
consulting work frequently involves 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 applications in
health and welfare enrollment, pension administration, compensation planning and
retirement planning.

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<PAGE>
HUMAN CAPITAL GROUP

Our Human Capital Group, which consists of over 390 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 10% of our North American consulting revenue in fiscal
year 2000. 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 programs 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.

We have developed 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. It
includes the opinions of 10,000 employees surveyed independently, reflecting a
large cross-section of jobs and industry types. Our clients compare their own
employee survey results against these norms to identify workplace perceptions
and satisfaction and commitment levels. 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.

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<PAGE>
EMPLOYEE COMMUNICATIONS CONSULTING

We also have one of the most respected 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 provides a comprehensive array of global
compensation, benefits and employment practices information that is often
studied and cited by many of our clients and competitors. In the United States,
we publish and market an 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.

EXAMPLES OF REPRESENTATIVE CLIENT ENGAGEMENTS

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- approach to regions outside North
America.

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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- 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 computer hardware 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 large high-tech 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 approach, expanding their own
internal call center capabilities through 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 technology-based delivery model improved the productivity
of the 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%.

SALES AND MARKETING

Our growth strategy starts with ensuring the satisfaction of current clients
through our Account Management program. We have approximately 135 account
managers who focus on the effective delivery of services to clients and on
expanding our relationships across service lines, geographic boundaries and
divisions within client companies. A key element of this program is an approach
we call CLIENTFIRST.-TM- Using proprietary processes and tools, ranging from
interview guides to satisfaction checklists to planning templates, we work with
clients to define their needs and

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expectations before an engagement begins and then continually measure our
performance according to the agreed upon standards.

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 a preferred human
capital consulting firm to many of the world's largest companies.

CLIENTS

We work with major corporations, 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 2000, our ten largest clients accounted
for approximately 12% of our consolidated revenues and no individual client
represented more than 4% of our consolidated revenues. Representative clients
include:

Asea Brown Boveri (ABB)
Canada Post
General Electric Company
General Motors

IBM
ICI Americas
Ingersoll-Rand
Lockheed Martin Corporation

COMPETITION

The human capital consulting business is highly competitive. 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. However, 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;

- 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.

Watson Wyatt is ranked fourth or fifth among the top HR consulting
companies, based on revenues, according to surveys of consulting companies from
the 1998 Kennedy Information Research Group report, December 1999 Business
Insurance rankings and June 2000 Consultants News.

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 we compete favorably with respect to these factors.

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EMPLOYEES

Watson Wyatt & Company employs approximately 4,000 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 plan to move our principal executive
offices to 1717 H Street NW, Washington DC later this year.

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.

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 expert reports have been exchanged. Unless
settled earlier, trial is scheduled for January 2001. The Administrative Board
seeks approximately $26 million in damages, plus interest.

CITY OF MILWAUKEE, WISCONSIN. In 1997, the City of Milwaukee Employees
Retirement Board 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 Employees Retirement Board. In response to the notice of claim, we
filed a declaratory judgment action against the City of Milwaukee and the
Employees Retirement Board 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.

CONNECTICUT CARPENTERS PENSION FUND. The Connecticut Carpenters Pension
Fund filed an action against us in 1999 claiming errors in valuations from 1991
through 1998 that allegedly resulted in understated liabilities. The plaintiffs
are seeking damages of approximately $65 million; a punitive damage claim has
been dismissed. In the event that the claim is not settled, trial is anticipated
in early 2001.

CLAIM AGAINST WATSON WYATT PARTNERS. In 1999, a law firm representing a
client based in Europe notified Watson Wyatt Partners, our European alliance
partner, of a claim involving alleged errors in the design of a global employee
stock plan which includes work performed by a former subsidiary of Watson
Wyatt & Company. The claim alleges damages that could exceed $75 million. Formal
proceedings have yet to be commenced and the parties have informally exchanged
information pursuant to English legal procedures. Although the parties concerned
are in discussions about the claim, proceedings might be commenced before the
end of the year.

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

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MANAGEMENT

EXECUTIVE OFFICERS AND DIRECTORS

The following table sets forth the names, ages and positions of our
directors and executive officers as of the date of this prospectus:

<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.................... 58 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................. 44 Vice President, Regional Manager (U.S. East) and
Director
James A. Gargiulo.................... 41 Vice President, Human Resources
Ira T. Kay........................... 50 Vice President, Director -- U.S. Compensation Practice
Brian E. Kennedy..................... 57 Vice President, Regional Manager (Canada) and Director
Eric P. Lofgren...................... 49 Vice President, Global Director -- Benefits Consulting
Group and Director
David P. Marini...................... 44 Vice President, Global Director -- H.R. Technologies
Group
Carl D. Mautz........................ 53 Vice President, Chief Financial Officer
Gail E. McKee........................ 41 Vice President and Director
Kevin L. Meehan...................... 55 Vice President and Director
J.P. Orbeta.......................... 39 Vice President, Global Director -- Human Capital Group
Sylvester J. Schieber................ 54 Vice President, Director of Research and Information
John A. Steinbrunner................. 50 Vice President and Director
A. Grahame Stott..................... 46 Vice President, Regional Manager (Asia-Pacific) and
Director
Charles P. Wood, Jr.................. 56 Vice President, Regional Manager (U.S. West) and
Director
Barbara H. Franklin.................. 60 Director
John J. Gabarro...................... 60 Director
Robert D. Masding.................... 56 Director
R. Michael McCullough................ 61 Director
Gilbert T. Ray....................... 55 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. Prior to
becoming President and Chief Executive Officer, he 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
President and 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, a competing human resources consulting firm,
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.

JORGE V. BOU has served as Vice President since 1998 and Regional Manager
(Latin America) since 1994. Prior to joining Watson Wyatt in 1986, Mr. Bou was a
Vice President with the Martin E.

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Segal Company, an actuarial and benefits consulting firm, and was previously
with the American International Group, an insurance organization. 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, a
specialty industrial manufacturing conglomerate. 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, an insurance and consulting
organization, and has held various human resources positions for the investment
banking firm of Salomon Brothers, The Gap, retailer, 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 since 1996. He was appointed
Director of the U.S. Compensation Practice in September 2000. Prior to assuming
his current responsibilites he was 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, a competing human resources consulting
firm, and prior to that, he was a Managing Director in the Human Resources
Department of the investment banking firm 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, an insurance and
benefits consulting firm, 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, a competing human
resources consulting firm, and seven years at The Mutual of New York Insurance
Company. 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.

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 the insurance company CIGNA Corporation, most
recently as the President of the Iowa division of Trilog Inc., a wholly-owned
401(k)

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recordkeeping subsidiary, and he was previously a CPA with the accounting firm
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 defense contractor Lockheed Martin Corporation.
From 1990 to 1994, Mr. Mautz held operating and corporate finance positions at
the computer firm Unisys Corporation and from 1972 to 1984 was a CPA with the
accounting firm of 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, an entertainment conglomerate, 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, a competing human resources
consulting firm, 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 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

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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 since 1998, as Regional
Manager (U.S. West) since 1999 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.

BARBARA H. FRANKLIN was appointed as a Director in May, 2000. Ms. Franklin
has been President and Chief Executive Officer of Barbara Franklin Enterprises,
an international trade consulting and investment firm, since 1995. Ms. Franklin
previously served as U.S. Secretary of Commerce in the Bush Administration.
Ms. Franklin is a director of four companies--Aetna, Inc., a health insurance
provider, The Dow Chemical Company, a chemical manufacturer, Milacron, Inc., a
manufacturing technologies company, and MedImmune, Inc., a biotechnology
company. Ms. Franklin is currently a distinguished visiting fellow at the
Heritage Foundation, vice chair of the Atlantic Council, a director of the
National Committee on United States-China Relations. She is also a trustee of
the Economic Club of New York and a member of the Board of Directors of the
Associates of the Harvard Business School.

JOHN J. GABARRO has served as a Director since 1999 and was previously a
director from 1995 to 1998. Mr. Gabarro has been a professor at the Harvard
Business School since 1972. 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 the management consulting firm 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, an automobile
property real estate investment trust, Charles E. Smith Residential Real Estate
Trust, a residential property real estate investment trust and is Chairman of
Ecutel, Inc., a private Internet communications products and services firm.

GILBERT T. RAY was appointed a Director in March, 2000. Mr. Ray is senior
counsel of the law firm O'Melveny & Myers LLP. He joined O'Melveny & Myers in
1972, and was named a partner in 1981. After practicing corporate law for over
28 years, Mr. Ray retired from active practice in January, 2000. Mr. Ray is a
member of the boards of Host Marriott Services Corporation, a concessions
provider, Automobile Club of Southern California, a provider of emergency road
and travel services and insurance, and is Chair of the Board of Sierra
Monolithics, Inc. a high speed communications systems company. Mr. Ray is also
the recipient of the Fred Snowden Humanitarian Award--Greater Los Angeles
African American Chamber of Commerce, the Outstanding Alumni

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Award--Ashland University, the NAACP Legal Defense Fund--Civil Rights Advocate
of the Year, and the Central City Association--Leadership and Achievement Award.

BOARD COMPOSITION

Prior to the proposed corporate reorganization, Watson Wyatt & Company
directors were elected at each annual stockholders' meeting for a one-year term.
Of the 17 seats, 12 are filled by current employees of Watson Wyatt & Company,
four are filled by outside directors, and one by the Senior Partner of Watson
Wyatt Partners. Under the Watson Wyatt & Company bylaws, an employee stockholder
is qualified to hold a directorship only during the term of his or her
employment.

Under the Watson Wyatt & Company Holdings certificate of incorporation, the
directorships are to be divided into three classes. At the regularly scheduled
stockholders' meeting in 2000, stockholders will elect three classes of
directors. Pursuant to our board rotation policy, Messrs. Kay, Kennedy,
Steinbrunner and Stott will not be standing for re-election at the next annual
meeting. 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. Under the Watson
Wyatt & Company Holdings certificate of incorporation and bylaws, each employee
director automatically ceases to be a director upon termination of his or her
employment.

BOARD COMMITTEES

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. The members of the Audit Committee are Barbara Franklin,
John Gabarro, Michael McCullough and Gilbert Ray.

COMPENSATION COMMITTEE. The Compensation Committee oversees executive
compensation policies and practices. The Compensation Committee members are
Barbara Franklin, John Gabarro, Michael McCullough and Gilbert Ray.

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. The members of the
Executive Committee are John Haley, Brian Kennedy, Ira Kay, Eric Lofgren and
Grahame Stott.

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. The members of the
Finance Committee are David Friend, Elizabeth Caflisch, Carl Mautz, John
Steinbrunner, Charles Wood and Grahame Stott.

Members of these committees may, but will not necessarily, change after the
next annual stockholders' meeting.

DIRECTOR COMPENSATION

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 2000 earn 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,

45
<PAGE>
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 Watson Wyatt & Company Holdings.

COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION

The members of our Compensation and Stock Committee, predecessor to the
current Compensation 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 did not
participate in decisions regarding their own compensation. No interlocking
relationship exists between our board of directors or our Compensation 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, 2000, 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 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 stock incentive bonus plan bonuses to eligible
associates based on the stock incentive bonus plan funding level approved by the
board and accrued at June 30, 1999, an individual's actual fiscal year bonus and
their actual stock ownership as compared to their target stock ownership. We
also intend to pay stock incentive bonus plan bonuses to eligible associates in
January 2001, which amounts were accrued at June 30, 2000. We will terminate the
stock incentive bonus plan following the completion of this 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, 2000, 1999 and 1998 by those persons who
were, on June 30, 2000:

SUMMARY COMPENSATION TABLE

<TABLE>
<CAPTION>
NAME AND FISCAL TOTAL ALL OTHER
PRINCIPAL POSITION YEAR SALARY BONUS SIBP(A) SALARY/BONUS/SIBP COMPENSATION(B)
------------------ -------- --------- --------- --------- ----------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
John J. Haley................................ 2000 $612,500 $570,000 $725,514 $1,908,014 $54,932
President, Chief Executive Officer and 1999 543,750 422,625 491,000 1,457,375 25,255
Director 1998 440,000 320,000 -- 760,000 19,300

Eric P. Lofgren.............................. 2000 430,000 350,000 367,736 1,147,736 23,107
Vice President, Global Director, Benefits 1999 390,000 290,000 260,960 940,960 19,170
Consulting Group and Director 1998 331,500 250,000 -- 581,500 15,035

Charles P. Wood, Jr.......................... 2000 390,000 250,000 413,750 1,053,750 22,969
Vice President, Western Regional Manager 1999 290,000 190,000 325,351 805,351 12,476
and Director 1998 246,750 125,000 -- 371,750 12,760

Kevin L. Meehan.............................. 2000 350,500 318,600 379,243 1,048,343 21,146
Vice President and Director 1999 326,250 300,000 290,425 916,675 17,690
1998 280,150 250,000 -- 530,150 5,110

David B. Friend, M.D......................... 2000 435,000 325,000 239,704 999,704 32,746
Vice President, Eastern Regional Manager 1999 415,000 315,000 175,270 905,270 21,380
and Director 1998 387,500 270,000 -- 657,500 17,125
</TABLE>

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

(a) In 1996, Watson Wyatt & Company adopted a supplemental bonus plan called the
stock incentive bonus plan. Following this offering, we will terminate the
stock incentive bonus plan and replace it with equity based incentives more
customary to publicly traded companies.

(b) "All Other Compensation" consists of the following: (1) 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; (2) 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 (3) payments for the annual cash out of excess unused
accrued vacation, as required by our paid time off policy, as amended in
1999. All Associates were subject to the same accrued vacation limits.

46
<PAGE>

Concurrent with this offering we will grant options to our associates
pursuant to a new stock option plan to purchase approximately 1,600,000 shares
of class A common stock at an exercise price equal to the public offering price.
As part of this grant, Messrs. Haley, Lofgren, Wood, Meehan and Dr. Friend will
be granted options to purchase stock on the same basis as other associates.

PENSION ARRANGEMENTS WITH NAMED EXECUTIVE OFFICER

Watson Wyatt & Company has an agreement with Dr. Friend to provide a
supplemental pension benefit. 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, before 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.

GENERAL EMPLOYMENT ARRANGEMENTS

Generally, executive officers are not parties to employment agreements with
us. Non-employee directors are paid pursuant to a compensation plan approved on
an annual basis. Executives and other associates in salary bands 4, 5, 6 and
higher are required to sign non-competition and confidentiality agreements to
protect our proprietary information.

47
<PAGE>
LONG TERM INCENTIVE PLAN

Under the terms of the 2000 Long Term Incentive Plan, which was approved by
our stockholders on June 26, 2000 and is subject to consummation of this public
offering, Watson Wyatt & Company Holdings is permitted to grant options to
associates and directors allowing them to purchase shares of class A common
stock at fair market value on the date of grant. Options to purchase an
aggregate of 4,500,000 shares are authorized under the plan. Concurrent with
this offering, we will grant options to our associates to purchase approximately
1,600,000 shares of class A common stock at an exercise price equal to the
public offering price. Each associate will be granted options to purchase stock
valued at 40% of their target bonus amounts, subject to a minimum grant of 100
options. These options will expire after seven years, subject to early
termination in specified circumstances, and will vest on a pro-rata basis over
five years.

TRANSACTIONS WITH MANAGEMENT AND OTHERS

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 Europe operations to a newly formed holding company
owned by our company and Watson Wyatt Partners in exchange for 50.1% of its
share. 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.

CORPORATE REORGANIZATION

GENERAL

We are offering shares of our class A common stock pursuant to this
prospectus. This offering is conditioned upon completion of the merger, which is
described below.

THE MERGER

Before this offering, Watson Wyatt & Company Holdings will be a wholly-owned
subsidiary of Watson Wyatt & Company. Immediately before this offering, a
wholly-owned subsidiary of Watson Wyatt & Company Holdings will merge with and
into Watson Wyatt & Company. At the time of such merger, each outstanding share
of common stock of Watson Wyatt & Company automatically will convert into one
share of Watson Wyatt & Company Holdings class B-1 common stock and one share of
Watson Wyatt & Company Holdings class B-2 common stock. Watson Wyatt & Company
will then return to capital the one share of Watson Wyatt & Company Holdings
previously owned by it. As a result of all these actions, existing Watson
Wyatt & Company stockholders automatically will become Watson Wyatt & Company
Holdings stockholders, and Watson Wyatt & Company Holdings then will own all of
Watson Wyatt & Company's outstanding common stock.

48
<PAGE>
The following charts illustrate the holding company structure before and
after the planned merger.

BEFORE MERGER

[CHART]

AFTER MERGER

[CHART]

49
<PAGE>
Shares of class B-1 common stock and class B-2 common stock are not
transferable or otherwise convertible into shares of class A common stock, until
the relevant transfer restriction period expires or is otherwise waived by the
board of directors. The board has not yet determined the conditions under which
it would waive these transfer restrictions, except that the stockholders
participating in this offering may exchange an equal number of shares of
class B-1 and class B-2 common stock into the shares of class A common stock to
be offered. Pursuant to the terms of the underwriting agreement, Watson Wyatt &
Company Holdings has agreed that for a period of 180 days from the date of this
prospectus, the board will not waive the stock transfer restriction without the
prior written consent of Duetsche Bank Securities Inc. The class B transfer
restriction periods, provided in our certificate of incorporation, will expire
12 months after this offering for shares of class B-1 common stock and
24 months after this offering for shares of class B-2 common stock. Once these
transfer restrictions expire or are waived by our board, the shares of class B
common stock automatically will convert into shares of class A common stock. The
shares of class A common stock by their terms can be freely transferred, subject
to any other applicable restrictions on transfer imposed by law or contract.
Except for the transfer restrictions placed on shares of class B common stock,
all shares of common stock of Watson Wyatt & Company Holdings will be identical.

After the merger and this offering, shares of class B-1 common stock and
class B-2 common stock will constitute about 83% of our total outstanding common
stock. Shares of class A common stock will constitute about 17% of our total
outstanding common stock.

The merger was approved by the stockholders on June 26, 2000. However, even
though the merger was approved by our existing stockholders, the merger will not
be consummated if we do not proceed with this offering.

As described above, current Watson Wyatt & Company stockholders are entitled
to participate in this offering. The board of directors has announced that it
will waive the transfer restrictions on a portion of the class B common stock
and permit the conversion of class B common stock to class A common stock for
resale in this offering. Following the conversion of Watson Wyatt & Company
stock for Watson Wyatt & Company Holdings class B-1 and class B-2 stock, each
selling stockholder will be allowed to sell in this offering the equivalent of
500 Watson Wyatt & Company shares, on a pre-conversion basis, or 500 class B-1
shares and 500 class B-2 shares, on a post-conversion basis, plus up to 10% of
the selling stockholder's remaining stockholdings. An even number of shares of
Watson Wyatt & Company Holdings class B-1 and class B-2 common stock will be
converted to shares of class A common stock and sold in this offering.

50
<PAGE>

PRINCIPAL AND MANAGEMENT SELLING STOCKHOLDERS

The following table sets forth information known to us with respect to
beneficial ownership of common stock as of September 8, 2000, after giving
effect to our corporate reorganization, of all directors, named officers and
directors and executive officers as a group, including the number of shares, if
any, that such beneficial owner intends to sell in this offering. To the extent
the underwriters exercise their overallotment option in full, the following
beneficial owners generally would sell approximately 15% more shares than listed
opposite their names below.

<TABLE>
<CAPTION>
SHARES BENEFICIALLY SHARES BENEFICIALLY
OWNED BEFORE OFFERING OWNED AFTER OFFERING(D)
--------------------- NUMBER OF -----------------------
NAME OF BENEFICIAL OWNER (A) NUMBER PERCENT SHARES TO BE SOLD NUMBER PERCENT
---------------------------- --------- --------- ----------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
John J. Haley................. 455,498 1.5% 0
Charles P. Wood, Jr........... 401,868 1.4 37,006
A. Grahame Stott.............. 268,000 * 18,014
Eric P. Lofgren............... 218,730 * 0
John A. Steinbrunner.......... 206,382 * 19,400
Kevin L. Meehan............... 200,022 * 18,826
Thomas W. Barratt............. 178,000 * 16,844
Ira T. Kay.................... 161,050 * 15,316
David B. Friend, M.D.......... 142,000 * 13,600
Paula A. DeLisle.............. 107,800 * 0
Brian E. Kennedy.............. 100,000 * 9,818
Gail E. McKee................. 54,750 * 5,742
Barbara H. Franklin........... 0(c) 0
John J. Gabarro............... 15,000 * 0
R. Michael McCullough......... 15,000 * 0
Robert D. Masding............. 726,000(b) 2.5% 0
Gilbert T. Ray................ 0(c) 0
All current directors and
executive officers as a
group (24).................. 4,061,984 13.7% 0
</TABLE>

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

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

(a) Unless noted otherwise, the address for each of the beneficial owners
identified in this table is
c/o of Watson Wyatt & Company Holdings, 6707 Democracy Boulevard, Suite 800,
Bethesda, Maryland 20817.

(b) Watson Wyatt Partners, in which Mr. Masding is Senior Partner, beneficially
owns 726,000 shares (2.5%) of our common stock. Mr. Masding does not own any
shares in his individual capacity and disclaims beneficial ownership of
these shares. Pursuant to our alliance agreement, if Watson Wyatt Partners
holds more than 800,000 shares of our common stock, it has an option to sell
to us any number of shares that exceed 600,000. We, in turn, have an option
to purchase from Watson Wyatt Partners any number of shares of our common
stock in excess of 800,000 shares if Watson Wyatt Partners holds more than
1,000,000 shares of our common stock.

(d) Assumes the underwriters do not elect to exercise the over-allotment option
to purchase an additional 840,000 shares of common stock.

51
<PAGE>
COMMON STOCK PURCHASE ARRANGEMENTS BEFORE PUBLIC OFFERING

To encourage ownership of common stock by associates, we had historically
maintained a stock purchase plan. Under the stock purchase plan, we regularly
sold common stock to associates on or about March 1 of each year, except in 1998
and 2000. 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. Before 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 stock purchase plan. In 1996, we reduced this
number to 200,000. The stock purchase plan will be terminated upon completion of
this offering.

The stock purchase plan permitted associates to borrow up to the full amount
of the purchase price of the common stock from our lenders, and we guaranteed
repayment of all such loans. The loans provided for full recourse to the
individual borrower and were 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 September 8, 2000, 3,271,000 shares of
common stock were pledged to our lenders to secure loans to stockholders,
representing approximately 22% of the outstanding shares of common stock. As of
the same date, the aggregate amount of outstanding loans was approximately
$14.4 million. This loan program will continue in effect to accommodate the
amortization of existing loans after the offering, but will be amended and will
not be used to create new loans.

52
<PAGE>

ASSOCIATE SELLING STOCKHOLDERS

The following table sets forth for each associate stockholder the total
number of shares of common stock being offered in this offering. Each associate
selling stockholder is an associate or former associate with our company. Except
as noted, each selling stockholder individually holds less than 1% of our
outstanding common stock both before and after this offering.

In preparing for this offering, we asked each associate selling stockholder
to indicate their interest in selling in this offering up to 1,000 shares of our
common stock, plus up to 10% of their remaining holdings on a post-conversion
basis. To the extent the underwriters exercise their over-allotment option, our
associate selling stockholders generally would sell approximately 15% more
shares than listed opposite their names below.

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TO BE SOLD
----------------------------- ----------------
<S> <C>
Charles Wood Jr. (a)......... 37,006
Frederick Green (b).......... 36,092
W. Michael Carter (c)........ 31,152
Clarence Bayer (d)........... 27,022
John Reynolds................ 24,646
Richard Hubbard.............. 24,320
Sylvester Schieber........... 24,028
Wallace Wilson............... 22,158
Michael Busby................ 21,728
Larry Weitzner............... 21,202
John Steinbrunner............ 19,400
Walter Bardenwerper.......... 19,172
Kevin Meehan................. 18,826
Richard Imperato............. 18,826
Robert Ellis................. 18,424
Anthony Stott................ 18,014
Charles Commander............ 18,014
Edward Fleischer............. 18,014
Kenneth Steiner.............. 17,760
David Riddell................ 17,102
Thomas Barratt............... 16,844
James Youngquist............. 16,582
Jay Wolfe.................... 16,212
Michael Button............... 16,212
Eugene Sullivan Jr........... 15,852
James Vonesh Jr.............. 15,834
Jorge Bou.................... 15,696
Ira Kay...................... 15,316
Louis Valentino.............. 15,312
Paul Sanchez................. 15,256
Joseph Huffman............... 14,902
Jack Williams................ 14,546
Gary Lawson.................. 14,142
Kevin Wagner................. 13,918
David Friend................. 13,600
David Beech.................. 13,546
Martin Brown................. 13,420
Clay Cprek................... 13,330
Keith Oswald................. 13,002
Raymond Shapiro.............. 13,000
Marjorie Kulash.............. 12,892
Thomas Grass................. 12,718
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TO BE SOLD
----------------------------- ----------------
<S> <C>
Steven Vernon................ 12,590
Grant Inglis................. 12,372
Steven Early................. 12,354
Wayne Dydo................... 12,284
Linda Moncrief............... 11,860
Daniel Lawrence.............. 11,530
James Terry Jr............... 11,476
William Miner................ 11,086
Alfred Lopus................. 10,818
John Parkington.............. 10,708
Patsy Amendola............... 10,682
Edward Forte................. 10,642
Peter Miller................. 10,420
Jamie Hale................... 10,346
Dan Fisher................... 10,334
William Hickman.............. 9,908
Frederic Kenyon.............. 9,900
Brian Kennedy................ 9,818
David Flagg.................. 9,818
Jennifer Mebes............... 9,818
Robert Haws.................. 9,818
Edward Graskamp.............. 9,728
Howard Peyser................ 9,472
Michael Gazdo Jr............. 9,300
Steven Richter............... 9,244
Patrick Snead................ 9,242
Kjeld Sorensen............... 9,078
Kam Li....................... 9,008
James Pearce................. 8,998
Frank Di Leonardi Jr......... 8,982
Edward Shumsky............... 8,980
Constantin Hontalas.......... 8,752
Richard Watts................ 8,646
Richard Lindahl.............. 8,016
Howard Fine.................. 7,990
Theodore Chien............... 7,836
Alfred Gimbel................ 7,828
Michael Maxwell.............. 7,718
Nadine Orloff................ 7,296
Iain Woods................... 7,238
Sharon Bronzwaer............. 7,206
Les Taylor................... 7,204
</TABLE>

53
<PAGE>

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TO BE SOLD
----------------------------- ----------------
<S> <C>
Andrew Dillon................ 7,154
F. Atkins.................... 7,146
Shih Yo Huang................ 7,026
Diane Plank.................. 6,912
Philip Schneider............. 6,912
Patricia Bethke.............. 6,850
Martin Swiatkowski........... 6,846
Philip Ullom................. 6,720
Danny Quant.................. 6,674
Robert Crane................. 6,578
Gregory Metzger.............. 6,396
Stanley Dash Jr.............. 6,390
John Caldarella.............. 6,360
James Minogue................ 6,350
Roger Ray.................... 6,336
David Marini................. 6,306
Donald Dulaney Jr............ 6,306
Jacques Leger................ 6,306
John Bartz................... 6,306
Michael Cochrane............. 6,306
Douglas Tokerud.............. 6,270
David Bright................. 6,256
Robert Lista................. 6,214
Richard Murdock.............. 6,176
Paul Robberson............... 6,124
Peter Mills.................. 5,968
Maureen Cotter............... 5,944
Nancy Yake................... 5,944
Carl Hess.................... 5,924
Uladislao Prieto............. 5,890
Barbara Snead................ 5,856
Gail McKee................... 5,742
John Menefee................. 5,562
Timothy Connolly............. 5,416
Paula Delisle................ 5,404
Stanley Goldfarb............. 5,404
Valerie Wedin................ 5,404
Victoria Slomiany............ 5,404
Savage Flatt................. 5,388
David Kornwitz............... 5,386
Kenneth Klingler............. 5,344
Francis Grealy Jr............ 5,316
David Fleiss................. 5,314
Hector Gonzalez Gale......... 5,314
Lawrence Difiore............. 5,274
Segundo Tascon Newton........ 5,134
C. Lawley Jr................. 5,052
Gunter Becher................ 5,044
Paul Lew..................... 4,998
Robert Sperl................. 4,882
Henry Pflager III............ 4,864
George Tornay Jr............. 4,856
Jeri Stepman................. 4,786
Arlen Ferguson............... 4,768
Mary McGowan................. 4,764
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TO BE SOLD
----------------------------- ----------------
<S> <C>
Peter Riemer................. 4,748
Marie Cox-Annett............. 4,740
Kyle Brown................... 4,734
Andre Latia.................. 4,654
James Lannen................. 4,612
Allison Easton............... 4,578
William Courage.............. 4,574
Denise Patterson............. 4,504
Richard Seid................. 4,454
William Cuthbert............. 4,446
Daniel Murphy................ 4,418
Marc McBrearty............... 4,418
David Harris................. 4,414
Robert Barry................. 4,414
Pang Chang................... 4,394
William Kilzer............... 4,342
James Stewart................ 4,324
Edward Lukis................. 4,320
Daniel Ishac................. 4,244
Albert Chau Kwok-Woon........ 4,216
Michel Guay.................. 4,180
Kevin Spring................. 4,162
Keith Grassel................ 4,144
Mark O'Reilly................ 4,090
David Barndollar............. 4,084
Donald Heezen................ 4,056
Jon Randall.................. 3,990
Brad Jeffrey................. 3,982
Keizo Tannawa................ 3,964
Sheldon Grossman............. 3,964
Carmine De Rubeis............ 3,878
Patrick Longhurst............ 3,864
Joseph Timmins............... 3,850
Robert Hackney............... 3,840
Carl Voss.................... 3,834
William Gee.................. 3,818
Howard Simms................. 3,798
Glenn Smith.................. 3,784
Ann Kenny.................... 3,752
Alan Taylor.................. 3,732
Richard Fulljames............ 3,656
Karen Valeck................. 3,646
Richard Beal................. 3,620
Andrew Marut................. 3,602
Charles Thrower.............. 3,602
Eric Schweizer............... 3,602
Mark Straus.................. 3,602
Robert Campbell.............. 3,602
Edward Hudson................ 3,600
Noriyuki Morimoto............ 3,588
Andrew Boal.................. 3,576
Pierre Lanoix................ 3,570
Robert McKee................. 3,558
Gordon Goodfellow............ 3,528
Ralph Fecke Jr............... 3,514
</TABLE>

54
<PAGE>

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TO BE SOLD
----------------------------- ----------------
<S> <C>
Helen Baker.................. 3,512
Jan Grude.................... 3,512
Johan Heymans................ 3,512
Michael Keane................ 3,512
John Stanforth............... 3,448
Steven Erickson.............. 3,408
Angela De Oliveira........... 3,364
Nancy Vander Baaren.......... 3,362
James Isbell................. 3,332
Luellen Lucid................ 3,288
Timothy Dillon............... 3,206
John Stahl................... 3,158
Michael Prokopow............. 3,092
Bryan Osborne................ 3,090
Robert Ryan.................. 3,044
Aruna Vohra.................. 3,022
Iva Martin................... 3,018
Ian Leznoff.................. 3,000
Scott Ziemba................. 2,990
Barbara Garland.............. 2,980
Debora Schell................ 2,974
Michael O'Boyle.............. 2,972
Steven McCormick............. 2,972
Cary Franklin................ 2,946
Donna Cherney................ 2,938
Miles Buckinghamshire........ 2,918
Ronald Metz.................. 2,896
Brian Murphy................. 2,892
Dennis Pastorelle............ 2,882
Jean Julian.................. 2,878
George Dubrish............... 2,824
Mary Jacobson................ 2,810
Alexander Miller............. 2,786
Joann Riopelle............... 2,766
Jerry Mcadams................ 2,756
Susan Starr.................. 2,744
James Locey.................. 2,730
Alan Hurley.................. 2,720
Mark Brolley................. 2,720
Christopher Johnson.......... 2,702
George Rippel................ 2,702
Hugh Mullenbach.............. 2,702
John Mckellar................ 2,702
Kathleen Burke............... 2,702
Marsha Fischel............... 2,702
Michael Campbell............. 2,702
Richard Chislett............. 2,702
John Diefenbach.............. 2,692
Barry Miller................. 2,654
Jolie Frank.................. 2,648
Eyke Nicholson............... 2,630
Brian Brown.................. 2,622
Brian Hersey................. 2,612
Ian Midgley.................. 2,612
Richard Tewksbury Jr......... 2,612
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TO BE SOLD
----------------------------- ----------------
<S> <C>
David Gore................... 2,596
Pedro Sanchez Cuervo......... 2,568
Marie Curreri................ 2,566
Michael Simpson.............. 2,550
George Yeates................ 2,540
Russell Barker............... 2,540
Peter Maillet................ 2,522
James Miller................. 2,518
Sheryl Smolkin............... 2,514
Kevin Gorman................. 2,510
Tignor Thompson.............. 2,492
Herbert Miller Jr............ 2,474
Leonard Levitt............... 2,454
Robert McMahon............... 2,444
Laura Sejen.................. 2,440
Carolyn Hadiji............... 2,432
Shirley Newman............... 2,416
Gerald Trask................. 2,414
Stephen Jackstadt............ 2,414
Dorothea Atkerson............ 2,408
Gary Karp.................... 2,404
Kenneth Jamison.............. 2,374
Michael Singer............... 2,366
Thomas Reed.................. 2,366
Alan Holdsworth.............. 2,350
Michael Ringuette............ 2,342
Joan Thorpe.................. 2,296
James Obernesser............. 2,268
Mark Bails................... 2,266
Thomas Ches.................. 2,264
David Marcus................. 2,262
Tamra Lair................... 2,260
Hans Kothuis................. 2,252
R. Adams..................... 2,252
Kenneth Murray............... 2,204
Kenneth Lining............... 2,202
Michael McGrath.............. 2,176
Jeffrey Kraft................ 2,172
Gary Gausman................. 2,168
J. Conradi................... 2,162
Jorge Vazquez................ 2,162
Raymond Robinson............. 2,150
Mary Stone................... 2,144
Charles Nightengale.......... 2,138
Robert Sherwood Jr........... 2,138
Marilyn Jones................ 2,120
Mark Agnew................... 2,108
Andrew Kusner................ 2,104
Michael Guerin III........... 2,096
Fran Schiavo................. 2,094
Kathleen Kartje.............. 2,086
James Goddeeris.............. 2,080
Colleen Schulte.............. 2,072
Jeffrey Klein................ 2,072
Richard Sinni................ 2,072
</TABLE>

55
<PAGE>

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TO BE SOLD
----------------------------- ----------------
<S> <C>
Stoddard Lawrence............ 2,072
Harold Barr.................. 2,064
Alice Opalach................ 2,038
David Lee.................... 2,002
Thomas Matthews.............. 2,000
Kevin Kenney................. 1,994
James Pare................... 1,982
Linda Mott................... 1,982
Lynda Avery.................. 1,964
David Strom.................. 1,946
Donald Cullinane............. 1,928
Mark Davis................... 1,914
Martin Crosby................ 1,910
Randall Dziubek.............. 1,904
Paul Meyer................... 1,868
Charlene Shishido............ 1,854
Linda Gilmour................ 1,852
Richard Mulder Jr............ 1,824
Ross Feldman................. 1,824
Deborah Wallace.............. 1,820
Lyman Edwards................ 1,814
Yu Sai....................... 1,812
Kathleen Kibbe............... 1,810
Albert Kleinberg Jr.......... 1,802
Alfred Schorath.............. 1,802
Diane Smith.................. 1,802
Dindina Tso.................. 1,802
Janet Downing................ 1,802
Jeffrey Kurtz................ 1,802
Joseph Chan.................. 1,802
Kathleen Hardy............... 1,802
Lewis Ward................... 1,802
Madeline McMenamin........... 1,802
Mark White................... 1,802
Michael Methlie.............. 1,802
Paul Morris.................. 1,802
Pierre Caron................. 1,802
Ronald Hammit................ 1,802
Sherrie Desmond.............. 1,802
Thomas McCarthy.............. 1,802
Thomas Porath................ 1,802
Valerie Paganelli............ 1,802
Christopher Goldsmith........ 1,796
Kathleen Rosenow............. 1,788
Juan Alonso.................. 1,784
Michael Kivi................. 1,784
Cynthia Boyle................ 1,770
James Alroth Jr.............. 1,756
Ardith Bowden................ 1,738
Hetty Ngo.................... 1,736
Daniel Johnson............... 1,730
Cara Jareb................... 1,726
Jeremiah Houston............. 1,720
Aura Whittaker............... 1,718
Linda Tandle................. 1,718
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TO BE SOLD
----------------------------- ----------------
<S> <C>
Amy Finsand.................. 1,714
Gerard Murphy................ 1,712
James Mullis................. 1,712
Jon Samuelson................ 1,712
Keith Paquin................. 1,712
Sheldon Wayne................ 1,712
Evalynne Bahrynowski......... 1,708
Erminelia Pestanas........... 1,690
Deborah Rochelle............. 1,686
Andrew Woolls................ 1,672
Raymond Sue.................. 1,670
Adam Matthews................ 1,666
Karen Wellerson.............. 1,666
Patricia Crooke.............. 1,666
Stephen Carlson.............. 1,660
Michael Hartfield............ 1,658
Robert Wesselkamper.......... 1,658
William Smith................ 1,652
Julie Campbell............... 1,648
Coralyn Del Rosario.......... 1,640
John Coskey.................. 1,630
Annie Lim.................... 1,622
Richard Mccleary............. 1,616
Cynthia Herb................. 1,612
Frank Gallo.................. 1,586
Paul Timmins................. 1,570
Bruno Valdevit............... 1,566
Robert Goodman............... 1,566
Shwu-Yuann Chow.............. 1,540
Ronald Jordan................ 1,534
Brian Finnerty............... 1,532
Carolyn Smith................ 1,532
Christine Kellogg............ 1,532
Christopher Wood............. 1,532
Daniel Morrison.............. 1,532
Lisa Drummond................ 1,532
Nestor Azcune................ 1,532
Robert Hirschberg............ 1,532
Claudia Roberts.............. 1,514
Valerie Wise................. 1,514
Dean Quick Jr................ 1,512
Judith Ziems................. 1,506
Bor-Song Wang................ 1,504
Jeanette Bakon............... 1,500
Irene Graham................. 1,496
Barbara Alpern............... 1,492
David McNeice................ 1,480
Derek Aldridge............... 1,478
Jeanne deCamps............... 1,478
Wendy Ziemer-Nemetz.......... 1,466
Anne Quinlan................. 1,462
David Shannon................ 1,460
Hilda Thompson............... 1,460
Alastair Scott Anthony....... 1,442
Catherine Meschter........... 1,442
</TABLE>

56
<PAGE>

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TO BE SOLD
----------------------------- ----------------
<S> <C>
Christopher Lonner........... 1,442
David Ronald................. 1,442
Douglas Belden............... 1,442
Glenn Palmer................. 1,442
Iain Woods................... 1,442
Kathleen Burns............... 1,442
Kevin McGarvey............... 1,442
Laura Newman................. 1,442
Nicholas Gruschow............ 1,442
Patricia Wenneman............ 1,442
Adelina Cruz................. 1,438
Flora Olsen.................. 1,432
Sherry Labute................ 1,432
Florence Oatridge............ 1,426
Mary Tugwell................. 1,424
Paul Christiani.............. 1,424
Juanita Fernandez............ 1,420
Kathleen Coda................ 1,420
Peter Schwalbenberg.......... 1,420
Margaret Ellen Clark......... 1,418
Raymond Murrill.............. 1,414
Sarah Clark.................. 1,414
Lisa Canafax................. 1,408
Karen Sutherland............. 1,406
Michelle Tsui................ 1,406
Yen-Hsing Li................. 1,406
Michael Landon............... 1,402
Lisa Swatland................ 1,400
Terry Paulus................. 1,388
Donald Doucette Jr........... 1,382
Tommie Coulston.............. 1,382
Sheryll Hirschi.............. 1,376
Paul Schulte................. 1,370
Aurora Arellano.............. 1,362
Frieda Umpierre.............. 1,362
Lisa Burrascano.............. 1,360
Elizabeth Giffels............ 1,356
Susan Stebbins............... 1,354
Bruce Kelley................. 1,352
Craig Williamson............. 1,352
David Dasef.................. 1,352
James Shaddy................. 1,352
Joseph Yip................... 1,352
Judy Gerwing................. 1,352
Michael Kirchner............. 1,352
Michael Mamish............... 1,352
Roger Smith.................. 1,352
Suzanne Horn................. 1,352
Anna Woo..................... 1,348
Richard Loebach.............. 1,344
Anne Soh..................... 1,342
Mark Bilderback.............. 1,334
Paul Lee-Shanok.............. 1,334
Sarah Hutchinson............. 1,334
Thomas O'Reilly.............. 1,326
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TO BE SOLD
----------------------------- ----------------
<S> <C>
Kiran Arora.................. 1,324
Rita Flory................... 1,320
William Odefey............... 1,320
Joyce Waslowicz.............. 1,318
Arthur Kelly................. 1,316
Garry Fraser................. 1,316
Christopher Steiger.......... 1,306
Robert Gump.................. 1,306
Benjamin Kibbe............... 1,300
Amy Litten................... 1,298
Karen Anway.................. 1,298
Thomas Grimsley.............. 1,298
Kevin Seda................... 1,292
Amanda Wilson................ 1,280
Bruce Walton................. 1,280
Herry Kuswara................ 1,280
Kathleen Dickerson........... 1,280
Mark Herndon................. 1,280
Jeffrey Passmore............. 1,270
Robert Brown................. 1,264
Alfred Bingham Jr............ 1,262
Diane Girard................. 1,262
Laurene Graig................ 1,262
Mervyn Kopinsky.............. 1,262
Rowena Agnes................. 1,262
Hung-Chyi He................. 1,260
Leslie Quantz................ 1,250
Richard Silvey............... 1,242
Robert Seith................. 1,242
Shelley Crosby............... 1,242
Thomas Bernier............... 1,234
Teresa Schepp................ 1,228
Sean Henaghan................ 1,224
Lori Palmer.................. 1,218
Bruce Schneider.............. 1,216
Ruth Townsend................ 1,210
Gloria Chilvers.............. 1,206
Robert Webb.................. 1,206
Theresa Santise-Mallios...... 1,204
Robert Newton................ 1,198
April Martin................. 1,192
Joseph Petroccione........... 1,192
Nancy Pokorny................ 1,192
Fred Pisoni.................. 1,188
Jeffrey Nipp................. 1,188
John Steele.................. 1,188
Michael Winter............... 1,188
Michel Gamache............... 1,188
Pierre Olivier............... 1,184
Gail Perrault................ 1,172
Peter Dorsey................. 1,172
Daniel Wu.................... 1,170
Felicisima Reyno............. 1,170
George Brown................. 1,170
Gilbert Lopez................ 1,170
</TABLE>

57
<PAGE>

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TO BE SOLD
----------------------------- ----------------
<S> <C>
James Marple................. 1,170
Jane Petruniak............... 1,170
Joseph Gallagher............. 1,170
Martin Lutyens............... 1,170
Mary Carney.................. 1,170
Rachel Baker................. 1,170
Robert Bacher................ 1,170
Mark Dunning................. 1,168
Gershon Lipschitz............ 1,162
Lynn Frontiero............... 1,162
Anne Cowling................. 1,152
George Nickle................ 1,152
Hiroomi Ichikawa............. 1,152
Rosaline Hixon............... 1,152
Pyush Kumar.................. 1,150
Pierre Boutin................ 1,148
Stephen Kilmer............... 1,148
Susan Bisping................ 1,148
Rose Menza................... 1,138
Sara Hutchinson.............. 1,138
Edward Murphy................ 1,134
Enrico Di Giuseppantonio..... 1,134
George Boldizar.............. 1,134
Patricia O'Reilly............ 1,134
Scott Fowler................. 1,134
Theresa Scandle.............. 1,134
Erica Curtis................. 1,128
Linda Steele................. 1,128
Daniel Sweet................. 1,126
Diane Sullivan............... 1,126
Ronald Dorfman............... 1,126
Ronald Archibald............. 1,118
Cheryl Littauer.............. 1,116
Virginia Brillon............. 1,114
Douglas Beckendorf........... 1,112
Pauline Durant............... 1,108
Don Hutchison................ 1,102
Eileen Settineri............. 1,102
Luc Grandchamp............... 1,100
Margaret Marciniak........... 1,100
Andrew MacDonald............. 1,098
Cara Cantrell................ 1,098
Murlyn Zeske................. 1,098
Yee Hoy Cheng................ 1,098
Celeste Wallwork............. 1,092
Marie Haroon................. 1,092
Robert Swatland.............. 1,088
Mark Buis.................... 1,086
Melanie Litke................ 1,082
Aaron Wong................... 1,080
David Neiger................. 1,080
David Swayze................. 1,080
Diane Gaulin................. 1,080
Eric Hoy..................... 1,080
Jacquelyn Derrow............. 1,080
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TO BE SOLD
----------------------------- ----------------
<S> <C>
Jane Auman................... 1,080
John Finney.................. 1,080
John O'Hara.................. 1,080
Linda Saunders............... 1,080
Lisa Schuler................. 1,080
Pedro Nebres Jr.............. 1,080
Rachelle Arcebal............. 1,080
Richard Weaver............... 1,080
Ronald Littler............... 1,080
Roxanne Poulin............... 1,080
Sigrid Geens................. 1,080
Steven Teo................... 1,080
Takashi Kano................. 1,080
Thomas Smith................. 1,080
Valerie White................ 1,080
Yuen-Sang Chan............... 1,080
Kimberly Van Valkenburgh..... 1,072
Tara Purohit................. 1,068
Gayle Lowen.................. 1,066
Coral Neisen................. 1,062
Jose Jesus Deduque........... 1,062
Terry McFadden............... 1,062
Kathleen Breckbill........... 1,058
Lynn Phillips................ 1,058
Mark Valerius................ 1,058
Gary Durand.................. 1,054
Joseph Porten................ 1,054
Diane Coulombe............... 1,052
Dorothy Proulx............... 1,046
Cynthia Somer-Larsen......... 1,044
Greg Sluka................... 1,044
Manette Snow................. 1,044
Renate Rodgers............... 1,044
Ann Etter.................... 1,042
Debra Lee Donnelly........... 1,040
Karen German................. 1,036
Eileen Moore................. 1,034
Mark Stewart................. 1,032
Robert Pecek................. 1,030
Catherine Lyn................ 1,026
David Hollingsworth.......... 1,026
Diane Savage................. 1,026
Edward Lehman................ 1,026
Kelly Devine................. 1,026
Lenita Palma................. 1,026
May Cheng.................... 1,026
Mike Patterson............... 1,026
Norma Hope-Ede............... 1,026
Paul Yim..................... 1,026
Satoko Hiraga................ 1,026
Fang-Yu Chen................. 1,022
Lynn Albert.................. 1,022
Rafael Fernandez-Toledo...... 1,020
Keith Gilbert................ 1,018
Michael Marion............... 1,018
</TABLE>

58
<PAGE>

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TO BE SOLD
----------------------------- ----------------
<S> <C>
Daniel Carpenter............. 1,016
Diana O'Grady................ 1,014
Donna Thompson............... 1,012
Inez Seaney.................. 1,008
Ma.Carmela Cabading.......... 1,008
Maureen Tarantello........... 1,008
Nancy Helt................... 1,008
Spencer Farrow............... 1,008
Susan Feldman................ 1,008
Wendell Gurley............... 1,008
Ecaterina Nagy............... 1,006
Nancy Zajac.................. 1,006
Nathalie Jutras.............. 1,006
Yiu Lai...................... 1,006
Russell Caine................ 1,002
Donna Trimmer................ 1,000
Robert Gormley............... 1,000
Bruce Osterweil.............. 998
Debora Robare................ 998
Hiromi Sudo.................. 994
Ruth Hannon.................. 994
Betsy Missimer............... 990
Dean Haskell................. 990
Diane Rose................... 990
Jack Potter.................. 990
Marcia Lambert............... 990
Michael Ashe................. 990
Myriam Peeters............... 990
Nancy Pendergast............. 990
Susan Hobson................. 990
Barry Bolander............... 988
David Cleland................ 988
Jacqueline Forbes............ 988
Laurie Randall............... 986
Maribel Zaballero............ 986
John Hampstead............... 984
Catherine Brown.............. 982
Corinne Carlson.............. 982
Janet Storace................ 982
Michael Kravitz.............. 982
Roger Edelman................ 976
David Youngs................. 974
Angela Hairston.............. 972
David Johnston............... 972
Dewey Dennis................. 972
Margaret George.............. 972
Mark Sanford................. 972
Nick Callil.................. 972
Raphael Law.................. 972
David Millington............. 970
Greta Broxham................ 970
Sharyn Lottero............... 968
Susan Bies................... 968
Birri Aradom................. 958
Ruby Burt.................... 958
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TO BE SOLD
----------------------------- ----------------
<S> <C>
Lee Exton.................... 956
Christopher Hemmer........... 954
Amy Brown.................... 946
Aida Sukys................... 900
Ann Breheny.................. 900
Asa Waterman III............. 900
Belinda Hayes................ 900
Beth Eve..................... 900
Betty Bardell................ 900
Bizhan Said.................. 900
Brad Carter.................. 900
Connie Sattler............... 900
Doris Chan................... 900
Elaine Hwang................. 900
Frederick Cheung............. 900
Hideki Machida............... 900
James Neal V................. 900
Jill Green................... 900
John Bowe.................... 900
Keat Tian.................... 900
Lauren Keller................ 900
Lisa Klaasen................. 900
Lourdes Martinez............. 900
Marshall Walters............. 900
Mary Hanhan.................. 900
Pamela Hughes Yannoni........ 900
Phillip Funk................. 900
Raymond George............... 900
Ricardo Donate-Armada........ 900
Robert Cavaliere............. 900
Sandra Hill.................. 900
Shelby Fox................... 900
Steven Likovich.............. 900
Stewart Hardacre............. 900
Theodore Don Jr.............. 900
Tracy Shatek................. 900
Vincent Grillo Jr............ 900
Bing Zheng................... 856
Kimberly Olson............... 846
Beverly Jackson.............. 818
Lawrence Harpine............. 810
Catherine Smith.............. 766
Jean Triner.................. 766
Susana Duran................. 726
Ada Leong.................... 720
Joseph D'Anna................ 720
Keiko Yokomizo............... 720
Kenneth Norman............... 720
Yasuhide Nerome.............. 720
Janice Sipus................. 630
Graham Batchelor............. 586
Dana Volinski................ 540
Jeanne Walsh................. 540
Karin Leblanc................ 540
Lilly Schor.................. 462
</TABLE>

59
<PAGE>

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TO BE SOLD
----------------------------- ----------------
<S> <C>
Thanh-Dung Cohn.............. 452
Karen Harris................. 450
Lelan Conti.................. 450
Judith Welch................. 360
Maria Pizzino................ 360
Nolan Kishi.................. 360
Paul Adamczyk................ 360
</TABLE>

<TABLE>
<CAPTION>
NUMBER OF SHARES
NAME TO BE SOLD
----------------------------- ----------------
<S> <C>
Steven Kueffner.............. 360
Crispin Lace................. 226
Melvin Warner................ 180
Frank Kovacs................. 78
Additional selling
stockholders (450)......... 227,640
</TABLE>

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

(a) Holds 401,868 shares prior to this offering, (1.4%), and 364,862 shares
after this offering, (1.1%).

(b) Holds 391,706 shares prior to this offering, (1.3%), and 355,614 shares
after this offering, (1.1%).

(d) Holds 321,524 shares prior to this offering, (1.1%), and 294,502 shares
after this offering, (.9%).

After the offering, we expect that approximately 17% of the outstanding
common stock will be held by the public and that approximately 83% of the
remaining common stock will be held by officers, directors and existing
stockholders.

60
<PAGE>
DESCRIPTION OF CAPITAL STOCK, CERTIFICATE OF INCORPORATION AND BYLAWS

COMMON STOCK

After the merger, we will be authorized to issue up to 99,000,000 shares of
common stock, par value $0.01 per share. 69,000,000 of these shares will be
class A common stock, 15,000,000 of these shares will be class B-1 common stock
and 15,000,000 of these shares will be class B-2 common stock. Upon completion
of this offering, approximately 5,600,000 shares of the class A common stock
will be outstanding (assuming the over-allotment option is not exercised), and
13,412,317 shares of class B-1 common stock and 13,412,317 shares of class B-2
common stock will be outstanding.

Each stockholder is entitled to one vote for each share of common stock held
on all matters submitted to a vote of stockholders. Subject to the preferences
of any series of preferred stock that may at times be outstanding, if any,
holders of outstanding shares of common stock are entitled to receive dividends
when, as, and if declared by our board of directors out of funds legally
available for dividends and, if we liquidate, dissolve or wind up, are entitled
to share ratably in all assets remaining after payment of liabilities and
payment of accrued dividends and liquidation preferences on the preferred stock,
if any. Holders of common stock have no preemptive rights and have no rights to
convert their common stock into any other securities. All shares of common stock
outstanding upon completion of this offering are validly authorized and issued,
fully paid and nonassessable.

The class A common stock will be entitled to one vote for each share of
common stock held on all matters submitted to a vote of stockholders. The shares
will be freely transferable (except for shares purchased by affiliates). We have
applied to list the class A shares on the New York Stock Exchange.

Each of the class B-1 common stock and class B-2 common stock will be
entitled to one vote for each share of common stock held on all matters
submitted to a vote of stockholders. The class B-1 shares will be restricted for
the 12 months following this offering, and the class B-2 shares will be
restricted for the 24 months following this offering, unless waived by the board
of directors. Following the expiration or waiver of each respective restriction
period, the class B-1 and class B-2 shares will automatically convert into
class A common stock.

Class B-1 common stock and the class B-2 common stock will be transferable
to permitted transferees from the time of issuance in accordance with our
bylaws. Permitted transferees are (A) a revocable trust created to hold shares
of the company for the benefit of a stockholder where the stockholder has
control over disposition and voting with regard to the trust, or, (B) an
irrevocable trust over which the stockholder has voting and dispositive control
that was created for the benefit of the stockholder or the spouse or descendent
of the stockholder, or, (C) any entity controlled by the stockholder, other than
a corporation, whose interests are owned by the stockholder and/or his/her
spouse and/or descendants, or, (D) a corporation that is wholly-owned by the
stockholder and/or one of the entities described in (A), (B) or (C) above.

Pursuant to the terms of the underwriting agreement, we have agreed that for
a period of 180 days from the date of this prospectus, our board will not waive
the stock transfer restrictions without the prior written consent of Deutsche
Bank Securities Inc. We have no understanding or arrangement with the
underwriters to consent to any proposed future sale, but they may do so in their
sole discretion.

PREFERRED STOCK

Our certificate of incorporation authorizes the issuance of up to 1,000,000
shares of preferred stock. Our 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 our stock, impeding or delaying a possible
takeover

61
<PAGE>
and adversely affecting the voting and other rights of the holders of class A
common stock and class B common stock.

PROVISIONS OF DELAWARE LAW AND OUR CERTIFICATE OF INCORPORATION AND BYLAWS
THAT MAY HAVE ANTI-TAKEOVER EFFECTS

ANTI-TAKEOVER PROVISIONS GENERALLY

The provisions of our certificate of incorporation and bylaws described
below were put into place to help ensure that our board of directors plays a
role in attempts to acquire control of our company. In this way, the board can
protect the interests of the company and its stockholders as appropriate under
the circumstances. If the board determines that a change of control is in the
company's and stockholders' 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 these provisions, referred to as anti-takeover
provisions, are beneficial to stockholders, their existence also may tend to
discourage open market purchases by a potential acquirer and some takeover bids.
As a result, our stockholders may be deprived of opportunities to sell some or
all of their shares at prices that are higher than prevailing market prices. The
provisions in theory may decrease the market price of our 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 provisions discourage undesirable
proposals, we may be able to avoid those expenditures of time and money.

The anti-takeover provisions may make it more difficult and time consuming
for a potential acquirer and existing stockholders to obtain control of the
company through replacing our 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, these provisions may tend to
perpetuate the incumbent board of directors and management.

DELAWARE ANTI-TAKEOVER STATUTE

We are now, and after the merger 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;

- 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 with respect to us and, therefore, may discourage
acquisition attempts.

62
<PAGE>
The following are various provisions of our certificate of incorporation and
bylaws that may be deemed to have an anti-takeover effect.

AUTHORIZED CAPITAL STOCK

Our certificate of incorporation authorizes the issuance of up to 99,000,000
shares of our common stock. After the merger and this offering, our board of
directors may authorize the issuance of additional shares of our common stock
without further action by our stockholders, unless such action is required in a
particular case by applicable laws or regulations or by any stock exchange upon
which our capital stock may be listed. Our certificate of incorporation does not
provide preemptive rights to our stockholders.

The authority to issue additional shares of our common stock provides us
with the flexibility necessary to meet our 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 purposes,
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 our company. In addition, the
sale of a substantial number of shares of our common stock to persons who have
an understanding with us concerning the voting of such shares, or the
distribution or declaration of a dividend of shares of our common stock to
stockholders, may have the effect of discouraging or increasing the cost of
unsolicited attempts to acquire control of our company. The certificate of
incorporation does not provide preemptive rights to our stockholders.

Watson Wyatt & Company's authorized capital stock currently consists of
25,000,000 shares of common stock. 14,812,317 of such shares were issued and
outstanding as of September 8, 2000.

All of these shares will be exchanged for class B common stock in the
merger.

CLASSIFIED BOARD OF DIRECTORS AND ABSENCE OF CUMULATIVE VOTING

Our certificate of incorporation provides that our 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.

The effect of our having a classified board of directors is that only
approximately one-third of the members of the board are elected each year.
Consequently, two annual meetings are effectively required for our stockholders
to change a majority of the members of the board.

Pursuant to our certificate of incorporation, each stockholder generally is
entitled to one vote for each share of our common 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 our common stock generally have the ability to elect 100% of the directors.
As a result, the holders of the remaining 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 our common stock to obtain representation
on our board of directors.

REMOVAL OF DIRECTORS

Under our 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 our voting stock. Also, under our bylaws, employee
directors must resign as directors upon termination of their employment.

63
<PAGE>
SPECIAL MEETINGS OF STOCKHOLDERS

Our 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 our certificate
of incorporation 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
our 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

Our certificate of incorporation provides that any action required or
permitted to be taken by our 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.

LIMITATION ON DIRECTORS LIABILITY

Our certificate of incorporation provides that a director will have no
personal liability to the company 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

- under Section 174 of the Delaware General Corporations Law, the payment of
unlawful dividends and the making of unlawful stock purchases or
redemptions; or

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

INDEMNIFICATION

Our certificate of incorporation and bylaws provide that we will indemnify
our 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 the company, 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 our best interests 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 the company, 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 our best interests, except that
no indemnification may be made with respect to any matter as to which such
person is adjudged liable to us, 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 that any director,
officer, employee, or agent of the company 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.

We are also expressly authorized to carry directors' and officers' insurance
providing indemnification for our directors, officers and certain employees for
some liabilities. We believe that these indemnification provisions and insurance
are necessary to attract and retain qualified directors and executive officers.

64
<PAGE>
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 any 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.
Our 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 a special meetings of stockholders being vested solely
in our board of directors and the president.

Our certificate of incorporation also provides that the board of directors
has the power to adopt, amend, or repeal the bylaws. Stockholders also have the
power to adopt, amend or repeal bylaws, by a vote of 67% of the outstanding
shares.

TRADING ON THE NEW YORK STOCK EXCHANGE

We applied to have our class A common stock approved for listing on The New
York Stock Exchange under the symbol "WW." Listing is subject to satisfying all
applicable listing criteria.

RIGHTS PLAN

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

TRANSFER AGENT AND REGISTRAR

The transfer agent and registrar for our common stock is First Union
National Bank, and its address is 1525 West W.T. Harris Boulevard, Charlotte,
North Carolina 28262-1153.

65
<PAGE>
SHARES ELIGIBLE FOR FUTURE SALE

Sales of substantial amounts of common stock after this offering could
adversely affect the market price of the common stock and could impair our
future ability to raise capital through the sale of our equity securities. Upon
the consummation of this offering, we will have outstanding 5,600,000 shares of
class A common stock (assuming no exercise of the underwriters' over-allotment
option), 13,412,317 shares of class B-1 common stock and 13,412,317 shares of
class B-2 common stock. All of the shares of class A common stock sold in the
offering will be freely tradable under the Securities Act, unless purchased by
our "affiliates" as that term is defined under the Securities Act. The
class B-1 and class B-2 common stock is subject to transfer restrictions for
periods extending 12 months and 24 months, respectively, after this offering,
unless earlier waived by the board of directors. Pursuant to the terms of the
underwriting agreement, we have agreed that for a period of 180 days from the
date of the prospectus, the board will not waive the stock transfer restrictions
without the prior written consent of Deutsche Bank Securities Inc. Upon the
expiration of transfer restriction periods in the class B-1 and class B-2 common
stock, all of the shares of class B-1 and class B-2 common stock will convert
automatically to class A common stock and become eligible for sale, subject to
compliance with Rule 144 by persons deemed our affiliates.

Because the shares of class B-1 and class B-2 common stock are being issued
pursuant to a registration statement on Form S-4, they will be freely tradable
without restriction under the Securities Act following the expiration or waiver
of the transfer restriction periods included in our certificate of incorporation
except for any such shares acquired by an affiliate, which shares will remain
subject to the resale limitations of Rule 144.

Generally, Rule 144 provides that an affiliate who has beneficially owned
shares for at least one year may sell his or her shares on the open market in
brokers' transactions within any three-month period a number of shares that does
not exceed the greater of:

- 1% of the then outstanding shares of common stock; and

- the average weekly trading volume in the common stock on the open market
during the four calendar weeks preceding the sale.

Sales under Rule 144 will also be subject to post-sale notice requirements
and the availability of current public information about us.

In addition to the transfer restrictions contained in our certificate of
incorporation, at the request of the underwriters we entered into agreements
providing for additional transfer restrictions with stockholders holding
approximately % of our common stock prior to the offering (approximately %
of our common stock after the offering, assuming exercise of the over-allotment
option), including major stockholders, executive officers and employee
directors. The agreements restrict transfers of all shares held by such persons
immediately following the offering, and the restrictions terminate as to 25% of
such shares on each of the first, second, third and fourth anniversaries of the
consummation of the public offering. The transfer restrictions contained in the
agreements also terminate in the event of the stockholder's death, retirement or
involuntary termination of employment, or a change of control of the company.

66
<PAGE>
UNDERWRITING

Under the terms and subject to the conditions contained in an underwriting
agreement dated , 2000, the underwriters named below, for whom Deutsche
Bank Securities Inc., Banc of America Securities LLC and Robert W. Baird & Co.
Incorporated are acting as representatives, have severally but not jointly
agreed to purchase from us and the selling stockholders the following respective
number of shares of class A common stock:

<TABLE>
<CAPTION>
UNDERWRITERS NUMBER OF SHARES
------------ ----------------
<S> <C>
Deutsche Bank Securities Inc................................
Banc of America Securities LLC..............................
Robert W. Baird & Co. Incorporated..........................
--------
Total...................................................
========
</TABLE>

The underwriting agreement provides that the obligations of the underwriters
are subject to customary conditions precedent that must be satisfied by us
(including the delivery of opinions of counsel, officers' closing certificates
and lockup agreements) and that the underwriters will be obligated to purchase
all of the shares of the class A common stock offered hereby, other than those
shares covered by the over-allotment option described below, if any are
purchased. The underwriting agreement provides that, in the event of a default
by an underwriter, the purchase commitments of non-defaulting underwriters may
be increased or the underwriting agreement may be terminated.

The underwriting discount will be an amount equal to the public offering
price per share, less the amount paid per share by the underwriters to us or the
selling stockholders, as the case may be. The following table shows the
underwriting discount to be paid to the underwriters by us and the selling
stockholders in this offering. These amounts are shown assuming both no exercise
and full exercise of the underwriters' option to purchase additional shares of
our class A common stock to cover over-allotments.

<TABLE>
<CAPTION>
% OF INITIAL
PUBLIC OFFERING
NO EXERCISE FULL EXERCISE PRICE
----------- ------------- ---------------
<S> <C> <C> <C>
Underwriting discount per share paid by us............ $ $ %
Underwriting discount per share paid by the selling
stockholders........................................ $ $ %
Total underwriting discount........................... $ $ %
Offering expenses per share paid by us................ $ $ %
Offering expenses per share paid by the selling
shareholders........................................ $ $ %
Total offering expenses............................... $ $ %
</TABLE>

We will pay all offering expenses, including those of the selling
stockholders, estimated to be approximately $ million in total. We
also have agreed to reimburse the selling stockholders for the underwriting
discounts on the shares sold by them in this offering. Offering expenses are
expenses incurred by us in connection with this offering and include
registration and filing fees, New York Stock Exchange listing fees, legal and
accounting fees and expenses, printing expenses, blue sky qualification fees and
expenses, transfer agent fees and other miscellaneous expenses.

A number of the selling stockholders have granted to the underwriters an
option expiring on the 30th day after the date of this prospectus to purchase up
to 840,000 additional shares of class A common stock at the initial public
offering price, less the underwriting discounts and commissions. Such option may
be exercised only to cover over-allotments in the sale of shares of class A
common stock. To the extent such option is exercised, each underwriter will
become obligated, subject to specified conditions, to purchase approximately the
same percentage of such additional shares of class A common stock as it was
obligated to purchase pursuant to the underwriting agreement.

67
<PAGE>
We have been advised by the representatives that the underwriters propose to
offer the shares of class A common stock to the public initially at the public
offering price set forth on the cover page of this prospectus and, through the
representatives, to selling group members at such price less a concession of
$ per share, and the underwriters and such selling group members
may allow a discount of $ per share on sales to certain other
broker-dealers. After the offering, the public offering price and concession and
discount to dealers may be changed by the representatives.

A prospectus in electronic format is being made available on Internet web
sites maintained by one or more of the lead underwriters of this offering and
may be made available on web sites maintained by other underwriters. Other than
the prospectus in electronic format, the information on any underwriter's web
site and any information contained in any other web site maintained by an
underwriter is not part of the prospectus or the registration statement of which
the prospectus forms a part.

The representatives have informed us that they do not expect discretionary
sales by the underwriters to exceed % of the shares being offered hereby.

We, our officers and directors, and certain of our existing stockholders
have agreed that we and they will not offer, sell, contract to sell, pledge or
otherwise dispose of or transfer, directly or indirectly, or, in our case, file
with the Securities and Exchange Commission a registration statement relating
to, any shares of class A common stock or securities exchangeable or exercisable
for or convertible into shares of class A common stock, or publicly disclose the
intention to do any of the foregoing, without the prior written consent of
Deutsche Bank Securities Inc. for a period of 180 days after the date of this
prospectus, except under certain circumstances.

We and, in limited circumstances, the selling stockholders, have agreed to
indemnify the underwriters against liabilities, including civil liabilities
under the Securities Act, or to contribute to payments which the underwriters
may be required to make in respect thereof.

We have applied to have our class A common stock approved for listing on the
New York Stock Exchange under the symbol "WW." Listing is subject to our
satisfying all applicable listing criteria.

Prior to this offering, there has been no public market for the class A
common stock. The initial public offering price will be determined by
negotiation between us and the representatives. The principal factors considered
in determining the initial public offering price will include:

- the information set forth in this prospectus and otherwise available to
the representatives;

- our history, our prospects, and the industry in which we compete;

- an assessment of our management;

- the prospects for, and the timing of, our future earnings;

- the present state of our development and our current financial condition;

- the general condition of the securities markets at the time of the
offering;

- the recent market prices of, and the demand for, publicly-traded common
stock of companies in businesses similar to ours;

- market conditions for initial public offerings; and

- other relevant factors.

68
<PAGE>
There can be no assurance that an active trading market will develop for the
class A common stock or that the class A common stock will trade in the market
after this offering at or above the initial public offering price.

The representatives, on behalf of the underwriters, may engage in
over-allotment, stabilizing transactions, syndicate covering transactions and
penalty bids in accordance with Regulation M under the Securities Exchange Act
of 1934. Specifically, the underwriters may over-allot shares of our class A
common stock in connection with this offering, thus creating a short sales
position in our class A common stock for their own account. A short sales
position results when an underwriter sells more shares of stock than that
underwriter is committed to purchase. A short sales position may involve either
"covered" short sales or "naked" short sales.

Covered short sales are sales made for an amount not greater than the
underwriters' over-allotment option to purchase additional shares in the
offering described above. The underwriters may close out any covered short
position by either exercising their over-allotment option or purchasing shares
in the open market. In determining the source of shares to close out the covered
short position, the underwriters will consider, among other things, the price of
shares available for purchase in the open market as compared to the price at
which they may purchase shares through the over-allotment option.

Naked short sales are sales in excess of the over-allotment option. The
underwriters will have to close out any naked short position by purchasing
shares in the open market. A naked short position is more likely to be created
if the underwriters are concerned that there may be downward pressure on the
price of the shares in the open market after pricing that could adversely affect
investors who purchase in the offering.

Accordingly, to cover these short sales positions or to stabilize the market
price of our class A common stock, the underwriters may bid for, and purchase,
shares of our class A common stock in the open market. These transactions may be
effected on the New York Stock Exchange or otherwise. Additionally, the
representatives, on behalf of the underwriters, may also reclaim selling
concessions allowed to an underwriter or dealer if the underwriting syndicate
repurchases shares distributed by that underwriter or dealer. Similar to other
purchase transactions, the underwriter's purchase to cover the syndicate short
sales or to stabilize the market price of our class A common stock may have the
effect of raising or maintaining the market price of our class A common stock or
preventing or mitigating a decline in the market price of our class A common
stock. As a result, the price of the shares of our class A common stock may be
higher than the price that might otherwise exist in the open market. The
underwriters are not required to engage in these activities and, if commenced,
may end any of these activities at any time.

We currently maintain a senior secured revolving credit facility with an
affiliate of Banc of America Securities LLC.

LEGAL MATTERS

The validity of the issuance of the shares of class A common stock offered
by the prospectus will be passed upon for us by Cadwalader, Wickersham & Taft.
Certain legal matters in connection with this offering will be passed upon for
the underwriters by Winston & Strawn.

EXPERTS

The consolidated financial statements of Watson Wyatt & Company as of
June 30, 2000 and 1999, and for each of the three years in the period ended
June 30, 2000, included in and incorporated by reference in this prospectus have
been so included or incorporated by reference in reliance on the report of
PricewaterhouseCoopers LLP, independent accountants, given on the authority of
such firm as experts in accounting and auditing.

69
<PAGE>

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the U.S. Securities and Exchange Commission a
registration statement on Form S-3 under the Securities Act relating to the
shares of class A common stock being offered by this prospectus. This 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 A common stock offered, see the registration statement and its exhibits.
We have also filed a registration statement on Form S-4 with the SEC relating to
the proposed merger of Watson Wyatt & Company with its indirect wholly-owned
subsidiary which will result in Watson Wyatt & Company becoming a wholly-owned
subsidiary of Watson Wyatt & Company Holdings.

The SEC allows us to incorporate by reference into this 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 prospectus. If we
subsequently file updating or superseding information in a document that is
incorporated by reference into this prospectus, the subsequent information will
also become part of this prospectus and will supersede the earlier information.
We are incorporating by reference our annual report on Form 10-K/A for the
fiscal year ended June 30, 2000 (file no. 0-20724) which we have filed with the
SEC.

We also are incorporating by reference into the prospectus all of our future
filings with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the Exchange
Act until this offering 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 Holdings
6707 Democracy Boulevard, Suite 800
Bethesda, Maryland 20817
Attention: Secretary
Telephone: (301) 581-4600

You should rely only on the information provided in this 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
prospectus is accurate as of any date other than the date on the first page of
the prospectus. We are offering to sell, and seeking offers to buy, the class A
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.

70
<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 in the period
ended June 30, 2000................................... F-3

Consolidated Balance Sheets at June 30, 2000 and 1999... F-4

Consolidated Statements of Cash Flows for each of the
three years in the period
ended June 30, 2000................................... F-5

Consolidated Statements of Changes in Permanent
Shareholders' Equity for each of the three years in
the period ended June 30, 2000........................ F-6

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

Valuation and Qualifying Accounts and Reserves (Schedule
II)..................................................... F-26
</TABLE>

F-1
<PAGE>
REPORT OF INDEPENDENT ACCOUNTANTS

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

In our opinion, the consolidated financial statements listed in the accompanying
index present fairly, in all material respects, the financial position of Watson
Wyatt & Company and its subsidiaries at June 30, 2000 and 1999, and the results
of their operations and their cash flows for each of the three years in the
period ended June 30, 2000, in conformity with accounting principles generally
accepted in the United States. In addition, in our opinion, the financial
statement schedule listed in the accompanying index presents fairly, in all
material respects, the information, set forth therein when read in conjunction
with the related consolidated financial statements. These financial statements
and financial statement schedule are the responsibility of the Company's
management; our responsibility is to express an opinion on these financial
statements and financial statement schedule 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 opinions expressed above.

PricewaterhouseCoopers LLP

Washington, D.C.
August 4, 2000

F-2
<PAGE>
WATSON WYATT & COMPANY

CONSOLIDATED STATEMENTS OF OPERATIONS

(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
---------------------------------
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Revenue..................................................... $624,583 $556,860 $512,660
-------- -------- ---------
Costs of providing services:
Salaries and employee benefits............................ 332,339 298,915 268,611
Stock incentive bonus plan................................ 30,283 22,610 --
Non-recurring compensation charge (see Note 12)........... -- -- 69,906
Professional and subcontracted services................... 49,608 47,863 49,907
Occupancy, communications and other....................... 100,099 92,668 88,840
General and administrative expenses....................... 63,596 56,578 51,759
Depreciation and amortization............................. 17,878 15,248 24,994
-------- -------- ---------
593,803 533,882 554,017
-------- -------- ---------
Income (loss) from operations (see Note 12)................. 30,780 22,978 (41,357)
Other:
Interest income........................................... 1,823 944 901
Interest expense.......................................... (1,876) (2,646) (2,768)
Income from affiliates...................................... 3,116 2,524 258
-------- -------- ---------

Income (loss) before income taxes and minority interest (see
Note 12).................................................. 33,843 23,800 (42,966)

Provision for income taxes:
Current................................................... 12,344 18,744 15,116
Deferred.................................................. 2,851 (7,296) (1,982)
-------- -------- ---------
15,195 11,448 13,134
-------- -------- ---------
Income (loss) before minority interest (see Note 12)........ 18,648 12,352 (56,100)
Minority interest in net income of consolidated
subsidiaries.............................................. (115) (217) (112)
-------- -------- ---------
Income (loss) from continuing operations (see Note 12)...... 18,533 12,135 (56,212)

Discontinued operations:

Loss from operations of discontinued Outsourcing Business
(less applicable income tax benefit of $5,053 for the year
ended
June 30, 1998)............................................ -- -- (6,821)

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)............................. $ 18,533 $ 20,813 $(126,118)
======== ======== =========
Earnings (loss) per share, continuing operations, basic and
fully diluted............................................. $ 1.24 $ 0.80 $ (3.27)
======== ======== =========
Earnings (loss) per share, discontinued operations, basic
and fully diluted......................................... $--...... $ 0.57 $ (4.07)
======== ======== =========
Earnings (loss) per share, net income (loss), basic and
fully diluted............................................. $ 1.24 $ 1.37 $ (7.34)
======== ======== =========
</TABLE>

See accompanying notes

F-3
<PAGE>
WATSON WYATT & COMPANY

CONSOLIDATED BALANCE SHEETS

(IN THOUSANDS)

<TABLE>
<CAPTION>
JUNE 30, JUNE 30,
2000 1999
--------- ---------
<S> <C> <C>
ASSETS
Cash and cash equivalents................................... $ 41,410 $ 35,985
Receivables from clients:
Billed, net of allowances of $2,832 and $3,701............ 76,729 72,798
Unbilled, net of allowances of $676 and $796.............. 66,009 63,068
-------- --------
142,738 135,866
Other current assets........................................ 11,705 10,834
-------- --------
Total current assets...................................... 195,853 182,685

Investment in affiliates.................................... 16,615 15,306
Fixed assets, net of accumulated depreciation of $83,211 and
$80,368................................................... 45,237 42,797
Deferred income taxes....................................... 53,355 56,206
Intangible assets, net of accumulated amortization of
$15,288 and $13,904....................................... 8,721 7,455
Other assets................................................ 10,179 9,511
-------- --------
Total Assets................................................ $329,960 $313,960
======== ========

LIABILITIES, REDEEMABLE COMMON STOCK AND PERMANENT SHAREHOLDERS' EQUITY

Accounts payable and accrued liabilities.................... $167,833 $152,619
Income taxes payable........................................ 11,843 18,374
-------- --------
Total current liabilities................................. 179,676 170,993
Accrued retirement benefits................................. 79,462 77,140
Deferred rent and accrued lease losses...................... 5,456 9,270
Other noncurrent liabilities................................ 23,657 22,608
Minority interest in subsidiaries........................... 498 669
Redeemable Common Stock--$1 par value: 25,000,000 shares
authorized; 14,805,145 and 16,112,416 issued and
outstanding; at redemption value.......................... 115,480 107,631
Permanent shareholders' equity:
Adjustment for redemption value (greater)/less than amounts
paid in by shareholders................................... (6,097) 11,420
Retained deficit............................................ (64,223) (83,209)
Cumulative translation adjustment (accumulated other
comprehensive loss)....................................... (3,949) (2,562)
Commitments and contingencies
-------- --------
Total Liabilities, Redeemable Common Stock and Permanent
Shareholders' Equity...................................... $329,960 $313,960
======== ========
</TABLE>

See accompanying notes

F-4
<PAGE>
WATSON WYATT & COMPANY

CONSOLIDATED STATEMENTS OF CASH FLOWS

(IN THOUSANDS)

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30,
-------------------------------
2000 1999 1998
-------- -------- ---------
<S> <C> <C> <C>
Cash flows from operating activities:
Net income (loss)......................................... $18,533 $20,813 $(126,118)
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
Provision for doubtful receivables from clients......... 6,338 9,086 6,158
Depreciation............................................ 16,025 13,680 12,849
Amortization of deferred software and development costs
and other intangible assets........................... 1,852 1,568 12,143
Provision for (benefit from) deferred income taxes...... 2,851 (7,295) (1,982)
Income from affiliates.................................. (3,116) (2,524) (258)
Minority interest in net income of consolidated
subsidiaries.......................................... 115 217 112
(Increase) decrease in assets (net of discontinued
operations):
Receivables from clients.............................. (13,210) (25,071) (11,660)
Income taxes receivable............................... -- 2,216 4,558
Other current assets.................................. (871) (3,889) 342
Other assets.......................................... (717) 480 76
Increase (decrease) in liabilities (net of discontinued
operations):
Accounts payable and accrued liabilities.............. 15,871 52,149 13,576
Income taxes payable.................................. (6,531) 12,052 (3,563)
Accrued retirement benefits........................... 2,322 (5,388) (4,169)
Deferred rent and accrued lease losses................ (3,814) (3,406) (2,262)
Other noncurrent liabilities.......................... 1,810 1,132 840
Other, net.............................................. 563 514 1,603
Discontinued operations, net............................ (1,090) (5,537) (18,554)
------- ------- ---------
Net cash from operating activities...................... 36,931 52,119 23,503
------- ------- ---------
Cash flows used in investing activities:
Purchases of fixed assets................................. (20,235) (19,684) (16,034)
Proceeds from sales of fixed assets....................... 495 237 623
Acquisitions.............................................. (3,069) (6,207) --
Investment in software and development costs.............. -- -- (3,000)
Distributions from affiliates............................. 1,187 4,220 3,076
Discontinued operations................................... -- -- (14,750)
------- ------- ---------
Net cash used in investing activities................... (21,622) (21,434) (30,085)
------- ------- ---------
Cash flows used in financing activities:
Net borrowings (repayments) on line of credit............. -- (9,000) 9,000
Issuances of Redeemable Common Stock...................... 132 15,451 1,005
Repurchases of Redeemable Common Stock.................... (9,347) (15,124) (13,141)
------- ------- ---------
Net cash used in financing activities................... (9,215) (8,673) (3,136)
------- ------- ---------
Effect of exchange rates on cash............................ (669) 568 (3,134)
------- ------- ---------
Increase (decrease) in cash and cash equivalents............ 5,425 22,580 (12,852)
Cash and cash equivalents at beginning of period............ 35,985 13,405 26,257
------- ------- ---------
Cash and cash equivalents at end of period.................. $41,410 $35,985 $ 13,405
======= ======= =========
</TABLE>

See accompanying notes

F-5
<PAGE>
WATSON WYATT & COMPANY

CONSOLIDATED STATEMENTS OF CHANGES IN PERMANENT SHAREHOLDERS' EQUITY

(IN THOUSANDS)

<TABLE>
<CAPTION>
ADJUSTMENT FOR
REDEMPTION VALUE
CUMULATIVE (GREATER)/LESS THAN
RETAINED TRANSLATION AMOUNTS PAID IN
DEFICIT LOSS BY SHAREHOLDERS TOTAL
--------- ----------- ------------------- ---------
<S> <C> <C> <C> <C>
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................ -- -- -- (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.............. -- -- -- 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)
Comprehensive Income:
Net income............................ 18,533 -- -- 18,533
Foreign currency translation
adjustment.......................... -- (1,387) -- (1,387)
---------
Total Comprehensive Income.............. -- -- -- 17,146
Effect of repurchases of 1,326,971
shares of common stock (various prices
per share)............................ 453 -- (453) --
Adjustment of redemption value for
change in Formula Book Value per
share................................. -- -- (17,064) (17,064)
--------- ------- -------- ---------

Balance at June 30, 2000................ $ (64,223) $(3,949) $ (6,097) $ (74,269)
========= ======= ======== =========
</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 (collectively referred to as
"we," "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 our stock is held by or for the benefit of
employees.

In 1998, the Company discontinued its benefits administration outsourcing
business as further described in Note 14. 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 prior to discontinuation.

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 revenue 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 and discontinued
operations.

PRINCIPLES OF CONSOLIDATION--Our consolidated financial statements include
the accounts of the Company and our majority-owned and controlled subsidiaries
after elimination of intercompany accounts and transactions. Investments in
affiliated companies over which we have 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--We consider short-term, highly liquid investments
with original maturities of 90 days or less to be cash equivalents. Such
investments were $23,500,000 at June 30, 2000, and $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. Services rendered
are generally billed on a monthly basis using fee arrangements defined at the
inception of the project. Unbilled receivables are stated at full billing rates
less an allowance for unbillable amounts.

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

In December 1999, the SEC issued Staff Accounting Bulletin No. 101 "Revenue
Recognition in Financial Statements" (SAB 101) which summarizes certain of the
staff's views on revenue recognition. Our revenue recognition policies have been
and continue to be in accordance with SAB 101.

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. We regularly
assess the recoverability of unamortized goodwill and other long-lived assets by
comparing the probable future cash flows with the net book value of the
underlying assets. Losses so identified are then measured as the difference
between the net book

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)
value of the asset and the discounted present value of the cash flows and are
recorded as identified.

EMPLOYEE RECEIVABLES--We had outstanding employee receivables included in
other current and noncurrent assets of $2,173,000 and $2,440,000 at June 30,
2000 and June 30, 1999, 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 our 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 our 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 our equity
interests in our 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 intercompany receivables and payables are not
recognized because such amounts are considered to be permanent and are not
expected to be liquidated.

FAIR VALUE OF FINANCIAL INSTRUMENTS--The carrying amount of our 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. We had no borrowings
outstanding under our revolving credit agreement at June 30, 2000 and June 30,
1999. We know of no event of default that would require us to satisfy the
guarantees described in Notes 9 and 16 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. We invest our excess cash with high quality financial institutions.
Concentrations of credit risk with respect to receivables from clients are
limited due to our large number of customers and their dispersion across many
industries and geographic regions.

STOCK-BASED COMPENSATION--We have elected to follow Accounting Principles
Board Opinion No. 25, Accounting for Stock Issued to Employees, for the stock
option plan adopted in fiscal year 2000. See Note 17. Compensation expense, if
any, would be recorded and measured as the difference between the fair market
value of the stock at the date of the grant and the option price. The
compensation expense would be recognized over the five-year vesting period
identified in the plan. For any cash based, non-stock awards, such as stock
appreciation rights, compensation expense will be recognized over the vesting
period to the extent that the market price of the stock increases. We have
elected the disclosure-only provisions of Statement of Financial Accounting
Standards No. 123, Accounting for Stock-Based Compensation. Management expects
any compensation expense recognized under the stock option plan to be immaterial
to our financial statements.

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 15,000 in fiscal year
2000, 15,215 in fiscal year 1999, and 17,170 in fiscal year 1998.

COMPREHENSIVE INCOME--In fiscal year 1999, we adopted Statement of Financial
Accounting Standards ("SFAS") No. 130 "Reporting Comprehensive Income."
Comprehensive income includes

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 1--SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
net income and changes in the cumulative foreign currency translation gain or
loss. For the years ended June 30, 2000, 1999 and 1998, comprehensive income
(loss) totaled $17,146,000, $21,167,000 and $(129,870,000), respectively.

NOTE 2--CASH FLOW INFORMATION

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

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Interest expense................................ $ 1,879 $1,889 $ 2,639
Income taxes.................................... $21,707 $5,462 $18,679
</TABLE>

NOTE 3--INVESTMENTS IN AFFILIATES

Entities accounted for under the equity method are:

<TABLE>
<CAPTION>
JUNE 30
OWNERSHIP -------------------
INTEREST 2000 1999
--------- -------- --------
<S> <C> <C> <C>
Watson Wyatt Partners......................... 10.0% $11,113 $ 9,265
Watson Wyatt Holdings (Europe) Limited........ 25.0% 5,502 6,041
------- -------
Total Investment in Affiliates................ $16,615 $15,306
======= =======
</TABLE>

On April 1, 1995, we transferred our 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. We also transferred our
Continental European operations to a newly-formed holding company, Watson Wyatt
Holdings (Europe) Limited ("WWHE"), jointly owned and controlled by us 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, we sold one
half of our investment in WWHE to Watsons; no gain or loss was recognized on the
transaction.

Our interest in Watsons is an investment in a general partnership. We retain
the ability to exercise significant influence over WWHE. As a result, both
investments are accounted for under the equity method.

At June 30, 2000, our investments in WWHE and Watsons exceeded our share of
the underlying net assets by $2,047,000 due primarily to the capitalization of
external transaction costs incurred by us. This basis differential is being
amortized over periods of 10 to 15 years.

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

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Equity in income from affiliates.................... $3,326 $2,760 $724
Amortization of basis differential.................. (210) (236) (466)
------ ------ ----
Income from affiliates.............................. $3,116 $2,524 $258
====== ====== ====
</TABLE>

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

<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Current assets........................................ $155,980 $117,717
Noncurrent assets..................................... 17,920 17,286
-------- --------
Total assets........................................ $173,900 $135,003
======== ========

Current liabilities................................... $ 64,640 $ 65,171
Noncurrent liabilities................................ 52,283 30,810
Shareholders' equity.................................. 56,977 39,022
-------- --------
Total liabilities & shareholders' equity............ $173,900 $135,003
======== ========
</TABLE>

Our operating results include our 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>
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
Revenue..................................... $224,507 $206,463 $173,012
Operating expenses.......................... 166,265 155,330 135,577
-------- -------- --------
Income before tax........................... $ 58,242 $ 51,133 $ 37,435
======== ======== ========
Net income.................................. $ 58,312 $ 51,116 $ 38,176
======== ======== ========
</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.

The components of fixed assets are:

<TABLE>
<CAPTION>
JUNE 30
-------------------
2000 1999
-------- --------
<S> <C> <C>
Furniture, fixtures and equipment........................ $98,578 $96,096
Leasehold improvements................................... 29,870 27,069
------- -------
128,448 123,165
Less: accumulated depreciation and amortization.......... (83,211) (80,368)
------- -------
Net fixed assets......................................... $45,237 $42,797
======= =======
</TABLE>

NOTE 5--PENSION AND SAVINGS PLANS

In fiscal year 1999, we 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

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 5--PENSION AND SAVINGS PLANS (CONTINUED)
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 our principal retirement
plans are:

<TABLE>
<CAPTION>
JUNE 30
-------------------
2000 1999
-------- --------
<S> <C> <C>
Defined benefit retirement plans......................... $27,905 $28,149
Canadian Separation Allowance Plan....................... 6,116 5,953
Postretirement benefits other than pensions.............. 45,441 43,038
------- -------
Accrued retirement benefits.............................. $79,462 $77,140
======= =======
</TABLE>

DEFINED BENEFIT PLANS

We sponsor both qualified and non-qualified non-contributory defined benefit
pension plans covering substantially all of our associates. Under our 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.

Net periodic pension cost consists of the following components:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Service cost................................... $23,968 $22,976 $18,340
Interest cost.................................. 26,163 23,909 22,302
Expected return on plan assets................. (40,138) (37,437) (31,910)
Amortization of transition obligation.......... 201 201 201
Amortization of net unrecognized gains......... (6,188) (5,979) (6,316)
Amortization of prior service cost............. 2,012 1,841 1,794
------- ------- -------
Net periodic pension cost...................... $ 6,018 $ 5,511 $ 4,411
======= ======= =======
</TABLE>

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

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)
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
---------------------
2000 1999
--------- ---------
<S> <C> <C>
Benefit obligation at beginning of year............... $377,407 $353,658
Service cost.......................................... 23,968 22,976
Interest cost......................................... 26,163 23,909
Actuarial gains....................................... (13,959) (8,503)
Benefit payments...................................... (21,352) (14,539)
Plan amendments....................................... 1,948 --
Foreign currency adjustment........................... (151) (94)
-------- --------
Benefit obligation at end of year..................... $394,024 $377,407
======== ========
</TABLE>

<TABLE>
<CAPTION>
JUNE 30
---------------------
2000 1999
--------- ---------
<S> <C> <C>
Fair value of plan assets at beginning of year........ $411,102 $381,398
Actual return on plan assets.......................... 58,077 36,473
Divestitures.......................................... (254) --
Company contributions................................. 12,786 7,889
Benefit payments...................................... (21,352) (14,539)
Foreign currency adjustment........................... (205) (119)
-------- --------
Fair value of plan assets at end of year.............. $460,154 $411,102
======== ========
</TABLE>

Pension plan assets consist of domestic equity, international equity and
fixed income securities.

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

<TABLE>
<CAPTION>
JUNE 30
-------------------
2000 1999
-------- --------
<S> <C> <C>
Projected benefit obligation............................. $86,620 $86,703
Accumulated benefit obligation........................... 46,892 42,740
Fair value of plan assets................................ -- --
</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 accrued pension benefit cost recognized in the Company's consolidated
balance sheets is computed as follows:

<TABLE>
<CAPTION>
JUNE 30
-------------------
2000 1999
-------- --------
<S> <C> <C>
Funded status at end of year........................... $ 66,384 $ 33,695
Unrecognized prior service cost........................ 9,187 9,255
Unrecognized net gain.................................. (101,248) (75,579)
Unrecognized transition obligation..................... 592 793
-------- --------
Net accrued pension liability.......................... $(25,085) $(31,836)
======== ========

Prepaid pension benefit cost........................... $ 38,918 $ 26,691
Accrued pension benefit liability...................... (64,003) (58,527)
Intangible assets...................................... -- --
Accumulated other comprehensive income................. -- --
-------- --------
Net accrued pension liability.......................... $(25,085) $(31,836)
======== ========
</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
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Discount rate, projected benefit obligation...... 7.25% 7.00% 6.75%
Discount rate, net periodic pension cost......... 7.00% 6.75% 7.50%
Expected long-term rate of return on assets...... 10.00% 10.00% 10.00%
Rate of increase in compensation levels.......... 5.34% 5.34% 5.80%
</TABLE>

DEFINED CONTRIBUTION PLANS

We sponsor a savings plan which provides benefits to substantially all U.S.
associates and under which we match 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 2000, 1999 and 1998 for the match was $5.6 million,
$4.5 million and $5.1 million, respectively. Under the plan, we also have the
ability to make discretionary profit-sharing contributions. We made no profit
sharing contributions during fiscal years 2000, 1999 or 1998. We also sponsor 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
2000, 1999 and 1998 amounted to $372,000, $377,000 and $293,000, respectively.

NOTE 6--BENEFITS OTHER THAN PENSIONS

HEALTH CARE BENEFITS

We sponsor a contributory health care plan that provides hospitalization,
medical and dental benefits to substantially all U.S. associates. We accrue a
liability for estimated incurred but unreported claims based on projected use of
the plan as well as paid claims of prior periods. The

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 6--BENEFITS OTHER THAN PENSIONS (CONTINUED)
liability totaled $2,483,000 at June 30, 2000 and $2,495,000 at June 30, 1999,
and is included in accounts payable and accrued liabilities in the consolidated
balance sheets.

POSTRETIREMENT BENEFITS

We provide 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. Our principal plans are unfunded.

Net periodic postretirement benefit cost consists of the following
components:

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Service cost...................................... $1,877 $1,898 $1,848
Interest cost..................................... 2,216 2,178 2,133
Amortization of transition obligation............. 46 46 46
Amortization of net unrecognized gains............ (683) (488) (584)
Amortization of prior service cost................ (127) (127) (127)
------ ------ ------
Net periodic postretirement benefit cost.......... $3,329 $3,507 $3,316
====== ====== ======
</TABLE>

The following tables set forth the changes in the accumulated postretirement
benefit obligation, Company contributions and benefit payments. Actuarial gains
primarily relate to a 0.25% increase in the discount rate used in the valuation
of the U.S. plan.

<TABLE>
<CAPTION>
JUNE 30
-------------------
2000 1999
-------- --------
<S> <C> <C>
Benefit obligation at beginning of year................ $ 34,981 $ 32,326
Service cost........................................... 1,877 1,898
Interest cost.......................................... 2,216 2,178
Participant contributions.............................. 267 175
Actuarial gains........................................ (3,102) (563)
Acquisitions........................................... -- 245
Benefit payments....................................... (1,413) (1,267)
Foreign currency adjustment............................ (16) (11)
-------- --------
Benefit obligation at end of year...................... $ 34,810 $ 34,981
======== ========
</TABLE>

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)

<TABLE>
<CAPTION>
JUNE 30
-------------------
2000 1999
-------- --------
<S> <C> <C>
Fair value of plan assets at beginning of year......... $ -- $ --
Company contributions.................................. 1,146 1,092
Participant contributions.............................. 267 175
Benefit payments....................................... (1,413) (1,267)
-------- --------
Fair value of plan assets at end of year............... $ -- $ --
======== ========
</TABLE>

The accrued other postretirement benefit cost recognized in the Company's
consolidated balance sheets is computed as follows:

<TABLE>
<CAPTION>
JUNE 30
-------------------
2000 1999
-------- --------
<S> <C> <C>
Funded status at end of year........................... $(34,810) $(34,981)
Unrecognized prior service cost........................ (1,198) (1,325)
Unrecognized net gain.................................. (11,163) (8,763)
Unrecognized transition obligation..................... 604 650
-------- --------
Net accrued postretirement liability................... $(46,567) $(44,419)
======== ========

Prepaid postretirement benefit cost.................... $ -- $ --
Accrued postretirement benefit liability............... (46,567) (44,419)
Intangible assets...................................... -- --
Accumulated other comprehensive income................. -- --
-------- --------
Net accrued postretirement liability................... $(46,567) $(44,419)
======== ========
</TABLE>

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

<TABLE>
<CAPTION>
JUNE 30
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Health care cost trend, accumulated benefit
obligation:
Pre-65 benefits
(decreasing to 5.00% for 2005 and thereafter)..... 8.00% 7.70% 8.40%
Post-65 benefits
(decreasing to 5.00% for 2008 and thereafter)..... 9.00% 7.10% 7.70%
Discount rate, accumulated benefit obligation
postretirement benefit............................ 7.25% 7.00% 6.75%
Discount rate, net periodic cost.................... 7.00% 6.75% 7.50%
</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 year 2000............................... $ 266 $ (76)
Effect on accumulated postretirement benefit
obligation as of June 30, 2000.................... 1,651 (1,714)
</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 7--ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities consist of:

<TABLE>
<CAPTION>
JUNE 30
---------------------
2000 1999
--------- ---------
<S> <C> <C>
Accounts payable and accrued liabilities.............. $ 58,653 $ 53,834
Accrued salaries and bonuses.......................... 83,357 68,405
Current portion of defined benefit retirement plans
and postretirement benefits other than pensions..... 2,491 9,948
Accrued vacation...................................... 14,840 13,578
Advance billings...................................... 8,492 6,854
-------- --------
Total accounts payable and accrued liabilities........ $167,833 $152,619
======== ========
</TABLE>

NOTE 8--LEASES

We lease office space, furniture and selected computer equipment under
operating lease agreements with terms generally ranging from one to ten years.
We have entered into sublease agreements for some of our excess leased space.
The rental expense was $44,563,000, $43,631,000 and $43,133,000 for fiscal years
2000, 1999 and 1998, respectively. Sublease income was $3,534,000, $4,208,000
and $3,905,000 for fiscal years 2000, 1999 and 1998, respectively.

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

<TABLE>
<CAPTION>
LEASE SUBLEASE
COMMITMENTS INCOME
----------- --------
<S> <C> <C>
2001................................................. $ 46,633 $4,537
2002................................................. 39,908 3,866
2003................................................. 28,113 116
2004................................................. 21,593 --
2005................................................. 16,512 --
Thereafter........................................... 36,310 --
-------- ------
$189,069 $8,519
======== ======
</TABLE>

As a result of relocations and the subleasing of excess office space, we
recognized lease termination losses of $0, $341,000 and $790,000 in fiscal years
2000, 1999 and 1998, respectively.

NOTE 9--NOTE PAYABLE

We have 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 our 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, 2000 or 1999. The credit facility requires us 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, 2000 we were in compliance with all covenants under the
credit facility. The revolving portion of the credit facility is scheduled to
mature on June 30, 2003.

Of the total credit line, $95,000,000 is available to us as revolving credit
for operating needs, $2,225,000 of which is unavailable as a result of support
required for letters of credit issued under the credit line. The remaining
$25,000,000 is available to secure loans to associates for the purchase of
redeemable common stock made available under our Stock Purchase Program. We

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 9--NOTE PAYABLE (CONTINUED)
guarantee these loans to our shareholders, the aggregate outstanding balances of
which totaled $14,385,000 and $20,316,000 at June 30, 2000 and 1999,
respectively. Shares totaling 3,273,000 and 4,735,000 of the Company's
redeemable common stock were pledged by shareholders to secure these loans at
June 30, 2000 and 1999, respectively.

NOTE 10--REDEEMABLE COMMON STOCK

Substantially all of our redeemable common stock is held by or for the
benefit of our employees and, pursuant to our bylaws, is subject to certain
restrictions. In connection with these restrictions, we have the following
rights and obligations regarding purchases and sales of our 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 our 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 are equal to
the formula book value as of the prior year end, adjusted to 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 our redeemable
common stock as of June 30, 1996, increased or decreased by net income or
losses, and all other Generally Accepted Accounting Principles ("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 $7.80 at
June 30, 2000 and $6.68 at June 30, 1999.

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)
The following schedule computes the formula book value per share at
June 30:

<TABLE>
<CAPTION>
2000 1999
--------- ---------
<S> <C> <C>
Consolidated net worth[1]................................... $ 46,200 $ 36,882
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 61,228
Add: Adjustment for after-tax effect of lease losses........ 2,137 3,606
-------- --------
Formula book value of redeemable common stock............... $115,480 $107,631
======== ========
Number of shares of redeemable common stock outstanding..... 14,805 16,112
======== ========
Formula book value per share of redeemable common stock..... $ 7.80 $ 6.68
======== ========
</TABLE>

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

[1] After adjusting for currency translation as specified in the Company's
bylaws of $4,989 in 2000 and $3,602 in 1999 and redemption value of
redeemable common stock of $115,480 at June 30, 2000, and $107,631 at June
30, 1999.

In view of our obligation to repurchase our 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 amount presented as redeemable common stock outside
the permanent shareholders' equity section is stated as the amount at which we
would be required to repurchase shares at the most recent fiscal year end
formula book value per share. In the permanent shareholders' equity section, the
"adjustment for redemption value less (greater) than amounts paid/deemed paid in
by shareholders" represents the amount that the redeemable value is less than
(exceeds) the cost of the stock.

<TABLE>
<CAPTION>
NUMBER OF REDEEMABLE
SHARES COMMON STOCK
---------- ------------
<S> <C> <C>
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
Redemption of shares........................................ (1,326,971) (9,347)
Issuance of shares.......................................... 19,700 132
Adjustment of redemption value for change in formula book
value per share........................................... -- 17,064
---------- --------
Balance at June 30, 2000.................................... 14,805,145 $115,480
========== ========
</TABLE>

We sponsor a Stock Purchase Plan ("SPP") which allows virtually all
associates to become shareholders. There was no formal stock sale under the SPP
in fiscal year 2000, although during this period we received $132,000 from four
private placements of an aggregate of 19,700 shares of

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)
stock under Section 4(2) of the Securities Act. During the fiscal year ended
June 30, 1999, we received $15,451,000 from the sale of 2,557,201 shares of
stock under the SPP.

NOTE 11--INCOME TAXES

The provision for income taxes is based upon reported income before income
taxes. Deferred income tax assets and liabilities reflect the effect of
temporary differences between the assets and liabilities recognized for
financial reporting purposes and the amounts recognized for income tax purposes.
The Company recognizes deferred tax assets if it is more likely than not that a
benefit will be realized.

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

<TABLE>
<CAPTION>
YEAR ENDED JUNE 30
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Current tax expense:
U.S....................................................... $ 5,276 $10,817 $ 9,972
State and local........................................... 438 4,050 3,324
Foreign................................................... 6,630 3,877 1,820
------- ------- -------
12,344 18,744 15,116
------- ------- -------
Deferred tax (benefit) expense:
U.S....................................................... 1,601 (5,776) (337)
State and local........................................... 3,231 (1,407) (1,706)
Foreign................................................... (1,981) (113) 61
------- ------- -------
2,851 (7,296) (1,982)
------- ------- -------
Total provision for income taxes............................ $15,195 $11,448 $13,134
======= ======= =======
</TABLE>

Current foreign tax expense attributable to income from continuing
operations was net of approximately $180,000, representing the tax benefit of a
net operating loss carryover for the year ended June 30, 2000. There was no such
benefit in the years ended June 30, 1999 and 1998.

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 11--INCOME TAXES (CONTINUED)
Deferred income tax assets (liabilities) included in the consolidated
balance sheets at June 30, 2000 and June 30, 1999 are comprised of the
following:

<TABLE>
<CAPTION>
JUNE 30
-------------------
2000 1999
-------- --------
<S> <C> <C>
Foreign temporary differences............................... $ (722) $(2,595)
------- -------
Gross deferred tax liabilities............................ (722) (2,595)
------- -------
Cash method of accounting for U.S. income tax purposes...... 2,475 3,744
Difference between book and tax depreciation................ 4,573 3,202
Accrued retirement benefits................................. 33,817 37,137
Amortization of deferred rent............................... 3,804 5,697
Foreign temporary differences............................... 5,125 6,367
Foreign net operating loss carryforwards.................... 1,617 1,989
Discontinued operations exit costs.......................... 6,562 7,230
Tax credit carryforwards.................................... 1,042 --
Other....................................................... 241 317
------- -------
Gross deferred tax assets................................. 59,256 65,683
------- -------
Deferred tax assets valuation allowance................... (5,179) (6,882)
------- -------
Net deferred tax asset.................................... $53,355 $56,206
======= =======
</TABLE>

At June 30, 2000 we had foreign tax credit carryforwards for U.S. tax
purposes of $393,000, which expire in 2002 through 2005. At June 30, 2000, we
had unused loss carryforwards for tax purposes in various jurisdictions outside
the U.S. amounting to $5,749,000, of which $4,171,000 can be indefinitely
carried forward under local statutes. The remaining foreign loss carryforwards
will expire, if unused, in varying amounts from 2001 through 2008. The valuation
allowance applies to the tax effect of the foreign net operating loss
carryforwards $(1,617,000), the tax effect of certain foreign temporary expenses
$(3,169,000) and foreign tax credit carryovers $(393,000) for which
realizability is considered uncertain.

The net change in the valuation allowance of $1,703,000 in fiscal year 2000
and $611,000 in fiscal year 1999 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 (loss) before taxes, minority
interest and discontinued operations for each of the three years ended June 30
are as follows:

<TABLE>
<CAPTION>
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Domestic...................................... $22,581 $15,203 $(47,435)
Foreign....................................... 11,262 8,597 4,469
------- ------- --------
$33,843 $23,800 $(42,966)
======= ======= ========
</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)

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
------------------------------
2000 1999 1998
-------- -------- --------
<S> <C> <C> <C>
Tax provision (benefit) at U.S. federal statutory tax rate
of 35%.................................................... $11,845 $ 8,330 $(15,038)
Increase (reduction) resulting from:
Non-deductible compensation expense....................... -- -- 24,467
Foreign income subject to higher (lower) foreign tax
rates................................................... 432 (377) (324)
Tax benefit of foreign losses reserved, net............... 275 881 852
State income taxes, net of federal tax effect............. 2,384 1,207 1,618
Non-deductible amortization and other expenses............ 1,323 849 758
Tax credits............................................... (1,282) -- (353)
Other..................................................... 218 558 1,154
------- ------- --------
Income tax provision........................................ $15,195 $11,448 $ 13,134
======= ======= ========
</TABLE>

NOTE 12--NON-RECURRING COMPENSATION CHARGE

In accordance with generally accepted accounting principles, we recorded a
charge against operating results of $69,906,000 in fiscal year 1998 as
compensation expense. This charge arises because we changed the method of
calculation of our formula book value during fiscal year 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 our benefits administration outsourcing business.

The non-recurring compensation charge does not represent a call against
Company resources and will not recur unless we modify our formula book value
calculation again. We have 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 its infrequent nature.

NOTE 13--SEGMENT INFORMATION

We are primarily organized geographically and have 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

We evaluated the performance of the segments and allocated resources to them
based on net operating income. Prior year data has been restated to be
consistent with current year classifications for comparative purposes.

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 13--SEGMENT INFORMATION (CONTINUED)
The table below presents specified information about reported segments as of
and for the year ended June 30, 2000 (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>
Revenue (net of
reimbursable
expenses)............ $214,223 $176,135 $79,127 $59,747 $43,975 $8,082 $12,337 $593,626
Net operating income... 56,806 34,517 9,058 10,187 3,739 460 4,318 119,085
Interest expense....... 1,307 1,027 205 -- 229 152 -- 2,920
Depreciation &
amortization......... 6,123 4,796 3,483 1,444 1,389 214 148 17,597
Receivables............ 48,287 44,668 14,811 15,259 11,723 2,979 -- 137,727
Income from
affiliates........... -- -- -- -- -- -- -- 3,116
</TABLE>

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>
Revenue (net of
reimbursable
expenses) $188,697 $154,937 $73,453 $48,688 $41,525 $7,115 $12,593 $527,008
Net operating income 45,522 27,351 1,382 6,258 2,772 141 4,241 87,667
Interest expense 1,158 856 471 17 300 98 -- 2,900
Depreciation &
amortization 5,950 4,414 3,351 1,281 1,186 143 177 16,502
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>
Revenue (net of
reimbursable
expenses)............ $157,524 $140,935 $82,286 $42,374 $40,664 $7,215 $13,253 $484,251
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>

Information about interest income and tax expense is not presented as a
segment expense because it is not considered a responsibility of the segment's
operating management.

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

<TABLE>
<CAPTION>
2000 1999 1998
--------- --------- ---------
<S> <C> <C> <C>
REVENUE:
Total segment revenue....................................... $593,626 $527,008 $484,251
Reimbursable expenses not included in segment revenue....... 30,829 30,426 28,686
Other, net.................................................. 128 (574) (277)
-------- -------- --------
Consolidated revenue........................................ $624,583 $556,860 $512,660
======== ======== ========
NET OPERATING INCOME:
Total segment income........................................ $119,085 $ 87,667 $ 72,585
Non-recurring compensation charge........................... -- -- (69,906)
Sublease loss............................................... -- (341) (790)
Income from affiliates...................................... 3,116 2,524 258
Differences in allocation methods for depreciation, G&A and
pension costs............................................. (3,218) 1,277 (6,208)
Gain on sale of business units.............................. 583 2,723 3,093
Bonuses and stock incentive bonus plan...................... (81,560) (67,194) (37,400)
Other, net.................................................. (4,163) (2,856) (4,598)
-------- -------- --------
Consolidated pretax income (loss) from continuing
operations................................................ $ 33,843 $ 23,800 $(42,966)
======== ======== ========
INTEREST EXPENSE:
Total segment expense....................................... $ 2,920 $ 2,900 $ 2,596
Differences in allocation method............................ (1,044) (254) 172
-------- -------- --------
Consolidated interest expense............................... $ 1,876 $ 2,646 $ 2,768
======== ======== ========
DEPRECIATION & AMORTIZATION:
Total segment expense....................................... $ 17,597 $ 16,502 $ 15,231
Capitalized software amortization, not allocated to
segments.................................................. -- -- 12,267
Goodwill amortization, not allocated to segments............ 1,852 1,568 549
Differences in allocation method and other.................. (1,571) (2,822) (3,053)
-------- -------- --------
Consolidated depreciation and amortization expense.......... $ 17,878 $ 15,248 $ 24,994
======== ======== ========
RECEIVABLES:
Total segment receivables--billed and unbilled.............. $137,727 $133,580 $116,340
Net valuation differences and receivables of discontinued
operations................................................ 5,011 2,286 13,056
-------- -------- --------
Total billed and unbilled receivables....................... 142,738 135,866 129,396
Assets not reported by segment.............................. 187,222 178,094 138,914
-------- -------- --------
Consolidated assets......................................... $329,960 $313,960 $268,310
======== ======== ========
</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)
The following represents total fees and long lived assets information by
geographic area as of and for the years ended June 30:

<TABLE>
<CAPTION>
REVENUE LONG LIVED ASSETS
--------------------------------- ------------------------------
2000 1999 1998 2000 1999 1998
--------- --------- --------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
United States.................. $512,826 $464,521 $424,246 $50,772 $53,618 $48,108
Foreign........................ 111,757 92,339 88,414 29,980 21,451 19,882
-------- -------- -------- ------- ------- -------
$624,583 $556,860 $512,660 $80,752 $75,069 $67,990
======== ======== ======== ======= ======= =======
</TABLE>

Revenue is based on the country of domicile for the legal entity that
originated the revenue. Exclusive of the United States, revenue from no single
country constituted more than 10% of consolidated revenue. Revenue from no
single customer constituted more than 4% of consolidated revenue.

NOTE 14--DISCONTINUED OPERATIONS

During fiscal year 1998, we discontinued our benefits administration
outsourcing business, including our investment in our affiliate, Wellspring
Resources LLC ("Wellspring"), pursuant to a Redemption, Restructuring, and
Indemnity Agreement ("the Restructuring Agreement") by which Wellspring redeemed
our 50% interest in Wellspring effective April 1, 1998. The restructuring
effected, pursuant to the Restructuring Agreement, the implementation of a
discontinuation plan approved by our Board of Directors on February 18, 1998.
Under the Restructuring Agreement, certain outsourcing contracts retained by us
when Wellspring was initially formed in 1996 ("Retained Clients") continued to
be performed until their respective contract expirations.

In connection with the restructuring, we agreed to indemnify Wellspring for
certain costs and losses as a result of services provided by Wellspring on our
behalf. Further, we were released from certain liabilities relating to the
Wellspring business in connection with the redemption.

In 1998, we recorded a pre-tax loss on discontinuation of $109,800,000,
which included the $45,200,000 write-off of our 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 our former venture partner.

In October 1998, we consummated agreements with the remaining retained
clients, Wellspring, and our 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. We 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."

NOTE 15--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 our behalf. Expenses
charged to us by Wellspring for such services for fiscal 1999 and 1998 were
$11,600,000 and $41,811,000, respectively. Our obligation to service the
retained clients

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 15--RELATED PARTY TRANSACTIONS (CONTINUED)
ceased during fiscal year 1999 and there were no amounts due to Wellspring at
either June 30, 2000 or 1999.

NOTE 16--COMMITMENTS AND CONTINGENT LIABILITIES

We are a defendant in certain lawsuits arising in the normal course of
business, some of which are in their earliest stages. There are no such matters
that management believes will have a material impact on our financial
statements.

As of June 30, 2000 and 1999, we and our affiliates had outstanding letters
of credit of $2,225,000.

We continue to guarantee certain leases for office premises and equipment
for Wellspring. Minimum remaining payments guaranteed under these leases at
June 30, 2000 total $49,300,000, which expire at various dates through 2007.
These leases are also jointly and severally guaranteed by our former partner in
Wellspring, State Street Bank and Trust Company. The estimated loss from the
potential exercise of these guarantees has been included in the loss on disposal
of the benefits administration outsourcing business.

NOTE 17--COMPANY REORGANIZATION AND LONG TERM INCENTIVE PLAN

On June 26, 2000, at a special meeting of the shareholders of Watson Wyatt &
Company, the shareholders approved the following two proposals.

The first proposal was to adopt an Agreement and Plan of Merger among Watson
Wyatt & Company, Watson Wyatt & Company Holdings and WW Merger Subsidiary, Inc.
Under the merger agreement, among other things, the merger subsidiary will merge
into Watson Wyatt & Company, and each share of Watson Wyatt & Company's
currently outstanding common stock will be converted into one share of
class B-1 and one share of class B-2 common stock of Watson Wyatt & Company
Holdings, contingent on the consummation of the public offering of class A
common stock of Watson Wyatt & Company Holdings.

The second proposal was to adopt the 2000 Long Term Incentive Plan. The plan
provides for grants of stock options and stock appreciation rights to be made by
Watson Wyatt & Company Holdings to eligible employees of Watson Wyatt & Company
Holdings and its subsidiaries, including Watson Wyatt & Company. This proposal
is contingent on the approval of the merger, the consummation of the merger and
the completion of the public offering. The Plan provides for the grant of
options to employees and directors to purchase up to 4,500,000 shares of
class A common stock at fair value at the date of grant. The options will expire
seven years after date of grant, subject to early termination in specific
circumstances and will vest on a pro-rata basis over five years.

Because the Plan provides for stock options with an exercise price that is
equal to fair market value of the common stock at the date of grant and because
there are no uncertainties that would require variable accounting, no
compensation expense will result. In a few foreign jurisdictions where option
grants are impractical, we will issue stock appreciation rights, which will
result in the recognition of compensation expense over a vesting period to the
extent that the market price of the stock increases. Management believes that
any compensation expense resulting from the issuance of stock appreciation
rights will be immaterial.

At June 30, 2000, no options have been granted.

F-25
<PAGE>
WATSON WYATT & COMPANY

SCHEDULE II
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES

(THOUSANDS OF DOLLARS)

<TABLE>
<CAPTION>
BALANCE AT ADDITIONS BALANCE AT
BEGINNING CHARGED ADDITIONS CHARGED TO END OF
DESCRIPTION OF YEAR AGAINST REVENUE OTHER ACCOUNTS DEDUCTIONS YEAR
----------- ---------- --------------- -------------------- ---------- ----------
<S> <C> <C> <C> <C> <C>
YEAR ENDED JUNE 30, 2000
-----------------------------------------------------------------------------

Allowance for doubtful
accounts.............. $3,701 $6,458 $-- $(7,327) $2,832

Valuation allowance for
deferred tax assets... 6,882 -- (1,703)(1) -- 5,179

YEAR ENDED JUNE 30, 1999
-----------------------------------------------------------------------------

Allowance for doubtful
accounts.............. $2,142 $9,503 $-- $(7,944) $3,701

Valuation allowance for
deferred tax assets... 6,271 -- 611(2) -- 6,882

YEAR ENDED JUNE 30, 1998
-----------------------------------------------------------------------------

Allowance for doubtful
accounts.............. $2,525 $5,613 $-- $(5,996) $2,142

Valuation allowance for
deferred tax assets... 3,702 -- 2,569(2) -- 6,271
</TABLE>

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

(1) The net decrease in the valuation allowance is primarily due to the tax
effect of the change in realizable foreign net operating losses, foreign
tax credits, and other foreign temporary differences.

(2) Represents current year net operating loss carryforwards and the
nondeductible foreign expenses for which realizability is considered
uncertain.

F-26
<PAGE>
NO DEALER, SALESPERSON OR OTHER PERSON IS AUTHORIZED TO GIVE ANY INFORMATION OR
TO REPRESENT ANYTHING NOT CONTAINED IN THIS PROSPECTUS. YOU MUST NOT RELY ON ANY
UNAUTHORIZED INFORMATION OR REPRESENTATIONS. THIS PROSPECTUS IS AN OFFER TO SELL
THE SHARES OFFERED HEREBY, BUT ONLY UNDER CIRCUMSTANCES AND IN JURISDICTIONS
WHERE IT IS LAWFUL TO DO SO. THE INFORMATION CONTAINED IN THIS PROSPECTUS IS
CURRENT ONLY AS OF ITS DATE.

TABLE OF CONTENTS

<TABLE>
<CAPTION>
PAGE
--------
<S> <C>
Prospectus Summary........................ 1
Risk Factors.............................. 6
Use of Terminology........................ 12
Use of Proceeds........................... 12
Dividend Policy........................... 13
Capitalization............................ 14
Dilution.................................. 16
Selected Consolidated Financial Data...... 17
Management's Discussion and Analysis of
Financial Condition and Results of
Operations.............................. 19
Business.................................. 29
Management................................ 41
Long Term Incentive Plan.................. 48
Transactions with Management and Others... 48
Corporate Reorganization.................. 48
Principal and Management Selling
Stockholders............................ 51
Common Stock Purchase Arrangements Before
the Public Offering..................... 52
Associate Selling Stockholders............ 53
Description of Capital Stock, Certificate
of Incorporation and Bylaws............. 61
Shares Eligible for Future Sale........... 66
Underwriting.............................. 67
Legal Matters............................. 69
Experts................................... 69
Where You Can Find More Information....... 70
Index to Consolidated Financial
Statements.............................. F-1
</TABLE>

THROUGH AND INCLUDING , 2000 (THE 25TH DAY AFTER THE DATE OF THIS
PROSPECTUS), ALL DEALERS EFFECTING TRANSACTIONS IN THESE SECURITIES, WHETHER OR
NOT PARTICIPATING IN THIS OFFERING, MAY BE REQUIRED TO DELIVER A PROSPECTUS.
THIS IS IN ADDITION TO THE DEALERS' OBLIGATION TO DELIVER A PROSPECTUS WHEN
ACTING AS AN UNDERWRITER AND WITH RESPECT TO AN UNSOLD ALLOTMENT OR
SUBSCRIPTION.

[LOGO]

WATSON WYATT & COMPANY HOLDINGS

5,600,000 SHARES

CLASS A COMMON STOCK

DEUTSCHE BANC ALEX. BROWN

BANC OF AMERICA SECURITIES LLC

ROBERT W. BAIRD & CO.

PROSPECTUS

, 2000
<PAGE>
PART II

INFORMATION NOT REQUIRED IN PROSPECTUS

ITEM 14. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.

The following table sets forth the costs and expenses, other than
underwriting discounts and commissions, payable by us in connection with the
sale of common stock being registered. All amounts, other than SEC, NASD and
NYSE fees, are estimates.

<TABLE>
<S> <C>
SEC registration fee........................................ $ 21,120
NASD filing fee............................................. 5,100
NYSE listing fee............................................ 182,600
Printing and engraving expenses............................. 100,000
Legal fees and expenses..................................... 500,000
Accounting fees and expenses................................ 400,000
Blue sky fees and expenses.................................. 10,000
Transfer agent and registrar fees and expenses.............. 1,500
Miscellaneous fees and expenses............................. 279,680
----------
Total..................................................... $1,500,000
==========
</TABLE>

Watson Wyatt & Company Holdings will bear all of the expenses shown above.

ITEM 15. INDEMNIFICATION OF DIRECTORS AND OFFICERS.

Subsection (a) of Section 145 of the Delaware General Corporation Law
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 Delaware General Corporation Law
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 Delaware General Corporation Law 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

II-1
<PAGE>
whether or not the corporation would have the power to indemnify him against
such liabilities under Section 145.

- Our certificate of incorporation provides that no director, or person
serving on a committee of the Board of Directors, shall be personally
liable to Watson Wyatt & Company Holdings 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 Holdings 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 Delaware General Corporation Law; or

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

Our certificate of incorporation provides 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, employee, or
agent of Watson Wyatt & Company Holdings or is or was serving at the request of
Watson Wyatt & Company Holdings 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
Holdings 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 16. EXHIBITS

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
1.1 ** Form of Underwriting Agreement

2.1 * Agreement and Plan of Merger, among Watson Wyatt & Company,
Watson Wyatt & Company Holdings and WW Merger Subsidiary,
Inc. incorporated by reference to Watson Wyatt & Company's
definitive proxy statement (File No. 0-20724) filed on
May 24, 2000

3.1 * Form of Amended and Restated Certificate of Incorporation of
Watson Wyatt & Company Holdings

3.2 * Form of Amended and Restated By-laws of Watson Wyatt &
Company Holdings

4.1 * Specimen Certificate for Watson Wyatt & Company Holdings'
class A common stock

5.1 * Opinion of Cadwalader, Wickersham & Taft

10.1 * Amended and Restated Credit Agreement, between Watson Wyatt
& Company and NationsBank, N.A., dated June 30, 1998,
incorporated by reference to Watson Wyatt & Company's annual
report on Form 10-K for its fiscal year ended June 30, 1998
(File No. 0-20724)

10.2 * Agreement with David B. Friend, M.D., dated October 22, 1999

10.3 * Lease between Watson Wyatt & Company and Marvin M.
Robertson, et al., dated January 9, 1998.
</TABLE>

II-2
<PAGE>

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<S> <C>
10.4 * First Amendment to Lease between Watson Wyatt & Company and
Marvin M. Robertson, et al., dated July 13, 2000,
incorporated by reference to Watson Wyatt & Company's annual
report on Form 10-K for the fiscal year ended June 30, 2000
(File No. 0-20724), filed on August 25, 2000

21.1 * Subsidiaries of the Company

23.1 Consent of PricewaterhouseCoopers LLP

23.3 * Consent of Cadwalader, Wickersham & Taft (included in
Exhibit 5.1)

24.1 * Power of Attorney

27.1 Financial Data Schedule
</TABLE>

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

* Previously filed

** To be filed by amendment

ITEM 17. 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, as amended, the
registrant certifies that it has reasonable grounds to believe that it meets all
of the requirements for filing on Form S-3 and has duly caused this Amendment
No. 4 to Registration Statement (No. 333-94973) to be signed on its behalf by
the undersigned, thereunto duly authorized, in the City of Bethesda, State of
Maryland, on September 8, 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>

Pursuant to the requirements of the Securities Act of 1933, as amended, this
Amendment No. 3 to Registration Statement (No. 333-94973) has been signed by the
following persons in the capacities and on the dates indicated below:

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ John J. Haley* President and Chief September 8, 2000
------------------------------------------- Executive Officer
Name: JOHN J. HALEY

/s/ Carl D. Mautz* Chief Financial Officer September 8, 2000
------------------------------------------- (Principal Financial
Name: CARL D. MAUTZ Officer and Principal
Accounting Officer)

/s/ Thomas W. Barratt* Director September 8, 2000
-------------------------------------------
Name: THOMAS W. BARRATT

/s/ Paula A. DeLisle* Director September 8, 2000
-------------------------------------------
Name: PAULA A. DELISLE

/s/ Barbara H. Franklin* Director September 8, 2000
-------------------------------------------
Name: BARBARA H. FRANKLIN

/s/ David B. Friend, M.D.* Director September 8, 2000
-------------------------------------------
Name: DAVID B. FRIEND, M.D.

/s/ John J. Gabarro* Director September 8, 2000
-------------------------------------------
Name: JOHN J. GABARRO

/s/ Ira T. Kay* Director September 8, 2000
-------------------------------------------
Name: IRA T. KAY

/s/ Brian E. Kennedy* Director September 8, 2000
-------------------------------------------
Name: BRIAN E. KENNEDY
</TABLE>

II-4
<PAGE>

<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<C> <S> <C>
/s/ Eric P. Lofgren* Director September 8, 2000
-------------------------------------------
Name: ERIC P. LOFGREN

/s/ Robert D. Masding* Director September 8, 2000
-------------------------------------------
Name: ROBERT D. MASDING

/s/ R. Michael McCullough* Director September 8, 2000
-------------------------------------------
Name: R. MICHAEL MCCULLOUGH

/s/ Gail E. McKee* Director September 8, 2000
-------------------------------------------
Name: GAIL E. MCKEE

/s/ Kevin L. Meehan* Director September 8, 2000
-------------------------------------------
Name: KEVIN L. MEEHAN

/s/ Gilbert T. Ray* Director September 8, 2000
-------------------------------------------
Name: GILBERT T. RAY

/s/ John A. Steinbrunner* Director September 8, 2000
-------------------------------------------
Name: JOHN A. STEINBRUNNER

/s/ A. Grahame Stott* Director September 8, 2000
-------------------------------------------
Name: A. GRAHAME STOTT

/s/ Charles P. Wood, Jr.* Director September 8, 2000
-------------------------------------------
Name: CHARLES P. WOOD, JR.
</TABLE>

<TABLE>
<S> <C> <C> <C>
*By: /s/ Walter W. Bardenwerper
--------------------------------------
WALTER W. BARDENWERPER
Attorney-in-fact
</TABLE>

II-5
<PAGE>
EXHIBIT INDEX

<TABLE>
<CAPTION>
EXHIBIT NO. DESCRIPTION
----------- -----------
<C> <S>
1.1** Form of Underwriting Agreement

2.1* Agreement and Plan of Merger, among Watson Wyatt & Company,
Watson Wyatt & Company Holdings and WW Merger Subsidiary,
Inc. incorporated by reference to Watson Wyatt & Company's
definitive proxy statement (File No. 0-20724) filed on
May 24, 2000

3.1* Form of Amended and Restated Certificate of Incorporation of
Watson Wyatt & Company Holdings

3.2* Form of Amended and Restated Bylaws of Watson Wyatt &
Company Holdings

4.1* Specimen Certificate for Watson Wyatt & Company Holdings'
class A common stock

5.1* Opinion of Cadwalader, Wickersham & Taft

10.1* Amended and Restated Credit Agreement between Watson Wyatt &
Company and NationsBank, N.A., dated June 30, 1998,
incorporated by reference to Watson Wyatt & Company's annual
report on Form 10K for its fiscal year ended June 30, 1998
(File No. 0-20724)

10.2* Agreement with David B. Friend, M.D., dated October 22, 1999

10.3* Lease between Watson Wyatt & Company and Marvin M.
Robertson, et al., dated January 9, 1998.

10.4* First Amendment to Lease between Watson Wyatt & Company and
Marvin M. Robertson et al. dated July 31, 2000, incorporated
by reference to Watson Wyatt & Company's annual report on
Form 10-K for the fiscal year ended June 30, 2000 (File
No. 0-20724) filed on August 25, 2000

21.1* Subsidiaries of the Company

23.1 Consent of PricewaterhouseCoopers LLP

23.3* Consent of Cadwalader, Wickersham & Taft (included in
Exhibit 5.1)

24.1* Power of Attorney

27.1 Financial Data Schedule
</TABLE>

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

* Previously filed

** To be filed by amendment