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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q





|x | QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
|- | ----------------------------------------------------------------------------------------



For the quarterly period ended March 31, 2004



OR



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



For the transition period from  to



Commission file number 000-50161





HEWITT HOLDINGS LLC

(Exact name of
registrant as specified in its charter)





|                                                               |  |                                     
|-------------------------------------------------------------- |  | ------------------------------------
|Illinois                                                       |  | 36-3974824                          
|(State or other jurisdiction of incorporation or organization) |  | (I.R.S. Employer Identification No.)



100 Half Day Road;
Lincolnshire, Illinois 60069; 847-295-5000

(Address, including zip code, and telephone number, including area code, of
registrants principal executive offices)



N/A

(Former Name, Former Address & Former Fiscal Year, if changed since last report)





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



Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    YES ̈NO  x



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HEWITT HOLDINGS LLC



FORM 10-Q

FOR THE PERIOD ENDED

MARCH 31, 2004



INDEX



|           |  |                                                                                                      |  |     
|---------- |  | ---------------------------------------------------------------------------------------------------- |  | ----
|           |  |                                                                                                      |  | PAGE
|PART I.    |  | FINANCIAL INFORMATION                                                                                |  |     
|           |  |                                                                                                     
|ITEM 1.    |  | Financial Statements:                                                                                |  |     
|           |  |                                                                                                     
|           |  | Consolidated Balance Sheets March 31, 2004 (Unaudited), andSeptember 30, 2003                       |  | 3   
|           |  |                                                                                                     
|           |  | Consolidated Statements of Operations Three and Six Months EndedMarch 31, 2004 and 2003 (Unaudited) |  | 4   
|           |  |                                                                                                     
|           |  | Consolidated Statements of Cash Flows Six Months EndedMarch 31, 2004 and 2003 (Unaudited)           |  | 5   
|           |  |                                                                                                     
|           |  | Notes to Consolidated Financial Statements                                                           |  | 6   
|           |  |                                                                                                     
|ITEM 2.    |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                |  | 18  
|           |  |                                                                                                     
|ITEM 3.    |  | Quantitative and Qualitative Disclosures about Market Risk                                           |  | 27  
|           |  |                                                                                                     
|ITEM 4.    |  | Controls and Procedures                                                                              |  | 27  
|           |  |                                                                                                     
|PART II.   |  | OTHER INFORMATION                                                                                    |  |     
|           |  |                                                                                                     
|ITEM 1.    |  | Legal Proceedings                                                                                    |  | 28  
|           |  |                                                                                                     
|ITEM 6.    |  | Exhibits and Reports on Form 8-K                                                                     |  | 28  
|           | 
|SIGNATURES |  | 29                                                                                                  



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PART I. FINANCIAL INFORMATION



ITEM 1. Financial Statements



HEWITT HOLDINGS LLC

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands)



|                                                                                                                         |  |                |         |                    |   |        
|------------------------------------------------------------------------------------------------------------------------ |  | -------------- | ------- | ------------------ | - | -------
|                                                                                                                         |  | March 31, 2004 |         | September 30, 2003
|                                                                                                                         |  | (Unaudited)    |         |                   
|ASSETS                                                                                                                   |  |                |         |                    |   |        
|Current Assets                                                                                                           |  |                |         |                    |   |        
|Cash and cash equivalents                                                                                                |  | $              | 4,879   |                    | $ | 5,937  
|Client receivables and unbilled work in process, less allowances of $22 at March 31, 2004 and $221 at September 30, 2003 |  |                |        |                    |   | 744    
|Prepaid expenses and other current assets                                                                                |  |                | 1       |                    |   | 113    
|                                                                                                                         |  |                |         |                    |   |        
|Total current assets                                                                                                     |  | $              | 4,880   |                    | $ | 6,794  
|                                                                                                                         |  |                |         |                    |   |        
|Non-Current Assets                                                                                                       |  |                |         |                    |   |        
|Property and equipment, net                                                                                              |  |                | 225,779 |                    |   | 229,912
|Intangible assets, net                                                                                                   |  |                | 874     |                    |   | 905    
|Investment in Hewitt Associates (Note 1)                                                                                 |  |                | 15,950  |                    |   | 15,960 
|Related party deferred rent receivable.                                                                                  |  |                | 3,805   |                    |   | 3,928  
|Due from owners                                                                                                          |  |                | 836     |                    |   | 739    
|Investment in Overlook Associates                                                                                        |  |                | 3,090   |                    |   | 3,181  
|                                                                                                                         |  |                |         |                    |   |        
|Total non-current assets                                                                                                 |  |                | 250,334 |                    |   | 254,625
|                                                                                                                         |  |                |         |                    |   |        
|Total Assets                                                                                                             |  | $              | 255,214 |                    | $ | 261,419
|                                                                                                                         |  |                |         |                    |   |        
|LIABILITIES                                                                                                              |  |                |         |                    |   |        
|Current Liabilities                                                                                                      |  |                |         |                    |   |        
|Accounts payable                                                                                                         |  | $              |        |                    | $ | 327    
|Accrued expenses                                                                                                         |  |                | 31      |                    |   | 1,675  
|Current portion of long-term debt                                                                                        |  |                | 9,035   |                    |   | 8,733  
|                                                                                                                         |  |                |         |                    |   |        
|Total current liabilities                                                                                                |  |                | 9,066   |                    |   | 10,735 
|                                                                                                                         |  |                |         |                    |   |        
|Long-Term Liabilities                                                                                                    |  |                |         |                    |   |        
|Debt, less current portion                                                                                               |  |                | 200,719 |                    |   | 205,314
|Other long-term liabilities                                                                                              |  |                | 711     |                    |   | 738    
|                                                                                                                         |  |                |         |                    |   |        
|Total long-term liabilities                                                                                              |  |                | 201,430 |                    |   | 206,052
|                                                                                                                         |  |                |         |                    |   |        
|Total Liabilities                                                                                                        |  | $              | 210,496 |                    | $ | 216,787
|                                                                                                                         |  |                |         |                    |   |        
|Commitments and Contingencies (Note 8)                                                                                   |  |                |         |                    |   |        
|                                                                                                                         |  |               
|Owners Capital                                                                                                          |  |                |         |                    |   |        
|Accumulated earnings and paid-in capital                                                                                 |  | $              | 43,897  |                    | $ | 44,542 
|Accumulated other comprehensive income                                                                                   |  |                | 821     |                    |   | 90     
|                                                                                                                         |  |                |         |                    |   |        
|Total owners capital                                                                                                    |  |                | 44,718  |                    |   | 44,632 
|                                                                                                                         |  |                |         |                    |   |        
|Total Liabilities and Owners Capital                                                                                    |  | $              | 255,214 |                    | $ | 261,419
|                                                                                                                         |  |                |         |                    |   |        



The accompanying notes
are an integral part of these financial statements.



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HEWITT HOLDINGS LLC

CONSOLIDATED STATEMENTS OF OPERATIONS (1)

(Unaudited)

(Dollars in thousands)



|                                                                                 |  |                              |        |   |                            |   |         |      |  |   |        |   |  |   |         |  
|-------------------------------------------------------------------------------- |  | ---------------------------- | ------ | - | -------------------------- | - | ------- | ---- |  | - | ------ | - |  | - | ------- | -
|                                                                                 |  | Three Months Ended March 31, |        |   | Six Months Ended March 31, |  
|                                                                                 |  | 2004                         |        |   | 2003                       |   |         | 2004 |  |   | 2003   |  
|Revenues:                                                                        |  |                              |        |   |                            |   |         |      |  |   |        |   |  |   |         |  
|HR services revenues before reimbursements                                       |  | $                            |       |   |                            | $ | 478,056 |      |  | $ |       |   |  | $ | 958,375 |  
|Rental revenues from Hewitt Associates                                           |  |                              | 5,715  |   |                            |   |        |      |  |   | 11,425 |   |  |   |        |  
|Other rental revenues                                                            |  |                              |       |   |                            |   | 540     |      |  |   |       |   |  |   | 1,722   |  
|                                                                                 |  |                              |        |   |                            |   |         |      |  |   |        |   |  |   |         |  
|Total revenues before reimbursements (net revenues)                              |  |                              | 5,715  |   |                            |   | 478,596 |      |  |   | 11,425 |   |  |   | 960,097 |  
|Reimbursements                                                                   |  |                              |       |   |                            |   | 13,928  |      |  |   |       |   |  |   | 27,534  |  
|                                                                                 |  |                              |        |   |                            |   |         |      |  |   |        |   |  |   |         |  
|Total revenues                                                                   |  |                              | 5,715  |   |                            |   | 492,524 |      |  |   | 11,425 |   |  |   | 987,631 |  
|                                                                                 |  |                              |        |   |                            |   |         |      |  |   |        |   |  |   |         |  
|Operating expenses:                                                              |  |                              |        |   |                            |   |         |      |  |   |        |   |  |   |         |  
|Compensation and related expenses, excluding restricted stock award compensation |  |                              |       |   |                            |   | 309,100 |      |  |   |       |   |  |   | 621,418 |  
|Restricted stock award compensation                                              |  |                              |       |   |                            |   | 4,659   |      |  |   |       |   |  |   | 29,544  |  
|Reimbursable expenses                                                            |  |                              |       |   |                            |   | 13,928  |      |  |   |       |   |  |   | 27,534  |  
|Other operating expenses                                                         |  |                              | 1,981  |   |                            |   | 90,955  |      |  |   | 3,912  |   |  |   | 182,803 |  
|Selling, general and administrative expenses                                     |  |                              | 652    |   |                            |   | 26,646  |      |  |   | 1,016  |   |  |   | 46,502  |  
|                                                                                 |  |                              |        |   |                            |   |         |      |  |   |        |   |  |   |         |  
|Total operating expenses                                                         |  |                              | 2,633  |   |                            |   | 445,288 |      |  |   | 4,928  |   |  |   | 907,801 |  
|                                                                                 |  |                              |        |   |                            |   |         |      |  |   |        |   |  |   |         |  
|Operating income                                                                 |  |                              | 3,082  |   |                            |   | 47,236  |      |  |   | 6,497  |   |  |   | 79,830  |  
|                                                                                 |  |                              |        |  
|Other expenses, net:                                                             |  |                              |        |   |                            |   |         |      |  |   |        |   |  |   |         |  
|Interest expense                                                                 |  |                              | (3,609 | ) |                            |   | (8,779  | )    |  |   | (7,255 | ) |  |   | (17,461 | )
|Interest income                                                                  |  |                              | 12     |   |                            |   | 528     |      |  |   | 22     |   |  |   | 1,264   |  
|Gain on sales of property                                                        |  |                              | 31     |   |                            |   | 17,285  |      |  |   | 408    |   |  |   | 17,464  |  
|Other income (expense), net                                                      |  |                              | (6     | ) |                            |   | (248    | )    |  |   | 1,312  |   |  |   | 21      |  
|                                                                                 |  |                              |        |   |                            |   |         |      |  |   |        |   |  |   |         |  
|                                                                                 |  |                              | (3,572 | ) |                            |   | 8,786   |      |  |   | (5,513 | ) |  |   | 1,288   |  
|                                                                                 |  |                              |        |   |                            |   |         |      |  |   |        |   |  |   |         |  
|Income (loss) before owner distributions                                         |  | $                            | (490   | ) |                            |   |         |      |  | $ | 984    |   |  |   |         |  
|                                                                                 |  |                              |        |   |                            |   |         |      |  |   |        |   |  |   |         |  
|Income before taxes, minority interest, and owner distributions                  |  |                              |        |   |                            |   | 56,022  |      |  |   |        |   |  |   | 81,118  |  
|                                                                                 |  |                              |        |  
|Provision for income taxes                                                       |  |                              |        |   |                            |   | 16,254  |      |  |   |        |   |  |   | 26,591  |  
|                                                                                 |  |                              |        |   |                            |   |         |      |  |   |        |   |  |   |         |  
|Income after taxes and before minority interest and owner distributions          |  |                              |        |   |                            |   | 39,768  |      |  |   |        |   |  |   | 54,527  |  
|                                                                                 |  |                              |        |  
|Minority interest                                                                |  |                              |        |   |                            |   | 6,667   |      |  |   |        |   |  |   | 10,852  |  
|                                                                                 |  |                              |        |   |                            |   |         |      |  |   |        |   |  |   |         |  
|Income after taxes and minority interest and before owner distributions          |  |                              |        |   |                            | $ | 33,101  |      |  |   |        |   |  | $ | 43,675  |  
|                                                                                 |  |                              |        |   |                            |   |         |      |  |   |        |   |  |   |         |  

---

|(1) | On July 1, 2003, Hewitt Holdings distributed the shares of Hewitt Associates, Inc. Class B common stock it previously held to its owners, with the exception of certain owners
resident outside the United States who continue to hold their shares through Hewitt Holdings. The distribution reduced Hewitt Holdings ownership interest in Hewitt Associates, Inc. to approximately 2%. Accordingly, the Company no longer
consolidates the results of Hewitt Associates, Inc. The Company accounted for the remaining investment in Hewitt Associates, Inc. using the equity method of accounting through January 28, 2004, when the shareholders of Hewitt Associates, Inc.
elected a majority of independent directors to its Board, upon which time the Company began accounting for the remaining investment in Hewitt Associates, Inc. using the cost method of accounting. As a result, the Companys consolidated
statements of operations for the three and six months ended March 31, 2004, do not include the consolidated results from operations for Hewitt Associates, Inc., however, for the three and six months ended March 31, 2003, the Companys
consolidated results do. Please see the pro forma financial statements presented on a consistent basis in Note 3.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



The accompanying notes are an integral part of these financial statements.



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HEWITT HOLDINGS LLC

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Dollars in thousands)



|                                                                                                                                                                                     |  |                            |        |   |      |   |          |  
|------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------ |  | -------------------------- | ------ | - | ---- | - | -------- | -
|                                                                                                                                                                                     |  | Six Months Ended March 31, |       
|                                                                                                                                                                                     |  | 2004                       |        |   | 2003 |  
|Cash flows from operating activities:                                                                                                                                                |  |                            |        |   |      |   |          |  
|Income before owner distributions                                                                                                                                                    |  | $                          | 984    |   |      |   |          |  
|Income after taxes and minority interest and before owner distributions                                                                                                              |  |                            |        |   |      | $ | 43,675   |  
|Adjustments to reconcile income before owner distributions and income after taxes and minority interest and before owner distributions to net
cash provided by operating activities: |  |                            |        |   |      |   |          |  
|Depreciation                                                                                                                                                                         |  |                            | 4,026  |   |      |   | 43,164   |  
|Amortization                                                                                                                                                                         |  |                            | 31     |   |      |   | 15,986   |  
|Restricted stock awards                                                                                                                                                              |  |                            |       |   |      |   | 26,889   |  
|Deferred income taxes                                                                                                                                                                |  |                            |       |   |      |   | 3        |  
|Minority interest                                                                                                                                                                    |  |                            |       |   |      |   | 10,852   |  
|Equity in earnings from unconsolidated investments                                                                                                                                   |  |                            | (1,381 | ) |      |   | (609     | )
|Gain on sales of property                                                                                                                                                            |  |                            | (408   | ) |      |   | (17,172  | )
|Director stock compensation                                                                                                                                                          |  |                            |       |   |      |   | 55       |  
|Changes in operating assets and liabilities:                                                                                                                                         |  |                            |        |   |      |   |          |  
|Client receivables and unbilled work in process                                                                                                                                      |  |                            | 744    |   |      |   | (5,422   | )
|Prepaid expenses and other current assets                                                                                                                                            |  |                            | 112    |   |      |   | (23,725  | )
|Related party deferred rent receivable                                                                                                                                               |  |                            | 123    |   |      |   |         |  
|Deferred contract costs                                                                                                                                                              |  |                            |       |   |      |   | 1,663    |  
|Accounts payable                                                                                                                                                                     |  |                            | (327   | ) |      |   | (9,452   | )
|Accrued expenses                                                                                                                                                                     |  |                            | (1,644 | ) |      |   | 17,175   |  
|Advanced billings to clients                                                                                                                                                         |  |                            |       |   |      |   | 21,418   |  
|Deferred contract revenues                                                                                                                                                           |  |                            |       |   |      |   | (8,479   | )
|Employee deferred compensation and accrued profit sharing                                                                                                                            |  |                            |       |   |      |   | (30,939  | )
|Other long-term liabilities                                                                                                                                                          |  |                            |       |   |      |   | (707     | )
|                                                                                                                                                                                     |  |                            |        |   |      |   |          |  
|Net cash provided by operating activities                                                                                                                                            |  |                            | 2,260  |   |      |   | 84,375   |  
|                                                                                                                                                                                     |  |                           
|Cash flows from investing activities:                                                                                                                                                |  |                            |        |   |      |   |          |  
|Additions to property and equipment                                                                                                                                                  |  |                            |       |   |      |   | (19,147  | )
|Cash paid for acquisitions, net of cash received                                                                                                                                     |  |                            |       |   |      |   | (6,846   | )
|Distributions from equity investment                                                                                                                                                 |  |                            | 581    |   |      |   |         |  
|Proceeds from sale of property                                                                                                                                                       |  |                            | 488    |   |      |   | 67,283   |  
|Increase in other assets                                                                                                                                                             |  |                            |       |   |      |   | (24,214  | )
|                                                                                                                                                                                     |  |                            |        |   |      |   |          |  
|Net cash provided by investing activities                                                                                                                                            |  |                            | 1,069  |   |      |   | 17,076   |  
|                                                                                                                                                                                     |  |                           
|Cash flows from financing activities:                                                                                                                                                |  |                            |        |   |      |   |          |  
|Capital contributions (distributions), net                                                                                                                                           |  |                            | 3      |   |      |   | (115,034 | )
|Proceeds from exercise of Hewitt Associates stock options                                                                                                                            |  |                            |       |   |      |   | 252      |  
|Short-term borrowings                                                                                                                                                                |  |                            |       |   |      |   | 529      |  
|Refund of tax deposits for owners                                                                                                                                                    |  |                            |       |   |      |   | 20,408   |  
|Taxes paid on behalf of owners                                                                                                                                                       |  |                            | (97    | ) |      |   |         |  
|Repayments of long-term debt                                                                                                                                                         |  |                            | (4,293 | ) |      |   | (17,278  | )
|Repayments of capital lease obligations                                                                                                                                              |  |                            |       |   |      |   | (5,141   | )
|Payment of offering costs by Hewitt Associates                                                                                                                                       |  |                            |       |   |      |   | (797     | )
|                                                                                                                                                                                     |  |                            |        |   |      |   |          |  
|Net cash used in financing activities                                                                                                                                                |  |                            | (4,387 | ) |      |   | (117,061 | )
|                                                                                                                                                                                     |  |                           
|Effect of exchange rate changes on cash and cash equivalents                                                                                                                         |  |                            |       |   |      |   | 395      |  
|                                                                                                                                                                                     |  |                            |        |   |      |   |          |  
|Net decrease in cash and cash equivalents                                                                                                                                            |  |                            | (1,058 | ) |      |   | (15,215  | )
|                                                                                                                                                                                     |  |                           
|Cash and cash equivalents, beginning of period                                                                                                                                       |  |                            | 5,937  |   |      |   | 173,736  |  
|                                                                                                                                                                                     |  |                            |        |   |      |   |          |  
|Cash and cash equivalents, end of period                                                                                                                                             |  | $                          | 4,879  |   |      | $ | 158,521  |  
|                                                                                                                                                                                     |  |                            |        |   |      |   |          |  



The accompanying notes
are an integral part of these financial statements.



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HEWITT HOLDINGS LLC

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

MARCH 31, 2004 AND 2003

(Unaudited)

(Dollars in thousands)



1. Description of Business



Hewitt Holdings LLC and Subsidiaries (Hewitt Holdings or the Company) consists of the Property Entities which consist of Hewitt
Properties I LLC, Hewitt Properties II LLC, Hewitt Properties III LLC, Hewitt Properties IV LLC, Hewitt Properties V LLC, Hewitt Properties VI LLC, Hewitt Properties VII LLC and The Bayview Trust. Prior to July 1, 2003, Hewitt Associates, Inc. and
its subsidiaries or its predecessor, Hewitt Associates LLC and Affiliates (Hewitt Associates) was the principal operating subsidiary of the Company. Hewitt Associates provides human resources outsourcing and consulting services. The term
owner refers to the individuals who are current or retired owners of limited liability company interests of Hewitt Holdings.



Hewitt Holdings owns significant real estate assets directly and through its Property Entities. Substantially all of the activities of the Property Entities involve
assets that are leased to Hewitt Associates on terms which at inception, were intended to be comparable to those which would have been obtained in an arms length transaction. The investments in these properties were funded through capital
contributions of Hewitt Holdings owners and third-party debt. The debt is a non-recourse obligation of Hewitt Holdings Property Entities and is not an obligation of, nor guaranteed by, Hewitt Associates. The properties the Company owns
are located in Illinois, Florida, and Texas.



In fiscal 2002, Hewitt Associates
completed its transition to a corporate structure and initial public offering. As part of that transition, Hewitt Holdings, received 70,819,520 shares of Hewitt Associates Class B common stock. On July 1, 2003, Hewitt Holdings distributed the
shares of Class B common stock of Hewitt Associates to its owners, with the exception of certain owners resident outside the United States who continue to hold their shares through Hewitt Holdings. The shares continue to be subject to the same
restrictions with respect to voting, transfer and book to market phase-in as they were when the shares were held by Hewitt Holdings. The distribution reduced Hewitt Holdings majority interest in Hewitt Associates of approximately 72% at June
30, 2003, to a minority interest of approximately 2% at July 1, 2003 and March 31, 2004.



On August 6, 2003, Hewitt Associates completed a secondary offering of Hewitt Associates Class A common stock held by owners of Hewitt Holdings. In conjunction with the secondary offering, Hewitt Holdings
distributed 350,431 shares of Hewitt Associates Class B common stock to certain owners, resident outside the United States, who had held their shares through Hewitt Holdings.



On January 28, 2004, Hewitt Associates Board of Directors authorized sales by holders of Class B and Class C common stock of up to 1
million shares per quarter, in the aggregate, pursuant to Rule 144 of the Securities Act of 1933. Since the plan was approved, 853,845 shares of stock have been converted from Class B and Class C common stock to Class A common stock and have been
sold under Rule 144.



On April 16, 2004, Hewitt Associates filed a Registration
Statement on Form S-3 with the Securities and Exchange Commission to facilitate possible future underwritten secondary offerings, block trades and other sales by the owners and the former partners of Bacon & Woodrow. The Registration Statement
was filed, in part, to facilitate future requests under a registration rights agreement which the Company entered into at the time of Hewitt Associates initial public offering.



2. Summary of Significant Accounting Policies



Basis of Presentation



The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the
Securities and Exchange Commission for quarterly reports on Form 10-Q. In the opinion of management, these financial statements include all adjustments necessary to present fairly the financial position, results of operations and cash flows as of
March 31, 2004, and for all periods presented. All adjustments made have been of a normal and recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted. The Company believes that the disclosures included are adequate and provide a fair presentation of interim period



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results. Interim financial statements are not necessarily indicative of the financial position or operating results for
an entire year. It is suggested that these interim financial statements be read in conjunction with the audited financial statements and the notes thereto, together with managements discussion and analysis of financial condition and results of
operations, included in the Companys Form 10-K for the fiscal year ended September 30, 2003 as filed with the Securities and Exchange Commission. Certain previously reported amounts have been reclassified to conform to the current period
presentation.



The consolidated financial statements are prepared on the
accrual basis of accounting. The significant accounting policies are summarized below:



Principles of Consolidation



The accompanying consolidated
financial statements reflect the operations of the Company and its majority owned subsidiaries after elimination of intercompany transactions and profits.



Investments in less than 50%-owned affiliated companies over which the Company has the ability to exercise significant influence are accounted for using the equity method
of accounting. The Company applies the equity method of accounting and does not consolidate its 51% interest in Overlook Associates, an Illinois partnership, as Hewitt Holdings does not exercise control over this partnership. Overlook Associates
owns and operates commercial office buildings and develops and sells vacant land in Lincolnshire, Illinois. Investments in less than 20%-owned affiliated companies over which the Company does not have the ability to exercise significant influence
are accounted for using the cost method of accounting.



On July 1, 2003, the
Company distributed 67,783,937 shares of Class B common stock of Hewitt Associates then held by the Company, to its owners (the Distribution). The Distribution reduced Hewitt Holdings majority interest in Hewitt Associates to
approximately 2% so that the Company no longer consolidates the results of Hewitt Associates, and accounted for the remaining investment in Hewitt Associates using the equity method of accounting through January 28, 2004. Prior to the Distribution,
all of the assets, liabilities and earnings of Hewitt Associates and its subsidiaries were consolidated in the Companys financial statements, and the non-affiliated investors Class A, Class B and Class C common stock interests in Hewitt
Associates were recorded as a Minority Interest on the consolidated balance sheet and statement of operations for financial reporting purposes. On January 28, 2004, the shareholders of Hewitt Associates elected a majority of independent
directors to its Board, at which time the Company began accounting for the remaining investment in Hewitt Associates using the cost method of accounting. The Companys consolidated balance sheets at March 31, 2004 and September 30, 2003 do not
reflect the consolidated assets, liabilities and capital of Hewitt Associates. However, the Companys consolidated statement of operations and statement of cash flows for the three and six months ended March 31, 2003, include the consolidated
results of operations of Hewitt Associates.



Prior to July 1, 2003, significant
eliminating entries resulting from the consolidation of Hewitt Associates included the elimination of intercompany capital leases and the reversal of intercompany rental income and expense and the recognition of depreciation and interest expense
related to the real estate under capital leases. As such, on a consolidated basis, the Companys financial statements prior to July 1, 2003, reflect the Companys owned real estate and related third-party debt and no intercompany lease
obligations and related activities.



Revenue Recognition



HR services revenues include fees generated from outsourcing contracts and from consulting
services provided to Hewitt Associates clients. Under outsourcing contracts, which typically have a three- to five-year term, clients generally pay an implementation fee and an ongoing service fee. In accordance with the Securities and
Exchange Commissions Staff Accounting Bulletin No. 101, Revenue Recognition in Financial Statements,Hewitt Associates recognizes revenues for non-refundable, upfront implementation fees evenly over the period between the initiation of
ongoing services through the end of the contract term (on a straight-line basis). Indirect costs of implementation are expensed as incurred. However, incremental direct costs of implementation are deferred and recognized as expense over the same
period that deferred implementation fees are recognized. If a client terminates an outsourcing contract prematurely, both the deferred implementation revenues and related costs are recognized in the period in which the termination occurs.



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HR services revenues related to ongoing service fees and to services provided outside the scope of outsourcing contracts
are recognized when persuasive evidence of an arrangement exists, services have been rendered, the fee is determinable and collectibility of the fee is reasonably assured. Ongoing service fees are typically billed and recognized on a monthly basis,
typically based on the number of plan participants or services and often with a minimum monthly fee. Services provided outside the scope of outsourcing contracts are billed and recognized on a time-and-material or fixed fee basis.



Losses on outsourcing or consulting arrangements are recognized during the period in which a
loss becomes probable and the amount of the loss is reasonably estimable. Contract or project losses are determined to be the amount by which the estimated direct and a portion of indirect costs exceed the estimated total revenues that will be
generated by the arrangement. Estimates are continuously monitored during the term of the arrangement and any changes to estimates are recorded in the current period and can result in either increases or decreases to income.



Hewitt Associates clients typically pay for consulting services either on a
time-and-materials or on a fixed-fee basis. Revenues are recognized under time-and-material based arrangements as services are provided. On fixed-fee engagements, revenues are recognized either as services are provided using the proportional
performance method and estimates of overall profitability and stages of project completion, or at the completion of a project, based on the facts and circumstances of the client arrangement.



Revenues earned in excess of billings are recorded as unbilled work in process. Billings in
excess of revenues earned are recorded as advanced billings to clients, a deferred revenue liability, until services are rendered.



In accordance with EITF Issue No. 01-14, Income Statement Characterization of Reimbursements Received for Out-of-Pocket Expenses Incurred,reimbursements received for out-ofpocket expenses incurred are characterized as revenues and are shown as a separate component of total revenues. Similarly, related reimbursable expenses are also shown separately within operating expenses.



The Company leases its real estate properties pursuant to operating leases.
The Company records rental income for the full term of each lease on a straight-line basis. Generally, the leases provide for lessee occupancy during periods for which no rent is due or where minimum rent payments increase during the term of the
lease. Accordingly, a receivable is recorded from lessees for the current difference between the straight-line rent and the rent that is contractually due from the lessee. During the three and six months ended March 31, 2004, 100% of the
Companys rental income was derived from leases with Hewitt Associates. Prior to the Distribution on July 1, 2003, all rental income and related receivables from Hewitt Associates were eliminated in the consolidation of Hewitt Associates.



Deferred Contract Costs and Deferred Contract Revenues



For new outsourcing services, upfront implementation efforts are required to set up a client
and their human resource or benefit programs on Hewitt Associates systems. The direct implementation or set up costs and any upfront set up fees are deferred and recognized into earnings over the life of the outsourcing agreement.
Specific, incremental and direct costs of implementation are deferred and recognized as primarily compensation and related expenses evenly over the period between the initiation of ongoing services through the end of the contract term.
Implementation fees may be received either upfront or over the ongoing services period in the fee per participant. By deferring the upfront set up fees over the ongoing services period, all set up revenues are recognized evenly over the contract
term along with the corresponding deferred contract costs.



Performance-Based Compensation



Hewitt Associates
compensation program includes a performance-based component that is determined by Hewitt Associates management. Performance-based compensation is discretionary and is based on Hewitt Associates, team, and individual performance.
Performance-based compensation is paid once per fiscal year after Hewitt



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Associates annual operating results are finalized. The amount of expense for performance-based compensation
recognized at interim and annual reporting dates involves judgment, is based on quarterly and annual results as compared to internal targets, and takes into account other factors, including industry trends results and the general economic
environment. Annual performance-based compensation levels may vary from current expectations as a result of changes in the actual performance of Hewitt Associates, team, or individual. As such, accrued amounts are subject to change in future periods
if actual future performance varies from performance levels anticipated in prior interim periods.



Use of Estimates



The preparation of
financial statements and related disclosures in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the consolidated
financial statements and accompanying notes. Estimates are used for, but not limited to, the accounting for contract and project loss reserves, performance-based compensation, the allowance for doubtful accounts, depreciation and amortization, asset
impairment, taxes, and any contingencies. Although these estimates are based on managements best knowledge of current events and actions that the Company may undertake in the future, actual results may be different from the estimates.



Stock-Based Compensation



Hewitt Associates accounts for its stock-based compensation plans under Statement of
Financial Accounting Standards (SFAS) No. 123, Accounting for Stock-Based Compensationas amended by SFAS No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure,which allows companies to apply the
provisions of Accounting Principles Board (APB) Opinion No. 25, Accounting for Stock Issued to Employees,and provide pro forma net income and net income per share disclosures for employee stock option grants as if the fair value
method defined in SFAS No. 123 had been applied.



Hewitt Associates
restricted stock awards, including restricted stock and restricted stock units, are measured using the fair market value of the stock as of the grant date and are recorded as unearned compensation on the balance sheet. As the restricted stock awards
vest, the unearned compensation is amortized to compensation expense on a straight-line basis. Employer payroll taxes are also recorded as expense when they become due over the vesting period. The shares are subject to forfeiture and restrictions on
sale or transfer for four years from the grant date.



Hewitt Associates also
grants nonqualified stock options at an exercise price equal to the fair market value of Hewitt Associates stock on the grant date. Since the stock options have no intrinsic value on the grant date, no compensation expense is recorded in
connection with the stock option grants. Generally, Hewitt Associates stock options vest 25 percent on each anniversary of the grant date, are fully vested four years from the grant date and have a term of ten years.



For purposes of pro forma disclosures, the estimated fair value of the stock options is
amortized to compensation expense over the stock options vesting period. The Companys pro forma income after taxes and minority interest and before owner distributions for the three and six months ended March 31, 2003, would have been as
follows:



|                                                                                                   |  |                    |        |   |                  |   |         |  
|-------------------------------------------------------------------------------------------------- |  | ------------------ | ------ | - | ---------------- | - | ------- | -
|                                                                                                   |  | Three Months Ended |        |   | Six Months Ended |  
|                                                                                                   |  | March 31, 2003     |       
|Income after taxes and minority interest and before owner distributions:                           |  |                    |        |   |                  |   |         |  
|As reported                                                                                        |  | $                  | 33,101 |   |                  | $ | 43,675  |  
|Stock-based compensation expense included in reported net income, net of tax and minority interest |  |                    | 1,969  |   |                  |   | 12,488  |  
|Pro forma stock compensation expense, net of tax and minority interest                             |  |                    | (3,048 | ) |                  |   | (14,610 | )
|                                                                                                   |  |                    |        |   |                  |   |         |  
|Adjusted income after taxes and minority interest and before owner distributions                   |  | $                  | 32,022 |   |                  | $ | 41,553  |  
|                                                                                                   |  |                    |        |   |                  |   |         |  





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New Accounting Pronouncements



In January 2003, the FASB issued FASB Interpretation No. 46 (FIN No. 46), Consolidation of Variable Interest Entities,to
expand upon existing accounting guidance that addresses when a company should include in its financial statements the assets, liabilities and activities of another entity. In December 2003, the FASB revised FIN No. 46 to provide more clarification.
Until now, a company generally has included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN No. 46 changes that by requiring a variable interest entity, as defined, to be
consolidated by a company if that company is subject to a majority of the risk of loss from the variable interest entitys activities or entitled to receive a majority of the entitys residual returns or both. FIN No. 46, as revised, did
not have a material impact on the Companys consolidated financial statements.



3. Distribution of Hewitt Associates Shares



On July 1, 2003,
the Company distributed 67,783,937 shares of Hewitt Associates Class B common stock it held to its owners (the Distribution). The Distribution reduced Hewitt Holdings majority interest in Hewitt Associates to approximately 2%
so that the Company no longer consolidates the results of Hewitt Associates, but accounted for the remaining investment in Hewitt Associates using the equity method of accounting through January 28, 2004. On January 28, 2004, the shareholders of
Hewitt Associates elected a majority of independent directors to its Board, at which time the Company began accounting for the remaining investment in Hewitt Associates using the cost method of accounting. As a result, the Companys
consolidated balance sheets at March 31, 2004 and September 30, 2003 do not reflect the consolidated assets, liabilities and capital of Hewitt Associates and the Companys statements of operations and cash flows for the three and six months
ended March 31, 2004 do not reflect the operations of Hewitt Associates. However, the Companys statements of operations and cash flows for the three and six months ended March 31, 2003, do include the operations of Hewitt Associates. Had the
Company accounted for the investment in Hewitt Associates under the cost method of accounting for the entire three and six months ended March 31, 2004, income (loss) before owner distributions would have been $(697) and $93, respectively.



The following unaudited pro forma results give effect to the de-consolidation
as if it had occurred on October 1, 2002, the beginning of fiscal 2003, and exclude any non-recurring adjustments, to allow for comparability. The Hewitt Associates historical results in the following pro forma consolidated income statements reflect
Hewitt Associates results for the three and six months ended March 31, 2003. The information presented is not necessarily indicative of the results of operations that might have occurred had the events described above actually taken place as
of the dates specified. The pro forma adjustments are based upon available information and assumptions that management believes are reasonable. This information and the accompanying notes should also be read in conjunction with our consolidated
financial statements and related notes included elsewhere in this Quarterly Report and our Annual Report on Form 10-K.



10



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Hewitt Holdings LLC

Pro Forma Consolidated Income Statements

(unaudited)



|                                                                                 |  |                                    |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|-------------------------------------------------------------------------------- |  | ---------------------------------- | ------- | - | ---------------------------- | - | -------- | ---------------------------- |  | - | --------- | ---- |  | - | ------ | -
|                                                                                 |  | Three Months Ending March 31, 2003 |        
|                                                                                 |  | Hewitt Holdings Historical         |         |   | Hewitt Associates Historical |   |          | De-consolidation Adjustments |  |   | Pro Forma |     
|                                                                                 |  | (Dollars in thousands)             |        
|Revenues:                                                                        |  |                                    |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|HR services revenues before reimbursements                                       |  | $                                  | 478,056 |   |                              | $ | (478,056 | )                            |  | $ |          |      |  | $ |       |  
|Rental revenues from Hewitt Associates                                           |  |                                    |        |   |                              |   |         |                              |  |   | 6,176     | (a)  |  |   | 6,176  |  
|Other rental revenues                                                            |  |                                    | 540     |   |                              |   |         |                              |  |   |          |      |  |   | 540    |  
|                                                                                 |  |                                    |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Total revenues before reimbursements (net revenues)                              |  |                                    | 478,596 |   |                              |   | (478,056 | )                            |  |   | 6,176     |      |  |   | 6,716  |  
|Reimbursements                                                                   |  |                                    | 13,928  |   |                              |   | (13,928  | )                            |  |   |          |      |  |   |       |  
|                                                                                 |  |                                    |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Total revenues                                                                   |  |                                    | 492,524 |   |                              |   | (491,984 | )                            |  |   | 6,176     |      |  |   | 6,716  |  
|                                                                                 |  |                                    |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Operating expenses:                                                              |  |                                    |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Compensation and related expenses, excluding restricted stock award compensation |  |                                    | 309,100 |   |                              |   | (309,871 | )                            |  |   | 771       | (b)  |  |   |       |  
|Restricted stock award compensation                                              |  |                                    | 4,659   |   |                              |   | (4,659   | )                            |  |   |          |      |  |   |       |  
|Reimbursable expenses                                                            |  |                                    | 13,928  |   |                              |   | (13,928  | )                            |  |   |          |      |  |   |       |  
|Other operating expenses                                                         |  |                                    | 90,955  |   |                              |   | (94,098  | )                            |  |   | 6,176     | (a)  |  |   | 3,299  |  
|                                                                                 |  |                                    |         |   |                              |   |          |                              |  |   | 266       | (c)  |  |   |        |  
|Selling, general and administrative expenses                                     |  |                                    | 26,646  |   |                              |   | (25,683  | )                            |  |   |          |      |  |   | 963    |  
|                                                                                 |  |                                    |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Total operating expenses                                                         |  |                                    | 445,288 |   |                              |   | (448,239 | )                            |  |   | 7,213     |      |  |   | 4,262  |  
|                                                                                 |  |                                    |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Operating income                                                                 |  |                                    | 47,236  |   |                              |   | (43,745  | )                            |  |   | (1,037    | )    |  |   | 2,454  |  
|                                                                                 |  |                                    |         |  
|Other expenses, net                                                              |  |                                    |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Interest expense                                                                 |  |                                    | (8,779  | ) |                              |   | 4,881    |                              |  |   | (296      | )(d) |  |   | (4,194 | )
|Interest income                                                                  |  |                                    | 528     |   |                              |   | (457     | )                            |  |   |          |      |  |   | 71     |  
|Gains on disposal of properties                                                  |  |                                    | 17,285  |   |                              |   |         |                              |  |   | 21,816    | (e)  |  |   | 39,101 |  
|Other income (expense), net                                                      |  |                                    | (248    | ) |                              |   | (440     | )                            |  |   |          |      |  |   | (688   | )
|                                                                                 |  |                                    |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|                                                                                 |  |                                    | 8,786   |   |                              |   | 3,984    |                              |  |   | 21,520    |      |  |   | 34,290 |  
|                                                                                 |  |                                    |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Income before income taxes, minority interest and owner distributions            |  |                                    | 56,022  |   |                              |   | (39,761  | )                            |  |   | 20,483    |      |  |   | 36,744 |  
|Provision for income taxes                                                       |  |                                    | 16,254  |   |                              |   | (16,254  | )                            |  |   |          |      |  |   |       |  
|                                                                                 |  |                                    |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Net income                                                                       |  |                                    |         |   |                              | $ | (23,507  | )                            |  |   |           |      |  |   |        |  
|                                                                                 |  |                                    |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Income after taxes and before minority interest and owner distributions          |  |                                    | 39,768  |   |                              |   |          |                              |  |   | 20,483    |      |  |   | 36,744 |  
|Minority interest                                                                |  |                                    | 6,667   |   |                              |   |          |                              |  |   | (6,667    | )(f) |  |   |       |  
|                                                                                 |  |                                    |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Income after taxes and minority interest and before owner distributions          |  | $                                  | 33,101  |   |                              |   |          |                              |  | $ | 27,150    |      |  | $ | 36,744 |  
|                                                                                 |  |                                    |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  

---

|(a) | Represents rental income from Hewitt Associates for the three months ended March 31, 2003. This adjustment reverses the elimination of the intercompany rental revenues and rent
expense when Hewitt Associates was consolidated by the Company.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(b) | Reclassification of payments made on behalf of owners.
|--- | ------------------------------------------------------

|(c) | Represents Hewitt Associates depreciation expense on a property leased under a capital lease from Hewitt Holdings. This adjustment reverses the elimination of the depreciation for a
building capitalized under a capital lease at Hewitt Associates.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) | Represents Hewitt Associates interest expense on a property leased under a capital lease from Hewitt Holdings. This adjustment reverses the elimination of interest expense on the
capital lease at Hewitt Associates.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(e) | Represents gain on the sale of the Newport Beach property that was deferred as a result of the capital lease at Hewitt Associates. This adjustment reverses the deferral of a portion
of the gain on sale.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(f) | An adjustment to eliminate the minority interest generated prior to the de-consolidation of Hewitt Associates.
|--- | --------------------------------------------------------------------------------------------------------------



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Hewitt Holdings LLC

Pro Forma Consolidated Income Statements

(unaudited)



|                                                                                 |  |                                  |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|-------------------------------------------------------------------------------- |  | -------------------------------- | ------- | - | ---------------------------- | - | -------- | ---------------------------- |  | - | --------- | ---- |  | - | ------ | -
|                                                                                 |  | Six Months Ending March 31, 2003 |        
|                                                                                 |  | Hewitt Holdings Historical       |         |   | Hewitt Associates Historical |   |          | De-consolidation Adjustments |  |   | Pro Forma |     
|                                                                                 |  | (Dollars in thousands)           |        
|Revenues:                                                                        |  |                                  |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|HR services revenues before reimbursements                                       |  | $                                | 958,375 |   |                              | $ | (958,375 | )                            |  | $ |          |      |  | $ |       |  
|Rental revenues from Hewitt Associates                                           |  |                                  |        |   |                              |   |         |                              |  |   | 12,586    | (a)  |  |   | 12,586 |  
|Other rental revenues                                                            |  |                                  | 1,722   |   |                              |   |         |                              |  |   |          |      |  |   | 1,722  |  
|                                                                                 |  |                                  |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Total revenues before reimbursements (net revenues)                              |  |                                  | 960,097 |   |                              |   | (958,375 | )                            |  |   | 12,586    |      |  |   | 14,308 |  
|Reimbursements                                                                   |  |                                  | 27,534  |   |                              |   | (27,534  | )                            |  |   |          |      |  |   |       |  
|                                                                                 |  |                                  |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Total revenues                                                                   |  |                                  | 987,631 |   |                              |   | (985,909 | )                            |  |   | 12,586    |      |  |   | 14,308 |  
|                                                                                 |  |                                  |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Operating expenses:                                                              |  |                                  |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Compensation and related expenses, excluding restricted stock award compensation |  |                                  | 621,418 |   |                              |   | (621,410 | )                            |  |   | (8        | )(b) |  |   |       |  
|Restricted stock award compensation                                              |  |                                  | 29,544  |   |                              |   | (29,544  | )                            |  |   |          |      |  |   |       |  
|Reimbursable expenses                                                            |  |                                  | 27,534  |   |                              |   | (27,534  | )                            |  |   |          |      |  |   |       |  
|Other operating expenses                                                         |  |                                  | 182,803 |   |                              |   | (188,511 | )                            |  |   | 12,586    | (a)  |  |   | 7,543  |  
|                                                                                 |  |                                  |         |   |                              |   |          |                              |  |   | 665       | (c)  |  |   |        |  
|Selling, general and administrative expenses                                     |  |                                  | 46,502  |   |                              |   | (45,119  | )                            |  |   |          |      |  |   | 1,383  |  
|                                                                                 |  |                                  |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Total operating expenses                                                         |  |                                  | 907,801 |   |                              |   | (912,118 | )                            |  |   | 13,243    |      |  |   | 8,926  |  
|                                                                                 |  |                                  |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Operating income                                                                 |  |                                  | 79,830  |   |                              |   | (73,791  | )                            |  |   | (657      | )    |  |   | 5,382  |  
|                                                                                 |  |                                  |         |  
|Other expenses, net                                                              |  |                                  |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Interest expense                                                                 |  |                                  | (17,461 | ) |                              |   | 10,198   |                              |  |   | (734      | )(d) |  |   | (7,997 | )
|Interest income                                                                  |  |                                  | 1,264   |   |                              |   | (1,100   | )                            |  |   |          |      |  |   | 164    |  
|Gains on disposal of properties                                                  |  |                                  | 17,464  |   |                              |   |         |                              |  |   | 21,816    | (e)  |  |   | 39,280 |  
|Other income (expense), net                                                      |  |                                  | 21      |   |                              |   | (164     | )                            |  |   |          |      |  |   | (143   | )
|                                                                                 |  |                                  |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|                                                                                 |  |                                  | 1,288   |   |                              |   | 8,934    |                              |  |   | 21,082    |      |  |   | 31,304 |  
|                                                                                 |  |                                  |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Income before income taxes, minority interest and owner distributions            |  |                                  | 81,118  |   |                              |   | (64,857  | )                            |  |   | 20,425    |      |  |   | 36,686 |  
|Provision for income taxes                                                       |  |                                  | 26,591  |   |                              |   | (26,591  | )                            |  |   |          |      |  |   |       |  
|                                                                                 |  |                                  |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Net income                                                                       |  |                                  |         |   |                              | $ | (38,266  | )                            |  |   |           |      |  |   |        |  
|                                                                                 |  |                                  |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Income after taxes and before minority interest and owner distributions          |  |                                  | 54,527  |   |                              |   |          |                              |  |   | 20,425    |      |  |   | 36,686 |  
|Minority interest                                                                |  |                                  | 10,852  |   |                              |   |          |                              |  |   | (10,852   | )(f) |  |   |       |  
|                                                                                 |  |                                  |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  
|Income after taxes and minority interest and before owner distributions          |  | $                                | 43,675  |   |                              |   |          |                              |  | $ | 31,277    |      |  | $ | 36,686 |  
|                                                                                 |  |                                  |         |   |                              |   |          |                              |  |   |           |      |  |   |        |  

---

|(a) | Represents rental income from Hewitt Associates for the six months ended March 31, 2003. This adjustment reverses the elimination of the intercompany rental revenues and rent
expense when Hewitt Associates was consolidated by the Company.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|(b) | Reclassification of payments made on behalf of owners.
|--- | ------------------------------------------------------

|(c) | Represents Hewitt Associates depreciation expense on a property leased under a capital lease from Hewitt Holdings. This adjustment reverses the elimination of the depreciation for a
building capitalized under a capital lease at Hewitt Associates.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(d) | Represents Hewitt Associates interest expense on a property leased under a capital lease from Hewitt Holdings. This adjustment reverses the elimination of interest expense on the
capital lease at Hewitt Associates.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(e) | Represents gain on the sale of the Newport Beach property that was deferred as a result of the capital lease at Hewitt Associates. This adjustment reverses the deferral of a portion
of the gain on sale.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(f) | An adjustment to eliminate the minority interest generated prior to the de-consolidation of Hewitt Associates.
|--- | --------------------------------------------------------------------------------------------------------------



4. Client Receivables and Unbilled Work in Process



At September 30, 2003, client receivables and unbilled work in process, net of allowances,
were $563 and $181, respectively, or $744 in total.



5. Intangible Assets



The Company tests intangible assets for impairment whenever indicators of
impairment arise. During the six months ended March 31, 2004 and for the year ended September 30, 2003, no impairments on intangible assets were recognized.



The following is a summary of intangible assets at March 31, 2004 and September 30, 2003. Intangible assets with definite useful lives are amortized over their respective
estimated useful lives and at March 31, 2004, and September 30, 2003, include deferred loan costs with an estimated useful life of 20 years.



|                     |  |                     |       |                         |   |       |  |                     |     |                         |   |       |  |   |     |  |   |    
|-------------------- |  | ------------------- | ----- | ----------------------- | - | ----- |  | ------------------- | --- | ----------------------- | - | ----- |  | - | --- |  | - | ---
|                     |  | March 31, 2004      |       | September 30, 2003     
|Definite useful life |  | GrossCarryingAmount |       | AccumulatedAmortization |   | Total |  | GrossCarryingAmount |     | AccumulatedAmortization |   | Total
|Deferred loan costs  |  | $                   | 1,217 |                         | $ | 343   |  | $                   | 874 |                         | $ | 1,217 |  | $ | 312 |  | $ | 905



Amortization expense related to
definite-lived intangible assets for the three and six months ended March 31, 2004 and 2003, are as follows:



|                     |  |                             |    |                           |   |       |  |      |    |  |   |       
|-------------------- |  | --------------------------- | -- | ------------------------- | - | ----- |  | ---- | -- |  | - | ------
|                     |  | Three Months EndedMarch 31, |    | Six Months EndedMarch 31,
|                     |  | 2004                        |    | 2003                      |   | 2004  |  | 2003
|Capitalized software |  | $                           |   |                           | $ | 7,911 |  | $    |   |  | $ | 14,948
|Trademarks           |  |                             |   |                           |   | 498   |  |      |   |  |   | 1,007 
|Deferred loan costs  |  |                             | 16 |                           |   | 16    |  |      | 31 |  |   | 31    
|                     |  |                             |    |                           |   |       |  |      |    |  |   |       
|Total                |  | $                           | 16 |                           | $ | 8,425 |  | $    | 31 |  | $ | 15,986
|                     |  |                             |    |                           |   |       |  |      |    |  |   |       



Estimated amortization expense related
to intangible assets at September 30, 2003, is $62 in each of the five years that end September 30, 2008 and $595 for years thereafter.



6. Related Party Transactions



The Company entered into real estate operating leases with Hewitt Associates and its subsidiaries on terms which at inception, were intended to be comparable to those
which would have been obtained in an arms length transaction. The investments in the properties were funded through capital contributions by Hewitt Holdings owners and third-party debt. The debt is reflected on the Companys balance
sheet and is not an obligation of, nor guaranteed by, Hewitt Associates.



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##### Table of Contents

In June 2002, Hewitt Associates entered into a 15-year capital lease with The Bayview Trust to lease office space in
Newport Beach, California. On March 7, 2003, The Bayview Trust sold the property in Newport Beach, California, and Hewitt Associates lease was assigned to the third-party purchaser of the building.



From May 31, 2002, through September 30, 2007, Hewitt Associates LLC, a subsidiary of Hewitt
Associates will provide certain support services to Hewitt Holdings, primarily in the financial, real estate and legal departments, as may be requested by Hewitt Holdings from time to time. Hewitt Holdings will pay Hewitt Associates LLC an annual
fee of $50 for basic services. Hewitt Associates LLC may charge Hewitt Holdings separately for additional services on a time and materials basis. Through March 31, 2004, fees for all services Hewitt Associates LLC has provided under the services
agreement, totaling $69 for the six months ended March 31, 2004 and $326 for the comparable prior year period, have been paid by Hewitt Holdings.



7. Stock-Based Compensation Plans



Hewitt Associates sponsors its a Global Stock and Incentive Compensation Plan (the Plan) for its employees and directors. The Plan is administered by the
Compensation and Leadership Committee of the Board of Directors of the Company (the Committee). Under the Plan, employees and directors may receive awards of nonqualified stock options, stock appreciation rights, restricted stock,
restricted stock units, performance shares, performance units, and cash-based awards, and employees can also receive incentive stock options. A total of 25,000,000 shares of Class A common stock have been reserved for issuance under the Plan.
Through the Distribution date, only restricted stock and restricted stock units and nonqualified stock options had been granted.



In connection with its initial public offering in June 2002, Hewitt Associates granted 5,789,908 shares of Class A restricted stock and restricted stock units to
employees. The restricted stock and restricted stock units have substantially the same terms, except the holders of restricted stock units do not have voting rights. The one-time initial public offering-related awards were valued at $110,141 on the
June 27, 2002, grant date (a weighted price of $19.02 per share) and 37% were amortized on a straight-line basis as non-cash compensation expense from the grant date until December 31, 2002 and 63% are being amortized on a straight-line basis as
non-cash compensation expense over four years following the grant date. As a result of the Distribution and subsequent de-consolidation of Hewitt Associates, the Company did not recognize any compensation expense for the initial public offering
restricted stock awards in the three and six months ended March 31, 2004. For the three and six months ended March 31, 2003, compensation expense for the initial public offering restricted stock awards was $4,659 and $29,544, respectively,
representing amortization and applicable payroll taxes for the period.



8.
Legal Proceedings



The Company is occasionally subject to lawsuits and
claims arising in the normal conduct of business. Management does not expect the outcome of any pending claim to have a material adverse affect on the business, financial condition or results of operations of the Company.



Hewitt Associates provides indemnifications of varying scope and size to certain customers
against claims of intellectual property infringement made by third parties arising from the use of its products or receipt of its services. The Company evaluates estimated losses for such indemnifications under SFAS 5, Accounting for
Contingencies, as interpreted by FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements forGuarantees, Including Indirect Guarantees of Indebtedness of Others. Management considers such factors as the
degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. As of March 31, 2004, the Company had no outstanding claims and was not subject to any pending litigation alleging that the
Companys products or services infringe the intellectual property rights of any third parties.



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##### Table of Contents

9. Other Comprehensive Income



The following table presents the after-tax components of the Companys other comprehensive income for the periods presented:



|                                                                        |  |                             |      |   |                           |   |        |      |  |      |       |  |   |       
|----------------------------------------------------------------------- |  | --------------------------- | ---- | - | ------------------------- | - | ------ | ---- |  | ---- | ----- |  | - | ------
|                                                                        |  | Three Months EndedMarch 31, |      |   | Six Months EndedMarch 31,
|                                                                        |  | 2004                        |      |   | 2003                      |   |        | 2004 |  | 2003
|Net Income before owner distributions                                   |  | $                           | (490 | ) |                           |   |        |      |  | $    | 984   |  |   |       
|Income after taxes and minority interest and before owner distributions |  |                             |      |   |                           | $ | 33,101 |      |  |      |       |  | $ | 43,675
|Other comprehensive income:                                             |  |                             |      |   |                           |   |        |      |  |      |       |  |   |       
|Foreign currency translation adjustments                                |  |                             | 142  |   |                           |   | (2,065 | )    |  |      | 731   |  |   | 1,643 
|                                                                        |  |                             |      |   |                           |   |        |      |  |      |       |  |   |       
|Accumulated other comprehensive income                                  |  | $                           | (348 | ) |                           | $ | 31,036 |      |  | $    | 1,715 |  | $ | 45,318
|                                                                        |  |                             |      |   |                           |   |        |      |  |      |       |  |   |       



10. Segment Data



As a result of the Distribution and subsequent de-consolidation of Hewitt Associates, Hewitt
Holdings has one business segment consisting of its real estate operations.



Prior to July 1, 2003, the Company determined that it had two reportable segments, Outsourcing and Consulting, based on similarities among the Hewitt Associates operating units including homogeneity of services, service delivery
methods, and use of technology.



Hewitt Associates operates many of the
administrative and support functions of its business through the use of centralized shared service operations to provide an economical and effective means of supporting the Outsourcing and Consulting segments. These shared services include
information systems, human resources, general office support and space management, overall corporate management, finance and legal services. Additionally, Hewitt Associates utilizes a client development group that markets the entire spectrum of its
services and devotes resources to maintaining existing client relationships. The compensation and related expenses, other operating expenses, and selling, general and administrative expenses of the administrative and marketing functions are not
allocated to the business segments, rather, they are included in unallocated shared costs. The costs of information systems, human resources and the direct client delivery activities provided by the client development function are, however,
allocated to the Outsourcing and Consulting segments on a specific identification basis or based on usage or headcount.



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##### Table of Contents

The table below presents information about the Companys reportable segments for the three and six months ended
March 31, 2003:



|                                                                         |  |                                  |         |                               |   |        
|------------------------------------------------------------------------ |  | -------------------------------- | ------- | ----------------------------- | - | -------
|                                                                         |  | Three MonthsEnded March 31, 2003 |         | Six MonthsEndedMarch 31, 2003
|Outsourcing                                                              |  |                                  |         |                               |   |        
|HR Services revenues before reimbursements                               |  | $                                | 295,919 |                               | $ | 604,092
|Segment income                                                           |  |                                  | 53,334  |                               |   | 122,047
|                                                                         |  |                                 
|Consulting                                                               |  |                                  |         |                               |   |        
|HR Services revenues before reimbursements                               |  | $                                | 182,137 |                               | $ | 354,283
|Segment income                                                           |  |                                  | 39,977  |                               |   | 66,178 
|                                                                         |  |                                 
|Total Company                                                            |  |                                  |         |                               |   |        
|HR Services revenues before reimbursements                               |  | $                                | 478,056 |                               | $ | 958,375
|Other rental revenues                                                    |  |                                  | 540     |                               |   | 1,722  
|                                                                         |  |                                  |         |                               |   |        
|Total revenues before reimbursements (net revenues)                      |  |                                  | 478,596 |                               |   | 960,097
|Reimbursements                                                           |  |                                  | 13,928  |                               |   | 27,534 
|                                                                         |  |                                  |         |                               |   |        
|Total revenues                                                           |  | $                                | 492,524 |                               | $ | 987,631
|                                                                         |  |                                  |         |                               |   |        
|                                                                         |  |                                 
|Segment income                                                           |  | $                                | 93,311  |                               | $ | 188,225
|Charges not recorded at the Segment level  restricted stock awards (1)  |  |                                  | 4,659   |                               |   | 29,544 
|Unallocated shared costs                                                 |  |                                  | 44,907  |                               |   | 84,890 
|                                                                         |  |                                  |         |                               |   |        
|Operating income  Hewitt Associates                                     |  |                                  | 43,745  |                               |   | 73,791 
|Hewitt Holdings LLC rental revenues                                      |  |                                  | 540     |                               |   | 1,722  
|Other operating income  Hewitt Holdings LLC and Properties Entities (2) |  |                                  | 2,951   |                               |   | 4,317  
|                                                                         |  |                                  |         |                               |   |        
|Operating income                                                         |  | $                                | 47,236  |                               | $ | 79,830 
|                                                                         |  |                                  |         |                               |   |        

---

|(1) | Compensation expense of $4,659 and $29,544 for the three and six months ended March 31, 2003, respectively, related to the amortization of the restricted stock awards.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | For historical periods, Hewitt Associates consolidated segment results include the majority of the occupancy costs under operating and capital leases. Incremental other
operating expenses at Hewitt Holdings LLC and Property Entities were not allocated to the segments. Included in other operating income is the elimination of intercompany charges included in the segment results.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



11. Sale of Property



On March 7, 2003, the Company, through its subsidiary, The Bayview Trust, sold a building located in Newport Beach, California to an
independent third party resulting in a gain of $39,930. Proceeds from the sale totaled $67,283. At the time of the sale, Hewitt Associates leased office space at the property. As a result of Hewitt Associates lease for a portion of this
property, the Company accounted for the sale as a sale-leaseback transaction and deferred $22,746 of the gain on the sale and began amortizing it into income over the life of the Hewitt Associates lease. The remaining $17,184 of the gain was
recognized as other income in the quarter ended March 31, 2003. As a result of the Distribution and subsequent de-consolidation of Hewitt Associates, the Company recognized $21,706 of the unamortized deferred gain on the sale in the fiscal fourth
quarter of 2003, with $508 remaining as deferred in other long-term liabilities representing the extent of the Companys continued ownership of Hewitt Associates and which is being amortized into income over the remaining lease period.



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##### Table of Contents

ITEM 2. Managements Discussion and Analysis of Financial Condition and Results of Operations



The following information should be read in conjunction with the information contained in our consolidated financial statements and related notes presented earlier in
this Quarterly Report on Form 10-Q. Please also refer to our consolidated financial statements and related notes and the information under the heading Managements Discussion and Analysis of Financial Condition and Results of
Operations included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission for additional information. In addition to historical information, this Quarterly Report on Form 10-Q may contain forward-looking
statements that involve risks, uncertainties and assumptions, which could cause actual results to differ materially from managements expectations. Please see additional risks and uncertainties described below and in the Notes Regarding
Forward-Looking Statements which appears later in this section.



We use the terms Hewitt Holdings and the Company to refer to Hewitt Holdings LLC and its subsidiaries. We use the term Hewitt Associates to refer to the business of Hewitt Associates, Inc. and its
subsidiaries. We use the term Property Entities to refer to Hewitt Holdings wholly-owned subsidiaries, Hewitt Properties I LLC, Hewitt Properties II LLC, Hewitt Properties III LLC, Hewitt Properties IV LLC, Hewitt Properties V LLC,
Hewitt Properties VI LLC, Hewitt Properties VII LLC and The Bayview Trust.



We use the term owner to refer to the individuals who are current or retired members of Hewitt Holdings. These individuals (with the exception of our retired owners) became employees of Hewitt Associates upon the completion
of Hewitt Associates transition to a corporate structure on May 31, 2002.



All references to years, unless otherwise noted, refer to our fiscal years, which end on September 30. For example, a reference to 2004 or fiscal 2004 means the twelve-month period that ends September 30, 2004.
All references to dollar amounts are in thousands. All references to percentages contained in Managements Discussion and Analysis of Financial Condition and Results of Operations refer to calculations based on the amounts in our
consolidated financial statements, presented earlier in this Quarterly Report on Form 10-Q. Certain prior period amounts have been reclassified to conform with the current year presentation.



Overview



On July 1, 2003, Hewitt Holdings distributed the shares of Hewitt Associates Class B common stock to its owners, with the exception of
certain owners, resident outside the United States, who will continue to hold their shares through Hewitt Holdings (the Distribution). Following the Distribution, Hewitt Holdings ownership in Hewitt Associates decreased to
approximately 2%. As such, Hewitt Holdings applied the equity method of accounting for its investment in Hewitt Associates through January 28, 2004, so that only Hewitt Holdings share of Hewitt Associates earnings was recognized as
Hewitt Holdings other income. On January 28, 2004, the shareholders of Hewitt Associates elected a majority of independent directors to its Board, at which time the Company began accounting for the remaining investment in Hewitt Associates
using the cost method of accounting. Beginning on July 1, 2003, Hewitt Holdings only business is owning, financing and leasing real estate assets which are primarily used by Hewitt Associates in operating its business. As a result of the
Distribution and subsequent de-consolidation of Hewitt Associates, Hewitt Holdings consolidated balance sheets as of March 31, 2004 and September 30, 2003 do not reflect the consolidated assets, liabilities and equity of Hewitt Associates.
However, the Companys consolidated statements of operations and statements of cash flows for the three and six months ended March 31, 2003, consolidates Hewitt Associates results.



Prior to the Distribution, Hewitt Associates was the principal operating business of the
Company. Hewitt Holdings total revenues were comprised of Hewitt Associates HR services revenues. Hewitt Holdings third-party rental income was not material in relation to consolidated revenue in fiscal 2003. In fiscal 2004, rental
revenues from Hewitt Associates make up all of Hewitt Holdings revenues.



18



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##### Table of Contents

Segments



As a result of the Distribution and subsequent de-consolidation of Hewitt Associates, Hewitt Holdings has one business segment consisting of its real estate operations.



Prior to the Distribution and de-consolidation of Hewitt Associates, the
Company had two reportable segments:



| |  | OutsourcingHewitt Associates applies its human resources expertise and employs its integrated technology systems to administer its clients human resource programs:
benefits, payroll and workforce management. Benefits outsourcing services include health and welfare (such as medical plans), defined contribution (such as 401(k) plans), and defined benefit (such as pension plans). Hewitt Associates expanded
outsourcing service offering includes payroll administration, which allows Hewitt Associates to provide clients with a stand-alone payroll service and enables Hewitt Associates to complete its comprehensive range of human resources services. Hewitt
Associates payroll services include installed payroll software and fully outsourced processing. Hewitt Associates workforce management outsourcing services include workforce administration, rewards management, recruiting and staffing,
performance management, learning and development, and talent management.
| | - | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | ConsultingHewitt Associates provide a wide array of consulting and actuarial services covering the design, implementation, communication and operation of health and welfare,
compensation and retirement plans and broader human resources programs and processes.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



While Hewitt Associates reports revenues and direct expenses based on these two segments, Hewitt Associates presents its offering to clients as a continuum of human resources services.



Critical Accounting Policies and Estimates



Revenues



We lease our real estate properties pursuant to operating leases. We record rental income for the full term of each lease on a straight-line
basis. However, generally, the leases provide for lessee occupancy during periods for which no rent is due or where minimum rental payments increase during the term of the lease. Accordingly, a receivable is recorded from lessees for the current
difference between the straight-line rent and the rent that is contractually due from the lessee. During the three and six months ended March 31, 2004, 100% of our rental income was derived from leases with Hewitt Associates. Prior to July 1, 2003,
the date we distributed the majority of our shares in Hewitt Associates, all rental income and related receivables from Hewitt Associates were eliminated in the consolidation of Hewitt Associates.



Long-Lived Assets Held and Used



We review long-lived assets for impairment whenever events or changes in circumstances
indicate that the carrying value of an asset may not be recoverable. If the undiscounted future cash flows from the long-lived asset are less than the carrying value, we recognize a loss equal to the difference between the carrying value and the
discounted future cash flows of the asset.



Our estimate of future cash flows
will be based on our experience, knowledge, and typically third-party advice or market data. However, these estimates can be affected by other factors and economic conditions that can be difficult to predict.



Estimates



Various assumptions and other factors underlie the determination of significant accounting estimates. The process of determining significant
estimates is fact specific and takes into account factors such as historical experience, known facts, current and expected economic conditions. We periodically reevaluate these significant factors and make adjustments when facts and circumstances
dictate, however, actual results may differ from estimates.



19



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##### Table of Contents

Historical Results of Operations



The following table sets forth our historical results of operations as a percentage of net revenues. The information for each of the
three-month periods is derived from unaudited consolidated financial statements which were prepared on the same basis as the annual consolidated financial statements. In our opinion, information for the three months ended March 31, 2004 and 2003
contains all adjustments, consisting only of normal recurring adjustments necessary to fairly present this information. Operating results for any period are not necessarily indicative of results for any future periods.



|                                                                                 |  |                             |        |                     |      |   |                                              |  |   |          |   |  |        |    |  |       |    |  |       |  
|-------------------------------------------------------------------------------- |  | --------------------------- | ------ | ------------------- | ---- | - | -------------------------------------------- |  | - | -------- | - |  | ------ | -- |  | ----- | -- |  | ----- | -
|                                                                                 |  | Three Months EndedMarch 31, |        | Increase/(Decrease) |      |   | % of Net RevenueThree Months Ended March 31, | 
|                                                                                 |  | 2004                        |        |                     | 2003 |   | Amount                                       |  |   | %        |   |  | 2004   |    |  | 2003  |   
|Revenues:                                                                        |  |                             |        |                     |      |   |                                              |  |   |          |   |  |        |    |  |       |    |  |       |  
|HR services revenues before reimbursements                                       |  | $                           |       |                     |      | $ | 478,056                                      |  | $ | (478,056 | ) |  | (100.0 | )% |  |      | %  |  | 99.9  | %
|Rental revenues from Hewitt Associates                                           |  |                             | 5,715  |                     |      |   |                                             |  |   | 5,715    |   |  | 100.0  |    |  | 100.0 |    |  |      |  
|Other rental revenues                                                            |  |                             |       |                     |      |   | 540                                          |  |   | (540     | ) |  | (100.0 | )  |  |      |    |  | 0.1   |  
|                                                                                 |  |                             |        |                     |      |   |                                              |  |   |          |   |  |        |    |  |       |    |  |       |  
|Total revenues before reimbursements (net revenues)                              |  |                             | 5,715  |                     |      |   | 478,596                                      |  |   | (472,881 | ) |  | (98.8  | )  |  | 100.0 |    |  | 100.0 |  
|Reimbursements                                                                   |  |                             |       |                     |      |   | 13,928                                       |  |   | (13,928  | ) |  | (100.0 | )  |  |      |    |  | 2.9   |  
|                                                                                 |  |                             |        |                     |      |   |                                              |  |   |          |   |  |        |    |  |       |    |  |       |  
|Total revenues                                                                   |  |                             | 5,715  |                     |      |   | 492,524                                      |  |   | (486,809 | ) |  | (98.8  | )  |  | 100.0 |    |  | 102.9 |  
|                                                                                 |  |                             |        |                     |      |   |                                              |  |   |          |   |  |        |    |  |       |    |  |       |  
|Operating expenses:                                                              |  |                             |        |                     |      |   |                                              |  |   |          |   |  |        |    |  |       |    |  |       |  
|Compensation and related expenses, excluding restricted stock award compensation |  |                             |       |                     |      |   | 309,100                                      |  |   | (309,100 | ) |  | (100.0 | )  |  |      |    |  | 64.6  |  
|Restricted stock award compensation                                              |  |                             |       |                     |      |   | 4,659                                        |  |   | (4,659   | ) |  | (100.0 | )  |  |      |    |  | 1.0   |  
|Reimbursable expenses                                                            |  |                             |       |                     |      |   | 13,928                                       |  |   | (13,928  | ) |  | (100.0 | )  |  |      |    |  | 2.9   |  
|Other operating expenses                                                         |  |                             | 1,981  |                     |      |   | 90,955                                       |  |   | (88,974  | ) |  | (97.8  | )  |  | 34.7  |    |  | 19.0  |  
|Selling, general and administrative expenses                                     |  |                             | 652    |                     |      |   | 26,646                                       |  |   | (25,994  | ) |  | (97.6  | )  |  | 11.4  |    |  | 5.5   |  
|                                                                                 |  |                             |        |                     |      |   |                                              |  |   |          |   |  |        |    |  |       |    |  |       |  
|Total operating expenses                                                         |  |                             | 2,633  |                     |      |   | 445,288                                      |  |   | (442,655 | ) |  | (99.4  | )  |  | 46.1  |    |  | 93.0  |  
|                                                                                 |  |                             |        |                     |      |   |                                              |  |   |          |   |  |        |    |  |       |    |  |       |  
|Operating income                                                                 |  |                             | 3,082  |                     |      |   | 47,236                                       |  |   | (44,154  | ) |  | (93.5  | )  |  | 53.9  |    |  | 9.9   |  
|Other expenses, net                                                              |  |                             | (3,572 | )                   |      |   | 8,786                                        |  |   | (12,358  | ) |  | (140.7 | )  |  | (62.5 | )  |  | 1.8   |  
|                                                                                 |  |                             |        |                     |      |   |                                              |  |   |          |   |  |        |    |  |       |    |  |       |  
|Income before owner distributions                                                |  | $                           | (490   | )                   |      |   |                                              |  | $ | (490     | ) |  | 100.0  |    |  | (8.6  | )% |  |       |  
|                                                                                 |  |                             |        |                     |      |   |                                              |  |   |          |   |  |        |    |  |       |    |  |       |  
|Income before taxes, minority interest and owner distributions                   |  |                             |        |                     |      |   | 56,022                                       |  |   | (56,022  | ) |  | (100.0 | )  |  |       |    |  | 11.7  |  
|Provision for income taxes                                                       |  |                             |        |                     |      |   | 16,254                                       |  |   | (16,254  | ) |  | (100.0 | )  |  |       |    |  | 3.4   |  
|                                                                                 |  |                             |        |                     |      |   |                                              |  |   |          |   |  |        |    |  |       |    |  |       |  
|Income after taxes and before minority interest and owner distributions          |  |                             |        |                     |      |   | 39,768                                       |  |   | (39,768  | ) |  | (100.0 | )  |  |       |    |  | 8.3   |  
|Minority interest                                                                |  |                             |        |                     |      |   | 6,667                                        |  |   | (6,667   | ) |  | (100.0 | )  |  |       |    |  | 1.4   |  
|                                                                                 |  |                             |        |                     |      |   |                                              |  |   |          |   |  |        |    |  |       |    |  |       |  
|Income after taxes, minority interest and before owner distributions             |  |                             |        |                     |      | $ | 33,101                                       |  | $ | (33,101  | ) |  | (100.0 | )% |  |       |    |  | 6.9   | %
|                                                                                 |  |                             |        |                     |      |   |                                              |  |   |          |   |  |        |    |  |       |    |  |       |  



As a result of the Distribution and
subsequent de-consolidation of Hewitt Associates, the results of operations for the three months ended March 31, 2004 and 2003 are not comparable. The results for the three months ended March 31, 2004 do not include the consolidated operating
results of Hewitt Associates, however, the results for the three months ended March 31, 2003 do. For a more meaningful comparison, the following table presents the historical results for the three months ended March 31, 2004 compared with the pro
forma results for the three months ended March 31, 2003. We refer you to Note 3 in the consolidated financial statements for more information on the pro forma results from operations. The information for each of the three-month periods is derived
from unaudited



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##### Table of Contents

consolidated financial statements, which were prepared on the same basis as the annual consolidated financial statements.
In our opinion, information for the three months ended March 31, 2004 and the pro forma results for the three months ended March 31, 2003 contains all adjustments, consisting only of normal recurring adjustments necessary to fairly present this
information. Operating results for any period are not necessarily indicative of results for any future periods.



|                                             |  |                             |        |                     |             |   |                                             |  |   |         |   |  |        |    |  |       |    |  |       |  
|-------------------------------------------- |  | --------------------------- | ------ | ------------------- | ----------- | - | ------------------------------------------- |  | - | ------- | - |  | ------ | -- |  | ----- | -- |  | ----- | -
|                                             |  | Three Months EndedMarch 31, |        | Increase/(Decrease) |             |   | % of Net RevenueThree Months EndedMarch 31, | 
|                                             |  | 2004                        |        |                     | 2003        |   | Amount                                      |  |   | %       |   |  | 2004   |    |  | 2003  |   
|                                             |  |                             |        |                     | (Pro Forma) |   |                                             |  |   |         |   |  |        |    |  |       |   
|Revenues:                                    |  |                             |        |                     |             |   |                                             |  |   |         |   |  |        |    |  |       |    |  |       |  
|Rental revenues from Hewitt Associates       |  |                             | 5,715  |                     |             |   | 6,176                                       |  |   | (461    | ) |  | (7.5   | )  |  | 100.0 | %  |  | 92.0  | %
|Other rental revenues                        |  |                             |       |                     |             |   | 540                                         |  |   | (540    | ) |  | (100.0 | )  |  |      |    |  | 8.0   |  
|                                             |  |                             |        |                     |             |   |                                             |  |   |         |   |  |        |    |  |       |    |  |       |  
|Total rental revenues                        |  |                             | 5,715  |                     |             |   | 6,716                                       |  |   | (1,001  | ) |  | (14.9  | )  |  | 100.0 |    |  | 100.0 |  
|                                             |  |                             |        |                     |             |   |                                             |  |   |         |   |  |        |    |  |       |    |  |       |  
|Operating expenses:                          |  |                             |        |                     |             |   |                                             |  |   |         |   |  |        |    |  |       |    |  |       |  
|Other operating expenses                     |  |                             | 1,981  |                     |             |   | 3,299                                       |  |   | (1,318  | ) |  | (40.0  | )  |  | 34.7  |    |  | 49.1  |  
|Selling, general and administrative expenses |  |                             | 652    |                     |             |   | 963                                         |  |   | (311    | ) |  | (32.3  | )  |  | 11.4  |    |  | 14.4  |  
|                                             |  |                             |        |                     |             |   |                                             |  |   |         |   |  |        |    |  |       |    |  |       |  
|Total operating expenses                     |  |                             | 2,633  |                     |             |   | 4,262                                       |  |   | (1,629  | ) |  | (38.2  | )  |  | 46.1  |    |  | 63.5  |  
|                                             |  |                             |        |                     |             |   |                                             |  |   |         |   |  |        |    |  |       |    |  |       |  
|Operating income                             |  |                             | 3,082  |                     |             |   | 2,454                                       |  |   | 628     |   |  | 25.6   |    |  | 53.9  |    |  | 36.5  |  
|Other expenses, net                          |  |                             | (3,572 | )                   |             |   | 34,290                                      |  |   | (37,862 | ) |  | (110.4 | )  |  | (62.5 | )  |  | 510.6 |  
|                                             |  |                             |        |                     |             |   |                                             |  |   |         |   |  |        |    |  |       |    |  |       |  
|Income before owner distributions            |  | $                           | (490   | )                   |             | $ | 36,744                                      |  | $ | (37,234 | ) |  | (101.3 | )% |  | (8.6  | )% |  | 547.1 | %
|                                             |  |                             |        |                     |             |   |                                             |  |   |         |   |  |        |    |  |       |    |  |       |  



Three Months Ended March 31, 2004
and 2003



Revenues



Rental revenues decreased by 15% to $5,715 in the three months ended March 31, 2004,
compared to $6,716 on a pro forma basis in the comparable prior year period. We sold the Newport Beach property in March 2003. This office building included operating leases with third parties and a lease with Hewitt Associates. As a result, other
rental revenues decreased by 100% over the comparable pro forma prior year period and rental revenues from Hewitt Associates also declined.



Other Operating Expenses



Other operating expenses (which include depreciation and amortization, utilities, repairs and maintenance, property taxes, and insurance) decreased by 40% to $1,981 in
the three months ended March 31, 2004 compared to $3,299 in the comparable pro forma prior year period. The decrease is a result of the disposal of the Newport Beach property. Expenses related to the Newport Beach property are included in the pro
forma results for the three months ended March 31, 2003 and are not included in the results for the three months ended March 31, 2004.



Selling, General and Administrative Expenses



Selling, general and administrative (SG&A) expenses (which includes legal and audit fees) decreased 32% to $652 for the three months ended March 31, 2004
compared to $963 in the comparable pro forma prior year period. The decrease is primarily a result of decreased legal fees, partially offset by increased audit fees resulting from the Company becoming a reporting company under the Securities
Exchange Act of 1934.



21



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##### Table of Contents

Other Expenses, Net



Other expenses, net (which includes interest expense, interest income, gains on disposals of properties and income from equity investments) decreased by 110% to an
expense of $3,572 in the three months ended March 31, 2004, from $34,290 of income in the comparable pro forma prior year period. The decrease in other expenses, net is primarily a result of the gain on the sale of the Newport Beach property in
2003. Additionally, a decrease in interest expense was slightly offset by equity earnings recorded in 2004 on the Companys investment in Hewitt Associates for one month with no such equity earnings recorded in the 2003 pro forma results and by
a decrease in interest income. Interest expense decreased as a result of lower principal balances on debt due to continued payments on outstanding debt. Interest income decreased as a result of the lower interest rates and less cash on hand for the
three months ended March 31, 2004 compared to the three months ended March 31, 2003.



22



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##### Table of Contents

The following table sets forth our historical results of operations as a percentage of net revenues. The information for
each of the six-month periods is derived from unaudited consolidated financial statements which were prepared on the same basis as the annual consolidated financial statements. In our opinion, information for the six months ended March 31, 2004 and
2003 contains all adjustments, consisting only of normal recurring adjustments necessary to fairly present this information. Operating results for any period are not necessarily indicative of results for any future periods.



|                                                                                 |  |                           |        |                     |      |   |                                           |  |   |          |   |  |        |    |  |       |   |  |       |  
|-------------------------------------------------------------------------------- |  | ------------------------- | ------ | ------------------- | ---- | - | ----------------------------------------- |  | - | -------- | - |  | ------ | -- |  | ----- | - |  | ----- | -
|                                                                                 |  | Six Months EndedMarch 31, |        | Increase/(Decrease) |      |   | % of Net RevenueSix Months EndedMarch 31, | 
|                                                                                 |  | 2004                      |        |                     | 2003 |   | Amount                                    |  |   | %        |   |  | 2004   |    |  | 2003  |  
|Revenues:                                                                        |  |                           |        |                     |      |   |                                           |  |   |          |   |  |        |    |  |       |   |  |       |  
|HR services revenues before reimbursements                                       |  | $                         |       |                     |      | $ | 958,375                                   |  | $ | (958,375 | ) |  | (100.0 | )% |  |      | % |  | 99.8  | %
|Rental revenues from Hewitt Associates                                           |  |                           | 11,425 |                     |      |   |                                          |  |   | 11,425   |   |  | 100.0  |    |  | 100.0 |   |  |      |  
|Other rental revenues                                                            |  |                           |       |                     |      |   | 1,722                                     |  |   | (1,722   | ) |  | (100.0 | )  |  |      |   |  | 0.2   |  
|                                                                                 |  |                           |        |                     |      |   |                                           |  |   |          |   |  |        |    |  |       |   |  |       |  
|Total revenues before reimbursements (net revenues)                              |  |                           | 11,425 |                     |      |   | 960,097                                   |  |   | (948,672 | ) |  | (98.8  | )  |  | 100.0 |   |  | 100.0 |  
|Reimbursements                                                                   |  |                           |       |                     |      |   | 27,534                                    |  |   | (27,534  | ) |  | (100.0 | )  |  |      |   |  | 2.9   |  
|                                                                                 |  |                           |        |                     |      |   |                                           |  |   |          |   |  |        |    |  |       |   |  |       |  
|Total revenues                                                                   |  |                           | 11,425 |                     |      |   | 987,631                                   |  |   | (976,206 | ) |  | (98.8  | )  |  | 100.0 |   |  | 102.9 |  
|                                                                                 |  |                           |        |                     |      |   |                                           |  |   |          |   |  |        |    |  |       |   |  |       |  
|Operating expenses:                                                              |  |                           |        |                     |      |   |                                           |  |   |          |   |  |        |    |  |       |   |  |       |  
|Compensation and related expenses, excluding restricted stock award compensation |  |                           |       |                     |      |   | 621,418                                   |  |   | (621,418 | ) |  | (100.0 | )  |  |      |   |  | 64.7  |  
|Restricted stock award compensation                                              |  |                           |       |                     |      |   | 29,544                                    |  |   | (29,544  | ) |  | (100.0 | )  |  |      |   |  | 3.1   |  
|Reimbursable expenses                                                            |  |                           |       |                     |      |   | 27,534                                    |  |   | (27,534  | ) |  | (100.0 | )  |  |      |   |  | 2.9   |  
|Other operating expenses                                                         |  |                           | 3,912  |                     |      |   | 182,803                                   |  |   | (178,891 | ) |  | (97.9  | )  |  | 34.2  |   |  | 19.0  |  
|Selling, general and administrative expenses                                     |  |                           | 1,016  |                     |      |   | 46,502                                    |  |   | (45,486  | ) |  | (97.8  | )  |  | 8.9   |   |  | 4.9   |  
|                                                                                 |  |                           |        |                     |      |   |                                           |  |   |          |   |  |        |    |  |       |   |  |       |  
|Total operating expenses                                                         |  |                           | 4,928  |                     |      |   | 907,801                                   |  |   | (902,873 | ) |  | (99.5  | )  |  | 43.1  |   |  | 94.6  |  
|                                                                                 |  |                           |        |                     |      |   |                                           |  |   |          |   |  |        |    |  |       |   |  |       |  
|Operating income                                                                 |  |                           | 6,497  |                     |      |   | 79,830                                    |  |   | (73,333  | ) |  | (91.9  | )  |  | 56.9  |   |  | 8.3   |  
|Other expenses, net                                                              |  |                           | (5,513 | )                   |      |   | 1,288                                     |  |   | (6,801   | ) |  | (528.0 | )  |  | (48.3 | ) |  | 0.1   |  
|                                                                                 |  |                           |        |                     |      |   |                                           |  |   |          |   |  |        |    |  |       |   |  |       |  
|Income before owner distributions                                                |  | $                         | 984    |                     |      |   |                                           |  | $ | 984      |   |  | 100.0  |    |  | 8.6   | % |  |       |  
|                                                                                 |  |                           |        |                     |      |   |                                           |  |   |          |   |  |        |    |  |       |   |  |       |  
|Income before taxes, minority interest and owner distributions                   |  |                           |        |                     |      |   | 81,118                                    |  |   | (81,118  | ) |  | (100.0 | )  |  |       |   |  | 8.4   |  
|Provision for income taxes                                                       |  |                           |        |                     |      |   | 26,591                                    |  |   | (26,891  | ) |  | (100.0 | )  |  |       |   |  | 2.8   |  
|                                                                                 |  |                           |        |                     |      |   |                                           |  |   |          |   |  |        |    |  |       |   |  |       |  
|Income after taxes and before minority interest and owner distributions          |  |                           |        |                     |      |   | 54,527                                    |  |   | (54,527  | ) |  | (100.0 | )  |  |       |   |  | 5.6   |  
|Minority interest                                                                |  |                           |        |                     |      |   | 10,852                                    |  |   | (10,852  | ) |  | (100.0 | )  |  |       |   |  | 1.1   |  
|                                                                                 |  |                           |        |                     |      |   |                                           |  |   |          |   |  |        |    |  |       |   |  |       |  
|Income after taxes, minority interest and before owner distributions             |  |                           |        |                     |      | $ | 43,675                                    |  | $ | (43,675  | ) |  | (100.0 | )% |  |       |   |  | 4.5   | %
|                                                                                 |  |                           |        |                     |      |   |                                           |  |   |          |   |  |        |    |  |       |   |  |       |  





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##### Table of Contents

The following table presents the historical results for the six months ended March 31, 2004 compared with the pro forma
results for the six months ended March 31, 2003 as described above and in Note 3. The information for each of the six-month periods is derived from unaudited consolidated financial statements, which were prepared on the same basis as the annual
consolidated financial statements. In our opinion, information for the six months ended March 31, 2004 and the pro forma results for the six months ended March 31, 2003 contains all adjustments, consisting only of normal recurring adjustments
necessary to fairly present this information. Operating results for any period are not necessarily indicative of results for any future periods.



|                                             |  |                           |        |                     |             |   |                                            |  |   |         |   |  |        |    |  |       |    |  |       |  
|-------------------------------------------- |  | ------------------------- | ------ | ------------------- | ----------- | - | ------------------------------------------ |  | - | ------- | - |  | ------ | -- |  | ----- | -- |  | ----- | -
|                                             |  | Six Months EndedMarch 31, |        | Increase/(Decrease) |             |   | % of Net RevenueSix Months Ended March 31, | 
|                                             |  | 2004                      |        |                     | 2003        |   | Amount                                     |  |   | %       |   |  | 2004   |    |  | 2003  |   
|                                             |  |                           |        |                     | (Pro Forma) |   |                                            |  |   |         |   |  |        |    |  |       |   
|Revenues:                                    |  |                           |        |                     |             |   |                                            |  |   |         |   |  |        |    |  |       |    |  |       |  
|Rental revenues from Hewitt Associates       |  |                           | 11,425 |                     |             |   | 12,586                                     |  |   | (1,161  | ) |  | (9.2   | )% |  | 100.0 | %  |  | 88.0  | %
|Other rental revenues                        |  |                           |       |                     |             |   | 1,722                                      |  |   | (1,722  | ) |  | (100.0 | )  |  |      |    |  | 12.0  |  
|                                             |  |                           |        |                     |             |   |                                            |  |   |         |   |  |        |    |  |       |    |  |       |  
|Total rental revenues                        |  |                           | 11,425 |                     |             |   | 14,308                                     |  |   | (2,883  | ) |  | (20.1  | )  |  | 100.0 |    |  | 100.0 |  
|                                             |  |                           |        |                     |             |   |                                            |  |   |         |   |  |        |    |  |       |    |  |       |  
|Operating expenses:                          |  |                           |        |                     |             |   |                                            |  |   |         |   |  |        |    |  |       |    |  |       |  
|Other operating expenses                     |  |                           | 3,912  |                     |             |   | 7,543                                      |  |   | (3,631  | ) |  | (48.1  | )  |  | 34.2  |    |  | 52.7  |  
|Selling, general and administrative expenses |  |                           | 1,016  |                     |             |   | 1,383                                      |  |   | (367    | ) |  | (26.5  | )  |  | 8.9   |    |  | 9.7   |  
|                                             |  |                           |        |                     |             |   |                                            |  |   |         |   |  |        |    |  |       |    |  |       |  
|Total operating expenses                     |  |                           | 4,928  |                     |             |   | 8,926                                      |  |   | (3,998  | ) |  | (44.8  | )  |  | 43.1  |    |  | 62.4  |  
|                                             |  |                           |        |                     |             |   |                                            |  |   |         |   |  |        |    |  |       |    |  |       |  
|Operating income                             |  |                           | 6,497  |                     |             |   | 5,382                                      |  |   | 1,115   |   |  | 20.7   |    |  | 56.9  |    |  | 37.6  |  
|Other expenses, net                          |  |                           | (5,513 | )                   |             |   | 31,304                                     |  |   | (36,817 | ) |  | (117.6 | )  |  | (48.3 | )  |  | 218.8 |  
|                                             |  |                           |        |                     |             |   |                                            |  |   |         |   |  |        |    |  |       |    |  |       |  
|Income before owner distributions            |  | $                         | 984    |                     |             | $ | 36,686                                     |  | $ | (35,702 | ) |  | (97.3  | )% |  | (8.6  | )% |  | 256.4 | %
|                                             |  |                           |        |                     |             |   |                                            |  |   |         |   |  |        |    |  |       |    |  |       |  



Six Months Ended March 31, 2004 and
2003



Revenues



Rental revenues decreased by 20% to $11,425 in the six months ended March 31, 2004, compared
to $14,308 on a pro forma basis in the comparable prior year period. We sold the Newport Beach property in March 2003. This office building included operating leases with third parties and a lease with Hewitt Associates. As a result, other rental
revenues decreased by 100% over the comparable pro forma prior year period and rental revenues from Hewitt Associates also declined.



Other Operating Expenses



Other operating expenses (which include depreciation and amortization, utilities, repairs and maintenance, property taxes, and insurance) decreased by 48% to $3,912 in
the six months ended March 31, 2004 compared to $7,543 in the comparable pro forma prior year period. The decrease is a result of the disposal of the Newport Beach property. Expenses related to the Newport Beach property are included in the pro
forma results for the six months ended March 31, 2003 and are not included in the results for the six months ended March 31, 2004.



Selling, General and Administrative Expenses



Selling, general and administrative (SG&A) expenses (which includes legal and audit fees) decreased 27% to $1,016 for the six months ended March 31, 2004
compared to $1,383 in the comparable pro forma prior year period. The decrease is primarily a result of decreased legal fees, partially offset by increased audit fees resulting from the Company becoming a reporting company under the Securities
Exchange Act of 1934.



24



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##### Table of Contents

Other Expenses, Net



Other expenses, net (which includes interest expense, interest income, gains on disposals of properties and income from equity investments) decreased by 118% to $5,513 of
expense in the six months ended March 31, 2004, from $31,304 of income in the comparable pro forma prior year period. The decrease in other expenses, net is primarily a result of the gain on the sale of the Newport Beach property in 2003.
Additionally, a decrease in interest expense was slightly offset by equity earnings recorded in 2004 on the Companys investment in Hewitt Associates for four months with no such equity earnings recorded in the 2003 pro forma results and by a
decrease in interest income. Interest expense decreased as a result of lower principal balances on debt due to continued payments on outstanding debt. Interest income decreased as a result of the lower interest rates and less cash on hand for the
six months ended March 31, 2004 compared to the six months ended March 31, 2003.



Liquidity and Capital Resources



We have historically funded
our growth and working capital requirements with funds from operations, capital contributions from owners, credit facilities, credit tenant notes and term notes.



|                                                 |  |                            |        |   |      |   |          |  
|------------------------------------------------ |  | -------------------------- | ------ | - | ---- | - | -------- | -
|Summary of Cash Flows                            |  | Six Months Ended March 31, |       
|                                                 |  | 2004                       |        |   | 2003 |  
|Cash provided by operating activities            |  | $                          | 2,260  |   |      | $ | 84,375   |  
|Cash provided by investing activities            |  |                            | 1,069  |   |      |   | 17,076   |  
|Cash used in financing activities                |  |                            | (4,387 | ) |      |   | (117,061 | )
|Effect of exchange rates on cash                 |  |                            |       |   |      |   | 395      |  
|                                                 |  |                            |        |   |      |   |          |  
|Net decrease in cash and cash equivalents        |  |                            | (1,058 | ) |      |   | (15,215  | )
|Cash and cash equivalents at beginning of period |  |                            | 5,937  |   |      |   | 173,736  |  
|                                                 |  |                            |        |   |      |   |          |  
|Cash and cash equivalents at end of period       |  | $                          | 4,879  |   |      | $ | 158,521  |  
|                                                 |  |                            |        |   |      |   |          |  



For the six months ended March 31,
2004 and 2003, cash provided by operating activities was $2,260 and $84,375, respectively. The decrease in cash flows provided by operating activities between the six months ended March 31, 2004 and 2003 is a result of the Distribution and
subsequent de-consolidation of Hewitt Associates. Cash flows from rental income in the six months ended March 31, 2004 was offset by cash payments made on accrued expenses.



For the six months ended March 31, 2004 and 2003, cash provided by investing activities was $1,069 and $17,076, respectively. The decrease
in cash provided by investing activities is a result of cash received from the sale of the Newport Beach property and the Distribution and subsequent de-consolidation of Hewitt Associates.



For the six months ended March 31, 2004 and 2003, cash used in financing activities was
$4,387 and $117,061, respectively. The decrease in cash used in financing activities is primarily a result of net capital distributions made in 2003 and the Distribution and subsequent de-consolidation of Hewitt Associates. Cash used in financing
activities in the first quarter of 2004 related primarily to the repayment of long-term debt.



At March 31, 2004, our cash and cash equivalents were $4,879, as compared to $158,521 at March 31, 2003, a decrease of $153,642 or 97%. Cash and cash equivalents decreased in late 2003 primarily due to the
de-consolidation of Hewitt Associates, which resulted in a reduction of $162,885 of Hewitt Associates cash on July 1, 2003. The disposal of the Newport Beach property generated cash and increased cash flows at March 31, 2003.



Significant ongoing commitments consist primarily of leases and debt.



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##### Table of Contents

The Company has entered into real estate operating leases with Hewitt Associates and its subsidiaries on terms comparable
to those that would have been obtained in an arms length transaction. The investments in the properties were funded through capital contributions by Hewitt Holdings owners and third-party debt. The properties and debt are reflected on
the Companys balance sheets and the debt is not an obligation of, nor guaranteed by, Hewitt Associates.



We issued secured credit tenant notes to various noteholders on several dates between October 1997 through May 1999, which totaled $209,754 as of March 31, 2004, and bear interest ranging from 6.52% to 7.13%. The
principal on each note is amortized monthly between 15 and 20 years from November 1998 through February 2020.



A number of our debt agreements contain financial and other covenants including, among others, covenants restricting our ability to incur indebtedness and create liens, to sell the assets or stock of a collateralized
subsidiary, and to pay dividends or make distributions to Hewitt Holdings owners which would result in a default. At March 31, 2004, we were in compliance with our debt agreement covenants.



We believe that funds from operations, cash on hand, and secured credit tenant notes will
satisfy our expected working capital, contractual obligations, capital expenditures, and investment requirements for at least the next 12 months and the foreseeable future.



New Accounting Pronouncements



In January 2003, the FASB issued FASB Interpretation No. 46 (FIN No. 46), Consolidation of Variable Interest Entities,to expand upon existing
accounting guidance that addresses when a company should include in its financial statements the assets, liabilities and activities of another entity. In December 2003, the FASB revised FIN No. 46 to provide more clarification. Until now, a company
generally has included another entity in its consolidated financial statements only if it controlled the entity through voting interests. FIN No. 46 changes that by requiring a variable interest entity, as defined, to be consolidated by a company if
that company is subject to a majority of the risk of loss from the variable interest entitys activities or entitled to receive a majority of the entitys residual returns or both. FIN No. 46, as revised, did not have a material impact on
the Companys consolidated financial statements.



Note Regarding
Forward-Looking Statements



This report contains forward-looking
statements relating to our operations that are based on our current expectations, estimates and projections. Words such as anticipates, believes, continues, estimates, expects,
goal, intends, may, opportunity, plans, potential, projects, forecasts, should, will, and similar expressions are intended to
identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future
events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. As a result, these statements speak only as of the date they were made.



Our actual results may differ from the forward-looking statements for many reasons,
including:



| |  | Our ability to successfully manage our significant capital investments.
| | - | -----------------------------------------------------------------------



| |  | The cyclical nature of the real estate industry and possible oversupply of, or reduced demand for, space in our core markets could have a material adverse effect on our results.
| | - | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Changes in interest rates and the availability of financing.
| | - | ------------------------------------------------------------



| |  | Competition from other properties in our core markets.
| | - | ------------------------------------------------------



| |  | The bankruptcy, insolvency or credit deterioration of our tenant.
| | - | -----------------------------------------------------------------



| |  | The need to periodically renovate, repair and re-lease space and the costs thereof.
| | - | -----------------------------------------------------------------------------------



| |  | Increases in maintenance, insurance and operating costs.
| | - | --------------------------------------------------------



| |  | Civil unrest, acts of terrorism, earthquakes and other natural disasters or acts of God that may result in uninsured losses.
| | - | ----------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

| |  | Changes in the availability and affordability of insurance on commercially reasonable terms, in levels of coverage for our real estate assets and in exclusions from insurance
policies for our real estate assets could result in increased premium costs and/ or higher self retention of risks.
| | - | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Changes in market rental rates and our ability to rent space on favorable terms could adversely impact our results.
| | - | -------------------------------------------------------------------------------------------------------------------



We undertake no obligation to publicly update or revise any forward-looking statements,
whether as a result of new information, future events or for any other reason.



Item 3. Quantitative and Qualitative Disclosures about Market Risks



We are exposed to market risk primarily from changes in interest rates. At March 31, 2004, we were not a party to any hedging transaction or derivative financial instrument.



We are exposed to interest rate market risk primarily related to our long-term debt and our
cash and cash equivalents. At March 31, 2004, 100% of our long-term debt was at a fixed rate. Our fixed rate debt consists of our secured credit tenant notes. At March 31, 2004, a 10 percent decrease in the levels of interest rates with all other
variables held constant would result in an increase in the fair market value of our fixed rate debt of approximately $7,100. At March 31, 2004, a 10 percent increase in the levels of interest rates with all other variables held constant would result
in a decrease in the fair market value of our fixed rate debt of approximately $6,800.



Our portfolio of cash and cash equivalents is designed for safety of principal and liquidity. We maintain a portfolio of cash equivalents in the highest rated money market investments and continuously monitor the investment ratings. The
investments are subject to inherent interest rate market risk as investments mature and are reinvested at current interest rates.



Item 4. Controls and Procedures



Our Chairman and
chief financial officer has concluded, based on their evaluation as of the end of the period covered by this Quarterly Report, that the Companys disclosure controls and procedures (as defined in the Securities Exchange Act of 1934
Rules 13a-15(e) and 15d-15(e)) are effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and reported within the time periods
specified in the Securities and Exchange Commissions rules and forms. There were no changes in the Companys internal controls over financial reporting during the quarter ended March 31, 2004 that have materially affected, or are
reasonably likely to materially affect, the Companys internal controls over financial reporting.



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##### Table of Contents

PART II. OTHER INFORMATION



ITEM 1. Legal Proceedings



The
Company is occasionally subject to lawsuits and claims arising out of the normal conduct of business. Management does not expect the outcome of pending claims to have a material adverse affect on the business, financial condition or results of
operations.



ITEM 6. Exhibits and Reports on Form 8-K



| | a. | Exhibits.
| | -- | ---------



|     |  |                                                                                                                                                                    
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|31.1 |  | Certification of Chief Executive Officer pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 
|     | 
|31.2 |  | Certification of Chief Financial Officer pursuant to 15 U.S.C. Section 10A, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 (filed herewith). 
|     | 
|32.1 |  | Certification of Chief Executive Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).
|     | 
|32.2 |  | Certification of Chief Financial Officer pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 (filed herewith).



| | b. | Reports on Form 8-K. None.
| | -- | --------------------------



ITEMS 2, 3, 4 And 5 Are Not Applicable And Have Been Omitted



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##### Table of Contents

SIGNATURES



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



|                  |  |                     |  |                  
|----------------- |  | ------------------- |  | -----------------
|                  |  | HEWITT HOLDINGS LLC
|                  |  | (Registrant)       
|                  |  |                    
|Date: May 5, 2004 |  | By:                 |  | /s/ David L. Hunt
|                  |  |                     |  | David L. Hunt    
|                  |  |                     |  | Chairman         



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