<PAGE>
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549


                                    FORM 10-Q


               __X__  QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
                      THE SECURITIES EXCHANGE ACT OF 1934

                      For the quarterly period ended June 30, 1999

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

                      For the transition period from _____ to _____

                             Commission file number 1-14762

                               THE SERVICEMASTER COMPANY
                (Exact name of registrant as specified in its charter)

             Delaware                                      36-3858106
   (State or other jurisdiction of             (IRS Employer Identification No.)
    incorporation or organization)

   One ServiceMaster Way, Downers Grove, Illinois           60515-1700
      (Address of principal executive offices)              (Zip Code)

                                     630-271-1300
                 (Registrant's telephone number, including area code)


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

Indicate  the  number of  shares  outstanding  of  each of the issuer's  classes
of shares: 311,933,000 shares on August 10, 1999.

This document consists of 20 pages, including the cover page.

<PAGE>

                                  TABLE OF CONTENTS

                                                                            Page
                                                                             No.
                                                                            ----
THE SERVICEMASTER COMPANY (Registrant) -


Part I.  Financial Information
-------  ---------------------

Consolidated Statements of Income for the three and
   six months ended June 30, 1999 and June 30, 1998                            2

Consolidated Statements of Financial Position
   as of June 30, 1999 and December 31, 1998                                   3

Consolidated Statements of Cash Flows for the six months
   ended June 30, 1999 and June 30, 1998                                       4

Notes to Consolidated Financial Statements                                     5

Management Discussion and Analysis of Financial Position
   and Results of Operations                                                   9


Part II.  Other Information
--------  -----------------

Item 1:  Legal Proceedings                                                    18


Signature                                                                     19


                                        1

<PAGE>
<TABLE>
<CAPTION>

                          PART I. FINANCIAL INFORMATION

                            THE SERVICEMASTER COMPANY
                        Consolidated Statements of Income
                      (In thousands, except per share data)


                                                             Three Months Ended                        Six Months Ended
                                                                  June 30,                                 June 30,

                                                          1999               1998                  1999               1998
                                                   --------------------------------------   --------------------------------------

<S>                                                  <C>                <C>                   <C>                <C>
Operating Revenue...............................     $    1,537,074     $    1,244,627        $    2,652,136     $    2,226,415

Operating Costs and Expenses:
Cost of services rendered
   and products sold............................          1,168,837            951,366             2,068,652          1,746,163
Selling and administrative expenses.............            226,098            179,466               362,717            296,684
Other, net (1)..................................             85,500                  -                85,500                  -
                                                     --------------     --------------        --------------     --------------
Total operating costs and expenses..............          1,480,435          1,130,832             2,516,869          2,042,847
                                                     --------------     --------------        --------------     --------------

Operating Income................................             56,639            113,795               135,267            183,568

Non-operating Expense (Income):
Interest expense................................             28,890             24,545                50,838             48,640
Interest and investment income..................             (5,649)            (5,389)               (9,270)            (8,824)
                                                     --------------     --------------        --------------     --------------

Income before Income Taxes......................             33,398             94,639                93,699            143,752
Provision for income taxes......................             15,363             38,235                40,055             58,078
                                                     --------------     --------------        --------------     --------------

Net Income......................................     $       18,035     $       56,404        $       53,644     $       85,674
                                                     ==============     ==============        ==============     ==============

Per Share
   Basic (1)(2)(3)..............................               $.06               $.20                  $.18               $.30
                                                               ====               ====                  ====               ====
   Diluted (1)(2)(3)............................               $.06               $.19                  $.17               $.29
                                                               ====               ====                  ====               ====

 Dividends Per Share............................               $.09               $.08                  $.18               $.16
                                                               ====               ====                  ====               ====


(1) In the second quarter of 1999, the Company realized an after-tax gain of $30
million ($50.1 million pretax)  relating to the sales of its Premier  automotive
business  and  its  remaining  15  percent  interest  in  ServiceMaster   Energy
Management,  and  recorded a one-time  after-tax  charge of $81 million  ($135.6
million pretax) relating to its Diversified Health Services business.  Excluding
the impact of these items, net income and earnings per share were as follows:


                                                             Three Months Ended                        Six Months Ended
                                                                  June 30,                                 June 30,

                                                          1999               1998                  1999               1998
                                                   --------------------------------------   --------------------------------------

Net income before non-recurring items, net.......    $       69,335     $       56,404       $       104,944     $       85,674
Per share before non-recurring items, net:
   Basic.........................................              $.22               $.20                  $.34               $.30
                                                               ====               ====                  ====               ====
   Diluted.......................................              $.22               $.19                  $.34               $.29
                                                               ====               ====                  ====               ====


(2) Basic earnings per share are calculated  based on 310,431 shares and 286,778
shares for the three  months  ended  June 30,  1999 and 1998,  respectively  and
305,047  shares and  283,001  shares for the six months  ended June 30, 1999 and
1998,  respectively.  Diluted earnings per share are calculated based on 318,179
shares and  296,441  shares for the three  months  ended June 30, 1999 and 1998,
respectively and 313,099 shares and 292,610 shares for the six months ended June
30, 1999 and 1998, respectively.

(3) All share and per share data reflect the three-for-two share split effective
August 26, 1998.


                 See Notes to Consolidated Financial Statements
</TABLE>
                                        2

<PAGE>
<TABLE>
<CAPTION>

                                       THE SERVICEMASTER COMPANY
                             Consolidated Statements of Financial Position
                                            (In thousands)

                                                                                  As of
                                                                         June 30,       December 31,
                                                                           1999             1998
                                                                       ------------    -------------
Assets

Current Assets:
<S>                                                                   <C>             <C>
Cash and cash equivalents............................................ $      53,934   $       66,400
Marketable securities................................................        55,713           54,022
Receivables, less allowances of $43,608
   and $38,988, respectively.........................................       575,120          372,375
Inventories..........................................................        82,586           49,770
Prepaid expenses and other assets....................................       217,231          127,635
                                                                       ------------    -------------
    Total current assets.............................................       984,584          670,202
                                                                       ------------    -------------

Property and Equipment:
   At cost...........................................................       629,912          441,209
   Less:  accumulated depreciation...................................       320,265          229,049
                                                                       ------------    -------------
    Net property and equipment.......................................       309,647          212,160
                                                                       ------------    -------------

Intangible assets, primarily trade names and goodwill,
   net of accumulated amortization of $297,070
   and $272,254, respectively........................................     2,370,531        1,884,002
Notes receivable, long-term securities, and other assets.............       144,417          148,487
                                                                       ------------    -------------

    Total assets..................................................... $   3,809,179   $    2,914,851
                                                                       ============    =============


Liabilities and Shareholders' Equity

Current Liabilities:
Accounts payable..................................................... $     157,490   $      110,523
Income taxes payable.................................................        45,487           84,165
Accrued liabilities..................................................       342,205          302,424
Deferred revenues....................................................       254,346          204,969
Current portion of long-term obligations.............................        46,283           51,616
                                                                       ------------    -------------
    Total current liabilities........................................       845,811          753,697
                                                                       ------------    -------------

Long-Term Debt.......................................................     1,644,961        1,076,167
Other Long-Term Obligations..........................................       125,043          128,501
Commitments and Contingencies .......................................

Shareholders' Equity:
Common stock $0.01 par value, authorized 1 billion shares; issued
    and outstanding 311,452 and 298,030 shares, respectively.........         3,115            2,980
Additional paid-in capital...........................................     1,026,398          788,124
Retained earnings....................................................       179,873          179,840
Accumulated other comprehensive income...............................          (252)           3,911
Restricted stock.....................................................        (2,981)          (3,383)
Treasury stock.......................................................       (12,789)         (14,986)
                                                                       ------------    -------------
    Total shareholders' equity.......................................     1,193,364          956,486
                                                                       ------------    -------------
    Total liabilities and shareholders' equity....................... $   3,809,179   $    2,914,851
                                                                       ============    =============

                 See Notes to Consolidated Financial Statements
</TABLE>
                                        3

<PAGE>
<TABLE>
<CAPTION>

                                       THE SERVICEMASTER COMPANY
                                 Consolidated Statements of Cash Flows
                                             (In thousands)

                                                                                 Six Months Ended
                                                                                     June 30,
                                                                              1999              1998
                                                                          ------------      ------------

<S>                                                                     <C>                <C>
Cash and Cash Equivalents at January 1................................  $       66,400     $      64,876

Cash Flows from Operations:
Net Income............................................................          53,644            85,674
    Adjustments to reconcile net income
    to net cash flows from operations:
       Depreciation and amortization..................................          55,305            47,916
       Non-recurring items, net.......................................          51,300                 -
       Change in working capital, net of acquisitions:
         Receivables..................................................         (85,602)          (61,538)
         Inventories and other current assets.........................         (69,372)          (54,687)
         Accounts payable.............................................          16,335            11,197
         Deferred revenues............................................          27,473            29,682
         Accrued liabilities..........................................          59,149            48,350
         Deferred 1998 tax payment....................................         (78,478)                -
       Other, net.....................................................          (1,948)              779
                                                                         -------------      ------------
Net Cash Provided from Operations.....................................          27,806           107,373
                                                                         -------------      ------------

Cash Flows from Investing Activities:
    Business acquisitions, net of cash acquired.......................        (419,034)         (144,053)
    Property additions................................................         (50,203)          (40,241)
    Sale of equipment and other assets................................           2,861             2,814
    Proceeds from the sale of businesses..............................          68,260                 -
    Payments to sellers of acquired businesses........................          (6,506)           (5,130)
    Notes receivable and financial investments........................         (16,606)           (2,657)
    Net purchases of investment securities............................          (6,577)           (2,133)
                                                                         -------------      ------------
Net Cash Used for Investing Activities................................        (427,805)         (191,400)
                                                                         -------------      ------------

Cash Flows from Financing Activities:
    Borrowings, net...................................................         666,639           185,571
    Payments of borrowings and other obligations......................        (223,936)         (293,632)
    Shareholders' dividends...........................................         (54,985)          (34,718)
    Purchase of ServiceMaster stock...................................         (12,354)           (4,019)
    Proceeds from employee share plans................................          11,669             5,877
    Proceeds from stock offering......................................               -           209,391
    Other.............................................................             500             3,005
                                                                         -------------      ------------
Net Cash Provided from Financing Activities...........................         387,533            71,475
                                                                         -------------      ------------

Cash Decrease during the Period.......................................         (12,466)          (12,552)
                                                                         -------------      ------------

Cash and Cash Equivalents at June 30..................................  $       53,934     $      52,324
                                                                         =============      ============


                 See Notes to Consolidated Financial Statements
</TABLE>
                                        4

<PAGE>
                            THE SERVICEMASTER COMPANY
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS


Note  1:  The  consolidated   financial   statements  include  the  accounts  of
ServiceMaster and its significant subsidiaries, collectively referred to as "the
Company".  Intercompany  transactions  and  balances  have  been  eliminated  in
consolidation.

Note 2: The consolidated financial statements included herein have been prepared
by the  Company  pursuant to the rules and  regulations  of the  Securities  and
Exchange  Commission.  Certain  information  and footnote  disclosures  normally
included in financial  statements prepared in accordance with generally accepted
accounting  principles have been condensed or omitted pursuant to such rules and
regulations.  However, the Company believes that the disclosures are adequate to
make the  information  presented  not  misleading.  It is  suggested  that these
consolidated  financial  statements  be read in  conjunction  with the financial
statements and the notes thereto  included in the Company's latest Annual Report
to shareholders and the Annual Report to the Securities and Exchange  Commission
on Form  10-K for the year  ended  December  31,  1998.  In the  opinion  of the
Company,  all adjustments  necessary to present fairly the financial position of
The  ServiceMaster  Company as of June 30, 1999 and December  31, 1998,  and the
results of  operations  for the three month and six month periods ended June 30,
1999 and 1998,  and the cash  flows for the six months  ended June 30,  1999 and
1998 have been included.  The preparation of the financial  statements  requires
management to make certain  estimates and  assumptions  required under generally
accepted  accounting  principles  which may differ from the actual results.  The
results of operations for any interim period are not  necessarily  indicative of
the results which might be obtained for a full year.

Note 3: For interim accounting purposes,  certain costs directly associated with
the  generation of lawn care revenues are initially  deferred and  recognized as
expense  as the  related  revenues  are  recognized.  All such  costs  are fully
recognized within the fiscal year in which they are incurred.

Note  4:  On July  24,  1998,  the  Company's  Board  of  Directors  declared  a
three-for-two  share split effective August 26, 1998, for shareholders of record
on August  12,  1998.  All share and per share data have been  restated  for all
periods presented to reflect this three-for-two split.

Note 5: Basic earnings per share  includes no dilution from options,  debentures
or other financial  instruments and is computed by dividing income  available to
common  stockholders  by the  weighted  average  number of  shares  outstanding.
Diluted  earnings  per share  reflects  the  potential  dilution of  convertible
securities and options to purchase common stock.  The following chart reconciles
both  the  numerator  and  the  denominator  of the  basic  earnings  per  share
computation to the numerator and  denominator of the diluted  earnings per share
computation.

<TABLE>
<CAPTION>

                                                        Three Months                     Three Months
                                                   Ended June 30, 1999               Ended June 30, 1998
                                             -------------------------------    ------------------------------
                                                                                 Pro forma
(In thousands, except per share data)          Income       Shares     EPS        Income       Shares     EPS
                                               ------       ------     ---        ------       ------     ---
<S>                                            <C>          <C>       <C>         <C>          <C>       <C>
Basic earnings per share                       $ 18,035     310,431   $0.06       $ 56,404     286,778   $0.20
                                                                      =====                              =====
Effect of dilutive securities - options               -       7,748                      -       9,663
                                             ----------   ---------             ----------   ---------
Diluted earnings per share                     $ 18,035     318,179   $0.06       $ 56,404     296,441   $0.19
                                             ==========   =========   =====     ==========   =========   =====
</TABLE>

                                        5
<PAGE>
<TABLE>
<CAPTION>
                                                       Six Months                        Six Months
                                                   Ended June 30, 1999               Ended June 30, 1998
                                             -------------------------------    ------------------------------
                                                                                 Pro forma
(In thousands, except per share data)          Income       Shares     EPS        Income       Shares     EPS
                                               ------       ------     ---        ------       ------     ---

<S>                                            <C>          <C>       <C>         <C>          <C>       <C>
Basic earnings per share                       $ 53,644     305,047   $0.18       $ 85,674     283,001   $0.30
                                                                      =====                              =====
Effect of dilutive securities, net of tax:
   Options                                            -       8,052                      -       9,244
   Convertible debentures                             -           -                     32         365
                                             ----------   ---------             ----------   ---------
Diluted earnings per share                     $ 53,644     313,099   $0.17       $ 85,706     292,610   $0.29
                                             ==========   =========   =====     ==========   =========   =====
</TABLE>


Note 6: In the Consolidated  Statements of Cash Flows, the caption Cash and Cash
Equivalents includes investments in short-term,  highly-liquid securities having
a maturity of three  months or less.  Supplemental  information  relating to the
Consolidated Statements of Cash Flows for the six months ended June 30, 1999 and
1998 is presented in the following  table.  The  significant  increase in income
taxes paid in 1999 reflects the payment of the 1998 federal tax obligation.

<TABLE>
<CAPTION>

(In thousands)                                                   1999        1998
                                                               ---------   ---------
Cash paid or (received for):
<S>                                                           <C>         <C>
Interest expense............................................  $   44,850  $   44,475
Interest and dividend income................................  $   (4,148) $   (4,268)
Income taxes................................................  $   85,829  $    6,920
</TABLE>


Note 7: Total  comprehensive  income was $17.9 million and $54.9 million for the
three months ended June 30, 1999 and 1998,  respectively,  and $49.5 million and
$86.3  million for the six months  ended June 30,  1999 and 1998,  respectively.
Total comprehensive income includes  net  income, changes in unrealized gains on
marketable securities and translation balances.

Note 8: On April 27, 1999, the Company acquired  American  Residential  Services
(ARS),  establishing  the Company as one of the  nation's  leading  providers of
heating,  ventilation,  and air conditioning  services. The Company acquired ARS
for  approximately  $285 million in cash and assumed debt. The  acquisition  has
been  accounted  for using the purchase  method and the results of ARS have been
included in the Company's  financial  statements  since the date of acquisition.
The excess of the consideration paid over the fair value of the business of $213
million was recorded as goodwill and is being amortized on a straight-line basis
over 40 years.  This  allocation of purchase price is preliminary and subject to
change as additional  information is obtained  related to the fair values of the
acquired net assets.

Note 9: In the second quarter, the Company sold its Premier business unit, which
provides cleaning and maintenance services to the automotive  industry,  to Durr
AG of Germany.  In addition,  the Company sold its remaining 15 percent interest
in ServiceMaster  Energy Management to its partner Texas Utilities.  These sales
resulted in  after-tax  gains  totaling  approximately  $30 million ($50 million
pretax).

Note 10:  The  business  of the  Company  is  primarily  conducted  through  the
ServiceMaster  Consumer and  Commercial  Services and  ServiceMaster  Management
Services  operating units. The Consumer and Commercial  Services unit provides a
variety of specialty  services to  residential  and  commercial  customers.  The
Management Services unit provides a variety of supportive management services to
health  care,   education,   and  commercial   accounts.   The  Company  derives
substantially  all of its revenues from customers in the United States with less
than five percent generated in foreign markets.

                                        6
<PAGE>
The Other Operations group includes primarily ServiceMaster Employer Services, a
professional  employer  organization  that provides clients with  administrative
processing of payroll,  insurance,  and other  employee  benefit  programs,  and
Diversified  Health  Services which  provides  services and products to the long
term  care  industry,   and  the  Company's  headquarters   operation.   Segment
information  as of and for the three  months  ended and six months ended June 30
are as follows:

<TABLE>
<CAPTION>

                                                          Three Months
                                                         Ended June 30,
----------------------------------------------------------------------------------------------------------------------------------
(In thousands)
                                                        Consumer &
                                                        Commercial           Management             Other
                      1999                               Services             Services           Operations        Consolidated
--------------------------------------------------    -----------------    -----------------    --------------     ---------------
<S>                                                    <C>                  <C>                  <C>                <C>
Revenue                                                $    910,874         $   468,174          $  158,026         $ 1,537,074
Operating Income                                       $    126,258         $    67,452          $ (137,071)        $    56,639
Operating Income Excluding Non-Recurring Items         $    126,258         $    17,352          $   (1,471)        $   142,139
Total Assets                                           $  3,303,016         $   216,116          $  290,047         $ 3,809,179

                      1998
--------------------------------------------------
Revenue                                                $    581,319         $   507,856          $  155,452         $ 1,244,627
Operating Income                                       $     91,200         $    17,833          $    4,762         $   113,795
Total Assets                                           $  2,086,989         $   240,443          $  476,788         $ 2,804,220



                                                           Six Months
                                                         Ended June 30,
----------------------------------------------------------------------------------------------------------------------------------
(In thousands)
                                                        Consumer &
                                                        Commercial           Management             Other
                      1999                               Services             Services           Operations        Consolidated
--------------------------------------------------    -----------------    -----------------    --------------     ---------------
Revenue                                                $  1,372,851         $   969,386          $  309,899         $ 2,652,136
Operating Income                                       $    188,799         $    86,654          $ (140,186)        $   135,267
Operating Income Excluding Non-Recurring Items         $    188,799         $    36,554          $   (4,586)        $   220,767

                      1998
--------------------------------------------------
Revenue                                                $    945,211         $   981,744          $  299,460         $ 2,226,415
Operating Income                                       $    140,737         $    36,149          $    6,682         $   183,568

</TABLE>

Note  11:  The long  term  care  industry  has  recently  undergone  a  dramatic
transition  period,  largely as a result of changes in government  reimbursement
and compliance policies.  The Company's Diversified Health Services unit manages
long term care  facilities  and, in a number of cases,  has helped finance these
facilities  generally in return for a long term management  contract and a share
in the market appreciation of the facility.  The division also provides a number
of ancillary services and products,  including  rehabilitation therapy,  medical
supplies,  pharmacy,  and design and build services.  Last quarter,  the Company
announced  that it was  undertaking  a strategic  review and  assessment  of its
Diversified  Health  Services  business  due to  changes  in  reimbursement  and
compliance policies and the resulting financial  difficulties of a number of its
customers.  Based on the review of the business  and the credit risks  involved,
the  Company   has   determined   to  reduce  the  scope  of  services   offered
substantially,  including  ancillary  services,  and eliminate all future credit
extension agreements. As a result, in the second quarter the Company recorded an
after-tax charge of $81 million for the  restructuring  and write-down of assets
relating to Diversified Health Services. Approximately $12 million of the charge
relates to provisions for future expected cash expenditures.

                                        7
<PAGE>
The following summarizes the components of the charge:


          (After-tax, in millions)
          Write-down of receivables,
             loans, and investments in nursing homes                 $19

          Provision for losses on contractual provisions
             and exit costs of certain ancillary services             11

          Write-down of impaired assets,
             primarily goodwill                                       51
                                                                     ---
          Total                                                      $81
                                                                     ===

The  write-down  of  receivables,  loans,  and  investments  in nursing homes is
largely due to the  deterioration  in the  financial  viability of the customers
resulting from Medicare changes. The majority of the write-down relates to seven
troubled homes.  As noted above,  the Company has also taken a charge to provide
for losses and exposures relating to exiting contracts and services. The Company
has exited or will exit a number of client  arrangements  in which customers are
not paying  Diversified  Health  Services and the prospect of collection is low.
The Company is sensitive to the need to provide  quality patient care throughout
the transition period of the Company's exit in these contracts.

Given the  uncertainty in the industry and the Company's  decision to reduce the
size and scope of  Diversified  Health  Services,  the Company  took a charge to
write-down the assets of Diversified  Health Services.  The Company reviewed the
expected cash flows from the business,  which were less than the carrying  value
of the assets, and accordingly, recorded an impairment charge.

Note 12:  In June  1998,  the  Financial  Accounting  Standards  Board  issued a
Statement of Financial  Accounting Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities".  This Statement was subsequently amended to
defer its effective date. The Company intends to adopt this Statement in January
2001 as required by the amended  Statement.  Adoption of this  Statement  is not
expected to have a material impact on the Company's financial statements.

                                        8
<PAGE>
                            THE SERVICEMASTER COMPANY
                       MANAGEMENT DISCUSSION AND ANALYSIS

RESULTS OF OPERATIONS

SECOND QUARTER 1999 COMPARED TO SECOND QUARTER 1998
---------------------------------------------------

Revenues  increased 23 percent over the second  quarter of 1998 to $1.5 billion,
reflecting   strong  growth  from  both  base   operations   and   acquisitions.
Approximately  eight  percent of the revenue  increase  resulted  from  internal
growth and small roll-up acquisitions in established  businesses while the newer
initiatives including landscaping, plumbing, and HVAC provided 22 percent of the
growth.   This  growth  was  partially   offset  by  the  sale  of  Premier  and
ServiceMaster  Energy  Management  and the  wind-down  of the Home  Health  Care
business.  Operating  income before  non-recurring  unusual  items  increased 25
percent over the prior year,  while margins  increased to 9.2 percent of revenue
from 9.1 percent in 1998. The operating margin  improvement  reflects  continued
strong  growth in the higher margin  Consumer and  Commercial  Services  segment
offset in part by acquiring  businesses with margins below the Company  average.
Net income before  non-recurring  unusual  items,  increased 23 percent to $69.3
million  from  $56.4  million  in  1998.   Diluted  earnings  per  share  before
non-recurring  items increased 16 percent to $.22.  Earnings per share grew at a
lower rate than net income due to the equity offering in May 1998 and the impact
of shares  issued in  acquisitions.  During the quarter the Company  realized an
after-tax  gain of $30 million,  relating to the sale of its Premier  automotive
business  and the sale of its  remaining  15 percent  interest in  ServiceMaster
Energy Management. In addition, the Company recorded a one-time after-tax charge
of $81 million relating to its Diversified Health Services business. These items
reduced  net income  from  ongoing  operations  by $51  million  ($85.5  million
pretax).  As a result,  the Company  reported  net income of $18  million,  with
diluted earnings per share of $.06.

The Consumer and  Commercial  Services  business unit  reported  revenue of $911
million,  an increase of 57 percent,  and operating income of $126.3 million, 38
percent higher than last year. The segment's profit growth included double digit
growth in the established businesses, as well as contributions from landscaping,
plumbing,  and HVAC  initiatives.  TruGreen-ChemLawn  achieved solid revenue and
profit  growth for the  quarter  reflecting  continued  strong  momentum  in the
commercial landscape operations.  The landscape  operations,  TruGreen Landcare,
has achieved  significant  increases through  acquisitions but has also realized
strong  internal  growth.  Over the next twelve months,  the Company  intends to
implement a new operating  system which may provide margin  improvements  in the
future.  Solid  sales of add-on  lawn care  services  and  growth in  commercial
accounts  helped  support  somewhat  weaker  growth  in  residential  lawn  care
services.  Terminix  achieved  excellent  growth in revenues  and profits due to
strong   increases  in  termite   completions  and  renewals,   improved  branch
efficiencies  and the  successful  integration  of  acquisitions.  Growth in new
termite  customers  reflects a continued  strong  demand of the termite  baiting
systems.  American  Home Shield  achieved  double  digit  growth in revenues and
profits,   reflecting   increases  in  warranty   contracts   sold  through  all
distribution  channels.  The combined  Rescue  Rooter and  American  Residential
Services  (ARS)  operations  reported  strong  growth in  revenue  and  profits,
reflecting  continued  productivity  improvements in the plumbing  operation and
good initial results from the integration of the businesses.

                                       9
<PAGE>
The  franchise  operations,  Residential/Commercial  and Merry  Maids,  reported
strong growth in revenues and profits as a result of the continued strong growth
of  company  owned  operations,   increased  licenses  sales,  and  productivity
initiatives.

The  Management  Services  business  unit  reported  revenue of $468 million and
operating income of $67.5 million. In the second quarter, the segment recorded a
$30 million  after-tax gain ($50 million pretax) resulting from the sales of its
Premier  automotive unit and its remaining 15 percent  interest in ServiceMaster
Energy Management.  Revenues from continuing operations grew two percent to $468
million as strong sales in the  Education  and Business & Industry  markets were
partially offset by a decrease in the larger Healthcare market. Operating income
from continuing operations increased six percent, as a result of strong overhead
cost  controls.  All these  markets  ended  the  quarter  with a higher  base of
annualized revenue than the beginning of the year levels.

On April 21,  1999,  the Company  sold its Premier  business  unit to Durr AG of
Germany for $76 million. Premier provides cleaning services for paint booths and
other  related  maintenance  services in the  automotive  industry.  The Company
believes that alliances or significant  incremental  investments would have been
required to remain  competitive  in this industry.  The sale of Premier  allowed
ServiceMaster  to realize the significant  appreciation in its investment and to
reinvest  the  proceeds  in  initiatives  more  central  to the  Company's  core
strategies.  The sale resulted in an after-tax gain of approximately $25 million
($42 million  pretax).  Also in the quarter,  the Company sold its  remaining 15
percent  interest in  ServiceMaster  Energy  Management  to its  partner,  Texas
Utilities,  which  resulted  in an  after-tax  gain of $5  million  ($8  million
pretax).

In the first quarter of this year, the Company announced that it was undertaking
a strategic  review and assessment of the services  comprising  the  Diversified
Health  Services   operation.   Diversified  Health  Services  provides  general
management  services  for long  term  care  facilities,  as well as a number  of
ancillary  services,   including   rehabilitation  therapy,   medical  supplies,
pharmacy,  and design and build services. In addition,  the Company has provided
financing to certain facilities. As a result of the review, the Company recorded
an after-tax  charge of $30 million in the second  quarter  relating to customer
receivables, loans, and other investments, as well as provisions for contractual
commitments.  An  after-tax  charge of $51  million  was also  recorded  for the
write-down of goodwill relating to these businesses.  Of the total charges, only
$12 million will result in future cash payments.  Following  these actions,  the
scope and services offered,  including ancillary services, will be substantially
reduced and all future credit extension agreements will be eliminated.

Cost of services  rendered and products sold  increased 23 percent due primarily
to general  business growth and  acquisitions,  but decreased as a percentage of
revenue to 76.0  percent  from 76.4  percent in 1998.  This  decrease  primarily
reflects  the changing  business mix of the business as Consumer and  Commercial
Services  increases  in size in  relationship  to the  overall  business  of the
Company, as well as productivity  improvements and the successful integration of
acquisitions   at   Consumer   and   Commercial   Services.   The  Consumer  and

                                       10

<PAGE>
Commercial Services  businesses generally  operate at higher gross margin levels
than  the  rest  of  the  business,   but also incur somewhat higher selling and
administrative expenses as a percentage of revenues.

Selling and administrative expenses increased 26 percent due to general business
growth  and  acquisitions,  and  increased  as a  percentage  of revenue to 14.7
percent from 14.4 percent in 1998.  This  increase as a percentage of revenue is
primarily due to the changing business mix of the company noted above.

Interest  expense  increased over the prior year primarily due to increased debt
levels  associated  with  acquisitions.  The tax  provision  reflects  a  higher
effective tax rate compared to last year, primarily due to the non-deductibility
of goodwill for several large acquisitions completed in 1999.


SIX MONTHS ENDED JUNE 30, 1999 AS COMPARED TO JUNE 30, 1998
-----------------------------------------------------------

Revenues  for the six months  increased  19 percent  over 1998 to $2.7  billion,
reflecting   strong  base  business  growth  and  the  effect  of  acquisitions.
Approximately  8 percent  of the growth  came from  internal  sources  and small
roll-up  acquisitions in existing service lines with another 15 percent increase
resulting from the newer  initiatives  in  landscaping,  plumbing,  and HVAC. As
noted in the three  month  comparison,  this  growth  was offset by the sale and
exiting of certain  businesses.  Operating  income,  excluding the non-recurring
unusual items noted in the three month discussion,  increased 20 percent,  while
margins increased to 8.3 percent of revenue from 8.2 percent in 1998.  Operating
margins  improved due to the change in business mix, as Consumer and  Commercial
Services  comprises a higher  percentage of the consolidated  operating  income.
Diluted earnings per share for the six months,  excluding  non-recurring  items,
were $.34 compared to diluted  earnings per share of $.29 last year, an increase
of 17 percent.  On this same basis, net income grew 22 percent to $104.9 million
from $85.7 million. Net income grew at a faster rate than earnings per share due
to an increase in shares  outstanding,  as a result of the equity  offering  and
shares issued for acquisitions.  As discussed in the three month comparison, the
Company  realized  after-tax gains totaling $30 million relating to the sales of
businesses  and  recorded an  after-tax  charge of $81  million  relating to its
Diversified  Health  Services  business.  These  items  reduced  net income form
ongoing  operations by $51 million ($85.5 million pretax).  As a result of these
items, for the six months,  the Company reported net income of $53.6 million and
diluted earnings per share of $.17.

The  Consumer  and  Commercial  Services  business  unit  achieved  a 45 percent
increase in revenue to $1.4 billion and operating  income of $188.8 million,  34
percent higher than last year. The segment's profit growth included double digit
increases  at  all  companies,  reflecting  acquisitions  and  internal  growth.
TruGreen-ChemLawn reported double digit increases in both revenue and profits as
solid growth in its lawn care operations was complimented by excellent growth in
the  newer  commercial  landscape  initiative.  Approximately  one-half  of  the
segment's 45 percent  growth in revenue came from the entry into the  commercial
landscape business. With the acquisition of LandCare USA, which was completed in
March, the Company became the largest provider of commercial  landscape services
in the country.  The acquisition provides  TruGreen-ChemLawn  the opportunity to
integrate its traditional lawn care services with

                                       11
<PAGE>
landscape   maintenance.   Terminix  achieved  very  strong   revenue and profit
growth  for the six  months,  reflecting  strong growth in all service lines and
continued  strong  customer  reception  of the  newer termite  baiting  systems.
American Home Shield  reported  double digit growth in both revenues and profits
with strong increases  in  direct-to-consumer  sales and renewal  sales.  Rescue
Rooter   reported   significant   increases in revenues and profits,  reflecting
the  acquisition  of ARS in April and solid  growth in the established business.
ARS  provides  comprehensive maintenance and repair services for HVAC, plumbing,
electrical and other systems, and  major  appliances  in  homes  and  commercial
buildings.   The  acquisition  of  ARS  establishes  the  Company  as one of the
country's  leading  providers  of  heating,  ventilation,  and  air conditioning
services and will  complement  the Company's  plumbing  business.  The franchise
operations,  Residential/Commercial  and Merry Maids operations  reported strong
revenue and profit growth for the six months as a result of increased  franchise
licenses sales and the benefit of productivity initiatives at the branches.

The  Management  Services  business  unit  reported  revenue of $969 million and
operating income of $86.7 million for the first six months.  As discussed in the
three month  comparison,  the segment recorded a significant gain related to the
sale of two of its business units. Revenues and operating income from continuing
operations  increased four  percent and five percent, respectively.  This growth
reflects the benefit of acquisitions made in April 1998 and overhead  efficiency
gains  throughout  the  business  unit.  For  the  six  months,  the traditional
Healthcare  market  reported  a decrease in revenue and profits, reflecting  the
termination   of  large  accounts  in  the  latter  part of  1998. The Education
market   reported    slightly  higher  profits,   as  good  sales  activity  and
controlled  overhead  spending  offset  margin  declines  from certain  contract
renegotiations. The Business & Industry group achieved strong growth in revenues
and profits,  reflecting the successful  integration  of  acquisitions  and base
business growth.

Cost of services rendered and products sold increased 18 percent,  primarily due
to general  business growth and  acquisitions.  Cost of services  decreased as a
percentage  of revenue to 78.0 percent in 1999 from 78.4  percent in 1998.  This
decrease  primarily  reflects  the  changing mix of the business as Consumer and
Commercial Services increases in size in relationship to the overall business of
the Company.  The Consumer and Commercial Services businesses generally operates
at higher  gross  margin  levels  than the rest of the  business  but also incur
somewhat higher selling and administrative expenses as a percentage of revenue.

Selling and administrative expenses increased 22 percent due to general business
growth  and  acquisitions,  and  increased  as a  percentage  of revenue to 13.7
percent in 1999 from 13.3  percent in 1998.  This  increase as a  percentage  of
revenue is primarily  attributable  to the changing  business mix of the Company
noted above.

The  increase in interest  expense for the six months is due to  increased  debt
levels associated with  acquisitions,  partially offset by proceeds from the May
1998 equity offering.  Interest and investment  income increased over prior year
primarily due to increased gains realized on sales of marketable securities from
the  American  Home  Shield  portfolio.  The tax  provision  reflects  a  higher
effective   tax  rate   compared  to  last  year,   which   reflects   increased
non-deductible intangible amortization expense.

                                       12
<PAGE>
FINANCIAL POSITION
------------------

Net cash provided from  operations  of $28 million was  significantly  below the
first six months of 1998.  The decrease  primarily  reflects the deferral of the
1998 federal tax payment  until March of 1999.  Federal  taxes of $78 million on
the Company's  1998  earnings  were accrued for in the  financial  statements in
1998, but not paid until the first quarter of 1999.  Excluding this tax payment,
cash provided from  operations was comparable to 1998 at $106 million.  (Some of
the tax expense in 1998 and 1999 will be deferred for longer periods of time due
to the  significant  timing  difference  between book and tax basis.) Due to the
seasonality of the lawn care, landscape,  and pest control operating cycles, the
Company's working capital needs are higher during the first half of the year and
have a significant  impact on funds provided from  operations.  Working  capital
needs  increased  in the first six  months of 1999  over  1998,  reflecting  the
significant growth in the Company's seasonal businesses,  especially landscaping
operations which primarily experienced increases in receivables and in inventory
levels.  Management  believes that funds  generated  from  operations  and other
existing  resources  will  continue to be adequate  to satisfy  ongoing  working
capital needs of the Company.

Accounts  and notes  receivable  grew over year end levels,  reflecting  general
business  growth,  increased  seasonal  activity in the Consumer and  Commercial
Services segment, and acquisitions, primarily LandCare and ARS. Inventories also
increased over year end levels as a result of normal  seasonal  build-ups in the
lawn care business and acquisitions.

Prepaids and other assets have increased from year end because of seasonality in
the  lawn  care  business  and   acquisitions  in  the  landscape  and  plumbing
operations.  The lawn care  operation  defers certain  marketing  costs that are
incurred during the first six months, but are directly  associated with revenues
realized  in  subsequent  quarters  of the  current  year.  These costs are then
amortized over the balance of the current lawn care  production  season,  as the
related revenues are recognized.

Deferred revenues also grew significantly,  reflecting strong growth at American
Home Shield,  increases in customer  prepayments  for lawn care and pest control
services, and the acquisition of ARS. Accrued liabilities and payables increased
from year end, primarily due to the acquisition  activity and seasonality of the
business.

Property  and   equipment   increased  due  to  general   business   growth  and
acquisitions,  primarily LandCare and ARS. Capital expenditures grew, reflecting
increased  investments  in  technology  throughout  the  organization,  business
growth,  and  recurring  capital  needs.  The Company  has no  material  capital
commitments at this time.

Total acquisitions in the first half of the year were approximately $789 million
($603  million  of which  was from the  LandCare  USA and  American  Residential
Services acquisitions).  Approximately one-third of the acquisitions were in the
form of  shares.  Intangible  assets  increased  $487  million  from  year  end,
reflecting  the effect of the  acquisitions,  which  included  $260 million from

                                       13
<PAGE>
LandCare, $213 million from ARS and various smaller acquisitions in the Consumer
and Commercial Services segment.

Debt levels increased due to the seasonal nature of the Company's operating cash
flows and the 1998 tax payment,  combined with the effects of  acquisitions  and
property  additions.  The  Company  is  party  to a  number  of  long-term  debt
agreements  which  require it to  maintain  compliance  with  certain  financial
covenants,  including  limitations on indebtedness,  restricted payments,  fixed
charge  coverage  ratios,  and net worth.  The Company is in compliance with the
covenants related to these debt agreements.

In August 1999, the Company  completed a senior  unsecured debt offering of $250
million,  7.875  percent  notes  priced to yield 7.98 percent and due August 15,
2009.  The  net  proceeds  will be used to  repay  a  portion  of the  Company's
borrowings  under its  revolving  bank credit  facility,  thereby,  reducing the
Company's exposure to short term interest rate fluctuations.

Total  shareholders'  equity increased to $1.2 billion in 1999 from $956 million
at December 31, 1998,  reflecting  earnings  growth as well as the shares issued
for  acquisitions,  partially  offset  by  cash  dividends  and  treasury  share
repurchases. Cash dividends paid directly to shareholders totaled $55 million or
$.18 per share.  The increase from the prior year reflects a 12 percent increase
in the dividend rate per share and an increase in shares outstanding,  primarily
resulting from the May 1998 equity offering and shares issued in acquisitions.


YEAR 2000 READINESS DISCLOSURE
------------------------------

Year 2000 Compliance.  Certain computer programs use two digits rather than four
to define the applicable year and consequently may not function  properly beyond
the year 1999 unless they are remediated.  In addition,  some computer  programs
are unable to recognize  the year 2000 as a leap year.  These  problems may also
exist in chips embedded in various types of equipment. The Company has long been
aware of this Year 2000 (Y2K)  problem.  The  Company  is  dealing  with the Y2K
problem in part  through  system  upgrades,  which were  planned to occur in the
normal  course of business.  In other cases,  the Company has put programs  into
place which the Company  believes  will result in the  completion  of  necessary
remediation efforts prior to the year 2000.

State of Readiness.  The Company has initiated a program (the "Y2K  program") to
address  Y2K issues as they affect the  Company's  information  technology  (IT)
systems,  electronic data  interfaces and its non-IT hardware and services.  The
Y2K program was set up to use the following  steps as  appropriate:  inventory -
assessment - planning - renovation - testing - implementation.  In addition, the
program  calls for  inquiries  of the  Company's  major  suppliers  of goods and
services  to  determine   their  Y2K  status  and  a  review  of  the  Company's
relationships   with  its   customers  to  determine  if  the  Company  has  any
responsibility  for the status of the  customers' IT and/or  non-IT  systems and
hardware.

In 1998,  the  Company  began to monitor  its  progress  on the Y2K program on a
consolidated  basis and completed an inventory  which covered both IT and non-IT
items  for  all  operating   companies  and  administrative   units  within  the
ServiceMaster enterprise.  All items in the inventory were placed in one of four

                                       14
<PAGE>
categories:  mission  critical,  critical,  important,  and ordinary  within the
context of the operating  company or administrative  unit involved.  (A "mission
critical" or "critical"  designation for an item within an operating  company or
administrative unit does not necessarily hold the same level of criticality from
the perspective of the entire ServiceMaster enterprise.)

Remediation  plans have been  developed  for the mission  critical  and critical
matters,  with milestones  established for each plan which enable  management to
measure  the  progress  made in  respect  of a plan  against  the work  schedule
established  for that plan.  Although  these  plans  encompass  many  separately
identifiable items, from a ServiceMaster  enterprise standpoint,  there are nine
projects (the "Key Projects")  which management has identified as either mission
critical or critical and which have required a measurable amount of attention to
remediate.  Although all of the Key Projects are scheduled for completion before
the end of the year 1999,  most of the Key Projects  were  completed by June 30,
1999.  As of August  10,  1999,  work on each of the Key  Projects  not  already
completed was on schedule and the Company believes that all Key Projects will be
completed in accordance with their scheduled completion dates.

The Company  utilized the services of an outside  consultant for the Y2K program
to help  identify  Y2K  issues  and to  develop  a  system  to  closely  monitor
remediation work. In early 1998, the Company  established a Y2K committee in the
parent unit with  responsibility  for  monitoring the Y2K program in each of the
Company's  operating  units and for  providing  status  reports  to the Board of
Directors.

In addition to the Key Projects,  remediation  plans were developed for LandCare
USA, Inc. and American  Residential  Services,  which were acquired in March and
April of 1999, respectively.  In both cases, the companies have extensive branch
networks, which operate on a variety of different platforms. The Company intends
to remediate  these  branches by  implementing a common  operating  system where
possible by year end, and  implementing  Y2K upgrades to the existing systems in
the other  branches.  At this time,  the Company does not expect Y2K problems to
occur as a result of the 1999  acquisitions  which will have a material  adverse
effect on the ServiceMaster enterprise.

Year 2000 Costs.  Several of the Key Projects are upgrades of systems  which the
Company would have undertaken  irrespective  of the Y2K problem.  In some cases,
including a new accounting and financial reporting system for the parent company
and  its  Management  Services  subsidiary,  work  on  these  systems  has  been
accelerated  in view of Y2K issues.  Other  upgrades or new systems were already
scheduled for  completion  prior to the year 2000,  such as a new support system
for the  Company's  American Home Shield  subsidiary  and a new  accounting  and
billing system for the recently developed  commercial  landscape business within
the Company's TruGreen-ChemLawn subsidiary.

References  to "Year  2000  costs" in this  report do not  include  the costs of
projects for which no acceleration is occurring due to Y2K issues. The Company's
Year  2000  costs to date are not  material  to its  results  of  operations  or
financial position and the Company does not expect its future Year 2000 costs to
be material to the Company's  results of operations or financial  position.  All
Year 2000 costs (as well as the costs of installing the system upgrades referred

                                       15

<PAGE>
to above) have been,  and are expected to continue to be,  funded with cash from
operations.

Year 2000 Risks.  The Company  believes that its greatest risk in respect of the
Year 2000  problem,  is that key third party  suppliers of goods or services may
fail to complete  their own  remediation  efforts in a timely manner and thereby
provoke an interruption in the ability of one or more of the operating  segments
of the Company to provide  uninterrupted  services to their  customers.  Utility
services (electrical,  water and gas), telephone service,  banking services and,
to a much lesser degree, the delivery of certain products are the critical items
in this regard.  Based on the Company's  inquiries to its providers of goods and
services as well as on the basis of the Company's general knowledge of the state
of readiness of the utility companies and banks with which it does business, the
Company does not expect to suffer any material  interruption  in the services on
which the Company and its customers depend.

The Company has reviewed its agreements with certain of its customers, including
particularly the customers of its Management  Services units for whom such units
provide facility  management  services.  The Company is satisfied that it is not
responsible, contractually or otherwise, for the Y2K readiness of the customer's
IT and non-IT  systems and  hardware,  and the Company has  notified  all of its
customers to this effect  where,  in the Company's  judgment,  the nature of the
customers' business or facility warranted such notices.

Where the Company uses its own  software in the course of  providing  management
services,  the  Company is  responsible  to make such  software  Y2K ready.  The
Company is confident that such software is already,  or soon will be, Y2K ready.
For those units of the Company which sell franchises and which provide  software
to the franchisees,  such software is already,  or soon will be, fully Y2K ready
or,  alternatively,  provision has been made for making available to franchisees
software from  third-party  developers from whom appropriate Y2K assurances have
been or will be received.

Contingency  Plans.  At this time, the Company fully expects all of its internal
key IT and non-IT systems to be Y2K ready well in advance of the end of the year
1999.  If  it  appears  that  timely  delivery  of  any  Key  Projects   becomes
questionable,  the Company  will  immediately  develop  appropriate  contingency
plans.

The  Company  presently  expects  that its  significant  providers  of goods and
services are or will be Y2K ready by the end of the year 1999.  The Company will
continue to make  inquires of its key  suppliers for the purpose of testing this
expectation.  Insofar as the  Company is  exposed  to risks  originating  in Y2K
problems at key suppliers, the Company will utilize short-term solutions, but no
practical  long-term  contingency  plans for these  external  Y2K  problems  are
possible.

Although the Company believes that its own critical  remediation efforts will be
completed  prior to the Year 2000,  the untimely  completion of Y2K  remediation
efforts  by third  parties  could,  in  certain  circumstances,  have a material
adverse effect on the operations of the Company.

                                       16

<PAGE>
Definition.  As used in this Year 2000 Readiness Disclosure Statement,  the term
"year 2000 ready" or "Y2K ready" when used with  reference to a item of software
or  equipment  means the  capability  of the  software or  equipment  to process
correctly  (including  calculating,   comparing,   sequencing,   displaying,  or
storing),  transmit,  or receive date data from,  into, and between the 20th and
21st  centuries,  and  during  the years  1999 and  2000,  and to make leap year
calculations,  provided  that all  products  used with the software or equipment
properly exchange accurate date data with it.

                                       17
<PAGE>


                           PART II. OTHER INFORMATION

Item 1:  Legal Proceedings

In  the  ordinary  course  of its  business  activities,  ServiceMaster  becomes
involved in judicial and  administrative  proceedings  that involve both private
parties and governmental  authorities.  As of August 13, 1999, these proceedings
included  a number of  general  liability  actions  and a very  small  number of
environmental  proceedings,  none  of  which  was  material  to  ServiceMaster's
financial condition or results of operations.

American Home Shield of Texas  Litigation.  A  lawsuit  was  filed  in  November
1997 in the  District  Court of  Harris  County,  Texas  against  ServiceMaster,
ServiceMaster's   American  Home  Shield  subsidiary   ("AHS")  and  AHS'  Texas
subsidiary ("AHS-Texas") in which the plaintiffs claimed that AHS-Texas violated
certain  provisions of two Texas consumer  protection  statutes in the course of
soliciting  new and  renewal  home  systems  and  appliance  warranty  contracts
("warranty contracts") (Kortz et. al. v. American Home Shield of Texas, et. al.,
originally filed under the name Lugrin et. al. v. American Home Shield of Texas,
et. al). A second lawsuit making similar allegations was filed in the same court
(Thorn v.  American  Home Shield of Texas,  et. al) but this second  lawsuit was
abated to the extent that any issues therein overlapped with issues litigated in
the Lugrin case. In April 1999,  AHS-Texas filed an interlocutory  appeal of the
District Court's certification of two sub-classes in the Lugrin case. While this
appeal was pending the Texas Legislature  enacted H.B. No. 1521 and, on June 19,
1999,  the Governor of Texas signed this  legislation  into law.  H.B. No. 1521,
which was effective immediately, amends the private right of action under one of
the two statutes upon which plaintiffs base their claims by removing a statutory
$1,000 penalty provision. The enactment of H.B. 1521 has the effect of requiring
the  plaintiffs  in the Lugrin and Thorn cases to prove that they were  actually
harmed in order to recover damages.  ServiceMaster  believes that the plaintiffs
have not been harmed by the conduct  that they have  alleged  and, in any event,
that the  AHS-Texas  warranty  contracts  comply  with Texas  law.  Accordingly,
ServiceMaster  believes that the ultimate outcome of the Lugrin and Thorne cases
will not be  material  to  ServiceMaster's  financial  condition  or  results of
operations.








In accordance  with the Private  Securities  Litigation  Reform Act of 1995, the
Company  notes  that  statements  that  look  forward  in  time,  which  include
everything other than historical  information,  involve risks and  uncertainties
that may affect the Company's actual results of operations.  Factors which could
cause actual results to differ materially  include the following (among others):
weather  conditions  adverse to certain of the Company's Consumer and Commercial
Services businesses, labor shortages, the entry of additional competitors in any
of the  markets  served  by  the  Company,  consolidation  of  hospitals  in the
healthcare  market,  the  condition of the U.S.  economy,  the  inability of key
suppliers to achieve  timely Y2K  compliance  in their  delivery  systems or the
inability  of the  Company  to make its own  systems  Y2K  compliant,  and other
factors  listed from time to time in the Company's  filings with the  Securities
and Exchange Commission.

                                       18


<PAGE>
                                      SIGNATURE


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.

Date:  August 13, 1999


                          THE SERVICEMASTER COMPANY
                          (Registrant)

                          By:                    /s/Steven C. Preston
                          ----------------------------------------------------
                                                    Steven C. Preston
                          Executive Vice President and Chief Financial Officer




                                       19
<PAGE>