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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
 Washington, D.C. 20549
 FORM 10-K
  þ
    
    ANNUAL REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934
 For the fiscal year ended June 30, 2011
 or
 o
    
    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: 001-34594
 TOWERS WATSON & CO.
  Delaware
(State or other jurisdiction of 
incorporation or organization)
    
    27-0676603
(I.R.S. Employer
Identification No.)
 875 Third Avenue, New York, NY 10022
 (212) 725-7550
 Securities registered pursuant to Section 12(b) of the Act:
 Title of each class
    
    Name of each exchange on which registeredClass A Common Stock, $0.01 par value
    
    New York Stock Exchange and
NASDAQ Global Select Market
 Securities registered pursuant to Section 12(g) of the Act:
 þ o
 o þ
 þ o
 o o
 o
  Large accelerated filer þ
    
    Accelerated filer o
    
    Non-accelerated filer o
    
    Smaller reporting company o(Do not check if a smaller reporting company)
 o þ
   DOCUMENTS INCORPORATED BY REFERENCE:




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##### 



TOWERS WATSON & CO.
INDEX TO ANNUAL REPORT ON FORM 10-K
   
 PagePART I.Item 1. Business
    
    
    3Item 1A. Risk Factors
    
    
    11Item 1B. Unresolved Staff Comments
    
    
    25Item 2. Properties
    
    
    25Item 3. Legal Proceedings
    
    
    25Item 4. (Removed and Reserved)
    
    
    25PART II.Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
    
    
    25Item 6. Selected Financial Data
    
    
    30Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations
    
    
    37Item 7A. Quantitative and Qualitative Disclosures about Market Risk
    
    
    56Item 8. Financial Statements and Supplementary Data
    
    
    57Item 9. Changes in and Disagreements With Accountants on Accounting and Financial Disclosure
    
    
    57Item 9A. Controls and Procedures
    
    
    57Item 9B. Other Information
    
    
    60PART III.Item 10. Directors, Executive Officers and Corporate Governance
    
    
    60Item 11. Executive Compensation
    
    
    60Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
    
    
    60Item 13. Certain Relationships and Related Transactions, and Director Independence
    
    
    60Item 14. Principal Accounting Fees and Services
    
    
    61PART IV.Item 15. Exhibits and Financial Statement Schedules
    
    
    61Signatures
    
    
    62Report of Independent Registered Public Accounting Firm
    
    
    63Consolidated Financial StatementsConsolidated Statements of OperationsFiscal year ended June 30, 2011, 2010, and 2009
    
    
    64Consolidated Balance SheetsJune 30, 2011 and June 30, 2010
    
    
    65Consolidated Statements of Cash FlowsFiscal year ended June 30, 2011, 2010, and 2009
    
    
    66Consolidated Statement of Changes in EquityFiscal year ended June 30, 2011, 2010, and 2009
    
    
    67Notes to the Consolidated Financial Statements
    
    
    68Certifications
    
    
    118EX-10.20EX-21.1EX-23.1EX-31.1EX-31.2EX-32.1




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Special Note Regarding Forward-Looking Statements
  
 PART I
 
 Item 1. Business.
 The Company
    The Merger
   3




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Business Overview
     The Wall Street Journal The
New York Times Financial Times BBC News CNBC
  4




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Principal Services
   Year ended June 30,2011
    
    
    2010
    
    
    2009Benefits
    
    
    59
    %
    
    
    64
    %
    
    
    69
    %Risk and Financial Services
    
    
    24
    
    
    
    21
    
    
    
    17Talent and Rewards
    
    
    17
    
    
    
    15
    
    
    
    14Total Segment Revenue
    
    
    100
    %
    
    
    100
    %
    
    
    100
    %
  Benefits Segment
   
    
    Retirement;
    
    Health and Group Benefits;
    
    Technology and Administration Solutions; and
    
    International Consulting.
 Retirement
    
    
    Retirement strategy and plan design;
    
    Actuarial services and related support;
    
    Retirement financial management;
    
    Settlement solutions;
    
    Compliance and governance strategies;
    
    Risk management; and
    
    Defined contribution solutions.
 5




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Health and Group Benefits
      
    
    Program strategy, design and pricing;
    
    Health condition management consulting;
    
    Pharmacy benefit management consulting;
    
    Workforce well-being evaluation and wellness and health promotion consulting;
    
    Performance measurement and monitoring;
    
    Development of funding strategies and forecasting, budgeting and reserve
setting;
    
    Vendor evaluation, selection and management; and
    
    Claims audits and pre- and post-implementation audits.
 Technology and Administration Solutions
  6




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
    
    Pension and retirement plan administration; and
    
    Health and welfare administration.
     International Consulting
  Risk and Financial Services Segment
  
    
    Risk Consulting and Software;
    
    Investment Consulting and Solutions; and
    
    Reinsurance and Insurance Brokerage.
    7




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Risk Consulting and Software
   
    
    Financial and regulatory reporting
    
    Enterprise risk and capital management
    
    M&A and corporate restructuring (including actuarial valuation, capital
analysis and due diligence)
    
    Product and market strategies (including pricing and predictive modeling)
    
    Financial modeling software and implementation support
    
    Integrated consulting and risk transfer
  Investment Consulting and Solutions
    
    
    Development of investment policy, governance and risk assessment
    
    Investment strategy
    
    Structured products design
    
    Manager structure and selection
    
    Manager monitoring and evaluation; performance reporting
    
    Implemented consulting
  8




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Reinsurance and Insurance Brokerage
   
    
    Reinsurance strategy and program review
    
    Claims management and program administration
    
    Catastrophe exposure management
    
    Contract negotiation and placement
    
    Market security evaluation and monitoring
    
    Integrated consulting and risk transfer
   Talent and Rewards Segment
  
    
    Executive Compensation;
    
    Rewards, Talent and Communication; and
    
    Data, Surveys and Technology.
 Executive Compensation
   Rewards, Talent and Communication
  9




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
    
    Talent Management. We help organizations develop integrated programs and
processes to identify clients leadership and workforce needs, develop leaders and
employees, and provide performance management to align goals and incentives for those
employees and leaders with the critical drivers of business performance. Also within this
practice, our human resources effectiveness services help clients implement the right human
resources structure, service delivery model and staff to meet the needs of both the
organization and employees efficiently and effectively.
    
    Rewards. We provide the strategy, design and execution support for compensation
programs to help clients optimize their reward spend and ensure their programs drive the
behaviors and performance required to meet key business goals. Within this practice, we
also have a sales effectiveness and rewards service offering focused on sales force
productivity and incentives.
    
    Communication and Change Management. We offer deep expertise in change
management, organizational effectiveness and communication to support our consulting
services and help drive employee engagement and align behavior with business results.
 Data, Surveys and Technology
     
    
    Talent|REWARD, an integrated suite of applications that covers recruiting,
performance management, global job leveling, compensation planning and administration,
succession planning, career development, and learning management
    
    Total Rewards portals and statements
    
    Onboarding applications
    
    HR portals
    
    AnswerKey, a set of tools to help support HR shared services/call centers
 Competition
   10




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Executive Officers of the Company
  Walter W. Bardenwerper (age 60)
 James K. Foreman (age 53)
 Julie J. Gebauer (age 50)
 Patricia L. Guinn (age 56)
 John J. Haley (age 61)
 Mark V. Mactas (age 59)
 11




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Roger F. Millay (age 54)
 Chandrasekhar (Babloo) Ramamurthy (age 55)
 Gene H. Wickes (age 59)
 Employees
  As of June 30,2011
    
    
    2010Benefits
    
    
    6,300
    
    
    
    6,200Risk and Financial Services
    
    
    2,300
    
    
    
    2,000Talent and Rewards
    
    
    2,100
    
    
    
    2,000Other
    
    
    300
    
    
    
    200Business Services (incl. Corporate and field support)
    
    
    2,100
    
    
    
    2,400Total associates
    
    
    13,100
    
    
    
    12,800
 Access to Public Filings, Code of Business Conduct and Ethics and Board Committee Charters
  12




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Item 1A   Risk Factors.
  If we are not able to successfully integrate the operations of Towers Perrin and Watson Wyatt, we
may fail to realize the anticipated growth opportunities and other anticipated benefits of the
Merger.
  
    
    Loss of key officers and employees;
    
    Loss of key clients;
    
    Loss of revenues; and
    
    Increases in operating, tax or other costs.
  The effects of the Merger may be dilutive to our earnings per share in the short term, and our
estimates of the operational cost savings we expect to result from the Merger and of the costs we
expect will be required to achieve such savings are inherently uncertain and may not be accurate,
and we may not be able to achieve the operational cost savings in the expected time frame or at
all.
  13




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Changes in Towers Watsons compensation structure relative to each of Towers Perrins and Watson
Wyatts current compensation structures could impair Towers Watsons ability to retain certain
current associates of each of Towers Perrin and Watson Wyatt.
  The loss of key associates could damage or result in the loss of client relationships and could
result in such associates competing against Towers Watson.
   Our clients could terminate or reduce our services at any time, which could decrease associate
utilization, adversely impacting our profitability and results of operations.
  Our quarterly revenues could fluctuate while our expenses are relatively fixed.
  
    
    The significance of client engagements commenced and completed during a
quarter;
    
    The seasonality of certain types of services. For example, our retirement
revenues typically are more heavily weighted toward the first and fourth quarters of the
calendar year, when annual actuarial valuations are required to be completed for calendar
year-end companies and the related services are performed;
    
    The number of business days in a quarter;
    
    Associate hiring and utilization rates;
    
    Clients ability to terminate engagements without penalty;
    
    The size and scope of assignments; and
    
    General economic conditions.
  14




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Improper management of our engagements could hurt our financial results.
  The trend of employers shifting from defined benefit plans to defined contribution plans could
materially adversely affect our business and results of operations.
  Our business will be negatively affected if we are not able to anticipate and keep pace with rapid
changes in government regulations or if government regulations decrease the need for our services
or increase our costs.
    Our business could be negatively affected by currently proposed or future legislative or regulatory
activity concerning compensation consultants.
   15




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Competition could result in loss of our market share and reduced profitability.
  Consolidation in the industries that we serve could materially adversely affect our business.
  We are subject to risks of doing business internationally.
  
    
    Currency exchange rate fluctuations;
    
    Unexpected increases in taxes or changes in U.S. or foreign tax laws;
    
    Compliance with a variety of international laws and regulations, such as data
privacy, employment regulations, trade barriers and restrictions on the import and export
of technologies, as well as U.S. laws affecting the activities of U.S. companies abroad,
including the Foreign Corrupt Practices Act of 1977 and sanctions programs administered by
the U.S. Department of the Treasury Office of Foreign Assets Control, and similar foreign
laws such as the U.K. Bribery Act;
    
    Absence in some jurisdictions of effective laws to protect our intellectual
property rights;
    
    New regulatory requirements or changes in policies and local laws that
materially affect the demand for our services or directly affect our foreign operations;
    
    Local economic and political conditions, including unusual, severe, or
protracted recessions in foreign economies and inflation risk;
    
    The length of payment cycles and potential difficulties in collecting accounts
receivable, particularly in light of the number of insolvencies in the current economic
environment and the numerous bankruptcy laws to which they are subject;
    
    Unusual and unexpected monetary exchange controls, price controls or
restrictions on transfers of cash; or
 16




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
    
    Civil disturbance, terrorism or other catastrophic events that reduce business
activity in other parts of the world.
  Our inability to successfully recover should we experience a disaster or other business continuity
problem could cause material financial loss, loss of human capital, regulatory actions,
reputational harm or legal liability.
    Demand for our services could decrease for various reasons, including a general economic downturn,
a decline in a clients or an industrys financial condition or prospects, or a decline in defined
benefit pension plans that could materially adversely affect our results of operations.
    The unaudited pro forma financial data included in this Annual Report are illustrative and the
actual financial condition and results of operations of Towers Watson may differ materially from
the historical financial statements of Watson Wyatt and the unaudited pro forma financial data
included in this Annual Report.
  17




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Our growth strategy depends, in part, on our ability to make acquisitions, and if we have
difficulty in acquiring, overpay for, or are unable to acquire other businesses, our business may
be materially adversely affected.
  We face risks when we acquire businesses, and may have difficulty integrating or managing acquired
businesses, which may harm our business, financial condition, results of operations or reputation.
   
    
    Diversion of management attention;
    
    Amortization of intangible assets, adversely affecting our reported results of
operations;
    
    Inability to retain the management, key personnel and other employees of the
acquired business;
    
    Inability to establish uniform standards, controls, systems, procedures and
policies;
    
    Inability to retain the acquired companys clients;
    
    Exposure to legal claims for activities of the acquired business prior to
acquisition; and
    
    Incurrence of additional expenses in connection with the integration process.
  Damage to our reputation could damage our businesses.
   We could be subject to claims arising from our work, as well as government inquiries and
investigations, which could materially adversely affect our reputation, business and financial
condition.
  18




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
    
    Claims that actuarial assumptions were unreasonable or that there were
computational errors leading to pension plan underfunding or under-reserving for insurance
claim liabilities;
    
    Claims of failure to review adequately or detect deficiencies in data, which
could lead to an underestimation of pension plan or insurance claim liabilities; and
    
    Claims that employee benefit plan documents were misinterpreted or plan
amendments were faulty, leading to unintended plan benefits or overpayments to
beneficiaries.
     We advise or act on behalf of clients regarding investments whose results are not guaranteed, and
clients that experience investment return shortfalls may assert claims against us.
  Our investment activities may require specialized operational competencies, and if we fail to
properly execute our role in cash and investment management, our clients or third parties may
assert claims against us.
  Towers Watson may be engaged in providing services outside the core human capital and risk
management business currently conducted by Towers Perrin and Watson Wyatt, which may carry greater
risk of liability.
  19




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Our business faces rapid technological change, and our failure to respond to this change quickly
could materially adversely affect our business.
   Limited protection of our intellectual property could harm our business, and we face the risk that
our services or products may infringe upon the intellectual property rights of others.
  We could have liability or our reputation could be damaged if we do not protect client data or
information systems or if our information systems are breached.
  Insurance may become more difficult or expensive to obtain.
  Towers Watson and its subsidiaries could encounter significant obstacles in securing adequate
insurance coverage for errors and omissions liability risks on favorable or acceptable terms.
  20




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We have material pension liabilities that can fluctuate significantly.
  Towers Perrin and Towers Watson are defendants in several lawsuits commenced by former Towers
Perrin shareholders.
 Dugan Action Dugan Action
 Dugan
Action Allen Action Dugan Action
 Pao Action Dugan Action Dugan Action
  21




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Our reinsurance brokerage business could be subject to claims arising from its work, which could
materially adversely affect our reputation and business.
   
    
    Place the reinsurance coverage requested by the client;
    
    Report claims on a timely basis or as required by the reinsurance contract or
program;
    
    Communicate complete and accurate information to reinsurers relating to the
risks being reinsured; or
    
    Appropriately model or advise our clients in relation to the extent and scope
of reinsurance coverage that is advisable for a clients needs.
  Reinsurance brokerage revenue is influenced by factors that are beyond our control, and volatility
or declines in premiums or other trends in the insurance and reinsurance markets could
significantly undermine the profitability of our reinsurance brokerage business.
    We may not be able to obtain financing on favorable terms or at all.
  Our revolving credit facility contains a number of restrictive covenants that restrict our
operations.
  
    
    Incur liens or additional indebtedness (including guarantees or contingent
obligations);
    
    Engage in mergers and other fundamental changes;
 22




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
    
    Sell or otherwise dispose of property or assets;
    
    Pay dividends and other distributions; and
    
    Change the nature of our business.
    We rely on third parties to provide services and their failure to perform the services could harm
our business.
  We are a holding company and, therefore, may not be able to receive dividends or other
distributions in needed amounts from our subsidiaries.
    Changes in our accounting estimates and assumptions could negatively affect our financial position
and results of operations.
  Our accounting for our long-term outsourcing contracts requires using estimates and projections
that may change over time. These changes may have a significant or adverse effect on our reported
results of operations or financial condition.
  23




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The stock price of Class A common stock may be volatile.
  
    
    General market and economic conditions, including market conditions in the
human capital and risk and financial management consulting industries and regulatory
developments in the United States, foreign countries or both;
    
    Actual or expected variations in our quarterly results of operations and in the
quarterly results of operations of companies perceived to be similar to us;
    
    Differences between actual results of operations and those expected by
investors and analysts;
    
    Changes in recommendations by securities analysts;
    
    Operations and stock performance of competitors;
    
    Accounting charges, including charges relating to the impairment of goodwill or
other intangible assets;
    
    Significant acquisitions, dispositions or strategic alliances by us or by
competitors;
    
    Sales of the Class A common stock, including sales by our directors and
officers or significant investors;
    
    Incurrence of additional debt;
    
    Dilutive issuance of equity;
    
    Recruitment or departure of key personnel;
    
    Loss or gain of key clients;
    
    Litigation involving us, our general industry or both; and
    
    Changes in reserves for professional liability claims.
  Shares of Towers Watson common stock eligible for public sale could adversely affect the stock
price.
     We will only pay dividends if and when declared by our board of directors.
  24




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We have various mechanisms in place that could prevent a change in control that a stockholder might
favor.
  
    
    Authorize the issuance of preferred stock without fixed characteristics, which
could be issued by our board of directors pursuant to a stockholder rights plan and deter a
takeover attempt;
    
    Provide that only the Chief Executive Officer, President or our board of
directors may call a special meeting of stockholders;
    
    Limit business at special stockholder meetings to such business as is brought
before the meeting by or at the direction of our board of directors;
    
    Prohibit stockholder action by written consent, and require all stockholder
actions to be taken at an annual or special meeting of the stockholders;
    
    Provide our board of directors with exclusive power to change the number of
directors;
    
    Provide that all vacancies on our board of directors, including new
directorships, may only be filled by a resolution adopted by a majority of the directors
then in office;
    
    Do not opt out of Section 203 of the Delaware General Corporation Law, which
prohibits business combinations between a corporation and any interested stockholder for a
period of three years following the time that such stockholder became an interested
stockholder;
    
    Require a supermajority vote for the stockholders to amend the bylaws; and
    
    Prohibit any stockholder from presenting a proposal or director nomination at
an annual stockholders meeting unless such stockholder provides us with sufficient advance
notice.
 
 Item 1B. Unresolved Staff Comments.
  
 Item 2. Properties.
   
 Item 3. Legal Proceedings.
  
 Item 4. (Removed and Reserved).
 
 Part II
 
 Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities.
 Market Information
   25




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High
    
    
    LowFiscal Year 2010Third quarter (January 4, 2010 - March 31, 2010)
    
    $
    51.48
    
    
    $
    42.72Fourth quarter (April 1, 2010 - June 30, 2010)
    
    $
    50.00
    
    
    $
    38.85Fiscal Year 2011First quarter (July 1, 2010 - September 30, 2010)
    
    $
    49.18
    
    
    $
    38.35Second quarter (October 1, 2010 - December 31, 2010)
    
    $
    53.47
    
    
    $
    48.96Third quarter (January 1, 2011 - March 31, 2011)
    
    $
    58.80
    
    
    $
    52.89Fourth quarter (April 1, 2011 - June 30, 2011)
    
    $
    65.71
    
    
    $
    54.33Fiscal Year 2012First quarter (July 1, 2011 - August 17, 2011)
    
    $
    66.38
    
    
    $
    52.26
 Holders
  Dividends
    Performance Graph
   26




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6/06
    
    
    6/07
    
    
    6/08
    
    
    6/09
    
    
    12/09Watson Wyatt Worldwide, Inc.
    
    
    100.00
    
    
    
    144.59
    
    
    
    152.40
    
    
    
    108.84
    
    
    
    138.27NYSE Composite
    
    
    100.00
    
    
    
    123.47
    
    
    
    110.83
    
    
    
    77.89
    
    
    
    95.83Old Peer Group
    
    
    100.00
    
    
    
    136.48
    
    
    
    131.57
    
    
    
    107.63
    
    
    
    128.46New Peer Group
    
    
    100.00
    
    
    
    128.21
    
    
    
    124.12
    
    
    
    101.13
    
    
    
    115.09
 27




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1/4/10
    
    
    6/30/10
    
    
    6/30/11Towers Watson & Co.
    
    
    100.00
    
    
    
    77.96
    
    
    
    132.60NYSE Composite
    
    
    100.00
    
    
    
    91.14
    
    
    
    120.29Old Peer Group
    
    
    100.00
    
    
    
    93.03
    
    
    
    142.18New Peer Group
    
    
    100.00
    
    
    
    96.64
    
    
    
    143.04
    Issuer Purchases of Equity Securities
  28




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Total Number of Shares
    
    
    Maximum Number ofTotal Number
    
    
    
    
    
    
    Purchased as Part of
    
    
    Shares that May Yet Beof Shares
    
    
    Average Price Paid
    
    
    Publicly Announced Plans
    
    
    Purchased Under the PlansPeriod
    
    Purchased (a)
    
    
    per Share
    
    
    or Programs
    
    
    or Programs (b)April 1, 2011 through April 30, 2011
    
    
    33,000
    
    
    
    55.19
    
    
    
    33,000
    
    
    
    2,128,838May 1, 2011 through May 31, 2011
    
    
    36,000
    
    
    
    59.48
    
    
    
    36,000
    
    
    
    2,092,838June 1, 2011 through June 30, 2011
    
    
    334,489
    
    
    
    61.93
    
    
    
    334,489
    
    
    
    1,758,349403,489
    
    
    
    
    
    
    
    403,489
    
    
    
    1,758,349
 
 (a)
    
    Of the 403,489 shares of Class A common stock repurchased in the fourth quarter of fiscal
year 2011, 54,000 shares were repurchased under the plan approved by our Board of Directors
during the third quarter of fiscal year 2010. The remaining 349,489 shares were repurchased
under the plan approved by our Board of Directors during the second quarter of fiscal year
2011.(b)
    
    The maximum number of shares that may yet be purchased under our plans includes the
remaining shares under our two stock repurchase plans. An estimate of the maximum number of
shares under the repurchase of up to $100 million of 1,521,838 shares was determined using the
closing price of our stock on June 30, 2011 of $65.71. 29




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Item 6. Selected Consolidated Financial Data
  Statement of Operations Data:
    
    Year Ended June 30,(amounts are in thousands, except per share data)
    
    2011
    
    
    2010 (a)
    
    
    2009
    
    
    2008
    
    
    2007Revenue
    
    $
    3,259,451
    
    
    $
    2,387,829
    
    
    $
    1,676,029
    
    
    $
    1,760,055
    
    
    $
    1,486,523Costs of providing services:Salaries and employee benefits
    
    
    2,043,063
    
    
    
    1,540,417
    
    
    
    1,029,299
    
    
    
    1,052,992
    
    
    
    879,341Professional and subcontracted services
    
    
    246,348
    
    
    
    163,848
    
    
    
    119,323
    
    
    
    138,983
    
    
    
    116,527Occupancy
    
    
    144,191
    
    
    
    109,454
    
    
    
    72,566
    
    
    
    83,255
    
    
    
    75,704General and administrative expenses
    
    
    281,576
    
    
    
    220,937
    
    
    
    172,010
    
    
    
    185,624
    
    
    
    178,411Depreciation and amortization
    
    
    130,575
    
    
    
    101,084
    
    
    
    73,448
    
    
    
    72,428
    
    
    
    57,235Transaction and integration expenses
    
    
    100,535
    
    
    
    87,644
    
    
    
    
    
    
    
    
    
    
    
    2,946,288
    
    
    
    2,223,384
    
    
    
    1,466,646
    
    
    
    1,533,282
    
    
    
    1,307,218Income from operations
    
    
    313,163
    
    
    
    164,445
    
    
    
    209,383
    
    
    
    226,773
    
    
    
    179,305Income/(Loss) from affiliates
    
    
    1,081
    
    
    
    (1,274
    )
    
    
    8,350
    
    
    
    2,325
    
    
    
    (5,500
    )Interest income
    
    
    5,523
    
    
    
    2,950
    
    
    
    2,022
    
    
    
    5,584
    
    
    
    4,066Interest expense
    
    
    (12,475
    )
    
    
    (7,508
    )
    
    
    (2,778
    )
    
    
    (5,977
    )
    
    
    (1,581
    )Other non-operating income
    
    
    19,349
    
    
    
    11,304
    
    
    
    4,926
    
    
    
    464
    
    
    
    178Income before income taxes
    
    
    326,641
    
    
    
    169,917
    
    
    
    221,903
    
    
    
    229,169
    
    
    
    176,468Provision for income taxes
    
    
    129,916
    
    
    
    50,907
    
    
    
    75,276
    
    
    
    73,470
    
    
    
    60,193Net income before non-controlling interests
    
    
    196,725
    
    
    
    119,010
    
    
    
    146,627
    
    
    
    155,699
    
    
    
    116,275Net income/(loss) attributable to
non-controlling interests
    
    
    2,288
    
    
    
    (1,587
    )
    
    
    169
    
    
    
    258
    
    
    
    Net income attributable to controlling interests
    
    $
    194,437
    
    
    $
    120,597
    
    
    $
    146,458
    
    
    $
    155,441
    
    
    
    116,275Earnings per share: net income attributable
to controlling interests:Basic
    
    $
    2.62
    
    
    $
    2.04
    
    
    $
    3.43
    
    
    $
    3.65
    
    
    $
    2.74Diluted
    
    $
    2.62
    
    
    $
    2.03
    
    
    $
    3.42
    
    
    $
    3.50
    
    
    $
    2.60Dividends declared per share
    
    $
    0.30
    
    
    $
    0.30
    
    
    $
    0.30
    
    
    $
    0.30
    
    
    $
    0.30Weighted average shares of common stock (000):Basic
    
    
    74,075
    
    
    
    59,257
    
    
    
    42,690
    
    
    
    42,577
    
    
    
    42,413Diluted
    
    
    74,139
    
    
    
    59,372
    
    
    
    42,861
    
    
    
    44,381
    
    
    
    44,684
 Balance Sheet and Other Data:
    
    As of June 30,(amounts are in thousands)
    
    2011
    
    
    2010
    
    
    2009
    
    
    2008
    
    
    2007Cash and cash equivalents
    
    $
    528,923
    
    
    $
    435,927
    
    
    $
    209,832
    
    
    $
    124,632
    
    
    $
    248,186Restricted Cash
    
    
    153,154
    
    
    
    164,539
    
    
    
    
    
    
    
    
    
    
    
    Working capital
    
    
    472,074
    
    
    
    479,521
    
    
    
    231,938
    
    
    
    172,241
    
    
    
    326,354Goodwill and Intangible assets
    
    
    2,638,496
    
    
    
    2,400,782
    
    
    
    728,987
    
    
    
    870,943
    
    
    
    594,651Total assets
    
    
    5,098,950
    
    
    
    4,573,617
    
    
    
    1,626,319
    
    
    
    1,715,976
    
    
    
    1,529,709Revolving credit facility
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    105,000Dividends declared
    
    
    22,846
    
    
    
    17,661
    
    
    
    12,785
    
    
    
    12,768
    
    
    
    12,717Stockholders equity
    
    
    2,591,527
    
    
    
    1,955,607
    
    
    
    853,638
    
    
    
    984,395
    
    
    
    787,519Shares outstanding
    
    
    73,601
    
    
    
    74,204
    
    
    
    42,657
    
    
    
    43,578
    
    
    
    42,299
 
 (a)
    
    Includes the effect of the Merger as of January 1, 2010 30




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##### Table of Contents



Item 7.
    
    Managements Discussion and Analysis of Financial Condition and Results of Operations.
 Executive Overview
 General
   Segments
  Benefits Segment.
  
    
    Retirement;
    
    Health and Group Benefits;
    
    Technology and Administration Solutions; and
    
    International Consulting.
  Risk and Financial Services Segment.
 
    
    Risk Consulting and Software (RCS);
    
    Investment Consulting and Solutions (Investment); and
    
    Reinsurance and Insurance Brokerage (Brokerage).
  31




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##### Table of Contents



Talent and Rewards Segment.
 
    
    Executive Compensation;
    
    Rewards, Talent and Communication; and
    
    Data, Surveys and Technology.
  Financial Statement Overview
   Fiscal YearGeographic Region
    
    2011
    
    
    2010
    
    
    2009United States
    
    
    49
    %
    
    
    52
    %
    
    
    43
    %United Kingdom
    
    
    22
    
    
    
    22
    
    
    
    32Canada
    
    
    6
    
    
    
    6
    
    
    
    4Germany
    
    
    4
    
    
    
    4
    
    
    
    4Netherlands
    
    
    3
    
    
    
    3
    
    
    
    3
     32




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Critical Accounting Policies and Estimates
  Revenue Recognition
     33




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##### Table of Contents



Valuation of Billed and Unbilled Receivables from Clients
  Discretionary Compensation
   Income Taxes
 Income Taxes
 34




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##### Table of Contents



Incurred But Not Reported (IBNR) Claims
  Pension Assumptions
     35




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##### Table of Contents



Assumptions Used in the Valuations of the Defined Benefit Pension Plans
   Year Ended June 30,2011
    
    
    2010
    
    
    2009North
    
    
    
    
    
    
    North
    
    
    
    
    
    
    NorthAmerica
    
    
    Europe
    
    
    America
    
    
    Europe
    
    
    America
    
    
    EuropeDiscount rate
    
    
    5.80
    %
    
    
    5.25
    %
    
    
    6.43
    %
    
    
    6.03
    %
    
    
    6.91
    %
    
    
    6.47
    %Expected long-term rate of return on assets
    
    
    8.16
    %
    
    
    6.79
    %
    
    
    8.11
    %
    
    
    6.48
    %
    
    
    8.61
    %
    
    
    6.53
    %Rate of increase in compensation levels
    
    
    3.88
    %
    
    
    3.88
    %
    
    
    3.93
    %
    
    
    5.09
    %
    
    
    4.08
    %
    
    
    5.36
    %
  June 30, 2011
    
    
    June 30, 2010North
    
    
    
    
    
    
    NorthAmerica
    
    
    Europe
    
    
    America
    
    
    EuropeDiscount rate
    
    
    5.79
    %
    
    
    5.62
    %
    
    
    5.86
    %
    
    
    5.25
    %Rate of increase in
compensation levels
    
    
    3.82
    %
    
    
    3.93
    %
    
    
    3.88
    %
    
    
    3.88
    %
     Effect on FY 2012Change in Assumption
    
    Pre-Tax Pension Expense25 basis point decrease in discount rate
    
    +$8.3 million25 basis point increase in discount rate
    
    -$8.2 million25 basis point decrease in expected return on assets
    
    +$4.9 million25 basis point increase in expected return on assets
    
    -$4.9 million
  36




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##### Table of Contents



Effect on FY 2012Change in Assumption
    
    Pre-Tax Pension Expense25 basis point decrease in discount rate
    
    +$3.9 million25 basis point increase in discount rate
    
    -$4.0 million25 basis point decrease in expected return on assets
    
    +$1.5 million25 basis point increase in expected return on assets
    
    -$1.5 million
  Goodwill and Intangible Assets
   Results of Operations
   37




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38




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##### Table of Contents



Historical Results of Operations
  Consolidated Statements of Operations
  Fiscal Year Ended June 30,2011
    
    
    2010
    
    
    2009Revenue
    
    $
    3,259,451
    
    
    
    100
    %
    
    $
    2,387,829
    
    
    
    100
    %
    
    $
    1,676,029
    
    
    
    100
    %Costs of providing services:Salaries and employee benefits
    
    
    2,043,063
    
    
    
    63
    %
    
    
    1,540,417
    
    
    
    65
    %
    
    
    1,029,299
    
    
    
    61
    %Professional and subcontracted services
    
    
    246,348
    
    
    
    8
    %
    
    
    163,848
    
    
    
    7
    %
    
    
    119,323
    
    
    
    7
    %Occupancy
    
    
    144,191
    
    
    
    4
    %
    
    
    109,454
    
    
    
    5
    %
    
    
    72,566
    
    
    
    4
    %General and administrative expenses
    
    
    281,576
    
    
    
    9
    %
    
    
    220,937
    
    
    
    9
    %
    
    
    172,010
    
    
    
    10
    %Depreciation and amortization
    
    
    130,575
    
    
    
    4
    %
    
    
    101,084
    
    
    
    4
    %
    
    
    73,448
    
    
    
    4
    %Transaction and integration expenses
    
    
    100,535
    
    
    
    3
    %
    
    
    87,644
    
    
    
    4
    %
    
    
    
    
    
    
    
    %2,946,288
    
    
    
    90
    %
    
    
    2,223,384
    
    
    
    93
    %
    
    
    1,466,646
    
    
    
    88
    %Income from operations
    
    
    313,163
    
    
    
    10
    %
    
    
    164,445
    
    
    
    7
    %
    
    
    209,383
    
    
    
    12
    %Income/(loss) from affiliates
    
    
    1,081
    
    
    
    
    %
    
    
    (1,274
    )
    
    
    
    %
    
    
    8,350
    
    
    
    
    %Interest income
    
    
    5,523
    
    
    
    
    %
    
    
    2,950
    
    
    
    
    %
    
    
    2,022
    
    
    
    
    %Interest expense
    
    
    (12,475
    )
    
    
    
    %
    
    
    (7,508
    )
    
    
    
    %
    
    
    (2,778
    )
    
    
    
    %Other non-operating income
    
    
    19,349
    
    
    
    1
    %
    
    
    11,304
    
    
    
    
    %
    
    
    4,926
    
    
    
    
    %Income before income taxes
    
    
    326,641
    
    
    
    10
    %
    
    
    169,917
    
    
    
    7
    %
    
    
    221,903
    
    
    
    13
    %Provision for income taxes
    
    
    129,916
    
    
    
    4
    %
    
    
    50,907
    
    
    
    2
    %
    
    
    75,276
    
    
    
    4
    %Net income before non-controlling interests
    
    
    196,725
    
    
    
    6
    %
    
    
    119,010
    
    
    
    5
    %
    
    
    146,627
    
    
    
    9
    %Net income/(loss) attributable to
non-controlling interests
    
    
    2,288
    
    
    
    
    %
    
    
    (1,587
    )
    
    
    
    %
    
    
    169
    
    
    
    
    %Net income attributable to controlling interests
    
    $
    194,437
    
    
    
    6
    %
    
    $
    120,597
    
    
    
    5
    %
    
    $
    146,458
    
    
    
    9
    %
 Historical Results of Operations for the Fiscal Year Ended June 30, 2011 Compared to Fiscal Year
Ended June 30, 2010
    39




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##### Table of Contents



Net income attributable to controlling interests.
  Earnings per share.
  Non-U.S. GAAP Measures
    Year Ended June 30,2011
    
    
    2010
    
    
    2009(in thousands)Reconciliation of net income before non-controlling interests to EBITDA
and Adjusted EBITDA is as follows:Net income before non-controlling interests
    
    $
    196,725
    
    
    $
    119,010
    
    
    $
    146,627Provision for income taxes
    
    
    129,916
    
    
    
    50,907
    
    
    
    75,276Interest, net
    
    
    6,952
    
    
    
    4,558
    
    
    
    756Depreciation and amortization
    
    
    130,575
    
    
    
    101,084
    
    
    
    73,448EBITDA
    
    
    464,168
    
    
    
    275,559
    
    
    
    296,107Transaction and integration expenses
    
    
    100,535
    
    
    
    87,644
    
    
    
    Stock-based compensation (a)
    
    
    71,715
    
    
    
    48,006
    
    
    
    Other non-operating income (b)
    
    
    (20,430
    )
    
    
    (10,030
    )
    
    
    (13,276
    )Adjusted EBITDA
    
    $
    615,988
    
    
    $
    401,179
    
    
    $
    282,831
 
 (a)
    
    Stock-based compensation is included in salary and employee benefits expense and relates to
shares of Restricted Class A common stock held by our current associates which were awarded to
them as former Towers Perrin employees in connection with the Merger.(b)
    
    Other non-operating income includes income from affiliates, and other non-operating income.  40




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##### Table of Contents



Year EndedJune 30, 2011(In thousands, except share andper share amounts)Net income attributable to controlling interests
    
    $
    194,437Adjusted for certain Merger-related items (c):Amortization of intangible assets
    
    
    34,087Transaction and integration expenses including severance (d)
    
    
    64,799Stock-based compensation (e)
    
    
    46,850Deferred payment from divestiture (f)
    
    
    (9,429
    )Other tax items
    
    
    603Adjusted net income attributable to controlling interests
    
    $
    331,347Weighted average shares of common stock  diluted (000)
    
    
    74,139Earnings per share  diluted, as reported
    
    $
    2.62Adjusted for certain Merger-related items:Amortization of intangible assets
    
    
    0.46Transaction and integration expenses including severance
    
    
    0.87Stock-based compensation
    
    
    0.63Deferred payment from divestiture
    
    
    (0.13
    )Other tax items
    
    
    0.01Adjusted earnings per share  diluted
    
    $
    4.46
 
 (c)
    
    The adjustments to net income attributable to controlling interests and diluted earnings per
share of certain Merger-related items are net of tax. In calculating the net of tax amounts,
the effective tax rate for amortization of intangible assets was 34.4%, transaction and
integration expenses including severance was 35.6%, stock-based compensation was 34.7%, other
non-operating income was 34.5%, deferred payment was 34.5%. Included in other tax items was a
$1.1 million benefit resulting from a tax restructuring in Japan and $1.7 million expense
resulting from incorporation of former Watson Wyatt branches, which is included in the
consolidated statement of operations under provision for income taxes.(d)
    
    Included in transaction and integration expenses including severance is approximately $2.0
million of expenses related to the recent acquisitions of Aliquant and EMB which were
completed in the second quarter and third quarter of fiscal year 2011, respectively.(e)
    
    Stock-based compensation relates to shares of Restricted Class A common stock held by our
current associates which were awarded to them as former Towers Perrin employees in connection
with the Merger.(f)
    
    Reflects a gain on the sale of e-Value, a sale of a financial modeling software, and the
deferred payment from divestiture received in the second quarter related to a divestiture by
former Towers Perrin in June 2009 before the closing of the Merger which is included in
non-operating income. Both items are included in non operating income. Historical Results of Operations for the Fiscal Year Ended June 30, 2010 Compared to Fiscal Year
Ended June 30, 2009
    41




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##### Table of Contents



Net income attributable to controlling interests.
  Earnings per share.
  42




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##### Table of Contents



UNAUDITED SUPPLEMENTAL PRO FORMA COMBINED STATEMENTS OF OPERATIONS
     
    
    related Merger consideration;
    
    adjustments made to record the assets and liabilities of Towers Perrin at their
estimated fair values;
    
    reclassifications made to conform Towers Perrins and Watson Wyatts historical
financial statement presentation to Towers Watsons; and
    
    the consolidation of Professional Consultants Insurance Company, Inc., which we
refer to as PCIC.
      43




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##### Table of Contents



Consolidated Statement of Operations
Year Ended June 30, 2011
 Year EndedJune 30, 2011Revenue
    
    $
    3,259,451Costs of providing services:Salaries and employee benefits
    
    
    2,043,063Professional and subcontracted services
    
    
    246,348Occupancy
    
    
    144,191General and administrative expenses
    
    
    281,576Depreciation and amortization
    
    
    130,575Transaction and integration expenses
    
    
    100,5352,946,288Income from operations
    
    
    313,163Income from affiliates
    
    
    1,081Interest income
    
    
    5,523Interest expense
    
    
    (12,475
    )Other non-operating income
    
    
    19,349Income before income taxes
    
    
    326,641Provision for income taxes
    
    
    129,916Net income before non-controlling interests
    
    
    196,725Net income attributable to non-controlling interests
    
    
    2,288Net income attributable to controlling interests
    
    $
    194,437Earnings per share:Net income  Basic
    
    $
    2.62Net income  Diluted
    
    $
    2.62Weighted average shares of common stock,
basic (000)
    
    
    74,075Weighted average shares of common stock,
diluted (000)
    
    
    74,139
 44




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##### Table of Contents



Unaudited Supplemental Pro Forma Combined Statement of Operations
Year Ended June 30, 2010
 Year Ended
    
    
    Six Months Ended
    
    
    Year EndedJune 30, 2010
    
    
    December 31, 2009
    
    
    June 30, 2010As Reported
    
    
    Historical
    
    
    Pro FormaTowers Watson
    
    
    Towers Perrin
    
    
    PCIC
    
    
    Adjustments
    
    
    As Adjusted(In thousands, except share and per share data)Revenue
    
    $
    2,387,829
    
    
    $
    798,131
    
    
    $
    12,750
    
    
    $
    (9,404
    )H
    
    $
    3,180,916(8,390
    )KCosts of providing services:Salaries and employee benefits
    
    
    1,540,417
    
    
    
    558,855
    
    
    
    107
    
    
    
    46,832
    B
    
    
    2,146,211Professional and subcontracted
services
    
    
    163,848
    
    
    
    79,421
    
    
    
    483
    
    
    
    
    
    
    
    243,752Occupancy
    
    
    109,454
    
    
    
    35,406
    
    
    
    
    
    
    
    1,835
    A
    
    
    146,695General and administrative expenses
    
    
    220,937
    
    
    
    40,351
    
    
    
    16,924
    
    
    
    (9,404
    )H
    
    
    268,808Depreciation and amortization
    
    
    101,084
    
    
    
    19,007
    
    
    
    
    
    
    
    11,508
    A
    
    
    131,599Transaction and integration expenses
    
    
    87,644
    
    
    
    15,734
    
    
    
    
    
    
    
    (103,378
    )E
    
    
    2,223,384
    
    
    
    748,774
    
    
    
    17,514
    
    
    
    (52,607
    )
    
    
    2,937,065Income from operations
    
    
    164,445
    
    
    
    49,357
    
    
    
    (4,764
    )
    
    
    34,813
    
    
    
    243,851(Loss)/income from affiliates
    
    
    (1,274
    )
    
    
    (164
    )
    
    
    
    
    
    
    353
    J
    
    
    (1,085
    )Interest income
    
    
    2,950
    
    
    
    530
    
    
    
    1,517
    
    
    
    (266
    )C
    
    
    4,731Interest expense
    
    
    (7,508
    )
    
    
    (1,536
    )
    
    
    
    
    
    
    (2,000
    )D
    
    
    (11,991
    )(947
    )GOther non-operating income
    
    
    11,304
    
    
    
    5,281
    
    
    
    
    
    
    
    
    
    
    
    16,585Income before income taxes
    
    
    169,917
    
    
    
    53,468
    
    
    
    (3,247
    )
    
    
    31,953
    
    
    
    252,091Provision for income taxes
    
    
    50,907
    
    
    
    9,779
    
    
    
    (1,187
    )
    
    
    8,419
    F
    
    
    67,918Net income before non-controlling interests
    
    
    119,010
    
    
    
    43,689
    
    
    
    (2,060
    )
    
    
    23,534
    
    
    
    184,173Net loss attributable to non-controlling interests
    
    
    (1,587
    )
    
    
    
    
    
    
    
    
    
    
    (559
    )I
    
    
    (2,146
    )Net income/(loss) attributable to controlling interests
    
    $
    120,597
    
    
    $
    43,689
    
    
    $
    (2,060
    )
    
    $
    24,093
    
    
    $
    186,319Earnings per share:Net income  Basic
    
    $
    2.04
    
    
    
    
    
    
    
    
    
    
    
    
    M
    
    $
    3.14Net income  Diluted
    
    $
    2.03
    
    
    
    
    
    
    
    
    
    
    
    
    M
    
    $
    3.14Weighted average shares of common stock,
basic (000)
    
    
    59,257
    
    
    
    
    
    
    
    
    
    
    
    
    M
    
    
    59,257Weighted average shares of common stock,
diluted (000)
    
    
    59,372
    
    
    
    
    
    
    
    
    
    
    
    
    M
    
    
    59,372
 45




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##### Table of Contents



Unaudited Supplemental Pro Forma Combined Statement of Operations
Year Ended June 30, 2009
 HistoricalPro FormaWatson Wyatt
    
    
    Towers Perrin
    
    
    PCIC
    
    
    Adjustments
    
    
    As Adjusted(In thousands, except share and per share data)Revenue
    
    $
    1,676,029
    
    
    $
    1,586,299
    
    
    $
    39,873
    
    
    $
    (27,804
    )H
    
    $
    3,251,323(23,074
    )KCosts of providing services:Salaries and employee benefits
    
    
    1,029,299
    
    
    
    1,107,619
    
    
    
    147
    
    
    
    99,397
    B
    
    
    2,236,462Professional and subcontracted
services
    
    
    119,323
    
    
    
    172,825
    
    
    
    1,144
    
    
    
    
    
    
    
    293,292Occupancy
    
    
    72,566
    
    
    
    68,157
    
    
    
    
    
    
    
    3,669
    A
    
    
    144,392General and administrative expenses
    
    
    172,010
    
    
    
    200,047
    
    
    
    19,226
    
    
    
    (27,804
    )H
    
    
    352,109(11,370
    )EDepreciation and amortization
    
    
    73,448
    
    
    
    38,758
    
    
    
    
    
    
    
    24,308
    A
    
    
    136,5141,466,646
    
    
    
    1,587,406
    
    
    
    20,517
    
    
    
    88,200
    
    
    
    3,162,769Income from operations
    
    
    209,383
    
    
    
    (1,107
    )
    
    
    19,356
    
    
    
    (139,078
    )
    
    
    88,554(Loss)/income from affiliates
    
    
    8,350
    
    
    
    5,257
    
    
    
    
    
    
    
    (13,313
    )J
    
    
    294Interest income
    
    
    2,022
    
    
    
    4,708
    
    
    
    4,924
    
    
    
    (3,087
    )C
    
    
    8,567Interest expense
    
    
    (2,778
    )
    
    
    (3,489
    )
    
    
    
    
    
    
    (4,000
    )D
    
    
    (12,160
    )(1,893
    )GOther non-operating income
    
    
    4,926
    
    
    
    14,884
    
    
    
    
    
    
    
    
    
    
    
    19,810Income before income taxes
    
    
    221,903
    
    
    
    20,253
    
    
    
    24,280
    
    
    
    (161,371
    )
    
    
    105,065Provision for income taxes
    
    
    75,276
    
    
    
    40,223
    
    
    
    8,268
    
    
    
    (63,251
    )F
    
    
    60,516Net income before non-controlling interests
    
    
    146,627
    
    
    
    (19,970
    )
    
    
    16,012
    
    
    
    (98,120
    )
    
    
    44,549Net loss attributable to non-controlling
interests
    
    
    169
    
    
    
    
    
    
    
    
    
    
    
    4,346
    I
    
    
    4,515Net income attributable to controlling
interests
    
    $
    146,458
    
    
    $
    (19,970
    )
    
    $
    16,012
    
    
    $
    (102,466
    )
    
    $
    40,034Earnings per share:Net income  basic
    
    $
    3.43
    
    
    
    
    
    
    
    
    
    
    
    
    M

    
    $
    0.68Net income  diluted
    
    $
    3.42
    
    
    
    
    
    
    
    
    
    
    
    
    M

    
    $
    0.67Weighted average shares of common stock,
basic (000)
    
    
    42,690
    
    
    
    
    
    
    
    
    
    
    
    
    M

    
    
    59,257Weighted average shares of common stock,
diluted (000)
    
    
    42,861
    
    
    
    
    
    
    
    
    
    
    
    
    M

    
    
    59,372
 46




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Pro Forma Adjustments
  A)
    
    Reflects estimated amortization of Towers Perrins acquired intangible assets on an
accelerated amortization basis over their estimated useful lives. Customer-related intangible
assets are amortized over a 12-year estimated life and developed technology intangible assets
are amortized over a weighted-average four-year estimated life. The trademark and trade names
intangible asset has an indefinite life. Also reflects an adjustment to rent expense to
approximate fair value of acquired leases.B)
    
    Reflects non-cash compensation expense in connection with the issuance of Towers Watson
restricted Class A common stock to Towers Perrin RSU holders in the Merger. The graded method
of expense methodology assumes that the restricted shares are issued to Towers Perrin RSU
holders in equal amounts of shares which vest over one year, two years and three years. The
current estimate of total non-cash compensation expense relating to Towers Watson restricted
Class A common stock for the three-year period is $160.0 million. This estimate was determined
assuming a 10% annual forfeiture rate based on actual and expected attrition.C)
    
    Reflects interest income forgone as a result of the cash consideration of $200 million paid
to Towers Perrin Class R Participants in conjunction with the redemption of Towers Watson
Class R common stock.D)
    
    Reflects interest accrued on $200 million principal amount of Towers Watson Notes issued to
Towers Perrin Class R Participants. Interest on the Towers Watson Notes accrued at a 2.0%
fixed rate per annum, compounded annually.E)
    
    Reflects the elimination of Merger-related transaction costs (including financial advisory,
legal and valuation fees). Because transaction costs will not have a continuing impact, they
are not reflected in the unaudited pro forma combined statement of operations.F)
    
    Reflects the provision for taxes as a result of the Merger. A U.S. statutory rate of 40.0%
was used for the fiscal year 2011, except for adjustments related to PCIC for which a 34%
statutory rate was used since PCIC would not be included in the U.S. consolidated tax return.
For the fiscal year 2010 the U.S. statutory rate of 39.6% was used. For purposes of
determining the estimated income tax expense for the adjustments reflected in the unaudited
pro forma combined statement of operations, taxes were determined by applying the
applicable statutory tax rate for jurisdictions where each pro forma adjustment is expected to
be reported. Although not reflected in these unaudited pro forma combined statements
of operations, the effective tax rate of the combined company could be significantly different
depending on post-acquisition activities, including repatriation decisions, the geographic mix
of income, and post-Merger restructuring activities.G)
    
    Reflects one year of amortization of $5.7 million of bank fees associated with the Towers
Watson credit facility, which will be amortized over a three-year period.H)
    
    Reflects the elimination of premium revenue and unearned revenues from Watson Wyatt and
Towers Perrin as recorded by PCIC, as well as related expense recorded by Watson Wyatt and
Towers Perrin.I)
    
    Reflects the 27.14% non-controlling interest in PCIC of the remaining minority shareholder.J)
    
    Reflects the elimination of Watson Wyatts and Towers Perrins earnings from PCIC as recorded
under the equity method.K)
    
    Reflects the reduction to Towers Perrins software revenue attributable to performance
obligations completed prior to the Merger. This reduction is required to reflect the acquired
deferred software revenue at fair value as of the date of the Merger.L)
    
    Reflects the elimination of merger-related deferred payment on the sale of an investment.
Because this deferred payment will not have a continuing impact, it is not reflected in the
unaudited pro forma consolidated statement of operations.M)
    
    Earnings per share calculations for the fiscal years ended June 30, 2011, 2010 and 2009 are
based on Towers Watsons fully diluted shares outstanding as of June 30, 2011, 2010 and 2009,
respectively.
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##### Table of Contents



Statement of Operations for the Fiscal Year Ended June 30, 2011
Compared to Pro Forma Financial Information for the Fiscal Year Ended June 30, 2010
 Revenue
    
    
    Benefits revenue increased 2% and was $1.9 billion for fiscal year 2011 compared to $1.8
billion for fiscal year 2010. On a constant currency basis, our Retirement practice revenue
remained consistent, which represents the majority of the segments revenue. The growth in
the Retirement practice is from the developing markets in Asia and Latin America which is
driven by new legislation and client demand. The Retirement practice in North America and
Europe experienced decreased revenue in fiscal year 2011 compared to the same period in
fiscal year 2010 because of a strong prior year comparable from project work related to
regulatory changes. Revenue increased on a constant currency basis in our Technology and
Administration Solutions practice, with revenue growth in the U.S. and a slight decline in
Europe. Growth in the U.S. was largely due to the addition of Aliquant, a health and welfare
benefits administration outsourcing firm that we acquired during the second quarter of
fiscal year 2011. Revenue increased in our Health and Group Benefits practice as health care
reform deadlines approach. Revenue in our Benefits segment increased 1% on an organic basis
which excludes the effects of acquisitions and currency effects.
    
    Risk and Financial Services revenue increased 2% and was $740.7 million and $727.6
million for the fiscal years ended June 30, 2011 and 2010, respectively. Revenue increased
on a constant currency basis in our Risk Consulting and Software practice primarily due to
the addition of EMB, a non-life consulting and software company, that we acquired during our
third quarter of fiscal year 2011. Revenue for our Risk Consulting and Software practice,
without the inclusion of EMB, decreased due to a decrease in project activity. Revenue from
our Brokerage practice decreased on a constant currency basis from decreases in pricing and
volume as a result of overall market conditions in the U.S. property and casualty insurance
marketplace, which were only partially offset from new client activity in Europe. Revenue
from our Investment practice decreased on a constant currency basis compared to fiscal year
2010 due to less activity in North America, a change in revenue mix in Europe and due to a
strong Investment practice comparable in the prior year. Revenue in our Risk and Financial
Services segment decreased 2% on an organic basis which excludes the effects of acquisitions
and currency.
    
    Talent and Rewards revenue remained consistent and was $543.5 million and $540.0 million
for the fiscal year ended June 30, 2011 and 2010, respectively. Revenues from our Executive
Compensation practice continued to decrease as work moved to a new Board-focused Executive
Compensation boutique firm, Pay Governance, to help some of our clients address perceived
independence issues. After adjusting for the revenue that was transferred to Pay Governance
and for two small acquisitions in Dubai and Sweden, Talent and Rewards experienced 7%
constant currency revenue growth. On an organic basis, revenues in all practices, Executive
Compensation; Rewards, Talent and Communication; and Data, Surveys and Technology,
increased. The organic increase in revenue for Executive Compensation is due to increased
project activity in North America in both management and compensation committee consulting
and strong growth in Asia Pacific. Increases in revenue in Asia Pacific, particularly China,
is attributed to local companies expanding nationally, regionally and globally and implement
executive pay plans to support growth. Organic revenue growth in Reward, Talent and
Communication was due to significant increases in all geographic regions especially in Asia.
We also experienced organic revenue growth in our Data, Surveys and Technology practice due
to growth in data and surveys in all geographic regions, especially in Asia.
 Salaries and Employee Benefits
  48




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Professional and Subcontracted Services
  Occupancy
  General and Administrative Expenses
  Depreciation and Amortization
  Transaction and Integration Expenses
  Income / (Loss) From Affiliates
  Interest Income
  Interest Expense
  Other Non-Operating Income
  49




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##### Table of Contents



Pro Forma Financial Information for the Fiscal Year Ended June 30, 2010
Compared to the Fiscal Year Ended June 30, 2009
 Revenue
   
    
    Benefits revenue increased less than 1% and was $1.8 billion for the fiscal
year ended June 30, 2010 compared to $1.8 billion for the fiscal year ended June 30, 2009.
Health and Group Benefits and Technology and Administration Solutions practices had single
digit increases year over year, which was partially offset by a less than 1% decrease in
the Retirement practice that makes up the majority of the segments revenue.
    
    Risk and Financial Services revenue decreased 4% and was $720.9 million and
$750.4 million for the fiscal years ended June 30, 2010 and 2009, respectively. This
decrease was a result of a decrease in revenue of the Risk Consulting and Software practice
from fiscal year 2009 to fiscal year 2010, which was partially offset by increases in
revenue of the Investment and Brokerage practices in fiscal year 2010 compared to fiscal
year 2009.
    
    Talent and Rewards revenue decreased 7% and was $538.8 million and $582.0
million for the fiscal years ended June 30, 2010 and 2009, respectively. This decrease was
primarily the result of a decrease in revenue from the Rewards, Talent and Communication
practice from fiscal year 2009 to fiscal year 2010. Executive Compensation practice also
decreased slightly and was partially offset by a single digit increase in Data, Surveys and
Technology revenue for fiscal year 2010 compared to fiscal year 2009.
 Salaries and Employee Benefits
  Professional and Subcontracted Services
  Occupancy
  50




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General and Administrative Expenses
  Depreciation and Amortization
  Transaction and Integration Expenses
  (Loss) / Income From Affiliates
  Interest Income
  Interest Expense
  Other Non-Operating Income
  Explanatory Note Regarding Pro Forma Financial Information
  51




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Historical Results of Towers Watson
  Liquidity and Capital Resources
          Cash Flows From/(Used in) Operating Activities.
  
    
    a $77.7 million increase in net income for fiscal year 2011 compared to fiscal
year 2010;
    
    a $534.2 million increase in cash flows from an increase in accounts payable,
accrued liabilities and deferred income. The fiscal year 2010 comparable period experienced
a decrease in cash flows due to the payment of Watson Wyatts bonus related to both the
fiscal year ended June 30, 2009 and the six months ended December 31, 2009, as well as,
Towers Perrins bonus related to calendar year December 31, 2009.
  52




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##### Table of Contents



Cash Flows Used in Investing Activities.
  Cash Flows Used in Financing Activities.
  Capital Commitments
  Dividends
  Off-Balance Sheet Arrangements and Contractual Obligations
 Remaining payments by fiscal year due as of June 30, 2011Less than
    
    
    
    
    
    
    
    
    
    
    More ThanContractual Cash Obligations (in thousands)
    
    Total
    
    
    1 Year
    
    
    1-3 Years
    
    
    3-5 Years
    
    
    5 YearsNotes Payable and accrued interest*
    
    $
    99,341
    
    
    $
    99,341
    
    
    $
    
    
    
    $
    
    
    
    $
    Lease Commitments
    
    
    601,226
    
    
    
    105,107
    
    
    
    180,236
    
    
    
    132,370
    
    
    
    183,512$
    700,567
    
    
    $
    204,448
    
    
    $
    180,236
    
    
    $
    132,370
    
    
    $
    183,512
 
 *
    
    The $99.3 million is due in March 2012. Operating Leases.
 Pension Contribution.
 Uncertain Tax Positions. Income Taxes
 Contingent Consideration from Acquisitions.
 Indebtedness
 Subordinated Notes due January 2011
  53




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##### Table of Contents



Subordinated Notes due March 2012
  Towers Watson Senior Credit Facility
    Letters of Credit under the Senior Credit Facility
  Additional Borrowings, Letters of Credit and Guarantees not part of the Senior Credit Facility
    Risk Management
  54




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Contingencies
        55




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##### Table of Contents



Recent Accounting Pronouncements
 Adopted
 Noncontrolling Interests in Consolidated Financial Statements  an amendment of ARB No.
51, Business
Combinations.
 Not yet adopted
 IntangiblesGoodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test
for Reporting Units with Zero or Negative Carrying Amounts (a consensus of the FASB Emerging Issues
Task Force),
 Comprehensive Income (Topic 220): Presentation of
Comprehensive Income Comprehensive Income .
 
 Item 7A. Quantitative and Qualitative Disclosures About Market Risk.
  Interest Rate Risk
  Foreign Currency Risk
  56




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##### Table of Contents



Translation Exposure
   
 Item 8. Financial Statements and Supplementary Data.
  
 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure.
  
 Item 9A. Controls and Procedures.
 Evaluation of Disclosure Controls and Procedures
  Changes in Internal Control Over Financial Reporting
  Managements Report on Internal Control over Financial Reporting
  (1)
    
    Pertain to the maintenance of records that in reasonable detail accurately and fairly
reflect the transactions and dispositions of the assets of the company;(2)
    
    Provide reasonable assurance that transactions are recorded as necessary to permit
preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in
accordance with authorizations of management and directors of the company; and
 57




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(3)
    
    Provide reasonable assurance regarding prevention or timely detection of unauthorized
acquisition, use or disposition of the companys assets that could have a material effect
on the financial statements.
    58




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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
        
 59




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##### Table of Contents



Item 9B. Other Information.
  
 Part III.
 
 Item 10. Directors, Executive Officers, and Audit Committee of the Registrant.
   Directors of the Company
 John J. Gabarro
  Victor F. Ganzi
  John J. Haley
  Mark V. Mactas
  Mark Maselli
  Brendan R. ONeill
  Linda D. Rabbitt
  Gilbert T. Ray
  Paul Thomas
  Wilhelm Zeller
  
 Item 11. Executive Compensation.
  
 Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters.
  
 Item 13. Certain Relationships and Related Transactions.
  60




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##### Table of Contents



Item 14. Principal Auditor Fees and Services.
  
 Part IV
 
 Item 15. Exhibits and Financial Statement Schedules.
  (1)
    
    Consolidated Financial Statements of Towers Watson & Co.
   
 (2)
    
    Consolidated Financial Statement Schedule for each of the three years in the period ended
June 30, 2011
   (3)
    
    Exhibits
  b)
    
    Exhibits
  c)
    
    Financial Statement Schedules
  61




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##### Table of Contents



SIGNATURES
  TOWERS WATSON & CO.
(Registrant)Date: August 29, 2011
    By:
    /s/ John J. HaleyJohn J. HaleyChief Executive Officer  Signature
    
    Title
    
    Date/s/ John J. Haley
    
    Chief Executive Officer and Director
    
    August 29, 2011John J. Haley/s/ Mark V. Mactas
    
    President, Chief Operating Officer and Director
    
    August 29, 2011Mark V. Mactas/s/ Roger F. Millay
    
    Chief Financial Officer
    
    August 29, 2011Roger F. Millay/s/ Peter L. Childs
    
    Principal Accounting Officer
    
    August 29, 2011Peter L. Childs/s/ John J. Gabarro
    
    Director
    
    August 29, 2011John J. Gabarro/s/ Victor F. Ganzi
    
    Director
    
    August 29, 2011Victor F. Ganzi/s/ Mark Maselli
    
    Director
    
    August 29, 2011Mark Maselli/s/ Brendan R. ONeill
    
    Director
    
    August 29, 2011Brendan R. ONeill/s/ Linda D. Rabbitt
    
    Director
    
    August 29, 2011Linda D. Rabbitt/s/ Gilbert T. Ray
    
    Director
    
    August 29, 2011Gilbert T. Ray/s/ Paul D. Thomas
    
    Director
    
    August 29, 2011Paul D. Thomas/s/ Wilhelm Zeller
    
    Director
    
    August 29, 2011Wilhelm Zeller
 62




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##### Table of Contents



REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 
      
 63




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##### Table of Contents



TOWERS WATSON & CO.


Consolidated Statements of Operations
 Year Ended June 30,2011
    
    
    2010
    
    
    2009Revenue
    
    $
    3,259,451
    
    
    $
    2,387,829
    
    
    $
    1,676,029Costs of providing services:Salaries and employee benefits
    
    
    2,043,063
    
    
    
    1,540,417
    
    
    
    1,029,299Professional and subcontracted services
    
    
    246,348
    
    
    
    163,848
    
    
    
    119,323Occupancy
    
    
    144,191
    
    
    
    109,454
    
    
    
    72,566General and administrative expenses
    
    
    281,576
    
    
    
    220,937
    
    
    
    172,010Depreciation and amortization
    
    
    130,575
    
    
    
    101,084
    
    
    
    73,448Transaction and integration expenses
    
    
    100,535
    
    
    
    87,644
    
    
    
    2,946,288
    
    
    
    2,223,384
    
    
    
    1,466,646Income from operations
    
    
    313,163
    
    
    
    164,445
    
    
    
    209,383Income/(loss) from affiliates
    
    
    1,081
    
    
    
    (1,274
    )
    
    
    8,350Interest income
    
    
    5,523
    
    
    
    2,950
    
    
    
    2,022Interest expense
    
    
    (12,475
    )
    
    
    (7,508
    )
    
    
    (2,778
    )Other non-operating income
    
    
    19,349
    
    
    
    11,304
    
    
    
    4,926Income before income taxes
    
    
    326,641
    
    
    
    169,917
    
    
    
    221,903Provision for income taxes
    
    
    129,916
    
    
    
    50,907
    
    
    
    75,276Net income before non-controlling interests
    
    
    196,725
    
    
    
    119,010
    
    
    
    146,627Net income/(loss) attributable to non-controlling interests
    
    
    2,288
    
    
    
    (1,587
    )
    
    
    169Net income attributable to controlling interests
    
    $
    194,437
    
    
    $
    120,597
    
    
    $
    146,458Earnings per share:Net income attributable to
controlling interests  basic
    
    $
    2.62
    
    
    $
    2.04
    
    
    $
    3.43Net income attributable to
controlling interests  diluted
    
    $
    2.62
    
    
    $
    2.03
    
    
    $
    3.42Weighted average shares of common stock, basic (000)
    
    
    74,075
    
    
    
    59,257
    
    
    
    42,690Weighted average shares of common stock, diluted (000)
    
    
    74,139
    
    
    
    59,372
    
    
    
    42,861
  64




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##### Table of Contents



TOWERS WATSON & CO.



Consolidated Balance Sheets
 June 30,2011
    
    
    2010AssetsCash and cash equivalents
    
    $
    528,923
    
    
    $
    435,927Restricted cash
    
    
    153,154
    
    
    
    164,539Short-term investments
    
    
    43,682
    
    
    
    51,009Receivables from clients:Billed, net of allowances of $12,636 and $7,975
    
    
    502,910
    
    
    
    421,602Unbilled, at estimated net realizable value
    
    
    276,020
    
    
    
    215,912778,930
    
    
    
    637,514Other current assets
    
    
    145,862
    
    
    
    156,312Total current assets
    
    
    1,650,551
    
    
    
    1,445,301Fixed assets, net
    
    
    252,343
    
    
    
    227,308Deferred income taxes
    
    
    188,569
    
    
    
    344,481Goodwill
    
    
    1,943,574
    
    
    
    1,717,295Intangible assets, net
    
    
    694,922
    
    
    
    683,487Other assets
    
    
    368,991
    
    
    
    155,745Total Assets
    
    $
    5,098,950
    
    
    $
    4,573,617LiabilitiesAccounts payable, accrued liabilities and deferred income
    
    $
    683,810
    
    
    $
    409,308Reinsurance payables
    
    
    147,902
    
    
    
    164,539Note payable
    
    
    99,341
    
    
    
    201,967Other current liabilities
    
    
    247,424
    
    
    
    189,966Total current liabilities
    
    
    1,178,477
    
    
    
    965,780Revolving credit facility
    
    
    
    
    
    
    Accrued retirement benefits
    
    
    784,559
    
    
    
    1,061,557Professional liability claims reserve
    
    
    312,108
    
    
    
    335,034Other noncurrent liabilities
    
    
    221,136
    
    
    
    246,574Total Liabilities
    
    
    2,496,280
    
    
    
    2,608,945Commitments and contingenciesStockholders EquityClass A Common Stock  $.01 par value: 300,000,000 shares authorized;
57,897,889 and 47,160,497 issued and 56,949,548 and 47,160,497 outstanding
    
    
    579
    
    
    
    472Class B Common Stock  $.01 par value: 93,500,000 shares authorized;
16,651,890 and 27,043,196 issued and 16,651,890 and 27,043,196 outstanding
    
    
    167
    
    
    
    270Additional paid-in capital
    
    
    1,773,285
    
    
    
    1,679,624Treasury stock, at cost  948,341 and 0 shares
    
    
    (52,360
    )
    
    
    Retained earnings
    
    
    883,161
    
    
    
    711,570Accumulated other comprehensive loss
    
    
    (13,305
    )
    
    
    (436,329
    )Total Stockholders Equity
    
    
    2,591,527
    
    
    
    1,955,607Non-controlling interest
    
    
    11,143
    
    
    
    9,065Total Equity
    
    
    2,602,670
    
    
    
    1,964,672Total Liabilities and Total Equity
    
    $
    5,098,950
    
    
    $
    4,573,617
  65




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TOWERS WATSON & CO.

Consolidated Statements of Cash Flows
 Year Ended June 30,2011
    
    
    2010
    
    
    2009Cash flows from/(used in) operating activities:Net income before non-controlling interests
    
    $
    196,725
    
    
    $
    119,010
    
    
    $
    146,627Adjustments to reconcile net income to net cash from/(used in) operating activities:Provision for doubtful receivables from clients
    
    
    13,004
    
    
    
    11,759
    
    
    
    5,355Depreciation
    
    
    78,461
    
    
    
    69,684
    
    
    
    59,556Amortization of intangible assets
    
    
    52,114
    
    
    
    31,400
    
    
    
    13,892Provision/(benefit) for deferred income taxes
    
    
    14,448
    
    
    
    (5,134
    )
    
    
    14,205Equity from affiliates
    
    
    (622
    )
    
    
    869
    
    
    
    (8,080
    )Stock-based compensation
    
    
    79,922
    
    
    
    52,953
    
    
    
    932Other, net
    
    
    (10,209
    )
    
    
    (9,975
    )
    
    
    (2,474
    )Changes in operating assets and liabilities (net of business acquisitions)Receivables from clients
    
    
    (98,468
    )
    
    
    (41,339
    )
    
    
    57,991Other current assets
    
    
    18,728
    
    
    
    (2,205
    )
    
    
    3,279Other noncurrent assets
    
    
    (39,343
    )
    
    
    50,854
    
    
    
    (3,497
    )Accounts payable, accrued liabilities and deferred income
    
    
    238,824
    
    
    
    (295,402
    )
    
    
    (28,717
    )Restricted cash
    
    
    22,167
    
    
    
    (49,756
    )
    
    
    Reinsurance payables
    
    
    (20,431
    )
    
    
    49,756
    
    
    
    Accrued retirement benefits
    
    
    (55,859
    )
    
    
    (71,292
    )
    
    
    (42,069
    )Professional liability claims reserves
    
    
    (28,746
    )
    
    
    16,171
    
    
    
    (5,900
    )Other current liabilities
    
    
    8,857
    
    
    
    20,874
    
    
    
    4,138Other noncurrent liabilities
    
    
    20,944
    
    
    
    (24,050
    )
    
    
    10,631Income tax related accounts
    
    
    50,721
    
    
    
    (8,801
    )
    
    
    1,678Cash flows from/(used in) operating activities
    
    
    541,237
    
    
    
    (84,624
    )
    
    
    227,547Cash flows (used in)/from investing activities:Cash paid for business acquisitions
    
    
    (141,885
    )
    
    
    (200,025
    )
    
    
    (1,185
    )Cash acquired from business acquisitions
    
    
    10,349
    
    
    
    603,208
    
    
    
    Purchases of fixed assets
    
    
    (76,859
    )
    
    
    (25,752
    )
    
    
    (39,195
    )Capitalized software costs
    
    
    (22,487
    )
    
    
    (19,632
    )
    
    
    (23,374
    )Purchases of held-to-maturity securities
    
    
    (14,295
    )
    
    
    
    
    
    
    Redemptions of held-to-maturity securities
    
    
    14,295
    
    
    
    
    
    
    
    Purchases of available-for-sale securities
    
    
    (54,696
    )
    
    
    (17,789
    )
    
    
    Redemption of available-for-sale securities
    
    
    72,703
    
    
    
    16,191
    
    
    
    Investment in affiliates
    
    
    (5,805
    )
    
    
    
    
    
    
    (2,302
    )Proceeds from sale of investments
    
    
    
    
    
    
    10,749
    
    
    
    Proceeds from divestitures
    
    
    17,772
    
    
    
    4,486
    
    
    
    4,926Cash flows (used in)/from investing activities
    
    
    (200,908
    )
    
    
    371,436
    
    
    
    (61,130
    )Cash flows used in financing activities:Borrowings under credit facility
    
    
    75,000
    
    
    
    126,333
    
    
    
    267,912Repayments under credit facility
    
    
    (75,000
    )
    
    
    (125,650
    )
    
    
    (267,912
    )Financing of credit facility
    
    
    
    
    
    
    (5,679
    )
    
    
    Repayments of notes payable
    
    
    (200,000
    )
    
    
    
    
    
    
    Dividends paid
    
    
    (21,599
    )
    
    
    (15,249
    )
    
    
    (12,785
    )Repurchases of common stock
    
    
    (30,646
    )
    
    
    (34,922
    )
    
    
    (77,443
    )Tax payment on vested shares
    
    
    (26,596
    )
    
    
    
    
    
    
    Issuances of common stock and excess tax benefit
    
    
    6,158
    
    
    
    6,068
    
    
    
    6,509Cash flows used in financing activities
    
    
    (272,683
    )
    
    
    (49,099
    )
    
    
    (83,719
    )Effect of exchange rates on cash
    
    
    25,350
    
    
    
    (11,618
    )
    
    
    2,502Increase/(decrease) in cash and cash equivalents
    
    
    92,996
    
    
    
    226,095
    
    
    
    85,200Cash and cash equivalents at beginning of period
    
    
    435,927
    
    
    
    209,832
    
    
    
    124,632Cash and cash equivalents at end of period
    
    $
    528,923
    
    
    $
    435,927
    
    
    $
    209,832Supplemental disclosures:Cash paid for interest
    
    $
    4,268
    
    
    $
    2,595
    
    
    $
    2,780Cash paid for income taxes, net of refunds
    
    $
    64,117
    
    
    $
    58,624
    
    
    $
    66,480Notes payable issued in connection with the Merger
    
    $
    
    
    
    $
    200,000
    
    
    $
    Notes payable issued in connection with the tender offer
    
    $
    
    
    
    $
    98,469
    
    
    $
    Issuance of stock in conjunction with the acquisitions of EMB and the Merger
    
    $
    11,250
    
    
    $
    1,357,379
    
    
    $
    Contingent payments accrued in conjunction with the acquisitions of EMB and Aliquant
    
    $
    20,026
    
    
    $
    
    
    
    $
    Common stock associated with vesting of Restricted A Shares
    
    
    26,248
    
    
    
    
    
    
    
    
  66




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##### Table of Contents



TOWERS WATSON & CO.
 
 Consolidated Statement of Changes in Equity
  Class A
    
    
    
    
    
    
    Class B
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    AccumulatedCommon
    
    
    Class A
    
    
    Common
    
    
    Class B
    
    
    Additional
    
    
    Treasury
    
    
    
    
    
    
    Other
    
    
    Non-Stock
    
    
    Common
    
    
    Stock
    
    
    Common
    
    
    Paid-in
    
    
    Stock,
    
    
    Retained
    
    
    Comprehensive
    
    
    ControllingOutstanding
    
    
    Stock
    
    
    Outstanding
    
    
    Stock
    
    
    Capital
    
    
    at Cost
    
    
    Earnings
    
    
    Loss
    
    
    Interest
    
    
    TotalBalance as of June 30, 2009
    
    
    42,657
    
    
    $
    438
    
    
    
    
    
    
    $
    
    
    
    $
    452,938
    
    
    $
    (63,299
    )
    
    $
    608,634
    
    
    $
    (145,073
    )
    
    $
    
    
    
    $
    853,638Comprehensive IncomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    62,468
    
    
    
    
    
    
    
    
    
    
    
    62,468Foreign currency translation adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (50,218
    )
    
    
    
    
    
    
    (50,218
    )Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    12,250Class A Common Stock:Watson Wyatt Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (6,364
    )
    
    
    
    
    
    
    
    
    
    
    (6,364
    )Repurchases of common stock
    
    
    (792
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,922
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (34,922
    )Issuances of common stock and excess tax benefit
    
    
    337
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,090
    )
    
    
    17,640
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    15,550Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    69Retirement of treasury stock
    
    
    
    
    
    
    (16
    )
    
    
    
    
    
    
    
    
    
    
    (80,565
    )
    
    
    80,581
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance as of December 31, 2009
    
    
    42,202
    
    
    $
    422
    
    
    
    
    
    
    $
    
    
    
    $
    370,352
    
    
    $
    
    
    
    $
    664,738
    
    
    $
    (195,291
    )
    
    $
    
    
    
    $
    840,221Merger of Towers Perrin and Watson WyattClass A Common Stock:Towers Watson stock issued for consideration of Merger:Issuance of Class A restricted shares
    
    
    4,249
    
    
    
    43
    
    
    
    
    
    
    
    
    
    
    
    43,686
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    43,729Issuance of Class B1-B4 shares
    
    
    
    
    
    
    
    
    
    
    29,483
    
    
    
    294
    
    
    
    1,313,356
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,313,650Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (11,297
    )
    
    
    
    
    
    
    
    
    
    
    (11,297
    )Issuances of common stock and excess tax benefit
    
    
    536
    
    
    
    7
    
    
    
    
    
    
    
    
    
    
    
    (2,210
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,203
    )Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,884
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    52,884Repurchases of Class B-1 shares from tender offer
    
    
    
    
    
    
    
    
    
    
    (2,267
    )
    
    
    (24
    )
    
    
    (98,444
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (98,468
    )Acceleration of Class B shares to Class A shares
    
    
    173
    
    
    
    
    
    
    
    (173
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Comprehensive Income:Net income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    58,129
    
    
    
    
    
    
    
    9,065
    
    
    
    67,194Additional minimum pension liability, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (163,105
    )
    
    
    
    
    
    
    (163,105
    )Hedge effectiveness, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,986
    )
    
    
    
    
    
    
    (1,986
    )Unrealized gain on available-for-sale securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    98
    
    
    
    
    
    
    
    98Foreign currency translation adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (76,045
    )
    
    
    
    
    
    
    (76,045
    )Total comprehensive loss
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (173,844
    )Balance as of June 30, 2010
    
    
    47,160
    
    
    $
    472
    
    
    
    27,043
    
    
    $
    270
    
    
    $
    1,679,624
    
    
    $
    
    
    
    $
    711,570
    
    
    $
    (436,329
    )
    
    $
    9,065
    
    
    $
    1,964,672Comprehensive IncomeNet income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    194,437
    
    
    
    
    
    
    
    2,288
    
    
    
    196,725Additional minimum pension liability, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    263,903
    
    
    
    
    
    
    
    263,903Foreign currency translation adjustment, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    192
    
    
    
    
    
    
    
    
    
    
    
    154,995
    
    
    
    
    
    
    
    155,187Unrealized loss on available for sale securities, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    968
    
    
    
    (210
    )
    
    
    758Hedge effectiveness, net of tax
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    3,158
    
    
    
    
    
    
    
    3,158Total comprehensive income
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    619,731Repurchases of common stock
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,646
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (30,646
    )Shares received for employee taxes upon conversion of Restricted A shares
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,596
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (26,596
    )Exercises of stock options and purchases under our ESPP
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,882
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,882Class A Common Stock:Cash dividends declared
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (22,846
    )
    
    
    
    
    
    
    
    
    
    
    (22,846
    )Issuances of common stock and excess tax benefits
    
    
    111
    
    
    
    1
    
    
    
    
    
    
    
    
    
    
    
    1,097
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,098Stock-based compensation
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,922
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    79,922Conversion of Restricted A shares to Class A shares
    
    
    (19
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Conversion of Class B-1 shares to Class A shares
    
    
    5,642
    
    
    
    56
    
    
    
    (5,642
    )
    
    
    (56
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Issuance of Class B-3 and B-4 shares for acquisition
    
    
    
    
    
    
    
    
    
    
    228
    
    
    
    2
    
    
    
    11,248
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,250Acceleration of Class B shares to Class A shares
    
    
    83
    
    
    
    1
    
    
    
    (84
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1Adjustment to repurchases of Class B-1 shares from tender offer
    
    
    
    
    
    
    
    
    
    
    28
    
    
    
    
    
    
    
    1,202
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    1,202Secondary offering conversion of Class B1 shares to Class A shares
    
    
    4,921
    
    
    
    49
    
    
    
    (4,921
    )
    
    
    (49
    )
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    Balance as of June 30, 2011
    
    
    57,898
    
    
    $
    579
    
    
    
    16,652
    
    
    $
    167
    
    
    $
    1,773,285
    
    
    $
    (52,360
    )
    
    $
    883,161
    
    
    $
    (13,305
    )
    
    $
    11,143
    
    
    $
    2,602,670
  67




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##### Table of Contents



TOWERS WATSON & CO.
 
 Notes to the Consolidated Financial Statements
(Tabular amounts in thousands except per share data)
 Note 1  Summary of Significant Accounting Policies
   Nature of the Business
 Principles of Consolidation
 Use of Estimates
 Cash and Cash Equivalents
 Restricted Cash
 Marketable Securities
 68




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##### Table of Contents



Receivables from Clients
 Revenue Recognition
       69




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##### Table of Contents



Income Taxes Income Taxes
 Foreign Currency Translation
 Fair Value of Financial Instruments
 Concentration of Credit Risk
 Change to Presentation of our Balance Sheet and Cash flows
 Incurred But Not Reported (IBNR) Claims
 Stock-based Compensation
  70




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##### Table of Contents



Earnings per Share (EPS) Earnings per Share
 Goodwill and Intangible Assets
  Recent Accounting Pronouncements
 Adopted
 Noncontrolling Interests in Consolidated Financial Statements  an amendment of ARB No.
51, Business
Combinations.
 Not yet adopted
 IntangiblesGoodwill and Other (Topic 350): When to Perform Step 2 of the Goodwill Impairment Test
for Reporting Units with Zero or Negative Carrying Amounts (a consensus of the FASB Emerging Issues
Task Force),
 71




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##### Table of Contents



Comprehensive Income (Topic 220): Presentation of
Comprehensive Income Comprehensive Income .
 Note 2  Mergers and Acquisitions
 Merger
  Consideration Exchanged
  
    
    46,911,275 shares of Towers Watson Class A Common Stock (less a number of
shares that were withheld for tax purposes in respect of Watson Wyatt deferred stock units
and deferred shares), including 4,248,984 shares of Restricted Towers Watson Class A Common
Stock:
 
    
    29,483,008 shares of Towers Watson Class B Common Stock, including:
 
    
    12,798,118 shares of Class B-1 Common Stock (which was subsequently reduced
by 2,267,265 shares related to our tender offer in June 2010 and 4,921,001 shares
related to our secondary offering in September 2010, further described in Note 13, and
all of which remaining shares were converted to shares of Class A Common Stock on
January 1, 2011);
 
    
    5,561,630 shares of Class B-2 Common Stock;
 
    
    5,561,630 shares of Class B-3 Common Stock; and
 
    
    5,561,630 shares of Class B-4 Common Stock;
 
    
    8,548,835 shares of Towers Watson Class R Common Stock, which subsequently were
redeemed automatically in exchange for the right to receive:
 
    
    $200 million in cash (subject to applicable tax withholding and gross-up
adjustments); and
 
    
    Towers Watson Notes in an aggregate principal amount of $200 million.
  Fair Value of Consideration
 Business Combinations
 72




---



##### Table of Contents



PCIC
   Fair value of net assets acquired and intangibles
  Customer relationships
  Trademarks and trade names
  73




---



##### Table of Contents



Developed technology
  Favorable and unfavorable lease contracts
  Measurement period
   January 1, 2010(In thousands, except share and per share data)Calculation of Consideration TransferredCash paid
    
    
    
    
    
    
    
    
    
    $
    200,000Notes payable issued to Towers Perrin shareholders
    
    
    
    
    
    
    
    
    
    
    200,000Towers Perrin shares converted to Towers Watson shares
    
    
    42,489,840Less Class R shares
    
    
    (8,548,835
    )Less 10% of consideration in RSUs
    
    
    (4,248,984
    )Shares of Towers Watson stock issued
    
    
    
    
    
    
    29,692,021Closing price of Watson Wyatt stock, December 31, 2009
    
    
    
    
    
    $
    47.52Average discount for restricted stock
    
    
    
    
    
    
    7
    %Aggregate fair value of the Towers Watson common stock issued
    
    
    
    
    
    
    
    
    
    
    1,313,650Fair value of RSUs assumed in the Merger
    
    
    
    
    
    
    
    
    
    
    43,729Total consideration transferred
    
    
    
    
    
    
    
    
    
    $
    1,757,379Current assets
    
    
    
    
    
    $
    1,002,567Other non-current assets
    
    
    
    
    
    
    219,755Identifiable intangible assets
    
    
    
    
    
    
    552,785Deferred tax asset, net
    
    
    
    
    
    
    149,381Current liabilities
    
    
    
    
    
    
    (672,033
    )Other long-term liabilities
    
    
    
    
    
    
    (760,708
    )Goodwill
    
    
    
    
    
    
    1,265,632Total tangible and intangible net assets
    
    
    
    
    
    
    
    
    
    $
    1,757,379
 74




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##### Table of Contents



Year Ended June 30,2010
    
    
    2009(in thousands)Revenue
    
    $
    3,180,916
    
    
    $
    3,251,323Costs of providing services:Salaries and employee benefits
    
    
    2,146,211
    
    
    
    2,236,462Professional and subcontracted services
    
    
    243,752
    
    
    
    293,292Occupancy
    
    
    146,695
    
    
    
    144,392General and administrative expenses
    
    
    268,808
    
    
    
    352,109Depreciation and amortization
    
    
    131,599
    
    
    
    136,5142,937,065
    
    
    
    3,162,769Income from operations
    
    
    243,851
    
    
    
    88,554Loss from affiliates
    
    
    (1,085
    )
    
    
    294Interest income
    
    
    4,731
    
    
    
    8,567Interest expense
    
    
    (11,991
    )
    
    
    (12,160
    )Other non-operating income
    
    
    16,585
    
    
    
    19,810Income before income taxes
    
    
    252,091
    
    
    
    105,065Provision for income taxes
    
    
    67,918
    
    
    
    64,157Net income before non-controlling interests
    
    
    184,173
    
    
    
    40,908Net loss attributable to non-controlling interests
    
    
    (2,146
    )
    
    
    4,515Net income attributable to controlling interests
    
    $
    186,319
    
    
    $
    36,393
 Acquisitions
   75




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##### Table of Contents



Note 3  Fixed Income Securities
  June 30, 2011
    
    
    June 30, 2010Amortized
    
    
    Unrealized
    
    
    Estimated
    
    
    Amortized
    
    
    Unrealized
    
    
    EstimatedCost
    
    
    Gains
    
    
    Fair Value
    
    
    Cost
    
    
    Gains
    
    
    Fair ValueShort-term investments: due in
one year or less
    
    $
    43,227
    
    
    $
    430
    
    
    $
    43,657
    
    
    $
    50,585
    
    
    $
    424
    
    
    $
    51,009Non-current assets: due in
one through five years
    
    
    49,625
    
    
    
    769
    
    
    
    50,394
    
    
    
    60,142
    
    
    
    1,956
    
    
    
    62,098
  Note 4  Fixed Assets
   June 30,2011
    
    
    2010Furniture, fixtures and equipment
    
    $
    195,891
    
    
    $
    172,899Computer software
    
    
    276,384
    
    
    
    239,153Leasehold improvements
    
    
    165,847
    
    
    
    157,554638,122
    
    
    
    569,606Less: accumulated depreciation and
amortization
    
    
    (385,779
    )
    
    
    (342,298
    )Fixed assets, net
    
    $
    252,343
    
    
    $
    227,308
  76




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##### Table of Contents



Note 5  Goodwill and Intangible Assets
  Risk andFinancial
    
    
    Talent andBenefits
    
    
    Services
    
    
    Rewards
    
    
    All Other
    
    
    TotalBalance as of June 30, 2009
    
    $
    394,954
    
    
    $
    115,942
    
    
    $
    30,644
    
    
    $
    1,214
    
    
    $
    542,754Goodwill acquired and contingent payments
    
    
    820,151
    
    
    
    365,767
    
    
    
    79,735
    
    
    
    
    
    
    
    1,265,653Translation adjustment
    
    
    (63,424
    )
    
    
    (22,336
    )
    
    
    (5,352
    )
    
    
    
    
    
    
    (91,112
    )Balance as of June 30, 2010
    
    
    1,151,681
    
    
    
    459,373
    
    
    
    105,027
    
    
    
    1,214
    
    
    
    1,717,295Goodwill acquired
    
    
    49,769
    
    
    
    49,150
    
    
    
    2,191
    
    
    
    
    
    
    
    101,110Translation adjustment
    
    
    86,909
    
    
    
    30,241
    
    
    
    8,019
    
    
    
    
    
    
    
    125,169Balance as of June 30, 2011
    
    $
    1,288,359
    
    
    $
    538,764
    
    
    $
    115,237
    
    
    $
    1,214
    
    
    $
    1,943,574
    Customer
    
    
    Core/
    
    
    
    
    
    
    FavorableTrademark &
    
    
    related
    
    
    developed
    
    
    Non-compete
    
    
    leasetrade name
    
    
    intangible
    
    
    technology
    
    
    agreements
    
    
    agreements
    
    
    TotalBalance as of June 30, 2009
    
    $
    100,511
    
    
    $
    78,843
    
    
    $
    6,757
    
    
    $
    122
    
    
    $
    
    
    
    $
    186,233Intangible assets acquired
    
    
    275,500
    
    
    
    140,800
    
    
    
    125,400
    
    
    
    
    
    
    
    11,085
    
    
    
    552,785Amortization
    
    
    
    
    
    
    (18,087
    )
    
    
    (13,170
    )
    
    
    (120
    )
    
    
    (1,495
    )
    
    
    (32,872
    )Translation adjustment
    
    
    (9,218
    )
    
    
    (12,750
    )
    
    
    (261
    )
    
    
    (2
    )
    
    
    (428
    )
    
    
    (22,659
    )Balance as of June 30, 2010
    
    
    366,793
    
    
    
    188,806
    
    
    
    118,726
    
    
    
    
    
    
    
    9,162
    
    
    
    683,487Intangible assets acquired
    
    
    
    
    
    
    27,396
    
    
    
    17,806
    
    
    
    250
    
    
    
    
    
    
    
    45,452Intangible assets written-off
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (1,376
    )
    
    
    (1,376
    )Amortization
    
    
    
    
    
    
    (29,081
    )
    
    
    (22,603
    )
    
    
    (250
    )
    
    
    (2,622
    )
    
    
    (54,556
    )Translation adjustment
    
    
    6,769
    
    
    
    15,034
    
    
    
    (162
    )
    
    
    
    
    
    
    274
    
    
    
    21,915Balance as of June 30, 2011
    
    $
    373,562
    
    
    $
    202,155
    
    
    $
    113,767
    
    
    $
    
    
    
    $
    5,438
    
    
    $
    694,922
    77




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##### Table of Contents



Fiscal Year 2011
    
    
    Fiscal Year 2010Gross
    
    
    
    
    
    
    GrossCarrying
    
    
    Accumulated
    
    
    Carrying
    
    
    AccumulatedAmount
    
    
    Amortization
    
    
    Amount
    
    
    AmortizationIntangible assets:Trademark and trade name
    
    $
    373,964
    
    
    $
    402
    
    
    $
    367,195
    
    
    $
    402Customer related intangibles
    
    
    280,547
    
    
    
    78,392
    
    
    
    237,072
    
    
    
    48,266Core/developed technology
    
    
    166,110
    
    
    
    52,343
    
    
    
    148,664
    
    
    
    29,938Non-compete agreements
    
    
    1,525
    
    
    
    1,525
    
    
    
    1,275
    
    
    
    1,275Favorable lease agreements
    
    
    6,808
    
    
    
    1,370
    
    
    
    10,657
    
    
    
    1,495Total intangible assets
    
    $
    828,954
    
    
    $
    134,032
    
    
    $
    764,863
    
    
    $
    81,376
   1)
    
    future estimated amortization expense for amortizable intangible assets consisting of:
 
    
    customer related intangibles
 
    
    core/developed technology
 
    
    non-compete agreements
 2)
    
    the rent offset resulting from the amortization of the net lease intangible assets and
liabilities for future fiscal years as follows:
 Fiscal year ending June 30,
    
    Amortization
    
    
    Rent Offset2012
    
    $
    56,843
    
    
    $
    (3,045
    )2013
    
    
    52,525
    
    
    
    (2,731
    )2014
    
    
    45,276
    
    
    
    (2,407
    )2015
    
    
    37,714
    
    
    
    (2,083
    )2016
    
    
    32,760
    
    
    
    (1,566
    )Thereafter
    
    
    90,804
    
    
    
    (4,064
    )Total
    
    $
    315,922
    
    
    $
    (15,896
    )
 Note 6  Fair Value Measurements
   Level 1
 Level 2
 a)
    
    Quoted prices for similar assets or liabilities in active markets;
 b)
    
    Quoted prices for identical or similar assets or liabilities in non-active markets;
 c)
    
    Pricing models whose inputs are observable for substantially the full term of the asset
or liability; and
 d)
    
    Pricing models whose inputs are derived principally from or corroborated by observable
market data through correlation or other means for substantially the full asset or
liability.
 Level 3
 78




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Fair Value Measurements on a Recurring Basis atJune 30, 2011Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssets:Available-for-sale securities:U.S. treasury securities and obligations of the U.S. government,
government agencies and authorities (a)
    
    $
    2,043
    
    
    $
    31,304
    
    
    $
    
    
    
    $
    33,347Corporate bonds (a)
    
    
    
    
    
    
    46,085
    
    
    
    
    
    
    
    46,085Obligations of states, municipalities and political subdivisions (a)
    
    
    
    
    
    
    14,620
    
    
    
    
    
    
    
    14,620Equity securities (b)
    
    
    1,383
    
    
    
    
    
    
    
    
    
    
    
    1,383Mutual funds (c)
    
    
    7,138
    
    
    
    
    
    
    
    
    
    
    
    7,138Derivatives:Foreign exchange forwards (d)
    
    
    
    
    
    
    2,665
    
    
    
    
    
    
    
    2,665Liabilities:Derivatives:Foreign exchange forwards (d)
    
    $
    
    
    
    $
    137
    
    
    $
    
    
    
    $
    137
 Fair Value Measurements on a Recurring Basis atJune 30, 2010Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalAssets:Available-for-sale securities:U.S. treasury securities and obligations of the U.S. government,
government agencies and authorities (a)
    
    $
    6,183
    
    
    $
    15,957
    
    
    $
    
    
    
    $
    22,140Corporate bonds (a)
    
    
    
    
    
    
    72,076
    
    
    
    
    
    
    
    72,076Obligations of states, municipalities and political subdivisions (a)
    
    
    
    
    
    
    18,878
    
    
    
    
    
    
    
    18,878Equity securities (b)
    
    
    1,056
    
    
    
    
    
    
    
    
    
    
    
    1,056Mutual funds (c)
    
    
    5,235
    
    
    
    
    
    
    
    
    
    
    
    5,235Derivatives:Foreign exchange forwards (d)
    
    
    
    
    
    
    731
    
    
    
    
    
    
    
    731Foreign exchange options (d)
    
    
    
    
    
    
    37
    
    
    
    
    
    
    
    37Liabilities:Derivatives:Foreign exchange forwards (d)
    
    $
    
    
    
    $
    4,100
    
    
    $
    
    
    
    $
    4,100Foreign exchange options (d)
    
    
    
    
    
    
    177
    
    
    
    
    
    
    
    177
 
 (a)
    
    These assets are included in short-term investments or other assets on the consolidated
balance sheet. See Note 3 for the classification of all fixed income securities as current or
non-current.(b)
    
    These assets are included in short-term investments or other assets on the consolidated
balance sheet.(c)
    
    These assets are included in other assets on the consolidated balance sheet.(d)
    
    These derivative investments are included in other current assets or accounts payable,
accrued liabilities and deferred income on the consolidated balance sheet. See Note 7 for
further information on our derivative investments.   79




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##### Table of Contents



Note 7  Derivative Financial Instruments
    Accounting Policy for Derivatives
      80




---



##### Table of Contents



Fair Value Measurements
  Asset derivatives
    
    Liability derivativesBalance sheet location
    
    Fair value
    
    Balance sheet location
    
    Fair valueJune 30,
    
    
    
    June 30,2011
    
    2010
    
    
    
    2011
    
    2010Derivatives designated as 
hedging instruments:Foreign exchange forwards
    
    Other current assets
    
    $
    2,073
    
    
    $
    731
    
    
    Accounts payable, accrued
liabilities and deferred
income
    
    $
    (114
    )
    
    $
    (4,100
    )Foreign exchange options
    
    Other current assets
    
    
    
    
    
    
    37
    
    
    Accounts payable, accrued
liabilities and deferred
income
    
    
    
    
    
    
    (94
    )Total derivatives designated 
as hedging instruments
    
    
    
    
    2,073
    
    
    
    768
    
    
    
    
    
    (114
    )
    
    
    (4,194
    )Derivatives not designated as 
hedging instruments:Foreign exchange forwards
    
    Other current assets
    
    $
    592
    
    
    $
    
    
    
    Accounts payable, accrued
liabilities and deferred
income
    
    $
    (23
    )
    
    $
    Foreign exchange options
    
    Other current assets
    
    
    
    
    
    
    
    
    
    Accounts payable, accrued
liabilities and deferred
income
    
    
    
    
    
    
    (83
    )Total derivatives not designated 
as hedging instruments
    
    
    
    
    592
    
    
    
    
    
    
    
    
    
    (23
    )
    
    
    (83
    )Total derivative assets (liabilities)
    
    
    
    $
    2,665
    
    
    $
    768
    
    
    
    
    $
    (137
    )
    
    $
    (4,277
    )
 81




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##### Table of Contents



Location of gain (loss)
    
    
    Gain (loss)Derivatives designated as
    
    
    
    
    
    
    
    
    
    Location
    
    
    
    
    
    
    
    
    
    
    recognized in income
    
    
    recognized in incomehedging instruments for
    
    Gain (loss)
    
    
    of loss reclassified
    
    
    Loss reclassified
    
    
    (ineffective portion and
    
    
    (ineffective portion andthe fiscal years ended
    
    recognized in OCI
    
    
    from OCI into income
    
    
    from OCI into income
    
    
    amount excluded from
    
    
    amount excluded fromJune 30, 2011 and 2010:
    
    (effective portion)
    
    
    (effective portion)
    
    
    (effective portion)
    
    
    effectiveness testing)
    
    
    effectiveness testing)2011
    
    
    2010
    
    
    
    
    
    
    2011
    
    
    2010
    
    
    
    
    
    
    2011
    
    
    2010Foreign exchange forwards
    
    $
    4,323
    
    
    $
    (3,335
    )
    
    General and
 administrative expenses
    
    $
    (683
    )
    
    $
    (266
    )
    
    General and 
administrative expenses
    
    $
    125
    
    
    $
    (65
    )Foreign exchange options
    
    
    
    
    
    
    (207
    )
    
    General and
 administrative expenses
    
    
    (207
    )
    
    
    
    
    
    General and

administrative expenses
    
    
    
    
    
    
    (32
    )Total
    
    $
    4,323
    
    
    $
    (3,542
    )
    
    
    
    
    
    $
    (890
    )
    
    $
    (266
    )
    
    
    
    
    
    $
    125
    
    
    $
    (97
    )
  Gain (loss) recognized in incomeDerivatives not designated
    
    Location of gain (loss)
    
    
    Fiscal year ended June 30,as hedging instruments:
    
    recognized in income
    
    
    2011
    
    
    2010Foreign exchange forwards
    
    General and administrative expenses
    
    $
    2,976
    
    
    $
    1,869Foreign exchange options
    
    General and administrative expenses
    
    
    
    
    
    
    (350
    )Total
    
    
    
    
    
    $
    2,976
    
    
    $
    1,519
 Note 8  Accounts Payable and Accrued Liabilities, Including Discretionary Compensation
  June 30,2011
    
    
    2010Accounts payable and accrued liabilities
    
    $
    199,456
    
    
    $
    138,821Accrued payroll and bonuses
    
    
    348,143
    
    
    
    150,761Deferred revenue
    
    
    136,211
    
    
    
    119,726Total accounts
payable, accrued
liabilities and
deferred income
    
    $
    683,810
    
    
    $
    409,308
 Note 9  Leases
  82




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Fiscal year ending June 30,
    
    Amortization2012
    
    $
    105,1072013
    
    
    94,6242014
    
    
    85,6112015
    
    
    72,7302016
    
    
    59,640Thereafter
    
    
    183,513Total
    
    $
    601,225
  Note 10  Retirement Benefits
 Defined Benefit Plans
     83




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##### Table of Contents



2012
    
    
    2011
    
    
    2010(Projected)
    
    
    (Actual)
    
    
    (Actual)U.S
    
    $
    
    
    
    $
    30,000
    
    
    $
    30,000Canada
    
    
    15,202
    
    
    
    6,346
    
    
    
    4,388Europe
    
    
    17,986
    
    
    
    19,216
    
    
    
    21,020
  Assumptions Used in the Valuations of the Defined Benefit Pension Plans
   Year Ended June 30,2011
    
    
    2010
    
    
    2009North
    
    
    
    
    
    
    North
    
    
    
    
    
    
    NorthAmerica
    
    
    Europe
    
    
    America
    
    
    Europe
    
    
    America
    
    
    EuropeDiscount rate
    
    
    5.80
    %
    
    
    5.25
    %
    
    
    6.43
    %
    
    
    6.03
    %
    
    
    6.91
    %
    
    
    6.47
    %Expected long-term rate of return on assets
    
    
    8.16
    %
    
    
    6.79
    %
    
    
    8.11
    %
    
    
    6.48
    %
    
    
    8.61
    %
    
    
    6.53
    %Rate of increase in compensation levels
    
    
    3.88
    %
    
    
    3.88
    %
    
    
    3.93
    %
    
    
    5.09
    %
    
    
    4.08
    %
    
    
    5.36
    %
 84




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##### Table of Contents



June 30, 2011
    
    
    June 30, 2010North
    
    
    
    
    
    
    NorthAmerica
    
    
    Europe
    
    
    America
    
    
    EuropeDiscount rate
    
    
    5.79
    %
    
    
    5.62
    %
    
    
    5.86
    %
    
    
    5.25
    %Rate of increase in
compensation levels
    
    
    3.82
    %
    
    
    3.93
    %
    
    
    3.88
    %
    
    
    3.88
    %
  Components of Net Periodic Benefit Cost for Defined Benefit Pension Plans
  Year ended June 30,2011
    
    
    2010
    
    
    2009North
    
    
    
    
    
    
    North
    
    
    
    
    
    
    NorthAmerica
    
    
    Europe
    
    
    America
    
    
    Europe
    
    
    America
    
    
    EuropeService cost
    
    $
    58,050
    
    
    $
    12,218
    
    
    $
    38,068
    
    
    $
    9,844
    
    
    $
    24,771
    
    
    $
    7,538Interest cost
    
    
    139,840
    
    
    
    39,000
    
    
    
    95,845
    
    
    
    30,631
    
    
    
    48,504
    
    
    
    22,759Expected return on plan assets
    
    
    (158,708
    )
    
    
    (40,420
    )
    
    
    (93,257
    )
    
    
    (27,078
    )
    
    
    (50,725
    )
    
    
    (20,945
    )Amortization of net loss/(gain)
    
    
    23,997
    
    
    
    5,574
    
    
    
    15,275
    
    
    
    2,615
    
    
    
    8,649
    
    
    
    (328
    )Amortization of prior service
(credit)/cost
    
    
    (6,632
    )
    
    
    41
    
    
    
    (1,623
    )
    
    
    41
    
    
    
    (2,279
    )
    
    
    42Settlement/(curtailment) and
other adjustments
    
    
    5,038
    
    
    
    (2,279
    )
    
    
    2,293
    
    
    
    924
    
    
    
    
    
    
    
    120Net periodic benefit cost
    
    $
    61,585
    
    
    $
    14,134
    
    
    $
    56,601
    
    
    $
    16,977
    
    
    $
    28,920
    
    
    $
    9,186
  2011
    
    
    2010North
    
    
    
    
    
    
    NorthAmerica
    
    
    Europe
    
    
    America
    
    
    EuropeCurrent year actuarial (gain)/loss
    
    $
    (172,078
    )
    
    $
    (107,560
    )
    
    $
    220,113
    
    
    $
    37,501Amortization of actuarial loss
    
    
    (23,997
    )
    
    
    (5,574
    )
    
    
    (15,275
    )
    
    
    (2,615
    )Current year prior service credit
    
    
    (73,926
    )
    
    
    
    
    
    
    
    
    
    
    Amortization of prior service credit/(cost)
    
    
    6,632
    
    
    
    (41
    )
    
    
    1,623
    
    
    
    (41
    )(Settlement)/curtailment
    
    
    (4,170
    )
    
    
    2,323
    
    
    
    (2,293
    )
    
    
    (64
    )Other
    
    
    5,378
    
    
    
    4,058
    
    
    
    1,320
    
    
    
    (4,638
    )Total recognized in other comprehensive income
    
    $
    (262,161
    )
    
    $
    (106,794
    )
    
    $
    205,488
    
    
    $
    30,143
   2012NorthAmerica
    
    
    EuropeActuarial loss/(gain)
    
    $
    20,094
    
    
    $
    (2,445
    )Prior service (credit)/cost
    
    
    (8,336
    )
    
    
    42Total
    
    $
    11,758
    
    
    $
    (2,403
    )
 85




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##### Table of Contents



2011
    
    
    2010North
    
    
    
    
    
    
    NorthAmerica
    
    
    Europe
    
    
    America
    
    
    EuropeChange in Benefit ObligationBenefit obligation at beginning of year
    
    $
    1,974,882
    
    
    $
    617,365
    
    
    $
    593,725
    
    
    $
    355,701Service cost
    
    
    46,955
    
    
    
    8,239
    
    
    
    30,420
    
    
    
    7,656Interest cost
    
    
    112,391
    
    
    
    34,236
    
    
    
    77,536
    
    
    
    27,501Actuarial losses/(gains)
    
    
    32,756
    
    
    
    (68,732
    )
    
    
    195,603
    
    
    
    61,309Benefit payments
    
    
    (83,171
    )
    
    
    (15,332
    )
    
    
    (65,263
    )
    
    
    (19,760
    )Participant contributions
    
    
    
    
    
    
    1,740
    
    
    
    
    
    
    
    Acquisition/business combination/divestiture
    
    
    
    
    
    
    
    
    
    
    1,139,366
    
    
    
    239,603Plan amendments and other
    
    
    (55,930
    )
    
    
    44
    
    
    
    
    
    
    
    2,513Curtailments
    
    
    
    
    
    
    (4,889
    )
    
    
    
    
    
    
    Foreign currency adjustment
    
    
    24,120
    
    
    
    49,693
    
    
    
    3,495
    
    
    
    (57,158
    )Benefit obligation at end of year
    
    $
    2,052,003
    
    
    $
    622,364
    
    
    $
    1,974,882
    
    
    $
    617,365Change in Plan AssetsFair value of plan assets, beginning of year
    
    $
    1,832,004
    
    
    $
    562,542
    
    
    $
    517,322
    
    
    $
    315,769Actual return on plan assets
    
    
    369,875
    
    
    
    64,026
    
    
    
    103,850
    
    
    
    55,514Company contributions
    
    
    36,346
    
    
    
    19,216
    
    
    
    34,388
    
    
    
    21,020Benefit payments
    
    
    (83,171
    )
    
    
    (15,332
    )
    
    
    (65,263
    )
    
    
    (19,760
    )Participant contributions
    
    
    
    
    
    
    1,740
    
    
    
    
    
    
    
    1,820Acquisition/business combination/divestiture
    
    
    
    
    
    
    
    
    
    
    1,239,101
    
    
    
    241,953Other
    
    
    
    
    
    
    (116
    )
    
    
    
    
    
    
    (166
    )Foreign currency adjustment
    
    
    19,825
    
    
    
    47,083
    
    
    
    2,606
    
    
    
    (53,609
    )Fair value of plan assets, end of year
    
    $
    2,174,879
    
    
    $
    679,159
    
    
    $
    1,832,004
    
    
    $
    562,541Funded status at end of year
    
    $
    122,876
    
    
    $
    56,795
    
    
    $
    (142,878
    )
    
    $
    (54,824
    )Accumulated Benefit Obligation
    
    $
    2,013,171
    
    
    $
    602,193
    
    
    $
    1,897,011
    
    
    $
    601,461
 2011
    
    
    2010North
    
    
    
    
    
    
    NorthAmerica
    
    
    Europe
    
    
    America
    
    
    EuropeAmounts recognized in Consolidated Balance
Sheets consist of:Noncurrent assets
    
    $
    179,546
    
    
    $
    56,795
    
    
    $
    45,949
    
    
    $
    2,568Noncurrent liabilities
    
    
    (56,670
    )
    
    
    
    
    
    
    (188,827
    )
    
    
    (57,392
    )Net amount recognized
    
    $
    122,876
    
    
    $
    56,795
    
    
    $
    (142,878
    )
    
    $
    (54,824
    )Amounts recognized in Accumulated Other
Comprehensive Income consist of:Net actuarial loss/(gain)
    
    $
    136,080
    
    
    $
    (30,437
    )
    
    $
    329,076
    
    
    $
    65,553Net prior service (credit)/cost
    
    
    (61,210
    )
    
    
    573
    
    
    
    (9,628
    )
    
    
    572Accumulated Other Comprehensive Income
    
    $
    74,870
    
    
    $
    (29,864
    )
    
    $
    319,448
    
    
    $
    66,125
 86




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##### Table of Contents



2011
    
    
    2010North
    
    
    
    
    
    
    NorthAmerica
    
    
    Europe
    
    
    America
    
    
    EuropeProjected benefit obligation at end of year
    
    $
    972,481
    
    
    $
    
    
    
    $
    932,277
    
    
    $
    594,687Fair value of plan assets, end of year
    
    $
    915,811
    
    
    $
    
    
    
    $
    743,450
    
    
    $
    537,296
   2011
    
    
    2010North
    
    
    
    
    
    
    NorthAmerica
    
    
    Europe
    
    
    America
    
    
    EuropeProjected benefit obligation at end of year
    
    $
    277,907
    
    
    $
    
    
    
    $
    932,277
    
    
    $
    575,196Accumulated benefit obligation at end of year
    
    $
    243,221
    
    
    $
    
    
    
    $
    854,406
    
    
    $
    564,959Fair value of plan assets at end of year
    
    $
    223,457
    
    
    $
    
    
    
    $
    743,450
    
    
    $
    519,880
   June 30,2011
    
    
    2010Change in Benefit ObligationBenefit obligation at beginning of year
    
    $
    627,474
    
    
    $
    126,922Service cost
    
    
    15,075
    
    
    
    9,836Interest cost
    
    
    32,213
    
    
    
    21,439Actuarial (gains)/losses
    
    
    (4,117
    )
    
    
    39,032Benefit payments
    
    
    (78,242
    )
    
    
    (37,003
    )Acquisition/business combination/divestiture
    
    
    
    
    
    
    480,337Plan amendments and other
    
    
    (17,127
    )
    
    
    698Foreign currency adjustment
    
    
    26,328
    
    
    
    (13,787
    )Benefit obligation at end of year
    
    $
    601,604
    
    
    $
    627,474Change in Plan AssetsFair value of plan assets, beginning of year
    
    $
    
    
    
    $
    Actual return on plan assets
    
    
    
    
    
    
    Company contributions
    
    
    78,242
    
    
    
    37,003Benefit payments
    
    
    (78,242
    )
    
    
    (37,003
    )Participant contributions
    
    
    
    
    
    
    Foreign currency adjustment
    
    
    
    
    
    
    Funded status at end of year
    
    $
    (601,604
    )
    
    $
    (627,474
    )Amounts recognized in Consolidated Balance Sheets consist of:Noncurrent assets
    
    $
    
    
    
    $
    Current liabilities
    
    
    (91,499
    )
    
    
    (81,743
    )Noncurrent liabilities
    
    
    (510,105
    )
    
    
    (545,731
    )Net amount recognized
    
    $
    (601,604
    )
    
    $
    (627,474
    )Amounts recognized in Accumulated Other Comprehensive Income consist of:Net actuarial loss
    
    $
    26,826
    
    
    $
    39,517Net prior service credit
    
    
    (16,600
    )
    
    
    (903
    )Accumulated Other Comprehensive Income
    
    $
    10,226
    
    
    $
    38,614Information for plans with obligations in excess of plan assets:Projected Benefit Obligation
    
    $
    601,604
    
    
    $
    627,474Accumulated Benefit Obligation
    
    
    590,644
    
    
    
    606,529Fair value of plan assets
    
    
    
    
    
    
    
 87




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##### Table of Contents



88




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##### Table of Contents



Fair Value Measurements on a Recurring Basis at June 30, 2011Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalNorth
    
    
    
    
    
    
    North
    
    
    
    
    
    
    NorthAmerica
    
    
    Europe
    
    
    America
    
    
    Europe
    
    
    America
    
    
    EuropeAsset category:Cash
    
    $
    5,837
    
    
    $
    15,179
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    21,016Cash equivalents
    
    
    
    
    
    
    
    
    
    
    40,053
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    40,053Equity securities:U.S. large cap
companies
    
    
    30,479
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,479U.S. mid cap companies
    
    
    73,887
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    73,887U.S. small cap
companies
    
    
    86,199
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    86,199International equities
    
    
    213,275
    
    
    
    14,452
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    227,727Fixed income:U.S. treasuries
    
    
    46,660
    
    
    
    
    
    
    
    152,986
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    199,646Corporate bonds
    
    
    
    
    
    
    
    
    
    
    428,156
    
    
    
    112,930
    
    
    
    
    
    
    
    
    
    
    
    541,086Other fixed income
    
    
    72,002
    
    
    
    121,247
    
    
    
    50,183
    (a)
    
    
    26,263
    (a)
    
    
    
    
    
    
    
    
    
    
    269,695Pooled funds
    
    
    
    
    
    
    
    
    
    
    434,208
    (b)
    
    
    353,161
    (b)
    
    
    
    
    
    
    
    
    
    
    787,369Mutual funds
    
    
    
    
    
    
    
    
    
    
    488,495
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    488,495Limited partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    50,066
    
    
    
    18,085
    
    
    
    68,151Derivatives
    
    
    
    
    
    
    
    
    
    
    30,377
    (d)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    30,377Insurance contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    17,841
    
    
    
    17,841Total assets
    
    $
    528,339
    
    
    $
    150,878
    
    
    $
    1,624,458
    
    
    $
    492,354
    
    
    $
    50,066
    
    
    $
    35,926
    
    
    $
    2,882,021Liability category:Derivatives
    
    $
    
    
    
    $
    
    
    
    $
    32,542
    (d)
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    32,542Net assets
    
    $
    528,339
    
    
    $
    150,878
    
    
    $
    1,591,916
    
    
    $
    492,354
    
    
    $
    50,066
    
    
    $
    35,926
    
    
    $
    2,849,479
 Fair Value Measurements on a Recurring Basis at June 30, 2010Level 1
    
    
    Level 2
    
    
    Level 3
    
    
    TotalNorth
    
    
    
    
    
    
    North
    
    
    
    
    
    
    NorthAmerica
    
    
    Europe
    
    
    America
    
    
    Europe
    
    
    America
    
    
    EuropeAsset category:Cash
    
    $
    1,921
    
    
    $
    15,375
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    
    
    
    $
    17,296Cash equivalents
    
    
    
    
    
    
    
    
    
    
    32,915
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    32,915Equity securities:U.S. large cap
companies
    
    
    21,507
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    21,507U.S. mid cap companies
    
    
    63,353
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    63,353U.S. small cap
companies
    
    
    83,393
    
    
    
    
    
    
    
    24
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    83,417International equities
    
    
    152,369
    
    
    
    17,008
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    169,377Fixed income:U.S. treasuries
    
    
    71,090
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    71,090Corporate bonds
    
    
    
    
    
    
    
    
    
    
    503,942
    
    
    
    99,405
    
    
    
    
    
    
    
    
    
    
    
    603,347Other fixed income
    
    
    64,485
    
    
    
    97,935
    
    
    
    85,581
    (a)
    
    
    18,011
    (a)
    
    
    
    
    
    
    
    
    
    
    266,012Pooled funds
    
    
    
    
    
    
    
    
    
    
    432,490
    (b)
    
    
    291,206
    (b)
    
    
    
    
    
    
    
    
    
    
    723,696Multi-strategy funds
    
    
    
    
    
    
    
    
    
    
    146,054
    (c)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    146,054Mutual funds
    
    
    
    
    
    
    
    
    
    
    129,174
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    129,174Limited partnerships
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    37,643
    
    
    
    9,200
    
    
    
    46,843Derivatives
    
    
    
    
    
    
    
    
    
    
    4,059
    (d)
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    4,059Insurance contracts
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    14,406
    
    
    
    14,406Net assets
    
    $
    458,118
    
    
    $
    130,318
    
    
    $
    1,334,239
    
    
    $
    408,622
    
    
    $
    37,643
    
    
    $
    23,606
    
    
    $
    2,392,546
 
 (a)
    
    This category includes municipal and foreign bonds.(b)
    
    This category includes pooled funds of both equity and fixed income securities. Fair value is
based on the calculated net asset value of shares held by the plan as reported by the sponsor
of the funds.(c)
    
    The fund seeks to exceed the total return of the S&P 500 Index by investing under normal
circumstances in S&P 500 Index derivatives, backed by a portfolio of fixed income instruments.
Fair value is based on the calculated net asset value of shares held by the plan as reported
by the sponsor of the funds.(d)
    
    We use various derivatives such as interest rate swaps, futures and options to match the
duration of the corporate bond portfolio with the duration of the plan liability. 89




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##### Table of Contents



Cash equivalents
 U.S. treasury securities
 Fixed Income
 Pooled Funds, Multi-strategy Funds and Mutual Funds
 Derivative investments
 Limited Partnerships:
 Insurance contracts:
  June 30,2011
    
    
    2010Net assets held in investments
    
    $
    2,849,479
    
    
    $
    2,392,546Dividend and interest receivable
    
    
    4,559
    
    
    
    11,195Other liabilities
    
    
    
    
    
    
    (9,196
    )Fair value of plan assets
    
    $
    2,854,038
    
    
    $
    2,394,545
  Limited
    
    
    InsurancePartnerships
    
    
    Contracts
    
    
    TotalBeginning balance at June 30, 2009
    
    $
    64,902
    
    
    $
    934
    
    
    $
    65,836Increase due to acquisition
    
    
    
    
    
    
    15,857
    
    
    
    15,857Net actual return on plan assets relating to assets still held at the
reporting date
    
    
    7,223
    
    
    
    178
    
    
    
    7,401Net purchases, sales and settlements
    
    
    (25,099
    )
    
    
    (227
    )
    
    
    (25,326
    )Change in foreign currency exchange rates
    
    
    (183
    )
    
    
    (2,336
    )
    
    
    (2,519
    )Ending balance at June 30, 2010
    
    $
    46,843
    
    
    $
    14,406
    
    
    $
    61,249Net actual return on plan assets relating to assets still held at the
reporting date
    
    
    6,817
    
    
    
    55
    
    
    
    6,872Net purchases, sales and settlements
    
    
    13,624
    
    
    
    719
    
    
    
    14,343Change in foreign currency exchange rates
    
    
    867
    
    
    
    2,661
    
    
    
    3,528Ending balance at June 30, 2011
    
    $
    68,151
    
    
    $
    17,841
    
    
    $
    85,992
 90




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##### Table of Contents



Benefit PaymentsNorthFiscal Year
    
    America
    
    
    Europe
    
    
    Total2012
    
    $
    190,507
    
    
    $
    48,216
    
    
    $
    238,7232013
    
    
    195,981
    
    
    
    15,274
    
    
    
    211,2552014
    
    
    177,386
    
    
    
    24,946
    
    
    
    202,3322015
    
    
    165,501
    
    
    
    19,212
    
    
    
    184,7132016
    
    
    166,389
    
    
    
    25,066
    
    
    
    191,455Years 2017 - 2021
    
    
    935,358
    
    
    
    150,483
    
    
    
    1,085,841$
    1,831,122
    
    
    $
    283,197
    
    
    $
    2,114,319
 Defined Contribution Plan
     Health Care Benefits
  Postretirement Benefits
  91




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##### Table of Contents



June 30,2011
    
    
    2010Health care cost trend, accumulated benefit obligation (decreasing to 5.00% for 2016 and thereafter)
    
    
    7.61
    %
    
    
    8.03
    %Discount rate, accumulated benefit obligation postretirement benefit
    
    
    5.65
    %
    
    
    5.91
    %Rate of compensation increase
    
    
    4.06
    %
    
    
    3.29
    %
   1%
    
    
    1%Increase
    
    
    DecreaseEffect on net periodic postretirement benefit cost in fiscal year 2011
    
    $
    967
    
    
    $
    (595
    )Effect on accumulated postretirement benefit obligation as of June 30, 2011
    
    
    3,839
    
    
    
    (3,202
    )
  Year Ended June 30,2011
    
    
    2010
    
    
    2009Service cost
    
    $
    4,211
    
    
    $
    3,313
    
    
    $
    1,157Interest cost
    
    
    11,706
    
    
    
    8,387
    
    
    
    2,495Expected return on assets
    
    
    (132
    )
    
    
    (66
    )
    
    
    Amortization of net unrecognized losses/(gains)
    
    
    1,674
    
    
    
    (1,151
    )
    
    
    (1,135
    )Amortization of prior service credit
    
    
    (6,842
    )
    
    
    (571
    )
    
    
    (661
    )Curtailment
    
    
    (2,209
    )
    
    
    
    
    
    
    Net periodic postretirement benefit cost
    
    $
    8,408
    
    
    $
    9,912
    
    
    $
    1,856
  2011
    
    
    2010Current year actuarial loss
    
    $
    12,771
    
    
    $
    16,782Amortization of actuarial (loss)/gain
    
    
    (1,674
    )
    
    
    1,151Current year prior service credit
    
    
    (63,745
    )
    
    
    Amortization of prior service credit
    
    
    6,842
    
    
    
    571Curtailment
    
    
    2,209
    
    
    
    Other
    
    
    (53
    )
    
    
    (156
    )Total recognized in other comprehensive income
    
    $
    (43,650
    )
    
    $
    18,348
  2012Actuarial loss
    
    $
    2,334Prior service credit
    
    
    (8,765
    )Total
    
    $
    (6,431
    )
 92




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##### Table of Contents



June 30,2011
    
    
    2010Change in Benefit ObligationBenefit obligation, beginning of year
    
    $
    245,540
    
    
    $
    38,944Service cost
    
    
    4,211
    
    
    
    3,313Interest cost
    
    
    11,706
    
    
    
    8,387Participant contributions
    
    
    2,795
    
    
    
    2,161Actuarial losses
    
    
    12,645
    
    
    
    16,714Benefit payments
    
    
    (14,397
    )
    
    
    (8,556
    )Acquisition/business combination/divestiture
    
    
    
    
    
    
    183,112Medicare Part D
    
    
    809
    
    
    
    708Plan amendments and other
    
    
    (63,745
    )
    
    
    Foreign currency adjustment
    
    
    2,365
    
    
    
    757Benefit obligation, end of year
    
    $
    201,929
    
    
    $
    245,540Change in Plan AssetsFair value of plan assets, beginning of year
    
    $
    6,575
    
    
    $
    Company contributions
    
    
    11,602
    
    
    
    6,395Participant contributions
    
    
    2,795
    
    
    
    2,161Benefit payments
    
    
    (14,397
    )
    
    
    (8,556
    )Actual return on plan assets
    
    
    5
    
    
    
    (2
    )Acquisition/business combination/divestiture
    
    
    
    
    
    
    6,577Fair value of plan assets, end of year
    
    $
    6,580
    
    
    $
    6,575Funded status at end of year
    
    $
    (195,349
    )
    
    $
    (238,965
    )Amounts recognized in Consolidated Balance Sheets consist of:Noncurrent assets
    
    $
    
    
    
    $
    Current liabilities
    
    
    (5,245
    )
    
    
    (4,438
    )Noncurrent liabilities
    
    
    (190,104
    )
    
    
    (234,527
    )Net amount recognized
    
    $
    (195,349
    )
    
    $
    (238,965
    )Amounts recognized in Accumulated Other Comprehensive Income consist of:Net actuarial loss
    
    $
    12,397
    
    
    $
    1,116Net prior service credit
    
    
    (57,899
    )
    
    
    (2,969
    )Accumulated Other Comprehensive Income
    
    $
    (45,502
    )
    
    $
    (1,853
    )
  Benefit
    
    
    Retiree drugFiscal Year
    
    payments
    
    
    subsidy2012
    
    $
    17,151
    
    
    $
    5992013
    
    
    18,429
    
    
    
    6922014
    
    
    19,056
    
    
    
    4332015
    
    
    20,151
    
    
    
    1242016
    
    
    21,378
    
    
    
    119Years 2017-2021
    
    
    123,470
    
    
    
    495$
    219,635
    
    
    $
    2,462
 93




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##### Table of Contents



Note 11  Debt, Commitments and Contingent Liabilities
  Subordinated Notes due January 2011
  Subordinated Notes due March 2012
  Towers Watson Senior Credit Facility
    Letters of Credit under the Senior Credit Facility
  94




---



##### Table of Contents



Additional Borrowings, Letters of Credit and Guarantees not part of the Senior Credit Facility
    Indemnification Agreements
  Legal Proceedings
      95




---



##### Table of Contents



Contingencies,
 ExxonMobil Superannuation Plan (Australia)
     Former Towers Perrin shareholder litigation
 Dugan
Action
 Dugan
 Dugan Action Dugan Action
 Dugan
Action, Allen Action"
 96




---



##### Table of Contents



Dugan Action.
 Pao Action" Dugan Action. Pao Dugan Action. Pao Action.
 Dugan Action Allen Pao
Actions
   Acument Global Technologies, Inc.
   97




---



##### Table of Contents



Note 12  Comprehensive Income/(Loss)
   June 30,2011
    
    
    2010Foreign currency translation
    
    $
    (2,726
    )
    
    $
    (157,721
    )Unrealized gain (loss) on derivative instruments, net of tax of $(764) and $1,292
    
    
    1,172
    
    
    
    (1,986
    )Unrealized gain on available for sale securities, net of tax of $(101) and $(29)
    
    
    1,066
    
    
    
    98Pension and postretirement, net of tax of $4,700 and $149,854
    
    
    (12,817
    )
    
    
    (276,720
    )Accumulated other comprehensive loss
    
    $
    (13,305
    )
    
    $
    (436,329
    )
 Note 13  Restricted Stock
   Stock Class
    
    Number of Shares
    
    
    Conversion DateB-2
    
    
    5,561,630
    
    
    January 1, 2012B-3
    
    
    5,675,488
    
    
    January 1, 2013B-4
    
    
    5,415,035
    
    
    January 1, 2014
      98




---



##### Table of Contents



Stock Class
    
    Number of Shares
    
    
    Conversion DateA
    
    
    1,217,281
    
    
    January 1, 2012A
    
    
    1,217,281
    
    
    January 1, 2013
  Note 14  Share-Based Compensation
  Towers Watson & Co. Employee Stock Purchase Plan
   Towers Watson & Co. 2009 Long-Term Incentive Plan
  Restricted Stock Units
   99




---



##### Table of Contents



Number of
    
    
    Weighted AverageShares
    
    
    Fair Value(thousands)Nonvested at June 30, 2010
    
    
    24.0
    
    
    $
    48.98Granted
    
    
    185.6
    
    
    
    46.07Vested
    
    
    (32.1
    )
    
    
    47.54Forfeited (1)
    
    
    (4.7
    )
    
    
    44.69Nonvested and expected to vest as of June 30, 2011
    
    
    172.9
    
    
    
    46.31
 
 (1)
    
    Forfeited shares represent performance shares that are not estimated to vest for the year
ended June 30, 2011.  Stock Options
   100




---



##### Table of Contents



Year Ended
    
    
    Year Ended
    
    
    Year EndedJune 30,
    
    
    June 30,
    
    
    June 30,2011
    
    
    2010
    
    
    2009Stock option grants:Risk-free interest rate
    
    
    
    %
    
    
    1.40%
    
    
    
    
    %Expected lives in years
    
    
    
    
    
    
    3
    
    
    
    Expected volatility
    
    
    
    %
    
    
    37.2%
    
    
    
    
    %Dividend yield
    
    
    
    %
    
    
    0.6%
    
    
    
    
    %Weighted-average grant date fair value
of options granted
    
    $
    
    
    
    $
    11.02
    
    
    $
    Number of shares granted
    
    
    
    
    
    
    234,581
    
    
    
    
  Weighted
    
    
    
    
    
    
    AverageAverage
    
    
    Aggregate
    
    
    RemainingNumber of
    
    
    Exercise
    
    
    Intrinsic
    
    
    ContractualShares
    
    
    Price
    
    
    Value
    
    
    Life(thousands)
    
    
    
    
    
    
    (thousands)
    
    
    (years)Outstanding at June 30, 2010
    
    
    234.6
    
    
    $
    44.05Granted
    
    
    
    
    
    
    Exercised
    
    
    (47.0
    )
    
    
    43.83
    
    
    $
    424.7Forfeited
    
    
    
    
    
    
    Expired
    
    
    
    
    
    
    Outstanding
and Exercisable at June 30, 2011
    
    
    187.6
    
    
    $
    44.11
    
    
    $
    4,051.8
    
    
    
    6.4
  Outstanding
    

    ExercisableWeighted
    
    
    
    
    
    
    
    
    
    WeightedAverage
    
    
    
    
    
    
    
    
    
    AverageRemaining
    
    Weighted
    
    
    
    
    
    Remaining
    
    WeightedNumber of
    
    Contractual
    
    Average
    
    Number of
    
    Contractual
    
    AverageExercise Price
    
    Shares
    
    Life
    
    Exercise Price
    
    Shares
    
    Life
    
    Exercise Price(thousands)
    
    (years)
    
    
    
    
    
    (thousands)
    
    (years)$
    42.47
    
    
    97.4
    
    
    
    6.8
    
    
    $
    42.47
    
    
    
    97.4
    
    
    
    6.8
    
    
    $
    42.47$
    45.88
    
    
    90.2
    
    
    
    6.1
    
    
    $
    45.88
    
    
    
    90.2
    
    
    
    6.1
    
    
    $
    45.88$
    42.47 to $45.88
    
    
    187.6
    
    
    
    
    
    
    $
    44.11
    
    
    
    187.6
    
    
    
    
    
    
    $
    44.11
 101




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##### Table of Contents



Former Watson Wyatt Plans and Change of Control Provisions
  Restricted Stock Units
  Deferred Stock Units
     Amended Compensation Plan for Outside Directors
  102




---



##### Table of Contents



Note 15  Income Taxes
  2011
    
    
    2010
    
    
    2009Domestic
    
    $
    206,975
    
    
    $
    27,375
    
    
    $
    127,811Foreign
    
    
    119,666
    
    
    
    142,542
    
    
    
    93,923326,641
    
    
    
    169,917
    
    
    
    221,734
  Year Ended June 30,2011
    
    
    2010
    
    
    2009Current tax expense:U.S. federal
    
    $
    44,360
    
    
    $
    6,288
    
    
    $
    31,899State and local
    
    
    15,489
    
    
    
    3,109
    
    
    
    7,067Foreign
    
    
    55,619
    
    
    
    46,644
    
    
    
    22,105115,468
    
    
    
    56,041
    
    
    
    61,071Deferred tax (benefit) expense:U.S. federal
    
    
    (4,186
    )
    
    
    (2,656
    )
    
    
    7,405State and local
    
    
    3,353
    
    
    
    (4,888
    )
    
    
    2,359Foreign
    
    
    15,281
    
    
    
    2,410
    
    
    
    4,44114,448
    
    
    
    (5,134
    )
    
    
    14,205Total provision for income taxes
    
    $
    129,916
    
    
    $
    50,907
    
    
    $
    75,276
  Year Ended June 30,2011
    
    
    2010
    
    
    2009Tax provision at U.S. federal statutory tax rate of 35 percent
    
    $
    114,325
    
    
    $
    59,471
    
    
    $
    77,607Increase (reduction) resulting from:Foreign income tax rate differential, net
    
    
    (19,639
    )
    
    
    (4,013
    )
    
    
    (7,613
    )State income taxes, net of federal tax effect
    
    
    13,095
    
    
    
    88
    
    
    
    6,579Non-deductible expenses and foreign dividend
    
    
    10,477
    
    
    
    5,350
    
    
    
    4,764Tax credits
    
    
    (5,041
    )
    
    
    (6,247
    )
    
    
    (4,702
    )Valuation allowance
    
    
    15,214
    
    
    
    (19,925
    )
    
    
    Medicare Part D subsidy
    
    
    
    
    
    
    9,367
    
    
    
    Legal entity restructuring
    
    
    
    
    
    
    5,636
    
    
    
    Other
    
    
    1,485
    
    
    
    1,180
    
    
    
    (1,359
    )Income tax provision
    
    $
    129,916
    
    
    $
    50,907
    
    
    $
    75,276
  103




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##### Table of Contents



June 30,2011
    
    
    2010Depreciation and amortization
    
    $
    (90,074
    )
    
    $
    (84,047
    )Trademarks and tradename
    
    
    (116,127
    )
    
    
    (116,127
    )Goodwill
    
    
    (15,915
    )
    
    
    (9,459
    )Unbilled receivables
    
    
    (42,284
    )
    
    
    (33,292
    )Deferred tax liability on unremitted earnings
    
    
    (3,745
    )
    
    
    (7,591
    )Other
    
    
    (9,619
    )
    
    
    (20,858
    )Gross deferred tax liabilities
    
    $
    (277,764
    )
    
    $
    (271,374
    )Accrued retirement benefits
    
    $
    218,855
    
    
    $
    378,100Deferred rent
    
    
    10,684
    
    
    
    5,157Net operating loss carryforwards
    
    
    61,308
    
    
    
    50,712Share-based compensation
    
    
    48,102
    
    
    
    26,084Accrued liabilities
    
    
    61,617
    
    
    
    63,803Accrued compensation
    
    
    25,698
    
    
    
    21,881Deferred revenue
    
    
    49,587
    
    
    
    43,976Foreign tax credit
    
    
    50,060
    
    
    
    47,189Other
    
    
    29,070
    
    
    
    35,997Gross deferred tax assets
    
    $
    554,981
    
    
    $
    672,899Deferred tax assets valuation allowance
    
    $
    (62,454
    )
    
    $
    (37,206
    )Net deferred tax asset
    
    $
    214,763
    
    
    $
    364,319
       104




---



##### Table of Contents



2011
    
    
    2010
    
    
    2009Balance at July 1
    
    $
    33,266
    
    
    $
    9,414
    
    
    $
    11,034Increases related to current year acquisitions
    
    
    
    
    
    
    24,515
    
    
    
    Increases related to tax positions in prior years
    
    
    797
    
    
    
    1,257
    
    
    
    248Decreases related to tax positions in prior years
    
    
    (3,744
    )
    
    
    (4,245
    )
    
    
    (213
    )Decreases related to settlements
    
    
    
    
    
    
    (283
    )
    
    
    (786
    )Decreases related to lapse in statute of
limitations
    
    
    (485
    )
    
    
    (1,781
    )
    
    
    (1,562
    )Increases related to current year tax positions
    
    
    8,378
    
    
    
    4,830
    
    
    
    1,116Cumulative translation adjustment
    
    
    1,572
    
    
    
    (441
    )
    
    
    (423
    )Balances at June 30
    
    $
    39,784
    
    
    $
    33,266
    
    
    $
    9,414
      Open Tax Years(fiscal year ending in)United States  federal
    
    2009 and forwardUnited States  various states
    
    1998 and forwardCanada  federal
    
    2003 and forwardGermany
    
    2004 and forwardThe Netherlands
    
    2008 and forwardUnited Kingdom
    
    2009 and forward
 105




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##### Table of Contents



Note 16  Segment Information
  (1)
    
    Benefits(2)
    
    Risk and Financial Services(3)
    
    Talent and Rewards
     Risk and
    
    
    Talent andBenefits
    
    
    Financial Services
    
    
    Rewards
    
    
    TotalRevenue (net of reimbursable expenses)
    
    $
    1,857,047
    
    
    $
    740,721
    
    
    $
    543,507
    
    
    $
    3,141,275Net operating income
    
    
    609,133
    
    
    
    181,970
    
    
    
    96,791
    
    
    
    887,894Depreciation and amortization
    
    
    21,888
    
    
    
    6,239
    
    
    
    7,342
    
    
    
    35,469Receivables
    
    
    460,492
    
    
    
    167,709
    
    
    
    119,921
    
    
    
    748,122
  Risk and
    
    
    Talent andBenefits
    
    
    Financial Services
    
    
    Rewards
    
    
    TotalRevenue (net of reimbursable expenses)
    
    $
    1,470,817
    
    
    $
    494,961
    
    
    $
    351,709
    
    
    $
    2,317,487Net operating income
    
    
    441,159
    
    
    
    112,373
    
    
    
    17,417
    
    
    
    570,949Depreciation and amortization
    
    
    26,509
    
    
    
    6,520
    
    
    
    8,736
    
    
    
    41,765Receivables
    
    
    400,169
    
    
    
    132,487
    
    
    
    107,465
    
    
    
    640,121
  Risk and
    
    
    Talent andBenefits
    
    
    Financial Services
    
    
    Rewards
    
    
    TotalRevenue (net of reimbursable expenses)
    
    $
    1,119,753
    
    
    $
    278,986
    
    
    $
    223,001
    
    
    $
    1,621,740Net operating income
    
    
    327,832
    
    
    
    62,579
    
    
    
    16,709
    
    
    
    407,120Depreciation and amortization
    
    
    24,471
    
    
    
    4,397
    
    
    
    7,426
    
    
    
    36,294Receivables
    
    
    226,445
    
    
    
    49,607
    
    
    
    32,919
    
    
    
    308,971
 106




---



##### Table of Contents



Fiscal Year Ended June 30,2011
    
    
    2010
    
    
    2009Revenue:Total segment revenue
    
    $
    3,141,275
    
    
    $
    2,317,487
    
    
    $
    1,621,740Reimbursable expenses and other
    
    
    118,176
    
    
    
    70,342
    
    
    
    54,289Revenue
    
    $
    3,259,451
    
    
    $
    2,387,829
    
    
    $
    1,676,029Net Operating Income:Total segment net operating income
    
    $
    887,894
    
    
    $
    570,949
    
    
    $
    407,120Differences in allocation methods (1)
    
    
    18,934
    
    
    
    7,012
    
    
    
    (1,183
    )Amortization of intangibles
    
    
    (51,989
    )
    
    
    (31,280
    )
    
    
    (13,892
    )Transaction and integration expenses
    
    
    (100,535
    )
    
    
    (87,644
    )
    
    
    Stock-based compensation and restricted A shares
    
    
    (71,715
    )
    
    
    (48,006
    )
    
    
    Discretionary compensation
    
    
    (337,694
    )
    
    
    (236,154
    )
    
    
    (167,590
    )Other non-operating income
    
    
    19,349
    
    
    
    11,304
    
    
    
    4,926Other, net
    
    
    (37,603
    )
    
    
    (16,264
    )
    
    
    (7,478
    )Income before income taxes
    
    $
    326,641
    
    
    $
    169,917
    
    
    $
    221,903Depreciation and Amortization Expense:Total segment expense
    
    $
    35,469
    
    
    $
    41,765
    
    
    $
    36,294Intangible asset amortization, not allocated to
segments
    
    
    51,989
    
    
    
    31,280
    
    
    
    13,892Information technology and other
    
    
    43,117
    
    
    
    28,039
    
    
    
    23,262Total depreciation and amortization expense
    
    $
    130,575
    
    
    $
    101,084
    
    
    $
    73,448Receivables:Total segment receivables  billed and unbilled (2)
    
    $
    748,122
    
    
    $
    640,121
    
    
    $
    308,971Valuation differences and other
    
    
    30,808
    
    
    
    (2,607
    )
    
    
    (6,561
    )Total billed and unbilled receivables
    
    
    778,930
    
    
    
    637,514
    
    
    
    302,410Assets not reported by segment
    
    
    4,320,020
    
    
    
    3,936,103
    
    
    
    1,323,909Total assets
    
    $
    5,098,950
    
    
    $
    4,573,617
    
    
    $
    1,626,319
 
 (1)
    
    Depreciation, general and administrative, pension, and medical costs are allocated to our
segments based on budgeted expenses determined at the beginning of the fiscal year as
management believes that these costs are largely uncontrollable to the segment. To the extent
that the actual expense base upon which allocations are made differs from the forecast/budget
amount, a reconciling item will be created between internally allocated expenses and the
actual expense that we report for GAAP purposes.(2)
    
    Total segment receivables, which reflect the receivable balances used by management to make
business decisions, are included for management reporting purposes net of deferred revenue.  Revenue
    
    
    Long-Lived Assets2011
    
    
    2010
    
    
    2009
    
    
    2011
    
    
    2010
    
    
    2009North America
    
    $
    1,865,299
    
    
    $
    1,325,876
    
    
    $
    835,941
    
    
    $
    1,588,876
    
    
    $
    1,331,241
    
    
    $
    201,450Europe
    
    
    1,158,567
    
    
    
    888,076
    
    
    
    701,035
    
    
    
    1,607,604
    
    
    
    1,352,990
    
    
    
    733,887Rest of World
    
    
    235,585
    
    
    
    173,877
    
    
    
    139,053
    
    
    
    63,650
    
    
    
    49,232
    
    
    
    13,470$
    3,259,451
    
    
    $
    2,387,829
    
    
    $
    1,676,029
    
    
    $
    3,259,830
    
    
    $
    2,733,463
    
    
    $
    948,807
  107




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##### Table of Contents



Note 17  Earnings Per Share
 Earnings per Share,
 Fiscal Year Ended June 30,2011
    
    
    2010
    
    
    2009Per Share
    
    
    
    
    
    
    
    
    
    
    Per Share
    
    
    
    
    
    
    
    
    
    
    Per ShareIncome
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Shares
    
    
    Amount
    
    
    Income
    
    
    Shares
    
    
    AmountBasic EPSNet income
attributable to controlling interests
    
    $
    194,437
    
    
    
    
    
    
    
    
    
    
    $
    120,597
    
    
    
    
    
    
    
    
    
    
    $
    146,458Less: Income
allocated to participating securities
    
    
    (9,324
    )
    
    
    
    
    
    
    
    
    
    
    (4,323
    )
    
    
    
    
    
    
    
    
    
    
    Income
available to common shareholders
    
    $
    185,113
    
    
    
    70,523
    
    
    $
    2.62
    
    
    $
    116,274
    
    
    
    57,135
    
    
    $
    2.04
    
    
    $
    146,458
    
    
    
    42,690
    
    
    $
    3.43Diluted EPSShare-based
compensation awards
    
    
    
    
    
    
    64
    
    
    
    
    
    
    
    
    
    
    
    115
    
    
    
    
    
    
    
    
    
    
    
    171Income
available to common shareholders
    
    $
    185,113
    
    
    
    70,587
    
    
    $
    2.62
    
    
    $
    116,274
    
    
    
    57,250
    
    
    $
    2.03
    
    
    $
    146,458
    
    
    
    42,861
    
    
    $
    3.42
  Note 18  Unaudited Quarterly Financial Data
  2011 Quarter EndedSeptember 30
    
    
    December 31
    
    
    March 31
    
    
    June 30Revenue
    
    $
    751,441
    
    
    $
    790,664
    
    
    $
    866,081
    
    
    $
    851,265Income from operations
    
    
    59,190
    
    
    
    62,053
    
    
    
    102,273
    
    
    
    89,647Income before income taxes
    
    
    58,859
    
    
    
    71,398
    
    
    
    108,126
    
    
    
    88,258Net income attributable to
controlling interests
    
    
    33,242
    
    
    
    48,103
    
    
    
    69,236
    
    
    
    43,856Earnings per share:Net income, basic
    
    $
    0.45
    
    
    $
    0.65
    
    
    $
    0.94
    
    
    $
    0.59Net income, diluted
    
    $
    0.45
    
    
    $
    0.65
    
    
    $
    0.94
    
    
    $
    0.59
 2010 Quarter EndedSeptember 30
    
    
    December 31
    
    
    March 31
    
    
    June 30Revenue
    
    $
    401,345
    
    
    $
    432,614
    
    
    $
    803,963
    
    
    $
    749,907Income from operations
    
    
    43,141
    
    
    
    45,809
    
    
    
    51,145
    
    
    
    24,350Income before income taxes
    
    
    45,079
    
    
    
    46,093
    
    
    
    49,696
    
    
    
    29,049Net income attributable to
controlling interests
    
    
    29,781
    
    
    
    23,872
    
    
    
    8,815
    
    
    
    58,129Earnings per share:Net income, basic
    
    $
    0.70
    
    
    $
    0.57
    
    
    $
    0.12
    
    
    $
    0.77Net income, diluted
    
    $
    0.69
    
    
    $
    0.56
    
    
    $
    0.12
    
    
    $
    0.77
  108




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##### Table of Contents



TOWERS WATSON & CO.
 Schedule II
Valuation and Qualifying Accounts and Reserves
  AdditionsBalance
    
    
    Charged
    
    
    Additionsat
    
    
    Against
    
    
    Charged
    
    
    Additions
    
    
    
    
    BalanceBeginning
    
    
    (Credited
    
    
    to
    
    
    Resulting
    
    
    
    
atof
    
    
    to)
    
    
    Other
    
    
    From
    

    

    
    
End ofDescription
    
    Year
    
    
    Revenue
    
    
    Accounts
    
    
    Acquisitions
    
    Deductions
    
    


YearYear Ended June 30, 2011Allowance for uncollectible accounts
    
    $
    7,975
    
    
    $
    13,004
    
    
    $
    
    
    
    $
    
    
    $
    (8,343
    )
    
    $
    12,636Allowance for unbillable accounts
    
    
    11,696
    
    
    
    5,027
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    16,723Valuation allowance for deferred
tax assets
    
    
    37,206
    
    
    
    
    
    
    
    28,892
    
    
    
    
    
    
    (3,644
    )
    
    
    62,454Year Ended June 30, 2010Allowance for uncollectible accounts
    
    $
    4,452
    
    
    $
    11,759
    
    
    $
    
    
    
    $
    
    
    $
    (8,236
    )
    
    $
    7,975Allowance for unbillable accounts
    
    
    9,115
    
    
    
    2,581
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    11,696Valuation allowance for deferred
tax assets
    
    
    10,884
    
    
    
    
    
    
    
    (20,868
    )
    
    
    47,190
    
    
    
    
    
    
    37,206Year Ended June 30, 2009Allowance for uncollectible accounts
    
    $
    8,544
    
    
    $
    5,355
    
    
    $
    
    
    
    $
    

    
    $
    (9,447
    )
    
    $
    4,452Allowance for unbillable accounts
    
    
    11,700
    
    
    
    
    
    
    
    
    
    
    
    
    
    
    (2,585
    )
    
    
    9,115Valuation allowance for deferred
tax assets
    
    
    12,524
    
    
    
    
    
    
    
    (1,640
    )
    
    
    
    
    
    
    
    
    
    10,884
 109




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##### Table of Contents



EXHIBITS.
   EXHIBIT INDEX
 ExhibitNumber
    
    Description of Exhibit3.1
    
    Second Amended and Restated Certificate of Incorporation of Towers Watson & Co. (1)3.2
    
    Amended and Restated Bylaws of Towers Watson & Co. (2)4.1
    
    Indenture, dated as of June 15, 2010, between Towers Watson & Co. and Wilmington Trust FSB, as
Trustee, and form of Towers Watson Notes. (3)10.1
    
    Credit Agreement dated as of January 1, 2010, among Towers Watson & Co. and certain subsidiaries, as
borrowers, each lender from time to time party thereto and Bank of America, N.A., as administrative
agent, swing line lender and L/C issuer. (4)10.2
    
    Towers Watson & Co. 2009 Long Term Incentive Plan.** (5)10.3
    
    Form of Transaction Based Compensation Agreement between Towers, Perrin, Forster & Crosby, Inc. (now
known as Towers Watson Pennsylvania Inc.) and certain executives.** (6)10.4
    
    Towers, Perrin, Forster & Crosby, Inc. Restricted Stock Unit Plan.** (7)10.5
    
    Form of Award pursuant to the Towers, Perrin, Forster & Crosby, Inc. Restricted Stock Unit Plan.** (8)10.6
    
    Form of Transaction Award pursuant to the Towers, Perrin, Forster & Crosby, Inc. Restricted Stock
Unit Plan.** (9)10.7
    
    Form of Indemnification Agreement with directors and executive officers.** (10)10.8
    
    Trust Deed and Rules of the Watson Wyatt Share Incentive Plan 2005 (U.K).** (11)10.9
    
    Watson Wyatt Share Incentive Plan 2005 Deed of Amendment (U.K.).** (11)10.1
    
    Share Purchase Plan 2005 (Spain).** (11)10.11
    
    Trust Deed and Rules of the Watson Wyatt Ireland Share Participation Scheme.** (11)10.12
    
    Watson Wyatt Amended and Restated Senior Officer Deferred Compensation Plan.** (12)10.13
    
    Watson Wyatt Amended Voluntary Deferred Compensation Plan for Non-Employee Directors.** (13)10.14
    
    Form of Non-Qualified Stock Option Award Agreement for use under the Towers Watson & Co. 2009
Long-Term Incentive Plan.** (14)10.15
    
    Towers Watson & Co. Compensation Plan for Non-Employee Directors.** (15)10.16
    
    Voluntary Deferred Compensation Plan for Non-Employee Directors.** (15)10.17
    
    Watson Wyatt & Company Holdings 2000 Long-Term Incentive Plan.** (16)10.18
    
    Form of Restricted Stock Unit Award Agreement (Performance-Based Vesting)** (17)10.19
    
    Appendix A to Awards (setting forth performance criteria for 2010  2013 performance period)** (18)10.20
    
    Watson Wyatt & Company Holdings Incentive Compensation Plan21.1
    
    Subsidiaries of Towers Watson & Co.*23.1
    
    Consent of Deloitte & Touche LLP, an independent registered public accounting firm.*31.1
    
    Certification of the Registrants Chief Executive Officer, John J. Haley, pursuant to Rule 13a-14 of
the Securities Exchange Act of 1934.*31.2
    
    Certification of the Registrants Chief Financial Officer, Roger F. Millay, pursuant to Rule 13a-14
of the Securities Exchange Act of 1934.*
 110




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##### Table of Contents



ExhibitNumber
    
    Description of Exhibit32.1
    
    Certification of the Registrants Chief Executive Officer, John J. Haley, and Chief Financial
Officer, Roger F. Millay, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of
the Sarbanes-Oxley Act of 2002.*
 
 *
    
    Filed herewith.**
    
    Designates management contracts and compensation plans.(1)
    
    Incorporated by reference to Exhibit 3.1 to the Form S-1/A filed by the Company on September
13, 2010.(2)
    
    Incorporated by reference to Exhibit 3.4 to the Companys joint proxy statement/prospectus
included in the Registration Statement on Form S-4/A (File No. 333-161705) filed by the
Company with the Securities and Exchange Commission and declared effective on November 9,
2009, as supplemented by the prospectus supplement filed pursuant to Rule 424(b)(3) on
December 14, 2009 (collectively, the Joint Proxy Statement/Prospectus).(3)
    
    Incorporated by reference to Exhibit 4.2 to the Registration Statement on Form S-1 (File No.
333-168201) filed by the Company on July 19, 2010.(4)
    
    Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Company on January 4,
2010.(5)
    
    Incorporated by reference to Annex G to the Joint Proxy Statement/Prospectus.(6)
    
    Incorporated by reference to Exhibit 10.4 to the Joint Proxy Statement/Prospectus.(7)
    
    Incorporated by reference to Exhibit 10.5 to the Joint Proxy Statement/Prospectus.(8)
    
    Incorporated by reference to Exhibit 10.6 to the Joint Proxy Statement/Prospectus.(9)
    
    Incorporated by reference to Exhibit 10.7 to the Joint Proxy Statement/Prospectus.(10)
    
    Incorporated by reference to Exhibit 10.8 to the Joint Proxy Statement/Prospectus.(11)
    
    Incorporated by reference to Exhibit 10.23 of Watson Wyatt Worldwide Inc.s Form 10-K filed
on September 1, 2006.(12)
    
    Incorporated by reference to Exhibit 10.11 to the Joint Proxy Statement/Prospectus.(13)
    
    Incorporated by reference to Exhibit 10.12 to the Joint Proxy Statement/Prospectus.(14)
    
    Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Company on March 8,
2010.(15)
    
    Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Company on May 18,
2010.(16)
    
    Incorporated by reference to Exhibit 10.23 of Watson Wyatt Worldwide Inc.s Form 10-Q filed
on November 9, 2009.(17)
    
    Incorporated by reference to Exhibit 10.1 to the Form 8-K filed by the Company on September
30, 2010.(18)
    
    Incorporated by reference to Exhibit 10.2 to the Form 8-K filed by the Company on September
30, 2010. 111