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UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549





FORM 10-Q







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

For the quarterly period ended March 31, 2009

OR



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

For the transition period from  to

Commission file number
001-31351





HEWITT ASSOCIATES, INC.

(Exact name
of registrant as specified in its charter)







|                                               |  |                                     
|---------------------------------------------- |  | ------------------------------------
|Delaware                                       |  | 47-0851756                          
|(State or other jurisdiction of incorporation) |  | (I.R.S. Employer Identification No.)



|                                          |  |           
|----------------------------------------- |  | ----------
|100 Half Day Road; Lincolnshire, Illinois |  | 60069     
|(Address of principal executive offices)  |  | (Zip Code)

847-295-5000

(Registrants telephone number, including area code)

N/A

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





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

Indicate by check mark
whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the
preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).    Yes   ̈    No   ̈

Indicate by check mark whether the Registrant is a large accelerated filer, an accelerated filer, a
non-accelerated filer, or a smaller reporting company. See the definitions of large accelerated filer, accelerated filer and smaller reporting company in Rule 12b-2 of the Exchange Act. (Check one):



|                                                                        |  |                              |  |  |  | 
|----------------------------------------------------------------------- |  | ---------------------------- |  |  |  | 
|Large accelerated filer  x                                              |  | Accelerated filer   ̈        
|Non-accelerated filer   ̈  (Do not check if a smaller reporting company) |  | Smaller reporting company   ̈

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange
Act).    Yes ̈    No  x

Indicate the number of shares outstanding of each class of the issuers common stock, as of the latest practical date.



|                                       |  |                                     
|-------------------------------------- |  | ------------------------------------
|Class                                  |  | Outstanding shares at March 31, 2009
|Class A Common Stock - $0.01 par value |  | 93,762,124                          









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HEWITT ASSOCIATES, INC.

FORM 10-Q

FOR THE
PERIOD ENDED

MARCH 31, 2009

INDEX



|                              |  |                                                                                                        |  |     
|----------------------------- |  | ------------------------------------------------------------------------------------------------------ |  | ----
|                              |  |                                                                                                        |  | PAGE
|PART I. FINANCIAL INFORMATION |  |                                                                                                       
|                              |  |                                                                                                       
|ITEM 1.                       |  | Financial Statements:                                                                                  |  |     
|                              |  |                                                                                                       
|                              |  | Consolidated Balance Sheets - March 31, 2009 (Unaudited) and September 30, 2008                        |  | 3   
|                              |  |                                                                                                       
|                              |  | Consolidated Statements of Operations - Three and Six Months Ended March 31, 2009 and 2008
(Unaudited) |  | 5   
|                              |  |                                                                                                       
|                              |  | Consolidated Statements of Cash Flows - Six Months Ended March 31, 2009 and 2008 (Unaudited)           |  | 6   
|                              |  |                                                                                                       
|                              |  | Notes to the Consolidated Financial Statements (Unaudited)                                             |  | 7   
|                              |  |                                                                                                       
|ITEM2.                        |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                  |  | 27  
|                              |  |                                                                                                       
|ITEM3.                        |  | Quantitative and Qualitative Disclosures about Market Risk                                             |  | 42  
|                              |  |                                                                                                       
|ITEM4.                        |  | Controls and Procedures                                                                                |  | 43  
|                              | 
|PART II. OTHER INFORMATION    |  |                                                                                                       
|                              |  |                                                                                                       
|ITEM1.                        |  | Legal Proceedings                                                                                      |  | 43  
|                              |  |                                                                                                       
|ITEM2.                        |  | Unregistered Sales of Equity Securities and Use of Proceeds                                            |  | 44  
|                              |  |                                                                                                       
|ITEM4.                        |  | Submission of Matters to a Vote of Security Holders                                                    |  | 45  
|                              |  |                                                                                                       
|ITEM6.                        |  | Exhibits                                                                                               |  | 45  
|                              | 
|SIGNATURES                    |  | 46                                                                                                    



2



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PART I. FINANCIAL INFORMATION



|ITEM1. | Financial Statements
|------ | --------------------

HEWITT ASSOCIATES, INC.

CONSOLIDATED BALANCE SHEETS

(In thousands except for share and per share amounts)



|                                                                                                                                               |  |               |           |                   |   |          
|---------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --------- | ----------------- | - | ---------
|                                                                                                                                               |  | March 31,2009 |           | September 30,2008
|                                                                                                                                               |  | (Unaudited)   |           |                  
|ASSETS                                                                                                                                         |  |               |           |                   |   |          
|                                                                                                                                               |  |              
|Current Assets:                                                                                                                                |  |               |           |                   |   |          
|Cash and cash equivalents                                                                                                                      |  | $             | 451,148   |                   | $ | 541,494  
|Client receivables and unbilled work in process, less allowances of $18,741 and $18,029 at March 31, 2009 and September 30, 2008,
respectively |  |               | 537,104   |                   |   | 655,543  
|Prepaid expenses and other current assets                                                                                                      |  |               | 126,384   |                   |   | 129,529  
|Funds held for clients                                                                                                                         |  |               | 97,626    |                   |   | 116,488  
|Short-term deferred contract costs, net                                                                                                        |  |               | 84,395    |                   |   | 83,444   
|Deferred income taxes, net                                                                                                                     |  |               | 24,643    |                   |   | 34,104   
|                                                                                                                                               |  |               |           |                   |   |          
|Total current assets                                                                                                                           |  |               | 1,321,300 |                   |   | 1,560,602
|                                                                                                                                               |  |               |           |                   |   |          
|Non-Current Assets:                                                                                                                            |  |               |           |                   |   |          
|Deferred contract costs, less current portion                                                                                                  |  |               | 257,446   |                   |   | 287,060  
|Property and equipment, net                                                                                                                    |  |               | 374,469   |                   |   | 385,885  
|Other intangible assets, net                                                                                                                   |  |               | 162,974   |                   |   | 206,822  
|Goodwill                                                                                                                                       |  |               | 325,330   |                   |   | 364,141  
|Long-term investments                                                                                                                          |  |               | 112,391   |                   |   | 124,530  
|Other non-current assets, net                                                                                                                  |  |               | 66,973    |                   |   | 63,762   
|                                                                                                                                               |  |               |           |                   |   |          
|Total non-current assets                                                                                                                       |  |               | 1,299,583 |                   |   | 1,432,200
|                                                                                                                                               |  |               |           |                   |   |          
|Total Assets                                                                                                                                   |  | $             | 2,620,883 |                   | $ | 2,992,802
|                                                                                                                                               |  |               |           |                   |   |          
|                                                                                                                                               |  |              
|LIABILITIES                                                                                                                                    |  |               |           |                   |   |          
|Current Liabilities:                                                                                                                           |  |               |           |                   |   |          
|Accounts payable                                                                                                                               |  | $             | 19,039    |                   | $ | 15,880   
|Accrued expenses                                                                                                                               |  |               | 185,067   |                   |   | 239,521  
|Funds held for clients                                                                                                                         |  |               | 97,626    |                   |   | 116,488  
|Advanced billings to clients                                                                                                                   |  |               | 154,948   |                   |   | 158,238  
|Accrued compensation and benefits                                                                                                              |  |               | 262,248   |                   |   | 403,611  
|Short-term deferred contract revenues, net                                                                                                     |  |               | 56,644    |                   |   | 52,733   
|Short-term debt                                                                                                                                |  |               |          |                   |   | 17,602   
|Current portion of long-term debt and capital lease obligations                                                                                |  |               | 21,521    |                   |   | 133,002  
|                                                                                                                                               |  |               |           |                   |   |          
|Total current liabilities                                                                                                                      |  |               | 797,093   |                   |   | 1,137,075
|                                                                                                                                               |  |               |           |                   |   |          
|Non-Current Liabilities:                                                                                                                       |  |               |           |                   |   |          
|Deferred contract revenues, less current portion                                                                                               |  |               | 190,588   |                   |   | 237,648  
|Debt and capital lease obligations, less current portion                                                                                       |  |               | 630,700   |                   |   | 650,182  
|Other non-current liabilities                                                                                                                  |  |               | 231,263   |                   |   | 240,637  
|Deferred income taxes, net                                                                                                                     |  |               | 62,996    |                   |   | 77,058   
|                                                                                                                                               |  |               |           |                   |   |          
|Total non-current liabilities                                                                                                                  |  |               | 1,115,547 |                   |   | 1,205,525
|                                                                                                                                               |  |               |           |                   |   |          
|Total Liabilities                                                                                                                              |  | $             | 1,912,640 |                   | $ | 2,342,600
|                                                                                                                                               |  |               |           |                   |   |          



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HEWITT ASSOCIATES, INC.

CONSOLIDATED BALANCE SHEETSContinued

(In thousands except for share and
per share amounts)



|                                                                                                                                                                                                                                   |  |               |            |   |                   |   |            |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | ---------- | - | ----------------- | - | ---------- | -
|                                                                                                                                                                                                                                   |  | March 31,2009 |            |   | September 30,2008 |  
|                                                                                                                                                                                                                                   |  | (Unaudited)   |            |   |                   |  
|STOCKHOLDERS EQUITY                                                                                                                                                                                                               |  |               |            |   |                   |   |            |  
|                                                                                                                                                                                                                                   |  |              
|Stockholders Equity:                                                                                                                                                                                                              |  |               |            |   |                   |   |            |  
|Class A common stock, par value $0.01 per share, 750,000,000 shares authorized, 130,752,613 and 130,390,880 shares issued, 93,762,124 and
94,227,120 shares outstanding, as of March 31, 2009 and September 30, 2008, respectively |  | $             | 1,308      |   |                   | $ | 1,304      |  
|Additional paid-in capital                                                                                                                                                                                                         |  |               | 1,614,509  |   |                   |   | 1,579,077  |  
|Cost of common stock in treasury, 36,990,489 and 36,163,760 shares of Class A common stock as of March 31, 2009 and
September 30, 2008, respectively                                                                               |  |               | (1,205,696 | ) |                   |   | (1,183,427 | )
|Retained earnings                                                                                                                                                                                                                  |  |               | 338,863    |   |                   |   | 206,558    |  
|Accumulated other comprehensive (loss) income, net                                                                                                                                                                                 |  |               | (40,741    | ) |                   |   | 46,690     |  
|                                                                                                                                                                                                                                   |  |               |            |   |                   |   |            |  
|Total stockholders equity                                                                                                                                                                                                         |  |               | 708,243    |   |                   |   | 650,202    |  
|                                                                                                                                                                                                                                   |  |               |            |   |                   |   |            |  
|Total Liabilities and Stockholders Equity                                                                                                                                                                                         |  | $             | 2,620,883  |   |                   | $ | 2,992,802  |  
|                                                                                                                                                                                                                                   |  |               |            |   |                   |   |            |  

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



4



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HEWITT ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(In thousands except for share and per share amounts)



|                                              |  |                             |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|--------------------------------------------- |  | --------------------------- | ---------- | - | ------------------------- | - | ----------- | ---- |  | - | ---------- | - |  | - | ----------- | -
|                                              |  | Three Months EndedMarch 31, |            |   | Six Months EndedMarch 31, |  
|                                              |  | 2009                        |            |   | 2008                      |   |             | 2009 |  |   | 2008       |  
|Revenues:                                     |  |                             |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Revenues before reimbursements (net revenues) |  | $                           | 746,252    |   |                           | $ | 773,099     |      |  | $ | 1,517,016  |   |  | $ | 1,566,942   |  
|Reimbursements                                |  |                             | 15,580     |   |                           |   | 16,449      |      |  |   | 38,789     |   |  |   | 41,598      |  
|                                              |  |                             |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Total revenues                                |  |                             | 761,832    |   |                           |   | 789,548     |      |  |   | 1,555,805  |   |  |   | 1,608,540   |  
|                                              |  |                             |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Operating expenses:                           |  |                             |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Compensation and related expenses             |  |                             | 470,852    |   |                           |   | 522,026     |      |  |   | 951,759    |   |  |   | 1,016,152   |  
|Asset impairment                              |  |                             | 786        |   |                           |   | 2,070       |      |  |   | 3,401      |   |  |   | 2,296       |  
|Reimbursable expenses                         |  |                             | 15,580     |   |                           |   | 16,449      |      |  |   | 38,789     |   |  |   | 41,598      |  
|Other operating expenses                      |  |                             | 141,301    |   |                           |   | 157,639     |      |  |   | 275,309    |   |  |   | 298,170     |  
|Selling, general and administrative expenses  |  |                             | 35,786     |   |                           |   | 58,571      |      |  |   | 76,663     |   |  |   | 108,598     |  
|Gain on sale of businesses                    |  |                             | (9,379     | ) |                           |   | (35,667     | )    |  |   | (9,379     | ) |  |   | (35,667     | )
|                                              |  |                             |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Total operating expenses                      |  |                             | 654,926    |   |                           |   | 721,088     |      |  |   | 1,336,542  |   |  |   | 1,431,147   |  
|                                              |  |                             |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Operating income                              |  |                             | 106,906    |   |                           |   | 68,460      |      |  |   | 219,263    |   |  |   | 177,393     |  
|                                              |  |                             |            |  
|Other income (expense), net:                  |  |                             |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Interest expense                              |  |                             | (9,854     | ) |                           |   | (4,241      | )    |  |   | (20,539    | ) |  |   | (7,985      | )
|Interest income                               |  |                             | 1,565      |   |                           |   | 4,892       |      |  |   | 5,865      |   |  |   | 13,490      |  
|Other income, net                             |  |                             | 1,537      |   |                           |   | 620         |      |  |   | 2,819      |   |  |   | 236         |  
|                                              |  |                             |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Total other income (expense), net             |  |                             | (6,752     | ) |                           |   | 1,271       |      |  |   | (11,855    | ) |  |   | 5,741       |  
|                                              |  |                             |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Income before income taxes                    |  |                             | 100,154    |   |                           |   | 69,731      |      |  |   | 207,408    |   |  |   | 183,134     |  
|                                              |  |                             |            |  
|Provision for income taxes                    |  |                             | 32,615     |   |                           |   | 25,238      |      |  |   | 75,103     |   |  |   | 74,694      |  
|                                              |  |                             |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Net income                                    |  | $                           | 67,539     |   |                           | $ | 44,493      |      |  | $ | 132,305    |   |  | $ | 108,440     |  
|                                              |  |                             |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Earnings per share:                           |  |                             |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Basic                                         |  | $                           | 0.72       |   |                           | $ | 0.45        |      |  | $ | 1.41       |   |  | $ | 1.07        |  
|Diluted                                       |  | $                           | 0.71       |   |                           | $ | 0.43        |      |  | $ | 1.39       |   |  | $ | 1.03        |  
|                                              |  |                             |            |  
|Weighted average shares:                      |  |                             |            |   |                           |   |             |      |  |   |            |   |  |   |             |  
|Basic                                         |  |                             | 93,674,297 |   |                           |   | 98,662,326  |      |  |   | 93,804,695 |   |  |   | 101,736,572 |  
|Diluted                                       |  |                             | 95,581,956 |   |                           |   | 103,662,906 |      |  |   | 95,512,923 |   |  |   | 106,666,140 |  

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



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HEWITT ASSOCIATES, INC.

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in thousands)



|                                                                                              |  |                           |          |   |      |   |          |  
|--------------------------------------------------------------------------------------------- |  | ------------------------- | -------- | - | ---- | - | -------- | -
|                                                                                              |  | Six Months EndedMarch 31, |         
|                                                                                              |  | 2009                      |          |   | 2008 |  
|Cash flows from operating activities:                                                         |  |                           |          |   |      |   |          |  
|Net income                                                                                    |  | $                         | 132,305  |   |      | $ | 108,440  |  
|Adjustments to reconcile net income to net cash provided by operating activities:             |  |                           |          |   |      |   |          |  
|Depreciation and amortization, including amortization of deferred contract revenues and costs |  |                           | 77,914   |   |      |   | 85,159   |  
|Gain on sale of businesses                                                                    |  |                           | (9,379   | ) |      |   | (35,667  | )
|Asset impairment                                                                              |  |                           | 3,401    |   |      |   | 2,296    |  
|Fair value adjustment related to financial assets                                             |  |                           | 1,788    |   |      |   |         |  
|Share-based compensation                                                                      |  |                           | 26,926   |   |      |   | 22,409   |  
|Deferred income taxes                                                                         |  |                           | 27,526   |   |      |   | (5,455   | )
|Changes in operating assets and liabilities, net of effect of acquisitions and dispositions:  |  |                           |          |   |      |   |          |  
|Client receivables and unbilled work in process                                               |  |                           | 67,482   |   |      |   | (18,339  | )
|Prepaid expenses and other current assets                                                     |  |                           | (7,466   | ) |      |   | (1,589   | )
|Deferred contract costs                                                                       |  |                           | (47,147  | ) |      |   | (52,861  | )
|Other assets                                                                                  |  |                           | (4,609   | ) |      |   | (36,946  | )
|Accounts payable                                                                              |  |                           | 4,620    |   |      |   | 10,979   |  
|Accrued compensation and benefits                                                             |  |                           | (124,885 | ) |      |   | (111,170 | )
|Accrued expenses                                                                              |  |                           | (46,783  | ) |      |   | (51,783  | )
|Advanced billings to clients                                                                  |  |                           | 7,500    |   |      |   | 17,392   |  
|Deferred contract revenues                                                                    |  |                           | 14,977   |   |      |   | 65,534   |  
|Other long-term liabilities                                                                   |  |                           | 3,258    |   |      |   | 38,948   |  
|                                                                                              |  |                           |          |   |      |   |          |  
|Net cash provided by operating activities                                                     |  |                           | 127,428  |   |      |   | 37,347   |  
|Cash flows from investing activities:                                                         |  |                           |          |   |      |   |          |  
|Purchases of investments                                                                      |  |                           |         |   |      |   | (426,675 | )
|Proceeds from sales of investments                                                            |  |                           | 4,025    |   |      |   | 504,000  |  
|Additions to property and equipment                                                           |  |                           | (62,604  | ) |      |   | (56,657  | )
|Cash paid for acquisitions and transaction costs                                              |  |                           |         |   |      |   | (40,431  | )
|Cash received for sale of businesses                                                          |  |                           | 1,105    |   |      |   | 42,420   |  
|                                                                                              |  |                           |          |   |      |   |          |  
|Net cash (used in) provided by investing activities                                           |  |                           | (57,474  | ) |      |   | 22,657   |  
|                                                                                              |  |                          
|Cash flows from financing activities:                                                         |  |                           |          |   |      |   |          |  
|Proceeds from the exercise of stock options                                                   |  |                           | 6,343    |   |      |   | 23,068   |  
|Excess tax benefits from the exercise of share-based awards                                   |  |                           | 2,345    |   |      |   | 2,482    |  
|Proceeds from short-term borrowings                                                           |  |                           | 18,119   |   |      |   | 121,583  |  
|Proceeds from long-term borrowings                                                            |  |                           |         |   |      |   | 39,751   |  
|Repayments of short-term borrowings, capital leases and long-term debt                        |  |                           | (146,369 | ) |      |   | (37,868  | )
|Purchase of Class A common shares for treasury                                                |  |                           | (22,269  | ) |      |   | (399,028 | )
|                                                                                              |  |                           |          |   |      |   |          |  
|Net cash used in financing activities                                                         |  |                           | (141,831 | ) |      |   | (250,012 | )
|                                                                                              |  |                          
|Effect of exchange rate changes on cash and cash equivalents                                  |  |                           | (18,469  | ) |      |   | 891      |  
|                                                                                              |  |                           |          |   |      |   |          |  
|Net decrease in cash and cash equivalents                                                     |  |                           | (90,346  | ) |      |   | (189,117 | )
|                                                                                              |  |                          
|Cash and cash equivalents, beginning of period                                                |  |                           | 541,494  |   |      |   | 378,743  |  
|                                                                                              |  |                           |          |   |      |   |          |  
|Cash and cash equivalents, end of period                                                      |  | $                         | 451,148  |   |      | $ | 189,626  |  
|                                                                                              |  |                           |          |   |      |   |          |  
|Supplementary disclosure of cash paid during the period:                                      |  |                           |          |   |      |   |          |  
|Interest paid                                                                                 |  | $                         | 23,001   |   |      | $ | 7,076    |  
|Income taxes paid                                                                             |  | $                         | 48,094   |   |      | $ | 73,724   |  

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



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HEWITT ASSOCIATES, INC.

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

(In thousands except for share and per share amounts)

1. Description of Business

Hewitt Associates, Inc., a Delaware corporation, and its subsidiaries (Hewitt
or the Company) provide global human resources benefits, outsourcing and consulting services. Benefits Outsourcing includes administrative services for health and welfare, defined contribution and defined benefit plans. Human Resource
Business Process Outsourcing (HR BPO) includes workforce administration, rewards management, recruiting and staffing, payroll processing, performance management, learning and development, talent management, time and attendance, procurement expertise
and vendor management. Hewitts Consulting business provides a wide array of consulting and actuarial services covering the design, implementation, communication and operation of health and welfare, compensation and retirement plans, and
broader human resources programs and processes.

2. Basis of Presentation

The accompanying unaudited interim consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission for quarterly reports on Form 10-Q. In the
opinion of management, these financial statements include all adjustments necessary to present fairly the financial position, results of operations and cash flows as of March 31, 2009, and for all periods presented. The consolidated financial
statements are prepared on the accrual basis of accounting. All adjustments made have been of a normal and recurring nature. Certain information and footnote disclosures normally included in annual financial statements prepared in accordance with
generally accepted accounting principles have been condensed or omitted. The Company believes that the disclosures included are adequate and provide a fair presentation of interim period results. Interim financial statements are not necessarily
indicative of the financial position or operating results for an entire year. It is suggested that these interim financial statements be read in conjunction with the audited financial statements and the notes thereto, together with managements
discussion and analysis of financial condition and results of operations, included in the Companys Form 10-K for the fiscal year ended September 30, 2008, as filed with the Securities and Exchange Commission.

New Accounting Pronouncements  Fair Value

In April 2009, the
Financial Accounting Standards Board (FASB) issued three Staff Positions (FSPs) intended to provide additional application guidance regarding fair value measurements and impairments of securities: (i) FSP FAS 157-4,
Determining Fair Value When the Volume and Level of Activity for the Asset or Liability Have Significantly Decreased and Identifying Transactions That Are Not Orderly(FSP FAS 157-4), (ii) FSP FAS 107-1 and APB 28-1,
Interim Disclosures about Fair Value of Financial Instruments (FSP FAS 107-1 and APB 28-1) and (iii) FSP FAS 115-2 and FAS 124-2, Recognition and Presentation of Other-Than-Temporary Impairments(FSP FAS 115-2
and FAS 124-2). These FSPs are all effective for interim and annual reporting periods ending after June 15, 2009 (Hewitts third quarter of fiscal 2009), with early adoption permitted for periods ending after March 15, 2009
(Hewitts second quarter of fiscal 2009).

FSP FAS 157-4 relates to determining fair values when there is no active market or where the price inputs
being used represent distressed sales. Specifically, it reaffirms the need to use judgment to ascertain if a formerly active market has become inactive and in determining fair values when markets have become inactive.

FSP FAS 107-1 and APB 28-1 relates to fair value disclosures for any financial instruments that are not currently reflected on the balance sheet at fair value. This FSP
amends SFAS No. 107, Disclosures about Fair Value of Financial Instruments and APB Opinion No. 28, Interim Financial Reporting ̧ to require disclosures about fair value at interim periods.



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FSP FAS 115-2 and FAS 124-2 amends the other-than-temporary impairment guidance in U.S. GAAP to make the guidance more
operational and to improve the presentation of other-than-temporary impairments in the financial statements. Under this FSP, if an impairment exists and the entity intends to sell the security or it is more likely than not that an entity will sell
the debt or equity security before recovery, the impairment is considered other-than-temporary and the entire amount of the impairment shall be recognized in earnings. Additionally, if an impairment of a debt security exists and it is more likely
than not that an entity will not sell the debt security before recovery of its cost basis, but it is probable that the investor will be unable to collect all amounts due according to the contractual terms of the security, the impairment is
considered other-than-temporary. The amount of the impairment related to credit losses shall be recognized in earnings and the amount of the impairment related to other factors shall be recognized in other comprehensive income.

The Company has not early adopted the provisions of the above three FSPs and is currently evaluating the potential impact, if any, of the above three FSPs on its
consolidated financial statements. The application of the provisions of these FSPs is not expected to have a material effect on the consolidated financial statements.

In February 2007, the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115(SFAS
No. 159). This Statement permits entities to choose to measure many financial instruments and certain other items at fair value. This Statement is effective as of the beginning of an entitys first fiscal year that begins after
November 15, 2007 (Hewitts fiscal year 2009). The Company adopted SFAS No. 159 as of October 1, 2008 and has elected to apply the fair value option to a put option relating to its auction rate securities (refer to Note 4 for
more information on auction rate securities). The adoption of SFAS No. 159 did not have a material impact on the Companys consolidated financial statements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, (SFAS No. 157). SFAS No. 157 establishes a framework for measuring fair value and expands disclosures
about fair value measurements. The changes to current practice resulting from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the expanded disclosures about fair value
measurements. The Statement is effective for fiscal years beginning after November 15, 2007 (Hewitts fiscal year 2009) and interim periods within those fiscal years. In February 2008, the FASB issued FSP No. FAS 157-2, Effective Date
of FASB Statement No. 157, which provides a one year deferral of the effective date of SFAS No. 157 for non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the financial statements at
fair value at least annually. In October 2008, the FASB issued FSP No. 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active, (FSP 157-3) that clarifies the application of SFAS
No. 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial asset is not active. FSP 157-3 was effective upon issuance.
The provisions of SFAS No. 157 were applied prospectively to fair value measurements and disclosures for financial assets and financial liabilities recognized or disclosed at fair value in the financial statements on at least an annual basis
beginning in the first quarter of fiscal 2009. The adoption of SFAS No. 157 did not have a material effect on the consolidated financial statements.

See Note 8 for additional information on fair value measurements.

New Accounting Pronouncements  Other

In March 2008, the FASB issued SFAS No. 161, Disclosures about Derivative Instruments and Hedging Activities  an amendment of FASB Statement No. 133(SFAS No. 161). This Statement amends and expands the disclosure requirements of FASB Statement No. 133, Accounting for Derivative Instruments and Hedging Activities. The Company adopted SFAS No. 161 during the
second quarter and has included the required disclosures in Note 16.

In December 2007, the FASB issued SFAS No. 160, Noncontrolling Interest in
Consolidated Financial Statements-an amendment of ARB No. 51 (SFAS No. 160). This Statement establishes accounting and reporting standards for noncontrolling interests and transactions between the reporting party and such
noncontrolling interests. This Statement is effective for fiscal years, and interim periods within those fiscal years, beginning on or after December 15, 2008 (Hewitts fiscal year 2010). The Company is currently evaluating the potential
impact, if any, of SFAS No. 160 on its consolidated financial statements.



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In December 2007, the FASB issued SFAS No. 141(R), Business Combinations, (SFAS No. 141(R)).
SFAS No. 141(R) requires the Company to continue to follow the guidance in SFAS No. 141 for certain aspects of business combinations, and provides additional guidance defining the acquirer, recognizing and measuring the identifiable assets
acquired, the liabilities assumed, any noncontrolling interest in the acquiree, assets and liabilities arising from contingencies, defining a bargain purchase and recognizing and measuring goodwill or a gain from a bargain purchase. SFAS
No. 141(R) also requires transaction costs to be charged to earnings and requires contingent consideration to be recorded at its fair value on the acquisition date. In addition, under SFAS No. 141(R), adjustments associated with changes in
tax contingencies that occur after the measurement period, not to exceed one year, are recorded as adjustments to income. This Statement is effective for all business combinations for which the acquisition date is on or after the beginning of an
entitys first fiscal year that begins after December 15, 2008 (Hewitts fiscal year 2010); however, the guidance in this Standard regarding the treatment of income tax contingencies is retrospective to business combinations completed
prior to October 1, 2009. The Company will adopt SFAS No. 141(R) for any business combinations occurring on or subsequent to October 1, 2009.

Reclassifications

Certain prior year amounts have been reclassified to conform to the current year presentation.

3. Goodwill and Other Intangible Assets, Net

Following is a summary
of changes in the carrying amount of goodwill for the six months ended March 31, 2009:



|                                            |  |                     |        |   |            |   |         |       |  |   |         |  
|------------------------------------------- |  | ------------------- | ------ | - | ---------- | - | ------- | ----- |  | - | ------- | -
|                                            |  | BenefitsOutsourcing |        |   | Consulting |   |         | Total | 
|Balance at September 30, 2008               |  | $                   | 88,005 |   |            | $ | 276,136 |       |  | $ | 364,141 |  
|Additions                                   |  |                     |       |   |            |   | 635     |       |  |   | 635     |  
|Adjustments and reclassifications           |  |                     | 12,530 |   |            |   | 522     |       |  |   | 13,052  |  
|Effect of changes in foreign exchange rates |  |                     | (590   | ) |            |   | (51,908 | )     |  |   | (52,498 | )
|                                            |  |                     |        |   |            |   |         |       |  |   |         |  
|Balance at March 31, 2009                   |  | $                   | 99,945 |   |            | $ | 225,385 |       |  | $ | 325,330 |  
|                                            |  |                     |        |   |            |   |         |       |  |   |         |  

The additions to goodwill in Consulting relate to accounting for the additional purchase price of a fiscal 2006
acquisition in accordance with SFAS No. 141. The purchase price was subject to certain contingent payments, held as restricted cash, if the acquired entity achieved specific operating targets. The restricted cash was paid out under the terms of
an escrow agreement on October 30, 2008. The adjustments and reclassifications to goodwill pertain to adjustments to the opening balance sheets related to the fiscal 2008 acquisitions of a Talent and Organizational Consulting business and a
leaves management business recorded in the Consulting and Benefits Outsourcing segments, respectively. The Company finalized the opening balance sheet related to the fiscal 2008 acquisition of a Talent and Organizational Consulting business during
the second quarter. The Company will finalize the opening balance sheets related to the fiscal 2008 acquisitions of a Talent and Organizational Consulting business and a leaves management business during the third and fourth quarters of fiscal 2009,
respectively.

Intangible assets with definite useful lives are amortized over their estimated lives and are tested for impairment whenever indicators of
impairment arise. The following is a summary of intangible assets at March 31, 2009 and September 30, 2008:



|                          |  |                     |         |                         |   |         |  |                     |         |                         |   |         |  |   |         |  |   |        
|------------------------- |  | ------------------- | ------- | ----------------------- | - | ------- |  | ------------------- | ------- | ----------------------- | - | ------- |  | - | ------- |  | - | -------
|                          |  | March 31, 2009      |         | September 30, 2008     
|                          |  | GrossCarryingAmount |         | AccumulatedAmortization |   | Net     |  | GrossCarryingAmount |         | AccumulatedAmortization |   | Net    
|Trademarks and tradenames |  | $                   | 4,949   |                         | $ | 2,874   |  | $                   | 2,075   |                         | $ | 16,380  |  | $ | 13,726  |  | $ | 2,654  
|Core technology           |  |                     | 48,476  |                         |   | 18,715  |  |                     | 29,761  |                         |   | 32,999  |  |   | 15,865  |  |   | 17,134 
|Customer relationships    |  |                     | 217,396 |                         |   | 86,258  |  |                     | 131,138 |                         |   | 274,575 |  |   | 87,541  |  |   | 187,034
|                          |  |                     |         |                         |   |         |  |                     |         |                         |   |         |  |   |         |  |   |        
|Total                     |  | $                   | 270,821 |                         | $ | 107,847 |  | $                   | 162,974 |                         | $ | 323,954 |  | $ | 117,132 |  | $ | 206,822
|                          |  |                     |         |                         |   |         |  |                     |         |                         |   |         |  |   |         |  |   |        



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The decrease in the gross carrying amounts of trademarks and tradenames and customer relationships is mostly due to the
impact of foreign currency translation adjustments. Additionally, a fully amortized tradename was removed from both the gross carrying and accumulated amortization amounts during the quarter. The increase in the gross carrying amount of core
technology is mostly due to adjustments to the opening balance sheet related to the fiscal 2008 acquisition of a leaves management business recorded in the Benefits Outsourcing segment.

Amortization expense related to intangible assets with definite useful lives for the three and six months ended March 31, 2009 and 2008 is as follows:



|                          |  |                             |       |                           |   |       |  |      |       |  |   |       
|------------------------- |  | --------------------------- | ----- | ------------------------- | - | ----- |  | ---- | ----- |  | - | ------
|                          |  | Three Months EndedMarch 31, |       | Six Months EndedMarch 31,
|                          |  | 2009                        |       | 2008                      |   | 2009  |  | 2008
|Trademarks and tradenames |  | $                           | 351   |                           | $ | 38    |  | $    | 733   |  | $ | 75    
|Core technology           |  |                             | 924   |                           |   | 1,286 |  |      | 1,378 |  |   | 2,139 
|Customer relationships    |  |                             | 3,276 |                           |   | 7,281 |  |      | 7,502 |  |   | 14,197
|                          |  |                             |       |                           |   |       |  |      |       |  |   |       
|Total                     |  | $                           | 4,551 |                           | $ | 8,605 |  | $    | 9,613 |  | $ | 16,411
|                          |  |                             |       |                           |   |       |  |      |       |  |   |       

4. Investments

At March 31, 2009, the Companys long-term investments were comprised of $112,391 in auction rate securities (ARS). While the underlying securities generally have long-term nominal maturities that exceed one year, the
interest rates on these investments reset periodically in scheduled auctions (generally every 7-35 days). The Company has the opportunity to sell its investments during such periodic auctions subject to buyer availability.

During February 2008, issues in the global credit and capital markets led to failed auctions with respect to the Companys ARS and there have been no successful
auctions to date. During the last three quarters of fiscal 2008 and first two quarters of fiscal 2009, all of the Companys outstanding ARS were subject to failed auctions. In the third quarter and fourth quarter of fiscal 2008, $6,500 and
$1,450, respectively, of the Companys ARS issues were called by the issuers at par. During the first and second quarters of fiscal 2009, $2,525 and $1,500, respectively, of the Companys ARS issues were called by the issuers at par.

In October 2008, the Company received an offer from UBS AG (UBS), one of its investment brokers, to sell at par value auction rate securities
originally purchased from UBS at any time during a two-year period beginning June 30, 2010. The Company has accepted this non-transferable offer. UBS also has the right to buy the ARS at par value from the Company at any time. By accepting this
put option, the Company demonstrated it no longer has the intent to hold the related UBS-brokered ARS until they fully recover in value and has the intent to sell these ARS under the terms of the UBS offer. Therefore, the decline of $2,349 in the
fair value of the UBS-brokered ARS below their par value as of September 30, 2008 that was previously considered a temporary unrealized loss and included in other comprehensive income is now considered other-than-temporary and has been included
in earnings as a realized loss, in accordance with SFAS No. 115, Accounting for Certain Investments in Debt and Equity Securities.The Company also changed the classification of the UBS-brokered ARS from available-for-sale securities to
trading securities and has recorded a total unrealized loss of $5,966 during the six months ended March 31, 2009 on the UBS-brokered ARS in earnings after the change in classification. These changes resulted in a total expense of $8,315 during
the six months ended March 31, 2009 which is included within other income (expense), net, in the accompanying consolidated statements of operations.

The Company has elected the fair value measurement option under SFAS No. 159, The Fair Value Option for Financial Assets and Liabilities,for the put option. See Note 8 for additional information on fair value measurements. The
Company has recognized the initial fair value of the put option of $12,692 as an asset within other assets in the accompanying consolidated balance sheets and recorded the resulting gain within other income (expense), net, in the accompanying
statements of operations. The unrealized loss from the subsequent decrease in fair value of the put option of $6,165 during the three months ended March 31, 2009 is included within other income (expense), net, in the accompanying statements of
operations. The total impact of the put option and losses related to the reclassification and changes in the fair value of the UBS-brokered ARS was a loss of $1,788 during the six months ended March 31, 2009, included within other income
(expense), net, in the accompanying consolidated statements of operations.



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At March 31, 2009, the Companys ARS portfolio with a par value of $127,425 had a fair value of $112,391, and
the related put option had a fair value of $6,527. In the absence of observable market data, the Company used a discounted cash flow model to determine the estimated fair value of its ARS and related put option at March 31, 2009. Refer to Note
8 for additional information on the fair value of auction rate securities and related put option.

Below is a reconciliation of the par value and estimated
fair market value of the Companys auction rate securities for the six months ended March 31, 2009:



|                                                                           |  |                  |        |   |                      |   |         |           |  |   |                     |   |  |           |         |   |                     |   |         |   |  |   |         |  
|-------------------------------------------------------------------------- |  | ---------------- | ------ | - | -------------------- | - | ------- | --------- |  | - | ------------------- | - |  | --------- | ------- | - | ------------------- | - | ------- | - |  | - | ------- | -
|                                                                           |  | Trading          |        |   | Available-For-Sale   |   |         |           | 
|                                                                           |  | UBS-Brokered ARS |        |   | Non-UBS-Brokered ARS |   |         | Total ARS | 
|                                                                           |  | Par Value        |        |   | EstimatedFair Value  |   |         | Par Value |  |   | EstimatedFair Value |   |  | Par Value |         |   | EstimatedFair Value |  
|Balance at October 1, 2008                                                 |  | $                |       |   |                      | $ |        |           |  | $ | 131,450             |   |  | $         | 124,530 |   |                     | $ | 131,450 |   |  | $ | 124,530 |  
|Transfer of UBS-brokered ARS securities fromavailable-for- sale to trading |  |                  | 68,800 |   |                      |   | 66,451  |           |  |   | (68,800             | ) |  |           | (66,451 | ) |                     |   |        |   |  |   |        |  
|Sold during the period                                                     |  |                  | (1,175 | ) |                      |   | (1,175  | )         |  |   | (1,350              | ) |  |           | (1,350  | ) |                     |   | (2,525  | ) |  |   | (2,525  | )
|Change in unrealized loss included in other comprehensive income           |  |                  |       |   |                      |   | 2,349   |           |  |   |                    |   |  |           | (9,326  | ) |                     |   |        |   |  |   | (6,977  | )
|Losses included in earnings(1) (2)                                         |  |                  |       |   |                      |   | (13,581 | )         |  |   |                    |   |  |           |        |   |                     |   |        |   |  |   | (13,581 | )
|                                                                           |  |                  |        |   |                      |   |         |           |  |   |                     |   |  |           |         |   |                     |   |         |   |  |   |         |  
|Balance at December 31, 2008                                               |  | $                | 67,625 |   |                      | $ | 54,044  |           |  | $ | 61,300              |   |  | $         | 47,403  |   |                     | $ | 128,925 |   |  | $ | 101,447 |  
|                                                                           |  |                  |        |   |                      |   |         |           |  |   |                     |   |  |           |         |   |                     |   |         |   |  |   |         |  
|Sold during the period                                                     |  |                  | (100   | ) |                      |   | (100    | )         |  |   | (1,400              | ) |  |           | (1,400  | ) |                     |   | (1,500  | ) |  |   | (1,500  | )
|Change in unrealized loss included in other comprehensive income           |  |                  |       |   |                      |   |        |           |  |   |                    |   |  |           | 7,178   |   |                     |   |        |   |  |   | 7,178   |  
|Gains included in earnings(1)                                              |  |                  |       |   |                      |   | 5,266   |           |  |   |                    |   |  |           |        |   |                     |   |        |   |  |   | 5,266   |  
|                                                                           |  |                  |        |   |                      |   |         |           |  |   |                     |   |  |           |         |   |                     |   |         |   |  |   |         |  
|Balance at March 31, 2009                                                  |  | $                | 67,525 |   |                      | $ | 59,210  |           |  | $ | 59,900              |   |  | $         | 53,181  |   |                     | $ | 127,425 |   |  | $ | 112,391 |  
|                                                                           |  |                  |        |   |                      |   |         |           |  |   |                     |   |  |           |         |   |                     |   |         |   |  |   |         |  



|(1) | Gains (losses) are recorded in other income (expense), net within the consolidated statements of operations.
|--- | ------------------------------------------------------------------------------------------------------------

|(2) | Includes realized loss of $2,349 transferred to earnings from other comprehensive income.
|--- | -----------------------------------------------------------------------------------------

As of March 31, 2009, approximately 97% of the Companys ARS portfolio was comprised of federally insured student loan backed securities and 82% of the Companys ARS portfolio was comprised of
Aaa/AAA/AAA rated investments by Moodys, S&P and Fitch, respectively.

Because the impairments in fair values related to the non-UBS-brokered
available-for-sale ARS have been relatively short in duration and considering the overall quality of the underlying investments and the anticipated future market for such investments, and given the Companys ability and intent to hold these
investments until they fully recover in value (including until contractual maturity if necessary), the impairment is considered to be temporary. However, the Company will reassess this conclusion in future reporting periods based on several factors,
including possible failure of the investments to be redeemed, potential deterioration of the credit ratings of the investments, market risk, the Companys continued ability and intent to hold until contractual maturity and other factors. Such a
reassessment may result in a conclusion that these investments are other-than-temporarily impaired. If it is determined that the fair value of these securities is other-than-temporarily impaired, the Company would record a loss in its consolidated
statements of operations, which could materially adversely impact its results of operations and financial condition.



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Based on the contractual maturities of the available-for-sale auction rate securities as of March 31, 2009 and
September 30, 2008, respectively, the par value and estimated fair market value of the securities were as follows:



|                                       |  |                |        |                     |   |           |  |                     |         |  |   |        
|-------------------------------------- |  | -------------- | ------ | ------------------- | - | --------- |  | ------------------- | ------- |  | - | -------
|                                       |  | March 31, 2009 |        | September 30, 2008 
|                                       |  | Par Value      |        | EstimatedFair Value |   | Par Value |  | EstimatedFair Value
|Long-term investments:                 |  |                |        |                     |   |           |  |                     |         |  |   |        
|Due in less than one year              |  | $              |       |                     | $ |          |  | $                   |        |  | $ |       
|Due after one year through five years  |  |                |       |                     |   |          |  |                     |        |  |   |       
|Due after five years through ten years |  |                |       |                     |   |          |  |                     | 5,000   |  |   | 5,000  
|Due after ten years                    |  |                | 59,900 |                     |   | 53,181    |  |                     | 126,450 |  |   | 119,530
|                                       |  |                |        |                     |   |           |  |                     |         |  |   |        
|Total                                  |  | $              | 59,900 |                     | $ | 53,181    |  | $                   | 131,450 |  | $ | 124,530
|                                       |  |                |        |                     |   |           |  |                     |         |  |   |        

Additionally, the Companys trading auction rate securities with a par value of $67,525 and an estimated fair
market value of $59,210 are expected to be redeemed concurrent with the UBS offer as discussed above.

5. Severance Accrual

As of March 31, 2009, the Company has estimated its severance obligations to be $15,338 in accordance with Statement of Financial Accounting Standards No. 112
(as Amended), Employers Accounting for Postemployment Benefits  an amendment of FASB Statements No. 5 and 43. The Companys severance policy provides that the affected employees are entitled to receive an amount of
severance pay that is based on the employees length of service, current employment status and level and benefits elections. For certain affected employees outside of the United States, the amount of severance is based upon the requirements of
local regulations. The Companys severance policy provides, in most cases, for salary continuation payments rather than lump sum termination payments. The Company recorded adjustments of $3,466 during the six months ended March 31, 2009
primarily relating to the impacts of foreign currency translation adjustments, the refinement of estimates and redeployment of associates to other positions. The Company recorded adjustments of $3,228 during the six months ended March 31, 2008
primarily relating to higher than expected attrition.

The following table summarizes the activity in the severance accrual for the six months ended
March 31, 2009 and 2008:



|                               |  |               |         |   |               |   |        |  
|------------------------------ |  | ------------- | ------- | - | ------------- | - | ------ | -
|                               |  | March 31,2009 |         |   | March 31,2008 |  
|Balance at beginning of period |  | $             | 27,859  |   |               | $ | 10,661 |  
|Additions                      |  |               | 6,014   |   |               |   | 5,146  |  
|Payments                       |  |               | (15,069 | ) |               |   | (6,187 | )
|Adjustments                    |  |               | (3,466  | ) |               |   | (3,228 | )
|                               |  |               |         |   |               |   |        |  
|Balance at end of period       |  | $             | 15,338  |   |               | $ | 6,392  |  
|                               |  |               |         |   |               |   |        |  

The additions and adjustments were recorded in compensation and related expenses within the consolidated
statements of operations. The Company anticipates that the majority of the remaining accrual will be paid out by the end of fiscal 2009, with the balance paid out by the end of fiscal 2010 based on the last date of potential salary continuation.

6. Restructuring Activities

In conjunction with an
ongoing review of the Companys leased real estate portfolio, during the third quarter of fiscal 2007, the Company announced its intention to consolidate facilities, and in some cases, exit certain properties. During the fourth quarter of
fiscal 2007 and throughout fiscal 2008, the Company recorded expense of $58,465 related to the exit and consolidation of certain facilities in both the U.S. and international locations. The charges consisted of $65,503 for recognition of the fair
value of lease vacancy obligations and lease termination charges and the reversal of $364 of prepaid rent. This was offset by the reversal of accrued rent of $7,402.



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The net costs were recorded in other operating expenses within the consolidated statements of operations and charged to the Benefits Outsourcing, HR BPO and
Consulting segments in the amounts of $27,956, $15,422 and $5,537, respectively; $9,550 was recorded to shared services and was not allocated to the segments.

During the second quarter of fiscal 2009, the Company updated estimated sublease rental assumptions initially used to determine the fair value of the liabilities incurred to exit certain facilities, as discussed above, in accordance with
SFAS No. 146, Accounting for Costs Associated with Exit or Disposal Activities. These assumptions were updated to reflect current market conditions relating to the commercial real estate rental market in the U.S. As a result, the Company
recorded adjustments to the restructuring reserve of $6,280. These additional costs were recorded in other operating expenses within the consolidated statements of operations and charged to the Benefits Outsourcing and HR BPO segments in the amounts
of $1,747 and $3,005, respectively; $1,528 was recorded to shared services and was not allocated to the segments.

Additionally, during the second quarter
of fiscal 2009, the Company recorded expense of $397 related to the exit and consolidation of a certain facility in the U.S. The charges consisted of $469 for recognition of the fair values of lease vacancy obligations offset by the reversal of
accrued rent of $72. The net costs were recorded in other operating expenses within the consolidated statements of operations and charged to the Consulting segment.

The following table summarizes the activity in the restructuring reserves for the six months ended March 31, 2009 and 2008:



|                               |  |               |        |   |               |   |        |  
|------------------------------ |  | ------------- | ------ | - | ------------- | - | ------ | -
|                               |  | March 31,2009 |        |   | March 31,2008 |  
|Balance at beginning of period |  | $             | 51,203 |   |               | $ | 20,887 |  
|Additions                      |  |               | 469    |   |               |   | 5,570  |  
|Payments, net                  |  |               | (6,825 | ) |               |   | (9,122 | )
|Adjustments                    |  |               | 4,448  |   |               |   | 2,085  |  
|                               |  |               |        |   |               |   |        |  
|Balance at end of period       |  | $             | 49,295 |   |               | $ | 19,420 |  
|                               |  |               |        |   |               |   |        |  

The Company recorded adjustments of $4,448 during the six months ended March 31, 2009 primarily relating to
revision of sublease rental assumptions discussed above. Also included in adjustments are the accretion of fair values and the effect of foreign currency translation.

The Company anticipates that the remaining accrual will be paid out by fiscal 2018, based on the longest term remaining on the Companys leased real estate.

In connection with the fiscal 2008 acquisition of a Talent and Organizational Consulting business in the United Kingdom, the Company formulated facility exit strategies.
The Company finalized the opening balance sheet related to this acquisition during the second quarter of fiscal 2009 and determined its liability for costs required to exit the property acquired in this acquisition was £1,519 ($2,174 at
March 31, 2009) and recognized this amount as an adjustment to goodwill as part of purchase accounting. The incremental amount of £617 ($882 at March 31, 2009) recorded to goodwill during the six months ended March 31, 2009
related to revised sublease assumptions. The accrued obligation was $1,508 as of March 31, 2009 and reflects the adjustment mentioned above, payments made to date and the impacts of foreign currency translation, as compared to $1,622 as of
September 30, 2008. Lease termination costs are expected to be paid by March 2012.

In connection with the fiscal 2008 acquisition of a Benefits
Outsourcing business, the Company formulated facility exit strategies. The Company recorded $1,070 of estimated liabilities for costs required to exit the property acquired in this acquisition which was recorded to goodwill as part of the
preliminary purchase accounting. The Company expects to finalize the opening balance sheet related to this acquisition by the end of the fourth quarter of fiscal 2009. The accrued obligation was $1,070 as of March 31, 2009. Lease termination
costs are expected to be paid by July 2011, which represents the date of early termination under the lease provisions.



13



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##### Table of Contents

7. Debt

The Company
did not have any short-term debt outstanding as of March 31, 2009. In March 2009, the Company closed on the sale of the net assets relating to its HR BPO mobility services business, which included an unsecured line of credit relating to the
operations of this business. Refer to Note 17 for additional information on divestitures. Short-term debt outstanding as of September 30, 2008 was $17,602 and consisted of borrowings on unsecured lines of credit relating to the HR BPO mobility
services business.

Long-term debt at March 31, 2009 and September 30, 2008, consisted of the following:



|                                                                |  |               |         |                   |   |        
|--------------------------------------------------------------- |  | ------------- | ------- | ----------------- | - | -------
|                                                                |  | March 31,2009 |         | September 30,2008
|Term loan credit facility                                       |  | $             | 27,191  |                   | $ | 38,449 
|Unsecured senior term loan                                      |  |               | 270,000 |                   |   | 270,000
|Capital lease obligations                                       |  |               | 78,964  |                   |   | 81,649 
|Unsecured convertible senior term notes                         |  |               |        |                   |   | 110,000
|Unsecured senior term notes                                     |  |               | 276,000 |                   |   | 283,000
|Other foreign debt                                              |  |               | 66      |                   |   | 86     
|                                                                |  |               |         |                   |   |        
|                                                                |  |               | 652,221 |                   |   | 783,184
|Current portion of long-term debt and capital lease obligations |  |               | 21,521  |                   |   | 133,002
|                                                                |  |               |         |                   |   |        
|Debt and capital lease obligations, less current portion        |  | $             | 630,700 |                   | $ | 650,182
|                                                                |  |               |         |                   |   |        

On October 1, 2008, the majority of the holders of the Companys $110,000 aggregate principal amount
2.5% Convertible Senior Notes due October 1, 2010 exercised their option requiring Hewitt to repurchase $109,800 of the $110,000 notes. Hewitt paid the principal amount of $109,800 plus accrued interest on October 2, 2008. The Company
redeemed the remaining principal amount of $200 plus accrued interest on December 31, 2008.

8. Fair Value Measurements

On October 1, 2008, the Company adopted the provisions of SFAS No. 157, Fair Value Measurements, as amended by FSP FAS 157-3, for assets and liabilities
measured at fair value on a recurring basis. Pursuant to FSP FAS 157-2, the Company will not apply the provisions of SFAS No. 157 to non-financial assets and non-financial liabilities, except those that are recognized or disclosed in the
financial statements at fair value at least annually, until October 1, 2009 (Hewitts fiscal year 2010).

SFAS No. 157 establishes a
framework for measuring fair value, clarifies the definition of fair value within that framework and expands disclosures about the use of fair value measurements. SFAS No. 157 defines fair value as the price that would be received to sell an
asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. A fair value measurement assumes that the transaction to sell the asset or transfer the liability occurs in the
principal market for the asset or liability or, in the absence of a principal market, the most advantageous market for the asset or liability.

SFAS
No. 157 specifies a hierarchy of valuation techniques based upon whether the inputs to those valuation techniques reflect assumptions that other market participants would use based upon market data obtained from independent sources (observable
inputs) or reflect the Companys own assumptions of market participant valuation (unobservable inputs). Valuation techniques used to measure fair value under SFAS No. 157 must maximize the use of observable inputs and minimize the use of
unobservable inputs. SFAS No. 157 establishes a fair value hierarchy that prioritizes the use of inputs used in valuation techniques into the following three levels:



| |  |  | Level 1  Quoted prices in active markets that are unadjusted and accessible at the measurement date for identical, unrestricted assets or liabilities;
| | - |  | -------------------------------------------------------------------------------------------------------------------------------------------------------



14



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##### Table of Contents

| |  |  | Level 2  Quoted prices for identical assets and liabilities in markets that are not active, quoted prices for similar assets and liabilities in active markets
or financial instruments for which significant inputs are observable, either directly or indirectly;
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  |  | Level 3  Prices or valuations that require inputs that are both significant to the fair value measurement and unobservable.
| | - |  | ----------------------------------------------------------------------------------------------------------------------------

When available, the Company uses unadjusted quoted market prices to measure fair value and classifies such items within Level 1. If quoted market prices are not
available, fair value is based upon internally developed models that use, where possible, current market-based or independently-sourced market parameters such as interest rates and currency rates. Items valued using internally generated models are
classified according to the lowest level input or value driver that is significant to the valuation. Thus, an item may be classified in Level 3 even though there may be inputs that are readily observable. If quoted market prices are not available,
the valuation model used generally depends on the specific asset or liability being valued.

Effective October 1, 2008, the Company adopted SFAS
No. 159, The Fair Value Option for Financial Assets and Financial Liabilities. The Company elected to measure and report a put option of $12,692 relating to its auction rate securities (refer to Note 4 for more information) at fair value
in order to account for the put option on the same basis (measured at fair value through earnings) as the associated asset (the auction rate securities).

The following table represents the Companys fair value hierarchy for its financial assets and liabilities (cash equivalents, investments and derivatives) measured at fair value on a recurring basis as of March 31, 2009:



|                                          |  |                                                  |         |         |   |         |         |  |       |         |  |   |         |  
|----------------------------------------- |  | ------------------------------------------------ | ------- | ------- | - | ------- | ------- |  | ----- | ------- |  | - | ------- | -
|                                          |  | Fair Value Measurements at Reporting Date Using: |        
|                                          |  | Level 1                                          |         | Level 2 |   |         | Level 3 |  | Total |        
|Assets:                                   |  |                                                  |         |         |   |         |         |  |       |         |  |   |         |  
|Cash and money market funds               |  | $                                                | 451,148 |         | $ |        |         |  | $     |        |  | $ | 451,148 |  
|Auction-rate securities(1)                |  |                                                  |        |         |   |        |         |  |       | 118,918 |  |   | 118,918 |  
|Derivative assets                         |  |                                                  |        |         |   | 374     |         |  |       |        |  |   | 374     |  
|                                          |  |                                                  |         |         |   |         |         |  |       |         |  |   |         |  
|Total assets                              |  | $                                                | 451,148 |         | $ | 374     |         |  | $     | 118,918 |  | $ | 570,440 |  
|                                          |  |                                                  |         |         |   |         |         |  |       |         |  |   |         |  
|Liabilities:                              |  |                                                  |         |         |   |         |         |  |       |         |  |   |         |  
|Derivative liabilities                    |  | $                                                |        |         | $ | 18,659  |         |  | $     |        |  | $ | 18,659  |  
|                                          |  |                                                  |         |         |   |         |         |  |       |         |  |   |         |  
|Total liabilities                         |  | $                                                |        |         | $ | 18,659  |         |  | $     |        |  | $ | 18,659  |  
|                                          |  |                                                  |         |         |   |         |         |  |       |         |  |   |         |  
|Amounts included in:                      |  |                                                  |         |         |   |         |         |  |       |         |  |   |         |  
|Cash and cash equivalents                 |  | $                                                | 451,148 |         | $ |        |         |  | $     |        |  | $ | 451,148 |  
|Prepaid expenses and other current assets |  |                                                  |        |         |   | 374     |         |  |       |        |  |   | 374     |  
|Long-term investments                     |  |                                                  |        |         |   |        |         |  |       | 112,391 |  |   | 112,391 |  
|Other non-current assets, net(1)          |  |                                                  |        |         |   |        |         |  |       | 6,527   |  |   | 6,527   |  
|Accrued expenses                          |  |                                                  |        |         |   | (18,659 | )       |  |       |        |  |   | (18,659 | )
|                                          |  |                                                  |         |         |   |         |         |  |       |         |  |   |         |  
|Total                                     |  | $                                                | 451,148 |         | $ | (18,285 | )       |  | $     | 118,918 |  | $ | 551,781 |  
|                                          |  |                                                  |         |         |   |         |         |  |       |         |  |   |         |  



|(1) | Includes put option elected for the fair value measurement option under SFAS No. 159 and classified as Level 3.
|--- | ---------------------------------------------------------------------------------------------------------------

Level 3 assets consist of available-for-sale and trading auction rate securities classified as long-term investments and a related put option as of March 31, 2009.
In the absence of observable market data, the Company used a discounted cash flow model to determine the estimated fair value of its ARS and related put option at March 31, 2009.

The assumptions used in the preparation of the discounted cash flow model were based on data available as of March 31, 2009, and include estimates of interest rates, timing and amount of cash flows, credit and
liquidity premiums and expected holding periods of the ARS and exercise date of the put option. These assumptions will be subject to change as the underlying data changes and market conditions evolve.



15



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##### Table of Contents

No significant changes in the valuation techniques were made during the period. The assumed interest income yields for the Companys ARS used in the
discounted cash flow model were based on the yields provided for in the prospectus of each of the Companys ARS issues as of March 31, 2009. The assumed discount rate used in the discounted cash flow model was based on the implied spreads
on recent student loan issues, which reflect the illiquidity in the ARS market. The assumed discount period used in the discounted cash flow model was determined by the Company by assigning a set of probabilities based on how the Company views its
ARS to be liquidated, and included the current pace of redemptions at par and the average terms that students take to pay back related student loans. Based on the valuation, the Company determined that the fair value of its available-for-sale ARS
was $53,181 and recorded a cumulative unrealized loss of $6,719 ($4,149 net of tax) within accumulated other comprehensive income, a component of stockholders equity, as the unrealized loss is considered to be temporary. Additionally, the
Company determined that the fair value of its trading ARS was $59,210 and recorded a total loss of $8,315 ($5,135 net of tax) within other income (expense), net in the accompanying consolidated statements of operations, for the realized and
unrealized holding losses, as discussed in Note 4. This loss was largely offset by a gain of $6,527 ($4,031 net of tax) within other income (expense), net in the accompanying consolidated statements of operations, to recognize the fair value of the
related put option.

A one percentage point change on the interest income yields would impact the fair value of the ARS holdings and put option by
approximately $4,846. A one percentage point change on the discount rate used for valuing the ARS holdings and put option would impact the fair value of the ARS holdings and put option by approximately $4,371.

Refer to Note 4 for additional information on auction rate securities.

The
following table provides a reconciliation of the beginning and ending balances for the assets measured at fair value using significant unobservable inputs (Level 3):



|                                                                 |  |                                                                                         |         |   |           |   |        |       |  |   |         |  
|---------------------------------------------------------------- |  | --------------------------------------------------------------------------------------- | ------- | - | --------- | - | ------ | ----- |  | - | ------- | -
|                                                                 |  | Fair Value Measurements at Reporting DateUsing Significant Unobservable
Inputs(Level 3) |        
|                                                                 |  | Auctionratesecurities                                                                   |         |   | Putoption |   |        | Total | 
|Balance at October 1, 2008                                       |  | $                                                                                       | 124,530 |   |           | $ |       |       |  | $ | 124,530 |  
|Change in unrealized loss included in other comprehensive income |  |                                                                                         | (6,977  | ) |           |   |       |       |  |   | (6,977  | )
|(Losses) gains included in earnings(1) (2)                       |  |                                                                                         | (13,581 | ) |           |   | 12,692 |       |  |   | (889    | )
|Sold during the period                                           |  |                                                                                         | (2,525  | ) |           |   |       |       |  |   | (2,525  | )
|                                                                 |  |                                                                                         |         |   |           |   |        |       |  |   |         |  
|Balance at December 31, 2008                                     |  | $                                                                                       | 101,447 |   |           | $ | 12,692 |       |  | $ | 114,139 |  
|                                                                 |  |                                                                                         |         |   |           |   |        |       |  |   |         |  
|Change in unrealized loss included in other comprehensive income |  |                                                                                         | 7,178   |   |           |   |       |       |  |   | 7,178   |  
|Gains (losses) included in earnings(1)                           |  |                                                                                         | 5,266   |   |           |   | (6,165 | )     |  |   | (899    | )
|Sold during the period                                           |  |                                                                                         | (1,500  | ) |           |   |       |       |  |   | (1,500  | )
|                                                                 |  |                                                                                         |         |   |           |   |        |       |  |   |         |  
|Balance at March 31, 2009                                        |  | $                                                                                       | 112,391 |   |           | $ | 6,527  |       |  | $ | 118,918 |  
|                                                                 |  |                                                                                         |         |   |           |   |        |       |  |   |         |  



|(1) | Gains (losses) are recorded in other income (expense), net within the consolidated statements of operations.
|--- | ------------------------------------------------------------------------------------------------------------

|(2) | Includes an unrealized loss of $2,349 reclassified to earnings from other comprehensive loss.
|--- | ---------------------------------------------------------------------------------------------



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##### Table of Contents

9. Share-Based Compensation

The Company recorded pre-tax share-based compensation expense of $14,372 and $13,073 during the three months ended March 31, 2009 and 2008, respectively, and $26,926 and $22,409 during the six months ended March 31, 2009 and 2008,
respectively, related to the Companys non-qualified stock options, restricted stock, restricted stock units and performance share units.

Under the
Companys Global Stock and Incentive Compensation Plan (the Plan), which was adopted in fiscal 2002 and is administered by the Compensation and Leadership Committee (the Committee) of the Companys Board of
Directors, employees and directors may receive awards of non-qualified stock options, stock appreciation rights, restricted stock, restricted stock units, performance shares, performance share units and cash-based awards; employees can also receive
incentive stock options. The Plan was amended in January 2008 to increase the number of shares of Class A common stock authorized and reserved for issuance by 7,000,000 shares. As of March 31, 2009, only restricted stock, restricted stock
units, performance share units and non-qualified stock options have been granted. A total of 32,000,000 shares of Class A common stock have been reserved for issuance under the Plan. As of March 31, 2009, there were 5,293,694 shares
available for grant under the Plan.

Restricted Stock and Restricted Stock Units

The following table summarizes restricted stock and restricted unit activity during the six months ended March 31, 2009:



|                                          |  |                 |   |  |                                     |       |                       |           |   |                                     |   |      
|----------------------------------------- |  | --------------- | - |  | ----------------------------------- | ----- | --------------------- | --------- | - | ----------------------------------- | - | -----
|                                          |  | March 31, 2009 
|                                          |  | RestrictedStock |   |  | WeightedAverageGrant DateFair Value |       | RestrictedStock Units |           |   | WeightedAverageGrant DateFair Value
|Shares outstanding at beginning of period |  | 315,921         |   |  | $                                   | 26.94 |                       | 2,263,986 |   |                                     | $ | 31.36
|Granted                                   |  |                |   |  | $                                   |      |                       | 2,073,408 |   |                                     | $ | 27.19
|Vested                                    |  | (13,975         | ) |  | $                                   | 24.41 |                       | (90,975   | ) |                                     | $ | 32.33
|Forfeited                                 |  | (69,586         | ) |  | $                                   | 25.91 |                       | (166,123  | ) |                                     | $ | 31.19
|                                          |  |                 |   |  |                                     |       |                       |           |   |                                     |   |      
|Shares outstanding at end of period       |  | 232,360         |   |  | $                                   | 27.39 |                       | 4,080,296 |   |                                     | $ | 29.23
|                                          |  |                 |   |  |                                     |       |                       |           |   |                                     |   |      

Stock Options

The Committee may grant both incentive stock options and non-qualified stock options to purchase shares of Class A common stock. Subject to the terms and provisions of the Plan, options may be granted to participants, as determined by
the Committee, provided that incentive stock options may not be granted to non-employee directors. The option price is determined by the Committee, provided that for options issued to participants in the United States, the option price may not be
less than 100% of the fair market value of the shares on the date the option is granted and no option may be exercisable later than the tenth anniversary of its grant. The non-qualified stock options generally vest in equal annual installments over
a period of four years.

The fair value used to determine compensation expense for the six months ended March 31, 2009 and 2008 was estimated at the
date of grant using a Black-Scholes option pricing model. The following table summarizes the weighted average assumptions used to determine fair value for options granted during the six months ended March 31, 2009 and 2008:



|                         |  |       |   |  |       |  
|------------------------ |  | ----- | - |  | ----- | -
|                         |  | 2009  |   |  | 2008  |  
|Expected volatility      |  | 29.30 | % |  | 26.61 | %
|Risk-free interest rate  |  | 2.13  | % |  | 3.84  | %
|Expected life (in years) |  | 6.17  |   |  | 6.04  |  
|Dividend yield           |  | 0     | % |  | 0     | %



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##### Table of Contents

The Company uses the simplified method, as defined in SEC Staff Accounting Bulletin (SAB)
No. 107, to determine the expected life assumption for all of its options. The Company continues to use the simplified method, as permitted by SAB No. 110, as it does not believe that it has sufficient historical exercise data
to provide a reasonable basis upon which to estimate expected life due to the limited time its equity shares have been publicly traded.

The following
table summarizes stock option activity during the six months ended March 31, 2009:



|                                     |  |                |   |  |                              |      
|------------------------------------ |  | -------------- | - |  | ---------------------------- | -----
|                                     |  | March 31, 2009
|                                     |  | Options        |   |  | WeightedAverageExercisePrice
|Outstanding at beginning of period   |  | 6,283,927      |   |  | $                            | 25.68
|Granted                              |  | 1,098,790      |   |  | $                            | 26.49
|Exercised                            |  | (277,530       | ) |  | $                            | 22.85
|Forfeited                            |  | (76,858        | ) |  | $                            | 31.79
|Expired                              |  | (50,282        | ) |  | $                            | 28.67
|                                     |  |                |   |  |                              |      
|Outstanding at end of period         |  | 6,978,047      |   |  | $                            | 25.83
|                                     |  |                |   |  |                              |      
|Exercisable options at end of period |  | 4,945,977      |   |  | $                            | 24.58

10. Pension and Postretirement Benefit Plans

Through various acquisitions, the Company has defined benefit pension plans, the largest of which was closed to new entrants in 1998, providing retirement benefits to eligible employees. The Company also has other
smaller defined benefit pension plans to provide benefits to eligible employees. It is the Companys policy to fund these plans in accordance with local practice and legislation. The Company also provides health benefits for retired U.S. and
Canadian employees and certain dependents when the employee becomes eligible for these benefits by satisfying plan provisions, which include certain age and service requirements. The health benefit plans are contributory and contributions are
reviewed annually and adjusted periodically.

The components of net periodic pension benefit costs for the three and six months ended March 31, 2009
and 2008 include:



|                                |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|------------------------------- |  | --------------------------- | ------ | - | ------------------------- | - | ------ | ---- |  | - | ------ | - |  | - | ------ | -
|                                |  | Pension Benefits            |       
|                                |  | Three Months EndedMarch 31, |        |   | Six Months EndedMarch 31, |  
|                                |  | 2009                        |        |   | 2008                      |   |        | 2009 |  |   | 2008   |  
|Service cost                    |  | $                           | 2,291  |   |                           | $ | 3,324  |      |  | $ | 4,706  |   |  | $ | 6,656  |  
|Interest cost                   |  |                             | 2,729  |   |                           |   | 2,796  |      |  |   | 5,668  |   |  |   | 5,613  |  
|Expected return on plan assets  |  |                             | (2,475 | ) |                           |   | (3,023 | )    |  |   | (4,861 | ) |  |   | (6,059 | )
|Unrecognized prior service cost |  |                             | 14     |   |                           |   | 22     |      |  |   | 30     |   |  |   | 45     |  
|Unrecognized loss (gain)        |  |                             | 182    |   |                           |   | (7     | )    |  |   | 311    |   |  |   | (14    | )
|                                |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  
|Net periodic benefit cost       |  | $                           | 2,741  |   |                           | $ | 3,112  |      |  | $ | 5,854  |   |  | $ | 6,241  |  
|                                |  |                             |        |   |                           |   |        |      |  |   |        |   |  |   |        |  

During the three and six months ended March 31, 2009, contributions of $5,849 and $18,309, respectively, were
made by the Company to the pension plans.



18



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##### Table of Contents

The components of net periodic health benefit costs for the three and six months ended March 31, 2009 and 2008
include:



|                                |  |                             |     |                           |   |      |  |      |     |  |   |    
|------------------------------- |  | --------------------------- | --- | ------------------------- | - | ---- |  | ---- | --- |  | - | ---
|                                |  | Health Benefits            
|                                |  | Three Months EndedMarch 31, |     | Six Months EndedMarch 31,
|                                |  | 2009                        |     | 2008                      |   | 2009 |  | 2008
|Service cost                    |  | $                           | 42  |                           | $ | 50   |  | $    | 84  |  | $ | 99 
|Interest cost                   |  |                             | 220 |                           |   | 214  |  |      | 440 |  |   | 428
|Unrecognized prior service cost |  |                             |    |                           |   |     |  |      | 1   |  |   | 1  
|Unrecognized loss               |  |                             | 26  |                           |   | 43   |  |      | 52  |  |   | 86 
|                                |  |                             |     |                           |   |      |  |      |     |  |   |    
|Net periodic benefit cost       |  | $                           | 288 |                           | $ | 307  |  | $    | 577 |  | $ | 614
|                                |  |                             |     |                           |   |      |  |      |     |  |   |    

11. Income Taxes

The Companys consolidated effective income tax rate was 32.6% and 36.2% for the three months ended March 31, 2009 and 2008, respectively, and 36.2% and 40.8% for the six months ended March 31, 2009 and 2008, respectively.
The Company reviews its expected annual effective income tax rates and makes changes on a quarterly basis as necessary based on certain factors such as changes in forecasted annual operating income; changes to the valuation allowance for net
deferred tax assets; changes to actual or forecasted permanent book to tax differences; impacts from future tax settlements with state, federal or foreign tax authorities; or impacts from tax law changes. Each quarter, the Company identifies items
which are not normal and recurring in nature and treats these as discrete events. The tax effect of discrete items is booked entirely in the quarter in which the discrete event occurs. Due to the volatility of these factors, the Companys
consolidated effective income tax rate can change significantly on a quarterly basis. The Company had a number of discrete events this quarter which reduced the three- and six-month consolidated effective income tax rate, including a tax benefit
recorded on the sale of its Latin America HR BPO business.

Effective October 1, 2007, the Company adopted FIN 48 which prescribes a
more-likely-than-not threshold for financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. This interpretation also provides guidance on derecognition of income tax assets and liabilities,
classification of current and deferred income tax assets and liabilities, accounting for interest and penalties associated with tax positions, accounting for income taxes in interim periods and income tax disclosures. Income tax-related interest
expense and income tax-related penalties have continued to be reported as a component of the provision for income taxes in the consolidated statement of operations. The Company included interest and penalties of $469 and $409 for the three months
ended March 31, 2009 and 2008, respectively, and $1,015 and $842 for the six months ended March 31, 2009 and 2008, respectively, in the provision for income taxes in the consolidated statement of operations. As of March 31, 2009 and
September 30, 2008, the total amount of accrued income tax-related interest and penalties included in the consolidated balance sheets was $14,979 and $13,857, respectively.

The Company is subject to examination in the U.S. federal tax jurisdiction for the tax years ending September 30, 2007 and September 30, 2008. The U.S. federal tax examination for the tax years ending
September 30, 2004 through September 30, 2006 has been completed, but the statutes of limitations for tax years 2004 through 2007 have not yet expired. The Company is also subject to examination in a number of state and foreign
jurisdictions for the 2003-2007 tax years, for which no individually material unrecognized tax benefits exist. The Company has also filed an appeal with the IRS for the tax years ended September 30, 2003 and September 30, 2004. The Company
believes appropriate provisions for all outstanding issues have been made for all jurisdictions and all open years.

As of March 31, 2009 and
September 30, 2008, the total amount of unrecognized tax benefits was $76,918 and $77,438. If tax matters for the 2003-2006 years are effectively settled with the IRS within the next 12 months, that settlement could increase earnings by $21,800
to $54,535 based on current estimates. Audit outcomes and the timing of audit settlements are subject to significant uncertainty.



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##### Table of Contents

12. Earnings Per Share

Basic earnings per share (EPS) is calculated by dividing net income by the weighted average number of shares of common stock outstanding. Diluted EPS includes the components of basic EPS and also gives effect to dilutive common
stock equivalents. Treasury stock is not considered outstanding for either basic or diluted EPS as weighted from the date the shares were placed into treasury. For purposes of calculating basic and diluted earnings per share, vested restricted stock
awards are considered outstanding. Under the treasury stock method, diluted EPS reflects the potential dilution that could occur if securities or other instruments that are convertible into common stock were exercised or could result in the issuance
of common stock. Potentially dilutive common stock equivalents include unvested restricted stock and restricted stock units, unexercised stock options and warrants that are in-the-money and outstanding convertible debt securities which
would have a dilutive effect if converted from debt to common stock. Restricted stock awards generally vest 25 percent at each fiscal year end following the grant date and are not considered outstanding in basic earnings per share until the vesting
date.

The following table presents computations of basic and diluted EPS in accordance with accounting principles generally accepted in the United States
of America:



|                                                         |  |                             |            |                           |   |             |  |      |            |  |   |            
|-------------------------------------------------------- |  | --------------------------- | ---------- | ------------------------- | - | ----------- |  | ---- | ---------- |  | - | -----------
|                                                         |  | Three Months EndedMarch 31, |            | Six Months EndedMarch 31,
|                                                         |  | 2009                        |            | 2008                      |   | 2009        |  | 2008
|Earnings per share  basic:                              |  |                             |            |                           |   |             |  |      |            |  |   |            
|Net income as reported                                   |  | $                           | 67,539     |                           | $ | 44,493      |  | $    | 132,305    |  | $ | 108,440    
|Weighted-average number of shares  basic                |  |                             | 93,674,297 |                           |   | 98,662,326  |  |      | 93,804,695 |  |   | 101,736,572
|                                                         |  |                             |            |                           |   |             |  |      |            |  |   |            
|Earnings per share  basic                               |  | $                           | 0.72       |                           | $ | 0.45        |  | $    | 1.41       |  | $ | 1.07       
|                                                         |  |                             |            |                           |   |             |  |      |            |  |   |            
|Earnings per share  diluted:                            |  |                             |            |                           |   |             |  |      |            |  |   |            
|Net income as reported                                   |  | $                           | 67,539     |                           | $ | 44,493      |  | $    | 132,305    |  | $ | 108,440    
|Plus: Income impact of assumed conversions:              |  |                             |            |                           |   |             |  |      |            |  |   |            
|Interest on convertible debt securities                  |  |                             |           |                           |   | 582         |  |      |           |  |   | 1,165      
|                                                         |  |                             |            |                           |   |             |  |      |            |  |   |            
|Net income for per share calculation                     |  | $                           | 67,539     |                           | $ | 45,075      |  | $    | 132,305    |  | $ | 109,605    
|                                                         |  |                             |            |                           |   |             |  |      |            |  |   |            
|Weighted-average number of shares  basic                |  |                             | 93,674,297 |                           |   | 98,662,326  |  |      | 93,804,695 |  |   | 101,736,572
|Incremental effect of dilutive common stock equivalents: |  |                             |            |                           |   |             |  |      |            |  |   |            
|Unvested restricted stock and restricted stock units     |  |                             | 881,792    |                           |   | 1,279,965   |  |      | 706,107    |  |   | 1,142,046  
|Unexercised stock options                                |  |                             | 1,025,867  |                           |   | 1,848,833   |  |      | 1,002,121  |  |   | 1,916,257  
|Convertible debt                                         |  |                             |           |                           |   | 1,870,748   |  |      |           |  |   | 1,870,748  
|Unexercised warrants                                     |  |                             |           |                           |   | 1,034       |  |      |           |  |   | 517        
|                                                         |  |                             |            |                           |   |             |  |      |            |  |   |            
|Weighted-average number of shares  diluted              |  |                             | 95,581,956 |                           |   | 103,662,906 |  |      | 95,512,923 |  |   | 106,666,140
|                                                         |  |                             |            |                           |   |             |  |      |            |  |   |            
|Earnings per share  diluted                             |  | $                           | 0.71       |                           | $ | 0.43        |  | $    | 1.39       |  | $ | 1.03       
|                                                         |  |                             |            |                           |   |             |  |      |            |  |   |            

Debt securities convertible into 1,870,748 shares of Class A common stock were outstanding in the three and
six months ended March 31, 2008, and the weighted-average convertible shares were included in the computation of diluted earnings per share for the three and six months ended March 31, 2008. Refer to Note 7 for additional information on
the Companys convertible debt. Warrants to sell 200,000 shares of Class A common stock were outstanding in the three and six months ended March 31, 2009 and 2008, but the warrants were not included in the computation of diluted
earnings per share for the three and six months ended March 31, 2009 because the effect of including the warrants would have been antidilutive. Of the outstanding stock options as of March 31, 2009 and 2008, 770,976 and zero weighted
average shares for each quarter and 790,069 and 98,487 for each six month period, respectively, were not included in the computation of diluted earnings per share because the options were not in-the-money.



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13. Other Comprehensive Income, Net

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



|                                                   |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |         |  
|-------------------------------------------------- |  | --------------------------- | ------- | - | ------------------------- | - | ------ | ---- |  | - | ------- | - |  | - | ------- | -
|                                                   |  | Three Months EndedMarch 31, |         |   | Six Months EndedMarch 31, |  
|                                                   |  | 2009                        |         |   | 2008                      |   |        | 2009 |  |   | 2008    |  
|Net income                                         |  | $                           | 67,539  |   |                           | $ | 44,493 |      |  | $ | 132,305 |   |  | $ | 108,440 |  
|Other comprehensive income (loss):                 |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |         |  
|Foreign currency translation adjustments           |  |                             | (25,114 | ) |                           |   | 1,299  |      |  |   | (79,765 | ) |  |   | 1,721   |  
|Unrealized gains (losses) on investments           |  |                             | 4,432   |   |                           |   | (2,518 | )    |  |   | 124     |   |  |   | (2,518  | )
|Net unrealized gain (loss) on hedging transactions |  |                             | 305     |   |                           |   | (489   | )    |  |   | (4,879  | ) |  |   | (593    | )
|Retirement plans                                   |  |                             | 51      |   |                           |   | 84     |      |  |   | (2,911  | ) |  |   | 116     |  
|                                                   |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |         |  
|Total comprehensive income                         |  | $                           | 47,213  |   |                           | $ | 42,869 |      |  | $ | 44,874  |   |  | $ | 107,166 |  
|                                                   |  |                             |         |   |                           |   |        |      |  |   |         |   |  |   |         |  

The foreign currency translation adjustments during the six months ended March 31, 2009 primarily relate to
the unfavorable changes in the value of the British pound sterling relative to the U.S. dollar.

For the six months ended March 31, 2009, the Company
recorded an unrealized gain of $201 ($124 net of tax) relating to its ARS portfolio, net of $2,349 ($1,451 net of tax) reclassified to earnings. Refer to Note 4 for more information on ARS.

In December 2007, the Company initiated a foreign currency risk management program involving the use of forward foreign currency derivatives. In August 2008, the Company
entered into interest rate swap derivative instruments to convert variable rate debt issued in August 2008 to fixed rate debt. In March 2009, the Company entered into an interest rate swap to convert the remaining variable rate exposure of the
variable rate debt issued in August 2008 into fixed rate debt. Refer to Note 16 for more information on derivative instruments.

14. Commitments and
Contingencies

Legal Proceedings

The Company is
involved in disputes arising in the ordinary course of its business relating to outsourcing or consulting agreements, professional liability claims, vendors or service providers or employment claims. The Company is also routinely audited and subject
to inquiries by governmental and regulatory agencies. The Company evaluates estimated losses under SFAS 5, Accounting for Contingencies. Management considers such factors as the probability of an unfavorable outcome and the ability to make a
reasonable estimate of the amount of loss and records a provision with respect to a claim, suit, investigation or proceeding when it is probable that a liability has been incurred and the amount of the loss can reasonably be estimated. If the
reasonable estimate of a probable loss is a range, and no amount within the range is a better estimate than another, the minimum amount in the range is accrued. If a loss is not probable or a probable loss cannot be reasonably estimated, no
liability is recorded. Insurance and other recoveries of book losses are separately evaluated, and recognized only if such recoveries are also probable and reasonably estimable.

During the six months ended March 31, 2009, the Company recorded net charges of approximately $5.1 million related to ongoing disputes and settlements.

The Company is involved in a dispute with Philips Electronics UK Limited (Philips) regarding a claim that the Company failed to properly value certain benefits in
connection with actuarial services provided from 1995 to 2000. On August 1, 2008, Philips and Philips Pension Trustees Limited filed suit in the High Court of Justice, Chancery Division, in London, England against Hewitt Associates Limited, a
subsidiary of the Company, Bacon & Woodrow, a predecessor of Hewitt Associates Limited, and Roger Parkin, a former employee of the Company. The suit claims damages of up to £103 million ($147 million at March 31, 2009). The
Company believes that it has valid defenses to Philips assertions and intends to defend vigorously any claim. Certain of the Companys professional liability insurers have denied $20 million of insurance coverage relating to this matter.
The Company disputes the position taken by the insurance carriers that have denied coverage and fully intends to enforce its rights under the policies at issue, and believes recovery is probable. The Company has provided $9 million ($4 million
during the current period) related to the Philips claim, including a reserve for the Companys retained insurance risk, and denied insurance coverages, net of expected insurance recoveries, of which $3 million has been incurred to date in
litigation expense.



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The Company does not believe that any unresolved dispute will have a material adverse effect on its financial condition
or results of operation. However, litigation in general and the outcome of any matter, in particular, cannot be predicted with certainty. An unfavorable resolution of one or more pending matters could have a material adverse impact on the
Companys results of operations for one or more reporting periods.

In the normal course of business, the Company also enters into contracts in which
it makes representations, warranties, guarantees and indemnities that relate to the performance of the Companys services and products. The Company does not expect any material losses related to such representations, warranties, guarantees and
indemnities.

15. Segment Results

Under SFAS
No. 131, Disclosures about Segments of an Enterprise and Related Information,the Company has determined that it has three reportable segments based on similarities among the operating units including homogeneity of services, service
delivery methods and use of technology. The three reportable segments are Benefits Outsourcing, HR BPO and Consulting.

The Company operates many of the
administrative and support functions of its business through the use of centralized shared service operations to provide an economical and effective means of supporting the operating segments. These shared services include information technology
services, human resources, management, corporate relations, finance, general counsel, real estate management, supplier management and other supporting services. Many of these costs, such as information technology services, human resources, real
estate management and other support services, are assigned to the business segments based on usage and consumption factors. Certain unallocated costs within finance, general counsel, management, client and market leadership and corporate relations
are not allocated to the business segments and remain in unallocated shared service costs.



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The table below summarizes the Companys reportable segment results.



|                                              |  |                             |         |   |                           |   |         |      |  |   |           |   |  |   |           |  
|--------------------------------------------- |  | --------------------------- | ------- | - | ------------------------- | - | ------- | ---- |  | - | --------- | - |  | - | --------- | -
|                                              |  | Three Months EndedMarch 31, |         |   | Six Months EndedMarch 31, |  
|                                              |  | 2009                        |         |   | 2008                      |   |         | 2009 |  |   | 2008      |  
|Benefits Outsourcing                          |  |                             |         |   |                           |   |         |      |  |   |           |   |  |   |           |  
|Segment revenues before reimbursements        |  | $                           | 392,171 |   |                           | $ | 383,867 |      |  | $ | 783,745   |   |  | $ | 787,205   |  
|Segment income                                |  |                             | 97,537  |   |                           |   | 85,608  |      |  |   | 199,993   |   |  |   | 205,789   |  
|                                              |  |                             |         |  
|HR BPO                                        |  |                             |         |   |                           |   |         |      |  |   |           |   |  |   |           |  
|Segment revenues before reimbursements        |  | $                           | 119,492 |   |                           | $ | 140,445 |      |  | $ | 250,183   |   |  | $ | 288,716   |  
|Segment loss                                  |  |                             | (216    | ) |                           |   | (18,159 | )    |  |   | (5,369    | ) |  |   | (45,423   | )
|                                              |  |                             |         |  
|Consulting                                    |  |                             |         |   |                           |   |         |      |  |   |           |   |  |   |           |  
|Segment revenues before reimbursements        |  | $                           | 243,156 |   |                           | $ | 260,620 |      |  | $ | 502,316   |   |  | $ | 514,994   |  
|Segment income                                |  |                             | 32,317  |   |                           |   | 24,731  |      |  |   | 69,799    |   |  |   | 61,167    |  
|                                              |  |                             |         |  
|Total Company                                 |  |                             |         |   |                           |   |         |      |  |   |           |   |  |   |           |  
|Segment revenues before reimbursements        |  | $                           | 754,819 |   |                           | $ | 784,932 |      |  | $ | 1,536,244 |   |  | $ | 1,590,915 |  
|Intersegment revenues                         |  |                             | (8,567  | ) |                           |   | (11,833 | )    |  |   | (19,228   | ) |  |   | (23,973   | )
|                                              |  |                             |         |   |                           |   |         |      |  |   |           |   |  |   |           |  
|Revenues before reimbursements (net revenues) |  |                             | 746,252 |   |                           |   | 773,099 |      |  |   | 1,517,016 |   |  |   | 1,566,942 |  
|Reimbursements                                |  |                             | 15,580  |   |                           |   | 16,449  |      |  |   | 38,789    |   |  |   | 41,598    |  
|                                              |  |                             |         |   |                           |   |         |      |  |   |           |   |  |   |           |  
|Total revenues                                |  | $                           | 761,832 |   |                           | $ | 789,548 |      |  | $ | 1,555,805 |   |  | $ | 1,608,540 |  
|                                              |  |                             |         |   |                           |   |         |      |  |   |           |   |  |   |           |  
|Segment income                                |  | $                           | 129,638 |   |                           | $ | 92,180  |      |  | $ | 264,423   |   |  | $ | 221,533   |  
|Charges not recorded at the segment level:    |  |                             |         |   |                           |   |         |      |  |   |           |   |  |   |           |  
|Unallocated shared service costs              |  |                             | 22,732  |   |                           |   | 23,720  |      |  |   | 45,160    |   |  |   | 44,140    |  
|                                              |  |                             |         |   |                           |   |         |      |  |   |           |   |  |   |           |  
|Operating income                              |  | $                           | 106,906 |   |                           | $ | 68,460  |      |  | $ | 219,263   |   |  | $ | 177,393   |  
|                                              |  |                             |         |   |                           |   |         |      |  |   |           |   |  |   |           |  

16. Derivative Instruments

In the normal course of business, the Company is exposed to the impact of foreign currency fluctuations and interest rate changes. The Company manages a portion of these risks by using derivative instruments to reduce
the effects from fluctuations caused by volatility in currency exchange and interest rates on its operating results and cash flows.

As a result of the use
of derivative instruments, the Company is exposed to the risk that counterparties to derivative contracts will fail to meet their contractual obligations. To mitigate the counterparty credit risk, the Company has a policy of only entering into
contracts with carefully selected major financial institutions based upon their credit ratings and other factors. The Company also continually assesses the creditworthiness of counterparties.

In its hedging programs, the Company uses forward contracts and interest rate swaps. The Company does not use derivatives for trading or speculative purposes. A brief
description of the Companys hedging programs is as follows:

Currency Hedging

The Company has a substantial operation in India for the development and deployment of technology solutions as well as for client and business support activities. In December 2007, the Company initiated a foreign
currency risk management program involving the use of foreign currency derivatives to hedge up to 75% of the Indian rupee (INR) exposure. The Company uses cash flow hedges to hedge forecasted transactions with its India operations. The
Company enters into non-deliverable forward exchange contracts as hedges of anticipated cash flows denominated in Indian rupees. These contracts protect against the risk that the eventual cash flows resulting from such transactions will be adversely
affected by changes in exchange rates between the U.S. dollar and the Indian rupee.



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Interest Rate Risk Management

On August 8, 2008, the Company entered into a loan agreement that provides for a senior unsecured term loan in the amount of $270,000 (the Term Loan). The Term Loan initially bears interest at a margin of 150 basis points
over LIBOR and matures on August 8, 2013 without amortization. The Company is exposed to interest rate risk from this long term variable rate debt. The Company uses cash flow hedges to hedge future interest payments on the Term Loan. The
Company entered into interest rate swaps to partially convert this variable rate exposure into fixed rate. The Company swapped $170,000 of the Term Loan for the first three years and $85,000 of the Term Loan for the fourth year. In March 2009, the
Company entered into an interest rate swap to convert the remaining $100,000 variable rate exposure into a fixed rate through maturity. Only the variable LIBOR piece of the Term Loan debt was swapped to fixed rate. These contracts protect against
the risk that the eventual cash flows resulting from such transactions will be adversely affected by changes in interest rates.

The Company accounts for
its derivative instruments and hedging activities in accordance with SFAS No. 133 Accounting for Derivative Instruments and Hedging Activities (SFAS No. 133). All derivatives are recognized in the balance sheet at fair
value. Fair values for the Companys derivative financial instruments are based on quoted market prices of comparable instruments or, if none are available, on pricing models or formulas using current assumptions. Changes in the fair value of
derivatives that are highly effective are recorded in other comprehensive income until the underlying transactions occur. Any realized gains or losses resulting from the cash flow hedges are recognized together with the hedged transaction in the
consolidated statement of operations. The effectiveness of the cash flow hedges is evaluated on a quarterly basis. If a cash flow hedge is no longer highly effective, the unrealized gains or losses are recognized in the consolidated statements of
operations. At inception date, the Company formally documents all relationships between hedging instruments and hedged items, as well as its risk management objective and strategy for undertaking various hedging activities. This process includes
matching all derivatives that are designated as cash flow hedges to specific forecasted transactions. The Company also formally assesses, both at the hedges inception and on an ongoing basis, whether the derivatives that are used in hedging
transactions are highly effective in offsetting changes in cash flows of hedged items. At March 31, 2009, all hedges were determined to be highly effective.



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The following table summarizes the fair value of derivative instruments and their respective balance sheet locations at
March 31, 2009 and September 30, 2008:



|                                                                       |  |                                        |  |                       |     |                                       |                  |            |   |       
|---------------------------------------------------------------------- |  | -------------------------------------- |  | --------------------- | --- | ------------------------------------- | ---------------- | ---------- | - | ------
|                                                                       |  | As of March 31, 2009                  
|                                                                       |  | Asset Derivatives                      |  | Liability Derivatives
|                                                                       |  | Location inConsolidatedBalance Sheets  |  | Fair Value            |     | Location inConsolidatedBalance Sheets |                  | Fair Value
|Derivatives designated as hedging instruments under SFAS No. 133:      |  |                                        |  |                       |     |                                       |                  |            |   |       
|Foreign exchange contracts                                             |  | Prepaid expenseand othercurrent assets |  | $                     | 374 |                                       | Accrued expenses |            | $ | 6,322 
|Interest rate contracts                                                |  | n/a                                    |  |                       |    |                                       | Accrued expenses |            |   | 12,337
|                                                                       |  |                                        |  |                       |     |                                       |                  |            |   |       
|Total derivatives designated as hedging instruments under SFAS No. 133 |  |                                        |  | $                     | 374 |                                       |                  |            | $ | 18,659
|                                                                       |  |                                        |  |                       |     |                                       |                  |            |   |       
|Total derivatives                                                      |  |                                        |  | $                     | 374 |                                       |                  |            | $ | 18,659
|                                                                       |  |                                        |  |                       |     |                                       |                  |            |   |       



|                                                                       |  |                                       |  |                       |   |                                       |                  |            |   |       
|---------------------------------------------------------------------- |  | ------------------------------------- |  | --------------------- | - | ------------------------------------- | ---------------- | ---------- | - | ------
|                                                                       |  | As of September 30, 2008             
|                                                                       |  | Asset Derivatives                     |  | Liability Derivatives
|                                                                       |  | Location inConsolidatedBalance Sheets |  | Fair Value            |   | Location inConsolidatedBalance Sheets |                  | Fair Value
|Derivatives designated as hedging instruments under SFAS No. 133:      |  |                                       |  |                       |   |                                       |                  |            |   |       
|Foreign exchange contracts                                             |  | n/a                                   |  | $                     |  |                                       | Accrued expenses |            | $ | 9,110 
|Interest rate contracts                                                |  | n/a                                   |  |                       |  |                                       | Accrued expenses |            |   | 1,273 
|                                                                       |  |                                       |  |                       |   |                                       |                  |            |   |       
|Total derivatives designated as hedging instruments under SFAS No. 133 |  |                                       |  | $                     |  |                                       |                  |            | $ | 10,383
|                                                                       |  |                                       |  |                       |   |                                       |                  |            |   |       
|Total derivatives                                                      |  |                                       |  | $                     |  |                                       |                  |            | $ | 10,383
|                                                                       |  |                                       |  |                       |   |                                       |                  |            |   |       

The following tables summarize the effect of derivative instruments on the consolidated statements of operations
for the three months ended March 31, 2009 and 2008:

Derivative Instruments in SFAS No. 133 Cash Flow Hedging Relationships:



|                           |  |                                                                             |        |   |                                                                                          |                              |                                                                                          |   |      |                                  |  |      |        |   |  |   |      |  
|-------------------------- |  | --------------------------------------------------------------------------- | ------ | - | ---------------------------------------------------------------------------------------- | ---------------------------- | ---------------------------------------------------------------------------------------- | - | ---- | -------------------------------- |  | ---- | ------ | - |  | - | ---- | -
|                           |  | Amount of Gain or (Loss)Recognized in OCI onDerivatives (effective portion) |        |   | Location of Gain or(Loss) Reclassifiedfrom AccumulatedOCI into Income(effective
portion) |                              | Amount of Gain or (Loss)Reclassified from AccumulatedOCI into Income (effective portion) |  
|                           |  | Three Months Ended March 31,                                                |        |   |                                                                                          | Three Months Ended March 31, |                                                                                         
|                           |  | 2009                                                                        |        |   | 2008                                                                                     |                              |                                                                                          |   | 2009 |                                  |  | 2008 |       
|Foreign exchange contracts |  | $                                                                           | (3,328 | ) |                                                                                          | $                            | (995                                                                                     | ) |      | Compensation andrelated expenses |  | $    | (4,262 | ) |  | $ | (193 | )
|Interest rate contracts    |  |                                                                             | (441   | ) |                                                                                          |                              |                                                                                         |   |      |                                  |  |      |        |   |  |   |      |  
|                           |  |                                                                             |        |   |                                                                                          |                              |                                                                                          |   |      |                                  |  |      |        |   |  |   |      |  
|Total                      |  | $                                                                           | (3,769 | ) |                                                                                          | $                            | (995                                                                                     | ) |      |                                  |  |      |        |   |  |   |      |  
|                           |  |                                                                             |        |   |                                                                                          |                              |                                                                                          |   |      |                                  |  |      |        |   |  |   |      |  



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The following tables summarize the effect of derivative instruments on the consolidated statements of operations for the
six months ended March 31, 2009 and 2008:

Derivative Instruments in SFAS No. 133 Cash Flow Hedging Relationships:



|                           |  |                                                                             |         |   |                                                                                              |                            |                                                                                         |   |      |                                   |  |      |        |   |  |   |      |  
|-------------------------- |  | --------------------------------------------------------------------------- | ------- | - | -------------------------------------------------------------------------------------------- | -------------------------- | --------------------------------------------------------------------------------------- | - | ---- | --------------------------------- |  | ---- | ------ | - |  | - | ---- | -
|                           |  | Amount of Gain or (Loss)Recognized in OCI
onDerivatives (effective portion) |         |   | Location of Gain or (Loss) Reclassified from
Accumulated OCI into Income (effective portion) |                            | Amount of Gain or (Loss)Reclassified from AccumulatedOCI into Income
(effectiveportion) |  
|                           |  | Six Months Ended March 31,                                                  |         |   |                                                                                              | Six Months Ended March 31, |                                                                                        
|                           |  | 2009                                                                        |         |   | 2008                                                                                         |                            |                                                                                         |   | 2009 |                                   |  | 2008 |       
|Foreign exchange contracts |  | $                                                                           | (5,595  | ) |                                                                                              | $                          | (1,167                                                                                  | ) |      | Compensation and related
expenses |  | $    | (8,757 | ) |  | $ | (195 | )
|Interest rate contracts    |  |                                                                             | (11,064 | ) |                                                                                              |                            |                                                                                        |   |      |                                   |  |      |        |   |  |   |      |  
|                           |  |                                                                             |         |   |                                                                                              |                            |                                                                                         |   |      |                                   |  |      |        |   |  |   |      |  
|Total                      |  | $                                                                           | (16,659 | ) |                                                                                              | $                          | (1,167                                                                                  | ) |      |                                   |  |      |        |   |  |   |      |  
|                           |  |                                                                             |         |   |                                                                                              |                            |                                                                                         |   |      |                                   |  |      |        |   |  |   |      |  

At March 31, 2009, the notional value of the derivatives related to outstanding non-deliverable Indian rupee
forward contracts maturing by December 2010 was $108,114 (INR 5,367,772) and the notional value of the derivatives related to the interest-rate swaps was $270,000. The estimated net amount of gains and losses at March 31, 2009 that is expected
to be reclassified from accumulated other comprehensive income into earnings within the next 12 months is approximately $5,307.

17. Divestitures

In February 2009, the Company closed on the sale of the net assets and stock relating to its Latin America HR BPO business. Additionally, in March 2009,
the Company closed on the sale of the net assets relating to its HR BPO mobility services business. Both divestitures are part of the Companys continued efforts to streamline its HR BPO service offerings.

The Company recorded a pre-tax gain of $9.1 million primarily related to the recognition of cumulative currency translation adjustments during the quarter ending
March 31, 2009 as a result of the sale of its Latin American HR BPO business. The Company recorded a pre-tax gain of $0.3 million during the quarter ending March 31, 2009 as a result of the sale of its HR BPO mobility services business.

On January 31, 2008, the Company sold the net assets of its Cyborg business (Cyborg). Cyborg was acquired in 2003 and provided licensed,
processed, and hosted payroll software services. Its operations were included in the HR BPO segment. The divestiture was part of the Companys continued efforts to streamline its HR BPO service offerings. The Company recorded a pre-tax gain of
$35,667 during the quarter ended March 31, 2008 as a result of the sale.

The Company has ongoing contractual obligations to provide the services
previously provided by the divested businesses, has contracted with the buyers for those services and continues to have direct cash flows with respect to such services. Because of the Companys continued direct cash flows related to these
divested businesses, the related operations are not classified as discontinued operations.



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|ITEM2. | Managements Discussion and Analysis of Financial Condition and Results of Operations
|------ | -------------------------------------------------------------------------------------

The following information should be read in conjunction with the information contained in our consolidated financial statements and related notes presented earlier in this Quarterly Report on Form 10-Q. Please also
refer to our consolidated financial statements and related notes and the information under the heading Managements Discussion and Analysis of Financial Condition and Results of Operations included in our Annual Report on Form 10-K
filed with the Securities and Exchange Commission for additional information. In addition to historical information, this Quarterly Report on Form 10-Q may contain forward-looking statements that involve risks, uncertainties and assumptions, which
could cause actual results to differ materially from managements expectations. Some of the risks and uncertainties are described below and in the Note Regarding Forward-Looking Statements which appears later in this section and in
our Annual Report on Form 10-K, in Item 1A under the heading Risk Factors.

We use the terms Hewitt, the
Company, we, us and our to refer to the business of Hewitt Associates, Inc. and its subsidiaries. All references to years, unless otherwise noted, refer to our fiscal years, which end on September 30.
For example, a reference to 2009 or fiscal 2009 means the twelve-month period that ends September 30, 2009. References to and adjustments for foreign currency translation are made within our discussion of
results so that the financial results can be viewed without the impact of fluctuating foreign currency exchange rates used in reporting results in one currency (U.S. dollar) and helps facilitate a comparative view of business results. Financial
results described within this section, except for share and per share information, are stated in millions of U.S. dollars unless otherwise noted. Certain prior-period amounts have been reclassified to conform to the current-year presentation.

Overview

Second quarter net revenues decreased 3.5%
as compared to the prior-year period. Excluding third party supplier revenues and adjusting for the unfavorable effect of foreign currency translation of $43.3 million and the net favorable impact of acquisitions and divestitures of $2.7 million,
net revenues increased 1.7%. This increase was driven by higher revenues in Consulting and Benefits Outsourcing, offset by a decrease in HR BPO.

The
growth in Consulting revenues, adjusting for the impact of foreign currency translation and acquisitions, resulted principally from increased demand for Retirement and Financial Management services, and was partially offset by a decrease in Talent
and Organizational Consulting services. The increase in Benefits Outsourcing revenue, adjusting for the impact of foreign currency translation and acquisitions, was primarily due to the realization of $20.1 million of deferred revenues relating to
the current quarter settlement of a contract dispute and was offset by the prior-year benefit of $4.4 million related to the resolution of an HR BPO contract restructuring also impacting Benefits Outsourcing and a decrease in project work. The
decrease in HR BPO revenues, excluding third party supplier revenues and adjusting for the impacts of foreign currency translation and divestitures, was due to planned service reductions to certain current and former clients. This was partially
offset by an increase in the number of clients going live with contract services over the last twelve months and an increase in project work. Also contributing to the decrease in HR BPO revenue was the prior-year benefit of $6.4 million related to
the resolution of a contract restructuring. Segment results are discussed in greater detail in the following section.

Operating income increased $38.5
million, or 56.2%, from the prior-year quarter. The prior-year period included a gain on the sale of Cyborg of $35.7 million while the current-year period included gains on the sale of the net assets of the HR BPO Latin America and mobility services
businesses of $9.1 million and $0.3 million, respectively. Consulting revenue growth coupled with compensation and cost management efforts and improved performance in HR BPO, reflecting lower costs associated with staffing leverage and
infrastructure cost management, also contributed to the growth in operating income. While the impacts of foreign currency translation related to the strengthening U.S. dollar affected our revenues and expenses during the quarter, the impact to
operating income was minimal principally due to our hedging program (refer to Note 16 of the Consolidated Financial Statements for more information on derivative instruments) and the global nature of our cost structure. Consolidated results of
operations are discussed in greater detail in the following section.



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We continue to maintain a strong balance sheet with significant liquidity even as the broader economy continues to endure
the effects of the credit crisis and equity market volatility. Cash and cash equivalents were $451.1 million at March 31, 2009 and included investments in highly rated money market funds and similar investments. We continuously monitor the
investment ratings of our counterparties. At March 31, 2009, the Company had available credit facilities with domestic and foreign banks for various corporate purposes. The amount of unused credit facilities as of March 31, 2009 was
approximately $221.4 million.

During the three months ended March 31, 2009, we repurchased approximately 0.4 million of our outstanding shares
at an average price of $26.95, for a total of approximately $10.3 million. At March 31, 2009, we had approximately $278.8 million remaining under our current $300 million share repurchase authorization.



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Consolidated Results of Operations

The following table sets forth our historical results of operations. Operating results for any period are not necessarily indicative of results for any future periods.

Three Months Ended March 31, 2009 and 2008

Unaudited



|                                             |  |                             |         |   |      |   |         |                   |  |       |      |  |      |      |  |      |  
|-------------------------------------------- |  | --------------------------- | ------- | - | ---- | - | ------- | ----------------- |  | ----- | ---- |  | ---- | ---- |  | ---- | -
|                                             |  | Three Months EndedMarch 31, |         |   |      |   |         | % of Net Revenues | 
|($ in thousands)                             |  | 2009                        |         |   | 2008 |   |         | %Change           |  |       | 2009 |  |      | 2008 | 
|Revenues:                                    |  |                             |         |   |      |   |         |                   |  |       |      |  |      |      |  |      |  
|Net revenues(1)                              |  | $                           | 746,252 |   |      | $ | 773,099 |                   |  | (3.5  | )%   |  |      |      |  |      |  
|Reimbursements                               |  |                             | 15,580  |   |      |   | 16,449  |                   |  | (5.3  | )%   |  |      |      |  |      |  
|                                             |  |                             |         |   |      |   |         |                   |  |       |      |  |      |      |  |      |  
|Total revenues                               |  |                             | 761,832 |   |      |   | 789,548 |                   |  | (3.5  | )%   |  |      |      |  |      |  
|                                             |  |                             |         |   |      |   |         |                   |  |       |      |  |      |      |  |      |  
|Operating expenses:                          |  |                             |         |   |      |   |         |                   |  |       |      |  |      |      |  |      |  
|Compensation and related expenses            |  |                             | 470,852 |   |      |   | 522,026 |                   |  | (9.8  | )%   |  | 63.1 |      |  | 67.5 |  
|Asset impairment                             |  |                             | 786     |   |      |   | 2,070   |                   |  | (62.0 | )%   |  | 0.1  |      |  | 0.3  |  
|Reimbursable expenses                        |  |                             | 15,580  |   |      |   | 16,449  |                   |  | (5.3  | )%   |  | 2.1  |      |  | 2.1  |  
|Other operating expenses(1)                  |  |                             | 141,301 |   |      |   | 157,639 |                   |  | (10.4 | )%   |  | 18.9 |      |  | 20.4 |  
|Selling, general and administrative expenses |  |                             | 35,786  |   |      |   | 58,571  |                   |  | (38.9 | )%   |  | 4.8  |      |  | 7.6  |  
|Gain on sale of businesses                   |  |                             | (9,379  | ) |      |   | (35,667 | )                 |  | (73.7 | )%   |  | (1.2 | )    |  | (4.6 | )
|                                             |  |                             |         |   |      |   |         |                   |  |       |      |  |      |      |  |      |  
|Total operating expenses                     |  |                             | 654,926 |   |      |   | 721,088 |                   |  | (9.2  | )%   |  | 87.8 |      |  | 93.3 |  
|                                             |  |                             |         |   |      |   |         |                   |  |       |      |  |      |      |  |      |  
|Operating income                             |  |                             | 106,906 |   |      |   | 68,460  |                   |  | 56.2  | %    |  | 14.3 |      |  | 8.9  |  
|                                             |  |                             |         |   |     
|Other income (expense), net:                 |  |                             |         |   |      |   |         |                   |  |       |      |  |      |      |  |      |  
|Interest expense                             |  |                             | (9,854  | ) |      |   | (4,241  | )                 |  | 132.4 | %    |  | (1.3 | )    |  | (0.6 | )
|Interest income                              |  |                             | 1,565   |   |      |   | 4,892   |                   |  | (68.0 | )%   |  | 0.2  |      |  | 0.6  |  
|Other income (expense), net                  |  |                             | 1,537   |   |      |   | 620     |                   |  | 147.9 | %    |  | 0.2  |      |  | 0.1  |  
|                                             |  |                             |         |   |      |   |         |                   |  |       |      |  |      |      |  |      |  
|Total other income (expense), net            |  |                             | (6,752  | ) |      |   | 1,271   |                   |  | n/m   |      |  | (0.9 | )    |  | 0.1  |  
|                                             |  |                             |         |   |      |   |         |                   |  |       |      |  |      |      |  |      |  
|Income before income taxes                   |  |                             | 100,154 |   |      |   | 69,731  |                   |  | 43.6  | %    |  | 13.4 |      |  | 9.0  |  
|Provision for income taxes                   |  |                             | 32,615  |   |      |   | 25,238  |                   |  | 29.2  | %    |  | 4.3  |      |  | 3.2  |  
|                                             |  |                             |         |   |      |   |         |                   |  |       |      |  |      |      |  |      |  
|Net income                                   |  | $                           | 67,539  |   |      | $ | 44,493  |                   |  | 51.8  | %    |  | 9.1  | %    |  | 5.8  | %
|                                             |  |                             |         |   |      |   |         |                   |  |       |      |  |      |      |  |      |  



|(1) | Net revenues include $9,677 and $9,157 of third party supplier revenues for the three months ended March 31, 2009 and 2008, respectively. Generally, the third party supplier
arrangements are marginally profitable. The related third party supplier expenses are included in other operating expenses.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net Revenues

Net revenues decreased 3.5% as compared to the prior-year period. Excluding third party supplier revenues and adjusting for the unfavorable effect of
foreign currency translation of $43.3 million and the net favorable impact of acquisitions and divestitures of $2.7 million, net revenues increased 1.7%. This increase was driven by growth in Consulting and Benefits Outsourcing, offset by a decrease
in HR BPO. Contributing to the increase in revenues was the realization of $20.1 million of deferred revenues relating to the current quarter settlement of a contract dispute, partially offset by the prior year benefit of $10.8 million related to an
HR BPO contract restructuring. Segment results are discussed in greater detail later in this section.



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Compensation and Related Expenses

Compensation and related expenses decreased 9.8%, or $51.2 million. The decrease is mostly due to the favorable expense impacts of foreign currency translation related to global operations, lower salary costs
associated with global sourcing and other cost management efforts, including prior severance actions. This was partially offset by higher compensation expense related to the impact of a prior year acquisition, an increase in consulting delivery
capacity and higher performance-based compensation. The realization of $15.2 million of deferred costs relating to the current quarter settlement of the previously noted contract dispute was largely offset by the prior year realization of $11.1
million of deferred costs related to an HR BPO contract restructuring.

Asset Impairment

The current year impairment charge of $0.8 million resulted from the write-off of deferred set-up costs associated with a client contract. The prior year impairment
charge of $2.1 million primarily resulted from the write-off of deferred set-up costs and capitalized software associated with certain client contracts.

Other Operating Expenses

The decrease in other operating expenses of $16.3 million, or 10.4% was primarily due to a reduction in client
service delivery costs, reflecting improved management of vendor spending, and the favorable expense impacts of foreign currency translation related to global operations. Lower infrastructure costs, including a decrease in rental expense resulting
from prior-year real estate exit charges also contributed to the decrease. The realization of $2.0 million of deferred costs relating to the current quarter settlement of the previously noted contract dispute was offset by the prior year realization
of $2.1 million of deferred costs related to an HR BPO contract restructuring.

Selling, General and Administrative Expenses (SG&A)

SG&A expense decreased $22.8 million, or 38.9%. The prior-year quarter included charges related to ongoing disputes and settlements with various
clients of approximately $14.4 million as compared to $4.7 million of similar charges in the current year quarter. Also contributing to the decrease were lower costs in the current quarter related to discretionary cost management, the favorable
impacts of foreign currency translation related to global operations and lower amortization of intangibles.

Gain on Sale of Businesses

In February 2009, the Company closed on the sale of the net assets and stock relating to its Latin America HR BPO business. Additionally, in March 2009, the Company
closed on the sale of the net assets relating to its HR BPO mobility services business. Both divestitures are part of the Companys continued efforts to streamline its HR BPO service offerings.

The Company recorded a pre-tax gain of $9.1 million primarily related to the recognition of cumulative currency translation adjustments during the quarter ended
March 31, 2009 as a result of the sale of its Latin American HR BPO business. The Company recorded a pre-tax gain of $0.3 million during the quarter ended March 31, 2009 as a result of the sale of its HR BPO mobility services business.

On January 31, 2008, the Company sold the net assets of its Cyborg business (Cyborg). Cyborg was acquired in 2003 and provided licensed,
processed, and hosted payroll software services. Its operations were included in the HR BPO segment. The divestiture was part of the Companys continued efforts to streamline its HR BPO service offerings. The Company recorded a pre-tax gain of
$35.7 million during the quarter ended March 31, 2008 as a result of the sale.



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Total Other Income (Expense), Net

Total other income (expense), net decreased by $8.0 million in the period driven by higher interest expense of $5.6 million, resulting from higher average debt balances as compared to the prior-year period. Lower
interest income of $3.3 million, primarily due to lower average interest rates as compared to the prior-year period, also contributed to the decrease. This was partially offset by higher other income (expense), net of $0.9 million mostly resulting
from higher gains on foreign currency transactions and the net unfavorable adjustment relating to the fair value of our auction rate securities and related put option.

Provision for Income Taxes

The Companys consolidated effective income tax rate was 32.6% and 36.2% for the
three months ended March 31, 2009 and 2008, respectively. The Company reviews its expected annual effective income tax rates and makes changes on a quarterly basis as necessary based on certain factors such as changes in forecasted annual
operating income; changes to the valuation allowance for net deferred tax assets; changes to actual or forecasted permanent book to tax differences; impacts from tax settlements with state, federal or foreign tax authorities; or impacts from tax law
changes. Each quarter, the Company identifies items which are not normal and recurring in nature and treats these as discrete events. The tax effect of discrete items is booked entirely in the quarter in which the discrete event occurs. Due to the
volatility of these factors, the Companys consolidated effective income tax rate can change significantly on a quarterly basis. The lower effective tax rate in the current period compared to the comparable prior-year period is due to the
effect of non-recurring discrete items and lower non-deductible share-based compensation in the current period which decreased the current period effective rate.



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##### Table of Contents

Six Months Ended March 31, 2009 and 2008

Unaudited



|                                             |  |                           |           |   |      |   |           |                   |  |       |      |  |      |      |  |      |  
|-------------------------------------------- |  | ------------------------- | --------- | - | ---- | - | --------- | ----------------- |  | ----- | ---- |  | ---- | ---- |  | ---- | -
|                                             |  | Six Months EndedMarch 31, |           |   |      |   |           | % of Net Revenues | 
|($ in thousands)                             |  | 2009                      |           |   | 2008 |   |           | %Change           |  |       | 2009 |  |      | 2008 | 
|Revenues:                                    |  |                           |           |   |      |   |           |                   |  |       |      |  |      |      |  |      |  
|Net revenues(1)                              |  | $                         | 1,517,016 |   |      | $ | 1,566,942 |                   |  | (3.2  | )%   |  |      |      |  |      |  
|Reimbursements                               |  |                           | 38,789    |   |      |   | 41,598    |                   |  | (6.8  | )%   |  |      |      |  |      |  
|                                             |  |                           |           |   |      |   |           |                   |  |       |      |  |      |      |  |      |  
|Total revenues                               |  |                           | 1,555,805 |   |      |   | 1,608,540 |                   |  | (3.3  | )%   |  |      |      |  |      |  
|                                             |  |                           |           |   |      |   |           |                   |  |       |      |  |      |      |  |      |  
|Operating expenses:                          |  |                           |           |   |      |   |           |                   |  |       |      |  |      |      |  |      |  
|Compensation and related expenses            |  |                           | 951,759   |   |      |   | 1,016,152 |                   |  | (6.3  | )%   |  | 62.7 |      |  | 64.8 |  
|Asset impairment                             |  |                           | 3,401     |   |      |   | 2,296     |                   |  | 48.1  | %    |  | 0.2  |      |  | 0.1  |  
|Reimbursable expenses                        |  |                           | 38,789    |   |      |   | 41,598    |                   |  | (6.8  | )%   |  | 2.6  |      |  | 2.7  |  
|Other operating expenses(1)                  |  |                           | 275,309   |   |      |   | 298,170   |                   |  | (7.7  | )%   |  | 18.1 |      |  | 19.0 |  
|Selling, general and administrative expenses |  |                           | 76,663    |   |      |   | 108,598   |                   |  | (29.4 | )%   |  | 5.1  |      |  | 6.9  |  
|Gain on sale of businesses                   |  |                           | (9,379    | ) |      |   | (35,667   | )                 |  | (73.7 | )%   |  | (0.6 | )    |  | (2.2 | )
|                                             |  |                           |           |   |      |   |           |                   |  |       |      |  |      |      |  |      |  
|Total operating expenses                     |  |                           | 1,336,542 |   |      |   | 1,431,147 |                   |  | (6.6  | )%   |  | 88.1 |      |  | 91.3 |  
|                                             |  |                           |           |   |      |   |           |                   |  |       |      |  |      |      |  |      |  
|Operating income                             |  |                           | 219,263   |   |      |   | 177,393   |                   |  | 23.6  | %    |  | 14.5 |      |  | 11.3 |  
|                                             |  |                           |           |   |     
|Other income (expense), net:                 |  |                           |           |   |      |   |           |                   |  |       |      |  |      |      |  |      |  
|Interest expense                             |  |                           | (20,539   | ) |      |   | (7,985    | )                 |  | 157.2 | %    |  | (1.4 | )    |  | (0.5 | )
|Interest income                              |  |                           | 5,865     |   |      |   | 13,490    |                   |  | (56.5 | )%   |  | 0.4  |      |  | 0.9  |  
|Other income (expense), net                  |  |                           | 2,819     |   |      |   | 236       |                   |  | n/m   |      |  | 0.2  |      |  |     |  
|                                             |  |                           |           |   |      |   |           |                   |  |       |      |  |      |      |  |      |  
|Total other income (expense), net            |  |                           | (11,855   | ) |      |   | 5,741     |                   |  | n/m   |      |  | (0.8 | )    |  | 0.4  |  
|                                             |  |                           |           |   |      |   |           |                   |  |       |      |  |      |      |  |      |  
|Income before income taxes                   |  |                           | 207,408   |   |      |   | 183,134   |                   |  | 13.3  | %    |  | 13.7 |      |  | 11.7 |  
|Provision for income taxes                   |  |                           | 75,103    |   |      |   | 74,694    |                   |  | 0.5   | %    |  | 5.0  |      |  | 4.8  |  
|                                             |  |                           |           |   |      |   |           |                   |  |       |      |  |      |      |  |      |  
|Net income                                   |  | $                         | 132,305   |   |      | $ | 108,440   |                   |  | 22.0  | %    |  | 8.7  | %    |  | 6.9  | %
|                                             |  |                           |           |   |      |   |           |                   |  |       |      |  |      |      |  |      |  



|(1) | Net revenues include $19,972 and $22,337 of third party supplier revenues for the six months ended March 31, 2009 and 2008, respectively. Generally, the third party supplier
arrangements are marginally profitable. The related third party supplier expenses are included in other operating expenses.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

Net Revenues

Net revenues decreased 3.2% as compared to the prior-year period. Excluding third party supplier revenues and adjusting for the unfavorable effect of
foreign currency translation of $79.1 million and the net favorable impact of acquisitions and divestitures of $6.8 million, net revenues increased 1.6%. This increase was driven by growth in Consulting offset by decreases in HR BPO and Benefits
Outsourcing. Contributing to the increase in revenues was the realization of $20.1 million of deferred revenues relating to the current quarter settlement of a contract dispute, which was more than offset by the prior year benefit of $23.1 million
related to the restructuring of two HR BPO contracts. Segment results are discussed in greater detail later in this section.

Compensation and Related
Expenses

Compensation and related expenses decreased 6.3%, or $64.4 million. The decrease is mostly due to the favorable expense impacts of foreign
currency translation related to global operations, lower salary costs associated with global sourcing and other cost management efforts, including prior severance actions. This was partially offset by higher compensation expense related to the
investment in several large and complex clients, an increase in consulting delivery capacity and higher performance-based compensation. The realization of $15.2 million of deferred costs relating to the current quarter settlement of the previously
noted contract dispute was offset by the prior year realization of $17.2 million of deferred costs related to the restructuring of two HR BPO contracts.



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Asset Impairment

The
current year impairment charge of $3.4 million resulted from the write-off of deferred set-up costs associated with certain client contracts, in addition to the impairment of customer relationship intangible assets. The prior year impairment charge
of $2.3 million resulted from the write-off of deferred set-up costs and capitalized software associated with a client contract.

Other Operating
Expenses

The decrease in other operating expenses of $22.9 million, or 7.7% was primarily due to the favorable expense impacts of foreign currency
translation related to global operations and a reduction in client service delivery costs, reflecting improved management of vendor spending. Lower infrastructure costs, including a decrease in rental expense resulting from prior-year real estate
exit charges also contributed to the decrease. A reduction in third party supplier costs of $2.0 million was offset by increases in capitalized software amortization. Additionally, the realization of $2.0 million of deferred costs relating to the
current quarter settlement of the previously noted contract dispute was offset by the prior year realization of $2.7 million of deferred costs related to the restructuring of two HR BPO contracts.

Selling, General and Administrative Expenses

SG&A expense
decreased $31.9 million, or 29.4%. The prior-year period included charges related to ongoing disputes and settlements with various clients of approximately $21 million as compared to $5.1 million of similar charges in the current year period. Also
contributing to the decrease were the favorable impacts of foreign currency translation related to global operations, lower costs in the current year related to discretionary cost management and lower amortization of intangibles, partially offset by
higher allowance for doubtful accounts.

Gain on Sale of Businesses

In February 2009, the Company closed on the sale of the net assets and stock relating to its Latin America HR BPO business. Additionally, in March 2009, the Company closed on the sale of the net assets relating to its
HR BPO mobility services business. Both divestitures are part of the Companys continued efforts to streamline its HR BPO service offerings.

The
Company recorded a pre-tax gain of $9.1 million primarily related to the recognition of cumulative currency translation adjustments during the quarter ended March 31, 2009 as a result of the sale of its Latin American HR BPO business. The
Company recorded a pre-tax gain of $0.3 million during the quarter ended March 31, 2009 as a result of the sale of its HR BPO mobility services business.

On January 31, 2008, the Company sold the net assets of its Cyborg business. Cyborg was acquired in 2003 and provided licensed, processed, and hosted payroll software services. Its operations were included in the HR BPO segment. The
divestiture was part of the Companys continued efforts to streamline its HR BPO service offerings. The Company recorded a pre-tax gain of $35.7 million during the quarter ended March 31, 2008 as a result of the sale.

Total Other Income (Expense), Net

Total other income (expense), net
decreased by $17.6 million in the period driven by higher interest expense of $12.6 million, resulting from higher average debt balances as compared to the prior-year period. Lower interest income of $7.6 million, primarily due to lower average
interest rates as compared to the prior-year period, also contributed to the decrease. This was partially offset by higher other income (expense), net of $2.6 million mostly resulting from higher gains on foreign currency transactions. Included in
other income (expense), net during the current year is a net unfavorable adjustment relating to the fair value of our auction rate securities and related put option.



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##### Table of Contents

Provision for Income Taxes

The Companys consolidated effective income tax rate was 36.2% and 40.8% for the six months ended March 31, 2009 and 2008, respectively. The Company reviews its expected annual effective income tax rates and makes changes on a
quarterly basis as necessary based on certain factors such as changes in forecasted annual operating income; changes to the valuation allowance for net deferred tax assets; changes to actual or forecasted permanent book to tax differences; impacts
from tax settlements with state, federal or foreign tax authorities; or impacts from tax law changes. Each quarter, the Company identifies items which are not normal and recurring in nature and treats these as discrete events. The tax effect of
discrete items is booked entirely in the quarter in which the discrete event occurs. Due to the volatility of these factors, the Companys consolidated effective income tax rate can change significantly on a quarterly basis. The lower effective
tax rate in the current period compared to the comparable prior-year period is due to the effect of non-recurring discrete items and lower non-deductible share-based compensation in the current period which decreased the current period effective
rate.



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##### Table of Contents

Segment Results

Operating income before unallocated shared service costs is referred to as segment income throughout the discussion.

Reconciliation of Segment Results to Total Company Results

Three Months Ended March 31, 2009 and 2008

Unaudited



|                                                   |  |                             |         |    |      |   |         |         |  |       |   
|-------------------------------------------------- |  | --------------------------- | ------- | -- | ---- | - | ------- | ------- |  | ----- | --
|                                                   |  | Three Months EndedMarch 31, |         |    |      |  
|($ in thousands)                                   |  | 2009                        |         |    | 2008 |   |         | %Change | 
|Benefits Outsourcing                               |  |                             |         |    |      |   |         |         |  |       |   
|Segment revenues before reimbursements             |  | $                           | 392,171 |    |      | $ | 383,867 |         |  | 2.2   | % 
|Segment income                                     |  |                             | 97,537  |    |      |   | 85,608  |         |  | 13.9  | % 
|Segment income as a percentage of segment revenues |  |                             | 24.9    | %  |      |   | 22.3    | %       |  |       |   
|                                                   |  |                             |        
|HR BPO                                             |  |                             |         |    |      |   |         |         |  |       |   
|Segment revenues before reimbursements(1)          |  | $                           | 119,492 |    |      | $ | 140,445 |         |  | (14.9 | )%
|Segment loss                                       |  |                             | (216    | )  |      |   | (18,159 | )       |  | (98.8 | )%
|Segment loss as a percentage of segment revenues   |  |                             | (0.2    | )% |      |   | (12.9   | )%      |  |       |   
|                                                   |  |                             |        
|Consulting                                         |  |                             |         |    |      |   |         |         |  |       |   
|Segment revenues before reimbursements             |  | $                           | 243,156 |    |      | $ | 260,620 |         |  | (6.7  | )%
|Segment income                                     |  |                             | 32,317  |    |      |   | 24,731  |         |  | 30.7  | % 
|Segment income as a percentage of segment revenues |  |                             | 13.3    | %  |      |   | 9.5     | %       |  |       |   
|                                                   |  |                             |        
|Total Company                                      |  |                             |         |    |      |   |         |         |  |       |   
|Segment revenues before reimbursements(1)          |  | $                           | 754,819 |    |      | $ | 784,932 |         |  | (3.8  | )%
|Intersegment revenues                              |  |                             | (8,567  | )  |      |   | (11,833 | )       |  | (27.6 | )%
|                                                   |  |                             |         |    |      |   |         |         |  |       |   
|Revenues before reimbursements (net revenues)      |  |                             | 746,252 |    |      |   | 773,099 |         |  | (3.5  | )%
|Reimbursements                                     |  |                             | 15,580  |    |      |   | 16,449  |         |  | (5.3  | )%
|                                                   |  |                             |         |    |      |   |         |         |  |       |   
|Total revenues                                     |  | $                           | 761,832 |    |      | $ | 789,548 |         |  | (3.5  | )%
|                                                   |  |                             |         |    |      |   |         |         |  |       |   
|Segment income                                     |  | $                           | 129,638 |    |      | $ | 92,180  |         |  | 40.6  | % 
|Unallocated shared service costs                   |  |                             | 22,732  |    |      |   | 23,720  |         |  | (4.2  | )%
|                                                   |  |                             |         |    |      |   |         |         |  |       |   
|Operating income                                   |  | $                           | 106,906 |    |      | $ | 68,460  |         |  | 56.2  | % 
|                                                   |  |                             |         |    |      |   |         |         |  |       |   



|(1) | HR BPO net revenues include $9,677 and $9,157 of third party supplier revenues for the three months ended March 31, 2009 and 2008, respectively. Generally, the third party
supplier arrangements are marginally profitable. The related third party supplier expenses are included in other operating expenses.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Benefits Outsourcing

Benefits Outsourcing net revenue increased 2.2%. Net revenues also increased 2.2% after adjusting for the unfavorable effect of foreign currency translation of $5.7 million and the offsetting impact of acquisitions of $5.8 million. The
increase was primarily due to the realization of $20.1 million of deferred revenues relating to the current quarter settlement of a contract dispute. This was offset by the prior-year benefit of $4.4 million related to the resolution of an HR BPO
contract restructuring which also impacted Benefits Outsourcing and a decrease in project work.

Benefits Outsourcing operating income increased 13.9%
compared to the prior-year period. The increase was due to cost savings related to infrastructure cost management efforts and reduced client service delivery expenses, reflecting improved management of vendor spending, partially offset by the impact
of lower project revenue. Included in the current-year period is a benefit relating to the current quarter settlement of a contract dispute which was largely offset by a benefit in the prior-year period related to the restructuring of an HR BPO
contract which also impacted Benefits Outsourcing.

HR BPO

HR BPO net revenue decreased 14.9%. Excluding third party supplier revenues and adjusting for the unfavorable effect of foreign currency translation of $6.6 million and the impact of $6.4 million of revenues generated in the prior-year
period by divested businesses, net revenue decreased 7.0%. The HR BPO revenue decrease was primarily due to planned service reductions to certain current and former clients. This was partially offset by an increase in the number of clients going
live with contract services over the last twelve months, and an increase in project work. Also contributing to the decrease was the prior-year benefit of $6.4 million related to the resolution of a contract restructuring.

HR BPO operating loss decreased 98.8% compared to the prior-year period. The prior-year period included a gain on the sale of Cyborg of $35.7 million while the
current-year period included gains on the sale of the net assets of the HR BPO Latin America and mobility services businesses of $9.1 million and $0.3 million, respectively. Also contributing to the decrease in segment loss were lower costs
associated with staffing leverage, lower amortization of intangibles and an increase in project revenue. The prior-year period also included net charges of $18 million related to the restructuring of an HR BPO contract and charges of $2.8 million
related to disputes and settlements with various clients.

Consulting

Consulting net revenues decreased 6.7%. Adjusting for the unfavorable effect of foreign currency translation of $31.0 million and the impact of acquisitions of $3.3 million, net revenue increased 3.9%. The revenue
growth resulted principally from increased demand for Retirement and Financial Management services in Europe and North America reflecting demand related to economic volatility. This was offset by decreases in revenue related to Talent and
Organizational Consulting services, reflecting declines across all regions, and Communication services in the U.S., both reflecting overall economic conditions.

Segment income increased 30.7% compared to the prior-year period. The increase in segment income was due to compensation leverage and discretionary expense management as well as net revenue growth, partially offset by a $4 million charge
related to an ongoing dispute with a client.

Unallocated Shared Service Costs

Unallocated shared service costs are global expenses that are incurred on behalf of the entire Company and are not specific to a business segment. These costs include finance, legal, management and corporate relations
and other related costs.

Unallocated costs decreased $1.0 million, or 4.2%. The decrease was primarily related to the favorable impact of foreign currency
translation, discretionary cost management and the deferral of compensation expense related to internally developed software, offset by an increase in legal fees.



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Six Months Ended March 31, 2009 and 2008

Unaudited



|                                                   |  |                           |           |    |      |   |           |         |  |       |   
|-------------------------------------------------- |  | ------------------------- | --------- | -- | ---- | - | --------- | ------- |  | ----- | --
|                                                   |  | Six Months EndedMarch 31, |           |    |      |  
|($ in thousands)                                   |  | 2009                      |           |    | 2008 |   |           | %Change | 
|Benefits Outsourcing                               |  |                           |           |    |      |   |           |         |  |       |   
|Segment revenues before reimbursements             |  | $                         | 783,745   |    |      | $ | 787,205   |         |  | (0.4  | )%
|Segment income                                     |  |                           | 199,993   |    |      |   | 205,789   |         |  | (2.8  | )%
|Segment income as a percentage of segment revenues |  |                           | 25.5      | %  |      |   | 26.1      | %       |  |       |   
|                                                   |  |                           |          
|HR BPO                                             |  |                           |           |    |      |   |           |         |  |       |   
|Segment revenues before reimbursements(1)          |  | $                         | 250,183   |    |      | $ | 288,716   |         |  | (13.3 | )%
|Segment loss                                       |  |                           | (5,369    | )  |      |   | (45,423   | )       |  | (88.2 | )%
|Segment loss as a percentage of segment revenues   |  |                           | (2.1      | )% |      |   | (15.7     | )%      |  |       |   
|                                                   |  |                           |          
|Consulting                                         |  |                           |           |    |      |   |           |         |  |       |   
|Segment revenues before reimbursements             |  | $                         | 502,316   |    |      | $ | 514,994   |         |  | (2.5  | )%
|Segment income                                     |  |                           | 69,799    |    |      |   | 61,167    |         |  | 14.1  | % 
|Segment income as a percentage of segment revenues |  |                           | 13.9      | %  |      |   | 11.9      | %       |  |       |   
|                                                   |  |                           |          
|Total Company                                      |  |                           |           |    |      |   |           |         |  |       |   
|Segment revenues before reimbursements(1)          |  | $                         | 1,536,244 |    |      | $ | 1,590,915 |         |  | (3.4  | )%
|Intersegment revenues                              |  |                           | (19,228   | )  |      |   | (23,973   | )       |  | (19.8 | )%
|                                                   |  |                           |           |    |      |   |           |         |  |       |   
|Revenues before reimbursements (net revenues)      |  |                           | 1,517,016 |    |      |   | 1,566,942 |         |  | (3.2  | )%
|Reimbursements                                     |  |                           | 38,789    |    |      |   | 41,598    |         |  | (6.8  | )%
|                                                   |  |                           |           |    |      |   |           |         |  |       |   
|Total revenues                                     |  | $                         | 1,555,805 |    |      | $ | 1,608,540 |         |  | (3.3  | )%
|                                                   |  |                           |           |    |      |   |           |         |  |       |   
|Segment income                                     |  | $                         | 264,423   |    |      | $ | 221,533   |         |  | 19.4  | % 
|Unallocated shared service costs                   |  |                           | 45,160    |    |      |   | 44,140    |         |  | 2.3   | % 
|                                                   |  |                           |           |    |      |   |           |         |  |       |   
|Operating income                                   |  | $                         | 219,263   |    |      | $ | 177,393   |         |  | 23.6  | % 
|                                                   |  |                           |           |    |      |   |           |         |  |       |   



|(1) | HR BPO net revenues include $19,972 and $22,337 of third party supplier revenues for the six months ended March 31, 2009 and 2008, respectively. Generally, the third party
supplier arrangements are marginally profitable. The related third party supplier expenses are included in other operating expenses.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Benefits Outsourcing

Benefits Outsourcing net revenue decreased 0.4%. Adjusting for the unfavorable effect of foreign currency translation of $10.2 million and the impact of acquisitions of $11.4 million, net revenues decreased 0.6%. The decrease was due to
current period adjustments related to client service issues in prior years, the prior-year benefit of $9.0 million related to the resolution of two HR BPO contract restructurings which also impacted Benefits Outsourcing, and a decrease in project
work. This was offset by the realization of $20.1 million of deferred revenues relating to the current quarter settlement of a contract dispute and net new clients going live with contract services over the last twelve months.

Benefits Outsourcing operating income decreased 2.8% compared to the prior year. The decrease was due to lower revenue and higher compensation expense related to the
investment in several large and complex clients and was partially offset by cost savings related to infrastructure cost management efforts. Included in the current-year period is a benefit relating to the current quarter settlement of a contract
dispute which was more than offset by a benefit in the prior-year period related to the restructuring of two HR BPO contracts which also impacted Benefits Outsourcing.

HR BPO

HR BPO net revenue decreased 13.3%. Excluding third party supplier revenues and adjusting for the unfavorable
effect of foreign currency translation of $13.3 million and the impact of $13.6 million of revenues generated in the prior-year period by divested businesses, net revenue decreased 3.8%. The HR BPO revenue decrease was primarily due to planned
service reductions to certain current and former clients. This was offset by an increase in the number of clients going live with contract services over the last twelve months and growth in revenue from existing clients, including an increase in
project work and transactional volumes. Also contributing to the decrease was the prior-year benefit of $14.1 million related to the resolution of two contract restructurings.

HR BPO operating loss decreased 88.2% compared to the prior-year period. The prior-year period included a gain on the sale of Cyborg of $35.7 million while the current-year period included gains on the sale of the net
assets of the HR BPO Latin America and mobility services businesses of $9.1 million and $0.3 million, respectively. Also contributing to the decrease in segment loss were lower costs associated with staffing leverage and infrastructure cost
management efforts and lower amortization of intangibles. The prior-year period also included net charges of $14.9 million related to the restructuring of two HR BPO contracts and charges of $5 million related to disputes and settlements with
various clients.

Consulting

Consulting net revenues
decreased 2.5%. Adjusting for the unfavorable effect of foreign currency translation of $55.7 million and the impact of acquisitions of $9.0 million, net revenue increased 6.6%. The revenue growth resulted principally from increased demand for
Retirement and Financial Management services in Europe and North America reflecting demand related to economic volatility, as well as growth in Health Management services in the U.S. This was offset by a decrease in revenue related to Talent and
Organizational Consulting services, reflecting declines in Europe and the U.S., and Communication services in the U.S., both reflecting overall economic conditions.

Segment income increased 14.1% compared to the prior-year period. The increase in segment income was due to compensation leverage and discretionary expense management revenue growth as well as net revenue growth,
partially offset by higher SG&A expenses and a $4 million charge in the current period related to an ongoing dispute with a client.

Unallocated
Shared Service Costs

Unallocated shared service costs are global expenses that are incurred on behalf of the entire Company and are not specific to a
business segment. These costs include finance, legal, management and corporate relations and other related costs.



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Unallocated costs increased $1.0 million, or 2.3%. The increase was primarily related to the timing of adjustments to
share-based compensation in the current period and incentive compensation in the prior-year period, in addition to increased fees for outside services. This was partially offset by the favorable impacts of foreign currency translation.

Critical Accounting Policies and Estimates

For a description of
our critical accounting policies and estimates, see our Annual Report on Form 10-K for the fiscal year ended September 30, 2008.

In February 2007,
the FASB issued SFAS No. 159, The Fair Value Option for Financial Assets and Financial Liabilities  Including an amendment of FASB Statement No. 115(SFAS No. 159). This Statement permits entities to choose to
measure many financial instruments and certain other items at fair value. This Statement is effective as of the beginning of an entitys first fiscal year that begins after November 15, 2007 (Hewitts fiscal year 2009). The Company
adopted SFAS No. 159 as of October 1, 2008 and has elected to apply the fair value option to a put option relating to its auction rate securities (refer to Note 4 for more information on auction rate securities). The adoption of SFAS
No. 159 did not have a material impact on the Companys consolidated financial statements. See Note 8 of the Consolidated Financial Statements for additional information on fair value measurements.

In September 2006, the FASB issued SFAS No. 157, Fair Value Measurements, (SFAS No. 157). SFAS No. 157 establishes a framework for
measuring fair value and expands disclosures about fair value measurements. The changes to current practice resulting from the application of this Statement relate to the definition of fair value, the methods used to measure fair value, and the
expanded disclosures about fair value measurements. The Statement is effective for fiscal years beginning after November 15, 2007 (Hewitts fiscal year 2009) and interim periods within those fiscal years. In February 2008, the FASB issued
FASB Staff Position No. FAS 157-2, Effective Date of FASB Statement No. 157, which provides a one year deferral of the effective date of SFAS No. 157 for non-financial assets and non-financial liabilities, except those that are
recognized or disclosed in the financial statements at fair value at least annually. On October 10, 2008, the FASB issued FSP No. 157-3, Determining the Fair Value of a Financial Asset When the Market for That Asset is Not Active,
(FSP 157-3) that clarifies the application of SFAS No. 157 in a market that is not active and provides an example to illustrate key considerations in determining the fair value of a financial asset when the market for that financial
asset is not active. FSP 157-3 is effective upon issuance. The provisions of SFAS No. 157 were applied prospectively to fair value measurements and disclosures for financial assets and financial liabilities recognized or disclosed at fair value
in the financial statements on at least an annual basis beginning in the first quarter of fiscal 2009. The adoption of SFAS No. 157 did not have a material effect on the consolidated financial statements. See Note 8 of the Consolidated
Financial Statements for additional information on fair value measurements.

Liquidity and Capital Resources

We have historically funded our growth and working capital requirements with internally generated funds, credit facilities and term notes. We believe we have broad access
to the capital markets.



|                                                 |  |                           |          |   |      |   |          |  
|------------------------------------------------ |  | ------------------------- | -------- | - | ---- | - | -------- | -
|Summary of Cash Flows                            |  | Six Months EndedMarch 31, |         
|(in thousands)                                   |  | 2009                      |          |   | 2008 |  
|Cash provided by operating activities            |  | $                         | 127,428  |   |      | $ | 37,347   |  
|Cash (used in) provided by investing activities  |  |                           | (57,474  | ) |      |   | 22,657   |  
|Cash used in financing activities                |  |                           | (141,831 | ) |      |   | (250,012 | )
|Effect of exchange rates on cash                 |  |                           | (18,469  | ) |      |   | 891      |  
|                                                 |  |                           |          |   |      |   |          |  
|Net decrease in cash and cash equivalents        |  |                           | (90,346  | ) |      |   | (189,117 | )
|Cash and cash equivalents at beginning of period |  |                           | 541,494  |   |      |   | 378,743  |  
|                                                 |  |                           |          |   |      |   |          |  
|Cash and cash equivalents at end of period       |  | $                         | 451,148  |   |      | $ | 189,626  |  
|                                                 |  |                           |          |   |      |   |          |  

Cash and cash equivalents were $451.1 million and $541.5 million as of March 31, 2009 and September 30,
2008, respectively. The Company intends to fund working capital requirements, principal and interest payments on the Companys debt, potential acquisitions and other liabilities with cash provided by operations and cash on hand, supplemented by
short-term and long-term borrowings under existing credit facilities.



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The increase in cash provided by operating activities was primarily due to an increase in cash collected on accounts
receivable and lower tax related payments. These factors were offset by a decrease in implementation fees.

The Company used more cash in the current year
in investing activities primarily due to an increase in capital expenditures and additions to capitalized software. The Company generated more cash in the prior year from investing activities due to higher net proceeds from the sale of investments.

The decrease in cash used in financing activities was primarily due to lower use of cash to repurchase Hewitts common stock, offset by the repayment
of the Companys $110 million convertible debt. The Company repurchased approximately 0.8 million of its outstanding shares at an average price of $26.88, for a total of $21.2 million during the six months ended March 31, 2009 as
compared to approximately 10.7 million of its outstanding shares at an average price of $37.34, for a total of $398.2 million, during the six months ended March 31, 2008. During the prior-year period, the Company also increased short-term
borrowing to fund an acquisition and borrowed $90 million against a credit facility to increase its cash position to add financial flexibility. Lower proceeds from the exercise of stock options in the current year also provided less cash.

We believe the cash on hand, together with funds from operations, other current assets and existing credit facilities will satisfy our expected working
capital, contractual obligations, planned capital expenditures and investment requirements for the foreseeable future.

At March 31, 2009, the Company
had available credit facilities with domestic and foreign banks for various corporate purposes. The amount of unused credit facilities as of March 31, 2009 was approximately $221.4 million.

Commitments

Significant ongoing commitments consist primarily of
leases, debt, purchase commitments and certain other long-term liabilities. For a summary and description of our ongoing commitments and contractual obligations, see our Annual Report on Form 10-K for the fiscal year ended September 30, 2008
and the Commitments section of the Liquidity and Capital Resources section of Managements Discussion and Analysis of Financial Condition and Results of Operations. There were no material changes in these commitments during the
three or six months ended March 31, 2009.



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Note Regarding Forward-Looking Statements

This report contains forward-looking statements relating to our operations that are based on our current expectations, estimates and projections. Words such as anticipates, believes,
continues, estimates, expects, goal, intends, may, opportunity, plans, potential, projects, forecasts,
should, will, and similar expressions are intended to identify such forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties, and assumptions that are difficult to
predict. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecasted in these forward-looking statements. Actual
results may differ from the forward-looking statements for many reasons. Important factors known to us that could cause such material differences are identified and discussed from time to time in our filings with the Securities and Exchange
Commission, including those factors discussed in Part I, Item 1A, Risk Factors of our Annual Report on Form 10-K for the year ended September 30, 2008. We undertake no obligation to update or revise any forward-looking
statements, whether as a result of new information, future events or for any other reason. Such important factors include:



| |  | The outsourcing and consulting markets are highly competitive, and if we are not able to compete effectively, our revenues and profit margins may be adversely
affected.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | A significant or prolonged economic downturn could have a material adverse effect on our revenues, financial condition and results of operation.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The profitability of our engagements with clients may not meet our expectations due to unexpected costs, cost overruns, early contract terminations, unrealized
assumptions used in our contract bidding process and the inability to maintain our prices.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | We might not be able to achieve the cost savings required to sustain and increase our profit margins.
|- |  | -----------------------------------------------------------------------------------------------------



| |  | Accounting for our long-term contracts requires using estimates and projections that may change over time. Such changes may have a significant or adverse effect on
our reported results of operations or consolidated balance sheet.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The loss of a significantly large client or several clients could have a material adverse effect on our revenues and profitability.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------



| |  | We may have difficulty integrating or managing acquired businesses, which may harm our financial results or reputation in the marketplace.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  | 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.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | If we are unable to satisfy regulatory requirements relating to internal controls over financial reporting, our business could suffer.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------



| |  | Our business performance and growth plans will be negatively affected if we are not able to effectively apply technology in driving value for our clients through
technology-based solutions or gain internal efficiencies through the effective application of technology and related tools.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | If our clients or third parties are not satisfied with our services, we may face damage to our professional reputation or legal liability.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------



| |  | Improper disclosure of personal data could result in liability and harm our reputation.
|- |  | ---------------------------------------------------------------------------------------



| |  | We depend on our employees; the inability to attract new talent or the loss of key employees could damage or result in the loss of client relationships and
adversely affect our business.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our global operations and expansion strategy pose complex management, foreign currency, legal, tax and economic risks, which we may not adequately address.
|- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | The demand for our services may not grow at rates we anticipate.
|- |  | ----------------------------------------------------------------



| |  | If we fail to establish and maintain alliances for developing, marketing and delivering our services, our ability to increase our revenues and profitability may
suffer.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | We rely on third parties to provide services and their failure to perform the service could do harm to our business.
|- |  | --------------------------------------------------------------------------------------------------------------------



| |  | We have only a limited ability to protect the intellectual property rights that are important to our success, and we face the risk that our services or products may
infringe upon the intellectual property rights of others.
|- |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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| |  | We rely heavily on our computing and communications infrastructure and the integrity of these systems in the delivery of services for our clients, and our
operational performance and revenue growth depends, in part, on the reliability and functionality of this infrastructure as a means of delivering human resources services.
|- |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Our quarterly revenues, operating results and profitability will vary from quarter to quarter, which may result in volatility of our stock price.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------



| |  | We may not be able to liquidate our auction rate securities at carrying value, which may result in an impairment of the fair value of these securities and may have
an impact on our ability to fund our ongoing operations and growth initiatives.
|- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | There are significant limitations on the ability of any person or company to buy Hewitt without the approval of the Board of Directors, which may decrease the price
of our Class A common stock.
|- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| |  | Section 203 of the Delaware General Corporation Law may delay, defer or prevent a change in control that our stockholders might consider to be in their best
interest.
|- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------

You should carefully consider each cautionary factor and all of the other information in this report. We undertake no
obligation to correct or update any forward-looking statements, whether as a result of new information, future events or otherwise. You are advised, however, to consult any future disclosure we make on related subjects in future reports to the
Securities and Exchange Commission (SEC).



|Item 3. | Quantitative and Qualitative Disclosures about Market Risk
|------- | ----------------------------------------------------------

We are
exposed to market risk primarily from changes in interest rates and foreign currency exchange rates. In December 2007, we initiated a foreign currency risk management program involving the uses of financial derivatives and, in August 2008, we
initiated a debt risk management program involving interest rate swaps. We do not hold or issue derivative financial instruments for trading purposes. At March 31, 2009, we were a party to hedging transactions including the use of derivative
financial instruments, as discussed below.

Foreign exchange risk

The Company has a substantial operation in India for the development and deployment of technology solutions as well as for client and business support activities. In December 2007, the Company initiated a foreign
currency risk management program involving the use of foreign currency derivatives related to exposures in fluctuations in the Indian rupee and expects to hedge up to 75% of the exposure. As of March 31, 2009, the Company was a party to foreign
currency derivative instruments related to exposures to the Indian rupee for approximately 55% of forecasted transactions of approximately $193.5 million. A 10% change in the exchange rate on the related exposure would result in an increase or
decrease of related expenses of approximately $19.3 million. Consistent with the use of the derivatives to offset the effect of exchange rate fluctuations, such increases or decreases in expenses would be offset by corresponding gains or losses,
respectively, of approximately $10.8 million on settlement of the derivative instruments.

Interest rate risk

We are exposed to interest rate risk primarily through our portfolio of cash and cash equivalents, short-term and long-term investments and variable interest rate debt.

On August 8, 2008, the Company entered into a long term loan agreement that provides for a senior unsecured term loan in the amount of $270 million
(the Term Loan). The Term Loan initially bears interest at a margin of 150 basis points over LIBOR which will change depending on the Companys leverage ratio. The Term Loan matures on August 8, 2013 without amortization. The
Company is exposed to interest rate risk from this long term variable rate debt. The Company entered into interest rate swaps to partially convert this variable rate exposure into fixed rate. The Company swapped $170 million of the Term Loan for the
first three years and $85 million of the Term Loan for the fourth year. In March 2009, the Company entered into an interest rate swap to convert the remaining $100,000 variable rate exposure into a fixed rate through maturity. Only the variable
LIBOR component of the Term Loan debt was swapped to fixed rate. A one percentage point change in LIBOR would increase or decrease our interest expense related to the Term Loan, by approximately $2.7 million over a full year. Consistent with the use
of the derivatives to offset the effect of interest rate fluctuations, such increases or decreases in interest rate expenses would be offset by corresponding gains or losses, respectively of approximately $2.7 million on settlement of the derivative
instruments.



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For further information regarding our market risk, refer to our Annual Report on Form 10-K for the year ended
September 30, 2008.



|Item 4. | Controls and Procedures
|------- | -----------------------

Evaluation of Disclosure Controls and
Procedures.

Under the supervision and with the participation of our senior management, including our chief executive officer and chief financial
officer, we conducted an evaluation of the effectiveness of the design and operation of our disclosure controls and procedures, as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the Exchange
Act), as of the end of the period covered by this quarterly report (the Evaluation Date). Based on this evaluation, our chief executive officer and chief financial officer concluded as of the Evaluation Date that our disclosure
controls and procedures were effective such that the information relating to the Company, including consolidated subsidiaries, required to be disclosed in our SEC reports (i) is recorded, processed, summarized and reported within the time
periods specified in SEC rules and forms, and (ii) is accumulated and communicated to the Companys management, including our chief executive officer and chief financial officer, as appropriate to allow timely decisions regarding required
disclosure.

Changes in Internal Control over Financial Reporting.

There has been no significant change in our internal control over financial reporting that occurred during the three months ended March 31, 2009 that has materially affected, or is reasonably likely to materially
affect, our internal control over financial reporting.

PART II. OTHER INFORMATION



|ITEM1. | Legal Proceedings
|------ | -----------------

The Company is involved in disputes arising in
the ordinary course of its business relating to outsourcing or consulting agreements, professional liability claims, vendors or service providers or employment claims. The Company is also routinely audited and subject to inquiries by governmental
and regulatory agencies. The Company evaluates estimated losses under SFAS 5, Accounting for Contingencies. Management considers such factors as the probability of an unfavorable outcome and the ability to make a reasonable estimate of the
amount of loss and records a provision with respect to a claim, suit, investigation or proceeding when it is probable that a liability has been incurred and the amount of the loss can reasonably be estimated. If the reasonable estimate of a probable
loss is a range, and no amount within the range is a better estimate than another, the minimum amount in the range is accrued. If a loss is not probable or a probable loss cannot be reasonably estimated, no liability is recorded. Insurance and other
recoveries of book losses are separately evaluated, and recognized only if such recoveries are also probable and reasonably estimable.

During the six
months ended March 31, 2009, the Company recorded net charges of approximately $5.1 million related to ongoing disputes and settlements.

The Company
is involved in a dispute with Philips Electronics UK Limited (Philips) regarding a claim that the Company failed to properly value certain benefits in connection with actuarial services provided from 1995 to 2000. On August 1, 2008, Philips and
Philips Pension Trustees Limited filed suit in the High Court of Justice, Chancery Division, in London, England against Hewitt Associates Limited, a subsidiary of the Company, Bacon & Woodrow, a predecessor of Hewitt Associates Limited, and
Roger Parkin, a former employee of the Company. The suit claims damages of up to £103 million ($147 million at March 31, 2009). The Company believes that it has valid defenses to Philips assertions and intends to defend
vigorously any claim. Certain of the Companys professional liability insurers have denied $20 million of insurance coverage relating to this matter. The Company disputes the position taken by the insurance carriers that have denied coverage
and fully intends to enforce its rights under the policies at issue, and believes recovery is probable. The Company has provided $9 million ($4 million during the current period) related to the Philips claim, including a reserve for the
Companys retained insurance risk, and denied insurance coverages, net of expected insurance recoveries, of which $3 million has been incurred to date in litigation expense.



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The Company does not believe that any unresolved dispute will have a material adverse effect on its financial condition
or results of operation. However, litigation in general and the outcome of any matter, in particular, cannot be predicted with certainty. An unfavorable resolution of one or more pending matters could have a material adverse impact on the
Companys results of operations for one or more reporting periods.

In the normal course of business, the Company also enters into contracts in which
it makes representations, warranties, guarantees and indemnities that relate to the performance of the Companys services and products. The Company does not expect any material losses related to such representations, warranties, guarantees and
indemnities.



|Item 2. | Unregistered Sales of Equity Securities and Use of Proceeds
|------- | -----------------------------------------------------------

(c)
Issuer Purchases of Equity Securities

The following table provides information about Hewitts share repurchase activity for the three months ended
March 31, 2009:



|                         |  |                               |  |                                |       |                                                                                   |         |                                                                                          |   |            
|------------------------ |  | ----------------------------- |  | ------------------------------ | ----- | --------------------------------------------------------------------------------- | ------- | ---------------------------------------------------------------------------------------- | - | -----------
|Period                   |  | TotalNumber ofSharesPurchased |  | Average PricePaid per Share(1) |       | Total Number of SharesPurchased as Part ofPublicly Announced Plansor Programs (2) |         | Approximate Dollar Valueof Shares that May Yet BePurchased Under the Plans orPrograms(2)
|January 1  31, 2009(1)  |  |                               |  |                                |       |                                                                                   |         |                                                                                          |   |            
|Class A                  |  | 176,277                       |  | $                              | 27.12 |                                                                                   | 172,672 |                                                                                          | $ | 284,435,655
|February 1  28, 2009(1) |  |                               |  |                                |       |                                                                                   |         |                                                                                          |   |            
|Class A                  |  | 14,500                        |  | $                              | 27.95 |                                                                                   | 14,500  |                                                                                          | $ | 284,030,331
|March 1  31, 2009(1)    |  |                               |  |                                |       |                                                                                   |         |                                                                                          |   |            
|Class A                  |  | 195,768                       |  | $                              | 26.83 |                                                                                   | 195,768 |                                                                                          | $ | 278,777,980
|                         |  |                               |  |                                |       |                                                                                   |         |                                                                                          |   |            
|Total Shares Purchased:  |  |                               |  |                                |       |                                                                                   |         |                                                                                          |   |            
|Class A                  |  | 386,545                       |  | $                              | 27.01 |                                                                                   | 382,940 |                                                                                          | $ | 278,777,980
|                         |  |                               |  |                                |       |                                                                                   |         |                                                                                          |   |            



|(1) | The shares purchased relate to the Companys share repurchase program and also shares employees have elected to have withheld to cover their minimum withholding requirements
for personal taxes related to the vesting of restricted stock or restricted stock units. The average price paid per share for January 1, 2009 through March 31, 2009 represents a weighted average of the closing stock prices on the dates the
shares were repurchased or withheld.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | During the first quarter of fiscal 2009, the Board of Directors authorized the Company to repurchase up to $300 million of its outstanding common shares through November 12,
2010.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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|Item 4. | Submission of Matters to a Vote of Security Holders
|------- | ---------------------------------------------------

The
Companys Annual Meeting of the Stockholders was held on February 4, 2009. There were present at the meeting, either in person or by proxy, holders of 88,930,652 shares of common stock. The following persons were elected to the
Companys Board of Directors as Class I directors to hold office until the expiration of their terms in 2012. The votes cast for each Director were as follows:



|                   |  |            |  |          
|------------------ |  | ---------- |  | ---------
|Nominee            |  | For        |  | Withheld 
|William J. Conaty  |  | 88,637,480 |  | 293,172  
|Michele M. Hunt(1) |  | 88,622,162 |  | 308,490  
|Cary D. McMillan   |  | 86,983,416 |  | 1,947,236



|(1) | Effective February 17, 2009, Ms. Hunt resigned from the Companys Board of Directors.
|--- | -------------------------------------------------------------------------------------

In addition to the Directors listed above, Directors who are continuing in their term of office are: Russell P. Fradin, Cheryl A. Francis, Michael E. Greenlees, Alex J. Mandl, Thomas J. Neff, and Steven P. Stanbrook.

The results of the other matters voted upon at the Annual Meeting were as follows:



| |  |  | Ratification of the appointment of Ernst & Young LLP to serve as the Companys independent auditors for the fiscal year ending on September 30,
2009. For  87,485,717, Against  1,390,614, Abstain  54,321.
| | - |  | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



|Item 6. | Exhibits
|------- | --------



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

ITEMS1A, 3, and 5 are not applicable and have been omitted.



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SIGNATURES

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



|                  |  |                         |  |                                             
|----------------- |  | ----------------------- |  | --------------------------------------------
|                  |  | HEWITT ASSOCIATES, INC.
|                  |  | (Registrant)           
|                  |  |                        
|Date: May 5, 2009 |  | By:                     |  | /s/ John J. Park                            
|                  |  |                         |  | John J. Park                                
|                  |  |                         |  | Chief Financial Officer                     
|                  |  |                         |  | (principal financial and accounting officer)



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