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SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549



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FORM 10-K



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



For the fiscal year ended September 30, 2004



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



Commission File Number 001-31351



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HEWITT ASSOCIATES, INC.

(Exact name of registrant as specified in its charter)



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



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

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



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Securities registered pursuant to Section 12(b) of the Act:



|                                       |  |                                          
|-------------------------------------- |  | -----------------------------------------
|Title of each Class                    |  | Name of each exchange on which registered
|Class A Common Stock - $0.01 par value |  | New York Stock Exchange                  



Securities
registered pursuant to Section 12(g) of the Act: None



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



Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation
S-K is not contained herein, and will not be contained, to the best of registrants knowledge, in a definitive proxy statement or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form
10-K ̈



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



The aggregate market value of the common stock of Hewitt Associates, Inc. outstanding shares estimated to be held by non-affiliates was
$3,026,735,068 as of October 31, 2004, based on an October 29, 2004 closing price of $28.03. While it is difficult to determine the number of shares owned by affiliates (within the meaning of the term under the applicable regulations of the
Securities and Exchange Commission), the registrant believes this estimate is reasonable.



|                                       |  |                                   
|-------------------------------------- |  | ----------------------------------
|Class                                  |  | Outstanding as of October 31, 2004
|Class A Common Stock - $0.01 par value |  | 54,796,237                        
|Class B Common Stock - $0.01 par value |  | 61,481,579                        
|Class C Common Stock - $0.01 par value |  | 4,384,170                         
|                                       |  |                                   
|                                       |  | 120,661,986                       



DOCUMENTS
INCORPORATED BY REFERENCE



Certain specified portions of the
registrants Proxy Statement for the Annual Meeting of Stockholders (the Proxy Statement) are incorporated by reference in response to Part III, Items 10-14, of this Form 10-K.



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HEWITT ASSOCIATES, INC.



FORM 10-K

For The Fiscal Year Ended

September 30, 2004



INDEX



|         |  |                                                                                                              |  |   
|-------- |  | ------------------------------------------------------------------------------------------------------------ |  | --
|Item     |  | Page                                                                                                        
|PART I   |  |                                                                                                             
|         |  |                                                                                                             
|1.       |  | Business                                                                                                     |  | 3 
|2.       |  | Properties                                                                                                   |  | 15
|3.       |  | Legal Proceedings                                                                                            |  | 15
|4.       |  | Submission of Matters to a Vote of Security Holders                                                          |  | 16
|         | 
|PART II  |  |                                                                                                             
|         |  |                                                                                                             
|5.       |  | Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities |  | 16
|6.       |  | Selected Financial Data                                                                                      |  | 17
|7.       |  | Managements Discussion and Analysis of Financial Condition and Results of Operations                        |  | 18
|7A.      |  | Quantitative and Qualitative Disclosures about Market Risk.                                                  |  | 39
|8.       |  | Financial Statements and Supplementary Data                                                                  |  | 40
|9.       |  | Changes in and Disagreements with Accountants on Accounting and Financial Disclosure                         |  | 40
|9A.      |  | Controls and Procedures                                                                                      |  | 40
|9B.      |  | Other Information                                                                                            |  | 40
|         | 
|PART III |  |                                                                                                             
|         |  |                                                                                                             
|10.      |  | Directors and Executive Officers of the Registrant                                                           |  | 40
|11.      |  | Executive Compensation                                                                                       |  | 41
|12.      |  | Security Ownership of Certain Beneficial Owners and Management                                               |  | 41
|13.      |  | Certain Relationships and Related Transactions                                                               |  | 41
|14.      |  | Principal Accountant Fees and Services                                                                       |  | 41
|         | 
|PART IV  |  |                                                                                                             
|         |  |                                                                                                             
|15.      |  | Exhibits and Financial Statement Schedules                                                                   |  | 41
|         |  | Signatures                                                                                                   |  | 42
|         |  | Index to Exhibits                                                                                            |  | 79



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PART I



Item 1. Business



Overview



Hewitt is a leading global provider of human resources outsourcing and consulting services.
Our mission is to excel, around the world, at helping our clients and their people succeed together. In fiscal 2004, which marked our 43rd consecutive year of revenue growth, we provided services to more than 2,650 clients. We believe that we are
well-positioned to continue our growth in a business environment characterized by a growing recognition of the critical importance of human resources, increasingly complex human resources challenges and rapid technological change.



Since our founding in 1940, we have continuously extended and expanded our human resources
service offerings in response to our clients needs. Early in our history, we specialized in providing actuarial services for sponsors of retirement plans and executive compensation consulting. These remain core competencies of the firm today.
Benefits legislation in the 1970s and the proliferation of flexible benefits and 401(k) programs in the 1980s substantially increased companies needs for advisory and administrative services related to health and welfare benefits,
retirement benefits and compensation programs. In 1991, we introduced the Total Benefit Administration system, which we believe is the first technology platform for outsourcing the administration of the three major benefit service areas using a single, integrated system and database.
Following significant investments in technology, infrastructure, and people, and with over thirteen years of experience, outsourcing is now our largest business segment.



Of our $2.2 billion of net revenues in 2004, 65% was generated in our outsourcing business and 35% was generated in our consulting business.
Our outsourcing business is comprised of benefits, payroll and broader human resource administrative services, and beginning in fiscal 2005, will include a wide range of human resource administrative services from the newly acquired Exult business
(see Recent Developments below). Our consulting business is comprised of three primary service areas, including health management, retirement and financial management, and talent and organization consulting.



To date, we have provided our outsourcing services primarily to companies with complex human
resources programs and over 10,000 employees. As of September 30, 2004, we were providing benefit outsourcing services to approximately 280 clients (typically through three- to five-year contracts) representing a total of approximately 435 benefit
services. We define a benefit outsourcing client as a company that has outsourced to us the administration of one or more of the three core benefit services. We define a benefit service as any one of the three benefit administration services that we
provide for a client. As a result, for clients who offer health and welfare, defined contribution and defined benefit programs, we have the opportunity to provide three benefit services.



We are focused on developing deep client relationships and establishing ourselves as the outsourcing provider of choice across all of our
outsourcing services. We have grown our outsourcing revenues by both expanding existing client relationships and adding new clients, both organically and through acquisition of competitors. We believe that we will continue to deliver significant
growth in our outsourcing business by expanding relationships with existing clients, increasing the penetration of our target outsourcing market, extending our service offerings, addressing the complex and changing needs for health benefit
management services, providing outsourcing services to mid-sized companies, establishing new business alliances, and growing our business outside the United States.



Through our consulting business, we provide a wide array of consulting and actuarial services covering the design, implementation,
communication and operation of health and welfare, compensation and retirement plans, and broader human resources programs and processes. Our consulting clients include a diverse base of companies, many of which have been clients for a long time. We
have grown our consulting revenues by both expanding existing client relationships and adding new clients. Looking back over the last five years, of our 100 largest consulting clients in 1999 (ranked by revenues), 77 are consulting clients today and
have been in each of the last five years.



We plan to continue to grow our
consulting business by extending services into our existing client base, targeting companies we currently do not serve, continuing to address the complex and changing needs for health and retirement benefits and talent management services and
growing our business outside the United States.



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Recent Developments



Exult Merger



Exult has been a leading provider of HR business process outsourcing. On June 15, 2004, we entered into an Agreement and Plan of Merger with Exult, Inc. and Eagle Merger Corp., a newly formed wholly owned subsidiary
of Hewitt and on October 1, 2004, after obtaining regulatory and stockholder approvals, the merger was completed. Eagle Merger Corp. was merged with and into Exult, and Exult became the surviving corporation and a wholly owned subsidiary of Hewitt.
Under the Agreement, each share of Exult common stock outstanding immediately prior to the effective time of the merger was converted into 0.2 shares of Hewitt Class A common stock. As such, the Exult stockholders received 22,159,921 shares of
Hewitt Class A stock in exchange for the 110,799,662 shares of outstanding Exult common stock. The purchase price is estimated to be approximately $776 million, including assumed debt and acquisition related costs. On October 29, 2004, Exult was
merged into Hewitt Associates, Inc. (See Note 6 to the consolidated and combined financials for additional information).



Shelf Registration Statement



On August 27, 2004, we filed an Amended Registration Statement on Form S-3/A with the Securities and Exchange Commission to facilitate possible future underwritten
secondary offerings, block trades and other sales by the former owners and the former partners of Bacon & Woodrow. The registration statement became effective on August 31, 2004. Through September 30, 2004, there were no sales of Hewitt stock
pursuant to this registration statement.



Release of Transfer Restrictions



Waiver of the transfer restrictions contained in our stockholders
agreement no longer requires the approval of our Board of Directors. FORE Holdings advised the Company that it will release the transfer restrictions on 2 percent of the original number of aggregate Class B and Class C shares each month from October
through December 2004 (approximately 1.6 million shares per month). Restrictions on 2 percent of the 0.9 million Class A shares held by certain Exult senior executives after the closing of the merger will also be released each month from October
through December 2004 (approximately 20,000 shares per month). The Company is unable to estimate how many of the related shares will be sold. FORE Holdings stated that liquidity opportunities after December 2004 could include a continuation of the
release of transfer restrictions at the same or a different rate, a managed secondary offering, negotiated sales to institutions or a combination of these scenarios. As previously disclosed, sales restrictions on remaining Class B and Class C shares
and shares held by certain senior Exult executives are expected to lapse on June 27, 2005.



Stock Repurchase Program



On June 14,
2004, our Board of Directors authorized the Company to repurchase up to an aggregate amount of $150 million of Hewitts Class A, Class B and Class C common stock, depending on market conditions and other customary factors, in light of the
Companys cash and short-term investments positions and expected future cash flows. No repurchases were made through September 30, 2004.



Rule 144 Sales



In addition, during the year, an aggregate of 1,857,325 shares of stock have been converted from Class B and Class C common stock to Class A common stock and sold under Rule 144 by the former owners and the former
partners of Bacon & Woodrow pursuant to a Rule 144 sale program previously approved by our Board of Directors.



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Market Overview



The global business environment is becoming increasingly complex, competitive, and technologically focused. The continued shift from a manufacturing-based to a service-
and knowledge-based economy places a greater premium on the people that a company attracts, motivates, and retains. The competition for this talent is complicated by demographic trends that show increasingly that the most experienced of the
workforce is nearing and entering retirement.



At the same time that companies
face tougher competition for essential talent and experience, they are also facing the pressures of rising health care and retirement costs, technology upgrades, and employee expectations for increased choice and enhanced services. They also face
pressure to control or lower their operational costs, avoid capital expenditures, increase quality, and raise productivity as well.



We believe that companies will increasingly seek help addressing these needs from outside providers of human resources services.



Business Segments



Our two principal business segments are outsourcing and consulting. See Note 21 to the consolidated and combined financial statements for
additional information on Segment and Geographic Data:



| | OutsourcingWe apply our human resources expertise and employ our integrated technology solutions to administer our clients human resources programs. Our benefits
outsourcing services include health and welfare (such as medical plans), defined contribution (such as 401(k) plans) and defined benefit (such as pension plans). Our payroll services include installed payroll software and fully outsourced
processing. Our workforce management outsourcing services include workforce administration, rewards management, recruiting and staffing, performance management, learning and development, and talent management. Beginning in fiscal year 2005, our
benefits administration, payroll, workforce management and the newly acquired Exult business provide us with a full range of human resources services to offer our clients. Exults services include recruiting and staffing, learning and
development, global mobility, time and attendance and accounts payable, procurement expertise and vendor management capabilities.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



While we report revenues and direct expenses based on these two segments, we combine our expertise in human resources outsourcing and consulting to create complete human resources solutions and a full continuum of human resources services.



We believe that our leadership in outsourcing and consulting, and our ability
to provide integrated solutions across and within both businesses are important competitive advantages. With our full range of services, we are able to leverage the data and knowledge we gain through outsourcing to provide more comprehensive and
market-based solutions in our consulting business. Likewise, we utilize the expertise developed through our consulting business to meet the specific objectives of our outsourcing clients through high-value, cost-effective solutions.



Outsourcing



Outsourcing represented 65% of our net revenues in fiscal 2004. We deliver outsourcing services primarily to organizations with more than
10,000 employees which have complex human resources and benefit programs. During fiscal 2004, 118 of our outsourcing clients were Fortune 500companies. Our outsourcing clients typically sign three- to five-year contracts and most of our
clients have renewed their contracts with us upon expiration of the initial term.



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Through an integrated suite of technologies that span infrastructure, data-warehousing, human resources applications,
security, service centers, portals and content management, we provide automated solutions to our clients human resources and benefits-related processes that are flexible enough to adapt to a broad range of program complexity and to accommodate
the needs of clients ranging in size from less than 1,000 to well over 500,000 employees. Our outsourcing services are designed to help clients eliminate inefficiencies in human resources and benefits delivery to employees, continue to meet business
objectives in a changing environment and meet compliance obligations of their human resources and benefits programs. We relieve human resources managers of the resource-intensive day-to-day processes required in the administration of human resources
and benefits programs, including recordkeeping, data management, systems integration, and transaction and decision support. We follow a comprehensive process to develop an understanding of our clients needs, learn their systems and culture and
jointly define their objectives. Our comprehensive approach provides a secure solution to manage employee data, record and manage transactions directed by employees, managers, and human resources professionals and administer human resources,
benefits, and payroll processes. In addition, we transmit and transfer data between our clients and both their employees and outside parties (such as health plans, trustees and investment managers). We also provide employers with web-based tools
that enable them to report on and analyze the effectiveness and the return on investment in their benefits, compensation, and human resources programs and facilitate project management with us.



Our outsourcing services enable our clients to satisfy their employees and
managers needs for information, decision-making tools and support, and ability to take action related to benefits, payroll, and human resources. We offer our clients employees three ways to communicate with us and manage their benefits
and human resources programs: Internet, automated voice response system and call centers. This multiple access approach encourages employees self-management of their benefits, which in turn helps our clients control and reduce their human
resources and benefits costs. Our web-based tools, Your Benefits Resources and HR WorkWays, are fully integrated with the Total Benefit Administration and workforce management platforms and provide employees, managers, and human resource professionals with personalized content and fast, accurate, and easy-to-use decision support tools
that allow real-time management of their human resources and benefits decisions and transactions. Your Benefits Resources also provides employees with seamless integrated interfaces to outside providers of services such as investment advice and health care provider
directories. Automated voice response provides participants certain transaction capabilities over the phone. These self-management solutions can be further enhanced through AccessDirect, a personalized directory service that enables employees to connect to their human
resources and benefits providers and access services. For employees, managers, and human resources professionals who need more assistance with human resources, payroll or benefits issues, we staff our call centers with employees who have received
extensive training in issues specific to the clients programs.



The
largest component of our Outsourcing segment consists of benefits outsourcing services, which includes three principal categories of employee benefit programs:



| | Health and Welfare;
|- | -------------------



| | Defined Contribution; and
|- | -------------------------



| | Defined Benefit.
|- | ----------------



Building on our experience in benefits outsourcing, we have developed solutions for supporting the additional human resource administrative needs of our clients. Our service offerings include a comprehensive range of
HR programs and solutions, including payroll, workforce administration, rewards management, recruiting and staffing, performance management, learning and development, and talent management. With the merger of Exult on October 1, 2004, we expanded
the organizations global presence and brought together additional service capabilities, including expanded recruiting and staffing, learning and development, global mobility, time and attendance and accounts payable, expense and vendor
management capabilities. These capabilities, combined with Hewitts full suite of human resources consulting services, allow Hewitt to provide flexible, end-to-end solutions, from strategy and design to administration and outsourcing. We also
believe that our infrastructure, including underlying software platforms, strong brand name and human resources market leadership, are additional competitive advantages which enable us to provide strong human resource management solutions.



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Health and Welfare.Our health and welfare benefits outsourcing services are a natural extension of our health
management consulting capabilities. Administering health and welfare benefit programs is an important and complex task for employers who must manage both the rising cost of providing health insurance and employees demands for increased choice
of health and welfare benefit options. Every year, each company has a period of time (typically three to four weeks) during which employees are required to make decisions regarding their health and welfare options and enroll in programs for the
following year. Each employer must communicate its benefit offerings by providing employees with information explaining the available options and answering employees questions regarding the various alternatives. Once employees have submitted
their choices, the employer must then accurately communicate these choices to provider organizations. For companies managing benefits administration internally, staffing a human resources department with adequate support to effectively and
efficiently handle this annual surge of activity is extremely challenging. Furthermore, ongoing health and welfare administration requires managing payroll deduction and status data that determine each participants health plan eligibility and
transmitting eligibility data to health plans and providers.



Our
technology-based delivery model offers employers a cost-effective and efficient solution to their health and welfare benefits administration needs. We are able to manage the annual enrollment process in a seamless manner for the employer and have
the ability to clearly communicate to employees their available choices. We also are able to deliver significant value to our clients outside of the annual enrollment process and in the context of ongoing benefits administration. For example,
Hewitt Associates Connections, our
automated data management and premium payment process, connects us with more than 280 insurance companies and other health plan providers in the United States, Canada and Puerto Rico, facilitating data transfer, resolving quality issues, validating
participant eligibility and paying premiums in order to eliminate overpayment to health plans. Additionally, we offer automatic payment of employees portion of program costs, providing significant efficiencies to the employer and helping to
ensure that contributions to health plans for inactive employees and retirees are appropriately credited. Further, we document and report issues and statistics to assist plan sponsors in driving better plan performance.



Our services are available to employees 24 hours a day, seven days a week. Your Benefits
Resources enables employees to enroll in and
manage their health and welfare benefits via the Internet. In addition to using Your Benefits Resources to obtain information about the various options available and model their health and welfare benefit costs under various assumptions, employees can also use our automated voice response
system or our call centers. Additionally, ProviderDirect, another web-based service, allows employees to identify in-network medical providers by criteria such as specialty, location and gender. Our Participant Advocacyservice
provides assistance directly to employees regarding the resolution of health plan eligibility, access and claim issues. In addition, in January 2004, we began providing Health Care Spending Accountadministration services through the Internet
that provide employees with a paperless way to manage their health care spending accounts and file claims for reimbursements.



Based on our knowledge of the marketplace and the number of employees to whom we provide services, we believe Hewitt is the largest provider of outsourced health and
welfare administrative services. As of September 30, 2004, we were providing health and welfare outsourcing services to 156 plan sponsors. We believe our experience and expertise in managing complex health and welfare plan administration issues will
be a significant factor in the continued growth of this business, especially as plan sponsors continue to focus on managing the cost of multi-option health and welfare programs.



Defined Contribution.Most companies outsource the administration of their defined contribution plans. Defined contribution
administration requires management of significant volumes of participant, payroll and investment fund data and transactions, and daily transaction data transmissions between companies and their defined contribution plan trustees and asset managers,
as well as daily posting of investment results to employees individual defined contribution accounts.



Unlike many of our competitors who provide defined contribution outsourcing services as a means to accumulate plan assets in their proprietary investment funds, we do not manage investments. As a result, we are able
to maintain an objective, independent position regarding our clients choices of funds to include in their plans. Our focus is on providing reliable, high quality and comprehensive services to both the plan sponsor and to the employee.



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Through our Total Benefit Administration system, we maintain and manage defined contribution data for clients, while accommodating clients choices of
trustees and investment funds. This allows our clients to provide defined contribution programs that their employees value, transfer the administrative burden for these programs and control costs. In addition, we work with researchers at leading
academic institutions to analyze the considerable amounts of data we accumulate to identify trends in participant investment behavior. This additional intelligence allows us to help our outsourcing clients refine their strategy for meeting
employees investment needs.



We provide web-based access 24 hours a day,
seven days a week through our Your Benefits Resources site for employees to make various elections and changes to their defined contribution accounts. Employees can also use our automated voice response system or our call centers to ask questions and make various
elections and changes. This is appealing to employees who increasingly desire the ability to actively manage their investments. Through integrated Your Benefits Resources capabilities, we also provide employees with access to investment advice from third party vendors and self-directed
brokerage account options through our subsidiary, Hewitt Financial Services, and its alliance with Harrisdirect,a leading provider of on-line brokerage services.



Based on our knowledge of the marketplace and number of employees to whom we provide services, we believe we are the largest provider of
outsourced defined contribution administration services that is not also an asset manager. As of September 30, 2004, we were providing defined contribution outsourcing services to 152 plan sponsors. While the domestic market for defined contribution
outsourcing is relatively well-developed, we believe the international markets offer us opportunities for expansion as employers in many countries outside the United States are beginning to adopt defined contribution plans. We believe our global
reach and our strategy to increase our international presence will provide an opportunity to grow this service offering. We believe industry consolidation will provide other opportunities for expansion in this area.



Defined Benefit.Many mid-sized and large employers sponsor defined benefit (pension)
plans. Pension plans are subject to numerous laws and regulations and the administration of them has historically been extremely complex and paper-intensive, resulting in challenges for employers. Because inaccurate or improper plan administration
can have significant adverse consequences, many employers seek third-party providers to administer their plans.



Our defined benefit outsourcing services were a natural extension of the retirement and financial management consulting services that we have provided since our
inception. Through our Total Benefit Administration system, we have re-engineered, streamlined and shortened the traditional processing of an employees retirement. Our approach relies on a high degree of automation for both calculations and execution of
transactions for each participant. Total Benefit Administration includes a database that captures all historical data for current and past employees, enabling employers to accurately apply plan provisions to appropriate participant populations, and often times, for multiple plans.
Additionally, for employers who are implementing plan changes, Total Benefit Administration offers an Internet channel that provides employers with decision-making support.



Through Your Benefits Resources, we provide employees convenient and easy-to-use web based tools to model their benefits based on various retirement dates, information regarding their
retirement options, and the ability to initiate and process their retirement on-line. Employees can also use our automated voice response system to model their benefits. Through our call centers, we provide access to pension counselors who are
knowledgeable about employees pension programs and options and who can explain the often complex process of how their pension plans work.



Based on our knowledge of the marketplace and the number of employees to whom we provide services, we believe we are the largest provider of outsourced defined benefit
administration services. Further, we believe that only a small percentage of organizations have outsourced their defined benefit administration to date. As of September 30, 2004, we were providing defined benefit outsourcing services to 127 plan
sponsors. We believe there are growth opportunities for us as we continue to leverage our technology, expertise and experience to bring our defined benefit outsourcing services to companies which have not yet outsourced their defined benefit plans.



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Payroll.We provide payroll services to our clients through a range of options, including in-house, licensed
solutions, payroll processing or fully outsourced solutions. We believe that the demand for payroll services among large companies is still largely untapped, and we expect to provide value to clients by applying the same human resources experience,
continuous systems enhancement and process improvement to the payroll environment that we have applied to our other outsourcing services. Our payroll services include, in addition to payroll processing, tax filing services, garnishment services,
banking services, regulatory compliance assistance and year-end tax and other payroll reporting. We provide these services as a standalone service as well as part of a multi-process HRO engagement.



Workforce Management.We have built on our experience in outsourcing and consulting to
provide our workforce management solutions. These services enable our clients to outsource a wide range of human resources administrative functions, including workforce administration, rewards management, recruiting and staffing, performance
management, learning and development, and talent management. Through our workforce management solutions, we enable companies to streamline their human resources administration and processes in order to enhance effectiveness and reduce costs, and to
employ web-based technologies to automate processes and transactions. By outsourcing their human resources functions to us, companies are able to receive improved services and tools for employees, managers and the human resources function without
having to continually invest capital and resources to keep pace with rapidly developing human resources technologies and processes. This service is provided through a combination of our own capabilities and alliances with other specialized
providers.



Our workforce management offering is an important element of our
outsourcing growth strategy.We now have five workforce management clients (typically through seven- to ten-year contracts) in this new and emerging marketplace. In fiscal year 2003, we successfully launched operations for our first workforce
management client, the U.S. operations of Sony Electronics. For our second workforce management client, a large pharmacy benefits management company, our health and welfare outsourcing services started in early fiscal 2003 and our defined benefit
and workforce management services started in mid fiscal 2003. Services for our third client, a healthcare organization, and our fourth client, a global financial services organization, commenced on a global basis in fiscal 2004. Our fifth client is
CapGemini Energy, a joint venture between Cap Gemini and the Texas-based utility services provider, TXU Energy. We provide our workforce management services to TXUs employees through an agreement we have with Cap Gemini Energy.



Consulting



Consulting represented 35% of our net revenues in fiscal 2004. We offer consulting services to a diverse range of clients. In todays
increasingly service and knowledge-based economy, companies regard the effective management of human capital as critical to the success of their business. Companies recognize that in order to attract, motivate and retain talented employees, they
must provide benefits, compensation and other human resources programs that employees view as valuable as well as the tools to enable employees to make choices and conduct related transactions.



To meet this need, we provide a wide array of consulting and actuarial services covering the
design, implementation and operation of health and welfare, compensation and retirement plans and broader human resources programs and processes. In addition, we use the information and data we collect and analyze through our outsourcing services to
develop consulting approaches that are effective and provide value to our clients.



Our consulting services consist of three principal categories:



| | Health Management;
|- | ------------------



| | Retirement and Financial Management; and
|- | ----------------------------------------



| | Talent and Organization Consulting.
|- | -----------------------------------



In addition to these principal Consulting service lines, we provide tailored communication services to enhance the success of client solutions in all of our service
areas. And, to a lesser degree, our client development group also provides consulting services.



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Health Management.Increasing health care costs present a challenge for many companies at a time when employees
expect broader and more cost-effective health care choices and general economic conditions place demands on employers to reduce spending. We believe we have an opportunity to help employers control these escalating costs and take advantage of the
transformation of health and welfare benefits from a managed care to a consumer-driven system in which employees are provided with cost and quality information tools to more effectively manage their use of the health care system. Our health
management consultants help clients design comprehensive health and welfare strategies, from the initial philosophical approach to specific benefit plan content that supports our clients human resources strategies. We assist our clients in the
selection of health plans that balance cost and value and improve employee satisfaction. We also help clients determine which funding approaches (i.e., insured, self-insured, or risk adjusted insured) and employee contribution strategies will best
meet their objectives.



We help our clients achieve these goals through our
proprietary technology applications and tools that we have developed, including:



| | The Hewitt Health Value Financial Index.A tool for comparing all employers health care benefits and costs against a database of approximately 18 million participants;
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The Hewitt Health Value Performance Index.Detailed quality, financial and administrative performance data on over 2,000 health plans across the United States;
|- | --------------------------------------------------------------------------------------------------------------------------------------------------------------



| | The Hewitt Health Resources eRFP. We believe this is the highest volume Internet purchasing site in the group health insurance industry, supporting over 4,800 HMO
negotiations and renewals annually; and
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Consumer Satisfaction Web Site. Feedback on employees satisfaction with individual health care plans as an additional measure of employer performance.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------



Our health management consulting business provided services to
approximately 425 clients during fiscal year 2004. We believe we continue to be well-positioned to address the growing, complex and changing needs for health benefit management services through our integrated approach, enabling us to provide
high-value, cost-effective solutions to meet the specific objectives of our clients.



Our health management consulting business is closely integrated with our health and welfare benefits outsourcing business to provide a comprehensive solution from strategy and design to delivery and administration of health and welfare
benefits. We are able to extract detailed design, demographic and health plan cost data from our outsourcing clients and aggregate the data to provide unique insights for our consulting clients into the quality, cost efficiency and rate structure of
nearly every local health plan in the United States. Furthermore, due to our health and welfare outsourcing experience, we are able to design programs that not only meet our clients business objectives, but that also can be administered,
communicated and delivered efficiently and cost effectively. In addition, for our consulting clients that are also outsourcing clients, we are able to leverage the data and knowledge we accumulate through outsourcing to create efficiencies, speed
implementation and execution of strategies and enhance our service offering in providing consulting services to them.



Following the announcement of investigations by several states into the practices of insurance companies and insurance brokers, we reviewed our business practices
relating to our health management consulting business, which is reported in our Consulting segment. We have received contingent commissions, on an unsolicited basis, which have been less than 0.1% of our Consulting segment revenues in each of the
last 3 years. We stopped accepting these commissions in May, 2004.



Retirement and Financial Management.Virtually all large companies sponsor retirement plans as part of their overall employee benefit programseither defined benefit plans, defined contribution plans or a combination of these
plans. Many large companies also offer retiree medical and life insurance benefits as part of their overall retirement benefit program. Over the past few decades, the liabilities and assets which underlie these programs have grown considerably, and
the regulatory and accounting standards which govern retirement plans have become increasingly complex. Additional services are often needed with respect to retirement plans in the case of significant corporate events or changes such as workforce
reductions, early retirement programs, mergers or acquisitions. All of this has contributed to a continuing demand for retirement-related consulting.



Our retirement and financial management business, which we refer to as RFM, assists clients in three primary activities: (i) developing overall retirement
program designs that are aligned with the needs of companies and their employees; (ii) providing actuarial analysis and financial strategies to support clients in their management of pension issues; and (iii) consulting on asset allocation,
investment policies and investment manager evaluation.



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There has been significant activity around retirement program redesign, as companies look to simplify plans, better
manage overall program costs and risks, and align their program design with their business objectives. Our RFM consultants work with clients to understand their business and workforce strategies, to define their philosophy with respect to retirement
programs, and to design programs that reinforce the key messages to their workforce, while also helping to ensure that the programs comply with applicable governmental regulations. To assist in the design process, we have developed a variety of
interactive, real-time modeling and analytical tools to help employers understand the effect of program changes on individual employees and to highlight the issues inherent in making an effective transition from one program to another. We measure
the competitive position of our clients retirement programs using our proprietary Benefit Index® tool, which calculates the relative value of a companys benefit program compared to a group of selected companies in the same industry, of similar size or in the same geographic
region. We believe Benefit Index® is the
industry benchmark for measuring the relative value of an organizations retirement program.



When employers sponsor defined benefit plans or retiree welfare plans, they require the services of a qualified actuary. Actuarial relationships tend to be long-standing, ongoing engagements, and actuarial services
represent a significant portion of our RFM business. Actuaries calculate a plans funded status, the annual cash contribution requirements under applicable governmental requirements, the annual expense impact under applicable accounting
standards and other benefit related information for a companys annual financial statements. However, our RFM actuarial consultants also provide strategic consulting that helps companies with annual and long-range budgeting and planning,
including analyzing alternative funding strategies that may help a company maximize tax advantages or minimize other pension costs. In addition, our consultants prepare financial projections of asset and liability trends (a joint effort with our RFM
investment consultants) to help companies determine long term risk management strategies. Our RFM actuarial consultants also assist clients in due diligence investigations and analyses of proposed mergers, asset sales, acquisitions and other
corporate restructurings to help our clients understand the implications of such transactions on the liabilities and funded status of the plan, as well as on the future cash contribution and expense trends.



Our RFM investment consultants work with fiduciaries of both defined contribution and defined
benefit plans to help set investment strategies, determine asset allocations and select asset managers. We also monitor the performance of a large number of asset managers and, since we do not manage assets, we are able to provide clients with
objective and independent analysis of investment policies and procedures.



Our
RFM consulting business is closely aligned with our defined benefit and defined contribution outsourcing business. With our full range of services, we are able to provide comprehensive retirement program solutions for clients, from strategy and
design of retirement plans to actuarial and investment services and administration, communication and implementation of retirement plans. For consulting clients that are also outsourcing clients, we are able to leverage the data and knowledge we
accumulate through outsourcing to assist them in developing plan design features and actuarial services best suited to their specific needs.



Our RFM consulting business provided services to over 1,750 clients during fiscal year 2004. We expect that our RFM services will continue to contribute to our overall
growth. Multinational clients have increasingly adopted a global outlook and often focus on selecting consultants with international capabilities. Over the past several years, we have expanded our global RFM capabilities significantly, through both
internal growth and a series of acquisitions and alliances in Canada, France, Germany, Hong Kong, Ireland, Mexico, The Netherlands, Norway, Sweden, Switzerland and the United Kingdom.



On June 5, 2002, we acquired the benefits consulting business of Bacon & Woodrow, a leading actuarial and benefits consulting firm in
the United Kingdom. We refer you to Note 6 to the consolidated and combined financial statements for additional information on this acquisition. Our increased presence in the United Kingdom, where many of our clients also have significant
operations, has enhanced our ability to offer global design, communication, actuarial and investment consulting services.



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Talent and Organization Consulting.Our talent and organization consulting business is focused on four primary
activities: (i) devising strategies for attracting, developing, motivating, rewarding and retaining the leadership and other talent our clients need to succeed; (ii) providing solutions to the people-related issues arising from organizational change
(such as mergers and acquisitions); (iii) helping create and implement customized reward and performance management programs, including annual incentives, stock options and other performance-based plans; and (iv) reducing costs and enhancing our
clients productivity through more effective human resource functions and processes.



Our services continue to focus on helping our clients address the challenges of finding, managing, engaging and rewarding talented employees and leaders. Meeting these challenges successfully is expected to become
even more important as the competition for talent becomes more intense. We expect competition for qualified people to intensify as the pool for talent decreases but the need for that talent increases. We believe this trend makes our services that
much more valuable and attractive to clients.



Through our numerous talent and
rewards tools, data and services, we help companies align their human resources investments with their business objectives, identifying critical human resources practices based on a given business environment, geography and labor force situation.
For example, our Total Compensation Measurement and Variable Compensation Measurement tools enable clients to analyze and assess compensation effectiveness and to compare their compensation programs with over 628 companies in the U.S. alone, including approximately 72 of the Fortune 100.We also
help clients use focus groups, interviews, surveys and other methods to better understand their workforce, enhance their relationships with their employees and encourage the types of behavior that ensure business success.



Our talent and organization consultants also assist clients with significant human resources
issues arising out of events such as mergers and acquisitions, divestitures, initial public offerings, spin-offs, joint ventures and other restructurings. In each of these organizational changes, people play a critical role in determining the
ultimate success or failure of the transactions. Our Hewitt Transaction Manager, a website supporting project management and providing access to technical expertise needs ranging from due diligence to integration, enables seamless collaboration between our clients, consultants and
external service providers. Since January 2000, we have provided organizational change services in connection with over 600 transactions, giving us important gateways into companies with whom we have not historically had firm-wide consulting
relationships. During this time our model has been successful. Several restructuring engagements have led to broader client relationships and in other areas of the firm, including global actuarial valuation work and benefits and payroll outsourcing.
We expect this number will grow even larger as we target and increase our investment in building new business with large multinationals headquartered outside North America.



Our human resources effectiveness consulting service helps clients reduce human resources operating costs, generate more productivity in the
workforce, and drive more effective people-related decisions. Our consultants employ technologies and tools to analyze the activities and costs of the human resources function in order to improve efficiencies, reduce costs and enhance effectiveness
of the function.



Our talent and organization consulting business provided
services to approximately 790 clients during fiscal year 2004. As companies continue to expand globally and seek assistance in developing and implementing successful organizational change, we anticipate that our services will be in increasing
demand. As demographic projections indicate an increasing shortage of talent globally, we also expect that clients will require assistance in creating effective strategies for attracting and retaining talent and for compensating them in a way that
is aligned and consistent with broader business objectives.



Our talent and
organization consulting business is closely aligned with our workforce management outsourcing services to help clients transform their human resources processes and improve the efficiency and effectiveness of the human resources function. We also
provide communication, training and change management services to support this transformation. We believe we will be able to leverage our deep human resources knowledge and consulting experience in this transformation process to benefit additional
outsourcing clients in the future.



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Client Development



We have an integrated, strategic approach to client development that helps us establish deep, long-term client relationships based on trust
and partnership. Unlike many firms, we have had a dedicated group managing this process for more than 30 years.



We view our clients human capital management challenges as an integrated whole, and offer solutions to those challenges that bring together our best thinking on
health care management, retirement management, talent and organization change, and human resources services delivery. We believe this differentiates us from other providers of either consulting or outsourcing services.



Our client development employees play an important role in helping us understand and assess
our clients human resources challenges in the context of their overall business. They also help to formulate comprehensive solutions that account for and incorporate the complete range of human resources strategy, design, implementation,
communication, administration, and customer services in an integrated fashion across and within our outsourcing and consulting businesses.



Our client development employees are responsible for expanding our client base, developing additional business with existing clients and overall client satisfaction. In
addition, they are responsible for ensuring that our work is delivered to both our and our clients standards and expectations.



The acquisition and management of our client relationships is supplemented and supported by teams of employees from the various disciplines within our business. These
employees help us ensure that we have both the proper coverage and appropriate expertise to demonstrate to clients that we have the capabilities required to address the most complex human resources challenges these organizations face.



We serve a diverse client base and do not experience significant industry concentration among
our clients. Also, no client represented more than 10% of net revenues in fiscal 2004, 2003 or 2002.



Intellectual Property



Our success has
resulted in part from our proprietary methodologies, processes, databases and other intellectual property, such as our Total Benefit Administration system, Benefit Index® and other measurement tools. We recognize the value of intellectual property in the marketplace and vigorously create, harvest and protect our
intellectual property.



To protect our proprietary rights, we rely primarily on
a combination of:



| | copyright, trade secret and trademark laws;
|- | -------------------------------------------



| | confidentiality agreements with employees and third parties; and
|- | ----------------------------------------------------------------



| | protective contractual provisions such as those contained in license and other agreements with consultants, suppliers, strategic partners and clients.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------



We hold no patents and our licenses are ordinary course licenses of software and data. While
we have a number of trademarks, none of our trademarks are material to the operation of our business.



Competition



We operate in a highly
competitive and rapidly changing global market and compete with a variety of organizations. In addition, a client may choose to use its own resources rather than engage an outside firm for human resources solutions.



Outsourcing. The principal competitors in our benefits outsourcing business are
outsourcing divisions of large financial institutions, such as CitiStreet (a partnership between subsidiaries of State Street and Citigroup), Fidelity



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Investments, Mellon Financial (through its subsidiary, Mellon HRSolutions), Merrill Lynch, Putnam Investments, T. Rowe
Price and the Vanguard Group, and other firms that provide benefits outsourcing services such as Towers Perrin. Some of our payroll competitors include Automatic Data Processing, Ceridian and Paychex while our principal workforce management
competitors include some of our benefits outsourcing competitors and companies such as Accenture, Affiliated Computer Services, Electronic Data Systems and IBM.



Consulting.The principal competitors in our consulting business are consulting firms focused on broader human resources, such as Mercer Human Resource
Consulting, Towers Perrin and Watson Wyatt Worldwide. We also face competition from smaller benefits and compensation firms, as well as from public accounting, consulting and insurance firms offering human resources services.



We believe that the principal competitive factors affecting both our outsourcing and
consulting businesses include our ability to integrate services and solutions for clients across service offerings, our perceived ability to add value in a cost-effective manner, our ability to commit resources and successfully complete projects on
a timely and cost-effective basis, our employees technical and industry expertise, and our professional reputation.



Technology Innovation



We believe that our technological capabilities are an essential component of our strategy to grow our benefits outsourcing business and create new service offerings. As of September 30, 2004, we had over 2,000
employees engaged in technology functions including research and development, application development and integration and operations. Technology and telecommunication expenses, excluding related employee compensation, were $197 million in 2004, $193
million in 2003 and $180 million in 2002.



We have a long history of
technological innovation. Our strategy is to develop custom solutions through open industry standards when we believe we can develop a better solution than is available in the market, and to integrate existing best-in-class systems when we believe
these solutions meet our clients needs. We were early adopters of XML-based web services for interaction with our clients, and we develop systems that are adaptable across multiple delivery channels (Internet, automated voice response and call
center). We have relationships with a number of our suppliers that allow us to routinely test and evaluate their products while they are still in their development stages and before they are generally available, keeping us on the leading edge of
technology-based solutions.



In 1991, we introduced the Total Benefit
Administration system, which we believe is
the first technology platform for outsourcing the administration of the three major benefit service areas in an integrated fashion. Examples of recent technology-based service enhancements include:



| | HR WorkWays, a comprehensive human resources portal presenting policies, resources and data personalized by role and by each individuals eligibility and participation in applicable compensation, benefits and other
human resources programs;
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | AccessDirect, a personalized navigation system for the web or telephone that connects employees to benefits providers;
|- | -----------------------------------------------------------------------------------------------------------------------



| | Your Benefits Resources, a web platform which uses dynamic personalization to provide employees with customized content and decision support tools and allows real-time management of health and welfare, defined
contribution and defined benefit decisions and transactions; and
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Hewitt Plan Sponsor Sight, utilizing best-in-class portal, collaboration and data warehousing technologies, to offer an on-line center allowing clients to collaborate and
manage work with us, analyze and report on their benefits programs and interact with a community of their peers.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Your Total Rewards and Your Total Rewards Executive, web platforms that present to employees or executives comprehensive information on the full value of the employment relationship, including base salary and bonuses, stock compensation,
retirement plans, health care coverage, life and accident insurance, training and development opportunities, work/life benefits, and other rewards.
|- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Contracts and Insurance



We have contracts with many of our clients that define our responsibilities and limit our liability. In addition, we maintain professional liability insurance that
covers the services we provide, subject to applicable deductibles and policy limits.



Employees



As of September 30, 2004, we had approximately
17,000 employees serving our clients through 81 offices in 30 countries, excluding joint ventures and minority investments. Of these employees, approximately 10,300 employees were in the Outsourcing segment, approximately 4,100 employees were in the
Consulting segment and approximately 2,600 employees were in information systems, human resources, client development, overall corporate management, finance and legal services, general office support and space management.



Website Access to Company Reports and Other Information



We make available free of charge through our website, www.hewitt.com, our Annual
Report on Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K and any amendments to those reports as soon as reasonably practicable after such material is electronically filed with the Securities and Exchange Commission. Our
internet website and the information contained therein or incorporated therein are not intended to be incorporated into this Annual Report on Form 10-K.



We have adopted a Code of Conduct that applies to all employees as well as our Board of Directors and corporate governance guidelines for our Board of Directors. The Code
of Conduct and corporate governance guidelines, as well as the Charters for the three committees of our Board of Directors, the Audit Committee, the Compensation and Leadership Committee, and the Nominating and Corporate Governance Committee, are
posted on our website www.hewitt.com. Copies of these documents will be provided free of charge upon written request directed to Investor Relations, Hewitt Associates, Inc. 100 Half Day Road, Lincolnshire, IL 60069.



Item 2. Properties



Our principal executive
offices are located in Lincolnshire, Illinois with a mailing address of 100 Half Day Road, Lincolnshire, Illinois 60069. Our Lincolnshire complex comprises 13 buildings on three campuses and approximately 2.4 million square feet. As of September 30,
2004, we had a total of 81 offices in 30 countries and operated 5 additional offices in 5 countries through joint ventures and minority investments. We do not own any significant real property. Substantially all of our office space is leased under
long-term leases. We lease most of our office space, including a portion of our principal executive offices in Lincolnshire, Illinois from FORE Holdings LLC (and/or subsidiaries thereof). We refer you to Note 15, Related Party Transactions, in the
notes to the consolidated and combined financial statements for information on these arrangements. We believe that our existing facilities are adequate for our current needs and that additional space will be available as needed.



Item 3. Legal Proceedings



We are not engaged in
any legal proceeding that we expect to have a material adverse effect on our business, financial condition or results of operations. In the ordinary course of our business, we are routinely audited and subject to inquiries by government and
regulatory agencies.



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



On September 30, 2004, the Company held a Special Meeting of the Stockholders. The purpose of the Special Meeting was to consider and approve the merger agreement and the issuance of shares of Class A common stock in
connection with the merger with Exult, Inc. Present at the meeting, either in person or by proxy, were holders of 91,928,241 common shares. The votes for the merger and issuance of Class A common stock were as follows: For  91,678,158,
Against 239,443, Abstained  10,640.



PART II



Item 5. Market for Registrants Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities.



Common Stock Market Information



Our Class A common stock is traded on the New York Stock Exchange (NYSE) under the symbol HEW. The following table sets forth the range of high and low sales prices for
each quarter for the last two fiscal years.



|                                                       |  |             |       |     |   |      
|------------------------------------------------------ |  | ----------- | ----- | --- | - | -----
|                                                       |  | Fiscal 2004
|                                                       |  | High        |       | Low
|4thQuarter (July 1, 2004 through September 30, 2004)   |  | $           | 28.18 |     | $ | 24.40
|3rdQuarter (April 1, 2004 through June 30, 2004)       |  | $           | 32.85 |     | $ | 27.10
|2ndQuarter (January 1, 2004 through March 31, 2004)    |  | $           | 35.80 |     | $ | 29.52
|1stQuarter (October 1, 2003 through December 31, 2003) |  | $           | 31.00 |     | $ | 23.50
|                                                       | 
|                                                       |  | Fiscal 2003
|                                                       |  | High        |       | Low
|4thQuarter (July 1, 2003 through September 30, 2003)   |  | $           | 26.90 |     | $ | 22.95
|3rdQuarter (April 1, 2003 through June 30, 2003)       |  | $           | 29.95 |     | $ | 20.70
|2ndQuarter (January 1, 2003 through March 31, 2003)    |  | $           | 34.60 |     | $ | 24.80
|1stQuarter (October 1, 2002 through December 31, 2002) |  | $           | 36.36 |     | $ | 26.30



There is no established public trading
market for Hewitts Class B or Class C common stock.



Holders Of Record



As of October 31, 2004, there were 879 stockholders of record of our
Class A common stock, 38 stockholders of record of our Class B common stock, and 51 stockholders of record of our Class C common stock, as furnished by our Stock Transfer Agent and Registrar, EquiServe. Several brokerage firms, banks and other
institutions (nominees) are listed once on the stockholders of record listing. However, in most cases, the nominees holdings represent blocks of our stock held in brokerage accounts for a number of individual stockholders. As such,
our actual number of stockholders is difficult to estimate with precision, but would be higher than the number of registered stockholders of record.



Dividend Policy



We have not paid cash dividends on our common stock. Our board of directors re-evaluates this policy periodically. Any determination to pay cash dividends will be at the discretion of the board of directors and will
be dependent upon our financial condition, results of operations, capital requirements, terms of our financing arrangements and such other factors as the board of directors deems relevant.



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Item 6. Selected Financial Data



The selected
financial data set forth below should be read in conjunction with the section entitled Managements Discussion and Analysis of Financial Condition and Results of Operations and the consolidated and combined financial statements,
notes thereto and other financial information included elsewhere herein.



|                                               |  |                                              |       |         |   |         |  |   |         |   |         |   |       |  |   |      
|---------------------------------------------- |  | -------------------------------------------- | ----- | ------- | - | ------- |  | - | ------- | - | ------- | - | ----- |  | - | -----
|                                               |  | 2004                                         |       | 2003(1) |   | 2002(2) |  |   | 2001(3) |   | 2000(3)
|                                               |  | (amounts in millions, except per share data)
|Fiscal Year ended September 30:                |  |                                              |       |         |   |         |  |   |         |   |         |   |       |  |   |      
|Total revenues                                 |  | $                                            | 2,262 |         | $ | 2,031   |  | $ | 1,750   |   |         | $ | 1,502 |  | $ | 1,306
|Income before taxes and owner distributions(4) |  |                                              |      |         |   |        |  |   |        |   |         |   | 183   |  |   | 182  
|Net income(4)                                  |  |                                              | 123   |         |   | 94      |  |   | 190     |   |         |   |      |  |   |     
|Income (loss) per share(5)                     |  |                                              |       |         |   |         |  |   |         |   |         |   |       |  |   |      
|Basic                                          |  | $                                            | 1.28  |         | $ | 0.99    |  | $ | (0.27   | ) |         | $ |      |  | $ |     
|Diluted                                        |  | $                                            | 1.25  |         | $ | 0.97    |  | $ | (0.27   | ) |         | $ |      |  | $ |     
|                                               |  |                                              |       |         |  
|As of September 30:                            |  |                                              |       |         |   |         |  |   |         |   |         |   |       |  |   |      
|Total assets                                   |  | $                                            | 1,808 |         | $ | 1,604   |  | $ | 1,345   |   |         | $ | 830   |  | $ | 826  
|Long-term obligations                          |  |                                              | 201   |         |   | 219     |  |   | 236     |   |         |   | 172   |  |   | 153  
|Working capital                                |  |                                              | 418   |         |   | 284     |  |   | 200     |   |         |   | 207   |  |   | 135  

---

|(1) | On June 5, 2003, we acquired Cyborg and on June 15, 2003, we acquired substantially all of the assets of NTRC. (See Note 6 to the consolidated and combined financial statements for
additional information on these acquisitions.) As such, their results are included in our results from the respective acquisition dates.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | On June 5, 2002, we acquired the benefits consulting business of Bacon & Woodrow and their results are included in our results from the acquisition date.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Includes the results of Sageo, a business launched by the Company with the intention of creating a stand-alone, Internet-based company that would provide a standardized set of
health and welfare offerings to companies seeking less complex benefits solutions. In the quarter ended September 30, 2001, the decision was made to transition Sageo clients from Sageos website to the Total Benefit Administration web interface. Stand-alone company expenses were
eliminated and Sageo website development spending ceased. At that time, since we had decided to discontinue the use of the Sageo website, we wrote off our remaining investment in the Sageo software (resulting in a $26 million non-recurring charge),
and terminated or redeployed the Sageo employees who worked within the stand-alone Sageo operation.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Prior to our transition to a corporate structure, Hewitt operated as a limited liability company. In such form, owners of the Company were compensated through distributions of
income and Hewitt did not incur firm-level income tax. Accordingly, results prior to May 31, 2002 do not include (i) compensation for services rendered by the owners or (ii) firm-level income tax expense. As a result, income before taxes and owner
distributions is not comparable to net income of a corporation. In connection with our transition to a corporate structure on May 31, 2002, the owners who worked in the business became employees and we began to record their compensation and related
expenses and became subject to corporate income taxes.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Loss per share in fiscal 2002 is calculated based on earnings during the four month period from May 31, 2002, the date on which our transition to a corporate structure was
completed, through September 30, 2002. The loss was generated primarily from several one-time charges incurred in connection with the transition to a corporate structure totaling $48 million and compensation expense related to the initial public
offering restricted stock awards totaling $28 million through September 30, 2002. We refer you to Note 3 of the notes to the consolidated and combined financial statements. Similarly, common stock is weighted from May 31, 2002 and not from the
beginning of the periods presented.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Item 7. Managements Discussion and Analysis of Financial Condition and Results of Operations



The following information should be read in conjunction with our consolidated and combined financial statements and related notes, included elsewhere in this Annual
Report on Form 10-K. In addition to historical information, this discussion and analysis may contain forward-looking statements that involve risks, uncertainties and assumptions, which could cause actual results to differ materially from
managements expectations. Please see additional risks and uncertainties described below and in the Notes Regarding Forward-Looking Statements which appears later in this section.



We use the terms Hewitt, the Company, we,
us, and our to refer to the business of Hewitt Associates, Inc. and its subsidiaries and, with respect to the period prior to May 31, 2002, the date of our transition to a corporate structure, the businesses of Hewitt
Associates LLC, its subsidiaries and its then affiliates, Hewitt Financial Services LLC and Sageo LLC (Hewitt Associates and Affiliates).



We use the term owner in this Annual Report on Form 10-K to refer to the individuals who are members of FORE Holdings LLC, formerly known as Hewitt
Holdings LLC, most of whom are our employees.



Due to integration
efforts related to our acquisition of the benefits consulting business of Bacon & Woodrow, standalone results for that business subsequent to the acquisition date were not available. To quantify the effects of the Bacon & Woodrow acquisition
in our discussion and analysis of results, we have added the prior year historical results of the benefits consulting business of Bacon & Woodrow to our prior period results for comparison with our current year results.



All references to years, unless otherwise noted, refer to our fiscal years, which end on
September 30. For example, a reference to 2004 or fiscal 2004 means the twelve-month period that ended September 30, 2004. All references to percentages contained in Managements Discussion and Analysis of
Financial Condition and Results of Operations refer to calculations based on the amounts in our consolidated and combined financial statements, included elsewhere in this Annual Report on Form 10-K. Prior period amounts have been reclassified
to conform with the current year presentation.



Overview



Hewitt Associates, Inc., a Delaware corporation, and its subsidiaries provide global
human resources outsourcing and consulting services. The Companys outsourcing business is comprised of employee benefit plan, payroll and workforce management administrative services. Hewitts consulting business is comprised of advisory
services in health management, retirement and financial management, talent and organization consulting and other consulting.



In connection with our transition to a corporate structure, which was completed on May 31, 2002, Hewitt Associates, Inc. was formed as a subsidiary of Hewitt Holdings and
Hewitt Holdings transferred all of its ownership interests in Hewitt Associates LLC and Affiliates to Hewitt Associates, Inc. In our limited liability company form, Hewitt Holdings owners were compensated through distributions of income rather
than through salaries, benefits and performance-based bonuses, and we did not incur any corporate income tax. Upon our transition to a corporate structure, (i) Hewitt Holdings owners who worked in the business became our employees and we began
to include their compensation in our compensation and related expenses, (ii) we became subject to corporate income taxes and (iii) we began to report net income and earnings per share.



On June 5, 2002, we acquired the actuarial and benefits consulting business of Bacon & Woodrow in the United Kingdom. The purchase price
totaled $259 million and consisted of 9.4 million shares of Hewitt Associates common stock valued at $219 million, $39 million of assumed net liabilities and approximately $1 million of acquisition-related costs. For additional information on the
Bacon & Woodrow acquisition, we refer you to Note 6 to our consolidated and combined financial statements. The results of operations for Bacon & Woodrow are included in our historical results from the date of the acquisition, June 5, 2002.



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On June 27, 2002, we sold 11,150,000 shares of Class A common stock at $19.00 per share in our initial public offering.
In July 2002, the underwriters exercised their over-allotment option to purchase an additional 1,672,500 shares of our Class A common stock at $19.00 per share. The combined transactions generated $219 million in net cash proceeds after offering
expenses.



For a pro forma presentation of results had these events occurred at
the beginning of the fiscal year 2002, we refer you to our Pro Forma Results of Operations which appear later in this section.



On June 5, 2003, we acquired Cyborg Worldwide, Inc., the parent of Cyborg Systems, Inc. (Cyborg), a global provider of human resources management software and
payroll services. The results of operations for Cyborg are included in the results of the Outsourcing segment from the acquisition date (see Note 6 to the consolidated and combined financial statements).



On June 15, 2003, the Company acquired substantially all of the assets of Northern Trust
Retirement Consulting, Northern Trust Corporations retirement consulting and administration business (NTRC), which provides retirement consulting and actuarial services and defined benefit, defined contribution and retiree health
and welfare administration services. The results of NTRC are included in the results of the Outsourcing and Consulting segments from the acquisition date (see Note 6 to our consolidated and combined financial statements).



On July 1, 2003, Hewitt Holdings distributed the shares of Class B common stock of Hewitt
Associates it held in beneficial ownership on behalf of its owners, with the exception of certain owners resident outside the United States who will continue to hold their shares through Hewitt Holdings. The distribution reduced Hewitt
Holdings majority interest in Hewitt Associates of approximately 71% at June 30, 2003, to a minority interest of approximately 2%. The shares continue to be subject to the same restrictions with respect to transfer and book to market phase-in
as they were when the shares were held by Hewitt Holdings. Also, with respect to voting, all Class B and Class C shares continue to be voted in accordance with the majority vote of those Class B and Class C stockholders participating in a
preliminary vote of such holders. At September 30, 2004, the number of Class B and Class C shares outstanding totaled 66,098,976 or approximately 67% of common stock outstanding.



At the January 29, 2004 Hewitt Associates, Inc. Board Meeting, the make-up of Hewitts Board changed so that individuals who have an
interest in Hewitt Holdings no longer had a majority position on the Board. On April 29, 2004, Hewitt Holdings formally changed its name from Hewitt Holdings LLC to FORE Holdings LLC (FORE Holdings).



Recent Developments



Exult Merger



Exult has been a leading provider of HR business process outsourcing. On June 15, 2004, we entered into an Agreement and Plan of Merger with Exult, Inc. and Eagle Merger
Corp., a newly formed wholly owned subsidiary of Hewitt, and on October 1, 2004, after obtaining regulatory and stockholder approvals, the merger was completed. Eagle Merger Corp. was merged with and into Exult, and Exult became the surviving
corporation and a wholly owned subsidiary of Hewitt. Under the Agreement, each share of Exult common stock outstanding immediately prior to the effective time of the merger was converted into 0.2 shares of Hewitt Class A common stock. As such, the
Exult stockholders received 22,159,921 shares of Hewitt Class A stock in exchange for the 110,799,662 shares of outstanding Exult common stock. The purchase price is estimated to be approximately $776 million, including assumed debt and acquisition
related costs. On October 29, 2004, Exult was merged into Hewitt Associates, Inc. On October 6, 2004, the Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission to allow the holders of $110 million of assumed
2.5% convertible senior notes, due on October 1, 2010, to resell their notes and the Hewitt Class A common stock issuable upon conversion of their notes. (See Note 6 to the consolidated and combined financial statements for additional information).



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Shelf Registration Statement



On August 27, 2004, we filed an Amended Registration Statement on Form S-3/A with the Securities and Exchange Commission to facilitate
possible future underwritten secondary offerings, block trades and other sales by the former owners and the former partners of Bacon & Woodrow. The registration statement became effective on August 31, 2004. Through September 30, 2004, there
were no sales of Hewitt stock pursuant to this registration statement.



Release of Transfer Restrictions



Waiver of the transfer
restrictions contained in our stockholders agreement no longer requires the approval of our Board of Directors. FORE Holdings advised the Company that it will release the transfer restrictions on 2% of the original number of aggregate Class B
and Class C shares each month from October through December 2004 (approximately 1.6 million shares per month). Restrictions on 2 percent of the 0.9 million Class A shares held by certain Exult senior executives after the closing of the merger will
also be released each month from October through December 2004 (approximately 20,000 shares per month). The Company is unable to estimate how many of the related shares will be sold. FORE Holdings stated that liquidity opportunities after December
2004 could include a continuation of the release of transfer restrictions at the same or a different rate, a managed secondary offering, negotiated sales to institutions or a combination of these scenarios. As previously disclosed, sales
restrictions on remaining Class B and Class C shares and shares held by certain senior Exult executives are expected to lapse on June 27, 2005.



Stock Repurchase Program



On June 14, 2004, our Board of Directors authorized the Company to repurchase up to an aggregate amount of $150 million of Hewitts Class A, Class B and Class C
common stock, depending on market conditions and other customary factors, in light of the Companys cash position and expected future cash flows. No repurchases were made through September 30, 2004.



Rule 144 Sales



In addition, during the year, an aggregate of 1,857,325 shares of stock have been converted from Class B and Class C common stock to Class A
common stock and sold under Rule 144 by the former owners and the former partners of Bacon & Woodrow pursuant to a Rule 144 sale program previously approved by our Board of Directors.



Segments



Of our $2.2 billion of consolidated net revenues for fiscal 2004, 65% was generated in our Outsourcing segment and 35% was generated in our Consulting segment.



Outsourcing



Our outsourcing business is comprised of benefits, payroll and broader human resource
administrative services, and beginning in fiscal 2005, will include a wide range of human resource administrative services from the newly acquired Exult business. With the merger of Exult on October 1, 2004, we expanded the organizations
global presence and brought together existing service capabilities in payroll, workforce administration, rewards management, recruiting and staffing, performance management, learning and development, and talent management, with additional
capabilities in recruiting and staffing, learning and development, global mobility, time and attendance, accounts payable, procurement expertise and vendor management.



Since we first began providing outsourcing services in 1991, we have made significant investments in technology, personnel and office space
to build our capabilities and address market opportunity. To maintain our outsourcing leadership position, we remain committed to making significant ongoing investments in technology, infrastructure, and people, in expanding our business and
driving greater efficiencies. With the investments that we have made in the benefits administration business to date, our acquisitions of Exult, Cyborg and NTRC, and our investments in workforce management administration, we expect to be able to
continue to improve our outsourcing capabilities and attract new clients.



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Consulting



Our consulting services consist of three principal categories: retirement and financial management, talent and organization consulting and health management. In addition
to these principal Consulting service lines, we provide tailored communication services to enhance the success of client solutions in all of our service areas. And, to a lesser degree, our client development group also provides consulting services.



We provide a wide array of consulting and actuarial services covering the
design, implementation, communication and operation of health and welfare, compensation and retirement plans and broader human resources programs and processes.



We experience a high level of recurring work because of our clients annual needs for certain of our services, such as actuarial valuations of defined benefit
plans and consultations regarding the processes of compensation review and health plan selection and negotiation. Certain of our consulting services, however, support more discretionary or event-driven client activities, including the re-engineering
of a clients human resources policies, corporate restructuring and change (e.g. mergers and acquisitions), and programs and projects designed to improve human resources effectiveness. As we have seen in our business and industry, the demand
for these services can be affected by general economic conditions, the financial position of our clients and the particular strategic activities they may be considering, and, therefore, is variable from period to period and more difficult for us to
predict.



Following the announcement of investigations by several states into
the practices of insurance companies and insurance brokers, we reviewed our business practices relating to our Consulting services. We have received contingent commissions, on an unsolicited basis, which have been less than 0.1% of our Consulting
revenues in each of the last 3 years. We stopped accepting these commissions in May, 2004.



Consolidated Financial Highlights



Net
revenues increased $223 or 11.3 % to $2,205 million in 2004 and increased $265 or 15.5% to $1,982 million in 2003. The net effects of favorable foreign currency translation, principally from the strengthening of European currencies relative to the
U.S. dollar, were approximately $40 million for the year ended September 30, 2004. Revenues from acquisitions of approximately $79 million for the year ended September 30, 2004 also contributed significantly to the increases. After adjusting for
these factors, net revenues increased $103 million, or 5.2%, for the year ended September 30, 2004. During 2004, we continued to see growth in the number of Outsourcing participants we serve. Outsourcing growth was 8.5% on an organic (i.e. excluding
acquisitions), constant currency basis for 2004, including growth in our workforce management business. Consulting revenues declined 0.4% on an organic, constant currency basis for 2004. For the year, declines in demand for our discretionary
consulting services, primarily in certain of the other consulting service areas, were offset by growth in health benefit management consulting while retirement and financial management consulting remained relatively flat.



Operating income increased $45 or 25.2% to $223 million from $178 million in the prior year.
During 2004, operating income as a percentage of net revenue increased to 10.1% compared to 9.0% in the prior year. In 2004 and 2003, the timing of the vesting of the initial public offering restricted stock awards had a significant impact on the
comparability of results. Excluding the amortization of the non-cash initial public offering stock awards of $17 million and $39 million for years ended September 30, 2004 and 2003, respectively, operating income was $240 million and $217 million
for these respective periods, an increase of 10.4% year over year. Excluding the initial public offering stock awards, operating income as a percentage of net revenue was 10.9% and 11.0% for the years ended September 30, 2004 and 2003, respectively.
On this adjusted basis, operating margins remained relatively flat in 2004 from 2003. Increases in Outsourcing segment margin, related to continued efforts to drive efficiencies in our benefits administration outsourcing business, were offset by
decreases in Consulting segment margin, which was the result of declines in our European region, driven by a combination of higher costs due to a previously planned office relocation and compensation costs on lower than planned revenue, which
resulted from the delay of certain legislative changes in Europe, as well a decline in revenue for certain discretionary communications and other consulting assignments in North America.



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Critical Accounting Policies and Estimates



Conforming with U.S. generally accepted accounting principles requires us to make estimates and assumptions that affect the reported amounts
and disclosures in the consolidated and combined financial statements and this Annual Report. The process of determining significant estimates is fact specific and takes into account factors such as historical experience, known facts, current and
expected economic conditions and, in some cases, actuarial techniques. We periodically reevaluate these significant factors and make adjustments when facts and circumstances change, however, actual results may differ from estimates. Certain of our
accounting policies require higher degrees of judgment than others in their application. These include certain aspects of accounting for revenue recognition, performance-based compensation, accounts receivable and unbilled work in process and
goodwill and other intangible assets.



Revenues



We enter into numerous service contracts through our outsourcing and consulting businesses.
Outsourcing contract terms typically range from three to five years, while consulting arrangements are generally of a short-term nature. The Company has contracts for multiple services primarily in the Outsourcing segment. In these contracts,
standalone deliverables include core services, such as Defined Benefit, Health & Welfare or Defined Contribution Benefit Plan Administration, and standalone ancillary services, such as Your Total Rewards. These services are tracked and
valued separately and recognized as revenue over the ongoing service period. Consulting services provided in connection with outsourcing engagements are accounted for at the time services are provided and are valued based on prevailing market rates.
Most consulting assignments are also very short-term in nature, so that the risks of recognizing revenue in the wrong period or at different values for stand-alone deliverables is significantly reduced.



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



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



Performance-Based Compensation



Our
compensation program includes a performance-based component that is determined by management. Performance-based compensation is discretionary and is based on individual, team, and total Company performance. The amount of expense for
performance-based compensation recognized at interim and annual reporting dates involves judgment, is based on our quarterly and annual results as compared to our internal targets, and takes into account other factors, including industry trends and
the general economic environment. Annual performance-based compensation levels may vary from current expectations as a result of changes in the actual performance of the Company, team or individual. As such, accrued amounts are subject to change in
future periods if actual future performance varies from performance levels anticipated in prior interim periods.



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Client Receivables and Unbilled Work In Process



We periodically evaluate the collectibility of our client receivables and unbilled work in process based on a combination of factors. In
circumstances where we become aware of a specific clients difficulty in meeting its financial obligations to us (e.g., bankruptcy, failure to pay amounts due to us or to others), we record an allowance for doubtful accounts to reduce the
client receivable to what we reasonably believe will be collected. For all other clients, we recognize an allowance for doubtful accounts based on past write-off history and the length of time the receivables are past due. Facts and circumstances
may change, which would require us to alter our estimates of the collectibility of client receivables and unbilled work in process. Factors mitigating this risk include our diverse client base. For the years ended September 30, 2004, 2003 and 2002,
no single client accounted for more than 10% of our total revenues.



Goodwill and Other Intangible Assets



We apply the purchase
method of accounting for acquisitions. The amounts assigned to the identifiable assets and liabilities acquired in connection with these acquisitions were based on estimated fair values as of the date of the acquisitions, with the remainder recorded
as goodwill. Estimates of fair value have been based primarily upon future cash flow projections for the acquired business and net assets, discounted to present value using a risk adjusted discount rate. In connection with these acquisitions, we
have recorded significant amounts of intangible assets, including goodwill.



We
evaluate our goodwill for impairment whenever indicators of impairment exist, with reviews at least annually. The evaluation is based upon a comparison of the estimated fair value of the reporting unit to which the goodwill has been assigned to the
sum of the carrying value of the assets and liabilities for that reporting unit. The fair values used in this evaluation are estimated based upon discounted future cash flow projections for the reporting unit. Our estimate of future cash flows is
based on our experience, knowledge and typically third-party advice or market data. However, these estimates can be affected by other factors and economic conditions that can be difficult to predict. Intangible assets with definite lives are
amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise.



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##### Table of Contents

Historical Results of Operations



The following tables set forth our historical results of operations as a percentage of net revenues for the years ended September 30.
Operating results for any period are not necessarily indicative of results for any future periods.



|                                                                                                |  |                          |           |        |         |   |           |                     |  |   |         |   |  |                   |   |  |      |           |   |  |       |   |  |       |   |  |       |  
|----------------------------------------------------------------------------------------------- |  | ------------------------ | --------- | ------ | ------- | - | --------- | ------------------- |  | - | ------- | - |  | ----------------- | - |  | ---- | --------- | - |  | ----- | - |  | ----- | - |  | ----- | -
|                                                                                                |  | Year ended September 30, |          
|                                                                                                |  | 2004                     |           |        | 2003(1) |   |           | Increase/(Decrease) |  |   | 2002(2) |   |  | % of Net Revenues |  
|                                                                                                |  |                          |           | Amount |         |   | %         |                     |  |   | 2004    |   |  | 2003              |   |  | 2002 |          
|Revenues:                                                                                       |  |                          |           |        |         |   |           |                     |  |   |         |   |  |                   |   |  |      |           |   |  |       |   |  |       |   |  |       |  
|Revenues before reimbursements (net revenues)                                                   |  | $                        | 2,204,682 |        |         | $ | 1,981,656 |                     |  | $ | 223,026 |   |  | 11.3              | % |  | $    | 1,716,197 |   |  | 100.0 | % |  | 100.0 | % |  | 100.0 | %
|Reimbursements                                                                                  |  |                          | 57,545    |        |         |   | 49,637    |                     |  |   | 7,908   |   |  | 15.9              |   |  |      | 33,882    |   |  | 2.6   |   |  | 2.5   |   |  | 2.0   |  
|                                                                                                |  |                          |           |        |         |   |           |                     |  |   |         |   |  |                   |   |  |      |           |   |  |       |   |  |       |   |  |       |  
|Total revenues                                                                                  |  |                          | 2,262,227 |        |         |   | 2,031,293 |                     |  |   | 230,934 |   |  | 11.4              |   |  |      | 1,750,079 |   |  | 102.6 |   |  | 102.5 |   |  | 102.0 |  
|                                                                                                |  |                          |           |        |         |   |           |                     |  |   |         |   |  |                   |   |  |      |           |   |  |       |   |  |       |   |  |       |  
|Operating expenses:                                                                             |  |                          |           |        |         |   |           |                     |  |   |         |   |  |                   |   |  |      |           |   |  |       |   |  |       |   |  |       |  
|Compensation and related expenses, excluding initial public offering restricted stock awards(3) |  |                          | 1,412,908 |        |         |   | 1,266,931 |                     |  |   | 145,977 |   |  | 11.5              |   |  |      | 1,014,993 |   |  | 64.1  |   |  | 63.9  |   |  | 59.1  |  
|Initial public offering restricted stock awards(4)                                              |  |                          | 16,733    |        |         |   | 39,010    |                     |  |   | (22,277 | ) |  | (57.1             | ) |  |      | 27,525    |   |  | 0.8   |   |  | 2.0   |   |  | 1.6   |  
|Reimbursable expenses                                                                           |  |                          | 57,545    |        |         |   | 49,637    |                     |  |   | 7,908   |   |  | 15.9              |   |  |      | 33,882    |   |  | 2.6   |   |  | 2.5   |   |  | 2.0   |  
|Other operating expenses                                                                        |  |                          | 431,912   |        |         |   | 396,009   |                     |  |   | 35,903  |   |  | 9.1               |   |  |      | 357,789   |   |  | 19.6  |   |  | 20.0  |   |  | 20.9  |  
|Selling, general and administrative expenses                                                    |  |                          | 120,296   |        |         |   | 101,725   |                     |  |   | 18,571  |   |  | 18.3              |   |  |      | 75,570    |   |  | 5.4   |   |  | 5.1   |   |  | 4.4   |  
|                                                                                                |  |                          |           |        |         |   |           |                     |  |   |         |   |  |                   |   |  |      |           |   |  |       |   |  |       |   |  |       |  
|Total operating expenses                                                                        |  |                          | 2,039,394 |        |         |   | 1,853,312 |                     |  |   | 186,082 |   |  | 10.0              |   |  |      | 1,509,759 |   |  | 92.5  |   |  | 93.5  |   |  | 88.0  |  
|                                                                                                |  |                          |           |        |         |   |           |                     |  |   |         |   |  |                   |   |  |      |           |   |  |       |   |  |       |   |  |       |  
|Operating income                                                                                |  |                          | 222,833   |        |         |   | 177,981   |                     |  |   | 44,852  |   |  | 25.2              |   |  |      | 240,320   |   |  | 10.1  |   |  | 9.0   |   |  | 14.0  |  
|                                                                                                |  |                          |           |        |         |   |           |                    
|Other expenses, net                                                                             |  |                          | (14,974   | )      |         |   | (17,340   | )                   |  |   | 2,366   |   |  | (13.6             | ) |  |      | (16,894   | ) |  | (0.6  | ) |  | (0.9  | ) |  | (1.0  | )
|                                                                                                |  |                          |           |        |         |   |           |                     |  |   |         |   |  |                   |   |  |      |           |   |  |       |   |  |       |   |  |       |  
|Income before income taxes                                                                      |  |                          | 207,859   |        |         |   | 160,641   |                     |  |   | 47,218  |   |  | 29.4              |   |  |      | 223,426   |   |  | 9.5   |   |  | 8.1   |   |  | 13.0  |  
|                                                                                                |  |                          |           |        |         |   |           |                    
|Provision for income taxes                                                                      |  |                          | 85,015    |        |         |   | 66,364    |                     |  |   | 18,651  |   |  | 28.1              |   |  |      | 33,053    |   |  | 3.9   |   |  | 3.3   |   |  | 1.9   |  
|                                                                                                |  |                          |           |        |         |   |           |                     |  |   |         |   |  |                   |   |  |      |           |   |  |       |   |  |       |   |  |       |  
|Net income(5)                                                                                   |  | $                        | 122,844   |        |         | $ | 94,277    |                     |  | $ | 28,567  |   |  | 30.3              | % |  | $    | 190,373   |   |  | 5.6   | % |  | 4.8   | % |  | 11.1  | %
|                                                                                                |  |                          |           |        |         |   |           |                     |  |   |         |   |  |                   |   |  |      |           |   |  |       |   |  |       |   |  |       |  

---

|(1) | On June 5, 2003, we acquired Cyborg and on June 15, 2003, we acquired substantially all of the assets of NTRC. As such, their results are included in our results from the respective
acquisition dates.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | On June 5, 2002, we acquired the benefits consulting business of Bacon & Woodrow and its results are included in our results from the acquisition date.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | Compensation and related expenses did not include compensation related the FORE Holdings owners who were active in the business prior to our transition to a corporate
structure on May 31, 2002.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | Compensation expense of $17 million, $39 million and $28 million for the years ended September 30, 2004, 2003 and 2002, respectively, related to the amortization of initial public
offering restricted stock awards.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Prior to our transition to a corporate structure, Hewitt operated as a limited liability company. In such form, owners of the Company were compensated through distributions of
income and Hewitt did not incur firm-level income tax. Accordingly, results prior to May 31, 2002 do not include (i) compensation for services rendered by the owners or (ii) firm-level income tax expense.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Fiscal Years Ended September 30, 2004, 2003 and 2002



Revenues



Net revenues were $2,205 million in 2004, $1,982 million in 2003 and $1,716 million in 2002. Net revenues increased by 11.3% in 2004, by
15.5% in 2003 and by 16.3% in 2002. Adjusting for the effects of acquisitions and the favorable effects of foreign currency translation, net revenues grew 5.2% in 2004 and 5.4% in 2003. Outsourcing net revenues increased by 14.8% to $1,432 million
in 2004, by 11.8% to $1,247 million in 2003, and by 17.2% to $1,115 million in 2002. Excluding the favorable effects of the acquisitions of Cyborg, NTRC, and the majority interest in our Puerto Rico operations of approximately $72 million, and the
effects of favorable foreign currency translation of approximately $6 million, Outsourcing net revenues increased 8.5% in 2004. Outsourcing revenue growth was primarily from the addition of new core benefits services in benefits administration, an
increase in one-time projects and the addition of new workforce management clients coming on line. Excluding the favorable effects of the acquisitions of Cyborg and NTRC in 2003 of approximately $29 million, and the effects of favorable foreign
currency translation of approximately $3 million, Outsourcing net revenues increased 8.9% in 2003. Revenue growth in our outsourcing business in 2003 and 2002, was from increased participant volume in benefits administration through the expansion of
services with existing and new clients. Volume growth in 2004 and 2003 was offset in part by lower pricing on new client services and renewals. Consulting net revenues increased by 5.2% to $773 million in 2004, by 22.3% to $734 million in 2003, and
by 14.7% to $601 million in 2002. The majority of the growth in 2004 was due to the effect of favorable foreign currency translation of approximately $34 million and the effect of acquisitions of approximately $7 million for NTRC, the majority
interest in our Puerto Rico operations and a small acquisition in Ireland. Adjusting for the favorable effects of foreign currency and the acquisitions, Consulting net revenues decreased 0.4% in 2004, from the prior year. Declines in demand for our
discretionary consulting services, primarily in certain of our other consulting service areas, were offset by growth in health benefit management consulting while retirement and financial management consulting remained relatively flat. Adjusting for
the effects of the Bacon & Woodrow acquisition, the consolidation of our Dutch affiliate upon purchase of the remaining interest in that affiliate in the first quarter of 2003, and favorable foreign currency translation of approximately $21
million in 2003 and $5 million in 2002, Consulting net revenues decreased 0.2% in 2003 and increased 6.2% in 2002. Growth in retirement plan and health benefit management consulting in 2003 and 2002 was offset by declines in demand for our more
discretionary consulting services in 2003 and to a lesser extent in 2002.



Compensation and Related Expenses



Compensation and related
expenses (which include all personnel and outside contractor costs and related expenses) were $1,413 million in 2004, $1,267 million in 2003 and $1,015 million in 2002. These expenses increased by 11.5% in 2004, by 24.8% in 2003 and by 21.2% in
2002. The $146 million increase in compensation and related expenses in 2004 was due to increases in employee headcount from acquisitions in 2003 and 2004, the effects of foreign currency translation, wage increases, and increases in outsourcing
personnel to support the growth of benefits administration outsourcing and workforce management. Excluding compensation expenses related to acquisitions of approximately $54 million and the unfavorable effects of foreign currency translation of
approximately $21 million, compensation and related expenses grew 5.7% in 2004. Please note that in fiscal 2002, prior to May 31, 2002, compensation and related expenses did not include owners compensation as FORE Holdings owners were
compensated through distributions of income. In connection with our transition to a corporate structure in June 2002, we incurred a non-recurring, non-cash $18 million compensation expense resulting from certain owners receiving more than their
proportional share of total capital, without offset for those owners who received less than their proportional share in the conversion of owners capital into common stock, and a non-recurring $8 million compensation expense related to our
establishing an owner vacation liability. The net increase in overall compensation and related expenses in 2003 over 2002 after the inclusion of estimated owner compensation and the exclusion of the non-recurring charges in 2002, was primarily due
to the inclusion of Bacon & Woodrows compensation and related expenses, cost of living increases, increases in employee headcount from the 2003 acquisitions of Cyborg and NTRC, and increases in Outsourcing personnel to support the growth
of benefit administration outsourcing and workforce management. As a percentage of net revenues, compensation and related expenses were 64.1%, 63.9% and 59.1% in 2004, 2003 and 2002, respectively. Adjusting for the effects of acquisitions, the
incorporation one-time charges of approximately $26 million, and including estimated owner compensation of approximately $108 million in 2002, compensation and related expenses as a percentage of net



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revenues was 63.9% for 2004, 63.7% for 2003 and 64.2% for 2002. Compensation and related expenses as a percentage of net
revenues increased slightly in 2004 from 2003 primarily due to lower than expected revenues relative to compensation increases in our retirement plan consulting business in Europe, offset by our continued effort to increase productivity and leverage
technology within our benefits administration outsourcing business, increased productivity in certain of our discretionary consulting services and the leveraging of shared services personnel.



Initial Public Offering Restricted Stock Awards



In connection with our initial public offering on June 27, 2002, we granted approximately
5.8 million shares of Class A restricted stock and restricted stock units to our employees. Compensation and related payroll tax expenses of approximately $83 million were recorded as initial public offering restricted stock award expense from June
27, 2002 through September 30, 2004, of which $17 million was recorded in 2004, $39 million in 2003 and $28 million in 2002. The changes in the initial public offering restricted stock award expense in 2003 and 2004, respectively, relates to the
timing of the vesting of the awards. Stock awards that vested over six months were fully expensed in early 2003, while the awards vesting over four years continue to be recognized into expense through June 27, 2006.



Other Operating Expenses



Other operating expenses (which include technology, occupancy and non-compensation related
direct client service costs) were $432 million in 2004, $396 million in 2003, and $358 million in 2002. These expenses increased by 9.1% in 2004, by 10.7% in 2003, and by 6.0% in 2002, but as a percentage of revenue declined slightly to 19.6% from
20.0% and 20.9% in 2004, 2003 and 2002, respectively. Adjusting for the effects of the acquisitions in 2004, 2003 and 2002, other operating expenses as a percentage of net revenues were 19.5%, 19.9% and 20.5%, respectively. The $36 million increase
in other operating expenses in 2004 primarily reflects the inclusion of operating costs from businesses acquired in 2004 and 2003, increased occupancy expenses in connection with a planned office relocation in the United Kingdom and increases in
computer equipment repairs and maintenance, partially offset by lower depreciation on computer equipment. The $38 million increase in other operating expenses in 2003 primarily reflects the inclusion of a full year of Bacon & Woodrows
results since the June 2002 acquisition as well as the inclusion of acquisitions made by the Company in 2003, increased depreciation and amortization expenses on buildings, computer equipment and software and increased computer maintenance expenses.
These increases were partially offset by lower telecommunications expenses in our Outsourcing segment as compared to fiscal 2002. There was a $20 million increase in other operating expenses in 2002, which primarily reflects the inclusion of Bacon
& Woodrow since the acquisition, along with increased spending in technology and maintenance expense in Outsourcing, offset in part by lower depreciation expenses on computer equipment and lower software maintenance expenses.



Selling, General and Administrative Expenses



Selling, general and administrative (SG&A) expenses (which include promotion
and marketing costs, corporate professional services, provisions for doubtful accounts and other general office expenses) were $120 million in 2004, $102 million in 2003, and $76 million in 2002. These expenses increased by 18.3% in 2004, by 34.6%
in 2003 and decreased by 14.5% in 2002. The $19 million increase in SG&A expenses in 2004 from 2003 resulted from the inclusion of SG&A costs from businesses acquired in 2004 and 2003, increased insurance costs and travel expenses. SG&A
expenses increased $26 million in 2003 from 2002, which primarily reflects the inclusion of Bacon & Woodrow since the acquisition as well as the inclusion of the 2003 acquisitions from their respective acquisition dates, and increased travel and
insurance expense in 2003. There was a $1 million increase in SG&A expenses in 2002, after excluding the effects of Sageo in 2001, which primarily reflects the operations of Bacon & Woodrow since the acquisition on June 5, 2002, offset in
part by lower client-related and internal travel-related expenses. As a percentage of net revenues, SG&A expenses were 5.5%, 5.1% and 4.4% in 2004, 2003 and 2002, respectively. Adjusting for the effects of the acquisitions in 2004, 2003 and
2002, SG&A expenses as a percentage of net revenues were 5.3%, 4.9% and 4.6%, respectively.



26



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##### Table of Contents

Other Expenses, Net



Other expenses, net (which includes interest expense, interest income, and other income or expense, such as equity earnings on unconsolidated ventures) were $15 million
in 2004, $17 million in 2003, and $17 million in 2002. As a percentage of net revenues, other expenses, net was 1% or less in all three years. Interest expense was $19 million in 2004, $20 million in 2003 and $16 million in 2002. The decrease in the
interest expense in 2004 is primarily due to decreased principal balances on our fixed rate long-term debt. The increase in interest expense in 2003 is primarily due to the addition of a full year of interest expense on two new capital leases for
office space executed in the third quarter of 2002. Interest expense remained flat in 2002 from 2001 despite a portion of our short-term debt being repaid with proceeds from the initial public offering because of higher interest expense associated
with the two new office capital leases. In 2002, other expenses, net also included a loss of approximately $4 million from a foreign currency option contract purchased in connection with our acquisition of the benefits consulting business of Bacon
& Woodrow which expired in 2002.



Provision for Income Taxes



The provision for income taxes was $85 million for the year ended
September 30, 2004, compared to $66 million in 2003 and $33 million in 2002. The increase in the provision for income taxes in 2004 over 2003 is due to increased income before income taxes. The increase in the provision for income taxes in 2003 is
primarily due to earnings being taxed for the full year in 2003 as compared to only four months in 2002, as a result of the timing of the Companys transition to a corporate structure on May 31, 2002 and related one-time charges in June 2002.
Approximately $22 million of the $33 million tax expense for fiscal 2002 related to tax liabilities arising both from a mandatory change in the Companys tax accounting method and from the initial recording of deferred tax assets and
liabilities related to temporary differences which resulted from the transition to a corporate structure. The remaining $11 million represents income tax expense arising from earnings between May 31, 2002, and September 30, 2002, while the Company
operated as a corporation. The non-recurring, non-cash $18 million compensation expense resulting from owners receiving more than their proportional share of total capital, without offset for those owners who received less than their proportional
share in conversion of owners capital into common stock, was not deductible.



Segment Results



We operate many of the administrative and
support functions of our business through centralized shared service operations, an arrangement that we believe is the most economical and effective means of supporting the Outsourcing and Consulting segments. These shared services include
information systems, human resources, overall corporate management, finance and legal services, general office support and space management. Additionally, we utilize a client development group that markets the entire spectrum of our services. The
compensation and related expenses, other operating expenses, and selling, general and administrative expenses of the administrative and marketing functions are not allocated to the business segments; rather, they are included in unallocated shared
costs. The costs of information services, human resources and the direct client delivery activities provided by the client development function are, however, allocated to the Outsourcing and Consulting segments on a specific identification basis or
based on usage and headcount. Operating income before unallocated shared costs is referred to as segment income throughout this discussion.



27



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##### Table of Contents

Reconciliation of Segment Results to Total Company Results

(in thousands)



|                                                    |  |      |           |        |      |   |           |                     |  |   |         |   |  |       |    |  |   |           |  
|--------------------------------------------------- |  | ---- | --------- | ------ | ---- | - | --------- | ------------------- |  | - | ------- | - |  | ----- | -- |  | - | --------- | -
|                                                    |  | 2004 |           |        | 2003 |   |           | Increase/(Decrease) |  |   | 2002    |  
|                                                    |  |      |           | Amount |      |   | %         |                     | 
|Outsourcing(1)                                      |  |      |           |        |      |   |           |                     |  |   |         |   |  |       |    |  |   |           |  
|Revenues before reimbursements (net revenues)       |  | $    | 1,432,091 |        |      | $ | 1,247,234 |                     |  | $ | 184,857 |   |  | 14.8  | %  |  | $ | 1,115,462 |  
|Segment income(2)                                   |  |      | 297,911   |        |      |   | 245,905   |                     |  |   | 52,006  |   |  | 21.1  | %  |  |   | 272,702   |  
|Segment income as a percent of segment net revenues |  |      | 20.8      | %      |      |   | 19.7      | %                   |  |   |         |   |  |       |    |  |   | 24.4      | %
|                                                    |  |      |           |        |     
|Consulting(3)                                       |  |      |           |        |      |   |           |                     |  |   |         |   |  |       |    |  |   |           |  
|Revenues before reimbursements (net revenues)       |  |      | 772,591   |        |      |   | 734,422   |                     |  |   | 38,169  |   |  | 5.2   | %  |  |   | 600,735   |  
|Segment income(2)                                   |  |      | 126,064   |        |      |   | 136,380   |                     |  |   | (10,316 | ) |  | (7.6  | )% |  |   | 161,787   |  
|Segment income as a percent of segment net revenues |  |      | 16.3      | %      |      |   | 18.6      | %                   |  |   |         |   |  |       |    |  |   | 26.9      | %
|                                                    |  |      |           |        |     
|Total Company                                       |  |      |           |        |      |   |           |                     |  |   |         |   |  |       |    |  |   |           |  
|Revenues before reimbursements (net revenues)       |  | $    | 2,204,682 |        |      | $ | 1,981,656 |                     |  | $ | 223,026 |   |  | 11.3  | %  |  | $ | 1,716,197 |  
|Reimbursements                                      |  |      | 57,545    |        |      |   | 49,637    |                     |  |   | 7,908   |   |  | 15.9  | %  |  |   | 33,882    |  
|                                                    |  |      |           |        |      |   |           |                     |  |   |         |   |  |       |    |  |   |           |  
|Total revenues                                      |  | $    | 2,262,227 |        |      | $ | 2,031,293 |                     |  | $ | 230,934 |   |  | 11.4  | %  |  | $ | 1,750,079 |  
|                                                    |  |      |           |        |      |   |           |                     |  |   |         |   |  |       |    |  |   |           |  
|Segment income(2)                                   |  | $    | 423,975   |        |      | $ | 382,285   |                     |  | $ | 41,690  |   |  | 10.9  | %  |  | $ | 434,489   |  
|Charges not recorded at the Segment level:          |  |      |           |        |      |   |           |                     |  |   |         |   |  |       |    |  |   |           |  
|One-time charges(4)                                 |  |      |          |        |      |   |          |                     |  |   |        |   |  |      | %  |  |   | 26,143    |  
|Initial public offering restricted stock awards(5)  |  |      | 16,733    |        |      |   | 39,010    |                     |  |   | (22,277 | ) |  | (57.1 | )% |  |   | 27,525    |  
|Unallocated shared costs(2)                         |  |      | 184,409   |        |      |   | 165,294   |                     |  |   | 19,115  |   |  | 11.6  | %  |  |   | 140,501   |  
|                                                    |  |      |           |        |      |   |           |                     |  |   |         |   |  |       |    |  |   |           |  
|Operating income(2)                                 |  | $    | 222,833   |        |      | $ | 177,981   |                     |  | $ | 44,852  |   |  | 25.2  | %  |  | $ | 240,320   |  
|                                                    |  |      |           |        |      |   |           |                     |  |   |         |   |  |       |    |  |   |           |  

---

|(1) | On June 5, 2003, we acquired Cyborg and on June 15, 2003, we acquired substantially all of the assets of NTRC. Their results are included in our Outsourcing segment results from the
respective acquisition dates.
|--- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Prior to May 31, 2002, FORE Holdings owners were compensated through distributions of income. In connection with our transition to a corporate structure on May 31, 2002, FORE
Holdings owners who worked in the business became employees and we began to record their compensation as compensation and related expenses in arriving at segment income.
|--- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | On June 5, 2002, we acquired the benefits consulting business of Bacon & Woodrow. As such, the results of Bacon & Woodrow have been included in our Consulting segment
results from the acquisition date.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | In connection with our transition to a corporate structure in fiscal 2002, the following one-time charges were incurred: a) $8 million of non-recurring compensation expense related
to the establishment of a vacation liability for FORE Holdings owners and b) $18 million of non-recurring compensation expense resulting from certain FORE Holdings owners receiving more common stock than their proportional share of total
capital, without offset for those FORE Holdings owners who received less than their proportional share.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Compensation expense of $17, $39 and $28 million for the years ended September 30, 2004, 2003 and 2002, respectively, related to the amortization of initial public offering
restricted stock awards.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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##### Table of Contents

Outsourcing



Fiscal Years Ended September 30, 2004, 2003 and 2002



Outsourcing net revenues were $1,432 million in 2004, $1,247 million in 2003, and $1,115 million in 2002. Net revenues increased by 14.8% in 2004, 11.8% in 2003, and
17.2% in 2002. Revenue growth in 2004 was due, in part, to the addition of acquisitions such as Cyborg, NTRC and consolidation of our Puerto Rico operations upon the purchase of the remaining interest in that affiliate, totaling approximately $72
million, as well as favorable effects of foreign currency translation of approximately $6 million. Excluding the effects of these acquisitions and favorable foreign currency translation, Outsourcing net revenues increased 8.5% in 2004. This
Outsourcing net revenue growth was primarily in the benefits administration business and was due to the addition of new core benefits services, an increase in one-time projects and new workforce management clients coming on line. Revenue growth in
2003 was due, in part, to the acquisitions of Cyborg and NTRC totaling $29 million, as well as the favorable effects of foreign currency translation of approximately $3 million. Excluding the effects of these acquisitions and favorable foreign
currency translation, Outsourcing net revenues increased 8.9% in 2003. Approximately one-half of this organic net revenue growth was from the addition of new clients and the other half from expanding services with existing clients in benefits
administration. In 2002, approximately one-quarter of our net revenue growth was a result of adding new clients with the remainder of the growth from expanding servicing with existing clients in benefits administration.



Outsourcing segment income as a percentage of outsourcing net revenues was 20.8% in 2004,
19.7% in 2003, and 24.4% in 2002. Excluding the effects of the acquisitions of $12 million in 2004 and $3 million in 2003 and including estimated owner compensation of $22 million prior to the transition to a corporate structure in 2002, segment
income as a percentage of Outsourcing net revenues was 21.0%, 20.5%, and 22.4% in 2004, 2003 and 2002, respectively. The increase in margin in 2004 was due to continued efforts to drive efficiencies in our benefits administration outsourcing
business by leveraging our technology and scale, which was partially offset by increased personnel to support the development and growth of workforce management and payroll offerings. The decrease in margin in 2003 from 2002 primarily relates to our
continued investment in the development of our workforce management offering.



Consulting



Fiscal Years Ended September 30, 2004, 2003 and
2002



Consulting net revenues were $773 million in 2004, $734 million in
2003, and $601 million in 2002. Net revenues increased 5.2% in 2004, 22.3% in 2003, and 14.7% in 2002. In 2004, the majority of this growth was due to the effect of favorable foreign currency translation of approximately $34 million, which primarily
affected our retirement plan consulting, and the effect of acquisitions of approximately $7 million for NTRC, the consolidation of our Puerto Rico operations upon the purchase of the remaining interest in that affiliate and a small acquisition in
Ireland. Adjusting for the favorable effects of foreign currency and the acquisitions, Consulting net revenues decreased 0.4% in 2004, as compared to the prior year. Declines in demand for our discretionary consulting services, primarily in certain
of our other consulting service areas, were offset by growth in health benefit management consulting while retirement and financial management was generally flat year over year. In 2003, Consulting net revenues increased primarily as a result of the
June 2002 acquisition of the benefits consulting business of Bacon & Woodrow. A portion of this growth was also due to favorable foreign currency translation from the strengthening of European currencies relative to the U.S. dollar and
consolidation of our Dutch affiliate upon purchase of the remaining interest in that affiliate in the first quarter of 2003. Adjusting for the effects of these acquisitions and favorable foreign currency translation of approximately $21 million in
2003 and $5 million in 2002, Consulting net revenues decreased 0.2% in 2003 and increased 6.2% in 2002. Growth in retirement plan and health benefit management consulting in 2003 and 2002 was offset by declines in demand for our more discretionary
consulting services in 2003 and to a lesser extent in 2002.



Consulting segment
income as a percentage of consulting net revenues was 16.3% in 2004, 18.6% in 2003 and 26.9% in 2002. Adjusting for effects of the acquisitions in 2004, 2003 and 2002 and including estimated owner compensation of $57 million prior to the transition
to a corporate structure in 2002, segment income as a percentage of Consulting net revenues was 15.8%, 18.8% and 16.4% in 2004, 2003 and 2002, respectively. The decrease in



29



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##### Table of Contents

margins in 2004 is primarily the result of declines in our European region, driven by a combination of higher costs due
to a previously planned office relocation and compensation costs on lower than planned revenue, which resulted from the delay of certain legislative changes in Europe, as well a decline in revenue for certain discretionary communications and other
consulting assignments in North America. The increase in margins in 2003 is primarily due to an increase in margin for retirement plan and health benefit consulting services over our more discretionary consulting services which were down due to
continued soft demand for those services in 2003 and 2002.



Quarterly
Results



The following tables set forth the unaudited quarterly financial
data for the periods indicated. The information for each of these periods has been prepared on the same basis as the audited consolidated and combined financial statements and, in our opinion, reflects all adjustments consisting only of normal
recurring adjustments necessary to present fairly our financial results. Operating results for previous periods do not necessarily indicate results that may be achieved in any future period. Amounts are in millions, except earnings per share
information.



|                                                                                             |  |                 |      |   |             |   |      |         |  |   |         |   |  |         |      |   |         |   |      |             |  |   |             |   |  |   |      |   |  |   |      |  
|-------------------------------------------------------------------------------------------- |  | --------------- | ---- | - | ----------- | - | ---- | ------- |  | - | ------- | - |  | ------- | ---- | - | ------- | - | ---- | ----------- |  | - | ----------- | - |  | - | ---- | - |  | - | ---- | -
|                                                                                             |  | Fiscal 2004 (1) |      |   | Fiscal 2003 |  
|                                                                                             |  | 1st Qtr         |      |   | 2nd Qtr     |   |      | 3rd Qtr |  |   | 4th Qtr |   |  | 1st Qtr |      |   | 2nd Qtr |   |      | 3rd Qtr (1) |  |   | 4th Qtr (1) |  
|Revenues:                                                                                    |  |                 |      |   |             |   |      |         |  |   |         |   |  |         |      |   |         |   |      |             |  |   |             |   |  |   |      |   |  |   |      |  
|Revenues before reimbursements (net revenue)                                                 |  | $               | 532  |   |             | $ | 546  |         |  | $ | 552     |   |  | $       | 575  |   |         | $ | 480  |             |  | $ | 478         |   |  | $ | 495  |   |  | $ | 529  |  
|Reimbursements                                                                               |  |                 | 19   |   |             |   | 13   |         |  |   | 12      |   |  |         | 14   |   |         |   | 14   |             |  |   | 14          |   |  |   | 13   |   |  |   | 9    |  
|                                                                                             |  |                 |      |   |             |   |      |         |  |   |         |   |  |         |      |   |         |   |      |             |  |   |             |   |  |   |      |   |  |   |      |  
|Total revenues                                                                               |  |                 | 551  |   |             |   | 559  |         |  |   | 564     |   |  |         | 589  |   |         |   | 494  |             |  |   | 492         |   |  |   | 508  |   |  |   | 538  |  
|                                                                                             |  |                 |      |   |             |   |      |         |  |   |         |   |  |         |      |   |         |   |      |             |  |   |             |   |  |   |      |   |  |   |      |  
|Operating expenses:                                                                          |  |                 |      |   |             |   |      |         |  |   |         |   |  |         |      |   |         |   |      |             |  |   |             |   |  |   |      |   |  |   |      |  
|Compensation and related expenses, excluding initial public offering restricted stock awards |  |                 | 340  |   |             |   | 347  |         |  |   | 359     |   |  |         | 367  |   |         |   | 311  |             |  |   | 310         |   |  |   | 319  |   |  |   | 327  |  
|Initial public offering restricted stock awards                                              |  |                 | 4    |   |             |   | 5    |         |  |   | 4       |   |  |         | 4    |   |         |   | 25   |             |  |   | 5           |   |  |   | 6    |   |  |   | 3    |  
|Reimbursable expenses                                                                        |  |                 | 19   |   |             |   | 13   |         |  |   | 12      |   |  |         | 14   |   |         |   | 14   |             |  |   | 14          |   |  |   | 13   |   |  |   | 9    |  
|Other operating expenses                                                                     |  |                 | 105  |   |             |   | 111  |         |  |   | 103     |   |  |         | 113  |   |         |   | 94   |             |  |   | 94          |   |  |   | 97   |   |  |   | 111  |  
|Selling, general and administrative expenses                                                 |  |                 | 27   |   |             |   | 28   |         |  |   | 32      |   |  |         | 33   |   |         |   | 20   |             |  |   | 25          |   |  |   | 25   |   |  |   | 32   |  
|                                                                                             |  |                 |      |   |             |   |      |         |  |   |         |   |  |         |      |   |         |   |      |             |  |   |             |   |  |   |      |   |  |   |      |  
|Total operating expenses                                                                     |  |                 | 495  |   |             |   | 504  |         |  |   | 510     |   |  |         | 531  |   |         |   | 464  |             |  |   | 448         |   |  |   | 460  |   |  |   | 482  |  
|                                                                                             |  |                 |      |   |             |   |      |         |  |   |         |   |  |         |      |   |         |   |      |             |  |   |             |   |  |   |      |   |  |   |      |  
|Operating income                                                                             |  |                 | 56   |   |             |   | 55   |         |  |   | 54      |   |  |         | 58   |   |         |   | 30   |             |  |   | 44          |   |  |   | 48   |   |  |   | 56   |  
|                                                                                             |  |                 |      |   |             |   |      |        
|Other expenses, net                                                                          |  |                 | (6   | ) |             |   | (4   | )       |  |   | (4      | ) |  |         | (1   | ) |         |   | (5   | )           |  |   | (4          | ) |  |   | (3   | ) |  |   | (5   | )
|                                                                                             |  |                 |      |   |             |   |      |         |  |   |         |   |  |         |      |   |         |   |      |             |  |   |             |   |  |   |      |   |  |   |      |  
|Income before income taxes                                                                   |  |                 | 50   |   |             |   | 51   |         |  |   | 50      |   |  |         | 57   |   |         |   | 25   |             |  |   | 40          |   |  |   | 45   |   |  |   | 51   |  
|                                                                                             |  |                 |      |   |             |   |      |        
|Provision for income taxes                                                                   |  |                 | 21   |   |             |   | 21   |         |  |   | 20      |   |  |         | 23   |   |         |   | 10   |             |  |   | 16          |   |  |   | 19   |   |  |   | 22   |  
|                                                                                             |  |                 |      |   |             |   |      |         |  |   |         |   |  |         |      |   |         |   |      |             |  |   |             |   |  |   |      |   |  |   |      |  
|Net income                                                                                   |  | $               | 29   |   |             | $ | 30   |         |  | $ | 30      |   |  | $       | 34   |   |         | $ | 15   |             |  | $ | 24          |   |  | $ | 26   |   |  | $ | 29   |  
|                                                                                             |  |                 |      |   |             |   |      |         |  |   |         |   |  |         |      |   |         |   |      |             |  |   |             |   |  |   |      |   |  |   |      |  
|Earnings per share  Basic                                                                   |  | $               | 0.31 |   |             | $ | 0.32 |         |  | $ | 0.31    |   |  | $       | 0.34 |   |         | $ | 0.16 |             |  | $ | 0.25        |   |  | $ | 0.28 |   |  | $ | 0.31 |  
| Diluted                                                                                    |  | $               | 0.30 |   |             | $ | 0.31 |         |  | $ | 0.30    |   |  | $       | 0.34 |   |         | $ | 0.15 |             |  | $ | 0.24        |   |  | $ | 0.27 |   |  | $ | 0.31 |  

---

|(1) | On June 5, 2003, we acquired Cyborg and on June 15, 2003, we acquired substantially all of the assets of NTRC. As such, their results are included in our results from the respective
acquisition dates.
|--- | --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



Seasonality and Inflation



Revenues and income vary over the fiscal year. Within our Outsourcing segment, we
generally experience a seasonal increase in our fiscal fourth and first quarter revenues because our clients benefit enrollment processes typically occur during the fall. Within our Consulting segment, we typically experience a seasonal peak
in the third and fourth fiscal quarters which reflects our clients business needs for these services. We believe inflation has had little effect on our results of operations during the past three years.



30



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##### Table of Contents

Pro Forma Results of Operations



During fiscal 2002, we completed several significant transactions. We completed our transition to a corporate structure in May 2002 and our
initial public offering and the acquisition of Bacon & Woodrow in June 2002. The following pro forma results give effect to all three of these transactions as if they had occurred on October 1, 2001, the beginning of fiscal 2002, and exclude any
non-recurring adjustments to facilitate comparability across fiscal periods. We believe that pro forma fiscal 2002 results provide meaningful information for comparison with fiscal 2003 and 2004 results.



The Bacon & Woodrow historical results in the following pro forma income statement
reflect Bacon & Woodrows results prior to the acquisition on June 5, 2002. As such, for the year ended September 30, 2002, the historical results for Bacon & Woodrow include approximately eight months of Bacon & Woodrows
results prior to the acquisition. The historical results of Hewitt for fiscal 2002 include Bacon & Woodrows results since June 5, 2002.



The information presented is not necessarily indicative of the results of operations that might have occurred had the events described above actually taken place as of
the dates specified. The pro forma adjustments are based upon available information and assumptions that management believes are reasonable. The Pro Forma Results of Operations and accompanying notes should be read in conjunction with our
consolidated and combined financial statements and related notes included elsewhere in this Annual Report on Form 10-K.



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##### Table of Contents

Hewitt Associates, Inc.

Pro Forma Income Statement

(unaudited)



|                                                                                             |  |                                                        |       |   |                |   |    |                                             |  |   |                                 |   |  |           |     |   |  |   |            |  
|-------------------------------------------------------------------------------------------- |  | ------------------------------------------------------ | ----- | - | -------------- | - | -- | ------------------------------------------- |  | - | ------------------------------- | - |  | --------- | --- | - |  | - | ---------- | -
|                                                                                             |  | Year Ended September 30, 2002                          |      
|                                                                                             |  | Hewitt Historical                                      |       |   | B&W Historical |   |    | Acquisitionand Incorporation Adjustments(1) |  |   | Adjustments for the Offering(2) |   |  | Pro Forma |    
|                                                                                             |  | (Dollars in millions, except share and per share data) |      
|Revenues:                                                                                    |  |                                                        |       |   |                |   |    |                                             |  |   |                                 |   |  |           |     |   |  |   |            |  
|Revenues before reimbursements (net revenues)                                                |  | $                                                      | 1,716 |   |                | $ | 91 |                                             |  | $ |                                |   |  | $         |    |   |  | $ | 1,807      |  
|Reimbursements                                                                               |  |                                                        | 34    |   |                |   | 3  |                                             |  |   |                                |   |  |           |    |   |  |   | 37         |  
|                                                                                             |  |                                                        |       |   |                |   |    |                                             |  |   |                                 |   |  |           |     |   |  |   |            |  
|Total revenues                                                                               |  |                                                        | 1,750 |   |                |   | 94 |                                             |  |   |                                |   |  |           |    |   |  |   | 1,844      |  
|                                                                                             |  |                                                        |       |   |               
|Operating expenses:                                                                          |  |                                                        |       |   |                |   |    |                                             |  |   |                                 |   |  |           |     |   |  |   |            |  
|Compensation and related expenses, excluding initial public offering restricted stock awards |  |                                                        | 1,015 |   |                |   | 50 |                                             |  |   | 93                              |   |  |           |    |   |  |   | 1,158      |  
|Initial public offering restricted stock awards                                              |  |                                                        | 28    |   |                |   |   |                                             |  |   |                                |   |  |           | 35  |   |  |   | 63         |  
|Reimbursable expenses                                                                        |  |                                                        | 34    |   |                |   | 3  |                                             |  |   |                                |   |  |           |    |   |  |   | 37         |  
|Other operating expenses                                                                     |  |                                                        | 358   |   |                |   | 11 |                                             |  |   | 2                               |   |  |           |    |   |  |   | 371        |  
|Selling, general and administrative expenses                                                 |  |                                                        | 75    |   |                |   | 14 |                                             |  |   | (8                              | ) |  |           |    |   |  |   | 81         |  
|                                                                                             |  |                                                        |       |   |                |   |    |                                             |  |   |                                 |   |  |           |     |   |  |   |            |  
|Total operating expenses                                                                     |  |                                                        | 1,510 |   |                |   | 78 |                                             |  |   | 87                              |   |  |           | 35  |   |  |   | 1,710      |  
|                                                                                             |  |                                                        |       |   |               
|Operating income                                                                             |  |                                                        | 240   |   |                |   | 16 |                                             |  |   | (87                             | ) |  |           | (35 | ) |  |   | 134        |  
|Other expenses, net                                                                          |  |                                                        | (17   | ) |                |   | (1 | )                                           |  |   | 3                               |   |  |           |    |   |  |   | (15        | )
|                                                                                             |  |                                                        |       |   |                |   |    |                                             |  |   |                                 |   |  |           |     |   |  |   |            |  
|Income before taxes and owner distributions                                                  |  |                                                        | 223   |   |                |   | 15 |                                             |  |   | (84                             | ) |  |           | (35 | ) |  |   | 119        |  
|                                                                                             |  |                                                        |       |   |               
|Provision for income taxes                                                                   |  |                                                        | 33    |   |                |   |   |                                             |  |   | 32                              |   |  |           | (14 | ) |  |   | 51         |  
|                                                                                             |  |                                                        |       |   |                |   |    |                                             |  |   |                                 |   |  |           |     |   |  |   |            |  
|Income before owner distributions                                                            |  |                                                        |       |   |                | $ | 15 |                                             |  |   |                                 |   |  |           |     |   |  |   |            |  
|                                                                                             |  |                                                        |       |   |                |   |    |                                             |  |   |                                 |   |  |           |     |   |  |   |            |  
|Net income                                                                                   |  | $                                                      | 190   |   |                |   |    |                                             |  | $ | (116                            | ) |  | $         | (21 | ) |  | $ | 68         |  
|                                                                                             |  |                                                        |       |   |                |   |    |                                             |  |   |                                 |   |  |           |     |   |  |   |            |  
|Earnings per share:                                                                          |  |                                                        |       |   |                |   |    |                                             |  |   |                                 |   |  |           |     |   |  |   |            |  
|basic                                                                                        |  |                                                        |       |   |                |   |    |                                             |  |   |                                 |   |  |           |     |   |  | $ | 0.73       |  
|diluted                                                                                      |  |                                                        |       |   |                |   |    |                                             |  |   |                                 |   |  |           |     |   |  | $ | 0.71       |  
|                                                                                             |  |                                                        |       |   |               
|Weighted average shares:                                                                     |  |                                                        |       |   |                |   |    |                                             |  |   |                                 |   |  |           |     |   |  |   |            |  
|basic                                                                                        |  |                                                        |       |   |                |   |    |                                             |  |   |                                 |   |  |           |     |   |  |   | 93,250,167 |  
|diluted                                                                                      |  |                                                        |       |   |                |   |    |                                             |  |   |                                 |   |  |           |     |   |  |   | 96,330,933 |  

---

|(1) | Bacon & Woodrow acquisition and Hewitt incorporation adjustments include the following one-time items that are excluded for pro forma purposes: an $8 million compensation
expense for a vacation liability arising from FORE Holdings owners becoming employees of the Company; an $18 million compensation expense resulting from the requirement to recognize the extent to which certain owners stock allocation was
greater than their proportional share of the capital accounts, without offset for the extent to which certain owners stock allocation is less than their proportional share of the capital accounts; a $22 million non-recurring income tax expense
resulting from the mandatory change in our tax accounting method and the establishment of deferred tax assets and liabilities; a $1 million compensation expense reflecting our assumption of annuity liabilities in connection with the Bacon &
Woodrow acquisition; a $6 million expense related to the former Bacon & Woodrow partners purchase of indemnity insurance prior to the acquisition; $2 million of acquisition-related professional service expenses incurred by Bacon &
Woodrow; and $4 million of losses incurred on a foreign currency purchase option related to the acquisition. Other adjustments include expenses that the Company would have incurred had it been a corporation for the entire period presented: $120
million of owner compensation expense for both FORE Holdings owners and Bacon & Woodrow partners; $54 million of additional income tax expense as if the Company had been a taxable entity for the entire period; $2 million of amortization of
intangible assets created as part of the acquisition; and $1 million of interest expense on borrowings to fund distributions of accumulated earnings to Bacon & Woodrows partners.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Initial public offering adjustments include compensation expense of $35 million reflecting the amortization of the one-time grant of initial public offering restricted stock awards
and the related income tax benefit of $14 million.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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On a pro forma basis, the Companys net revenues were $1,807 million compared to its actual net revenues of $1,716
million for the year ended September 30, 2002. The difference in the net revenues is attributable to the inclusion of a full twelve months of the Bacon & Woodrow net revenues on a pro forma basis as compared to the inclusion of the Bacon &
Woodrow net revenues from the June 5, 2002, acquisition date forward in the reported historical results for 2002.



On a pro forma basis, the Companys net income was $68 million compared to its actual net income of $190 million for the year ended September 30, 2002. The
difference is attributable to: (1) the inclusion of owner salaries, benefits, bonuses, and payroll taxes for the entire year; (2) the inclusion of an estimated tax expense as if the Company had been subject to income tax for the entire year; (3) the
exclusion of non-recurring charges for owner vacation accrual, the disproportionate share compensation charge, and the $22 million non-recurring income tax expense; (4) the inclusion of compensation expense for the entire year, reflecting the
amortization of the one-time grant of initial public offering awards to employees and the estimated tax benefit related to these awards; (5) the inclusion of the Bacon & Woodrow operations for the entire year, adjusted for non-recurring items,
on a pro forma basis; (6) the exclusion of losses incurred on a foreign currency purchase option; (7) the inclusion of amortization expense for the amortization of intangible assets acquired as part of the Bacon & Woodrow business in pro forma
net income; (8) the inclusion of estimated interest expense for borrowings to fund the payment of distributions to the former partners of Bacon & Woodrow; and (9) the inclusion of estimated compensation expense for the assumption of annuity
liabilities in connection with the Bacon & Woodrow acquisition.



Liquidity and Capital Resources



We have historically funded
our growth and working capital requirements with internally generated funds, credit facilities and term notes. Our change to a corporate structure in May 2002 and our initial public offering in June 2002 enhanced our ability to access public market
financing to fund new investments and acquisitions, as well as to meet ongoing and future capital resource needs.



|                                                 |  |                          |          |   |      |   |          |      |  |   |          |  
|------------------------------------------------ |  | ------------------------ | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|Summary of Cash Flows                            |  | Year Ended September 30, |         
|(in thousands)                                   |  | 2004                     |          |   | 2003 |   |          | 2002 | 
|Cash provided by operating activities            |  | $                        | 241,089  |   |      | $ | 278,554  |      |  | $ | 251,221  |  
|Cash used in investing activities                |  |                          | (135,787 | ) |      |   | (240,098 | )    |  |   | (153,404 | )
|Cash used in financing activities                |  |                          | (44,619  | ) |      |   | (51,641  | )    |  |   | (81,728  | )
|Effect of exchange rates on cash                 |  |                          | 1,013    |   |      |   | 2,210    |      |  |   | 2,065    |  
|                                                 |  |                          |          |   |      |   |          |      |  |   |          |  
|Net increase in cash and cash equivalents        |  |                          | 61,696   |   |      |   | (10,975  | )    |  |   | 18,154   |  
|Cash and cash equivalents at beginning of period |  |                          | 67,785   |   |      |   | 78,760   |      |  |   | 60,606   |  
|                                                 |  |                          |          |   |      |   |          |      |  |   |          |  
|Cash and cash equivalents at end of period       |  | $                        | 129,481  |   |      | $ | 67,785   |      |  | $ | 78,760   |  
|                                                 |  |                          |          |   |      |   |          |      |  |   |          |  



At September 30, 2004, we reclassified
the auction rate municipal bonds that were included in cash and cash equivalents to investments. At September 30, 2004, 2003 and 2002, our investments in the auction rate municipal bonds totaled $183 million, $160 million and $58 million,
respectively. Cash and cash equivalents were $129 million, $68 million, and $79 million at September 30, 2004, 2003 and 2002, respectively. Cash and cash equivalents increased by $62 million or 91.0% in 2004, decreased by $11 million or 13.9% in
2003 and increased by $18 million or 30% in 2002. Working capital, defined as current assets less current liabilities, was $418 million, $284 million and $200 million at September 30, 2004, 2003 and 2002, respectively.



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For the years ended September 30, 2004, 2003 and 2002, cash provided by operating activities was $241 million, $279
million and $251 million, respectively. The decrease in cash provided by operating activities in 2004 was primarily related to a significant increase in advanced billing arrangements in the prior year while current year advance billing levels
remained steady. Additionally, the decrease was due in part to the timing of cash collection of receivables and limited deferred billing arrangements, partially offset by increases in accounts payable and deferred compensation. The increase in cash
flows provided by operating activities in 2003 over 2002 was due largely to increases in collections on client receivables. This increase was offset by the inclusion of a full year of compensation expenses related to former owners and a provision
for corporate income taxes, stemming from our transition to a corporate structure on May 31, 2002. Prior to May 31, 2002, the distributions to FORE Holdings owners were paid out of cash flows from financing activities as capital distributions,
and we did not pay corporate income taxes when we operated as a limited liability company. In 2002, cash collections on client receivables were lower as a result of the distribution of $153 million of client receivables to FORE Holdings in fiscal
2002 as part of our transition to a corporate structure, which reduced our fiscal 2002 cash flows from operating activities.



For the years ended September 30, 2004, 2003 and 2002, cash used in investing activities was $136 million, $240 million and $153 million, respectively. The decrease in
cash used in investing activities in 2004 over 2003 was primarily due to a decrease in net purchases of short-term investments and less net cash paid for acquisitions in the current year than in the prior year. Excluding purchases and sales of
short-term investments and cash paid for acquisitions, cash used in investing activities increased by $28 million due to increased expenditures for property and equipment, offset by slightly lower expenditures for software development than in the
prior year. The Companys property and equipment expenditures were primarily for computer and telecommunications equipment and leasehold improvements and furniture and fixtures related to the relocation to new office space in the United Kingdom
and the expansion of operations in India. The increase in cash used in investing activities in 2003 over 2002 was primarily due to cash paid for acquisitions (see Note 6 to the consolidated and combined financial statements) and increased net
purchases of short-term investments, offset by decreased spending on computer hardware and software development.



For the year ended September 30, 2004, 2003 and 2002, cash used in financing activities was $45 million, $52 million and $82 million, respectively. The decrease in cash
used in financing activities in 2004 from 2003 was primarily due to reduced spending on capital lease obligations as we have decreased our leasing in favor of purchasing equipment and due to increased proceeds from the exercise of stock options
resulting from more options becoming vested. These lower uses of cash were offset by increased payments on our long-term debt as the installments on our unsecured senior term notes have begun to come due. With respect to 2003 and 2002, after our
transition to a corporate structure in mid 2002, capital distributions to FORE Holdings owners were replaced by compensation and related expenses for those owners who remained active in the business. This change shifted the funds used to pay
owner employees from financing to operating activities in mid 2002. Prior to the change, the capital distributions in 2002 were offset in large part by the receipt of the initial public offering proceeds in 2002. Moving into 2003, this change in
corporate structure and form of owner remuneration was one of the primary reasons cash used in financing declined significantly in 2003. Offsetting the decrease in 2003 was an increase in cash used in financing activities to pay down approximately
$8 million of additional debt from internally generated funds from operations than in the prior year.



We incur significant cash outflows for upfront implementation efforts on new outsourcing services. These costs are capitalized as Deferred Contract Costs and amortized over the life of the respective outsourcing
arrangements. Similarly, upfront implementation fees are also deferred as Deferred Contract Revenues and amortized over the life of the respective outsourcing arrangements. Historically, for most arrangements, we received upfront implementation fees
for those efforts; however, implementation fees may also be received over the ongoing services period. We have seen a shift to more of our implementation fees being recovered over the ongoing services period. If this shift were to continue, this
would reduce our operating cash flows when beginning to implement large new outsourcing agreements than weve experienced in the past.



Capital expenditures for property, plant and equipment and software were approximately $101 million, $70 million and $94 million for the years ended September 30, 2004,
2003 and 2002, respectively. The Companys significant investments in 2004 were for computer and telecommunications equipment, leasehold improvements and furniture and fixtures.



34



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##### Table of Contents

Commitments



Significant ongoing commitments consist primarily of leases and debt. The following table shows the minimum future debt or non-cancelable rental payments required under
existing debt agreements or lease agreements which have initial or remaining non-cancelable lease terms in excess of one year as of September 30, 2004.



Contractual Obligations



|                              |  |                             |       |      |   |             |  |             |     |            |   |     |  |   |    
|----------------------------- |  | --------------------------- | ----- | ---- | - | ----------- |  | ----------- | --- | ---------- | - | --- |  | - | ---
|                              |  | Payments Due in Fiscal Year
|                              |  | Total                       |       | 2005 |   | 2006 - 2007 |  | 2008 - 2009 |     | Thereafter
|                              |  | (in millions)              
|Operating leases:             |  |                             |       |      |   |             |  |             |     |            |   |     |  |   |    
|Related party                 |  | $                           | 438   |      | $ | 33          |  | $           | 67  |            | $ | 67  |  | $ | 271
|Third party                   |  |                             | 420   |      |   | 65          |  |             | 165 |            |   | 54  |  |   | 136
|                              |  |                             |       |      |   |             |  |             |     |            |   |     |  |   |    
|                              |  |                             | 858   |      |   | 98          |  |             | 232 |            |   | 121 |  |   | 407
|                              |  |                             |       |      |  
|Capital leases:               |  |                             |       |      |   |             |  |             |     |            |   |     |  |   |    
|Third party                   |  |                             | 132   |      |   | 11          |  |             | 19  |            |   | 20  |  |   | 82 
|                              |  |                             |       |      |   |             |  |             |     |            |   |     |  |   |    
|                              |  |                             | 132   |      |   | 11          |  |             | 19  |            |   | 20  |  |   | 82 
|                              |  |                             |       |      |  
|Debt:                         |  |                             |       |      |   |             |  |             |     |            |   |     |  |   |    
|Principal                     |  |                             | 135   |      |   | 13          |  |             | 51  |            |   | 24  |  |   | 47 
|Interest                      |  |                             | 39    |      |   | 10          |  |             | 16  |            |   | 9   |  |   | 4  
|                              |  |                             |       |      |   |             |  |             |     |            |   |     |  |   |    
|                              |  |                             | 174   |      |   | 23          |  |             | 67  |            |   | 33  |  |   | 51 
|                              |  |                             |       |      |  
|Purchase commitments          |  |                             | 54    |      |   | 29          |  |             | 24  |            |   | 1   |  |   |   
|                              |  |                             |       |      |  
|Other long-term liabilities   |  |                             | 59    |      |   | 4           |  |             | 15  |            |   | 7   |  |   | 33 
|                              |  |                             |       |      |   |             |  |             |     |            |   |     |  |   |    
|Total contractual obligations |  | $                           | 1,277 |      | $ | 165         |  | $           | 357 |            | $ | 182 |  | $ | 573
|                              |  |                             |       |      |   |             |  |             |     |            |   |     |  |   |    



Purchase commitments consist of
commitments for telecommunications usage, software licenses, consulting contracts and insurance coverage. Other long-term liabilities consist primarily of payments for pension plans, post retirement benefit plans, and other long-term liabilities.



Operating Leases



We have entered into related party operating leases with FORE Holdings and its subsidiaries,
Hewitt Properties I LLC, Hewitt Properties II LLC, Hewitt Properties III LLC, Hewitt Properties IV LLC, and Overlook Associates (an equity method investment of FORE Holdings). The minimum aggregate lease payments on these leases totaled $438 million
as of September 30, 2004. The following are real estate lease commitments with FORE Holdings Property Entities which were outstanding as of September 30, 2004:



|                           |  |                        |  |                   |  |                
|-------------------------- |  | ---------------------- |  | ----------------- |  | ---------------
|Holdings Property Entities |  | Location               |  | Commencement Date |  | Expiration Date
|Hewitt Properties I        |  | Lincolnshire, Illinois |  | November 1998     |  | November 2018  
|Hewitt Properties II       |  | Lincolnshire, Illinois |  | December 1999     |  | December 2019  
|Hewitt Properties III      |  | Lincolnshire, Illinois |  | May 1999          |  | May 2014       
|Hewitt Properties IV       |  | Orlando, Florida       |  | March 2000        |  | March 2020     
|Hewitt Properties IV       |  | The Woodlands, Texas   |  | March 2000        |  | March 2020     
|Overlook Associates        |  | Lincolnshire, Illinois |  | *                 |  | *              

---

|* | We have several leases of various terms with Overlook Associates. The first began in 1989 and the last will expire in 2017.
|- | ---------------------------------------------------------------------------------------------------------------------------



Total lease payments to FORE Holdings and subsidiaries were $34 million in 2004, $34 million
in 2003 and $40 million in 2002. The leases were entered into on terms comparable to those which could have been obtained on an arms length basis. The underlying real property value owned by FORE Holdings property entities aggregated
$360 million and $357 million in 2004 and 2003. The investments in the properties owned by these related parties were



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funded through capital contributions by FORE Holdings and third-party debt. Total outstanding debt owed to third parties
by these related parties totaled $261 million and $274 million in 2004 and 2003. The debt is payable over periods that range up to sixteen years, and bears fixed interest rates that range from 5.58% to 7.93%. This debt is not reflected on our
balance sheet as the obligation represented by the debt is an obligation of FORE Holdings and its related parties and is not an obligation of the Company. Substantially all of the activities of FORE Holdings property entities involve assets
that are leased to us. We refer you to Note 15 of our consolidated and combined financial statements for more information regarding these related party leases.



We also have various third-party operating leases for office space, furniture and equipment with terms ranging from one to twenty years. As of September 30, 2004, the
minimum aggregate lease payments on these leases totaled $420 million. We lease office space in approximately 81 locations in 30 countries. As of September 30, 2004, the minimum annual base rent under such office leases totaled $58 million (non-U.S.
lease rental rates converted into U.S. dollars at exchange rates as of September 30, 2004) and aggregate lease payments on the office leases totaled $407 million. We also have several leases for office furniture used in Hewitt-owned buildings in
Lincolnshire, Illinois, The Woodlands, Texas and Orlando, Florida. The oldest of these leases has a commencement date of July 1, 1998 and expires on June 30, 2006. The most recent of these leases has a commencement date of December 1, 1999 and
expires on May 31, 2007. As of September 30, 2004, combined annual lease payments under these leases were $3 million and the minimum aggregate lease payments on these leases totaled $9 million. We also lease office equipment such as copiers, servers
and disk drives under numerous leases. Annual aggregate lease obligations under these leases as of September 30, 2004 were $3 million and the minimum aggregate lease payments on these leases totaled $5 million.



Total rental expenses for operating leases were $116 million in 2004, $104 million in 2003
and $104 million in 2002.



Capital Leases



During the third quarter of fiscal 2002, we entered into two 15-year capital leases for
office space. At inception of the leases, we recorded $89 million in buildings and long-term debt to reflect the long-term capital lease obligations. Lease payments are made in monthly installments at 7.33% interest. As of September 30, 2004, the
outstanding debt related to these leases was $83 million. One of the leases, totaling approximately $23 million at September 30, 2004, was with a related party, The Bayview Trust. However, on March 7, 2003, The Bayview Trust sold the building and
our lease was assigned to the third-party purchaser of the building.



Our
computer and telecommunications equipment installment notes and capitalized leases are secured by the related equipment. The amounts due are payable over three- to five-year terms and are payable in monthly or quarterly installments and at various
interest rates ranging from 2.455% to 7.0%. At September 30, 2004, the outstanding balance on the equipment financing agreements was $2 million.



Variable Interest Rate Debt



Our debt consists primarily of lines of credit, term notes, and equipment financing arrangements. We currently have one domestic unsecured line of credit facility. The
three-year facility provides for borrowings up to $75 million. Borrowings under the facility accrue interest at LIBOR plus 52.5-to-72.5 basis points or the prime rate, at our option. Borrowings are repayable upon demand or at expiration of the
facility on September 27, 2005. Quarterly facility fees ranging from 10-to-15 basis points are charged on the average daily commitment under the facility. If the utilization under the facility exceeds 50% of the commitment, an additional utilization
fee is assessed at a rate of 0.125% per annum. At September 30, 2004, there was no outstanding balance on the facility.



Hewitt Bacon & Woodrow Ltd., a U.K. subsidiary, has an unsecured British pound sterling line of credit permitting borrowings up to £5 million until expiration
of the facility on July 31, 2005, at a current rate of 5.775%. As of September 30, 2004, there was no outstanding balance on the line of credit. There was other foreign debt outstanding at September 30, 2004 totaling approximately $0.7 million,
pursuant to local banking relationships in over a half-dozen countries.



We
have a contract with a lender to guarantee borrowings of our subsidiaries up to $20 million in multiple currency loans and letters of credit. There is no fixed termination date on this contract. This contract allows Hewitts foreign



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##### Table of Contents

subsidiaries to secure financing at rates based on Hewitts credit-worthiness. The contract was signed August 31,
2004, and $1.4 million of the facility is used by Hewitts India office to support local letters of credit and bank guarantees. The facility provides for borrowings at LIBOR plus 75 basis points. As of September 30, 2004, there were no
borrowings under this contract.



Fixed Interest Rate Debt



We have issued unsecured senior term notes to various financial institutions consisting
primarily of insurance companies totaling $134 million as of September 30, 2004. Of this amount, $10 million bears interest at 7.65% and is repayable in October 2005; $15 million bears interest at 7.90% and is repayable in October 2010; $15 million
bears interest at 7.93% and is repayable in June 2007; $10 million bears interest at 8.11% and is repayable in June 2010; $9 million bears interest at 7.94% and is repayable in five annual installments which began in March 2003; $35 million bears
interest at 8.08%, and is repayable in five annual installments beginning in March 2008; and $40 million bears interest at 7.45%, and is repayable in five annual installments which began in May 2004. The unsecured senior term notes include
provisions for significant early payment penalties.



A number of our debt
agreements contain financial and other covenants including, among others, covenants restricting our ability to incur indebtedness and create liens, to sell the assets or stock of a collateralized subsidiary, and to pay dividends or make
distributions to FORE Holdings owners, a violation of which would result in a default. Our debt agreements also contain covenants requiring Hewitt Associates LLC and its affiliates to maintain a minimum level of net worth of $237 million at
September 30, 2004, to maintain a maximum ratio of total debt to net worth of 0.45 to 1.00, to maintain interest rate coverage of at least 2.00-to-1.00 and to maintain a leverage ratio not to exceed 2.25-to-1.00. At September 30, 2004, we were in
compliance with the terms of our debt agreements.



Self-Insurance



We established a captive insurance subsidiary in fiscal 2003 as a
cost-effective way to self-insure against certain business risks and losses. To date, the captive insurance subsidiary has issued policies to cover the deductible portion of various insured exposures including the deductible portions of our workers
compensation and professional liability insurance.



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, capital expenditures, and investment requirements for at least the next 12 months and
the foreseeable future.



New Accounting Pronouncements



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



In September 2004, the Financial Accounting Standards Boards Emerging Issue Task Force (EITF) reached a consensus on EITF Issue No. 04-08, The Effect
of Contingently Convertible Instruments on Diluted Earnings per Share. The Task Force reached a conclusion that Contingently Convertible Instruments (Co-Cos) should be included in diluted earnings per share computations, if dilutive,
regardless of whether the market price trigger or other contingent feature has been met. Through September 30, 2004, EITF Issue No. 04-08 had no effect on the Company. In October 2004, with the acquisition of Exult and $110,000 of convertible senior
notes, future earnings per share computations will include the convertible notes to the extent that they are determined to be dilutive.



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##### Table of Contents

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.



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



| | The actions of our competitors could adversely impact our results.
|- | ------------------------------------------------------------------



| | A prolonged economic downturn could have a material adverse effect on our results.
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| | Our ability to successfully manage our significant capital investments and acquisitions, including our ability to successfully integrate acquired companies.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------



| | In our outsourcing business, early contract terminations could cause our business to be less profitable than anticipated.
|- | -------------------------------------------------------------------------------------------------------------------------



| | The demand for human resources business process outsourcing services may not grow at rates we anticipate.
|- | ---------------------------------------------------------------------------------------------------------



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



| | If we are not able to anticipate and keep pace with rapid changes in government regulations or if government regulations increase the costs of delivering our services or decrease
the need for our services, our business may be negatively affected.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | If we are not able to keep pace with rapid changes in technology or if growth in the use of technology in business is not as rapid as in the past, our business may be negatively
affected.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| | The loss of key employees may damage or result in the loss of client relationships.
|- | -----------------------------------------------------------------------------------



| | Our global operations and expansion strategy entail complex management, foreign currency, legal, tax and economic risks.
|- | ------------------------------------------------------------------------------------------------------------------------



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



| | We rely on our computing and communications infrastructure and the integrity of these systems, and our revenue growth depends, in part, on our ability to use the Internet as a means
for delivering human resources services.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



| | Our profitability will suffer if we are not able to maintain our prices and control our costs, including staffing costs.
|- | ------------------------------------------------------------------------------------------------------------------------



| | Our ability to recruit, retain and motivate employees and to compete effectively.
|- | ---------------------------------------------------------------------------------



| | Insurance market conditions may reduce available coverage and result in increased premium costs and/ or higher self retention of risks.
|- | ---------------------------------------------------------------------------------------------------------------------------------------



| | Our client contracts and vendor relationships may not yield the results we expect.
|- | ----------------------------------------------------------------------------------



| | Our initial stockholders, many of whom are our employees, continue to hold a significant number of Hewitt shares and their interests may differ from those of our other stockholders.
|- | -------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | Our stock price may decline due to the large number of shares of common stock eligible for future sale.
|- | -------------------------------------------------------------------------------------------------------



38



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##### Table of Contents

For a more detailed discussion of our risk factors, see the information under the heading Risk Factors in our
Registration Statements on Form S-3 (File No. 333-119576) and S-4 (File No. 333-117326) filed with the Securities Exchange Commission. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new
information, future events or for any other reason.



Item 7A. Quantitative and Qualitative Disclosures About Market Risk



We are exposed to market risk primarily from changes in interest rates and foreign currency exchange rates. Historically, we have not entered into hedging transactions, such as foreign currency forward contracts or
interest rate swaps, to manage this risk due to our low percentage of foreign debt and restrictions on our fixed rate debt. However, in August 2001, we purchased a £150 million foreign currency option to offset the foreign currency risk
associated with the planned purchase of the benefits consulting business of Bacon & Woodrow. This instrument expired in May 2002. We do not hold or issue derivative financial instruments for trading purposes. At September 30, 2004, we were not a
party to any hedging transaction or derivative financial instrument.



Interest rate risk



We are exposed to interest rate risk
primarily through our portfolio of cash and cash equivalents and debt.



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



At September 30, 2004, 100% of our unsecured senior term notes were at a fixed rate. At September 30, 2004, a 10 percent decrease in the levels of interest rates with all other variables held constant would result in
an increase in the fair market value of our fixed rate debt of $1.7 million. At September 30, 2004, a 10 percent increase in the levels of interest rates with all other variables held constant would result in a decrease in the fair market value of
our fixed rate debt of $1.7 million.



Our short-term debt with a variable rate
consists of our unsecured line of credit, which has an interest rate of LIBOR plus 52.5- to-72.5 basis points or the prime rate, at our option. As of September 30, 2004, there was no outstanding balance on this line of credit. In addition, Hewitt
Bacon & Woodrow Ltd., our U.K. subsidiary, has an unsecured British pound sterling line of credit permitting borrowings of up to £5 million until expiration of the facility on July 31, 2005, at a current rate of 5.775%. As of September 30,
2004, there was no outstanding balance on the line of credit. There was other foreign debt outstanding September 30, 2004, totaling approximately $0.7 million, pursuant to local banking relationships in over a half-dozen countries.



Our foreign subsidiaries maintained debt with an effective interest rate of 6.21% during the
year ended September 30, 2004. A one percentage point increase would have increased our interest expense by approximately $0.15 million for the year ended September 30, 2004. We also maintain an invested cash portfolio which earned interest at an
average rate of 1.54% during the year ended September 30, 2004. A one percentage point increase would have increased our interest income by approximately $2.25 million year ended September 30, 2004. Therefore, the net effect of a one percentage
point increase in interest rates would have been approximately $2.10 million (or net decrease in income from a one percentage point decrease in the rate) for the year ended September 30, 2004.



Foreign exchange risk



For the year ended September 30, 2004, revenues from U.S. operations as a percent of total revenues were 81%. Unrealized foreign currency
translation gains were $29 million for the year ended September 30, 2004, and were primarily due to the strengthening of the British pound sterling relative to the U.S. dollar over the prior year. We do not enter into any foreign currency forward
contracts for speculative or trading purposes.



39



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##### Table of Contents

Operating in international markets means that we are exposed to movements in foreign exchange rates, primarily the
British pound sterling and the Euro. Approximately 11% of our net revenues for fiscal 2004 were from the United Kingdom. Approximately 3% of our net revenues for fiscal 2004 were from countries whose currency is the Euro. Changes in these foreign
exchange rates could have a significant impact on our translated international results of operations in U.S. dollars. A 10% change in the average exchange rate for the British pound sterling in fiscal 2004, would have impacted our pre-tax net
operating income by approximately $1.4 million. A 10% change in the average exchange rate for the Euro would have impacted our pre-tax net operating income by approximately $0.1 million for the year ended September 30, 2004.



Item 8. Financial Statements and Supplementary Data



The financial information required by Item 8 is contained in Item 15 of Part IV beginning on page 44.



Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure



There have been no changes in or disagreements with independent auditors on accounting and financial disclosure.



Item 9A. Controls and Procedures



Our chief
executive officer and our chief financial officer have concluded, based on their evaluation as of the end of the period covered by this Annual Report, that the Companys disclosure controls and procedures (as defined in the
Securities Exchange Act of 1934 Rules 13a-15(e) and 15d-15(e)) are effective to ensure that information required to be disclosed in the reports that we file or submit under the Securities Exchange Act of 1934 is recorded, processed, summarized, and
reported within the time periods specified in the Securities and Exchange Commissions rules and forms. There were no changes in the Companys internal control over financial reporting during the year ended September 30, 2004, that have
materially affected, or reasonably likely to materially affect, the Companys internal controls over financial reporting.



Item 9B. Other Information



The Company has no
information to report pursuant to Item 9B.



PART III



Item 10. Directors and Executive Officers of the Registrant.



Reference is made to the Proxy Statement under the headings Election of Directors and Directors and Officers (hereby incorporated by reference) for this information.



We have adopted a Code of Ethics that applies to our principal executive officer and
principal financial and accounting officer. The Code of Ethics is posted on our website at www.hewitt.com and is filed as an exhibit to this Annual Report on Form 10-K. We intend to satisfy the requirements under Item 5.05 of Form 8-K
regarding disclosure of amendments to, or waivers from, provisions of our Code of Ethics that apply to our principal executive officer and principal financial and accounting officer by posting such information on our website. Copies of the Code of
Ethics will be provided free of charge upon written request directed to Investor Relations, Hewitt Associates, Inc., 100 Half Day Road, Lincolnshire, IL 60069.



40



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##### Table of Contents

Item 11. Executive Compensation.



Reference is
made to the Proxy Statement under the heading Executive Compensation (hereby incorporated by reference) for this information.



Item 12. Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters.



Reference is made to the Proxy Statement under the heading Security Ownership of Certain Beneficial Owners and Management and Securities Authorized for
Issuance under Equity Compensation Plans (hereby incorporated by reference) for this information.



Item 13. Certain Relationships and Related Transactions.



Reference is made to the Proxy Statement under the heading Certain Relationships and Related Transactions (hereby incorporated by reference) for this information.



Item 14. Principal Accountant Fees and Services.



Reference is made to the Proxy Statement under the heading Audit Fees (hereby incorporated by reference) for this information.



PART IV



Item 15. Exhibits and Financial Statement Schedules.



1. Financial Statements



The financial statements listed on the Index to the Financial Statements (page 44) are filed as part of this Annual Report.



2. Financial Statement Schedules



These schedules have been omitted because the required information is included in the consolidated financial statements or notes thereto or because they
are not applicable or not required.



3. Exhibits



The exhibits listed on the Index to Exhibits (pages 80
through 84) are filed as part of this Annual Report.



41



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##### Table of Contents

SIGNATURES



Pursuant to the requirements of
Section 13 or 15(d) 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.By:

/s/ DAN A. DECANNIEREDan A. DeCanniereChief Financial Officer(Principal financial and accounting officer)Date:

November 18, 2004




Pursuant to the requirements of
the Securities Exchange Act of 1934, this report has been signed by the following persons on behalf of the Registrant and in the capacities indicated on the 18th day of November, 2004:



|                                                                                          |  |                                  
|----------------------------------------------------------------------------------------- |  | ---------------------------------
|/s/ DALE L. GIFFORD                                                                       |  | /s/ DANIEL J. HOLLAND            
|Dale L. Gifford                                                                           |  | Daniel J. Holland                
|Chairman of the Board, Chief Executive Officer and Director (Principal executive officer) |  | Chief Operating Officer, Director
|                                                                                          | 
|/s/ DAN A. DECANNIERE                                                                     |  | /s/ MICHELE M. HUNT              
|Dan A. DeCanniere                                                                         |  | Michele M. Hunt                  
|Chief Financial Officer                                                                   |  | Director                         
|(Principal financial and accounting officer)                                              |  |                                  
|                                                                                          | 
|/s/ STEVEN A. DENNING                                                                     |  | /s/ JAMES P. KELLY               
|Steven A. Denning                                                                         |  | James P. Kelly                   
|Director                                                                                  |  | Director                         
|                                                                                          | 
|/s/ BRYAN J. DOYLE                                                                        |  | /s/ CARY D. McMILLAN             
|Bryan J. Doyle                                                                            |  | Cary D. McMillan                 
|Director                                                                                  |  | Director                         
|                                                                                          | 
|/s/ CHERYL A. FRANCIS                                                                     |  | /s/ THOMAS J. NEFF               
|Cheryl A. Francis                                                                         |  | Thomas J. Neff                   
|Director                                                                                  |  | Director                         
|                                                                                          | 
|/s/ JULIE S. GORDON                                                                       |  | /s/ STEVEN P. STANBROOK          
|Julie S. Gordon                                                                           |  | Steven P. Stanbrook              
|Director                                                                                  |  | Director                         
|                                                                                          | 
|/s/ MICHAEL E. GREENLEES                                                                  |  |                                  
|Michael E. Greenlees                                                                      |  |                                  
|Director                                                                                  |  |                                  



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ITEM 15(a). INDEX TO FINANCIAL STATEMENTS



|                                                                                                                         |  |   
|------------------------------------------------------------------------------------------------------------------------ |  | --
|Report of Ernst & Young LLP, Independent Registered Public Accounting Firm                                               |  | 44
|                                                                                                                         | 
|Consolidated Balance Sheets as of September 30, 2004 and 2003                                                            |  | 45
|                                                                                                                         | 
|Consolidated and Combined Statements of Operations for the Fiscal Years EndedSeptember 30, 2004, 2003 and 2002           |  | 47
|                                                                                                                         | 
|Consolidated and Combined Statements of Stockholders Equity for the Fiscal Years EndedSeptember 30, 2004, 2003 and 2002 |  | 48
|                                                                                                                         | 
|Consolidated and Combined Statements of Cash Flows for the Fiscal Years EndedSeptember 30, 2004, 2003, and 2002          |  | 50
|                                                                                                                         | 
|Notes to Consolidated and Combined Financial Statements                                                                  |  | 52



43



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##### Table of Contents

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM



To the Board of Directors and Stockholders of Hewitt Associates, Inc.:



We have audited the accompanying consolidated balance sheets of Hewitt Associates, Inc. (a Delaware corporation) and subsidiaries and its predecessor (the Company) as of September 30, 2004 and 2003, and the related consolidated
and combined statements of operations, stockholders equity and cash flows for each of the three years ended September 30, 2004. These consolidated and combined financial statements are the responsibility of the Companys management. Our
responsibility is to express an opinion on these consolidated and combined financial statements based on our audits.



We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.



In our opinion, the consolidated and combined financial statements referred to
above present fairly, in all material respects, the financial position of the Company as of September 30, 2004 and 2003, and the results of their operations and their cash flows for each of the three years in the period ended September 30, 2004, in
conformity with U.S. generally accepted accounting principles.



ERNST &
YOUNG LLP



Chicago, Illinois

October 27, 2004



44



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##### Table of Contents

HEWITT ASSOCIATES, INC.

CONSOLIDATED BALANCE SHEETS

(Dollars in thousands except share and per share amounts)



|                                                                                                                                     |  |               |           |      |   |          
|------------------------------------------------------------------------------------------------------------------------------------ |  | ------------- | --------- | ---- | - | ---------
|                                                                                                                                     |  | September 30,
|                                                                                                                                     |  | 2004          |           | 2003
|ASSETS                                                                                                                               |  |               |           |      |   |          
|                                                                                                                                     |  |              
|Current Assets:                                                                                                                      |  |               |           |      |   |          
|Cash and cash equivalents                                                                                                            |  | $             | 129,481   |      | $ | 67,785   
|Short-term investments                                                                                                               |  |               | 183,205   |      |   | 159,720  
|Client receivables and unbilled work in process, less allowances of $21,732 and $15,011 at September 30, 2004 and 2003,
respectively |  |               | 522,882   |      |   | 461,430  
|Prepaid expenses and other current assets                                                                                            |  |               | 65,239    |      |   | 46,496   
|Deferred income taxes, net                                                                                                           |  |               | 246       |      |   | 8,948    
|                                                                                                                                     |  |               |           |      |   |          
|Total current assets                                                                                                                 |  |               | 901,053   |      |   | 744,379  
|                                                                                                                                     |  |               |           |      |   |          
|Non-Current Assets:                                                                                                                  |  |               |           |      |   |          
|Deferred contract costs                                                                                                              |  |               | 162,602   |      |   | 138,475  
|Property and equipment, net                                                                                                          |  |               | 236,480   |      |   | 237,476  
|Capitalized software, net                                                                                                            |  |               | 84,969    |      |   | 95,054   
|Other intangible assets, net                                                                                                         |  |               | 107,322   |      |   | 107,540  
|Goodwill, net                                                                                                                        |  |               | 285,743   |      |   | 259,294  
|Other assets, net                                                                                                                    |  |               | 29,805    |      |   | 21,937   
|                                                                                                                                     |  |               |           |      |   |          
|Total non-current assets                                                                                                             |  |               | 906,921   |      |   | 859,776  
|                                                                                                                                     |  |               |           |      |   |          
|Total Assets                                                                                                                         |  | $             | 1,807,974 |      | $ | 1,604,155
|                                                                                                                                     |  |               |           |      |   |          
|LIABILITIES                                                                                                                          |  |               |           |      |   |          
|                                                                                                                                     |  |              
|Current Liabilities:                                                                                                                 |  |               |           |      |   |          
|Accounts payable                                                                                                                     |  | $             | 20,909    |      | $ | 14,508   
|Accrued expenses                                                                                                                     |  |               | 105,470   |      |   | 103,520  
|Advanced billings to clients                                                                                                         |  |               | 106,934   |      |   | 107,247  
|Accrued compensation and benefits                                                                                                    |  |               | 181,812   |      |   | 147,821  
|Short-term debt and current portion of long-term debt                                                                                |  |               | 13,445    |      |   | 33,000   
|Current portion of capital lease obligations                                                                                         |  |               | 5,373     |      |   | 6,602    
|Employee deferred compensation and accrued profit sharing                                                                            |  |               | 49,450    |      |   | 47,583   
|                                                                                                                                     |  |               |           |      |   |          
|Total current liabilities                                                                                                            |  |               | 483,393   |      |   | 460,281  
|                                                                                                                                     |  |               |           |      |   |          
|Long-Term Liabilities:                                                                                                               |  |               |           |      |   |          
|Deferred contract revenues                                                                                                           |  |               | 118,025   |      |   | 118,167  
|Debt, less current portion                                                                                                           |  |               | 121,253   |      |   | 135,563  
|Capital lease obligations, less current portion                                                                                      |  |               | 79,982    |      |   | 83,191   
|Other long-term liabilities                                                                                                          |  |               | 75,512    |      |   | 69,468   
|Deferred income taxes, net                                                                                                           |  |               | 70,456    |      |   | 47,424   
|                                                                                                                                     |  |               |           |      |   |          
|Total long-term liabilities                                                                                                          |  |               | 465,228   |      |   | 453,813  
|                                                                                                                                     |  |               |           |      |   |          
|Total Liabilities                                                                                                                    |  | $             | 948,621   |      | $ | 914,094  
|                                                                                                                                     |  |               |           |      |   |          



Commitments and Contingencies (Notes 14 and 18)



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##### Table of Contents

HEWITT ASSOCIATES, INC.

CONSOLIDATED BALANCE SHEETS - Continued

(Dollars in thousands except share and
per share amounts)



|                                                                                                                                                                                         |  |               |           |   |      |   |           |  
|---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- |  | ------------- | --------- | - | ---- | - | --------- | -
|                                                                                                                                                                                         |  | September 30, |          
|                                                                                                                                                                                         |  | 2004          |           |   | 2003 |  
|STOCKHOLDERS EQUITY                                                                                                                                                                     |  |               |           |   |      |   |           |  
|                                                                                                                                                                                         |  |              
|Stockholders Equity:                                                                                                                                                                    |  |               |           |   |      |   |           |  
|Class A common stock, par value $0.01 per share, 750,000,000 shares authorized, 32,480,669 and 30,463,187 shares issued and outstanding, as of
September 30, 2004 and 2003, respectively |  | $             | 325       |   |      | $ | 305       |  
|Class B common stock, par value $0.01 per share, 200,000,000 shares authorized, 61,707,114 and 63,420,466 shares issued and outstanding, as of
September 30, 2004 and 2003, respectively |  |               | 617       |   |      |   | 634       |  
|Class C common stock, par value $0.01 per share, 50,000,000 shares authorized, 4,391,862 and 4,603,915 shares issued and outstanding as of
September 30, 2004 and 2003, respectively     |  |               | 44        |   |      |   | 46        |  
|Restricted stock units, 118,363 and 173,998 units issued and outstanding, as of September 30, 2004 and 2003, respectively                                                                |  |               | 2,166     |   |      |   | 3,302     |  
|Additional paid-in capital                                                                                                                                                               |  |               | 633,934   |   |      |   | 627,329   |  
|Cost of common stock in treasury, 526,518 and 270,294 shares of Class A common stock as of September 30, 2004 and 2003,
respectively                                                     |  |               | (13,414   | ) |      |   | (6,164    | )
|Retained earnings                                                                                                                                                                        |  |               | 194,430   |   |      |   | 71,586    |  
|Unearned compensation                                                                                                                                                                    |  |               | (27,799   | ) |      |   | (45,534   | )
|Accumulated other comprehensive income                                                                                                                                                   |  |               | 69,050    |   |      |   | 38,557    |  
|                                                                                                                                                                                         |  |               |           |   |      |   |           |  
|Total stockholders equity                                                                                                                                                               |  |               | 859,353   |   |      |   | 690,061   |  
|                                                                                                                                                                                         |  |               |           |   |      |   |           |  
|Total Liabilities and Stockholders Equity                                                                                                                                               |  | $             | 1,807,974 |   |      | $ | 1,604,155 |  
|                                                                                                                                                                                         |  |               |           |   |      |   |           |  



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



46



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##### Table of Contents

HEWITT ASSOCIATES, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS

(Dollars in thousands except share and per share amounts)



|                                                                                             |  |                          |            |   |      |   |            |         |  |   |            |  
|-------------------------------------------------------------------------------------------- |  | ------------------------ | ---------- | - | ---- | - | ---------- | ------- |  | - | ---------- | -
|                                                                                             |  | Year Ended September 30, |           
|                                                                                             |  | 2004                     |            |   | 2003 |   |            | 2002(1) | 
|Revenues:                                                                                    |  |                          |            |   |      |   |            |         |  |   |            |  
|Revenues before reimbursements (net revenues)                                                |  | $                        | 2,204,682  |   |      | $ | 1,981,656  |         |  | $ | 1,716,197  |  
|Reimbursements                                                                               |  |                          | 57,545     |   |      |   | 49,637     |         |  |   | 33,882     |  
|                                                                                             |  |                          |            |   |      |   |            |         |  |   |            |  
|Total revenues                                                                               |  |                          | 2,262,227  |   |      |   | 2,031,293  |         |  |   | 1,750,079  |  
|                                                                                             |  |                          |            |   |      |   |            |         |  |   |            |  
|Operating expenses:                                                                          |  |                          |            |   |      |   |            |         |  |   |            |  
|Compensation and related expenses, excluding initial public offering restricted stock awards |  |                          | 1,412,908  |   |      |   | 1,266,931  |         |  |   | 1,014,993  |  
|Initial public offering restricted stock awards                                              |  |                          | 16,733     |   |      |   | 39,010     |         |  |   | 27,525     |  
|Reimbursable expenses                                                                        |  |                          | 57,545     |   |      |   | 49,637     |         |  |   | 33,882     |  
|Other operating expenses                                                                     |  |                          | 431,912    |   |      |   | 396,009    |         |  |   | 357,789    |  
|Selling, general and administrative expenses                                                 |  |                          | 120,296    |   |      |   | 101,725    |         |  |   | 75,570     |  
|                                                                                             |  |                          |            |   |      |   |            |         |  |   |            |  
|Total operating expenses                                                                     |  |                          | 2,039,394  |   |      |   | 1,853,312  |         |  |   | 1,509,759  |  
|                                                                                             |  |                          |            |   |      |   |            |         |  |   |            |  
|Operating income                                                                             |  |                          | 222,833    |   |      |   | 177,981    |         |  |   | 240,320    |  
|                                                                                             |  |                          |           
|Other expenses, net:                                                                         |  |                          |            |   |      |   |            |         |  |   |            |  
|Interest expense                                                                             |  |                          | (18,608    | ) |      |   | (20,014    | )       |  |   | (16,098    | )
|Interest income                                                                              |  |                          | 3,316      |   |      |   | 2,638      |         |  |   | 2,291      |  
|Other income (expense), net                                                                  |  |                          | 318        |   |      |   | 36         |         |  |   | (3,087     | )
|                                                                                             |  |                          |            |   |      |   |            |         |  |   |            |  
|                                                                                             |  |                          | (14,974    | ) |      |   | (17,340    | )       |  |   | (16,894    | )
|                                                                                             |  |                          |            |   |      |   |            |         |  |   |            |  
|Income before income taxes                                                                   |  |                          | 207,859    |   |      |   | 160,641    |         |  |   | 223,426    |  
|                                                                                             |  |                          |           
|Provision for income taxes                                                                   |  |                          | 85,015     |   |      |   | 66,364     |         |  |   | 33,053     |  
|                                                                                             |  |                          |            |   |      |   |            |         |  |   |            |  
|Net income                                                                                   |  | $                        | 122,844    |   |      | $ | 94,277     |         |  | $ | 190,373    |  
|                                                                                             |  |                          |            |   |      |   |            |         |  |   |            |  
|Earnings per share(2):                                                                       |  |                          |            |   |      |   |            |         |  |   |            |  
|Basic                                                                                        |  | $                        | 1.28       |   |      | $ | 0.99       |         |  | $ | (0.27      | )
|Diluted                                                                                      |  | $                        | 1.25       |   |      | $ | 0.97       |         |  | $ | (0.27      | )
|                                                                                             |  |                          |           
|Weighted average shares(2):                                                                  |  |                          |            |   |      |   |            |         |  |   |            |  
|Basic                                                                                        |  |                          | 96,031,389 |   |      |   | 94,783,223 |         |  |   | 85,301,042 |  
|Diluted                                                                                      |  |                          | 97,950,088 |   |      |   | 96,832,723 |         |  |   | 85,301,042 |  

---

|(1) | In connection with the Companys transition to a corporate structure on May 31, 2002, owners who worked in the business became employees and the Company began to record their
compensation in compensation and related expenses and the Company became subject to corporate income taxes. As such, owner compensation expenses and corporate income taxes were recorded for all of fiscal 2004 and 2003, but only for four months of
fiscal 2002. Additionally, on June 5, 2002, the Company acquired the benefits consulting business of Bacon & Woodrow and their results are included in the Companys results from the acquisition date.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Loss per share in fiscal 2002 is calculated based on the net loss incurred for the four month period from May 31, 2002, the date on which the Companys transition to a
corporate structure was completed, through September 30, 2002. Similarly, common stock is weighted from May 31, 2002 and not from the beginning of fiscal 2002.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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



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##### Table of Contents

HEWITT ASSOCIATES, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS EQUITY

(Dollars in thousands except share and per share amounts)



|                                                                                      |  |                   |   |                       |            |   |                       |        |     |                       |        |             |                        |        |   |                            |        |  |                        |        |  |                             |        |   |                        |          |        |                |        |        |                                               |  |   |         |   |  |         |  |   |        |   |  |   |         |   |  |          |   |  |   |          |   |  |   |        |   |  |   |          |  
|------------------------------------------------------------------------------------- |  | ----------------- | - | --------------------- | ---------- | - | --------------------- | ------ | --- | --------------------- | ------ | ----------- | ---------------------- | ------ | - | -------------------------- | ------ |  | ---------------------- | ------ |  | --------------------------- | ------ | - | ---------------------- | -------- | ------ | -------------- | ------ | ------ | --------------------------------------------- |  | - | ------- | - |  | ------- |  | - | ------ | - |  | - | ------- | - |  | -------- | - |  | - | -------- | - |  | - | ------ | - |  | - | -------- | -
|                                                                                      |  | Pre-ferred Shares |   | Class A Common Shares |            |   | Class B Common Shares |        |     | Class C Common Shares |        |             | Restricted Stock Units |        |   | Additional Paid-in Capital |        |  | Treasury Stock,at Cost |        |  | Retained Earnings (Deficit) |        |   | UnearnedCompen- sation |          |        | OwnersCapital |        |        | Accu- mulatedOtherCompre- hensiveIncome(Loss) |  |   | Total   |  
|                                                                                      |  | Shares            |   |                       | Amount     |   |                       | Shares |     |                       | Amount |             |                        | Shares |   |                            | Amount |  |                        | Shares |  |                             | Amount |   |                        |          | Shares |                | Amount |        |                                               |  |   |         |  
|Balance at September 30, 2001                                                         |  | $                 |  |                       |           |   |                       | $      |    |                       |        |            |                        |        | $ |                           |        |  |                       |        |  | $                           |       |   |                        |         |        |                | $      |       |                                               |  | $ |        |   |  |        |  | $ |       |   |  | $ |        |   |  |         |   |  | $ | 260,138  |   |  | $ | (767   | ) |  | $ | 259,371  |  
|Comprehensive income:                                                                 |  |                   |   |                       |            |   |                       |        |     |                       |        |             |                        |        |   |                            |        |  |                        |        |  |                             |        |   |                        |          |        |                |        |        |                                               |  |   |         |   |  |         |  |   |        |   |  |   |         |   |  |          |   |  |   |          |   |  |   |        |   |  |   |          |  
|Income before taxes and owner distributions for the eight months ended May 31, 2002   |  |                   |  |                       |           |   |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   |        |   |  |        |  |   |       |   |  |   |        |   |  |         |   |  |   | 213,064  |   |  |   |       |   |  |   | 213,064  |  
|Net loss for the four months ended September 30, 2002                                 |  |                   |  |                       |           |   |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   |        |   |  |        |  |   |       |   |  |   | (22,691 | ) |  |         |   |  |   |         |   |  |   |       |   |  |   | (22,691  | )
|Other comprehensive income (loss):                                                    |  |                   |   |                       |            |   |                       |        |     |                       |        |             |                        |        |   |                            |        |  |                        |        |  |                             |        |   |                        |          |        |                |        |        |                                               |  |   |         |   |  |         |  |   |        |   |  |   |         |   |  |          |   |  |   |          |   |  |   |        |   |  |   |          |  
|Minimum pension liability adjustment                                                  |  |                   |  |                       |           |   |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   |        |   |  |        |  |   |       |   |  |   |        |   |  |         |   |  |   |         |   |  |   | (690   | ) |  |   | (690     | )
|Foreign currency translation adjustments                                              |  |                   |  |                       |           |   |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   |        |   |  |        |  |   |       |   |  |   |        |   |  |         |   |  |   |         |   |  |   | 17,648 |   |  |   | 17,648   |  
|                                                                                      |  |                   |   |                       |            |   |                       |        |     |                       |        |             |                        |        |   |                            |        |  |                        |        |  |                             |        |   |                        |          |        |                |        |        |                                               |  |   |         |   |  |         |  |   |        |   |  |   |         |   |  |          |   |  |   |          |   |  |   |        |   |  |   |          |  
|Total other compre-hensive income (loss)                                              |  |                   |   |                       |            |   |                       |        |     |                       |        |             |                        |        |   |                            |        |  |                        |        |  |                             |        |   |                        |          |        |                |        |        |                                               |  |   |         |   |  |         |  |   |        |   |  |   |         |   |  |          |   |  |   |          |   |  |   | 16,958 |   |  |   |          |  
|Total comprehensive income (loss)                                                     |  |                   |   |                       |            |   |                       |        |     |                       |        |             |                        |        |   |                            |        |  |                        |        |  |                             |        |   |                        |          |        |                |        |        |                                               |  |   |         |   |  |         |  |   |        |   |  |   |         |   |  |          |   |  |   |          |   |  |   |        |   |  |   | 207,331  |  
|Capital distributions, net                                                            |  |                   |  |                       |           |   |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   |        |   |  |        |  |   |       |   |  |   |        |   |  |         |   |  |   | (415,986 | ) |  |   |       |   |  |   | (415,986 | )
|Effect of the transition to corporate structure                                       |  |                   |  |                       |           |   |                       |        |    |                       |        | 70,819,520  |                        |        |   | 708                        |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   | 56,508  |   |  |        |  |   |       |   |  |   |        |   |  |         |   |  |   | (57,216  | ) |  |   |       |   |  |   |         |  
|Disproportionate share allocation adjustment                                          |  |                   |  |                       |           |   |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   | 17,843  |   |  |        |  |   |       |   |  |   |        |   |  |         |   |  |   |         |   |  |   |       |   |  |   | 17,843   |  
|Acquisition of Bacon & Woodrow                                                        |  |                   |  |                       | 941,753    |   |                       |        | 9   |                       |        | 2,906,904   |                        |        |   | 29                         |        |  | 5,568,869              |        |  |                             | 56     |   |                        |         |        |                |        |       |                                               |  |   | 219,146 |   |  |        |  |   |       |   |  |   |        |   |  |         |   |  |   |         |   |  |   |       |   |  |   | 219,240  |  
|Net proceeds from initial public offering                                             |  |                   |  |                       | 12,822,500 |   |                       |        | 128 |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   | 219,170 |   |  |        |  |   |       |   |  |   |        |   |  |         |   |  |   |         |   |  |   |       |   |  |   | 219,298  |  
|Initial public offering restricted stock grant                                        |  |                   |  |                       | 5,467,216  |   |                       |        | 55  |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        | 322,692  |        |                |        | 6,131  |                                               |  |   | 103,955 |   |  |        |  |   |       |   |  |   |        |   |  | (110,141 | ) |  |   |         |   |  |   |       |   |  |   |         |  
|Amortization of unearned compensation                                                 |  |                   |  |                       |           |   |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   |        |   |  |        |  |   |       |   |  |   |        |   |  | 25,389   |   |  |   |         |   |  |   |       |   |  |   | 25,389   |  
|Issuance of Class A common shares  outside directors                                 |  |                   |  |                       | 3,404      |   |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   | 79      |   |  |        |  |   |       |   |  |   |        |   |  |         |   |  |   |         |   |  |   |       |   |  |   | 79       |  
|Net forfeiture of restricted common stock pursuant to the global stock plan and other |  |                   |  |                       | (72,213    | ) |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        | (2,790   | )      |                |        | (53    | )                                             |  |   | (1,324  | ) |  |        |  |   |       |   |  |   |        |   |  | 1,377    |   |  |   |         |   |  |   |       |   |  |   |         |  
|                                                                                      |  |                   |   |                       |            |   |                       |        |     |                       |        |             |                        |        |   |                            |        |  |                        |        |  |                             |        |   |                        |          |        |                |        |        |                                               |  |   |         |   |  |         |  |   |        |   |  |   |         |   |  |          |   |  |   |          |   |  |   |        |   |  |   |          |  
|Balance at September 30, 2002                                                         |  |                   |  |                       | 19,162,660 |   |                       |        | 192 |                       |        | 73,726,424  |                        |        |   | 737                        |        |  | 5,568,869              |        |  |                             | 56     |   |                        | 319,902  |        |                |        | 6,078  |                                               |  |   | 615,377 |   |  |        |  |   |       |   |  |   | (22,691 | ) |  | (83,375  | ) |  |   |         |   |  |   | 16,191 |   |  |   | 532,565  |  
|Comprehensive income (loss):                                                          |  |                   |   |                       |            |   |                       |        |     |                       |        |             |                        |        |   |                            |        |  |                        |        |  |                             |        |   |                        |          |        |                |        |        |                                               |  |   |         |   |  |         |  |   |        |   |  |   |         |   |  |          |   |  |   |          |   |  |   |        |   |  |   |          |  
|Net income                                                                            |  |                   |  |                       |           |   |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   |        |   |  |        |  |   |       |   |  |   | 94,277  |   |  |         |   |  |   |         |   |  |   |       |   |  |   | 94,277   |  
|Other comprehensive income (loss):                                                    |  |                   |   |                       |            |   |                       |        |     |                       |        |             |                        |        |   |                            |        |  |                        |        |  |                             |        |   |                        |          |        |                |        |        |                                               |  |   |         |   |  |         |  |   |        |   |  |   |         |   |  |          |   |  |   |          |   |  |   |        |   |  |   |          |  
|Minimum pension liability adjustment                                                  |  |                   |  |                       |           |   |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   |        |   |  |        |  |   |       |   |  |   |        |   |  |         |   |  |   |         |   |  |   | (333   | ) |  |   | (333     | )
|Foreign currency translation adjustments                                              |  |                   |  |                       |           |   |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   |        |   |  |        |  |   |       |   |  |   |        |   |  |         |   |  |   |         |   |  |   | 22,699 |   |  |   | 22,699   |  
|                                                                                      |  |                   |   |                       |            |   |                       |        |     |                       |        |             |                        |        |   |                            |        |  |                        |        |  |                             |        |   |                        |          |        |                |        |        |                                               |  |   |         |   |  |         |  |   |        |   |  |   |         |   |  |          |   |  |   |          |   |  |   |        |   |  |   |          |  
|Total other compre-hensive income (loss)                                              |  |                   |   |                       |            |   |                       |        |     |                       |        |             |                        |        |   |                            |        |  |                        |        |  |                             |        |   |                        |          |        |                |        |        |                                               |  |   |         |   |  |         |  |   |        |   |  |   |         |   |  |          |   |  |   |          |   |  |   | 22,366 |   |  |   |          |  
|Total comprehensive income (loss)                                                     |  |                   |   |                       |            |   |                       |        |     |                       |        |             |                        |        |   |                            |        |  |                        |        |  |                             |        |   |                        |          |        |                |        |        |                                               |  |   |         |   |  |         |  |   |        |   |  |   |         |   |  |          |   |  |   |          |   |  |   |        |   |  |   | 116,643  |  
|Payments for initial public offering costs                                            |  |                   |  |                       |           |   |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   | (796    | ) |  |        |  |   |       |   |  |   |        |   |  |         |   |  |   |         |   |  |   |       |   |  |   | (796     | )
|Amortization of unearned compensation                                                 |  |                   |  |                       |           |   |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   |        |   |  |        |  |   |       |   |  |   |        |   |  | 34,834   |   |  |   |         |   |  |   |       |   |  |   | 34,834   |  
|Tax benefits from stock plans                                                         |  |                   |  |                       |           |   |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   | 12,122  |   |  |        |  |   |       |   |  |   |        |   |  |         |   |  |   |         |   |  |   |       |   |  |   | 12,122   |  
|Restricted stock unit vesting                                                         |  |                   |  |                       | 140,285    |   |                       |        | 1   |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        | (140,285 | )      |                |        | (2,669 | )                                             |  |   | 2,668   |   |  |        |  |   |       |   |  |   |        |   |  |         |   |  |   |         |   |  |   |       |   |  |   |         |  
|Shares exchanged in secondary offering                                                |  |                   |  |                       | 11,270,912 |   |                       |        | 113 |                       |        | (10,305,958 | )                      |        |   | (103                       | )      |  | (964,954               | )      |  |                             | (10    | ) |                        |         |        |                |        |       |                                               |  |   |        |   |  |        |  |   |       |   |  |   |        |   |  |         |   |  |   |         |   |  |   |       |   |  |   |         |  
|Purchase of Class A common shares for treasury                                        |  |                   |  |                       |           |   |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   |        |   |  | 270,294 |  |   | (6,164 | ) |  |   |        |   |  |         |   |  |   |         |   |  |   |       |   |  |   | (6,164   | )
|Issuance of Class A common shares:                                                    |  |                   |   |                       |            |   |                       |        |     |                       |        |             |                        |        |   |                            |        |  |                        |        |  |                             |        |   |                        |          |        |                |        |        |                                               |  |   |         |   |  |         |  |   |        |   |  |   |         |   |  |          |   |  |   |          |   |  |   |        |   |  |   |          |  
|Employee stock options                                                                |  |                   |  |                       | 35,808     |   |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   | 681     |   |  |        |  |   |       |   |  |   |        |   |  |         |   |  |   |         |   |  |   |       |   |  |   | 681      |  
|Outside Directors                                                                     |  |                   |  |                       | 6,661      |   |                       |        |    |                       |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        |         |        |                |        |       |                                               |  |   | 175     |   |  |        |  |   |       |   |  |   |        |   |  |         |   |  |   |         |   |  |   |       |   |  |   | 175      |  
|Net forfeiture of restricted common stock pursuant to the global stock plan and other |  |                   |  |                       | (153,139   | ) |                       |        | (1  | )                     |        |            |                        |        |   |                           |        |  |                       |        |  |                             |       |   |                        | (5,619   | )      |                |        | (107   | )                                             |  |   | (2,898  | ) |  |        |  |   |       |   |  |   |        |   |  | 3,007    |   |  |   |         |   |  |   |       |   |  |   | 1        |  
|                                                                                      |  |                   |   |                       |            |   |                       |        |     |                       |        |             |                        |        |   |                            |        |  |                        |        |  |                             |        |   |                        |          |        |                |        |        |                                               |  |   |         |   |  |         |  |   |        |   |  |   |         |   |  |          |   |  |   |          |   |  |   |        |   |  |   |          |  
|Balance at September 30, 2003                                                         |  |                   |  |                       | 30,463,187 |   |                       |        | 305 |                       |        | 63,420,466  |                        |        |   | 634                        |        |  | 4,603,915              |        |  |                             | 46     |   |                        | 173,998  |        |                |        | 3,302  |                                               |  |   | 627,329 |   |  | 270,294 |  |   | (6,164 | ) |  |   | 71,586  |   |  | (45,534  | ) |  |   |         |   |  |   | 38,557 |   |  |   | 690,061  |  



48



---

##### Table of Contents

HEWITT ASSOCIATES, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF STOCKHOLDERS EQUITY

(Dollars in
thousands except share and per share amounts)



|                                                                                      |  |                  |  |                       |        |  |                       |        |   |                       |            |   |                       |        |     |                          |        |           |                        |        |   |                           |        |                       |         |   |                |   |                                             |   |       |   |         |   |  |         |  |   |         |   |  |   |         |  |   |         |   |  |   |   |  |   |        |  |   |         |  
|------------------------------------------------------------------------------------- |  | ---------------- |  | --------------------- | ------ |  | --------------------- | ------ | - | --------------------- | ---------- | - | --------------------- | ------ | --- | ------------------------ | ------ | --------- | ---------------------- | ------ | - | ------------------------- | ------ | --------------------- | ------- | - | -------------- | - | ------------------------------------------- | - | ----- | - | ------- | - |  | ------- |  | - | ------- | - |  | - | ------- |  | - | ------- | - |  | - | - |  | - | ------ |  | - | ------- | -
|                                                                                      |  | Pre-ferredShares |  | Class A Common Shares |        |  | Class B Common Shares |        |   | Class C Common Shares |            |   | RestrictedStock Units |        |     | AdditionalPaid-inCapital |        |           | Treasury Stock,at Cost |        |   | RetainedEarnings(Deficit) |        | UnearnedCompen-sation |         |   | OwnersCapital |   | Accu-mulatedOtherCompre-hensiveIncome(Loss) |   | Total |  
|                                                                                      |  |                  |  |                       |        |  |                       |        |   |                       |           
|                                                                                      |  | Shares           |  |                       | Amount |  |                       | Shares |   |                       | Amount     |   |                       | Shares |     |                          | Amount |           |                        | Shares |   |                           | Amount |                       |         |   | Shares         |   | Amount                                      |   |       |   |         |   | 
|Comprehensive income (loss):                                                          |  |                  |  |                       |        |  |                       |        |   |                       |            |   |                       |        |     |                          |        |           |                        |        |   |                           |        |                       |         |   |                |   |                                             |   |       |   |         |   |  |         |  |   |         |   |  |   |         |  |   |         |   |  |   |   |  |   |        |  |   |         |  
|Net income                                                                            |  |                 |  |                      |        |  |                       |       |   |                       |           |   |                       |        |    |                          |        |          |                        |        |   |                          |        |                       |        |   |                |   |                                            |   |       |   |        |   |  |        |  |   |        |   |  |   | 122,844 |  |   |        |   |  |   |  |  |   |       |  |   | 122,844 |  
|Other comprehensive income (loss):                                                    |  |                  |  |                       |        |  |                       |        |   |                       |            |   |                       |        |     |                          |        |           |                        |        |   |                           |        |                       |         |   |                |   |                                             |   |       |   |         |   |  |         |  |   |         |   |  |   |         |  |   |         |   |  |   |   |  |   |        |  |   |         |  
|Minimum pension liability adjustment                                                  |  |                 |  |                      |        |  |                       |       |   |                       |           |   |                       |        |    |                          |        |          |                        |        |   |                          |        |                       |        |   |                |   |                                            |   |       |   |        |   |  |        |  |   |        |   |  |   |        |  |   |        |   |  |   |  |  |   | 1,023  |  |   | 1,023   |  
|Foreign currency translation adjustments                                              |  |                 |  |                      |        |  |                       |       |   |                       |           |   |                       |        |    |                          |        |          |                        |        |   |                          |        |                       |        |   |                |   |                                            |   |       |   |        |   |  |        |  |   |        |   |  |   |        |  |   |        |   |  |   |  |  |   | 29,470 |  |   | 29,470  |  
|                                                                                      |  |                  |  |                       |        |  |                       |        |   |                       |            |   |                       |        |     |                          |        |           |                        |        |   |                           |        |                       |         |   |                |   |                                             |   |       |   |         |   |  |         |  |   |         |   |  |   |         |  |   |         |   |  |   |   |  |   |        |  |   |         |  
|Total other comprehensive income (loss)                                               |  |                  |  |                       |        |  |                       |        |   |                       |            |   |                       |        |     |                          |        |           |                        |        |   |                           |        |                       |         |   |                |   |                                             |   |       |   |         |   |  |         |  |   |         |   |  |   |         |  |   |         |   |  |   |   |  |   | 30,493 |  |   |         |  
|Total comprehensive income                                                            |  |                  |  |                       |        |  |                       |        |   |                       |            |   |                       |        |     |                          |        |           |                        |        |   |                           |        |                       |         |   |                |   |                                             |   |       |   |         |   |  |         |  |   |         |   |  |   |         |  |   |         |   |  |   |   |  |   |        |  |   | 153,337 |  
|Amortization of unearned compensation                                                 |  |                 |  |                      |        |  |                       |       |   |                       |           |   |                       |        |    |                          |        |          |                        |        |   |                          |        |                       |        |   |                |   |                                             |   |       |   |         |   |  |        |  |   |        |   |  |   |        |  |   | 15,017  |   |  |   |  |  |   |       |  |   | 15,017  |  
|Tax benefits from stock plans                                                         |  |                 |  |                      |        |  |                       |       |   |                       |           |   |                       |        |    |                          |        |          |                        |        |   |                          |        |                       |        |   |                |   |                                            |   |       |   | 4,014   |   |  |        |  |   |        |   |  |   |        |  |   |        |   |  |   |  |  |   |       |  |   | 4,014   |  
|Restricted stock unit vesting                                                         |  |                 |  | 45,982                |        |  |                       |       |   |                       |           |   |                       |        |    |                          |        |          |                        |        |   |                          |        |                       | (45,393 | ) |                |   | (862                                        | ) |       |   | 866     |   |  |        |  |   |        |   |  |   |        |  |   |        |   |  |   |  |  |   |       |  |   | 4       |  
|Purchase of Class A common shares for treasury                                        |  |                 |  |                      |        |  |                       |       |   |                       |           |   |                       |        |    |                          |        |          |                        |        |   |                          |        |                       |        |   |                |   |                                            |   |       |   |        |   |  | 256,224 |  |   | (7,250  | ) |  |   |        |  |   |        |   |  |   |  |  |   |       |  |   | (7,250  | )
|Issuance of Class A common shares:                                                    |  |                  |  |                       |        |  |                       |        |   |                       |            |   |                       |        |     |                          |        |           |                        |        |   |                           |        |                       |         |   |                |   |                                             |   |       |   |         |   |  |         |  |   |         |   |  |   |         |  |   |         |   |  |   |   |  |   |        |  |   |         |  
|Employee stock options                                                                |  |                 |  | 185,234               |        |  |                       | 2      |   |                       |           |   |                       |        |    |                          |        |          |                        |        |   |                          |        |                       |        |   |                |   |                                            |   |       |   | 4,137   |   |  |        |  |   |        |   |  |   |        |  |   | (249    | ) |  |   |  |  |   |       |  |   | 3,890   |  
|Outside Directors                                                                     |  |                 |  | 9,440                 |        |  |                       |       |   |                       |           |   |                       |        |    |                          |        |          |                        |        |   |                          |        |                       | 4,706   |   |                |   | 10                                          |   |       |   | 410     |   |  |        |  |   |        |   |  |   |        |  |   | (140    | ) |  |   |  |  |   |       |  |   | 280     |  
|Rule 144 share conversions and other share conversions                                |  |                 |  | 1,925,405             |        |  |                       | 19     |   |                       | (1,713,352 | ) |                       |        | (17 | )                        |        | (212,053  | )                      |        |   | (2                        | )      |                       |        |   |                |   |                                            |   |       |   |        |   |  |        |  |   |        |   |  |   |        |  |   |        |   |  |   |  |  |   |       |  |   |        |  
|Net forfeiture of restricted common stock pursuant to the global stock plan and other |  |                 |  | (148,579              | )      |  |                       | (1     | ) |                       |           |   |                       |        |    |                          |        |          |                        |        |   |                          |        |                       | (14,948 | ) |                |   | (284                                        | ) |       |   | (2,822  | ) |  |        |  |   |        |   |  |   |        |  |   | 3,107   |   |  |   |  |  |   |       |  |   |        |  
|                                                                                      |  |                  |  |                       |        |  |                       |        |   |                       |            |   |                       |        |     |                          |        |           |                        |        |   |                           |        |                       |         |   |                |   |                                             |   |       |   |         |   |  |         |  |   |         |   |  |   |         |  |   |         |   |  |   |   |  |   |        |  |   |         |  
|Balance at September 30, 2004                                                         |  |                 |  | 32,480,669            |        |  | $                     | 325    |   |                       | 61,707,114 |   |                       | $      | 617 |                          |        | 4,391,862 |                        |        | $ | 44                        |        |                       | 118,363 |   |                | $ | 2,166                                       |   |       | $ | 633,934 |   |  | 526,518 |  | $ | (13,414 | ) |  | $ | 194,430 |  | $ | (27,799 | ) |  | $ |  |  | $ | 69,050 |  | $ | 859,353 |  
|                                                                                      |  |                  |  |                       |        |  |                       |        |   |                       |            |   |                       |        |     |                          |        |           |                        |        |   |                           |        |                       |         |   |                |   |                                             |   |       |   |         |   |  |         |  |   |         |   |  |   |         |  |   |         |   |  |   |   |  |   |        |  |   |         |  



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



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HEWITT ASSOCIATES, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS

(Dollars in thousands)



|                                                                                  |  |                          |          |   |      |   |          |      |  |   |          |  
|--------------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                                  |  | Year Ended September 30, |         
|                                                                                  |  | 2004                     |          |   | 2003 |   |          | 2002 | 
|Cash flows from operating activities:                                             |  |                          |          |   |      |   |          |      |  |   |          |  
|Net income                                                                        |  | $                        | 122,844  |   |      | $ | 94,277   |      |  | $ | 190,373  |  
|Adjustments to reconcile net income to net cash provided by operating activities: |  |                          |          |   |      |   |          |      |  |   |          |  
|Depreciation                                                                      |  |                          | 75,412   |   |      |   | 76,703   |      |  |   | 70,575   |  
|Amortization                                                                      |  |                          | 42,806   |   |      |   | 37,691   |      |  |   | 26,035   |  
|Net unrealized loss on securities                                                 |  |                          |         |   |      |   |         |      |  |   | 3,653    |  
|Initial public offering restricted stock awards                                   |  |                          | 15,017   |   |      |   | 34,833   |      |  |   | 25,389   |  
|Owner compensation charge (Note 3)                                                |  |                          |         |   |      |   |         |      |  |   | 17,843   |  
|Establishment of owner vacation liability (Note 3)                                |  |                          |         |   |      |   |         |      |  |   | 8,300    |  
|Director stock remuneration                                                       |  |                          | 280      |   |      |   | 175      |      |  |   | 79       |  
|Deferred income taxes                                                             |  |                          | 31,590   |   |      |   | 36,187   |      |  |   | 2,289    |  
|Changes in operating assets and liabilities:                                      |  |                          |          |   |      |   |          |      |  |   |          |  
|Client receivables and unbilled work in process                                   |  |                          | (61,890  | ) |      |   | (52,537  | )    |  |   | (129,565 | )
|Prepaid expenses and other current assets                                         |  |                          | (12,620  | ) |      |   | (6,696   | )    |  |   | (4,139   | )
|Due from related parties                                                          |  |                          |         |   |      |   | 3,468    |      |  |   | (3,468   | )
|Deferred contract costs                                                           |  |                          | (24,427  | ) |      |   | (13,184  | )    |  |   | 3,689    |  
|Accounts payable                                                                  |  |                          | 6,001    |   |      |   | (12,995  | )    |  |   | (5,250   | )
|Accrued compensation and benefits                                                 |  |                          | 31,524   |   |      |   | 38,466   |      |  |   | 59,253   |  
|Accrued expenses                                                                  |  |                          | 7,827    |   |      |   | 18,849   |      |  |   | (31,029  | )
|Advanced billings to clients                                                      |  |                          | (391     | ) |      |   | 32,811   |      |  |   | 13,315   |  
|Deferred contract revenues                                                        |  |                          | (270     | ) |      |   | (9,150   | )    |  |   | (3,830   | )
|Employee deferred compensation and accrued profit sharing                         |  |                          | 1,724    |   |      |   | (9,320   | )    |  |   | 4,200    |  
|Other long-term liabilities                                                       |  |                          | 5,662    |   |      |   | 8,976    |      |  |   | 3,509    |  
|                                                                                  |  |                          |          |   |      |   |          |      |  |   |          |  
|Net cash provided by operating activities                                         |  |                          | 241,089  |   |      |   | 278,554  |      |  |   | 251,221  |  
|                                                                                  |  |                          |         
|Cash flows from investing activities:                                             |  |                          |          |   |      |   |          |      |  |   |          |  
|Purchases of short-term investments                                               |  |                          | (469,330 | ) |      |   | (258,975 | )    |  |   | (62,690  | )
|Sales of short-term investments                                                   |  |                          | 445,845  |   |      |   | 156,945  |      |  |   | 5,000    |  
|Additions to property and equipment                                               |  |                          | (69,669  | ) |      |   | (43,415  | )    |  |   | (58,765  | )
|Cash paid for acquisitions and transaction costs, net of cash acquired            |  |                          | (11,450  | ) |      |   | (65,152  | )    |  |   | (887     | )
|Increase in other assets                                                          |  |                          | (31,183  | ) |      |   | (29,501  | )    |  |   | (36,062  | )
|                                                                                  |  |                          |          |   |      |   |          |      |  |   |          |  
|Net cash used in investing activities                                             |  |                          | (135,787 | ) |      |   | (240,098 | )    |  |   | (153,404 | )
|                                                                                  |  |                          |         
|Cash flows from financing activities:                                             |  |                          |          |   |      |   |          |      |  |   |          |  
|Proceeds from issuance of stock in initial public offering                        |  |                          |         |   |      |   |         |      |  |   | 226,564  |  
|Proceeds from the exercise of stock options                                       |  |                          | 3,890    |   |      |   | 681      |      |  |   |         |  
|Capital distributions to former owners, net                                       |  |                          |         |   |      |   |         |      |  |   | (263,565 | )
|Short-term borrowings                                                             |  |                          | 18,064   |   |      |   | 7,669    |      |  |   | 59,661   |  
|Repayments of short-term borrowings                                               |  |                          | (38,639  | ) |      |   | (32,624  | )    |  |   | (73,765  | )
|Repayments of long-term debt                                                      |  |                          | (13,000  | ) |      |   | (9,236   | )    |  |   | (6,250   | )
|Repayments of capital lease obligations                                           |  |                          | (7,684   | ) |      |   | (11,171  | )    |  |   | (17,007  | )
|Payment of deferred financing fees                                                |  |                          |         |   |      |   |         |      |  |   | (1,437   | )
|Purchase of Class A common shares for treasury                                    |  |                          | (7,250   | ) |      |   | (6,164   | )    |  |   |         |  
|Payment of offering costs                                                         |  |                          |         |   |      |   | (796     | )    |  |   | (5,929   | )
|                                                                                  |  |                          |          |   |      |   |          |      |  |   |          |  
|Net cash used in financing activities                                             |  |                          | (44,619  | ) |      |   | (51,641  | )    |  |   | (81,728  | )



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HEWITT ASSOCIATES, INC.

CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS -Continued

(Dollars in
thousands)



|                                                                            |  |                          |          |   |      |   |          |      |  |   |          |  
|--------------------------------------------------------------------------- |  | ------------------------ | -------- | - | ---- | - | -------- | ---- |  | - | -------- | -
|                                                                            |  | Year Ended September 30, |         
|                                                                            |  | 2004                     |          |   | 2003 |   |          | 2002 | 
|Effect of exchange rate changes on cash and cash equivalents                |  |                          | 1,013    |   |      |   | 2,210    |      |  |   | 2,065    |  
|                                                                            |  |                          |          |   |      |   |          |      |  |   |          |  
|Net increase in cash and cash equivalents                                   |  |                          | 61,696   |   |      |   | (10,975  | )    |  |   | 18,154   |  
|                                                                            |  |                          |         
|Cash and cash equivalents, beginning of period                              |  |                          | 67,785   |   |      |   | 78,760   |      |  |   | 60,606   |  
|                                                                            |  |                          |          |   |      |   |          |      |  |   |          |  
|Cash and cash equivalents, end of period                                    |  | $                        | 129,481  |   |      | $ | 67,785   |      |  | $ | 78,760   |  
|                                                                            |  |                          |          |   |      |   |          |      |  |   |          |  
|Change in client receivables and unbilled work in process:                  |  |                          |          |   |      |   |          |      |  |   |          |  
|Beginning of year client receivables and unbilled work in process           |  | $                        | 461,430  |   |      | $ | 392,267  |      |  | $ | 366,493  |  
|Beginning of year long-term unbilled work in process                        |  |                          | 7,143    |   |      |   | 1,917    |      |  |   |         |  
|Non-cash distribution of client receivables to Hewitt Holdings              |  |                          |         |   |      |   |         |      |  |   | (152,500 | )
|Fair value of acquired client receivables and unbilled work in process      |  |                          | 2,736    |   |      |   | 12,481   |      |  |   | 46,188   |  
|Effect of exchange rates on client receivables and unbilled work in process |  |                          | 7,686    |   |      |   | 9,371    |      |  |   | 4,438    |  
|End of year long-term unbilled work in process                              |  |                          | (18,003  | ) |      |   | (7,143   | )    |  |   | (1,917   | )
|End of year client receivables and unbilled work in process                 |  |                          | (522,882 | ) |      |   | (461,430 | )    |  |   | (392,267 | )
|                                                                            |  |                          |          |   |      |   |          |      |  |   |          |  
|Change in client receivables and unbilled work in process                   |  | $                        | (61,890  | ) |      | $ | (52,537  | )    |  | $ | (129,565 | )
|                                                                            |  |                          |          |   |      |   |          |      |  |   |          |  
|Schedule of noncash investing and financing activities:                     |  |                          |          |   |      |   |          |      |  |   |          |  
|Acquisition, cash paid, net of cash acquired:                               |  |                          |          |   |      |   |          |      |  |   |          |  
|Common stock issued in connection with acquisition                          |  | $                        |         |   |      | $ |         |      |  | $ | 219,240  |  
|Prepaid transaction costs                                                   |  |                          | (3,708   | ) |      |   |         |      |  |   |         |  
|Fair value of assets acquired                                               |  |                          | (3,530   | ) |      |   | (72,932  | )    |  |   | (142,406 | )
|Fair value of liabilities assumed                                           |  |                          | 2,966    |   |      |   | 52,126   |      |  |   | 100,403  |  
|Goodwill                                                                    |  |                          | (7,178   | ) |      |   | (44,346  | )    |  |   | (178,124 | )
|                                                                            |  |                          |          |   |      |   |          |      |  |   |          |  
|Cash paid, net of cash acquired                                             |  |                          | (11,450  | ) |      |   | (65,152  | )    |  |   | (887     | )
|Real estate and equipment purchased under capital leases                    |  |                          | 2,917    |   |      |   |         |      |  |   | 88,944   |  
|Software licenses purchased under long-term agreements                      |  |                          | 7,444    |   |      |   | 8,146    |      |  |   | 18,148   |  
|Client receivables distributed to Hewitt Holdings                           |  |                          |         |   |      |   |         |      |  |   | 152,500  |  
|Conversion of owner capital to common stock                                 |  |                          |         |   |      |   |         |      |  |   | 57,216   |  
|Offering costs accrued but not yet paid                                     |  |                          |         |   |      |   |         |      |  |   | 1,347    |  
|Supplementary disclosure of cash paid during the year:                      |  |                          |          |   |      |   |          |      |  |   |          |  
|Interest paid                                                               |  | $                        | 18,398   |   |      | $ | 18,390   |      |  | $ | 16,210   |  
|Income taxes paid                                                           |  |                          | 56,847   |   |      |   | 8,486    |      |  |   | 33,647   |  



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



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HEWITT ASSOCIATES, INC.

NOTES TO THE CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS

FOR THE FISCAL YEARS ENDED SEPTEMBER 30, 2004, 2003 and 2002

(Dollars in thousands except 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 outsourcing and consulting services. The Companys outsourcing business is comprised of employee
benefit plan, payroll and workforce management administration services. Hewitts consulting business is comprised of advisory services in health management, retirement and financial management, talent and organization consulting and other
consulting.



2. Summary of Significant Accounting Policies



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



Principles of Consolidation and Combination



The accompanying
consolidated and combined financial statements reflect the operations of the Company and its majority owned subsidiaries after elimination of intercompany accounts and transactions. Combined financial statements are presented for periods prior to
the transition to a corporate structure when the combined entities that now make up the Company were under common control. Upon consummation of the transition to a corporate structure, the affiliated companies of Hewitt were transferred into the
newly formed corporation, Hewitt Associates, Inc., and their results are presented on a consolidated basis.



Revenue Recognition



Revenues include
fees generated from outsourcing contracts and from consulting services provided to the Companys clients. Revenues from sales or licensing of software are not material. Under the Companys outsourcing contracts, which typically have a
three- to five-year term, clients generally pay an implementation fee and an ongoing service fee. The Company recognizes revenues for non-refundable, upfront implementation fees evenly over the period between the initiation of ongoing services
through the end of the contract term (on a straight-line basis). Indirect costs of implementation are expensed as incurred. However, incremental direct costs of implementation are deferred and recognized as expense over the same period that deferred
implementation fees are recognized. If a client terminates an outsourcing contract prematurely, both the deferred implementation revenues and related costs are recognized through the period in which the termination occurs.



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



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



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



The Company has contracts for multiple services primarily in the Outsourcing segment. In these contracts, standalone deliverables include
core services, such as Defined Benefit, Health & Welfare or Defined Contribution Benefit Plan Administration, and standalone ancillary services, such as Your Total Rewards,which are tracked and valued separately. The upfront,
non-refundable implementation fees on outsourcing standalone deliverables are also deferred and recognized over the life of the contract, so that revenues for both implementation services and ongoing services are generally recorded over the same
period (e.g. life of the contract). Consulting services provided in connection with outsourcing engagements are accounted for at the time services are provided and are valued based on prevailing market rates.



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



The Company considers the criteria established by Emerging Issues Task Force (EITF) Issue No. 99-19, Reporting Revenue Gross as a Principal versus Net as
an Agent,in determining whether revenue should be recognized on a gross versus a net basis. In consideration of these criteria, the Company recognizes revenue primarily on a gross basis. Factors considered in determining if gross or net
recognition is appropriate include whether the Company is primarily responsible to the client for the services, changes the delivered product, performs part of the service delivered, has discretion on vendor selection, or bears credit risk. In
accordance with EITF Issue No. 01-14, Income Statement Characterization of Reimbursements Received for Out-of-Pocket Expenses Incurred,reimbursements received for out-ofpocket expenses incurred are characterized as revenues
and are shown as a separate component of total revenues. Similarly, related reimbursable expenses are also shown separately within operating expenses.



Deferred Contract Costs and Deferred Contract Revenues



For new outsourcing services, upfront implementation efforts are required to set up a client and their human resource or benefit programs on the Companys systems.
The direct implementation or set up costs and any upfront set up fees are deferred and recognized into earnings over the life of the outsourcing agreement. Specific, incremental and direct costs of implementation are deferred and
recognized as primarily compensation and related expenses evenly over the period from the initiation of ongoing services through the end of the contract term. Implementation fees may be received either upfront or over the ongoing services period in
the fee per participant. By deferring the upfront set up fees over the ongoing services period, all set up revenues are recognized evenly over the contract term along with the corresponding deferred contract costs. Additionally, at September 30,
2004 and 2003, a small portion of the deferred contract revenues includes deferred revenue on payroll software maintenance agreements.



Funds Held for Clients



A small portion of the Companys outsourcing agreements require the Company to hold client funds. As of September 30, 2004 and 2003, $14,693 and $8,292, respectively, were included within prepaid expenses and
other current assets and accrued expenses related to the client fund obligations.



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Client Receivables and Unbilled Work in Process



The Company periodically evaluates the collectibility of its client receivables and unbilled work in process based on a combination of
factors. In circumstances where the Company becomes aware of a specific clients difficulty in meeting its financial obligations (e.g., bankruptcy filings, failure to pay amounts due to the Company or to others), the Company records an
allowance for doubtful accounts to reduce the client receivable to what the Company reasonably believes will be collected. For all other clients, the Company recognizes an allowance for doubtful accounts based on past write-off history and the
length of time the receivables are past due. Facts and circumstances may change that would require the Company to alter its estimates of the collectibility of client receivables and unbilled work in process.



Performance-Based Compensation



The Companys compensation program includes a performance-based component that is
determined by management. Performance-based compensation is discretionary and is based on individual, team, and total Company performance. Performance-based compensation is paid once per fiscal year after the Companys annual operating results
are finalized. The amount of expense for performance-based compensation recognized at interim and annual reporting dates involves judgment, is based on our quarterly and annual results as compared to our internal targets, and takes into account
other factors, including industry trends and the general economic environment. Annual performance-based compensation levels may vary from current expectations as a result of changes in the actual performance of the Company, team or individual. As
such, accrued amounts are subject to change in future periods if actual future performance varies from performance levels anticipated in prior interim periods.



Income Before Income Taxes



Prior to May 31, 2002, the Company operated as a group of affiliated limited liability companies and recorded income before income taxes and owner distributions in
accordance with accounting principles generally accepted in the United States of America. Income before income taxes prior to May 31, 2002 is not comparable to fiscal 2003 and 2004 income before income taxes because compensation and related expenses
for services rendered by owners have not been reflected as expenses but were reflected as capital distributions to owners. As such, results prior to May 31, 2002, do not reflect the financial position, results of operations, and changes in cash
flows that would have been reported had the Company operated as a corporation for all the periods presented.



Income Taxes



On May 31, 2002, the
Company became subject to federal and state income taxes and began to apply the asset and liability method described in Statement of Financial Accounting Standards (SFAS) No. 109, Accounting for Income Taxes.Deferred tax assets
and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and
liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. Prior to May 31, 2002, the Company was not subject to corporate income taxes because it operated as a limited liability company. As a
limited liability company, taxes on income earned prior to May 31, 2002 were the responsibility of the former owners of the Company.



Foreign Currency Translation



The Companys foreign operations use local currency as their functional currency. Accordingly, assets and liabilities of foreign subsidiaries are translated into
U.S. Dollars at exchange rates in effect at year-end, while revenues and expenses are translated at average exchange rates prevailing during the year. Translation adjustments are reported as a component of accumulated other comprehensive income
(loss) in stockholders equity. Gains or losses resulting from foreign exchange transactions, which have not been significant, are recorded in earnings within other income (expense), net.



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Earnings Per Share



On May 31, 2002, the Company completed its transition to a corporate structure and began to report earnings per share in accordance with SFAS No. 128, Earnings Per
Share.Under the treasury stock method, unvested restricted stock awards and unexercised stock options with fair market values of the underlying stock greater than the stock options exercise prices are considered common stock equivalents
for the purposes of calculating diluted earnings per share for periods when there are positive earnings and the incremental effect would be dilutive. Prior to May 31, 2002, Hewitt was comprised of limited liability companies and did not have
outstanding common stock from which to calculate earnings per share, nor did the Companys earnings include owner compensation or income taxes. As such, the Companys net income prior to May 31, 2002, is not comparable to net income of a
corporation or the Companys net income after May 31, 2002. For the year ended September 30, 2002, earnings per share was calculated based on the net loss incurred in the four-month period from May 31, 2002, through September 30, 2002.



Use of Estimates



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



Concentrations of Credit Risk



The Companys financial instruments that are exposed to concentrations of credit risk
consist of cash equivalents, client receivables and unbilled work in process. Hewitt invests its cash equivalents in the highest rated money market and similar investments and continuously monitors the investment ratings. Concentrations of credit
risk with respect to unbilled revenues and receivables are limited as no client makes up a significant portion of the Companys billings. Credit risk itself is limited due to the Companys large number of Fortune 500clients, its
clients strong credit histories, and their dispersion across many different industries and geographic regions. For each of the years ended September 30, 2004, 2003 and 2002, no single client represented ten percent or more of the
Companys total revenues.



Fair Value of Financial Instruments



Cash and cash equivalents, marketable securities, client receivables, and
foreign exchange instruments are financial assets with carrying values that approximate fair value. Accounts payable, accrued compensation and benefits, accrued expenses and liabilities and the Companys variable rate debt are financial
liabilities with carrying values that approximate fair value. The fair value of the Companys $134,000 fixed rate senior term notes is estimated to be approximately $147,000 at September 30, 2004 and was calculated by discounting the future
cash flows of the senior term notes at rates currently offered to the Company for similar debt instruments with comparable maturities.



Cash and Cash Equivalents



The Company defines cash and cash equivalents as cash and investments with original maturities of 90 days or less. At September 30, 2004 and 2003, cash and cash
equivalents included cash in checking and money market accounts as well as corporate tax-advantaged money market investments maturing in 90 days or less.



Marketable Securities



Marketable securities represent available-for-sale securities and are classified on the balance sheet within short-term investments at their fair market value. Unrealized gains or losses are reported as a component of
accumulated other comprehensive income (loss). Realized gains or losses are reported in other expenses, net on the consolidated and combined statements of operations.



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Property and Equipment



Property and equipment are recorded at cost. Depreciation and amortization include amounts recorded under capital leases and are computed using the straight-line
method over the estimated useful lives of the assets, which are as follows:



|                             |  |                                              
|---------------------------- |  | ---------------------------------------------
|Asset Description            |  | Asset Life                                   
|Computer equipment           |  | 3 to 5 years                                 
|Telecommunications equipment |  | 5 years                                      
|Furniture and equipment      |  | 5 to 15 years                                
|Leasehold improvements       |  | Lesser of estimated useful life or lease term
|Buildings                    |  | Lesser of estimated useful life or lease term



Long-lived assets are reviewed for
impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets held for use are assessed by a comparison of the carrying amount of the asset to the
estimated future undiscounted net cash flows expected to be generated by the asset. If estimated future undiscounted net cash flows are less than the carrying amount of the asset, the asset is considered impaired and expense is recorded in an amount
required to reduce the carrying amount of the asset to its fair value.



Software Development Costs



Software development costs for
software developed for internal use are accounted for in accordance with the American Institute of Certified Public Accountants Statement of Position No. 98-1 (SOP 98-1), Accounting for Costs of Computer Software Developed or
Obtained for Internal Use.SOP 98-1 requires the capitalization of certain costs incurred in connection with developing or obtaining internal use software. The Company amortizes the software costs over periods ranging from three to five years.



Costs associated with the planning and design phase of the development of
software products, including coding and testing activities necessary to establish technological feasibility of computer software products to be sold, leased, or otherwise marketed, are expensed as incurred. Once technological feasibility has been
determined, costs incurred in the construction phase of software development, including coding, testing, and product quality assurance are capitalized. Capitalization ceases when the software products are available for release to customers.



Goodwill and Intangible Assets



Goodwill is not amortized but is reviewed for impairment annually or more frequently if
indicators arise. The evaluation is based upon a comparison of the estimated fair value of the unit of the Companys business to which the goodwill has been assigned, to the sum of the carrying value of the assets and liabilities of that unit.
The fair values used in this evaluation are estimated based upon discounted future cash flow projections for the unit. These cash flow projections are based upon a number of estimates and assumptions. Intangible assets with definite lives are
amortized over their estimated useful lives and are reviewed for impairment if indicators of impairment arise.



Amortization of the Companys definite lived intangible assets are computed using the straight-line method over the estimated useful lives of the assets, which are as follows:



|                       |  |               
|---------------------- |  | --------------
|Asset Description      |  | Asset Life    
|Capitalized software   |  | 3 to 5 years  
|Trademarks             |  | 3 to 5 years  
|Customer relationships |  | 12 to 30 years



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Stock-Based Compensation



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



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



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



For purposes of pro forma disclosures, applying the Black Scholes valuation
method, had the estimated fair value of the stock options been amortized to compensation expense over the stock options vesting period, the Companys pro forma net income and earnings per share would have been as follows:



|                                                                             |  |                          |         |   |      |   |         |      |  |   |         |  
|---------------------------------------------------------------------------- |  | ------------------------ | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                                                                             |  | Year Ended September 30, |        
|                                                                             |  | 2004                     |         |   | 2003 |   |         | 2002 | 
|Net income:                                                                  |  |                          |         |   |      |   |         |      |  |   |         |  
|As reported                                                                  |  | $                        | 122,844 |   |      | $ | 94,277  |      |  | $ | 190,373 |  
|Less net income through May 31, 2002                                         |  |                          |         |   |      |   |         |      |  |   | 213,064 |  
|                                                                             |  |                          |         |   |      |   |         |      |  |   |         |  
|Net loss from June 1, 2002 through September 30, 2002                        |  |                          |         |   |      |   |         |      |  |   | (22,691 | )
|Stock-based compensation expense included in reported net income, net of tax |  |                          | 9,872   |   |      |   | 23,016  |      |  |   | 16,240  |  
|Pro forma stock compensation expense, net of tax                             |  |                          | (19,807 | ) |      |   | (28,459 | )    |  |   | (17,370 | )
|                                                                             |  |                          |         |   |      |   |         |      |  |   |         |  
|Adjusted net income                                                          |  | $                        | 112,909 |   |      | $ | 88,834  |      |  | $ | (23,821 | )
|                                                                             |  |                          |         |   |      |   |         |      |  |   |         |  
|Net income (loss) per share  basic:                                         |  |                          |         |   |      |   |         |      |  |   |         |  
|As reported                                                                  |  | $                        | 1.28    |   |      | $ | 0.99    |      |  | $ | (0.27   | )
|Adjusted net income (loss) per share                                         |  | $                        | 1.18    |   |      | $ | 0.94    |      |  | $ | (0.28   | )
|                                                                             |  |                          |        
|Net income (loss) per share  diluted:                                       |  |                          |         |   |      |   |         |      |  |   |         |  
|As reported                                                                  |  | $                        | 1.25    |   |      | $ | 0.97    |      |  | $ | (0.27   | )
|Adjusted net income (loss) per share                                         |  | $                        | 1.15    |   |      | $ | 0.92    |      |  | $ | (0.28   | )



The above pro forma information
regarding net income and earnings per share has been determined as if the Company had accounted for its employee stock options under the fair value method. The fair value for these stock options was estimated at the date of grant using a
Black-Scholes option pricing model with the following weighted-average assumptions:



|                        |  |             |  |             |  |            
|----------------------- |  | ----------- |  | ----------- |  | -----------
|                        |  | 2004        |  | 2003        |  | 2002       
|Expected volatility     |  | 35%         |  | 35%         |  | 35%        
|Risk-free interest rate |  | 3.36%-3.47% |  | 2.87%-3.37% |  | 3.81%-4.19%
|Expected life           |  | 5           |  | 5           |  | 4          
|Dividend yield          |  | 0%          |  | 0%          |  | 0%         



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New Accounting Pronouncements



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



In September 2004, the Financial Accounting Standards Boards Emerging Issue Task Force (EITF) reached a consensus on EITF Issue No. 04-08, The Effect of Contingently Convertible Instruments on Diluted Earnings per
Share. The Task Force reached a conclusion that Contingently Convertible Instruments (Co-Cos) should be included in diluted earnings per share computations, if dilutive, regardless of whether the market price trigger or other
contingent feature has been met. Through September 30, 2004, EITF Issue No. 04-08 had no effect on the Company. In October 2004, with the acquisition of Exult and $110,000 of convertible senior notes, future earnings per share computations will
include the convertible notes to the extent that they are determined to be dilutive. See Note 6 for additional information on the acquisition of Exult.



Reclassifications



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



3. Transition to a Corporate Structure



On May 31, 2002, the Company completed its transition to a corporate structure in connection with its planned initial public offering.



Prior to the transition to a corporate structure, the Company consisted of single-member
limited liability companies, which were wholly owned by Hewitt Holdings. As such, owners capital represented the ownership interests of Hewitt Holdings in the Company. Historically, distributions to and contributions from Hewitt Holdings were
based on the capital requirements of the Company and of Hewitt Holdings, and were subject to the discretion of the owners of Hewitt Holdings.



On March 1, 2002, Hewitt Associates, Inc., a Delaware corporation, was formed as a subsidiary of Hewitt Holdings. Three classes of common stock were authorized. The
holders of Class A, Class B, and Class C common stock have one vote per share. All shares of Class B and Class C common stock are voted in accordance with a majority of the votes cast by the holders of Class B and Class C common stock as a group.



In May 2002, Hewitt Associates LLC distributed $152,500 of accounts receivable
and $55,000 of cash to Hewitt Holdings to fund a distribution to the owners of accumulated earnings in preparation for Hewitt Associates LLC and Affiliates transition to a corporate structure. Cash collected on the receivables was first
received by the Company and then remitted to Hewitt Holdings and the Company did not bear any collection risk associated with these receivables.



On May 31, 2002, Hewitt Holdings transferred all of its ownership interests in Hewitt Associates LLC and Affiliates to Hewitt Associates, Inc., thereby making Hewitt
Associates LLC and Affiliates a wholly-owned subsidiary of the Company. The capital in the business was converted and Hewitt Holdings received 70,819,520 shares of the Companys Class B common stock.



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In connection with the transition to a corporate structure, the Company incurred a non-recurring compensation expense
resulting from certain owners receiving more than their proportional share of total capital, without offset for those owners who received less than their proportional share in the issuance of the Class B common stock. The amount of this one-time
charge was $17,843. As a result of owners becoming employees of the Company, the owners began to receive compensation and the Company incurred an additional non-recurring compensation expense resulting from the establishment of a vacation liability
for these owners in the amount of $8,300. The Company also became subject to income taxes subsequent to its transition to a corporate structure. As a result, the Company incurred a non-recurring income tax expense of $21,711 to initially record
deferred tax assets and liabilities under the provisions of SFAS No. 109.



On
July 1, 2003, Hewitt Holdings distributed the shares of Class B common stock of Hewitt Associates to its owners, with the exception of certain owners resident outside the United States who will continue to hold their shares through Hewitt Holdings.
The shares continue to be subject to the same restrictions with respect to voting, transfer and book to market phase-in as they were when the shares were held by Hewitt Holdings. The distribution reduced Hewitt Holdings majority interest in
Hewitt Associates of approximately 71% at June 30, 2003, to a minority interest of approximately 2% at September 30, 2004 and 2003.



On April 29, 2004, Hewitt Holdings LLC changed its name to FORE Holdings LLC (FORE Holdings).



4. Initial Public Offering



On June 27, 2002, the Company sold 11,150,000 shares of Class A common stock at $19.00 per share in its initial public offering. The Companys gross proceeds from
the offering were $211,850, before the underwriting discount of $14,829 and offering expenses of $8,072.



In July 2002, the underwriters exercised their over-allotment option to purchase an additional 1,672,500 shares of the Companys Class A common stock at $19.00 per share. The option exercise generated gross
proceeds of $31,778 before the underwriting discount of $2,225.



Of the
$218,502 in net proceeds received in July 2002, $52,000 was used to repay the outstanding balance on the Companys lines of credit, $8,341 was used to pay income taxes resulting from the Companys transition to a corporate structure, and
the balance was retained for general corporate purposes and working capital.



In connection with the initial public offering, the Company granted to employees restricted stock, restricted stock units, and nonqualified stock options on common stock. (See Note 17, Stock-Based Compensation Plan, for additional
information).



5. 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. For purposes of calculating basic and diluted earnings per share, vested
restricted stock awards and exercised stock options are considered outstanding. For diluted EPS, a portion of unvested restricted stock awards and unexercised stock options that are in-the-money are also considered common stock
equivalents. Restricted stock awards vest 25 percent on each anniversary of the grant date and are not considered outstanding in basic earnings per share until the vesting date.



For the year ended September 30, 2002, earnings per share was calculated based on the net loss incurred between May 31, 2002 and September
30, 2002, the four-month period during which the Company operated as a corporation. As such, the earnings per share for the year ended September 30, 2002 is not indicative of the amount that would have been computed had the Company been a
corporation for the entire year presented. During the period between May 31, 2002 and September 30, 2002, the Company also incurred several one-time charges totaling $47,854 (see Note 3) related to the Companys transition to a corporate
structure and $27,525 of compensation expense related to



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the initial public offering restricted stock award which resulted in a net loss. As such, the effect of incremental
shares of common stock equivalents has not been reflected as an adjustment to diluted earnings per share as the impact is antidilutive. Additionally, common stock has been weighted from the time of the Companys transition to a corporate
structure on May 31, 2002 and not from the beginning of fiscal 2002.



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



|                                                         |  |                          |            |      |   |            |  |   |            |  
|-------------------------------------------------------- |  | ------------------------ | ---------- | ---- | - | ---------- |  | - | ---------- | -
|                                                         |  | Year Ended September 30, |           
|                                                         |  | 2004                     |            | 2003 |   | 2002       | 
|Net income as reported                                   |  | $                        | 122,844    |      | $ | 94,277     |  | $ | 190,373    |  
|                                                         |  |                          |            |      |   |            |  |   |            |  
|Less net income through May 31, 2002                     |  |                          |            |      |   |            |  |   | 213,064    |  
|                                                         |  |                          |            |      |   |            |  |   |            |  
|Net loss from June 1, 2002 through September 30, 2002    |  |                          |            |      |   |            |  | $ | (22,691    | )
|                                                         |  |                          |            |      |   |            |  |   |            |  
|Weighted-average number of common stock for basic        |  |                          | 96,031,389 |      |   | 94,783,223 |  |   | 85,301,042 |  
|                                                         |  |                          |           
|Incremental effect of dilutive common stock equivalents: |  |                          |            |      |   |            |  |   |            |  
|Unvested restricted stock awards                         |  |                          | 741,387    |      |   | 1,312,259  |  |   |           |  
|Unexercised in-the-money stock options                   |  |                          | 1,177,312  |      |   | 737,241    |  |   |           |  
|                                                         |  |                          |            |      |   |            |  |   |            |  
|Weighted-average number of common stock for diluted      |  |                          | 97,950,088 |      |   | 96,832,723 |  |   | 85,301,042 |  
|                                                         |  |                          |            |      |   |            |  |   |            |  
|Earnings (loss) per share  basic                        |  | $                        | 1.28       |      | $ | 0.99       |  | $ | (0.27      | )
|Earnings (loss) per share  diluted                      |  | $                        | 1.25       |      | $ | 0.97       |  | $ | (0.27      | )



Stock options to purchase 996,380
weighted-average shares in 2004, 51,782 weighted-average shares in 2003 and 56,223 weighted-average shares in 2002 of Class A common stock, were outstanding, but were not included in the computation of diluted earnings per share because the exercise
price of the options was greater than the average market price of the Class A common stock and, therefore, the effect would have been antidilutive.



6. Acquisitions



Exult Merger



Exult has been a leading
provider of HR business process outsourcing. On June 15, 2004, we entered into an Agreement and Plan of Merger with Exult, Inc. and Eagle Merger Corp., a newly formed wholly owned subsidiary of Hewitt and on October 1, 2004, after obtaining
regulatory and stockholder approvals, the merger was completed. Eagle Merger Corp. was merged with and into Exult, and Exult became the surviving corporation and a wholly owned subsidiary of Hewitt. Under the Agreement, each share of Exult common
stock outstanding immediately prior to the effective time of the merger was converted into 0.2 shares of Hewitt Class A common stock. As such, the Exult stockholders received 22,159,921 shares of Hewitt Class A stock in exchange for the 110,799,662
shares of outstanding Exult common stock. The purchase price is estimated to be approximately $776 million, including assumed debt and acquisition related costs. On October 29, 2004, Exult was merged into Hewitt Associates, Inc. As part of the
acquisition, the Company acquired $110 million of 2.5% convertible senior notes, due on October 1, 2010. On October 6, 2004, the Company filed a Registration Statement on Form S-3 with the Securities and Exchange Commission to allow the holders to
resell their notes and the 1,870,748 shares of Hewitt Class A common stock issuable upon conversion of their notes at the current conversion price. In connection with the merger, the Company granted 692,139 shares of Class A restricted stock and
restricted stock units to certain Exult employees. These awards were valued at $18,535 on the October 1, 2004 grant date (a price of $26.78 per share) and vest ratably through June 27, 2006.



Benefits Administration and Actuarial Business of the Northern Trust Corporation



On June 15, 2003, the Company acquired substantially all of the assets of
Northern Trust Retirement Consulting LLC, Northern Trust Corporations retirement consulting and administration business (NTRC), which provides retirement consulting and actuarial services and defined benefit, defined contribution
and retiree health and welfare administration services. The benefit administration business will operate within the Companys Outsourcing segment



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and the retirement consulting and actuarial business within the Consulting segment. The purchase price was comprised of
$17,600 in cash for the assignment of client, vendor and third-party contract rights and obligations applicable to the acquired business; computer equipment, furniture and leasehold improvements owned or leased by NTRC in its Atlanta, Georgia
facility, and the assumption of NTRCs real estate lease obligation for its Atlanta, Georgia facility. The allocation of the purchase price resulted in the allocation of $7,821 to goodwill. The Company expects all of the goodwill to be
deductible for U.S. tax purposes. As part of the acquisition agreement, the Company has agreed with the Northern Trust Corporation to, on a non-exclusive basis, recommend Northern Trust Corporations custody, trustee and benefit payment
services to the Companys clients and prospective clients and Northern Trust Corporation has agreed to recommend the Companys outsourcing services to their clients and prospective clients. NTRCs results of operations are included
within the Companys historical results from the acquisition date of June 15, 2003. This acquisition is not considered to be material to the Company, and, therefore, pro forma information has not been presented.



Cyborg Worldwide, Inc.



On June 5, 2003, the Company purchased Cyborg Worldwide, Inc., the parent of Cyborg Systems, Inc. (Cyborg), a global provider of
human resources management software and payroll services. Cyborg will operate within the Companys Outsourcing segment. The purchase price totaled $43,645, and was comprised of $43,000 of cash and $645 of acquisition related costs, plus the
potential for additional performance-based consideration of up to $30,000 payable through 2006. On June 8, 2004, the Company entered an agreement with Cyborgs selling stockholders to settle the performance-based consideration obligation for
$10,000. The allocation of the $53,645 adjusted purchase price to acquired net assets resulted in the allocation of $25,353 to goodwill and $30,638 to identifiable intangible assets, which includes $17,823 to customer relationships with an estimated
twelve-year useful life, $12,116 to capitalized software with an estimated five-year life and $699 to trademarks with an estimated three-year useful life. The preliminary allocation also included allocations of $9,138 to identifiable assets and
$11,484 to assumed liabilities. The Company expects all of the goodwill to be deductible for U.S. tax purposes. Cyborgs results of operations are included within the Companys historical results from the acquisition date of June 5, 2003.
This acquisition is not considered to be material to the Company, and, therefore, pro forma information has not been presented.



Bacon & Woodrow



On June 5, 2002, the Company acquired the actuarial and benefits consulting business of Bacon & Woodrow (Bacon & Woodrow) in the United Kingdom. The purchase price totaled $259,009, and was
comprised of $219,240 of common stock, $38,882 in assumed net liabilities, and $887 of acquisition related costs. Bacon & Woodrows results of operations are included within the Companys historical results from the acquisition date of
June 5, 2002.



Pursuant to the purchase agreement, the former partners and
employees of Bacon & Woodrow initially received an aggregate of 1,400,000 shares of the Companys Series A mandatorily redeemable preferred stock which was redeemable for shares of the Companys common stock. Effective August 2, 2002,
the Bacon & Woodrow former partners and employees elected to exchange their shares of Series A preferred stock for common stock. Of the 9,417,526 shares of common stock issued, the former partners of Bacon & Woodrow received 2,906,904 shares
of Class B common stock and 5,568,869 shares of Class C common stock, and a trust for the benefit of the non-partner employees of Bacon & Woodrow received 941,753 shares of Class A common stock.



The allocation of the $259,009 purchase price to acquired net assets resulted in the
allocation of $178,124 to goodwill, $65,874 to identifiable intangible assets (primarily customer relationships) with indefinite lives, $15,011 to identifiable intangible assets with estimated five-year lives, $61,521 to identifiable assets (which
includes $40,445 of client receivables and unbilled work in process), and $100,403 to assumed liabilities (which includes $22,687 of accounts payable and accrued expenses and $36,071 of short term borrowings). The Company expects all of the goodwill
to be deductible for U.S. tax purposes.



In the quarter ending September 30,
2003, the Company began amortizing the customer relationships intangible asset by taking a charge for the year then ending. The customer relationships intangible asset totaled £45,200, or $65,874



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as of the acquisition date. The Company is amortizing the intangible asset in two classes on a straight-line basis over
15 and 30 years. The allocation between the two classes was based primarily on customer revenue size. The useful life for each class was based primarily on historical customer turnover, the relative difficulty in the ability of customers to switch
service providers and the nature and complexity of the customers. The Company estimates that it will record recurring non-cash, pre-tax amortization expense of approximately £408 ($734 at a September 30, 2004 exchange rate) per quarter for the
next 15 years and approximately £345 ($621 at a September 30, 2004 exchange rate) per quarter thereafter through the end of the 30 year period.



Assuming the acquisition of Bacon & Woodrow occurred at the beginning of fiscal 2002, pro forma net revenues would have been approximately $1,807,000 in 2002 and pro
forma net income would have been approximately $215,000 in 2002. These pro forma results, which are unaudited, give effect to the Companys incorporation and initial public offering on the dates such events actually occurred, on May 31, 2002
and June 27, 2002, respectively. Because the Company was a limited liability company for the first eight months of fiscal 2002, the pro forma effect of the acquisition on earnings per share is not meaningful. The pro forma results are not
necessarily indicative of what would have occurred if the acquisition had been consummated at the beginning of 2002, nor are they necessarily indicative of future consolidated operating results.



Other Acquisitions



During 2004, the Company acquired a controlling interest in a joint venture investment in Puerto Rico and the remaining interest in a joint
venture investment in India. The Company acquired these entities for cash at an aggregate cost of $13,249. The preliminary allocations of the purchase price resulted in the aggregate allocation of $3,569 to goodwill, of which $2,572 was assigned to
the Outsourcing segment, with the remainder of $997 assigned to the Consulting segment. The Company expects all of the goodwill to be deductible for U.S. tax purposes. These acquisitions are not considered to be material to the Company, and,
therefore, pro forma information has not been presented.



During 2003, the
Company acquired the controlling interests in joint venture investments in The Netherlands, India, and Singapore, and an actuarial business in Ireland. The Company acquired these entities for cash at an aggregate cost of $14,617. The allocations of
the purchase price resulted in the aggregate allocation of $17,183 to goodwill, of which $5,427 was assigned to the Outsourcing segment, with the remainder of $11,756 assigned to the Consulting segment. The Company expects approximately one-half of
the goodwill to be deductible for U.S. tax purposes. These acquisitions are not considered to be material to the Company, and, therefore, pro forma information has not been presented.



7. Short-Term Investments



Short-term investments are comprised of available-for-sale securities. Investments classified as available-for-sale securities consist of $183,205 and $159,720 of auction
rate municipal bonds at September 30, 2004 and 2003, respectively. The Companys investments in these securities are recorded at cost, which approximates fair market value due to their variable interest rates which typically reset every 28 to
35 days. As a result, at September 30, 2004 and 2003, the company had no cumulative gross unrealized holding gains (losses) or gross realized gains (losses) from its available-for-sale securities. All income generated from the auction rate municipal
bonds was recorded as interest income.



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Estimated fair market value of debt securities classified as available-for-sale by contractual maturities consist of the
following:



|                                            |  |      |        
|------------------------------------------- |  | ---- | -------
|                                            |  | 2004
|Amounts included in short-term investments: |  |      |        
|Due in less than one year                   |  | $    | 4,855  
|Due after one year through five years       |  |      |       
|Due after five years through ten years      |  |      | 9,500  
|Due after ten years                         |  |      | 168,850
|                                            |  |      |        
|                                            |  | $    | 183,205
|                                            |  |      |        



8. Client Receivables and Unbilled
Work in Process



Client receivables and unbilled work in process, net of
allowances, at September 30, 2004 and 2003, consisted of the following:



|                         |  |      |         |      |   |        
|------------------------ |  | ---- | ------- | ---- | - | -------
|                         |  | 2004 |         | 2003
|Client receivables       |  | $    | 339,306 |      | $ | 278,966
|Unbilled work in process |  |      | 183,576 |      |   | 182,464
|                         |  |      |         |      |   |        
|                         |  | $    | 522,882 |      | $ | 461,430
|                         |  |      |         |      |   |        



As of September 30, 2004 and 2003,
$18,003 and $7,143, respectively, of long-term unbilled work in process is classified within other assets, net.



The activity in the client receivable and unbilled work in process allowances for the years ended September 30, 2004, 2003 and 2002, consisted of the following:



|                             |  |      |         |   |      |   |         |      |  |   |         |  
|---------------------------- |  | ---- | ------- | - | ---- | - | ------- | ---- |  | - | ------- | -
|                             |  | 2004 |         |   | 2003 |   |         | 2002 | 
|Balance at beginning of year |  | $    | 15,011  |   |      | $ | 16,160  |      |  | $ | 14,540  |  
|Increase in allowances       |  |      | 23,764  |   |      |   | 17,661  |      |  |   | 31,453  |  
|Use of allowances            |  |      | (17,043 | ) |      |   | (18,810 | )    |  |   | (29,833 | )
|                             |  |      |         |   |      |   |         |      |  |   |         |  
|Balance at end of year       |  | $    | 21,732  |   |      | $ | 15,011  |      |  | $ | 16,160  |  
|                             |  |      |         |   |      |   |         |      |  |   |         |  



9. Financial Instruments



The Company does not enter into derivative transactions except in limited
situations when there is a compelling reason to mitigate economic risk. On August 6, 2001, Hewitt purchased a £150 million foreign currency option to offset the foreign currency risk associated with its planned purchase of the benefits
consulting business of Bacon & Woodrow for common stock with a value of £140 million. (See Note 6, Acquisitions). The cost of the foreign currency option was $2,344, and it expired in May 2002. This instrument did not qualify for the hedge
accounting treatment under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, because SFAS No. 133 prohibits hedge accounting for a forecasted business combination. The instrument was marked to the spot rate and
resulting gains or losses were recognized currently in other expenses, net. For the year ended September 30, 2002 the loss on the option was $3,653. The Company had no derivative instruments outstanding at September 30, 2004 and 2003.



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10. Property and Equipment



As of September 30, 2004 and 2003, net property and equipment, which includes assets under capital leases, consisted of the following:



|                                               |  |      |          |   |      |   |          |  
|---------------------------------------------- |  | ---- | -------- | - | ---- | - | -------- | -
|                                               |  | 2004 |          |   | 2003 |  
|Property and equipment:                        |  |      |          |   |      |   |          |  
|Buildings                                      |  | $    | 92,057   |   |      | $ | 90,328   |  
|Computer equipment                             |  |      | 284,778  |   |      |   | 255,723  |  
|Telecommunications equipment                   |  |      | 116,027  |   |      |   | 110,569  |  
|Furniture and equipment                        |  |      | 101,493  |   |      |   | 92,145   |  
|Leasehold improvements                         |  |      | 92,089   |   |      |   | 81,912   |  
|                                               |  |      |          |   |      |   |          |  
|Total property and equipment                   |  |      | 686,444  |   |      |   | 630,677  |  
|Less accumulated depreciation and amortization |  |      | (449,964 | ) |      |   | (393,201 | )
|                                               |  |      |          |   |      |   |          |  
|Balance at end of year                         |  | $    | 236,480  |   |      | $ | 237,476  |  
|                                               |  |      |          |   |      |   |          |  



11. Goodwill and Other Intangible
Assets



The Company adopted SFAS No. 142, Goodwill and Other Intangible
Assets,on October 1, 2002, which requires that goodwill no longer be amortized but tested for impairment at least annually.



The Company tests goodwill for impairment annually or whenever indicators of impairment arise. During the years ended September 30, 2004, 2003 and 2002, no impairments
were recognized.



The following is a summary of net income for the year ended
September 30, 2002, adjusted to remove the amortization of goodwill:



|                                  |  |      |        
|--------------------------------- |  | ---- | -------
|                                  |  | 2002
|Net income:                       |  |      |        
|As reported                       |  | $    | 190,373
|Goodwill amortization, net of tax |  |      | 730    
|                                  |  |      |        
|As adjusted                       |  | $    | 191,103
|                                  |  |      |        



The following is a summary of changes
in the carrying amount of goodwill for the years ended September 30, 2004 and 2003:



|                                            |  |                    |        |                   |   |         |       |  |   |        
|------------------------------------------- |  | ------------------ | ------ | ----------------- | - | ------- | ----- |  | - | -------
|                                            |  | OutsourcingSegment |        | ConsultingSegment |   |         | Total
|Balance at September 30, 2002               |  | $                  |       |                   | $ | 201,286 |       |  | $ | 201,286
|Additions and other adjustments             |  |                    | 26,741 |                   |   | 17,605  |       |  |   | 44,346 
|Effect of changes in foreign exchange rates |  |                    |       |                   |   | 13,662  |       |  |   | 13,662 
|                                            |  |                    |        |                   |   |         |       |  |   |        
|Balance at September 30, 2003               |  |                    | 26,741 |                   |   | 232,553 |       |  |   | 259,294
|Additions and other adjustments             |  |                    | 13,669 |                   |   | (6,495  | )     |  |   | 7,174  
|Effect of changes in foreign exchange rates |  |                    | 245    |                   |   | 19,030  |       |  |   | 19,275 
|                                            |  |                    |        |                   |   |         |       |  |   |        
|Balance at September 30, 2004               |  | $                  | 40,655 |                   | $ | 245,088 |       |  | $ | 285,743
|                                            |  |                    |        |                   |   |         |       |  |   |        



Goodwill additions during the year
ended September 30, 2004 resulted from the settlement of the Cyborg performance-based consideration obligation and from the acquisitions of the remaining interest in two of the Companys joint ventures, one in Puerto Rico and one in India.
Goodwill adjustments during the year ended September 30, 2004 resulted from purchase price allocation adjustments related to the NTRC acquisition, an acquisition in the Netherlands and Switzerland. Goodwill, customer relationships, and trademark
additions during the year ended September 30, 2003, resulted from acquisitions (see Note 6, Acquisitions) and goodwill also increased from an adjustment to the purchase price allocation related to an acquisition in Switzerland.



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Intangible assets with definite useful lives are amortized over their estimated useful lives and are tested for
impairment whenever indicators of impairment arise. The following is a summary of intangible assets at September 30, 2004 and 2003:



|                       |  |                     |         |                         |   |         |  |                     |         |                         |   |         |  |   |         |  |   |        
|---------------------- |  | ------------------- | ------- | ----------------------- | - | ------- |  | ------------------- | ------- | ----------------------- | - | ------- |  | - | ------- |  | - | -------
|                       |  | 2004                |         | 2003                   
|Definite useful life   |  | GrossCarryingAmount |         | AccumulatedAmortization |   | Net     |  | GrossCarryingAmount |         | AccumulatedAmortization |   | Net    
|Capitalized software   |  | $                   | 242,128 |                         | $ | 157,159 |  | $                   | 84,969  |                         | $ | 219,220 |  | $ | 124,166 |  | $ | 95,054 
|Trademarks             |  |                     | 12,478  |                         |   | 5,821   |  |                     | 6,657   |                         |   | 11,517  |  |   | 2,962   |  |   | 8,555  
|Customer relationships |  |                     | 109,422 |                         |   | 8,757   |  |                     | 100,665 |                         |   | 102,392 |  |   | 3,407   |  |   | 98,985 
|                       |  |                     |         |                         |   |         |  |                     |         |                         |   |         |  |   |         |  |   |        
|Total                  |  | $                   | 364,028 |                         | $ | 171,737 |  | $                   | 192,291 |                         | $ | 333,129 |  | $ | 130,535 |  | $ | 202,594
|                       |  |                     |         |                         |   |         |  |                     |         |                         |   |         |  |   |         |  |   |        



The increase in the gross carrying
amounts of trademarks and customer relationships is primarily the result of the impact of foreign currency exchange rates.



Amortization expense related to definite-lived intangible assets for the years ended September 30, 2004, 2003 and 2002, are as follows:



|                       |  |      |        |      |   |        |  |   |       
|---------------------- |  | ---- | ------ | ---- | - | ------ |  | - | ------
|                       |  | 2004 |        | 2003 |   | 2002  
|Capitalized software   |  | $    | 35,063 |      | $ | 32,234 |  | $ | 24,679
|Trademarks             |  |      | 2,617  |      |   | 2,210  |  |   | 509   
|Customer relationships |  |      | 5,126  |      |   | 3,247  |  |   |      
|                       |  |      |        |      |   |        |  |   |       
|Total                  |  | $    | 42,806 |      | $ | 37,691 |  | $ | 25,188
|                       |  |      |        |      |   |        |  |   |       



Applying current foreign exchange
rates, estimated amortization expense related to intangible assets with definite lives at September 30, 2004, for each of the years in the five-year period ending September 30, 2009 and thereafter is as follows:



|                                           |  |      |        |      |   |        |  |      |        |      |   |                    |  |       |       |  |   |        |  |   |        
|------------------------------------------ |  | ---- | ------ | ---- | - | ------ |  | ---- | ------ | ---- | - | ------------------ |  | ----- | ----- |  | - | ------ |  | - | -------
|Fiscal year ending:                        |  | 2005 |        | 2006 |   | 2007   |  | 2008 |        | 2009 |   | 2010 andthereafter |  | Total
|Estimated intangibles amortization expense |  | $    | 38,795 |      | $ | 32,669 |  | $    | 24,305 |      | $ | 13,232             |  | $     | 8,335 |  | $ | 74,955 |  | $ | 192,291



12. Other Assets



As of September 30, 2004 and 2003, other assets consisted of the following:



|                                                 |  |      |        |      |   |       
|------------------------------------------------ |  | ---- | ------ | ---- | - | ------
|                                                 |  | 2004 |        | 2003
|Other assets:                                    |  |      |        |      |   |       
|Long-term unbilled work in process               |  | $    | 18,003 |      | $ | 7,143 
|Prepaid long-term interest and service contracts |  |      | 9,798  |      |   | 11,667
|Investments in affiliated companies              |  |      | 2,004  |      |   | 3,127 
|                                                 |  |      |        |      |   |       
|Other assets                                     |  | $    | 29,805 |      | $ | 21,937
|                                                 |  |      |        |      |   |       



The Company has several prepaid
long-term contracts for maintenance on computer software systems. Benefits related to these long-term prepaid maintenance contracts are received over the contractual period, as designated. The long-term portion of the prepaid interest relates to
prepaid lease obligations of the Company.



Investments in less than 50%-owned
affiliated companies over which the Company has the ability to exercise significant influence are accounted for using the equity method of accounting. During 2004 and 2003, the Company acquired the controlling interests in joint venture investments
in Puerto Rico, The Netherlands, India, and Singapore. See Note 6, Acquisitions, for additional information.



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13. Debt



Debt at September 30, 2004 and 2003, consisted of the following:



|                                     |  |      |         |      |   |        
|------------------------------------ |  | ---- | ------- | ---- | - | -------
|                                     |  | 2004 |         | 2003
|Unsecured lines of credit            |  | $    |        |      | $ | 15,852 
|Other foreign debt                   |  |      | 698     |      |   | 5,711  
|Unsecured senior term notes          |  |      | 134,000 |      |   | 147,000
|                                     |  |      |         |      |   |        
|                                     |  |      | 134,698 |      |   | 168,563
|Current portion                      |  |      | 13,445  |      |   | 33,000 
|                                     |  |      |         |      |   |        
|Long-term debt, less current portion |  | $    | 121,253 |      | $ | 135,563
|                                     |  |      |         |      |   |        



The principal portion of long-term
debt becomes due as follows:



|                    |  |   |        
|------------------- |  | - | -------
|Fiscal year ending: |  |  
|2005                |  | $ | 13,445 
|2006                |  |   | 23,136 
|2007                |  |   | 28,036 
|2008                |  |   | 17,030 
|2009                |  |   | 7,051  
|2010 and thereafter |  |   | 46,000 
|                    |  |   |        
|Total               |  | $ | 134,698
|                    |  |   |        



On September 27, 2002, the Company
obtained two unsecured line of credit facilities. The 364- day facility provided for borrowings up to $70 million and expired on September 26, 2003. The three-year facility provided for borrowings up to $50 million. On September 29, 2003, the
three-year facility was amended to provide for borrowings up to $75 million. Borrowings under the facility accrue interest at LIBOR plus 52.5-to-72.5 basis points or the prime rate, at the Companys option. Borrowings are repayable upon demand
or at expiration of the facility on September 27, 2005. Quarterly facility fees ranging from 10 to 15 basis points are charged on the average daily commitment under the facility. If the utilization under the facility exceeds 50% of the commitment,
an additional utilization fee based on the utilization is assessed at a rate of 0.125% per annum. At September 30, 2004 and 2003, there was no outstanding balance on the remaining facility.



On March 7, 2003, Hewitt entered into a contract with a lender to guarantee borrowings of its
subsidiaries up to $13 million in multiple currency loans and letters of credit to replace its unsecured multi-currency line of credit, which the Company repaid in February 2003. On August 1, 2003, the contract was amended to increase the guarantee
amount to $20 million. There is no fixed termination date on this contract. This contract allows Hewitt subsidiaries to secure financing at rates based on Hewitts credit-worthiness. The contract was signed August 31, 2004, and $1.4 million of
the facility is used by Hewitts India office to support local letters of credit and bank guarantees. The facility provides for borrowings at LIBOR plus 75 basis points. As of September 30, 2004 and 2003, there were no borrowings under this
contract.



On October 16, 2000, the Company issued unsecured senior term notes
to various note holders in the amount of $25,000. Of this amount, $10,000 bears interest at 7.65%, and is repayable on October 15, 2005; $15,000 bears interest at 7.90%, and is repayable on October 15, 2010.



On July 7, 2000, the Company issued unsecured senior term notes to various note holders in
the amount of $25,000. Of this amount, $15,000 bears interest at 7.93%, and is repayable on June 30, 2007; $10,000 bears interest at 8.11%, and is repayable on June 30, 2010.



On March 30, 2000, the Company issued $50,000 of unsecured senior term notes to various note holders. Of this amount, $15,000 bears interest
at 7.94% and is repayable in annual installments beginning March 2003 through March 2007. The Company began paying annual installments of $3,000 in March 2003. At September 30, 2004 and 2003, the outstanding balance was $9,000 and $12,000,
respectively. The remaining $35,000 bears interest at 8.08% and is repayable in annual installments beginning March 2008 through March 2012.



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On February 23, 1998, the Company obtained an unsecured multi-currency line of credit with banks permitting borrowings up
to $10,000 at a multi-currency interbank interest rate plus 75 basis points. All outstanding balances on the unsecured multi-currency line of credit were repaid in full at the expiration of the facility on February 28, 2003. In addition, Hewitt
Bacon & Woodrow Ltd., the Companys U.K. subsidiary, had an unsecured British pound sterling line of credit permitting borrowings of up to £20 million until July 30, 2003, and £17 million thereafter until expiration of the
facility on July 1, 2004. In July 2004, the line of credit was amended and extended to allow for borrowings up to £5,000 until the expiration of the facility on July 31, 2005. As of September 30, 2004 there was no outstanding balance on the
line of credit and the current interest rate was 5.775%. At September 30, 2003, the outstanding balance was £9,500, equivalent to $15,852, with interest at a rate of 4.53%. Other foreign debt outstanding at September 30, 2004 and 2003 totaled
$698 and $5,711, respectively, pursuant to local banking relationships.



On May
30, 1996, the Company issued unsecured senior term notes to various note holders in the amount of $50,000, bearing interest at 7.45%. The notes are repayable in annual installments beginning May 2004 through May 2008. The Company began paying
installments of $10,000 in May 2004. At September 30, 2004 and 2003, the outstanding balances were $40,000 and $50,000, respectively.



On May 28, 1996, the Company obtained an unsecured seven-year term loan agreement with various banks in the amount of $30,000, bearing interest at 6.50%. The Company paid
interest on a quarterly basis through June 30, 2002. On July 31, 1998, the Company also began to make monthly principal payments which continued through June 30, 2002, at which time, the Company paid the remaining principal balance.



Various debt agreements call for the maintenance of specified financial ratios, among other
restrictions. At September 30, 2004 and 2003, the Company was in compliance with all debt covenants.



14. Lease Agreements



The Company has
obligations under long-term non-cancelable lease agreements, principally for office space, furniture, and equipment, with terms ranging from one to twenty years. Some of the leases are with related parties (See Note 15, Related Party Transactions).



Capital Leases



Capital lease obligations at September 30, 2004 and 2003, consisted of the following:



|                                                |  |      |        |      |   |       
|----------------------------------------------- |  | ---- | ------ | ---- | - | ------
|                                                |  | 2004 |        | 2003
|Building capital leases                         |  | $    | 83,023 |      | $ | 85,813
|Computer and telecommunications equipment       |  |      | 2,332  |      |   | 3,980 
|                                                |  |      |        |      |   |       
|                                                |  |      | 85,355 |      |   | 89,793
|Current portion                                 |  |      | 5,373  |      |   | 6,602 
|                                                |  |      |        |      |   |       
|Capital lease obligations, less current portion |  | $    | 79,982 |      | $ | 83,191
|                                                |  |      |        |      |   |       



The Companys two building
capital leases are payable in monthly installments at 7.33% interest and expire in April 2017 and May 2017.



The Companys computer and telecommunications equipment installment notes and capitalized leases are secured by the related equipment and are payable typically over three to five years in monthly or quarterly
installments and at various interest rates ranging from 2.455% to 7.0%.



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The following is a schedule of minimum future rental payments required as of September 30, 2004, under capital leases
which have an initial or remaining non-cancelable lease term in excess of one year:



|                             |  |           |        |          |   |        |  |   |        
|---------------------------- |  | --------- | ------ | -------- | - | ------ |  | - | -------
|Fiscal year ending:          |  | Principal |        | Interest |   | Total 
|                             |  |           |        |          |   |        |  |   |        
|2005                         |  | $         | 5,373  |          | $ | 6,015  |  | $ | 11,388 
|2006                         |  |           | 3,738  |          |   | 5,695  |  |   | 9,433  
|2007                         |  |           | 4,118  |          |   | 5,416  |  |   | 9,534  
|2008                         |  |           | 4,599  |          |   | 5,102  |  |   | 9,701  
|2009                         |  |           | 5,144  |          |   | 4,750  |  |   | 9,894  
|2010 and there after         |  |           | 62,383 |          |   | 19,617 |  |   | 82,000 
|                             |  |           |        |          |   |        |  |   |        
|Total minimum lease payments |  | $         | 85,355 |          | $ | 46,595 |  | $ | 131,950
|                             |  |           |        |          |   |        |  |   |        



Operating Leases



The Company also has various third-party operating leases for office space, furniture, and
equipment with terms ranging from one to twenty years. The Company has various office leases that grant a free rent period and have escalating rents. The accompanying consolidated and combined statements of operations reflect rent expense on a
straight-line basis recognized over the term of the leases. The difference between straight-line basis rent and the amount paid has been recorded as accrued lease obligations. The Company also has leases that have lease renewal provisions.



The following is a schedule of minimum future rental payments as of September
30, 2004, under operating leases with an initial or remaining non-cancelable lease terms in excess of one year:



|                             |  |            |         |              |   |         |  |   |        
|---------------------------- |  | ---------- | ------- | ------------ | - | ------- |  | - | -------
|Fiscal year ending:          |  | ThirdParty |         | RelatedParty |   | Total  
|                             |  |            |         |              |   |         |  |   |        
|2005                         |  | $          | 64,613  |              | $ | 33,075  |  | $ | 97,688 
|2006                         |  |            | 98,889  |              |   | 33,339  |  |   | 132,228
|2007                         |  |            | 65,705  |              |   | 33,635  |  |   | 99,340 
|2008                         |  |            | 31,037  |              |   | 33,845  |  |   | 64,882 
|2009                         |  |            | 23,414  |              |   | 33,022  |  |   | 56,436 
|2010 and there after         |  |            | 136,344 |              |   | 270,763 |  |   | 407,107
|                             |  |            |         |              |   |         |  |   |        
|Total minimum lease payments |  | $          | 420,002 |              | $ | 437,679 |  | $ | 857,681
|                             |  |            |         |              |   |         |  |   |        



Total rental expense for operating
leases amounted to $115,685 in 2004, $104,094 in 2003 and $104,228 in 2002.



15. Related Party Transactions



The Company entered into real
estate transactions as described below with FORE Holdings and its subsidiaries, Hewitt Properties I LLC, Hewitt Properties II LLC, Hewitt Properties III LLC, Hewitt Properties IV LLC, and Hewitt Properties VII LLC, The Bayview Trust, and Overlook
Associates (an equity method investment of FORE Holdings). The following related party leases were outstanding during the years ended September 30, 2004, 2003 and 2002:



|                           |  |                           |  |                   |  |                
|-------------------------- |  | ------------------------- |  | ----------------- |  | ---------------
|Holdings Property Entities |  | Location                  |  | Commencement Date |  | Expiration Date
|FORE Holdings LLC          |  | Rowayton, Connecticut     |  | October 1994      |  | November 2001  
|Hewitt Properties I        |  | Lincolnshire, Illinois    |  | November 1998     |  | November 2018  
|Hewitt Properties II       |  | Lincolnshire, Illinois    |  | December 1999     |  | December 2019  
|Hewitt Properties III      |  | Lincolnshire, Illinois    |  | May 1999          |  | May 2014       
|Hewitt Properties IV       |  | Orlando, Florida          |  | March 2000        |  | March 2020     
|Hewitt Properties IV       |  | The Woodlands, Texas      |  | March 2000        |  | March 2020     
|Hewitt Properties VII*     |  | Norwalk, Connecticut      |  | September 2001    |  | September 2017 
|The Bayview Trust*         |  | Newport Beach, California |  | June 2002         |  | May 2017       
|Overlook Associates        |  | Lincolnshire, Illinois    |  | **                |  | **             

---

|* | FORE Holdings sold its interest in the Norwalk property in April 2002 and its interest in the Newport Beach property in March 2003, as such, these leases are no longer held by a
related party, but remain capital leases of the Company.
|- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|** | The Company has several leases with Overlook Associates, the first began in 1989 and the last expires in 2017.
|-- | --------------------------------------------------------------------------------------------------------------



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Total lease payments were $33,814 in 2004, $34,105 in 2003 and $40,053 in 2002. The leases were entered into on terms
comparable to those which could have been obtained on an arms length basis. The historical cost of the real property owned by the Holdings property entities aggregates to $360,125 and $357,114 in 2004 and 2003, respectively. The investment in
these properties was funded through capital contributions by FORE Holdings and third-party debt. Total outstanding debt owed to third parties by these related parties totaled $261,047 and $273,619 in 2004 and 2003, respectively. The debt is payable
over periods that range up to sixteen years, and bears fixed interest rates that range from 5.58% to 7.93%. This debt is not reflected on the Companys balance sheet as it is an obligation of FORE Holdings and its related parties, and is not an
obligation of the Company. Substantially all of the activities of the FORE Holdings property entities involve assets that are leased to the Company. The Company does not guarantee the debt related to these properties.



In April 2002, Hewitt Properties VII sold the Norwalk, Connecticut property and the Company
entered into a 15-year capital lease with the purchaser to lease the office space. The Company recorded a $65,000 increase to both property and long-term debt to record this long-term lease obligation.



In June 2002, the Company entered into a 15-year capital lease with The Bayview Trust to
lease office space in Newport Beach, California. The Company recorded a $23,944 increase to both property and long-term debt to record this long-term lease obligation. On March 7, 2003, The Bayview Trust sold the property in Newport Beach,
California, and the Companys lease was assigned to the third-party purchaser of the building.



From May 31, 2002, through September 30, 2007, Hewitt Associates LLC, a subsidiary of the Company, is providing certain support services to FORE Holdings, primarily in the financial, real estate and legal departments,
as may be requested by FORE Holdings from time to time. FORE Holdings will pay Hewitt Associates LLC an annual fee of $50 for basic services and an additional fee for additional services on a time-and-materials basis. Fees for services Hewitt
Associates LLC provided under the services agreement, totaled $117, $425 and $17 for the years ended September 30, 2004, 2003 and 2002, respectively. All such fees have been paid by FORE Holdings through September 30, 2004.



In fiscal 2002, the consolidated and combined statement of operations includes expenses that
have been allocated to the Company on a specific identification basis by Hewitt Holdings at that time. Management believes these allocations and charges were reasonable and that such expenses would not have differed materially had the Company
operated on a stand-alone basis.



16. Retirement Plans



Employee 401(k) and Profit Sharing Plan



The Company has a qualified 401(k) and profit sharing plan for its eligible employees. Under
the plan, Hewitt makes annual contributions equal to a percentage of participants total cash compensation and may make additional contributions in accordance with the terms of the plan. Additionally, employees may make contributions in
accordance with the terms of the plan, with a portion of those contributions matched by the Company. In 2004, 2003, and 2002, profit sharing plan expenses were $58,035, $53,980 and $66,005, respectively.



Defined Benefit Plans



With the acquisition of the actuarial and benefits consulting business of Bacon & Woodrow, the Company acquired a defined benefit
pension plan, which was closed to new entrants in 1998 and provides 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 in accordance with local practice and legislation.



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Healthcare Plans



The Company provides health benefits for retired 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 covering substantially all U.S. and Canadian employees are contributory, with contributions reviewed annually and adjusted as appropriate. These plans contain other
cost-sharing features such as deductibles and coinsurance. The Company does not pre-fund these plans and has the right to modify or terminate any of these plans in the future.



The following tables provide a reconciliation of the changes in the defined benefit and healthcare plans benefit obligations and fair
value of assets for the years ended September 30, 2004 and 2003, and a statement of funded status as of September 30, 2004 and 2003.



|                                                                 |  |                  |         |   |                 |   |         |      |  |   |         |   |  |   |         |  
|---------------------------------------------------------------- |  | ---------------- | ------- | - | --------------- | - | ------- | ---- |  | - | ------- | - |  | - | ------- | -
|                                                                 |  | Pension Benefits |         |   | Health Benefits |  
|                                                                 |  | 2004             |         |   | 2003            |   |         | 2004 |  |   | 2003    |  
|Change in Benefit Obligation                                     |  |                  |         |   |                 |   |         |      |  |   |         |   |  |   |         |  
|Benefit obligation, beginning of year                            |  | $                | 128,633 |   |                 | $ | 63,413  |      |  | $ | 11,627  |   |  | $ | 8,553   |  
|Acquisitions                                                     |  |                  | 726     |   |                 |   | 41,172  |      |  |   |        |   |  |   |        |  
|Service cost                                                     |  |                  | 8,264   |   |                 |   | 5,784   |      |  |   | 1,138   |   |  |   | 803     |  
|Interest cost                                                    |  |                  | 7,160   |   |                 |   | 4,107   |      |  |   | 692     |   |  |   | 597     |  
|Plan amendments                                                  |  |                  |        |   |                 |   |        |      |  |   | 333     |   |  |   | 404     |  
|Actuarial (gains)/losses                                         |  |                  | (9,056  | ) |                 |   | 9,318   |      |  |   | 292     |   |  |   | 1,463   |  
|Benefit payments                                                 |  |                  | (3,745  | ) |                 |   | (1,336  | )    |  |   | (598    | ) |  |   | (193    | )
|Changes in foreign exchange rates                                |  |                  | 9,146   |   |                 |   | 6,175   |      |  |   |        |   |  |   |        |  
|                                                                 |  |                  |         |   |                 |   |         |      |  |   |         |   |  |   |         |  
|Benefit obligation end of year                                   |  | $                | 141,128 |   |                 | $ | 128,633 |      |  | $ | 13,484  |   |  | $ | 11,627  |  
|                                                                 |  |                  |         |   |                 |   |         |      |  |   |         |   |  |   |         |  
|Change in Plan Assets                                            |  |                  |         |   |                 |   |         |      |  |   |         |   |  |   |         |  
|Fair value of plan assets, beginning of year                     |  | $                | 87,750  |   |                 | $ | 39,079  |      |  | $ |        |   |  | $ |        |  
|Acquisitions                                                     |  |                  | 436     |   |                 |   | 38,118  |      |  |   |        |   |  |   |        |  
|Actual return on plan assets                                     |  |                  | 5,049   |   |                 |   | 2,269   |      |  |   |        |   |  |   |        |  
|Employer contribution                                            |  |                  | 8,176   |   |                 |   | 5,852   |      |  |   | 598     |   |  |   | 193     |  
|Benefit payments                                                 |  |                  | (3,745  | ) |                 |   | (1,336  | )    |  |   | (598    | ) |  |   | (193    | )
|Changes in foreign exchange rates                                |  |                  | 5,929   |   |                 |   | 3,768   |      |  |   |        |   |  |   |        |  
|                                                                 |  |                  |         |   |                 |   |         |      |  |   |         |   |  |   |         |  
|Fair value of plan assets, end of year                           |  | $                | 103,595 |   |                 | $ | 87,750  |      |  | $ |         |   |  | $ |        |  
|                                                                 |  |                  |         |   |                 |   |         |      |  |   |         |   |  |   |         |  
|Reconciliation of Accrued Obligation and Total Amount Recognized |  |                  |         |   |                 |   |         |      |  |   |         |   |  |   |         |  
|Unfunded status                                                  |  | $                | (37,533 | ) |                 | $ | (40,883 | )    |  | $ | (13,484 | ) |  | $ | (11,627 | )
|Unrecognized net loss                                            |  |                  | 14,708  |   |                 |   | 21,889  |      |  |   | 3,875   |   |  |   | 3,699   |  
|Unrecognized prior service cost                                  |  |                  |        |   |                 |   |        |      |  |   | 2,953   |   |  |   | 2,798   |  
|Unrecognized transition obligation                               |  |                  |        |   |                 |   |        |      |  |   | 459     |   |  |   | 492     |  
|Minimum pension liability                                        |  |                  |        |   |                 |   | (1,023  | )    |  |   |        |   |  |   |        |  
|                                                                 |  |                  |         |   |                 |   |         |      |  |   |         |   |  |   |         |  
|Net amount recognized, end of year                               |  | $                | (22,825 | ) |                 | $ | (20,017 | )    |  | $ | (6,197  | ) |  | $ | (4,638  | )
|                                                                 |  |                  |         |   |                 |   |         |      |  |   |         |   |  |   |         |  
|Amounts recognized in Balance Sheet are as follows:              |  |                  |         |   |                 |   |         |      |  |   |         |   |  |   |         |  
|Accrued benefit cost                                             |  | $                | 22,825  |   |                 | $ | 19,684  |      |  | $ | 6,197   |   |  | $ | 4,638   |  
|Accumulated other comprehensive income                           |  |                  |        |   |                 |   | 333     |      |  |   |        |   |  |   |        |  
|                                                                 |  |                  |         |   |                 |   |         |      |  |   |         |   |  |   |         |  
|Net amount recognized                                            |  | $                | 22,825  |   |                 | $ | 20,017  |      |  | $ | 6,197   |   |  | $ | 4,638   |  
|                                                                 |  |                  |         |   |                 |   |         |      |  |   |         |   |  |   |         |  
|Accumulated Benefit Obligation                                   |  | $                | 118,358 |   |                 | $ | 98,110  |      |  |   |         |   |  |   |         |  
|                                                                 |  |                  |         |   |                 |   |         |      |  |   |         |   |  |   |         |  



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The assumptions used in the measurement of our benefit obligations as of June 30, 2004 and 2003 are as follows:



|                               |  |                  |   |  |                 |   |  |      |   |  |      |  
|------------------------------ |  | ---------------- | - |  | --------------- | - |  | ---- | - |  | ---- | -
|                               |  | Pension Benefits |   |  | Health Benefits |  
|                               |  | 2004             |   |  | 2003            |   |  | 2004 |   |  | 2003 |  
|Weighted-average assumptions:  |  |                  |   |  |                 |   |  |      |   |  |      |  
|Discount rate                  |  | 5.23             | % |  | 4.85            | % |  | 6.00 | % |  | 6.00 | %
|Expected return on plan assets |  | 5.99             | % |  | 5.51            | % |  | N/A  |   |  | N/A  |  
|Rate of compensation increase  |  | 3.73             | % |  | 3.40            | % |  | N/A  |   |  | N/A  |  



The health plan provides flat dollar
credits based on years of service and age at retirement. There is a small group of grandfathered retirees who receive postretirement medical coverage at a percentage of cost. The liabilities for these retirees are valued assuming an 11.0% health
care cost trend rate for 2004. The rate was assumed to decrease gradually to 6.0% in 2014 and remain at that level thereafter.



The effect of a one percentage point increase or decrease in the assumed health care cost trend rates on total service and interest costs and the postretirement benefit
obligation are provided in the following table.



|                                                                |  |      |     |   |      |   |     |  
|--------------------------------------------------------------- |  | ---- | --- | - | ---- | - | --- | -
|                                                                |  | 2004 |     |   | 2003 |  
|Effect of 1% Change in the Assumed Health Care Cost Trend Rates |  |      |     |   |      |   |     |  
|Effect of 1% increase on:                                       |  |      |     |   |      |   |     |  
|Total of service and interest cost components                   |  | $    | 4   |   |      | $ | 4   |  
|Benefit obligations                                             |  |      | 50  |   |      |   | 64  |  
|Effect of 1% decrease on:                                       |  |      |     |   |      |   |     |  
|Total of service and interest cost components                   |  | $    | (4  | ) |      | $ | (4  | )
|Benefit obligation                                              |  |      | (46 | ) |      |   | (59 | )



The Companys pension plan
weighted-average asset allocations at September 30, 2004, and 2003, by asset category are as follows:



|                  |  |        |   |  |        |  
|----------------- |  | ------ | - |  | ------ | -
|                  |  | 2004   |   |  | 2003   |  
|Asset Category    |  |        |   |  |        |  
|Equity securities |  | 40.47  | % |  | 37.86  | %
|Debt securities   |  | 46.99  |   |  | 48.97  |  
|Real estate       |  | 4.70   |   |  | 5.61   |  
|Other             |  | 7.84   |   |  | 7.56   |  
|                  |  |        |   |  |        |  
|Total             |  | 100.00 | % |  | 100.00 | %
|                  |  |        |   |  |        |  



The investment objectives for the
pension plan assets are to generate returns that will enable the plans to meet their future obligations. The strategies balance the requirement to generate returns through investments such as equity securities, with the need to control risk through
less volatile assets such as fixed income securities, while also meeting local regulations. Approximately 90% of the Companys plan assets relate to the Companys pension plans in the United Kingdom and Switzerland. In the United Kingdom,
the plan assets are managed in two separate portfolios, an equity portfolio and a bond portfolio. The strategy is to invest 56% and 44% of the plan assets in equity securities and debt securities, respectively. The total return is tracked to the
relevant market index, within specified tolerances and after allowance for withholding tax where applicable, for each of the funds in which the assets are invested. The plan assets for the Switzerland plan are managed in accordance with the laws in
Switzerland. Within the scope of the Swiss laws, the strategy targets equity securities of 35%-45%, debt securities of 35%-65%, real estate investments of 5%-15% and other investments of 0%-5%.



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The following benefit payments, which reflect expected future service, as appropriate, are expected to be paid:



|                        |  |                  |        |                 |   |      
|----------------------- |  | ---------------- | ------ | --------------- | - | -----
|                        |  | Pension Benefits |        | Health Benefits
|2005                    |  | $                | 2,798  |                 | $ | 366  
|2006                    |  |                  | 3,004  |                 |   | 405  
|2007                    |  |                  | 3,084  |                 |   | 474  
|2008                    |  |                  | 3,318  |                 |   | 575  
|2009                    |  |                  | 3,291  |                 |   | 653  
|Years 2010 through 2014 |  |                  | 23,216 |                 |   | 5,050



The components of net periodic benefit
costs for the three years ended September 30, 2004 include:



|                                        |  |                  |        |   |                 |   |        |      |  |   |        |   |      |   |       |  |   |       |  |   |      
|--------------------------------------- |  | ---------------- | ------ | - | --------------- | - | ------ | ---- |  | - | ------ | - | ---- | - | ----- |  | - | ----- |  | - | -----
|                                        |  | Pension Benefits |        |   | Health Benefits
|                                        |  | 2004             |        |   | 2003            |   |        | 2002 |  |   | 2004   |   | 2003 |   | 2002 
|Components of Net Periodic Benefit Cost |  |                  |        |   |                 |   |        |      |  |   |        |   |      |   |       |  |   |       |  |   |      
|Service cost                            |  | $                | 8,264  |   |                 | $ | 5,784  |      |  | $ | 809    |   |      | $ | 1,138 |  | $ | 803   |  | $ | 608  
|Interest cost                           |  |                  | 7,160  |   |                 |   | 4,107  |      |  |   | 1,148  |   |      |   | 692   |  |   | 597   |  |   | 336  
|Expected return on plan assets          |  |                  | (5,613 | ) |                 |   | (3,411 | )    |  |   | (1,041 | ) |      |   |      |  |   |      |  |   |     
|(Gain) loss recognized in the year      |  |                  | 10     |   |                 |   |       |      |  |   |       |   |      |   |      |  |   |      |  |   |     
|Amortization of:                        |  |                  |        |   |                 |   |        |      |  |   |        |   |      |   |       |  |   |       |  |   |      
|Unrecognized prior service cost         |  |                  |       |   |                 |   |       |      |  |   |       |   |      |   | 179   |  |   | 160   |  |   |     
|Unrecognized loss                       |  |                  | 360    |   |                 |   |       |      |  |   |       |   |      |   | 115   |  |   | 66    |  |   | 68   
|Transition obligation                   |  |                  |       |   |                 |   |       |      |  |   |       |   |      |   | 33    |  |   | 33    |  |   | 33   
|                                        |  |                  |        |   |                 |   |        |      |  |   |        |   |      |   |       |  |   |       |  |   |      
|Net periodic benefit cost               |  | $                | 10,181 |   |                 | $ | 6,480  |      |  | $ | 916    |   |      | $ | 2,157 |  | $ | 1,659 |  | $ | 1,045
|                                        |  |                  |        |   |                 |   |        |      |  |   |        |   |      |   |       |  |   |       |  |   |      



On December 8, 2003, the Medicare
Prescription Drug, Improvement and Modernization Act of 2003 (the Act) became effective. The Act introduces a prescription drug benefit under Medicare (Medicare Part D) as well as a federal subsidy to sponsors of retiree health care
benefit plans that provide a benefit that is at least the actuarial equivalent of Medicare Part D.



In accordance with the FASB Staff Position (FSP) 106-2 (FSP 106-2), Accounting and Disclosure Requirements Related to the Medicare Prescription Drug, Improvement and Modernization Act of
2003, the Company evaluated its plan and determined that the plan is not the actuarial equivalent of Medicare Part D. The financial statements and the notes to the financial statements do not include the effect of the Act on the accumulated
postretirement benefit obligation or the net periodic postretirement benefit cost.



The Company presently anticipates contributing approximately $10,000 to fund its pension plans and $366 to fund its health benefit plans in fiscal 2005.



17. Stock-Based Compensation Plans



In 2002, the Company adopted the Hewitt Associates, Inc. Global Stock and Incentive Compensation Plan (the Plan) for employees and directors. The Plan is
administered by the Compensation and Leadership Committee of the Board of Directors of the Company (the Committee). Under the Plan, employees and directors may receive awards of nonqualified stock options, stock appreciation rights,
restricted stock, restricted stock units, performance shares, performance units, and cash-based awards, and employees can also receive incentive stock options. As of September 30, 2004, only restricted stock, restricted stock units and nonqualified
stock options have been granted. A total of 25,000,000 shares of Class A common stock have been reserved for issuance under the Plan. As of September 30, 2004, there were 8,679,897 shares available for grant under the Plan.



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##### Table of Contents

Restricted Stock and Restricted Stock Units



In connection with the initial public offering, the Company granted 5,789,908 shares of Class A restricted stock and restricted stock units
to employees. The restricted stock and restricted stock units have substantially the same terms, except the holders of restricted stock units do not have voting rights. The one-time initial public offering-related awards were valued at $110,141 on
the June 27, 2002 grant date (a weighted price of $19.02 per share) and recognized as unearned compensation within stockholders equity. Over the six-month and four-year vesting periods, the unearned compensation is being recognized as
compensation expense. For the years ended September 30, 2004, 2003 and 2002, compensation expense for the initial public offering restricted stock awards was $16,733, $39,010 and $27,525, respectively, including the award compensation expense and
applicable payroll taxes for the respective periods.



Stock Options



The Committee may grant both incentive stock options and nonqualified
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 in such number, and upon such terms, 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 nonqualified stock options granted vest ratably over a period of four years. As of September 30, 2004, the Company has
11,212,831 options outstanding with a weighted average exercise price of $23.71. The following table summarizes stock option activity during 2004 and 2003:



|                                          |  |            |   |      |                                 |       |        |           |   |                                  |   |        |  |           |                                 |  |   |      
|----------------------------------------- |  | ---------- | - | ---- | ------------------------------- | ----- | ------ | --------- | - | -------------------------------- | - | ------ |  | --------- | ------------------------------- |  | - | -----
|                                          |  | 2004       |   | 2003 |                                 | 2002 
|                                          |  | Shares     |   |      | Weighted- Average ExercisePrice |       | Shares |           |   | Weighted- Average Exercise Price |   | Shares |  |           | Weighted- Average ExercisePrice
|Outstanding at beginning of fiscal year   |  | 7,791,989  |   |      | $                               | 21.70 |        | 4,089,003 |   |                                  | $ | 19.29  |  |          |                                 |  | $ |     
|Granted                                   |  | 3,892,029  |   |      |                                 | 27.35 |        | 3,844,793 |   |                                  |   | 24.19  |  | 4,106,703 |                                 |  |   | 19.29
|Exercised                                 |  | (185,234   | ) |      |                                 | 19.57 |        | (35,808   | ) |                                  |   | 19.00  |  |          |                                 |  |   |     
|Forfeited                                 |  | (273,022   | ) |      |                                 | 20.19 |        | (105,999  | ) |                                  |   | 20.11  |  | (17,700   | )                               |  |   | 19.00
|Expired                                   |  | (12,931    | ) |      |                                 | 20.42 |        |          |   |                                  |   |       |  |          |                                 |  |   |     
|                                          |  |            |   |      |                                 |       |        |           |   |                                  |   |        |  |           |                                 |  |   |      
|Outstanding at end of fiscal year         |  | 11,212,831 |   |      | $                               | 23.71 |        | 7,791,989 |   |                                  | $ | 21.70  |  | 4,089,003 |                                 |  | $ | 19.29
|                                          |  |            |   |      |                                 |       |        |           |   |                                  |   |        |  |           |                                 |  |   |      
|Exercisable options at end of fiscal year |  | 2,926,847  |   |      | $                               | 20.95 |        | 1,106,256 |   |                                  | $ | 19.42  |  |          |                                 |  | $ |     



The weighted-average estimated fair
market value of employee stock options granted during 2004, 2003 and 2002 was $10.10, $8.59 and $6.50 per share, respectively. These stock options were granted at exercise prices equal to the current fair market value of the underlying stock. The
following table summarizes information about stock options outstanding at September 30, 2004.



|                                  |  |                     |  |                                  |       |                                |     |                    |           |                                  |   |      
|--------------------------------- |  | ------------------- |  | -------------------------------- | ----- | ------------------------------ | --- | ------------------ | --------- | -------------------------------- | - | -----
|                                  |  | Outstanding Options |  | Exercisable Options             
|                                  |  | Number Outstanding  |  | Weighted- Average Exercise Price |       | Weighted- Average Term (Years) |     | Number Outstanding |           | Weighted- Average Exercise Price
|Reasonable price range groupings: |  |                     |  |                                  |       |                                |     |                    |           |                                  |   |      
|$19.00                            |  | 3,506,774           |  | $                                | 19.00 |                                | 7.7 |                    | 1,817,726 |                                  | $ | 19.00
|$23.50-$29.30                     |  | 7,649,580           |  |                                  | 25.75 |                                | 6.2 |                    | 1,092,667 |                                  |   | 24.03
|$32.45-$34.60                     |  | 56,477              |  |                                  | 32.76 |                                | 8.6 |                    | 16,454    |                                  |   | 32.71
|                                  |  |                     |  |                                  |       |                                |     |                    |           |                                  |   |      
|                                  |  | 11,212,831          |  | $                                | 23.71 |                                | 6.7 |                    | 2,926,847 |                                  | $ | 20.95
|                                  |  |                     |  |                                  |       |                                |     |                    |           |                                  |   |      



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18. Legal Proceedings



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



The Company provides indemnifications of varying scope and size to certain customers against claims of intellectual property infringement made by third parties arising from the use of our products or receipt of our
services. The Company evaluates estimated losses for such indemnifications under SFAS 5, Accounting for Contingencies, as interpreted by FASB Interpretation No. 45, Guarantors Accounting and Disclosure Requirements forGuarantees, Including Indirect Guarantees of Indebtedness of Others. Management considers such factors as the degree of probability of an unfavorable outcome and the ability to make a reasonable estimate of the amount of loss. As of September
30, 2004, the Company had no outstanding claims and was not subject to any pending litigation alleging that the Companys products or services infringe the intellectual property rights of any third parties.



19. Other Comprehensive Income (Loss)



Accumulated other comprehensive income (loss) consists of the following components:



|                                  |  |                                         |        |   |                           |   |        |                                               |  |   |        |  
|--------------------------------- |  | --------------------------------------- | ------ | - | ------------------------- | - | ------ | --------------------------------------------- |  | - | ------ | -
|                                  |  | Foreign Currency Translation Adjustment |        |   | Minimum Pension Liability |   |        | Accumulated Other Comprehensive Income (Loss) | 
|                                  |  |                                        
|As of September 30, 2001          |  | $                                       | (767   | ) |                           | $ |       |                                               |  | $ | (767   | )
|Other comprehensive income (loss) |  |                                         | 17,648 |   |                           |   | (690   | )                                             |  |   | 16,958 |  
|                                  |  |                                         |        |   |                           |   |        |                                               |  |   |        |  
|As of September 30, 2002          |  |                                         | 16,881 |   |                           |   | (690   | )                                             |  |   | 16,191 |  
|Other comprehensive income (loss) |  |                                         | 22,699 |   |                           |   | (333   | )                                             |  |   | 22,366 |  
|                                  |  |                                         |        |   |                           |   |        |                                               |  |   |        |  
|As of September 30, 2003          |  |                                         | 39,580 |   |                           |   | (1,023 | )                                             |  |   | 38,557 |  
|Other comprehensive income        |  |                                         | 29,470 |   |                           |   | 1,023  |                                               |  |   | 30,493 |  
|                                  |  |                                         |        |   |                           |   |        |                                               |  |   |        |  
|As of September 30, 2004          |  | $                                       | 69,050 |   |                           | $ |       |                                               |  | $ | 69,050 |  
|                                  |  |                                         |        |   |                           |   |        |                                               |  |   |        |  



The increases in foreign currency
translation during the years ended September 30, 2004, 2003 and 2002 were primarily related to an increase in the value of the British pound sterling relative to the U.S. dollar.



20. Income Taxes



Prior to the Companys transition to a corporate structure, no provision for income taxes was made as the liability for such taxes were that of the former owners. As
a result of the Companys transition to a corporate structure on May 31, 2002, a tax expense of $21,711 was recognized in fiscal 2002 related to deferred tax assets and liabilities recorded in accordance with the provisions of SFAS No. 109,
Accounting for Income Taxes, arising from temporary differences between the book and tax basis of the Companys assets and liabilities at the date of transition.



For the years ended September 30, 2004 and 2003 and for the four month period subsequent to the transition to a corporate structure in
fiscal 2002, the Companys provision for income taxes aggregated $85,015, $66,364 and $11,342 ($33,053 income tax expense less the $21,711 tax expense related to the transition to a corporate structure), respectively, and consisted of the
following:



|                |  |         |        |          |   |        |  |         |        |          |   |        |  |         |        |          |   |        |       |   |        |  |   |         |   |  |   |       
|--------------- |  | ------- | ------ | -------- | - | ------ |  | ------- | ------ | -------- | - | ------ |  | ------- | ------ | -------- | - | ------ | ----- | - | ------ |  | - | ------- | - |  | - | ------
|                |  | 2004    |        | 2003     |   | 2002  
|                |  | Current |        | Deferred |   | Total  |  | Current |        | Deferred |   | Total  |  | Current |        | Deferred |   |        | Total
|U.S. Federal    |  | $       | 41,177 |          | $ | 29,218 |  | $       | 70,395 |          | $ | 24,018 |  | $       | 31,931 |          | $ | 55,949 |       | $ | 25,740 |  | $ | (16,108 | ) |  | $ | 9,632 
|State and local |  |         | 7,297  |          |   | 3,163  |  |         | 10,460 |          |   | 3,808  |  |         | 4,254  |          |   | 8,062  |       |   | 4,808  |  |   | (3,314  | ) |  |   | 1,494 
|Foreign         |  |         | 4,160  |          |   |       |  |         | 4,160  |          |   | 2,353  |  |         |       |          |   | 2,353  |       |   | 216    |  |   |        |   |  |   | 216   
|                |  |         |        |          |   |        |  |         |        |          |   |        |  |         |        |          |   |        |       |   |        |  |   |         |   |  |   |       
|                |  | $       | 52,634 |          | $ | 32,381 |  | $       | 85,015 |          | $ | 30,179 |  | $       | 36,185 |          | $ | 66,364 |       | $ | 30,764 |  | $ | (19,422 | ) |  | $ | 11,342
|                |  |         |        |          |   |        |  |         |        |          |   |        |  |         |        |          |   |        |       |   |        |  |   |         |   |  |   |       



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United States income taxes have not been provided on undistributed earnings of international subsidiaries. Those earnings
are considered to be indefinitely reinvested. Upon distribution of those earnings in the form of dividends or otherwise, the Company may be subject to both U.S. income taxes (subject to adjustment for foreign tax credits) and withholding taxes
payable to the various foreign countries.



At September 30, 2004 and 2003, the
Company had income taxes payable of $7,505 and $17,401, respectively. Payments for the current federal income tax liability for 2004 will be reduced by approximately $4,000, and were reduced by approximately $12,000 in 2003, for the vesting of
restricted stock and restricted stock units and the exercise of nonqualified stock options. The tax benefit resulting from the vesting of the restricted stock and stock units and the exercise of these options has been credited to additional paid-in
capital. Income tax expense for the period subsequent to transition differed from the amounts computed by applying the U.S. federal income tax rate of 35% to income before taxes ($207,859 and $160,641 for the years ended September 30, 2004 and 2003,
respectively, and $10,361 for the period June 1, 2002 through September 30, 2002) as a result of the following:



|                                                                            |  |      |        |   |      |   |        |  |   |       
|--------------------------------------------------------------------------- |  | ---- | ------ | - | ---- | - | ------ |  | - | ------
|                                                                            |  | 2004 |        |   | 2003 |   | 2002  
|Provision for taxes at U.S. federal statutory rate                          |  | $    | 72,751 |   |      | $ | 56,224 |  | $ | 3,626 
|Increase (reduction) in income taxes resulting from:                        |  |      |        |   |      |   |        |  |   |       
|Costs of transition to corporate structure                                  |  |      |       |   |      |   |       |  |   | 4,530 
|State and local income taxes, net of federal income tax benefits            |  |      | 7,799  |   |      |   | 5,040  |  |   | 972   
|Nondeductible expenses                                                      |  |      | 909    |   |      |   | 839    |  |   | 592   
|Foreign earnings taxed at varying rates and foreign losses not tax effected |  |      | 3,909  |   |      |   | 2,923  |  |   | 1,401 
|Other                                                                       |  |      | (353   | ) |      |   | 1,338  |  |   | 221   
|                                                                            |  |      |        |   |      |   |        |  |   |       
|                                                                            |  | $    | 85,015 |   |      | $ | 66,364 |  | $ | 11,342
|                                                                            |  |      |        |   |      |   |        |  |   |       



The tax effects of temporary
differences that give rise to significant portions of the deferred tax assets and deferred tax liabilities are presented below:



|                                 |  |      |         |   |      |   |         |  
|-------------------------------- |  | ---- | ------- | - | ---- | - | ------- | -
|                                 |  | 2004 |         |   | 2003 |  
|Deferred tax assets:             |  |      |         |   |      |   |         |  
|Accrued expenses                 |  | $    | 22,157  |   |      | $ | 20,181  |  
|Foreign tax loss carryforwards   |  |      | 38,097  |   |      |   | 27,579  |  
|Other                            |  |      | 4,635   |   |      |   | 12,505  |  
|                                 |  |      |         |   |      |   |         |  
|                                 |  |      | 64,889  |   |      |   | 60,265  |  
|Valuation allowance              |  |      | (38,097 | ) |      |   | (27,579 | )
|                                 |  |      |         |   |      |   |         |  
|                                 |  | $    | 26,792  |   |      | $ | 32,686  |  
|                                 |  |      |         |   |      |   |         |  
|Deferred tax liabilities:        |  |      |         |   |      |   |         |  
|Compensation and benefits        |  | $    | 22,804  |   |      | $ | 12,286  |  
|Income deferred for tax purposes |  |      | 3,340   |   |      |   | 3,332   |  
|Goodwill amortization            |  |      | 31,959  |   |      |   | 27,633  |  
|Depreciation and amortization    |  |      | 10,799  |   |      |   | 10,273  |  
|Other                            |  |      | 28,100  |   |      |   | 17,638  |  
|                                 |  |      |         |   |      |   |         |  
|                                 |  | $    | 97,002  |   |      | $ | 71,162  |  
|                                 |  |      |         |   |      |   |         |  



Of the $128,135 net operating loss
carryforwards of foreign subsidiaries (representing the $38,097 of foreign tax loss carryforwards deferred tax asset in the table above), $107,176 relates to losses that have already provided a tax benefit in the U.S. due to rules permitting flow
through of such losses in certain circumstances. Without such losses



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included, the cumulative net operating loss carryforwards at September 30, 2004 were approximately $20,959 which are
subject to various provisions of each respective country. Approximately $19,940 of this amount expires between 2005 and 2019 and $1,019 of the amount has an indefinite life.



In assessing the realizability of deferred tax assets, management considers whether it is more likely than not that some portion or all of
the deferred tax assets will not be realized. The ultimate realization of deferred tax assets is dependent upon the generation of future taxable income during the periods in which those temporary differences become deductible. Management considers
the scheduled reversal of deferred tax liabilities except for goodwill, projected future taxable income, and tax planning strategies in making this assessment. In order to fully realize the deferred tax asset, the Company will need to generate
future taxable income prior to the expiration of the foreign net operating loss carryforwards which expire in 2005 through 2019. Foreign taxable loss for the years ended September 30, 2004 and 2003 and for the four-month period ended September 30,
2002 was $25,090, $11,922 and $21,477, respectively. Consolidated taxable income for the years ended September 30, 2004 and 2003, and for the four month period ended September 30, 2002, was $210,396, $163,263 and $26,457, respectively. Based upon
the level of historical taxable income and projections for future taxable income over the periods during which the deferred tax assets are deductible, management believes it is more likely than not the Company will realize the benefits of these
deductible differences, net of the existing valuation allowances at September 30, 2004. The amount of the deferred tax asset considered realizable, however, could be reduced in the near term if estimates of future taxable income during the
carryforward period are reduced.



21. Segments and Geographic Data



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



| | OutsourcingHewitt applies its human resources expertise and employs its integrated technology solutions to administer its clients human resources programs. Hewitts
benefits outsourcing services include health and welfare (such as medical plans), defined contribution (such as 401(k) plans) and defined benefit (such as pension plans). Hewitts payroll services include installed payroll software and fully
outsourced processing. Hewitts workforce management outsourcing services include workforce administration, rewards management, recruiting and staffing, performance management, learning and development, and talent management.
|- | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



| | ConsultingHewitt 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.
|- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



While Hewitt reports revenues and direct expenses based on these two segments, Hewitt combines its expertise in human resources outsourcing and consulting to create complete human resources solutions and a full
continuum of human resources services.



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



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The table below presents information about the Companys reportable segments for the periods presented:



|                                                    |  |                          |           |      |   |           |  |   |          
|--------------------------------------------------- |  | ------------------------ | --------- | ---- | - | --------- |  | - | ---------
|                                                    |  | Year Ended September 30,
|                                                    |  | 2004                     |           | 2003 |   | 2002     
|Outsourcing(1)                                      |  |                          |           |      |   |           |  |   |          
|Revenues before reimbursements (net revenues)       |  | $                        | 1,432,091 |      | $ | 1,247,234 |  | $ | 1,115,462
|Segment income(2)                                   |  |                          | 297,911   |      |   | 245,905   |  |   | 272,702  
|Net client receivables and unbilled work in process |  |                          | 294,141   |      |   | 251,672   |  |   |          
|Long-term unbilled work in process                  |  |                          | 18,003    |      |   | 7,143     |  |   |          
|Goodwill and certain intangible assets              |  |                          | 65,703    |      |   | 53,837    |  |   |          
|Deferred contract costs                             |  |                          | 162,121   |      |   | 138,475   |  |   |          
|                                                    |  |                          |          
|Consulting(3)                                       |  |                          |           |      |   |           |  |   |          
|Revenues before reimbursements (net revenues)       |  | $                        | 772,591   |      | $ | 734,422   |  | $ | 600,735  
|Segment income(2)                                   |  |                          | 126,064   |      |   | 136,380   |  |   | 161,787  
|Net client receivables and unbilled work in process |  |                          | 228,741   |      |   | 209,758   |  |   |          
|Long-term unbilled work in process                  |  |                          |          |      |   |          |  |   |          
|Goodwill and certain intangible assets              |  |                          | 327,362   |      |   | 312,996   |  |   |          
|Deferred contract costs                             |  |                          | 481       |      |   |          |  |   |          
|                                                    |  |                          |          
|Total Company                                       |  |                          |           |      |   |           |  |   |          
|Revenues before reimbursements (net revenues)       |  | $                        | 2,204,682 |      | $ | 1,981,656 |  | $ | 1,716,197
|Reimbursements                                      |  |                          | 57,545    |      |   | 49,637    |  |   | 33,882   
|                                                    |  |                          |           |      |   |           |  |   |          
|Total revenues                                      |  | $                        | 2,262,227 |      | $ | 2,031,293 |  | $ | 1,750,079
|                                                    |  |                          |           |      |   |           |  |   |          
|Segment income(2)                                   |  | $                        | 423,975   |      | $ | 382,285   |  | $ | 434,489  
|                                                    |  |                          |           |      |   |           |  |   |          
|Charges not recorded at the Segment level:          |  |                          |           |      |   |           |  |   |          
|One-time charges(4)                                 |  |                          |          |      |   |          |  |   | 26,143   
|Initial public offering restricted stock awards(5)  |  |                          | 16,733    |      |   | 39,010    |  |   | 27,525   
|Unallocated shared costs(2)                         |  |                          | 184,409   |      |   | 165,294   |  |   | 140,501  
|                                                    |  |                          |           |      |   |           |  |   |          
|Operating income(2)                                 |  | $                        | 222,833   |      | $ | 177,981   |  | $ | 240,320  
|                                                    |  |                          |           |      |   |           |  |   |          
|Net client receivables and unbilled work in process |  | $                        | 522,882   |      | $ | 461,430   |  |   |          
|Long-term unbilled work in process                  |  |                          | 18,003    |      |   | 7,143     |  |   |          
|Goodwill and certain intangible assets              |  |                          | 393,065   |      |   | 366,833   |  |   |          
|Deferred contract costs                             |  |                          | 162,602   |      |   | 138,475   |  |   |          
|Assets not reported by segment                      |  |                          | 711,422   |      |   | 630,274   |  |   |          
|                                                    |  |                          |           |      |   |           |  |   |          
|Total assets                                        |  | $                        | 1,807,974 |      | $ | 1,604,155 |  |   |          
|                                                    |  |                          |           |      |   |           |  |   |          

---

|(1) | On June 5, 2003, the Company acquired Cyborg and on June 15, 2003, the Company acquired substantially all of the assets of NTRC. As such, their results are included in the
Companys results from the respective acquisition dates.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(2) | Prior to May 31, 2002, owners were compensated through distributions of income. In connection with the Companys transition to a corporate structure on May 31, 2002, owners who
worked in the business became employees and the Company began to record their compensation as compensation and related expenses in arriving at segment income.
|--- | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(3) | On June 5, 2002, the Company acquired the benefits consulting business of Bacon & Woodrow. As such, the results of Bacon & Woodrow have been included in the Companys
Consulting segments results from the acquisition date.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(4) | In connection with the Companys transition to a corporate structure, the following one-time charges were incurred: a) $8,300 of non-recurring compensation expense related to
the establishment of a vacation liability for its former owners and b) $17,843 of non-recurring compensation expense resulting from certain owners receiving more common stock than their proportional share of total capital, without offset for those
owners who receive less than their proportional share of stock.
|--- | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------

|(5) | Compensation expense of $16,733, $39,010 and $27,525 for the years ended September 30, 2004, 2003 and 2002, respectively, related to the amortization of initial public offering
restricted stock awards.
|--- | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------



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Revenues and long-lived assets by geographic area for the following fiscal years are provided below. Revenues are
attributed to geographic areas based on the country where the associates perform the services. Long-lived assets include net property and equipment, deferred contract costs, goodwill and intangible assets, such as capitalized software, but exclude
investments in affiliated companies.



|                    |  |                          |           |      |   |           |  |   |          
|------------------- |  | ------------------------ | --------- | ---- | - | --------- |  | - | ---------
|                    |  | Year Ended September 30,
|                    |  | 2004                     |           | 2003 |   | 2002     
|Revenues            |  |                          |           |      |   |           |  |   |          
|United States       |  | $                        | 1,841,294 |      | $ | 1,687,861 |  | $ | 1,571,747
|United Kingdom      |  |                          | 256,230   |      |   | 212,899   |  |   | 84,313   
|All Other Countries |  |                          | 164,703   |      |   | 130,533   |  |   | 94,019   
|                    |  |                          |           |      |   |           |  |   |          
|Total               |  | $                        | 2,262,227 |      | $ | 2,031,293 |  | $ | 1,750,079
|                    |  |                          |           |      |   |           |  |   |          
|Long-Lived Assets   |  |                          |           |      |   |           |  |   |          
|United States       |  | $                        | 514,085   |      | $ | 506,132   |  |   |          
|United Kingdom      |  |                          | 348,912   |      |   | 316,977   |  |   |          
|All Other Countries |  |                          | 41,920    |      |   | 33,540    |  |   |          
|                    |  |                          |           |      |   |           |  |   |          
|Total               |  | $                        | 904,917   |      | $ | 856,649   |  |   |          
|                    |  |                          |           |      |   |           |  |   |          



22. Regulated Subsidiary



Hewitt Financial Services LLC (HFS), a wholly-owned
subsidiary of the Company, is a registered U.S. broker-dealer. HFS is subject to the Securities and Exchange Commissions Uniform Net Capital Rule, and has elected to compute its net capital in accordance with the Alternative
Standard of that rule. As of September 30, 2004 and 2003, HFS had regulatory net capital, as defined, of $16,274 and $2,402, respectively, which exceeded the amounts required by $16,269 and $2,397, respectively.



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INDEX TO EXHIBITS



|        |  |                                                                                                                                                                                                                                                                                                                                                                                                      
|------- |  | -----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|Exhibit |  | Description                                                                                                                                                                                                                                                                                                                                                                                          
|2.1     |  | Business Amalgamation Agreement between the Partners of Bacon & Woodrow signatory thereto, Hewitt Holdings LLC and Hewitt Associates, Inc. (incorporated by reference to Exhibit 2.1 to
Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-84198).                                                                                                       
|        | 
|2.2     |  | Amendment to Business Amalgamation Agreement, between the Partners of Bacon & Woodrow signatory thereto, Hewitt Holdings LLC and Hewitt Associates, Inc. (incorporated by reference to
Exhibit 2.2 to Hewitt Associates, Inc.s Annual Report on Form 10-K for the year ended September 30, 2002).                                                                                                   
|        | 
|2.3     |  | Agreement and Plan of Merger, dated as of June 15, 2004, by and among Exult, Inc., Hewitt Associates, Inc. and Eagle Merger Corp (incorporated by reference to Exhibit 2.1 to Hewitt
Associates, Inc.s Registration Statement on Form S-4, Registration No. 333-117326).                                                                                                                            
|        | 
|3.1     |  | Amended and Restated Certificate of Incorporation (incorporated by reference to Exhibit 3.1 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No.
333-84198).                                                                                                                                                                                                
|        | 
|3.2     |  | Amended and Restated By-laws (incorporated by reference to Exhibit 3.2 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No.
333-84198).                                                                                                                                                                                                                     
|        | 
|4.1     |  | Specimen Class A Common Stock Certificate of the Registrant (incorporated by reference to Exhibit 4.1 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended,
Registration No. 333-84198).                                                                                                                                                                                      
|        | 
|10.1    |  | Amended and Restated Multicurrency Promissory Note, dated February 23, 1998 (incorporated by reference to Exhibit 10.1 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as
amended, Registration No. 333-105560).                                                                                                                                                                    
|        | 
|10.2    |  | Hewitt Global Stock and Incentive Compensation Plan (incorporated by reference to Exhibit 10.2 to Hewitt Associates, Inc.s Quarterly Report on Form 10-Q for the quarter ended June 30,
2002).                                                                                                                                                                                                      
|        | 
|10.3    |  | Stockholders Agreement, dated as of June 15, 2004, by and among Hewitt Associates, Inc., General Atlantic Partners 54, L.P., General Atlantic Partners 57, L.P., General Atlantic Partners 60,
L.P., GAP Coinvestment Partners, L.P. and GAP Coinvestment Partners II, L.P. (incorporated by reference to Exhibit 99.2 to Hewitt Associates, Inc.s Current Report on Form 8-K, dated June 15, 2004).
|        | 
|10.4    |  | Stockholders Agreement, dated as of June 15, 2004, by and among Hewitt Associates, Inc., Kevin M. Campbell, James C. Madden, V., Michael J. Salvino and Stephen M. Unterberger (incorporated by
reference to Exhibit 99.3 to Hewitt Associates, Inc.s Current Report on Form 8-K, dated June 15, 2004).                                                                                             
|        | 
|10.5    |  | Amended and Restated Registration Rights Agreement between Hewitt Holdings LLC and Hewitt Associates, Inc. (incorporated by reference to Exhibit 10.3 to Hewitt Associates, Inc.s
Registration Statement on Form S-1, as amended, Registration No. 333-105560).                                                                                                                                     
|        | 
|10.6    |  | Hewitt Associates LLC Note Purchase Agreement, dated May 1, 1996, authorizing the issue and sale of $50,000,000 aggregate principal amount of its 7.45% Senior Notes due May 30, 2008
(incorporated by reference to Exhibit 10.4 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-105560).                                                          



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|       |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                 
|------ |  | ------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.7   |  | Hewitt Associates LLC Note Purchase Agreement, dated as of March 15, 2000, authorizing the issue and sale of $15,000,000 aggregate principal amount of its 7.94% Senior Notes, Series A,
Tranche 1, due March 30, 2007 and $35,000,000 aggregate principal amount of its 8.08% Senior Notes, Series A, Tranche 2, due March 30, 2012 (incorporated by reference to Exhibit 10.5 to Hewitt Associates, Inc.s Registration Statement on Form
S-1, as amended, Registration No. 333-105560).                                                      
|       | 
|10.8   |  | Hewitt Associates LLC First Amendment to Note Purchase Agreement, dated as of June 15, 2000, amending the Note Purchase Agreement authorizing the issue and sale of $15,000,000 aggregate
principal amount of its 7.94% Senior Notes, Series A, Tranche 1, due March 30, 2007 and $35,000,000 aggregate principal amount of its 8.08% Senior Notes, Series A, Tranche 2, due March 30, 2012 (incorporated by reference to Exhibit 10.6 to Hewitt
Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-84198).
|       | 
|10.9   |  | Hewitt Associates LLC Supplemental Note Purchase Agreement (Series B), dated as of June 15, 2000, authorizing the issue and sale of $10,000,000 aggregate principal amount of Subsequent Notes
designated as its 8.11% Senior Notes, Series B, due June 30, 2010 (incorporated by reference to Exhibit 10.7 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-105560).                                                                                                                          
|       | 
|10.10  |  | Hewitt Associates LLC Supplemental Note Purchase Agreement (Series C), dated as of June 15, 2000, authorizing the issue and sale of $15,000,000 aggregate principal amount of Subsequent Notes
designated as its 7.93% Senior Notes, Series C, due June 30, 2007 (incorporated by reference to Exhibit 10.8 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-105560).                                                                                                                          
|       | 
|10.11  |  | Hewitt Associates LLC Supplemental Note Purchase Agreement (Series D), dated as of October 1, 2000, authorizing the issue and sale of $10,000,000 aggregate principal amount of Subsequent
Notes designated as its 7.65% Senior Notes, Series D, due October 15, 2005 (incorporated by reference to Exhibit 10.9 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-105560).                                                                                                                     
|       | 
|10.12  |  | Hewitt Associates LLC Supplemental Note Purchase Agreement (Series E), dated as of October 1, 2000, authorizing the issue and sale of $15,000,000 aggregate principal amount of Subsequent
Notes designated as its 7.90% Senior Notes, Series E, due October 15, 2010 (incorporated by reference to Exhibit 10.10 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-105560).                                                                                                                    
|       | 
|10.13  |  | Transfer Restriction Agreement between Hewitt Holdings LLC and Hewitt Associates, Inc. (incorporated by reference to Exhibit 10.11 to Hewitt Associates, Inc.s Registration Statement on
Form S-1, as amended, Registration No. 333-105560).                                                                                                                                                                                                                                                                                                   
|       | 
|10.14+ |  | Distribution Agreement between Hewitt Holdings LLC and Hewitt Associates LLC (incorporated by reference to Exhibit 10.12 to Hewitt Associates, Inc.s Registration Statement on Form S-1,
as amended, Registration No. 333-105560).                                                                                                                                                                                                                                                                                                             
|       | 
|10.15  |  | Revolving and Term Credit Facility by and among Hewitt Associates LLC, Harris Trust and Savings Bank, Individually and as Agent, and the Lenders Party thereto dated as of May 28, 1996, as
amended by Amendments 1 through 6 thereto (incorporated by reference to Exhibit 10.13 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-105560).                                                                                                                                                    
|       | 
|10.16  |  | Transfer Restriction Agreement between Hewitt Associates, Inc. and the partners of Bacon & Woodrow (incorporated by reference to Exhibit 10.14 to Hewitt Associates, Inc.s
Registration Statement on Form S-1, as amended, Registration No. 333-84198).                                                                                                                                                                                                                                                                                        
|       | 
|10.17  |  | Services Agreement between Hewitt Holdings LLC and Hewitt Associates LLC (incorporated by reference to Exhibit 10.15 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as
amended, Registration No. 333-84198).                                                                                                                                                                                                                                                                                                                  



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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                                    
|----- |  | ---------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.18 |  | First Amendment and Waiver to Note Purchase Agreement, dated May 31, 2002, authorizing the issue and sale of $50,000,000 aggregate principal amount of its 7.45% Senior Notes due May 30, 2008
(incorporated by reference to Exhibit 10.16 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-105560).                                                                                                                                                                                                                                              
|      | 
|10.19 |  | Second Amendment and Waiver to Note Purchase Agreement, dated May 31, 2002, authorizing the issue and sale of $15,000,000 of its 7.94% Senior Notes, Series A, Tranche 1, $35,000,000 of its
8.08% Senior Notes, Series A, Tranch 2, $10,000,000 of its 8.11% Senior Notes, Series B, $15,000,000 of its 7.93% Senior Notes, Series C, $10,000,000 of its 7.65%, Senior Notes, Series D, and $15,000,000 of its 7.90% Senior Notes, Series E
(incorporated by reference to Exhibit 10.17 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-105560).
|      | 
|10.20 |  | Ownership Interest Transfer Agreement between Hewitt Holdings LLC and Hewitt Associates, Inc. (incorporated by reference to Exhibit 10.18 to Hewitt Associates, Inc.s Registration
Statement on Form S-1, as amended, Registration No. 333-105560).                                                                                                                                                                                                                                                                                                                                               
|      | 
|10.21 |  | Lease Agreement by and between Hewitt Properties I LLC and Hewitt Associates LLC dated as of October 1, 1997, as amended on May 31, 2002 (incorporated by reference to Exhibit 10.19 to Hewitt
Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-105560).                                                                                                                                                                                                                                                                                                    
|      | 
|10.22 |  | Lease Agreement by and between Hewitt Properties III LLC and Hewitt Associates LLC dated as of April 22, 1999, as amended on May 31, 2002 (incorporated by reference to Exhibit 10.20 to Hewitt
Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-105560).                                                                                                                                                                                                                                                                                                   
|      | 
|10.23 |  | Seventh Amendment to Revolving and Term Credit Agreement by and among Hewitt Associates LLC, Harris Trust and Savings Bank, Individually and as Agent, and the Lenders Party thereto
(incorporated by reference to Exhibit 10.21 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-84198).                                                                                                                                                                                                                                                         
|      | 
|10.24 |  | Three Year Credit Agreement, dated as of September 27, 2002, among Hewitt Associates LLC and Harris Trust and Savings Bank, Bank of America NA, Wells Fargo Bank NA, Wachovia Bank NA
(incorporated by reference to Exhibit 10.22 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-105560).                                                                                                                                                                                                                                                       
|      | 
|10.25 |  | 364-Day Credit Agreement, dated as of September 27, 2002, among Hewitt Associates LLC and Harris Trust and Savings Bank, Bank of America NA, Wells Fargo Bank NA, Wachovia Bank NA
(incorporated by reference to Exhibit 10.23 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-105560).                                                                                                                                                                                                                                                          
|      | 
|10.26 |  | Aggregate Term Facility, dated as of June 5, 2002 and amended on August 29, 2002, by and among Hewitt Bacon & Woodrow Limited and Barclays Bank PLC (incorporated by reference to Exhibit
10.24 to Hewitt Associates, Inc.s Annual Report on Form 10-K for the year ended September 30, 2002.)                                                                                                                                                                                                                                                                                                    
|      | 
|10.27 |  | Lease Agreement by and between Hewitt Properties II LLC and Hewitt Associates LLC dated as of July 31, 1998, as amended on May 31, 2002 (incorporated by reference to Exhibit 10.25 to Hewitt
Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-105560).                                                                                                                                                                                                                                                                                                     
|      | 
|10.28 |  | Lease Agreement by and between Hewitt Properties IV LLC and Hewitt Associates LLC dated as of April 22, 1999 (for The Woodlands, Texas property), as amended on May 31, 2002 (incorporated by
reference to Exhibit 10.26 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-105560).                                                                                                                                                                                                                                                                



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|      |  |                                                                                                                                                                                                                                                                                                                                                                                                                                                                                         
|----- |  | ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------
|10.29 |  | Lease Agreement by and between Hewitt Properties IV LLC and Hewitt Associates LLC dated as of April 22, 1999 (for the Orlando, Florida property), as amended on May 31, 2002 (incorporated by
reference to Exhibit 10.27 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-105560).                                                                                                                                                     
|      | 
|10.30 |  | Lease Agreement by and between LaSalle Bank National AssociationTrust # 108178, Trustee for Overlook Associates with Hewitt Holdings LLC (51%) and Tower Parkway Associates (49%) as
general partners and Hewitt Associates LLC dated as of May 15, 1989, as amended by amendments 1 through 9 thereto. (incorporated by reference to Exhibit 10.28 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended,
Registration No. 333-105560).                         
|      | 
|10.31 |  | Lease Agreement by and between LaSalle Bank National AssociationTrust # 108178, Trustee for Overlook Associates with Hewitt Holdings LLC (51%) and Tower Parkway Associates (49%) as
general partners and Hewitt Associates LLC dated as of August 15, 1995, as amended by amendments on October 1, 1995 and September 28, 2001. (incorporated by reference to Exhibit 10.29 to Hewitt Associates, Inc.s Registration Statement on Form
S-1, as amended, Registration No. 333-105560).
|      | 
|10.32 |  | Lease Agreement by and between LaSalle Bank National AssociationTrust # 108178, Trustee for Overlook Associates with Hewitt Holdings LLC (51%) and Tower Parkway Associates (49%) as
general partners and Hewitt Associates LLC dated as of December 1, 1989, as amended on September 28, 2001. (incorporated by reference to Exhibit 10.30 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No.
333-105560).                                 
|      | 
|10.33 |  | Stockholders Agreement by and among Hewitt Associates, Inc., Hewitt Holdings LLC and the Covered Persons signatory thereto dated as of July 1, 2003. (incorporated by reference to
Exhibit 10.31 to Hewitt Associates, Inc.s Registration Statement on Form S-1, as amended, Registration No. 333-105560).                                                                                                                                                                            
|      | 
|10.34 |  | Guaranty Agreement, dated as of March 7, 2003, by and between Hewitt Associates, LLC and Citigroup, Inc. and its Affiliates (incorporated by reference to Exhibit 10.1 to Hewitt Associates,
Inc.s Quarterly Report on Form 10-Q for the quarter ended March 31, 2003).                                                                                                                                                                                                                
|      | 
|10.35 |  | Amendment to the Three Year Credit Agreement, dated as of September 27, 2003, between Hewitt Associates LLC and Harris Trust and Savings Bank, Bank of America NA, Wells Fargo Bank NA,
Wachovia Bank NA (incorporated by reference to Exhibit 10.33 to Hewitt Associates, Inc.s Annual Report on Form 10-K for the year ended September 30, 2003).                                                                                                                                    
|      | 
|10.36 |  | Amended Schedule A, dated as of August 1, 2003, and to the Guaranty Agreement by and between Hewitt Associates, LLC and Citigroup, Inc. and its Affiliates, dated as of March 7, 2003
(incorporated by reference to Exhibit 10.34 to Hewitt Associates, Inc.s Annual Report on Form 10-K for the year ended September 30, 2003).                                                                                                                                                       
|      | 
|14.   |  | Code of Ethics (incorporated by reference to Exhibit 14 to Hewitt Associates, Inc.s Annual Report on Form 10-K for the year ended September 30, 2003.)                                                                                                                                                                                                                                                                                                                                 
|      | 
|21.   |  | Subsidiaries.                                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|      | 
|23.1  |  | Consent of Ernst & Young LLP.                                                                                                                                                                                                                                                                                                                                                                                                                                                           
|      | 
|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).                                                                                                                                                                                                                                                                                                                      



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|     |  |                                                                                                                                                                    
|---- |  | -------------------------------------------------------------------------------------------------------------------------------------------------------------------
|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).

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|+ | Confidential treatment has been granted for portions of this document.
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