UNITED STATES
                       SECURITIES AND EXCHANGE COMMISSION
                             WASHINGTON, D.C. 20549

                                   FORM 10-Q

(Mark One)

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

   FOR THE QUARTERLY PERIOD ENDED SEPTEMBER 30, 1999

                                              OR

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

   FOR THE TRANSITION PERIOD FROM _____ TO _____

                         COMMISSION FILE NUMBER: 0-20724

                             WATSON WYATT & COMPANY
             (Exact name of registrant as specified in its charter)

       DELAWARE                                       53-0181291
   (State or other                                 (I.R.S. Employer
   jurisdiction of                                Identification No.)
   incorporation or
    organization)

                            6707 DEMOCRACY BOULEVARD
                                   SUITE 800
                               BETHESDA, MD 20817
          (Address of principal executive offices, including zip code)
                                 (301) 581-4600
              (Registrant's telephone number, including area code)


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

Indicate the number of shares  outstanding  of each of the issuer's  classes of
common stock, as of November 12, 1999.

Common Stock, $1.00 par value                                     14,896,655
-----------------------------                                  ----------------
         Class                                                 Number of Shares
<PAGE>
<TABLE>
<CAPTION>



                                               WATSON WYATT & COMPANY
                                        CONSOLIDATED STATEMENTS OF OPERATIONS
                                (THOUSANDS OF U.S. DOLLARS, EXCEPT PER SHARE AMOUNTS)

                                                                                      Three Months Ended September 30,
                                                                                      --------------------------------
                                                                                          1999                1998
                                                                                      ------------        ------------
                                                                                                (Unaudited)
<S>                                                                                   <C>                 <C>

Fees                                                                                  $    146,323        $    133,985
                                                                                      ------------        ------------

Costs of providing services:
     Salaries and employee benefits                                                         85,803              78,498
     Occupancy and communications                                                           14,742              14,521
     Professional and subcontracted services                                                 9,796               8,714
     Other                                                                                   7,274               2,846
                                                                                      ------------        ------------
                                                                                           117,615             104,579

General and administrative expenses                                                         13,178              11,160
Depreciation and amortization                                                                4,907               3,853
                                                                                      ------------        ------------
                                                                                           135,700             119,592
                                                                                      ------------        ------------

Income from operations                                                                      10,623              14,393

Other:
     Interest income                                                                         1,036                 124
     Interest expense                                                                         (390)               (553)

Income from affiliates                                                                         988                 160
                                                                                      ------------        ------------


Income before income taxes and minority interest                                            12,257              14,124


Provision for income taxes                                                                   5,919               6,830
                                                                                      ------------        ------------


Income before minority interest                                                              6,338               7,294


Minority interest in net loss of consolidated subsidiaries                                      18                   -
                                                                                      ------------        ------------

Net Income                                                                            $      6,356        $      7,294
                                                                                      ============        ============



Earnings per share                                                                    $       0.41        $       0.47
                                                                                      ============        ============

Weighted average shares of Redeembable Common Stock                                         15,331              15,377
                                                                                      ============        ============



                                               See accompanying notes
                                                         F-2
</TABLE>
<PAGE>
<TABLE>
<CAPTION>


                                                 WATSON WYATT & COMPANY
                                              CONSOLIDATED BALANCE SHEETS
                                              (THOUSANDS OF U.S. DOLLARS)

                                                                                  September 30,              June 30,
                                                                                      1999                     1999
                                                                                 --------------            -------------
                                                                                  (Unaudited)

<S>                                                                              <C>                       <C>

                                                         ASSETS

Cash and cash equivalents                                                        $       13,835            $      35,985
Receivables from clients:
     Billed, net of allowances of $6,526 and $3,701                                      76,215                   72,798
     Unbilled                                                                            70,581                   63,068
                                                                                 --------------            -------------
                                                                                        146,796                  135,866
Other current assets                                                                     10,389                   10,834
                                                                                 --------------            -------------
     Total current assets                                                               171,020                  182,685
Investment in affiliates                                                                 16,561                   15,306
Fixed assets                                                                             40,887                   42,797
Deferred income taxes                                                                    56,206                   56,206
Intangible assets                                                                         9,804                    7,455
Other assets                                                                              9,908                    9,511
                                                                                 --------------            -------------

                                                                                 $      304,386            $     313,960
                                                                                 ==============            =============

                         LIABILITIES, REDEEMABLE COMMON STOCK AND PERMANENT SHAREHOLDERS' EQUITY

Accounts payable and accrued liabilities                                         $      125,393            $     152,371
Note payable and book overdrafts                                                         31,562                      248
Income taxes payable                                                                      8,393                   18,374
                                                                                 --------------            -------------
     Total current liabilities                                                          165,348                  170,993

Accrued retirement benefits                                                              74,871                   77,140
Deferred rent and accrued lease losses                                                    9,078                    9,270
Other noncurrent liabilities                                                             22,149                   22,608
Minority interest in subsidiaries                                                           564                      669
Redeemable Common Stock - $1 par value:
     25,000,000 shares authorized;
     15,012,350 and 16,112,416 issued
     and outstanding; at redemption value                                               100,282                  107,631
Permanent shareholders' equity:
Adjustment for redemption value less
     than amounts paid in by shareholders                                                10,641                   11,420
Retained deficit                                                                        (76,496)                 (83,209)
Cumulative translation loss                                                              (2,051)                  (2,562)
Commitments and contingencies
                                                                                 --------------           --------------

                                                                                 $      304,386           $      313,960
                                                                                 ==============           ==============




                                                 See accompanying notes
                                                          F-3
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
                                                   WATSON WYATT & COMPANY
                                            CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                 (THOUSANDS OF U.S. DOLLARS)


                                                                                           Three Months Ended September 30,
                                                                                           --------------------------------
                                                                                               1999               1998
                                                                                           ------------       -------------
                                                                                                     (Unaudited)

<S>                                                                                        <C>                <C>

Cash flows from (used for) operating activities:
     Net income                                                                            $      6,356       $       7,294
     Adjustments to reconcile net income to net cash
       provided by operating activities:

         Provision for doubtful receivables from clients                                           4,169              1,957
         Depreciation                                                                              4,519              3,601
         Amortization of intangible assets                                                           388                252
         Income from affiliates                                                                     (988)              (160)
         Minority interest in net loss of consolidated subsidiaries                                  (18)                 -
         (Increase) decrease in assets (net of discontinued operations):
             Receivables from clients                                                            (15,098)           (15,093)
             Income taxes receivable                                                                   -              2,216
             Other current assets                                                                    445             (3,287)
             Other assets                                                                           (397)               635
         (Decrease) increase in liabilities (net of discontinued operations):
             Accounts payable and accrued liabilities                                            (26,978)           (18,828)
             Income taxes payable                                                                 (9,981)             3,396
             Accrued retirement benefits                                                          (2,269)               (24)
             Deferred rent and accrued lease losses                                                 (192)              (635)
             Other noncurrent liabilities                                                            178                489
          Other, net                                                                                 (72)              (108)
          Discontinued operations, net                                                              (637)              (717)
                                                                                           -------------      -------------
          Net cash used for operating activities                                                 (40,575)           (19,012)
                                                                                           -------------      -------------
Cash flows (used in) from investing activities:
     Purchases of fixed assets                                                                    (2,645)            (2,775)
     Acquisitions                                                                                 (2,700)            (5,671)
     Investment in affiliates                                                                        297              1,151
                                                                                           -------------      -------------
Net cash used in investing activities                                                             (5,048)            (7,295)
                                                                                           -------------      -------------

Cash flows from (used by) financing activities:
     Borrowings and book overdrafts                                                               31,314             32,944
     Issuances of Redeemable Common Stock                                                              -                  -
     Repurchases of Redeemable Common Stock                                                       (7,771)            (6,285)
                                                                                           -------------      -------------
          Net cash from financing activities                                                       23,543             26,659
                                                                                           -------------      -------------
Effect of exchange rates on cash                                                                     (70)              (165)
                                                                                           -------------      -------------

(Decrease) increase in cash and cash equivalents                                                 (22,150)               187

Cash and cash equivalents at beginning of period                                                  35,985             13,405
                                                                                           -------------      -------------

Cash and cash equivalents at end of period                                                 $      13,835      $      13,592
                                                                                           =============      =============





                                                   See accompanying notes
                                                             F-4
</TABLE>
<PAGE>
<TABLE>
<CAPTION>



                                             WATSON WYATT & COMPANY
                      CONSOLIDATED STATEMENTS OF CHANGE IN PERMANENT SHAREHOLDERS' EQUITY
                                           (THOUSANDS OF U.S. DOLLARS)
                                                   (Unaudited)

                                                                                 Adjustment for
                                                                                Redemption Value
                                                                  Cumulative    Less Than Amounts
                                                   Retained      Translation       Paid in by
                                                    Deficit          Loss         Shareholders       Total
                                                 ------------     ----------       ----------      ---------
<S>                                              <C>              <C>              <C>             <C>

Balance at June 30, 1999                         $    (83,209)    $   (2,562)      $   11,420      $ (74,351)

Comprehensive Income:
Net income                                              6,356              -                -          6,356
Foreign currency translation adjustment                     -            511                -            511
                                                 ------------     ----------       ----------      ---------
Total Comprehensive Income                              6,356            511                -          6,867
Effect of repurchases of 1,100,066 shares of
     common stock                                         357              -             (357)             -
Adjustment of redemption value for change
     in Formula Book Value per share                        -              -             (422)          (422)
                                                 ------------     ----------       ----------      ---------

Balance at September 30, 1999                    $    (76,496)    $   (2,051)      $   10,641      $ (67,906)
                                                 ============     ==========       ==========      =========






                                             See accompanying notes
                                                      F-5

</TABLE>
<PAGE>

                             WATSON WYATT & COMPANY

                 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
                                  (Unaudited)


1.   The accompanying  unaudited  consolidated  financial  statements of Watson
     Wyatt & Company and its subsidiaries, (collectively, "Watson Wyatt" or the
     "Company"),  are presented in accordance with the rules and regulations of
     the Securities and Exchange  Commission  ("SEC") and do not include all of
     the  disclosures   normally  required  by  Generally  Accepted  Accounting
     Principles.  In the opinion of management,  these  statements  reflect all
     adjustments,  consisting only of normal recurring  adjustments,  which are
     necessary for a fair presentation of the consolidated financial statements
     for the interim periods.  The consolidated  financial statements should be
     read in conjunction with the audited consolidated financial statements and
     notes thereto  contained in the  Company's  Annual Report on Form 10-K for
     the year ended June 30, 1999.

     The results of operations  for the three months ended  September 30,  1999
     are not necessarily indicative of the results that can be expected for the
     entire  fiscal year ending  June 30,  2000.  The results  reflect  prorata
     growth in share value,  anticipated tax rates and potential  distributions
     at the discretion of the Company's Board of Directors.  Certain prior year
     amounts   have  been   reclassified   to  conform  to  the  current   year
     presentation.

2.   Under the Company's  Bylaws,  the Company is obligated to  repurchase  its
     Redeemable Common Stock, except in certain circumstances. Accordingly, the
     redemption value of outstanding  shares is classified as Redeemable Common
     Stock and not as permanent  shareholders' equity.  Redeemable Common Stock
     is equal to the number of shares  outstanding  multiplied  by the  Formula
     Book Value per share,  which was $6.68 per share at September 30, 1999 and
     June 30, 1999.  Permanent  shareholders' equity includes an adjustment for
     the difference between the redemption value of the Redeemable Common Stock
     and the  amounts  actually  paid or deemed  paid by  shareholders  for the
     shares.

3.   During the three months ended September 30, 1999, the Company  repurchased
     1,100,066  shares of Redeemable  Common Stock. The computation of earnings
     per  share  is  based  upon the  weighted  average  number  of  shares  of
     Redeemable  Common  Stock  outstanding  during the  period.  The number of
     shares (in thousands) used in the computation is 15,331 and 15,377 for the
     three months ended September 30, 1999 and 1998, respectively.

4.   In the third  quarter of fiscal year 1998,  the Company  discontinued  its
     Benefits Administration Outsourcing Business,  including its investment in
     its  affiliate  Wellspring  Resources,  LLC  ("Wellspring").  The  Company
     recorded an after tax loss of $69.9 million.  In October 1998, the Company
     consummated  agreements with certain clients,  Wellspring,  and its former
     venture partner to transfer operating  responsibility for these clients to
     Wellspring,  clarifying the remaining future obligations and costs related
     to the  discontinuation.  The Company  reduced the amount of its provision
     for losses from disposal of the Outsourcing Business in the second quarter
     of fiscal  year 1999 by $8.7  million,  net of tax,  and  believes  it has
     adequate  provisions for any remaining costs. No adjustments to net income
     were recorded as a result of the discontinuation during the quarters ended
     September 30, 1999 and 1998.

                                      -6-
<PAGE>

5.   The Company has adopted  SFAS No. 130  "Reporting  Comprehensive  Income."
     Comprehensive  income  includes  net income and changes in the  cumulative
     translation  gain or loss. For the three months ended  September 30, 1999,
     comprehensive  income totaled $6.9 million  compared with $7.3 million for
     the three months ended September 30, 1998.

6.   In fiscal year 1999, the Company adopted SFAS No. 131  "Disclosures  about
     Segments  of an  Enterprise  and  Related  Information."  The  Company  is
     primarily organized geographically and has seven reportable segments:

            (1)  U.S. East
            (2)  U.S. Central
            (3)  U.S. West
            (4)  Asia/Pacific
            (5)  Canada
            (6)  Latin America
            (7)  Data Services

The Company  evaluates the performance of its segments and allocates  resources
to them based on net operating income.  Prior year data has been restated to be
consistent with current year classifications.

The table below presents  specified  information  about reported segments as of
and for the quarter ended September 30, 1999 (in thousands):

<TABLE>
<CAPTION>
                    U.S.      U.S.     U.S.      Asia/               Latin    Data
                    East    Central    West     Pacific   Canada    America Services   Total
                    ----    -------    ----     -------   ------    ------- --------   -----
<S>               <C>       <C>       <C>       <C>       <C>      <C>      <C>      <C>
External fees     $ 41,238  $ 33,340  $ 14,883  $ 12,346  $ 8,628  $ 1,219  $ 3,592  $ 115,246
Intersegment fees   10,550     7,006     4,631     1,079    1,098      346       34     24,744
Net operating
  income            14,700     6,691     2,218     1,778      (22)    (282)   1,883     26,966
Receivables         58,459    44,369    18,398    13,552   11,386    2,639        -    148,803

</TABLE>
The table below presents specified  information about reported segments as of
and for the quarter ended September 30, 1998 (in thousands):

<TABLE>
<CAPTION>

                    U.S.      U.S.     U.S.      Asia/               Latin    Data
                    East    Central    West     Pacific   Canada    America Services   Total
                    ----    -------    ----     -------   ------    ------- --------   -----
<S>               <C>       <C>       <C>       <C>       <C>      <C>      <C>       <C>
External fees     $ 34,598  $ 30,946  $ 17,253  $ 11,203  $ 8,396  $ 1,006  $ 3,904  $ 107,306
Intersegment fees    9,458     5,319     4,763       625    1,262      458       92     21,977
Net operating
  income            12,112     6,485     3,705     1,804      470     (118)   1,756     26,214
Receivables         45,819    38,895    24,423    11,286   13,324    1,889        -    135,636
</TABLE>

Information about interest income and tax expense is not presented as it is not
considered a responsibility of the segments' operating management.

                                      -7-
<PAGE>

A  reconciliation  of the information  reported by segment to the  consolidated
amounts follows for the quarters ended September 30:
<TABLE>
<CAPTION>
                                                                              1999      1998
                                                                              ----      ----
<S>                                                                      <C>        <C>
Fees:
-----
Total segment external and intersegment fees                             $ 139,990  $ 129,283
Reimbursable expenses not included in segment fees                           6,227      6,001
Other, net                                                                     106     (1,299)
                                                                         ---------  ---------
Consolidated fees                                                        $ 146,323  $ 133,985
                                                                         =========  =========
Net Operating Income:
---------------------
Total segment income                                                     $  26,966  $  26,214
Income from affiliates                                                         988        160
Differences in allocation methods for depreciation
  G&A and pension costs                                                      2,112      1,833
Gain on sale of business units                                                   -      3,822
Discretionary payments                                                     (21,198)   (15,774)
Other, net                                                                   3,389     (2,131)
                                                                         ---------  ---------
Consolidated pretax income from continuing operations                    $  12,257  $  14,124
                                                                         =========  =========

Receivables:
------------
Total segment receivables - billed and unbilled                          $ 148,803  $ 135,636
Net valuation differences and receivables of discontinued operations        (2,007)     5,155
                                                                         ---------  ---------
Total billed and unbilled receivables                                      146,796    140,791
Assets not reported by segment                                             157,590    143,546
                                                                         ---------  ---------
Consolidated assets                                                      $ 304,386  $ 284,337
                                                                         =========  =========
</TABLE>


ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

GENERAL

Watson  Wyatt  &  Company,   together  with  its  affiliates  and  consolidated
subsidiaries,   (collectively,  "Watson  Wyatt"  or  the  "Company"),  provides
employee  benefits,  human  resources and human  resources  systems  technology
consulting  to major  employers  throughout  the  world.  The  Company  and its
alliance  partner,  Watson Wyatt  Partners,  the leading  United  Kingdom-based
employee benefits partnership, operate seamlessly as Watson Wyatt Worldwide.

Watson Wyatt is owned almost entirely by its active  employees.  The Company is
incorporated in Delaware,  and its principal  executive  offices are located at
6707  Democracy  Boulevard,  Suite 800,  Bethesda,  MD 20817.  The  Company was
founded in 1946; Watson Wyatt Partners was founded in 1878.

Watson Wyatt's fiscal year ends June 30. The financial  statements contained in
this quarterly report reflect  Consolidated Balance Sheets as of the end of the
first quarter of fiscal year 2000 (September 30, 1999) and as of the end of the
prior  fiscal  year 1999  (June  30,  1999),  and  Consolidated  Statements  of
Operations,  of Cash Flows and of Changes in Permanent Shareholders' Equity for
the three months ended September 30, 1999 and 1998.

                                      -8-
<PAGE>

GLOBAL OPERATIONS

Watson Wyatt Worldwide employs approximately 5,300 associates in offices in the
United  States,  Canada,  Asia and the South  Pacific,  Europe,  Africa,  Latin
America and the U.S. Caribbean.

Watson Wyatt & Company is primarily organized based on the following geographic
regions:  U.S. East, U.S. Central,  U.S. West,  Asia/Pacific,  Canada and Latin
America.  As of  June  30,  1999,  the  Company  employed  approximately  3,850
associates as follows:

        U.S. East               950
        U.S. Central            975
        U.S. West               450
        Asia/Pacific            625
        Canada                  425
        Latin America            80
        Data Services            60
        Corporate/Other         285
                            -------
                              3,850
                            =======

PRINCIPAL SERVICES

Watson Wyatt focuses its services in four principal areas:

BENEFITS CONSULTING: The Benefits Consulting practice provides analysis, design
and  implementation of retirement  programs,  including  actuarial services and
required  reporting  of plan  contributions  and funding  levels,  group health
benefit  plan design and  provider  selection,  and defined  contribution  plan
design and related services.

HR TECHNOLOGIES CONSULTING:  The HR Technologies  Consulting practice develops
technology-based  solutions  to  reduce  employer  costs and  improve  employee
service in human resources administration, including web-based applications.

HUMAN CAPITAL CONSULTING:  The Human  Capital  Consulting  practice  provides
comprehensive  consulting in compensation plan design,  executive compensation,
salary  management,  benefits  communication and  organizational  effectiveness
consulting.

DATA SERVICES:  Watson  Wyatt  Data  Services  produces  custom  and  standard
compensation,  benefits  and best  practices  surveys  and  reference  works to
clients throughout the world. Over 5,000 companies participate in the Company's
surveys;   its  services  include  over  seventy   reference   publications  in
remuneration,  benefits and employment  practices  which are utilized by global
and local companies in fifty countries.

Within  the  past  two  years,  Watson  Wyatt  has  divested  several  non-core
businesses   -   including   benefits   administration   outsourcing,   defined
contribution  record-keeping software,  and its North American risk  management
consulting services - in order to focus on these core consulting areas.

While the  Company  groups  services  into  functional  categories,  management
believes a primary  strength  is its ability to deliver  its  services  without
boundaries to meet the requirements of its clients.

                                       -9-
<PAGE>

COMPETITION

The  human  resource  consulting  business,  including  all  of  the  Company's
principal services,  is highly competitive.  Barriers to entry relate primarily
to the  need to  assemble  the  specialized  intellectual  capital  to  provide
expertise demanded by clients. The Company's  competitive position is strongest
in  retirement,  benefits  and HR  technology  consulting,  but  there is not a
substantial difference between the competitive position of its overall business
as compared to its individual lines of business.

Watson  Wyatt  ranks  number one in the  consulting  industry  when it comes to
delivering  value to  clients  and  overall  reputation  according  to a recent
independent study conducted by THE WALL STREET JOURNAL among its subscribers.

The Company's  competitors  include other human resource  consulting  firms and
certain public  accounting/consulting  firms;  its most direct  competitors are
five to seven firms which offer  similar  services in the United States and, in
several cases, internationally.  Buyers of consulting services in the Company's
core  businesses  consistently  mention that their key  selection  criteria are
quality, the ability to tailor services to a client's unique needs,  creativity
and  overall  value.  In  recent  years,  price  has  become  a  somewhat  more
significant  competitive  factor  in  some  aspects  of  the  business.   Other
competitive factors of increasing  importance are the quality and effectiveness
of available  technology  and  software and the ability to serve  multinational
clients.

RESULTS OF OPERATIONS--THREE MONTHS ENDED SEPTEMBER 30, 1999 COMPARED TO THREE
MONTHS ENDED SEPTEMBER 30, 1998.

For the first three months of fiscal year 2000 the Company  produced net income
of $6.4 million, a decrease of $0.9 million from net income of $7.3 million for
the first three months of fiscal year 1999.  Excluding a $1.9 million after-tax
gain from the sale of the Company's defined  contribution daily  record-keeping
software  included in the fiscal year 1999 results,  net income  increased $1.0
million,  or 19%.  These results  reflect share value growth and bonus accruals
that are ultimately determined at the discretion of the Board of Directors.

Fees for the first three  months of fiscal year 2000  totaled  $146.3  million,
compared to $134.0  million for the first three months of fiscal year 1999,  an
increase  of $12.3  million,  or 9%.  The  revenue  growth is  attributable  to
improved  performance  in the  Company's  U.S. East and U.S.  Central  Regions,
primarily from increased billable hours.

Salaries and  employee  benefit  expenses for the first  quarter of fiscal year
2000 were $85.8 million, an increase of $7.3 million, or 9%, from $78.5 million
in the first  quarter of fiscal year 1999.  The increase is  attributable  to a
$9.1 million rise in  compensation  to  associates,  caused by a 4% increase in
headcount and a higher fiscal year 2000 estimated bonus accrual.  This increase
is partially offset by a $1.9 million reduction in pension expense.

Occupancy and  communication  expenses  during the first quarter of fiscal year
2000 totaled  $14.7  million,  an increase of $0.2  million,  or 1%, from $14.5
million in the first quarter of the prior fiscal year.

Professional and subcontracted services increased by $1.1 million, or 13%, from
the first quarter of fiscal year 1999, reflecting timing differences associated
mainly with legal, marketing and operational payments to external vendors.

                                      -10-
<PAGE>

Other costs of providing  services  were $7.3 million for the first  quarter of
fiscal year 2000,  an increase of $4.4 million from the first quarter of fiscal
year 1999.  The  difference is mainly  attributable  to the inclusion in fiscal
year  1999 of a $3.7  million  gain  from  the  sale of the  Company's  defined
contribution daily record-keeping software. The remainder of the difference can
be attributed to increased general office and travel expenses.

General and  administrative  ("G&A")  expenses for the first  quarter of fiscal
year 2000 were $13.2 million,  a $2.0 million,  or 18%, increase from the first
quarter of fiscal year 1999. This increase is primarily the result of increased
salaries and benefits, and an increased bonus accrual.

Depreciation and amortization  expense of $4.9 million for the first quarter of
fiscal year 2000  represents an increase of $1.1 million from the first quarter
of fiscal year 1999. This increase is due to a higher depreciable  capital base
and higher intangibles related to prior year acquisitions.

Interest  income  increased  $0.9 million from the first quarter of fiscal year
1999.  This  increase  can be  attributed  to the  receipt of  interest of $0.5
million  related to a federal tax refund as well as to interest  income of $0.4
million earned during the quarter on a higher average investment balance.

Income from  affiliates  was $1.0 million for the quarter  ended  September 30,
1999 compared with $0.2 million for the quarter ended  September 30, 1998.  The
increase  reflects   significantly   improved   business   operations  in  both
Continental Europe and the United Kingdom.

Income  taxes for the  quarter  ending  September  30,  1999 were $5.9  million
compared to $6.8 million in the first  quarter of fiscal year 1999 due to lower
income before income taxes and minority interest.  The Company's  effective tax
rate of 48% at September 30, 1999 remained  unchanged  from the prior year. The
Company's  tax rate is affected by  differing  foreign tax rates in various tax
jurisdictions.  The Company has not  recorded a tax benefit on certain  foreign
net operating loss carryovers and foreign deferred  expenses to the extent that
it is more likely than not that a benefit will not be realized.

LIQUIDITY AND CAPITAL RESOURCES

The Company relies primarily on funds from operations and short-term borrowings
as its sources of liquidity.  The Company  believes that it has access to ample
financial  resources to finance its growth,  meet its commitments to affiliates
as well as support ongoing operations.  The Company's cash and cash equivalents
at September 30, 1999 totaled $13.8 million,  compared to $36.0 million at June
30, 1999. The decrease is mainly  attributable  to the timing of the payment of
corporate  taxes and to purchases of capital  assets during the first  quarter.
The  Company  had no  borrowings  outstanding  under  its line of  credit as of
September 30, 1999 and June 30, 1999.

The allowance for doubtful  accounts  increased $2.8 million from June 30, 1999
to September 30, 1999. The movement is  attributable  to an increased  accounts
receivable  balance as of September 30, 1999 and an increased  emphasis on cash
collections  in the last month of the fiscal year that  decreased the allowance
as of June 30,  1999.  The  change in the  allowance  for the first  quarter of
fiscal year 2000 is  consistent  with the change in the first quarter of fiscal
year 1999. The number of months of accounts  receivable  outstanding was 1.2 at
September 30, 1999 compared to 1.3 at September 30, 1998.

CASH USED FOR OPERATING ACTIVITIES.  For the first three months of fiscal year
2000,  the Company had operating  cash outflows of $40.6  million,  compared to
$19.0  million for the first three months of fiscal year 1999.  The increase in
cash outflows  results  mainly from the payment of higher  accrued  bonuses and
corporate  tax payments for fiscal year 1999 in fiscal year 2000  compared with
the prior year.

                                      -11-
<PAGE>

The  Company's  ratio of  current  assets  to  current  liabilities  was 1.0 at
September 30, 1999, compared to 1.1 at September 30, 1998.

CASH USED IN INVESTING ACTIVITIES.  Cash used in  investing activities was $5.0
million for the first three months of fiscal year 2000, versus $7.3 million for
the same  period in fiscal  year 1999.  The  decrease  in cash usage was due to
lower  contingency   payments  associated  with  1999  acquisitions  and  lower
distributions from affiliates to the Company.

Anticipated  commitments  of  funds  are  estimated  at $24.0  million  for the
remainder of fiscal year 2000, mainly for computer  hardware  purchases and for
office relocations and renovations. The Company expects operating cash flows to
provide for the Company's cash needs.

CASH FROM FINANCING ACTIVITIES.  Cash flows  provided by financing  activities
were $23.5 million for the first three months of fiscal year 2000, versus $26.7
million in the preceding  fiscal year.  The decrease is mainly due to the lower
level of borrowings and book  overdrafts  and higher  repurchases of Redeemable
Common Stock.

The Company's $120.0 million revolving credit line matures on June 29, 2003. Of
the $95.0  million of the credit line that is allocated  for  operating  needs,
$92.8  million  is  available  as  of  September  30,  1999  ($2.2  million  is
unavailable as a result of support  required for letters of credit issued under
the credit line), compared to $74.9 million on September 30, 1998.

YEAR 2000 ISSUE

The Company has substantially  completed its scheduled  preparations to address
the Year 2000 problem.  Remaining scheduled  activities include finalization of
contingency  plans,  monitoring of  developments  and completion of  unfinished
remediation  activity.  Management expects that effort will be required through
the end of calendar year 1999 and beyond to enable the Company to meet its Year
2000  compliance  goals.  Based on the work  completed  during  the past  year,
management  continues to be confident  that the Year 2000 problem is not likely
to have a material  effect on the Company's  business,  results of  operations,
financial condition or cash flows. Nevertheless, since the effects of  the Year
2000 problem are likely to be  unpredictable,  management  does not expect that
the  Company's  Year 2000  compliance  program will  eliminate  all risk to the
Company associated with the Year 2000 problem.

The  Company's  Year 2000  compliance  plan relies on  geographic  and practice
leaders to assess and oversee  repair or  replacement  of software and hardware
used  in  their  domain.  As of  September  30,  1999,  this  effort  has  been
substantially  completed  and  exceptions  to the plan  have  been  identified.
Management   believes  that  geographic  and  practice   leaders  have  adopted
appropriate  plans to address the remaining work identified in their respective
domains.

Based on its ongoing  review,  management  continues  to believe  that the most
significant risk facing the Company in connection with Year 2000 issues relates
to software  provided by the Company for use by, or on behalf of, its  clients.
This software has been provided  principally  by the HR  Technologies  practice
(including  benefit  administration  software and call center services) and the
Retirement practice (principally  spreadsheet-based  benefit calculators).  The
risks  presented  include the  possibility of errors or  contractual  liability
caused by non-compliant  software that is not identified or corrected and costs
of replacing or repairing client systems.  The following  summarizes the status
of the Company's Year 2000 compliance  efforts related to client software as of
September 30, 1999:

                                      -12-
<PAGE>

     Remediation and testing were complete on substantially  all of the systems
     inventoried by the Retirement practice in North America.  This assessment,
     however,   does  not  include  certain   internal   systems  with  limited
     application  (such as calculators  used to estimate  benefits for a single
     client plan).  The Company will  remediate and test such systems as a part
     of its normal quality review process when such systems are next used.

     The  HR  Technologies  practice  has  completed  assessment  on all of the
     systems  inventoried  in North  America.  Over 90% of the  effort has been
     completed  relating  to the  testing  and  remediation  of these  systems.
     Testing and  remediation  of the  remaining  systems are  scheduled  to be
     completed  before the end of 1999. A  substantial  number of the remaining
     systems  are used to  support  open  enrollment  in benefit  plans;  these
     systems are normally  modified  late in the calendar year and any required
     Year 2000 remediation will be performed as a part of such modifications.

     The Company has substantially completed a program of contacting clients to
     discuss Year 2000 issues related to Watson Wyatt software.

The Company has completed  assessment,  repair, and testing of all its internal
information  technology  systems,  including  WyVal,  the  Company's  actuarial
valuation  software.  The Company has completed an inventory of its vendors and
is monitoring Year 2000 compliance efforts by its major vendors. Because of the
nature of the Company's  business and the widely  distributed  locations of the
Company's  operations,  management  believes  that  the  Company  does not face
significant  risks  from Year  2000  failures  in  systems  relied  upon by its
vendors.  The Company has not reviewed the Year 2000  compliance  status of its
clients,  some of which  may be  affected  by Year  2000  problems.  Management
believes that the effect of client  problems on the Company's own operations is
not  likely to be  material  because of the  broad,  diversified  nature of the
Company's  client  base.  The  Company  will  continue  to  develop  and revise
contingency  procedures to address the Year 2000 situation.  In many cases, the
Company  will rely on  existing  contingency  plans  relating  to  failures  in
information  technology systems. A principal focus of the Company's contingency
planning is backing up systems and maintaining  communications  among employees
and  with  clients  in  case  of  short-term   telecommunications  failures  or
short-term limitations on access to the Company's offices.

Other risks  identified  by the  Company  include:  risk of a general  economic
downturn as a result of the Year 2000 problem; risk arising from the failure of
infrastructure,  including  power,  water,  telecommunications,   and  building
services; and risks from operations outside North America.  Because of the size
of these operations, management does not expect that Year 2000 problems outside
North America will have a material  effect on the Company,  but such operations
are included  within the Company's  Year 2000 program.  The Company's Year 2000
compliance  program will not address or prevent  adverse effects to the Company
because of economic disruption or failure of public infrastructure.

The Company has not projected Year 2000 compliance  costs for fiscal year 2000.
Management expects these costs will be lower in fiscal year 2000 than in fiscal
year 1999, when the Company's Year 2000 compliance costs exceeded $4.0 million.
Funds for costs associated with the Company's Year 2000 compliance efforts will
come from  operating  cash flows for all areas of the Company's  operations and
will be expensed as incurred.

                                      -13-
<PAGE>

The information  concerning the Company's Year 2000 compliance  effort includes
"forward-looking  statements"  within  the  meaning of the  Private  Securities
Litigation Reform Act of 1995. Such  forward-looking  statements  involve known
and unknown  risks,  uncertainties,  and other  factors  that may cause  actual
events  or  costs  to  be   materially   different   than   indicated  by  such
forward-looking statements.  These factors include, among others, unanticipated
costs of  remediation  and  replacement,  the  Company's  inability to meet its
targeted  dates  as  scheduled  and  extensive  failures  of  governmental  and
municipal  infrastructures.  Any estimates and projections  described have been
developed by the  management of the Company and are based on the Company's best
judgments  together with the information  that is available to date. Due to the
many uncertainties  surrounding the Year 2000 problem,  the shareholders of the
Company  are  cautioned  not to place undue  reliance  on such  forward-looking
statements.

                                      -14-
<PAGE>


PART II.       OTHER INFORMATION
               -----------------

ITEM 1. LEGAL PROCEEDINGS

Watson Wyatt is from time to time a defendant in various  lawsuits  which arise
in the ordinary  course of business.  These disputes  typically  involve claims
relating to employment matters or the rendering of professional  services.  The
management of the Company does not believe that any such  currently  pending or
threatened  litigation  is  likely  to have a  material  adverse  effect on the
business or financial condition of Watson Wyatt.

ITEM 2. CHANGES IN SECURITIES

None.

ITEM 3. DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS

None.

ITEM 5. OTHER INFORMATION

None.

ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K

a.      Exhibits

        3.1    Restated Certificate of Incorporation of Watson Wyatt & Company2
        3.2    Restated Bylaws (as amended through November 19, 1998)3
        4      Form of Certificate Representing Common Stock1
        10     Credit Agreement Among NationsBank, N.A. and Others dated
               June 30, 19984

b.      Reports on Form 8-K

        None.




--------
1    Incorporated by reference from Registrant's Initial Statement on Form 10
     (File No. 0-20724), filed on October 13, 1992
2    Incorporated by reference from Registrant's Annual Report on Form 10-K for
     the fiscal year ended June 30, 1996 (File No. 0-20724), filed on
     September 16, 1996
3    Incorporated by reference from Registrant's  Report on Form S-8
     (File No. 33-369545), filed on December 23, 1998
4    Incorporated by reference from Registrant's Annual Report on Form 10-K for
     the fiscal year ended June 30, 1998 (File No. 0-20724), filed on
     September 24, 1998

                                      -15-
<PAGE>

SIGNATURES



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

Watson Wyatt & Company
(Registrant)




/S/ John J. Haley                                             November 12, 1999
-------------------                                           -----------------
Name:          John J. Haley                                  Date
Title:         President and Chief
               Executive Officer

/S/ Carl D. Mautz                                             November 12, 1999
-------------------                                           -----------------
Name:          Carl D. Mautz                                  Date
Title:         Vice President and Chief
               Financial Officer

/S/ Peter L. Childs                                           November 12, 1999
-------------------                                           -----------------
Name:          Peter L. Childs                                Date
Title:         Controller


                                      -16-