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 MARCH 31, 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: 33-369545

                             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 May 14, 1999.

Common Stock, $1.00 par value                                  16,201,605
-----------------------------                               ----------------
         Class                                              Number of Shares

<PAGE>
<TABLE>

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


                                                     QUARTERS ENDED MARCH 31,            NINE MONTHS ENDED MARCH 31,
                                                      1999                1998              1999              1998
                                                   ----------          ----------        ----------       ----------
                                                             (Unaudited)                          (Unaudited)

<S>                                                <C>                <C>                <C>              <C>

Fees                                               $ 135,573           $ 124,558         $ 409,916        $ 377,828

Costs of providing services:
    Salaries and employee benefits                    77,877              70,293           234,345          199,959
    Occupancy and communications                      16,412              15,422            46,366           46,229
    Professional and subcontracted services           11,573              11,626            33,625           37,699
    Other                                              9,303               6,666            20,889           21,290
                                                   ----------          ----------        ----------       ----------
                                                     115,165             104,007           335,225          305,177


General and administrative expenses                   14,194              12,849            42,046           36,556
Depreciation and amortization                          3,996               5,576            11,820           14,797
                                                   ----------          ----------        ----------       ----------
                                                     133,355             122,432           389,091          356,530

Income from operations                                 2,218               2,126            20,825           21,298

Other:
    Interest income                                      127                 119               655              605
    Interest expense                                    (473)             (1,168)           (2,194)          (2,594)

    Income (loss) from affiliates                        583                (215)            1,608             (219)
                                                   ----------          ----------        ----------       ----------

Income before income taxes and minority interest       2,455                 862            20,894           19,090

Provision for income taxes:
    Current                                            1,530                 470            10,447            8,953
    Deferred                                               -                   -                 -                -
                                                   ----------          ----------        ----------       ----------
                                                       1,530                 470            10,447            8,953
                                                   ----------          ----------        ----------       ----------

Income before minority interest                          925                 392            10,447           10,137

Minority interest in net loss/(income)
    of consolidated subsidiaries                          54                  86               (31)             (55)
                                                   ----------          ----------        ----------       ----------

Income from continuing operations                        979                 478            10,416           10,082

Discontinued operations:

Loss from operations of discontinued Outsourcing
    Business [net of applicable income tax benefit
    of $1,895 and $4,772 respectively]                     -              (1,664)                -           (7,102)


(Loss) adjustment on disposal of Outsourcing
    Business.  1998 loss is net of applicable income
    tax benefit of $48,148; 1999 adjustment is net
    of applicable income tax expense of $6,322             -             (71,652)            8,678          (71,652)
                                                   ----------          ----------        ----------       ----------

Net income (loss)                                  $     979           $ (72,838)        $  19,094        $ (68,672)
                                                   ==========          ==========        ==========       ==========


Earnings per share, continuing operations          $    0.07           $    0.03         $    0.70        $    0.58
                                                   ==========          ==========        ==========       ==========

Earnings/(loss) per share, discontinued operations $       -           $   (4.33)        $    0.58        $   (4.50)
                                                   ==========          ==========        ==========       ==========

Earnings/(loss) per share, net income              $    0.07           $   (4.30)        $    1.28        $   (3.92)
                                                   ==========          ==========        ==========       ==========
</TABLE>



                                                        See accompanying notes
                                                                 F-2

<PAGE>
<TABLE>


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

                                                                                 MARCH 31,                JUNE 30,
                                                                                   1999                     1998
                                                                               --------------           --------------
                                                                                (Unaudited)
                                                       ASSETS
<S>                                                                            <C>                     <C>  
Cash and cash equivalents                                                      $      12,756            $      13,405
Receivables from clients:

     Billed, net of allowances of $6,601 and $2,142                                   66,534                   69,671
     Unbilled                                                                         74,024                   59,725
                                                                               --------------           --------------
                                                                                     140,558                  129,396

Income taxes receivable                                                                    -                    2,216
Other current assets                                                                   7,602                    6,945
                                                                               --------------           --------------
     Total current assets                                                            160,916                  151,962

Investment in affiliates                                                              15,807                   17,666
Fixed assets                                                                          36,187                   37,368
Deferred income taxes                                                                 48,911                   48,911
Other intangible assets                                                                7,757                    2,412
Other assets                                                                           9,114                    9,991
                                                                               --------------           --------------

                                                                               $     278,692            $     268,310
                                                                               ==============           ==============

                       LIABILITIES, REDEEMABLE COMMON STOCK AND PERMANENT SHAREHOLDERS' EQUITY


Accounts payable and accrued liabilities                                       $     116,862            $     116,548
Note payable and book overdrafts                                                       3,341                   11,666
Income taxes payable                                                                  11,814                        -
                                                                               --------------           --------------
     Total current liabilities                                                       132,017                  128,214

Accrued retirement benefits                                                           80,929                   82,528
Deferred rent and accrued lease losses                                                10,235                   12,676
Other noncurrent liabilities                                                          22,473                   32,784

Minority interest in subsidiaries                                                        424                      322

Redeemable Common Stock - $1 par value:
     25,000,000 shares authorized;
     16,360,932 and 15,916,757 issued
     and outstanding; at redemption value                                             98,984                   96,296

Permanent shareholders' equity:
Adjustment for redemption value less
     than amounts paid in by shareholders                                             21,912                   25,240
Accumulated deficit                                                                  (85,269)                (106,834)
Cumulative translation loss                                                           (3,013)                  (2,916)
Commitments and contingencies
                                                                               --------------           --------------

                                                                               $     278,692            $     268,310
                                                                               ==============           ==============
</TABLE>



                                               See accompanying notes
                                                         F-3
<PAGE>
<TABLE>

                                                   WATSON WYATT & COMPANY
                                           CONSOLIDATED STATEMENTS OF CASH FLOWS
                                                (THOUSANDS OF U.S. DOLLARS)


                                                                                             NINE MONTHS ENDED MARCH 31,
                                                                                         ------------------------------------
                                                                                               1999                  1998
                                                                                         --------------        --------------
                                                                                                     (Unaudited)
<S>                                                                                      <C>                   <C>
Cash flows from operating activities:
     Net income                                                                          $      19,094         $     (68,672)
     Adjustments to reconcile net income to net cash
       provided by operating activities:

         (Adjustment to) net loss from discontinued operations                                  (8,678)               78,754
         Provision for doubtful receivables from clients                                         9,670                 5,981
         Depreciation                                                                           10,780                11,357
         Amortization of deferred software and development costs
             and other intangible assets                                                         1,040                 3,440
         Provision for deferred income taxes                                                         -                  (147)
         (Income) loss from affiliates                                                          (1,608)                  219
         Minority interest in net income of consolidated subsidiaries                               31                    55
         (Increase) decrease in assets (net of discontinued operations):
             Receivables from clients                                                          (30,239)              (18,957)
             Income taxes receivable                                                             2,216                 2,558
             Other current assets                                                                 (657)                  629
             Other assets                                                                          877                   590
         (Decrease) increase in liabilities (net of discontinued operations):
             Accounts payable and accrued liabilities                                           17,057                 1,075
             Income taxes payable                                                                5,492                 1,210
             Accrued retirement benefits                                                        (1,599)               (3,601)
             Deferred rent and accrued lease losses                                             (2,441)               (2,981)
             Other noncurrent liabilities                                                        1,210                (1,211)
         Other, net                                                                                210                  (154)
         Discontinued operations, net                                                           (3,857)              (17,997)
                                                                                         --------------        --------------
         Net cash provided by (used by) operating activities                                    18,598                (7,852)
                                                                                         --------------        --------------

Cash flows from investing activities:
     Purchases of fixed assets                                                                  (9,729)               (8,854)
     Acquisitions                                                                               (6,207)                    -
     Investment in software and development costs                                                    -                (2,506)
     Investment in affiliates                                                                    3,151                 2,749
     Discontinued operations                                                                         -               (14,750)
                                                                                         --------------        --------------
         Net cash used in investing activities                                                 (12,785)              (23,361)
                                                                                         --------------        --------------

Cash flows from financing activities:
     Net borrowings and bank overdrafts                                                         (8,325)               28,229
     Issuances of Redeemable Common Stock                                                       15,055                   525
     Repurchases of Redeemable Common Stock                                                    (13,224)               (9,674)
                                                                                         --------------        --------------
         Net cash (used by) provided by financing activities                                    (6,494)               19,080
                                                                                         --------------        --------------
Effect of exchange rates on cash                                                                    32                (3,120)
                                                                                         --------------        --------------
Decrease in cash and cash equivalents                                                             (649)              (15,253)
Cash and cash equivalents at beginning of period                                                13,405                26,257
                                                                                         --------------        --------------
Cash and cash equivalents at end of period                                               $      12,756         $      11,004
                                                                                         ==============        ==============

</TABLE>






                                                   See accompanying notes
                                                            F-4

<PAGE>
<TABLE>

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


                                                                                           ADJUSTMENT FOR
                                                                                          REDEMPTION VALUE
                                                                           CUMULATIVE    LESS THAN AMOUNTS
                                                            ACCUMULATED   TRANSLATION        PAID IN BY
                                                              DEFICIT        LOSS           SHAREHOLDERS
                                                            ----------     ----------       ----------

<S>                                                         <C>            <C>              <C> 
Balance at June 30, 1998                                    $ (106,834)    $   (2,916)      $   25,240

Comprehensive income:
Net income                                                      19,094              -                -
Foreign currency translation adjustment                              -            (97)               -
                                                            ----------     ----------       ----------
Total comprehensive income                                      19,094            (97)               -
Effect of repurchases of 2,106,426 shares of
     common stock (various prices per share)                     2,471              -           (2,471)
Adjustment of redemption value for change
     in Formula Book Value per share                                 -              -             (857)
                                                            ----------     ----------       ----------
Balance at March 31, 1999                                    $ (85,269)    $   (3,013)      $   21,912
                                                            ==========     ==========       ==========
</TABLE>



                                                 See accompanying notes
                                                          F-5
<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  Form 10-K for the year  ended
   June 30, 1998.

   The results of operations for the nine months ended March 31,  1999 are not
   necessarily  indicative  of the results that can be expected for the entire
   fiscal year ending  June 30,  1999. The results  reflect  prorata growth in
   share  value,  anticipated  tax rates and  potential  distributions  at the
   discretion of the Company's Board of Directors.  The Consolidated Statement
   of Cash Flows for the nine months ended  March 31, 1998  has been  restated
   to reflect the Company's discontinued operations.

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 $6.05 per share at  March 31, 1999
   and June 30, 1998.  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 nine months  ended  March 31, 1999,  the Company  repurchased
   2,106,426  shares of Redeemable  Common Stock, at various prices per share.
   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
   14,693 and  16,935  for the three  months  ended  March 31, 1999  and 1998,
   respectively,   and  14,931  and   17,503   for  the  nine   months   ended
   March 31, 1999 and 1998, respectively.

4.    In the third  quarter  of fiscal  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 $71.7 million,  representing the write-off of
   its investment in Wellspring,  net capitalized  software  development costs
   for the Retained  Clients and a provision for completion of any obligations
   to  clients,  vendors  or its former  venture  partner  and a further  $7.1
   million  in net  operating  losses  of the  Outsourcing  Business  prior to
   discontinuation.  Through the full fiscal year 1998,  the Company's  losses
   from discontinued  operations totaled $69.9 million.  In October 1998,  the
   Company  consummated   agreements  with  the  remaining  Retained  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.  Management
   believes  that savings of $25.0  million  compared  with initial  estimates
   made in the third  quarter of fiscal 1998 and $15.0 million from the amount
   provided at June 30, 1998  will be realized from these events.  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.

                                      -6-
<PAGE>
5.    On  September 30, 1998,  the  Company  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  March 31, 1999,  comprehensive  income totaled $0.5 million compared
   with a  comprehensive  loss of $72.8  million  for the three  months  ended
   March 31, 1998.  For the nine months  ended  March 31, 1999,  comprehensive
   income   totaled   $19.0   million,   and  for  the   nine   months   ended
   March 31, 1998, comprehensive loss totaled $71.8 million.

6.    In June 1997, the Financial  Accounting  Standards Board issued SFAS No.
   131,  "Disclosure about Segments of an Enterprise and Related  Information"
   effective for fiscal years  beginning  after  December 15,  1997.  SFAS No.
   131 requires the Company to report  financial and  descriptive  information
   about its reportable  operating  segments.  The Company will adopt SFAS No.
   131  in  its  year-end  reporting  as of  June 30,  1999.  The  Company  is
   currently   evaluating  the  impact  of  SFAS  No.  131  on  its  financial
   statements.



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,  provides employee benefits, human resources and human resources
systems technology  consulting.  The Company and its alliance partner,  Watson
Wyatt  Partners,  a United  Kingdom  partnership,  operate  globally as Watson
Wyatt  Worldwide.  The  Company  works  primarily  with  large  and  mid-sized
organizations.

Founded  in  1946,  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.

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 third  quarter of fiscal year 1999  (March 31, 1999)  and as of the end of
the prior fiscal year 1998  (June 30, 1998),  and  Consolidated  Statements of
Operations,  of Cash Flows and of Changes in  Permanent  Shareholders'  Equity
for the three and nine months ended March 31, 1999 and 1998.


RESULTS OF  OPERATIONS  - NINE MONTHS  ENDED  MARCH 31, 1999  COMPARED TO NINE
MONTHS ENDED MARCH 31, 1998.

For the first nine months of fiscal year 1999 the Company  produced net income
of  $19.1  million,  an  increase  of $87.8  million  from a net loss of $68.7
million for the first nine  months of fiscal  year 1998.  The fiscal year 1998
loss  includes a loss of $78.8  million from the  operation  of the  Company's
former  Benefits  Administration  Outsourcing  Business,  while  current  year
results  include the reversal of the  estimated  loss from the disposal of the
Company's  Benefits  Administration  Outsourcing  Business  of  $8.7  million.
Continuing  operations  generated  income of $10.4 million for the first three
quarters  of the year,  an  increase  of $0.3  million  from the 1998 level of
$10.1 million.  Increased  revenues are largely  offset by increased  salaries
and employee benefits.

Third quarter fees were $135.6  million,  up 9% from $124.6  million in fiscal
1998.  Fees for the  first  nine  months  of fiscal  year  1999  total  $409.9

                                      -7-
<PAGE>
million  compared  to $377.8  million for the first nine months of fiscal year
1998,  an  increase  of $32.1  million,  or 8%.  The  revenue  growth  in both
periods  is  attributable  to  improved  performance  in the  Company's  North
American Benefits Consulting Group and Human Resource Technologies,  primarily
from  increased  billable  hours,  as well as an  improvement in the Company's
Asia/Pacific operations.

Salaries and employee  benefit  expenses for the third  quarter of fiscal year
1999 were $77.9  million,  an increase  of $7.6  million,  or 11%,  from $70.3
million  in the third  quarter  of fiscal  year  1998.  The  Company  incurred
salaries and  employee  benefit  expenses of $234.3  million in the first nine
months  of the  year,  up  $34.4  million  or 17%  from the  prior  year.  The
increase is  attributable  to increased  compensation  to  associates of $26.6
million,  partly  the  result  of  a  5%  increase  in  associates.   Further,
personnel  restructuring  expenses and retirement  benefits expenses increased
$4.1 million.  The remaining  $3.7 million  increase is due to higher  related
fringe benefits expenses.

Occupancy and  communication  expenses during the third quarter of fiscal year
1999  totaled  $16.4  million,  an increase of $1.0  million,  or 6%, from the
third  quarter  of  the  prior  year.  The  Company  incurred   occupancy  and
communications  expenses  of $46.4  million  in the first  nine  months of the
year, up $0.1 million from the prior year.

Professional and subcontracted  services were unchanged from the third quarter
of fiscal  year 1998.  For the nine  months,  professional  and  subcontracted
services decreased 11%, or $4.1 million from last year,  reflecting  decreased
legal and general corporate expenses.

Other costs of providing  services  were $9.3 million for the third quarter of
fiscal year 1999, an increase of $2.6 million,  or 40%, from the third quarter
of fiscal  year  1998.  The  increase  is due to  increased  travel and hotel,
higher  publications and other expenses totaling $1.9 million and $0.7 million
in other  expenses  related to the sale of certain  businesses.  For the first
nine months of fiscal year 1999, other costs of providing  services  decreased
$0.4 million, or 2%, from $21.3 million in fiscal 1998.

Interest  expense was $0.5  million for the 1999  quarter  compared  with $1.2
million in the 1998  quarter  and $2.2  million  for the nine month  period in
1999  compared  with $2.6 million in the 1998  period.  The decrease is due to
lower  borrowings  in the recent  quarter  in 1999,  mostly as a result of the
Company's  annual  stock  sale,  which  did not  occur  in 1998.  Income  from
affiliates  was $0.6  million  for the quarter  ended March 31, 1999  compared
with a loss of $0.2 million for the same  quarter in 1998.  For the nine month
period in 1999,  income from affiliates  totaled $1.6 million  compared with a
loss of $0.2  million in the 1998 period.  The change in both periods  relates
to the Company's European affiliates.

General and  administrative  ("G&A")  expenses for the third quarter of fiscal
year 1999 were $14.2 million, a $1.3 million,  or 11%, increase from the third
quarter of fiscal  year 1998.  For the first nine  months of fiscal year 1999,
G&A  increased  $5.5  million,  or 15%,  from $36.6  million  in fiscal  1998,
reflecting increased advertising  expenditures,  human resource activities and
technology support of core consulting areas.

Depreciation  and  amortization  expense of $4.0 million for the third quarter
of fiscal  year 1999  represents  a decrease  of $1.6  million  from the third
quarter of fiscal  year 1998.  For the first nine  months of fiscal year 1999,
depreciation  and  amortization  decreased  $3.0  million,  or 20%, from $14.8
million  in fiscal  1998.  The  decrease  is  attributable  to the  absence of
amortization  expense for deferred  software in 1999, as the Company had fully
amortized such balances at June 30, 1998.

Income  taxes for the  quarter  ending  March 31, 1999 were $1.5  million,  an
effective rate of 62%, compared with $0.5 million,  55%, for the third quarter
in fiscal  year 1998.  For the first nine  months of fiscal  1999,  the income
tax provision was $10.4  million,  an effective rate of 50%. This compares to

                                      -8-
<PAGE>
a provision  of $9.0  million,  or 47%, in fiscal year 1998.  The  increase in
the effective  tax rates is due to changes in income in various  jurisdictions
with differing tax rates, particularly foreign jurisdictions.

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 and support ongoing  operations.  The Company's cash
and cash  equivalents at  March 31, 1999  totaled $12.8  million,  compared to
$13.4 million at June 30, 1998.  The Company had borrowings  outstanding under
its line of credit of $0.8  million  at  March 31, 1999  and $9.0  million  at
June 30, 1998.

CASH FROM  OPERATIONS.  For the first nine  months of fiscal  year  1999,  the
Company  had cash  inflows  from  operations  of $18.6  million,  compared  to
outflows  from  operations of $7.9 million for the first nine months of fiscal
year  1998.  Discontinued  operations  used  $14.1  million  less cash than in
fiscal  year  1998.  Additional  cash  flow was  generated  in 1999  mainly by
higher increases in accounts payable, partly offset by higher net receivables.

The  Company's  ratio of  current  assets to  current  liabilities  of 1.22 at
March 31, 1999 strengthened slightly from the 1.19 figure on June 30, 1998.

CASH FROM INVESTING  ACTIVITIES.  Cash used in investing  activities was $12.8
million for the first nine months of fiscal year 1999,  versus  $23.4  million
for the same  period in fiscal year 1998.  The overall  decrease in cash usage
results from the lack of investment in the  Company's  discontinued  operation
in  1999  compared  with  $14.8  million  in  1998,  net of the  $6.2  million
acquisition in 1999.

The Company has  anticipated  commitments  to spend cash of $10.0  million for
the remainder of fiscal year 1999, mostly for capital assets.

CASH FROM FINANCING  ACTIVITIES.  Cash flows used by financing activities were
$6.5  million  for the first nine  months of fiscal  year 1999,  versus  $19.1
million of inflows in the  preceding  fiscal  year.  The higher use of cash is
due to the lower level of outstanding  borrowings and book overdrafts of $36.6
million,  and $3.6 million more in repurchases  of Redeemable  Common Stock in
fiscal year 1999  compared to 1998.  The Company  also  conducted a stock sale
in the third  quarter of fiscal year 1999,  generating  $15.1 million in cash.
The Company did not hold a stock sale in fiscal year 1998.

The  Company's   revolving  credit  line  matures  on  June 30, 2003.   As  of
March 31, 1999,  $94.2 million of the credit line was available to the Company
as  revolving  credit  for  operating  needs,  compared  to $27.4  million  on
March 31, 1998.

YEAR 2000 ISSUE

The Company has  continued  to address the Year 2000 problem as it affects the
Company's  business.  Management  believes  that a  sustained  effort  will be
required  to enable  the  Company  to meet its Year 2000  goals.  Based on the
work completed during the third quarter,  management is increasingly confident
that the Company will address its Year 2000 issues on a timely basis.

Based on the review  conducted to date,  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

                                      -9-
<PAGE>
benefit  calculators).  The risks presented  include the possibility of errors
or  contractual  liability  caused  by  non-compliant  software  that  is  not
identified  or  corrected,  the  possibility  that  remediation  will  not  be
accomplished  according to the timetable  identified  below,  and the costs of
replacing or repairing client systems.

Other risks identified by the Company include:

*     Risks from operations outside the United States
*     Risk of a general economic downturn as a result of the Year 2000 problem
*     Risk arising  from the failure of  infrastructure,  including  power and
      telecommunications services
*     Liabilities  as a  result  of Year  2000  warranties  provided  to third
      parties

The Company's  Year 2000  compliance  plan relies on  geographic  and practice
leaders to assess and oversee  repair or replacement of software used in their
domain.  Management  believes  that  this  plan is  appropriate  for the risks
presented,  but this  conclusion is subject to reassessment as a result of the
Company's on-going compliance  efforts.  Since the Year 2000 problem is likely
to have  unpredictable  effects,  including effects that have not been planned
for,  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.

Management  believes  that the  Year  2000  problem  is not  likely  to have a
material  effect  on  the  Company's  business,   results  of  operations,  or
financial   condition.   Management  believes  its  plan  will  enable  it  to
appropriately address Year 2000 issues on a timely basis.

While the Company has made progress  toward meeting its  compliance  goals for
software  provided to or used on behalf of clients,  the Company  continues to
be  behind  in  its  schedule  for  compliance   activity.   The  Company  has
substantially  completed  the  inventory  of  systems  used by or on behalf of
clients.  During  January,  the Company began to actively  contact its clients
to  determine  the  compliance  status  of  software  provided  to them by the
Company.  This effort has increased  Management's  confidence that the Company
will  ultimately  be  successful  in  identifying  and  repairing  most client
systems.  If the Company fails to meet its schedule for  addressing  Year 2000
problems in client  software,  it may incur additional  costs.  Because of the
wide  diversity of systems  involved,  the Company is unable to estimate costs
associated with remediation of client software,  revenue that may be lost as a
result of  non-compensated  activities  related to remediation,  or costs that
may arise from  delays in  remediation.  The Company  will  continue to assess
the  materiality of the Year 2000 problem as part of its on-going  remediation
efforts.

The  Company  has  completed  assessment,  repair  and  testing  of its  major
internal  systems,   including  WyVal,  the  Company's   actuarial   valuation
software.  Management  believes  that  the  Company  is  likely  to  meet  its
forthcoming  deadlines  for Year  2000  compliance  activity  affecting  other
internal  systems.  The Company has  completed an inventory of its vendors and
will  seek  appropriate  confirmation  of  Year  2000  compliance  efforts  by
material   vendors.   Because  of  the  nature  of  the  Company's   business,
management  believes  that the Company  does not face  significant  risks from
Year 2000  failures in systems  relied upon by its vendors.  Nevertheless,  it
is likely that some vendor systems will fail  (particularly  those outside the
United  States or Canada)  and the Company  cannot  predict the effect of such
failure  upon  its  operations.   The  Company  has  established   contingency
procedures  to  deal  with  risks  presented  specifically  by the  Year  2000
situation.  The Company has not  reviewed the Year 2000  compliance  status of
its clients.  It is likely that the Year 2000 will affect  operations  of some
clients.  Management  is unable to predict  the effect of client  problems  on
the  Company's  own  operations,  but  believes  these  are not  likely  to be
material  because of the broad,  diversified  nature of the  Company's  client
base.

The Company  estimates  that its cost to address Year 2000  compliance  issues
will  exceed  $4.0  million  for  fiscal  year 1999 and that its costs will be
significantly  lower in fiscal  year 2000.  These  costs  include  the fees of

                                      -10-

<PAGE>

outside  consultants  and  remediation  costs  associated  with  software  and
hardware used internally by the Company.  Funds for costs  associated with the
Company's  Year 2000  compliance  efforts will come from general  revenues for
all  areas of the  Company's  operations.  These  costs  will be  expensed  as
incurred.

The  Company has  established  July 1, 1999 as the target date for all systems
(including  internal  systems  and systems  used by clients) to be  compliant,
retired,   or  replaced.   It  is  likely  that  some   remediation   efforts,
particularly for software  developed for clients,  will be delayed beyond July
1, 1999.  In the past the Company  has revised its target  dates for Year 2000
compliance activity and target dates remain subject to revision.

The  following  table  summarizes  the  approximate  percentage of work in the
stages specified which as been completed as of April 15, 1999:

                              ASSESSMENT        REMEDIATION         TESTING
                              ----------        -----------         -------
INTERNAL SYSTEMS
----------------
   Major Systems               Completed         Completed         Completed
   Other Systems               Completed            50%               30%
SYSTEMS DEVELOPED FOR CLIENTS
-----------------------------
   HR Technology             More than 70%     More than 20%     More than 20%
   Retirement                More than 90%     More than 90%     More than 90%


The Company's  principal  Retirement  valuation software system is included in
"Internal  Systems - Major  Systems."  In the case of  systems  developed  for
clients,  the  figures  are  subject  to  adjustment  as a result of  on-going
efforts to inventory  systems.  Figures  presented  do not include  operations
outside  of North  America.  The  Company  has  previously  reported  progress
regarding  practices  other than Retirement and HR  Technologies.  The Company
is  discontinuing  this  reporting  because,  based on the review to date, the
systems  involved  are not  material  to the  Company's  Year 2000  compliance
effort.

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.


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.

                                      -11-

<PAGE>

ITEM 2.           CHANGES IN SECURITIES

On the dates below,  unregistered  shares of the Company's  Redeemable  Common
Stock were sold to  certain  eligible  purchasers  (as that term is defined in
the  Company's  Bylaws) in  transactions  not  involving a public  offering in
reliance  on  Section  4(2)  of the  Securities  Act of  1933.  The  aggregate
offering price was $411,400.00.  The table below summarizes the sales.

                                                                AGGREGATE
    DATE              SHARES ISSUED         SHARE PRICE      OFFERING PRICE
---------------------------------------------------------------------------
January 15, 1999          18,000               $ 6.05       $    108,900.00
January 18, 1999          50,000               $ 6.05       $    302,500.00
---------------------------------------------------------------------------
TOTAL                     68,000                            $    411,400.00
===========================================================================

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)4
      4     Form of Certificate Representing Common Stock1
      10    Credit Agreement Among NationsBank, N.A. and Others dated June 30,
            19983

b.    Reports on Form 8-K

      None.


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

                                      -12-
<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                                                May 14, 1999
--------------------------                                       ------------
Name:       John J. Haley                                        Date
Title:      President and Chief
            Executive Officer

/S/ Carl D. Mautz                                                May 14, 1999
--------------------------                                       ------------
Name:       Carl D. Mautz                                        Date
Title:      Vice President and Chief Financial Officer


                           -13-
<PAGE>