UNITED STATES
SECURITIES AND EXCHANGE COMMISSION

FORM 10-Q

(Mark One)

OR

Commission File Number: 000-49713

ACCENTURE SCA

46A, Avenue J.F. Kennedy
L-1855 Luxembourg
(Address of principal executive offices)

(352) 26 42 35 00
(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 þ No o

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

The number of shares of the Registrant’s Class I common shares, par value €1.25 per share, outstanding as of April 1, 2005 was 867,668,006 (which number does not include 103,625,448 issued shares held by subsidiaries of the Registrant).

ACCENTURE SCA

INDEX

2

PART I – FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

ACCENTURE SCA

CONSOLIDATED BALANCE SHEETS
February 28, 2005 and August 31, 2004
(In thousands of U.S. dollars, except share and per share amounts)

3

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

4

ACCENTURE SCA

CONSOLIDATED INCOME STATEMENTS

For the Three and Six Months Ended February 28, 2005 and February 29, 2004
(In thousands of U.S. dollars)
(Unaudited)

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

5

ACCENTURE SCA

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

6

ACCENTURE SCA

CONSOLIDATED CASH FLOWS STATEMENTS

For the Six Months Ended February 28, 2005 and February 29, 2004
(In thousands of U.S. dollars)
(Unaudited)

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

7

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(In thousands of U.S. Dollars, except share amounts or as otherwise disclosed)
(Unaudited)

1. BASIS OF PRESENTATION

     The accompanying unaudited interim Consolidated Financial Statements of Accenture SCA, a Luxemburg partnership limited by shares, and its controlled subsidiary companies (together, “Accenture” or the “Company”) have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”) for quarterly reports on Form 10-Q and do not include all of the information and note disclosures required by accounting principles generally accepted in the United States of America for complete financial statements. These consolidated financial statements should therefore be read in conjunction with the consolidated financial statements and notes thereto for the fiscal year ended August 31, 2004 included in the Company’s Annual Report on Form 10-K filed with the SEC on November 5, 2004. The accompanying unaudited interim consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America and reflect all adjustments of a normal, recurring nature that are, in the opinion of management, necessary for a fair presentation of results for these interim periods. The results of operations for the three and six months ended February 28, 2005 are not necessarily indicative of the results that may be expected for the fiscal year ending August 31, 2005. Certain prior-period amounts have been reclassified to conform to the current-period presentation.

2. PRO FORMA IMPACT OF EMPLOYEE STOCK OPTIONS AND SHARE PURCHASE PLANS

     Accenture follows the intrinsic value method in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, to account for its employee stock options and share purchase rights. Accordingly, no compensation expense is recognized for share purchase rights granted in connection with the issuance of stock options under the Company’s employee share incentive plan and through its employee share purchase plan; however, compensation expense is recognized in connection with the issuance of restricted share units granted under the Company’s share incentive plan. Beginning September 1, 2005, Accenture will be required to record compensation expense for its employee stock options and share purchase rights as a result of a revision to Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation, (“SFAS No. 123”) issued in December 2004. Had compensation expense for employee stock options granted under the Company’s share incentive plan and employee share purchase rights under its share purchase plan been determined based on fair value at the grant date consistent with SFAS No. 123 with stock options expensed using the accelerated expense attribution method, the Company’s net income would have been reduced to the pro forma amounts indicated below:

3. RESTRUCTURING AND REORGANIZATION

Restructuring

     In fiscal 2002, Accenture recognized restructuring costs of $110,524 (“Fiscal 2002 Restructuring”) related to a global consolidation of office space, consisting of $67,112 to consolidate various locations and $43,412 to abandon the related fixed assets.

     In the second quarter of fiscal 2004, Accenture recognized restructuring costs of $107,256 (“Fiscal 2004 Restructuring”), primarily in the United States and the United Kingdom, consisting of $89,331 to consolidate various locations and $17,925 to abandon the related fixed assets. The Fiscal 2004 Restructuring costs were allocated to the reportable operating segments as follows: $26,952 to Communications & High Tech; $23,579 to Financial Services; $15,774 to Government; $23,491 to Products; and $17,460 to Resources.

8

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands of U.S. Dollars, except share amounts or as otherwise disclosed)
(Unaudited)

     The Company’s restructuring activity for the three and six months ended February 28, 2005 is as follows:

     The restructuring liabilities at February 28, 2005 were $87,073, of which $18,700 was included in other accrued liabilities and $68,373 was included in other non-current liabilities. The recorded liabilities represent the net present value of the estimated remaining obligations related to existing operating leases. Other than immaterial changes in lease estimates, there have been no adjustments to the original liabilities recorded, and Accenture does not expect to make future material adjustments.

Reorganization

     In fiscal 2001, Accenture recognized reorganization liabilities in connection with its transition to a corporate structure. Favorable final determinations of certain reorganization liabilities accrued in 2001 resulted in net benefits in our Consolidated Income Statement for the three and six months ended February 28, 2005. Interest related to reorganization liabilities is included in net reorganization benefit/expense. The Company’s reorganization activity for the period is as follows:

     The reorganization liabilities at February 28, 2005 were $467,827, of which $125,980 was included in other accrued liabilities, because final determinations could occur within 12 months, and $341,847 was included in other non-current liabilities.

4. ACCUMULATED OTHER COMPREHENSIVE LOSS

     The components of Accumulated other comprehensive loss are as follows:

     Comprehensive income is as follows:

9

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands of U.S. Dollars, except share amounts or as otherwise disclosed)
(Unaudited)

5. GOODWILL

     The changes in the carrying amount of goodwill by reportable segment for the six months ended February 28, 2005 are as follows:

6. PROFIT SHARING AND RETIREMENT PLANS

     In the United States and certain other countries, Accenture maintains and administers retirement plans and postretirement medical plans for certain active, retired and resigned Accenture employees. The components of net periodic pension and postretirement expense are as follows:

10

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands of U.S. Dollars, except share amounts or as otherwise disclosed)
(Unaudited)

7. MATERIAL TRANSACTIONS AFFECTING SHAREHOLDERS’ EQUITY

     On December 20, 2004, a tender offer made to Accenture SCA Class I shareholders on November 16, 2004 by Accenture SCA and one of its subsidiaries resulted in the redemption and purchase of an aggregate of 3,463,488 Accenture SCA Class I common shares at a price of $24.61 per share. The total cash outlay for these transactions was $85,236. During the six months ended February 28, 2005, Accenture SCA purchased or redeemed 9,393,118 Accenture SCA Class I common shares with an aggregate purchase price of $235,676.

     At February 28, 2005, there was $912,546 available for open-market share purchases of Accenture Ltd Class A common shares and $2,135,158 of previously authorized funds available for the purchase, redemption and exchange of Accenture shares held by partners, former partners, their permitted transferees and employees.

     Effective as of February 18, 2005, Accenture awarded to certain of its highest-performing partners stock options to purchase approximately 15 million Accenture Ltd Class A common shares, having an aggregate fair market value, at the time of grant, of $170,000.

11

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands of U.S. Dollars, except share amounts or as otherwise disclosed)
(Unaudited)

8.	COMMITMENTS AND CONTINGENCIES

Guarantees

     As a result of our increase in ownership of Accenture HR Services from 50 percent to 100 percent in February 2002, Accenture may be required to make additional purchase price payments through September 30, 2008, conditional on Accenture HR Services achieving certain levels of qualifying revenues. An amendment to the purchase agreement was signed in January 2005, increasing the guaranteed additional purchase price by $10,000 and decreasing the total amount of additional purchase price that Accenture may be required to make from $187,500 to $177,500. During the three months and six months ended February 28, 2005, Accenture made payments of $0 and $11,310, respectively. The remaining potential liability at February 28, 2005 was $164,470.

     In February 2005, Accenture signed an amendment to the Avanade, Inc. stockholders agreement. As a result of the amendment, there is no longer a fixed purchase price minimum or maximum payable by Accenture for the Avanade, Inc. shares not already owned by Accenture. Accenture now has the right to purchase substantially all of the remaining outstanding shares of Avanade, Inc. not owned by Accenture at fair market value if certain events occur. Accenture may also be required to purchase substantially all of the remaining outstanding shares of Avanade, Inc. at fair market value if certain events occur.

     Accenture has various agreements in which it may be obligated to indemnify the other parties with respect to certain matters. Generally, these indemnification provisions are included in contracts arising in the normal course of business under which the Company customarily agrees to hold the indemnified party harmless against losses arising from a breach of representations related to such matters as title to assets sold and licensed or certain intellectual property rights. Payments by Accenture under such indemnification clauses are generally conditioned on the other party making a claim. Such claims are typically subject to challenge by Accenture and to dispute resolution procedures specified in the particular contract. Further, the Company’s obligations under these agreements may be limited in terms of time and/or amount and, in some instances, Accenture may have recourse against third parties for certain payments made by the Company. It is not possible to predict the maximum potential amount of future payments under these indemnification agreements due to the conditional nature of Accenture’s obligations and the unique facts of each particular agreement. Historically, the Company has not made any payments under these agreements that have been material individually or in the aggregate. As of February 28, 2005, management was not aware of any obligations arising under indemnification agreements that would require material payments.

     From time to time, Accenture enters into contracts with clients whereby it has joint and several liability with other participants and third parties providing related services and products to clients. Under these arrangements, Accenture and other parties may assume some responsibility to the client for the performance of others under the terms and conditions of the contract with or for the benefit of the client. In some arrangements, the extent of Accenture’s obligations for the performance of others is not expressly specified. As of February 28, 2005, Accenture estimates it had assumed an aggregate potential liability of approximately $719,827 to its clients for the performance of others under arrangements described in this paragraph. These contracts typically provide recourse provisions that would allow Accenture to recover from the other parties all but approximately $44,232 if Accenture is obligated to make payments to the clients that are the consequence of a performance default by the other parties. To date, Accenture has not been required to make any payments under any of the contracts described in this paragraph.

Legal Contingencies

     At February 28, 2005, Accenture or its present personnel had been named as a defendant in various litigation matters. All of these are civil in nature. Based on the present status of these litigation matters, the management of Accenture believes they will not ultimately have a material effect on the results of operations, financial position or cash flows of Accenture.

12

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands of U.S. Dollars, except share amounts or as otherwise disclosed)
(Unaudited)

9. SEGMENT REPORTING

     Operating segments are defined by SFAS No. 131, Disclosures about Segments of an Enterprise and Related Information, as components of an enterprise about which separate financial information is available that is evaluated regularly by the chief operating decision maker, or decision-making group, in deciding how to allocate resources and in assessing performance.

     Accenture’s chief operating decision maker is its chief executive officer. The operating segments are managed separately because each operating segment represents a strategic business unit providing management consulting, technology and outsourcing services that serves clients in different industries.

     The reportable operating segments are the five operating groups, which are Communications & High Tech, Financial Services, Government, Products and Resources. Revenues before reimbursements and operating income by reportable operating segment are as follows:

     Reorganization benefits and restructuring costs were allocated to the reportable operating segments as follows:

13

ACCENTURE SCA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - (Continued)
(In thousands of U.S. Dollars, except share amounts or as otherwise disclosed)
(Unaudited)

10. SUBSEQUENT EVENTS

     On March 7, 2005, a tender offer made to Accenture SCA Class I shareholders on February 1, 2005 by Accenture SCA and one of its subsidiaries resulted in the redemption or purchase of an aggregate of 18,745,917 Accenture SCA Class I common shares at a price of $26.30 per share. At the same time, a subsidiary of Accenture SCA purchased 314,038 Accenture Canada Holdings Inc. exchangeable shares at a price of $26.30 per share. The total cash outlay for these transactions was $501,277.

     On March 15, 2005, as a result of favorable final determinations of certain reorganization liabilities recorded in connection with our transition to a corporate structure in 2001, we recognized benefits of approximately $69,000.

14

     The following discussion and analysis should be read in conjunction with our Consolidated Financial Statements and related notes included elsewhere in this Quarterly Report on Form 10-Q and in our Annual Report on Form 10-K for the year ended August 31, 2004, and with the information under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended August 31, 2004.

     We use the terms “Accenture,” “we,” “our Company,” “our” and “us” in this report to refer to Accenture SCA and its subsidiaries. All references to years, unless otherwise noted, refer to our fiscal year, which ends on August 31. For example, a reference to “fiscal 2004” or “fiscal year 2004” means the 12-month period that ended on August 31, 2004. All references to quarters, unless otherwise noted, refer to the quarters of our fiscal year. We use the term “partner” to refer to the executive employees of Accenture with the “partner” title.

Disclosure Regarding Forward-Looking Statements

     This Quarterly Report on Form 10-Q contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933 and Section 21E of the Securities Exchange Act of 1934 relating to our operations, results of operations and other matters that are based on our current expectations, estimates and projections. Words such as “expects,” “intends,” “plans,” “projects,” “believes,” “estimates” and similar expressions are used to identify these forward-looking statements. These statements are not guarantees of future performance and involve risks, uncertainties and assumptions that are difficult to predict. Forward-looking statements are based upon assumptions as to future events that may not prove to be accurate. Actual outcomes and results may differ materially from what is expressed or forecast in these forward-looking statements. The reasons for this include changes in general economic and political conditions, including fluctuations in currency exchange rates, and the following factors:

•	Our results of operations are materially affected by economic conditions, levels of business activity and rates of change in the industries we serve.
•	Our business will be negatively affected if we are not able to anticipate and keep pace with rapid changes in technology or if growth in the use of technology in business is not as rapid as in the past.
•	We may face damage to our professional reputation or legal liability if our clients are not satisfied with our services.
•	Our engagements with clients may not be profitable or may be terminated by our clients on short notice.
•	Our global operations pose complex management, foreign currency, legal, tax and economic risks, which we may not adequately address.
•	The consulting, technology and outsourcing markets are highly competitive and the pace of consolidation, as well as vertical integration, among our competitors continues to increase. As a result, we may not be able to compete effectively if we cannot efficiently respond to these developments in a timely manner.
•	If we are unable to attract, retain and motivate employees, we will not be able to compete effectively and will not be able to grow our business.
•	Our profitability will suffer if we are not able to maintain our pricing and utilization rates and control our costs. A continuation of current pricing pressures could result in permanent changes in pricing policies and delivery capabilities.
•	Our quarterly revenues, operating results and profitability will vary from quarter to quarter, which may result in increased volatility of our share price.
•	We continue to achieve greater percentages of revenues and growth through outsourcing. This strategy could result in higher concentrations of revenues and contributions to income from a smaller number of larger clients on customized outsourcing solutions or, in the case of more-standardized business process outsourcing services provided through our BPO businesses, from larger portfolios of clients for whom we provide similar services and solutions utilizing standard operating models. As our outsourcing business continues to grow, we may continue to experience increased pressure on our overall margins, particularly during the early stages of new outsourcing contracts.
•	On certain complex engagements where we partner with third parties, clients are increasingly demanding that we guarantee the performance of our business partners whom we do not control.

15

•	If we are not able to implement the requirements of Section 404 of the Sarbanes-Oxley Act of 2002 or attain an unqualified report from our independent auditors as to our internal controls as required as of the end of the current fiscal year, our reputation, our financial results and the market price of the Accenture Ltd Class A common shares could suffer.
•	We may experience difficulties with new business and financial systems implemented as of September 1, 2004 that could disrupt our ability to timely and accurately process and report key components of our results of operations and financial condition, although, to date, we have not experienced any significant difficulties.
•	Recent tax legislation, future legislation and negative publicity related to Bermuda companies such as Accenture Ltd, our parent, may lead to an increase in our tax burden or affect our relationships with our clients.
•	Our services or solutions may infringe upon the intellectual property rights of others.
•	We have only a limited ability to protect our intellectual property rights, which are important to our success.
•	If our alliances do not succeed, we may not be successful in implementing our growth strategy.
•	We will continue to be controlled by Accenture Ltd, which in turn may continue to be controlled by our partners, whose interests may differ from those of our other shareholders.
•	The share price of Accenture Ltd Class A common shares may decline due to the large number of Class A common shares eligible for future sale.
•	We may need additional capital in the future, and this capital may not be available to us. The raising of additional capital may dilute shareholders’ ownership in us.
•	We are registered in Luxembourg, and a significant portion of our assets is located outside the United States. As a result, it may not be possible for shareholders to enforce civil liability provisions of the Federal or state securities laws of the United States.
•	Luxembourg law differs from the laws in effect in the United States and may afford less protection to shareholders.

For a more detailed discussion of these factors, see the information under the heading “Business—Risk Factors” in our Annual Report on Form 10-K for the year ended August 31, 2004. We undertake no obligation to update or revise any forward-looking statements.

Overview

     Revenues are driven by the ability of our senior executives to secure contracts for new engagements and to deliver solutions and services that add value to our clients. Our ability to add value to clients and therefore drive revenues depends in part on our ability to deliver market-leading service offerings and to deploy skilled teams of professionals quickly and on a global basis.

     Our results of operations are also affected by the economic conditions, levels of business activity and rates of change in the industries we serve, as well as by the pace of technological change and the type and level of technology spending by our clients. The ability to identify and capitalize on these market and technological changes early in their cycles is a key driver of our performance. The strengthening economic recovery continues to stimulate the technology spending of many companies. We are continuing to see increasing numbers of opportunities from companies seeking both revenue-generating and cost-cutting initiatives. We expect revenue growth rates across our segments to continue to vary from quarter to quarter during fiscal 2005 as the economic recovery continues to take hold at different rates in different industries and geographic markets.

     Revenues before reimbursements for the three and six months ended February 28, 2005 were $3.81 billion and $7.54 billion, respectively, compared with $3.30 billion and $6.56 billion, respectively, for the three and six months ended February 29, 2004, an increase of 15% for both periods in U.S. dollars and 10% and 9%, respectively, in local currency terms.

     Outsourcing revenues before reimbursements for the three and six months ended February 28, 2005 were $1.51 billion and $2.86 billion, respectively, compared with $1.28 billion and $2.44 billion, respectively, for the three and six months ended February 29, 2004, an increase of 18% and 17%, respectively, in U.S. dollars and 13% and 12%, respectively, in local currency terms. Outsourcing contracts typically have longer terms than consulting contracts and generally have lower gross margins than consulting contracts, particularly in the first year. While we expect that outsourcing will continue to deliver solid growth to our business over the remainder of this fiscal year, it is likely to grow overall at a slower rate than it did in fiscal 2004. The average size of most new outsourcing opportunities we see in the market continues to be smaller than those contracts we executed in the first six months of fiscal 2004. Long-term relationships with many of our clients continue to contribute to our success in growing

16

our outsourcing business. Long-term, complex outsourcing contracts, including their consulting components, require ongoing review of their terms and scope of work, in light of our clients’ evolving business needs and our performance expectations. Should the size or number of modifications to these arrangements increase, as our business continues to grow and these contracts evolve, we may experience increased variability in expected cash flows, revenues and profitability.

     Consulting revenues before reimbursements for the three and six months ended February 28, 2005 were $2.30 billion and $4.68 billion, respectively, compared with $2.02 billion and $4.12 billion, respectively, for the three and six months ended February 29, 2004, an increase of 14% for both periods in U.S. dollars and 8% for both periods in local currency terms.

     We have certain contracts (the “NHS Contracts”) under which we have been engaged to design, develop and deploy new patient administration, assessment and care systems (the “Systems”) for the National Health Service in England (the “NHS”) and, subsequently, to provide ongoing operational services once these systems have been deployed. We have experienced temporary delays in our ability to deploy, as planned, a number of the Systems’ components. The delays in deployment have resulted in lower-than-expected revenues, margins, billings and cash flows to date. We are also continuing to carry unbilled services on the NHS Contracts in amounts significantly above our initial estimates. For the first six months of fiscal 2005, we have recorded losses attributable to these contracts of approximately $38 million. As of February 28, 2005, client financing and other assets attributable to this client totaled $349 million.

     We are continuing to work with the NHS to agree to alternative deployment plans and to consider different financing arrangements. Under our contracts with the NHS our ability to bill and collect the unbilled services we are carrying is subject to our ability to agree with our client on alternative deployment plans and to successful deployment. Based on agreeing to the alternative deployment plans currently under discussion, we expect that aggregate losses on the NHS Contracts for this fiscal year could be from $110 million to $150 million, and that client financing and other assets attributable to this client could total between $400 million and $460 million by our fiscal year end. Based on agreeing to these deployment plans, we currently expect contract losses to continue in fiscal 2006, but at levels less than those expected for this fiscal year. We expect further improved performance in fiscal 2007 and the contracts to achieve expected profitability over the remainder of their terms. The revenues and costs from the NHS Contracts are apportioned equally between our Government and Products operating groups.

     As a global company, our revenues are generated in multiple currencies and may be significantly affected by currency exchange-rate fluctuations. During the first six months of fiscal 2005, the strengthening of various currencies versus the U.S. dollar continued to result in favorable currency translation and increased our reported revenues, operating expenses and operating income. If the U.S. dollar strengthens against other currencies, the resulting unfavorable currency translation could decrease our reported U.S. dollar revenues, operating expenses and operating income and also result in our reported U.S. dollar revenue growth being lower than our growth in local currency terms.

     The primary categories of operating expenses are cost of services, sales and marketing costs, and general and administrative costs. Cost of services is primarily driven by the cost of client-service personnel, which consists mainly of compensation, sub-contractor and other personnel costs, and by non-payroll outsourcing costs. Cost of services as a percentage of revenues is driven by the prices we obtain for our solutions and services; the chargeability, or utilization, of our client-service workforces; and the level of non-payroll costs associated with the continuing accelerated growth of new outsourcing contracts. Chargeability represents the percentage of our professionals’ time spent on billable work. Sales and marketing expense is driven primarily by business-development activities; the development of new service offerings; the level of concentration of clients in a particular industry or market; and client-targeting, image-development and brand recognition activities. General and administrative costs primarily include costs for non-client-facing personnel, information systems and office space, which we seek to manage at levels consistent with changes in activity levels in our business. Operating expenses include net reorganization benefits and costs and restructuring costs, which may vary substantially from quarter to quarter.

     Gross margins (revenues before reimbursements less cost of services before reimbursements) for the three months ended February 28, 2005 were 31% of revenues before reimbursements, compared with 33% for the three months ended February 29, 2004. This decrease was due primarily to the lower-than-expected margins attributable to temporary delays under the NHS Contracts and incurred and expected cost overruns associated with the development of reusable assets in connection with several client contracts. To a lesser extent, a number of delivery inefficiencies, including continuing staffing costs and higher subcontractor usage, also contributed to this decrease. We did not accrue variable compensation expense for the three months ended February 28, 2005, which partially offset the decrease in gross margins.

     Our cost-management strategy continues to be to anticipate changes in demand for our services and to identify cost-management initiatives. We aggressively plan and manage our payroll costs to meet the anticipated demand for our services, given that payroll costs are the most significant portion of our operating expenses.

17

     Our attrition rate for the three months ended February 28, 2005 was 18%, lower than the 20% attrition rate we experienced in the first quarter of fiscal 2005. Increasing competition for scarce talent will likely present us with supply-and-demand and skill-level imbalance challenges in certain industry segments, skill sets and geographic regions for the remainder of fiscal 2005. We continue to add substantial numbers of new employees and will continue to actively recruit new employees to balance our mix of skills and resources to meet current and projected future demands, replace departing employees and expand our global sourcing approach, which includes our network of delivery centers and other capabilities around the world. We may need to continue to adjust compensation over the course of the year in certain industry segments, skill sets and geographies in order to attract and retain appropriate numbers of qualified employees. Our ability to grow our business could also be adversely affected if we do not effectively assimilate substantial numbers of new employees into our workforces. These compensation adjustments and the additional costs of recruiting, hiring, training and assimilating increasing numbers of new employees could adversely affect our operating margins.

     Sales and marketing and general and administrative costs as a percentage of revenues before reimbursements were 19% and 20%, respectively, for the three and six months ended February 28, 2005, compared with 20% and 21%, respectively, for the three and six months ended February 29, 2004.

     Operating income as a percentage of revenues before reimbursements for the three months ended February 28, 2005 increased to 12% from 9% for the three months ended February 29, 2004. This increase was primarily related to restructuring costs of $107 million recorded in fiscal 2004. Excluding reorganization and restructuring, operating income as a percentage of revenues before reimbursements for the three months ended February 28, 2005 decreased by 1.1 percentage points compared with the three months ended February 29, 2004. For both the six months ended February 28, 2005 and February 29, 2004, operating income as a percentage of revenues before reimbursements was 12%.

New Contract Bookings and Backlog

     New contract bookings for the three months ended February 28, 2005 were $4,875 million, a decrease of $2,774 million, or 36% from the three months ended February 29, 2004, with consulting bookings decreasing 3%, to $2,810 million, and outsourcing bookings decreasing 57%, to $2,065 million. New contract bookings for the six months ended February 28, 2005 were $8,905 million, a decrease of $3,795 million, or 30%, from the six months ended February 29, 2004, with consulting bookings decreasing 4% and outsourcing bookings decreasing 47%. The size and scope of many of our new outsourcing contract bookings have decreased when compared to new outsourcing contract bookings for the six months ended February 29, 2004. The decrease in new contract bookings were partially attributable to the signing of the two large NHS Contracts in the second quarter of fiscal 2004, which significantly increased new contract bookings for the three and six months ended February 29, 2004.

     We provide information regarding our new contract bookings because we believe doing so provides useful trend information regarding changes in the volume of our new business over time. However, the timing of large new contract bookings can significantly affect the level of bookings in a particular quarter. Information regarding our new bookings is not comparable to, nor should it be substituted for, an analysis of our revenues over time. New contract bookings include new contracts as well as renewals, extensions and additions to existing contracts. New contract bookings for prior-period amounts are not adjusted for currency fluctuations.

     The majority of our contracts are terminable by the client on short notice or without notice. Accordingly, we do not believe it is appropriate to characterize bookings attributable to these contracts as backlog. Normally, if a client terminates a project, the client remains obligated to pay for commitments we have made to third parties in connection with the project, services performed and reimbursable expenses incurred by us through the date of termination.

Critical Accounting Policies and Estimates

     For a complete description of our critical accounting policies and estimates, refer to our Annual Report on Form 10-K for the year ended August 31, 2004.

18

Segments/Operating Groups

     Our five reportable operating segments are our operating groups, which are Communications & High Tech, Financial Services, Government, Products and Resources. Operating groups are managed on the basis of revenues before reimbursements because our management believes these are a better indicator of operating group performance than revenues. From time to time, our operating groups work together to sell and implement certain contracts. The resulting revenues and costs from these contracts may be apportioned among the participating operating groups. Generally, operating expenses for each operating group have similar characteristics and are subject to the same factors, pressures and challenges. However, the economic environment and its effects on the industries served by our operating groups affect revenues and operating expenses within our operating groups to differing degrees. Decisions relating to staffing levels are not made uniformly across our operating groups, due in part to the needs of our operating groups to tailor their workforces to meet the specific needs of their businesses. The shift in mix toward outsourcing contracts is not uniform among our operating groups and, consequently, neither is the impact on operating group results caused by this shift. Local currency fluctuations also tend to affect our operating groups differently, depending on the geographic concentrations and locations of their businesses.

     Revenues for each of our operating groups, geographic regions and types of work are as follows: