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SECURITIES AND EXCHANGE COMMISSION

Washington, D. C. 20549

FORM 10-K

For the fiscal year ended September 30, 2004

Commission File Number 001-31351

HEWITT ASSOCIATES, INC.

(Exact name of registrant as specified in its charter)

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

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

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

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

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

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

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

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

DOCUMENTS INCORPORATED BY REFERENCE

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

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HEWITT ASSOCIATES, INC.

FORM 10-K

For The Fiscal Year Ended

September 30, 2004

INDEX

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PART I

Item 1. Business

Overview

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

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

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

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

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

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

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

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Recent Developments

Exult Merger

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

Shelf Registration Statement

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

Release of Transfer Restrictions

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

Stock Repurchase Program

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

Rule 144 Sales

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

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Market Overview

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

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

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

Business Segments

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

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

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

Outsourcing

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Consulting

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

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

Our consulting services consist of three principal categories:

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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Client Development

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

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

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

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

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

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

Intellectual Property

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

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

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

Competition

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

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

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

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

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

Technology Innovation

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

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

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

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Contracts and Insurance

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

Employees

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

Website Access to Company Reports and Other Information

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

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

Item 2. Properties

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

Item 3. Legal Proceedings

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

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

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

PART II

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

Common Stock Market Information

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

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

Holders Of Record

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

Dividend Policy

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

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Item 6. Selected Financial Data

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

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

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

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

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

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

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

Overview

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

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

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

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

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

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

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

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

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

Recent Developments

Exult Merger

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

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Shelf Registration Statement

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

Release of Transfer Restrictions

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

Stock Repurchase Program

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

Rule 144 Sales

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

Segments

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

Outsourcing

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

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

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Consulting

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

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

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

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

Consolidated Financial Highlights

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

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

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Critical Accounting Policies and Estimates

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

Revenues

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

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

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

Performance-Based Compensation

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

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Client Receivables and Unbilled Work In Process

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

Goodwill and Other Intangible Assets

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

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

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Historical Results of Operations

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

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Fiscal Years Ended September 30, 2004, 2003 and 2002

Revenues

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

Compensation and Related Expenses

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

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

Initial Public Offering Restricted Stock Awards

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

Other Operating Expenses

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

Selling, General and Administrative Expenses

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

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Other Expenses, Net

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

Provision for Income Taxes

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

Segment Results

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

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Reconciliation of Segment Results to Total Company Results

(in thousands)

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Outsourcing

Fiscal Years Ended September 30, 2004, 2003 and 2002

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

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

Consulting

Fiscal Years Ended September 30, 2004, 2003 and 2002

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

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

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

Quarterly Results

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

Seasonality and Inflation

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

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Pro Forma Results of Operations

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

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

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

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Hewitt Associates, Inc.

Pro Forma Income Statement

(unaudited)