Perspective - Fall 2009

Watson Wyatt's Ideas Exchange conference gathers leading institutional investors

Risk is biggest issue in the changing investment world

Watson Wyatt Investment Consulting held its "Ideas Exchange (iX)" annual conference in Hong Kong to discuss risk in the institutional investment environment. The key message to come through from the iX conference was that the institutional funds that will succeed will be those that have a good handle on risk and are better prepared to manage it via streamlined decision-making processes.

"Risky business, the theme of this year's conference, resonates with all participants in the investment industry," said Naomi Denning, Watson Wyatt's Head of Investment Consulting for Asia Pacific.

"We believe the most successful institutional investors will be those who learn from the recent crisis, develop an understanding of risk, and implement far better programs to manage it. The Ideas Exchange forum is ideal for the many players in the industry to come together to share experiences and develop ideas for the future." Events of the recent past such as the global financial crisis have been difficult for the investment industry. Investors need to prepare for the unexpected. Their risk management processes have had to be forwardlooking and can be adapted to a changing environment.

Naomi Denning said the subjects covered at the iX conference clearly demonstrated that it was essential for institutional investors to develop and enhance their risk management processes if they want to succeed in a future environment of continuing systemic flaws, more financial crises and the potential for global contagion.

During the iX conference, Watson Wyatt used a series of presentations and an interactive case study to demonstrate how funds can act constructively to improve their risk management processes, including:

Building shared principles and beliefs about risk
Building a stronger understanding of risk in relation to alternative assets
and active management
Using tools, such as "Fund Dashboard", to increase the efficiency of
fiduciaries' decision-making processes
In the case of defined benefit funds, developing a 'journey plan' that sets guidelines for trustees to follow in order to meet their funding objectives.

The conference - being held around the world - under the banner of Ideas Exchange brings together all parts of the institutional investment industry to develop new and innovative solutions for the problems and challenges faced by institutional investors such as public or corporate retirement funds. Around 100 delegates attended, representing leading institutional investment organizations and investment managers in Hong Kong and other Asian markets, as well as consultants from Watson Wyatt's Hong Kong and global investment consulting teams. The iX conference is held annually in Hong Kong with smaller round-table iX events taking place quarterly.

For information, contact Kelvin Ko, email: kelvin.ko@watsonwyatt.com

Towers Perrin and Watson Wyatt to combine to form Towers Watson

Combined company positioned for sustainable growth and profitability with a broader portfolio and wider geographic footprint
Excerpt from Watson Wyatt press release dated June 28, 2009

Towers, Perrin, Forster & Crosby, Inc. and Watson Wyatt Worldwide, Inc. (NYSE, NASDAQ: WW) announced that their respective Boards of Directors have unanimously approved a definitive agreement under which Towers Perrin and Watson Wyatt will combine in a merger of equals to form a new, publicly listed company called Towers Watson & Co. Based on the closing price of Watson Wyatt common stock on June 26, 2009, the implied equity value of the transaction is approximately $3.5 billion. Watson Wyatt Chief Executive Officer John Haley will serve the combined company as Chief Executive Officer; Towers Perrin Chief Executive Officer Mark Mactas will serve as President.

"The combination of Towers Perrin and Watson Wyatt into Towers Watson will create one of the world's leading professional services firms, well positioned for sustained growth and profitability across all geographies and business segments," said Mr. Haley. "The combination will further strengthen our core service lines while offering our clients an enhanced portfolio of proven offerings across a range of financial, risk and people management areas. Towers Watson will have tremendous global reach and service breadth to meet the growing needs of the world's largest multinational corporations. As we provide more value for our clients, we in turn create value for our people and our shareholders."

Mark Mactas, Chief Executive Officer of Towers Perrin, said, "This is an important transaction for our respective organizations that positions us well for a future of accelerated growth and higher levels of profitability. The fit between our firms is excellent, starting with a deep commitment to client service and shared values of integrity, professionalism and respect. Our service lines and geographic strengths are also highly complementary, which creates great opportunities for growth. We couldn't be more excited about this combination, which will change the landscape of our industry."

Towers Watson, which is expected to have annual revenues in excess of $3 billion, will benefit from the scale of the combined companies and anticipates approximately $80 million in pretax annual synergies.

Strategic & Financial Benefits of the Transaction
Strengthened Organizational Capabilities:

Towers Watson will be stronger than the sum of its parts, positioned for industry leadership long into the future and a more effective competitor that can provide additional services to our existing and prospective clients.

Expanded Global Presence with Geographically Diverse Revenue Base: The combination will expand our global footprint to optimize service, global reach, and seamless delivery for our clients. Towers Watson will operate within four geographic regions: North America, EMEA (Europe, Middle East and Africa), Asia-Pacific, and Latin America.
Enhanced Products and Services: Towers Watson will focus its operations on three segments: Benefits, Talent and Rewards, and Risk and Financial Services. These will build on existing thought leadership and research, and will be supported by a more comprehensive set of services, from strategic advice to solutions and implementation.

We believe that these benefits will lead to:

Increased Growth and Revenue: For our shareholders, we expect to deliver economies of scale, diversification of our current businesses, and increased growth and investment potential.
Greater Depth of Talent for Our Clients: We expect to provide broader solutions and a deeper talent pool across a wider geographic footprint.
Greater Opportunities for Our People: For our people, there will be an expanded set of career opportunities, a stronger brand, greater access to resources, and a broader network of colleagues.

Full press release: http://www.watsonwyatt.com/news/press.asp?ID=21599

PRC - Employer social insurance contributions made mandatory

Employers in Shanghai are now required to contribute to social insurance plans (retirement, medical, maternity, unemployment and work-related injury) for eligible non-Shanghai resident employees. This regulation, which was issued by the Shanghai Human Resource and Social Security Bureau, is expected to result in higher costs to employers in Shanghai, as social insurance contributions there are higher than in many other locations in China.

Key Details
The main features of this regulation are as follows:

It is obligatory for non-Shanghai resident employees under the age of 45
to participate in Shanghai social insurance.
Employees who are not residents of a city/town in other provinces must have a professional technical title, or a national qualification certificate of technician or senior technician to be eligible.
In the absence of either, they must at least have the expertise required
for their position by their employer.
The question of the portability of the social pension is still unclear. This is an important issue to a mobile labor population - some non-Shanghai resident employees have been contributing to social pensions in their home province, may transfer to work in other locations after a few years in Shanghai, or not plan to retire in Shanghai eventually.

Previously, a non-Shanghai resident employee was not eligible to participate in Shanghai social insurance, and could only purchase transitional social insurance arrangements until the employer obtained a Shanghai Resident Card for them.

Mike Button - 30 years of Watson Wyatt in Hong Kong

A few years ago, when Watson Wyatt celebrated 30 years of presence in Hong Kong and Asia Pacific and the 30th anniversary of its partnership with Jardines, everyone who didn't know better thought that Mike had been with Watson Wyatt just as long. Not quite. It was then a couple years short of the third decade. Mike has recently reached the milestone in a display of formidable longevity and loyalty to the Company!

Mike started his career in the UK and then transferred to HK in 1979 with Harris Graham & Partners (subsequently becoming Wyatt), starting work in a small office near The Excelsior Hotel. The Company's growth from its humble beginnings three decades ago to its dominant position today owes a huge debt to the pioneering Mike. Indeed, the company's history reflects Mike's career. In his long service, Mike has consulted with clients from Jakarta to Taipei, cultivating and retaining trusted business advisor relationships with a myriad of clients that span decades, companies that remain Watson Wyatt clients on our prized client portfolio today.

All those who have been lucky to work with Mike throughout those years, know him for his good humor, charm and friendliness. He has come to represent Watson Wyatt's brand in Hong Kong embodied in The Lifetime Achievement Award he received from ChinaStaff in 2005, crowning an enviable career that is still going strong.

Many of us, especially those who had been volunteered to take part in the Watson Wyatt Wacky Wacers team in the annual Matilda Sedan Chair Charity Race, will remember his inexhaustible well of wacky ideas - he gave us the Flying Pigs, Alice in Wonderland, Charlie and the Chocolate factory, and many more enchanted characters - combining the creativity and innovation that is the hallmark of Mike's career, with commitment to the community, while having fun. And of course, who can forget the sight of Mike bursting into song in a Benefits seminar, or zooming around town, and into work, in his classic post-box red MGB. Over the years, Mike has also brought glory to HK, representing HKSAR in its HK Hockey veterans team.

Mike commented, 'I consider myself very lucky to be in a job which involves teaming up with such a wide range of talented professionals, both within Watson Wyatt and amongst the valued clients I work with. It is this more than anything which has sustained and motivated me over the years.'