SEIC

SEI Investments Company 2007 Annual Report Summary

Business Context and Reporting Period

This Form 10-K covers the fiscal year ended December 31, 2007. SEI Investments Company is a global provider of investment processing, fund processing, and investment management outsourcing solutions. As of year-end 2007, the company administered $426.1 billion in mutual fund and pooled assets and managed $196.8 billion in assets. The company operates through six primary segments: Private Banks, Investment Advisors, Institutional Investors, Investment Managers, Investments in New Businesses, and LSV Asset Management.

Key Financial Metrics

Operating Margins: Consolidated operating margins were negatively impacted by infrastructure spending and a non-cash charge, though specific consolidated margin percentages were not explicitly stated as a single figure in the text. Segment margins ranged from 20% (Private Banks) to 52% (Investment Advisors).

Material Changes vs. Prior Period

• Revenue Growth: Revenues increased 16% to $1.37 billion, driven primarily by higher asset-based fees due to capital market appreciation in the first three quarters of 2007 and late 2006, as well as new business sales.
• LSV Consolidation Impact: The LSV Asset Management segment contributed significantly to growth, with revenues up 19% and earnings up 17% compared to 2006.
• Global Wealth Platform: The company placed the Global Wealth Platform into service in 2007, resulting in $217.8 million in amortization of previously capitalized costs beginning in the third quarter.
• Non-Cash Charge: A $25.1 million non-cash charge was recorded in Q4 2007 related to Capital Support Agreements for money market funds holding structured investment vehicles (SIVs).
• Tax Rate: The effective tax rate increased to 36.6% in 2007 from 33.9% in 2006, negatively impacting net income.

Guidance, Outlook, and Risks

Outlook and Strategy: Management intends to continue enhancing the Global Wealth Platform, expecting significant development costs in 2008. The company is transforming from a product-based to a solutions-based model. Stock repurchases continued, with 7.16 million shares bought back in 2007 for $205.1 million.

Key Risks and Contingencies:

• Capital Support Agreements: The company entered into agreements to support money market funds holding SIVs. As of February 21, 2008, the obligation increased to $31.7 million due to a technical default in an SIV security, potentially requiring an additional $6.6 million expense in Q1 2008. The aggregate limit was raised to $156.0 million.
• Market Volatility: Revenues are heavily dependent on asset values; prolonged market volatility could adversely affect earnings.
• Regulatory Environment: The company faces extensive regulation and is responding to various examinations, which have increased compliance costs.
• Technology Risk: Reliance on proprietary systems exposes the company to operational risks regarding data security and system interruptions.

Investor Verification Checklist

• Capital Support Obligations: Verify the current status of the SIV securities and the potential for further non-cash charges or cash outflows under the Capital Support Agreements beyond the $31.7 million estimated in February 2008.
• Global Wealth Platform Costs: Monitor the amortization schedule and ongoing development costs for the Global Wealth Platform, which impacts operating margins.
• Asset Flows: Assess net new asset flows versus market appreciation to determine the sustainability of revenue growth independent of market conditions.
• LSV Consolidation: Review the terms of the LSV Employee Group debt and the company's guaranty obligations, as this drives a significant portion of consolidated results.
• Stock Repurchase Program: Confirm the remaining authorization ($112.2 million as of Jan 31, 2008) and future buyback activity.