UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended December 31, 20072008

OR

For the transition period from                    to                    

Commission file number 0 - 10200

SEI INVESTMENTS COMPANY

(Exact name of registrant as specified in its charter)

Registrant’s telephone number, including area code 610-676-1000

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

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

None

(Title of class)

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  x    No  ¨

Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act.    Yes  ¨    No  x

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 definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.  ¨

(Cover page 1 of 2 pages)

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated filer, (See definitionor a smaller reporting company. See definitions of “large accelerated filer,” “accelerated filerfiler” and large accelerated filer”“smaller reporting company” in Rule 12b-2 of the Exchange Act). (Check one):Act.

Large accelerated filer  x    Accelerated filer  ¨    Non-accelerated filer  ¨

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x

The aggregate market value of the voting common stock held by non-affiliates of the registrant was approximately $4.0$3.2 billion based on the closing price of $29.04$23.52 as reported by NASDAQ on June 29, 200730, 2008 (the last business day of the registrant’s most recently completed second fiscal quarter). For purposes of making this calculation only, the registrant has defined affiliates as including all executive officers, directors and beneficial owners of more than ten percent of the common stock of the registrant.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS

DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.

Yes  ¨    No   ¨

(APPLICABLE ONLY TO CORPORATE REGISTRANTS)

Number of shares outstanding of each of the registrant’s classes of common stock, as of the close of business on January 31, 2008:February 20, 2009:

DOCUMENTS INCORPORATED BY REFERENCE

Portions of the following documents are incorporated by reference herein:

(Cover page 2 of 2 pages)

SEI Investments Company

Fiscal Year Ended December 31, 20072008

TABLE OF CONTENTS

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PART I

Forward Looking Statements

This Annual Report on Form 10-K contains certain “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements involve certain known and unknown risks, uncertainties and other factors, many of which are beyond our control, and are not limited to those discussed in Item 1A, “Risk Factors.” All statements that do not relate to historical or current facts are forward-looking statements. These statements may include words such as “anticipate,” “estimate,” “expect,” “project,” “intend,” “plan,” “believe,” and other words and terms of similar meaning in connection with any discussion of future operating or financial performance. In particular, these include statements relating to present or anticipated products and markets, future revenues, capital expenditures, expansion plans, future financing and liquidity, personnel, and other statements regarding matters that are not historical facts or statements of current condition.

Any or all forward-looking statements contained within this Annual Report on Form 10-K may turn out to be wrong. They can be affected by inaccurate assumptions we might make, or by known or unknown risks and uncertainties. Many factors mentioned in the discussion below will be important in determining future results. Consequently, we cannot guarantee any forward-looking statements. Actual future results may vary materially.

We undertake no obligation to publicly update any forward-looking statements, whether as a result of new information, future events or otherwise, except as required by law. You are advised, however, to consult any further disclosures we make on related subjects in our filings with the U.S. Securities and Exchange Commission (SEC).

Item 1.Business.

Overview

SEI (NASDAQ: SEIC) is a leading global provider of investment processing, fund processing, and investment management business outsourcing solutions that help corporations, financial institutions, financial advisors, and affluentultra-high-net-worth families create and manage wealth. As of December 31, 2007,2008, through its subsidiaries and partnerships in which the company has a significant interest, SEI administers $426.1$379.6 billion in mutual fund and pooled assets, manages $196.8$134.3 billion in assets, and operates from more than 20numerous offices in over a dozen countries.worldwide.

Our wealth management business solutions include:

General Development of the Business

For over 35 years, SEI has been a leading provider of wealth management business solutions for the financial services industry.

We began doing business in 1968 by providing computer-based training simulations to train bank loan officers in credit lending practices.

1970’s

We developed an investment accounting system for bank trust departments in 1972, and became a leading provider of investment processing outsourcing services to banks and trust institutions.

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1980’s

SEI became a public company in 1981. We entered the asset management business in 1982 and launched a series of money market mutual funds for bank clients. Later in the decade, we expanded our services to bank clients by offering mutual fund accounting services, and investment operations outsourcing services.

1990’s

We introduced our “Manager of Managers”“Manager-of-Managers” investment process, and offered these programs to investment advisors who manage wealth for their high-net-worth clients. We entered the institutional investor market and began offering asset management programs to retirement plan sponsors and institutional investors in selected global markets, including the United States, Canada, the United Kingdom, continental Europe, South Africa and East Asia.

2000’s

We delivered broader, more strategic solutions for clients and markets, including a complete life and wealth platform for operating an investment advisory business, a total operational outsourcing solution for investment managers, a fully-integrated pension management system for retirement plan sponsors and a complete life and wealth solution for affluentultra-high-net-worth families. We introduced Global Wealth Services, a next generation business solution integrating investment processing technology, operating processes and investment management programs.

Strategy

We seek to achieve growth in earnings and shareholder value by strengthening our position as a provider of global wealth management solutions. To achieve this objective, we have implemented these strategies:

Create broader solutions for wealth service firms. Banks, investment managers and financial advisors seek to enter new markets, expand their service offerings, provide a differentiated experience to their clients, improve efficiencies, reduce risks, and better manage their businesses. We are developing next generation business solutions integrating technology, operating processes, and financial products designed to help these institutions better serve their clients and provide opportunities to improve their business success.

Help institutional investors manage retirement plans and operating capital. Retirement plan sponsors, not-for-profit organizations and other institutional investors strive to meet their financial objectives while reducing business risk. We deliver customized investment management solutions that enable investors to make better decisions about their investments and to manage their assets more effectively.

Help affluent individual investors manage their life and wealth goals. These investors demand a holistic wealth management experience that focuses on their life goals and provides them with an integrated array of financial services that includes substantially more than traditional wealth management offerings. We help these investors identify their goals and offer comprehensive life and wealth advisory services including life planning, investments and other financial services.

Expand into global markets. Global markets are large and present significant opportunities for growth. We are evolving U.S. business models for the global wealth management marketplace, focusing on the needs of institutional investors, private banks, investment advisors and affluent individual investors.

Fundamental Principles

We are guided by these fundamental principles in managing the business and adopting these growth strategies:

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Products and Services

Investment Processing

Investment processing solutions use our proprietary software to perform investment management and accounting, enabling banks and other wealth service firms to outsource investment processing activities. These solutions include computer processing services, software services, business process outsourcing services, securities valuation and trade execution services.

We offer these outsourcing solutions to banks and trust institutions that provide wealth management services to their private and institutional investors. Investment advisors also use these investment processing servicessolutions, together with our investment management programs, in providingto provide wealth management services to their investors.

These solutions include TRUST 3000^®, a comprehensive trust accounting and investment system that provides securities processing and investment accounting for all types of domestic and global securities, and support for multiple account types, including personal trust, corporate trust, institutional trust, and non-trust investment accounts.

In 2007, we introduced Global Wealth Services, a next generation business solution that integrates investment processing technology, operating processes and investment management programs. Global Wealth Services provides the strategic infrastructure to help private banks grow and keep pace with a rapidly changing wealth management industry. To enhance this offering, we have invested in the development of expanded services supported by

Enhancing the Global Wealth Platform. ThisServices solution is the Global Wealth Platform, an investment accounting and securities processing system provides the backbone for our Global Wealth Services and includeswith capabilities that include global securities processing, trade-date and multi-currency accounting and reporting. The Global Wealth Platform offers enhanced client experience capabilities and improved operating efficiencies, and enables us to enter new markets in the United Kingdom, continental Europe and the United States. The platform is designed around the client and portfolio management processes. This enables banks to institutionalize their client processes around an investor’s investment objectives, facilitating a transition to model-based portfolio management, providing an improved client experience, andwhile minimizing the expense associated with investment operations.

In 2007, we entered the European private bank marketoperations and transformed a client bank in the United Kingdom into Global Wealth Services. In the future, the Global Wealth Services solution will be further enhanced through the Global Wealth Platform. We believe the enhanced Global Wealth Services solution enabled by the new infrastructure will improve the client experience and place our clients in a superior position to serve the changing needs of their clients.reducing risk.

Revenues from investment processing services are earned as monthly fees from contracted services including software licenses, information processing, and investment operations. Revenues are primarily earned based upon the number of trust accounts being serviced. Revenues may also be earned for contracted project-oriented services related to client implementations. These revenues are recognized in Information processing and software servicing fees on the accompanying Consolidated Statements of Operations. Securities valuation and trade execution fees are recognized as Transaction-based and trade execution fees on the accompanying Consolidated Statements of Operations. In addition, as we deploy our Global Wealth Services solution, we will attempt to price our investment processing services as a percentage of assets under management.management and administration.

Investment Management Programs

Investment management programs consist of money market, fixed-income and equity mutual funds, alternate investmentsalternative investment portfolios and separate accounts. These include a series of money market, equity, fixed-income and alternative investment portfolios, primarily in the form of registered investment companies. We serve as the administrator and investment advisor for many of these products.

We offer investment managementprovide these programs to affluent individual investors and institutional investors, together with investment strategies that can be tailored to the objectives and risk tolerances of different types of investors. We distribute these funds primarily through investment advisory firms, including investment advisors and banks, or directly to institutional or individual investors.

We have expanded these investment management programs to include other consultative, operational and technology components, creating comprehensive solutions tailored to the needs of a specific market. These components may include investment strategies, consulting services, administrative and processing services and technology tools.

Page 4Investors in our investment programs typically follow a customized investment strategy and invest in a globally diversified portfolio that consists of 86

multiple classes and investment styles, constructed according to our disciplined investment process. Our investment process is based on five principles: asset allocation and appropriate diversification, both of which are important to investment performance; portfolio structure, tax management,construction that consists of multiple specialist managers with complementary approaches to achieve diversification of risk and continuous portfolio management. The investment management programs allow access toreturns; manager selection, where SEI acts as a manager-of-managers, selecting some of the best style-specific money managers who are normally not availablefrom a global network of money managers; continuous portfolio management, to individual investors. This innovative approach, called Manager-of-Managers, is designed to promote adherence to our disciplined investment principles in thatensure each manager’s performance is trackedinvestment approach remains consistent with the objectives of the portfolio; and scrutinized. The potential benefittax management, for an emphasis on after-tax returns.

Page 4 of this method is improved performance with reduced volatility, because it eliminates the task of attempting to predict which style of investing will be in favor at any particular time. We maintain the asset-class exposure within the specifically defined boundaries of our client’s asset allocation plan by incorporating a formal rebalancing program in the asset management process.97

As of December 31, 2007,2008, we managed $129.2$96.6 billion in total assets, net of $72.9$37.7 billion in assets managed by LSV Asset Management (LSV). Our assets under management include $103.3$67.7 billion invested in our fixed-income and equity funds or through separately managed account programs, $15.0$18.2 billion invested in our liquidity funds and $10.9$10.7 billion invested in our collective trust fund programs.

Revenues from investment management programs are primarily earned as a contractual percentage of net assets under management. These revenues are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Fund Processing

Fund processing solutions include a full range of administration and distribution support services to mutual funds, collective trust funds, hedge funds, fund of funds, private equity funds and other types of investment funds. Administrative services include fund accounting, trustee and custodial support, legal support, transfer agency and shareholder servicing. Distribution support services range from market and industry insight and analysis to identifying distribution opportunities.

We offer these fund administration and distribution services to U.S. banks, investment management firms and investment companies that sponsor and distribute mutual funds and other U.S.-regulated investments. We also offer these services to investment managers worldwide that sponsor and distribute alternative investments, including hedge funds, fund of funds, private equity funds, and other investment vehicles. We also offer operational outsourcing solutions for the administration and management of separately managed account programs, as well as total operational outsourcing solutions for investment management firms.

As of December 31, 2007,2008, we administered $229.4$245.3 billion in non-SEI mutual funds and other pooled assets.

Revenues from fund processing are primarily earned based upon a contractual percentage of net assets under administration. These revenues are recognized in Asset management, administration and distribution fees on the accompanying Consolidated Statements of Operations.

Business Segments

Business segments are generally organized around our target markets. Financial information about each business segment is contained in Note 1314 to the Consolidated Financial Statements. Our business segments are:

Private Banks – provides investment processing and investment management programs to banks and trust institutions worldwide;worldwide and independent wealth advisers located in the United Kingdom;

Investment Advisors – provides investment management programs to affluent investors through a network of independent registered investment advisors, financial planners and other investment professionals in the United States;

Institutional Investors – provides investment management programs and administrative outsourcing solutions to retirement plan sponsors and not-for-profit organizations worldwide;

Investment Managers – provides investment processing, fund processing and operational outsourcing solutions to investment managers, fund companies and banking institutions located in the United States and to investment managers worldwide of alternative asset classes such as hedge funds, fund of funds, and private equity funds;

Investments in New Businesses – provides investment management programs to affluentultra-high-net-worth families residing in the United States and Europe through the SEI Wealth Network^®; and

LSV Asset Management – is a registered investment advisor that provides investment advisory services to institutions, including pension plans and investment companies.

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The percentage of consolidated revenues generated by each business segment for the last three years was:

in the credit markets as they impactthat affect the value of money market instruments, including structured investment vehicles, on the creditworthiness of the structured investment vehicle securities and the overall asset levels of our money market funds. Additionally, in the Funds.event the fund realizes a loss from the sale or disposition of a structured investment vehicle, we would be required to pay an amount to the funds of our obligation that could negatively impact our liquidity resources.

Poor fund performance may affect our revenues and earnings. Our ability to maintain our existing clients and attract new clients may be negatively affected if the performance of our mutual funds and other investment products, relative to market conditions and other comparable competitive investment products, is lower. Investors may decide to place their investable funds elsewhere which would reduce the amount of assets we manage resulting in a decrease in our revenues.

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Consolidation within our target markets may affect our business. Merger and acquisition activity between banks and other financial institutions could reduce the number of existing and prospective clients. Consolidation activities may also cause larger institutions to internalize some or all of our services. These factors may negatively impact our ability to generate future growth in revenues and earnings.

The Company and our clients are subject to extensive governmental regulation. Our various business activities are conducted through entities which may be registered with the Securities and Exchange Commission (SEC) as an investment advisor, a broker-dealer, a transfer agent, an investment company or with the United States Office of Thrift Supervision or state banking authorities as a trust company. Our broker-dealer is also a member of the Financial Industry Regulatory Authority and is subject to its rules and oversight. In addition, various subsidiaries of the Company are registered with, and subject to the oversight of, regulatory authorities primarily in the United Kingdom and the Republic of Ireland. Many of our clients are subject to substantial regulation by federal and state banking, securities or insurance authorities or the Department of Labor. Compliance with existing and future regulations and responding to and complying with recent regulatory activity affecting broker-dealers, investment advisors, investment companies and their service providers and financial institutions could have a significant impact on us. We have responded and are currently responding to various regulatory examinations, inquiries and requests. As a result of these examinations, inquiries and requests, we review our compliance procedures and business operations and make changes as we deem necessary. These activities resulted in an increased level of general and administrative costs.

We offer investment and banking products that also are subject to regulation by the federal and state securities and banking authorities, as well as non-United Statesforeign regulatory authorities, where applicable. Existing or future regulations that affect these products could lead to a reduction in sales of these products. Directed brokerage payment arrangements offered by us are also subject to the SEC and other federal regulatory authorities. Changes in the regulation of directed brokerage or soft dollar payment arrangements or strategic decisions of our clients regarding these arrangements could affect sales of some services, primarily our brokerage services.

As a result of the recent economic and political developments, there has been an unusual amount of speculation about governmental regulation of financial institutions and financial products. Changes in laws or regulations and changes in the identity or policies of the regulators having jurisdiction over our regulated subsidiaries, products or clients could have a material impact on our markets, customers, solutions, revenues and costs.

We are exposed to systems and technology risks. Through our proprietary systems, we maintain and process data for our clients that is critical to their business operations. An unanticipated interruption of service may have significant ramifications, such as lost data, damaged software codes, or inaccurate processing of transactions. As a result, the costs necessary to rectify these problems may be substantial.

We are exposed to data security risks. A failure to safeguard the integrity and confidentiality of client data and our proprietary data from the infiltration by an unauthorized user that is either stored on or transmitted between our proprietary systems or to other third party service provider systems may lead to modifications or theft of critical and sensitive data pertaining to us or our clients. The costs incurred to correct client data and prevent further unauthorized access to our data or client data could be extensive.

We are dependent upon third party approvals. Many of the investment advisors through which we distribute our investment offerings are affiliated with independent broker-dealers or other networks, which have regulatory responsibility for the advisor’s practice. As part of the regulatory oversight, these broker-dealers or networks must approve the use of our investment products by affiliated advisors within their networks. Failure to receive such approval, or the withdrawal of such approval, could adversely affect the marketing of our investment products.

We are exposed to operational risks. Operational risk generally refers to the risk of loss resulting from our operations, including, but not limited to, improper or unauthorized execution and processing of transactions, deficiencies in our operating systems, business disruptions and inadequacies or breaches in our internal control processes. We operate different businesses in diverse markets and are reliant on the ability of our employees and

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systems to process large volumes of transactions often within short time frames. In the event of a breakdown or improper operation of systems, human error or improper action by employees, we could suffer financial loss, regulatory sanctions or damage to our reputation. In order to mitigate and control operational risk, we continue to enhance policies and procedures that are designed to identify and manage operational risk.

Changes in, or interpretation of, accounting principles could affect our revenues and earnings. We prepare our consolidated financial statements in accordance with generally accepted accounting principles. A change in these principles can have a significant effect on our reported results and may even retroactively affect previously reported results. Our accounting policy for recording stock-based compensation has recently been affected by changes in accounting principles. In January 2006, we adopted Statement of Financial Accounting Standards No. 123(R) (SFAS 123(R)), “Share-Based Payment,” which requires the measurement of all stock-based compensation to employees, including grants of employee stock options, using a fair value based method and the recording of such expense in our consolidated statements of operations. SFAS 123(R) had a significant adverse effect on our financial results and will continue to impact our future results.

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Changes in, or interpretations of, tax rules and regulations may adversely affect our effective tax rates. Unanticipated changes in our tax rates could affect our future results of operations. Our future effective tax rates could be adversely affected by changes in tax laws or the interpretation of tax laws. We are subject to possible examinations of our income tax returns by the Internal Revenue Service and state and foreign tax authorities. We regularly assess the likelihood of outcomes resulting from these examinations to determine the adequacy of our provision for income taxes, however, there can be no assurance that the final determination of any examination will not have an adverse effect on our operating results or financial position.

Currency fluctuations could negatively affect our future revenues and earnings as our business grows globally. We operate and invest globally to expand our business into foreign markets. Our foreign subsidiaries use the local currency as the functional currency. As these businesses evolve, our exposure to changes in currency exchange rates may increase. Adverse movements in currency exchange rates may negatively affect our operating results, liquidity and financial condition.

We rely on our executive officers and senior management. Most of our executive officers and senior management personnel do not have employment agreements with us. The loss of these individuals may have a material adverse affect on our future operations.

Item 1B.Unresolved Staff Comments.

None.

Item 2.Properties.

Our corporate headquarters is located in Oaks, Pennsylvania and consists of nine buildings situated on approximately 90 acres. We own and operate the land and buildings, which encompass approximately 486,000 square feet of office space and 34,000 square feet of data center space. We lease other offices which aggregate 62,00060,000 square feet. We also own a 3,400 square foot condominium that is used for business purposes in New York, New York.

Item 3.Legal Proceedings.

On September 30, 2004, SIDCO was named as a defendant in a putative consolidated amended class action complaint (the “PBHG Complaint”) filed in the United States District Court for the District of Maryland titled “Stephen Carey v. Pilgrim Baxter & Associates, LTD, et. al.” The PBHG Complaint was purportedly made on behalf of all persons that purchased or held PBHG mutual funds during the period from November 1, 1998 to November 13, 2003 and related generally to various market timing practices allegedly permitted by the PBHG Funds. The suit named as defendants some 36 persons and entities, including various persons and entities affiliated with Pilgrim Baxter & Associates, Ltd., various PBHG Funds, various alleged market timers, various alleged facilitating brokers, various clearing brokers, various banks that allegedly financed the market timing activities, various distributors/underwriters and others. The PBHG Complaint alleged that SIDCO was the named distributor/underwriter from November 1998 until July 2001 for various PBHG funds in which market timing allegedly occurred during that period. The PBHG Complaint generally alleged that the prospectus for certain PBHG funds made misstatements and omissions concerning market timing practices in PBHG funds. The PBHG Complaint alleged that SIDCO violated Sections 11 and 12(a)(2) of the Securities Act of 1933, Section 10(b) of the Securities Exchange Act of 1934 and Rule 10b-5 thereunder, and Sections 34(b) and 36(a) of the Investment Company Act of 1940, and that SIDCO breached its fiduciary duties, engaged in constructive fraud and aided and abetted the breach by others of their fiduciary duties. The PBHG Complaint did not name SIDCO or any of its affiliates as a market timer, facilitating or clearing broker or financier of market timers. The PBHG Complaint sought unspecified compensatory and punitive damages, disgorgement and restitution. In 2006, the plaintiffs submitted a proposed form of order dismissing SIDCO from the action, but the Court has not yet acted on the proposed order.

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

There were no matters submitted to a vote of security holders during the fourth quarter of 2007.2008.

Executive Officers of the Registrant

Information about our executive officers is contained in Item 10 of this report and is incorporated by reference into this Part I.

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PART II

Price Range of Common Stock and Dividends:Dividends:

Our common stock is traded on The Nasdaq Global Select Market^® (NASDAQ) under the symbol “SEIC.” The following table shows the high and low sales prices for our common stock as reported by NASDAQ and the dividends declared on our common stock for the last two years. Our Board of Directors intends to declare future dividends on a semiannual basis.

As of January 31, 2008,30, 2009, we estimate that we had approximately 520510 shareholders of record.

For information on our equity compensation plans, refer to Note 910 to the Consolidated Financial Statements and Item 12 of this Annual Report on Form 10-K.

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Comparison of Cumulative Total Return of Common Stock, Industry Index and Nasdaq Market Index:

COMPARISON OF 5-YEAR CUMULATIVE TOTAL RETURN

AMONG SEI INVESTMENTS,

NASDAQ MARKET INDEX AND PEER GROUP INDEX

ASSUMES $100 INVESTED ON JAN. 1, 2003

ASSUMES DIVIDEND REINVESTED

FISCAL YEAR ENDING DEC. 31, 2007

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Issuer Purchases of Equity Securities:

Our Board of Directors has authorized the repurchase of up to $1.43$1.53 billion of our common stock. Currently, there is no expiration date for our common stock repurchase program.

Information regarding the repurchase of common stock during the three months ended December 31, 20072008 is:

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(In thousands, except per-share data)

This table presents selected consolidated financial information for the five-year period ended December 31, 2007.2008. This data should be read in conjunction with the financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this Annual Report on Form 10-K.

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(In thousands, except per-share data)

This discussion reviews and analyzes the consolidated financial condition at December 31, 20072008 and 2006,2007, the consolidated results of operations for the years ended December 31, 2008, 2007, 2006, and 2005,2006, and other factors that may affect future financial performance. This discussion should be read in conjunction with the Selected Financial Data included in Item 6 of this Annual Report and the Consolidated Financial Statements and Notes to the Consolidated Financial Statements included in Item 8 of this Annual Report.

Overview

Our Business and Business Segments

We are a leading global provider of investment processing, fund processing, and investment management business outsourcing solutions that help corporations, financial institutions, financial advisors, and affluentultra-high-net-worth families create and manage wealth. Investment processing fees are earned as monthly fees for contracted services, including computer processing services, software licenses, and trust operations services, as well as transaction-based fees for providing securities valuation and trade-execution. Fund processing and investment management fees are earned as a percentage of average assets under management or administration. As of December 31, 2007,2008, through our subsidiaries and partnerships in which we have a significant interest, we administer $426.1$379.6 billion in mutual fund and pooled assets, manage $196.8$134.3 billion in assets, and operate from more than 20numerous offices in over a dozen countries.

Effective January 1, 2007, we changed the names of three of our business segments. The Private Banking and Trust business segment was renamed as Private Banks, the Enterprises business segment was renamed as Institutional Investors, and the Money Managers business segment was renamed as Investment Managers. Additionally, the structure of two of our business segments changed on January 1, 2007. The investment management programs and services offered to global private banks of the Investments in New Businesses segment was moved to the Private Banks segment. For comparability, the prior period’s results have been reclassified to reflect the realignment of the business segments.worldwide.

Our reportable business segments are:

Private Banks – provides investment processing and investment management programs to banks and trust institutions worldwide and independent wealth advisers located in the United Kingdom and accounts for 3033 percent of consolidated revenues in 2007;2008;

Investment Advisors – provides investment management programs to affluent investors through a network of independent registered investment advisors, financial planners and other investment professionals in the United States and accounts for 1918 percent of consolidated revenues in 2007;2008;

Institutional Investors – provides investment management programs and administrative outsourcing solutions to retirement plan sponsors and not-for-profit organizations worldwide and accounts for 1516 percent of consolidated revenues in 2007;2008;

Investment Managers – provides investment processing, fund processing and operational outsourcing solutions to investment managers, fund companies and banking institutions located in the United States and to investment managers worldwide of alternative asset classes such as hedge funds, fund of funds, and private equity funds and accounts for ten11 percent of consolidated revenues in 2007;2008;

Investments in New Businesses – provides investment management programs to affluentultra-high-net-worth families residing in the United States and Europe through the SEI Wealth Network^®. This segment accounts for one percent of consolidated revenues in 2007;2008; and

LSV Asset Management – is a registered investment advisor that provides investment advisory services to institutions, including pension plans and investment companies. This segment accounts for 2521 percent of consolidated revenues in 2007.2008.

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Results of Operations

Revenues, Expenses, Income from operations and Income before income taxes by business segment for the year ended 2008 compared to the year ended 2007, and for the year ended 2007 compared to the year ended 2006 are:

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Asset Balances

This table presents assets of our clients, or of our clients’ customers, for which we provide management or administrative services. These assets are not included in our balance sheets because we do not own them.

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Assets under management are total assets of our clients or their customers invested in our equity and fixed-income investment programs, collective trust fund programs, and liquidity funds for which we provide asset management services. Assets under management and administration are total assets of our clients or their customers for whom we provide administrative services, including client proprietary fund balances for which we provide administration and/or distribution services.

General Overview

Recent Highlightsevents in 2008 had unprecedented effects on the capital markets and greatly impacted the values of our assets under management and administration. During most of 2008, the equity markets declined steadily but then rapidly deteriorated beginning in September and throughout the remainder of the year. The S&P 500¹ and the Dow Jones Industrial Average² declined by over 35 percent and 30 percent, respectively, in 2008. Both measures declined by approximately 20 percent in the fourth quarter. Asset management, administration and distribution fees trended downward in 2008, following the decline of the capital markets. New client activity in our Institutional Investors and Investment Managers segments served to offset some of the devaluation in our assets under management and administration caused by the capital markets.

The lack of confidence in the capital markets also drove investors to seek highly-liquid, stable investments, such as money market funds, U.S. Treasury securities and alternative investments such as commodities. Our revenues were negatively impacted by this trend as some clients transferred their assets from our higher margin investment products, such as equity and fixed-income funds, into our lower margin investment products, such as money market funds. This tendency was especially true for our assets under management of U.S. investors in our Investment Advisors segment. Our revenues were also negatively impacted by withdrawals of assets from our investment products entirely by international investors in our Private Banks segment.

Volatility in the capital markets in 2007 was driven mainly by the onset of the subprime mortgage crisis in the later half of the year. The gains achieved in the first half of 2007 were largely offset by the decline in equity prices from fears of a broadening economic slowdown which led to negative returns in the fourth quarter. For the year, the S&P 500 and Dow Jones Industrial Average reported only modest gains. The appreciation in market values throughout most of 2007 increased the value of the assets we manage and administer thereby increasing our base revenues from existing clients. Even with the poor fourth quarter in 2007, our revenues increased relative to prior year comparable periods. Cash flows into our funds exceeded redemptions during 2007 from new and existing clients. The capital markets in 2007 were significantly different than 2008. This trend is evident in our revenues as well.

In late 2007, we entered into Capital Support Agreements with several of our money market funds. Among other money market instruments, these funds held senior notes issued by structured investment vehicles (SIV or SIVs) which failed to make payments on their outstanding notes on the scheduled maturity dates. Prolonged illiquidity in the credit markets during 2008 significantly reduced the market value of the collateral underlying the SIV securities owned by our money market funds, which greatly increased our obligation under the Capital Support Agreements (See “Money Market Fund Support” later in this discussion).

Of primary importance to our strategic initiatives is the successful deployment of the Global Wealth Platform. The initial version of the platform was delivered in July 2007. Our plan is to provide additional significant functionality for the platform through a series of releases that are expected to offer a complete global investment processing solution to private banks and non-bank wealth management firms. Our efforts in 2008 were primarily focused on major investment processing enhancements and building the operational infrastructure necessary to support the platform and our clients. The additional functionality built during 2008 was placed into service through a large release in January 2009.

Significant Items Impacting Our Financial Results in 2008

Revenues decreased $121.1 million, or nine percent, to $1.25 billion in 2008 compared to 2007. Net income declined $120.6 million, or 46 percent, to $139.3 million and diluted earnings per share dropped to $0.71 per share in 2008 compared to $1.28 per share in 2007. We believe the following items were significant to our business during 2008:

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Significant Items Impacting Our Financial Results in 2007

Revenues increased $193.3 million, or 16 percent, to $1.37 billion with netin 2007 compared to 2006. Net income ofincreased $22.8 million, or 10 percent, to $259.8 million and diluted earnings per share of $1.28.improved to $1.28 per share in 2007 compared to $1.17 per share in 2006. We believe the following items were significant to our business during 2007:

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Forward Looking Information and Risk Factors

Certain information contained in this discussion is or may be considered forward-looking. Forward-looking statements relate to future operations, strategies, financial results or other developments. Forward-looking statements are based upon estimates and assumptions that involve certain risks and uncertainties, many of which are beyond our control or are subject to change. Although we believe our assumptions are reasonable, they could be inaccurate. Our actual future revenues and income could differ materially from our expected results. We have no obligation to publicly update or revise any forward-looking statements.

Among the risks and uncertainties which may affect our future operations, strategies, financial results or other developments are those risks described in Item 1A “Risk Factors” of this Annual Report. The following items are, in our opinion, anticipated to occur in the next 12 to 18 months:

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Money Market Fund Support

In late 2007, we entered into Capital Support Agreements with the SEI Daily Income Trust Prime Obligation Fund (the SDIT PO Fund), the SEI Daily Income Trust Money Market Fund (the SDIT MM Fund), and the SEI Liquid Asset Trust Prime Obligation Fund (the SLAT PO Fund) (each a Fund or, together, the Funds). We are the advisor to the Funds. The sub-advisor to the Funds is Columbia Management, which is the primary investment management division of Bank of America Corporation. Many of our clients are investors in the Funds. SDIT PO Fund is rated AAA and Aaa by Standards & Poor’s Corporation (S&P) and Moody’s Investor Services Inc. (Moody’s), respectively, and the SDIT MM Fund is rated Aaa by Moody’s. The SLAT PO Fund is not rated by S&P or Moody’s.

TheAmong other money market instruments, the Funds hold senior notes issued by structured investment vehicles (SIV or SIVs).SIVs. SIVs issue commercial paper and other debt securities and use the proceeds to purchase bonds and other long-term debt instruments that are used to collateralize the obligations of the vehicle. The senior notes are collateralized by residential mortgage-backed securities, commercial mortgage-backed securities, corporate collateralized debt obligations and collateralized debt obligations of asset-backed securities. Some of the SIVs have either ceased making payments or potentially may cease making payments on itstheir outstanding notes on the scheduled maturity dates.

In October 2007, S&P stated that it would place any mutual fund that had an AAA rating and owned certain SIVsSIV securities on credit watch with negative implications unless the fund was provided credit support having an A-1 short-term rating by S&P. Although we were not obligated to provide the credit support required by S&P, in order to avoid a credit watch by S&P on the SDIT PO Fund, and to address the needs of our customers who require an S&P AAA rating of the SDIT PO Fund, we entered into the Capital Support Agreements to satisfy S&P’s requirement. We entered into similar agreements with the SDIT MM and SLAT PO Funds.

Since the time we entered into the Capital Support Agreements in late 2007, significant illiquidity issues persisted in the credit markets which caused the market values of the collateral underlying the SIV securities to decline. This triggered ratings downgrades on the SIV securities from the principal rating agencies which required us to post additional capital support to the SDIT PO Fund in order for it to maintain a AAA rating by S&P. In late 2008, we amended the Capital Support Agreements with the SDIT PO Fund and the SLAT PO Fund. We also amended our credit facility to increase the aggregate amount available for borrowings up to $300.0 million (See Liquidity and Capital Resources section later in this discussion and Note 8 to the Consolidated Financial Statements).

On September 30, 2008, we purchased the Gryphon (formerly Cheyne) notes directly from the SDIT MM Fund. The Gryphon notes were the last remaining SIV securities held by this Fund. The cash purchase price paid to the SDIT MM Fund of $15.3 million was equal to the amortized cost of the Gryphon notes. The market value on that date was $8.7 million and as of December 31, 2008 was $5.7 million. The total loss recognized through December 31, 2008 was $9.3 million. The Gryphon notes were received by the SDIT MM Fund in exchange for the Cheyne notes through a restructuring in July 2008. We have received cash distributions on the Gryphon notes since our purchase of the notes in September 2008. The Capital Support Agreements requireAgreement with the SDIT MM fund was allowed to lapse after the purchase of the Gryphon notes.

On November 5, 2008, we amended the Capital Support Agreement that was entered into on November 8, 2007 with the SDIT PO Fund. The Amended and Restated Capital Support Agreement (the SDIT PO Amended Agreement) requires us to provide additional support to the SDIT PO Fund. The SDIT PO Amended Agreement provides that if the SDIT PO Fund realizes payments or sales proceeds from the ultimate disposition of any of the specified SIV securities which are less than its amortized cost, we will be required to provide capital to the SDIT PO Fund equal to the amount by which the amortized cost of the specified SIV securities exceeds the amount realized from the sale or other disposition of the SIV securities. Also, we must maintain collateral in the form of a letter of credit and/or a segregated cash account equal to the difference between the amortized cost value and the market value of the specified SIV securities plus an amount equal to ten percent of the market value of the specified SIV securities. The SDIT PO Amended Agreement is scheduled to expire on November 6, 2009.

On November 28, 2008, we amended the Capital Support Agreement that was entered into on December 3, 2007 with the SLAT PO Fund. The Amended and Restated Capital Support Agreement (the SLAT PO Amended Agreement) requires us to commit capital to the SLAT PO Fund subject to thean aggregate limit of $126.0$30.0 million in the case of the SDIT PO Fund, $3.0 million in the case of the SDIT MM Fund, and $1.5 million in the case if the SLAT PO Fund, if the Fundfund realizes payments or sales proceeds from the ultimate disposition of any specified SIV securities held by the Fund which are less than the amortized cost of the specified SIV securities. Upon the sale or other disposition of athe SIV security,securities, the amount of required capital commitment would be the least of the following amounts: (i) the amount, if any, by which the amortized cost of the SIV securitysecurities exceeds the amount realized from the sale or other disposition of the SIV security;securities; (ii) the amount, if any, necessary to restore the net asset value per share of the Fund to $0.9950, (or in the case of the SDIT PO Fund, so long as the SDIT PO Fund is rated AAA by S&P, $0.9975), or (iii) the remaining amount of the aggregate limit of the Capital Support Agreement applicable to the Fund, taking into account all prior contributions.

The obligations under Under the Capital Support Agreements are secured by lettersSLAT PO Amended Agreement, we must maintain collateral in the form of a letter of credit of a third party bank rated A-1 by S&P. The letters of credit were issued under our existing credit facility, which provides for borrowings up to $200.0 million with provisions for an additional $100.0 million under certain conditions (See Note 7and/or segregated cash account equal to the Consolidated Financial Statements for more information relatedaggregate limit of committed capital. The SLAT PO Amended Agreement is scheduled to the letters of credit and credit facility). The Capital Support Agreements and the letters of credit have a term of one year. In the event that capital must be provided to the Funds, we may, at ourexpire on November 6, 2009.

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discretion, utilize our credit facility or contribute the required capital from unrestricted cash. However, so long as the letters of credit remain outstanding, the amount available under the credit facility will be reduced by the amount of the letters of credit. Therefore, only the remaining $69.5 million is unrestricted and may be used for general purposes. Some of the covenants contained within the credit facility were amended as a result of the Capital Support Agreements that provide certain allowances and exemptions for transactions arising solely from the Capital Support Agreements.

In the event we are required to commit capital to anyeither Fund, we will not receive any consideration from the Fund, in the form of shares of the Fund or any other form, for the contributed capital. If the mark-to-marketmarket value of the SIV securities is less than its amortized cost and if(and in the case of the SLAT PO Fund, the aggregate net asset value of the SLAT PO Fund is less than $0.9950 (or in the case of the SDIT PO Fund, so long as the SDIT PO Fund is rated AAA by S&P, $0.9975)$0.9950), then, even though the loss has not been realized through the sale or other disposition of the SIV securities, we will be obligated to commit the required amount of capital sofor the amount that the Fund’smarket value of the SIV securities are less than its amortized cost (or in the case of the SLAT PO Fund, the net asset value is at least $.9950 (or in the case of the SDIT PO Fund, $0.9975)$.9950). However, in this case, we would not be required to pay the capital contribution to the Funds.

As of December 31, 2007,2008, the amount of our obligation to commit capital to the Funds was $25.1$174.0 million, but this amount was not required to be paid since the Funds did not realize any loss from the sale of the SIV securities. However, we were required to record an expense for $25.1 million whichThe amount of our obligations recognized is reflected in Net (loss) gainloss from investments on the Consolidated Statements of OperationsOperations.

The following table summarizes our obligations from the Amended Capital Support Agreements as of the accompanying Consolidated Financial Statements. At December 31, 2007,2008.

The obligations under the aggregate market value of the SIVs covered by theAmended Capital Support Agreements are secured by letters of credit of a third party bank rated A-1 by S&P. The letters of credit were issued under our existing credit facility that provides for borrowings up to $300.0 million. The letters of credit have a term of one year. As of December 31, 2008, we have $190.0 million of letters of credit outstanding (See Liquidity and Capital Resources section later in this discussion).

All SIV securities that remain on the books of the two Funds covered by the Amended Capital Support Agreements are in technical default. The Funds currently hold five SIV securities, three Funds was $710.1 million.

In January 2008, anotherof which have already restructured. Gryphon is the largest SIV security withinheld by the Funds suffered a technical default, triggering ratings downgrades fromFunds. As of February 20, 2009, the principal rating agencies. As a result, the carryingaggregate par value of this security in the Funds was reduced as well. In addition, S&P has requiredGryphon notes represent 74 percent of the postingtotal par value of additional capital support forall SIV securities held by the SDIT PO fund.Fund and 11 percent of the total par value of all SIV securities held by the SLAT PO Fund. The next largest SIV security held by the Funds is Stanfield Victoria. Stanfield Victoria is currently in receivership and has not yet fully restructured. The ultimate outcome of the restructuring is currently unknown. As a result of these events, we amendedFebruary 20, 2009, the aggregate par value of Stanfield Victoria represents the remaining 26 percent of the total par value of all SIV securities held by the SDIT PO Fund and 24 percent of the total par value of all SIV securities held by the SLAT PO Fund. Gryphon and Stanfield Victoria represent 86 percent of the total par value of the SIV securities held, in aggregate, by the Funds. No other SEI-sponsored fund holds any SIV securities.

According to the terms of the Amended Capital Support Agreements, we are required to provide additional funding subjectpurchase any SIV securities held by the Funds which have not completed restructuring by April 1, 2009. We anticipate that the SIV securities that have not restructured as of February 20, 2009 may not complete restructuring by March 31, 2009 and; therefore, we expect that we will be required to a newpurchase these SIV securities.

Our total risk of loss from SIV securities is limited to the aggregate limit of $156.0 million from $130.5 million. We secured $150.0 million ofremaining par value held by the revised funding limit throughFunds and on our credit facility and secured the remaining $6.0 million through a segregated bank account. This increase caused the amount available for borrowings under our credit facility to be further reduced to $50.0 million.

balance sheet. As of February 21, 2008,20, 2009, the amount which would be accrued for our contribution obligations under the Capital Support Agreements based on that day’s marketaggregate par value of these securities totaled $336.5 million. We do not engage in any lending activities or any other activity that exposes us to a risk of loss associated with the portfolio assets of the Funds, including the SIVs covered by the Capital Support Agreements, was $31.7 million. Based upon this valuation and assuming no other changesilliquidity issues in the portfolio assets through March 31, 2008, an additional non-cash expensecredit markets.

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The following table summarizes our obligations from the first quarter 2008. There have been no cash payments made under theAmended Capital Support Agreements as of February 21, 2008. At February 21, 2008, the aggregate market value of the SIVs covered by20, 2009.

When we entered into the Capital Support Agreements, on the booksFunds became variable interest entities and we were considered to have a significant variable interest in the Funds. Therefore, we needed to determine if we were the primary beneficiary according to the provisions established in FIN 46(R). Our analysis concluded that we were not the primary beneficiary because the support we provide under the Capital Support Agreements would not absorb a majority of the three Funds was $699.2 million.

We believe thatvariability created by the SIV securities will be successfully restructured, althoughassets of the Funds. As a result, we cannot predictwere not required to consolidate the timing or net impact the restructuring will ultimately have on the realized value of these SIV securities. Excluding the SIV securities in technical default, as of February 21, 2008, all remaining SIV holdingsaccounts of the Funds continueinto our Consolidated Financial Statements. We perform this analysis at each reconsideration event (See Note 1 to have an AAA or A-1 rating from a major credit rating agency. For further information regarding the portfolio assets of the Funds, the month-end holdings of each of the Funds can be viewed after the 15^th day of the following month at http://www.seic.com/holdings home.asp.Consolidated Financial Statements).

The Amended Capital Support Agreements are considered derivative contracts in accordance with applicable accounting guidance. The fair valueguidance and are categorized as Level 3 liabilities as specified by SFAS No. 157 (SFAS 157), “Fair Value Measurements” (See Fair Value Measurements section later in this discussion). These Level 3 liabilities comprise 53 percent of the contracts was determined using a valuation model for credit default swaps.our total current liabilities at December 31, 2008. The fair value of the derivative contracts approximates the value of our actual obligation at December 31, 2007.2008. The value of the Capital Support Agreements will be determined at least quarterly. In the event payments are not required to be paid to the Funds, such expense may be reversed in a subsequent period.

Our future obligation under the Amended Capital Support Agreements is affected by a number of factors including, but not limited to, prevailing conditions in the credit markets as they impact the value of money market instruments, including the liquidity of SIV securities owned by the Funds, the creditworthiness of the SIV securities and the overall asset levelslevel of the Funds. ChangesSLAT PO Fund. A change in the net asset value of the Funds areSLAT PO Fund is dependent upon net investments or redemptions in the Fund and the net asset value of the portfolio assets of the Funds. Changes in these amounts, including changes in portfolio assets resulting from mark-to-market adjustments, will affect the per share net asset value of the Funds. The fair market value of the SIV securities is derived from current market prices or, in the event no market price exists, from independentexternal valuation sources.sources (See Fair Value Measurements section later in this discussion).

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We believe changes in the value of the portfolio assets of the Funds and changes in theThe market value of the SIV securities arehas the two most volatile factors affecting our obligation. These factors can causesignificant impact on the amount of our obligation tounder the Capital Support Agreements. Our obligation can fluctuate on a daily basis. The following discussion,table, based on actual values as of February 21, 2008,20, 2009, is included to give an indication of the impact of movementsa one percent movement in the value of the portfolio assets ofsecurities issued by SIVs held by the Funds and changes in the price of the SIV securities on our obligation.obligation under the Capital Support Agreements:

In the following example, we assume

Page 26 of the SIV securities remains unchanged but the value of the portfolio assets of the Funds increases by ten percent or decreases by ten percent. A ten percent increase in the value of the portfolio assets of the Funds would cause our obligation to decrease by approximately $1.9 million. Conversely, a ten percent decrease in the value of the portfolio assets of the Funds would cause our obligation to increase by approximately $1.9 million.97

In this example, we assume the value of the portfolio assets of the funds remains unchanged but the value of the SIV securities increases by one percent or decreases by one percent. A one percent increase in the value of the SIV securities would cause our obligation to decrease by approximately $3.9 million. Conversely, a one percent decrease in the value of the SIV securities would cause our obligation to increase by approximately $3.9 million.

Stock-Based Compensation

Our stock based compensation consists of stock option grants to board members, senior management and key employees. We adoptedbelieve that stock based compensation serves as an important means of aligning the provisionsinterest of management and employees with the interests of our shareholders. The 2007 Equity Compensation plan became effective June 1, 2007 and provides for the grant of incentive stock options, non-qualified stock options and stock appreciation rights of up to 20 million shares of common stock. Upon the effective date of the 2007 Equity Compensation Plan, our 1998 Equity Compensation plan was terminated. No options are available for grant under the 1998 Plan and any grants outstanding under the 1998 Plan continue in effect under the terms of the grant and the applicable plan. Currently, our stock based compensation consists of only non-qualified stock options. For more information on our option plans, see Note 10 to the Consolidated Financial Statements and Item 12 of this Annual Report.

We account for stock based compensation in accordance with SFAS 123(R) during the first quarter of 2006 to account for stock-based compensation. We elected the modified-prospective method, under which prior periods are not restated for comparative purposes.. Under the fair value recognition provisions of this statement, stock-based compensation cost is measured at the grant date based on the fair value of the award and is recognized as expense over the requisite service period, which is the vesting period. We currently use the Black-Scholes option pricing model to determine the fair value of stock options. The determination of the fair value of stock-based payment awards on the date of grant using an option-pricing model is affected by our stock price as well as various other assumptions. These assumptions include our expected stock price volatility over the term of the awards, actual and projected employee stock option exercise behaviors, risk-free interest rate and expected dividends. We are required to estimate forfeitures at the time of grant and revise those estimates in subsequent periods if actual forfeitures differ from those estimates. We currently base our expectations for these assumptions from historical data. These expectations are subject to change in future periods.

StockAll outstanding stock options granted have performance based vesting conditions based onprovisions that tie the attainmentvesting of certain earnings per share targets establishedstock options to our financial performance. Our stock options vest at the date of grant. The first performance condition determines vestinga rate of 50 percent of the options,when a specified diluted earning per share target is achieved, and a second performance condition determines the vesting of the remaining 50 percent of the options. The performance conditions are measured annually on December 31. Optionswhen a second, higher specified diluted earnings per share target is achieved. Stock options granted prior to 2006 also couldfully vest in their entiretyafter seven years from the date of grant. Beginning in 2006, the seven year vesting trigger was eliminated and, as a result, options do not vest due to the passage of time but solely as a result of achievement of the financial vesting targets. Earnings per share targets are calculated exclusive of stock-based compensation expense, net of tax. The diluted earnings per share targets are established at time of grant and are measured annually on December 31. The amount of stock-based compensation expense is based upon our estimates of when we believe the earnings per share targets may be achieved. If our estimate of the attainment of the earnings per share targets proves to be inaccurate, the remaining amount of stock-based compensation expense could be accelerated, spread out over a longer period, or reversed. This may cause volatility in the recognition of stock-based compensation expense in future periods and could materially affect our net income and net income per share.

In 20072008 and 2006,2007, we recognized approximately $28.2$16.0 million and $24.8$28.2 million, respectively, in stock-based compensation expense. expense, a decrease of $12.2 million. This decrease consisted of the following components:

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Based upon our current viewestimate of how many options will vest and when they will vest, we estimate that stock-based compensation expense will be recognized according to the following schedule:

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Results of Operations

Revenues, Expenses, Income from operations and Income before income taxes by business segment for the year ended 2007 compared to the year ended 2006, and for the year ended 2006 compared to the year ended 2005 are:

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Asset Balances

This table presents assets of our clients, or of our clients’ customers, for which we provide management or administrative services. These assets are not included in our balance sheets because we do not own them.

Asset Balances

(In millions)

Assets under management are total assets of our clients or their customers invested in our equity and fixed-income investment programs, collective trust fund programs, and liquidity funds for which we provide asset management services. Assets under management and administration are total assets of our clients or their customers for whom we provide administrative services, including client proprietary fund balances for which we provide administration and/or distribution services. Assets invested in equity and fixed-income programs as of December 31, 2007, 2006 and 2005 include assets managed by LSV.

Consolidated

Our revenues increased $193.3 million, or 16 percent, to $1.37 billion in 2007 compared to 2006, and increased $402.7 million, or 52 percent, to $1.18 billion in 2006 compared to 2005. Higher asset-based fees derived from capital market appreciation throughout most of 2007 and late 2006 primarily drove our revenue growth across all of our business segments. Sales of new business in our Private Banks, Investment Advisors, Institutional Investors and Investment Managers business segments also contributed significantly to the increase in our revenues. The increase in revenues in 2006 was primarily due to consolidating the accounts of LSV into our financial statements, which accounted for $291.1 million of the increase in revenues. Revenue growth in 2006 was also driven by increased asset-based fees due to favorable capital market conditions and sales of new business in our Private Banks, Institutional Investors, and Investment Managers business segments.

Income before income taxes increased $50.8 million, or 14 percent, to $409.5 million in 2007 and increased $63.5 million, or 22 percent, in 2006 compared to 2005. Diluted earnings per share in 2007 were $1.28 per share as compared to $1.17 per share a year ago, an increase of nine percent. Diluted earnings per share increased by $0.26 per share in 2006 compared to 2005, an increase of 29 percent. The increase in revenues as previously described generated improved profits and operating margins in our Investment Advisors, Institutional Investors and Investment Managers business segments. Our consolidated operating margins were negatively impacted by increased non-capitalized spending related to the Global Wealth Platform and the development of the necessary infrastructure to deliver and support new company strategies and solutions. Additionally, our profits and operating margins were negatively impacted by a non-cash charge of $25.1 million in the fourth quarter 2007 related to agreements that provide capital support to money market funds. The increase in net income and diluted earnings per share in 2006 as compared to 2005 was due primarily to the net operating results of LSV.

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Business Segments

Private Banks

Revenues decreased $5.4 million, or one percent, in 2008 compared to 2007. Revenues during 2008 were primarily affected by:

Revenues increased $46.5 million, or 13 percent, in 2007 compared to 2006, and $39.1 million, or 12 percent, in 2006 compared to 2005.2006. Revenues during 2007 and 2006 were primarily affected by:

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Operating margins were 20 percent in 2008 and 2007. Operating income decreased $1.2 million, or one percent, in 2008 compared with 2007. Operating income in 2008 was primarily affected by:

Operating margins were 20 percent in 2007 as compared to 24 percent in 2006. Operating income decreased $5.4 million, or six percent, in 2007, compared with 2006. Operating income induring 2007 was primarily affected by:

Operating margins were 24Investment Advisors

Revenues decreased $36.1 million, or 14 percent, in 2006 as compared to 26 percent in 2005. Operating income increased $2.3 million, or three percent, in 2006,2008 compared with 2005. Operating income2007. Revenues during 2006 was2008 were primarily affected by:

Investment Advisors

Revenues increased $33.6 million, or 15 percent, in 2007 compared with 2006, and $22.3 million, or 11 percent, in 2006 compared with 2005.2006. Revenues during 2007 and 2006 were primarily affected by:

Operating margins were 45 percent in 2008 and 52 percent in 2007. Operating income decreased $33.4 million, or 25 percent, in 2008 compared with 2007. Operating income in 2008 was primarily affected by:

Page 23

Operating margins were 52 percent in 2007 andas compared to 50 percent in 2006. Operating income increased $20.5 million, or 18 percent, in 2007 compared with 2006. Operating income induring 2007 was primarily affected by: