10-K405: Annual report [Sections 13 and 15(d), S-K Item 405]

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

================

FORM 10-K

(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934

For the fiscal year ended: December 31, 1997
------------------------------------------------
OR

[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934

For the transition period from to
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Commission file number 0 - 10200
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SEI INVESTMENTS COMPANY
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(Exact name of registrant as specified in its charter)

Pennsylvania 23-1707341
- -------------------------------------- ------------------------------------
(State or other jurisdiction of (IRS Employer Identification Number)
incorporation or organization)

1 Freedom Valley Drive, Oaks, Pennsylvania 19456-1100
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(Address of principal executive offices) (Zip Code)

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

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

Name of Each Exchange on Which
Title of Each Class Registered
- ----------------------------------------- -----------------------------------
None

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

Common Stock, par value $.01 per share
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(Title of class)

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. [X]

(Cover page 1 of 2 pages)

Exhibit Index on page 53
Page 1 of 116 pages

1


State the aggregate market value of the voting stock held by non-affiliates of
the registrant based on the closing price of such stock as reported by NASDAQ as
of February 28, 1998: $704,754,941. For purposes of making this calculation
only, registrant has defined affiliates as including all 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 14(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:

Indicate the number of shares outstanding of each of the registrant's classes of
common stock, as of February 28, 1998: 17,729,912.


DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the following documents are incorporated by reference herein:

1. Notice of and Proxy Statement for the 1998 Annual Meeting of
Shareholders to be filed within 120 days after the end of the fiscal
year covered by this annual report, incorporated by reference in Part
III hereof.

(Cover page 2 of 2 pages)


2

PART I
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Item 1. Business.
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General Development of Business
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SEI Investments Company ("SEI" or the "Company") was incorporated in
Pennsylvania in 1968. SEI Investments Distribution Company ("SIDCO"), formerly
known as SEI Financial Services Company, SEI Investments Management Corporation
("SIMC"), formerly known as SEI Financial Management Corporation, and SEI Trust
Company ("SEI Trust") are the principal wholly owned subsidiaries of the
Company. SIDCO is a broker-dealer registered with the Securities and Exchange
Commission ("SEC") under the Securities Exchange Act of 1934 and is a member of
the National Association of Securities Dealers, Inc. SIMC is an investment
advisor registered with the SEC under the Investment Advisers Act of 1940. SEI
Trust is a trust entity chartered in the Commonwealth of Pennsylvania.

At the time of the Company's initial public offering in March 1981, the
Company's principal business activity was providing an on-line, real-time
accounting and management information system to bank trust departments.
Beginning in 1982, the Company, through SIDCO and SIMC, expanded its trust
product line by sponsoring a number of institutional investment products,
primarily in the form of registered investment companies sold to SEI clients and
other institutional investors and financial intermediaries.

In 1983, the Company, through SIDCO, entered the pension and investment
consulting business by acquiring the Funds Evaluation Division of A.G. Becker
Paribas, Inc. and began providing a comparative investment performance
evaluation service to tax-exempt fund sponsors and institutional money managers.
In 1986, the Company, through an additional acquisition, began providing
evaluation services to Canadian fund sponsors and money managers. In 1995, the
Company decided to exit its U.S. consulting business and subsequently sold its
Capital Resources Division ("CR") as of December 31, 1997 (See Note 2 of the
Notes to Consolidated Financial Statements). The Company has retained its
Canadian pension and investment advisor consulting business.

In 1989, the Company acquired National FSI, Inc., which eventually became SEI
Defined Contribution Retirement Services ("DC"), a division of SIMC. DC
provided administrative and processing services and software services for use by
employee benefit plans. In 1996, the Company completed the transfer of the
processing services provided by DC to a third party and at December 31, 1996,
the Company wrote off its entire interest in DC (See Note 2 of the Notes to
Consolidated Financial Statements).

In 1990, SIDCO and SIMC began providing a full range of administration and
distribution services to proprietary mutual funds established for banks and
other financial institutions and intermediaries. The client serves as the
investment advisor for the proprietary funds, and the funds are sold primarily
to customers of the client.

In 1991, the Company began to offer various asset management services to
institutional investors. These services included programs created to help
institutional investors establish investment objectives and asset allocation
strategies, and to gain access to top-quality investment managers. Beginning in
1992, the Company began offering its asset management services to high-net-worth
individuals and small defined contribution and benefit plans through selected
financial intermediaries.

In 1994, the Company, through SEI Trust, began offering complete back-office
accounting and processing services to trust institutions which allows them to
outsource their trust operations and related investment functions.

In 1995, the Company began to expand its asset management services outside the
United States by targeting selected foreign markets in which the Company could
tailor its investment management programs to institutional investors and high-
net-worth individuals.

3

Industry Segments
- -----------------

The Company is organized around its two primary business lines: Investment
Technology and Services and Asset Management. The Investment Technology and
Services segment, which accounted for 62 percent of the Company's consolidated
revenues in 1997, includes the following products and services: TRUST 3000
product line, proprietary funds administration and distribution services, and
trust back-office processing. The Asset Management segment, which accounted for
38 percent of the Company's consolidated revenues in 1997, consists of the
global distribution of the Company's asset management products to the
institutional and high-net-worth markets.

Financial information about the Company's business segments is contained in Note
12 of the Notes to Consolidated Financial Statements in Item 8. Additional
financial information and discussion about the Company's business segments,
including a breakdown of the Company's revenues by product line, is contained in
Management's Discussion and Analysis of Financial Condition and Results of
Operations in Item 7.

Investment Technology and Services

Trust Technology Services


The Company, through SIMC, provides trust and investment accounting and
management information services as an outsourcer to financial institutions with
its TRUST 3000 product line. TRUST 3000 is a complete trust accounting and
investment system with fully automated securities movement and control linked
directly to the Depository Trust Company. TRUST 3000 offers investment
management functionality through a number of integrated products and sub-systems
that supports investment accounting, client administration, portfolio analysis,
and trade order processing for both domestic and global securities processing.
TRUST 3000 also provides access to multiple third-party pricing and asset
related information. The TRUST 3000 product line allows clients to choose the
processing alternatives that best suit their business needs. The Company
provides trust and investment processing services through a state-of-the-art
data communications network which is internally managed. Clients utilize
terminals and workstations which are connected through this network to access
the Company's data center.

The value of the TRUST 3000 product line has been further enhanced by the
introduction of the Company's StrataQuest product line. StrataQuest is a
flexible combination of modular workstation application products that transform
data into user-friendly customer service and investment analysis desktop
applications. StrataQuest also provides technology platform products that
manage the flow of data and allow for the integration of TRUST 3000 information
with other financial institution systems in an open systems architecture. This
product provides standard, efficient, and reliable interfaces that update and
retrieve TRUST 3000 information from any application operating in the customer's
distributed computing environment.

SEI's market for its trust accounting and management information services
consists primarily of bank trust departments managing assets between $10 million
and $100 billion. The Company believes that there are approximately 1,500 trust
departments of this size. At December 31, 1997, the Company was providing
processing or software services to approximately 110 trust departments,
including trust departments of 36 of the top 100 banks, located in 37 states,
the District of Columbia, and Canada. The Company segregates the trust
accounting and information services market by trust assets under management: $20
billion or more in managed assets; $750 million to $20 billion in managed
assets; and under $750 million in managed assets. Each of these three trust
accounting and management information services markets are characterized by
different pricing, service, and product parameters. SEI endeavors to offer a
full range of products and services suitable for each. Customers generally
contract for terms of three to five years and revenues are based on monthly
processing and software application service fees.

4

Principal competitors of the Company's trust accounting and processing services
are Fidelity-Trust Technology Services LLC, SunGard Data Systems, and Marshall
and Isley. In addition, numerous financial institutions operate their own trust
processing systems. The Company believes that in terms of both revenues and
number of clients served, its TRUST 3000 product is the leading trust accounting
and management system sold by third-party vendors to bank trust departments.
The Company believes that, with regard to its TRUST 3000 product line, the most
important factors in a potential customer's evaluation and choice of vendor are:
product and service reliability; security and risk; functional capability; ease
of use and future flexibility; value; and cost effectiveness. A vendor's
experience in, and commitment to, the financial industry is also considered.
Revenues from trust technology services accounted for approximately 35 percent
of the Company's consolidated revenues in 1997.

Trust Back-Office Processing

In 1994, the Company began to extend its trust technology line by offering trust
back-office processing. Through SEI Trust, the Company provides a fully
integrated custody and back-office outsourcing solution to trust organizations.
By combining its TRUST 3000 product line with sophisticated global investment
products and back-office capabilities, SEI Trust can offer a total outsourcing
solution. This level of outsourcing provides trust institutions with access to
the industry's state-of-the-art accounting system, along with processing,
reporting, and custody services provided through the specialized capabilities of
SEI Trust personnel. SEI Trust automates and centralizes all of the client's
trust accounting, income collections, securities settlement, and securities
processing functions. In addition, SEI Trust prepares and processes customer
statements, investment reviews, and employee benefit accrual reports and
remittances to the clients' customers.

Initially, community banks were the target market for this product. However, as
the concept of outsourcing has gained credibility and acceptance within the
industry, the customer base for these products and services has expanded to
include both small and large banks. The Company believes that the market for
its outsourcing solution consists primarily of bank trust departments ranging in
size from start-ups to those managing assets of $10 billion, and selected
business lines of trust departments up to $100 billion in assets. SEI Trust's
current contracts span from start-up trust companies to a $50 billion trust
department. The term of the contracts varies from three to five years. At
December 31, 1997, SEI Trust had contracts to perform back-office processing
services to 49 clients.

The major strategic issue facing this product line is the continued
consolidation of the banking industry, which may reduce the number of potential
bank prospects and/or eliminate customers from its user base. Currently, the
only known competitor in this market is Marshall and Isley. Additional
competitors can be expected over the next few years. Revenues from trust back-
office processing is not yet material as a percentage of the Company's
consolidated revenues in 1997.

Proprietary Fund Services

In 1990, the Company, through SIDCO and SIMC, began providing administrative and
distribution services to proprietary mutual funds for which a bank serves as the
investment advisor, and are sold primarily to clients of the bank. Today, SEI
provides a full range of administration and distribution services to the
proprietary funds created for banks, other financial institutions, and money
managers. Administration services offered include back-office administrative,
financial, legal and regulatory compliance, and shareholder accounting services.
Distribution services offered include marketing strategy and sales, and
wholesaler support. SEI also assists the client in establishing both product
and program strategy. SEI offers a multifaceted marketing program which assists
in promoting the funds at the institutional and retail levels. At December 31,
1997, SEI provided administration and distribution services for banks, money
managers, and credit union proprietary fund complexes with assets under
administration of approximately $82.5 billion. These complexes include various
open-end management investment companies.

5

The Company's market for its proprietary funds services and products consists
primarily of bank trust departments and investment advisors. At the end of
1997, there were approximately 115 proprietary fund complexes that existed in
the United States. SEI administered proprietary funds for approximately 35
clients at December 31, 1997. The Company's contracts with proprietary mutual
funds have initial terms ranging from two to five years. Principal competitors
of the Company's proprietary mutual fund services include The BISYS Group,
Federated Investors, Inc., First Data Corporation, PFPC, and State Street Bank.
The Company believes that a potential customer of its proprietary mutual fund
services considers the price of such services, the performance of its
administrative and other support services such as legal and marketing, and the
integration of such services with proprietary software provided by the Company.

In 1996, Congress signed into law legislation allowing the tax-free conversion
of common trust funds into mutual funds. This change in legislation has created
an additional opportunity for the Company in its proprietary mutual fund
business and has already contributed to the increased amount of assets under
administration. While banks are currently prohibited by banking laws from
serving as the principal underwriter to mutual funds, legislation has been
proposed from time to time to remove this restriction. If such legislation is
passed, some banks may consider performing some or all of the services provided
by SEI themselves. In addition, consolidation in the banking industry may reduce
the number of bank proprietary fund complexes in existence. Revenues from
proprietary fund services accounted for approximately 25 percent of the
Company's consolidated revenues in 1997.

Asset Management

SEI, through SIDCO and SIMC, has created a number of investment products and
services for institutional investors and high-net-worth investors distributed
through financial intermediaries. The initial investment products, first
distributed in 1982, were developed to meet the liquidity requirements of bank
trust departments utilizing the Company's TRUST 3000 product line. In 1985, the
Company began offering equity, fixed income, and tax-exempt products.
Currently, the products offered by the Company include a series of Company
sponsored domestic equity, fixed income, and tax-exempt mutual funds, separate
account management, and offshore funds. The Company employs a total investment
management approach that uses a qualitative asset allocation model and
investment strategies based upon the precepts of modern portfolio theory,
specialist sub-advisors selected and monitored by the Company, and active risk
management.

SEI, through SIMC, serves as the administrator, transfer agent, and fund
accountant for these products. SIMC also acts as the investment advisor for
many of these products. SIMC's investment advisory and administration contracts
are subject to renewal annually by the board of trustees of the funds. These
contracts provide for the payment of administrative fees based on a percentage
of the average daily net assets of each fund.

Investment Management Services

The Company began providing investment solutions to defined benefit plans,
hospitals, endowment funds, and other institutional investors in 1991. SEI
offers such investors an integrated investment program which enables a pension
or other investment committee to outsource their investment management process
to SEI. SEI works with each client to develop asset management strategies that
are consistent with the client's business needs and investment objectives.
Consideration is given to the client's financial and investment objectives, risk
tolerance, investment restrictions, and time horizon. A client's strategy is
implemented through SEI's Family of Funds that employ style specific sub-
advisors. Through technology, SEI offers its clients continuous portfolio
management and periodic reallocation of assets. SEI's total investment
management approach provides clients with increased diversification, reduced
risk, and greater control over their portfolios. Clients also have the ability
to access specialized money managers through separate accounts.

6

The Company also offers asset management programs tailored to meet the needs of
high-net-worth individuals (defined by the Company as individuals with over
$500,000 of investable assets) and small institutions that are marketed through
selected intermediaries such as independent broker-dealers, registered
investment advisors, financial planners, life insurance producers, and bank
trust departments. Investment recommendations are based on one of SEI's asset
management strategies that utilize SEI's Family of Funds. The Company's asset
management strategies offer financial intermediaries various asset allocation
models that provide diversification among investment classes and periodic
rebalancing to achieve the investor's objectives. SEI also provides marketing
assistance, sales support, and back-office services such as custody and
recordkeeping.

At December 31, 1997, there were approximately 1,600 clients invested in the
Company's asset management programs through separate accounts or through the
Company's Family of Funds with $13.7 billion in assets invested. The principal
competition for the Company's asset management products is from other investment
advisors and mutual fund companies. Fees are earned as a percentage of assets
under management. Revenues from investment management services accounted for
approximately 19 percent of the Company's consolidated revenues in 1997.


Liquidity Management Services

Since 1982, the Company has offered liquidity products to bank trust
departments. The Company also provides cash sweep technology, cash management
services and other financial management solutions to corporations. The Company's
cash sweep technology enables a financial institution to sweep excess balances
from demand deposit accounts into money market accounts. Recently, the Company
began offering a complete cash management investment program, CashStrategies,
which incorporates cash flow analytics with SEI developed software to provide
corporate treasurers an effective solution in managing their cash and investment
portfolios.

The Company's liquidity products consist primarily of money market and other
short-term mutual funds and the SEI Repurchase Agreement Program ("REPO"). REPO
permits institutions to invest short-term funds in overnight and term tri-party
repurchase agreements and other overnight and short-term investment products.

Clients that use the TRUST 3000 product line can also effect purchases and
redemptions in SEI's investment products through an automated subsystem included
in the Company's TRUST 3000 system that performs daily sweeps of trust accounts
and invests the available cash in one or more of the Company's investment
products. Other clients may purchase or redeem the Company's investment
products and retrieve information about their accounts through SEI Direct, or by
telephone orders to SIMC.

The Company's market for its liquidity products and services consists primarily
of bank trust departments, investment advisors, and corporations located in the
United States. The number of clients using the Company's liquidity products and
services totaled approximately 550 at December 31, 1997. Total assets invested
in the Company's liquidity funds, including REPO, totaled $17.9 billion at
December 31, 1997.

Principal competitors of the Company's liquidity products and services include
Federated Investors, Inc., Fidelity Management Corporation, Investors Fiduciary
Trust Company, and Goldman, Sachs & Co., and other mutual fund complexes that
market to institutional investors as well as individual bank proprietary and
common trust funds. The Company believes that a potential customer of its
liquidity services business considers the price and performance of the Company's
investment products and its diverse product offerings, as well as the ease of
investment through SEI's automated sweep system, SEI Direct, and its cash sweep
technology. Revenues from liquidity management services accounted for
approximately 8 percent of the Company's consolidated revenues in 1997.

7

Other Investment Products and Services

The Company has several other operations that include performance measurement
and consulting services to Canadian pension plans, brokerage and clearing
services, and several other business ventures to expand the Company's asset
management business both domestically and internationally.

The Company, through its wholly owned subsidiary, SEI Inc. ("SEI Inc."),
formerly known as SEI Financial Services Limited, provides performance
evaluation and other consulting services to Canadian pension plans. SEI Inc.
also supports money managers in managing their clients' investments through
investment performance evaluation services, as well as trading cost analysis and
marketing strategy review. The market for the Company's consulting services
consists mostly of defined benefit plan sponsors and investment managers located
in Canada. At December 31, 1997, the Company was providing consulting services
to approximately 370 defined benefit plan sponsors and 40 investment managers.

The Company's fund sponsor, money manager, and TRUST 3000 clients remit payment
for services rendered by SEI in cash or, subject to applicable regulatory
guidelines, by directing brokerage commissions to SIDCO or SEI Inc. through SEI-
approved clearing agents or clearing brokers. These clients may also apply a
portion of such directed brokerage commissions to defray certain other third-
party costs. As a result of the directed brokerage business, the Company's
revenues may be affected by changes in market trading volume or changes in
government regulations affecting directed brokerage payments.

In 1994, the Company formed a partnership with three leading academics in the
field of finance. The partnership, LSV Asset Management ("LSV"), is a value-
oriented, contrarian money manager that offers a deep-value investment
alternative. The direct market for LSV's money management services includes
large pension fund sponsors world-wide. In addition to managing approximately
$463 million of the Company's own mutual funds, LSV is managing approximately
$916 million of institutional assets as of December 31, 1997.

The Company also formed an asset management company in Canada in 1994, Primus
Capital Advisors Co. ("Primus"). Primus is an investment counselor/portfolio
manager offering investment advisory services to both large and small Canadian
defined benefit pension plans. At December 31, 1997, Primus had 14 clients with
total assets under management of $261 million.

The Company is currently establishing its distribution channels in the global
asset management marketplace through various acquisitions and the startup of
several satellite offices outside the United States. The Company offers asset
management programs and services to high-net-worth investors and institutions in
foreign countries, including pension plans, governmental organizations, and
private corporations. At December 31, 1997, the Company had approximately $400
million of assets under management through its global asset management group.

Revenues from other investment products and services accounted for approximately
11 percent of the Company's consolidated revenues in 1997.

Marketing and Sales
- -------------------

SEI employs 26 sales representatives in its Investment Technology and Services
segment and 64 sales representatives in its Asset Management segment. These
sales personnel operate from 16 offices located in Oaks, Pennsylvania; San
Francisco, California; Chicago, Illinois; Boston, Massachusetts; New York, New
York; Dallas, Texas; Norcross, Georgia; Toronto, Ontario; Montreal, Quebec;
Vancouver, British Columbia; Halifax, Nova Scotia; Zurich, Switzerland; Dublin,
Ireland; Johannesburg, South Africa; Causeway Bay, Hong Kong, and Buenos Aires,
Argentina.

Customers
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The Company currently serves approximately 2,500 clients. For the year ended
December 31, 1997, no single customer accounted for more than 10 percent of the
Company's revenues in any industry segment.

8

Development of New Products and Services
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Software products


The Company believes that its service to existing and potential customers is
enhanced by its substantial investment in improving existing software products
and developing new products and services for the financial industry. To sustain
and enhance its competitive position in the industry, the Company is committed
to a continuous and high level of expenditures for research and development.
The Company currently utilizes over 250 professionals dedicated to the design,
development, and enhancement of SEI products. The Company currently releases
new products as they are completed. The benefit to the client is frequent, more
manageable releases. Maintenance releases occur four times each year during the
months of February, May, August, and November.

The Company's product development efforts are focused on its StrataQuest open
architecture product line. StrataQuest allows the Company's clients to operate
in a multi-platform environment using client/server installations. This open
architecture facilitates the development of new applications for the Company, as
well as expanding the upward functionality of its existing products to enhance
their attractiveness to the largest clients.

During 1997, 1996, and 1995, the Company expended (including amounts
capitalized) approximately $22,500,000 (7.7 percent of revenues), $26,254,000
(10.6 percent of revenues), and $16,744,000 (7.4 percent of revenues),
respectively, to design, develop, and modify existing or new products and
services.

Investment products

The Company is looking to capitalize on international growth opportunities in
the investment management industry by expanding the distribution of the
Company's investment products and services through asset management solutions
for institutions and high-net-worth investors outside North America. The
Company's strategy is designed to capitalize on two major trends in the global
marketplace: (1) the privatization and globalization of pension funds, and (2)
the increased wealth accumulation among high-net-worth investors. The Company's
marketing efforts have focused on four main regions: Europe, East Asia, Latin
America, and South Africa. In all four regions, the Company's initial strategy
is to team with local partners to establish name recognition and distribution
channels for the Company's products and services. The Company's global asset
management group has made significant progress during the past two years,
including the establishment of an offshore fund family in Ireland, the creation
of a distribution network and an acquisition of an investment advisory firm in
Argentina, a joint venture in Taiwan, and asset management contracts signed with
a Swiss pension plan and several South African institutions.

Year 2000

In 1995, the Company began a comprehensive program to address the Year 2000
compliance problem facing the Company's TRUST 3000 product line's technology and
operating systems. The Company has completed an analysis of the impact Year 2000
will have on TRUST 3000 and has begun the necessary work to ensure that the
product line is Year 2000 compliant by early 1999. Management estimates that it
will cost about $10 million to bring TRUST 3000 into Year 2000 compliance, the
majority of which will be capitalized. Thus far, the Company has expended about
$3.5 million fixing TRUST 3000. Year 2000 is a major focus of the Company's
development efforts.

In 1997, the Company expanded its Year 2000 review and analysis to include all
other facets of its business. The Company has a dedicated staff that is
reviewing the Year 2000 status of all software and technology vendors utilized
in the Company's operations and by the mutual funds administered by the Company.
Management does not expect to expend significant resources to bring all its
internal proprietary systems into Year 2000 compliance. (See Assessment of Risks
Associated with the Year 2000 in Management's Discussion and Analysis of
Financial Condition and Results of Operations).

9

Regulatory Considerations
- -------------------------

SIDCO and SIMC are subject to various federal and state laws and regulations
that grant supervisory agencies, including the SEC, broad administrative powers.
In the event of a failure to comply with such laws and regulations, the possible
sanctions that may be imposed include the suspension of individual employees,
limitations on SIDCO's or SIMC's engaging in business for specified periods of
time, the revocation of SIDCO's or SIMC's registration as a broker-dealer or
investment advisor, censures, and fines. SEI Trust is subject to laws and
regulations imposed by state banking authorities. In the event of a failure to
comply with these laws and regulations, limitations may be placed on the
business of SEI Trust, or its license as a trust company may be revoked.

Investment products offered by SEI and its subsidiaries are also subject to
regulation by the SEC and state securities authorities, as well as non-U.S.
regulatory authorities, where applicable. Existing or future regulations that
affect these investment vehicles or their investment strategies could impair
their investment performance and lead to a reduction in sales of such investment
products. Directed brokerage payment arrangements offered by the Company are
also subject to SEC and other federal regulatory authorities. Changes in the
regulation of directed brokerage or soft dollar payment arrangements could
affect the Company's sales of some services, primarily its brokerage and
consulting services.

Bank clients of both business segments are subject to supervision by federal and
state banking authorities concerning the manner in which such clients purchase
and receive the Company's products and services. Plan sponsor clients are
subject to supervision by the Department of Labor and compliance with employee
benefit regulations. Investment advisor clients are regulated by the SEC and
state securities authorities. Existing or future regulations applicable to the
Company's clients may affect such clients' purchase of the products and services
offered by the Company.

Personnel
- ---------

At February 28, 1998, the Company had 1,061 full-time and 72 part-time
employees. None of the Company's employees are represented by a labor union.
The Company considers its employee relations to be good.

Item 2. Properties.
----------

The Company relocated its corporate headquarters to Oaks, Pennsylvania in late
1996. The new campus consists of five buildings situated on approximately 90
acres. The buildings and the land are owned and operated by the Company, which
encompasses approximately 225,000 square feet. The Company's data center and
warehouse facility are housed in an additional 70,000 square feet of leased
space in Wayne, Pennsylvania. The Company also leases an additional 67,500
square feet of space in Wayne for its mutual funds operation. All other offices
leased by the Company aggregate 43,000 square feet. The Company owns a New York
City condominium (3,400 square feet) used for business purposes.

Item 3. Legal Proceedings.
-----------------

There are no legal proceedings to which the Company is a party or to which any
of its properties is subject which are expected to have a material adverse
effect on the business of the Company.

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 1997.

Information with regard to the executive officers of the Company is contained in
Item 10 hereof and is incorporated by reference to this Part I.

10

PART II
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Item 5. Market for the Registrant's Securities and Related Stockholder Matters.
----------------------------------------------------------------------

Price Range of Common Stock:
- ---------------------------

The Company's common stock is traded in the NASDAQ National Market System under
the symbol SEIC. The following table shows the range of closing sales prices on
the NASDAQ National Market System for the periods indicated.

1997 High Low
- ---- ---- ---
First Quarter 25 3/4 20
Second Quarter 24 3/8 18 3/4
Third Quarter 33 1/2 24
Fourth Quarter 44 1/2 32 3/4

1996 High Low
- ---- ---- ---
First Quarter 24 1/2 21 1/4
Second Quarter 26 3/8 21 1/8
Third Quarter 24 1/2 17 3/4
Fourth Quarter 23 1/2 20

As of February 28, 1998, there were approximately 1,100 shareholders of record.
The Board of Directors declared a $.14 dividend in May and December of 1997, and
a $.12 dividend in May and December of 1996. The Board of Directors has
indicated its intention to pay future dividends on a semiannual basis.

11

Item 6. Selected Financial Data.
-----------------------
(In thousands, except per share data)

The following table summarizes selected financial data for the five years in the
period ended December 31, 1997. The historical selected financial data for the
Company for each of the five years in the period ended December 31 are derived
from, and are qualified by reference to, the financial statements of the Company
which are included with Item 8 in this report. Such financial statements have
been audited by Arthur Andersen LLP, independent public accountants, to the
extent indicated in their reports. This data should be read in conjunction with
the Company's financial statements and "Management's Discussion and Analysis of
Financial Condition and Results of Operations" included in this report.