November 13, 2003 - 10-Q: Quarterly report pursuant to Section 13 or 15(d)

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, D.C. 20549

FORM 10-Q

(Mark One)*

x	Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended September 30, 2003

¨	Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from to

0-10200

(Commission File Number)

SEI INVESTMENTS COMPANY

(Exact name of registrant as specified in its charter)

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

1 Freedom Valley Drive, Oaks, Pennsylvania 19456-1100

(Address of principal executive offices)

(Zip Code)

(610) 676-1000

(Registrants telephone number, including area code)

N/A

(Former name, former address and former fiscal year, if changed since last report)

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 whether the registrant is an accelerated filer (as defined in Rule 12b-2 of the Securities Exchange Act of 1934). Yes x No ¨

APPLICABLE ONLY TO ISSUERS 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 Sections 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 ISSUERS:

Indicate the number of shares outstanding of each of the issuers classes of common stock, as of October 31, 2003: 105,424,005 shares of common stock, par value $.01 per share.

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements

SEI Investments Company

Consolidated Balance Sheets

(unaudited)

(In thousands)

	September 30, 2003		December 31, 2002
Assets

Current Assets:

Cash and cash equivalents	$	192,607	$	165,724
Restricted cash		10,484		10,000
Receivables from regulated investment companies		25,541		22,588
Receivables, net of allowance for doubtful accounts of $1,700		58,524		52,054
Deferred income taxes		2,920		3,526
Prepaid expenses and other current assets		7,091		7,543

Total Current Assets		297,167		261,435

Property and Equipment, net of accumulated depreciation and amortization of $96,735 and $111,210		109,167		104,258

Capitalized Software, net of accumulated amortization of $16,540 and $15,204		17,162		12,596

Investments Available for Sale		64,220		62,433

Other Assets, net		32,737		23,425

Total Assets	$	520,453	$	464,147

The accompanying notes are an integral part of these consolidated financial statements.

SEI Investments Company

Consolidated Balance Sheets

(unaudited)

(In thousands, except par value)

	September 30, 2003		December 31, 2002
Liabilities and Shareholders Equity

Current Liabilities:

Current portion of long-term debt	$	14,365	$	9,556
Accounts payable		3,737		4,058
Accrued expenses		113,299		119,427
Deferred revenue		640		1,206

Total Current Liabilities		132,041		134,247

Long-term Debt		26,535		33,500

Deferred Income Taxes		7,301		6,393

Shareholders Equity:

Common stock, $.01 par value, 750,000 shares authorized; 105,368 and 106,184 shares issued and outstanding		1,054		1,062
Capital in excess of par value		240,505		216,284
Retained earnings		110,678		74,019
Accumulated other comprehensive gains (losses)		2,339		(1,358	)

Total Shareholders Equity		354,576		290,007

Total Liabilities and Shareholders Equity	$	520,453	$	464,147

The accompanying notes are an integral part of these consolidated financial statements.

SEI Investments Company

Consolidated Statements of Income

(unaudited)

(In thousands, except per share data)

	Three Month Period Ended September 30,
			2003					2002
Revenues			$	161,056				$	153,316

Expenses:
Operating and development				70,733					61,957
Sales and marketing				33,791					32,940
General and administrative				7,394					5,779

Income from operations				49,138					52,640

Equity in the earnings of unconsolidated affiliate				6,288					2,861
Net gain from investments				509					574
Interest income				817					1,303
Interest expense				(564	)				(663	)

Income before income taxes				56,188					56,715
Income taxes				20,789					20,984

Net income				35,399					35,731

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments				550					(202	)
Unrealized holding gain (loss) on investments, Unrealized holding gains (losses) during the period net of income tax (expense) benefit of ($333) and $1,600	532					(2,792	)
Less: reclassification adjustment for (gains) losses realized in net income, net of income tax expense (benefit) of $462 and ($1,016)	(786	)		(254	)	1,730			(1,062	)

Other comprehensive income (loss)				296					(1,264	)

Comprehensive income			$	35,695				$	34,467

Basic earnings per common share			$	.34				$	.33

Diluted earnings per common share			$	.33				$	.32

The accompanying notes are an integral part of these consolidated financial statements.

SEI Investments Company

Consolidated Statements of Income

(unaudited)

(In thousands, except per share data)

	Nine Month Period Ended September 30,
			2003					2002
Revenues			$	465,215				$	471,382

Expenses:
Operating and development				205,489					198,880
Sales and marketing				88,936					99,033
General and administrative				17,880					17,460

Income from operations				152,910					156,009

Equity in the earnings of unconsolidated affiliate				14,763					8,643
Net (loss) gain from investments				(3,673	)				574
Interest income				3,424					3,847
Interest expense				(1,651	)				(1,628	)
Other income				509

Income before income taxes				166,282					167,445
Income taxes				61,524					61,954

Net income				104,758					105,491

Other comprehensive income (loss), net of tax:
Foreign currency translation adjustments				1,647					656
Unrealized holding gain (loss) on investments, Unrealized holding gains (losses) during the period net of income tax (expense) benefit of ($1,251) and $2,209	2,116					(3,771	)
Less: reclassification adjustment for (gains) losses realized in net income, net of income tax expense (benefit) of $39 and ($985)	(66	)		2,050		1,730			(2,041	)

Other comprehensive income (loss)				3,697					(1,385	)

Comprehensive income			$	108,455				$	104,106

Basic earnings per common share			$	1.00				$	.97

Diluted earnings per common share			$	.97				$	.93

Dividends declared per common share			$	.07				$	.06

The accompanying notes are an integral part of these consolidated financial statements.

SEI Investments Company

Consolidated Statements of Cash Flows

(unaudited)

(In thousands)

	Nine Month Period Ended September 30,
	2003			2002
Cash flows from operating activities:
Net income	$	104,758		$	105,491
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization		12,670			13,614
Undistributed equity in the earnings of unconsolidated affiliate		(4,967	)		(1,896	)
Tax benefit on stock options exercised		15,014			15,188
Other		5,999			(736	)
Change in current assets and liabilities:
Decrease (increase) in
Receivables from regulated investment companies		(2,953	)		4,179
Receivables		(6,470	)		(4,523	)
Prepaid expenses and other current assets		452			425
Increase (decrease) in
Accounts payable		(321	)		(2,393	)
Accrued expenses		246			1,100
Deferred revenue		(566	)		(2,249	)

Net cash provided by operating activities		123,862			128,200

Cash flows from investing activities:
Additions to property and equipment		(16,442	)		(20,944	)
Additions to capitalized software		(5,902	)		(2,399	)
Purchase of investments available for sale		(39,862	)		(16,489	)
Sale of investments available for sale		40,352			21,215
Other		(446	)		432

Net cash used in investing activities		(22,300	)		(18,185	)

Cash flows from financing activities:
Payment on long-term debt		(9,405	)		(6,166	)
Purchase and retirement of common stock		(65,880	)		(103,639	)
Proceeds from issuance of common stock		14,308			10,229
Payment of dividends		(13,702	)		(12,050	)

Net cash used in financing activities		(74,679	)		(111,626	)

Net increase (decrease) in cash and cash equivalents		26,883			(1,611	)

Cash and cash equivalents, beginning of period		165,724			163,685

Cash and cash equivalents, end of period	$	192,607		$	162,074

The accompanying notes are an integral part of these consolidated financial statements.

Notes to Consolidated Financial Statements

(all figures are in thousands except per share data)

Note 1.

Summary of Significant Accounting Policies

Nature of Operations

SEI Investments Company (the Company) is organized around its five primary target markets: Private Banking and Trust, Investment Advisors, Enterprises, Money Managers, and Investments in New Businesses. Private Banking and Trust provides investment processing solutions, fund processing solutions and investment management programs to banks and private trust companies. Investment Advisors provides investment management programs and investment processing solutions to affluent investors through a network of financial intermediaries, independent investment advisors and other investment professionals. Enterprises provides retirement and treasury business solutions for corporations, unions, foundations and endowments, and other institutional investors. Money Managers provides investment solutions to U.S. investment managers, mutual fund companies and alternative investment managers worldwide. Investments in New Businesses include the Companys global asset management businesses as well as initiatives into new U.S. markets.

Summary Financial Information and Results of Operations

In the opinion of the Company, the accompanying unaudited Consolidated Financial Statements contain all adjustments (consisting of only normal recurring adjustments) necessary to present fairly the financial position as of September 30, 2003, the results of operations for the three and nine month periods ended September 30, 2003 and 2002, and cash flows for the nine month periods ended September 30, 2003 and 2002.

Interim Financial Information

While the Company believes that the disclosures presented are adequate to make the information not misleading, these Consolidated Financial Statements should be read in conjunction with the Consolidated Financial Statements and the Notes to the Consolidated Financial Statements included in the Companys latest Annual Report on Form 10-K.

Principles of Consolidation

The Consolidated Financial Statements include the accounts of the Company and its wholly owned subsidiaries. The Companys principal subsidiaries are SEI Investments Distribution Company (SIDCO), SEI Investments Management Corporation (SIMC), and SEI Private Trust Company. All intercompany accounts and transactions have been eliminated. Investment in unconsolidated affiliate is accounted for using the equity method due to the Companys less than 50 percent ownership. The Companys portion of the affiliates operating results is reflected in Equity in the earnings of unconsolidated affiliate on the accompanying Consolidated Statements of Income (See Note 6).

Property and Equipment

Property and equipment on the accompanying Consolidated Balance Sheets consist of the following:

	September 30, 2003			December 31, 2002			Estimated Useful Lives (In Years)
Buildings	$	81,835		$	75,825		25 to 39
Land		9,379			9,345		N/A
Equipment		56,903			79,260		3 to 5
Purchased software		20,880			21,256		3
Furniture and fixtures		15,810			15,523		3 to 5
Leasehold improvements		8,020			7,386		Lease Term
Construction in progress		13,075			6,873		N/A

		205,902			215,468
Less: Accumulated depreciation and amortization		(96,735	)		(111,210	)

Property and Equipment, net	$	109,167		$	104,258

Property and equipment are stated at cost. Depreciation and amortization are computed using the straight-line method over the estimated useful life of each asset. Expenditures for renewals and betterments are capitalized, while maintenance and repairs are charged to expense when incurred.

Capitalized Software

The Company accounts for software development costs in accordance with Statement of Financial Accounting Standards No. 86, Accounting for the Costs of Computer Software to Be Sold, Leased, or Otherwise Marketed (SFAS 86). Under SFAS 86, costs incurred to create a computer software product are charged to research and development expense as incurred until technological feasibility has been established. The Company establishes technological feasibility upon completion of a detail program design. At that point, computer software costs are capitalized until the product is available for general release to customers. The establishment of technological feasibility and the ongoing assessment of recoverability of capitalized software development costs require considerable judgment by management with respect to certain external factors, including, but not limited to, anticipated future revenues, estimated economic life, and changes in technology. The Company did not capitalize any software development costs during the nine month periods ended September 30, 2003 and 2002 in accordance with SFAS 86.

In 2002, the Company adopted the guidance established in Emerging Issues Task Force Issue 00-03 Application of AICPA Statement of Position 97-2 to Arrangements That Include the Right to Use Software Stored on Another Entitys Hardware, and applies Statement of Position 98-1 (SOP 98-1), Accounting for the Cost of Computer Software Developed or Obtained for Internal Use, for development costs associated with software products to be provided in a hosting environment. SOP 98-1 requires that costs incurred in the preliminary project and post implementation stages of an internal software project be expensed as incurred and that certain costs incurred in the application development stage of a project be capitalized. The Company capitalized $5,902 and $2,399 in software development costs in accordance with SOP 98-1 during the nine month periods ended September 30, 2003 and 2002, respectively.

Amortization of capitalized software development costs begins when the product is released or placed into service. Capitalized software development costs are amortized on a product-by-product basis using the straight-line method over the estimated economic life of the product or enhancement, which is primarily three to ten years, with a weighted average remaining life of approximately 4.9 years. Amortization expense was $1,336 and $1,301 during the nine month periods ended September 30, 2003 and 2002, respectively, and is included in Operating and development expenses on the accompanying Consolidated Statements of Income.

Earnings per Share

The Company computes earnings per common share in accordance with Statement of Financial Accounting Standards No. 128, Earnings per Share (SFAS 128). Pursuant to SFAS 128, dual presentation of basic and diluted earnings per common share is required on the face of the statements of income for companies with complex capital structures. Basic earnings per common share is calculated by dividing net income available to common shareholders by the weighted average number of common shares outstanding for the period. Diluted earnings per common share reflects the potential dilution from the exercise or conversion of securities into common stock, such as stock options.

	For the Three Month Period Ended September 30, 2003
	Income (Numerator)		Shares (Denominator)	Per Share Amount
Basic earnings per common share	$	35,399	105,100	$	.34

Dilutive effect of stock options			2,815

Diluted earnings per common share	$	35,399	107,915	$	.33


	For the Three Month Period Ended September 30, 2002
	Income (Numerator)		Shares (Denominator)	Per Share Amount
Basic earnings per common share	$	35,731	107,936	$	.33

Dilutive effect of stock options			3,799

Diluted earnings per common share	$	35,731	111,735	$	.32

Options to purchase 2,656 and 2,802 shares of common stock, with an average exercise price of $49.91 and $45.53, were outstanding during the three month periods ended September 30, 2003 and 2002, respectively, but were excluded from the diluted earnings per common share calculation because the options exercise prices were greater than the average market price of the Companys common stock.

	For the Nine Month Period Ended September 30, 2003
	Income (Numerator)		Shares (Denominator)	Per Share Amount
Basic earnings per common share	$	104,758	105,231	$	1.00

Dilutive effect of stock options			3,263

Diluted earnings per common share	$	104,758	108,494	$	.97


	For the Nine Month Period Ended September 30, 2002
	Income (Numerator)		Shares (Denominator)	Per Share Amount
Basic earnings per common share	$	105,491	108,988	$	.97

Dilutive effect of stock options			4,686

Diluted earnings per common share	$	105,491	113,674	$	.93

Options to purchase 4,898 and 2,802 shares of common stock, with an average exercise price of $38.17 and $45.53 were outstanding during the nine month periods ended September 30, 2003 and 2002, respectively, but were excluded from the diluted earnings per common share calculation because the options exercise prices were greater than the average market price of the Companys common stock.

Stock-Based Compensation

The Company accounts for stock-based compensation in accordance with Accounting Principles Board Opinion No. 25, Accounting for Stock Issued to Employees, and related interpretations and has presented the required Statement of Financial Accounting Standards No. 123, Accounting for Stock-Based Compensation (SFAS 123), as amended by Statement of Financial Accounting Standards No. 148, Accounting for Stock-Based Compensation-Transition and Disclosure (SFAS 148), pro forma disclosure in the table below.

The Company applies Accounting Principles Board Opinion No. 25 and related interpretations in accounting for its plans, and accordingly, no compensation cost has been recognized for the Companys fixed stock-based compensation. Had compensation cost been determined consistent with SFAS 123, as amended by SFAS 148, the Companys net income would have been reduced to the following pro forma amounts:

	For the Three Month Period Ended September 30,						For the Nine Month Period Ended September 30,
	2003			2002			2003			2002
Net Income:
As reported	$	35,399		$	35,731		$	104,758		$	105,491
Deduct: Total stock-based employee expense determined under the fair value based method for all awards, net of related tax effects		(2,448	)		(2,326	)		(7,362	)		(6,977	)

Pro forma	$	32,951		$	33,405		$	97,396		$	98,514

Basic earnings per common share
As reported	$	.34		$	.33		$	1.00		$	.97
Pro forma	$	.31		$	.31		$	.93		$	.90

Diluted earnings per common share
As reported	$	.33		$	.32		$	.97		$	.93
Pro forma	$	.31		$	.30		$	.90		$	.87

Statements of Cash Flows

For purposes of the Consolidated Statements of Cash Flows, the Company considers investment instruments purchased with an original maturity of three months or less to be cash equivalents.

Supplemental disclosures of cash paid/received during the nine month periods ended September 30, 2003 and 2002 is as follows:

	2003		2002
Interest paid	$	2,228	$	2,318
Interest and dividends received		3,671		4,010
Income taxes paid		49,066		34,210

Managements Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the Unites States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

New Accounting Pronouncements

In November 2002, the Financial Accounting Standards Board (FASB) issued FASB Interpretation No. 45,Guarantors Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of indebtedness of Others, (FIN 45). This interpretation elaborates on the disclosures to be made by a guarantor in its interim and annual financial statements about its obligations under certain guarantees it has issued. It also clarifies that a guarantor is required to recognize, at the inception of a guarantee, a liability for the fair value of the obligation undertaken in issuing the guarantee. The initial recognition and measurement provisions of FIN 45 are applicable on a prospective basis to guarantees issued or modified on or after January 1, 2003. The recognition and measurement provisions of FIN 45 does not, nor is it expected to, have any material effect on the results of operations, financial position or liquidity of the Company.

In January 2003, the FASB issued FASB Interpretation No. 46, Consolidation of Variable Interest Entities, an Interpretation of ARB No. 51, (FIN 46). This interpretation provides guidance on the identification of, and financial reporting for, entities over which control is achieved through means other than voting rights. The consolidation requirements of FIN 46 apply immediately to variable interest entities created after January 31, 2003 and to older entities in interim periods beginning after June 30, 2003. Certain of the disclosure requirements apply to all financial statements issued after January 31, 2003, regardless of when the variable interest entity was established. The Company does not have an interest in any entity that requires disclosure or consolidation as a result of adopting the provisions of FIN 46.

In February 2003, the Emerging Issues Task Force ratified Issue No. 00-21,Revenue Arrangements with Multiple Deliverables (Issue 00-21). Issue 00-21 addresses certain aspects of the accounting by a vendor for arrangements under which it will perform multiple revenue-generating activities and addresses how to determine whether an arrangement involving multiple deliverables contains more than one unit of accounting. The Company provides certain services that involve a series of different product offerings that can be purchased as a complete solution or as individual components. Consideration for these types of services is usually a combination of fixed and variable payment amounts. Issue 00-21 became effective for revenue arrangements entered into after June 30, 2003. The Company applies the provisions of EITF 00-21 and as of September 30, 2003 it has not had a material effect on the results of operations, financial position or liquidity of the Company.

Note 2. Comprehensive Income The Company computes comprehensive income in accordance with Statement of Financial Accounting Standards No. 130, Reporting Comprehensive Income (SFAS 130). SFAS 130 establishes standards for reporting and presentation of comprehensive income and its components (revenues, expenses, gains and losses) in a full set of general-purpose financial statements that is presented with equal prominence as other financial statements. Comprehensive income includes net income, foreign currency translation adjustments, and unrealized holding gains and losses and is presented on the accompanying Consolidated Statements of Income. Accumulated other comprehensive gains (losses) on the Consolidated Balance Sheets changed from December 31, 2002 to September 30, 2003 which is as follows:

	Foreign Currency Translation Adjustments		Unrealized Holding Gains (Losses) on Investments			Accumulated Other Comprehensive Gains (Losses)
Beginning balance (Dec. 31, 2002)	$	367	$	(1,725	)	$	(1,358	)
Current period change		1,647		2,050			3,697

Ending balance (Sept. 30, 2003)	$	2,014	$	325		$	2,339

Note 3.

Receivables - Receivables on the accompanying Consolidated Balance Sheets consist of the following:

	September 30, 2003			December 31, 2002
Trade receivables	$	21,677		$	20,326
Fees earned, not received		945			1,452
Fees earned, not billed		37,602			31,976

		60,224			53,754
Less: Allowance for doubtful accounts		(1,700	)		(1,700	)

	$	58,524		$	52,054

Fees earned, not received represent brokerage commissions earned but not yet collected. Fees earned, not billed represent receivables earned but not billed and result from timing differences between services provided and contractual billing schedules.

Receivables from regulated investment companies on the accompanying Consolidated Balance Sheets represent fees collected from the Companys wholly owned subsidiaries, SIDCO and SIMC, for distribution, investment advisory, and administration services provided by these subsidiaries to various regulated investment companies.

Note 4.

Investments Available for Sale - The Company accounts for investments in marketable securities pursuant to Statement of Financial Accounting Standards No. 115, Accounting for Certain Investments in Debt and Equity Securities (SFAS 115). SFAS 115 requires that debt and equity securities classified as available for sale be reported at market value. Unrealized holding gains and losses, net of income taxes, are reported as a separate component of comprehensive income. Realized gains and losses, as determined on a specific identification basis, are reported separately on the accompanying Consolidated Statements of Income.

	As of September 30, 2003
	Cost Amount		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Company-sponsored mutual funds	$	54,788	$	856	$	(207	)	$	55,437
Equity securities		8,922				(139	)		8,783

	$	63,710	$	856	$	(346	)	$	64,220


	As of December 31, 2002
	Cost Amount		Gross Unrealized Gains		Gross Unrealized Losses			Fair Value
Company-sponsored mutual funds	$	45,642	$	860	$	(331	)	$	46,171
Equity securities		19,543				(3,281	)		16,262

	$	65,185	$	860	$	(3,612	)	$	62,433

The net unrealized holding gains at September 30, 2003 were $325 (net of income tax expense of $185) and the net unrealized holding losses at December 31, 2002 were $1,725 (net of income tax benefit of $1,027) and are reported as a separate component of Accumulated other comprehensive gains (losses) on the accompanying Consolidated Balance Sheets.

Management performs a review of all investments in marketable securities on a quarterly basis with regards to impairment. Factors considered in determining other-than-temporary impairment are significant or prolonged declines in the price of investments based on available market prices. Additional consideration is given to the ability to recover the carrying amount of the investment. During the nine month period ended September 30, 2003, management determined that certain investments were impaired. The Company recorded an impairment charge of $595 related to other-than temporary declines in fair value and is included in Net (loss) gain from investments on the accompanying Consolidated Statements of Income. The Company did not record an impairment charge related to other-than-temporary declines in fair value for any of its securities available-for-sale during the three month period ended September 30, 2003.

During the three month period ended September 30, 2003, the Company recognized gross realized gains from available-for-sale securities of $1,386 and gross realized losses from available-for-sale securities of $138. For the nine month period ended September 30, 2003, the Company recognized gross realized gains from available-for-sale securities of $1,434 and gross realized losses from available-for-sale securities of $734.

Note 5.

Derivative Instruments and Hedging Activities - The Company is exposed to market risk associated with its designated Investments available for sale. To provide some protection against potential market fluctuations associated with its Investments available for sale, the Company has entered into various derivative financial transactions in the form of futures and equity contracts (i.e. derivatives).

The Company accounts for its derivatives in accordance with Statement of Financial Accounting Standards No. 133, Accounting for Derivative Instruments and Hedging Activities (SFAS 133 ) and Statement of Financial Accounting Standards No. 138, Accounting for Certain Derivative Instruments and Certain Hedging Activities an amendment of FASB Statement No. 133 (SFAS 138).

The Company recognizes all derivatives on the balance sheet at fair value. On the date the derivative instrument is entered into, the Company generally designates the derivative as a hedge of the fair value of a recognized asset. Changes in the fair value of a derivative that is designated as, and meets all the required criteria for, a fair value hedge, along with the gain or loss on the hedged asset attributable to the hedged risk, are recorded in current period earnings. The portion of the change in fair value of a derivative associated with hedge ineffectiveness or the component of a derivative instrument excluded from the assessment of hedge effectiveness is recorded currently in earnings. Also, changes in the entire fair value of a derivative that is not designated as a hedge are recognized immediately in earnings. The Company formally documents all relationships between hedging instruments and hedged items, as well as its risk-management objective and strategy for undertaking various hedge transactions. This process includes relating all derivatives that are designated as fair value hedges to specific assets on the balance sheet.

The Company also formally assesses, both at the inception of the hedge and on an ongoing basis, whether each derivative is highly effective in offsetting changes in fair values of the hedged item. If it is determined that a derivative is not highly effective as a hedge or if a derivative ceases to be a highly effective hedge, the Company will discontinue hedge accounting prospectively. During 2002, the Company discontinued hedge accounting prospectively for certain derivatives utilized to manage economic exposure because of hedge ineffectiveness. The Company may continue to enter into economic hedges to support certain business strategies but may not designate such derivatives as accounting hedges. Managements decision to no longer apply hedge accounting to certain derivatives as well as hedge ineffectiveness may cause volatility in quarterly earnings and equity. Currently, the Company does not apply hedge accounting to any of its derivative instruments.

At September 30, 2003, Net (loss) gain from investments on the accompanying Consolidated Statements of Income includes a net loss of $740 and $2,657 from changes in the fair value of the hedge instruments for the three and nine month periods ended September 30, 2003, respectively.

The Company currently holds futures contracts with a notional amount of $16,546 with a financial institution with various terms. The Company also currently holds equity derivatives with a notional amount of $8,783 with a financial institution with various terms. During the nine month period ending September 30, 2003, the Company did not enter into or hold derivative financial instruments for trading purposes.

Note 6.

Other Assets - Other assets on the accompanying Consolidated Balance Sheets consist of the following:

	September 30, 2003		December 31, 2002
Investment in unconsolidated affiliate	$	20,751	$	8,535
Other, net		11,986		14,890

Other assets	$	32,737	$	23,425

Other, net consists of long-term prepaid expenses, deposits and other investments carried at cost.

During the nine month period ended September 30, 2003, the Company recorded an impairment charge for $1,196 related to an equity investment in a private technology company and is reflected in Net (loss) gain from investments on the accompanying Consolidated Statements of Income.

Investment in Unconsolidated Affiliate LSV Asset Management (LSV) is a partnership formed between the Company and several leading academics in the field of finance. LSV is a registered investment advisor, which provides investment advisory services to institutions, including pension plans and investment companies. LSV is currently the portfolio manager for a number of Company-sponsored mutual funds. The Companys interest in LSV was approximately 44 percent for the six month period ending June 30, 2003 and increased to approximately 46 percent for the three month period ending September 30, 2003. The Companys interest in LSV was approximately 44 percent for the nine month period ending September 30, 2002. LSV is accounted for using the equity method of accounting due to the Companys less than 50 percent ownership. The Companys portion of LSVs net earnings is reflected in Equity in the earnings of unconsolidated affiliate on the accompanying Consolidated Statements of Income.

On June 30, 2003, the Company entered into an Assignment and Purchase Agreement (the Purchase Agreement) to acquire an additional two percent interest in LSV. As a result of the Purchase Agreement, the Companys total partnership interest in LSV is approximately 46 percent. At September 30, 2003, the basis of the Companys investment in LSV exceeded its underlying equity in the net assets of LSV by $8,048. The Company accounts for this amount as goodwill embedded in its investment in LSV. The Company does not record amortization expense associated with such embedded goodwill but assesses whether such embedded goodwill is impaired on an annual basis. The embedded goodwill in LSV was not deemed impaired during the nine month period ended September 30, 2003. In addition, the Purchase Agreement contains a contingent payment provision that is triggered in the event of the sale of a certain percentage of the Partnerships business and assets. The contingent payment provision expires on January 1, 2006.

The following table contains the condensed statements of income of LSV for the three and nine month period ended September 30:

	Three Month Period Ended September 30,				Nine Month Period Ended September 30,
	2003		2002		2003		2002
Revenues	$	16,569	$	9,047	$	41,061	$	26,914

Net income	$	13,564	$	6,526	$	32,898	$	19,716

The following table contains the condensed balance sheets of LSV:

	September 30, 2003		December 31, 2002
Current assets	$	28,345	$	18,193
Non-current assets		393		280

Total assets	$	28,738	$	18,473

Current liabilities	$	2,272	$	2,383
Partners capital		26,466		16,090

Total liabilities and partners capital	$	28,738	$	18,473

Note 7.

Accrued Expenses Accrued expenses on the accompanying Consolidated Balance Sheets consist of the following:

	September 30, 2003		December 31, 2002
Accrued compensation	$	28,487	$	33,612
Accrued brokerage services		8,698		9,103
Accrued income taxes		5,281		9,281
Other accrued expenses		70,833		67,431

Total accrued expenses	$	113,299	$	119,427

Note 8.

Credit Agreement On September 15, 2003 (the Closing Date), the Company entered into a $200,000 364-day Credit Agreement (the Credit Facility). The Credit Facility became available on the Closing Date and ends 364 days after the Closing Date (the Termination Date). At the Termination Date, any aggregate principal amount of loans outstanding under the Credit Facility will, at the Companys option, convert to a one-year term loan, payable in four equal quarterly installments. The Credit Facility, when utilized, will accrue interest at the Prime Rate or one hundredths of one percent above the London Interbank Offer Rate (LIBOR). The Company is obligated to pay a commitment fee equal to one-quarter of one percent per annum on the daily unused portion of the Credit Facility. The Credit Facility contains various covenants, including limitations of indebtedness, maintenance of minimum net worth levels, and restrictions on certain investments. None of these covenants currently negatively affect the Companys liquidity or capital resources. As of September 30, 2003, the Company had no borrowings under the Credit Facility.

Note 9.

Long-term Debt - On February 24, 1997, the Company signed a Note Purchase Agreement authorizing the issuance and sale of $20,000 of 7.20 percent Senior Notes, Series A, and $15,000 of 7.27 percent Senior Notes, Series B (collectively, the Notes), in a private offering with certain financial institutions. The Notes are unsecured with final maturities ranging from 10 to 15 years. The Note Purchase Agreement, as amended, contains various covenants, including limitations on indebtedness, maintenance of minimum net worth levels, and restrictions on certain investments. In addition, the Note Purchase Agreement limits the Companys ability to merge or consolidate, and to sell certain assets. The Company was in compliance with all covenants during the nine month period ended September 30, 2003. Principal payments on the Notes are made annually from the date of issuance while interest payments are made semi-annually. The Company made its scheduled principal payment of $4,000 in February 2003. The current portion of the Notes amounted to $4,000 at September 30, 2003.

On June 26, 2001, the Company entered into a term loan agreement (the Loan Agreement) with a separate lending institution. The Loan Agreement, as amended, provides for borrowing up to $25,000 in the form of a term loan, and expires on March 31, 2006 and is payable in 17 equal quarterly installments. On August 2, 2001, the Company borrowed the entire $25,000. The Loan Agreement accrues interest at the Prime Rate or one and thirty-five hundredths of one percent above LIBOR. The Loan Agreement contains various covenants, including limitations on indebtedness and restrictions on certain investments. None of these covenants negatively affect the Companys liquidity or capital resources. The Company was in compliance with all covenants during the nine month period ending September 30, 2003. The Company made its scheduled principal payments of $1,389 in March, June and September of 2003. The current portion of the notes amounted to $5,556 at September 30, 2003. The interest rate being applied at September 30, 2003 was 2.51 percent.

On June 30, 2003, the Company had a payable to LSV in the amount of $7,250, which bears interest at the rate of four percent per annum and is to be repaid in six quarterly installments beginning July 1, 2003. The Company made its first scheduled principal payment of $1,238 In July 2003. The current portion of the debt amounted to $4,809 at September 30, 2003.

Note 10.

Common Stock Buyback - The Board of Directors has authorized the purchase of the Companys common stock on the open market or through private transactions of up to an aggregate of $703,365. Beginning with the inception of the Companys common stock buyback program and through September 30, 2003, a total of 109,000,000 shares at an aggregate cost of $672,176 have been purchased and retired. The Company purchased 2,519,000 shares at a total cost of $65,880 during the nine month period ended September 30, 2003.

The Company immediately retires its common stock when purchased. Upon retirement, the Company reduces Capital in excess of par value for the average capital per share outstanding and the remainder is charged against Retained earnings. If the Company reduces its Retained earnings to zero, any subsequent purchases of common stock will be charged entirely to Capital in excess of par value.

Note 11.

Segment Information The Company defines its business segments in accordance with Statement of Financial Accounting Standards No. 131, Disclosures about Segments of an Enterprise and Related Information (SFAS 131). SFAS 131 establishes standards for the way public business enterprises report financial information about operating segments in financial statements. SFAS 131 also requires additional disclosures about product and services, geographic areas, and major customers.

The Companys management evaluates financial performance of its operating segments based on Income from operations. The Companys operations are organized into separate business units that offer products and services tailored for particular market segments. The Companys reportable segments are Private Banking and Trust, Investment Advisors, Enterprises, Money Managers, and Investments in New Businesses. The accounting policies of the reportable segments are the same as those described in Note 1. The information in the following tables is derived from the Companys internal financial reporting used for corporate management purposes.

The following tables highlight certain financial information about each of the Companys segments for the three month periods ended September 30, 2003 and 2002.

	Private Banking and Trust		Investment Advisors		Enterprises		Money Managers		Investments In New Businesses			General and Administrative			Total
	For the Three Month Period Ended September 30, 2003
Revenues	$	73,805	$	42,372	$	17,965	$	14,136	$	12,778					$	161,056

Operating income (loss)	$	27,925	$	21,937	$	8,691	$	2,391	$	(4,412	)	$	(7,394	)	$	49,138

Other income, net															$	7,050

Income before income taxes															$	56,188

Depreciation and amortization	$	2,284	$	735	$	228	$	302	$	332		$	162		$	4,043

Capital expenditures	$	5,307	$	1,682	$	765	$	525	$	809		$	483		$	9,571


	Private Banking and Trust		Investment Advisors		Enterprises		Money Managers		Investments In New Businesses			General and Administrative			Total
	For the Three Month Period Ended September 30, 2002
Revenues	$	80,510	$	35,866	$	13,393	$	12,502	$	11,045					$	153,316

Operating income (loss)	$	34,296	$	20,023	$	5,502	$	2,118	$	(3,520	)	$	(5,779	)	$	52,640

Other income, net															$	4,075

Income before income taxes															$	56,715

Depreciation and amortization	$	2,736	$	820	$	279	$	289	$	345		$	146		$	4,615

Capital expenditures	$	2,983	$	986	$	370	$	417	$	308		$	283		$	5,347

The following tables highlight certain financial information about each of the Companys segments for the nine month periods ended September 30, 2003 and 2002.

	Private Banking and Trust		Investment Advisors		Enterprises		Money Managers		Investments In New Businesses			General and Administrative			Total
	For the Nine Month Period Ended September 30, 2003
Revenues	$	228,319	$	115,364	$	46,356	$	39,574	$	35,602					$	465,215

Operating income (loss)	$	94,962	$	61,722	$	21,444	$	6,670	$	(14,008	)	$	(17,880	)	$	152,910

Other income, net															$	13,372

Income before income taxes															$	166,282

Depreciation and amortization	$	7,370	$	2,364	$	643	$	919	$	946		$	428		$	12,670

Capital expenditures	$	11,935	$	3,867	$	1,758	$	1,236	$	2,438		$	1,110		$	22,344


	Private Banking and Trust		Investment Advisors		Enterprises		Money Managers		Investments In New Businesses			General and Administrative			Total
	For the Nine Month Period Ended September 30, 2002
Revenues	$	246,346	$	113,986	$	42,420	$	34,103	$	34,527					$	471,382

Operating income (loss)	$	101,773	$	58,463	$	16,682	$	6,693	$	(10,142	)	$	(17,460	)	$	156,009

Other income, net															$	11,436

Income before income taxes															$	167,445

Depreciation and amortization	$	8,337	$	2,315	$	807	$	783	$	959		$	413		$	13,614

Capital expenditures	$	12,693	$	4,282	$	1,947	$	1,451	$	1,741		$	1,229		$	23,343

Item 2.

Managements Discussion and Analysis of Financial Condition and Results of Operations.

(In thousands, except asset balances and per share data)

This discussion reviews and analyzes the consolidated financial condition at September 30, 2003 and 2002, the consolidated results of operations for the three and nine month period ended September 30, 2003 and 2002 and other key factors that may affect future performance. This discussion should be read in conjunction with the Consolidated Financial Statements and the Notes to the Consolidated Financial Statements.

Results of Operations

Three and Nine Month Periods Ended September 30, 2003 compared to Three and Nine Month Periods Ended September 30, 2002

Consolidated Overview

Operations are organized into business units that offer various products and services tailored for particular market segments. Reportable segments are Private Banking and Trust, Investment Advisors, Enterprises, Money Managers, and Investments in New Businesses. The accounting policies of the business segments are the same as those used in the preparation of the consolidated financial statements. Management evaluates financial performance of the operating segments based on Income from operations.

	Three Month Period Ended								Nine Month Period Ended
	Sept. 30 2003			Sept. 30 2002			Percent Change		Sept. 30 2003			Sept. 30 2002			Percent Change
Private Banking and Trust:
Revenues	$	73,805		$	80,510		(8	)%	$	228,319		$	246,346		(7	)%
Income from operations		27,925			34,296		(19	)%		94,962			101,773		(7	)%

Investment Advisors:
Revenues		42,372			35,866		18	%		115,364			113,986		1	%
Income from operations		21,937			20,023		10	%		61,722			58,463		6	%

Enterprises:
Revenues		17,965			13,393		34	%		46,356			42,420		9	%
Income from operations		8,691			5,502		58	%		21,444			16,682		29	%

Money Managers:
Revenues		14,136			12,502		13	%		39,574			34,103		16	%
Income from operations		2,391			2,118		13	%		6,670			6,693

Investments in New Businesses:
Revenues		12,778			11,045		16	%		35,602			34,527		3	%
Loss from operations		(4,412	)		(3,520	)	(25	)%		(14,008	)		(10,142	)	38	%

General and Administrative:
Loss from operations		(7,394	)		(5,779	)	28	%		(17,880	)		(17,460	)	2	%

Consolidated Segment Totals:
Revenues	$	161,056		$	153,316		5	%	$	465,215		$	471,382		(1	)%
Income from operations	$	49,138		$	52,640		(7	)%	$	152,910		$	156,009		(2	)%

Other income, net		7,050			4,075		73	%		13,372			11,436		17	%

Income before income taxes		56,188			56,715		(1	)%		166,282			167,445		(1	)%

Income taxes		20,789			20,984		(1	)%		61,524			61,954		(1	)%

Net income	$	35,399		$	35,731		(1	)%	$	104,758		$	105,491		(1	)%

Diluted earnings per share	$	.33		$	.32		3	%	$	.97		$	.93		4	%

Consolidated revenues increased $7.7 million, or 5 percent, to $161.1 million for the three month period ended September 30, 2003 compared with the three month period ended September 30, 2002. For the nine month period ended September 30, 2003, consolidated revenues decreased $6.2 million, or 1 percent, to $465.2 million as compared to the prior year comparable period. The primary driver for the increase in revenues during the three months ended September 30, 2003 was the recognition of approximately $7.0 million in non-recurring brokerage fees. These fees were for transition management services we provided to our mutual funds during a portfolio restructuring because of a change in the funds sub-advisors. Investment management fees in both comparable periods increased as a result of higher average assets under management due to improved capital market conditions and new business activity. However, the percentage earned from average assets under management decreased in both comparable periods due to a shift in some assets from higher-fee products into lower-fee products. The fees earned from average client proprietary assets under administration decreased significantly during both comparable periods because of client losses in the fund processing business. We have also experienced a significant decline in non-recurring project fees for the Investment processing business in both comparable periods.

Operating margins before General and administrative expenses declined to 35 percent for the three month period ended September 30, 2003, from 38 percent for the prior year comparable period. Operating margins for the nine month periods ended September 30, 2003 and 2002 was approximately 37 percent. Results reflect increased investment spending during the third quarter 2003 for the development of new products and services. A portion of this increased spending was capitalized. Operating margins during the third quarter of 2003 were also negatively impacted by increased personnel and promotional costs, as well as the recognition of some significant one-time expenses.

Other income primarily includes earnings from our unconsolidated affiliate, interest income, interest expense and realized gains and losses from available-for-sale securities. The increase in other income was mainly due to a significant increase in the earnings of our unconsolidated affiliate. This increase resulted from growth in average assets under management because of new business activity and a higher amount of performance related fees. Our percentage of net profit from the unconsolidated affiliate is reflected in other income. Other income was negatively impacted in 2003 by losses from hedging activities, realized losses from the sale of available-for-sale securities and the write-down in the value of investments considered other than temporary.

Diluted earnings per share increased three percent during the three month period ended September 30, 2003 compared with the three month period ended September 30, 2002 and increased four percent during the nine month period ended September 30, 2003, as compared to the prior year comparable period. This increase was due to a decrease in the number of shares used to calculate diluted earnings per share as a result of our stock repurchase program.

Although we remain optimistic about our long-term prospects, the outlook for the capital markets remains uncertain. This could lead to the continued devaluation in the assets we manage and/or administer, continued redemption rates, and prolonged buying decisions among our clients.

Asset Balances

(In millions)

	As of September 30,
	2003		2002		Percent Change
Assets invested in equity and fixed income programs	$	56,741	$	46,195	15	%
Assets of unconsolidated affiliate invested in equity and fixed income programs		12,435		6,255	99	%
Assets invested in liquidity funds		18,227		19,763	(8	)%

Assets under management		87,403		72,213	21	%

Client proprietary assets under administration		154,951		161,207	(4	)%

Assets under management and administration	$	242,354	$	233,420	4	%

The asset figures shown above represent assets of our clients or their customers for which we provide management and/or administrative services and are excluded from the accompanying balance sheets, since we do not own these assets. Assets of unconsolidated affiliate represent assets of their clients or their

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

Private Banking and Trust

Private Banking and Trust provides investment processing solutions, fund processing solutions, and investment management programs to banks and private trust companies. Investment processing solutions primarily include outsourcing services as an application service provider, or ASP, through our TRUST 3000 product line and as a business service provider, or BSP, through our trust company. TRUST 3000 includes integrated systems that provide a complete investment accounting and management information system for private banks and trust institutions. Revenues are primarily earned from monthly processing and software servicing fees and non-recurring project fees.

Fund processing solutions include administration and distribution services provided to bank proprietary mutual funds. These services primarily include fund administration and accounting, regulatory and compliance services, shareholder recordkeeping, and marketing. Revenues are earned primarily as a percentage of the average asset values of the proprietary funds.

Investment management fees are earned primarily as a percentage of the average asset value of assets under management.

	Three Month Period Ended								Nine Month Period Ended
	Sept 30, 2003			Sept 30, 2002			Percent Change		Sept 30, 2003			Sept 30, 2002			Percent Change
Revenues:
Investment processing fees	$	53,846		$	57,330		(6	)%	$	164,913		$	171,659		(4	)%
Fund processing fees		10,048			13,360		(25	)%		33,619			43,696		(23	)%
Investment management fees		9,911			9,820		1	%		29,787			30,991		(4	)%

Total revenues		73,805			80,510		(8	)%		228,319			246,346		(7	)%

Expenses:
Operating and development		36,254			33,854		7	%		106,646			111,117		(4	)%
Sales and marketing		9,626			12,360		(22	)%		26,711			33,456		(20	)%

Income from operations	$	27,925		$	34,296		(19	)%	$	94,962		$	101,773		(7	)%

Operating margin		38	%		43	%				42	%		41	%

Percent of Revenue:
Operating and development		49	%		42	%				46	%		45	%
Sales and marketing		13	%		15	%				12	%		14	%

Investment processing fees decreased $3.5 million, or 6 percent, during the three month period ended September 30, 2003, as compared to the corresponding prior year period. For the nine month period ended September 30, 2003, investment processing fees decreased $6.7 million, or 4 percent, as compared to the prior year comparable period. This decrease in both comparable periods was primarily due to a decrease in transaction-based fees from our brokerage services and lower non-recurring project fees. However, our recurring revenue base has increased in both comparable periods that has partially mitigated the reduction in non-recurring fees.

Fund processing fees decreased $3.3 million, or 25 percent, during the three month period ended September 30, 2003, as compared to the corresponding prior year period. For the nine month period ended September 30, 2003, fund processing fees decreased $10 million, or 23 percent. The decline in our fund processing fees was mainly due to client losses.

Operating margin during the three month period ended September 30, 2003 decreased relative to the same period in 2002 due to a higher level of investment spending for the development of new products and services. Personnel, mainly compensation, also increased during this period. However, there was a corresponding

decrease in direct expenses associated with the decline in transaction-based fees and fund processing fees. Operating margin during the nine month period ended September 30, 2003 increased slightly due to our cost containment efforts during the past year.

Investment Advisors

Investment Advisors provides investment management programs and investment processing solutions to affluent investors distributed through a network of independent registered investment advisors, financial planners and other investment professionals. Revenues are primarily earned as a percentage of the average asset values under management.

	Three Month Period Ended								Nine Month Period Ended
	Sept 30, 2003			Sept 30, 2002			Percent Change		Sept 30, 2003			Sept 30, 2002			Percent Change
Total Revenues	$	42,372		$	35,866		18	%	$	115,364		$	113,986		1	%

Expenses:
Operating and development		10,640			8,393		27	%		31,023			28,303		10	%
Sales and marketing		9,795			7,450		31	%		22,619			27,220		(17	)%

Income from operations	$	21,937		$	20,023		10	%	$	61,722		$	58,463		6	%

Operating margin		52	%		56	%				54	%		51	%

Percent of Revenue:
Operating and development		25	%		23	%				27	%		25	%
Sales and marketing		23	%		21	%				19	%		24	%

Revenues increased $6.5 million, or 18 percent, for the three month period ended September 30, 2003 compared with the three month period ended September 30, 2002. For the nine month period ended September 30, 2003, revenues increased $1.4 million, or 1 percent, as compared with the corresponding prior year period. Revenues for the third quarter 2003 increased substantially due to the recognition of approximately $3.5 million in non-recurring brokerage fees. These fees were for transition management services we provided to our mutual funds during a portfolio restructuring because of a change in the funds sub-advisors. Also, our revenues increased in both comparable periods due to higher average asset balances relative to prior year average asset balances for the same time periods. This was mainly due to improved capital market conditions. Although average assets under management increased due to market appreciation, net asset funding for the quarter decreased due to redemptions. Redemptions were impacted by the closing of our variable annuity fund and the loss of a large offshore client. Without these two items, net asset funding would have been positive for the quarter.

Operating margin during the three month period ended September 30, 2003 decreased due to higher investment spending for new products and services and the recognition of some one-time costs. Operating margin improvement during the first nine months of 2003 was primarily due to the management of certain discretionary expenses, mainly marketing and compensation.

Enterprises

Enterprises provides business solutions to pension plan sponsors, hospitals, foundations, unions, endowment funds and other institutional investors. We also provide treasury business solutions to corporations. Revenues are earned primarily as a percentage of the average asset values under management.

	Three Month Period Ended								Nine Month Period Ended
	Sept 30, 2003			Sept 30, 2002			Percent Change		Sept 30, 2003			Sept 30, 2002			Percent Change
Total Revenues	$	17,965		$	13,393		34	%	$	46,356		$	42,420		9	%

Expenses:
Operating and development		4,183			4,147		1	%		11,248			13,017		(14	)%
Sales and marketing		5,091			3,744		36	%		13,664			12,721		7	%

Income from operations	$	8,691		$	5,502		58	%	$	21,444		$	16,682		29	%

Operating margin		48	%		41	%				46	%		39	%

Percent of Revenue:
Operating and development		23	%		31	%				24	%		31	%
Sales and marketing		29	%		28	%				30	%		30	%

Revenues increased $4.6 million, or 34 percent, for the three month period ended September 30, 2003 compared with the three month period ended September 30, 2002. For the nine month period ended September 30, 2003, revenues increased $3.9 million, or 9 percent, as compared with the corresponding prior year period. Revenues in the third quarter 2003 were boosted from the recognition of approximately $3.0 million in non-recurring brokerage fees. These fees were for transition management services we provided to our mutual funds during a portfolio restructuring because of a change in the funds sub-advisors. Average asset balances for the third quarter and year-to-date increased slightly over prior year comparable balances due to improved capital market conditions and new business activity.

Income from operations and operating margin in both comparable periods increased due to management of discretionary spending, primarily for marketing and personnel expenses and the inclusion of the significant non-recurring brokerage fees.

Money Managers

Money Managers provides investment solutions to U.S investment managers, U.S. based mutual fund companies and to investment managers worldwide of alternative asset classes (e.g., hedge funds and private equity funds). Revenues are earned primarily as a percentage of the average asset values under management and administration.

	Three Month Period Ended								Nine Month Period Ended
	Sept 30, 2003			Sept 30, 2002			Percent Change		Sept 30, 2003			Sept 30, 2002			Percent Change
Total Revenues	$	14,136		$	12,502		13	%	$	39,574		$	34,103		16	%

Expenses:
Operating and development		8,497			6,528		30	%		23,638			17,614		34	%
Sales and marketing		3,248			3,856		(16	)%		9,266			9,796		(5	)%

Income from operations	$	2,391		$	2,118		13	%	$	6,670		$	6,693

Operating margin		17	%		17	%				17	%		20	%

Percent of Revenue:
Operating and development		60	%		52	%				60	%		51	%
Sales and marketing		23	%		31	%				23	%		29	%

Revenues increased $1.6 million, or 13 percent, for the three month period ended September 30, 2003 compared with the three month period ended September 30, 2002. For the nine month period ended September 30, 2003, revenues increased $5.5 million, or 16 percent, as compared to the prior year comparable period. Average asset balances increased in both comparable periods contributing to the increase in revenues. The increase in average asset balances and revenues was mainly due to improved capital market condition and new business activity.

Income from operations and profit margin in both comparable periods were negatively affected by increased levels of spending associated with building the necessary infrastructure to provide a complete business solution for this market. A substantial portion of this spending was for increased personnel and other operating costs.

Investments in New Businesses

Investments in New Businesses provides investment management, fund processing, and investment processing solutions to non-U.S. banks, investment advisors, enterprises and money managers located outside the United States. This segment also includes other initiatives in new U.S. markets. Revenues are earned primarily as a percentage of the average asset values under management.

	Three Month Period Ended								Nine Month Period Ended
	Sept 30, 2003			Sept 30, 2002			Percent Change		Sept 30, 2003			Sept 30, 2002			Percent Change
Total Revenues	$	12,778		$	11,045		16	%	$	35,602		$	34,527		3	%

Expenses:
Operating and development		11,159			9,035		24	%		32,934			28,829		14	%
Sales and marketing		6,031			5,530		9	%		16,676			15,840		5	%

Loss from operations	$	(4,412	)	$	(3,520	)	25	%	$	(14,008	)	$	(10,142	)	38	%

Operating margin		(35	)%		(32	)%				(39	)%		(29	)%

Percent of Revenue:
Operating and development		88	%		82	%				92	%		84	%
Sales and marketing		47	%		50	%				47	%		45	%

Revenues increased $1.7 million, or 16 percent, for the three month period ended September 30, 2003 compared with the three month period ended September 30, 2002. For the nine month period ended September 30, 2003, revenues increased $1.1 million, or 3 percent, as compared to the prior year comparable period. We continue to experience positive market acceptance of our investment solution offerings in Canada and Europe. New business activity in these regions has increased during the past year.

Operating losses in each period include investments made in the infrastructure of our European-based operations and technology costs to further enhance our product offerings. We also continue to invest in expanding our distribution channels in our target markets and other U.S. based initiatives. We expect continued investment in these regions to build our distribution network and enhance our product offerings throughout the remainder of 2003 and into 2004 and should continue to incur losses.

General & Administrative

General and administrative expense primarily consists of corporate overhead costs and other costs not directly attributable to a reportable business segment.

	Three Month Period Ended								Nine Month Period Ended
	Sept 30, 2003			Sept 30, 2002			Percent Change		Sept 30, 2003			Sept 30, 2002			Percent Change
General and Administrative	$	7,394		$	5,779		28	%	$	17,880		$	17,460		2	%

Percent of Consolidated Revenue		5	%		4	%				4	%		4	%

General and administrative expenses during the third quarter of 2003 include additional costs related to compliance with regulatory requirements.

Other Income

Other income on the accompanying Consolidated Statements of Income consist of the following:

	Three Month Period Ended								Nine Month Period Ended
	Sept 30, 2003			Sept 30, 2002			Percent Change		Sept 30, 2003			Sept 30, 2002			Percent Change
Equity in the earnings of unconsolidated affiliate	$	6,288		$	2,861		120	%	$	14,763		$	8,643		71	%
Net gain (loss) on investments		509			574		(11	)%		(3,673	)		574		(740	)%
Interest income		817			1,303		(37	)%		3,424			3,847		(11	)%
Interest expense		(564	)		(663	)	(15	)%		(1,651	)		(1,628	)	1	%
Other										509					(100	)%

Total other income, net	$	7,050		$	4,075		73	%	$	13,372		$	11,436		17	%

Equity in the earnings of unconsolidated affiliate on the accompanying Consolidated Statements of Income includes our less than 50 percent ownership interest in the general partnership of LSV Asset Management (LSV) (See Note 6 to the Consolidated Financial Statements). The increase in LSVs net earnings is due to an increase in assets under management from new business activity and a higher amount of performance related fees.

Net loss from investments for the nine month period ended September 30, 2003 includes a loss of $2.6 million from hedge ineffectiveness, a charge for $0.6 million for other-than-temporary declines in market value, $1.2 million for the write-down of an equity investment in a private technology firm and $0.7 million in realized gains from sales of marketable securities.

Interest income is earned based upon the amount of cash that is invested daily and fluctuations in interest income recognized for one period in relation to another is due to changes in the average cash balance invested for the period and/or changes in interest rates.

Interest expense is directly attributable to our long-term debt and other borrowings.

Income Taxes

Our effective tax rate was 37.0 percent for each of the nine month periods ending September 30, 2003 and 2002.

Liquidity and Capital Resources

	Nine Month Period Ended September 30,
	2003			2002
Net cash provided by operating activities	$	123,862		$	128,200
Net cash used in investing activities		(22,300	)		(18,185	)
Net cash used in financing activities		(74,679	)		(111,626	)

Net increase (decrease) in cash and cash equivalents		26,883			(1,611	)

Cash and cash equivalents, beginning of period		165,724			163,685

Cash and cash equivalents, end of period	$	192,607		$	162,074

Cash requirements and liquidity needs are primarily funded through our cash flow from operations and our capacity for additional borrowing. We currently have a line of credit that provides for borrowings of up to $200.0 million. The availability of the line of credit is subject to compliance with certain covenants set forth in the agreement, (See Note 8 of the Notes to Consolidated Financial Statements). At September 30, 2003 the unused sources of liquidity consisted of unrestricted cash and cash equivalents of $192.6 million and the unused portion of the line of credit of $200.0 million.

Net cash provided by operating activities for the nine month period ended September 30, 2003 decreased $4.3 million relative to the same comparable period in 2002. The decrease in cash flow from operations was primarily due an increase in receivables.

Net cash used in investing activities primarily includes capital expenditures and purchases and sales of available-for-sale securities. Net cash used in investing activities increased about $4.1 million during the nine month period ended September 30, 2003 as compared to the prior year period. Capital expenditures for property, plant and equipment, including capitalized software development costs, were $22.3 million for the nine month period ended September 30, 2003 verses $23.3 million for the prior year comparable period. Capital expenditures in the nine month period ended September 30, 2003 included $12.0 million related to the expansion of our corporate headquarters. This expansion is being done to relocate our data center from a facility that we are currently leasing. We expect this project to be completed by the beginning of 2004. Purchases of available-for-sale securities in the nine month period ended September 30, 2003 were approximately $39.9 million, as compared to $16.5 million in the prior year period, whereas sales of available-for-sale securities totaled $40.4 million in the nine month period ended September 30, 2003, as compared to $21.2 in the prior year period.

Net cash used in financing activities primarily includes principal payments on our debt, the repurchase of our common stock and dividend payments. Net cash used in financing activities decreased approximately $36.9 million during the nine month period ended September 30, 2003 relative to the same period in 2002. This decrease was primarily due to a decrease in stock repurchases. The board of directors had authorized the repurchase of our common stock up to $703.4 million. During the nine month period ended September 30, 2003, the Company purchased 2.5 million shares at a cost of $65.9 million, as compared to purchases of 3.7 million shares at a cost of $103.6 million during the comparable prior year period. As of October 31, 2003, we still had $23.3 million of authorization remaining for the purchase of our common stock under this program.

We made principal payments of $4.0 million for the Senior Notes, $4.2 million for the term loan and $1.2 million for the purchase agreement during the nine month period ended September 30, 2003. We made principal payments of $2.0 million for the Senior Notes and $4.2 million for the term loan during the nine month period ended September 30, 2002 (See Note 9 to the Consolidated Financial Statements).

Cash dividends paid were $13.7 million or $.13 per share in the nine month period ended September 30, 2003 and $12.1 million or $.11 per share during the comparable prior year period. Our Board of Directors has indicated its intention to continue making cash dividend payments.

Forward-Looking Information and Risk Factors

The Private Securities Litigation Reform Act of 1995 provides a safe harbor for forward-looking statements. 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 our annual report on Form 10-K. These risks include the following:

changes in capital markets which may affect our revenues and earnings

changes in interest rates

the performance of the funds we manage

consolidation within our target markets, including consolidations between banks and other financial institutions

systems and technology risks, and

the effect of extensive governmental regulation.

SEI 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 as an investment adviser, a broker-dealer, a transfer agent, an investment company or with the US Office of Thrift Supervision or state banking authorities as a trust company. Our broker-dealer is also a member of the National Association of Securities Dealers and is subject to its rules and oversight. 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 companies and their service providers could have a significant impact on us. We have responded and are currently responding to various regulatory examinations and requests and generally implementing changes and reviewing our compliance procedures and business operations. These activities resulted in increased general and administrative costs during the third quarter of 2003 and may continue to result in higher general and administrative costs, in amounts which may be material and which could affect our future operations and financial results.

Item 3. Quantitative and Qualitative Disclosures About Market Risk

Interest Rate Risk - Our exposure to changes in interest rates primarily relates to our investment portfolio and long-term debt obligations. Our excess cash is principally invested in short-term, highly liquid financial instruments, mainly money market funds, with initial maturities of three month period or less. Our investment portfolio also includes some long-term fixed income mutual funds, principally invested in federal government agency securities. We place our investments in financial instruments that meet high credit quality standards. A portion of our long-term debt is based upon a variable rate which renews every three month period. While changes in interest rates could decrease interest income or increase interest expense, we do not believe that we have a material exposure to changes in interest rates. We do not undertake any specific actions to cover our exposure to interest rate risk and are not a party to any interest rate risk management transactions.

Concentration of Credit Risk Financial instruments which potentially expose us to concentrations of credit risk consist primarily of cash equivalents, marketable securities and trade receivables. Cash equivalents are principally invested in short-term money market funds or placed with major banks and high credit qualified financial institutions. Concentrations of credit risk with respect to our receivables are limited due to the large number of clients and their dispersion across geographic areas. No single group or customer represents greater than 10 percent of total accounts receivable.

Foreign Currency Risk We transact business in the local currencies of various foreign countries, principally Canada, Europe and Asia. The total of all of our foreign operations only accounts for approximately 8 percent of total consolidated revenues. Also, most of our foreign operations match local currency revenues with local currency costs. Due to these reasons, we do not hedge against foreign operations nor do we expect any material loss with respect to foreign currency risk.

Price Risk - We are exposed to price risk associated with changes in the fair value of our investment portfolio. To provide some protection against potential fair value changes for some of these investments, we have entered into various derivative financial instruments. We currently hold derivative financial instruments with a notional amount of $25.3 million with various terms, generally less than one year. The effectiveness of these hedging relationships is evaluated on a retrospective and prospective basis using quantitative measures of correlation. If a hedge is ineffective, any excess gains or losses attributable to such ineffectiveness are recognized in current period earnings. During the nine month period ended September 30, 2003, we did not enter into or hold any derivative financial instruments for trading purposes.

During the nine month period ended September 30, 2003, we recorded a $0.6 million impairment charge related to other-than-temporary declines in the fair value of certain securities held within our investment portfolio. Also, the amount of hedge ineffectiveness that was charged to current period earnings was a loss of $2.6 million. The aggregate effect of a hypothetical 10 percent change in the fair value of these derivative financial instruments would not be material to our results of operations, financial position, or liquidity.

A significant portion of our revenues are based upon the market value of assets we manage or administer. A decline in the market value of these assets as a result of changes in market conditions, the general economy or other factors will negatively impact our revenues and earnings.

Item 4. Controls and Procedures

(a)	Evaluation of Disclosure Controls and Procedures

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this report. Based on that evaluation, the Chief Executive Officer and Chief Financial Officer concluded that our disclosure controls and procedures as of the end of the period covered by this report are functioning effectively to provide reasonable assurance that the information required to be disclosed by us in reports filed under the Securities Exchange Act of 1934 is recorded, processed, summarized and reported within the time periods specified in the SECs rules and forms. A controls system, no matter how well designed and operated, cannot provide absolute assurance that the objectives of the controls system are met, and no evaluation of controls can provide absolute assurance that all control issues and instances of fraud, if any, within a company have been detected.

(b)	Change in Internal Control over Financial Reporting

No change in our internal control over financial reporting occurred during our most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, our internal control over financial reporting.

PART II. OTHER INFORMATION

Item 6. Exhibits and Reports on Form 8-K

(a)

The following is a list of exhibits filed as part of the Form 10-Q.

10.1 $200,000 364 Day Credit Agreement, dated September 15, 2003, among SEI Investments Company, the lenders thereto, Bank One, N.A., The Bank of Nova Scotia, Union Bank of California, N.A., PNC Bank, National Association and Wachovia Bank, National Association. (Page 32)

10.2 First Amendment to Loan Agreement, dated September 15, 2003, between SEI Investments Company and U.S. Bank National Asociation. (Page 98)

31.1 Certification of Alfred P. West, Jr, Chairman and Chief Executive Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Page 106)

31.2 Certification of Dennis J. McGonigle, Chief Financial Officer, as required pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. (Page 107)

32.1 Certification of Alfred P. West, Jr., Chairman and Chief Executive Officer, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Page 108)

32.2 Certification of Dennis J. McGonigle, Chief Financial Officer, as required pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (Page 109)

(b)

Reports on Form 8-K

On July 3, 2003, our Capital Accumulation Plan filed an amended report on Form 8-K reporting under Item 4 a change in Registrants certifying accountant.

On July 21, 2003, we furnished a report on Form 8-K for our Second Quarter 2003 earnings announcement.

On October 20, 2003, we furnished a report on Form 8-K for our Third Quarter 2003 earnings announcement.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

	SEI INVESTMENTS COMPANY

Date November 13, 2003	By	/s/ Dennis J. McGonigle
		Dennis J. McGonigle
		Chief Financial Officer

Form: 10-Q

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