This discussion reviews and analyzes the consolidated financial condition at March 31, 2009 and 2008, the consolidated results of operations for the three months ended March 31, 2009 and 2008 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.

Overview

Our Business and Business Segments

We are a leading global provider of investment processing, fund processing, and investment management business outsourcing solutions that help corporations, financial institutions, financial advisors, and ultra-high-net-worth families create and manage wealth. Investment processing fees are earned as monthly fees for contracted services including computer processing services, software licenses, and trust operations services, as well as transaction-based fees for providing securities valuation and trade-execution. Fund processing and investment management fees are earned as a percentage of average assets under management or administration. As of March 31, 2009, through our subsidiaries and partnerships in which we have a significant interest, we administer $354.4 billion in mutual fund and pooled assets, manage $122.7 billion in assets, and operate from numerous countries worldwide.

Our reportable business segments are:

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

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

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

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

Investments in New Businesses - provides investment management programs to ultra-high-net-worth families residing in the United States through the SEI Wealth Networkฎ; and

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

Financial Results

Revenues, Expenses and Income from Operations by business segment for the three
months ended March 31, 2009 compared to the three months ended March 31, 2008
were as follows:



                                                         For the Three Month Period Ended March 31,
                                                                                                Percent
                                                         2009                 2008              Change
Revenues:
Private Banks                                       $       96,948       $      107,054                (9 %)
Investment Advisors                                         37,508               60,519               (38 %)
Institutional Investors                                     39,379               50,689               (22 %)
Investment Managers                                         33,332               36,493                (9 %)
Investments in New Businesses                                1,254                1,834               (32 %)
LSV                                                         40,190               77,319               (48 %)

Total revenues                                      $      248,611       $      333,908               (26 %)
Expenses:
Private Banks                                       $       78,798       $       86,167                (9 %)
Investment Advisors                                         27,109               31,376               (14 %)
Institutional Investors                                     24,170               30,140               (20 %)
Investment Managers                                         22,867               25,964               (12 %)
Investments in New Businesses                                3,293                4,652               (29 %)
LSV                                                         26,446               47,356               (44 %)

Total expenses                                      $      182,683       $      225,655               (19 %)
Income from business segments:
Private Banks                                       $       18,150       $       20,887               (13 %)
Investment Advisors                                         10,399               29,143               (64 %)
Institutional Investors                                     15,209               20,549               (26 %)
Investment Managers                                         10,465               10,529                (1 %)
Investments in New Businesses                               (2,039 )             (2,818 )              28 %
LSV                                                         13,744               29,963               (54 %)

Total income from business segments                 $       65,928       $      108,253               (39 %)
Corporate overhead                                          (9,641 )            (10,109 )              (5 %)
LSV Employee Group (1)                                      (1,820 )             (1,821 )              -
Noncontrolling interest reflected in segments (2)           19,063               42,188               (55 %)

Income from operations                              $       73,530       $      138,511               (47 %)

(1) Primarily relates to amortization costs of identifiable intangible assets.

(2) For the three months ended March 31, 2009 and 2008, includes $18,862 and $41,238, respectively, of noncontrolling interest of the other partners of LSV.

Asset Balances

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



  Asset Balances                                        As of March 31,      Percent
  (In millions)                                        2009        2008      Change
  Private Banks:
  Equity and fixed income programs                   $   9,679   $  18,904       (49 %)
  Collective trust fund programs                         1,198       1,008        19 %
  Liquidity funds                                        8,929       9,198        (3 %)

  Total assets under management                      $  19,806   $  29,110       (32 %)
  Client proprietary assets under administration         9,920      13,897       (29 %)

  Total assets                                       $  29,726   $  43,007       (31 %)
  Investment Advisors:
  Equity and fixed income programs                   $  18,832   $  32,736       (42 %)
  Collective trust fund programs                         2,716       2,310        18 %
  Liquidity funds                                        3,458       2,461        41 %

  Total assets under management                      $  25,006   $  37,507       (33 %)
  Institutional Investors:
  Equity and fixed income programs                   $  32,565   $  43,134       (25 %)
  Collective trust fund programs                           791         924       (14 %)
  Liquidity funds                                        3,802       4,077        (7 %)

  Total assets under management                      $  37,158   $  48,135       (23 %)
  Investment Managers:
  Equity and fixed income programs                   $       3   $      20       (85 %)
  Collective trust fund programs                         6,917       6,571         5 %
  Liquidity funds                                          898         571        57 %

  Total assets under management                      $   7,818   $   7,162         9 %
  Client proprietary assets under administration       221,798     225,005        (1 %)

  Total assets                                       $ 229,616   $ 232,167        (1 %)
  Investments in New Businesses:
  Equity and fixed income programs                   $     472   $     869       (46 %)
  Liquidity funds                                          157          77       104 %

  Total assets under management                      $     629   $     946       (34 %)
  LSV:
  Equity and fixed income programs                   $  32,308   $  61,765       (48 %)
  Consolidated:
  Equity and fixed income programs                   $  93,859   $ 157,428       (40 %)
  Collective trust fund programs                        11,622      10,813         7 %
  Liquidity funds                                       17,244      16,384         5 %

  Total assets under management                      $ 122,725   $ 184,625       (34 %)
  Client proprietary assets under administration       231,718     238,902        (3 %)

  Total assets under management and administration   $ 354,443   $ 423,527       (16 %)

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

Consolidated revenues declined $85.3 million, or 26 percent in the three month period ended March 31, 2009 compared to the same period a year ago. Net income decreased $14.7 million, or 30 percent in the three month period ended March 31, 2009 compared to the corresponding period a year ago. Diluted earnings per share were $.18 in the three month period ended March 31, 2009 compared to $.25 in the three month period ended March 31, 2008.

In our opinion, the following items had a significant impact on our financial results for the three month periods ended March 31, 2009 and 2008:

• The severe downturn in the capital markets during 2008 and continued volatility during the first quarter 2009 caused our Asset management, administration and distribution fees to decrease $90.7 million, or 35 percent, as compared to the first quarter of 2008. Our assets under management decreased $61.9 billion during the past 12 months, of which $29.5 billion pertained to assets managed by LSV.

• New business activity in our Institutional Investors and Investment Managers segments partially mitigated the negative impact from the capital market depreciation on our revenues. New client asset funding, as well as asset funding from existing clients, for our retirement and not-for-profit solutions in our Institutional Investors segment and for our hedge fund and separately managed accounts solutions in our Investment Managers segment positively impacted revenues in the first quarter of 2009.

• Revenues in our Private Banks segment include $7.0 million in non-recurring fees received by us in the first quarter of 2009 from the buyouts of existing contracts by a large bank client and a community bank client. These buyouts were a direct result of merger and acquisition activity.

• Our earnings during the first quarter of 2009 were adversely affected by further losses totaling $14.4 million associated with SIV-related issues involving SEI-sponsored money market funds. Cumulative losses from SIV-related issues as of March 31, 2009 total $197.7 million (See "Money Market Fund Support" later in this discussion).

• Our percentage ownership of LSV remained at approximately 43 percent. Our proportionate share in the earnings of LSV in the first quarter 2009 was $13.7 million, a decrease of $16.2 million, or 54 percent, from the comparable period in 2008. Revenues decreased 48 percent primarily because of significant market depreciation in the value of the assets managed. LSV's assets under management were $32.3 billion at March 31, 2009, as compared to $61.8 billion at March 31, 2008, a decrease of 48 percent.

• In March 2009, certain partners of LSV, including SEI, have agreed to designate a portion of their partnership interest for the purpose of providing an interest in the partnership to a select group of key LSV employees. In April 2009, these contributing partners agreed to provide certain key LSV employees an interest in LSV thereby reducing our interest in LSV to approximately 42 percent. Effective April 1, 2009, we expect to deconsolidate the assets, liabilities, revenues and expenses of LSV and account for our interest in LSV under the equity method of accounting. We are currently evaluating the impact of this transaction on our consolidated financial statements, in particular, as it pertains to SFAS 160 and SFAS 141R.

• We continued to invest in the Global Wealth Platform and its operational infrastructure. During the first quarter of 2009, we capitalized $13.6 million for significant enhancements and new functionality for the platform, as compared to $12.2 million in the first quarter of 2008. We will continue to incur significant development costs for these enhancements and upgrades. Our intention is to implement enhancements and upgrades into the platform through a series of releases. In January 2009, we implemented a new release of the Global Wealth Platform. Previously capitalized software development costs of approximately $55.2 million related to this latest release were placed into service. Additional quarterly amortization expense from this latest release is expected to be approximately $1.0 million per quarter.

• Our operating expenses during the first quarter of 2009 decreased across all of our business segments. A portion of these declines were due to lower direct costs as a result of reduced revenues. In addition, a significant portion of these declines resulted from our efforts to reduce discretionary expenses across the company. Included in these actions are the elimination of non-strategic activities, process improvements and a reduction in our global workforce, which was undertaken in February 2009. We incurred one-time termination costs associated with the workforce reduction of approximately $6.3 million during the first quarter of 2009, which is included in Compensation, benefits and other personnel expense on the accompanying Consolidated Statements of Operations.

• We did not experience any significant collectibility issues regarding our receivables during the first quarter 2009 and have not received any indications that we should anticipate such issues in the near term.

• We continued our stock repurchase program during 2009 and purchased approximately 527,000 shares at an average price of approximately $11 per share in the first quarter of 2009.

Money Market Fund Support

In 2007, we entered into Capital Support Agreements with the SEI Daily Income Trust Prime Obligation Fund (the SDIT PO Fund), the SEI Daily Income Trust Money Market Fund (the SDIT MM Fund), and the SEI Liquid Asset Trust Prime Obligation Fund (the SLAT PO Fund) (each a Fund or, together, the Funds). The terms, conditions and subsequent amendments of the Capital Support Agreements are described in our latest Annual Report on Form 10-K in Part II, Item 7 under the caption titled "Money Market Fund Support".

In March 2009, we purchased all of the Gryphon notes from the SDIT PO Fund and the SLAT PO Fund. The cash purchase price of $194.9 million paid to the Funds was equal to the amortized cost of these securities. In order to finance the purchases of the Gryphon notes, we borrowed $195.0 million through our credit facility during March 2009. We recorded losses of approximately $130.5 million as of March 31, 2009 due to this purchase and the earlier purchase of the Gryphon notes from the SDIT MM Fund in September 2008.

As a result of the purchases of the Gryphon Notes from the SDIT PO Fund and the SLAT PO Fund, our required capital contribution according to the Amended Capital Support Agreements was reduced by approximately $116.1 million during the first quarter of 2009. This reduction in our required contributions partially offset the investment losses incurred from the purchases of the Gryphon notes so that our net charge from SIV-related issues for the first quarter totaled $14.4 million. As of March 31, 2009, our required capital contribution to the Funds according to the Amended Capital Support Agreements was $57.9 million.

Also as a result of these purchases, the letters of credit posted to collateralize our obligations under the Amended Capital Support Agreements was reduced from an aggregate $195.0 million to $69.0 million (See Liquidity and Capital Resources section later in this discussion). Our borrowings of $195.0 million to finance the purchases of the Gryphon notes and outstanding letters of credit directly reduce the amount available for future borrowings under the credit facility. As of April 29, 2009, letters of credit of $69.0 million remained outstanding and our total borrowings through the credit facility remained at $195.0 million. Therefore, only the remaining $36.0 million of the credit facility is unrestricted and may be used for general purposes.

At March 31, 2009, the aggregate par value and market value of the SIVs covered by the Amended Capital Support Agreements on the books of the Funds was $123.9 million and $58.6 million, respectively. The aggregate par value of the Gryphon notes purchased from the Funds on our books was $208.7 million.

All SIV securities that remain on the books of the two Funds covered by the Amended Capital Support Agreements are in technical default. The Funds currently hold four SIV securities. No other SEI-sponsored fund holds any SIV securities. It is our intention to purchase the remaining SIV securities from the SDIT PO Fund and SLAT PO Fund over the next several months. We expect to have purchased all of the SIV securities covered by the Amended Capital Support Agreements prior to the expiration dates of the agreements in November 2009.

Our required capital contribution according to the Amended Capital Support Agreement with the SLAT PO Fund is based upon the amount necessary to restore the net asset value per share of the Fund to $0.9950. If we decide to purchase the remaining SIV securities from the SLAT PO Fund, our required purchase price would be equal to 100 percent of the amortized cost value of these securities. Therefore, we would expect to incur further losses of approximately $7.0 million from our intended purchase of the remaining SIV securities from the SLAT PO Fund based on actual values of the securities as of April 29, 2009.

Our total risk of loss from SIV securities is limited to the aggregate remaining par value held by the Funds and on our balance sheet. As of April 29, 2009, the aggregate par value of these securities totaled $122.2 million. We do not engage in any lending activities or any other activity that exposes us to a risk of loss associated with the illiquidity issues in the credit markets.

When we entered into the Capital Support Agreements, the Funds became variable interest entities and we were considered to have a significant variable interest in the Funds. Therefore, we needed to determine if we were the primary beneficiary according to the provisions established in FIN 46(R). Our analysis concluded that we were not the primary beneficiary because the support we provide under the Capital Support Agreements would not absorb a majority of the variability created by the assets of the Funds. As a result, we were not required to consolidate the accounts of the Funds into our Consolidated Financial Statements.

The Amended Capital Support Agreements are considered derivative contracts in accordance with applicable accounting guidance and are categorized as Level 3 liabilities as specified by SFAS No. 157 (SFAS 157), "Fair Value Measurements" (See Fair Value Measurements section later in this discussion). These Level 3 liabilities comprise 34 percent of our total current liabilities at March 31, 2009. The fair value of the derivative contracts approximates the value of our actual obligation at March 31, 2009. The value of the Capital Support Agreements will be determined at least quarterly. In the event payments are not required to be paid to the Funds, such expense may be reversed in a subsequent period.

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

The market value of the SIV securities has the most significant impact on the amount of our obligation under the Capital Support Agreements. Our obligation can fluctuate on a daily basis. The following table, based on actual values as of April 29, 2009, is included to give an indication of the impact of a one percent movement in the value of securities issued by SIVs held by the Funds on our obligation under the Capital Support Agreements:

                                                           Hypothetical
                                                              Change
                                                             In Value
          Capital Support Agreement for SDIT PO Fund       $         634
          Capital Support Agreement for SLAT PO Fund (1)             588

                                                           $       1,222

(1) Assumes no change in the value of the portfolio assets of the Fund.

Stock-Based Compensation

All outstanding stock options have performance based vesting provisions that tie the vesting of stock options to our financial performance. Our stock options vest at a rate of 50 percent when a specified diluted earning per share target is achieved, and the remaining 50 percent when a second, higher specified diluted earnings per share target is achieved. Stock options granted prior to 2006 fully vest after seven years from the date of grant. Beginning in 2006, the seven year vesting trigger was eliminated and, as a result, options do not vest due to the passage of time but solely as a result of achievement of the financial vesting targets. Earnings per share targets are calculated exclusive of stock-based compensation expense, net of tax. The diluted earnings per share targets are

During the three months ended March 31, 2009 and 2008, we recognized approximately $3.4 million and $4.7 million, respectively, in stock-based compensation expense, a decrease of $1.3 million. This decrease consisted of the following components:

Change in Stock-Based Compensation Expense Stock-based compensation cost recognized in 2009 for grants made in December 2008 $ 1,772 Change in management's estimate of expected vesting of stock options for grants that were outstanding at December 31, 2008 (2,867 ) Other items (159 )

$ (1,254 )

We do not expect that certain option grants, which do not vest due to the passage of time, will attain their pre-determined vesting targets and; therefore, we discontinued the amortization of the unrecognized stock-based compensation cost associated with these grants. These option grants have an unrecognized compensation cost of $21.3 million.

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

                                             Stock-Based
                                             Compensation
                        Period                 Expense
                        Remainder of 2009   $        9,989
                        2010                        12,279
                        2011                        11,327
                        2012                         6,824
                        2013                         5,084
                        2014                         1,498
                        2015                         1,498

                                            $       48,499

Business Segments

Private Banks



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