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SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-K

(Mark One)

For the fiscal year ended: December 31, 2003

OR

For the transition period from              to             

Commission file number 0-10200

SEI INVESTMENTS COMPANY

(Exact name of registrant as specified in its charter)

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

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

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

Common Stock, par value $.01 per share

(Title of class)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes  x    No  ¨

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K.    x

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  ¨

The aggregate market value of the voting common stock held by non-affiliates of the registrant was approximately $2.4 billion based on the closing price of $31.99 as reported by NASDAQ on June 30, 2003 (the last business day of the registrant’s most recently completed second fiscal quarter). For purposes of making this calculation only, the registrant has defined affiliates as including all executive officers, directors and beneficial owners of more than ten percent of the common stock of the registrant.

APPLICABLE ONLY TO REGISTRANTS INVOLVED IN BANKRUPTCY PROCEEDINGS

DURING THE PRECEDING FIVE YEARS:

Indicate by check mark whether the registrant has filed all documents and reports required to be filed by Section 12, 13, or 15(d) of the Securities Exchange Act of 1934 subsequent to the distribution of securities under a plan confirmed by a court.    Yes  ¨    No  ¨

APPLICABLE ONLY TO CORPORATE REGISTRANTS:

Number of shares outstanding of each of the registrant’s classes of common stock, as of the close of business on February 27, 2004:

DOCUMENTS INCORPORATED BY REFERENCE:

Portions of the following documents are incorporated by reference herein:

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PART I

Forward Looking Statements

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

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

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

Item 1. Business.

Overview

SEI Investments Company, together with its wholly-owned subsidiaries, is a leading global provider of outsourcing business solutions for investment processing, mutual fund processing, and investment management for the financial services industry. As of December 31, 2003, through our subsidiaries and partnerships in which we have a significant interest, we managed almost $90 billion in assets and administered almost $254 billion in mutual fund and pooled assets and operated 22 offices in 11 countries.

We were incorporated in the Commonwealth of Pennsylvania in 1968. Our corporate headquarters is located at One Freedom Valley Drive, Oaks, Pennsylvania, 19456. We initially offered our shares to the public in 1981 and our common stock is listed on The NASDAQ National Market under the symbol “SEIC.”

Today, financial organizations face greater and more complicated challenges than in the past. They must improve efficiency and profitability during periods of economic expansion and contraction. Our mission is to deliver comprehensive business solutions to our clients by focusing on innovative, complete business solutions strongly enabled by technology. These business solutions employ an operational model that is both scalable and leverageable across all business lines. We are organized around the markets we serve and can leverage cross-market learning. This enables us to deliver solutions that can satisfy the needs of our clients regardless of the financial sector in which they operate. It is our belief that this client-centric structure differentiates us from our competitors.

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Products and Services

Investment Processing

Our investment processing solution is supported by our proprietary software system, TRUST 3000^®. We use this system for many of our business solutions to track investment activities in multiple types of investment accounts, including personal trust, corporate trust, institutional trust, and non-trust investment accounts. TRUST 3000^® is a complete trust accounting and investment system that provides straight-through processing for investment transactions. TRUST 3000^® offers investment management functionality through integrated products and sub-systems that support investment accounting, client administration, portfolio analysis, reporting, and trade-order processing for both domestic and global securities. This core accounting application combines comprehensive trust and securities accounting with integrated and automated front, middle, and back-office solutions. Clients can manage their front-office operations through the use of our systems to maintain and service their clients. The middle-office performs the administrative activities of the front-office and provides the connection between the front-office and the investment operations area, which is the back-office. Clients can outsource their entire middle and back-office operations to us. All of our software components are either fully integrated or in the process of being fully integrated with TRUST 3000^® to provide a single platform solution with straight-through business processing from the front-office directly to the back-office.

Investment Management Programs

Our investment management products consist of mutual funds and separate account programs offering a range of investment solutions to help clients satisfy their investment management requirements. These include a series of money market, equity, fixed-income and alternative investment portfolios, primarily in the form of registered investment companies. We serve as the administrator and transfer agent for the mutual funds and also act as the investment advisor for many of these products. The investment advisory and administration contracts are subject to annual renewal by the Board of Trustees of the Funds. These contracts provide for the payment of fees to us based on a percentage of the average daily net assets of each fund.

We utilize a disciplined investment process that focuses on investors’ objectives. This investment process is based on five principles: asset allocation, portfolio structure, tax management, multiple specialist managers, and continuous portfolio management. The investment management programs allow access to some of the best style-specific money managers who are normally not available to individual investors. This innovative approach, called Manager-of-Managers, ensures adherence to our disciplined investment principles in that each manager’s performance is tracked and scrutinized. The potential benefit of this method is improved performance with reduced volatility, because it eliminates the task of attempting to predict which style of investing will be in favor at any particular time. We maintain the asset class exposure within the specifically defined boundaries of our client’s asset allocation plan by incorporating a formal rebalancing program in the asset management process.

As of December 31, 2003, we managed $74.9 billion in total assets, including $13.3 billion invested in our liquidity funds and $61.6 billion invested in our fixed-income and equity funds or through separately managed account programs.

Fund Processing

We are a full service provider of administration and distribution support services to mutual funds, hedge funds, fund of funds, private equity funds and other types of investment funds. Typically, the client is the fund sponsor and investment advisor, and the funds are sold primarily to customers of the client. Administration services include, among other things, some or all of the following: fund accounting, trustee and custodial support, legal support, transfer agency and shareholder servicing. Fund accounting services consist of investment tracking, fund valuation, investment and tax reporting, regulatory compliance and daily support. Distribution support services range from providing high level market and industry insight and analysis to identifying distribution opportunities and establishing a sound marketing strategy to launch new products. These services also include expanding the distribution of existing products. This can include assistance with developing and executing business and marketing plans for our clients’ funds.

As of December 31, 2003, we administered $163.2 billion in non-SEI mutual funds and other pooled assets.

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Business Segments

Products and services are offered as complete outsourced business solutions to the financial services industry. We are organized around our target markets. Financial information about each segment is contained in Note 12 to the Consolidated Financial Statements. Our business segments are:

Private Banking and Trust - provides investment processing, fund processing, and investment management solutions to banks and other trust institutions located in the United States;

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

Enterprises - provides retirement and treasury solutions to corporations, unions, municipalities, and hospitals, and an endowment solution for the not-for-profit market in the United States;

Money Managers - provides mutual and pooled fund processing and investment processing solutions to investment managers and mutual fund companies in the United States and to investment managers worldwide of alternative asset classes (e.g., hedge funds, fund of funds, and private equity funds);

Investments in New Businesses - provides investment management and fund processing solutions to investment advisors, corporations, and money managers located outside the United States. This segment also includes other new initiatives in United States markets.

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

Private Banking and Trust

The Private Banking and Trust segment offers our investment processing, fund processing and investment management solutions to banks and trust institutions of all sizes. The investment processing solution allows banks and trust companies to outsource trust and investment related functions. This permits the client to focus on other critical processes. We offer two outsourcing models: an application services provider, or ASP model, and a business services provider, or BSP model.

The ASP model utilizes the full functionality of our TRUST 3000^® system to handle the investment processing needs for our clients who prefer to manage their middle and back-office services internally. Clients directly access TRUST 3000^® utilizing workstations connected to our data center. The ASP model provides a dedicated relationship team that supports our client’s business, centralized data center management, application development, and operational outsourcing. We also assist our clients with reevaluating their systems and process needs as their businesses change. This ensures that scalable solutions keep pace with changing business requirements.

The BSP model was designed for institutional clients who prefer to outsource their entire trust department operations and processes by combining our technological strength and investment expertise to assume the entire back-office trust function. The BSP model includes comprehensive services in the areas of: securities, mutual fund and cash processing; account access and reporting; audit, compliance and regulatory services; custody and safekeeping of assets; income collections; securities settlement; and other related trust activities.

The ASP and BSP models require the conversion of the client’s data onto TRUST 3000^®. For a large bank conversion, a dedicated team focuses on the client and assists in business reengineering efforts. The time period for conversions can range from a few months for small institutions to 15 months for large institutions.

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Client contracts for the ASP and BSP models have terms that are from three to seven years in length. Revenues for our investment processing solution are earned as monthly fees for contracted services including computer processing services, software licenses, and trust operations services. Revenues are also earned as transaction-based fees for providing securities valuation and trade-execution services. Our principal competitors in the investment processing business for this segment include SunGard Data Systems Inc., Metavante Corporation, a division of Marshal and Isley, and other financial institutions that operate their own trust accounting systems.

We also offer banks and trust institutions a fund processing solution. Contracts with bank mutual fund complexes for fund processing services have terms that are from two to five years. Fees are primarily earned as a percentage of average assets under administration of the bank mutual fund complexes. A corresponding direct expense is also recorded for marketing services that is calculated as a percentage of average assets under administration. Our principal competitors include The BISYS Group, Inc., Federated Investors, Inc., PFPC Worldwide Inc. (a member of the PNC Financial Services Group, Inc.), State Street Bank and Trust Company, and other investment company administrators.

Some of our clients that utilize the BSP model participate in our investment management programs. Banks can offer their clients the ability to invest in our mutual funds or our separate account programs.

At December 31, 2003, we had significant relationships with approximately 175 banks and trust institutions, including trust departments of eight of the top ten largest United States banks. We also had single product relationships with an additional 200 banks and trust institutions.

Investment Advisors

The Investment Advisors segment offers business-building solutions to registered investment advisors, many of whom are affiliated with or are registered as an independent broker-dealer, financial planners, and life insurance agents located throughout the United States. The financial advisors are able to outsource many aspects of their investment process, back-office operations, marketing, and customer service to us. The business-building solution allows our clients to focus their resources on creating financial plans, implementing investment strategies, and educating and servicing their customers. These financial advisors are able to customize portfolios to include separate account managers as well as mutual funds. The investment programs we offer through these financial advisors are targeted to attract the assets of high-net-worth individual investors (defined as individuals with over $500,000 of investable assets) and small to medium-sized institutional plans.

Fees are earned as a percentage of average assets under management. At December 31, 2003, there were approximately 1,100 financial advisors who had at least $5.0 million each in customer assets invested in our mutual funds and separately managed accounts. The principal competition for our asset management products is from other investment advisors and mutual fund companies. In the advisor distributor channel, the principal competitors include Frank Russell Company, a subsidiary of Northwestern Mutual, Lockwood Advisors, Inc., a subsidiary of Bank of New York, and other broker-dealers.

Enterprises

The Enterprises segment offers a retirement outsourcing solution to corporations, unions, municipalities, hospitals, and other institutional investors located in the United States. A complete investment and administrative outsourcing solution is also offered to endowments and foundations. Clients can outsource their entire investment management needs and the administration for defined benefit and defined contribution plans as well as the administration of endowment and foundation asset pools. The outsourcing program integrates a strategic platform with the Manager-of-Managers investment process and complete plan administration services, including trustee, custodial, benefit payment services, record-keeping services, and donor administration. The strategic platform includes consulting services such as actuarial services, asset liability modeling, and the customization of an asset allocation plan that is designed to meet long-term objectives. The benefits of this approach include: (i) an investment plan designed to meet the clients long-term needs; (ii) an investment process that removes the responsibility of manager selection, reduces business risk, provides ongoing due diligence, and increases operational efficiency; and (iii) administrative services that remove the back-office responsibilities.

Fees are primarily earned as a percentage of average assets under management. At December 31, 2003, our primary client base consisted of approximately 350 clients. The principal competitor for this segment is Frank Russell Company, a subsidiary of Northwestern Mutual.

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Money Managers

The Money Managers segment offers fund and investment processing solutions to traditional investment managers located in the United States and to investment managers worldwide of alternative asset classes (e.g., hedge funds, fund of funds, and private equity funds). Contracts for our fund and investment processing solutions generally have terms ranging from one to five years.

Fees are primarily earned as a percentage of average assets under management and administration. At December 31, 2003, we provided our fund processing solutions to approximately 130 investment management companies and alternative investment managers. Our principal competitors for this segment include The BISYS Group, Inc., Citco, PFPC Worldwide Inc., a member of the PNC Financial Services Group, Inc., State Street Bank and Trust Company, and Bank of Bermuda.

Investments in New Businesses

The Investments in New Businesses segment offers several other business ventures intended to expand our investment management programs and services to private banks, high-net-worth investors, pension plans, governmental organizations, and private corporations in certain foreign countries. This segment also includes other new initiatives in United States markets.

Using the same asset management disciplines that have benefited United States clients, investment management solutions are tailored to the needs of institutional and affluent individual investors in offshore markets. Our approach is to offer a coherent global business solution consistent with our United States strategy of providing portfolio solution offerings rather than individual products. These portfolio solution offerings are focused on allocation of assets among the portfolio’s specialist money managers, and direction and evaluation of the investment services provided by these selected managers. Additionally, our services include the delivery of local investment management as part of a portfolio solution, and local distribution and marketing.

We are also expanding our investment solutions to include affluent families located in the United States. The family wealth management solution offers flexible family-office type services through a highly personalized solution while utilizing the Manager-of-Managers investment process. We have made, and will continue to make, significant investments in technology, marketing and infrastructure to develop and support our new business initiatives.

At December 31, 2003, there were approximately 150 clients for the global business and approximately 110 for the family wealth solution. Principal competitors for the global businesses are Frank Russell Company and Northern Trust. The principal competitors for the family wealth solution are private banking departments within national banks.

Other

We maintain an interest in the general partnership LSV Asset Management, or LSV. LSV is a registered investment advisor that provides investment advisory services to institutions, including pension plans and investment companies. LSV is a value-oriented, contrarian money manager that offers a deep-value investment alternative utilizing a proprietary equity investment model to identify securities that are generally considered to be out of favor by the market. LSV is currently the specialist advisor to a number of our equity mutual funds. In addition, LSV is a portfolio manager to a portion of our global investment products. At December 31, 2003, LSV managed about $18.2 billion in total assets, of which $2.5 billion were assets of SEI clients invested in our mutual funds. We account for LSV using the equity method of accounting due to our less than 50 percent ownership interest. At December 31, 2003, our interest in LSV was approximately 46 percent of the partnership’s total interests. Our portion of LSV’s net operating income was $22.5 million in 2003, $12.7 million in 2002, and $10.3 million in 2001.

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Research and Development

We devote significant resources to research and development. We spent, including amounts capitalized, approximately $56.6 million in 2003, $53.6 million in 2002, and $61.5 million in 2001 to design, develop, and modify existing or new products and services. Research and development expenditures as a percentage of sales totaled 8.9 percent in 2003, 8.6 percent in 2002, and 9.3 percent in 2001.

System requirements to satisfy the needs of the financial services industry are complex, substantial and continually evolving because of a number of factors, including, increased trading volume, introduction of new investment alternatives, changes in technology, changes in laws and regulations, and increased competition. We believe service to existing and potential clients is enhanced by substantial investments to improve existing software products and development of new products and services for the financial services industry. We will continue to emphasize the importance of research and development to enhance our competitive position in the industry. We use a combination of SEI professionals and partner firms to staff the design, development, and enhancement of our software products.

Marketing and Sales

Our business solutions are directly marketed to potential clients in our target markets. We employ approximately 90 sales representatives and they operate from offices located throughout the United States, Canada, Western Europe, South Africa and other locations.

Customers

In 2003, no single customer accounted for more than ten percent of revenues in any industry segment.

Personnel

At February 27, 2004, we had 1,858 full-time and 57 part-time employees. None of our employees are unionized. Management considers employee relations to be generally good.

Regulatory Considerations

Our principal wholly-owned subsidiaries are SEI Investments Distribution Company, or SIDCO, SEI Investments Management Corporation, or SIMC, and SEI Private Trust Company, or SPTC. SIDCO is a broker-dealer registered with the SEC under the Securities and Exchange Act of 1934 and is a member of the National Association of Securities Dealers, Inc. SIMC is an investment advisor registered with the SEC under the Investment Advisers Act of 1940. SPTC is a federal savings and loan organization chartered and regulated by the United States Office of Thrift Supervision. In addition, various SEI subsidiaries are subject to the jurisdiction of regulatory authorities in the United Kingdom and the Republic of Ireland.

SIDCO and SIMC are subject to various federal and state laws and regulations that grant supervisory agencies, including the SEC, broad administrative powers. In the event of a failure to comply with these laws and regulations, the possible sanctions that may be imposed include the suspension of individual employees, limitations on the permissibility of SIDCO, SIMC, SEI, and our other subsidiaries to engage in business for specified periods of time, the revocation of applicable registration as a broker-dealer or investment advisor, as the case may be, censures, and fines. SPTC is subject to laws and regulations imposed by federal and state banking authorities. In the event of a failure to comply with these laws and regulations, restrictions, including revocation of applicable banking charter, may be placed on the business of SPTC. Additionally, the securities and banking laws applicable to us and our subsidiaries provide for certain private rights of action that could give rise to civil litigation. Any litigation could have significant financial and non-financial consequences including monetary judgments and the requirement to take action or limit activities that could ultimately affect our business.

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

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Bank clients are subject to supervision by federal and state banking authorities concerning the manner in which such clients purchase and receive our products and services. Plan sponsor clients are subject to supervision by the Department of Labor and compliance with employee benefit regulations. Investment advisor and broker-dealer clients are regulated by the SEC and state securities authorities. Existing or future regulations applicable to our clients may affect our clients’ purchase of our products and services.

During a routine examination of our broker-dealer subsidiary, SIDCO, conducted by the staff of the SEC’s Philadelphia Regional Office, the staff identified violations in early 2003 and prior periods of certain provisions of the Securities Exchange Act of 1934, including violations of the Act’s net capital, customer protection, reporting and books and records provisions. These violations resulted, in part, from amounts attributable to a SIDCO affiliate being commingled in a SIDCO account established pursuant to the customer protection provisions of Rule 15c3-3(k)(2)(i). SIDCO has submitted an offer of settlement to the SEC. Pursuant to the offer of settlement, SIDCO would be censured and ordered to cease and desist from committing or causing violations of Section 15(c)(3) and 17(a) of the Act and Rules 15c3-1, 15c3-3, 17a-3, 17a-5 and 17a-11, thereunder. SIDCO would pay a civil monetary penalty of $375,000, which was recorded in 2003, and has agreed to various undertakings, including, among other items, employing an independent consultant to review and make findings concerning SIDCO’s internal controls, policies, practices and procedures. SEI Investments Company has also submitted an offer of settlement to the SEC covering the same activity. Pursuant to the offer of settlement, SEI will be ordered to cease and desist from causing SIDCO’s violations of the above noted provisions of the Securities Exchange Act of 1934 and rules thereunder. No additional penalties are imposed on SEI in its offer of settlement. No customer of SEI or SIDCO experienced any monetary losses as a result of these violations.

We believe that we have corrected the issues noted by the SEC and we are committed to increasing our compliance activities to prevent any recurrences.

In addition, see the discussion of governmental regulations under the caption “Factors That May Affect Our Results” below for a description of the risks that proposed regulatory changes may present for our business.

Factors That May Affect Our Results

We believe that the risks and uncertainties described below are those that impose the greatest threat to the sustainability of our business. However, there are other risks and uncertainties that exist that may be unknown to us or, in the present opinion of our management, do not currently pose a material risk of harm to us. The risk and uncertainties facing our business, including those described below, could materially adversely affect our business, results of operations, financial condition or liquidity.

Our revenues and earnings are affected by changes in the capital markets. A significant portion of our revenues are asset-based fees, which are derived from the assets we manage and administer. Economic uncertainty and volatile capital markets may influence an investor’s decision to invest in and maintain an investment in a mutual fund or other investment product. As a result, the value of the assets we manage and administer could fluctuate and cause a reduction in our revenues and earnings.

Changes in interest rates may affect fees from our money market funds. Interest rates during the past several years have remained relatively low. The effect of changing interest rates may prompt investors to redeem their shares in our money market funds for other securities offering higher yields. These redemptions would cause a decline in the amount of money market assets we manage, thereby negatively affecting our revenues.

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

Consolidation within our target markets may affect our business. Merger and acquisition activity within our target markets is a major strategic issue for us. Consolidations between banks and other financial institutions could reduce our existing client base and the number of potential clients. This activity may also cause larger institutions to internalize some or all of our services. These factors may negatively impact our ability to generate future growth in revenues and earnings.

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Our business is subject to extensive governmental regulation. Our various business activities are conducted through entities which may be registered with the SEC as an investment advisor, a broker-dealer, a transfer agent, an investment company, or with the United States Office of Thrift Supervision or state banking authorities as a trust company. Our broker-dealer is also a member of the 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 our business. We have responded and are currently responding to various regulatory requests and are generally implementing changes and reviewing our compliance procedures and business operations.

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

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

We are exposed to operational risks. Operational risk generally refers to the risk of loss resulting from our operations, including, but not limited to, improper or unauthorized execution and processing of transactions, deficiencies in our operating systems, business disruptions and inadequacies or breaches in our internal control processes. We operate different businesses in diverse markets and are reliant on the ability of our employees and systems to process large volumes of transactions often within short time frames. In the event of a breakdown or improper operation of systems, human error or improper action by employees, we could suffer financial loss, regulatory sanctions or damage to our reputation. In order to mitigate and control operational risk, we continue to enhance policies and procedures that are designed to identify and manage operational risk.

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

Available Information

We maintain a website at www.seic.com and make available free of charge through the Investor Information section of this website our annual reports on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and all amendments to those reports filed or furnished pursuant to Section 13(a) or 15(d) of the Exchange Act as soon as reasonably practicable after we electronically file such material with, or furnish it to, the SEC. We include our website in this Annual Report on Form 10-K only as an inactive textual reference and do not intend it to be an active link to our website. The material on our website is not part of this Annual Report on Form 10-K.

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Item 2. Properties.

Our corporate headquarters is located in Oaks, Pennsylvania and consists of seven buildings situated on approximately 90 acres. We own and operate the land and buildings, which encompass approximately 400,000 square feet of office space. In early 2004, we completed a 34,000 square foot data center facility at our corporate headquarters. We lease approximately 67,500 square feet of office space in Wayne, Pennsylvania for our mutual funds operations. This lease expires in June 2004 and that operation will be moved to the existing corporate headquarters. All other offices we lease aggregate 64,000 square feet. Additionally, we own a 3,400 square foot condominium that is used for business purposes in New York, New York.

Item 3. Legal Proceedings.

There are no legal proceedings to which we are a party or to which any of our properties is subject that we believe will have a material adverse effect on our business.

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

There were no matters submitted to a vote of security holders during the fourth quarter of 2003.

Executive Officers of the Registrant

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

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PART II

Item 5. Market for the Registrant’s Common Equity and Related Stockholder Matters.

Price Range of Common Stock:

Our common stock is traded on The NASDAQ National Market under the symbol “SEIC.” The following table shows the high and low sales prices for our common stock as reported by The NASDAQ National Market for the periods indicated below.

As of February 27, 2004, we estimate that we had approximately 700 shareholders of record. Our board of directors declared a $.07 dividend in May 2003 and a $.09 dividend in December 2003, and a $.06 dividend in each of May and December 2002 (See Note 8 to the Consolidated Financial Statements).

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Item 6. Selected Financial Data.

(In thousands, except per-share data)

The following table represents selected consolidated financial information for the five-year period ended December 31, 2003. This data should be read in conjunction with the financial statements and “Management’s Discussion and Analysis of Financial Condition and Results of Operations” included in this report.

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Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operation.

(In thousands, except per-share data)

This discussion reviews and analyzes the consolidated financial condition at December 31, 2003 and 2002, the consolidated results of operations for the past three years, and other factors that may affect future financial performance. This discussion should be read in conjunction with the Selected Financial Data included in Item 6 of this report and the Consolidated Financial Statements and Notes to the Consolidated Financial Statements included in Item 8 of this report.

Results of Operations

Consolidated Overview

Our operations are organized into five business segments that offer different business solutions tailored to meet the needs of particular markets. Reportable segments are: Private Banking and Trust, Investment Advisors, Enterprises, Money Managers, and Investments in New Businesses. The accounting policies of our business segments are the same as those used in the preparation of the consolidated financial statements. Management evaluates financial performance of our operating segments based on Income from operations.

Revenues and Income from operations by segment for 2003, 2002, and 2001 were as follows:

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Consolidated revenues increased $6.6 million, or one percent, to $636.2 million in 2003 compared to 2002, but declined $28.4 million, or four percent, to $629.6 million in 2002 compared to 2001. The increase in our revenues in 2003 was primarily driven by the generation of new client sales in the Money Managers, Enterprises and Investments in New Businesses segments. Asset-based fees across all of the segments in 2003, except Private Banking and Trust, increased due to improved capital market conditions during the latter half of 2003, whereas, asset based fees during 2002 were negatively affected by poor capital markets in all of our segments. Revenues in the Investment Advisors and Enterprises segments during 2003 were impacted by the recognition of approximately $6.4 million in non-recurring brokerage fees. The non-recurring brokerage fees were for transition management services provided to our mutual funds during a portfolio restructuring resulting from a change in the funds’ sub-advisors. Revenue decreased in the Private Banking and Trust segment in both comparable periods, mainly due to the loss of several large bank clients in our fund processing business which significantly reduced total administration fees. Also, revenues in this segment were affected by a decrease in non-recurring project fees for our ASP solution and transaction-based fees from our brokerage services.

Consolidated income from operations declined $3.6 million in 2003, or two percent, after increasing $26.6 million, or 15 percent, in 2002 compared to 2001. Operating margin declined to 32 percent in 2003 after improving to 33 percent in 2002. The decline in operating income and operating margin in 2003 was primarily attributable to increased investment spending for the development of new products and services. A portion of this increased spending was capitalized. In 2002, we continued to make significant investments for the development of new products and services, but sharpened our investment priorities to better focus our efforts. Income from operations and operating margin in both comparable periods was supported by cost containment efforts and reduced discretionary spending that focused on marketing, consulting, and annual incentive compensation payments. A portion of our personnel costs are sales commissions and non-sales bonus payments that are tied to performance goals at the corporate and segment levels. The actual amount of bonuses to be paid for the year is a function of actual performance relative to established targets.

Other income includes our percentage of net earnings from our unconsolidated affiliate, realized gains and losses from available-for-sale securities, and interest income and expense. Other income increased $4.9 million, or 37 percent, in 2003 but decreased $1.9 million, or 13 percent, in 2002 compared to 2001. Earnings from the unconsolidated affiliate increased $9.8 million during 2003 due to growth in assets under management from new business and improved capital markets. Other income was negatively affected by net realized losses from available-for-sale securities of $6.9 million in 2003 and $2.4 million in 2002.

Diluted earnings per share in 2003 grew at a greater rate of growth as compared to net income because of a decrease in the number of shares used to calculate diluted earnings per share, a direct result of our stock repurchase program.

The general business climate that existed during the past few years included volatile capital markets, economic uncertainty and delayed strategic decisions by our clients and by the customers of our clients. This resulted in reduced asset-based fees due to fewer assets under management and administration, redemption of existing assets, and a reduction in the inflow of new assets. If the economy continues to recover, we are optimistic about our ability to generate new business and cross-sell our services to existing clients as they seek new alternatives to generate revenue growth while controlling costs. However, continued adverse volatility in the capital markets could negatively affect our future revenues and earnings.

As has been the case in prior years, consolidations among our bank clients continue to be a strategic challenge for our Private Banking and Trust segment. The impact of bank consolidations, including recent merger announcements, could positively or negatively alter our client base and significantly affect our revenues and earnings.

We expect continued investment in initiatives related to the development of new solutions that can be leveraged across our business segments, and continued expansion of our global businesses. We remain optimistic about the long-term prospects for all of our initiatives.

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Asset Balances

(In millions)

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 total assets of our clients or their customers invested in our equity and fixed-income investment programs, and liquidity funds for which we provide asset management services. Assets under management and administration consist of 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.

Private Banking and Trust

Total revenues for this segment declined $21.5 million, or six percent, in 2003, compared with 2002, and $27.0 million, or eight percent, in 2002 compared with 2001. The decrease in total revenues during 2003 and 2002 was primarily attributable to the loss of fund processing clients. Also, revenues in both comparable periods were affected by non-recurring project fees and transaction based fees.

Investment processing fees decreased $6.9 million, or three percent, during 2003 but increased $5.0 million, or two percent, in 2002. A decrease in non-recurring project fees affected revenues in both comparable periods and was the primary driver for lower investment processing fees during 2003. An increase in our recurring revenues from the ASP and BSP solutions served to partially offset some of this decrease. A decrease in transaction based fees also contributed to lower 2003 revenues.

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Fund processing fees declined in both comparable periods primarily due to client losses which negatively impacted assets under administration and the associated asset-based fee revenues. Revenues decreased $12.4 million, or 22 percent, in 2003, compared with 2002 and $29.5 million, or 35 percent, in 2002, compared with 2001. The decrease in fund processing fees in 2002 was also attributed to unfavorable capital markets.

Operating income decreased $12.3 million, or nine percent, in 2003, compared with 2002, and $6.2 million, or four percent, in 2002, compared with 2001. The decrease in operating income in both comparable periods was mainly due to depressed revenues, as previously mentioned, net of the decrease in direct expenses associated with these lost revenues. Margins were mainly supported by our ability to manage discretionary spending effectively, especially in the areas of marketing, consulting and annual incentive and sales compensation payments.

Investment Advisors

Revenues increased $6.9 million in 2003, or five percent, compared with 2002, but declined $5.8 million in 2002, or four percent, compared with 2001. Revenues in 2003 benefited from the recognition of approximately $3.2 million in non-recurring brokerage fees and an increase in asset-based fees mainly due to improved capital market conditions. The decrease in revenues in 2002 from 2001 was primarily due to a devaluation of assets under management due to poor capital market conditions. Although average assets under management increased in 2003 relative to 2002 due to market appreciation, net cash flows into our mutual funds for the year decreased due to higher than normal redemption activity. Some of the redemption activity resulted from our efforts to reposition ourselves within this business.

Operating income and margins were up in each comparable period. Operating income for 2003 increased $7.7 million, or ten percent, compared with 2002, and increased $16.9 million in 2002, or 28 percent, compared with 2001. Improvements in operating income and margins in 2003 were mainly due to the increase in revenues previously described and the continuation of certain cost containment measures. These improvements, however, were offset by higher investment spending for new products and services and the recognition of certain one-time costs. Operating income and margin improvement in 2002 came mostly from cost containment measures in the areas of incentive compensation costs and marketing expenditures.

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Enterprises

Revenues increased $6.2 million during 2003, or 11 percent, compared with 2002 after declining $8.6 million in 2002, or 13 percent, compared with 2001. Growth in revenues in 2003 was primarily driven by the generation of new client sales, $3.2 million in non-recurring brokerage fees, and an increase in assets under management from improved capital markets. The decline in revenues in 2002 was mainly due to the impact of negative capital markets and the loss of two retirement solutions clients in late 2001.

Operating income and margins increased in both comparable periods. Operating income in 2003 grew because of the growth in revenues discussed previously coupled with the continuation of our efforts to control discretionary expenses. The rise in operating income and margin in 2002 relative to 2001 was chiefly attributable to lower expenses in the areas of marketing and incentive compensation. We also benefited from a decrease in technology development costs in 2002 with the completion of our Treasury trading platform in 2001.

Money Managers

Revenues increased $8.8 million in 2003, or 19 percent, compared with 2002 and $9.9 million in 2002, or 27 percent, compared with 2001. Revenue growth for the past two years was primarily from sales of new business. The alternative investment market provided the majority of our new business activity in 2003 and 2002. In this particular market, we added 25 new clients in 2003, and 28 clients in 2002. Better capital markets in 2003 helped boost revenues whereas poor capital markets during 2002 constricted revenue growth.

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Operating income increased to $9.1 million in 2003 from $8.9 million in 2002. Operating margin declined three percentage points in 2003 relative to 2002 due to spending associated with new product offerings and enhancing our infrastructure. A substantial portion of this spending was for increased personnel and other operating costs intended to differentiate our existing product offerings and introduce an outsourcing solution for separately managed accounts. The increase in operating margin of five percentage points in 2002 relative to 2001 was supported by measures to control discretionary costs.

Investments in New Businesses

Revenues increased in both comparable periods, rising $6.2 million in 2003, or 14 percent, compared with 2002, and $3.2 million in 2002, or eight percent, over 2001. The year over year increases in revenues are primarily due to new business activity. Most of the revenue growth came from the global institutional business in both the U.K. and Canada, as well as, in the individual advisor and private banking distribution channels as our product offerings continue to gain market acceptance.

Losses from operations increased by $3.4 million in 2003, or 23 percent, compared with 2002. This increase in operating losses is attributable to continued investments in globalizing our business, including infrastructure expenses and increased expenditures in sales and marketing. Also, we continue to invest in new U.S. initiatives to help ultra-high-net-worth investors manage their wealth. These investments include technology, marketing, and infrastructure-related costs. We expect continued investments in both our global and family-wealth businesses in 2004. Operating losses and margin improvement in 2002 as compared with 2001 were affected by increased revenues, a reduction in our investment spending, and some cost containment measures.

General & Administrative

General and administrative expense includes corporate overhead costs and other costs not directly attributable to any of our business segments. Compliance with existing and future regulations and responding to and complying with recent regulatory activity affecting our businesses is a key priority. We have responded and are currently responding to various regulatory examinations and requests and are generally implementing changes and reviewing our compliance procedures. These activities resulted in additional general and administrative costs during 2003 and may continue to result in higher general and administrative costs in 2004.

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Other Income

Other income consists of the following:

Equity in the earnings of unconsolidated affiliate includes our less than 50 percent ownership in the general partnership LSV Asset Management, or LSV (See Note 5 to the Consolidated Financial Statements). The increase in net earnings of LSV in 2003 and 2002 was mainly due to an increase in assets under management from new business activity. Earnings in 2002 were also partially boosted by increases in performance-based fees.

Net loss from investments in 2003 includes a loss of $6.0 million from a decline in the fair value of derivative financial instruments, whereas, 2002 included a gain of $2.0 million from an increase in the fair value of derivative financial instruments. These derivative financial instruments are used to minimize the price risk associated with changes in the fair value of our seed investments in new investments being offered. These derivative financial investments did not qualify for hedge accounting under current accounting rules. As a result, changes in the fair value of these derivative financial instruments were recorded in current period earnings whereas the change in the fair value of the hedged asset will be realized upon sale in future period earnings. Management’s decision to enter into derivative financial instruments that do not qualify for hedge accounting may cause volatility in quarterly earnings. Net loss from investments in 2002 also includes a charge of $3.9 million for other-than-temporary declines in market value (See Notes 3 and 4 to the Consolidated Financial Statements). Net loss from investments in 2003 also includes the write-off about $1.2 million associated with an investment in a private technology company.

Interest income is earned based upon the amount of cash invested in interest bearing accounts. Fluctuations in interest income recognized for one period in relation to another is due to changes in the average cash balances invested for the period and/or changes in interest rates. Interest income was down in 2003 and 2002 due to lower interest rates despite an increase in our average cash balances.

Our interest expense is directly attributable to our long-term debt and other borrowings. Interest expense fluctuations result from debt transactions or changes in interest rates. Interest expense during the past three years has increased mainly due to new borrowings, net of principal payments against existing debt arrangements and lower interest rates. A portion of our interest expense in 2002 and 2001 was capitalized because some of our debt was used for the construction of an additional building at our corporate headquarters.

Income Taxes

Our effective tax rate was 36.25 percent in 2003, 37.0 percent in 2002, and 37.0 percent in 2001. The rate reduction in 2003, compared to 2002, was due to an increase in the amount of research and development expenditures for which we are claiming a tax credit and a reassessment of valuation allowance for capital losses. Certain expenditures associated with research and development which qualified for a tax credit reduced our tax liability and effective tax rate.

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Liquidity and Capital Resources

Cash requirements and liquidity needs are expected to be funded through our cash flow from operations and our capacity for additional borrowing. We currently have a credit facility that provides for borrowings of up to $200.0 million. The availability of the credit facility is subject to compliance with certain covenants set forth in the agreement (See Note 6 to the Consolidated Financial Statements). At December 31, 2003, our unused sources of liquidity consisted of unrestricted cash and cash equivalents of $200.0 million and the credit facility of $200.0 million.

Net cash provided by operating activities grew $2.3 million in 2003 and $1.4 million in 2002 from the prior comparable years primarily from an increase in income and favorable working capital trends through improved productivity and lower discretionary costs. However, net cash from operating activities in both comparable periods were negatively affected by the reduced tax benefit received from stock option exercises.

Net cash used in investing activities primarily includes capital expenditures and purchases and sales of available-for-sale securities. Capital expenditures for property, plant and equipment were $23.7 million in 2003, $24.8 million in 2002, and $40.3 million in 2001. Our capital expenditures were primarily for the expansion of our corporate headquarters. We completed the construction on our new data center in early 2004 and we also completed construction of an additional building and parking structure in 2002. Purchases and sales of our mutual funds and other securities were mainly for the testing and subsequent startup of new investment programs to be offered to our clients. Purchases were approximately $57.4 million in 2003, $23.8 million in 2002, and $69.6 million in 2001. Sales totaled $52.4 million in 2003, $30.7 million in 2002, and $24.6 million in 2001 (See Note 3 to the Consolidated Financial Statements). Capitalized software development costs were $10.4 million in 2003 and $3.3 million in 2002. This increase was due to a higher amount of software development costs eligible for capitalization (See Note 1 to the Consolidated Financial Statements).

Net cash used in financing activities primarily includes principal payments on our debt, the repurchase of our common stock and dividend payments. Principal payments on our long-term debt were $12.0 million in 2003, $7.6 million in 2002 and $3.4 million in 2001. In 2001, we borrowed $25.0 million as a term loan from a lending institution. Our long-term debt is subject to various covenants contained in each lending agreement. Currently, these covenants do not negatively affect our liquidity. During 2003, we replaced our $50.0 million line of credit with a $200.0 million credit facility. The credit facility was generated through a syndicate of lenders and may be used for general corporate purposes, including the repurchase of our common stock (See Notes 6 and 7 to the Consolidated Financial Statements).

Our board of directors has authorized the repurchase of our common stock of up to $753.4 million. During 2003, we repurchased approximately 3.5 million shares of our common stock at a cost of $95.5 million. As of February 27, 2004, we still had $51.4 million of authorization remaining for the purchase of our common stock under this program (See Note 8 to the Consolidated Financial Statements).

Cash dividends paid were $13.7 million or $.13 per share in 2003 and $12.1 million or $.11 per share in 2002. Our board of directors declared a cash dividend of $.09 per share on December 16, 2003. The dividend was paid on January 22, 2004 for $9.4 million.

We believe our operating cash flow, available borrowing capacity, and existing cash and cash equivalents should provide adequate funds for continuing operations; continued investment in new products and equipment; our common stock repurchase program; expansion of our corporate headquarters; future dividend payments; and principal and interest payments on our long-term debt.

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Off-Balance Sheet Arrangements

We have no off-balance sheet financing arrangements or transactions with structured finance and special purpose entities. Our off-balance sheet commitments are generally limited to future payments under non-cancelable operating leases for facilities, data processing equipment, and software and other maintenance agreements.

Contractual Obligations

The following table lists all of our future commitments:

Critical Accounting Policies

The accompanying consolidated financial statements and supplementary information were prepared in accordance with accounting principles generally accepted in the United States. Our significant accounting policies are discussed in Note 1 to the Consolidated Financial Statements. Inherent in the application of many of these accounting policies is the need for management to make estimates and judgments in the determination of certain revenues, expenses, assets and liabilities. Materially different financial results can occur as circumstances change and additional information becomes known. We believe that the following accounting policies require extensive judgment by our management to determine the recognition and timing of amounts recorded in our financial statements.

Revenue Recognition:

Revenues are recognized in the periods in which the related services are performed provided that pervasive evidence of an agreement exists, the fee is fixed or determinable, and collectibility is reasonably assured. Cash received by us in advance of the performance of services is deferred and recognized as revenue when earned. Our principal sources of revenues are: (1) information processing and software servicing fees that are recurring in nature and earned based on the number of trust accounts being serviced and non-recurring project fees that are determined upon contractual agreements; and (2) asset management, administration and distribution fees calculated as a percentage of the total average daily net assets under management or administration. The majority of our revenues are based on contractual arrangements and do not require judgment by management. Certain portions of our revenues do require management’s consideration to determine the amount and timing of recognition.

Allowance for Doubtful Accounts:

We maintain an allowance for doubtful accounts for estimated losses resulting from the inability of some of our clients to make their scheduled payments. The allowance for doubtful accounts is primarily based on an aging analysis of the total outstanding receivables balance at each balance sheet date. Other factors are considered in determining the adequacy of the allowance for doubtful accounts, such as historical trends, the financial condition of our clients and other factors that may be deemed appropriate. Based upon this analysis, the allowance for doubtful accounts is adjusted to an amount that is sufficient to cover expected losses from doubtful accounts.

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Investments Available For Sale:

We value our investments in marketable securities based on quoted market prices. We review our investments in marketable securities on a quarterly basis with regard to impairment. Factors considered in determining other-than-temporary impairment are significant or prolonged declines in the fair value of our investments, our ability and intent to retain the investment for a period sufficient to allow the value to recover, and the financial condition of the investment. After considering these factors, if we believe that a decline is other-than-temporary, the carrying value of the investment is written down to its fair value through current period earnings.

Computer Software Development Costs:

We utilize internally developed computer software as part of our product offering. In the development of a new software product, substantial consideration must be given by management to determine whether costs incurred are research and development costs, or internal software development costs eligible for capitalization. Management must consider a number of different factors during their evaluation of each computer software development project that includes estimates and assumptions. Costs considered to be research and development are expensed as incurred. After meeting certain requirements, internal software development costs are capitalized as incurred.

The recoverability of capitalized computer software development costs requires considerable judgment by management which includes, but is not limited to, an evaluation of expected future revenues and cash flows, acceptability of the product in the market, the ability to support the product in a cost-effective manner, technological enhancements and any other factor deemed appropriate. If management determines that certain software products are considered either obsolete or incapable of producing sustainable future cash flows, an impairment charge would be required. The amount of the impairment charge would be based on estimates of the software’s anticipated future cash flows compared to its book value.

Income Tax Accounting:

The computation of our income tax expense requires the interpretation of complex tax laws and regulations in many taxing jurisdictions around the world. Actual income tax expense can differ significantly from our estimates.

Deferred tax assets and liabilities are recognized for the future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases and operating loss and tax credit carryforwards. We assess the recoverability of deferred tax assets based on our estimated future taxable income and tax strategies. We also recognize a liability for expected future tax contingencies. We assess the liability based on our review of various tax issues and interpretations of tax law. Differences between our estimates and actual results could have a significant impact to our consolidated results of operations, financial position, or liquidity.

The assessment of critical accounting policies is not meant to be an all-inclusive discussion of the uncertainties to financial results that can occur from the application of the full range of our accounting policies. Materially different financial results could occur in the application of other accounting policies as well. Also, materially different results can occur upon the adoption of new accounting standards.

New Accounting Pronouncements

See the discussion of New Accounting Pronouncements in Note 1 to the Consolidated Financial Statements.

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Item 7A. 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 a substantial portion of such investments having initial maturities of three months 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 months. 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 deposits are maintained with financial institutions in excess of federally insured limits. 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 customer represents greater than ten percent of total accounts receivable.

Foreign Currency Risk – We transact business in the local currencies of various foreign countries, principally Canada, Ireland, the United Kingdom and South Korea. The total of all of our foreign operations accounts for less than ten 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 investments in marketable securities relating to the startup of new pooled investment offerings. The length of time that funds remain invested in these new pooled investment offerings is dependent on client subscriptions. We will redeem our investments as clients subscribe to these new investment offerings. To provide protection against potential fair value changes for these investments, we have entered into various derivative financial instruments. As of December 31, 2003, we held derivative financial instruments with a notional amount of $26.9 million with various terms, generally less than two years. Changes in the fair value of the derivative financial instruments are recognized in current period earnings, whereas, the change in the fair value of the investment is recorded on the balance sheet in other comprehensive income. Therefore, changes in the fair value of the derivative financial instrument and changes in the fair value of the investment are not recognized through earnings in the same period. We did not enter into or hold any derivative financial instruments for trading purposes during 2003 or 2002.

We recorded an impairment charge of $0.6 million in 2003 and $3.8 million in 2002 related to other-than-temporary declines in the fair value of certain securities held within our investment portfolio. Also, current period earnings includes a loss of $6.0 million in 2003 compared to a gain of $4.2 million in 2002 relating to changes in the fair value of derivative financial instrument. The aggregate effect of a hypothetical ten percent change in the fair value of these derivative financial instruments would not be material to our results of operations, financial position, or liquidity.

Market Risk – 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.

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Item 8. Financial Statements and Supplementary Data.

Index to Financial Statements: