Practice Management UpdateFirst Quarter 2001

April 17, 2001SEI Advisor Network

• Market and SEI Performance Overview for 1st Qtr

• Recent Enhancements to SEI’s Implementation Strategy

• Expectations Going Forward

• Presentation of 2nd Qtr Advisor Tool Kit

• Questions & Answers

Today’s Agenda

11stst-Quarter Market Conditions-Quarter Market ConditionsValidate Validate SEISEI’s’s Investment Management ApproachInvestment Management Approach

Diversification• Portfolios benefited from diversification into bonds • Equity funds benefited from diversification into value stocks

Strong Managers• Disciplined managers, each with a targeted sub-style• Long-term performance, e.g. Sanford Bernstein, LSV, Cap Guardian

SEI’s Active Management of Managers• Moved from Mellon to Deutsche in Large Cap Value Fund• Moved from Mellon to Parametric, and Addition of Peregrine, in Tax-

Managed Large Cap Fund

Talking Points - I

Talking Points - II11st-st-Quarter Tracking Errors Were Negative and Quarter Tracking Errors Were Negative and

Sometimes Larger Than ExpectedSometimes Larger Than Expected

• SEI is closely monitoring the performance of all managers in this bear market.

• Large, negative tracking errors have happened before. In the past, negative deviations were reversed in subsequent quarters.

• For example, the Large Cap Growth Fund under-performed by more than two percentage points in the 3rd quarter 1998, only to be followed by two consecutive quarters of 2% out-performance.

• We are confident that the 1st quarter deviations do not signal fundamental problems with our managers or our portfolios, and do not put at risk our long-term performance.

Market and Performance OverviewFirst Quarter 2001

Economic and Financial Review

Poor market fundamentals and deteriorating economic situation during the first quarter were due to:

• Higher oil prices• Tight monetary policy during 2000• Overcapacity in technology sector• Shaken consumer confidence

It’s surprising that the economy held up as well as it did, even as the markets did not.

• The US economy is on its own these next few months

• Benefits of lower interest rates and tax cuts are expected by Q-4

• Consumers will support the economy in second and third quarters

• Stocks historically anticipate economic shifts by 4 to 5 months

• If this trend continues, the market bloodletting may soon be over

• Bear markets don’t last forever, they just feel like they do!

Expansion Start Date

Upturn in S&P 500 Lead Time

May 1954 Sep 1953 8 months

April 1958 Dec 1957 4 months

Feb 1961 Oct 1960 4 months

Nov 1970 July 1970 4 months

Mar 1975 Dec 1974 3 months

July 1980 April 1980 3 months

Nov 1982 Aug 1982 3 months

Mar 1991 Oct 1990 5 months

Average Lead Time: 4.3 months

Economic and Financial Prospects

Equity Markets Crumbled

75%

100%

125%

150%

175%

200%

225%

250%

99 00 01

DJIA Nasdaq Wilshire 5000

Returns Performance of the Dow, the Nasdaq and the Wilshire 5000Returns Performance of the Dow, the Nasdaq and the Wilshire 50001999 to 2001 Q11999 to 2001 Q1

Note: All indexes set to 100 on January 2, 1999

Diversification Proves Its Value

-30%

-25%

-20%

-15%

-10%

-5%

0%

5%

10%

Nasdaq Int'l Stocks Wilshire5000

EmergingMarketStocks

Int'l FixedIncome

EmergingMarketDebt

MunicipalBonds

US FixedIncome

High YieldBonds

First Quarter Returns of Selected Asset Classes and Market IndicesFirst Quarter Returns of Selected Asset Classes and Market Indices

SEI Portfolio Performance: Annual Returns2001 Q1 2000 1999 1997

Note: Index Blended Benchmarks are gross returns, while SEI specific portfolios are net returns. Outperformance in BOLD.

Active Tax-Managed (ATM) 60

Active Tax-Managed (ATM) 100Index Blended Benchmark

Index Blended Benchmark

TAX-MANAGED-6.86-6.45

-12.23-11.60

-14.45-11.16

17.2616.41

28.1126.12

Institutional Growth & Income (60 / 40) -7.58Index Blended Benchmark -6.78

Institutional Equity (100) -13.63Index Blended Benchmark -12.31

INSTITUTIONAL-4.40-4.97

-12.43-12.64

14.0513.38

20.8519.52

Domestic Equity (100) -14.53Index Blended Benchmark -12.80

Global Equity (100) -14.39Index Blended Benchmark -12.99

-7.48-9.82

-9.58-10.80

20.4719.95

24.2121.40

33.1930.91

25.5724.70

DOMESTIC

GLOBAL

1998

11.8813.34

14.1116.32

20.5121.52

20.3721.24

-6.65-4.64

17.3615.74

28.6825.60

SEI Portfolio Performance: Rolling Returns2001 Q1 1 Year 3 Year 5 Year

Active Tax-Managed (ATM) 60

Active Tax-Managed (ATM) 100Index Blended Benchmark

Index Blended Benchmark

TAX-MANAGED-14.69-13.07

-26.38-24.22

1.872.61

-0.210.80

Institutional Growth & Income (60 / 40)Index Blended Benchmark

Institutional Equity (100)Index Blended Benchmark

INSTITUTIONAL-14.42-13.74

-27.05-26.02

2.262.47

-0.49-0.18

7.757.58

8.538.28

-24.38-24.69

-25.49-25.02

0.550.65

0.680.43

12.0811.62

10.569.99

DOMESTIC

2 Year

-0.190.82

-3.75-2.22

0.930.46

-3.05-3.58

-3.76-4.04

-3.29-3.96

-6.86-6.45

-12.23-11.60

-7.58-6.78

-13.63-12.31

-14.53-12.80

-14.39-12.99

Domestic Equity (100)Index Blended Benchmark

Global Equity (100)Index Blended Benchmark

GLOBAL

Note: Index Blended Benchmarks are gross returns, while SEI specific portfolios are net returns. Outperformance in BOLD.

Relative Return vs R 1000 G

-6%

-4%

-2%

0%

2%

4%

6%

97Q

197

Q2

97Q

397

Q4

98Q

198

Q2

98Q

398

Q4

99Q

199

Q2

99Q

399

Q4

00Q

100

Q2

00Q

300

Q4

01Q

1

US Large Cap Growth FundThe Biggest Decliner Last Quarter The Biggest Decliner Last Quarter

• The bear market took a toll on growth stocks. SEI Large Cap Growth Fund lost 24.8%.

• SEI underperformed the Russell 1000 Growth Index by 3.9%, The causes:

• Downturn of high-quality stocks such as EMC and Cisco

• Rebound of some high-risk Internet and PC stocks that our managers shun for lack of strong fundamentals.

• Bad quarters have occurred in the past and are the norm. We underperformed during two quarters of each of the last four calendar years, and went on to beat the index each of those years.

01Q1 2000 1999 1998 1997SEI Large Growth -24.84% -19.41% 34.20% 38.80% 34.76%

R1000 Growth -20.90% -22.42% 33.16% 38.71% 30.49%

Net contribution -3.94% 3.01% 1.04% 0.09% 4.27%

Fund Performance

Only 9 of 238 growth funds beat the benchmark every

year between ‘97 and ’00. SEI is in this top 4%

Source: Morningstar

SEI Domestic Equity portfolio is a combination of 4 funds: Large Growth, Large Value, Small Growth & Small Value

Morningstar Five Star Managers as of 12/31/99

Who Better than SEI?SEI vs. Morningstar “Five Star” Funds

1st Quarter 2001 Performance

SEI Five Star Alpha

Intermediate-Term Municipal 2.30% 2.31% -0.01%

Intermediate-Term Taxable 3.14% 3.15% -0.01%

Domestic Equity Portfolio -14.70% -20.46% +5.76%

Foreign Stock -13.70% -16.36% +2.66%

Holds True for 2000, Too SEI vs. Morningstar “Five Star” Funds

Year 2000 Performance

SEI Five Star Alpha

Intermediate-Term Municipal 8.53% 4.98% +3.55%

Intermediate-Term Taxable 12.52% 8.52% +4.00%

Domestic Equity Portfolio -7.48% -13.68% +6.20%

Foreign Stock -17.74% -18.21% +0.47%

Source: Morningstar

SEI Domestic Equity portfolio is a combination of 4 funds: Large Growth, Large Value, Small Growth & Small Value

Morningstar Five Star Managers as of 12/31/99

Review of Recent Portfolio Enhancements

International Equity Fund

Fund Performance

Changes Paying OffChanges Paying Off

• Fund produces superior long-term results

• For the three-year period ending 2000, the Fund outperformed its EAFE benchmark by 1.7%.

• In line with benchmark in 1st quarter. • Good stock selection within the technology

sector boosted results

• Fund outperforms peer group with lower than average risk (1st percentile is best on both measures)

• 36th percentile return 14th percentile tracking error

01Q1 2000 1999 1998 1997SEI Intl Equity -13.70% -17.74% 39.63% 19.29% -1.86%

MSCI EAFE -13.73% -14.17% 26.96% 20.00% 1.78%

Net contribution 0.03% -3.57% 12.67% -0.71% -3.64%

Oeschle InternationalNon-US Growth

Capital GuardianNon-US GARP

AcadianNon-US Value

BlackRockEurope Martin Currie

Japan Value

Jardine FlemingPacific Growth

SEI has prepared an article on the International Fund for use

with your clients. Download the article at www.seic.com/iag

Emerging Market Equity Fund

Fund Performance

01Q1 2000 1999 1998 1997SEI EM Equity -6.37% -34.47% 70.31% -31.95% -9.12%

MSCI EMF -5.46% -30.61% 66.41% -25.33% -11.58%

Net contribution -0.91% -3.86% 3.90% -6.62% 2.46%

Reconstruction CompleteReconstruction Complete

ProblemProblem CorrectionCorrection• Difficulty accessing local Gained permission to

stocks in Taiwan and India trade locally in Taiwan. limited our liquidity and Using equity-linked raised volatility warrants in India

• Lacking Middle East Added Schroder specialty manager

• Overweight in growth stocks Added Boston Co. beat the benchmark by 4% in first quarter.

Market Displays Different Risk/Reward Profile Market Displays Different Risk/Reward Profile

• Recognize that emerging market funds experience larger tracking errors because annual returns are more volatile

SchroderGlobal Core

Nicholas ApplegateGlobal Growth

SGYAsia

MorganStanley

LatinAmerica

SchroderEMEA

The Boston CompanyGlobal Value

The addition of Nicholas Applegate and The Boston

Company reflect the increased importance of investment style

in the emerging markets.

US Tax-Managed Large Cap Fund

Fund Performance

AllianceCore

Growth

ProvidentHyper Growth

Major Structural Enhancements Major Structural Enhancements

Parametric• Parametric capitalizes on “loss harvesting”

opportunities created in this difficult market.• Fund has harvested a net realized loss

exceeding $180 million as of 3/31/01, enhancing current after-tax returns.

• Losses will be carried forward to support future performance

Peregrine• Superior long-term growth performance

LSV to come online May 2001 (pending Board approval)

• Superior performance achieved with contrarian value stocks

ParametricCore Tax-Managed

EquinoxRelative

Value

Sanford Bernstein

Deep Value

01Q1 2000 1999 1998#

SEI TM Large* -13.13% -12.42% 18.48% 19.85%

R1000 -12.57% -7.79% 20.91% 17.69%

Net contribution -0.56% -4.63% -2.43% 2.16%

PeregrineLong-term

Growth

LSVContrarian

Value

* Pre-tax returns for SEI Tax-Managed Large Cap Fund # Returns from Fund inception in March 1998

SEI has prepared an article on Parametric for use with your clients.

Download the article at www.seic.com/iag

US Large Cap Value Fund

Strong Manager Line-Up Strong Manager Line-Up

• Fund posted 3.9% absolute return over last 12 months.

• Outperformed benchmark by 1.4% in 1st quarter, by 3.7% over last 12 months.

• Specialist value managers are driving Fund’s superior returns

• Bernstein: + 20% one-year return• LSV: + 17% one-year return

• Deutsche has replaced Mellon

01Q1 2000 1999 1998 1997SEI Large Value -4.47% 5.74% 4.93% 11.35% 36.74%

R1000 Value -5.86% 7.01% 7.34% 15.63% 35.19%

Net contribution 1.39% -1.27% -2.41% -4.28% 1.55%

DeutscheValue

LSVContrarian

Value

Sanford Bernstein

Deep Value

IridianRelative

Value

Fund Performance

SEI will soon release a white paper providing a detailed

description of the Fund and the benefits of adding Deutsche as

the core value manager

Going Forward

Important to Keep In Mind…

• Predicting market highs and lows is very difficult.

• Bear markets do not last forever.

• Recovery can be swift.

• Investors who are sitting on the sidelines run the risk of missing the rebound.

• Over time, equities outperform all other classes.

• SEI’s diversified portfolios will cushion further deterioration and allow early participation in rallies.

• Because SEI portfolios are diversified geographically and across asset classes, we expect to benefit from strong performance wherever in the world it occurs.

• We are confident that tracking error will revert to norm within the next two quarters.

What to Expect From SEI Going Forward

• Enhance Client’s Understanding of the Nature of Business and Market Cycles.

• Focus on Client’s Investment Goals and Progress Towards These Goals.

• Confirm That They’re Still On Track to Meet Their Objectives.

• Reiterate the Value of SEI’s Investment Strategy in Ultimately Reaching Their Goals.

• Use the Updated Advisor Tool Kit to Communicate 1st Qtr Performance.

How to Communicate Performance to Clients

• SEI has prepared a variety of articles to help you communicate the themes we discussed to your clients

• You may access these articles on the SEI client website at www.seic.com/iag

• Current articles include discussions on the following:

• The recent performance of the Large Cap Growth Fund• The new Core-Tax Managed manager Parametric• Spotlight on the International Equity Fund• Keeping the Bear Market in perspective• Many more to come

For More Information . . .