Investment Performance Review Second Quarter 2001 July 11, 2001 SEI Advisor Network

Investment Performance ReviewSecond Quarter 2001

July 11, 2001SEI Advisor Network

• Market and SEI Performance Overview for 2nd Qtr

• Recent Enhancements to SEI’s Implementation Strategy

• Presentation of Advisor Tool Kit

• Questions & Answers

Today’s Agenda

For Intermediary Use Only. Not For Public Distribution

Market and Performance OverviewFirst Quarter 2001


Mixed Signals From the US Economy

NAPM Purchasing Managers' Index, (Index, SA)

20

30

40

50

60

70

80

70 73 76 79 82 85 88 91 94 97 00

Some Indicators Some Indicators are Recessionary. . .are Recessionary. . .

. . .While Others are . . .While Others are Far From TroubleFar From Trouble

Unemployment Rate Since 1970 (%)

3

4

5

6

7

8

9

10

11

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00

Une

mpl

oym

ent

Rat

e (%

)

Consumer Spending

-4%

-2%

0%

2%

4%

6%

8%

10%

70 72 74 76 78 80 82 84 86 88 90 92 94 96 98 00

% C

ha

ng

e (

y-o

-y)

Announced Layoffs

0

500

1,000

1,500

2,000

1989 1991 1993 1995 1997 1999 2001*

La

yoff

s (

Th

s.)

* Projected


It’s tempting at times like these to expect the worst, It’s tempting at times like these to expect the worst, BUTBUT

The economic news remains mixed, which suggests areas of weakness and strength

Tax cuts and Fed rate cuts do work with a lag on consumer and business spending

Stock prices have rebounded, boosting consumer confidence

Reasons to Believe


Disciplined Investing Yields Results

2nd Quarter Offered Further Confirmation that SEI’s Investment Process Works

Tracking Errors Have Reverted to the Norm

Talking Points


The Rocky Road to Recovery

70%

80%

90%

100%

110%

120%

130%

Jan-01 Feb-01 Mar-01 Apr-01 May-01 Jun-01

Dow Nasdaq Wilshire 5000

Year-to-Date Returns as of 6/30/01 forYear-to-Date Returns as of 6/30/01 forthe Dow, the Nasdaq and the Wilshire 5000the Dow, the Nasdaq and the Wilshire 5000

Note: All indexes set to 100 on January 2, 2001 For Intermediary Use Only. Not For Public Distribution

2nd Quarter Fund Performance

ReturnReturn

Small Cap GrowthSmall Cap Growth

Alpha*Alpha*

Q2 Net Returns (%)

International EquityInternational Equity

Emerging Market EquityEmerging Market Equity

Emerging Market DebtEmerging Market Debt

+ 23.17% + 5.05%

+ 5.71%

+ 4.41% + 0.98%

For Intermediary Use Only. Not For Public Distribution* Return Relative to Benchmark

Tax-Managed Large CapTax-Managed Large Cap

Core Fixed IncomeCore Fixed Income

High YieldHigh Yield

Large Cap ValueLarge Cap Value

Large Cap GrowthLarge Cap Growth

Small Cap ValueSmall Cap Value

International Fixed IncomeInternational Fixed Income

+ 1.81%

- 0.71%

+ 6.88% + 0.57%

+ 0.61%

- 0.61%

+ 5.15% + 0.27%

+ 0.30%

+ 0.45%

+ 8.31% - 0.11%

- 0.11%

+ 11.13%

- 2.67% - 0.69%

- 0.57%

SEI Portfolio Performance: Rolling Returns2001 Q2 1 Year 3 Year 5 Year

Active Tax-Managed (ATM) 60


Index Blended Benchmark


TAX-MANAGED

-9.20

-8.25

-18.39

-16.99

3.17

3.90

1.82

2.85

Institutional Growth & Income (60 / 40)


Institutional Equity (100)


INSTITUTIONAL

-8.83

-9.00

-18.89

-18.93

3.57

3.66

1.72

1.91

7.75

7.58

8.53

8.28

-15.36

-16.42

-17.59

-18.07

2.63

2.63

2.13

1.83

12.90

12.29

11.02

10.39

DOMESTIC

2 Year

-1.48

0.13

-6.24

-3.76

0.93

0.46

-3.05

-3.58

-4.42

-4.50

-4.52

-4.70

Domestic Equity (100)


Global Equity (100)


GLOBAL

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


3.74

3.29

5.76

4.97

3.65

3.36

5.65

5.14

7.69

7.39

5.95

5.58

SEI Portfolio Performance: Annual Returns

2001 YTD 2000 1999 1997

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





TAX-MANAGED

-3.38

-3.00

-14.45

-11.16

17.26

16.41

28.11

26.12

Institutional Growth & Income (60 / 40)


Institutional Equity (100)


INSTITUTIONAL

-4.40

-4.97

-12.43

-12.64

14.05

13.38

20.85

19.52

Domestic Equity (100)


Global Equity (100)


-7.48

-9.82

-9.58

-10.80

20.47

19.95

24.21

21.40

33.19

30.91

25.57

24.70

DOMESTIC

GLOBAL

1998

11.88

13.34

14.11

16.32

20.51

21.52

20.37

21.24

-6.65

-4.64

17.36

15.74

28.68

25.60


-7.17

-6.62

-4.20

-3.65

-8.75

-7.80

-7.95

-6.36

-9.29

-8.13

Analysis of Large Cap Growth PerformanceYear-to-Date 2001 as of 6/30/01

-5.0%

-4.0%

-3.0%

-2.0%

-1.0%

0.0%

Stock Selection Industry Weight

Attribution (%) • SEI managers correctly judged industry performance. For example, overexposure to energy and underexposure to technology boosted first-half performance.

• Stock holdings within the technology sector were at the root of the first quarter’s underperformance. In the tumultuous markets at the start of the year, investors sought shelter in some well-known technology names that our investment managers did not hold because the companies did not satisfy the managers’ investment criteria.

• Notable deviations from the benchmark were IBM, Microsoft, Nokia and Solectron.

-6.0%

-4.0%

-2.0%

0.0%

2.0%

Cyclic

als

Staple

s

Energ

y

Financ

ials

Health

Car

e

Indu

stria

ls

Techn

olog

y

Mat

erial

s

Teleco

m

Utilitie

s

Stock Selection Attribution, by Sector (%)

Q2 YTD 1 Year 3 Year 5 Year

SEI Large Growth 8.31% -18.59% -37.30% 0.23% 13.31%

R1000 Growth 8.42% -14.24% -36.17% 0.69% 11.98%

Net contribution -0.11% -4.35% -1.13% -0.46% 1.33%For Intermediary Use Only. Not For Public Distribution

Analysis of Small Cap Growth PerformanceYear-to-Date 2001 as of 6/30/01

• Fund performance remains extraordinarily strong.

• Quarter-to-quarter fluctuations occasionally happen because our managers select stocks based on their long-term funda-mentals, not short-term technical factors.

• An example of this occurred this year.

• The Fund fell short of the benchmark in the first quarter due largely to underperformance in three sectors.

• The Fund handily outperformed the benchmark in the second quarter thanks to gains in those same three sectors.

-2.0%

0.0%

2.0%

4.0%


SEI Small Growth 23.17% -0.74% -21.67% 14.04% 11.55%

R2000 Growth 18.12% 0.16% -23.25% 2.19% 4.79%

Net contribution 5.05% -0.90% 1.58% 11.85% 6.76%

Q1 Stock Selection by Sector (%)

-4.0%

-2.0%

0.0%

Cyclic

als

Staple

s

Energ

y

Financ

ials

Health

Car

e

Indu

stria

ls

Techn

olog

y

Mat

erial

s

Teleco

m

Utilitie

s

Q2 Stock Selection by Sector (%)


US Tax-Managed Large Cap Fund

Fund Performance

AllianceCore

Growth

ProvidentHyper Growth

Recent Enhancements Paying OffRecent Enhancements Paying Off

• Changes were made to our tax-managed structure in an effort to maintain the tax sensitively of the Tax-Managed Large Cap Fund while delivering the opportunity for greater returns.

• These changes are supporting positive results for the Fund:

• Posted a +7% absolute return for the quarter

• Outperformed its benchmark during the second quarter

• Core-Tax Manager Parametric has capitalized on loss harvesting opportunities to enhance after-tax performance

ParametricCore Tax-Managed

EquinoxRelative

Value

Sanford Bernstein

Deep Value

PeregrineLong-term

Growth

** Pre-tax returns for SEI Tax-Managed Large Cap Fund

# Returns from Fund inception in March 1998

Q2 YTD 1 Year 3 Year Incept#

SEI TMLC** 6.88% -7.15% -16.33% 2.03% 4.43%

R1000 6.31% -7.05% -14.96% 4.24% 6.13%

Net contribution 0.57% -0.10% -1.37% -2.21% -1.70%For Intermediary Use Only. Not For Public Distribution

US Large Cap Value Fund

Building on Positive PerformanceBuilding on Positive Performance

• Fund gained over 5% during the second quarter

• Led the benchmark once again in Q2• The Fund has now led its benchmark in four

consecutive quarters to generate near 5% outperformance over the last year

Each of our specialist value managers outperformed during the quarter

• LSV: + 7% return in Q2• Bernstein: + 7% return in Q2• Iridian: + 5% return in Q2

The recent addition of Deutsche as the new core manager in the Fund has already paid off:

• Manager posted a 5% return during the quarter to exceed the benchmark.

DeutscheValue

LSVContrarian

Value

Sanford Bernstein

Deep Value

IridianRelative

Value

Fund Performance


SEI Large Value 5.15% 0.45% 15.02% 3.92% 13.65%

R1000 Value 4.88% -1.27% 10.33% 5.35% 14.94%

Net contribution 0.27% 1.72% 4.69% -1.43% -1.29%

Emerging Market Equity Fund

Fund Performance

SchroderGlobal Core

Nicholas ApplegateGlobal Growth

SGYAsia

MorganStanley

LatinAmerica

SchroderEMEA

The Boston CompanyGlobal Value

Emerging Equity Fund Rallied in Q2Emerging Equity Fund Rallied in Q2

• Emerging markets continue to outperform US and International markets this year, and SEI’s Fund is outperforming its benchmark by a sizeable margin.

• Stock selection in China, India, Korea and South Africa helped drive performance

• Recent structural enhancements to Fund paying off

• Dedication to value stocks through Boston Company has been beneficial, as value continues to outperform growth in these regions

• Exposure to EMEA regions such as Israel, Russia and South Africa has also boosted returns


SEI EM Equity 5.71% -1.02% -28.58% -2.87% -8.12%

MSCI EMF 3.90% -1.78% -25.92% 1.59% -6.01%

Net contribution 1.81% 0.76% -2.66% -4.46% -2.11%For Intermediary Use Only. Not For Public Distribution

Review of Recent Portfolio Enhancements


High Yield Bond Fund

Credit SuisseCore

NomuraConcentrator

Nicholas ApplegateCore

NomuraConcentrator

ShenkmanFundamental Value

Old Structure New Structure

• The Fund has posted consistent long-term positive returns that are ahead of its benchmark

• SEI is adding Shenkman to target the Fundamental Value segment of the High Yield market. This should improve the risk and reward profiles for the Fund.

• Process and research capacity concerns necessitated the replacement of Credit Suisse

• Nicholas Applegate will take the reins as the Fund’s new Core manager


SEI High Yield -0.61% 4.38% -1.11% -1.02% 4.72%

CSFB HY, DCO -0.91% 4.12% -0.76% -1.18% 4.19%

Net contribution 0.30% 0.26% -0.35% 0.16% 0.53%For Intermediary Use Only. Not For Public Distribution

Disciplined Investing Yields Results

2nd Quarter Offered Further Confirmation that SEI’s Investment Process Works

Tracking Errors Have Reverted to the Norm

Talking Points


Documents

Investment Performance Review Second Quarter 2001 July 11, 2001 SEI Advisor Network