WESTWOOD HOLDINGS GROUP INC

Unless the context otherwise requires, the term “we,” “us,” “our,” “Westwood,” or “Westwood Holdings Group” when used in this Form 10-K (“Report”) and in the Annual Report to the Stockholders refers to Westwood Holdings Group, Inc., a Delaware corporation, and its consolidated subsidiaries taken as a whole. This Report contains some forward-looking statements within the meaning of the federal securities laws. Actual results and the timing of some events could differ materially from those projected in or contemplated by the forward-looking statements due to a number of factors including, without limitation, those set forth under “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations” and “Item 1A. Risk Factors.”

General

We manage investment assets and provide services for our clients through our subsidiaries, Westwood Management Corp., Westwood Advisors, L.L.C. and Salient Advisors, L.P. (each of which is a registered investment adviser ("RIA") registered with the Securities and Exchange Commission and referred to hereinafter together as “Westwood Management”) and Westwood Trust ("Westwood Wealth Management"). Westwood Management, founded in 1983, provides investment advisory services to institutional investors, a family of mutual funds called the Westwood Funds®, other mutual funds, individual investors and clients of Westwood Trust. Westwood Trust, founded as a state-chartered trust company in 1974, provides trust, custodial and investment management services through the use of commingled funds and individual securities to institutions and high net worth individuals. Our revenues are generally derived from fees based on a percentage of assets under management ("AUM") and assets under advisement ("AUA"). Westwood Management and Westwood Trust collectively had AUM of approximately $15.5 billion and AUA of approximately $1.1 billion at December 31, 2023. We were incorporated under the laws of the State of Delaware on December 12, 2001. Our common stock is listed on the New York Stock Exchange under the ticker symbol “WHG.” We are a holding company whose principal assets consist of the capital stock and ownership interests of our operating subsidiaries, primarily Westwood Management, Westwood Trust and Broadmark Asset Management, LLC ("Broadmark").

The success of our business is dependent on client, institutional investment consultant and intermediary relationships. In addition to investment performance, we believe that client service is of paramount importance in the asset management business. Accordingly, a major business focus for us is to build strong relationships with clients to enhance our ability to anticipate their needs and satisfy their investment objectives. Our team approach is designed to deliver efficient, responsive service to our clients.

Our operating structure is capable of supporting a larger business and thus we believe we are poised to accommodate growth by acquisition, product innovation and internal growth within our client base. We have developed investment strategies that we expect to be attractive in our target institutional, wealth management and intermediary markets. Developing new investment strategies and building the organization can result in incurring expenses before significant offsetting revenues are realized. We continue to evaluate new strategies and resources in terms of meeting actual and potential investor needs.

During 2022 we acquired the asset management business of Salient Partners, L.P. (the "Salient Acquisition"). As part of the Salient Acquisition we also acquired Salient Capital, L.P. ("SCLP"), Salient Advisors, L.P. ("Salient Advisors") and an approximately 48% interest in Broadmark. Broadmark is a San Francisco-based RIA managing and/or sub-advising mutual funds, retail and institutional separately-managed accounts. SCLP is an SEC-registered broker-dealer and Financial Industry Regulatory Authority ("FINRA") member and serves as a sub-placement agent for private placements. Salient Advisors is an SEC registered investment adviser, a Commodity Futures Trading Commission ("CFTC") registered Commodity Pool Operator ("CPO") and a National Futures Association ("NFA") member. Salient Advisors is an advisor to the Westwood Salient Tactical Plus Fund, which is subadvised by Broadmark.

Acquisition of Controlling Interest in Broadmark Asset Management LLC

In January 2023 we acquired an additional 32% interest in Broadmark for $1.2 million (net of cash acquired), increasing our ownership of Broadmark to approximately 80%, which represents a controlling interest for financial statement consolidation purposes (the "Broadmark Acquisition").

Strategic Investments

Over the past several years we have made a number of strategic investments, including investments in InvestCloud, Inc. ("InvestCloud"), Vista Bank, ("Vista"), Westwood Hospitality Fund I, LLC ("Westwood Hospitality") and Westwood Energy Secondaries Fund I, LLC ("Westwood Energy Secondaries").

InvestCloud is a digital financial services provider. In addition to our investment in InvestCloud, we initiated a technology transformation several years ago using InvestCloud as a core provider. This technology transformation included overhauling and streamlining our enterprise data infrastructure and investment management operating platform. We also developed and launched digital client portals with InvestCloud, offering our clients secure “anytime, anywhere” access to their financial information.

Vista offers traditional banking services and provides clients of Westwood Trust efficient access to lines of credit secured by their investment portfolios. Our partnership provides Vista the opportunity to refer its clients needing more complex financial planning and investment services to Westwood Wealth Management.

Westwood Hospitality is a private investment fund seeded via our investment and which is offered to clients of Westwood Trust.

Westwood Energy Secondaries is a private investment fund seeded via our investment and which is offered to our clients.

Available Information

We maintain a website at westwoodgroup.com. Information contained on, or connected to, our website is not incorporated by reference into this Report and should not be considered part of this Report or any other filing that we make with the Securities and Exchange Commission ("SEC"). All of our filings with the SEC, including our annual report on Form 10-K, quarterly reports on Form 10-Q, current reports on Form 8-K and any amendments to those reports filed or furnished pursuant to Sections 13(a) or 15(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), are available free of charge on our website. Our Code of Business Conduct, Corporate Governance Guidelines and Audit Committee, Compensation and Human Capital, and Governance/Nominating Committee Charters are available without charge on our website. Stockholders may also obtain print copies of these documents free of charge by submitting a written request to Murray Forbes III, our Chief Financial Officer and Treasurer, at the address set forth on the front of this Report. The public can also obtain access to any public document we file with the SEC at www.sec.gov.

Advisory

General

Our advisory business encompasses five distinct investment capabilities — United States ("U.S.") Value Equity, Multi-Asset, Energy and Real Assets, Tactical Absolute Return, and Income Alternatives.

Westwood Management provides investment advisory services to large institutions, including corporate retirement plans, public retirement plans, endowments and foundations. Institutional separate account minimums vary by investment strategy and generally range from $10 million to $25 million. Westwood Management also provides advisory services to financial advisors, individuals and the Westwood Funds®, as well as sub-advisory services to other mutual funds and pooled investment vehicles.

Investment Strategies

We offer high-conviction equity, outcome-oriented solutions and liquid alternatives to address a wide range of investment objectives, including four strategies each with over $1 billion in AUM: LargeCap Value, Income Opportunity, SmallCap Value and MLP & Energy Infrastructure.

U.S. Value Equity

The U.S. Value Equity team employs a value-oriented approach focused on identifying undervalued, high-quality businesses capable of generating superior risk-adjusted returns, using a fundamental, bottom-up, three-step investment process. Our team seeks well-run businesses with conservative balance sheets and strong free cash flow that can grow their business value by funding growth initiatives or by returning capital to shareholders. Identifying undervalued companies with strong fundamentals, where the outlook for future earnings growth is underestimated by the market, offers us the potential for asymmetric returns. This investment approach is intended to preserve capital during unfavorable periods and provide superior real returns over the long term. We have established a track record of producing both competitive risk adjusted and real returns for our clients. The principal investment strategies currently managed by the U.S. Value Equity team are as follows:

LargeCap Value: Investments in equity securities of approximately 40 to 60 companies benchmarked to the Russell 1000 Value Index.

MidCap Value: Investments in equity securities of approximately 50 to 80 companies benchmarked to the Russell Midcap Value Index.

SMidCap Value: Investments in equity securities of approximately 50 to 70 companies benchmarked to the Russell 2500 Value Index.

SmallCap Value: Investments in equity securities of approximately 50 to 70 companies benchmarked to the Russell 2000 Value Index.

AllCap Value: Investments in equity securities of approximately 50 to 80 companies benchmarked to the Russell 3000 Value Index.

Multi-Asset

The Multi-Asset team employs an investment process that applies top-down views across asset classes along with bottom-up security selection, utilizing quantitative and fundamental tools to evaluate macro, micro and technical conditions across a range of asset classes. Our outcome-oriented solutions utilize strategic and tactical allocations as well as a discipline focused on managing downside risks.

The team draws on the proprietary fundamental research of Westwood’s investment teams in order to identify securities with attractive risk-adjusted return profiles across a broad spectrum of income-producing securities. The principal investment strategies currently managed by the Multi-Asset team are as follows:

Income Opportunity: Multi-Asset strategy that invests across multiple fixed income sectors, including convertibles and income-producing equity securities. Typically invests in a range of asset types with the equity component usually comprising between approximately 30% and 50% of this strategy.

Total Return: Multi-Asset strategy that invests across multiple bond sectors, including convertibles and income producing equity securities. Typically invests in a range of asset types with the equity component usually comprising between approximately 50% and 70% of this strategy.

High Income: Multi-Asset strategy that invests across multiple bond sectors, including convertibles and income-producing equity securities. Typically invests in a range of asset types with the equity component usually comprising between approximately 15% and 30% of this strategy.

Energy and Real Assets

The Energy and Real Assets team employs an investment approach designed to provide access to a broad universe of Master Limited Partnerships ("MLPs") and MLP-related companies, including midstream and other energy infrastructure companies, with the potential to capture a range of energy infrastructure opportunities. The portfolio managers consider the primary risk factors for midstream energy infrastructure companies to be equity markets, high yield spreads, commodity prices and interest rates. The team monitors and discusses changes in these risk factors on a daily basis. The firm utilizes quantitative models to measure valuations, momentum and other risk attributes. The investment team monitors key risk factors for each company and the overall market and positions portfolios accordingly to align with their portfolio management philosophy. The principal investment strategy currently managed by the Energy and Real Asset team is as follows:

MLP & Energy Infrastructure: Offers access to a wide universe of MLPs and MLP-related companies with the potential to capture energy infrastructure opportunities.

Tactical Absolute Return

Tactical Absolute Return strategies are subadvised by Broadmark. These strategies seek to deliver positive absolute returns through market cycles. We believe that tactical portfolio allocation can actively manage market exposure by adapting to economic conditions and internal market momentum. These strategies may appeal to clients who believe that it may be unwise to be fully invested in equities during periods of intense speculation and monetary tightening within an overvalued market. We also find other market environments in which we believe investors should be fully invested and even overweight higher beta sectors and indices. Our goal is to be in concert with the overall economic/business cycle.

Broadmark’s investment process is grounded in four pillars. The first three pillars – valuation, monetary policy and investor sentiment — are qualitative in nature. The fourth pillar is a quantitative assessment of volume and breadth-based momentum. Using a combination of these qualitative and quantitative metrics, Broadmark seeks to manage risk and enhance alpha by tactically phasing into and out of major equity cycles. Broadmark invests primarily in a diversified portfolio of exchange-traded funds ("ETFs") and instruments providing exposure to indices, sectors and industries based on this four-pillar process. The investment team may tactically deploy leveraged investment techniques as well as short positions that allow a net exposure ranging from net long to net short depending on the strategy.

Tactical Growth: Strategy that actively manages equity market exposure through the use of ETFs and other index-based instruments. Seeks to produce above-average, risk-adjusted returns, in all market environments, while exhibiting less downside volatility than the S&P 500® Index. It is designed to help investors sidestep market downturns, while attempting to participate in its growth via continuous active management of portfolio market exposure.

Tactical Plus: Strategy that actively manages equity market exposure by primarily investing in equity-based futures, ETFs and options. Seeks to produce above-average, risk-adjusted returns, in any market environment while exhibiting less downside volatility than the S&P 500® Index by investing primarily in a diversified portfolio of instruments with exposure to

U.S. and non-U.S. equity securities. It is designed to help investors sidestep market downturns, while attempting to participate in its growth via the continuous and active management of portfolio market exposure.

Income Alternatives

Our Multi-Asset team manages our Alternative Income strategy, and our Real Estate team manages our Select Income and Global Real Estate strategies. We believe alternative approaches to income investing can provide diversified sources of risk and return and potentially reduce volatility. Absolute return-oriented and yield-focused strategies for investing in securities not typically found in traditional fixed income portfolios can help investors produce returns from non-traditional sources with low correlation and enhanced portfolio diversification.

Alternative Income: We believe a market-neutral approach utilizing convertible arbitrage and opportunistic fixed income can serve as a complement to bond allocations. Our framework consists of three primary sources of return that aim to neutralize systematic risk. We employ a multi-strategy process seeking to generate positive absolute returns through a short duration yield portfolio of global convertible securities, convertible arbitrage and macro-hedging.

Select Income: Seeks to produce consistent high income from non-traditional publicly traded securities. Invests in senior securities and high-income equities primarily issued by real estate investment companies, (i.e., real estate investment trust preferred securities), but can also diversify among preferred stocks, common stocks and bonds to seek income and total return.

Global Real Estate: Invests primarily in high-quality commercial and residential real estate companies located in the U.S. and non-U.S. countries that can potentially serve as inflation-protected income vs. traditional income-oriented securities. Approaches stock selection with an emphasis on superior property location and quality, strong prospects for appreciation in property rents and values, and management’s track record for adding value. Utilizes a rigorous, repeatable, bottom-up investment approach incorporating quantitative and qualitative analyses of company cash flows, assets and management.

Our ability to grow AUM is primarily dependent on our competitive investment performance and our success in building strong relationships with our clients, investment consulting firms, financial intermediaries and RIAs. We continually seek to expand AUM by organically growing our existing investment strategies and by adding new products as evidenced by our Salient Acquisition in November 2022 and our subsequent acquisition of a controlling interest in Broadmark in 2023. The Salient Acquisition expanded our product portfolio to serve financial intermediaries and institutional clients with additional product offerings, including Energy and Real Assets, Tactical Absolute Return, and Income Alternatives. We will continue to focus on organic product initiatives to grow our investment strategies while considering new investment strategies via acquisitions or from third parties, as discussed under "Growth Strategy" below. Our growth strategy provides clients with more investment opportunities and diversifies our AUM and revenue sources, thereby reducing risk in any one area of investment and increasing our competitive ability to attract new clients. Our ten largest clients accounted for approximately 21% of our fee revenues for the year ended December 31, 2023. The loss of some or all of these large clients could have a material adverse effect on our business and our results of operations.

Managed Investment Solutions

Our newest investment team, Managed Investment Solutions, joined us in late 2023, and focuses on tailoring investment solutions to a diverse array of individual institutional risk/reward tolerances and investment approaches. The team’s unique approach blends active design with passive implementation and is intended to provide differentiated value for Westwood clients. Prospective clients for this service include public plans, sovereign wealth funds, corporate pension plans, defined contribution plans, endowments, foundations, consultant groups and wealth investors.

Advisory and Sub-advisory Agreements

Westwood Management manages client accounts under investment advisory and sub-advisory agreements. As is typical for the asset management industry, these agreements are usually terminable upon short notice and provide for revenues based on the market value of client AUM. Advisory fees are paid quarterly in advance based on AUM on the last day of the preceding quarter, quarterly in arrears based on AUM on the last day of the quarter just ended or based on a daily or monthly average of AUM for the stated period. Certain clients have contractual performance-based fee arrangements, which generate additional revenues if we outperform a specified index over a specific period of time. Revenue for performance-based fees is recorded at the end of the measurement period. Revenue from advance payments is deferred and recognized over the period that services are performed. Pursuant to these agreements, Westwood provides overall investment management services, including directing investments in conformity with client-established investment objectives and restrictions. Unless otherwise directed in writing by clients, Westwood has the authority to vote all proxies with respect to securities in client portfolios.

Westwood Management is party to sub-advisory agreements with other investment advisers under which it performs similar services under advisory agreements. Our sub-advisory fees are generally computed based upon the average daily AUM and are payable on a monthly basis.

Westwood Management provides investment advisory services to the Westwood Funds® family of mutual funds:

As of December 31, 2023, AUM in the Westwood Funds® totaled $4.1 billion.

Trust

General

Westwood Trust provides fiduciary and investment services to high net worth individuals and families, non-profit endowments and foundations, public and private retirement plans and individual retirement accounts ("IRAs"). Westwood Trust is chartered and regulated by the Texas Department of Banking. Fees charged by Westwood Trust are separately negotiated with each client and are typically based on AUM. Clients generally have at least $1 million in investable assets.

Fiduciary Services

Westwood Trust’s fiduciary services include but are not limited to: financial planning, wealth transfer planning, customizable trust services, trust administration and estate settlement. Westwood Trust also provides custodial services, tax reporting, accounting of trust income and principal, beneficiary and retiree distributions and safekeeping of assets.

Investment Services

Westwood Trust utilizes a consultative approach in developing a portfolio asset allocation for individual clients. Our approach involves examining clients' financial situations, including their current portfolio of investments, and advising clients on ways to reduce risk, enhance investment returns and strengthen their financial position based on each client’s unique objectives and constraints. Westwood Trust seeks to define and improve the risk/return profiles of client investment portfolios by offering a comprehensive investment solution or by enhancing clients’ existing investment strategies. Westwood Trust manages separate portfolios of equity and fixed income securities for certain agency and trust clients. Equity portfolios are generally patterned after the institutional strategies offered by Westwood Management or developed by our internal investment teams. Fixed income portfolios consist of targeted "laddered" portfolios of primarily high-quality municipal securities and Treasury bills.

Westwood Trust also sponsors a range of commingled funds in which client assets are commingled to achieve economies of scale. Westwood Trust’s commingled funds fall within two basic categories: personal trusts (common trust funds) and employee benefit trusts (collective investment funds). Westwood Trust sponsors commingled funds for most of the investment strategies managed by Westwood Management.

Westwood Trust also develops asset allocation models for certain clients utilizing its commingled funds, mutual funds managed by Westwood Management and non-affiliated mutual funds.

Enhanced Balanced® Portfolios

Westwood Trust is a strong proponent of asset class diversification and offers its clients the ability to diversify among many different asset classes. Westwood Trust Enhanced Balanced® portfolios allocate assets among these asset classes into a customizable portfolio for clients seeking to maximize return for any given level of risk. Periodic adjustments are made to asset class weightings in Enhanced Balanced® portfolios based on historical returns, risk and correlation data, and our current capital markets outlook.

Select Equity Strategy

The Westwood Select Equity strategy aims to provide low-frequency turnover and tax efficiency to high net worth individuals. The offering allows individuals to own a diversified portfolio of best ideas from across Westwood's investment teams. The portfolios include value and growth stocks, along with small-, mid- and large-cap stocks. Westwood Select Equity is also available without the tax efficiency overlay.

Dividend Select Strategy

The Westwood Dividend Select strategy aims to provide dividend income to investors. The offering allows investors to own a diversified portfolio of dividend-producing equity securities. The portfolios primarily include value stocks, along with mid- and large-cap stocks.

High Alpha Strategy

The Westwood High Alpha strategy aims to provide long-term appreciation to investors. The offering allows investors to own a concentrated portfolio of securities to provide higher returns commensurate with higher volatility. The portfolios primarily include growth stocks in the mid- to large-capitalization range.

Distribution Channels

Westwood Management investment funds and advisory services are distributed through two primary market channels - Institutional and Intermediary. Our Distribution sales and support infrastructure supports marketing and client service in both channels. Westwood Wealth Management provides wealth and investment management solutions primarily to individuals and utilizes both Westwood Management and external investment management services.

Institutional

The institutional team markets Westwood funds and advisory and sub-advisory services to defined benefit and defined contribution corporate and public plan sponsors, foundations and endowments, financial institutions and investment consultants. We maintain strong relationships with many global, national and regional investment consulting firms, which have contributed to our being considered and hired by their clients. By leveraging these relationships, we can offer our strategies within select defined contribution and other retirement plans where clients utilize mutual fund vehicles. Sub-advising funds of other financial institutions allows us to extend our marketing reach using other firms' distribution systems.

Intermediary and Retail

In the intermediary and retail channel, our team directly markets our investment services, including the Westwood Funds®, to financial intermediaries, RIAs, broker-dealers, turnkey asset management programs and select mutual fund platforms. We also focus on expanding our relationships with financial intermediaries that manage discretionary mutual fund models. Our Intermediary sales team markets our mutual funds and separately managed accounts directly to select broker-dealers and RIAs.

Managed accounts are somewhat similar to mutual fund relationships in that a third-party financial institution, such as a broker-dealer or RIA, trades securities using our model. The typical managed account client is a high net worth individual or small institution that prefers to own shares directly, rather than in a mutual fund. In these arrangements, the third-party financial institution is responsible to the end client for client service, operations and accounting.

Wealth Management

In our wealth management channel, we generate awareness of our trust fiduciary and investment services through investment consultants, centers of influence, community involvement, and targeted direct marketing to high net worth individuals, families and small to medium-sized institutions. We also seek asset growth generated by referrals from existing clients.

Growth Strategy

We believe we have established a strong platform to support future growth, deriving strength from the experience and capabilities of our management team and our skilled investment and client professionals. We believe opportunities for future growth will come from our ability to:

•generate growth in our investment management platform from new and existing clients and consultant relationships, while expanding intermediary distribution;

•attract and retain key employees;

•grow assets in our existing investment strategies;

•continue to enhance our digital capabilities;

•foster continued growth of the wealth management platform and distribution channel;

•foster expanded intermediary distribution;

•pursue strategic corporate development opportunities;

•continue to strengthen our brand name; and

•develop or acquire new investment strategies.

Generate growth from new and existing clients and consultant relationships, while expanding intermediary distribution. As our primary business objective, we intend to maintain and enhance existing relationships with clients, investment consultants and intermediaries by providing value-added investment performance and client service. Over the last few years, we have expanded and restructured our distribution team to improve our proactive sales and client engagement strategy. We intend to pursue growth via targeted sales and marketing efforts that showcase our boutique offerings across our product platform with consistent investment performance and superior client service. New institutional client accounts are sourced from investment consultants or from our direct sales efforts with institutional investors. The Salient Acquisition has significantly expanded our product range and distribution capabilities. We intend to leverage this increased scale and broader product availability to enhance offerings to institutional, intermediary and wealth management clients. We believe a key factor leading to our being considered for new client mandates and platform placements is the in-depth knowledge of our firm, our people and our processes currently embedded in our consultant and platform relationships and being developed in prospective relationships.

Attract and retain key employees. We believe we have created a workplace environment in which motivated, performance-driven and client-oriented individuals can thrive. As a public company, we offer our employees a compensation program that includes strong equity incentives to closely align their success with that of our clients and stockholders. We believe these factors are critical to maintaining a stable, client-focused environment that can support future growth.

Grow assets in our existing investment strategies. We have significant capacity to manage additional assets across the investment strategies developed by leveraging the core competencies of our U.S. Value Equity and Multi-Asset teams. We have considerably expanded our range of investment strategies by adding Energy and Real Assets, Tactical Absolute Return and Select Income as a result of the Salient Acquisition.

Continue to enhance our digital capabilities. Over the past several years, we have invested significantly to enhance our automation and digital efficiency. We moved our technology infrastructure to secure, cloud-based access, created a data warehouse to improve our investment operations workflow, upgraded our trade order management and trade compliance systems, digitized our portfolio accounting and reconciliation system, and outsourced our trading function. We also developed digital client portals for our institutional and wealth management clients. We believe these investments position us to improve efficiencies and better respond to consumer demand for digital interaction with investment advisors.

Foster continued growth of the wealth management platform and distribution channel. Westwood Trust serves high net worth individuals and families as well as small to medium-sized institutions. We anticipate continued interest from clients and prospective clients in our holistic wealth management model. A significant percentage of Westwood Trust’s asset inflows stems from referrals along with gathering additional assets from existing clients. We believe our Enhanced Balanced® strategy, which offers comprehensive, diversified exposure to multiple asset classes, our Select Equity strategy offering diversified equity exposure in a tax-efficient manner, and our separately managed portfolio offerings together provide opportunities for growth.

Foster expanded intermediary distribution. For the past several years, we have expanded our geographic approach and focused coverage for intermediary distribution, building up our intermediary sales team to extend our reach and accelerate growth in top markets. As a result of the Salient Acquisition, we have again expanded our sales and marketing resources to accelerate growth geographically and across market segments via third-party platforms. We believe that providing investors with access to our mutual funds and separately managed accounts is a key component to achieving asset growth in the defined contribution and retirement marketplaces as well as with RIAs and select broker-dealers.

Pursue strategic corporate development opportunities. We continually evaluate strategic corporate development opportunities to augment our organic growth. We may pursue a variety of transactions, including acquisitions of asset management firms, mutual funds, wealth management firms or other financial institutions, as well as hiring investment professionals or teams. We consider opportunities that can enhance our existing operations, expand our range of investment strategies and services, or further develop our distribution capabilities. By acquiring investment firms or by hiring investment professionals or teams that successfully manage investment strategies outside our current areas of expertise, we can attract new clients and provide existing clients with even more diversified investment strategies. We may also consider forging alliances with other financial services or technology firms to leverage our core competency of developing and managing investment strategies with partners that can provide enhanced distribution capabilities or additional service offerings.

Continue to strengthen our brand name. We believe that the strength of our brand name has been a key component to our long-term success in the investment industry and will be instrumental to our future success. We have developed a strong brand name largely through our performance, coupled with high-profile coverage in investment publications and electronic media. Many of our investment professionals have been prominent in print and electronic media, and we will continue to use creative ways to strengthen our brand name and reputation in our target markets.

Develop or acquire new investment strategies. We continue to look for opportunities to expand the range of investment strategies we offer to existing and prospective clients. We may consider internally developed strategies that extend our existing investment process to new markets, asset classes or strategies, and we may also consider externally acquired investment strategies. An expanded range of investment strategies offers additional ways to serve our client base, generating more diversified revenue streams and providing asset and revenue growth potential.

Competition

We are subject to substantial and growing competition in all aspects of our business. Barriers to entry in the asset management business are relatively low and we expect more competitors in future. Many asset managers are larger, better known and have greater resources than us.

We compete with other asset management firms on the basis of investment strategies, investment performance in absolute terms and relative to peer groups, quality of service, the levels of fees charged, attractive compensation offered to key employees and the way in which investment strategies are marketed. Many of our competitors offer more investment strategies and services than we do and many have substantially greater AUM.

We compete against numerous investment dealers, banks, insurance companies, mutual fund companies, exchange-traded funds, brokerage and investment firms and others that sell equity funds, taxable income funds, tax-free investments and other investment products. The allocation of assets by many investors from active equity investing to index funds, fixed income or similar asset classes has enhanced the ability of firms offering non-equity asset classes and passive equity management to compete more effectively with us. The demand for passive strategies with low-fee structures has rapidly increased and investors frequently demand customized and personalized strategies to fit their investment needs. This shift in the marketplace may benefit competitors offering certain investment vehicles that we do not offer. In summary, our competitive landscape is intense and dynamic, which may affect our ability to compete successfully.

Additionally, most prospective clients perform a thorough review of an investment manager’s background, investment policies and performance before committing assets. In many cases, prospective clients invite competing firms to make presentations. The process of obtaining a new client typically takes twelve to eighteen months from the time of initial contact. While we have achieved success in competing for clients, it is a process to which we dedicate significant resources over an extended period with no certainty of winning client mandates.

Regulation

Virtually all aspects of our business are subject to federal, state and other non-U.S. jurisdictions' laws and regulations. These laws and regulations are primarily intended to protect investment advisory clients. Under such laws and regulations, agencies that regulate investment advisers have broad administrative powers, including the power to limit, restrict or prohibit advisers from carrying on their business if they fail to comply with such laws and regulations. Possible sanctions include suspension of individual employees, limitations on engaging in certain lines of business for specified periods of time, revocation of investment adviser and other registrations, censures and fines. We believe that we are in compliance with all material laws and regulations.

Westwood Management

Our business is subject to regulation at federal and state levels by the SEC and other regulatory bodies. Westwood Management Corp. and Westwood Advisors, L.L.C. are registered with the SEC under the Investment Advisers Act and under the laws of various states. As RIAs, Westwood Management Corp. and Westwood Advisors, L.L.C. are regulated and subject to examination by the SEC. The Investment Advisers Act imposes numerous obligations on RIAs, including fiduciary duties, record keeping, operational and marketing requirements and disclosure obligations. Westwood Management Corp. also acts as adviser to the Westwood Funds®, a family of mutual funds registered with the SEC under the Investment Company Act of 1940 (the “Investment Company Act”). As an adviser to a registered investment company, Westwood Management Corp. must comply with the Investment Company Act and related regulations. The Investment Company Act imposes numerous obligations on registered investment companies, including requirements relating to operations, fees charged, sales, accounting, record keeping, disclosure, governance, and restrictions on transactions with affiliates. Under SEC rules and regulations promulgated pursuant to the federal securities laws, we are subject to periodic SEC examinations. The SEC can institute proceedings and impose sanctions for violations of the Investment Advisers Act and the Investment Company Act, ranging from censure to termination of an investment adviser’s registration. The failure of Westwood Management Corp. and Westwood Advisors, L.L.C. to comply with SEC requirements could have a material adverse effect on Westwood. We are also required to comply with anti-money laundering laws and regulations, including the USA PATRIOT Act of 2001, as subsequently amended and reauthorized (the "Patriot Act"). We believe that we are in compliance with the regulations under the Investment Advisers Act, the Investment Company Act and the Patriot Act.

As an investment adviser, we have a fiduciary duty to our clients. The SEC has interpreted that duty to impose standards, requirements and limitations on, among other things: trading of client accounts, allocation of investment opportunities among clients, use of soft dollars, execution of transactions and recommendations to clients. We manage accounts for our clients with the authority to buy and sell securities, select broker-dealers to execute trades and negotiate brokerage commission rates. We receive soft dollar credits from certain broker-dealers that are used to pay for brokerage and research-related products, which reduces certain company operating expenses. We intend to use soft dollars to pay only for brokerage and research related products and services that fall within the safe harbor provisions of the Securities Exchange Act of 1934. If our ability to use soft dollars were reduced or eliminated as a result of the implementation of statutory amendments or new regulations, our operating expenses would increase.

Westwood Trust

Westwood Trust operates in a highly regulated environment and is subject to extensive supervision and examination. As a Texas chartered trust company, Westwood Trust is subject to the Texas Finance Code (the "Finance Code"), the rules and regulations promulgated under the Finance Code and supervision by the Texas Department of Banking. These laws are intended primarily for the protection of Westwood Trust’s clients and creditors rather than for the benefit of investors. The Finance Code provides for and regulates a variety of matters, such as:

•minimum capital maintenance requirements;

•restrictions on dividends;

•restrictions on investments of restricted capital;

•lending and borrowing limitations;

•prohibitions against engaging in certain activities;

•periodic fiduciary and information technology examinations by the Texas Department of Banking Commissioner;

•furnishing periodic financial statements to the Texas Department of Banking Commissioner;

•fiduciary record keeping requirements; and

•prior regulatory approval for certain corporate events (such as mergers, the sale or purchase of all or substantially all trust company assets and transactions transferring control of a trust company).

The Finance Code also gives the Banking Commissioner broad regulatory powers (including penalties and civil and administrative actions) if the trust company violates certain provisions of the Finance Code, including implementing conservatorship or closure if Westwood Trust is determined to be in a “hazardous condition” (as defined by applicable law). Westwood Trust’s failure to comply with the Finance Code could have a material adverse effect on Westwood.

Westwood Trust is limited by the Finance Code in the payment of dividends to undivided profits, which is described as that part of equity capital equal to the balance of net profits, income, gains and losses since formation minus subsequent distributions to stockholders and transfers to surplus or capital under share dividends or appropriate board resolutions. At the discretion of its Board of Directors (the "Board"), Westwood Trust has made quarterly and special dividend payments, and other distributions, to Westwood Holdings Group, Inc. out of undivided profits.

SEC Broker‑Dealer Registration / FINRA Regulation

SCLP is subject to regulation by the SEC, FINRA and various states. In addition, certain of our employees are registered with FINRA and such states and subject to SEC, state and FINRA regulation. The failure of this company and/or employees to comply with relevant regulation could have a material adverse effect on our business.

Employee Retirement Income Security Act of 1974

We are subject to the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), and to its related regulations insofar as we are a fiduciary under ERISA with respect to some clients. ERISA and applicable provisions of the Internal Revenue Code impose certain duties on fiduciaries under ERISA or on entities that provide services to ERISA plan clients and prohibit certain transactions involving ERISA plan clients.

Human Capital Resources

Health and Safety

The health and safety of our employees is a high priority, consistent with our operating philosophy of focusing on transparency, effective corporate governance, life principles and giving back to the communities in which we live and work.

Diversity and Inclusion

We believe that our culture of diversity and inclusion enables us to develop and fully utilize the strengths of our people. As of December 31, 2023, approximately 43% of our workforce was female and minorities represented approximately 34% of our workforce.

Employees

At December 31, 2023, we had 145 full-time employees, all located in the U.S. No employees are represented by a labor union, and we believe our employee relations are favorable. As of December 31, 2023, approximately 16% of our employees held the Chartered Financial Analyst designation.

Environmental, Social and Governance ("ESG")

ESG Core Principles

Since inception, we have fostered a corporate culture focused on a set of core values. To keep us motivated, we have found inspiration in Coach John Wooden’s Pyramid of Success™ which helps all of us aspire to and maintain a culture of teamwork, integrity and putting client interests ahead of our own.

Our ESG focus is guided by the following six pillars:

1. Environmental impact;

2. Diversity, equity and inclusion;

3. Community;

4. Responsible investing;

5. Privacy and data protection; and

6. Governance.

We include ESG pillars in the way we conduct our business and measure ourselves against them because it makes good sense. It improves our ability to create an environment that values true diversity, inclusiveness and transparency and ultimately supports long-term employee growth. Our focus on transparency, corporate governance, life principles, ethical conduct and giving back to the communities in which we operate is core to our values.

Governance

Westwood is committed to the successful integration and promotion of ESG at the corporate level and the investment level. We have separate governing structures to ensure that we have the necessary leadership to create and sustain a clear corporate strategy permeating our business. The separation of responsibilities among these governing structures ensures proper accountability across our firm.

Westwood’s Board plays an important role to ensure that the interests of shareholders are being represented and that Westwood is fulfilling its fiduciary duties. The Board regularly interacts with management to ensure that stakeholder interests are properly considered. Management provides the Board with regular updates on our ESG efforts and collaboration between the Board and those responsible for ESG is key to our implementation strategy. Our Board benefits from deep industry experience and a majority of its members are independent which enables strong oversight of our business.

Westwood’s ESG Steering Committee is responsible for ensuring the effective execution of our overall ESG strategy. Along with our CEO, this group sets the strategic direction for our ESG agenda, oversees implementation, and reviews our ESG strategy with our Board.

We have established two additional groups, a Responsible Investment Committee and a Corporate Responsibility Committee, to ensure we have the leadership required to create a clear corporate sustainability strategy across our business.

The Responsible Investment Committee was established to consider matters related to the maintenance, development and implementation of our responsible investment practices in support of our ESG policy. The Corporate Responsibility Committee was established for the oversight and implementation of our corporate sustainability strategy and ESG policies. The Corporate Responsibility Committee governs as a cross-functional team designed to engage leadership across key corporate functions.

Responsible Investment / ESG Integration

Our responsible investment commitment is evident in our investment approach across our investment solutions where we take a fundamental approach to identifying high-quality companies and sound businesses around the world. As an active asset manager, ESG issues are directly linked into our bottom-up, fundamental assessment of companies. Our fundamental, financial materiality-based approach to identifying high-quality companies and sound businesses around the world has always led our investment team to consider these issues in our fundamental analyses, which evaluate the merits of a company's strategy, downside risk and valuation. As ESG integration and evaluation techniques continue to evolve, we will adapt our analyses to ensure we comply with our fiduciary responsibilities at all times.

Westwood is a signatory of the United Nations Principles for Responsible Investment ("UNPRI") and is committed to adopting and implementing responsible investment principles in a manner consistent with our fiduciary duties to clients. We support the UNPRI and recognize the importance of considering ESG issues as an element in our overall investment process.

Engagement

As part of our fundamental investment research process, our analysts conduct meetings with target company management and investor relations to understand strategy, execution and financial strength throughout the life of our investment. Meetings inform our investment analysis and amplify our understanding of a business’s ability to adapt to changing business environments. Meetings can take place in person, during investment conferences and video calls, and they build on long-standing relationships. Our understanding of material issues affecting the company is captured and shared in our valuation analysis and recommendations made by our Research Analysts.

Westwood does not set and track engagement objectives. We engage on specific topics on a case-by-case basis and when ESG or other issues are of specific concern, our team seeks purposeful dialogue to understand how the company plans to address the issues which will then be viewed from a "tracking" perspective over time. Our engagement is generally conducted through direct dialogue between our investment professionals and company managements which provides a more constructive approach toward understanding issues and encouraging solutions that provide value to stakeholders.

Proxy Voting

Westwood views proxy voting rights as valuable portfolio assets. Our overarching principle is to exercise voting responsibilities solely in the best interests of our clients. We use proxy voting as a means of addressing corporate governance issues and identifying corporate actions that enhance shareholder value. Our process benefits from multiple inputs and directly involves our investment professionals.

Westwood uses guidelines from a third-party proxy research service, Glass, Lewis & Co. ("Glass Lewis"), that we believe create value for our clients and cover most proxy issues. The Investment Operations Team, including the head of data governance, oversees the implementation of our proxy voting policy. Westwood’s Corporate Responsibility Committee, together with our investment team’s bi-monthly review of ballots, considers the proxy voting guidelines on environmental and social issues laid out by Glass Lewis’s policy to be in alignment with our financial-materiality-based view of ESG integration. Glass Lewis’s policy states that it will vote in when there is a clear link between the proposal and value enhancement or risk mitigation. Our goal is to vote all proxies and, in most cases, we agree with and follow the recommendations of our proxy research service however our Research Analysts review proxies bi-monthly and occasionally recommend a vote that differs from Glass Lewis. We vote against recommendations when we believe that it is in our clients’ best interests to do so. A summary of voting is sent to each client for whom proxies are voted on an annual basis.

Social Impact and Corporate Giving

Westwood has a long history of community involvement and support of local charitable causes. This involvement is a cornerstone of our culture, drives employee engagement and makes employees proud to work at Westwood. In honoring Westwood’s history of community involvement and support of local charitable causes, Westwood supports and partners with organizations that embrace activities that align with Westwood’s core values of teamwork, excellence, integrity and placement of client and stakeholder interests above our own. Every year, Westwood supports several charitable organizations financially and through employee volunteer efforts focused on issues that include education, children’s needs, homelessness, food insecurity and disaster relief.

Environment

At Westwood, we embrace caring for our communities and work hard to take care of the world around us. Westwood is committed to the responsible use, and protection of, our natural environment through conservation and sustainable practices that enhance ecosystem resilience, human well-being and ultimately our company’s strength and resiliency. Through our initiative to calculate our travel-related carbon footprint and buy offset carbon credits, we have begun to measure and offset greenhouse gas emissions. We are committed to offsetting our carbon emissions generated through air travel, a substantial portion of our emissions as an asset manager.

Diversity, Equity and Inclusion

Diversity is an important part of our culture and identity; approximately 43% of our employees are women — many in senior positions — and approximately 34% of our employees self-identify as members of minority communities.

Diversity, Equity and Inclusion concepts are an integral part of our history, culture and identity. Westwood was founded by a woman — a remarkable feat in 1983, when the finance industry had only a small percentage of women in the workforce. We embrace opportunity for individuals from all backgrounds and are committed to fostering an environment that values unique ideas, perspectives and experiences. We believe that, in such an environment, our employees feel valued, involved and empowered to do their best work, deliver the best possible service to our clients and meet their full potential.