As filed with the Securities and Exchange Commission on June 6, 2002

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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

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FORM 10

Amendment No. 5

GENERAL FORM FOR REGISTRATION OF SECURITIES
Pursuant to Section 12(b) or (g) of the Securities Exchange Act of 1934

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Westwood Holdings Group, Inc.
(Exact name of registrant as specified in its charter)

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Delaware                  75-2969997
(State or other           (I.R.S. Employer
jurisdiction of          Identification No.)
incorporation or
organization)

300 Crescent Court, Suite 1300
Dallas, Texas 75201
(214) 756-6900
(Address, including zip code, and telephone number, including area code, of
principal executive offices)

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

Name of exchange on which each
Title of each class to be so registered   class is to be registered
---------------------------------------   -------------------------
Common Stock, $0.01 par value         New York Stock Exchange

Securities to be registered pursuant to Section 12(g) of the Act:    None

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Copies of Communications Sent To:

David G. McLane               John B. McKnight
Gardere Wynne Sewell LLP       Locke Liddell & Sapp LLP
1601 Elm Street, Suite 3000   2200 Ross Avenue, Suite 2200
Dallas, Texas 75201-4761          Dallas, Texas 75201
Telephone: (214) 999-3000      Telephone: (214) 740-8000

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EXPLANATORY NOTE: THIS REGISTRATION STATEMENT HAS BEEN PREPARED ON A
PROSPECTIVE BASIS ON THE ASSUMPTION THAT, AMONG OTHER THINGS, THE SPIN-OFF (AS
DESCRIBED IN THE INFORMATION STATEMENT WHICH IS A PART OF THIS REGISTRATION
STATEMENT) AND THE RELATED TRANSACTIONS CONTEMPLATED TO OCCUR PRIOR TO OR
CONTEMPORANEOUSLY WITH THE SPIN-OFF WILL BE CONSUMMATED AS CONTEMPLATED BY THE
INFORMATION STATEMENT. THERE CAN BE NO ASSURANCE, HOWEVER, THAT ANY OR ALL OF
SUCH TRANSACTIONS WILL OCCUR OR WILL OCCUR AS SO CONTEMPLATED. ANY SIGNIFICANT
MODIFICATIONS OR VARIATIONS IN THE TRANSACTIONS CONTEMPLATED WILL BE REFLECTED
IN AN AMENDMENT OR SUPPLEMENT TO THIS REGISTRATION STATEMENT.

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WESTWOOD HOLDINGS GROUP, INC.

I. INFORMATION INCLUDED IN INFORMATION STATEMENT AND INCORPORATED IN FORM 10 BY
REFERENCE

CROSS-REFERENCE SHEET BETWEEN
INFORMATION STATEMENT AND ITEMS OF FORM 10

Item No. Item Caption                                  Location in Information Statement
-------- ------------                                  ---------------------------------

Item 1.  Business                          "Summary," (pg. 1) "Risk Factors," (pg. 6) "Relationship
Between SWS and Westwood After the Spin-off,"
(pg. 25) "Management's Discussion and Analysis of
Financial Condition and Results of Operations," (pg. 32)
"Business" (pg. 40)
Item 2.  Financial Information             "Selected Consolidated Financial Data," (pg. 30)
"Management's Discussion and Analysis of Financial
Condition and Results of Operations" (pg. 32)
Item 3.  Properties                        "Business - Properties" (pg. 46)
Item 4.  Security Ownership of Certain     "Principal Stockholders" (pg. 55)
Beneficial Owners and
Management
Item 5.  Directors and Executive Officers  "Management" (pg. 47)
Item 6.  Executive Compensation            "Management" (pg. 47)
Item 7.  Certain Relationships and Related "Relationship Between SWS and Westwood After the Spin-
Transactions                      off," (pg. 25) "Certain Relationships and Related
Transactions" (pg. 57)
Item 8.  Legal Proceedings                 "Business - Legal Proceedings" (pg. 46)
Item 9.  Market Price and Dividends on the "Summary," (pg. 1) "Risk Factors," (pg. 6) "The Spin-off,"
Registrant's Common Equity        (pg. 14) "Dividend Policy," (pg. 29) "Description of
and Related Stockholder           Capital Stock" (pg. 58)
Matters
Item 11. Description of Registrant's       "Description of Capital Stock" (pg. 58)
Securities to be Registered
Item 12. Indemnification of Directors and  "Description of Capital Stock - Liability and
Officers                          Indemnification of Directors and Officers" (pg. 61)
Item 13. Financial Statements and          "Selected Consolidated Financial Data," (pg. 30)
Supplementary Data                "Consolidated Financial Statements" (pg. F-1)
Item 14. Changes in and disagreements      "Management's Discussion and Analysis of Financial
with Accountants on               Condition and Results of Operations--Expected Change
Accounting and Financial          in Independent Accountants" (pg. 39)
Disclosure
Item 15. Financial Statements and Exhibits "Index to Consolidated Financial Statements" (pg. F-1)

II. INFORMATION NOT INCLUDED IN INFORMATION STATEMENT

Item 10.  Recent Sales of Unregistered Securities

On December 14, 2001, in connection with the incorporation of Westwood
Holdings Group, Inc. ("Westwood"), Westwood issued 5,374,140 shares of its
common stock to SWS Group, Inc. in return for the contribution of all of the
issued and outstanding capital stock of Westwood Management Corporation and
Westwood Trust to Westwood. The exemption from registration was pursuant to
Section 4(2) of the Securities Act of 1933, as amended, and the rules and
regulations promulgated under the Securities Act on the basis that the
transaction did not involve a public offering.

Item 15.  Financial Statements and Exhibits

(b) Exhibits:

Exhibit
Number                                           Description
------                                           -----------

2.1  Distribution Agreement between SWS Group, Inc. and Westwood Holdings Group, Inc.*

3.1  Amended and Restated Certificate of Incorporation of Westwood Holdings Group, Inc.**

3.2  Amended and Restated Bylaws of Westwood Holdings Group, Inc.**

4.1  Form of Common Stock Certificate of Westwood Holdings Group, Inc.**

8.1  Tax Opinion from Gardere Wynne Sewell LLP**

10.1  Westwood Holdings Group, Inc. Stock Incentive Plan**

10.2  Westwood Holdings Group, Inc. Deferred Compensation Plan**

10.3  Tax Separation Agreement between SWS Group, Inc. and Westwood Holdings Group, Inc.*

10.4  Transition Services Agreement between SWS Group, Inc., Westwood Management Corporation and
Westwood Trust*

10.5  Promissory Note and Pledge Agreement between Susan Byrne and Westwood Holdings Group,
Inc.**

10.6  Promissory Note and Pledge Agreement between Brian Casey and Westwood Holdings Group,
Inc.**

10.7  Promissory Note and Pledge Agreement between Patricia Fraze and Westwood Holdings
Group, Inc.**

10.8  Promissory Note and Pledge Agreement between Lynda Calkin and Westwood Holdings
Group, Inc.**

10.9  Promissory Note and Pledge Agreement between Joyce Schaer and Westwood Holdings
Group, Inc.**

10.10  Office Lease between Westwood Management Corporation and Crescent Real Estate Funding I, L.P.,
dated as of April 4, 1990, and amendment thereto**

10.11  Software License Agreement between Infovisa and Westwood Trust, dated as of December 1,
2001**

10.12  Software License and Support Agreement between Advent Software, Inc. and Westwood
Management Corporation, dated as of December 30, 1996**

16.1  Letter from Arthur Andersen LLP*

21.1  Subsidiaries**

23.1  Consent of Gardere Wynne Sewell LLP (included in Exhibit 8.1)**

99.1  Information Statement of SWS Group, Inc.*

99.2  Letter from Westwood Holdings Group, Inc. regarding representations from Arthur Andersen LLP**

--------
*  Filed herewith.
** Previously filed.

SIGNATURES

Pursuant to the requirements of Section 12 of the Securities Exchange Act of
1934, the registrant has duly caused this registration statement to be signed
on its behalf by the undersigned, thereunto duly authorized.

WESTWOOD HOLDINGS GROUP, INC.

By:      /S/ SUSAN M. BYRNE
-----------------------------
Susan M. Byrne, Chief
Executive Officer

Dated June 6, 2002

Exhibit 2.1

DISTRIBUTION AGREEMENT

This DISTRIBUTION AGREEMENT is dated as of June 6, 2002 (this
"Agreement") between SWS Group, Inc., a Delaware corporation ("SWS"), and
Westwood Holdings Group, Inc., a Delaware corporation ("Westwood").

W I T N E S S E T H

WHEREAS, SWS currently conducts a number of businesses, including asset
management services;

WHEREAS, SWS contributed to Westwood all of the capital stock of
Westwood Management Corporation and Westwood Trust, and in exchange therefor
Westwood has issued to SWS 5,374 shares of Westwood common stock, $0.01 par
value per share ("Westwood Common Stock");

WHEREAS, the SWS Board of Directors has authorized the distribution of
all of the issued and outstanding shares of Westwood Common Stock that continue
to be owned by SWS to the holders of its issued and outstanding shares of common
stock, par value $0.10 per share (the "SWS Common Stock"), as of the record
date, on the basis of one share of Westwood Common Stock for every four shares
of SWS Common Stock (the "Distribution");

WHEREAS, the parties intend that the Distribution qualify as a tax-free
transaction under Section 355(a) of the Internal Revenue Code of 1986, as
amended (the "Code"); and

WHEREAS, the parties hereto have determined to set forth the principal
corporate and other transactions required to effect the Distribution and to set
forth other agreements that will govern certain other matters prior to and
following the Distribution.

NOW, THEREFORE, in consideration of the mutual covenants contained in
this Agreement, the parties hereby agree as follows:

ARTICLE 1
DEFINITIONS

The following terms, as used herein, have the following meanings:

"Action" means any demand, claim, suit, action, arbitration, inquiry,
investigation or other proceeding by or before or any Governmental Authority or
any arbitration or mediation tribunal.

"Affiliate" means, with respect to any Person, any Person directly or
indirectly controlling, controlled by, or under common control with such other
Person; provided, however, that for purposes of this Agreement, any Person who
was a member of both Groups prior to the Distribution shall be deemed to be an
Affiliate only of the Group of which such Person is a

member following the Distribution. For the purposes of this definition,
"control" means the possession, directly or indirectly, of the power to direct
or cause the direction of the management and policies of a Person, whether
through the ownership of voting securities, by contract or otherwise; and the
terms "controlling" and "controlled" have meanings correlative to the foregoing.
Any contrary provision of this Agreement notwithstanding, neither SWS nor any of
its Subsidiaries shall be deemed to be an Affiliate of Westwood.

"Agreement" has the meaning set forth in the preamble hereto, as such
agreement may be amended and supplemented from time to time in accordance with
its terms.

"Ancillary Agreement" means each of the Tax Separation Agreement; the
Transition Services Agreement; that certain Investment Agreement, dated June 2,
1999, relating to the Southwest Special Reserve Account for the Benefit of PAIB,
between Westwood Management Corporation and SWS; that certain Investment
Agreement, dated October 3, 1993, relating to the Special Reserve Account for
Exclusive Benefit of Customers between Westwood Management Corporation and SWS;
that certain Agency Account without Investment Advice Letter of Instruction,
dated March 31, 1998, relating to the Southwest Special Reserve Account between
Westwood Trust and SWS; and that certain Agency Account without Investment
Advice Letter of Instruction, dated as of March 31, 1998, relating to the
Special Reserve Account for the Exclusive Benefit of PAIB between Westwood Trust
and SWS; as any of such agreements may be amended or superseded from time to
time.

"Boykin Trust" means the Richard A. Boykin, Jr. Family Trust.

"Commission" means the Securities and Exchange Commission.

"Distribution" has the meaning set forth in the recitals to this
Agreement.

"Distribution Agent" means Computershare Trust Company, Inc.

"Distribution Date" means the day as of which the Distribution shall be
effected.

"Distribution Documents" means all of the agreements and other
documents entered into in connection with the Distribution as contemplated
hereby, including, without limitation, this Agreement and the Ancillary
Agreements.

"Exchange Act" means the Securities Exchange Act of 1934, as amended,
and the rules and regulations promulgated thereunder.

"Finally Determined" means, with respect to any Action or other matter,
that the outcome or resolution of such Action or matter has been judicially
determined by judgment or order not subject to further appeal or discretionary
review.

"Form 10" means the registration statement on Form 10 initially filed
by Westwood with the Commission on February 8, 2002 to effect the registration
of Westwood Common Stock

2

pursuant to the Exchange Act in connection with the Distribution, as such
registration statement may be amended or supplemented from time to time.

"Group" means, as the context requires, the Westwood Group or the SWS
Group.

"Indemnified Party" has the meaning set forth in Section 3.4.

"Indemnifying Party" has the meaning set forth in Section 3.4.

"Information Statement" means the final Information Statement to be
sent to each holder of SWS Common Stock in connection with the Distribution.

"Insurance Proceeds" means those monies (i) received by an insured from
an insurance carrier or (ii) paid by an insurance carrier on behalf of the
insured, in either case net of any applicable premium adjustment,
retrospectively rated premium, deductible, retention, cost or reserve paid or
held by or for the benefit of such insured.

"Insured Claims" means those Liabilities that, individually or in the
aggregate, are covered within the terms and conditions of any of the SWS
Policies, whether or not subject to deductibles, co-insurance, uncollectability
or retrospectively rated premium adjustments, but only to the extent that such
Liabilities are within applicable policy limits, including aggregates.

"Liabilities" means any and all claims, debts, liabilities and
obligations, absolute or contingent, matured or not matured, liquidated or
unliquidated, accrued or unaccrued, known or unknown, whenever arising,
including all costs and expenses relating thereto, and including, without
limitation, those debts, liabilities and obligations arising under this
Agreement, any law, rule, regulation, any action, order, injunction or consent
decree of any governmental agency or entity, or any award of any arbitrator of
any kind, and those arising under any agreement, commitment or undertaking.

"Losses" means, with respect to any Person, any and all damage, loss,
liability and expense incurred or suffered by such Person (including, without
limitation, reasonable expenses of investigation and reasonable attorneys' fees
and expenses in connection with any and all Actions or threatened Actions).

"Person" means an individual, corporation, limited liability company,
partnership, association, trust or other entity or organization, including a
governmental or political subdivision or an agency or instrumentality thereof.

"Record Date" means the date determined by the SWS Board of Directors
(or determined by a committee of such Board of Directors pursuant to authority
delegated to such committee by the SWS Board of Directors) as the record date
for determining the holders of SWS Common Stock entitled to receive the
Distribution.

"Return" has the meaning set forth in the Tax Separation Agreement.

3

"Securities Act" means the Securities Act of 1933, as amended, and the
rules and regulations promulgated thereunder.

"Subsidiary" means, with respect to any Person, any other entity of
which securities or other ownership interests having ordinary voting power to
elect a majority of the board of directors or other persons performing similar
functions are at the time directly or indirectly owned by such Person.

"SWS" has the meaning set forth in the preamble.

"SWS Common Stock" has the meaning set forth in the recitals to this
Agreement.

"SWS Group" means SWS and its Subsidiaries (other than any Subsidiary
or member of, or other entity in, the Westwood Group).

"SWS Liabilities" means all (i) Liabilities of the SWS Group resulting
from breaches by the SWS Group under this Agreement, (ii) Liabilities accrued as
of the Distribution Date, except as otherwise specifically provided herein, and
other Liabilities, whether arising before, on or after the Distribution Date, of
or relating to the SWS Group or arising from or in connection with the conduct
of the business of the SWS Group (other than the Westwood Business) or the
ownership or use of assets in connection therewith and (iii) any Liabilities or
expenses of the Westwood Group in excess of $500,000 that arise out of or
directly or indirectly relate to the Boykin Trust (such expenses to include
unpaid trustee fees owing to Westwood at the time of the Distribution but not
thereafter). Notwithstanding the foregoing, "SWS Liabilities" shall exclude (y)
any Liabilities for Taxes (since such Liabilities shall be governed by the Tax
Separation Agreement) and (z) any Liabilities specifically retained or assumed
by Westwood pursuant to this Agreement.

"SWS Policies" means the following insurance policies, together with
the rights, benefits and privileges thereunder, which are owned or maintained by
or on behalf of SWS or any of its predecessors and which relate to both the
business of SWS and the Westwood Business:

Coverage                            Insurer                      Policy Number
--------                            -------                      -------------
Property                            Fidelity & Deposit Co.       FSA0004730-06
Commercial General Liability        Fidelity & Deposit Co.       FSA0004730-06
Business Auto                       Fidelity & Deposit Co.       CAP0008823-07
Umbrella Liability                  Fidelity & Deposit Co.       CCL0004936-07
Fiduciary Liability                 Fidelity & Deposit Co.       FRP0002987-02
Directors & Officer                 National Union Fire          858-18-49
D&O - Excess                        Federal Insurance Co.        70426732
Kidnap & Ransom                     Chubb Group                  8113-81-83C
Financial Institution Bond          National Union Fire          280-68-84

"Tax" has the meaning set forth in the Tax Separation Agreement.

4

"Tax Separation Agreement" means the Tax Separation Agreement dated as
of the date hereof between SWS and Westwood.

"Third-Party Claim" has the meaning set forth in Section 3.5.

"Transition Services Agreement" means the Transition Services Agreement
dated as of the date hereof between SWS and Westwood.

"Westwood" has the meaning set forth in the preamble.

"Westwood Business" means the business of Westwood and its Subsidiaries
as conducted as of the date hereof.

"Westwood Common Stock" has the meaning set forth in the recitals to
this Agreement.

"Westwood Group" means Westwood Holdings Group, Inc. and its
Subsidiaries as of and after the Distribution Date (including all predecessors
to such Persons).

"Westwood Liabilities" means all (i) Liabilities of the Westwood Group
resulting from breaches by the Westwood Group under this Agreement, (ii)
Liabilities expressly assumed by Westwood pursuant to Section 4.5 herein and
(iii) except as otherwise specifically provided herein, other Liabilities,
whether arising before, on or after the Distribution Date, of or relating to the
Westwood Group or arising from or in connection with the conduct of the Westwood
Business or the ownership or use of assets in connection therewith.
Notwithstanding the foregoing, "Westwood Liabilities" shall exclude: (x) any
Liabilities for Taxes (since such Liabilities shall be governed by the Tax
Separation Agreement), (y) any Liabilities or expenses of the Westwood Group in
excess of $500,000 that arise out of or directly or indirectly relate to the
Boykin Trust (such expenses to include unpaid trustee fees owing to Westwood at
the time of the Distribution but not thereafter) and (z) any Liabilities
specifically retained or assumed by SWS pursuant to this Agreement.

ARTICLE 2
THE DISTRIBUTION

Section 2.1  Cooperation Prior to the Distribution

(a) SWS and Westwood shall prepare, and Westwood shall file with the
Commission, the Form 10, which shall include the Information Statement, and
which shall set forth appropriate disclosure concerning Westwood and the
Distribution. SWS and Westwood shall use reasonable efforts to cause the Form 10
to become effective under the Exchange Act as soon as practicable. After the
Form 10 has become effective, SWS shall mail the Information Statement to the
holders of SWS Common Stock as of the Record Date.

(b) SWS and Westwood shall cooperate in preparing, filing with the
Commission and causing to become effective any registration statements or
amendments thereto that are

5

appropriate to reflect the establishment of or amendments to any employee
benefit and other plans contemplated by this Agreement and the Ancillary
Agreements.

(c) SWS and Westwood shall take all such action as may be necessary or
appropriate under the securities or blue sky laws of states or other political
subdivisions of the United States in connection with the transactions
contemplated by this Agreement and the Ancillary Agreements.

(d) Westwood shall prepare, file and pursue an application to permit
listing of the Westwood Common Stock on the New York Stock Exchange.

Section 2.2  SWS Board Action; Conditions Precedent to the Distribution

SWS's Board of Directors shall, in its discretion, establish (or
delegate authority to establish) the Record Date and the Distribution Date and
any appropriate procedures in connection with the Distribution. In no event
shall the Distribution occur unless the following conditions shall have been
waived by SWS or shall have been satisfied:

(a) the Commission must have declared the Form 10 effective under the
Exchange Act;

(b) the New York Stock Exchange must have approved the listing of the
Westwood Common Stock, subject to official notice of issuance;

(c) the SWS Board of Directors must be satisfied that the Distribution
will be made out of surplus within the meaning of Section 170 of the General
Corporation Law of the State of Delaware;

(d) the SWS Board of Directors must have approved the Distribution and
must not have abandoned, deferred or modified the Distribution at any time
before the completion of the Distribution;

(e) Westwood's Certificate of Incorporation and Bylaws, in
substantially the forms filed as exhibits to the Form 10, must be in effect;

(f) Westwood must have received approval of the change of control of
Westwood Trust from the Texas Banking Commissioner or confirmation that a change
of control of Westwood Trust has not occurred as a result of the Distribution;
and

(g) each of the Ancillary Agreements shall have been duly executed and
delivered by the parties thereto.

Section 2.3  The Distribution

Subject to the terms and conditions set forth in this Agreement, (i)
prior to the Distribution Date, SWS shall deliver to the Distribution Agent for
the benefit of holders of

6

record of SWS Common Stock on the Record Date, a stock certificate or
certificates, endorsed by SWS in blank, representing all of the outstanding
shares of Westwood Common Stock held by SWS, (ii) the Distribution shall be
effective on the Distribution Date and (iii) SWS shall instruct the Distribution
Agent to distribute, on or as soon as practicable after the Distribution Date,
to each holder of record (other than SWS as the holder of treasury shares) of
SWS Common Stock as of the close of business on the Record Date one share of
Westwood Common Stock for every four shares of SWS Common Stock so held.
Westwood agrees to provide all certificates for shares of Westwood Common Stock
that SWS shall require (after giving effect to Sections 2.4 and 2.5) in order to
effect the Distribution.

Section 2.4 Split of Westwood Common Stock to Accomplish the
Distribution

Following the filing of Westwood's Amended and Restated Certificate of
Incorporation with the Secretary of State of the State of Delaware and prior to
the Distribution Date, Westwood shall effect a stock split in the form of a
stock dividend which will result in the ownership by SWS of a number of shares
of Westwood Common Stock, rounded to the next higher share, if necessary, equal
to one-fourth of the number of shares of SWS Common Stock outstanding (excluding
treasury shares) on the Record Date.

Section 2.5  Fractional Shares

No certificates representing fractional shares of Westwood Common Stock
will be distributed in the Distribution. The Distribution Agent will be directed
to determine the number of whole shares and fractional shares of Westwood Common
Stock allocable to each holder of SWS Common Stock as of the Record Date. Upon
the determination by the Distribution Agent of the aggregate number of
fractional shares, as soon as practicable after the Distribution Date, the
Distribution Agent, acting on behalf of the holders thereof, shall sell such
fractional shares for cash on the open market and shall disburse to each holder
entitled thereto the appropriate portion of the resulting cash proceeds
(calculated by multiplying the average gross selling price per share times the
number of fractional shares allocable to such holder), less a pro rata portion
of the aggregate brokerage commission payable in connection with the sale.

Section 2.6  Intercompany and Third Party Accounts

All accounts between the SWS Group and the Westwood Group, including
receivables, payables and loans, or any other account that may arise (other than
receivables, payables and loans otherwise specifically provided for hereunder or
under any Ancillary Agreement), as well as all accounts between the SWS Group or
the Westwood Group on the one hand, and third parties on the other hand,
including, without limitation, in respect of any cash balances, any cash
balances representing deposited checks or drafts for which only a provisional
credit has been allowed or any cash held in any centralized cash management
system between the SWS Group and the Westwood Group which exist and have not
been settled by the Distribution Date, shall be paid or settled in the ordinary
course of business in a manner consistent with the payment or settlement of
similar accounts arising from transactions with third parties no later than 30
days after the Distribution Date.

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ARTICLE 3
INDEMNIFICATION

Section 3.1  Westwood Indemnification of the SWS Group

(a) Subject to Section 3.3, on and after the Distribution Date,
Westwood shall indemnify, defend and hold harmless the SWS Group and the
respective directors, officers, employees and Affiliates of each Person in the
SWS Group (the "SWS Indemnitees") from and against any and all Losses incurred
or suffered by any of the SWS Indemnitees arising out of, or due to the failure
of any Person in the Westwood Group to pay, perform or otherwise discharge, any
of the Westwood Liabilities.

(b) Subject to Section 3.3, Westwood shall indemnify, defend and hold
harmless each of the SWS Indemnitees and each Person, if any, who controls any
SWS Indemnitee within the meaning of either Section 15 of the Securities Act or
Section 20 of the Exchange Act from and against any and all Losses caused by any
untrue statement or alleged untrue statement of a material fact contained in the
Form 10 or any amendment thereof or the Information Statement (as amended or
supplemented if Westwood shall have furnished any amendments or supplements
thereto), or caused by any omission or alleged omission to state therein a
material fact necessary to make the statements therein, in the light of the
circumstances under which they were made, not misleading, if, and only to the
extent that, such Losses are caused by any untrue statement or omission or
alleged untrue statement or alleged omission arising out of information provided
by Westwood for inclusion in the Form 10 or Information Statement.

Section 3.2  SWS Indemnification of Westwood Group

(a) Subject to Section 3.3, on and after the Distribution Date, SWS
shall indemnify, defend and hold harmless the Westwood Group and the respective
directors, officers, employees and Affiliates of each Person in the Westwood
Group (the "Westwood Indemnitees") from and against any and all Losses incurred
or suffered by any of the Westwood Indemnitees and arising out of, or due to the
failure of any Person in the SWS Group to pay, perform or otherwise discharge,
any of the SWS Liabilities.

(b) Subject to Section 3.3, SWS shall indemnify, defend and hold
harmless each of the Westwood Indemnitees and each Person, if any, who controls
any Westwood Indemnitee within the meaning of either Section 15 of the
Securities Act or Section 20 of the Exchange Act from and against any and all
Losses caused by any untrue statement or alleged untrue statement of a material
fact contained in the Form 10 or any amendment thereof or the Information
Statement (as amended or supplemented if SWS shall have furnished any amendments
or supplements thereto), or caused by any omission or alleged omission to state
therein a material fact necessary to make the statements therein, in the light
of the circumstances under which they were made, not misleading, if, and only to
the extent that, such Losses are caused by any untrue statement or omission or
alleged untrue statement or alleged omission arising out of information provided
by SWS for inclusion in the Form 10 or Information Statement.

8

Section 3.3  Insurance; Third Party Obligations; Tax Benefits; Payments
Received

Any indemnification pursuant to Sections 3.1 or 3.2 shall be paid net
of the amount of any insurance or other amounts that would be payable by any
third party (other than expenses owed to Westwood by the Boykin Trust, including
unpaid trustee fees owed to Westwood at or prior to the Distribution) to the
Indemnified Party (as defined below) in the absence of this Agreement
(irrespective of time of receipt of such insurance or other amounts) and net of
any tax benefit to the Indemnified Party attributable to the relevant payment or
Liability. Such indemnification shall be increased to reflect any tax liability
of the indemnified party so that the indemnified party receives 100% of the
after-tax amount of any payment or liability. It is expressly agreed that no
insurer or any other third party shall be (i) entitled to a benefit it would not
be entitled to receive in the absence of the foregoing indemnification
provisions, (ii) relieved of the responsibility to pay any claims to which it is
obligated or (iii) entitled to any subrogation rights with respect to any
obligation hereunder.

In the event that Westwood receives payment at any time or from time to
time from the Boykin Trust for its expenses (including unpaid trustee fees owed
to Westwood at or prior to the Distribution) and SWS has made one or more
indemnification payments for any Liabilities or expenses that arise out of or
directly or indirectly relate to the Boykin Trust, Westwood shall immediately
reimburse SWS up to the amount of any such non-reimbursed indemnification
payments. To the extent that any payments received by Westwood from the Boykin
Trust are in excess of the amount of indemnification payments made by SWS, the
difference shall be credited against the $500,000 threshold calculation under
(iii) of "SWS Liabilities" in Article I.

Section 3.4  Notice and Payment of Claims

If any SWS Indemnitee or Westwood Indemnitee (the "Indemnified Party")
determines that it is or may be entitled to indemnification by any party (the
"Indemnifying Party") under Article 3 (other than in connection with any Action
subject to Section 3.5), the Indemnified Party shall deliver to the Indemnifying
Party a written notice specifying, to the extent reasonably practicable, the
basis for its claim for indemnification and the amount for which the Indemnified
Party reasonably believes it is entitled to be indemnified. Within 30 days after
receipt of such notice, the Indemnifying Party shall pay the Indemnified Party
such amount in cash or other immediately available funds unless the Indemnifying
Party objects to the claim for indemnification or the amount thereof. If the
Indemnifying Party does not give the Indemnified Party written notice objecting
to such indemnity claim and setting forth the grounds therefor within such
30-day period, the Indemnified Party shall give the Indemnifying Party an
additional notice of its claims for indemnification and if the Indemnifying
Party does not give the Indemnified Party written notice objecting to such
claims within 10 days after receipt of such additional notice, the Indemnifying
Party shall be deemed to have acknowledged its liability for such claim and the
Indemnified Party may exercise any and all of its rights under applicable law to
collect such amount. In the event of such a timely objection by the Indemnifying
Party, the amount, if any, that is Finally Determined to be required to be paid
by the Indemnifying Party in respect of such indemnity claim shall be paid by
the Indemnifying Party to the Indemnified Party in cash within 15 days after
such indemnity claim has been so Finally Determined. Notice and

9

payment of all claims shall be in accordance with the provisions of this
Agreement and with a copy of the notice to:

SWS Group, Inc.
1201 Elm Street, Suite 3500
Dallas, Texas 75270
Telecopy: (214) 859-6020
Attention: General Counsel

Section 3.5  Notice and Defense of Third-Party Claims

Promptly following the earlier of (i) receipt of notice of the
commencement by a third party of any Action against or otherwise involving any
Indemnified Party or (ii) receipt of information from a third party alleging the
existence of a claim against an Indemnified Party, in either case, with respect
to which indemnification may be sought pursuant to this Agreement (a
"Third-Party Claim"), the Indemnified Party shall give the Indemnifying Party
written notice thereof. The failure of the Indemnified Party to give notice as
provided in this Section 3.5 shall not relieve the Indemnifying Party of its
obligations under this Agreement, except to the extent that the Indemnifying
Party is materially prejudiced by such failure to give notice. Within 15 days
after receipt of such notice, the Indemnifying Party may (i) by giving written
notice thereof to the Indemnified Party, acknowledge liability for such
indemnification claim and at its option elect to assume the defense of such
Third-Party Claim at its sole cost and expense or (ii) object to the claim for
indemnification set forth in the notice delivered by the Indemnified Party
pursuant to the first sentence of this Section 3.5; provided that if the
Indemnifying Party does not within such 15-day period give the Indemnified Party
written notice objecting to such indemnification claim and setting forth the
grounds therefor, the Indemnified Party shall give the Indemnifying Party an
additional notice of its claims for indemnification and if the Indemnifying
Party does not give the Indemnified Party written notice objecting to such
claims within 10 days after receipt of such additional notice, the Indemnifying
Party shall be deemed to have acknowledged its liability for such
indemnification claim. If the Indemnifying Party has elected to assume the
defense of a Third-Party Claim, (x) the defense shall be conducted by counsel
retained by the Indemnifying Party and reasonably satisfactory to the
Indemnified Party, provided that the Indemnified Party shall have the right to
employ counsel to represent such Indemnified Party if, in such Indemnified
Party's reasonable judgment, a conflict of interest between such Indemnified
Party and such Indemnifying Party exists in respect of such claim that would
make representation of both such parties by one counsel inappropriate, and in
such event the fees and expenses of such separate counsel shall be paid by such
Indemnifying Party (if the Indemnifying Party elects to assume such defense, the
Indemnified Party shall have the right to participate in the defense thereof and
to employ counsel, subject to the foregoing proviso, at its own expense,
separate from the counsel employed by the Indemnifying Party, it being
understood that the Indemnifying Party shall control such defense); and (y) the
Indemnifying Party may settle or compromise the Third Party Claim without the
prior written consent of the Indemnified Party so long as such settlement
includes an unconditional release of the Indemnified Party from all claims that
are the subject of such Third Party Claim, provided that the Indemnifying Party
may not agree to any such settlement pursuant to which any remedy or relief,
other than monetary damages for which the Indemnifying Party shall be
responsible hereunder, shall be applied to or

10

against the Indemnified Party, without the prior written consent of the
Indemnified Party, which consent shall not be unreasonably withheld. If the
Indemnifying Party does not assume the defense of a Third-Party Claim for which
it has acknowledged liability for indemnification hereunder, the Indemnified
Party may require the Indemnifying Party to reimburse it on a current basis for
its reasonable expenses of investigation, reasonable attorneys' fees and
reasonable out-of-pocket expenses incurred in defending against such Third-Party
Claim and the Indemnifying Party shall be bound by the result obtained with
respect thereto by the Indemnified Party; provided that the Indemnifying Party
shall not be liable for any settlement effected without its consent, which
consent shall not be unreasonably withheld. The Indemnifying Party shall pay to
the Indemnified Party in cash the amount, if any, for which the Indemnified
Party is entitled to be indemnified hereunder within 15 days after such Third
Party Claim has been Finally Determined, in the case of an indemnity claim as to
which the Indemnifying Party has acknowledged liability or, in the case of any
indemnity claim as to which the Indemnifying Party has not acknowledged
liability, within 15 days after such Indemnifying Party's objection to liability
hereunder has been Finally Determined.

Section 3.6  Contribution

If for any reason the indemnification provided for in Section 3.1 or
3.2 is unavailable to any Indemnified Party, or insufficient to hold it
harmless, then the Indemnifying Party shall contribute to the amount paid or
payable by such Indemnified Party as a result of such Losses in such proportion
as is appropriate to reflect all relevant equitable considerations.

Section 3.7  Non-Exclusivity of Remedies

The remedies provided for in this Article 3 are not exclusive and shall
not limit any rights or remedies that may otherwise be available to any
Indemnified Party at law or in equity.

Section 3.8  Termination of Indemnification Obligations

The obligations of the parties under this Article 3 shall terminate two
years after the Distribution Date; provided, however, such obligations shall not
terminate with respect to any claim for indemnification or contribution or with
respect to which notice is delivered to the Indemnifying Party in accordance
with Section 3.4 prior to the date of termination.

ARTICLE 4
EMPLOYEES AND EMPLOYEE BENEFIT PLANS

Section 4.1  Employees Generally

As of the Distribution Date, SWS will retain responsibility for all of
its current employees (other than employees of Westwood Group), and Westwood
will retain responsibility for all employees of Westwood Group (including
persons absent from active service by reason of disability or otherwise). As of
the Distribution Date, employees of Westwood Group will no longer be deemed
employees of SWS Group.

11

Section 4.2  Employee Benefit Plans Generally

As of the Distribution Date, all SWS medical, dental, disability, life
insurance and similar plans provided by SWS Group to its employees shall
terminate as to employees of Westwood Group. Westwood will adopt employee
benefit plans that will be substantially similar to plans provided by SWS to be
effective as of the Distribution Date.

Section 4.3  SWS Stock Options Held by Westwood Group Employees

As of the Distribution Date, SWS shall provide for 100% vesting of
options to purchase SWS Common Stock held by employees of the Westwood Group.
Each option to purchase SWS Common Stock held by an employee of Westwood Group
will be amended to substitute Westwood or one of its Subsidiaries for SWS as the
employer of such employee. In addition, to the extent that SWS makes any
adjustments to its outstanding options as a result of the Distribution, similar
adjustments will be made to the SWS options held by Westwood employees.

Section 4.4  SWS 401(k) Profit Sharing Plan Accounts Held by Westwood
Group Employees

As of the Distribution Date, SWS shall provide for 100% vesting for
accounts in the SWS 401(k) Profit Sharing Plan for employees of the Westwood
Group. As soon as practicable following the Distribution, the trustees of the
SWS 401(k) Profit Sharing Plan will transfer such accounts to the trustees of
the Westwood Group 401(k) Profit Sharing Plan.

Section 4.5  SWS Deferred Compensation Plan Accounts Held by Westwood
Group Employees

As soon as practicable following the Distribution, the trustee of the
SWS rabbi trust, which holds the assets of the SWS Deferred Compensation Plan,
will transfer the accounts held for the benefit of Westwood Group employees to
the trustee of the Westwood Group rabbi trust, which holds the assets of the
Westwood Group Deferred Compensation Plan. Contemporaneous with the transfer of
the assets to the Westwood Group rabbi trust, SWS will transfer to Westwood, and
Westwood will assume, the related liability and unrealized holding gain
accounts.

Section 4.6  Restriction on Solicitation or Employment of Employees

For a period of one year following the Distribution Date, each of the
SWS Group and the Westwood Group agrees that (without the prior written consent
of the other) it will not, directly or indirectly, (i) solicit or otherwise
attempt to induce or influence any employee of the other Group to terminate
employment with his or her then-current employer or (ii) employ any employee of
the other Group; provided, that the foregoing shall not apply to the
solicitation or hiring of any Person whose employment with a Group terminated at
least 90 days prior to the date of such solicitation or hiring for a bona fide
reason not intended to circumvent the provisions of this Section 4.6.

12

ARTICLE 5
ACCESS TO INFORMATION

Section 5.1  Provision of Corporate Records

Immediately prior to or as soon as practicable following the
Distribution Date, each Group shall provide to the other Group all documents,
contracts, books, records, Tax Returns (and any information related thereto) and
data (including but not limited to minute books, stock registers, stock
certificates and documents of title) in its possession relating to such other
Group or such other Group's business and affairs; provided that if any such
documents, contracts, books, records, Tax Returns (and any information related
thereto) or data relate to both Groups or the business and operations of both
Groups, each such Group shall provide to the other Group true and complete
copies of such documents, contracts, books, records, Tax Returns (and any
information related thereto) or data. Data stored in electronic form shall be
provided in the format in which it existed at the Distribution Date and, if
requested, in hard copy (at the expense of the requesting party), except as
otherwise specifically set forth in this Agreement or any Ancillary Agreement.

Section 5.2  Access to Information

From and after the Distribution Date, each Group shall, during the time
specified in Section 5.5, afford promptly to the other Group and its
accountants, counsel and other designated representatives reasonable access
during normal business hours to all documents, contracts, books, records,
computer data, Tax Returns (and any information related thereto) and other data
in such Group's possession relating to such other Group or the business and
affairs of such other Group (other than data and information subject to an
attorney/client or other privilege), insofar as such access is reasonably
required by such other Group, including, without limitation, for audit,
accounting, litigation, disclosure reporting and regulatory compliance purposes.

Section 5.3  Litigation Cooperation

Each Group shall use reasonable efforts to make available to the other
Group and its accountants, counsel, and other designated representatives, upon
written request, its directors, officers, employees and representatives as
witnesses, and shall otherwise cooperate with the other Group, to the extent
reasonably required in connection with any Action arising out of either Group's
business and operations prior to the Distribution Date in which the requesting
party may from time to time be involved.

Section 5.4  Reimbursement

Each Group providing information or witnesses to the other Group, or
otherwise incurring any expense in connection with cooperating, under Sections
5.1, 5.2 or 5.3 shall be entitled to receive from the recipient thereof, upon
the presentation of invoices therefor, payment for all out-of-pocket costs and
expenses as may be reasonably incurred in providing such information, witnesses
or cooperation.

13

Section 5.5  Retention of Records

Except as otherwise required by law or agreed to in writing, each party
shall, and shall cause the members of its respective Group to, retain all
information relating to the other Group's business and operations in accordance
with past practice of such party (provided that all Tax Returns and information
related thereto will be retained for a period of six years). Notwithstanding the
foregoing, any party may destroy or otherwise dispose of any such information at
any time, provided that, prior to such destruction or disposal, (i) such party
shall provide not less than 90 days' prior written notice to the other party,
specifying the information proposed to be destroyed or disposed of and the
scheduled date for such destruction or disposal and (ii) if the recipient of
such notice shall request in writing prior to the scheduled date for such
destruction or disposal that any of the information proposed to be destroyed or
disposed of be delivered to such requesting party, the party proposing the
destruction or disposal shall promptly arrange for the delivery of such of the
information as was requested at the expense of the requesting party.

Section 5.6  Confidentiality

Each party shall hold and shall cause its directors, officers,
employees, agents, consultants and advisors ("Representatives") to hold in
strict confidence all information (other than any such information relating
solely to the business or affairs of such party) concerning the other party
unless (i) such party is compelled to disclose such information by judicial or
administrative process or, in the opinion of its counsel, by other requirements
of law or (ii) such information can be shown to have been (A) in the public
domain through no fault of such party or (B) lawfully acquired after the
Distribution Date on a non-confidential basis from other sources.
Notwithstanding the foregoing, such party may disclose such information to its
Representatives so long as such Persons are informed by such party of the
confidential nature of such information and are directed by such party to treat
such information confidentially. If such party or any of its Representatives
becomes legally compelled to disclose any documents or information subject to
this Section, such party will promptly notify the other party so that the other
party may seek a protective order or other remedy or waive such party's
compliance with this Section. If no such protective order or other remedy is
obtained or waiver granted, such party will furnish only that portion of the
information which it is advised by counsel is legally required and will exercise
its reasonable efforts to obtain reliable assurance that confidential treatment
will be accorded such information. Such party agrees to be responsible for any
breach of this Section by it and its Representatives.

Section 5.7  Privileged Matters

The parties hereto recognize that legal and other professional services
that have been and will be provided prior to the Distribution Date have been and
will be rendered for the benefit of each of the members of the SWS Group and
each of the members of the Westwood Group, and that each of the members of the
SWS Group and each of the members of the Westwood Group should be deemed to be
the client for the purposes of asserting all privileges which may be asserted
under applicable law. Except as otherwise specifically provided in the Tax
Separation

14

Agreement with respect to tax matters, to allocate the interests of each party
in the information as to which any party is entitled to assert a privilege, the
parties agree as follows:

(a) SWS shall be entitled, in perpetuity, to control the assertion or
waiver of all privileges in connection with privileged information that relates
solely to the business of SWS (exclusive of the Westwood Business), whether or
not the privileged information is in the possession of or under the control of
SWS or Westwood. SWS shall also be entitled, in perpetuity, to control the
assertion or waiver of all privileges in connection with privileged information
that relates solely to the subject matter of any claims constituting SWS
Liabilities, now pending or which may be asserted in the future, in any Action
initiated against or by SWS, whether or not the privileged information is in the
possession of or under the control of SWS or Westwood.

(b) Westwood shall be entitled, in perpetuity, to control the assertion
or waiver of all privileges in connection with privileged information that
relates solely to the Westwood Business, whether or not the privileged
information is in the possession of or under the control of SWS or Westwood.
Westwood shall also be entitled, in perpetuity, to control the assertion or
waiver of all privileges in connection with privileged information which relates
solely to the subject matter of any claims constituting Westwood Liabilities,
now pending or which may be asserted in the future, in any Action initiated
against or by Westwood, whether or not the privileged information is in the
possession of Westwood or under the control of SWS or Westwood.

(c) The parties hereto agree that they shall have a shared privilege,
with equal right to assert or waive, subject to the restrictions in this Section
5.7, with respect to all privileges not allocated pursuant to the terms of
Sections 5.7(a) and (b). All privileges relating to any Action, disputes or
other matters that involve SWS and Westwood in respect of which such parties
retain any responsibility or liability under this Agreement shall be subject to
a shared privilege among them.

(d) No party hereto may waive any privilege which could be asserted
under any applicable law, and in which any other party hereto has a shared
privilege, without the consent of the other party, which consent shall not be
unreasonably withheld or delayed, except to the extent reasonably required in
connection with any Third-Party Claim or as provided in subsection (e) below.
Consent shall be in writing, or shall be deemed to be granted unless written
objection is made within 20 days after notice upon the other party requesting
such consent.

(e) In the event of any Action or dispute between any of the parties
hereto, any party and a Subsidiary of another party hereto, or a Subsidiary of
one party hereto and a Subsidiary of another party hereto, either such party, to
the extent necessary in connection with such Action or dispute, may waive a
privilege in which the other party has a shared privilege, without obtaining the
consent of the other party, provided that such waiver of a shared privilege
shall be effective only as to the use of information with respect to such Action
or dispute between the relevant parties and/or their Subsidiaries, and shall not
operate as a waiver of the shared privilege with respect to third parties.

15

(f) If a dispute arises between or among the parties hereto or their
respective Subsidiaries regarding whether a privilege should be waived to
protect or advance the interest of any party, each party agrees that it shall
negotiate in good faith, shall endeavor to minimize any prejudice to the rights
of the other parties, and shall not unreasonably withhold consent to any request
for waiver by another party. Each party hereto specifically agrees that it will
not withhold consent to waiver for any purpose except to protect its own
legitimate interests.

(g) Upon receipt by any party hereto or by any Subsidiary thereof of
any subpoena, discovery or other request which arguably calls for the production
or disclosure of information subject to a shared privilege or as to which
another party has the sole right hereunder to assert a privilege, or if any
party obtains knowledge that any of its or any of its Subsidiaries' current or
former officers or directors has received any subpoena, discovery or other
requests which arguably calls for the production or disclosure of such
privileged information, such party shall promptly notify the other party of the
existence of the request and shall provide the other party a reasonable
opportunity to review the information (to the extent such information is
available to such party) and to assert any rights it or they may have under this
Section 5.7 or otherwise to prevent the production or disclosure of such
privileged information.

(h) The transfer of all records and other information pursuant to this
Agreement is made in reliance on the agreement of SWS and Westwood, as set forth
in Sections 5.6 and 5.7, to maintain the confidentiality of privileged
information and to assert and maintain all applicable privileges. The access to
information being granted pursuant to Sections 5.1 and 5.2 hereof, the agreement
to cooperate with respect to litigation pursuant to Section 5.3, the furnishing
of notices and documents and other cooperative efforts contemplated by Section
3.5 hereof, and the transfer of privileged information between and among the
parties and their respective Subsidiaries pursuant to this Agreement shall not
be deemed a waiver of any privilege that has been or may be asserted under this
Agreement or otherwise.

(i) Any waiver of privilege granted pursuant to this Section 5.7 shall
only be valid if given in writing and signed by the Chief Executive Officer,
General Counsel or Board of Directors of the party granting such waiver.

ARTICLE 6
FURTHER ASSURANCES AND CONSENTS

In addition to the actions specifically provided for elsewhere in this
Agreement, each of the parties hereto shall use its reasonable efforts to take,
or cause to be taken, all actions, and to do, or cause to be done, all things,
reasonably necessary, proper or advisable under applicable laws, regulations and
agreements or otherwise to consummate and make effective the transactions
contemplated by this Agreement, including but not limited to using its
reasonable efforts to obtain any consents and approvals and to make any filings
and applications necessary or desirable in order to consummate the transactions
contemplated by this Agreement; provided that no party hereto shall be obligated
to pay any consideration therefor (except for filing fees and other similar
charges) to any third party from whom such consents or approvals are

16

requested or to take any action or omit to take any action if the taking of or
the omission to take such action would be unreasonably burdensome to the party,
its Group or its Group's business.

ARTICLE 7
MISCELLANEOUS

Section 7.1  Notices

All notices and other communications to any party hereunder shall be in
writing (including telecopy or similar writing) and, except as noted, shall be
deemed given when received addressed as follows:

If to SWS, to:

SWS Group, Inc.
1201 Elm Street, Suite 3500
Dallas, Texas 75270
Telecopy: (214) 859-6020
Attention: General Counsel

With a copy to:

Gardere Wynne Sewell LLP
1601 Elm Street, Suite 3000
Dallas, Texas  75201-4761
Telecopy: (214) 999-4667
Attention: David G. McLane

If to Westwood, to:

Westwood Holdings Group, Inc.
300 Crescent Court, Suite 1300
Dallas, Texas 75201
Telecopy: (214) 756-6920
Attention: Brian O. Casey, President

With a copy to:

Locke Liddell & Sapp LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Telecopy: (214) 740-8800
Attention: John B. McKnight

Any party may, by written notice so delivered to the other parties, change the
address to which delivery of any notice shall thereafter be made.

17

Section 7.2  Amendments; No Waivers

(a) Any provision of this Agreement may be amended or waived if, and
only if, such amendment or waiver is in writing and signed, in the case of an
amendment, by SWS and Westwood, or in the case of a waiver, by the party against
whom the waiver is to be effective.

(b) No failure or delay by any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof nor shall any single or
partial exercise thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights and remedies herein
provided shall be cumulative and not exclusive of any rights or remedies
provided by law.

Section 7.3  Expenses

Except as specifically provided otherwise in this Agreement or any Ancillary
Agreement, all costs and expenses incurred by the SWS Group in connection with
the Distribution and related transactions shall be paid by SWS, and all costs
and expenses incurred by the Westwood Group in connection with the Distribution
and related transactions shall be paid by Westwood.

Section 7.4  Insurance Matters

(a) Continuation of Westwood Rights under SWS Policies. SWS and
--------------------------------------------------
Westwood agree that, following the Distribution Date, Westwood shall retain all
rights of an insured party under each of the SWS Policies with respect to any
injury, loss, liability, damage or expense incurred or claimed to have been
incurred prior to the Distribution Date by any party in or in connection with
the conduct of the Westwood Business or against Westwood or any Westwood
Subsidiary, to the extent that such injury, loss, liability, damage or expense
may arise out of insured or insurable occurrences or events under one or more of
the SWS Policies. If, subsequent to the Distribution Date, any Person shall
assert such a claim whose occurrence is prior to the Distribution Date against
Westwood or any Westwood Subsidiary, SWS shall at the time such claim is
asserted be deemed to assign, without need of further documentation, to Westwood
any and all rights of an insured party under the applicable SWS Policy with
respect to such asserted claim, specifically including rights of indemnity, if
any, and the right, if any, to be defended by or at the expense of the insurer;
provided, however, that nothing in this paragraph shall be deemed to constitute
(or to reflect) the assignment of the SWS Policies, or any of them, to Westwood.

(b) Administration. From and after the Distribution Date, SWS shall be
--------------
responsible for accounting for premiums, indemnity payments, deductibles and
retentions, as appropriate under the terms and conditions of each of the SWS
Policies; distributing Insurance Proceeds as contemplated by this Agreement;
reporting to insurers its own Insured Claims and those Insured Claims which
Westwood has reported to it; and processing and managing Insured Claims made
under the SWS Policies based on supporting information and documentation
provided by the party submitting such Insured Claim; provided that SWS's
retention of the administrative responsibilities for the SWS Policies listed in
this paragraph (b) will not relieve the party

18

submitting any Insured Claim of the primary responsibility for reporting such
Insured Claim accurately, completely and in a timely manner. Subject to Section
3 hereof, each of SWS and Westwood shall administer and pay any costs related to
defending its respective Insured Claims under the SWS Policies to the extent
such defense costs are not covered under such policies, and will be responsible
for obtaining or reviewing the appropriateness of releases upon settlement of
its respective Insured Claims under the SWS Policies. The retention of the SWS
Policies by SWS is in no way intended to limit, inhibit or preclude any right to
insurance coverage for any Insured Claim of a named insured under the SWS
Policies, including, but no limited to, Westwood and any of its operations, and
any Westwood Subsidiary or Affiliate.

(c) Allocation of Policy Limits. SWS and Westwood agree that where
---------------------------
Westwood Liabilities are specifically covered under SWS Policies in effect for
periods prior to the Distribution Date, then from and after the Distribution
Date Westwood may claim for Insured Claims under each such SWS Policy as and to
the extent that such insurance is available up to the full extent of the
applicable fixed dollar coverage limits of the policy, subject to the terms of
this Section 7.4(c). In the event that the aggregate of Insured Claims by SWS
and Westwood have exhausted the fixed dollar coverage limits under a particular
SWS Policy, taking into account defense costs to the extent such costs are
applied against such limits of such policy, then the party that has utilized
more than its "allocable portion" (as defined below) of the fixed dollar
coverage limits under such Policy (the "benefited party") shall indemnify the
party which utilized less than its allocable portion of such fixed dollar
coverage limits (the "non-exceeding party") for any subsequent claim by the
non-exceeding party (including, without limitation, defense costs related to
such claim) arising out of an insured or insurable occurrence or event under
such SWS Policy which would have been an Insured Claim but for the fact that the
limits of such SWS Policy were exceeded, up to the difference between such
parties allocable portion of the fixed dollar coverage limits under such SWS
Policy and the amount of such fixed dollar coverage limits (excluding defense
costs to the extent such costs are not applied against the fixed dollar coverage
limits) actually utilized by the non-exceeding party (the "maximum reimbursement
amount"). The non-exceeding party shall submit to the benefited party the same
information and documentation that it would have been required to submit to the
insurance carrier under the applicable SWS Policy within the same time frames
provided for in such SWS Policy, and the benefited party shall, within 30 days
of receipt of documentation supporting such claim, either pay such claim or give
written notice denying the claim to the non-exceeding party. Westwood's
"allocable portion" is the percentage of consolidated SWS sales attributable to
the Westwood Business for the SWS fiscal year during which the event giving rise
to the claim occurred (or, with respect to SWS's 2002 fiscal year, for the
portion of the 2002 fiscal year prior to the Distribution), and SWS's "allocable
portion" is the percentage of consolidated SWS sales attributable to the
business of SWS (exclusive of the Westwood Business) for the same period.

In the event the benefited party denies any claim, then the parties
shall select an independent insurance coverage expert within 30 days of the
notice of denial. If the parties are unable to agree on an independent insurance
coverage expert within 45 days of the notice of denial, and a third independent
insurance coverage expert shall be selected by mutual agreement of the first two
independent insurance coverage experts within 60 days of the notice of denial.
If the parties agree on the selection of an independent insurance coverage
expert, such expert so selected, or if the parties do not so agree, the third
independent insurance coverage expert so

19

selected, shall interpret the terms, provisions and conditions of the applicable
SWS Policy and shall determine, within 45 days of being selected, whether the
claim would have been an Insured Claim under such SWS Policy and the amount of
reimbursement that the non-exceeding party will receive in settlement of such
claims; provided, however, that the aggregate amount of claims paid by a
benefited party under this paragraph (c) shall not exceed the maximum
reimbursement amount.

The decision of the independent insurance coverage expert will be final
and binding on the parties, and no appeal may be taken from that decision. Fees
and costs for attorneys, experts and all independent insurance coverage experts
will be borne equally by the parties. This agreement of the parties to submit
disputes between them to the procedures set forth in this paragraph (c) will not
be deemed a waiver of legal defenses, including, but not limited to, statutes of
limitations, that either party may have.

Except as set forth in this paragraph (c) or in paragraph (d) of this
Section 7.4, SWS and Westwood will not be liable to one another for claims by
the other not reimbursed by insurers for any other reason whatsoever not within
the control of SWS or Westwood, as the case may be, including, but not limited
to, coinsurance provisions, deductibles, quota share deductibles, self-insured
retentions, bankruptcy or insolvency of an insurance carrier, SWS Policy
limitations or restrictions, any coverage disputes, any failure to timely claim
by Westwood or SWS or any defect in such claim or its processing.

(d) Allocation of Insurance Deductibles. Insured Claims by both SWS and
-----------------------------------
Westwood shall be subject to, and shall apply toward the satisfaction of, the
full amount of applicable deductibles or self-insured retentions under the SWS
Policies; provided that, if the aggregate deductibles or self-insured retentions
under any SWS Policy (other than an SWS Policy providing for directors and
officers liability coverage) are exceeded and one company benefits from the
deductibles or retentions paid by the other, then the benefited company shall
reimburse the other company to the extent of such benefit up to its allocable
portion of such aggregate deductible or retention within 30 days of receipt of
such benefit.

(e) Allocation of Insurance Proceeds. SWS shall direct the insurance
--------------------------------
carriers to pay Insurance Proceeds with respect to claims, costs and expenses
under the SWS Policies directly to or on behalf of Westwood with respect to
Westwood Insured Claims and directly to or on behalf of SWS with respect to
SWS's Insured Claims. The parties agree to use their best efforts to cooperate
with respect to insurance matters.

(f) In the event that Insured Claims of both Westwood and SWS exist
relating to the same occurrence, Westwood and SWS agree to jointly defend such
Insured Claim; provided, that, if, in the reasonable judgment of one party, a
conflict of interest between SWS and Westwood exists in respect of such Insured
Claim or if the other party assumes responsibility for such Insured Claim with
any reservations or exceptions, the party which concludes that a conflict exists
or that has not assumed responsibility for such Insured Claim will have the
right to employ separate counsel reasonably satisfactory to the other party. In
that event, the fees and expenses of such separate counsel will be paid by the
party retaining such counsel unless the other party shall have indemnified such
party against such fees and expenses pursuant to this Agreement or

20

otherwise. Nothing in this Section 7.4 shall be construed to limit or otherwise
alter in any way the indemnity obligations of the parties to this Agreement, by
operation of law or otherwise.

Section 7.5  Successors and Assigns

The provisions of this Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and assigns;
provided that neither party may assign, delegate or otherwise transfer any of
its rights or obligations under this Agreement without the consent of the other
parties hereto. If any party or any of its successors or assigns (i) shall
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation or entity of such consolidation or merger or (ii) shall
transfer all or substantially all of its properties and assets to any Person,
then, and in each such case, proper provisions shall be made to the satisfaction
of the other party so that the successors and assigns of such party shall assume
all of the obligations of such party under the Distribution Documents.

Section 7.6  Governing Law

This Agreement shall be construed in accordance with and governed by
the law of the State of Texas, without regard to the conflicts of laws rules
thereof.

Section 7.7  Counterparts; Effectiveness

This Agreement may be signed in any number of counterparts, each of
which shall be an original, with the same effect as if the signatures thereto
and hereto were upon the same instrument. This Agreement shall become effective
when each party hereto shall have received a counterpart hereof signed by the
other parties hereto.

Section 7.8  Entire Agreement

This Agreement and the other Distribution Documents constitute the
entire understanding of the parties with respect to the subject matter hereof
and thereof and supersedes all prior agreements, understandings and
negotiations, both written and oral, between the parties with respect to the
subject matter hereof and thereof. No representation, inducement, promise,
understanding, condition or warranty not set forth herein or in the other
Distribution Documents has been made or relied upon by any party hereto. Neither
this Agreement nor any provision hereof is intended to confer upon any Person
other than the parties hereto any rights or remedies hereunder. To the extent
that the provisions of this Agreement are inconsistent with the provisions of
any other Distribution Document, the provisions of such other Distribution
Document shall prevail.

Section 7.9  Tax Matters

(a) Except as otherwise provided herein and not inconsistent with the
Tax Separation Agreement, this Agreement shall not govern the preparation and
filing of any Tax Returns, the payment of, and liability for, any Tax, and the
management of any proceedings or contests

21

relating to any Tax, each of which shall be exclusively governed by the Tax
Separation Agreement.

(b) On or before the Distribution Date, SWS shall have received an
opinion from Gardere Wynne Sewell LLP, counsel to SWS, in form and substance
reasonably satisfactory to SWS, substantially to the effect that, on the basis
of the facts, representations and assumptions set forth in such opinion which
are consistent with the state of facts existing on the Distribution Date, the
Distribution will constitute a tax-free transaction under Section 355(a) of the
Code. In rendering its opinion, SWS's counsel may require and rely upon the
truth and accuracy of various representations and covenants, including those
contained in the Form 10, the Ancillary Agreements, certificates of officers of
SWS, Westwood and others, and other documents, certificates and records they
deem necessary or appropriate as a basis for their opinion.

(c) SWS and Westwood shall comply with all reporting and document
retention requirements of the Code, and the regulations promulgated thereunder,
applicable to the Distribution.

Section 7.10  Jurisdiction

Any Action seeking to enforce any provision of, or based on any matter
arising out of or in connection with, this Agreement or the transactions
contemplated hereby may be brought in the United States District Court for the
Northern District of Texas or any other Texas state court sitting in Dallas
County, and each of the parties hereby consents to the jurisdiction of such
courts (and of the appropriate appellate courts therefrom) in any such suit,
action or proceeding and irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of the venue
of any such suit, action or proceeding in any such court or that any such suit,
action or proceeding which is brought in any such court has been brought in an
inconvenient form. Process in any such suit, action or proceeding may be served
on any party anywhere in the world, whether within or without the jurisdiction
of any such court. Without limiting the foregoing, each party agrees that
service of process on such party as provided in Section 7.1 shall be deemed
effective service of process on such party.

Section 7.11  Existing Arrangements

Except as otherwise contemplated hereby or by the other Distribution
Documents, all prior agreements and arrangements, including those relating to
goods, rights or services provided or licensed, between the Westwood Group and
the SWS Group shall be terminated effective as of the Distribution Date, if not
theretofore terminated. No such agreements or arrangements shall be in effect
after the Distribution Date unless embodied in the Distribution Documents.

Section 7.12  Termination Prior to the Distribution

The SWS Board of Directors may at any time prior to the Distribution
abandon the Distribution and, by notice to Westwood, terminate this Agreement
(whether or not the SWS Board of Directors has theretofore approved this
Agreement and/or the Distribution).

22

Section 7.13  Severability

If any one or more of the provisions contained in this Agreement should
be declared invalid, illegal or unenforceable in any respect, the validity,
legality and enforceability of the remaining provisions contained in this
Agreement shall not in any way be affected or impaired thereby so long as the
economic or legal substance of the transactions contemplated hereby is not
affected in any manner materially adverse to any party. Upon such a declaration,
the parties shall modify this Agreement so as to effect the original intent of
the parties as closely as possible in an acceptable manner so that the
transactions contemplated hereby are consummated as originally contemplated to
the fullest extent possible.

Section 7.14  Survival

All covenants and agreements of the parties contained in this Agreement
shall survive the Distribution Date indefinitely, unless a specific survival or
other applicable period is expressly set forth herein.

Section 7.15  Captions

The captions herein are included for convenience of reference only and
shall be ignored in the construction or interpretation hereof.

Section 7.16  Specific Performance

Each party to this Agreement acknowledges and agrees that damages for a
breach or threatened breach of any of the provisions of this Agreement would be
inadequate and irreparable harm would occur. In recognition of this fact, each
party agrees that, if there is a breach or threatened breach, in addition to any
damages, the other nonbreaching party to this Agreement, without posting any
bond, shall be entitled to seek and obtain equitable relief in the form of
specific performance, temporary restraining order, temporary or permanent
injunction, attachment, or any other equitable remedy which may then be
available to obligate the breaching party (i) to perform its obligations under
this Agreement or (ii) if the breaching party is unable, for whatever reason, to
perform those obligations, to take any other actions as are necessary, advisable
or appropriate to give the other party to this Agreement the economic effect
which comes as close as possible to the performance of those obligations
(including, but not limited to, transferring, or granting liens on, the assets
of the breaching party to secure the performance by the breaching party of those
obligations).

Section 7.17  Release

Effective upon the Distribution and except as otherwise specifically
set forth in this Agreement, each of SWS and Westwood releases and forever
discharges the other and its respective directors, officers and Affiliates of
and from all Liabilities against such other party, and its respective directors,
officers and Affiliates or any of its successors or assigns, which the releasing
party has or ever had, which arise out of or relate to events, circumstances or
actions taken by such other party prior to the Distribution; provided, however,
that the foregoing general

23

release shall not apply to this Agreement, the Ancillary Agreements or the
transactions contemplated hereby or thereby and shall not affect either party's
right to enforce this Agreement or any of the Ancillary Agreements in accordance
with their terms.

IN WITNESS WHEREOF the parties hereto have caused this Distribution
Agreement to be duly executed by their respective authorized officers as of the
date first above written.

SWS GROUP, INC.

By:  /s/ Kenneth R. Hanks
__________________________________________________
Executive Vice President

WESTWOOD HOLDINGS GROUP, INC.

By:  /s/ Bryan O. Casey
__________________________________________________
Brian O. Casey, President

24

EXHIBIT 10.3

TAX SEPARATION AGREEMENT

This TAX SEPARATION AGREEMENT (this "Agreement"), dated as of June 6,
2002, is by and between SWS Group, Inc., a Delaware corporation ("SWS"), and
Westwood Holdings Group, Inc., a Delaware corporation ("Westwood"). SWS and
Westwood may be jointly or separately referred to herein as the "Parties" or a
"Party." For the reasons and under the terms below, the Parties desire to fix
their joint and separate tax liabilities as follows:

SWS, Westwood, Westwood Management Corporation ("WMC") and/or Westwood
Trust ("WT") have heretofore joined in filing certain consolidated, combined and
unitary federal, state, local and/or foreign income tax returns.

As of December 14, 2001, SWS sold 19.82% of its 100% interest in
Westwood to certain members of Westwood's management and transferred all of the
capital stock of WMC and WT to Westwood in a transaction intended to qualify for
non-recognition treatment under Section 368(a)(1)(D) of the Internal Revenue
Code of 1986, as amended (the "Code"). SWS intends to distribute its remaining
80.18% interest in Westwood to its stockholders in a transaction intended to
qualify for non-recognition treatment under Section 355(a) of the Code (the
"Spin-off").

The Parties desire to allocate their rights and obligations with
respect to the handling of Taxes (as defined below) and to agree as to certain
other matters.

ARTICLE 1
DEFINITIONS

"Agreement" has the meaning assigned to it in the introductory
paragraph hereof.

"Assessed" means self-assessed or determined by a Taxing Authority that
a Person is, or may become, subject to legal proceedings.

"Code" has the meaning assigned to it in the recitals hereto.

"Consolidated Tax" shall mean any Tax payable to a Taxing Authority on
a consolidated, combined or unitary basis.

"Managing Party" has the meaning assigned to it in Section 5(A).

"Other Party" has the meaning assigned to it in Section 5(A).

"Party" and "Parties" has the meaning assigned to it in the
introductory paragraph hereto.

"Person" has the meaning assigned to it in Section 7701(a)(1) of the
Code.

"Prime" means the rate announced from time to time as "prime" as
reported in the Wall Street Journal's Money Rates table as the prime rate with
respect to the applicable currency.

"Return" shall mean any return, report, filing, declaration,
questionnaire or other document required to be filed (or permitted to be filed
in order to obtain a Favorable Tax Attribute), including information reports,
requests for extensions of time, filings made with estimated tax payments,
claims for Tax refunds and amended Returns that may be filed for any period with
any Taxing Authority in connection with any Tax.

"Separate Tax" means any Tax other than a Consolidated Tax.

"Spin-off" has the meaning assigned to it in the recitals.

"Spin-off Date" means the effective date of the Spin-off.

"Straddle Period" has the meaning assigned to it in Article 2 of this
Agreement.

"SWS" has the meaning assigned to it in the introductory paragraph
hereto.

"SWS Consolidated Group" means SWS and each of its direct and indirect
corporate subsidiaries, including each subsidiary that is a member of the
Westwood Group, that is eligible to join with SWS or a member of the SWS Group
in the filing of a Consolidated Tax Return.

"SWS Group" means SWS and each of its direct or indirect corporate
subsidiaries, other than those subsidiaries that are members of the Westwood
Group, that is eligible to join with SWS in the filing of a Consolidated Return.

"SWS Share" means the ratio of (A) the number of days of such Straddle
Period preceding, and including, the Spin-off Date over (B) the total number of
days in such Straddle Period.

"Tax" means any tax of any kind, together with any interest, penalties,
fines and other additions to Tax, imposed by any Taxing Authority. A
non-compulsory payment shall not be considered a Tax.

"Tax Attributes" means items of income, gain, deduction, loss and
credit, and similar items that have an effect on a Tax. "Favorable Tax
Attributes" are Tax Attributes that reduce Taxes.

"Tax Benefit" means an amount derived with respect to a Tax Attribute
that is equal to the excess of (i) the amount of Taxes that would have been
payable by the recipient of the Tax Benefit without the use of the Tax Attribute
(including, but not limited to, a carryback, carryforward, or reattribution of
the Tax Attribute), over (ii) the amount of Taxes, as the case may be, actually
payable by such recipient.

2

"Tax Contest" means any judicial or administrative proceeding (i)
brought by a Taxing Authority against a Person for the collection of Tax or (ii)
brought by a Person against a Taxing Authority for refund of Tax paid or to
prevent imposition of assessment of Tax against the Person or the property of a
Person.

"Tax Refund" means a reimbursement from a Taxing Authority for a Tax
previously paid or accrued by or on behalf of the recipient of the
reimbursement.

"Taxing Authority" means any federal, state, local, foreign or
international court, government, department, commission, board, bureau, agency,
office or other regulatory administration or governmental authority that has
legal authority to assess a Tax.

"Westwood" has the meaning assigned to it in the introductory paragraph
hereto.

"Westwood Group" means Westwood and each of its direct or indirect
corporate subsidiaries that is eligible to join with Westwood in the filing of a
Consolidated Tax Return.

"Westwood Group Consolidated Tax Benefit" means an amount derived by
the SWS Consolidated Group with respect to any Tax period prior to, and
including, the 2002 Tax year, by reason of the application of one or more
Favorable Tax Attributes of the Westwood Group (including any Favorable Tax
Attributes recognized in a Tax period following the 2002 Tax year that the
Westwood Group elects to be carried back to such earlier Tax period), that is
equal to the excess, if any, of (i) the amount of Consolidated Tax that would
have been payable by the SWS Consolidated Group for such Tax period without the
use of the Favorable Tax Attribute(s), over (ii) the amount of Consolidated Tax
that is actually payable by the SWS Consolidated Group for such Tax period.

"Westwood Group Consolidated Tax Liability" means the Westwood Group's
allocable share of the SWS Consolidated Group's Consolidated Tax liability for
the 2002 Tax year computed using the SWS Consolidated Group's historical method
of computations as if the Westwood Group were not, and never were, a part of any
consolidated group other than a consolidated group of which Westwood was the
common parent.

ARTICLE 2
STRADDLE PERIODS

SWS and Westwood agree that with respect to any Tax period for the
payment of a Separate Tax that includes, but does not end on, the Spin-off Date,
if permissible under applicable law, the Parties will elect to close such Tax
period on the Spin-off Date. Any such Tax period not permitted to be closed
under applicable law shall, for purposes of this Agreement, be referred to
herein as a "Straddle Period."

3

ARTICLE 3
FILING OF RETURNS

A. SWS shall be responsible for the preparation and filing of (i) all
Consolidated Tax Returns of the SWS Consolidated Group for all Tax periods; (ii)
all Separate Tax Returns of any member of the Westwood Group for all Tax periods
ending on or before the Spin-off Date and (iii) all Separate Tax Returns of any
member of the SWS Group for all Tax periods; provided, however, that such Tax
Returns shall be filed consistent with past practice provided that with respect
to any Return in which an item relating to the Westwood Group or any member
thereof will be reflected, SWS agrees to (x) consult with Westwood prior to
filing such a Return regarding the manner in which such items will be reflected
therein; (y) prepare each such Return in a manner consistent with its past
practice; and (z) undertake in good faith to prepare such Returns in a manner
that SWS determines may be substantively beneficial to the Westwood Group for
any taxable period ending after the Spin-off Date, but only to the extent that
such manner of preparing Returns has no adverse impact on SWS. SWS shall be
responsible for the remittance of all Taxes with respect to any Returns filed
pursuant to this Section 3(A). Except as otherwise provided in this Agreement,
SWS will hold the Westwood Group harmless from any cost or liability arising
from the failure to perform this Section 3(A).

B. Westwood shall be responsible for the preparation and filing of all
Returns, including both Consolidated Tax Returns and Separate Tax Returns, and
the remittance of Taxes with respect thereto, of the Westwood Group or any
member thereof for all Tax periods ending after the Spin-off Date. Except as
otherwise provided in this Agreement, Westwood will hold SWS harmless from any
cost or liability arising from the failure to perform this Section 3(B).

ARTICLE 4
TAX SHARING

A. Westwood shall pay to SWS an amount equal to any Westwood Group
Consolidated Tax Liability.

B. If the SWS Consolidated Group (or any member thereof) receives a Tax
Refund or Tax Benefit which relates to a period prior to the Spin-off Date
because of a Westwood Group Consolidated Tax Benefit or a Favorable Tax
Attribute of any member of the Westwood Group recognized after the Spin-off Date
is carried back to a Tax period that ends before or includes the Spin-off Date,
then any Tax Refund or Tax Benefit received by the SWS Consolidated Group
attributable to that Favorable Tax Attribute will be paid by SWS to Westwood.
SWS will pay to Westwood the amount of any such Tax Refund or Tax Benefit on or
before the due date of the SWS Consolidated Group's Consolidated Tax Return for
the Tax period in which the Favorable Tax Attribute is used and usable by the
SWS Consolidated Group or any of its members.

C. Any Tax Refunds or Tax Benefits realized by the SWS Consolidated
Group not otherwise allocated pursuant to this Agreement shall be allocated to
SWS or Westwood based on the source of the Tax Refund or Tax Benefit.

4

D. SWS will indemnify, defend and hold harmless the Westwood Group from
and against any and all liabilities for any Consolidated Taxes of the SWS
Consolidated Group, other than Consolidated Taxes allocated to the Westwood
Group by this Agreement. Westwood will indemnify, defend and hold harmless the
SWS Group from and against any and all liabilities for any Consolidated Taxes of
the Westwood Group, other than Consolidated Taxes allocated to the SWS Group by
this Agreement. SWS will indemnify, defend and hold harmless the Westwood Group
from and against any and all liabilities for (i) Separate Taxes attributable to
the Separate Tax Returns described in Sections 3(A)(ii) and 3(A)(iii) of this
Agreement and (ii) the SWS Share of any Separate Tax of any member of the
Westwood Group attributable to a Straddle Period.

E. If, as a result of Westwood's actions, a transaction or series of
transactions triggers application of Section 355(e) of the Code in connection
with the Spin-off, Westwood shall be liable to pay SWS the amount of Tax for
which SWS becomes liable solely by reason of application of Section 355(e) of
the Code and without consideration of any other Tax Attribute of SWS.

F. If, as a result of SWS's actions, a transaction or series of
transactions triggers application of Section 355(e) of the Code in connection
with the Spin-off, SWS will be responsible for and will pay the Tax for which
SWS becomes liable under Section 355(e) of the Code and will hold Westwood
harmless for any and all costs and liabilities from application of Section
355(e) of the Code.

ARTICLE 5
PROCEEDINGS

A. The Party who has filed, or is entitled to file pursuant to Article
3 of this Agreement or otherwise, a Return, shall be responsible for and
entitled to manage any Tax Contest relating to such Return (a "Managing Party");
provided, however, that the Managing Party shall keep the other Party (the
--------  -------
"Other Party") informed of all material developments and events relating to any
such Tax Contest to the extent the Tax Contest creates or affects any Tax
liability or Tax Benefit of the Other Party or may give rise to a claim for
indemnification by the Other Party against the Managing Party under Section 4(D)
of this Agreement.

B. Notwithstanding anything to the contrary in Section 5(A) of this
Agreement or otherwise, Westwood may elect, at its expense, to act as the
Managing Party with respect to an issue raised under Section 355(e) of the Code
for which SWS may become liable as a result of Westwood's actions and for which
Westwood is responsible to pay SWS pursuant to Section 4(E) of this Agreement;
provided, however, that any disposition of an issue that may be adverse in any
--------  -------
way to SWS and that is not compensated for by Westwood pursuant to Section 4(E)
of this Agreement may be made only with the approval of SWS.

C. The Managing Party is hereby authorized to settle any Tax Contest;
provided, however, that if any proposed settlement creates or affects any Tax
--------  -------
liability or Tax Benefit of the Other Party or may give rise to a claim for
indemnification by the Other Party against the

5

Managing Party under Section 4(D) of this Agreement, the Managing Party shall
provide the Other Party with ten (10) days advance written notice of such
proposed settlement. If the Managing Party and the Other Party are unable to
agree on the terms of such proposed settlement prior to the expiration of such
ten (10) day period, the Parties agree that such disagreement shall be resolved
pursuant to binding arbitration.

D. The Managing Party shall bear the costs and expenses of any Tax
Contest. If, under this Agreement or otherwise, a Tax Contest results in a
payment or Tax Benefit to the Other Party, the Managing Party shall be entitled
to offset the payment by the amount of the Managing Party's costs incurred in
the Tax Contest multiplied by the ratio of (i) the Other Party's Tax Benefits
obtained in the Tax Contest, over (ii) the total Tax Benefits obtained in the
Tax Contest. If, under this Agreement or otherwise, a Tax Contest results in a
Tax deficiency to, or a decrease or offset of a Favorable Tax Attribute
attributable to the Other Party, the Other Party shall pay to the Managing Party
an amount equal to the product of (x) the Managing Party's costs in the Tax
Contest and (y) the ratio of the amount of the Other Party's Tax deficiency or
Favorable Tax Attribute decrease or offset over the total Tax deficiency or
Favorable Tax Attribute decrease or offset resulting from the Tax Contest.

ARTICLE 6
COOPERATION

The Parties agree to cooperate in carrying out the terms of this
Agreement.

ARTICLE 7
PAYMENT

Except as otherwise provided in this Agreement, any payment under this
Agreement shall be made within thirty (30) days after the date the paying Party
first had notice the payment was due. Any payment that is not made when due
shall bear interest at a rate equal to Prime until paid.

ARTICLE 8
INCORPORATION OF DISTRIBUTION AGREEMENT

Any issue not expressly addressed by this Agreement shall be decided
under that certain Distribution Agreement dated June 6, 2002, the provisions of
which are incorporated by reference hereto.

6

ARTICLE 9
ADMINISTRATIVE AND COMPLIANCE MATTERS

Any and all existing tax sharing agreements or arrangements, written or
unwritten, between any member of the SWS Group and any member of the Westwood
Group shall be terminated as of the date of this Agreement. As of the date of
this Agreement, neither the members of the SWS Group nor the members of the
Westwood Group shall have any further rights or liabilities under any such
preexisting tax sharing agreements, and this Agreement shall be the sole tax
sharing agreement between SWS and Westwood as well as the respective members of
SWS Group and the Westwood Group.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

7

IN WITNESS WHEREOF, the parties having caused this Agreement to be duly
executed as of the date first above written.

SWS GROUP, INC.

By:  /s/ Kenneth R. Hanks
--------------------------------------------------
Executive Vice President

WESTWOOD HOLDINGS GROUP, INC.

By:  /s/ Brian O. Casey
--------------------------------------------------
Brian O. Casey, President

EXHIBIT 10.4

TRANSITION SERVICES AGREEMENT

This TRANSITION SERVICES AGREEMENT (this "Agreement") for the
performance of certain corporate services is executed and made effective as of
June 6, 2002, by and among SWS Group, Inc., a Delaware corporation ("SWS"),
Westwood Management Corporation, a New York corporation ("Westwood Management"),
and Westwood Trust, a Texas trust ("Westwood Trust" and together with Westwood
Management, "Westwood"). Unless otherwise defined herein, capitalized terms have
the meaning assigned to them in the Distribution Agreement (defined herein).

WHEREAS, SWS, through its ownership of 80.18% of the issued and
outstanding common stock, $0.01 par value per share (the "Westwood Common
Stock"), of Westwood Holdings Group, Inc. participates in the business of asset
management;

WHEREAS, the Board of Directors of SWS has determined that it would be
advisable and in the best interests of SWS and its stockholders for SWS to
distribute all of the shares of Westwood Common Stock that it owns on a pro rata
basis to the holders of SWS common stock (the "Distribution") pursuant to that
certain Distribution Agreement, dated as of the date hereof, between SWS and
Westwood Holdings Group, Inc. (the "Distribution Agreement");

WHEREAS, the parties intend that the transactions described herein will
be effective at the Distribution Date (as defined in the Distribution
Agreement); and

WHEREAS, the parties hereto deem it to be appropriate and in the best
interests of the parties that SWS provide certain services to Westwood on the
terms and conditions set forth herein.

NOW, THEREFORE, in consideration of the mutual promises contained
herein and other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto agree as follows:

1. Description of Services. Effective as of the Distribution Date, SWS
shall, subject to the terms and provisions of this Agreement, provide Westwood
with the information technology and equipment services listed on Schedule 1.1
------------
and the human resources services listed on Schedule 1.2; provided, however, that
------------
the human resources services specifically exclude direct involvement with
employees of Westwood in the investigation of employee discipline and
grievances, or regarding an employee's specific question or problem involving
interpretation under any policy, program or benefit document; or any specific
activities involving potential employee complaints under any federal or state
regulations.

2. Consideration for Services. Westwood shall pay SWS the fees set
forth on Schedule 1.1 for information technology and equipment services provided
------------
and $95.00 per hour for human resources services provided in the first 15 hours
in any calendar week, and $125.00 per hour for all human resources services
provided in excess of 15 hours in any calendar week.

3. Terms of Payment. Within ten business days after the end of each
month during the term of this Agreement, SWS will submit a written invoice to
Westwood for service fees for services performed during the immediately
preceding month together with an accounting of the charges for such services.
Within 30 business days after the receipt of such invoices, Westwood will remit
payment of the full amount of such invoice to SWS in the manner provided below.
Interest shall accrue at the Prime Rate (defined herein) plus 2% per annum on
any amounts not received by SWS within 30 days after Westwood's receipt of the
SWS invoice. "Prime Rate" means the prime rate of interest as published from
time to time in the Wall Street Journal.

4. Method of Payment. All amounts payable by Westwood for the services
rendered by SWS pursuant to this Agreement shall be remitted to SWS in United
States dollars in the form of a check or wire transfer.

5. Warranties. THIS IS A SERVICE AGREEMENT. EXCEPT AS EXPRESSLY STATED
IN THIS AGREEMENT, THERE ARE NO WARRANTIES OR GUARANTIES, INCLUDING, BUT NOT
LIMITED TO, THE IMPLIED WARRANTIES OF MERCHANTABILITY, TITLE AND FITNESS FOR A
PARTICULAR PURPOSE.

6. Liability; Indemnification.

(a) In no event shall either SWS have any liability, whether
based on contract, tort (including, without limitation, negligence),
warranty or any other legal or equitable grounds, for any punitive,
consequential, special, indirect or incidental loss or damage suffered
by Westwood arising from or related to this Agreement, including
without limitation, loss of data, profits, interest or revenue, or
interruption of business, even if the party providing the services
hereunder is advised of the possibility of such losses or damages.

(b) The limitations set forth in Section 6(a) above shall not
apply to liabilities that may arise as the result of willful
misconduct, gross negligence, fraud or breach of this Agreement of the
party providing the services hereunder.

(c) Each party hereto (the "Indemnifying Party") shall
indemnify and defend the other party and its directors, officers,
employees and representatives (the "Indemnified Party") from and
against any and all claim, loss, cost, damage, liability and expense,
including reasonable counsel fees, incurred by the Indemnified Party
resulting from the Indemnifying Party's gross negligence, willful
misconduct, fraud or breach of this Agreement. If for any reason the
indemnification provided for in this Section 6(c) is unavailable to any
Indemnified Party, or insufficient to hold it harmless, then the
Indemnifying Party shall contribute to the amount paid or payable by
such Indemnified

2

Party as a result of such claim, loss, cost, damage, liability and
expense in such proportion as is appropriate to reflect all relevant
equitable considerations.

(d) Any indemnification claim arising under this Agreement
shall be resolved in accordance with Sections 3.4 and 3.5 of the
Distribution Agreement.

(e) The indemnification obligations set forth under Sections
6(c) and 6(d) shall terminate two years after the date of this
Agreement; provided, however, such obligations shall not terminate with
respect to any claim for indemnification or contribution or with
respect to which notice is delivered to the Indemnifying Party in
accordance with Section 3.4 of the Distribution Agreement prior to the
date of termination.

7. Termination.

(a) SWS will provide Westwood (i) the information technology
and equipment services for one year following the Distribution Date,
except for the equipment rentals listed under Schedule 1.1 hereto which
will continue until the expiration of the leases relating to such
equipment whether such expiration is before or after the one year
period and (ii) the human resources services for a period of six months
following the Distribution Date; provided, however, that Westwood may,
at its option, upon no less than 30 days prior written notice to SWS
(or such other period as the parties may mutually agree in writing),
terminate any or all of the information technology and equipment
services or the human resources services.

(b) SWS and Westwood are parties to (i) the Investment
Agreement dated June 2, 1999, relating to The Southwest Special Reserve
Account for the Benefit of PAIB and (ii) the Investment Agreement dated
October 19, 1993 relating to The Special Reserve Account for Exclusive
Benefit of Customers, as such agreements may be amended or superseded
from time to time (collectively, the "Investment Agreements"). SWS and
Westwood Trust are parties to (A) the Agency Account without Investment
Advice Letter of Instruction March 31, 1998 relating to the Special
Reserve Account and (B) the Agency Account without Investment Advice
Letter of Instruction June 2, 1999 relating to the Special Reserve
Account for the Exclusive Benefit of PAIB, as such agreements may be
amended or superseded from time to time (collectively, the "Custodial
Agreements" and together with the Investment Agreements, the
"Management Agreements"). Nothing in this Agreement is intended to
modify or amend the terms of the Management Agreements, except that SWS
agrees that, except in the event of a default under the terms of the
Management Agreements, SWS shall not terminate any of the Management
Agreements at any time less than one year following the Distribution
Date. Thereafter, the termination provision of each respective
Management Agreement shall govern the terms of its termination.

(c) Notwithstanding Section 7(a) above, this Agreement may be
terminated in its entirety in accordance with the following:

3

(i) Upon written agreement of the parties;

(ii) By either SWS or Westwood for material breach
hereof by the other if the breach is not cured within 30
calendar days after written notice of breach is delivered to
the breaching party; or

(iii) By either SWS or Westwood, upon written notice
to the other if the other shall become insolvent or shall make
an assignment of substantially all of its assets for the
benefit of creditors, or shall be placed in receivership,
reorganization, liquidation or bankruptcy.

Notwithstanding the foregoing, the termination of
this Agreement shall not affect the continued effectiveness of
Section 7(b)(or Section 9(d) pertaining to the Management
Agreements), absent the express written stipulation of the
parties otherwise.

8. Transfer of Software Licenses. SWS agrees to take all necessary
actions on the Distribution Date to transfer and assign to Westwood (i) all
applicable software licenses for the authorized use by Westwood of all versions
of Microsoft Office Professional on existing computers as of March 31, 2002 (up
to and including XP), upgrade rights to versions of Microsoft Windows Operating
System on existing computers as of March 31, 2002 (up to and including XP),
current version of Microsoft Server Client Access Licenses as of March 31, 2002,
Symantec NAV, Symantec Ghost 7.5, Microsoft Windows NT 4.0 Server, Microsoft
Windows 2000 Server and Microsoft SQL Server 2000 used by Westwood on the
Distribution Date, and (ii) all applicable upgrade protection or maintenance
purchased by SWS related to the Symantec NAV licenses (collectively, the
"Software Licenses and Maintenance"). Westwood agrees to execute all required
documents for transfer as required by the manufacturer of said items, as well as
accept and assume the Software Licenses and Maintenance as of the Distribution
Date.

9. General.

(a) Force Majeure. Any delays in or failure of performance by
SWS or Westwood shall not constitute a default hereunder if and to the
extent such delay or failure of performance is caused by occurrences
beyond the reasonable control of SWS or Westwood, as the case may be,
including, but not limited to: acts of God or the public enemy;
compliance with any order or request of any governmental authority;
acts of war; riots or strikes or other concerted acts of personnel; or
any other causes beyond the reasonable control of SWS or Westwood,
whether or not of the same class or kind as those specifically named
above.

(b) Confidentiality. Section 5.6 of the Distribution Agreement
shall govern this Agreement.

(c) Notices. All notices and other communications to any party
hereunder shall be in writing (including telecopy or similar writing)
and, except as noted, shall be deemed given when received addressed as
follows:

4

If to SWS, to:

SWS Group, Inc.
1201 Elm Street, Suite 3500
Dallas, Texas 75270
Telecopy: (214) 859-6020
Attention: General Counsel

With a copy to:

Gardere Wynne Sewell LLP
1601 Elm Street, Suite 3000
Dallas, Texas 75201-4761
Telecopy: (214) 999-4667
Attention: David G. McLane

If to Westwood Management or Westwood Trust, to:

Westwood Management Corporation
or Westwood Trust
300 Crescent Court, Suite 1300
Dallas, Texas 75201
Telecopy: (214) 756-6979
Attention:  Brian O. Casey, President

With a copy to:

Locke Liddell & Sapp LLP
2200 Ross Avenue, Suite 2200
Dallas, Texas 75201
Telecopy: (214) 740-8800
Attention: John B. McKnight

(d) Amendments; No Waivers.

(i) Any provision of this Agreement may be amended or
waived if, and only if, such amendment or waiver is in writing
and signed, in the case of an amendment, by SWS and Westwood,
or in the case of a waiver, by the party against whom the
waiver is to be effective.

(ii) No failure or delay by any party in exercising
any right, power or privilege hereunder shall operate as a
waiver thereof nor shall any single or partial exercise
thereof preclude any other or further exercise thereof or the
exercise of any other right, power or privilege. The rights
and remedies herein provided shall be cumulative and not
exclusive of any rights or remedies provided by law.

5

(e) Entire Agreement. This Agreement constitutes the entire
understanding of the parties with respect to the subject matter hereof
and supersedes all prior agreements, understandings and negotiations,
both written and oral, between the parties with respect to the subject
matter hereof and thereof. No representation, inducement, promise,
understanding, condition or warranty not set forth herein has been made
or relied upon by any party hereto. Neither this Agreement nor any
provision hereof is intended to confer upon any Person other than the
parties hereto any rights or remedies hereunder. To the extent that the
provisions of this Agreement are inconsistent with the provisions of
any other Distribution Document, the provisions of this Agreement shall
prevail. The terms of Section 7(b) (as well as the terms of Section
9(d) pertaining to the Management Agreements) shall prevail over any
inconsistent terms in the Management Agreements.

(f) Successors and Assigns. The provisions of this Agreement
shall be binding upon and inure to the benefit of the parties hereto
and their respective successors and assigns; provided that neither
party may assign, delegate or otherwise transfer any of its rights or
obligations under this Agreement without the consent of the other
parties hereto. If any party or any of its successors or assigns (i)
shall consolidate with or merge into any other Person and shall not be
the continuing or surviving corporation or entity of such consolidation
or merger or (ii) shall transfer all or substantially all of its
properties and assets to any Person, then, and in each such case,
proper provisions shall be made so that the successors and assigns of
such party shall assume all of the obligations of such party under the
Distribution documents and the Management Agreements.

(g) Governing Law. This Agreement shall be construed in
accordance with and governed by the law of the State of Texas, without
regard to the conflicts of laws rules thereof.

(h) Counterparts; Effectiveness. This Agreement may be signed
in any number of counterparts, each of which shall be an original, with
the same effect as if the signatures thereto and hereto were upon the
same instrument. This Agreement shall become effective when each party
hereto shall have received a counterpart hereof signed by the other
parties hereto.

(i) Jurisdiction. Any Action seeking to enforce any provision
of, or based on any matter arising out of or in connection with, this
Agreement or the transactions contemplated hereby may be brought in the
United States District Court for the Northern District of Texas or any
other Texas state court sitting in Dallas County, and each of the
parties hereby consents to the jurisdiction of such courts (and of the
appropriate appellate courts therefrom) in any such suit, action or
proceeding and irrevocably waives, to the fullest extent permitted by
law, any objection which it may now or hereafter have to the laying of
the venue of any such suit, action or proceeding in any such court or
that any such suit, action or proceeding which is brought in any such
court has been brought in an inconvenient form. Process in any such
suit, action or proceeding may be served on any party anywhere in the
world, whether within or without the jurisdiction of any such court.

6

Without limiting the foregoing, each party agrees that service of
process on such party as provided in Section 9(c) shall be deemed
effective service of process on such party.

(j) Existing Arrangements. Except as otherwise contemplated
hereby, by the other Distribution Documents or by the Management
Agreements, all prior agreements and arrangements, including those
relating to goods, rights or services provided or licensed, between the
Westwood and the SWS shall be terminated effective as of the
Distribution Date, if not theretofore terminated. No such agreements or
arrangements shall be in effect after the Distribution Date unless
embodied in the Distribution Documents or by the Management Agreements.

(k) Severability. If any one or more of the provisions
contained in this Agreement should be declared invalid, illegal or
unenforceable in any respect, the validity, legality and enforceability
of the remaining provisions contained in this Agreement shall not in
any way be affected or impaired thereby so long as the economic or
legal substance of the transactions contemplated hereby is not affected
in any manner materially adverse to any party. Upon such a declaration,
the parties shall modify this Agreement so as to effect the original
intent of the parties as closely as possible in an acceptable manner so
that the transactions contemplated hereby are consummated as originally
contemplated to the fullest extent possible.

(l) Captions. The captions herein are included for convenience
of reference only and shall be ignored in the construction or
interpretation hereof.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK.]

7

IN WITNESS WHEREOF the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first above
written.

SWS GROUP, INC.

By:  /s/ Kenneth R. Hanks
--------------------------------------------------
Executive Vice President

WESTWOOD MANAGEMENT CORPORATION

By:  /s/ Brian O. Casey
--------------------------------------------------
Brian O. Casey, President

WESTWOOD TRUST

By:  /s/ Brian O. Casey
--------------------------------------------------
Brian O. Casey, Executive Vice President

Schedule 1.1

Information Technology and Equipment Services

SWS agrees to provide to Westwood information technology and equipment services
in a manner that is consistent with the current support services provided by SWS
to Westwood and at a pricing level that is consistent with the pricing provided
to other SWS customers. The prices and support services are subject to change
based on current practices and market conditions.

Internet Access/Email:

SWS will continue to provide Westwood with internet access for a fee of $600 per
month. Westwood will be required to purchase the following items in order to
have the equivalent email capabilities it currently has:

Hardware

$   2,092.00
Upgrade to 1GB Ram                                                        $     697.00
5 18 GB Hard Drives                                                       $   1,530.00
Smart Array 5302/32                                                       $     984.00
----------------
Total Hardware                               $   5,303.00
----------------

Software                                                   Qty      Unit Price      Ext. Price
VLA Windows 2000 Server                                     1.00        680.39         680.39
VLA Windows 2000 Client                                    51.00         27.59       1,407.09 **
Windows 2000 Server with Boot Disk                          1.00            23          23.00
VLA Exchange Server 2000                                    1.00        644.46         644.46
VLA Exchange Client 2000                                   51.00         61.95       3,159.45 **
Exchange Server 20000 English CD Media                      1.00            19          19.00

Total Software                                          5,933.39
----------------

Less: Licenses to be transferred to Westwood from SWS
VLA Windows 2000 Client                                                        (1,407.09)
VLA Exchange Client 2000                                                       (3,159.45)
----------------
Adjusted Total Software                                          1,366.85
----------------

----------------
Grand Total                                                                      $   6,669.85
================

** The client licenses for Windows 2000 and Exchange are already included in the
core licenses per user that are being transferred to Westwood from SWS.

Westwood will continue to be directly connected to SWS's network. As such,
Westwood will be provided with SWS's standard virus protection, network security
and network monitoring.

Schedule 1.1 - Page 1

Data Lines:

All data line costs that are currently billed to SWS (e.g., T1, circuits, etc.)
for the access and use of Westwood will be billed to Westwood at cost. Currently
these lines include:

---------------------- --------------------- -------------------- ---------------------- --------------------
Line                   Vendor                Acct #               Circuit ID             Avg Monthly Amount
(a)
---------------------- --------------------- -------------------- ---------------------- --------------------
T1 (300 Crescent Ct    MCI Worldcom          31187-dal            13-odc-3cr-0007        $375.00
to 1201 Elm)
---------------------- --------------------- -------------------- ---------------------- --------------------
ISDN Backup (300       Southwestern Bell     214-220-0287         11.ibjd.674094         $80.00
Crescent Ct. to 1201   Telephone
Elm)
---------------------- --------------------- -------------------- ---------------------- --------------------
56K private line to    Southwestern Bell     510-072-1015         14.XHGS.65394          $80.00
Bloomberg              Telephone
---------------------- --------------------- -------------------- ---------------------- --------------------

(a) Monthly billing is subject to change based on current tariffs and fees.

SWS agrees to work with Westwood in good faith to transfer ownership to, and
obligations for, all data lines, including any modifications thereto specified
by Westwood, as deemed necessary for Westwood's normal course of business.

SOHO/VPN Connections:

SWS will continue to support all current VPN and SOHO connections for the period
of this Agreement.

Westwood will be billed monthly per the following schedule, based on the method
of connection:

ISDN Connection                 $100 per connection per month
----
ADSL Connection                 $100 per connection per month
----
Modem/Dial Up Connection        $35 per connection per month
---
VPN Connection                  $30 per connection per month
---
Desktop, Server and Application Support:

SWS will provide Westwood with help desk support and trouble ticketing services
for a flat fee of $100 per month. In the event that the help desk is unable to
provide the assistance requested assistance from Westwood, it will direct the
matter to another support department and monitor the services provided by such
department, which may include on-site services. If this occurs, SWS will charge
Westwood at a rate of $40 per hour, plus out-of-pocket travel expenses.
---
Schedule 1.1 - Page 2

ILX or Other Equity Quote Services:

SWS will continue to provide ILX or other equity quote services to Westwood for
the term of this Agreement for a fee equal to the actual fees charged to SWS by
third parties for such services, which may change from time to time.

Equipment Rental:

The equipment attached as Exhibit 1 to this Schedule 1.1 are leased by SWS from
---------         ------------
Winthrop Resources Corporation as of the date of this Agreement. Westwood will
continue to use the equipment set forth on Exhibit 1 until such time the lease
---------
relating to such equipment expires. Westwood will be billed monthly by SWS at
the rates listed below. Westwood will be subject to the terms and agreements of
the Master Lease Agreement between SWS and Winthrop Resources Corporation.

The equipment lease schedules and monthly rent for the equipment leases in
effect as of the date of the Agreement are listed below. The monthly rent
indicated below includes applicable sales tax.

-------------------------------------------
Lease      Expiration      Monthly
Schedule        Date          Rent

-------------------------------------------
7         4/30/2002    $  1,010.25
-------------------------------------------
8         7/31/2002    $    130.71
-------------------------------------------
9        10/31/2002    $    299.48
-------------------------------------------
10         1/31/2003    $    444.92
-------------------------------------------
11         3/31/2002    $    443.49
-------------------------------------------
12         7/31/2002    $    431.50
-------------------------------------------
13         7/31/2003    $  1,324.12
-------------------------------------------
14         9/30/2003    $    719.07
-------------------------------------------
15        11/30/2003    $    172.96
-------------------------------------------
16         2/28/2004    $    657.00
-------------------------------------------
17         4/30/2004    $    126.11
-------------------------------------------
18**       6/30/2004    $     51.18
-------------------------------------------

** more equipment may be added to this lease schedule pursuant to the terms of
the Master Lease Agreement

Website Hosting/Maintenance:

SWS will continue to provide website hosting and co-location services for
Westwood's website through SWS Technologies. The current monthly fee for this
service is $319.80, including applicable sales tax. Westwood will be billed for
this fee separately by SWS Technologies and is subject to its pricing terms,
which shall not be less favorable than the fair market value for such services.

Schedule 1.1 - Page 3

SWS will provide website maintenance (e.g., updates, modifications, etc.) for
Westwood's website at a rate of $75 per hour plus related out-of-pocket
---
travel expenses.

Disaster Recovery:

Westwood currently performs their own data backup of all servers located at
their offices. This process is coordinated by an SWS employee and monitored by
Westwood. Following the Distribution Date, Westwood will continue to be
responsible for tape storage and monitoring. In the event that Westwood converts
to a different method of tape backup, such as Vytal Vault, Westwood will be
responsible for the conversion to the new method, including all costs and
expenses relating thereto, and SWS will provide any support needed for such
conversion. SWS will charge Westwood a fee of $45 per hour for such conversion
---
support services.

Any consultation for disaster recovery plan development and testing or Work
Place Area recovery will be quoted under a separate agreement.

Schedule 1.1 - Page 4

Schedule 1.2

HUMAN RESOURCES SERVICES

General human resources advisory services involving the evaluation or
development of payroll, benefits and compensation programs and systems

Development of employee handbook and pertinent policies

Development of effective human resources practices

Consultation on setting up proper controls to insure human resources compliance
with various federal and state employee relations regulations

Guidance on proper interviewing procedures and processes

Assistance in identifying effective recruiting resources

Development of human resources forms and documents

Other general human resources related services

Schedule 1.2 - Page 1

Exhibit 16.1

Office of the Chief Accountant
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C.  20549

June 5, 2002

Dear Madam/Sir:

We have read the disclosure under Management's Discussion and Analysis-
"Expected Change in Independent Accountants" included in Westwood Holdings
Group, Inc.'s Form 10 filed with the Securities and Exchange Commission and are
in agreement with the statements contained therein in response to Item 304(a) of
Regulation S-K.

Very truly yours,

/S/ ARTHUR ANDERSEN LLP

ARTHUR ANDERSEN LLP
Dallas, Texas

Exhibit 99.1
PRELIMINARY COPY
SUBJECT TO COMPLETION OR AMENDMENT

INFORMATION STATEMENT OF SWS GROUP, INC.

Dear SWS Group, Inc. Stockholder:

On April 8, 2002, the Board of Directors of SWS Group, Inc. ("SWS") approved
plans to spin-off its Westwood asset management business to SWS stockholders.
SWS will accomplish the spin-off by distributing all of the common stock of
Westwood Holdings Group, Inc. ("Westwood") that it holds to SWS stockholders.
As a holder of SWS common stock, you will receive one share of Westwood common
stock for every four shares of SWS common stock that you own at the close of
business on June 17, 2002, the record date for the spin-off. We are sending you
this information statement to describe the spin-off of Westwood from SWS. The
spin-off is intended to be tax-free to SWS stockholders, except for cash
received for any fractional shares. We expect the spin-off to occur on or about
June 28, 2002. Immediately after the spin-off is completed, SWS will not own
any shares of Westwood common stock, and Westwood will be an independent public
company.

A STOCKHOLDER VOTE IS NOT REQUIRED FOR THE SPIN-OFF TO OCCUR. WE ARE NOT
ASKING YOU FOR A PROXY, AND WE REQUEST THAT YOU DO NOT SEND US A PROXY. In
addition, you do not need to pay any cash or other consideration for the shares
of Westwood common stock that you receive in the spin-off, nor will you be
required to surrender or exchange shares of SWS common stock, or take any other
action in order to receive Westwood common stock. The number of shares of SWS
common stock that you currently own will not change as a result of the spin-off.

SWS has contributed 100% of the issued and outstanding capital stock of
Westwood Management Corporation ("Westwood Management") and Westwood Trust to
Westwood, a newly formed corporation controlled by SWS. Westwood is a holding
company and its principal assets consist of all of the outstanding capital
stock of Westwood Management and Westwood Trust. Westwood Management and
Westwood Trust are continuing to operate as wholly owned subsidiaries of
Westwood. Following the spin-off, SWS will continue to own brokerage and
banking businesses, including SWS Securities, Inc.; SWS Financial Services,
Inc.; Mydiscountbroker.com, Inc.; May Financial Corporation; Southwest Clearing
Corp.; O'Connor & Company Securities, Inc.; First Savings Bank, FSB; FSBF,
L.L.C.; and FSB Development, L.L.C., as well as other businesses and operations.

There has been no trading market for Westwood common stock. However, we
expect that a limited market for Westwood common stock, commonly known as a
"when issued" trading market, will develop on or shortly before the record date
for the spin-off. The New York Stock Exchange has authorized the listing of
Westwood's common stock under the ticker symbol "WHG."

This information statement contains information about the spin-off of
Westwood and about its business, management and financial performance. We
encourage you to read it in its entirety.

Sincerely,

SWS GROUP, INC.

Don A. Buchholz
Chief Executive Officer

As you review this information statement, you should carefully consider the
matters described in "Risk Factors" beginning on page 6 in evaluating the
benefits and risks of holding or disposing of shares of Westwood common stock
that you will receive in the spin-off.

This information statement does not constitute an offer to sell or the
solicitation of an offer to buy any securities.

Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this information statement is truthful or complete. Any representation to the
contrary is a criminal offense.

The date of this information statement is June 7, 2002, and it is being
mailed to SWS stockholders on or about June 14, 2002.

TABLE OF CONTENTS

Page
----

SUMMARY................................................................   1
RISK FACTORS...........................................................   6
SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS..........................  13
THE SPIN-OFF...........................................................  14
Background and Reasons for the Spin-Off.............................  14
Description of the Spin-off.........................................  18
Results of the Spin-off.............................................  19
Material U.S. Federal Income Tax Consequences of the Spin-off.......  19
Listing and Trading of Westwood Common Stock........................  23

RELATIONSHIP BETWEEN SWS AND WESTWOOD AFTER THE SPIN-OFF...............  25
Distribution Agreement..............................................  25
Transition Services Agreement.......................................  28
Tax Separation Agreement............................................  28

DIVIDEND POLICY........................................................  29
SELECTED CONSOLIDATED FINANCIAL DATA...................................  30
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS..........................................................  32
Overview............................................................  32
Results of Operations...............................................  34
Liquidity and Capital Resources.....................................  37
Quantitative and Qualitative Disclosures About Market Risk..........  38
Expected Change in Independent Accountants..........................  39

BUSINESS...............................................................  40
General.............................................................  40
Westwood Management Corporation.....................................  40
Westwood Trust......................................................  43
Growth Strategy.....................................................  43
Competition.........................................................  44
Regulation..........................................................  45
Employees...........................................................  46
Properties..........................................................  46
Legal Proceedings...................................................  46

MANAGEMENT.............................................................  47
Board Committees....................................................  48
Director Compensation...............................................  49
Compensation of Executive Officers..................................  50
Compensation Committee Interlocks and Insider Participation.........  54

PRINCIPAL STOCKHOLDERS.................................................  55
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.........................  57
DESCRIPTION OF CAPITAL STOCK...........................................  58
WHERE YOU CAN FIND MORE INFORMATION....................................  62
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS............................. F-1

i

SUMMARY

This summary highlights selected information from this document but does not
contain all details concerning the spin-off of Westwood, including information
that may be important to you. To better understand the spin-off and Westwood,
you should carefully read this entire document. References in this document to
"we," "our," "us" or "Westwood" mean Westwood Holdings Group, Inc. and its
subsidiaries, Westwood Management Corporation and Westwood Trust.

We expect that our Board of Directors will approve a stock split in the form
of a stock dividend to be effective as of an undetermined future date prior to
the spin-off in order to provide the number of shares required for the
spin-off. As of May 15, 2002, SWS had 17,236,446 shares of common stock
outstanding (excluding treasury shares). Assuming no change to the number of
SWS shares outstanding on the record date for the spin-off, our stock split
ratio would be 999.02605 shares of our common stock for every one share of our
common stock held, which would result in an estimated 5,374,140 shares of our
common stock outstanding immediately following the spin-off. Share numbers and
some other numbers based on share numbers that are presented in this
information statement reflect this assumed stock split ratio. To the extent
that the number of SWS shares outstanding on the record date for the spin-off
is different than the number outstanding on May 15, 2002, our actual stock
split ratio and the actual number of our shares outstanding immediately
following the spin-off will be somewhat different.

Who We Are

We manage investment assets and provide services for our clients through our
two subsidiaries, Westwood Management and Westwood Trust. Westwood Management
provides investment advisory services to corporate pension funds, public
retirement plans, endowments and foundations, mutual funds and clients of
Westwood Trust. Westwood Trust provides to institutions and high net worth
individuals trust and custodial services and participation in common trust
funds that it sponsors. Our revenues are generally derived from fees based on a
percentage of assets under management, and at March 31, 2002, Westwood
Management and Westwood Trust collectively managed assets valued at
approximately $4.0 billion. We have been providing investment advisory services
since 1983 and, according to recognized industry sources, including
Morningstar, Inc., when measured over multi-year periods, our principal asset
classes have consistently ranked above the median in performance within their
peer groups.

The Spin-off

SWS will accomplish the spin-off by distributing all of the shares of our
common stock that it holds to SWS's stockholders. SWS currently holds 80.18% of
our outstanding common stock. Some members of our management currently hold
19.82% of our outstanding common stock, and such shares will not be distributed
to SWS's stockholders. On April 8, 2002, the SWS Board of Directors formally
approved the spin-off. Each SWS stockholder as of the close of business on June
17, 2002, which is the record date for the spin-off, will receive shares of our
common stock. Those SWS stockholders will receive one share of our common stock
for every four shares of SWS common stock held as of the record date. We expect
that our Board of Directors will approve a stock split in the form of a stock
dividend to be effective as of an undetermined future date prior to the
spin-off in order to provide the number of shares required for the spin-off.
SWS and we expect that the spin-off will take place on or about June 28, 2002,
although completion of the spin-off is contingent upon the satisfaction of
conditions described in a distribution agreement. Based on the assumed stock
split ratio, SWS executive officers and directors will own 685,819 (or
approximately 12.8%) of our outstanding shares, and our executive officers and
directors will own 1,144,044 (or approximately 21.3%) of our outstanding shares
following the spin-off. Common board members' holdings are included in the
foregoing figures. See "Relationship Between SWS and Westwood After the
Spin-off."

As soon as practicable on or about the spin-off date, SWS will deliver to
the distribution agent, Computershare Trust Company, Inc., certificates
representing the shares of our common stock that it holds. The distribution
agent will then make distributions in book-entry form to each holder of SWS
common stock, unless such holder requests the delivery of a certificate.

Questions and Answers About the Spin-off and Westwood

Q:  Why is SWS separating its businesses?

A:  SWS's Board of Directors has determined that the separation of its Westwood
asset management business from its other businesses, which include brokerage
and banking services, is in the best interests of its stockholders. SWS's Board
of Directors believes that the Westwood asset management business has distinct
financial and operating characteristics from SWS's other businesses and that
separating it will:

.  provide Westwood's management the ability to focus their efforts and
financial resources on its core business, thus enabling it to compete more
effectively in its own markets;

.  provide Westwood a platform to enhance client service by better aligning
Westwood's performance on behalf of its clients with the compensation of
its employees;

.  provide Westwood the ability to better retain and recruit high quality
employees by providing employee compensation and benefit programs more
closely tied to its performance, including stock-based and other incentive
programs that reward employees based on their contribution to its success;

.  provide Westwood the ability to operate independently without the capital
resource allocation issues present within the combined SWS, which in the
near term will allow Westwood to invest in additional technology, such as
an enhanced website and more efficient client reporting systems;

.  provide Westwood additional operating flexibility and allow it to achieve
improved cost structures and operating efficiencies;

.  enable Westwood to avoid any perception that a conflict of interest exists
because it is a subsidiary of SWS, as SWS is a large securities clearing
firm;

.  enable Westwood to attract business from competitors of SWS; and

.  enable the financial community and investors to better measure the
performance of both SWS and Westwood against comparable companies in
similar businesses and make investment decisions based on the separate
operations of the companies.

Q:  Why is the separation of the two companies structured as a spin-off?

A:  SWS's Board of Directors believes that a tax-free distribution of its
shares of Westwood offers SWS and its stockholders the greatest long-term value
and is the most tax efficient way to separate the companies.

Q:  Should I send in my SWS stock certificates for exchange?

A:  No. Holders of SWS common stock should not send stock certificates to SWS,
Westwood or the distribution agent.

Q:  How will fractional shares be treated?

A:  On or after the spin-off date, our distribution agent will aggregate all
fractional shares, sell them on the open market at prevailing market prices and
distribute the aggregate proceeds ratably to those SWS stockholders otherwise
entitled to those fractional shares. As a result, each holder of SWS common
stock who would

2

otherwise be entitled to receive a fractional share will receive cash for those
fractional shares less applicable taxes and a pro rata portion of the aggregate
brokerage commission payable in connection with the sale of the fractional
shares.

Q:  What do stockholders need to do to participate in the spin-off?

A:  Nothing. On the spin-off date, SWS will provide for the distribution of the
shares of our common stock that it holds by the distribution agent.

Q:  Will the spin-off change the number of shares I own in SWS?

A:  No. The spin-off will not change the number of SWS common shares that you
own. Immediately after the spin-off, SWS's stockholders will continue to own
their respective proportionate interests in SWS and Westwood. However,
stockholders will now own their interests in these businesses through their
ownership of stock in each of two independent public companies.

Q:  Are there risks to continuing to own Westwood common stock?

A:  Yes. Our business is subject to both general and specific business risks
relating to our operations. In addition, our separation from SWS presents risks
relating to our being an independent public company for the first time, as well
as risks relating to the nature of the spin-off transaction itself. Many of
these risks are described in the "Risk Factors" section beginning on page 6. We
encourage you to read that section carefully.

Q:  Will Westwood common stock be publicly traded?

A:  The New York Stock Exchange has authorized the listing of our common stock
on the NYSE under the ticker symbol "WHG." We expect that regular trading will
begin on or about the spin-off date.

Before regular trading begins, we expect that a limited market for shares of
our common stock, commonly known as a "when issued" trading market, will
develop on or shortly before the record date for the spin-off. The term
"when-issued" means that shares can be traded prior to the time certificates
are actually available or issued. Even though when-issued trading may develop,
none of these trades will settle prior to the effective date of the spin-off,
and if the spin-off does not occur, all when-issued trading will be null and
void.

Q.  Will the spin-off affect the trading price of my SWS common stock?

A:  Probably. After the spin-off, SWS common stock will continue to be listed
on the NYSE under the symbol "SWS," and the trading price of SWS common stock
will likely be lower than the trading price immediately prior to the spin-off.
Moreover, until the market has evaluated the operations of SWS without our
operations, the trading price of SWS common stock may fluctuate significantly.

Q.  What is likely to be the initial trading price of Westwood common stock?

A.  There can be no reliable prediction as to the prices at which Westwood
common stock will trade after completion of the spin-off. You should know,
however, that:

.  The SWS Board of Directors obtained a valuation report from Bernstein,
Phalon & Conklin in December 2001 that concluded as of September 30, 2001,
after applying a discount for lack of marketability to reflect the fact
that Westwood was privately held on that date, that the aggregate fair
market value of a 19.9% interest in Westwood was $4,115,000, or $3.85 per
share.

.  In February 2002 the SWS Board of Directors concluded that the
distribution ratio of one share of Westwood common stock for every four
shares of SWS common stock would likely result in an initial

3

trading price for Westwood common stock of at least $10.00 per share. This
conclusion was reached based on available information regarding the
trading prices of asset management companies at that time, as well as the
many years of experience of the SWS Board in evaluating the prices of
publicly traded stocks. Substantially all of the members of the SWS Board
have more than 15 years of experience in evaluating the prices of publicly
traded stocks. The SWS Board particularly noted that:

.  the trading prices of other publicly held asset management companies
had risen in recent months; and

.  by virtue of SWS having sold a portion of its ownership interest in
Westwood to Westwood management, the market price of Westwood common
stock would likely be higher because key members of Westwood
management were incentivized to remain with Westwood and to seek to
increase the value of their ownership interest in Westwood.

We do not believe that investors should utilize either the September 2001
valuation or the conclusion of the SWS Board of Directors in February 2002 in
making any determination as to an appropriate value or an appropriate trading
price for Westwood common stock following completion of the spin-off for the
reasons discussed on page 17. Neither SWS nor Westwood can provide any
assurance as to an appropriate value or initial trading price for Westwood
common stock. See "The Spin-off--Background and Reasons for the Spin-off" and
"Risk Factors--Risks Relating to the Spin-Off--There has been no prior market
for our common stock, and it is difficult to predict the prices at which our
common stock might trade."

Q:  What if I want to sell my SWS common stock or Westwood common stock?

A:  Unless you are an affiliate of SWS or Westwood, you are free to sell your
shares of SWS common stock or Westwood common stock. However, you should
consult with your financial and tax advisors as to the implications of any
sales. Neither SWS nor Westwood are making any recommendations on the purchase,
retention or sale of shares of SWS common stock or Westwood common stock. If
you do decide to sell any shares, you should make sure your broker, bank or
other nominee understands whether you want to sell your SWS common stock, your
Westwood common stock or both.

Q:  Will SWS And Westwood be related in any way after the spin-off?

A:  Immediately following the spin-off, SWS's significant stockholders will be
significant Westwood stockholders. However, SWS will not own any shares of our
common stock after the spin-off, and we will not own any shares of SWS common
stock after the spin-off. Although SWS will no longer have any ownership
interest in us after the spin-off, SWS and Westwood will have two common Board
members, Frederick R. Meyer and Jon L. Mosle, Jr. Based on the number of shares
of SWS common stock owned by SWS executive officers and directors as of May 15,
2002, they will directly or indirectly own 685,819 (or approximately 12.8%) of
our outstanding shares immediately following the spin-off. Further, as of May
15, 2002, our executive officers and directors directly or indirectly owned
418,390 (or approximately 2.4%) of the outstanding shares of SWS common stock
and, based on the assumed stock split, will own 1,144,044 (or approximately
21.3%) of our outstanding shares following the spin-off. The common Board
members' holdings are included in the foregoing SWS common stock and Westwood
common stock figures. Additionally, SWS and we have entered into various
agreements to define our continuing business relationships. See "Relationship
Between SWS and Westwood After the Spin-off."

Q:  What are the conditions to the spin-off becoming effective?

A:  The completion of the spin-off depends upon satisfaction of a number of
conditions, including:

.  the Securities and Exchange Commission must have declared our registration
statement on Form 10 effective under the Securities Exchange Act of 1934;

4

.  the NYSE must have approved the listing of our common stock, subject to
official notice of issuance;

.  SWS's Board of Directors must be satisfied that the spin-off will be made
out of surplus within the meaning of Section 170 of the General
Corporation Law of the State of Delaware;

.  SWS's Board of Directors must have approved the spin-off and must not have
abandoned, deferred or modified the spin-off at any time before the
completion of the spin-off;

.  our Certificate of Incorporation and Bylaws, in substantially the forms
filed as exhibits to the Form 10 and as described in this information
statement, must be in effect;

.  we must receive approval of the change of control of Westwood Trust from
the Texas Department of Banking or confirmation that a change of control
of Westwood Trust has not occurred as a result of the spin-off; and

.  SWS and we must have executed and delivered the various ancillary
agreements described in this information statement.

Q:  Can SWS decide not to go through with the spin-off?

A:  Yes. SWS can cancel the spin-off for any reason at any time before it is
completed.

Q:  Will SWS, Westwood or I be taxed on the spin-off under U.S. federal tax
laws?

A:  Based on an opinion received from Gardere Wynne Sewell LLP, SWS expects
that the spin-off will qualify as tax-free to its stockholders for federal
income tax purposes, except for cash received in lieu of fractional shares.
However, you should consult your tax advisor as to the particular tax
consequences to you of the spin-off. You should also review the discussion of
the risks relating to the tax-free qualification of the spin-off that begins on
page 7 of this document and the discussion under "The Spin-Off -- Material U.S.
Federal Income Tax Consequences of the Spin-off" that begins on page 19 of this
document.

Even if the spin-off otherwise qualifies as a tax-free distribution to SWS's
stockholders, a corporate level federal income tax would be payable by SWS if
either SWS or Westwood experiences a change-in-control, as determined under
Section 355(e) of the Internal Revenue Code of 1986, as amended. We have agreed
to indemnify SWS for any such taxes that arise if we are responsible for
triggering a change-in-control. Otherwise, there are no direct or indirect
corporate tax consequences to us as a result of the spin-off.

Q:  Who is acting as the distribution agent?

A:  Computershare Trust Company, Inc.
350 Indiana Street, Suite 800
Golden, Colorado 80401
Telephone: 303-262-0600

Q:  Where can SWS stockholders get more information?

A:  You may direct questions to SWS's Investor Relations Department, 1201 Elm
Street, Suite 3500, Dallas, Texas 75270, telephone number: 214-859-1800; or you
may contact the distribution agent for the spin-off at 303-262-0600.

5

RISK FACTORS

You should carefully consider each of the following risks, which we believe
are the principal risks that we face, and all of the other information in this
information statement. Some of the following risks relate to our spin-off from
SWS. Other risks relate to our business, the securities markets and ownership
of our common stock. Our business may also be adversely affected by risks and
uncertainties not presently known to us or that we currently believe are
immaterial. If any of the following risks and uncertainties develop into actual
events, this could have a material adverse effect on our business, financial
condition or results of operations. If this occurs, the trading price of our
common stock could decline, and you may lose all or part of your investment.

Risks Relating to the Spin-Off

We have no operating history as an independent public company and may be
unable to operate profitably as a stand-alone company.

There can be no assurance that, as an independent company, we will continue
to be profitable following the spin-off. SWS has owned our business for many
years and has operated that business as a part of its overall financial
services business. As part of SWS's business, we have been able to rely, to
some degree, on the cash flow and other resources of SWS, including
administrative services, as well as on fees related to our management of the
SWS cash reserve funds, which we will continue to manage for at least one year
following the spin-off. Following the spin-off, we will need to obtain from
third parties those resources previously provided by SWS, although SWS has
agreed to provide to us for a limited time certain equipment and human
resources services. See "Relationship Between SWS and Westwood After the
Spin-off" and "Business." The terms extended to us by third parties may not be
as favorable as the terms provided by SWS.

Our historical financial information may not be indicative of our future
performance because, in part, we expect to have higher expenses.

Our historical financial information included in this information statement
may not be indicative of our future performance and does not necessarily
reflect our financial position, results of operations and cash flows had we
operated as an independent public company during each of the periods presented.
Our expenses have been allocated from SWS on the basis of our relative number
of employees, relative revenues and other allocation bases. These allocated
expenses represent services provided by SWS, including human resources,
accounting, internal audit, income tax, legal, insurance and information
technology. Had we been an independent public company in 2001, we estimate that
our total expenses would have been approximately $800,000 higher than those
reflected in the consolidated financial statements. The increase in expenses
includes, without limitation, increased public company compliance costs,
employee compensation, insurance costs, legal expenses, and accounting and
payroll costs. The foregoing estimate of higher expenses is not necessarily an
accurate measure of what our stand-alone expenses would have been in 2001 or
will be in the future, and our expenses could be higher. The costs we actually
incur in the future will depend on the market for these services when they are
actually purchased and the size and nature of our future operations. The
financial information included herein does not reflect any changes that may
occur in our financial condition and operations as a result of the spin-off.
See "Management's Discussion and Analysis of Financial Condition and Results of
Operations" and our consolidated financial statements.

There has been no prior market for our common stock, and it is difficult to
predict the prices at which our common stock might trade.

There has been no established trading market for our common stock, and there
can be no reliable prediction as to the prices at which it will trade after
completion of the spin-off. While it is expected that a limited market for
shares of our common stock, commonly known as a "when-issued" trading market,
will develop near the record date, until our common stock is fully distributed
and an orderly trading market develops, the prices at

6

which trading in our common stock occurs may fluctuate significantly. The term
"when-issued" means that shares can be traded prior to the time certificates
are actually available or issued. Even though when-issued trading may develop,
none of these trades will settle prior to the effective date of the spin-off.
Trading in our common stock on a "when-issued" basis exposes traders to a risk
of loss if the spin-off does not occur. See "The Spin-off -- Listing and
Trading of Westwood Common Stock." The SWS Board of Directors obtained a
valuation report in December 2001 that concluded as of September 30, 2001,
after applying a discount for lack of marketability to reflect the fact that
Westwood was privately held on that date, that the aggregate fair market value
of a 19.9% interest in Westwood was $4,115,000, or $3.85 per share. In February
2002 the SWS Board of Directors concluded that the distribution ratio of one
share of Westwood common stock for every four shares of SWS common stock would
likely result in an initial trading price for Westwood common stock of at least
$10.00 per share. We do not believe that investors should utilize either the
September 2001 valuation or the conclusion of the SWS Board of Directors in
February 2002 in making any determination as to an appropriate value or an
appropriate trading price for Westwood common stock following completion of the
spin-off. Neither SWS nor Westwood can provide any assurance as to an
appropriate value or initial trading price for Westwood common stock.
Determining the proper price of an equity security is very subjective, and
different investors will have different opinions regarding price and will apply
varying pricing methodologies. The prices at which shares of our common stock
trade will be determined based on the composite of pricing expectations of all
market participants and may be influenced by many factors, including, among
others, our performance and prospects, the depth and liquidity of the market
for our common stock, investor perception of us, our business and the industry
in which we operate, our dividend policy, general financial and other market
conditions, domestic and international economic conditions, and the impact of
factors described in this "Risk Factors" section. See "The Spin-off --
Background and Reasons for the Spin-off" and "-- Listing and Trading of
Westwood Common Stock."

If the spin-off is taxable, you could be required to pay tax on the fair
market value of the shares of Westwood common stock you receive in the
spin-off, and SWS could incur a corporate tax liability for which Westwood
could be responsible under some circumstances.

Based on an opinion received from Gardere Wynne Sewell LLP, SWS expects that
the spin-off will qualify as tax-free to SWS and its stockholders for U.S.
federal income tax purposes, except for cash received in lieu of fractional
shares. However, Gardere's opinion is not binding on the courts or the IRS.
Whether a spin-off qualifies as tax-free depends in part upon the reasons for
the spin-off and satisfaction of numerous other fact-based requirements. If the
spin-off fails to qualify as a tax-free distribution for U.S. federal income
tax purposes, SWS stockholders who receive shares of our common stock in the
spin-off would be treated as if they had received a taxable distribution in an
amount equal to the fair market value of our common stock received. The amount
of the taxable distribution would be taxed as a dividend. If the spin-off fails
to qualify as a tax-free distribution for U.S. federal income tax purposes to
SWS stockholders, then, in general, a corporate income tax could also be
payable on the difference between the fair market value of the stock and SWS's
adjusted tax basis in the stock at the time of the spin-off by the combined tax
group of which SWS is the common parent. Even if the spin-off qualifies as a
tax-free distribution to SWS stockholders, it may be subject to corporate
income tax under Section 355(e) of the Internal Revenue Code of 1986, as
amended, if one or more persons acquire a 50% or greater interest in SWS or
Westwood as part of a plan or series of related transactions that included the
spin-off. Any acquisition that occurs during the four-year period beginning two
years before the spin-off will be presumed to be part of a plan or a series of
transactions relating to the spin-off. SWS or Westwood, whichever is
responsible for triggering a change-in-control resulting in the application of
Section 355(e) of the Code, will bear any related taxes that arise. Even if the
application of Section 355(e) resulted in the imposition of corporate income
tax liability, this alone would not affect the tax-free nature of the
distribution to SWS stockholders. See "The Spin-off -- Material U.S. Federal
Income Tax Consequences of the Spin-off" and "Relationship Between SWS and
Westwood After the Spin-off -- Tax Separation Agreement."

The trading price of SWS common stock may decline after the spin-off.

After the spin-off, SWS common stock will continue to be listed for trading
on the NYSE under the symbol "SWS." As a result of the spin-off, absent other
action, the trading price of SWS common stock immediately

7

following the spin-off is expected to be lower than the trading price of SWS
common stock immediately prior to the spin-off.

We will not be able to rely on SWS to fund future capital requirements.

In the past, some of our capital needs have been satisfied or guaranteed by
SWS. However, following the spin-off, SWS will no longer provide funds to
finance our working capital or other cash requirements. We cannot be certain
that financing, if needed, will be available on favorable terms, if at all. We
believe that our capital requirements will vary greatly from quarter to quarter
depending on, among other things, capital expenditures, fluctuations in our
operating results and financing activities. We believe that our current cash
and cash equivalents and cash flows from operations after the spin-off will be
sufficient to satisfy our cash requirements for the foreseeable future.
However, if future financing is necessary, we may or may not be able to obtain
financing with interest rates as favorable as those historically enjoyed by
SWS, if at all. Further, any future equity financings could dilute the relative
percentage ownership of the then existing holders of our common stock, and any
future debt financings could involve restrictive covenants that limit our
ability to take certain actions.

Substantial sales of our common stock following the spin-off, or the
perception that such sales might occur, could depress the market price of our
common stock.

All of the shares of our common stock distributed in the spin-off will be
eligible for immediate resale in the public market, except for shares held by
our affiliates. Any sales of substantial amounts of our common stock in the
public market, or the perception that such sales might occur, whether as a
result of the spin-off or otherwise, could depress the market price of our
common stock. We are unable to predict whether substantial amounts of our
common stock will be sold in the open market following the spin-off. See "The
Spin-off -- Listing and Trading of Westwood Common Stock."

The distribution agreement and the tax separation agreement contain
indemnification obligations for SWS and us that neither party may be able to
satisfy, which could result in increased expenses and liabilities for us.

The distribution agreement and the tax separation agreement allocate
responsibility between SWS and us for various liabilities and obligations.
However, the availability of such indemnities will depend upon the future
financial strength of SWS and ourselves. SWS or we may not be in a financial
position to fund such indemnities if they should arise, which could result in
increased expenses and liabilities for us. The distribution agreement provides
that each party will indemnify the other against claims arising out of the
distribution agreement and claims arising out of their respective businesses
before and after the spin-off. Additionally, the distribution agreement
provides that SWS will indemnify us for any liabilities or expenses in excess
of $500,000 that relate to our representation as the corporate trustee for the
Richard A. Boykin, Jr. Family Trust. The tax separation agreement provides that
each party will indemnify the other with respect to some taxes attributable to
their respective businesses arising before or after the spin-off. The tax
separation agreement also allocates responsibility between SWS and us with
respect to any corporate income taxes for which SWS becomes liable by reason of
a change-in-control of SWS or us resulting in the application of Section 355(e)
of the Code. If this occurs as a result of our actions, we would be liable to
pay SWS the amount of taxes for which SWS becomes liable solely by reason of
application of Section 355(e) of the Code and without consideration of any
other tax attribute of SWS. See "Relationship Between SWS and Westwood After
the Spin-off."

Some provisions may discourage a third party from acquiring control of
Westwood.

It could be difficult for a potential bidder to acquire us because our
Certificate of Incorporation and Bylaws contain provisions that may discourage
takeover attempts. In particular, our Certificate of Incorporation and Bylaws
permit our Board of Directors to issue, without stockholder approval, preferred
stock with such terms as the Board may determine. Additionally, our directors
may only be removed for cause by a vote of the holders of at least two-thirds
of the shares of stock entitled to vote, and stockholders cannot act by written
consent. We have

8

also elected to not exclude ourselves from the restrictions of Section 203 of
the Delaware General Corporation Law, which makes it more difficult for a
person who is an "interested stockholder" to effect various business
combinations with a corporation for a three-year period. Also, the tax
separation agreement provides that if, as a result of our actions, a
change-in-control of SWS or us triggers application of Section 355(e) of the
Code, we would be liable to pay SWS the amount of any corporate income taxes
for which SWS becomes liable solely by reason of application of Section 355(e)
of the Code and without consideration of any other tax attribute of SWS. These
provisions may increase the cost or difficulty for a third party to acquire
control of us or may discourage acquisition bids altogether. See "Description
of Capital Stock -- Provisions That May Have an Anti-Takeover Effect."

Risks Related to our Business

Some members of our management are critical to our success, and our inability
to attract and retain key employees could compromise our future success.

We believe that our future success will depend to a significant extent upon
the services of our executive officers, particularly Susan M. Byrne, our
Chairman of the Board and Chief Executive Officer, and Brian O. Casey, our
President and Chief Operating Officer. We do not have employment agreements
with any of our key employees, including Ms. Byrne or Mr. Casey. The loss of
the services of one or more of our key employees or our failure to attract,
retain and motivate qualified personnel could negatively impact our business,
financial condition, results of operations and future prospects. As with other
asset management businesses, our future performance depends to a significant
degree upon the continued contributions of certain officers, portfolio managers
and other key marketing, client service and management personnel. There is
substantial competition for these types of skilled personnel.

Some executive officers have substantial influence over our investment
policies.

Susan M. Byrne, our chief investment officer, establishes and implements
policy with respect to our investment advisory activity. Ms. Byrne and Mr.
Casey decide on any changes in management philosophy, style or approach with
respect to our investment advisory policies.

Negative performance of the securities markets could reduce our revenues.

Our results of operations are affected by many economic factors, including
the performance of the securities markets. Negative performance in the
securities markets or certain segments of those markets or short-term
volatility in the securities markets or segments thereof could result in
investors withdrawing assets from the markets or decreasing their rate of
investment, either of which could reduce our revenues. Because most of our
revenues are based on the value of assets under management, a decline in the
value of those assets would also adversely affect our revenues and results of
operations. Favorable performance by the securities markets prior to 2001
attracted a substantial increase in investments in these markets. Partly as a
result of this financial environment, the assets under our management increased
significantly and levels of profitability grew. The growth rate of our assets
under management has varied from year to year, and our growth rate could
decline significantly. In addition, in periods of slowing growth or declining
revenues, profits and profit margins are adversely affected because certain
expenses remain relatively fixed.

For example, more than two-thirds of our assets under management are
invested in equity securities of companies with a large market capitalization.
As a consequence, we are particularly susceptible to the volatility associated
with changes in the market for large capitalization stocks. Due to this
concentration, any change or reduction in such markets, including a shift of
Westwood Management clients' and potential clients' preference from investments
in equity securities of large capitalization stocks to other equity or fixed
income securities could have a significant negative impact on our revenues and
results of operations. This negative impact could occur due to the depreciation
in value of our assets under management and/or the election by clients to
select other firms to manage their assets, either of which events would result
in decreased assets under management and therefore reduced revenues and a
decline in results of operations.

9

Poor investment performance of the assets managed by us could adversely
affect our results of operations.

Because we compete with many other asset management firms on the basis of
asset classes offered and the investment performance of those asset classes,
our success is dependent to a significant extent on the investment performance
of the assets that we manage. During 2001 the asset classes comprising the bulk
of assets under our management performed below the median within their peer
groups. This relative underperformance could adversely affect our results of
operations, especially if it continues. Good performance stimulates new client
accounts, which results in higher revenues for us. Conversely, poor performance
tends to result in the loss or reduction of client accounts, with corresponding
decreases in revenues.

Our business is dependent on investment advisory, subadvisory and trust
agreements that are subject to termination or non-renewal; therefore, we
could lose any of our clients on very short notice.

Substantially all of our revenues are derived pursuant to investment
advisory, subadvisory and trust agreements with our clients. Any termination of
or failure to renew these agreements could have a material adverse impact on
us. In general, either party may terminate these agreements upon 30-days
notice. Investment advisory and subadvisory agreements are terminated in the
event of an "assignment" (as defined in the Investment Company Act of 1940, as
amended). Generally, any change of control would constitute an "assignment"
under the 1940 Act. The spin-off is not expected to result in a change of
control and therefore under the applicable rules of the SEC would not
constitute such an assignment.

A small number of clients account for a substantial portion of our business.
As such, the reduction or loss of business with any of these clients could
have an adverse impact on our business, financial condition and results of
operations.

Our largest four clients accounted for 21.1% of total revenues for the
twelve months ended March 31, 2002, and we are therefore dependent to a
significant degree on our ability to maintain our existing relationships with
these clients. There can be no assurance that we will be successful in
maintaining our existing client relationships or in securing additional
clients. Any failure by us to retain one or more of our large clients or
establish profitable relationships with additional clients could have a
material adverse effect on our business, financial condition and results of
operations.

Any event that negatively affects the asset management industry could have a
material adverse effect on us.

Any event affecting the asset management industry that results in a general
decrease in assets under management or a significant general decline in the
number of advisory clients or accounts could negatively impact our revenues.
Our future growth and success depends in part upon the continued growth of the
asset management industry, which experienced significant growth prior to 2001.

Due to the substantial cost and time required to introduce new asset classes
in our industry, we may not be able to successfully introduce new asset
classes in a timely manner, or at all.

The development and marketing of new asset classes in our industry is
extremely costly and requires a substantial amount of time. Our ability to
successfully market and sell a new asset class depends on our financial
resources, the asset class's performance results, the timing of the offering
and our marketing strategies. Once an asset class is developed, whether through
acquisition or development internally, we need to be able to effectively market
the asset class to our existing and prospective clients. This entails incurring
significant financial expenses related to research on the target assets and the
demand for such asset class in the market, as well as costs related to doing
road shows, sponsoring conferences and attending trade shows. In addition, our
ability to sell new asset classes to our existing and potential clients depends
on our ability to meet or exceed the performance of our competitors who offer
the same or similar asset classes. We may not be able to profitably manage the
assets within a given asset class. Moreover, it may take years before we are
able to produce the level of results that will enable us to attract clients. If
we are unable to capitalize on the costs and expenses incurred in developing
new asset classes, we may experience losses as a result of our management of
these asset classes, and our ability to introduce further new asset classes and
compete in our industry may be hampered.

10

If we are unable to successfully and timely expand our asset classes, we may
not be able to maintain our competitive position in the asset management
industry.

Our ability to remain competitive will depend, in part, on our ability to
expand our asset classes under management. We are continually looking for
opportunities to expand our asset classes, both in terms of growing our
existing asset classes and developing new asset classes focusing on investment
areas that we do not currently cover. We intend to grow our asset classes
either internally or by acquiring asset classes from third parties. It may be
costly and time consuming for us to develop these new assets internally.
Moreover, we may not be able to find asset classes that are consistent with our
growth strategies or acquire asset classes from third parties on terms
acceptable to us, if at all. If we are unable to expand our asset classes or be
able to do so in a timely manner, we may lose clients to other asset management
firms, which would have an adverse affect on our business, financial condition
and results of operations.

Our business is subject to pervasive regulation with attendant costs of
compliance and serious consequences for violations.

Virtually all aspects of our business are subject to various laws and
regulations. Violations of such laws or regulations could subject us and/or our
employees to disciplinary proceedings or civil or criminal liability, including
revocation of licenses, censures, fines or temporary suspension, permanent bar
from the conduct of business, conservatorship or closure. Any such proceeding
or liability could have a material adverse effect upon our business, financial
condition, results of operations and business prospects. These laws and
regulations generally grant regulatory agencies and bodies broad administrative
powers, including, in some cases, the power to limit or restrict us from
operating our business and, in other cases, the powers to place us under
conservatorship or closure, in the event we fail to comply with such laws and
regulations. Due to the extensive regulations and laws to which we are subject,
our management is required to devote substantial time and effort to legal and
regulatory compliance issues. In addition, the regulatory environment in which
we operate is subject to change. We may be adversely affected as a result of
new or revised legislation or regulations or by changes in the interpretation
or enforcement of existing laws and regulations. See "Business -- Regulation."

Potential misuse of assets and information in the possession of our portfolio
managers and employees could result in costly litigation and liability for us
and our clients.

Our portfolio managers handle a significant amount of assets, financial and
personal information for our clients. Although we have implemented a system of
controls to minimize the risk of fraudulent taking or misuse of assets and
information, there can be no assurance that our controls will be adequate to
prevent taking or misuse by our portfolio managers or employees. If our
controls are ineffective in preventing the fraudulent taking or misuse of
assets and information, we could be subject to costly litigation, which could
consume a substantial amount of our resources and distract our management from
the operation of Westwood and could also result in regulatory sanctions.
Additionally, any such fraudulent actions could adversely affect some of our
clients in other ways, and these clients could seek redress against us.

Acquisitions, which are part of our long-term business strategy, involve
inherent risks that could compromise the success of the combined business and
dilute the holdings of current stockholders.

As part of our long-term business strategy, we intend to consider
acquisitions of similar or complementary businesses. See "Business -- Growth
Strategy." If we are not correct when we assess the value, strengths,
weaknesses, liabilities and potential profitability of acquisition candidates
or if we are not successful in integrating the operations of the acquired
businesses, the success of the combined business could be compromised. Any
future acquisitions will be accompanied by the risks commonly associated with
acquisitions. These risks include, among others, potential exposure to unknown
liabilities of acquired companies and to acquisition costs and expenses, the
difficulty and expense of integrating the operations and personnel of the
acquired companies, the potential disruption to the business of the combined
company and potential diversion of

11

management's time and attention, the impairment of relationships with and the
possible loss of key employees and clients as a result of the changes in
management, the occurrence of amortization expenses in connection with
acquisitions and dilution to the stockholders of the combined company if the
acquisition is made for stock of the combined company. In addition, asset
classes, technologies or businesses of acquired companies may not be
effectively assimilated into our business or have a positive effect on the
combined company's revenues or earnings. The combined company may also incur
significant expense to complete acquisitions and to support the acquired asset
classes and businesses. Further, any such acquisitions may be funded with cash,
debt or equity, which could have the effect of diluting the holdings or
limiting the rights of stockholders. Finally, we may not be successful in
identifying attractive acquisition candidates or completing acquisitions on
favorable terms.

Various factors may hinder the declaration and payment of dividends following
the spin-off.

Our payment of dividends is subject to the discretion of our Board of
Directors, and various factors may prevent us from paying dividends. Such
factors include our financial position, capital requirements and liquidity, the
existence of a stock repurchase program, any loan agreement restrictions, state
corporate and banking law restrictions, results of operations and such other
factors as our Board of Directors may consider relevant. In addition, as a
holding company, our ability to pay dividends is dependent on the dividends and
income we receive from our subsidiaries. At the present time our primary source
of cash is dividends that may be received from Westwood Management or Westwood
Trust. The payment of dividends by Westwood Management or Westwood Trust is
subject to the discretion of their Boards of Directors and compliance with
applicable laws, including, in particular, the provisions of the Texas Finance
Code applicable to Westwood Trust. See "Dividend Policy" and "Management's
Discussion and Analysis of Financial Condition and Results of Operations."

Our business is vulnerable to systems failures that could have a material
adverse effect on our business, financial condition and results of operations.

Any delays or inaccuracies in securities pricing information or information
processing could give rise to claims against us, which could have a material
adverse effect on our business, financial condition and results of operations.
We are highly dependent on communications and information systems and on third
party vendors for securities pricing information and updates from certain
software. We may suffer a systems failure or interruption, whether caused by an
earthquake, fire, other natural disaster, power or telecommunications failure,
unauthorized access, act of God, act of war or otherwise, and our back-up
procedures and capabilities may not be adequate or sufficient to eliminate the
risk of extended interruptions in operations.

Members of our Board of Directors and executive management may have conflicts
of interest after the spin-off due to their relationships with SWS.

Two members of our Board of Directors, Frederick R. Meyer and Jon L. Mosle,
Jr., also serve on the SWS Board of Directors. In addition, all of the members
of our Board of Directors and executive management will own shares of both SWS
and Westwood common stock after the spin-off. These circumstances could create,
or appear to create, potential conflicts of interest when our directors and
management are faced with decisions that could have different implications for
SWS and Westwood. Examples of these types of decisions might include the
resolution of disputes arising out of the agreements governing the relationship
between SWS and Westwood following the spin-off and SWS's continued use of
Westwood to act as manager of its cash reserve funds. Also, the appearance of
conflicts, even if such conflicts do not materialize, might adversely affect
the public's perception of us following the spin-off. See "Relationship Between
SWS and Westwood After the Spin-Off."

12

SPECIAL NOTE ABOUT FORWARD-LOOKING STATEMENTS

We have made forward-looking statements in this information statement
including, without limitation, in the sections entitled "Summary," "Risk
Factors," "Management's Discussion and Analysis of Financial Condition and
Results of Operations" and "Business," that are based on our management's
beliefs and assumptions and on information currently available to our
management. Forward-looking statements include the information concerning our
possible or assumed future results of operations, business strategies, need for
financing, competitive position, potential growth opportunities, potential
operating performance improvements, ability to retain and recruit personnel,
benefits resulting from our spin-off from SWS, the effects of competition and
the effects of future legislation or regulations. Forward-looking statements
include all statements that are not historical facts and can be identified by
the use of forward-looking terminology such as the words "believe," "expect,"
"plan," "intend," "anticipate," "estimate," "predict," "potential," "continue,"
"may," "will," "should" or the negative of these terms or similar expressions.

Forward-looking statements involve risks, uncertainties and assumptions.
Actual results may differ materially from those expressed in these
forward-looking statements. You should not put undue reliance on any
forward-looking statements. Except as required under the federal securities
laws and the rules and regulations of the SEC, we do not have any intention or
obligation to update publicly any forward-looking statements after we
distribute this information statement.

The risk factors discussed in "Risk Factors" could cause our results to
differ materially from those expressed in forward-looking statements. There may
also be other risks and uncertainties that we are unable to predict at this
time or which we do not now expect to have a material adverse impact on our
business.

13

THE SPIN-OFF

Background and Reasons for the Spin-Off

In May 2001, SWS management informed the SWS Board of Directors that asset
management companies similar to Westwood were being sold and purchased for
attractive values. At that time, the SWS Board authorized SWS management to
investigate a potential sale or spin-off of Westwood. After considering these
types of transactions and having discussions with Westwood management, SWS
management reported to the SWS Board that, primarily for federal income tax
reasons, a spin-off appeared to be more favorable to SWS and its stockholders
than a sale of Westwood.

At its August 2001 meeting, the SWS Board considered the spin-off and sale
alternatives. During the 90 days preceding that meeting, the average ratio of
the SWS trading price to the SWS book value (stockholders' equity) per share
was 1.15. Based on industry sources available at that time, the SWS Board noted
that the ratios for asset management companies were approximately double the
ratios for broker/dealers. Therefore, the Board considered that $1.00 of book
value transferred out of SWS to the SWS stockholders in the form of Westwood
stock would translate into a corresponding increase in theoretical market value
from $1.15 to $2.30. Based on these price-to-book ratios, Westwood's
stockholders' equity at December 31, 2000 of $12.8 million would theoretically
result in an increase in the deemed market capitalization of Westwood from
$14.7 million to $29.4 million. The SWS Board did not do this analysis in an
effort to value Westwood, but rather as support for the proposition that
spinning off Westwood would generate enhanced value for SWS stockholders.

The Board also considered that if Westwood were sold, SWS would have a tax
liability on the gain from the sale. In addition, SWS stockholders would have a
tax liability on any cash dividend paid from the proceeds of a sale. Based on
these considerations, the SWS Board determined that a spin-off would increase
stockholder value and should avoid tax liability for SWS and its stockholders.
Additionally, the Board determined that a spin-off was in the best interest of
SWS and its stockholders because the spin-off would create two independent
public companies that would be better positioned to adopt strategies and pursue
objectives appropriate to their respective needs. SWS's brokerage and banking
businesses and the Westwood business each have different operating objectives
and growth opportunities. By separating the operations, SWS and Westwood could
focus their attention and financial resources on their own core businesses and
on exploring and implementing the most appropriate business opportunities.
Thereafter, SWS engaged Gardere Wynne Sewell LLP to provide advice regarding
tax issues, structure and other issues related to the spin-off.

While SWS would continue to focus on the brokerage and banking businesses,
we would focus on providing our customers with quality, innovative asset
management and related services. The expected benefits of the spin-off include:

.  provide our management the ability to focus their efforts and financial
resources on our core business, thus enabling us to compete more
effectively in our own markets;

.  provide us a platform to enhance client service by better aligning our
performance on behalf of our clients with the compensation of our
employees;

.  provide us the ability to better retain and recruit high quality employees
by providing employee compensation and benefit programs more closely tied
to our performance, including stock-based and other incentive programs
that reward employees based on their contribution to our success;

.  provide us the ability to operate independently without the capital
resource allocation issues present within the combined SWS, which in the
near term will allow us to invest in additional technology, such as an
enhanced website and more efficient client reporting systems;

.  provide us additional operating flexibility and allow us to achieve
improved cost structures and operating efficiencies;

.  enable us to avoid any perception that a conflict of interest exists
because we are a subsidiary of SWS, as SWS is a large securities clearing
firm;

.  enable us to attract business from competitors of SWS; and

14

.  enable the financial community and investors to better measure the
performance of both SWS and Westwood against comparable companies in
similar businesses and make investment decisions based on the separate
operations of the companies.

During September and October 2001, SWS management and members of the SWS
Board of Directors engaged in extensive discussions with Westwood management
regarding the implementation of the proposed spin-off. In November 2001, the
SWS Board of Directors authorized the formation of Westwood Holdings Group,
Inc. and approved the contribution of the capital stock of Westwood Management
and Westwood Trust to Westwood Holdings Group, Inc. In December 2001, the SWS
Board of Directors preliminarily approved the terms of the proposed spin-off
and directed SWS management to prepare the necessary regulatory filings.

In addition, during September and October 2001, SWS management and members
of the SWS Board of Directors engaged in discussions with Westwood management
regarding the terms upon which SWS might agree to sell approximately 19.9% of
Westwood common stock to Westwood management. The SWS Board had concluded that
before distributing the Westwood common stock to its stockholders, it was
desirable to align members of Westwood's management more closely to Westwood
through substantial stock ownership and a financial commitment represented by
management's incurrence of indebtedness to Westwood. An understanding was
reached in October 2001 that SWS would sell an approximately 19.9% interest in
Westwood to Westwood management based upon the value of that interest at
September 30, 2001, as determined on the basis of an independent valuation. SWS
retained the services of Bernstein, Phalon & Conklin to provide such a
valuation. On December 13, 2001 the requested valuation report was delivered,
which concluded that based on and subject to the facts, limiting conditions and
assumptions presented in the valuation report and the exhibits attached
thereto, $4,115,000 reasonably represented the aggregate fair market value as
of September 30, 2001 of a 19.9% interest in Westwood. In determining the
aggregate fair market value of the indicated interest, the valuation report
identified several salient valuation factors that were considered, as follows:

. Westwood's assets under management are primarily for ERISA clients rather
than high net worth individuals, the former of which it was noted tended
to be more performance-oriented and volatile, although ERISA clients tend
to have long investment horizons and thus are less subject to market fads
than are individual investors.

. Ms. Byrne and Mr. Casey have key roles with Westwood, but have no
ownership interest in Westwood and have no employment or non-compete
agreements with Westwood. The valuation report further noted that if Ms.
Byrne or Mr. Casey were to obtain an ownership interest in Westwood that
this might be a mitigating factor that would reduce the risk to Westwood
of either of their departures.

. Peer group asset managers have stock ownership, in contrast to the absence
of any direct stock ownership by Westwood management.

. Ms. Byrne's high media profile benefits Westwood and, correspondingly, her
departure could negatively impact Westwood.

. While on a long term basis Westwood has performed toward the upper
quartile in its peer groups, Westwood performed toward the lowest quartile
when considering the results of 2001 alone.

. Westwood has a relatively high customer concentration.

. Westwood has experienced consistent growth in both assets under management
and investment advisory fees, and has been consistently profitable in
recent years.

The valuation report noted that there are three general ways of determining
value, as published by the Business Valuation Standards Committee of the
American Society of Appraisers - the income, market and asset-based approaches.
The report focused on the income and market approaches because an asset-based
approach would not account for Westwood's intangible assets, such as customer
relationships, management and goodwill.

15

The income approach is a general way of determining a value indication of a
business, business ownership interest, or security using various methods
wherein a value is determined by converting anticipated benefits. This approach
is predicated on the assumption that the value of an asset can be determined by
the present worth of future benefits derived from it. The valuation report uses
the income approach known as the capitalization of benefits method, in which a
representative future benefit level is divided or multiplied by a
capitalization factor to convert the representative benefits to a value.

The market approach is a general way of determining value using various
methods, such as the guideline company method, the external transaction method
and the internal transaction method, that compare the subject company with
similar businesses, business ownership interests, or securities that have been
sold. The valuation report uses all three methods in its analysis of Westwood's
value. The guideline company method involves the selection of companies that
are deemed to have similar qualitative and quantitative investment
characteristics to the subject company. Valuation ratios of the guideline
companies are then applied to a representative earnings stream of the subject
company to determine a value for the subject company. The transaction method
involves analyzing previous sales of company stock or acquisitions of private
or public companies similar to the subject company. The valuation report
considered both external transactions (acquisitions of similar businesses) and
one internal transaction (the 1993 acquisition of Westwood by SWS).

The results of the several valuation techniques applied to arrive at a
marketable, minority value for Westwood are as follows:

Market Approach--Guideline Company Method......... $38,200,000
Market Approach--External Transaction Method...... $25,000,000
Market Approach--Internal Transaction Method...... $28,000,000
Income Approach--Capitalization of Benefits Method $36,000,000

Each of the above approaches was given equal weight in determining the fair
market value of Westwood on a minority, marketable basis, which was estimated
to be $31,800,000. After applying a 35% discount for lack of marketability due
to the illiquid nature of an investment in Westwood at that time, an aggregate
fair market value of $20,670,000 was derived, which equated to a value of
$4,115,000 for a 19.9% interest in Westwood. Based on this valuation report, on
December 14, 2001 SWS sold a 19.82% interest in Westwood common stock to
Westwood's management for an aggregate price of $4,093,000, or $3.85 per share.

In February 2002, the SWS Board of Directors held a special meeting to
establish a preliminary spin-off distribution ratio, and preliminarily
authorized a distribution of one share of Westwood common stock for every four
shares of SWS common stock held on the record date. In order to determine the
appropriate distribution ratio, the SWS Board of Directors considered both the
number of round lot holders that would be necessary in order for Westwood
common stock to comply with the listing standards of the NYSE, as well as a
desirable trading price for Westwood common stock. Based on the number of
400-share round lot holders of SWS common stock in February 2002, the SWS board
concluded that a one-for-four distribution ratio would satisfy the NYSE's
minimum round lot holder requirement. The SWS Board concluded that this
distribution ratio would likely result in an initial trading price for Westwood
common stock of at least $10.00 per share. This conclusion was reached based on
available information regarding the trading prices of asset management
companies at that time, as well as the many years of experience of the SWS
Board in evaluating the prices of publicly traded stocks. Substantially all of
the members of the SWS Board have more than 15 years of experience in
evaluating the prices of publicly traded stocks. The SWS Board particularly
noted that the trading prices of other publicly held asset management companies
had risen in recent months and that, by virtue of SWS having sold a portion of
its ownership interest in Westwood to Westwood management, the market price of
Westwood common stock would likely be higher because key members of Westwood
management were incentivized to remain with Westwood and to seek to increase
the value of their ownership interest in Westwood.

16

We do not believe that investors should utilize either the September 2001
valuation or the conclusion of the SWS Board of Directors in February 2002 in
making any determination as to an appropriate value or an appropriate trading
price for Westwood common stock following completion of the spin-off for the
following reasons:

.  The September 2001 valuation determined Westwood's aggregate minority,
marketable value and also the value of a 19.9% non-marketable interest in
a privately held company. The valuation was not intended to predict the
public trading price of Westwood common stock.

.  The September 2001 valuation does not reflect the fact that Westwood
management's ownership of a portion of Westwood would probably enhance the
market price of Westwood common stock.

.  Market prices for asset management companies have generally improved since
September 2001.

.  Also, with respect to the conclusion reached by the SWS Board in February
2002, it is important to note that the SWS Board was seeking to set the
proper distribution ratio, and its judgment as to the minimum initial
trading price for Westwood common stock was merely supportive of
determining the proper distribution ratio and was not a formal valuation
analysis.

Neither SWS nor Westwood can provide any assurance as to an appropriate
value or initial trading price for Westwood common stock. Determining the
proper price of an equity security is very subjective, and different investors
will have different opinions regarding price and will apply varying pricing
methodologies. The market for Westwood common stock will ultimately price
Westwood common stock based on the composite of pricing expectations of all
market participants. Neither the company valuations set forth in the valuation
report nor the SWS Board of Directors' conclusion as to the likely minimum
initial trading price reflects the price that a diverse pool of investors would
collectively assign to Westwood common stock. See "Risk Factors--Risks Relating
to the Spin-Off--There has been no prior market for our common stock, and it is
difficult to predict the prices at which our common stock might trade."

17

Description of the Spin-off

SWS will accomplish the spin-off by distributing all of the shares of our
common stock that it holds to SWS's stockholders. SWS currently holds 80.18% of
our outstanding common stock. The following diagram illustrates the current
structure of Westwood and the distribution from SWS to its stockholders:

[GRAPHIC]

Westwood Graph

On April 8, 2002, the SWS Board of Directors formally approved the spin-off.
Each SWS stockholder as of the close of business on June 17, 2002, which is the
record date for the spin-off, will receive shares of our common stock. Those
SWS stockholders will receive one share of our common stock for every four
shares of SWS common stock held as of the record date. It is expected that our
Board of Directors will approve a stock split in the form of a stock dividend
to be effective as of an undetermined future date prior to the spin-off in
order to provide the number of shares required for the spin-off. SWS and
Westwood expect that the spin-off will take place on or about June 28, 2002,
although completion of the spin-off is contingent upon the satisfaction of
conditions described in the distribution agreement. See "Relationship Between
SWS and Westwood After the Spin-off."

As soon as practicable on or about the spin-off date, SWS will deliver to
the distribution agent, Computershare Trust Company, Inc., certificates
representing the shares of Westwood common stock that it holds. The
distribution agent will make distributions in book-entry form to each holder of
SWS common stock. Upon written request by a stockholder, the distribution agent
will deliver a certificate. SWS's shares of our common stock are duly
authorized, validly issued, fully paid and nonassessable, and the holders of
these shares will not be entitled to preemptive rights. See "Description of
Capital Stock."

We will not issue any fractional shares as part of the spin-off. Instead,
each holder of SWS common stock who would otherwise be entitled to receive a
fractional share will receive cash for those fractional shares less

18

applicable taxes and a pro rata portion of the aggregate brokerage commission
payable in connection with the sale of the fractional shares. On or after the
spin-off date, the distribution agent will aggregate all fractional shares,
sell them on the open market at prevailing market prices and distribute the
aggregate proceeds ratably to those SWS stockholders otherwise entitled to
those fractional shares. See "--Material U.S. Federal Income Tax Consequences
of the Spin-off" for a discussion of the United States federal income tax
treatment of proceeds from fractional share interests. The distribution agent
will act in its sole discretion, without influence from SWS or Westwood, in
effecting these sales. The distribution agent will independently determine all
aspects of the sales. Neither the distribution agent nor the broker-dealers it
uses are affiliates of SWS or Westwood. None of SWS, Westwood or the
distribution agent can guarantee any minimum sale price for the fractional
shares of our common stock. Neither SWS or Westwood will pay any interest on
the proceeds from the sale of aggregated fractional shares.

No vote of SWS stockholders is required or sought in connection with the
spin-off, and SWS stockholders will have no appraisal rights in connection with
the spin-off.

Options granted to Westwood employees under the SWS Securities, Inc. Stock
Option Plan and the SWS Securities, Inc. 1997 Stock Plan will become fully
vested as of the date of the spin-off, and Westwood will be substituted for SWS
as the employer of these employees. In addition, to the extent that SWS makes
any adjustments to its outstanding options as a result of the spin-off, similar
adjustments will be made to the SWS options held by Westwood employees.

No SWS stockholder will be required to pay cash or other consideration for
any shares of our common stock received in the spin-off, or to surrender or
exchange shares of SWS common stock to receive our common stock.

Results of the Spin-off

After the spin-off, we will be a separate public company, independent from
SWS. Except with respect to shares currently held by some members of our
management, which represent 19.82% of our outstanding common stock prior to the
spin-off, the number and identity of our stockholders immediately after the
spin-off generally will be the same as the number and identity of stockholders
of SWS immediately prior to the spin-off. As a result of the spin-off, we
expect to have approximately 150 holders of record and an estimated 5,374,140
shares of our common stock outstanding, based on the number of SWS record
stockholders, the distribution ratio, the assumed stock split ratio for our
common stock, and the number of outstanding shares of SWS common stock as of
the close of business on May 15, 2002. The actual number of shares of our
common stock to be distributed will be determined as of the record date. The
spin-off will not affect the number of outstanding shares of SWS common stock
or the rights of SWS stockholders.

Material U.S. Federal Income Tax Consequences of the Spin-off

General

The following is a summary description of the material federal income tax
consequences of the spin-off. This summary is not intended as a complete
description of all of the tax consequences of the spin-off and does not discuss
tax consequences under the laws of state, local or foreign governments or any
other jurisdiction. Moreover, the following discussion may not apply to
particular categories of holders subject to special tax treatment under the
federal income tax laws, including, without limitation, insurance companies,
financial institutions, broker-dealers, estates, trusts, tax-exempt
organizations, real estate investment trusts, regulated investment companies,
non-United States holders, or persons that will hold their shares of our common
stock as a position in a straddle, as part of a synthetic security or hedge, or
as part of a conversion transaction or other integrated investment, other than
a capital asset. This summary does not address the tax consequences to current
stockholders of Westwood. Further, it does not include a description of any
alternative minimum tax consequences that may be applicable to the receipt of
our shares pursuant to the spin-off. This summary assumes

19

that you hold your shares of our common stock as a capital asset within the
meaning of section 1221 of the Internal Revenue Code of 1986, as amended, or
the "Code." In this regard, special rules not discussed in this summary may
apply to some of SWS's stockholders.

The following discussion is based on currently existing provisions of the
Code, existing, proposed and temporary Treasury Department regulations
promulgated under the Code and current administrative rulings and court
decisions. All of the foregoing are subject to change, which may or may not be
retroactive, and any of these changes could affect the validity of the
following discussion.

We urge you to consult your tax advisor as to the particular tax
consequences to you of the spin-off described herein, including the
applicability and effect of any state, local or foreign tax laws, and the
possible effects of changes in applicable tax laws.

Consequences if the Spin-off is Tax-free

SWS has received an opinion from Gardere Wynne Sewell LLP to the effect
that, among other things, the spin-off will qualify as a tax-free distribution
under Section 355 of the Code. The opinion of Gardere Wynne Sewell LLP will
rely on representations made by SWS and us and factual assumptions. If any of
the factual assumptions or representations relied upon in the opinion are
inaccurate, the opinion may not accurately describe the tax treatment to you as
a result of the receipt of our common stock pursuant to the spin-off. In
addition, a tax opinion is not binding on the Internal Revenue Service, and we
do not intend to request a ruling from the Internal Revenue Services with
respect to these matters. Furthermore, there is no assurance that the Internal
Revenue Service would agree with the conclusions set forth in the opinion or
this discussion.

Assuming that the spin-off qualifies as a tax-free distribution:

.  except in connection with cash received in lieu of fractional shares, as
described below, no stockholder of SWS will recognize any income, gain or
loss as a result of the receipt of shares of our common stock;

.  each stockholder of SWS have an aggregate tax basis in the shares of our
common stock received in the spin-off and the shares of SWS common stock
held immediately following the spin-off equal to the tax basis in the
shares SWS common stock held immediately prior to the spin-off. This
aggregate tax basis will be allocated between the shares of our common
stock and SWS common stock in proportion to each of their fair market
values on the date of the spin-off. Each stockholder will assign tax basis
to each share of our common stock on a pro-rata basis. If a stockholder
has multiple blocks of SWS common stock, the stockholder will then
allocate the SWS tax basis (as determined above) back to a specific block
of SWS common stock in the amount of the total basis attributable to SWS
common stock multiplied by a fraction, the numerator of which is the
pre-spin-off tax basis attributable to that block of SWS common stock and
the denominator of which is the pre-spin-off tax basis of all of the
stockholder's SWS common stock. After the total tax basis for each block
has been determined, the stockholder will assign tax basis to the shares
within each block on a pro-rata basis;

.  the holding period for each stockholder of SWS for shares of our common
stock received in the spin-off will include the holding period for the
shares of SWS common stock held at the time of the spin-off (assuming the
stockholder held the SWS common stock as a capital asset on the date of
the spin-off). If a stockholder has multiple blocks of SWS common stock,
the stockholder will take multiple holding periods for each share of our
common stock, allocated on the basis of the fair market value of the SWS
common stock in each block (assuming the stockholder held the SWS common
stock as a capital asset on the date of the spin-off);

.  each stockholder who receives cash as a result of the sale of fractional
shares of our stock by the distribution agent will be treated as if such
fractional share had been received by the stockholder as part of the
distribution and then sold by the stockholder. Accordingly, the
stockholder will recognize gain or loss equal to the difference between
the cash so received and the portion of the tax basis in our stock that

20

is allocable to the fractional share. This gain or loss will be capital
gain or loss, provided that the fractional share was held by the
stockholder as a capital asset at the time of the distribution; and

.  SWS will not recognize any gain or loss on its distribution of our common
stock to SWS stockholders pursuant to the spin-off.

Current Treasury Department regulations require each stockholder of SWS who
receives a distribution of our common stock in the spin-off to attach to his,
her or its federal income tax return for the year in which the distribution
occurs a statement setting forth information as may be appropriate in order to
show the applicability of Section 355 of the Code to the spin-off. Such
statement shall include a description of the stock received and the names and
addresses of all the corporations involved in the transaction. SWS has agreed
it will provide each SWS stockholder as of the record date the information
necessary to comply with this requirement.

Consequences if the Spin-off is Taxable

If the spin-off fails to qualify as a tax-free distribution under Section
355 of the Code, then each stockholder of SWS receiving shares of our common
stock in the spin-off generally would be treated as if the stockholder received
a taxable distribution in an amount equal to the fair market value of our
common stock received, which would result in:

(a) a dividend taxable at ordinary income rates to the extent paid out of
SWS's current and accumulated earnings and profits; then

(b) a reduction in the stockholder's adjusted tax basis in his, her or its
SWS common stock to the extent the amount received exceeds the amount
referenced in clause (a) and does not exceed the stockholder's adjusted
tax basis in the stock; and then

(c) gain from the sale or exchange of the stockholder's SWS common stock to
the extent the amount received exceeds the sum of the amounts referenced
in clauses (a) and (b).

Each stockholder's initial tax basis in the Westwood common stock received
by the stockholder would be equal to the fair market value of such stock at the
time of the spin-off.

If the spin-off fails to qualify as a tax-free distribution under Section
355 of the Code, then the consolidated group of which SWS is the common parent
would be required to recognize taxable gain or loss equal to the difference
between the fair market value of the our common stock at the time of the
distribution and SWS's adjusted tax basis in such stock.

Consequences of Certain Ownership Changes after the Spin-off

Even if the spin-off otherwise qualifies as a tax-free distribution under
Section 355 of the Code, a corporate level federal income tax would be payable
by SWS if either SWS or Westwood experiences a prohibited change-in-control as
determined under Section 355(e) of the Code.

Section 355(e) of the Code generally provides that a corporation that
distributes shares of a subsidiary in a spin-off that is otherwise tax-free
will incur federal income tax liability if 50% or more, by vote or value, of
the capital stock of either the corporation making the distribution or the
spun-off subsidiary is acquired by one or more persons pursuant to a plan or
series of related transactions that includes the spin-off. This provision can
be triggered by certain reorganizations involving the acquisition of the assets
or stock of the corporation making the distribution or of the spun-off
subsidiary, or by issuances or redemptions of the stock of the distributing
corporation or of the spun-off subsidiary. There is a presumption that any
acquisition or issuance that occurs within two years before or after the
spin-off is part of a plan relating to the spin-off and one or more of such
stock acquisitions or issuances could produce a prohibited 50% acquisition.
However, the presumption may be rebutted by establishing that the spin-off and
the acquisitions are not part of a plan or series of related transactions.

21

In April 2002, temporary Treasury Department regulations were issued that
clarify when a spin-off is part of a plan, or series of related transactions,
where one or more persons acquire stock of the distributing or spun-off
subsidiary resulting in a 50% acquisition. The regulations rely on a variety of
factors to determine the existence of such a plan or series of related
transactions, including the following:

.  the business purpose or purposes for the distribution;

.  the intentions of the parties;

.  the existence of discussions, agreements, understandings, arrangements or
substantial negotiations relating to acquisitions;

.  the timing of transactions or acquisitions;

.  the causal connection or relationship between the spin-off and the
acquisitions; and

.  the occurrence of unexpected changes in market or business conditions.

These temporary Treasury Department regulations apply to this spin-off. The
Treasury Department has stated that it will continue to devote significant
resources towards developing additional guidance regarding what facts and
arrangements result in a prohibited 50% acquisition and that it will publish
more guidance on this issue in the near future. It is not known whether future
rules and regulations would apply to the spin-off.

If the spin-off is taxable solely under Section 355(e) of the Code, SWS will
recognize gain equal to the difference between the fair market value of our
common stock at the time of the distribution and SWS's adjusted tax basis in
the stock. However, holders of SWS common stock who receive our common stock in
the spin-off would not recognize any income, gain or loss as a result of the
receipt of shares of our common stock if the spin-off is taxable solely by
reason of Section 355(e) of the Code.

The tax separation agreement between SWS and us allocates responsibility for
the possible corporate tax burden resulting from the spin-off, as well as other
tax items. For example, if the spin-off is taxable under Section 355(e) of the
Code as a result of a 50% acquisition of either SWS or Westwood, then the
resulting tax burden imposed on SWS will be borne by the party responsible for
triggering the change-in-control. See "Relationship Between SWS and Westwood
After the Spin-off -- Tax Separation Agreement."

Back-up Withholding Requirements

SWS is required to withhold federal income tax at a rate of 30% with respect
to payments such as dividends, interest or proceeds from the sale of stock made
to (a) persons who do not have a social security number or taxpayer
identification number, (b) persons that the IRS has determined have a history
of evading federal income tax or (c) persons who have refused to furnish SWS
with information sufficient to enable it to comply with its applicable federal
income tax information reporting obligations. Such withholding is known as
backup withholding. Backup withholding is not an additional tax and may be
refunded (or credited against the stockholder's U.S. federal income tax
liability, if any), provided that required information is furnished to SWS.
United States information reporting requirements and backup withholding may
apply to our stockholders with respect to dividends paid on, and proceeds from
the taxable sale, exchange or other disposition of, our common stock unless the
stockholder:

.  is a corporation or comes within certain other exempt categories, and,
when required, demonstrates these facts; or

.  provides a correct taxpayer identification number, certifies that there
has been no loss of exemption from backup withholding and otherwise
complies with applicable requirements of the backup withholding rules.

You may be subject to penalties imposed by the IRS if you do not supply SWS
with your correct taxpayer identification number. You should consult your tax
advisor as to your qualification for exemption from backup withholding and the
procedure for obtaining such an exemption. If information-reporting
requirements apply to you, the amount of dividends paid with respect to your
shares will be reported annually to the IRS and to you.

22

Listing and Trading of Westwood Common Stock

There has been no public market for our common stock. An active trading
market may not develop or be sustained in the future. However, we expect that a
limited market for shares of our common stock, commonly known as a "when
issued" trading market, will develop on or shortly before the record date for
the spin-off. The term "when-issued" means that shares can be traded prior to
the time certificates are actually available or issued. Even though when-issued
trading may develop, none of these trades would settle prior to the effective
date of the spin-off, and if the spin-off does not occur, all when-issued
trading will be null and void. The NYSE has authorized the listing of our
common stock on the NYSE under the ticker symbol "WHG." Beginning on the first
NYSE trading day after the spin-off, we expect that our common stock will trade
on a "regular" basis. The term "regular" refers to trading after a security has
been issued and typically involves a transaction that settles on the third full
business day following the date of a transaction.

We cannot predict the prices at which our common stock may trade before the
spin-off on a "when issued" basis or after the spin-off on a "regular" basis.
These prices will be determined by the marketplace and may be significantly
below the book value per share of our common stock. Until our common stock is
fully distributed, an orderly trading market develops, and the market has fully
analyzed our operations, prices at which trading in shares of our common stock
occurs may fluctuate significantly. These prices may be influenced by many
factors, including quarter to quarter variations in our actual or anticipated
financial results or those of other companies in the industries or the markets
that we serve, investor perception of our company and the asset management
industry, and general economic and market conditions. In addition, the stock
market in general has experienced extreme price and volume fluctuations that
have affected the market price of many stocks and that have often been
unrelated or disproportionate to the operating performance of these companies.
These are just some factors that may adversely affect the market price of our
common stock. See "Risk Factors--There has been no prior market for our common
stock, and it is difficult to predict the prices at which our common stock
might trade."

Substantially all of the shares of our common stock that will be distributed
in the spin-off will be eligible for immediate resale. In transactions similar
to the spin-off, it is not unusual for a significant redistribution of shares
to occur during the first few weeks or even months following completion of the
transaction because of the differing objectives and strategies of investors who
acquire shares of our common stock in the transaction. We are not able to
predict whether substantial amounts of our common stock will be sold in the
open market following the spin-off or what effect these sales may have on
prices at which our common stock may trade. Sales of substantial amounts of our
common stock in the public market during this period, the perception that any
redistribution has not been completed or the prospect of our having to
undertake a public offering of our common stock following the spin-off could
materially affect the market price of our common stock.

Shares of our common stock received in the spin-off by "affiliates" (as
defined under Rule 144 under the Securities Act of 1933, as amended) will not
be freely transferable. Persons who can be considered our affiliates after the
spin-off generally include individuals or entities that directly, or indirectly
through one or more intermediaries, control, are controlled by, or are under
common control with, us, and include some of our officers and directors. Our
affiliates may only sell common stock received in the spin-off:

.  under a registration statement that the SEC has declared effective under
the Securities Act; or

.  under an exemption from registration under the Securities Act, such as the
exemption afforded by Rule 144, which limit sales by affiliates based on
the average four-week trading volume or 1% of the outstanding common stock.

Similarly, the shares of our common stock purchased by our executive
officers from SWS in December 2001 cannot be resold unless the resale is
registered with the SEC or an exemption from registration is available, such as
the exemption pursuant to Rule 144. In the event these executive officers were
to seek to sell the shares that they purchased from SWS pursuant to Rule 144,
the one-year holding period requirement would apply.

It is expected that shortly following the completion of the spin-off that
the compensation committee of our Board of Directors will award options
covering approximately 200,000 to 250,000 shares of our common stock at

23

an exercise price equal to the closing price per share as reported by the NYSE
on the grant date. These options will vest over four years with the initial
portion of such options vesting one year after the date of grant. These options
will be granted under the Westwood Holdings Group, Inc. Stock Incentive Plan.
See "Management--Compensation of Executive Officers--Compensatory Plans and
Arrangements--Westwood Stock Incentive Plan." Shares of our common stock issued
upon exercise of these options will be registered on Form S-8 under the
Securities Act and will, therefore, be freely transferable under the securities
laws, except by affiliates as described above.

SWS expects that its common stock will meet the continued listing standards
of the NYSE and that its common stock will continue to trade on a regular basis
under the symbol "SWS" following the spin-off. SWS common stock may also trade
on a when-issued basis, reflecting an assumed post-spin-off value for SWS
common stock. When-issued trading in SWS common stock, if available, could last
from on or about the record date through the effective date of the spin-off. If
when-issued trading in SWS common stock is available, SWS stockholders may
trade their existing SWS common stock prior to the effective date of the
spin-off in either the when-issued market or in the regular market for SWS
common stock. If a stockholder trades in the when-issued market, he will have
no obligation to transfer to a purchaser of SWS common stock the Westwood
common stock such stockholder receives in the spin-off. If a stockholder trades
in the regular market, the shares of SWS common stock traded will be
accompanied by due bills representing the Westwood common stock to be
distributed in the spin-off. If when-issued trading in SWS common stock is not
available, neither the SWS common stock nor the due bills may be purchased or
sold separately during the period from the record date through the effective
date of the spin-off.

If a when-issued market for SWS common stock develops, an additional listing
for SWS common stock will appear on the NYSE. Differences may exist between the
combined value of when-issued Westwood common stock plus when-issued SWS common
stock and the price of SWS common stock during this period. Until the market
has fully analyzed the operations of SWS without the operations of Westwood,
the prices at which SWS common stock trades may fluctuate significantly.

You should consider consulting your financial and tax advisors prior to
making any decisions with respect to the purchase, retention or sale of shares
of SWS common stock or Westwood common stock. Neither SWS nor Westwood makes
recommendations on the purchase, retention or sale of your shares of SWS common
stock or Westwood common stock.

24

RELATIONSHIP BETWEEN SWS AND WESTWOOD AFTER THE SPIN-OFF

This section of the information statement summarizes material agreements,
including certain transition services, indemnification, tax and other matters,
relating to the spin-off between SWS and us that will govern the ongoing
relationships between the two companies after the spin-off and will provide for
an orderly transition to our status as a separate, independent company.
Additional or modified agreements, arrangements and transactions, which will be
negotiated at arm's length, may be entered into between SWS and us after the
spin-off. Our business consists of the businesses previously conducted by the
Westwood asset management business of SWS. On an overall basis, our business
will constitute substantially the same business as that previously conducted by
the Westwood asset management business of SWS. You should also read the
agreements, forms of which have been filed as exhibits to the registration
statement on Form 10 of which this information statement forms a part.

Distribution Agreement

The distribution agreement provides for:

.  the principal corporate transactions and procedures required to effect the
spin-off; and

.  certain other agreements relating to the continuing relationship between
SWS and us after the spin-off, as described below.

Conditions to the Spin-Off

The distribution agreement provides that the following conditions must be
satisfied or waived before or as of the date of the spin-off for the spin-off
to occur:

.  the SEC must have declared our registration statement on Form 10 effective
under the Securities Exchange Act;

.  the NYSE must have approved the listing of our common stock, subject to
official notice of issuance;

.  SWS's Board of Directors must be satisfied that the spin-off will be made
out of surplus within the meaning of Section 170 of the General
Corporation Law of the State of Delaware;

.  SWS's Board of Directors must have approved the spin-off and must not have
abandoned, deferred or modified the spin-off at any time before the
completion of the spin-off;

.  our Certificate of Incorporation and Bylaws, in substantially the forms
filed as exhibits to the Form 10 and as described in this information
statement, must be in effect;

.  we must receive approval of the change of control of Westwood Trust from
the Texas Department of Banking or confirmation that a change of control
of Westwood Trust has not occurred as a result of the spin-off; and

.  SWS and we must have executed and delivered the various ancillary
agreements described in this section.

Cross-Indemnification

We and SWS have agreed to indemnify each other against certain liabilities
with respect to which a claim is made within two years of the spin-off date. We
have agreed to indemnify SWS and parties related to SWS from and against:

.  any and all damage, loss, liability and expense arising out of, or due to,
our failure to discharge any of our obligations under the distribution
agreement;

.  any and all damage, loss, liability and expense expressly assumed by us in
the distribution agreement;

.  any and all damage, loss, liability and expense, whether arising before,
on or after the spin-off, relating to us or arising from or in connection
with the conduct of our business or the ownership or use of our assets in
connection with our business;

25

.  any and all past and future liabilities or expenses up to $500,000 arising
from or in connection with the Richard A. Boykin, Jr. Family Trust, for
which we currently serve as trustee (such expenses to include unpaid
trustee fees owed to us at the time of the spin-off but not thereafter);
and

.  any and all damage, loss, liability and expense caused by any untrue
statement or alleged untrue statement contained in this information
statement or the registration statement of which it is a part or caused by
any omission or alleged omission to state a material fact necessary to
make the statements therein not misleading, if, and only to the extent
that, such untrue statement or omission arises out of information provided
by us for inclusion in this information statement or registration
statement.

SWS has agreed to indemnify us and parties related to us from and against:

.  any and all damage, loss, liability and expense arising out of, or due to,
SWS's failure to discharge any of its obligations under the distribution
agreement;

.  any and all damage, loss, liability and expense, whether arising before,
on or after the spin-off, relating to SWS or arising from or in connection
with the conduct of its business or the ownership or use of its assets in
connection with its business (other than the business of Westwood);

.  any and all damage, loss, liability and expense arising out of, or due to,
SWS's failure to discharge any of its obligations under the distribution
agreement and the transition services agreement;

.  any and all past and future liabilities or expenses in excess of $500,000
arising from or in connection with the Richard A. Boykin, Jr. Family
Trust, for which we currently serve as trustee (such expenses to include
unpaid trustee fees owed to us at the time of the spin-off but not
thereafter); and

.  any and all damage, loss, liability and expense caused by any untrue
statement or alleged untrue statement contained in this information
statement or the registration statement of which it is a part or caused by
any omission or alleged omission to state a material fact necessary to
make the statements therein not misleading, if, and only to the extent
that, such untrue statement or omission arises out of information provided
by SWS for inclusion in this information statement or registration
statement.

We have acted as corporate trustee for the Boykin Trust for several years.
As corporate trustee, we recently filed a voluntary petition for bankruptcy on
behalf of the Boykin Trust because it is subject to various pending legal
actions, outstanding judgments and owes money to numerous creditors, including
trustee fees and other amounts advanced by us that are owed to us in connection
with our representation. The petition seeks the liquidation of the Boykin
Trust's assets and seeks to maximize the distribution to the Boykin Trust's
creditors on an equitable basis. The Boykin Trust's only asset with value is a
large block of land that has been listed with a real estate broker. If we are
successful in selling the land, it is uncertain whether such sale will provide
enough proceeds to pay off the creditors of the Boykin Trust. If we acted with
gross negligence or in bad faith while serving as the corporate trustee of the
Boykin Trust, those creditors or other persons could assert actions against us.

None of these indemnities applies to indemnification for income tax
liabilities, which are addressed in the tax separation agreement described
below under "Tax Separation Agreement." The distribution agreement also
includes procedures for notice and payment of indemnification claims and
generally provides that the indemnifying party may assume the defense of a
claim or suit brought by a third party. Any indemnification amount paid under
the indemnities will be paid net of the amount of any insurance or other
amounts that would be payable by any third party to the indemnified party in
the absence of the indemnity. In addition, the distribution agreement provides
that if indemnification is unavailable or insufficient to hold the indemnified
party harmless, the indemnifying party will contribute to the amount paid or
payable in a manner appropriate to reflect all relevant equitable
considerations.

26

Employee Benefits

The distribution agreement includes the following provisions relating to
employee matters:

Treatment of Employees and Plans in General.  At the time of completion of
the spin-off, SWS will retain responsibility for all its current employees
(other than Westwood employees), whom we refer to as SWS employees, and we will
retain responsibility for all of our employees (including persons absent from
active service by reason of disability or otherwise), whom we collectively
refer to as our employees or Westwood employees. At the time of completion of
the spin-off, our employees will no longer be deemed employees of SWS. In
connection with the spin-off, we will adopt employee benefit plans that will be
substantially similar to certain plans provided to our employees by SWS, such
as the SWS 401(k), medical, dental, disability and life insurance plans. Since
the SWS plans provided to our employees will terminate as to those employees as
of the spin-off, we expect our plans to be effective as of the date of the
spin-off.

Our active employees who participate in the SWS 401(k) Profit Sharing Plan
(the "SWS 401(k) Plan") will cease active participation in that plan and will
be given the opportunity to participate in the new Westwood 401(k) Profit
Sharing Plan (the "Westwood 401(k) Plan"). At the time of the spin-off,
Westwood employees will become 100% vested in their accounts in the SWS 401(k)
Plan, and as soon as practicable following the spin-off, trustees for the SWS
401(k) Plan will transfer account balances under the SWS 401(k) Plan to the
Westwood 401(k) Plan without forfeiture of any portion of the Westwood
employees' account balances.

Additionally, our active employees who participated in the SWS Deferred
Compensation Plan ceased active participation in that plan and are being given
the opportunity to participate in the new Westwood Deferred Compensation Plan.
As soon as practicable following the spin-off, the trustee of the SWS Deferred
Compensation Plan will transfer the accounts of the Westwood employees to the
trustee of the Westwood Deferred Compensation Plan. Contemporaneously with the
transfers of the assets to the Westwood Deferred Compensation Plan, SWS will
transfer the related liability and unrealized holding gain accounts.

Equity-Based Compensation.  In connection with the spin-off and effective as
of the completion of the spin-off, options granted to Westwood employees under
the SWS Securities, Inc. Stock Option Plan and the SWS Securities, Inc. 1997
Stock Option Plan will become fully vested as of the date of the spin-off, and
Westwood will be substituted for SWS as the employer of these employees. In
addition, to the extent that SWS makes any adjustments to its outstanding
options as a result of the spin-off, similar adjustments will be made to the
SWS options held by Westwood employees.

Restriction on Solicitation or Employment of Employees

For a period of one year after the spin-off, we and SWS will agree not to,
and to cause our subsidiaries not to, directly or indirectly:

.  solicit or otherwise attempt to induce or influence any employee of the
other party or a subsidiary to leave employment with his or her
then-current employer; or

.  employ any employee of the other party or a subsidiary of the other party,
in each case without the consent of the other party.

However, if an employee of SWS or Westwood is terminated or terminates
employment within such one year period, the terminated employee shall be
eligible to be hired by SWS or Westwood, as the case may be, at any time after
90 days following such employee's termination; provided that such solicitation
or hiring is for a bona fide reason not intended to circumvent the
non-solicitation provisions noted above.

Access to Information; Provision of Witnesses; Confidentiality

Under the distribution agreement, we and SWS will allow the other party and
their specified representatives reasonable access to all records in our or its
possession relating to the business and affairs of the other party as

27

reasonably required. Access will be allowed for such purposes as audit,
accounting, litigation, disclosure reporting and regulatory compliance. Each
party will also use reasonable efforts to make available to the other party and
its accountants, counsel and other designated representatives, upon written
request, its directors, officers, employees and representatives as witnesses
and will otherwise cooperate with the other party in connection with any
proceeding arising out of its or the other party's business and operations
before the spin-off. Subject to limited exceptions, we, SWS and our respective
directors, officers, employees, agents, consultants and advisors will hold in
strict confidence all information in our, its or their possession concerning
the other party.

Transaction Expenses

The distribution agreement provides for each of SWS and us to pay our own
expenses in connection with the spin-off.

Transition Services Agreement

The transition services agreement provides for the continued provision of
certain services by SWS to us, on a transitional basis, consistent with the
historical provision of these services and the other terms of the transition
services agreement. These services consist of human resources services and
information technology and equipment services, such as Internet access and
email; data lines; SOHO/VPN connections; desktop, server and application
support; ILX or other equity quote services; equipment rental; website hosting
and maintenance; and disaster recovery. SWS will provide the human resources
services for $95/hour for the first 15 hours in any calendar week and $125/hour
for any hours in excess of 15 in any calendar week. SWS will provide the
information services at prices consistent with those charged to other SWS
customers and the equipment services based on SWS's current lease payment for
such equipment. In each case, SWS will provide such services effective as of
the spin-off date to the extent that they are identified or described in the
transition services agreement. SWS has agreed to provide human resources
services for six months following the spin-off, information technology services
for one year following the spin-off, and equipment services until the
expiration of the lease relating to such equipment. We may terminate SWS's
provision of any or all services under the transition services agreement upon
30 days' prior written notice to SWS. Upon the termination or expiration of
that agreement, we will need to determine whether we will seek to continue the
arrangement set forth in the agreement (subject to SWS's consent), internally
develop the provision of services provided thereunder or seek to obtain such
services from a third party. At this time we have not yet determined which of
these options we will pursue.

The transition services agreement also provides that SWS will retain us for
a term of not less than one year to provide investment management and custodial
services with respect to the SWS cash reserve funds. Following such one-year
period, SWS may, at its option, upon no less than 30 days' prior written notice
to Westwood, terminate such services.

Tax Separation Agreement

We will be included in SWS's U.S. federal consolidated income tax group and
any other consolidated, combined or unitary foreign, state and local tax group
of SWS for all tax periods preceding the spin-off. Pursuant to a tax separation
agreement with SWS, we are required to pay to SWS the portion of any taxes
reported on the consolidated, combined or unitary tax returns filed by SWS for
the 2002 tax year that are attributable to our business. For this purpose, the
tax attributable to our business will be determined using SWS's historical
method of computations as if we were not, and never were, a part of any
consolidated group of SWS. We shall also be responsible for any increase (and
will receive the benefit of any decrease) in any tax reported on these
consolidated, combined or unitary tax returns that results from an audit by a
tax authority (or other tax adjustment) of a tax attribute of us.

28

SWS will be responsible for the preparation and filing of all
non-consolidated tax returns relating to us, and the payment of any taxes
relating to these returns, for all tax periods ending on or before the
spin-off. With respect to any non-consolidated tax returns relating to us for
tax periods that begin on or before, but end after, the spin-off ("straddle
periods"), elections will be made to close the tax periods on the date of the
spin-off if permissible under applicable law. With respect to any straddle
period for which an election cannot be made, we shall be responsible for the
preparation and filing of all non-consolidated returns relating to us, and the
remittance of any taxes relating to these returns. SWS will indemnify us for
the portion of any of these non-consolidated taxes that relate to the portion
of the straddle period prior to the spin-off.

We will be responsible for the preparation and filing of all tax returns
(both consolidated and non-consolidated) relating to us, and the payment of any
taxes relating to these returns, for all tax periods beginning after the
spin-off.

The tax separation agreement allocates responsibility between SWS and us
with respect to any corporate income taxes for which SWS becomes liable by
reason of a change-in-control of SWS or us resulting in the application of
Section 355(e) of the Code. The party responsible for triggering a
change-in-control will bear any taxes that arise from the application of
Section 355(e) of the Code in connection with the spin-off.

DIVIDEND POLICY

The declaration and payment of dividends is subject to the discretion of our
Board of Directors. Any determination as to the payment of dividends, as well
as the type and amount of such dividends, will depend on, among other things,
general economic and business conditions, our strategic plans, our financial
results and condition, and contractual, legal and regulatory restrictions on
the payment of dividends by us. We are a holding company and, as such, our
ability to pay dividends is subject to the ability of our subsidiaries to
provide us with cash. We cannot provide any assurance that dividends will be
declared and paid in the future.

Westwood Trust is limited under applicable Texas law in the payment of
dividends to undivided profits: that part of equity capital equal to the
balance of net profits, income, gains, and losses since its formation date
minus subsequent distributions to stockholders and transfers to surplus or
capital under share dividends or appropriate Board resolutions. At March 31,
2002, Westwood Trust had undivided profits of approximately $449,000.

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SELECTED CONSOLIDATED FINANCIAL DATA

The selected consolidated financial data of Westwood with respect to each of
the three years in the period ended December 31, 2001, and as of December 31,
2001 and 2000, is derived from the audited consolidated financial statements of
Westwood and should be read in conjunction with those statements, which are
included in this information statement. The selected consolidated financial
data for each of the two years in the period ended December 31, 1998, and as of
December 1999, 1998 and 1997, and for the three months ended March 31, 2002,
and 2001 is derived from the unaudited consolidated financial statements of
Westwood. The unaudited selected consolidated financial data at March 31, 2002
and March 31, 2001, and for each of the three month periods then ended, should
be read in conjunction with the unaudited consolidated financial statements of
Westwood included in this information statement, and includes all adjustments,
consisting of only normal recurring adjustments, which we consider necessary
for the fair presentation of our financial position and results of operations
for these periods. Operating results for the three months ended March 31, 2002
and March 31, 2001 are not necessarily indicative of the results that we will
experience for the entire year. The data below reflects Westwood's results as
it has historically been operated as a part of SWS, and these results may not
be indicative of Westwood's future performance as an independent company
following the spin-off. The information set forth below should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" included elsewhere in this information statement.

Three months
ended March 31,
(in thousands, except        Years ended December 31,
per share amounts)    (in thousands, except per share amounts)
--------------------- ---------------------------------------
2002       2001      2001(1)   2000    1999    1998    1997
-------    -------   -------  ------- ------- ------- -------

Statements of Income Data:
Total revenues................... $ 5,532    $ 4,720    $19,587  $16,136 $11,336 $10,085 $ 6,585
Total expenses...................   3,253      2,853     15,229    9,524   7,933   7,000   5,582
Income before income taxes.......   2,279      1,867      4,358    6,612   3,403   3,085   1,003
Provision for income tax expense.     893        727      3,097    2,628   1,469   1,294     452
Net income.......................   1,386      1,140    $ 1,261  $ 3,984 $ 1,934 $ 1,791 $   551
Earnings per share (2)........... $257.95    $212.14    $234.68  $741.45 $359.90 $333.34 $102.51

As of
March 31,              As of December 31,
(in thousands)             (in thousands)
-------------- --------------------------------------
2002       2001    2000    1999    1998    1997
-------------- ------- ------- ------- ------- ------

Balance Sheet Data:
Cash and money market accounts.....    $ 8,652     $12,097 $ 9,572 $ 2,148 $ 3,264 $  864
Total assets.......................     18,418      21,053  18,100  11,711  10,227  7,133
Stockholders' equity...............     15,403      14,032  12,802   8,590   6,681  4,889
Tangible book value per share (3)..    $ 2,438     $ 2,183 $ 1,940 $ 1,143 $   774 $  427

Assets Under Management (in millions):    $ 3,984     $ 4,120 $ 3,601 $ 2,373 $ 2,083 $1,688

--------
(1) Total expenses include a $4.0 million equity based compensation charge,
reflecting (i) the difference in value of $3.4 million between the amount
paid by our executive officers to SWS for shares of our common stock
purchased by them and the value for financial reporting purposes of the
shares on December 14, 2001 and (ii) the below market interest rate
associated with the loans made by Westwood to the executive officers to
enable them to purchase such shares. Total expenses would have been
approximately $11,253,000 and net income would have been approximately
$5,027,000 without the compensation charge.

30

(2) Reflects earnings per share based on the actual number of shares of our
common stock outstanding on March 31, 2002. It is expected that our Board
of Directors will approve a stock split in the form of a stock dividend to
be effective as of an undetermined future date prior to the spin-off based
on a formula that will cause our common stock held by SWS to equal
one-fourth the number of shares of SWS common stock outstanding on the
record date of the stock dividend. Were the stock split effective as of May
15, 2002, based on the number of shares of SWS common stock outstanding at
that date, earnings per share would have been the following pro forma
amounts:

Three months
ended March 31,         Year ended December 31,
--------------- ---------------------------------------
2002    2001    2001    2000    1999    1998    1997
------- ------- ------- ------- ------- ------- -------

Earnings per share--
As reported -- basic.. $257.95 $212.14 $234.68 $741.45 $359.90 $333.34 $102.51
As reported -- diluted  257.95  212.14  234.68  741.45  359.90  333.34  102.51
Pro forma -- basic....    0.26    0.21    0.23    0.74    0.36    0.33    0.10
Pro forma -- diluted..    0.26    0.21    0.23    0.74    0.36    0.33    0.10

However, excluding the $4.0 million equity based compensation charge
discussed in note (1) above and including an additional $800,000 of expenses
we have estimated we would have incurred in 2001 had we been a stand-alone
public company, pro forma earnings per share for 2001 would have been $0.84
on both a basic and diluted basis. See "Management's Discussion and Analysis
of Financial Condition and Results of Operations--Liquidity and Capital
Resources" for a more detailed discussion of the additional estimated public
company-related expenses.

(3) Calculated by dividing, at period end, stockholders' equity less goodwill
by the number of common shares outstanding.

31

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS

The following discussion contains forward-looking statements that involve
risks and uncertainties. Our actual results could differ materially from those
discussed in the forward looking statements as a result of various factors,
including those set forth under "Risk Factors," elsewhere in this information
statement. You should read the following discussion and analysis in conjunction
with our consolidated financial statements and related notes thereto appearing
elsewhere in this document.

Overview

We manage investment assets and provide services for our clients through our
two subsidiaries, Westwood Management and Westwood Trust. Westwood Management
provides investment advisory services to corporate pension funds, public
retirement plans, endowments and foundations, mutual funds and clients of
Westwood Trust. Westwood Trust provides to institutions and high net worth
individuals trust and custodial services and participation in common trust
funds that it sponsors. Our revenues are generally derived from fees based on a
percentage of assets under management, and at March 31, 2002, Westwood
Management and Westwood Trust collectively managed assets valued at
approximately $4.0 billion. We have been providing investment advisory services
since 1983 and, according to recognized industry sources, including
Morningstar, Inc., when measured over multi-year periods, our principal asset
classes have consistently ranked above the median in performance within their
peer groups.

Revenues

We derive our revenues from investment advisory fees, trust fees and other
revenues. Our advisory fees are generated by Westwood Management, which manages
its clients' accounts under investment advisory and subadvisory agreements.
Advisory fees are calculated based on a percentage of assets under management,
and are paid in accordance with the terms of the agreements. Most of Westwood
Management's advisory fees are paid quarterly in advance based on the assets
under management on the last day of the preceding quarter. However, some fees
are paid quarterly in arrears or are based on a daily or monthly analysis of
assets under management for the stated period. Westwood Management recognizes
revenues as services are rendered.

Our trust fees are generated by Westwood Trust pursuant to trust or
custodial agreements. Trust fees are separately negotiated with each client and
are generally based on a percentage of assets under management, which in turn
is influenced by the complexity of the operations of the trust and the services
provided. Westwood Trust also provides trust services to a small number of
clients on a fixed fee basis. Similar to advisory fees generated by Westwood
Management, most trust fees are paid quarterly in advance and are recognized as
services are rendered.

Our other revenues generally consist of interest income, investment income
and consulting fees. We invest most of our cash in money market funds, although
we do invest smaller amounts in bonds and equity instruments. The most
significant component of our other revenues is consulting fees paid to us by
Gabelli Advisers, Inc.

Assets Under Management

Assets under management increased $574 million, or 16.8%, to $4.0 billion at
March 31, 2002, compared with $3.4 billion at March 31, 2001. The growth in
assets under management was principally attributable to assets from new clients.

Assets under management increased $511 million, or 14.4%, to $4.1 billion at
December 31, 2001, compared with $3.6 billion at December 31, 2000. The growth
in assets under management was principally attributable to assets from new
clients. Assets under management increased $1.2 billion, or 51.8%, to $3.6
billion at December 31, 2000, compared with $2.4 billion at December 31, 1999.
The growth in assets under management was principally attributable to
additional assets from new and existing clients, as well as market appreciation
of assets under management.

32

As of March 31,(1) As of December 31,(1)
(in millions)         (in millions)                       % Change
------------------ --------------------  -----------------------------------------
March 31, 2002
vs. March 31,
2002      2001     2001    2000   1999       2001      2001 vs. 2000 2000 vs. 1999
------    ------   ------  ------ ------ -------------- ------------- -------------

Westwood Management Corporation
Separate Accounts.................... $2,239    $1,653   $2,185  $1,776 $1,295      35.4%          23.0%         37.2%
Subadvisory..........................    447       717      678     825    316     (37.8)         (17.8)        161.6
Gabelli Westwood Funds...............    521       478      501     429    377       9.0           16.7          13.8
Managed Accounts.....................    131        85      119      91     --      53.4           31.9           N/A
------    ------   ------  ------ ------     -----          -----         -----
Total..............................  3,338     2,934    3,483   3,121  1,988      13.8           11.6          57.0

Westwood Trust
Commingled Funds.....................    504       351      477     353    261      43.6           35.1          35.2
Private Accounts.....................     74        59       77      59     58      25.4           30.5           1.7
Agency/Custody Accounts..............     68        66       83      68     66       3.0           22.1           3.0
------    ------   ------  ------ ------     -----          -----         -----
Total..............................    646       476      637     480    385      35.7           32.7          24.7

Total Assets Under Management........... $3,984    $3,410   $4,120  $3,601 $2,373      16.8%          14.4%         51.8%
======    ======   ======  ====== ======     =====          =====         =====

--------
(1) The above table excludes the SWS cash reserve funds for which Westwood
Management serves as investment advisor and Westwood Trust serves as
custodian. The SWS cash reserve funds were $440 million and $378 million as
of March 31, 2002 and March 31, 2001, respectively, and $500 million,
$263 million and $187 million as of December 31, 2001, 2000 and 1999,
respectively. These accounts are noted separately due to their unique
nature within our business and because they can experience significant
fluctuations on a weekly basis.

Westwood Management.  In the above table, "Separate Accounts" represent
corporate pension and profit sharing plans, public employee retirement
accounts, Taft Hartley plans, endowments, foundations and individuals.
"Subadvisory" represents relationships where Westwood Management provides
investment management services for funds offered by other financial
institutions. "Gabelli Westwood Funds" represent the family of mutual funds for
which Westwood Management serves as subadvisor. "Managed Accounts" represent
relationships with brokerage firms and other registered investment advisors who
offer Westwood Management's products to their customers.

Westwood Trust.  In the above table, "Commingled Funds" are established to
facilitate investment of fiduciary funds of multiple clients by combining
assets into a single trust for taxable and tax-exempt entities. "Private
Accounts" represent discretionary accounts where Westwood Trust acts as trustee
or agent and has full investment discretion. "Agency/Custody Accounts"
represent non-discretionary accounts in which Westwood Trust provides agent or
custodial services for a fee, but does not act in an advisory capacity.

Matters Involving SWS Group, Inc.

We were incorporated under the laws of the State of Delaware on December 12,
2001, as a subsidiary of SWS. Our principal assets consist of the capital stock
of Westwood Management and Westwood Trust. After the spin-off, we will be an
independent public company, with SWS having no continuing ownership interest in
us. We have entered into various agreements with SWS that address the
allocation of certain rights and obligations and that define our relationship
with SWS after the spin-off, including a distribution agreement, a tax
separation agreement and a transition services agreement. See "Relationship
Between SWS and Westwood After the Spin-off."

On December 14, 2001, SWS sold 1,064,668 shares of Westwood common stock,
constituting 19.82% of Westwood's outstanding common stock, to five Westwood
executive officers for an aggregate of $4.1 million, or $3.85 per share.
Westwood's 2001 results of operations include a non-cash compensation expense
of $4.0 million, reflecting (i) the difference in value of $3.4 million between
the amount paid by the executive officers to

33

SWS for the shares of Westwood common stock and the value for financial
reporting purposes of the shares on December 14, 2001 and (ii) the below market
interest rate associated with the loans made by Westwood to the executive
officers to enable them to purchase such shares. The purchase price for the
shares sold by SWS to these executives was premised upon an understanding
reached in October 2001 that SWS would sell the shares of Westwood common stock
based on their value at September 30, 2001, and was based on a valuation as of
September 30, 2001, covering the shares sold, which valuation was delivered to
the SWS Board in December 2001 and took into account the fact that the shares
represented a minority interest in closely held, non-marketable securities.

Our consolidated financial statements have been prepared in accordance with
accounting principles generally accepted in the United States, and reflect our
historical financial position, results of operations and cash flows as a part
of SWS. The financial information included in this information statement is not
necessarily indicative of what our financial position, results of operations or
cash flows would have been had we operated as an independent public company
during the periods presented, nor is it necessarily indicative of our future
performance as an independent public company. Our expenses have been allocated
from SWS on the basis of our relative number of employees, relative revenues
and other allocation bases. These allocated expenses represent services
provided by SWS, including human resources, accounting, internal audit, income
tax, legal, insurance and information technology.

Results of Operations

The following table and discussion of our results of operations is based
upon data derived from the consolidated statements of income contained in our
consolidated financial statements and should be read in conjunction with these
statements, which are included elsewhere in this information statement.

Three months
ended
March 31,    Years ended December 31,
(in thousands)     (in thousands)                        % Change
-------------  -----------------------  -----------------------------------------
March 31, 2002
vs. March 31,
2002    2001   2001     2000    1999        2001      2001 vs. 2000 2000 vs. 1999
------  ------ -------  ------- ------- -------------- ------------- -------------

Revenues
Advisory fees........................ $4,212  $3,633 $14,918  $12,038 $ 8,650      15.9%          23.9%         39.2%
Trust fees...........................  1,133     880   3,755    3,079   2,282      28.8           22.0          34.9
Other revenues.......................    187     207     914    1,019     404      (9.7)         (10.3)        152.2
------  ------ -------  ------- -------     -----          -----         -----
Total revenues.....................  5,532   4,720  19,587   16,136  11,336      17.2           21.4          42.3
Expenses
Employee compensation and benefits...  2,220   2,089   8,042    6,890   5,345       6.3           16.7          28.9
Equity based compensation charge.....     --      --   3,976       --      --       N/A            N/A           N/A
Sales and marketing..................    120     131     485      452     425      (8.4)           7.3           6.4
Information technology...............    222     241     818      730     748      (7.9)          12.1          (2.4)
Professional services................    367      89     702      281     239     312.4          149.8          17.6
General and administrative...........    324     303   1,206    1,171   1,176       6.9            3.0          (0.4)
------  ------ -------  ------- -------     -----          -----         -----
Total expenses.....................  3,253   2,853  15,229    9,524   7,933      14.0           59.9          20.1
Income before income taxes..............  2,279   1,867   4,358    6,612   3,403      22.1          (34.1)         94.3
Provision for income tax expense........    893     727   3,097    2,628   1,469      22.8           17.8          78.9
------  ------ -------  ------- -------     -----          -----         -----
Net income                               $1,386  $1,140 $ 1,261  $ 3,984 $ 1,934      21.6%         (68.3)%       106.0%
======  ====== =======  ======= =======     =====          =====         =====

34

Three months ended March 31, 2002 compared to three months ended March 31,
2001

Total Revenues.  Our total revenues increased by 17.2% to $5.5 million for
the three months ended March 31, 2002 compared with $4.7 million for the three
months ended March 31, 2001. Advisory fees increased by 15.9% to $4.2 million
for the three months ended March 31, 2002 compared with $3.6 million for the
three months ended March 31, 2001 primarily as a result of increased assets
under management derived from new clients. Trust fees increased by 28.8% to
$1.1 million for the three months ended March 31, 2002 compared with $880,000
for the three months ended March 31, 2001 primarily due to increased trust
assets under management. Other revenues, which generally consists of interest
and investment income and consulting fees, decreased by 9.7% to $187,000 for
the three months ended March 31, 2002 compared with $207,000 for the three
months ended March 31, 2001. Other revenues decreased primarily as a result of
lower interest income due to lower market interest rates, which was partially
offset by better mark-to-market performance on investments compared to the 2001
period.

Employee Compensation and Benefits.  Employee compensation and benefits
costs generally consist of salaries, benefits and incentive compensation.
Employee compensation and benefits increased by 6.3% to $2.2 million for the
three months ended March 31, 2002 compared with $2.1 million for the three
months ended March 31, 2001. This increase resulted primarily from increased
incentive compensation, which increase was largely based on growth in income
before income taxes and also an increase in the number of investment
professionals and other personnel.

Sales and Marketing.  Sales and marketing costs generally consist of costs
associated with our marketing efforts, including travel and advertising costs.
Sales and marketing costs decreased by 8.4% to $120,000 for the three months
ended March 31, 2002 compared with $131,000 for the three months ended March
31, 2001. The decrease in these expenses is primarily the result of lower
travel expenses.

Information Technology.  Information technology expenses generally consist
of costs associated with computing hardware and software licenses, maintenance
and support, telecommunications, proprietary investment research tools and
other related costs. Information technology costs decreased by 7.9% to $222,000
for the three months ended March 31, 2002 compared with $241,000 for the three
months ended March 31, 2001. The decrease in these expenses is primarily due to
lower software maintenance expenses.

Professional Services.  Professional services expenses generally consist of
costs associated with legal, audit and other professional services.
Professional services expenses increased by 312.4% to $367,000 for the three
months ended March 31, 2002 compared with $89,000 for the three months ended
March 31, 2001. The increase in these expenses is primarily the result of legal
and accounting costs associated with the spin-off from SWS, as well as legal
expenses associated with the Boykin litigation and bankruptcy proceedings. See
"Relationship Between SWS and Westwood After the Spin-off -- Distribution
Agreement." We expect that our professional services expenses for 2002 will be
somewhat higher than our expenses for 2001 largely due to expenses associated
with the spin-off, the Boykin Trust matters and other compliance matters
related to our being an independent, public company. We anticipate that our
professional services expenses for 2003 will approximate or perhaps be somewhat
lower than our 2001 professional services expenses.

General and Administrative.  General and administrative expenses generally
consist of costs associated with the lease of our office space, investor
relations, licenses and fees, depreciation, insurance, office supplies and
other miscellaneous expenses. General and administrative expenses increased by
6.9% to $324,000 for the three months ended March 31, 2002 compared with
$303,000 for the three months ended March 31, 2001. The increase in these
expenses is primarily the result of increased investor relations expenses and
charitable contributions, partially offset by the cessation of goodwill
amortization. Effective January 1, 2002, we adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other
Intangible Assets." Upon adoption of SFAS 142 we discontinued our amortization
of goodwill. Goodwill amortization during the three months ended March 31, 2001
was approximately $18,000. The adoption of SFAS 142 does not have a significant
impact on the comparability of our earnings per share or net income.

35

Provision for Income Tax Expense.  Provision for income tax expense
increased by 22.8% to $893,000 for the three months ended March 31, 2002
compared with $727,000 for the three months ended March 31, 2001, reflecting an
effective tax rate of 39.2% and 38.9% for the three months ended March 31, 2002
and March 31, 2001, respectively.

Year Ended December 31, 2001 Compared to Year Ended December 31, 2000

Total Revenues.  Our total revenues increased by 21.4% to $19.6 million in
2001 from $16.1 million in 2000. Advisory fees increased by 23.9% to $14.9
million in 2001 from $12.0 million in 2000 primarily as a result of increased
assets under management derived from new clients. Trust fees increased by 22%
to $3.8 million in 2001 from $3.1 million in 2000 primarily due to increased
trust assets under management. Other revenues decreased by 10.3% to $914,000 in
2001 from $1.0 million in 2000. Other revenues decreased primarily as a result
of mark-to-market losses on investments.

Employee Compensation and Benefits.   Employee compensation and benefits
increased by 16.7% to $8.0 million in 2001 from $6.9 million in 2000. This
increase resulted primarily from increased incentive compensation, which
increase was largely based on growth in income before income taxes (excluding
the equity based compensation charge) and also an increase in the number of
investment professionals and other personnel.

Equity Based Compensation Charge.  The $4.0 million equity based
compensation charge in 2001 relates to the sale of a minority interest in
Westwood to our executive officers by SWS and reflects (i) the difference in
value of $3.4 million between the amount paid by our executive officers to SWS
for shares of our common stock purchased by them and the value for financial
reporting purposes of the shares on December 14, 2001 and (ii) the below market
interest rate associated with the loans made by Westwood to the executive
officers to enable them to purchase such shares.

Sales and Marketing.   Sales and marketing costs increased by 7.3% to
$485,000 in 2001 from $452,000 in 2000. The increase in these expenses is
primarily the result of expanded business development activities.

Information Technology.   Information technology costs increased by 12.1% to
$818,000 in 2001 from $730,000 in 2000. The increase in these expenses is
primarily due to additional expenditures for new proprietary investment
research tools, as well as a dedicated effort to enhance the automation and
efficiency of our back office operations.

Professional Services.   Professional services expenses increased by 149.8%
to $702,000 in 2001 from $281,000 in 2000. The increase in these expenses is
primarily the result of legal and accounting costs associated with the spin-off
from SWS, as well as legal expenses associated with the Boykin Trust litigation
and bankruptcy proceedings. See "Relationship Between SWS and Westwood After
the Spin-off -- Distribution Agreement."

General and Administrative.   General and administrative expenses increased
by 3.0% to $1.2 million in 2001. The increase in these expenses is primarily
the result of increased usage of office supplies and higher custody fees
related to our international fund.

Provision for Income Tax Expense.  Provision for income tax expense
increased by 17.8% to $3.1 million in 2001 from $2.6 million in 2000,
reflecting an effective tax rate of 71.1% and 39.7% for 2001 and 2000,
respectively. The increase in the effective tax rate resulted from the
non-deductibility of most of the equity based compensation charge incurred in
2001.

36

Year Ended December 31, 2000 Compared to Year Ended December 31, 1999

Total Revenues.  Our total revenues increased by 42.3% to $16.1 million in
2000 from $11.3 million in 1999. Advisory fees increased by 39.2% to $12.0
million in 2000 from $8.7 million in 1999 primarily as a result of increased
assets under management, which in turn was attributable to new assets from new
and existing clients as well as market appreciation in assets under management.
Trust fees increased by 34.9% to $3.1 million in 2000 from $2.3 million in 1999
as a result of increased trust assets under management. Other revenues
increased by 152.2% to $1.0 million in 2000 from $404,000 in 1999. Other
revenues increased primarily as a result of higher interest income and
mark-to-market gains on investments.

Employee Compensation and Benefits.  Employee compensation and benefits
costs increased by 28.9% to $6.9 million in 2000 from $5.3 million in 1999.
This increase resulted primarily from increased incentive compensation, which
increase was largely based on growth in income before income taxes as well as
an increase in the number of personnel.

Sales and Marketing.  Sales and marketing costs increased by 6.4% to
$452,000 in 2000 from $425,000 in 1999. The increase in these expenses is the
result of expanded business development activities.

Information Technology.  Information technology expenses decreased by 2.4%
to $730,000 in 2000 from $748,000 in 1999. These expenses remained relatively
constant year to year.

Professional Services.  Professional services expenses increased by 17.6% to
$281,000 in 2000 from $239,000 in 1999. The increase in these expenses is
primarily a function of a higher need for professional services commensurate
with the growth in our assets under management and new accounts.

General and Administrative.  General and administrative expenses decreased
by 0.4% to $1.2 million in 2000. These expenses remained relatively constant
from year to year.

Provision for Income Tax Expense.  Provision for income tax expense
increased by 78.9% to $2.6 million in 2000 from $1.5 million in 1999,
reflecting an effective tax rate of 39.7% and 43.2% for 2000 and 1999,
respectively. A decrease in the effective tax rate is due to the fact that we
were no longer subject to New York state and city income taxes in 2000.

Liquidity and Capital Resources

In general, we have not historically relied on SWS to provide us with
capital to fund the operations of our business. We have funded our operations
and cash requirements with cash generated from operating activities. As a
result, we do not believe that the additional expenses associated with the
spin-off and our being an independent public company will have a material
effect on our liquidity and capital resources in the near term. However, had we
been an independent public company in 2001, we estimate that our total expenses
would have been approximately $800,000 higher than those reflected in the
consolidated financial statements. The increase in expenses includes, without
limitation, increased public company compliance costs, employee compensation,
insurance costs, legal expenses, and accounting and payroll costs. The
foregoing estimate of higher expenses is not necessarily an accurate measure of
what our stand-alone expenses would have been in 2001 or will be in the future,
and our expenses could be higher. The costs we actually incur in the future
will depend on the market for these services when they are actually purchased
and the size and nature of our future operations.

As of March 31, 2002, we had no long-term debt. The changes in net cash
provided by operating activities generally reflect the changes in earnings plus
the effect of non-cash items and changes in working capital. Changes in working
capital, especially accounts receivable and accounts payable, are generally the
result of timing differences between collection of fees billed and payment of
operating expenses.

37

During the three months ended March 31, 2002, cash flow used in operating
activities, principally our investment advisory business, was $3.4 million.
During 2001, we generated cash flow from operating activities of $7.3 million.
During 2000, we generated $5.5 million of cash flow from operating activities.
At March 31, 2002, December 31, 2001 and 2000, we had working capital of $11.1
million, $11.2 million and $10.1 million, respectively.

Cash flow provided by investing activities during the three months ended
March 31, 2002 was $4.3 million, and was primarily related to the sale of money
market funds to make incentive compensation payments. Cash used in investing
activities during 2001 was $7.4 million, and was primarily related to the
investment of excess cash balances. Cash used in investing activities during
2000 was $1.8 million, and was primarily related to the investment of excess
cash balances.

There were no financing activities during the three months ended March 31,
2002. Cash used in financing activities during 2001 was $4.1 million and was
related to the funding of loans used to enable our executive officers to
purchase shares of our common stock from SWS. The loans bear interest at the
rate of 3.93% per annum, payable annually, with the principal payable at
maturity on the ninth anniversary of the date of the loans. There were no
financing activities during 2000.

We had cash and money market funds of $8.7 million at March 31, 2002. We had
cash and money market funds of $12.1 million at December 31, 2001, as compared
to $9.6 million at December 31, 2000. The increase in our liquidity over these
annual periods was principally due to an increase in money market funds of $6.7
million, offset by a decrease in cash of $4.1 million. The decrease in cash was
primarily due to our funding of loans of $4.1 million in 2001 to our executive
officers to enable them to purchase shares of our common stock from SWS. We had
no liabilities for borrowed money at March 31, 2002, December 31, 2001 or
December 31, 2000, and our accounts payable were paid in the ordinary course of
business for each of the periods then ended.

Our future liquidity and capital requirements will depend upon numerous
factors. We believe that current cash and short-term investment balances and
cash generated from operations will be sufficient to meet the operating and
capital requirements of our ordinary business operations through at least the
next twelve months. However, there can be no assurance that we will not require
additional financing within this time frame. Our forecast of the period of time
through which our financial resources will be adequate to support our
operations is a forward-looking statement that involves risks and
uncertainties, and actual results could vary. The failure to raise needed
capital on attractive terms, if at all, could have a material adverse effect on
our business, financial condition and results of operations.

Quantitative and Qualitative Disclosures About Market Risk

Westwood utilizes various financial instruments, which entail certain
inherent market risks. We do not currently participate in any hedging
activities, nor do we currently utilize any derivative financial instruments.
The following information describes the key aspects of certain financial
instruments that have market risks.

Interest Rate

Our cash equivalents and other investment instruments are exposed to
financial market risk due to fluctuation in interest rates, which may affect
our interest income. These instruments are not entered into for trading
purposes. We do not expect our interest income to be significantly affected by
a sudden change in market interest rates. However, the value of assets under
management is affected by changes in interest rates. Since we derive a
substantial portion of our revenues from investment advisory and trust fees
based on the value of assets under management, our revenues may be adversely
affected by changing interest rates.

38

Expected Change in Independent Accountants

Our management has determined that we will dismiss Arthur Andersen LLP as
our independent accountants. The dismissal of Arthur Andersen will be effective
upon our Board of Directors taking definitive action. The audit reports of
Arthur Andersen on our consolidated financial statements as of and for the
fiscal years ended December 31, 2001 and 2000 did not contain an adverse
opinion or disclaimer of opinion, nor were they qualified or modified as to
uncertainty, audit scope or accounting principles.

During the two most recent fiscal years ended December 31, 2001, and the
subsequent interim period through June 4, 2002, there were no disagreements
between Arthur Andersen and us on any matter of accounting principles or
practices, financial statement disclosure, or auditing scope or procedure.

None of the reportable events described under Item 304(a)(1)(v) of
Regulation S-K have occurred within the two most recent fiscal years ended
December 31, 2001 or within the interim period through June 4, 2002.

Arthur Andersen has been provided with a copy of this disclosure and has
furnished a letter addressed to the SEC stating that they agree with the above
statements. A copy of Arthur Andersen's letter to the SEC is filed as Exhibit
16 to the registration statement on Form 10 of which this information statement
forms a part.

39

BUSINESS

General

We manage investment assets and provide services for our clients through our
two subsidiaries, Westwood Management and Westwood Trust. Westwood Management
provides investment advisory services to corporate pension funds, public
retirement plans, endowments and foundations, mutual funds and clients of
Westwood Trust. Westwood Trust provides to institutions and high net worth
individuals trust and custodial services and participation in common trust
funds that it sponsors. Our revenues are generally derived from fees based on a
percentage of assets under management, and at March 31, 2002, Westwood
Management and Westwood Trust collectively managed assets valued at
approximately $4.0 billion. We have been providing investment advisory services
since 1983 and, according to recognized industry sources, including
Morningstar, Inc., when measured over multi-year periods, our principal asset
classes have consistently ranked above the median in performance within their
peer groups.

The core of our business is dependent on our client relationships. We
believe that in addition to investment performance, client service is paramount
in the asset management business. As such, a major focus of our business
strategy is to continue building strong relationships with clients to better
enable us to anticipate their needs and to satisfy their investment objectives.
Our team approach ensures efficient, responsive service for our clients. Our
future success will depend to a significant degree on both investment
performance and our ability to provide responsive client service.

The NYSE has authorized the listing of our common stock on the NYSE under
the ticker symbol "WHG." We maintain a website at www.westwoodgroup.com.
Information found on our website is not a part of this information statement.

Westwood Management Corporation

General

Westwood Management provides investment advisory services to large
institutions, including corporate pension funds, public retirement plans,
endowments, foundations and mutual funds, having at least $25 million in assets.

Our overall investment philosophy is determined by Susan M. Byrne and, with
respect to the bulk of assets under management, is focused on achieving a
superior, risk-adjusted return by investing in companies that are positioned
for growth but are not fully recognized in the marketplace. This investment
approach is designed to preserve capital in unfavorable periods and to provide
superior real returns over the long term. Ms. Byrne has worked in the
investment arena for more than 30 years. Westwood Management's investment
advisory team also includes 15 additional portfolio managers, trading and
research professionals, all of whom have substantial investment management
experience. The continuity of the team and its years of experience are critical
elements in successfully managing investments.

Managed Asset Classes

Asset Management.  We provide clients with a broad range of investment asset
classes designed to meet varying investment objectives. This affords our
clients the opportunity to meet their investment objective through the use of
one management advisor. More than half of our assets under management are
invested in our Large Cap Equity asset class, although the portion of assets
under management in other asset classes has been growing. The following sets
forth the various asset classes currently managed by Westwood Management:

LargeCap Equity:  Investments in equity securities of approximately 40
well-seasoned companies with market capitalizations generally over $10
billion. Our strategy for this portfolio is to focus on investing in
companies that provide earnings through operational improvements and can be
purchased inexpensively.

40

SMidCap Equity:  Investments in equity securities of approximately 35-45
companies with market capitalizations of $250 million to $7.5 billion.
Similar to the LargeCap Equity asset class, we seek to discover the same
kinds of operational improvements but within mid-size companies, which offer
attractive risk/return profiles.

SmallCap Equity:  Investments in approximately 65 growth companies with
market capitalizations between $100 million and $1.5 billion at the time of
purchase. Our approach to growth investing is more conservative than many
managers of growth portfolios. We focus on small companies whose earnings
are accelerating and are positioned for sustainable future growth.

Balanced:  Investments in a combination of equity and fixed income
securities, which are designed to provide both growth opportunities and
income, while also placing emphasis upon asset preservation in "down"
markets. Westwood Management applies its expertise in dynamic asset
allocation and security selection in carrying out this balanced strategy
approach.

Real Estate Investment Trusts (or REITs):  Investments in the publicly
traded equity securities of approximately 50 real estate investment trusts.
Our investment process incorporates a quantitative ranking system where each
real estate sector and related stocks are evaluated. Westwood Management
then makes investment selection based on qualitative research of the
top-ranked REITS within our proprietary ranking system.

Fourth Wave:  Investments in equity securities of approximately 30-50
companies with varying market capitalizations. The fund focuses on
identifying innovative companies with the highest potential for revenue and
earnings growth. The fund invests in the higher growth segments of the
economy, including the technology, healthcare and capital equipment sectors.

Fixed Income Core/Intermediate Bonds:  Investments in high-grade,
intermediate term, corporate and government bonds. We seek to add value to
client portfolios through yield curve positioning and investment in
improving credit quality.

Each asset class is a portfolio of equity and/or fixed income securities
determined by Westwood Management's portfolio managers to best provide the long
term returns consistent with Westwood Management's investment philosophy. Our
portfolio managers make decisions for all of Westwood Management's asset
classes in accordance with the investment objectives and policies of such
classes, including determining when and which securities to purchase and sell.

We employ various strategies, including a value-oriented approach as well as
others that are more closely correlated to growth investing, in managing our
asset classes. The common thread that permeates through our investment
strategies is our focus on a disciplined approach to controlling risk and
preserving the core value of the assets under management whenever possible. The
LargeCap Equity asset class has a greater emphasis on identifying companies
where earnings result from actual operational improvements and not manufactured
improvements occurring through financial statement adjustments. Our desire to
prevent the loss of the core value of the assets under management is the
overriding objective of this strategy, even if the cost is the loss of
opportunity for potentially higher earnings. The growth strategy seeks to
primarily invest in companies that are leaders in their industry or sector and
are worthy of paying a slight premium relative to their growth rate. However,
the growth strategy incorporates an element of risk control through investments
in steady and stable growth companies, thus controlling downside losses in the
total portfolio. Whether through investments in leaders of industry or in
companies that provide steady and stable growth, Westwood Management seeks to
consistently demonstrate superior performance relative to industry peers and
the broad market.

More than two-thirds of our assets under management are invested in equity
securities of companies with a large market capitalization. As a consequence,
we are particularly susceptible to the volatility associated with changes in
the market for large capitalization stocks. Due to this concentration, any
change or reduction in such markets, including a shift of Westwood Management
clients' and potential clients' preference from investments in equity
securities of large capitalization stocks to other equity or fixed income
securities could have a significant negative impact on our business.

41

When measured over multi-year periods, Westwood Management's principal asset
classes have consistently ranked above the median within their peer groups in
performance according to recognized industry sources, including Morningstar,
Inc. For the ten-year period ending on December 31, 2001, our LargeCap Equity,
Balanced and Fixed Income asset classes have ranked in the top quartile in
their peer groups. However, it should be noted that when considering the
results of 2001 alone, the asset classes comprising the bulk of assets under
management performed below the median within their peer groups.

Our assets under management have grown 73.3% from December 31, 1999 through
December 31, 2001. Our ability to obtain such growth is a result of our
competitive long-term performance record and our strong relationship with
consulting firms throughout the nation. We are continually looking for
opportunities to expand our asset classes in terms of growing our existing
asset classes and developing new portfolios focusing on investment areas that
are not currently part of our asset classes under management. We intend to grow
our asset classes either internally or by acquiring new asset classes from
third parties, as discussed under "--Growth Strategies" below. Our growth
strategy not only provides our clients more investment opportunities, but also
diversifies our assets under management, thereby reducing our risk in any one
area of investment and increasing our competitive ability to attract new
clients.

Cash Management.  Westwood Management also provides cash management and
custodial services for the SWS cash reserve funds. The SWS cash reserve funds
totaled $440 million at March 31, 2002. Westwood Management charges a fee based
on the total amount of cash assets under management. Following the spin-off,
Westwood Management will continue to provide cash management and custodial
services with respect to the SWS cash reserve funds for a term of not less than
one year for a fee mutually agreed to by the parties. See "Relationship Between
SWS and Westwood After the Spin-off -- Transition Services Agreement."

Advisory and Subadvisory Service Agreements

Westwood Management manages accounts of its clients under investment
advisory and subadvisory agreements. These agreements are usually terminable
upon short notice and provide for compensation based on the market value of the
client's assets under management. Our fees are generally payable in advance on
a calendar quarterly basis. Pursuant to these agreements, Westwood Management
provides overall investment management services, including providing advice and
recommendations concerning investments and reinvestments in conformity with the
investment objectives and restrictions posed by the clients. Unless otherwise
directed in writing by our client, Westwood Management has the authority to
vote all proxies with respect to client's assets.

Westwood Management is also a party to subadvisory agreements with other
investment companies under which it performs substantially the same services as
it does under its advisory agreements. However, the investment strategy adopted
for a particular client is subject to supervision and review by the client. Our
fees are computed daily based upon the daily net assets of the client and are
payable on a monthly basis. As with our advisory agreements, these agreements
are terminable upon short notice.

Under our subadvisory agreement with Gabelli Advisers, Inc., Westwood
Management provides investment advisory services to the Gabelli Westwood family
of funds. The Gabelli Westwood Equity Fund is a large cap fund with assets
consisting of securities valued at approximately $312 million as of March 31,
2002. As of that date, Morningstar, Inc. awarded the Gabelli Westwood Equity
Fund a four star rating. Westwood Management owns shares of Class A Common
Stock representing an 18.8% economic interest in Gabelli Advisers, Inc.

Our four largest clients accounted for approximately 21.1% of total revenues
for the twelve months ended March 31, 2002, and we are therefore dependent to a
significant degree on our ability to maintain our existing relationships with
these clients. There can be no assurance that we will be successful in
maintaining our existing client relationships or in securing additional clients.

42

Westwood Trust

General

Westwood Trust provides to institutions and high net worth individuals
having at least $1 million in assets under management trust and custodial
services and participation in common trust funds that it sponsors. Westwood
Trust seeks to define and improve the risk/return profile of the client's
investment portfolio by complementing or enhancing existing investment
strategies. Westwood Trust also provides back office services to its clients,
including tax reporting, distribution of income to beneficiaries, preparation
of trust and account statements and attending to the special needs of
particular trusts. Westwood Trust serves as trustee for tax and estate-planning
purposes, as well as for special needs trusts. Westwood Trust is chartered and
regulated by the Texas Department of Banking.

Westwood Trust primarily provides services for employee benefit trusts and
personal trusts. Employee benefit trusts include retirement plans of businesses
to benefit their employees, such as defined contribution plans, pensions and
401(k) plans. Westwood Trust may be appointed trustee and provide
administrative support for these plans, as well as investment advisory and
custodial services. Personal trusts are developed to achieve a number of
different objectives, and Westwood Trust acts as trustee to these trusts and
assists in developing tax advantaged trust portfolios for them. The fees
charged by Westwood Trust are separately negotiated with each client and are
based on the complexity of the operations of the trust and the amount of assets
under management.

Services

Westwood Trust undertakes a fiduciary responsibility toward the management
of each client's financial affairs and utilizes a consultative asset allocation
approach. This approach involves Westwood Trust examining the client's
financial affairs, including the client's portfolio of investments, and
advising the client on ways in which it can enhance its investment returns and
financial position. Westwood Trust also provides custodial services, which
includes advising clients on the investment and reinvestment of their assets,
and providing safekeeping and accounting services.

Common Trust Funds

Westwood Trust sponsors a number of common trust funds in which we commingle
clients' assets to achieve economies of scale. Our common trust funds fall
within two basic categories: personal trust and employee benefit trust. We
sponsor common trust funds for most of the asset classes managed by Westwood
Management. We also engage third party subadvisors to supplement the management
services provided by Westwood Management for some of our common trust funds,
such as our International Equity and High Yield Bond common trust funds.

Growth Strategy

We believe that we have established a strong platform to support future
growth, deriving our strength in large part from the experience and
capabilities of our management team and skilled investment professionals. We
believe that assembling this focused, stable team has contributed in large part
to our solid investment performance results, quality customer service and a
growing array of asset classes under management. Opportunities for our future
growth are expected to come from existing and new clients, strategic
acquisitions and alliances and the continued strengthening of our brand name.

Generate growth from new and existing clients.  As our primary business
objective, we intend to maintain and enhance existing client relationships by
continuing to provide solid investment performance results and a high level of
quality service to existing clients. Additionally, we will pursue growth from
new clients through targeted sales and marketing efforts that emphasize our
performance results and client services.

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Attract and retain key employees.  In order to achieve our client
relationship objectives, we must be able to retain and attract talented
investment professionals. We believe that we have created a workplace
environment in which intense, client-oriented individuals thrive. Following the
completion of the spin-off, we will be able to offer to our key employees a
compensation program that includes strong equity incentives so that the success
of our clients will be closely tied to the success of our key employees. We
believe this is a critical ingredient to continuing to build a stable,
client-focused environment.

Pursue strategic acquisitions and alliances.  While we will not initially
seek new alliances, we will evaluate strategic acquisition, joint venture and
alliance opportunities over time. We may, in time, have an interest in pursuing
asset management firms or trust companies that have assets with respect to
which we have expertise or those that appear appropriate as a means of
expanding the range of our asset classes. By acquiring investment firms that
successfully manage asset classes in which we do not specialize, we could
attract new clients and provide our existing clients with a more diversified
range of asset classes.

Continue strengthening our brand name.  We believe that the strength of our
brand name has been a key ingredient to our long-term tenure in the investment
industry and will be instrumental to our future success. We have developed our
strong brand name largely through high profile coverage in various investment
publications and electronic media. In particular, Ms. Byrne enjoys a highly
visible presence in print and electronic media, which also enhances our brand
name. We will continue to find creative ways to strengthen our brand name, as
well as continue our successful marketing practices.

Competition

We are subject to substantial and growing competition in all aspects of our
business. Barriers to entry to the asset management business are relatively
low, and our management anticipates that we will face a growing number of
competitors. Although no one company dominates the asset management industry,
many companies are larger, better known and have greater resources than us.

Further, we compete with other asset management firms on the basis of asset
classes offered, the investment performance of those asset classes in absolute
terms and relative to peer group performance, quality of service, fees charged,
the level and type of compensation offered to key employees, and the manner in
which asset classes are marketed. Many of our competitors have more asset
classes and services and may also have substantially greater assets under
management.

We compete against an ever-increasing number of investment dealers, banks,
insurance companies and others that sell equity funds, taxable income funds,
tax-free investments and other investment products. Also, the allocation by
many clients of assets away from active equity investment 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 effectively compete
with us. In short, the competitive landscape in which we operate is both
intense and dynamic, and there can be no assurance that we will be able to
compete effectively in the future as an independent company.

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

44

Regulation

Westwood Management

Virtually all aspects of our business are subject to various federal and
state laws and regulations. These laws and regulations are primarily intended
to protect investment advisory clients and stockholders of registered
investment companies. Under such laws and regulations, agencies that regulate
investment advisers, such as ourselves, have broad administrative powers,
including the power to limit, restrict or prohibit such an adviser from
carrying on its business in the event that it fails to comply with such laws
and regulations. In such event, the possible sanctions that may be imposed
include the 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 substantial compliance with all material laws and regulations.

Our business is subject to regulation at both the federal and state level by
the SEC and other regulatory bodies. Westwood Management is registered with the
Commission under the Investment Advisers Act of 1940 and under the laws of
various states. As a registered investment adviser, Westwood Management is
regulated and subject to examination by the SEC. The Investment Advisers Act
imposes numerous obligations on registered investment advisers, including
fiduciary duties, record keeping requirements, operational requirements,
marketing requirements and disclosure obligations. Under the rules and
regulations of the SEC promulgated pursuant to the federal securities laws, we
are subject to periodic examination by the SEC and the National Association of
Securities Dealers, Inc. The SEC is authorized to institute proceedings and
impose sanctions for violations of the Investment Advisers Act, ranging from
censure to termination of an investment adviser's registration. In addition,
the NASD, as a self-regulatory organization, is authorized to institute
proceedings and impose sanctions against members for violations of its rules
and guidelines, which may include censure, suspension, expulsion, limitation of
activities, functions and operations, or any other appropriate sanction. The
failure of Westwood Management to comply with the requirements of the SEC or
the NASD could have a material adverse effect on Westwood. We believe that we
are in substantial compliance with the requirements of the regulations under
the Investment Advisers Act and with the rules and guidelines established by
the NASD.

We derive a substantial amount of our revenues from investment advisory
services through our investment management agreements. Under the Investment
Advisers Act, our investment management agreements terminate automatically if
assigned without the client's consent. Under the Investment Company Act,
advisory agreements with registered investment companies, such as the mutual
funds for which we act as subadvisor, terminate automatically upon assignment.
The term "assignment" is broadly defined and includes direct assignments as
well as assignments that may be deemed to occur, under certain circumstances,
upon the transfer, directly or indirectly, of a controlling interest in us or
Westwood Management. We do not believe that the spin-off will constitute an
assignment under any such investment management or advisory agreements.

Various regulations also cover certain investment strategies that may be
used by Westwood Management for hedging purposes. To the extent that Westwood
Management purchases futures contracts, Westwood Management may be subject to
the commodities and futures regulations of the Commodity Futures Trading
Commission.

Westwood Trust

Westwood Trust also 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 rules and
regulations promulgated under that act 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;

45

.  restrictions on investments of restricted capital;

.  lending and borrowing limitations;

.  prohibitions against engaging in certain activities;

.  periodic examinations by the office of the Commissioner;

.  furnishing periodic financial statements to the Commissioner;

.  fiduciary record-keeping requirements;

.  bonding requirements for the protection of clients; and

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

The Finance Code also gives the Commissioner broad regulatory powers
(including penalties and civil and administrative actions) if the trust company
violates certain provisions of the Finance Code or conservatorship or closure
if Westwood Trust is determined to be in a "hazardous condition" (as the law
defines that term).

As required by the Finance Code, Westwood Trust maintains minimum restricted
capital of $1 million; however, the Finance Code permits the Commissioner to
require trust companies on a case-by case basis to maintain additional capital.
In addition, under Texas law, Westwood Trust generally cannot have liabilities,
which exceed five times its restricted capital. At March 31, 2002, Westwood
Trust had total liabilities of approximately $339,000.

Westwood Trust is limited by the Finance Code in the payment of dividends to
undivided profits: that part of equity capital equal to the balance of net
profits, income, gains, and losses since its formation date minus subsequent
distributions to stockholders and transfers to surplus or capital under share
dividends or appropriate Board resolutions. At March 31, 2002, Westwood Trust
had undivided profits of approximately $449,000.

We are subject to the Employee Retirement Income Security Act of 1974, as
amended, and to the related regulations, insofar we are a "fiduciary" under
ERISA with respect to some of our clients. ERISA and applicable provisions of
the Code impose certain duties on persons who are fiduciaries under ERISA or
who provide services to ERISA plan clients and prohibit certain transactions
involving ERISA plan clients. Our failure to comply with these requirements
could have a material adverse effect on us.

Employees

At March 31, 2002, we had 42 full-time employees, 16 of whom are portfolio
managers, trading and research professionals, 13 of whom are marketing and
client service professionals and 13 of whom are administrative and reporting
personnel. None of our employees are represented by a labor union, and we
consider our employee relations to be good.

Properties

We conduct our principal operations through a leased property with
approximately 13,500 square feet located in Dallas, Texas. The lease agreement
expires in July 2004. We believe that our facilities are adequate to serve our
currently anticipated business needs.

Legal Proceedings

We are subject from time to time to certain claims and legal proceedings
arising in the ordinary course of our business.

46

MANAGEMENT

The following table sets forth information regarding our current executive
officers and directors. We currently have five directors. Each of the directors
below has been elected to serve until the next annual meeting of stockholders
and his or her successor has been elected and has been qualified, or until the
director's earlier death, resignation or removal.

Name                      Age                Principal Position
----                      ---                ------------------

Susan M. Byrne................ 55  Chairman of the Board of Directors, Chief
Executive Officer, Treasurer and Director

Brian O. Casey................ 39  President, Chief Operating Officer, Secretary and
Director

Patricia R. Fraze............. 58  Executive Vice President and Director of
Westwood Management and Director of
Westwood Trust

Lynda J. Calkin............... 50  Senior Vice President and Director of Westwood
Management

Joyce A. Schaer............... 36  Senior Vice President and Director of Westwood
Management

Frederick R. Meyer (1)(2)..... 74  Director

Jon L. Mosle, Jr. (1)(2)...... 72  Director

Raymond E. Wooldridge (1)..... 63  Director

--------
(1) Audit committee member.
(2) Compensation committee member; it is expected that Mr. Wooldridge will
become a member of the compensation committee after the spin-off.

Susan M. Byrne has served as Chairman of the Board of Directors, Chief
Executive Officer and director of Westwood since its inception in December
2001. Ms. Byrne is the founder of Westwood Management and has served as its
Chairman of the Board, President and Chief Investment Officer since 1983. She
served as a director of Westwood Trust from 1996 to 1999. Ms. Byrne serves as a
member of the Board of the University of Texas Investment Management Company.
She also serves as the Vice-chair of the Board of Trustees for the City of
Dallas Employees Retirement Fund and Chair of the Investment Committee for The
First Presbyterian Church of Dallas Foundation.

Brian O. Casey has served as President, Chief Operating Officer and director
of Westwood since its inception in December 2001. Mr. Casey has served as
Executive Vice President and Chief Operating Officer of Westwood Management
since 2000 and as the President and as a director of Westwood Trust since 1996.
Prior to his appointment to those positions, Mr. Casey served as the Vice
President of Marketing and Client Services of Westwood Management from 1992 to
1996.

Patricia R. Fraze has served as Executive Vice President of Westwood
Management since 1995 and as Director, Client Services, since 2000. Ms. Fraze
serves as a director of Westwood Management and Westwood Trust. Ms. Fraze
joined Westwood in 1990 as Vice President and fixed income analyst and
subsequently served as Portfolio Manager for fixed income and balanced
portfolios. Prior to joining Westwood, Ms. Fraze was Vice President, Portfolio
Strategies and Fixed Income Research at Drexel Burnham Lambert and also spent
twenty-two years in mathematics education at both the secondary and graduate
level.

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Lynda J. Calkin, CFA, has served as Senior Vice President and Portfolio
Manager for Westwood Management since 1993. Ms. Calkin serves as a director of
Westwood Management. Prior to joining Westwood, Ms. Calkin was a Vice President
and Portfolio Manager at Hourglass Capital Management from 1989 to 1993. Ms.
Calkin also served as an equity analyst at MSecurities from 1984 to 1989.

Joyce A. Schaer has served as Director of Marketing for Westwood Management
since 1997 and was promoted to Senior Vice President in 2000. Ms. Schaer serves
as a director of Westwood Management. Ms. Schaer has held other marketing
positions at Westwood including Vice President-Marketing for the Eastern Region
of the United States from 1994 to 1996. Ms. Schaer joined the firm in 1989 and
has held various positions in the trading, portfolio management and client
services areas.

Frederick R. Meyer has served as a director of Westwood since its inception
in December 2001. He has served as a director of SWS since 1991. Since 1985, he
has served as the Chairman of the Board of Aladdin Industries, LLC, a
diversified company. He served as Aladdin Industries, LLC's President between
1987 and 1994 and as its Chief Executive Officer from 1995 to January 1999 and
again from November 2000 to present. He also served as President and Chief
Operating Officer of Tyler Corporation, a diversified manufacturing
corporation, from 1983 to 1986 and acted as a consultant to Tyler Corporation
from 1986 to 1989. He currently serves as a director of Aladdin Industries, LLC
and Palm Harbor Homes, Inc., a marketer of manufactured homes.

Jon L. Mosle, Jr. has served as a director of Westwood since its inception
in December 2001. He has served as director of SWS since 1991. He served as
Director of Private Capital Management for Ameritrust Texas Corporation from
1984 to 1992. From 1954 to 1984, he was affiliated with Rotan Mosle, Inc., a
regional NYSE member firm, which was acquired by PaineWebber Incorporated in
1983. His roles at Rotan Mosle, Inc. included supervisory responsibility for
both over-the-counter trading and municipal departments, as well as
participating in corporate finance activities. He served as branch manager,
regional manager, Vice Chairman of the Board and member of Rotan Mosle, Inc.'s
operating committee.

Raymond E. Wooldridge has served as a director of Westwood since its
inception in December 2001. He is a director of CEC Entertainment, Inc., a
Dallas-based NYSE company that operates a chain of pizza and children's
entertainment restaurants, D. A. Davidson & Company, Inc., an investment firm
located in the Pacific Northwest, and its subsidiary Davidson Trust Company,
and Security Bank, a Texas-based regional bank. From 1986 to 1999, he was a
director of SWS; from 1996 to 1999, he served as the Vice Chairman and Chairman
of the Executive Committee of SWS; from 1993 to 1996, he served as Chief
Executive Officer of SWS; and from 1986 to 1993, he served as President and
Chief Operating Officer of SWS. He is a past Chairman of the National
Securities Clearing Corporation, a national clearing agency registered with the
SEC and past Vice Chairman of the Board of Governors of the National
Association of Securities Dealers.

Board Committees

We have established two committees of the Board of Directors--an audit
committee and a compensation committee. The Board of Directors may also
establish such other committees as it deems appropriate, in accordance with
applicable Delaware law and our Bylaws.

Audit Committee.  The audit committee operates pursuant to a charter
approved by our Board of Directors, which the audit committee reviews annually
to determine if revisions are necessary or appropriate. The audit committee
oversees the preparation of our financial statements and our independent
auditors. The audit committee considers and recommends the employment of an
independent accounting firm to conduct the annual audit, determines the
independence of our independent accountants and recommends actions to our Board
of Directors to ensure their independence. The audit committee is responsible
for reviewing reports from our management and internal auditors relating to our
financial condition and other matters that may have a material impact on our
financial statements and compliance policies. The audit committee is also
responsible for inquiring of our management and independent auditors regarding
the appropriateness of the accounting principles we

48

follow, changes in accounting principles and their impact on our financial
statements and reviewing the internal audit program in terms of scope of audits
conducted or scheduled to be conducted. The audit committee is responsible for
preparing a report stating among other things whether our audited financial
statements be included in our Annual Report.

Compensation Committee.  The compensation committee authorizes and
determines all salaries for our officers and supervisory employees, administers
our incentive compensation plans in accordance with the powers and authority
granted in such plans, determines any incentive allowances to be made to our
officers and staff, administers all of our stock option plans and other equity
ownership, compensation, retirement and benefit plans, approves the
performance-based compensation of individuals pursuant to Code Section 162(m)
and administers other matters relating to compensation or benefits.

Director Compensation

Each non-employee member of our Board of Directors shall receive $1,500 for
each meeting of the Board of Directors attended by the member, up to a maximum
of $6,000 per year. Each non-employee member of our Board of Directors shall
receive an additional $2,500 per year if the member serves on one or more
committees of our Board of Directors. Additionally, shortly following the
spin-off and upon each date of election or reelection as a member of our Board
of Directors, each non-employee director shall be awarded non-statutory stock
options for 2,500 shares of our common stock, which shall vest at the
expiration of twelve months from the date of grant and shall have a term of ten
years. See "Compensation of Executive Officers--Westwood Stock Incentive
Plan--Options to Non-Employee Directors." We will review our compensation
arrangement for directors from time to time.

49

Compensation of Executive Officers

The following compensation table sets forth the compensation paid by SWS to
our Chief Executive Officer and our four mostly highly compensated executive
officers during the year ending December 31, 2001. References to "restricted
stock" and "stock options" mean restricted shares of SWS common stock and
options to purchase SWS common stock.

The compensation described below does not reflect the compensation such
executive officers will receive following the spin-off. Our compensation
committee determines the annual base salaries of, and annual and long-term
incentive opportunities for, our executive officers.

Summary Compensation Table

Long-Term Compensation
-------------------------------
Annual Compensation        Awards
---------------------------- -----------
Securities
Underlying       All Other
Name and Principal Position             Year Salary ($) Bonus ($)(1) Options (#) Compensation ($)(2)
---------------------------             ---- ---------- ------------ ----------- -------------------

Susan M. Byrne.............................. 2001  496,000    1,500,000      8,000          22,100
Chief Executive Officer and Treasurer

Brian O. Casey.............................. 2001  236,500      550,000      7,000          22,100
President, Chief Operating Officer and
Secretary

Patricia R. Fraze........................... 2001  192,500      275,000      2,000          22,100
Executive Vice President of Westwood
Management and Director of
Westwood Trust

Lynda J. Calkin............................. 2001  215,000      300,000      1,500          22,100
Senior Vice President of Westwood
Management

Joyce A. Schaer............................. 2001  180,000      315,000      3,000          17,000
Senior Vice President of Westwood
Management

--------
(1) The bonuses reflect amounts accrued in 2001, but actually paid to each
executive officer in 2002.
(2) Includes SWS's annual profit sharing contributions and 401(k) matching
contributions to the SWS 401(k) Plan.

50

Stock Options

Options Granted in Last Year.  The following table sets forth information
regarding options to acquire SWS common stock that SWS granted to the executive
officers for the year ended December 31, 2001.

Potential Realizable
Number of  % of Total                           Value at Assumed
Securities   Options/                            Annual Rates of Stock
Underlying     SARs                              Price Appreciation for
Options/   Granted to                            Option Term(1)
SARs     Employees  Exercise Price Expiration ----------------------
Name              Granted (#)  in Year     ($/Share)       Date      5%         10%
----              ----------- ---------- -------------- ----------  -------    --------

Susan M. Byrne......    8,000       2.0%        $18.99      9/10/11   $95,542    $242,121
Brian O. Casey......    7,000       1.8%        $18.99      9/10/11   $83,599    $211,856
Patricia R. Fraze...    2,000         *         $18.99      9/10/11   $23,885    $ 60,530
Lynda J. Calkin.....    1,500         *         $18.99      9/10/11   $17,914    $ 45,398
Joyce A. Schaer.....    3,000         *         $18.99      9/10/11   $35,828    $ 90,796

--------
*  Less than 1%
(1) Pursuant to the rules promulgated by the SEC, the amounts under these
columns reflect calculations at assumed 5% and 10% appreciation rates and,
therefore, are not intended to forecast further appreciation, if any, of
the respective underlying common stock. The potential realizable value to
the optionees was computed as the difference between the appreciated value
at the expiration date of the stock options of the applicable underlying
common stock obtainable upon exercise of such stock options over the
aggregate exercise price of such stock options.

Aggregated Option Exercises in Last Year and Year End Option Values.  The
following table sets forth information concerning the exercise of SWS stock
options during the year ended December 31, 2001 by the executive officers and
the number and aggregate value of unexercised in-the-money options for SWS's
stock options at December 31, 2001. The actual amount, if any, realized on
exercise of stock options will depend on the amount by which the market price
of our common stock on the date of exercise exceeds the exercise price, as
adjusted. The actual value realized on the exercise of unexercised in-the-money
stock options (whether exercisable or unexercisable) may be higher or lower
than the values reflected in this table. In connection with the spin-off, these
options will become fully vested at the time of the spin-off, and Westwood will
be substituted for SWS as the employer. In addition, to the extent that SWS
makes any adjustments to its outstanding options as a result of the spin-off,
similar adjustments will be made to the SWS options held by Westwood employees.
See "Relationship Between SWS and Westwood After the Spin-off--Distribution
Agreement--Employee Benefits."

Number of Securities      Value of Unexercised
Underlying Unexercised         In-The-Money
Options/ SARs             Options/SARs
Shares                        at Year End           at Year-End ($)(1)
Acquired on     Value     ------------------------- -------------------------
Name          Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable
----          ------------ ------------ ----------- ------------- ----------- -------------

Susan M. Byrne...      --           --        11,601       14,582       $77,832      $63,545
Brian O. Casey...      --           --         8,391       12,701       $52,886      $55,399
Patricia R. Fraze      --           --         4,981        4,850       $33,155      $18,004
Lynda J. Calkin..      --           --         6,689        5,438       $44,227      $16,471
Joyce A. Schaer..      --           --         5,989        6,938       $38,245      $16,471

--------
(1) Values are stated based upon the closing price of $25.45 per share of SWS
common stock on the NYSE on December 31, 2001, the last trading day of 2001.

51

Compensatory Plans and Arrangements

Prior to and in connection with the spin-off, we will enter into a
distribution agreement with SWS, which will include provisions relating to
employee matters as summarized above in "Relationship between SWS and Westwood
After the Spin-off--Distribution Agreement--Employee Benefits." Summarized
below are certain benefit arrangements, other than arrangements applicable to
all employees generally, that have been established for the benefit of our
directors, executive officers and employees following the spin-off.

Westwood Stock Incentive Plan.  We recently adopted the Westwood Holdings
Group, Inc. Stock Incentive Plan. We believe that the stock incentive plan will
encourage eligible participants, through their individual efforts, to improve
our overall performance and to promote profitability by providing them an
opportunity to participate in the increased value they help create. There will
be 948,100 shares of our common stock reserved for issuance under the stock
incentive plan. Our officers, directors, employees and consultants are eligible
to receive awards under the stock incentive plan, which is administered by the
compensation committee of our Board of Directors. Our Board of Directors may
terminate or amend the stock incentive plan at any time without stockholder
approval, provided that no termination or amendment of the stock incentive plan
shall adversely affect any then outstanding option, purchase right or other
award without the consent of the holder, unless such termination or amendment
is required to enable an option designated as an incentive stock option to
qualify as an incentive stock option or is necessary to comply with any
applicable law, regulation or rule. The stock incentive plan will terminate in
2012 unless terminated earlier by our Board of Directors.

Options.  Options granted under the stock incentive plan may be in the
form of incentive stock options (as defined under Section 422 of the Code) or
non-statutory stock options. Only our employees are eligible to receive
incentive stock options. In general, all options granted under the stock
incentive plan will lapse no more than ten years from the date of grant (five
years in the case of an incentive stock option granted to a 10% stockholder of
us or one of our subsidiaries). The exercise price of any option will be
determined by the compensation committee at the time the option is granted and
will not be less than 100% of the fair market value per share of our common
stock on the date the option is granted (110% in the case of an incentive stock
option granted to a 10% stockholder of us or one of our subsidiaries). The
aggregate fair market value on the date of grant of the common stock for which
incentive stock options are exercisable by an optionee during any calendar year
may not exceed $100,000. Any options granted pursuant to the terms of the stock
incentive plan shall be evidenced by an option agreement specifying the number
of shares of our stock covered thereby and other terms and conditions as are
determined by the compensation committee.

Shortly following the completion of the spin-off, the compensation committee
of our Board of Directors expects to award options covering approximately
200,000 to 250,000 shares of our common stock at an exercise price equal to the
closing price per share as reported by the NYSE on the date of grant. These
options will vest over four years with the initial portion of such options
vesting one year after the date of grant.

Options to Non-Employee Directors.  Pursuant to the stock incentive
plan, each of our non-employee directors shall, shortly after the date of the
spin-off and on the date of election or re-election as a member of our Board of
Directors, be granted a non-statutory stock option for 2,500 shares of our
common stock at an exercise price equal to the closing price per share as
reported by the NYSE on the date of grant, in the case of the initial
directors, and on the date of election or reelection, in the case of any new or
reelected director subsequent to the spin-off. Each non-statutory stock option
granted to our non-employee directors shall vest at the expiration of twelve
months from the date of the grant and shall have a term of ten years.
Expiration of a non-employee director's term of office shall not affect a
non-employee director's right to exercise its option to the extent such option
is vested at any time prior to the expiration of the director's term.

Restricted Stock Awards.  The compensation committee of our Board of
Directors may also make awards of restricted shares of our stock. The vesting
and number of restricted shares of our stock may be conditioned upon the lapse
of time or the satisfaction of other factors determined by the compensation

52

committee. The recipient of restricted shares will generally have the rights
and privileges of a stockholder with respect to the right to receive dividends
and the right to vote the shares. None of the restricted shares may be sold,
transferred or pledged during the restricted period, and all restricted shares
shall be forfeited, and all rights to the shares will terminate, if the
recipient ceases to be an employee, consultant or director of us or any of our
subsidiaries before the expiration or termination of the restricted period and
satisfaction of any other conditions prescribed by us with respect to the
shares.

Purchase Rights.  The compensation committee of our Board of Directors
may also make awards of stock purchase rights, which entitle the holder to
purchase a specified number of shares of our common stock during the period of
time, and subject to the terms and conditions, as the compensation committee
determines. Each award of purchase rights may have a different exercise period
or periods, shall specify the method of payment (which may include promissory
notes) to purchase our stock and shall set forth any repurchase rights or calls
applicable to the purchased stock.

Annual Incentive Awards.  The compensation committee of our Board of
Directors may also grant annual incentive awards of stock, cash or any
combination of stock and cash, to our employees, in such amounts and subject to
such terms and conditions as the compensation committee may determine. The
compensation committee shall establish the maximum level of annual incentive
awards that may be granted for each year. Within 90 days after the commencement
of each year, the compensation committee shall determine which employees shall
be eligible to receive an annual incentive award for such year and determine an
objective formula for computing the annual incentive award for such year based
upon the attainment of various performance goals. The committee may, in its
sole discretion, reduce, but not increase, the annual incentive award payable
to any participating employee during a year.

Performance-Based Awards.  The compensation committee of our Board of
Directors may also grant performance-based awards of the right, expressed in
units, to receive stock, cash or any combination of stock and cash, to eligible
officers or other key employees as determined by the compensation committee in
its sole discretion. At the time of each grant of a performance-based award,
the compensation committee shall establish an objective formula for computing
the award based upon the attainment of various performance goals over a
performance cycle of at least one year. Performance goals may include minimum,
maximum and target levels of performance, with the size of the award based on
the level of performance attained. The number of shares of stock and/or the
amount of cash payable in settlement of a performance-based award shall be
determined by the committee at the end of the performance cycle. The
compensation committee may, in its discretion, eliminate or reduce the amount
of any performance-based award that otherwise would be payable to a
participating officer or other employee unless the participant has a vested
right under applicable employment law to receive the full performance-based
award. Performance-based awards may be made alone, or in addition to, other
grants and awards under the stock incentive plan.

Westwood Deferred Compensation Plan.  Recently, we adopted the Westwood
Holdings Group, Inc. Deferred Compensation Plan. We believe that the deferred
compensation plan will increase retention of our executive officers and senior
management as well as increase stock ownership among participants in the
deferred compensation plan. Under its terms, the deferred compensation plan
allows eligible employees to defer a certain portion of each bonus and to
invest such amounts in various investment alternatives including our stock. We
match a portion of the deferrals in cash, which will equal 25% of the eligible
employee's annual deferral amount, but will not exceed $10,000. Our
compensation committee believes that programs such as the deferred compensation
plan will further align the executive officers' long-term financial and
strategic interests with those of our stockholders. Our employees who
participated in the SWS Deferred Compensation Plan will have their account
balances under the SWS Deferred Compensation Plan transferred to the Westwood
Deferred Compensation Plan without forfeiting any portion of their existing
account balance.

53

Compensation Committee Interlocks and Insider Participation

No member of our compensation committee is a current or former officer or
employee of Westwood or its subsidiaries or has had a relationship requiring
disclosure by Westwood under applicable federal securities regulations. No
executive officer of Westwood served as a director or member of the
compensation committee of any entity that has one or more executive officers
serving as a member of our Board of Directors or compensation committee.

54

PRINCIPAL STOCKHOLDERS

On December 14, 2001, we issued to SWS 5,374,140 shares of our common stock,
and on that same date SWS sold 1,065,028 shares of our common stock to our
executive officers. To the extent our executive officers or directors own
shares of SWS common stock at the time of the spin-off, they will share in the
spin-off on the same terms as other holders of SWS common stock.

The following table sets forth the number of shares of SWS common stock and
Westwood common stock that is beneficially owned as of May 15, 2002 and the
approximate number and percentage of shares of Westwood common stock that will
be beneficially owned immediately following the spin-off date, based on the
number of outstanding shares of SWS common stock as of May 15, 2002, the
assumed stock split ratio of our common stock and a distribution of one share
of our common stock for every four shares of SWS common stock as of the record
date, by each of our executive officers and directors, individually and as a
group. As a result of the application of the foregoing assumptions, we would
expect to have an estimated 5,374,140 shares of our common stock outstanding
immediately after completion of the spin-off, although the actual number of
shares that will be outstanding will not be determinable until the record date.
Except as otherwise noted, each person and entity named in the tables below has
sole voting and investment power with respect to all shares of our common stock
beneficially owned.

Number of Shares of Number of Shares of Number of Shares of   Percentage of
SWS Common Stock     Westwood Common     Westwood Common    Westwood Common
Owned on         Stock Owned on     Stock Owned After  Stock Owned After
Name                 May 15, 2002(1)      May 15, 2002       the Spin-off(1)     the Spin-off
----               ------------------- ------------------- ------------------- -----------------

SWS Group, Inc........            --            4,309,112                  --              --
Susan M. Byrne........       166,921(2)           720,019             755,203            14.1%
Brian O. Casey........        22,542(3)           240,006             240,368             4.5%
Patricia R. Fraze.....        24,332(4)            25,001              28,626               *
Lynda J. Calkin.......        14,713(5)            40,001              40,647               *
Joyce A. Schaer.......        13,229(6)            40,001              40,076               *
Frederick R. Meyer....        78,999(7)                --              17,230               *
Jon L. Mosle, Jr......        28,038(8)                --               4,490               *
Raymond E. Wooldridge.        69,616                   --              17,404               *
Executive officers and
directors as a group
(8 persons).........       418,390(9)         1,065,028           1,144,044            21.3%

--------
*  less than 1%

(1) Includes shares subject to options that may be acquired within 60 days
after completion of the spin-off. Such shares are deemed to be outstanding
and to be beneficially owned by the person or group holding the options for
the purpose of computing the percentage ownership of such person or group,
but are not treated as outstanding for the purpose of computing the
percentage ownership of any other person or group.
(2) Includes 26,183 shares of SWS common stock issuable upon exercise of stock
options.
(3) Includes 21,092 shares of SWS common stock issuable upon exercise of stock
options.
(4) Includes 9,831 shares of SWS common stock issuable upon exercise of stock
options.
(5) Includes 12,127 shares of SWS common stock issuable upon exercise of stock
options.
(6) Includes 12,927 shares of SWS common stock issuable upon exercise of stock
options.
(7) Includes 10,077 shares of SWS common stock issuable upon exercise of stock
options.
(8) Includes 10,077 shares of SWS common stock issuable upon exercise of stock
options.
(9) Includes 102,314 shares of SWS common stock issuable upon exercise of stock
options.

The following table sets forth, to our knowledge, based on their current
reported ownership of SWS common stock, the number and percentage of shares of
Westwood common stock that will be owned

55

immediately following the spin-off date by each person (other than executive
officers and directors) who will beneficially own 5% or more of Westwood common
stock.

Number of Shares of Number of Shares of   Percentage of
SWS Common Stock     Westwood Common    Westwood Common
Owned on        Stock Owned After  Stock Owned After
Name                       May 15, 2002        the Spin-off       the Spin-off
----                    ------------------- ------------------- -----------------

Don A. Buchholz.............      1,655,957(1)         413,989              7.7%
1201 Elm Street, Suite 3500
Dallas, Texas 75270

Martin J. Whitman...........      1,747,954(2)         436,988              8.1%
767 Third Avenue
New York, NY 10017-2023

EQSF Advisers, Inc..........      1,623,250(2)         405,812              7.6%
767 Third Avenue
New York, NY 10017-2023

--------

(1) Includes 999,247 shares held by Buchholz Arlington Banshares, Ltd. and
550,000 shares owned by Buchholz Family Holdings, Ltd. Excludes 64,409
shares held by Buchholz Investments, which is a general partnership, the
partners of which are Don A. Buchholz, his wife, adult son and adult
daughter. Pursuant to the terms of the partnership agreement governing
Buchholz Investments, Mr. Buchholz's adult son has voting power and
investment power with regard to the shares owned by the partnership. The
partnership agreement also provides that any partner may withdraw from the
partnership upon 30 days' notice and, unless the partnership is liquidated,
that partner shall receive the value of his or her capital account. Don A.
Buchholz and his wife own one-third of Buchholz Investments.
(2) This information is based on a Schedule 13G filing made with the SEC on May
9, 2002. Includes 1,623,250 shares owned by EQSF Advisers, Inc. and 124,704
shares owned by M. J. Whitman Advisers, Inc., both of which are controlled
by Martin J. Whitman. Mr. Whitman is the Chief Executive Officer of EQSF
Advisers, Inc. and the Chief Investment Officer of M. J. Whitman Advisers,
Inc. Mr. Whitman disclaims beneficial ownership of all shares.

56

CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS

On December 14, 2001, we issued to SWS 5,374,140 shares of our common stock,
and on that same date, SWS sold 1,065,028 shares of the Westwood common stock
to our executive officers for an aggregate of $4.1 million, or $3.85 per share,
pursuant to a stock purchase agreement. The purchase price for the shares sold
by SWS to our executive officers was premised upon an understanding reached in
October 2001 that SWS would sell the shares of Westwood common stock based on
their value at September 30, 2001, and was based on a valuation as of September
30, 2001, covering the shares sold, which valuation was delivered to the SWS
Board in December 2001 and took into account the fact that the shares
represented a minority interest in closely held, non-marketable securities. The
issuance of shares to SWS and the resale of those shares to the executive
officers were effected in reliance on private placement exemptions from the
registration requirements of the Securities Act.

Each executive officer received a loan from us pursuant to a promissory note
to pay for their shares of our common stock purchased from SWS. The loans
totalled $4.1 million and are full recourse loans, secured by a pledge of the
shares purchased by each executive officer. The loans can be fully or partially
prepaid, and in the event of a partial prepayment, the number of shares subject
to the related pledge would be released on a pro rata basis. The loans bear
interest at the rate of 3.93% per annum, payable annually, with the principal
payable at maturity on the ninth anniversary of the date of the loans. If an
executive officer's employment is terminated for cause, or an executive officer
terminates his or her employment without good reason, his or her loan will
accelerate and become payable in full within 90 days following termination of
employment.

The table below identifies each executive officer who purchased shares of
Westwood common stock from SWS, the number of shares each executive officer
purchased and the amount of the promissory note executed by each executive
officer.

Name of Executive Officer No. of Shares Purchased from SWS Amount of Promissory Note
------------------------- -------------------------------- -------------------------

Susan M.Byrne                     720,019                     $2,766,960
Brian O. Casey                    240,006                     $  922,320
Patricia R.Fraze                   25,001                     $   96,075
Lynda J. Calkin                    40,001                     $  153,720
Joyce A. Schaer                    40,001                     $  153,720

We have managed the SWS cash reserve funds since 1993 and have served as
trustee of the SWS Deferred Compensation Plan since 1999. We charge SWS a fee
based on assets under management. In the three months ended March 31, 2002 and
the years ended December 31, 2001, 2000 and 1999, SWS has paid to us advisory
and trustee fees in the amount of approximately $207,000, $675,000, $496,000
and $378,000, respectively. Following the spin-off, we will continue to manage
the cash reserve funds for SWS for a period of at least one year. In addition,
SWS will provide us with certain transitional services on a limited basis
pursuant to various agreements. See "Relationship Between SWS and Westwood
After the Spin-off."

All future material transactions involving affiliated parties will be
subject to approval by a majority of Westwood's disinterested directors.

57

DESCRIPTION OF CAPITAL STOCK

Introduction

Our Board of Directors and stockholders have approved our amended and
restated Certificate of Incorporation and Bylaws. Our Amended and Restated
Bylaws (the "Bylaws") will be fully in effect prior to completion of the
spin-off. The following descriptions of our common stock assume that the
Amended and Restated Certificate of Incorporation (the "Certificate of
Incorporation") has been filed with and approved by the Delaware Secretary of
State. The Certificate of Incorporation will be fully in effect prior to
completion of the spin-off.

Our authorized capital stock consists of 10,000,000 million shares of common
stock, $0.01 par value per share, and 1,000,000 million shares of preferred
stock, $0.01 par value per share. We expect that our Board of Directors will
approve a stock split in the form of a stock dividend of our common stock to be
effective as of an undetermined future date prior to the spin-off in order to
provide a sufficient number of shares for the spin-off. The stock split ratio
will be based on the distribution ratio and the number of SWS shares
outstanding on the record date. Based on the assumed stock split ratio, on the
spin-off date and following the distribution of our common stock held by SWS to
its stockholders, we will have an estimated 5,374,140 shares of our common
stock outstanding and approximately 150 holders of record. No shares of our
preferred stock are currently outstanding.

The following description of our capital stock is intended as a summary and
is qualified in its entirety by reference to our Amended and Restated
Certificate of Incorporation and Amended and Restated Bylaws filed as exhibits
to the registration statement on Form 10, of which this information statement
forms a part, and to Delaware corporate law.

Common Stock

Voting Rights

The holders of our common stock are entitled to one vote per share on all
matters to be voted on by stockholders. Holders of our common stock are not
entitled to cumulate their votes in the election of directors. Generally, all
matters on which stockholders vote must be approved by a majority of the votes
entitled to be cast by all shares of common stock present in person or
represented by proxy, subject to any voting rights granted to holders of any
preferred stock. Except as otherwise provided by law, and subject to any voting
rights granted to holders of any outstanding preferred stock, amendments to our
Certificate of Incorporation must be approved by holders of a majority of all
outstanding shares of common stock.

Dividends

Holders of common stock will share ratably in any dividend declared by our
Board of Directors, subject to any preferential rights of any outstanding
preferred stock.

Other Rights

In the event of any merger or consolidation of Westwood with or into another
company in connection with which shares of common stock are converted into or
exchangeable for shares of stock, other securities or property (including
cash), all holders of common stock will be entitled to receive the same kind
and amount of shares of stock and other securities and property (including
cash).

If we are liquidated, dissolved or wound up, we will pay the full amounts
required to be paid to holders of shares of any outstanding preferred stock
before we make any payments to holders of shares of our common stock. All
holders of shares of our common stock are entitled to share ratably in any
assets available for distribution to these holders, after all of our other
creditors have been satisfied.

No shares of our common stock may be redeemed. Holders of shares of our
common stock do not have any preemptive rights to purchase additional shares of
our common stock.

58

Preferred Stock

We may issue up to 1,000,000 shares of preferred stock in one or more
classes or series and with the terms of each class or series stated in our
Board of Directors' resolutions providing for the designation and issue of that
class or series. Our Certificate of Incorporation authorizes our Board of
Directors to determine the dividend, voting, conversion, redemption and
liquidation preferences, rights, privileges and limitations pertaining to each
class or series of preferred stock that we issue.

We believe that the ability of our Board of Directors to issue one or more
series of our preferred stock will provide us with flexibility in structuring
possible future financings and acquisitions, and in meeting other corporate
needs which might arise. The authorized shares of our preferred stock, as well
as authorized shares of our common stock, will be available for issuance
without further action by our stockholders, unless such action is required by
applicable law or the rules of any stock exchange or automated quotation system
on which our securities may be listed or traded. The NYSE currently requires
stockholder approval in several instances, including where the present or
potential issuance of shares could result in an increase in the number of
shares of common stock, or in the amount of voting securities, outstanding of
at least 20%. If the approval of our stockholders is not required for the
issuance of shares of our preferred stock or our common stock, our Board of
Directors may determine not to seek stockholder approval.

Provisions That May Have an Anti-Takeover Effect

Some provisions of our Certificate of Incorporation, Bylaws and the tax
separation agreement summarized below may be deemed to have an anti-takeover
effect and may delay, deter or prevent a tender offer or takeover attempt that
some, or a majority, of our stockholders might believe to be in their best
interests or in which stockholders might receive a premium for their stock over
the then-current market price of such stock.

Board of Directors.  Our Bylaws provide that, subject to any rights of
holders of preferred stock to elect additional directors under specified
circumstances, the number of directors of Westwood shall be fixed from time to
time by resolution adopted by the affirmative vote of a majority of the Board
of Directors or pursuant to the action of the stockholders and shall not be
less than three nor more than eleven. In addition, our Certificate of
Incorporation and Bylaws provide that newly created directorships resulting
from any increase in the authorized number of directors or any vacancies in the
Board of Directors resulting from death, resignation, disqualification or
removal may be filled only by a majority vote of the directors then in office.
Our Certificate of Incorporation provides that directors may be removed only
for cause upon the vote of at least two-thirds of the securities entitled to
vote in the election of directors.

No Stockholder Action by Written Consent; Limitations on Calling Special
Meetings.  Our Certificate of Incorporation and Bylaws also provide that all
actions taken by stockholders must be taken at an annual or special meeting of
stockholders and that stockholders may not take actions by written consent.
Special meetings of stockholders may be called only by specified officers of
Westwood or by the Board of Directors.

Amendments to the Certificate of Incorporation and Bylaws.  Our Certificate
of Incorporation generally provides that the Bylaws and certain provisions of
our Certificate of Incorporation may be altered, amended or repealed by the
affirmative vote of the holders of at least two-thirds of our securities
entitled to vote in the election of directors. However, our Bylaws may be
altered, amended or repealed by a majority vote of our Board of Directors.

Preferred Stock.  Our Board of Directors could issue a series of preferred
stock that could, depending on the terms of such series, delay, defer or
prevent a change in control of Westwood. Our Board of Directors will make any
determination to issue such shares based on its judgment as to the best
interests of Westwood and its stockholders. Our Board of Directors, in so
acting, could issue preferred stock having terms that could discourage an
acquisition attempt through which an acquiror may be able to change the
composition of our Board of

59

Directors, including a tender offer or other transaction that some, or a
majority, of our stockholders might believe to be in their best interests or in
which stockholders might receive a premium for their stock over the
then-current market price of such stock.

Delaware Business Combination Statute.  Section 203 of the Delaware General
Corporation Law applies to us. Section 203 provides that, except for
transactions specified in Section 203, a corporation will not engage in any
"business combination" with any "interested stockholder" for a three-year
period after the date that the stockholder became an interested stockholder
unless:

.  before the date that the stockholder became an interested stockholder, the
Board approved either the business combination or the transaction which
resulted in the stockholder becoming an interested stockholder;

.  upon completion of the transaction which resulted in the stockholder
becoming an interested stockholder, the interested stockholder owned at
least 85% of the voting stock of the corporation outstanding at the time
the transaction commenced, excluding for purposes of determining the
number of shares outstanding, shares owned by:

--persons who are both directors and officers; or

--employee stock plans in some circumstances; or

.  on or after the date that the stockholder became an interested
stockholder, the business combination is approved by the Board of the
corporation and authorized at an annual or special meeting of stockholders
by the affirmative vote of at least two-thirds of the outstanding voting
stock that is not owned by the interested stockholder.

A "business combination" includes a merger, consolidation, asset sale or
other transaction resulting in a financial benefit to an interested
stockholder. An "interested stockholder" is a person who, together with
affiliates and associates, owns (or within three years, did own) 15% or more of
a corporation's outstanding voting stock.

Section 203 makes it more difficult under some circumstances for an
interested stockholder to effect a business combination with us for a
three-year period, although our stockholders may elect to exclude us from the
restrictions imposed under Section 203.

The restrictions imposed by Section 203 will not apply to a corporation in
some circumstances, including if:

.  the corporation's original certificate of incorporation contains a
provision expressly electing not to be governed by Section 203; or

.  twelve months have passed after the corporation, by action of its
stockholders holding a majority of the shares entitled to vote, amends its
certificate of incorporation expressly electing not to be governed by
Section 203.

We have not elected to opt out of Section 203. Thus, the restrictions
imposed by Section 203 will apply to us.

Tax Indemnification Exposure.  The tax separation agreement between SWS and
us provides that if, as a result of our actions, a change-in-control of us
triggers application of Section 355(e) of the Code, we would be liable to pay
SWS the amount of any corporate income taxes for which SWS becomes liable
solely by reason of application of Section 355(e) of the Code and without
consideration of any other tax attribute of SWS. This provision may have an
anti-takeover effect. See "Relationship Between SWS and Westwood After the
Spin-off -- Tax Separation Agreement."

60

Liability and Indemnification of Directors and Officers

Delaware General Corporation Law, our Certificate of Incorporation and our
Bylaws contain provisions relating to the limitation of liability and
indemnification of our directors and officers. In addition, we will enter into
indemnification agreements with each of our directors and executive officers
prior to completion of the spin-off.

Our Certificate of Incorporation provides that our directors are not
personally liable to us or our stockholders for monetary damages for breach of
their fiduciary duties as directors to the fullest extent permitted by Delaware
law. Existing Delaware law permits the elimination or limitation of directors'
personal liability to us or our stockholders for monetary damages for breach of
their fiduciary duties as directors, except liability for:

.  any breach of a director's duty of loyalty to us or our stockholders;

.  acts or omissions not in good faith or involving intentional misconduct or
a knowing violation of law;

.  any transaction from which a director derived improper personal benefit;

.  the unlawful payment of dividends; and

.  unlawful stock repurchases or redemptions.

Because of these exculpation provisions, stockholders may be unable to
recover monetary damages against directors for actions taken by them that
constitute negligence or that otherwise violate their fiduciary duties as
directors, although it may be possible to obtain injunctive or other equitable
relief with respect to such actions. If equitable remedies are not available to
stockholders, stockholders may not have an effective remedy against a director
in connection with the director's conduct.

Our Certificate of Incorporation also provides that we will indemnify and
hold harmless any person who was or is a party or is threatened to be made a
party to, or is involved in, any threatened, pending or completed civil,
criminal, administrative or investigative action, suit or proceeding to the
fullest extent permitted by Delaware law by reason of the fact that the person
is or was (i) one of our directors or officers or (ii) serving at our request
as a director, officer, employee or agent of another corporation, partnership,
joint venture, trust or other enterprise. We may also pay the expenses incurred
in connection with any such proceeding in advance of its final disposition to
the fullest extent authorized by Delaware law.

Additionally, we will seek to obtain directors and officers liability
insurance prior to the spin-off.

Transfer Agent

The transfer agent and registrar for our common stock is Computershare Trust
Company, Inc. The contact information for the transfer agent and registrar is:

350 Indiana Street, Suite 800
Golden, Colorado 80401
Telephone: 303-262-0600

61

WHERE YOU CAN FIND MORE INFORMATION

We have filed with the SEC a Form 10 with respect to the shares of our
common stock that SWS's stockholders will receive in the spin-off. This
information statement does not contain all of the information contained in the
Form 10 and the exhibits and schedules to the Form 10. Some items are omitted
in accordance with the rules and regulations of the SEC. For additional
information relating to us and the spin-off, reference is made to the Form 10
and the exhibits to the Form 10, which are on file at the offices of the SEC.
Statements contained in this information statement as to the contents of any
contract or other document referred to are not necessarily complete and in each
instance, if the contract or document is filed as an exhibit, reference is made
to the copy of the contract or other documents filed as an exhibit to the Form
10. Each statement is qualified in all respects by the relevant reference.

You may inspect and copy the Form 10 and the exhibits to the Form 10 that we
have filed with the SEC at the SEC's Public Reference Room at 450 Fifth Street,
N.W., Washington, DC 20549. Please call the SEC at 1-800-SEC-0330 for further
information on the Public Reference Room. In addition, the SEC maintains an
Internet site at http://www.sec.gov, from which you can electronically access
the Form 10, including the exhibits and schedules to the Form 10.

After the spin-off, we will be required to comply with the reporting
requirements of the Exchange Act and to file with the SEC reports, proxy
statements and other information as required by the Exchange Act. Additionally,
we will be required to provide annual reports containing audited financial
statements to our stockholders in connection with our annual meetings of
stockholders. After the spin-off, these reports, proxy statements and other
information will be available to be inspected and copied at the public
reference facilities of the SEC or obtained by mail or over the Internet from
the SEC, as described above. We expect to receive approval, subject to official
notice of issuance, to have our common stock listed on the NYSE under the
symbol "WHG." When our common stock commences trading on the NYSE, such
reports, proxy statements and other information will be available for
inspection at the offices of the NYSE, 11 Wall Street, New York, New York 10005.

62

INDEX TO FINANCIAL STATEMENTS

Page
----

Audited Consolidated Financial Statements

Report of Independent Public Accountants...................................  F-2

Consolidated Balance Sheets as of December 31, 2001 and 2000...............  F-3

Consolidated Statements of Income for the years ended December 31, 2001,
2000 and 1999............................................................  F-4

Consolidated Statements of Stockholders' Equity for the years ended
December 31, 2001, 2000 and 1999.........................................  F-5

Consolidated Statements of Cash Flows for the years ended December 31,
2001, 2000 and 1999......................................................  F-6

Notes to Consolidated Financial Statements.................................  F-7

Unaudited Consolidated Financial Statements

Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001..... F-18

Consolidated Statements of Income for the three months ended March 31,
2002 and 2001............................................................ F-19

Consolidated Statements of Cash Flows for the three months ended March 31,
2002 and 2001............................................................ F-20

Notes to Interim Consolidated Financial Statements......................... F-21

F-1

Report of Independent Public Accountants

The Board of Directors and Stockholders
Westwood Holdings Group, Inc.:

We have audited the accompanying consolidated balance sheets of Westwood
Holdings Group, Inc. and subsidiaries as of December 31, 2001 and 2000, and the
related consolidated statements of income, stockholders' equity, and cash flows
for each of the three years in the period ended December 31, 2001. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.

We conducted our audits in accordance with auditing standards generally
accepted in the United States. Those standards require that we plan and perform
the audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.

In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Westwood Holdings Group,
Inc. and subsidiaries as of December 31, 2001 and 2000, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 2001, in conformity with accounting principles generally
accepted in the United States.

/s/ Arthur Andersen LLP
Dallas, Texas,
February 1, 2002

F-2

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
As of December 31, 2001 and 2000
(in thousands, except par values and share amounts)

2001    2000
-------  -------

ASSETS
------
Current Assets:
Cash and cash equivalents......................................................... $   149  $ 4,283
Accounts receivable...............................................................   2,397    2,760
Investments, at market value......................................................  15,571    8,236
-------  -------
Total current assets..........................................................  18,117   15,279
-------  -------
Goodwill, net of accumulated amortization of $640 in 2001 and $567 in 2000........   2,302    2,375
Other Assets, net....................................................................     634      446
-------  -------
Total assets.................................................................. $21,053  $18,100
=======  =======

LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
Current Liabilities:
Accounts payable and accrued liabilities.......................................... $   876  $   532
Compensation and benefits payable.................................................   3,986    3,162
Income taxes payable..............................................................   2,028    1,479
-------  -------
Total current liabilities.....................................................   6,890    5,173
Other Liabilities....................................................................     131      125
-------  -------
Total liabilities.............................................................   7,021    5,298
Stockholders' Equity:
Common stock of Westwood Holdings Group, Inc., $0.01 par value, authorized 20,000
shares, issued and outstanding 5,374 shares at December 31, 2001................      --       --
Common stock of Westwood Management Corporation, $0.10 par value, authorized
100,000 shares, issued and outstanding 6,862 shares at December 31, 2000........      --        1
Common stock of Westwood Trust, $0.10 par value, authorized 1,700,000 shares,
issued and outstanding 1,655,500 shares at December 31, 2000....................      --      165
Additional paid-in capital........................................................   9,469    5,798
Notes receivable from stockholders................................................  (3,536)      --
Retained earnings.................................................................   8,099    6,838
-------  -------
Total stockholders' equity....................................................  14,032   12,802
-------  -------
Total liabilities and stockholders' equity........................................ $21,053  $18,100
=======  =======

The accompanying notes are an integral part of these consolidated financial
statements.

F-3

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
For the Years Ended December 31, 2001, 2000, and 1999
(in thousands, except per share amounts)

2001    2000    1999
------- ------- -------

Advisory fees............................................ $14,918 $12,038 $ 8,650
Trust fees...............................................   3,755   3,079   2,282
Other revenues...........................................     914   1,019     404
------- ------- -------
Total revenues....................................  19,587  16,136  11,336
------- ------- -------
Employee compensation and benefits.......................   8,042   6,890   5,345
Equity based compensation charge.........................   3,976      --      --
Sales and marketing......................................     485     452     425
Information technology...................................     818     730     748
Professional services....................................     702     281     239
General and administrative...............................   1,206   1,171   1,176
------- ------- -------
Total expenses....................................  15,229   9,524   7,933
------- ------- -------
Income before income taxes...............................   4,358   6,612   3,403
Provision for income tax expense.........................   3,097   2,628   1,469
------- ------- -------
Net income............................................... $ 1,261 $ 3,984 $ 1,934
======= ======= =======
Earnings per share:
Earnings per share--basic............................. $234.68 $741.45 $359.90
======= ======= =======
Earnings per share--diluted........................... $234.68 $741.45 $359.90
======= ======= =======

The accompanying notes are an integral part of these consolidated financial
statements.

F-4

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
For the Years Ended December 31, 2001, 2000, and 1999
(in thousands)

Westwood    Westwood
Holdings   Management   Westwood                Notes
Group, Inc. Corporation   Trust    Additional  Receivable
Common      Common      Common    Paid-In       from     Retained Stockholders'
Stock, PAR  Stock, PAR  Stock, PAR  Capital   Shareholders Earnings    Equity
----------- ----------- ---------- ---------- ------------ -------- -------------

BALANCE, December 31, 1998....................    $ --        $  1       $ 165      $5,386     $    --     $  920     $ 6,472
Net income.................................      --          --          --          --          --      1,934       1,934
Noncash contributions......................      --          --          --         184          --         --         184
----        ----       -----      ------     -------     ------     -------
BALANCE, December 31, 1999....................      --           1         165       5,570          --      2,854       8,590
Net income.................................      --          --          --          --          --      3,984       3,984
Noncash contributions......................      --          --          --         228          --         --         228
----        ----       -----      ------     -------     ------     -------
BALANCE, December 31, 2000....................      --           1         165       5,798                  6,838      12,802
Formation of Westwood Holdings Group, Inc..      --          (1)       (165)        166          --         --          --
Net income.................................      --          --          --          --          --      1,261       1,261
Notes issued to shareholders (Note 12).....      --          --          --          --      (3,536)        --      (3,536)
Noncash contributions (Note 12)............      --          --          --       3,505          --         --       3,505
----        ----       -----      ------     -------     ------     -------
BALANCE, December 31, 2001....................    $ --        $ --       $  --      $9,469     $(3,536)    $8,099     $14,032
====        ====       =====      ======     =======     ======     =======

The accompanying notes are an integral part of these consolidated financial
statements.

F-5

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2001, 2000, and 1999
(in thousands)

2001      2000      1999
--------  --------  --------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income............................................................ $  1,261  $  3,984  $  1,934
Adjustments to reconcile net income to net cash provided by operating
activities:
Depreciation and amortization.......................................      157       167       175
SWS expense allocations not reimbursed by the Company...............       85       228       184
Equity based compensation charge....................................    3,976        --        --
Purchases of investments............................................   (1,493)   (3,955)  (17,059)
Sales of investments................................................      817     5,826    14,367
Change in operating assets and liabilities--
Increase in accounts receivable...................................      (37)   (1,088)     (245)
Decrease in other assets..........................................      181        68       247
Increase (decrease) in accounts payable and accrued liabilities...      344       223      (316)
Increase in compensation and benefits payable.....................      824     1,120       136
Increase (decrease) in income taxes payable.......................      549       876      (430)
Increase (decrease) in other liabilities..........................        6       (41)      (71)
--------  --------  --------
Net cash provided by operating activities.......................    6,670     7,408    (1,078)
--------  --------  --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of money market funds.......................................  (19,159)  (16,643)   (3,942)
Sales of money market funds...........................................   12,500    12,942     3,959
Purchase of fixed assets..............................................      (52)       (6)      (67)
--------  --------  --------
Net cash used in investing activities...........................   (6,711)   (3,707)      (50)
--------  --------  --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Note receivable.......................................................   (4,093)       --        --
--------  --------  --------
Net cash used in financing activities...........................   (4,093)       --        --
--------  --------  --------
NET INCREASE (DECREASE) IN CASH                                           (4,134)    3,701    (1,128)
Cash, beginning of year................................................    4,283       582     1,710
--------  --------  --------
Cash, end of year...................................................... $    149  $  4,283  $    582
========  ========  ========

The accompanying notes are an integral part of these consolidated financial
statements.

F-6

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1.  DESCRIPTION OF THE BUSINESS:

Formation of Westwood Holdings Group, Inc. (the "Company")

On December 12, 2001, the Company was formed by SWS Group, Inc. ("SWS") to
be a holding company for two of the businesses that substantially comprised the
asset management segment of SWS. Prior to December 14, 2001, the Company had no
assets or operations. On December 14, 2001, SWS contributed all of the issued
and outstanding common stock of two wholly owned subsidiaries, Westwood
Management Corporation ("Management") and Westwood Trust ("Trust") to the
Company and announced its intention to spin the Company off to SWS's
shareholders. For financial statement purposes, the Company accounted for the
contribution of Management and Trust to the Company as a reorganization of
entities under common control at historical cost.

Accordingly, the accompanying financial statements of the Company include
the financial statements of Management and Trust on a combined basis for
periods prior to their contribution to the Company and on a consolidated basis
for the period on and after their contribution to the Company.

On December 14, 2001, five of the Company's executive officers acquired from
SWS 19.82% of the Company's issued and outstanding common stock (Note 12).

Nature of Operations

The Company manages investment assets and provides services for its clients
through two subsidiaries, Management and Trust. Management provides investment
advisory services to corporate pension funds, public retirement plans,
endowments and foundations, mutual funds and clients of Trust. Trust provides
to institutions and high net worth individuals trust and custodial services and
participation in common trust funds that it sponsors. Revenue is largely
dependent on the total value and composition of assets under management
("AUM"). Accordingly, fluctuations in financial markets and in the composition
of AUM impact revenue and results of operations.

Management is a registered investment advisor under the Investment Advisors
Act of 1940. Trust is chartered and regulated by the Texas Department of
Banking.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation

The accompanying consolidated financial statements are presented using the
accrual basis of accounting. All significant intercompany balances and
transactions have been eliminated.

Since the Company was operated as a part of SWS during the periods
presented, the accompanying financial information may not necessarily reflect
what the results of operations, financial position, or cash flows of the
Company would have been if the Company had been a separate, independent company
during those periods. Within these consolidated financial statements and
accompanying notes historical transactions and events involving Management and
Trust are discussed as if the Company were the entity involved in the
transaction or event unless the context indicates otherwise.

Use of Estimates

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported

F-7

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

amounts of assets and liabilities, the disclosure of contingent assets and
liabilities at the date of the consolidated financial statements and the
reported amounts of revenues and expenses during the reporting period. Actual
results could differ from those estimates.

Revenue Recognition

Investment advisory and trust fees are recognized as services are provided.
These fees are determined in accordance with contracts between the Company's
subsidiaries and their clients and are generally based on a percentage of AUM.

Cash and Cash Equivalents

Cash and cash equivalents consist of short-term, highly liquid investments
with maturities of three months or less at acquisition and are recorded at
cost, which approximates market value.

Investments

Money market securities are classified as available for sale securities. All
other marketable securities are classified as trading securities. All
securities are carried at quoted market value on the accompanying balance
sheet. Net unrealized holding gains or losses on these investments are
reflected as a component of other revenues.

Property and Equipment

Property and equipment are stated at cost, less accumulated depreciation,
and have been included in Other Assets in the accompanying consolidated balance
sheets. Depreciation of furniture and equipment is provided over the estimated
useful lives of the assets (from 3 to 7 years), and depreciation on leasehold
improvements is provided over the lease term, which ends in 2004, using the
straight-line method.

Goodwill

Goodwill, which represents the excess of purchase price over fair value of
net assets acquired when SWS purchased Management and Trust in 1993, is
amortized on a straight-line basis over forty years. In June 2001, the
Financial Accounting Standards Board ("FASB") issued SFAS No. 142 "Goodwill and
Other Intangible Assets." SFAS No. 142 requires that goodwill and intangible
assets with indefinite useful lives will no longer be amortized, but will be
tested for impairment at least annually. The statement also provides specific
guidance for impairment testing. Provisions of this statement are required to
be applied starting with fiscal years beginning after December 15, 2001. SFAS
No. 142 is required to be applied at the beginning of an entity's fiscal year
to all goodwill and other intangible assets recognized in the financial
statements at that date. Therefore, the Company will apply the provisions of
SFAS No. 142 in the first quarter of fiscal 2002. Under the new standard, the
Company will cease amortizing its goodwill, and will review the remaining
goodwill for impairment in accordance with guidelines set forth in the
standard. Amortization expense was approximately $73,000 in each of 2001, 2000
and 1999.

The Company estimates that the adoption of SFAS No 142 will not have a
material impact on the consolidated financial statements.

Federal Income Taxes

Prior to the Spin-off, the Company was and will join with SWS and its other
subsidiaries in filing a consolidated Federal income tax return. SWS's
consolidated Federal income tax expense was allocated to the Company as if the
Company filed a separate consolidated Federal income tax return, assuming the
utilization of

F-8

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

tax-planning strategies consistent with those utilized by SWS. Upon completion
of the Spin-off, the Company will cease to be a member of the SWS consolidated
affiliated group and, as a result, will discontinue filing a consolidated
Federal income tax return with SWS.

Deferred income tax assets and liabilities are determined based on the
differences between the financial statement and income tax bases of assets and
liabilities as measured at enacted income tax rates that will be in effect when
these differences reverse, and are included in Other Assets in the accompanying
consolidated balance sheets. Deferred income tax expense is generally the
result of changes in the deferred tax assets and liabilities.

Stock-Based Compensation

Prior to the Spin-off, employees of the Company were granted options to
acquire SWS common stock by SWS. At Spin-off, these options will become fully
vested. The Company accounts for employee stock-based compensation using the
intrinsic value method of accounting prescribed by Accounting Principles
Bulletin ("APB") Opinion No. 25, "Accounting for Stock Issued to Employees". In
accordance with SFAS No. 123, "Accounting for Stock-Based Compensation," the
Company provides pro forma disclosures of net income and earnings per share for
stock option grants as if the fair value based method had been applied (Note 7).

Fair Value of Financial Instruments

The estimated fair values of the Company's financial instruments have been
determined by the Company using available information. The fair value amounts
discussed in Note 4 are not necessarily indicative of either the amounts the
Company would realize upon disposition of these instruments or the Company's
intent or ability to dispose of these assets. The estimated fair value of cash
and cash equivalents, as well as accounts receivable and payable, approximates
their carrying value due to their short-term maturities. The carrying amount of
investments designated as "trading" equals their fair value which is equal to
prices quoted in active markets.

3.  ACCOUNTS RECEIVABLE:

The Company's trade accounts receivable balances do not include any
allowance for doubtful accounts nor has any bad debt expense attributable to
trade receivables been recorded for the years ended December 31, 1999 through
2001. The majority of the balances are advisory and trust fees receivable from
customers.

F-9

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

4.  INVESTMENTS:

Investments held as trading securities and investments held as available for
sale securities are as follows (in thousands):

Gross      Gross    Gross
Unrealized Unrealized Market
Cost     Gains      Losses   Value
------- ---------- ---------- -------

December 31, 2001:
U.S. Government and Government agency obligations. $ 1,550    $26        $ --    $ 1,576
Funds:
Money market..................................  11,948     --          --     11,948
Equity........................................     901     --         106        795
Bond..........................................   1,210     42          --      1,252
-------    ---        ----    -------
Marketable securities...................... $15,609    $68        $106    $15,571
=======    ===        ====    =======
December 31, 2000:
U.S. Government and Government agency obligations. $ 1,151    $ 8        $ --    $ 1,159
Funds:
Money market..................................   5,289     --          --      5,289
Equity........................................     400     --          --        400
Bond..........................................   1,153     14          --      1,167
Real estate investment trusts ("REIT")............     200     21          --        221
-------    ---        ----    -------
Marketable securities...................... $ 8,193    $43        $ --    $ 8,236
=======    ===        ====    =======

All of these investments are carried at market value. The money market funds
are available for sale securities. The other investments are trading securities.

F-10

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

5.  INCOME TAXES:

Income tax expense for the years ended December 31, 2001, 2000 and 1999
(effective rate of 71.1% in 2001, 39.7% in 2000 and 43.2% in 1999) differs from
the amount that would otherwise have been calculated by applying the Federal
corporate tax rate (34% in 2001, 2000 and 1999) to income before income taxes.
The Company's tax expense was calculated based on SWS's federal corporate tax
rate of 35% in 2001, 2000 and 1999. The difference between the Federal
corporate tax rate of 34% and the effective tax rate is comprised of the
following (in thousands):

2001   2000   1999
------ ------ ------

Income tax expense at the statutory rate..... $1,482 $2,248 $1,157
State franchise and income taxes.............    336    274    237
Nondeductible equity-based compensation......  1,197     --     --
Other, net...................................     82    106     75
------ ------ ------
$3,097 $2,628 $1,469
====== ====== ======

Income taxes as set forth in the consolidated statements of income consisted
of the following components (in thousands):

2001   2000    1999
------ ------  ------

State - current.............................. $  490 $  425  $  363
State - deferred.............................     27     (4)      1
Federal - current............................  2,369  2,235   1,097
Federal - deferred...........................    211    (28)      8
------ ------  ------
Provision for income tax expense............. $3,097 $2,628  $1,469
====== ======  ======

The tax effects of temporary differences that give rise to the deferred tax
assets and deferred tax liabilities as of December 31, 2001 and 2000 are
presented below (in thousands):

2001 2000
---- ----

Difference between tax basis and value of note receivable from stockholders $214 $ --
Depreciation at rates different for tax than for financial reporting.......   34   19
Other......................................................................   10    1
---- ----
Total deferred tax assets - included in other assets on the consolidated
balance sheets........................................................... $258 $ 20
==== ====

As a result of the Company's history of taxable income and the nature of the
items from which deferred tax assets are derived, management believes that it
is more likely than not that the Company will realize the benefit of the
deferred tax assets.

Cash paid for income taxes was approximately $2,270,000, $1,643,000, and
$1,964,000 in 2001, 2000, and 1999, respectively.

6.  REGULATORY CAPITAL REQUIREMENTS:

Trust is subject to the capital requirements of the Texas Department of
Banking, and has a minimum capital requirement of $1 million. Trust had total
stockholders' equity of approximately $3.7 million, which is $2.7 million in
excess of its minimum capital requirement at December 31, 2001.

Trust is limited under applicable Texas law in the payment of dividends to
undivided profits: that part of equity capital equal to the balance of net
profits, income, gains, and losses since its formation date minus subsequent
distributions to stockholders and transfers to surplus or capital under share
dividends or appropriate Board resolutions. At December 31, 2001, Trust had
undivided profits of approximately $385,000.

F-11

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

7.  EMPLOYEE BENEFITS:

Stock Option Plan

At December 31, 2001, 2000 and 1999, the Company's employees participated in
the SWS Stock Option Plan (the "1996 Plan"). The 1996 Plan reserves shares of
the SWS common stock for issuance to eligible employees of SWS or its
subsidiaries. Shares reserved under this option plan reflect all stock
dividends issued by SWS. Options granted under the 1996 Plan have a maximum
ten-year term, and the vesting period is determined on an individual basis by
the Stock Option Committee of SWS's Board of Directors.

A summary of the status of SWS's outstanding stock options issued to
employees of the Company as of December 31, 2001, 2000 and 1999 is presented
below:

2001                2000                1999
------------------- ------------------- -------------------
Weighted            Weighted            Weighted
Average             Average             Average
Underlying Exercise Underlying Exercise Underlying Exercise
Shares    Price     Shares    Price     Shares    Price
---------- -------- ---------- -------- ---------- --------

Outstanding, beginning of period......    83,033   $24.41    56,854    $24.49    33,200    $19.35
Granted............................    31,000    18.99    30,950     28.75    22,350     32.02
Exercised..........................    (1,103)   15.26    (2,065)    15.99    (1,842)    18.46
Forfeited..........................    (3,472)   29.40    (8,149)    26.89        --        --
Adjustment for stock dividends.....     8,132       --     5,443        --     3,146        --
--------            -------             -------
Outstanding, end of period............   117,590   $22.92    83,033    $24.41    56,854    $24.49
========            =======             =======
Exercisable, end of period.........    49,283             25,717              12,199

Weighted-average fair value of options
granted during fiscal year..........  $  10.52            $ 23.08             $ 26.31

The following table summarizes information for the stock options outstanding
at December 31, 2001:

Options Outstanding            Options Exercisable
-------------------------------------- ---------------------
Weighted-             Weighted-
Weighted-Average  Average               Average
Range of Exercise      Number       Remaining     Exercise    Number    Exercise
Prices               Outstanding Contractual Life   Price   Exercisable   Price
------               ----------- ---------------- --------- ----------- ---------

$15.26 - 18.99        66,677      7.8 years      $17.38     30,516     $16.11
28.75 - 32.02        50,913      8.2             30.17     18,767      30.72
-------------       -------      ---------      ------     ------     ------
$15.26 - 32.02       117,590      8.0            $22.92     49,283     $21.67

F-12

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

The Company applies APB 25 and related interpretations in accounting for its
option plans. Accordingly, no compensation cost has been recognized for its
stock options. Had compensation cost been determined valuing the options using
the Black-Scholes option pricing model as provided in SFAS No. 123, the
Company's net income and earnings per share would have been the pro forma
amounts indicated below for the years ended December 31, 2001, 2000 and 1999:

2001    2000    1999
------- ------- -------

Net income (in thousands)-
As reported.................................... $ 1,261 $ 3,984 $ 1,934
Pro forma......................................     852   3,712   1,819

Earnings per share-
As reported - basic............................  234.68  741.45  359.90
As reported - diluted..........................  234.68  741.45  359.90
Pro forma - basic..............................  158.53  690.68  338.44
Pro forma - diluted............................  158.53  690.68  338.44

The fair value of each option was estimated on the date of grant using the
Black-Scholes option-pricing model with the following assumptions for 2001,
2000 and 1999:

2001          2000          1999
------------- ------------- -------------

Expected volatility...........      56%           81%          100%
Risk-free interest rate.......     4.85%         5.72%         5.82%
Expected dividend yield.......     1.77%         0.89%         0.68%
Expected life................. 5 to 10 years 5 to 10 years 5 to 10 years

As of December 31, 2001, there have been no options granted to acquire the
common stock of the Company or either of its subsidiaries.

Profit Sharing/401(k) Plan

SWS has a defined contribution profit sharing/401(k) plan that covers
substantially all of the Company's employees. SWS provided profit sharing plan
benefits become fully vested after six years of service by the participant.
Profit sharing contributions were accrued and funded at SWS's discretion.
Profit sharing expense related to the Company's employees for 2001, 2000 and
1999 was approximately $38,000, $251,000 and $353,000, respectively. The 401(k)
portion of the plan began in January 2000, and SWS provides a match of up to 4%
of eligible compensation. SWS's matching contributions vest immediately and the
expense totaled approximately $127,000 in 2001 and $117,000 in 2000.

8.  EARNINGS PER SHARE:

A reconciliation between the weighted average shares outstanding used in the
basic and diluted EPS computations is as follows (in thousands, except share
and per share amounts):

2001    2000    1999
------- ------- -------

Net income................................... $ 1,261 $ 3,984 $ 1,934
Weighted average shares outstanding - basic
and diluted................................   5,374   5,374   5,374
Earnings per share - basic...................  234.68  741.45  359.90
Earnings per share - diluted.................  234.68  741.45  359.90

The Company has no outstanding options, warrants, convertible securities, or
other potential common shares that were antidilutive or excluded from the
diluted EPS calculations.

F-13

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

9.  COMMITMENTS AND CONTINGENCIES:

The Company leases its offices under noncancelable operating lease
agreements. Rental expense for facilities and equipment leases for fiscal years
2001, 2000 and 1999 aggregated approximately $591,000, $601,000 and $645,000,
respectively, and is included in General and Administrative expenses in the
accompanying consolidated statements of income.

At December 31, 2001, the future rental payments for the noncancelable
operating leases for each of the following three years and thereafter follow
(in thousands):

Year ending:
2002........................................... $  498
2003...........................................    477
2004...........................................    264
Thereafter........................................     --
------
Total payments due......................... $1,239
======

In the normal course of business, the Company has been named as a defendant
in a lawsuit. Management believes that resolution of this claim will not result
in any material adverse effect on the Company's consolidated financial position
or results of operations.

10.  AFFILIATE TRANSACTIONS:

SWS, through its principal subsidiary, SWS Securities, Inc., provided
accounting, technology and administrative services for the Company in 2001,
2000 and 1999. Management serves as investment advisor for the SWS cash reserve
funds, and Trust serves as custodian for the SWS cash reserve funds and as
trustee for the assets of the SWS Deferred Compensation Plan.

The accompanying financial statements include the following revenues (in
thousands) from transactions with SWS and its subsidiaries other than
Management and Trust:

2001 2000 1999
---- ---- ----

Advisory fees..................................... $441 $329 $263
Trust fees........................................  234  167  115
==== ==== ====

The accompanying financial statements include the following expenses (in
thousands) for charges from SWS and its subsidiaries other than Management and
Trust.

2001 2000 1999
---- ---- ----

Employee benefits................................. $190 $169 $169
Information technology............................  269  232  228
Professional services.............................   34   35   34
General and administrative........................   62   55   52
---- ---- ----
$555 $491 $483
==== ==== ====

These expenses have been allocated from SWS on the basis of the Company's
relative number of employees, relative revenues, or other allocation bases.
These allocated expenses represent services provided by SWS including human
resources, accounting, internal audit, income tax, legal, insurance, and
information technology. Including the allocation of SWS expenses, the expenses
in these consolidated financial statements include all of the costs
attributable to the Company's operations. However, because the Company operated
as a subsidiary of SWS and because the expenses included in these consolidated
financial statements include allocations of SWS's expenses, the expenses
included in these consolidated statements do not purport to be the expenses
that the Company would have incurred had it been an independent company.

F-14

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

Had the Company been an independent public company in 2001, management
estimates that total expenses would have been approximately $800,000 higher
than those reflected in these consolidated financial statements. The principal
reasons for the increase in expenses are increased public company compliance
costs, employee compensation, insurance costs, legal expenses, and accounting
and payroll costs.

The foregoing estimate of higher expenses is not necessarily an accurate
measure of what the Company's stand-alone expenses would have been in 2001 or
will be in the future, and the Company's expenses could be higher. The costs
incurred by the Company in the future will depend on the market for these
services when they are actually purchased and the size and nature of the
Company's future operations. Following a transition period, the Company expects
to stop acquiring services from SWS and to independently purchase all services
currently being provided by SWS.

If one or more persons acquire a 50% or greater interest in SWS or the
Company as part of a plan or series of related transactions that included the
spin-off, SWS would be taxed on the spin-off as if the spin-off had been a
sale. Any acquisition that occurs during the four-year period beginning two
years before the spin-off will be presumed to be a part of a plan or a series
of transactions that included the spin-off. SWS or the Company, whichever is
responsible for triggering a change-in-control, will bear any related taxes
that arise.

11.  SEGMENT REPORTING:

The Company operates two segments: the Management segment and the Trust
segment. Such segments are managed separately based on types of products and
services offered and their related client bases. The Company evaluates the
performance of its segments based primarily on income before income taxes.

Management

The Management segment is composed of Management, which provides investment
advisory services to corporate pension funds, public retirement plans,
endowments and foundations, and investment subadvisory services to mutual funds
and clients of Trust.

Trust

The Trust segment is composed of Trust, which provides to institutions and
high net worth individuals trust and custodial services and participation in
common trust funds that Trust sponsors.

Corporate

Westwood Holdings Group, Inc. has no operations.

F-15

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

All accounting policies are the same as those described in the summary of
significant accounting policies. Intersegment balances that eliminate in
consolidation have been applied to the appropriate segment.

Management Trust  Corporate Eliminations Consolidated
---------- ------ --------- ------------ ------------
(in thousands)

December 31, 2001
Net revenues from external sources.  $15,663   $3,917  $     7    $     --     $19,587
Net intersegment revenues..........    1,187       --    4,994      (6,181)         --
Net interest revenue...............      432      184        7          --         623
Depreciation and amortization......      127       30       --          --         157
Income (loss) before income taxes..    7,776      550    1,026      (4,994)      4,358
Segment assets.....................   17,306    4,208   13,797     (14,258)     21,053
Expenditures for long-lived assets.       48        4       --          --          52

December 31, 2000
Net revenues from external sources.  $12,832   $3,304  $    --    $     --     $16,136
Net intersegment revenues..........      921       --       --        (921)         --
Net interest revenue...............      341      149       --          --         490
Depreciation and amortization......      137       30       --          --         167
Income (loss) before income taxes..    6,073      539       --          --       6,612
Segment assets.....................   14,934    3,692       --        (526)     18,100
Expenditures for long-lived assets.        4        2       --          --           6

December 31, 1999
Net revenues from external sources.  $ 9,030   $2,306  $    --    $     --     $11,336
Net intersegment revenues..........      578       --       --        (578)         --
Net interest revenue...............      103      120       --          --         223
Depreciation and amortization......      145       30       --          --         175
Income (loss) before income taxes..    3,229      174       --          --       3,403
Segment assets.....................    9,041    3,153       --        (483)     11,711
Expenditures for long-lived assets.       67       --       --          --          67

12.  EQUITY-BASED COMPENSATION:

On December 14, 2001, SWS sold 1,065 shares of the Company's common stock,
constituting 19.82% of the Company's outstanding common stock, to five of the
Company's executive officers for cash consideration of $4,093,000, a price
premised upon an understanding reached in October 2001 that SWS would sell the
shares of the Company's common stock based on their value at September 30,
2001, after applying appropriate valuation discounts. The Company loaned the
executive officers $4,093,000 on a full-recourse basis, evidenced by notes
secured by the stock, payable in nine years and bearing interest at 3.93%.

Because the notes are receivable in connection with the sale of the
Company's common stock, they were recorded at their fair value of $3,536,000 as
an offset to stockholders' equity. The difference between the face amount of
the notes and their fair value is due to the difference between the stated
interest rate and an estimated market interest rate of 6.0%.

The difference between the fair value for financial reporting purposes of
the stock on December 14, 2001, $7,512,000, and the fair value of the note,
$3,536,000, was recorded as an equity-based compensation charge of $3,976,000.
The difference between the value of the stock, $7,512,000, and the cash
consideration paid to SWS of $4,093,000, is an expense incurred by SWS for the
Company and is reflected as an equity-based compensation

F-16

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(Continued)

expense with the offset as a contribution to the Company's additional paid-in
capital. The remainder of the equity-based compensation expense is the
difference between the face and fair value of the notes, $557,000.

The difference between the $4,093,000 paid for the stock and the fair value
of the stock for financial reporting purposes on December 14, 2001, is
attributable to an increase in assets under management and the common stock
prices of comparable public companies between September 30, 2001 and December
14, 2001. The amount of assets under management, which is a factor in
determining the Company's revenues, and the common stock prices of comparable
public companies are significant considerations in estimating the value of the
Company. In addition, the $4,093,000 valuation included a 35% discount for lack
of marketability. For financial accounting purposes, no discount for lack of
marketability was recorded, which accounts for $2,204,000 of the difference
between $7,512,000 and $4,093,000.

13.  CONCENTRATION:

During the year ended December 31, 1999, one customer accounted for
approximately 10% of the Company's revenues.

14.  ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

At December 31, 2001 and 2000, Accounts Payable and Accrued Liabilities
included accrued franchise taxes of approximately $492,000 and $371,000,
respectively.

F-17

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED BALANCE SHEETS
As of March 31, 2002 and December 31, 2001
(in thousands, except par values and share amounts)

March 31,
2002     December 31,
(unaudited)     2001
----------- ------------

ASSETS
Current Assets:
Cash and cash equivalents..................................................   $ 1,013     $   149
Accounts receivable........................................................     2,826       2,397
Investments, at market value...............................................    11,260      15,571
-------     -------
Total current assets...................................................    15,099      18,117
-------     -------
Goodwill, net of accumulated amortization of $640..........................     2,302       2,302
Other Assets, net.............................................................     1,017         634
-------     -------
Total assets...........................................................   $18,418     $21,053
=======     =======
LIABILITIES AND STOCKHOLDERS' EQUITY
Current Liabilities:
Accounts payable and accrued liabilities...................................   $ 1,018     $   876
Compensation and benefits payable..........................................     1,113       3,986
Income taxes payable.......................................................       773       2,028
-------     -------
Total current liabilities..............................................     2,904       6,890
Other Liabilities.............................................................       111         131
-------     -------
Total liabilities......................................................     3,015       7,021
Stockholders' Equity:
Common stock of Westwood Holdings Group, Inc., $0.01 par value, authorized
20,000 shares, issued and outstanding 5,374 shares at March 31, 2002 and
December 31, 2001........................................................        --          --
Additional paid-in capital.................................................     9,469       9,469
Notes receivable from stockholders.........................................    (3,552)     (3,536)
Retained earnings..........................................................     9,486       8,099
-------     -------
Total stockholders' equity.............................................    15,403      14,032
-------     -------
Total liabilities and stockholders' equity.................................   $18,418     $21,053
=======     =======

The accompanying notes are an integral part of these interim consolidated
financial statements.

F-18

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME
(in thousands, except per share amounts)
(unaudited)

For the three months
ended March 31,
--------------------
2002       2001
-------    -------

Advisory fees..................... $ 4,212    $ 3,633
Trust fees........................   1,133        880
Other revenues....................     187        207
-------    -------
Total revenues.................   5,532      4,720

Employee compensation and benefits   2,220      2,089
Sales and marketing...............     120        131
Information technology............     222        241
Professional services.............     367         89
General and administrative........     324        303
-------    -------
Total expenses.................   3,253      2,853

Income before income taxes........   2,279      1,867
Provision for income tax expense..     893        727
-------    -------
Net income........................ $ 1,386    $ 1,140
=======    =======

Earnings per share:
Earnings per share--basic*..... $257.95    $212.14
=======    =======
Earnings per share--diluted*... $257.95    $212.14
=======    =======

--------
*  Earnings per share have not been adjusted for a stock split to be effective
as of an unspecified future date. See Note 4 for disclosure of what EPS
would have been had the stock split been effective as of May 15, 2002.

The accompanying notes are an integral part of these interim consolidated
financial statements.

F-19

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
(unaudited)

For the three months
ended March 31,
---------------------
2002        2001
----------  ---------

CASH FLOWS FROM OPERATING ACTIVITIES:
Net income....................................................................... $    1,386  $   1,140
Adjustments to reconcile net income to net cash provided by operating activities:
Depreciation and amortization..................................................         18         42
Accretion of discount on notes receivable......................................        (16)        --
SWS expense allocations not reimbursed by the Company..........................         --         22
Purchases of investments.......................................................       (293)      (322)
Sales of investments...........................................................        302          1
Change in operating assets and liabilities--
(Increase) decrease in accounts receivable.................................       (429)     1,262
Increase in other assets...................................................       (401)      (137)
Increase in accounts payable and accrued liabilities.......................        142        102
Decrease in compensation and benefits payable..............................     (2,873)    (2,186)
(Decrease) increase in income taxes payable................................     (1,255)       720
(Decrease) increase in other liabilities...................................        (20)        17
----------  ---------
Net cash (used in) provided by operating activities.....................     (3,439)       661
----------  ---------
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of money market funds..................................................     (2,201)      (156)
Sales of money market funds......................................................      6,504          4
Purchase of fixed assets.........................................................         --        (41)
----------  ---------
Net cash provided by (used in) investing activities.....................      4,303       (193)
----------  ---------
CASH FLOWS FROM FINANCING ACTIVITIES:
Net cash provided by (used in) financing activities.....................         --         --
----------  ---------
NET INCREASE IN CASH..............................................................        864        468
Cash, beginning of period.........................................................        149      4,283
----------  ---------
Cash, end of period............................................................... $    1,013  $   4,751
==========  =========

The accompanying notes are an integral part of these interim consolidated
financial statements.

F-20

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)

1.  DESCRIPTION OF THE BUSINESS:

The Company manages investment assets and provides services for its clients
through two subsidiaries, Management and Trust. Management provides investment
advisory services to corporate pension funds, public retirement plans,
endowments and foundations, mutual funds and clients of Trust. Trust provides
to institutions and high net worth individuals trust and custodial services and
participation in common trust funds that it sponsors. Revenue is largely
dependent on the total value and composition of assets under management
("AUM"). Accordingly, fluctuations in financial markets and in the composition
of AUM impact revenue and results of operations.

Management is a registered investment advisor under the Investment Advisors
Act of 1940. Trust is chartered and regulated by the Texas Department of
Banking.

2.  SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

Basis of Presentation

The accompanying consolidated financial statements have been prepared
without audit and reflect all adjustments that, in the opinion of management,
are necessary to present fairly our financial position as of March 31, 2002,
and our results of operations and cash flows for the periods presented. All
such adjustments are normal and recurring in nature. The accompanying
consolidated financial statements have been prepared in accordance with the
instructions for the presentation of interim financial information as
prescribed by the Securities and Exchange Commission (SEC) and, therefore, do
not purport to contain all necessary financial disclosures required by
generally accepted accounting principles that might otherwise be necessary in
the circumstances, and should be read in conjunction with our consolidated
financial statements, and notes thereto, for the year ended December 31, 2001,
included in our annual financial statements included elsewhere herein. Refer to
our accounting policies described in the notes to our annual financial
statements which we consistently followed in preparing this interim financial
information. Operating results for the three months ended March 31, 2002 are
not necessarily indicative of the results for the year ending December 31, 2002
or any future period.

Since the Company was operated as a part of SWS during the periods
presented, the accompanying financial information may not necessarily reflect
what the results of operations, financial position, or cash flows of the
Company would have been if the Company had been a separate, independent company
during those periods. Within these consolidated financial statements and
accompanying notes, historical transactions and events involving Management and
Trust are discussed as if the Company were the entity involved in the
transaction or event unless the context indicates otherwise.

Use of Estimates

The preparation of consolidated financial statements in conformity with
accounting principles generally accepted in the United States requires
management to make estimates and assumptions that affect the reported amounts
of assets and liabilities, the disclosure of contingent assets and liabilities
at the date of the consolidated financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.

F-21

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)

Goodwill

Effective January 1, 2002, the Company adopted the provisions of Statement
of Financial Accounting Standards (SFAS) No. 142, "Goodwill and Other
Intangible Assets." Upon adoption of SFAS 142 the Company discontinued its
amortization of goodwill. Goodwill amortization during the three months ended
March 31, 2001 was approximately $18,000. The adoption of SFAS 142 does not
have a significant impact on the comparability of the Company's earnings per
share or net income.

3.  INVESTMENTS:

Investments held as trading securities and investments held as available for
sale securities are as follows (in thousands):

Gross      Gross    Gross
Unrealized Unrealized Market
Cost     Gains      Losses   Value
------- ---------- ---------- -------

March 31, 2002:
U.S. Government and Government agency obligations $ 1,561    $ 7       $  --    $ 1,568

Funds:
Money market...................................   7,639     --          --      7,639
Equity.........................................     901     --         (94)       807
Bond...........................................   1,224     22          --      1,246
-------    ---       -----    -------
Marketable securities........................ $11,325    $29       $ (94)   $11,260
=======    ===       =====    =======
December 31, 2001:
U.S. Government and Government agency obligations $ 1,550    $26       $  --    $ 1,576

Funds:
Money market...................................  11,948     --          --     11,948
Equity.........................................     901     --        (106)       795
Bond...........................................   1,210     42          --      1,252
-------    ---       -----    -------
Marketable securities........................ $15,609    $68       $(106)   $15,571
=======    ===       =====    =======

All of these investments are carried at market value. The money market funds
are available for sale securities. The other investments are trading securities.

4.  EARNINGS PER SHARE:

Basic earnings per common share is computed by dividing net income available
to common shareholders by the weighted average number of shares outstanding
during the period. The Company had no options outstanding during the quarters
ended March 31, 2002 or 2001. Therefore, there is no difference between basic
earnings per common share and diluted earnings per common share for either
period. The weighted average common shares outstanding used in computing basic
and diluted earnings per common share for the quarters ended March 31, 2002 and
2001, were 5,374 shares for each quarter.

It is expected that the Board of Directors will approve a stock split that
will be accounted for as a stock dividend to be effective as of an undetermined
future date prior to the spin-off based on a formula that will cause

F-22

WESTWOOD HOLDINGS GROUP, INC. AND SUBSIDIARIES

NOTES TO INTERIM CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(Unaudited)

the Company's common stock held by SWS to equal one-fourth the number of shares
of SWS common stock outstanding on the record date of the stock dividend. Were
the stock dividend effective as of May 15, 2002, based on the number of shares
of SWS common stock outstanding at that date, earnings per share would have
been the following pro forma amounts:

Three months   Three months
ended          ended
March 31, 2002 March 31, 2001
-------------- --------------

Earnings per share-
As reported -- basic...    $257.95        $212.14
As reported -- diluted.     257.95         212.14
Pro forma -- basic.....       0.26           0.21
Pro forma -- diluted...       0.26           0.21

5.  SEGMENT REPORTING:

The Company operates two segments: the Management segment and the Trust
segment. Such segments are managed separately based on types of products and
services offered and their related client bases. The Company evaluates the
performance of its segments based primarily on income before income taxes.

Management

The Management segment is composed of Management, which provides investment
advisory services to corporate pension funds, public retirement plans,
endowments and foundations, and investment subadvisory services to mutual funds
and clients of Trust.

Trust

The Trust segment is composed of Trust, which provides to institutions and
high net worth individuals trust and custodial services and participation in
common trust funds that Trust sponsors. Westwood Holdings Group, Inc. has no
operations.

All accounting policies are the same as those described in the summary of
significant accounting policies. Intersegment balances that eliminate in
consolidation have been applied to the appropriate segment.

Management Trust Corporate Eliminations Consolidated
---------- ----- --------- ------------ ------------

March 31, 2002
Net revenues from external sources.    4,349   1,128      55          --        5,532
Net intersegment revenues..........      391      --   1,350      (1,741)          --
Income before income taxes.........    2,097     127   1,405      (1,350)       2,279
Segment assets.....................   14,124   4,059  15,014     (14,779)      18,418

March 31, 2001
Net revenues from external sources.    3,806     914      --          --        4,720
Net intersegment revenues..........      277      --      --        (277)          --
Income before income taxes.........    1,749     118      --          --        1,867
Segment assets.....................   14,238   3,743      --         (66)      17,915

F-23