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The Wall Street Analyst Forum

The Wall Street Analyst Forum. March 2, 2006. Forward – Looking Statements.

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The Wall Street Analyst Forum

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  1. The Wall Street Analyst Forum March 2, 2006

  2. Forward – Looking Statements • This presentation may include statements that are not purely historical facts, as well as other statements including words such as "anticipate," "believe," "plan," "estimate," "expect," "intend," "should," "could," "goal," "target," "designed," "on track," "comfortable with," "optimistic" and other similar expressions. These statements constitute forward-looking statements within the meaning of the federal securities laws. These forward-looking statements are subject to known and unknown risks, uncertainties and other factors which may cause actual results to be materially different from those contemplated by the forward-looking statements. Such factors include the risks and uncertainties referenced in our documents filed with, or furnished to, the Securities and Exchange Commission, including without limitation those identified under the caption "Risk Factors" in our Form 10-K for the year ended December 31, 2005, which together with our other filings can be viewed without charge on the Internet at www.sec.gov. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. You are cautioned not to place undue reliance on forward-looking statements.

  3. Firm Overview • Well-established asset management firm • Clear focus on investment management and client service since 1983 • Strong and committed team of professionals • Senior members of the firm have worked together for over a decade • Independent with equity-based incentives • Publicly traded company (NYSE: WHG) since 2002 • Over 24% of company stock held by senior management and employees • Effective tool to attract and retain talented professionals • Strong asset base • Approximately $5.0 billion in assets under management as of December 31, 2005 • Superior long-term performance • Strict adherence to our process has resulted in outstanding risk-adjusted returns for our clients • Culture of integrity, ethics, solid governance and internal controls • Clean reports from external and internal auditors verify that our internal controls are effective • Awarded one of the highest corporate governance ratings in asset management industry by ISS

  4. Westwood History Westwood Management Corp. • Registered Investment Advisor • Institutional focus 1983 • SWS Provided: • Capital • Autonomy • Technology • Distribution Acquired by Southwest Securities (SWS) 1993 • Distributed by Gabelli • Sub-advised by Westwood Westwood Funds 1994 • Commingled funds • New product platform Westwood Trust 1996 Westwood Holdings Group, Inc. • Spin-off • Independent public company 2002 • Targeted to institutional, defined contribution market • Advised by Westwood; distributed by SEI WHG Funds 2005

  5. Westwood Structure Supermajority Independent Board of Directors • Westwood Management Corp. • Separately Managed Portfolios • Large Institutions • >$25MM • Westwood Trust • Commingled Funds • Small to Mid Size Institutions • Private Client/HNW Individuals • Enhanced Balanced asset allocation model • >$5MM • WHG Funds • Mutual Funds • Institutions • Defined Contribution Marketplace • >$500K Value Equity-Oriented Strategies Income-Oriented Strategies

  6. What Differentiates Us • Singular focus on team-based value and income investing • A belief that superior long-term results are best achieved by controlling downside risk • Manage concentrated yet well-diversified portfolios that reflect our best ideas

  7. Westwood Management Institutional Success Factors • Performance • Excess return over benchmark (alpha) • Relative performance vs. peers (Top 40% of peer group over rolling 3-5 yr periods) • Organizational stability • Personnel retention • Equity incentives • Long-term vision • Consistent adherence to investment style over time • Regulatory compliance • Client Service • Competent, experienced personnel in front of customers • Attentive to client & responsive to consultant (gatekeeper) • Price • LargeCap Value products are most price sensitive while capacity constrained products SMidCap, Income, SmallCap are less sensitive • New Products • Relationship with gatekeepers (consultants) critical to acceptance • 3-year performance record • $100 million in AUM

  8. Westwood Trust Wealth Advisory Success Factors • Reputation • Local presence • Regulatory compliance • Strong references • Client Service • Relationship with client relationship manager is most critical • Willingness to listen to the customer (wealth and personal counselor) • Consultative needs-based approach with unique customer solutions • Frequent contact to strengthen relationship • Price • Pricing has become more competitive in recent years, but remains at the high end of the investment product continuum • Westwood Trust has introduced institutional pricing in anticipation of where the market will be in a few years

  9. Overview of Investment Process • Idea generation • Proprietary fundamental research • Make buy & sell recommendations Research Analysts • Led by senior analysts • Weekly due diligence meetings to review analyst recommendations • Approved securities move to the “On Deck Circle” 4 Research Groups • At least one member from each Research Group • Weekly meetings to review portfolio and new names • Makes buy and sell decisions and manages portfolio risk Portfolio Teams • Qualities that Westwood analysts look for in securities: • Strong free cash flow characteristics • Stable to improving return on equity • Improving balance sheet • Upside earnings surprise without corresponding change in consensus estimates

  10. How We Manage Our Company We strive to manage our company to reflect the qualities we look for in selecting securities for client portfolios Peer group consists of: AC, AMG, AVZ, BEN, BKF, BLK, CLMS, CNS, EV, FII, GBL, JNC, JNS, LM, TROW, WDR, WPL

  11. Compensation • People are our most important asset • Our people have chosen to accept restricted stock in lieu of increased cash compensation for the opportunity to earn a multiple on that deferral and so they may receive dividends in a tax advantaged way (15% tax on dividends vs. 35% tax on current compensation) • Restricted stock is granted annually and subject to a four-year vesting schedule that begins with each new grant • We recognize this expense ratably over the vesting period

  12. Product Life Cycle 1983 1985 1987 1997 2002 2003 2004 Inception Date

  13. Peer Group Performance Comparison Percentile Ranking as of 12/31/05 Source: Mobius MSearch

  14. Recent Performance Accolades • Pensions & Investments Pensions & Investments has ranked our SMidCap Equity and LargeCap Equity products among the Top 10 Managers in the Commingled Domestic Overall Equity and Commingled Domestic Value Equity categories for the one- year period ending December 31, 2005. • Money Manager Review Westwood SMidCap Equity earned a #1 ranking for three-year risk-adjusted return from Money Manager Review for the period ending December 31, 2005. • Lipper Ranking Lipper ranked the Westwood Equity Fund (WESWX) 1st among Multi-Class LargeCap Value Funds for the one-year period ending December 31, 2005. • Wall Street Journal Ranking The Westwood Equity Fund was ranked 1st among the LargeCap Value Funds and the Timothy Plan Large/Mid Cap Value was ranked 1st among the Multi Cap Value Funds in the Wall Street Journal Mutual Funds Quarterly Review “Category Kings in 19 Realms” for the period ending December 31, 2005.

  15. Product Summary LargeCap Value – flagship SMidCapValue – gaining traction institutionally; key focus of marketing efforts SmallCap Value – “R&D”; capacity constrained product with high demand AllCapValue – “R&D” Income – gaining traction; unique product Enhanced BalancedTM • Asset allocation model – 7 asset classes managed by Westwood Management 4 asset classes managed by subadvisors • Consultative approach • Low cost, efficient solution • Asset gathering platform • Private Client – “Best Ideas”

  16. Scalability and Operational Leverage • Spin-off related costs in 2002 • New hires in 2002-2005 to upgrade talent level and build out firm • Restricted stock costs build beginning in 2003 • Sarbanes-Oxley and other compliance related costs in 2004-2005 • Assets generally follow performance resulting in increased revenue • As assets and revenues build, cash earnings grow • Potential for revenue growth and the operating leverage inherent in the asset management business

  17. Westwood Trust Growth in Assets Under Management Three-year compound annual growth rate = 24.4%

  18. Business StrategyBuild the Foundation for Growth • Build firm to transcend founder • Create team based approach to investing • Add people and systems to build foundation for future growth • Create new products • Organic growth with excess cash paid out to stockholders • Build Trust company

  19. Firms That Once Looked Like Westwood in 2005 Assets Under Management 2005 1999 2000 Advisory Fees 1999 2000 2005

  20. AUM Growth of Successful Firms

  21. Successful Firms Compared to Westwood Today Assets Under Management 2005 2005 2005 Advisory Fees 2005 2005 2005

  22. Near-Term Asset Growth Initiatives • 1. Institutional Marketplace (LargeCap Value, SMidCap Value & Income Opportunity) • Consultant Marketing • Direct Marketing to Institutional Plan Sponsors • 2. Cross Selling (SmallCap Value) • SmallCap Value: 3-Phase roll-out beginning with selected clients and consultant relationships • 3. Managed Account Brokerage Platforms (AllCap Value) • Selectively offer AllCap Value in an effort to increase assets to $100 million threshold • 4. Wealth Management and High-End RIA Marketplace (Income Opportunity & AllCap Value) • Raise awareness with existing providers and cultivate new relationships within this marketplace • 5. Private Clients, Foundations & Endowments (Westwood Trust Enhanced Balanced) • Multi-manager/multi-style, low cost, client centric solution • 6. Defined Contribution 401(k) Marketplace (WHG Funds) • Identify Third Party Administrators, existing clients with DC Plans, and consultants who maintain an active DC consulting practice

  23. Summary • Established firm with recognized institutional presence • Seasoned competitive products • Attractive product pipeline with strong performance; gaining traction in institutional marketplace • Private client growth opportunities; “Affluenza”/Baby Boom/Texas High Net Worth per capita/Southwest population migration • Employees are stakeholders • Building phase nearing completion • Opportunity to realize operational leverage and growth • Potential for significant cash generation combined with history of returning excess cash to stockholders

  24. www.westwoodgroup.com 200 Crescent Court Suite 1200 Dallas, Texas 75201 (214)756-6900

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