SAROFIM TRUST CO., LTA

Part 2A of Form ADV Firm Brochure Item 1 –Cover Page Sarofim Trust Co. Two Houston Center, Suite 2907 Houston, Texas 77010-1083 Tel: 713-654-4484 Fax: 713-654-8184 www.sarofim.com contact@sarofim.com March 21, 2025 This brochure provides information about the qualifications and business practices of Sarofim Trust Co. If you have any questions about the contents of this brochure, please contact us at 713-654-4484 or contact@sarofim.com. The information in this brochure has not been approved or verified by the United States Securities and Exchange Commission (SEC) or by any state securities authority. Additional information about Sarofim Trust Co. is also available on the SEC’s website at www.adviserinfo.sec.gov. Sarofim Trust Co. is an investment adviser that is registered with the SEC in compliance with the Investment Advisers Act of 1940, as amended. Such registration does not imply a certain level of skill or training. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 1 of 37  Item 2 – Material Changes This brochure serves as an annual update to the previous brochure Sarofim Trust Co., which was dated as of March 25, 2024. This brochure reflects updated information related to our assets under management. In connection with the periodic update of this brochure, we routinely make changes in an effort to improve and clarify the descriptions of our business practices and compliance policies and procedures or in response to evolving industry and firm practices. We encourage all recipients to carefully review this Form ADV Part 2A in its entirety. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 2 of 37  Item 3 – Table of Contents Page Item 2 – Material Changes ...............................................................................................................2 Item 3 – Table of Contents...............................................................................................................3 Item 4 – Advisory Business .............................................................................................................4 Item 5 – Fees and Compensation ...................................................................................................10 Item 6 – Performance-Based Fees and Side-by-Side Management ...............................................13 Item 7 – Types of Clients ...............................................................................................................14 Item 8 – Methods of Analysis, Investment Strategies and Risk of Loss .......................................15 Item 9 – Disciplinary Information .................................................................................................21 Item 10 – Other Financial Industry Activities and Affiliations .....................................................22 Item 11 – Code of Ethics, Participation or Interest in Client Transactions, and Personal Trading ...............................................................................................................................23 Item 12 – Brokerage Practices .......................................................................................................26 Item 13 – Review of Accounts.......................................................................................................31 Item 14 – Client Referrals and Other Compensation .....................................................................32 Item 15 – Custody ..........................................................................................................................33 Item 16 – Investment Discretion ....................................................................................................34 Item 17 – Voting Client Securities.................................................................................................35 Item 18 – Financial Information ....................................................................................................37 Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 3 of 37  Item 4 – Advisory Business Our History and Organization Sarofim Trust Co., a Texas limited trust association organized and chartered under the laws of the State of Texas, also referred to herein as “the firm”, was established in January 1978 as a wholly owned subsidiary of Fayez Sarofim & Co., a registered investment adviser. Fayez Sarofim & Co. was founded in August 1958 by Fayez Sarofim. Sarofim Trust Co. is focused on the investment counseling business. Sarofim Trust Co. is registered with and regulated by the SEC under the Investment Advisers Act of 1940, as amended. The firm’s registration with the SEC as an investment adviser does not imply a certain level of skill or training. As a Texas limited trust association, the firm is also subject to the jurisdiction of the Texas Department of Banking and is examined by the Department of Banking annually. Sarofim Trust Company is principally owned by Fayez Sarofim and is a wholly-owned subsidiary Fayez Sarofim & Co., which itself is a wholly-owned subsidiary of The Sarofim Group, LLC., which is 100 percent owned by current, active employees of Fayez Sarofim & Co. and members of the Sarofim family. Fayez Sarofim & Co. is principally owned by the Sarofim SGI Voting Trust, which is the majority shareholder of The Sarofim Group. The Sarofim SGI Voting Trust is controlled by Christopher Sarofim, the Chairman of the firm. The Sarofim Group is the ultimate corporate parent of a group of affiliated companies that generally operates as a single advisory business and includes the firm, two other registered investment advisers, and other business entities. The other registered adviser affiliates are: • Fayez Sarofim & Co. • Sarofim International Management Company, LLC The firm is also affiliated with Sarofim Realty Advisors, LLC which is a separately registered real estate investment adviser. Sarofim Trust Co. is a separate legal entity, and we have our own Board of Directors and elected officers. The investment strategies offered and research used by Sarofim Trust Co. are the same as the investment strategies offered and research generated at Fayez Sarofim & Co. From a compliance and regulatory perspective, Sarofim Trust Co. has adopted Fayez Sarofim & Co.’s compliance policies and procedures and relies on Fayez Sarofim & Co.’s personnel to undertake regulatory and compliance requirements such as filings with the SEC and the Texas Department of Banking. Sarofim Trust Co. had client assets under management of approximately $8.8 billion as of December 31, 2024. On the same date, the total client assets managed by the firm and its investment adviser affiliates, were approximately $38.0 billion. Please refer to “Our Advisory Services” below for a discussion of the client assets managed by Sarofim Trust Co. on a discretionary and non-discretionary basis. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 4 of 37  Our Advisory Services Sarofim Trust Co. provides investment supervisory services and other investment advisory services to a broad range of clients. Portfolio managers at the firm operate within the guidelines set by our Trust Committee. The Investment Committee is responsible for the firm’s portfolio structures and all investment decisions. The firm’s advisory services are detailed in the applicable governing documents, separate account agreements and other offering documents. The firm has and may in the future enter into side letters or other similar agreements with certain investors that have the effect of establishing rights (including economic or other terms) under, or altering or supplementing the terms of, the relevant governing documents or separate account agreements with respect to such investors. Large Capitalization Equity Product Sarofim Trust Co.’s primary investment product is our Large Capitalization Equity Product, which is available to both institutions and individuals. Our equity strategy is focused on domestically traded common stocks with large market capitalizations and high daily trading volumes. American Depositary Receipts, preferred stocks, and foreign stocks may also be included if permitted by client guidelines. We seek to invest in stocks of high quality, financially sound industry leaders that have an expanding global presence. We seek to maintain an investment perspective of at least three to five years, which generally results in low portfolio turnover and is typically tax efficient for taxable investors. Our strategy does not use derivatives, options, short-selling, leverage, or initial public offerings. We do not attempt to time the market. Global Equity Product Institutions and individuals seeking greater international equity exposure may wish to invest in Sarofim Trust Co.’s Global Equity Product. While the investment approach is similar to that of our Large Capitalization Equity Product, the Global Equity Product has a larger concentration in foreign-based companies and may include shares that are not traded on domestic exchanges. Global Equity Product portfolios primarily have their assets in common stock, ordinary shares, or American Depository Receipts. We focus on high quality multinational companies with large market capitalizations. Generally, at least 25 percent of assets are invested in companies organized in the United States and at least 25 percent of assets are invested in companies organized in other countries. We maintain an investment perspective of at least three to five years, which generally results in low portfolio turnover and is typically tax efficient for taxable investors. You can access this product by opening a separate account with the firm; by investing in the BNY Mellon Worldwide Growth Fund, which Fayez Sarofim & Co. sub-advises, and non-US investors may access this product by investing in the Sarofim Global Equity Fund for which Fayez Sarofim & Co. serves as investment manager. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 5 of 37  International Equity Product Institutions and individuals seeking discrete international equity exposure may wish to invest in Sarofim Trust Co.’s International Equity Product. The International Equity Product shares an investment approach consistent with our other products, with the key point of differentiation being its exclusive focus on internationally domiciled companies. International Equity Product portfolios primarily have their assets in common stock, ordinary shares, or American Depository Receipts. The International Equity Product invests in the stocks of high-quality international companies with large market capitalizations and does not seek specific geographic exposures. Stock selection is primarily driven by the assessment of a company’s total return potential over a three-to-five-year investment horizon, which results in low portfolio turnover and is typically tax efficient for taxable investors. You can access this product by opening a separate account with the firm. Concentrated Equity Product Institutions and individuals seeking a concentrated portfolio composition may wish to invest in Sarofim Trust Co.’s Concentrated Equity Product. While the investment approach is similar to that of our Large Capitalization Equity Product, the Concentrated Equity Product owns more concentrated positions in our highest conviction holdings. Concentrated Equity Product portfolios are primarily invested in domestically traded common shares with large market capitalizations and high daily trading volumes. American Depositary Receipts, preferred stocks, and foreign stocks may also be included if permitted by client guidelines. Concentrated Equity Product portfolios will typically be comprised of 15-30 stocks with a maximum weighting of 20% of the portfolio in a single security. Stock selection is primarily driven by the Investment Manager’s assessment of the stock’s total return potential relative to downside risk and not by adherence to a singular “growth” or “value” strategy. As such, the composition of the portfolio will vary depending upon market conditions and the opportunities available in the market at any given time. As a result, the portfolio is likely to experience a higher level of turnover and volatility than the Large Capitalization Equity Product and is not managed for tax efficiency. You can access this product by opening a separate account with the firm. Equity Income Product The Equity Income Product seeks income and long-term capital appreciation by primarily investing in large capitalization domestic equities and other income-producing securities. Over periods of three-to-five years or longer, we strive to achieve a growing stream of income and total returns in excess of the income generated. Our Equity Income investment strategy primarily utilizes common stock, ordinary shares, and American Depository Receipts of high-quality companies based either in the United States or in other countries. Companies represented in the portfolio typically have market capitalizations of at least $5 billion. Using fundamental analysis, we seek to identify companies in business segments that have demonstrated the ability to maintain and grow earnings with a desire to return increasing amounts of cash to shareholders. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 6 of 37  You can access this product by opening a separate account with the firm. Core Fixed Income Product Sarofim Trust Co. also offers a Core Fixed Income Product to institutions and individuals. Our fixed income strategy emphasizes risk-averse management, current income and low cash reserves. Portfolio holdings may include United States Treasury securities, United States government agency securities, high quality corporate and municipal bonds, high quality commercial paper, and shares of money market funds. We select specific sectors and securities that we believe offer the best combination of quality, liquidity, income generation, and relative value consistent with our risk parameters. Foreign government and foreign corporate bonds are generally not part of our strategy. Municipal Bond Portfolios The firm also manages tax-free income portfolios, consisting of high quality municipal bonds rated AA or higher. Portfolios are customized relative to the client’s state of residence. Balanced Portfolios At a client’s request, Sarofim Trust Co. will also construct balanced portfolios. These balanced portfolios combine the firm’s equity and fixed income strategies in proportions tailored to client requirements. Private Placements From time to time, Sarofim Trust Co. may provide certain firm clients with greater than $20 million invested with the firm, as well as certain third-party investors or other persons, including the firm’s principals, personnel and certain other persons associated with Sarofim Trust Co., investment opportunities to directly or indirectly invest in certain privately-held companies and/or pooled investment vehicles, in each case via a private placement. In connection with any such private placement, Sarofim Trust Co. will endeavor to negotiate investment terms for participating clients as part of the firm’s collective negotiations for its other client accounts and proprietary accounts participating in the investment. Meeting Individual Client Needs The firm manages its separate portfolios for institutions and individuals on an account by account basis, taking into consideration a client’s financial resources, investment objectives, and needs. The firm addresses individual requirements for such items as current income, cash flow, and taxes. The firm will also vote the proxies related to securities held in a client’s account if requested to do so by the client. Proxies are voted in accordance with the firm’s Proxy Voting policy and established procedures. Please refer to Item 17—Voting Client Securities. Sarofim Trust Co. prefers not to be constrained by client instructions that prohibit holding certain securities. We believe that the ability to select from the widest range of investments that are consistent with our strategy results in higher returns over time. However, the firm does manage a number of accounts subject to instructions that specify various exclusions or that limit weightings in individual sectors, industries, or securities. We will accept new accounts subject Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 7 of 37  to these types of instructions as long as we do not view the proposed directives as overly restrictive or too difficult or impossible to implement and monitor. Discretionary and Non-Discretionary Accounts Sarofim Trust Co. manages clients’ assets on either a fully discretionary basis or a non- discretionary basis. Currently, our clients have granted us full discretionary authority to manage the investment of assets in their accounts. With full discretionary authority for an account, we are able to do the following without obtaining the client’s consent: • Determine which securities to buy or sell and when to execute the transactions • Determine the total amount of securities to buy or sell, subject to available funds • Determine the broker or dealer through which securities are bought or sold • Negotiate with the selected broker regarding commission rates for securities transactions Item 12 of this brochure provides more information on the firm’s brokerage practices, and Item 16 discusses investment discretion. When we provide services on a non-discretionary basis, we give the client investment advice, but we do not have the authority to implement our recommendations in the client’s portfolio without the client’s approval. The information provided above about the investment advisory services provided by Sarofim Trust Co. is qualified in its entirety by reference to the applicable governing documents, separate account agreements and other offering documents. As of December 31, 2024, the firm managed approximately $8.8 billion in client assets on a discretionary basis and no assets on a non-discretionary basis. Our Trust and Trustee Services As a Texas trust company, the firm is authorized, among other things: • To act as trustee, executor, administrator, or guardian when designated by any person, corporation or court to do so and as agent for the performance of any lawful act • To purchase, sell, discount and negotiate notes, drafts and checks • To purchase and sell stocks, bonds, and securities Sarofim Trust Co. may be designated as a trustee of pension plan funds, profit sharing plan funds and other employee benefit plan funds; corporate funds; endowment funds; and the funds of individuals. When acting as a trustee, the firm will manage the investment of funds and will provide investment supervisory services in accordance with the trust agreement or other governing document establishing the trust. As a trustee, the firm will also provide custodial and other services and will take title to the assets for the benefit of the beneficiaries of the trust. Sarofim Trust Co. serves as the trustee for a group trust known as the Sarofim Trust Co. Employee Benefit Investment Trust formed under the laws of the State of Texas. The beneficiaries of this trust are various employee benefit plans and governmental plans. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 8 of 37  Substantially all of the assets of this trust are invested in marketable equity securities. The Sarofim Trust Co. Employee Benefit Investment Trust is open to new investors. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 9 of 37  Item 5 – Fees and Compensation Advisory Service Fees If you open an account at Sarofim Trust Co., the fee you will pay for our advisory services is calculated according to one or more of the schedules presented below. Fees are billed in three month rolling periods, after the end of each such period, and are based on the market value of the assets at the end of the last day of such period on which the New York Stock Exchange is open. Asset-based advisory fees charged for the provision of Sarofim Trust Co.’s investment management services are based upon the valuation of securities and investments provided by Sarofim Trust Co.’s pricing services, which are reflected on its internally generated portfolio appraisal statements. These statements may show different market values for particular investments than what is reflected on a client’s custodial statement. Sarofim Trust Co. maintains policies and procedures regarding the valuation of securities and investments held in client accounts. Equity Fees: Large Capitalization Equity Product, Concentrated Equity Product, Equity Income Product, and the Equity Portfolios of Balanced Accounts Market Value of Equities Rate First $2,000,000 is billed at 0.75% (or 75 basis points) per year (i.e., 0.1875% per quarter) Next $18,000,000 is billed at 0.50% (or 50 basis points) per year (i.e., 0.1250% per quarter) Next $20,000,000 is billed at 0.40% (or 40 basis points) per year (i.e., 0.1000% per quarter) Next $20,000,000 is billed at 0.35% (or 35 basis points) per year (i.e., 0.0875% per quarter) Amounts over $60,000,000 are billed at 0.20% (or 20 basis points) per year (i.e., 0.0500% per quarter) Equity Fees: Global Equity Product and International Equity Product Market Value of Equities Rate First $50,000,000 is billed at 0.60% (or 60 basis points) per year (i.e., 0.15% per quarter) Next $50,000,000 is billed at 0.40% (or 40 basis points) per year (i.e., 0.1% per quarter) Amounts Over $100,000,000 are billed at 0.30% (or 30 basis points) per year (i.e. 0.075% per quarter) Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 10 of 37  Fees for the Sarofim Trust Co. Employee Benefit Investment Trust Clients invested in the Sarofim Trust Co. Employee Benefit Investment Trust are charged an investment management fee that is computed daily based on the market value of the assets under management in the trust and is deducted from trust assets quarterly at an annual rate of 0.50%, or 50 basis points. This fee is established by the Declaration of Trust governing this group trust. Fixed Income Fees The fee for fixed income securities is 0.20%, (20 basis points) per year, or 0.05% (5 basis points) per quarter. Cash Fees Our investment advisory agreements authorize Sarofim Trust Co. to bill cash positions in our portfolios at an annual rate of 0.20%, or 20 basis points. Cash assets may be held temporarily in money market funds or other short-term interest-bearing arrangements. If this is the case, such assets may also be subject to fees payable to the manager of these funds in addition to the fees charged by Sarofim Trust Co. Notwithstanding the above, we currently waive our fees on cash positions in our portfolios for all clients; however, this should not be interpreted as a permanent waiver, and we reserve the right to reinstitute the above-referenced cash position billing rate. Private Placement Program Fees Our fee for clients participating in private placement transactions is 0.50% (or 50 bps) of a participating client’s capital contributions to each investment until such investment is fully liquidated or otherwise fully disposed of by client. Trustee Fees In addition to advisory service fees, a trust client of Sarofim Trust Co. incurs a trustee fee. The decision to charge a trustee fee and the determination of the amount are made on a case-by-case basis. Our Billing Practices For the purpose of computing fees, we may agree to treat managed assets in related accounts as if all the assets were in one account. After the fee is computed in this way, it is divided among the accounts involved, usually in proportion to the market value of each account. This grouping of related accounts must be approved in advance by the firm, and approval is not assured. We generally do not regard our fees as negotiable because we believe our fees are at the low end of the range of fees in the industry for comparable services. However, in a few instances, the firm in its sole discretion has granted (and may in the future grant) exceptions to the application of our regular fee schedules when we believe there are highly unusual factors involved that justify exceptional treatment. The firm attempts to ensure that other clients having similar unusual factors are treated in a similar manner for fee purposes, but this cannot be assured. From Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 11 of 37  time to time, the firm will seek to determine if such unusual factors continue to justify deviations from our regular fee schedule. As mentioned earlier, the firm’s fees are billed quarterly, in arrears. Our advisory clients may direct their custodians to deduct Sarofim Trust Co.’s fees from the assets in their account. Alternatively, advisory clients may choose not to have the fees deducted from their accounts and may arrange to pay the fees by check or wire transfer. In trust accounts where Sarofim Trust Co. is trustee, our fees are paid from the account. The firm does not accept advance fee payments. Third-Party Fees You May Incur Sarofim Trust Co. is not affiliated with a brokerage firm. The firm’s brokerage practices are discussed in Item 12 of this brochure. The advisory service fee you pay to us does not include other fees or charges you may incur in connection with your account at Sarofim Trust Co. The following is a non-exclusive list of the types of fees and charges that might be payable to third parties in connection with your account. This list is not meant to be exhaustive. There may be additional fees that are not included in this list. Examples of Fees Paid to Third Parties • Custodial fees • Broker commissions • Wire transfer or other transaction fees • Exchange fees • Odd lot differentials • Fees charged by mutual funds, including money market funds Other Compensation Sarofim Trust Co. receives fees from BNY Mellon (formerly named Dreyfus Service Corporation) for acting as service agent for accounts owning shares of registered investment companies sponsored by BNY Mellon, including those for which Fayez Sarofim & Co. is engaged as sub-investment adviser. We do not believe that material conflicts of interest arise from this arrangement due to the insignificant amount of the fees received and the regulatory and compliance regimens in which Sarofim Trust Co., Fayez Sarofim & Co., and BNY Mellon operate. Please refer to the applicable governing documents, separate account agreements and other offering documents for complete information with respect to fees and compensation. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 12 of 37  Item 6 – Performance-Based Fees and Side-by-Side Management Sarofim Trust Co. does not have fee structures that include performance-based fee arrangements, which generally refers to fees based on a share of capital gains on or capital appreciation of the assets of a client. Since Sarofim Trust Co. does not manage accounts that are charged a performance-based fee, the firm does not manage any such accounts side-by-side with accounts that are charged another type of fee, such as an hourly or flat fee or an asset-based fee. Generally speaking, side-by-side management is a reference to the simultaneous management of mutual funds and hedge funds. Sarofim Trust Co. has not formed a hedge fund and is not a manager to hedge funds. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 13 of 37  Item 7 – Types of Clients Sarofim Trust Co. serves as an investment adviser for a broad range of clients including but not limited to: Individuals—retirement accounts Individuals—taxable accounts Insurance companies Insurance Company Separate Accounts • Private employer pension and profit-sharing plans • State and local government retirement systems • Taft-Hartley union plans • Employee savings and thrift plans • Keogh plans • • • Endowments, foundations, or other tax-exempt organizations • Banks • Trusts and estates • Registered investment companies, i.e., mutual funds • • • Corporations and small businesses We continue to seek new clients. Generally, the minimum dollar amount for new managed accounts is $5 million, subject to the firm’s discretion. However, the minimum dollar amount for new managed accounts in our Global Equity Product is $10 million, subject to the firm’s discretion. The firm may waive these size requirements in its sole discretion if related accounts are currently under management and otherwise on a case-by-case basis. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 14 of 37  Item 8 – Methods of Analysis, Investment Strategies and Risk of Loss Sarofim Trust Co. provides day-to-day investment advisory services to the firm’s clients. The following is a summary of the investment strategies and methods of analysis generally used by Sarofim Trust Co. on behalf of the firm’s clients. More detailed descriptions of the investment strategies and methods of analysis are included in the applicable governing documents, separate account agreements and other offering documents. There can be no assurance that Sarofim Trust Co. will achieve the investment objectives of a particular client, and a loss of investment is possible. Equity Products Under most circumstances, our portfolios are fully invested with low cash balances. Our longer- term investment perspective generally results in low portfolio turnover and is typically tax- efficient for taxable investors. Our strategies do not use derivatives, options, short-selling, leverage, or initial public offerings. We do not attempt to time the market. Central to our philosophy is the belief that earnings growth is the most important driver of long- term stock price appreciation. In our experience, companies with dominant franchises in structurally attractive industries are most likely to generate durable growth. Generally, we invest in the stocks of high quality industry leaders that have a market capitalization of $5 billion or higher. These established companies have demonstrated sustained patterns of earnings and dividend increases. They have an expanding global presence and sustainable competitive advantages. Their balance sheets are strong, and their management teams have a record of successfully redeploying capital. To shape our portfolios, Sarofim Trust Co. employs a predominantly “bottom-up” investment process managed by the Investment Committee. Drawing on the fundamental research of our in- house analysts and select external resources, the Committee formulates a macroeconomic and capital market outlook and evaluates the attractiveness of the various economic sectors and industries. The most attractive segments are identified along with those areas that should be underweighted or avoided. This macro overlay provides a context for the analysts’ research efforts and helps direct them to the industries and companies most aligned with the Committee’s current outlook. The analysts present specific buy and sell recommendations to the Investment Committee, which makes the final decision. The Investment Committee is responsible for the firm’s portfolio structure and all investment decisions. Fayez Sarofim & Co.’s internal research function is crucial to this investment process. Fayez Sarofim & Co.’s research analysts perform independent, fundamental analysis on all of our investments and potential investments. The research analysts visit companies, interview company managers, attend trade conferences, review corporate reports, filings and press releases, and stay abreast of financial and market news. They have access to numerous software and on- line products and selectively utilize numerous outside sources of information, such as government agencies, consultants, and Wall Street sources. The most important output of this internal research effort is proprietary projections of a company’s earnings, cash flow and dividends over a multiple-year period. These projections drive our valuation analysis. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 15 of 37  The Trust Committee seeks to control investment risk through disciplined adherence to our investment decision-making process. We continuously monitor the underlying operating and earnings trends of the companies represented in the portfolio and remain alert to changes in demand, competition, or technology that may influence these trends. Diversification also plays a role in our approach to controlling risk, and we monitor portfolios by industry exposure and individual stock concentration. We confine our equity holdings to securities with large market capitalizations and high daily trading volumes to help limit liquidity risk. Although we strive to mitigate risks that may accompany an investment in our Large Capitalization Equity Product, clients who invest in this product can lose money, including losing a portion of their original investment. The prices of the securities in our portfolios fluctuate. We cannot guarantee any particular level of performance. Below is a list of the types of risks you should consider before investing in our products. While the discussion below often refers to an “account,” it enumerates certain risk factors that apply generally to an investment in an account or other fund, vehicle or portfolio managed by Sarofim Trust Co. • Concentration Risk. The risk that there is an insufficient level of diversification such that an investor is excessively exposed to one or a limited number of investments, industries or sectors. Sarofim Trust Co. expects to make a limited number of investments, resulting in the risk that the aggregate returns realized by an account may be substantially adversely affected by the unfavorable performance of, or a default in respect of, even one of such investments. • Equity Securities Risk. The value of an account will fluctuate with changes in the value of the equity securities in which it invests. Equity securities prices fluctuate for several reasons, including changes in investors’ perceptions of the financial condition of an issuer or the general condition of the relevant equity market, such as market volatility, or when political or economic events affecting an issuer occur. Common stock prices may be particularly sensitive to rising interest rates, as the cost of capital rises and borrowing costs increase. Equity securities may decline significantly in price over short or extended periods of time, and such declines may occur in the equity market as a whole, or they may occur in only a particular country, company, industry or sector of the market. • Inflation Risk. Inflation risk is the risk that the value of assets or income from investments will be less in the future as inflation decreases the value of money. As inflation increases, the present value of an account’s assets and distributions may decline. • Non-U.S. Securities Risk. Non-U.S. securities may be subject to higher volatility than securities of domestic issuers due to possible adverse political, social or economic developments, restrictions on foreign investment or exchange of securities, capital controls, lack of liquidity, currency exchange rates, excessive taxation, government seizure of assets, the imposition of sanctions by foreign governments, different legal or accounting standards, and less government supervision and regulation of securities exchanges in foreign countries. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 16 of 37  • Significant Exposure Risk. To the extent an account invests a large percentage of its assets in a single asset class or the securities of issuers within the same country, state, region, industry or sector, an adverse economic, business or political development may affect the value of the account’s investments more than if the account were more broadly diversified. A significant exposure makes the account more susceptible to any single occurrence and may subject the account to greater market risk than a portfolio that is more broadly diversified. • Style Risk. Our investment strategy focuses on what we believe to be high-quality stocks with large market capitalizations. As a result, our portfolios may underperform the broader market during intervals when such securities are out of favor with investors. • Value Stocks Risk. The intrinsic value of a stock with value characteristics may not be fully recognized by the market for a long time or a stock judged to be undervalued may actually be appropriately priced at a low level. Fixed Income Products Sarofim Trust Co.’s Core Fixed Income Product emphasizes risk-averse management, current income and low cash reserves. Portfolio holdings may include United States Treasury securities, United States government agency securities, mortgage pass-through securities of government- sponsored enterprises (GSE) such as Ginnie Mae, investment grade corporate bonds, municipal bonds, high quality commercial paper, and shares of money market funds. Foreign government and foreign corporate bonds and sub-prime mortgages are not part of our strategy. In our fixed income portfolios, we emphasize certain sectors and select specific securities that we believe offer the best combination of quality, liquidity, income, and value consistent with our overall duration target. The duration of a fixed income portfolio is a measure of risk that indicates the sensitivity of the portfolio’s market value to changes in interest rates. We will make modest shifts in our duration target to reflect changes in the Trust Committee’s projections for interest rates and inflation. As a result of the overlap between members of the Trust Committee and members of Fayez Sarofim & Co.’s Investment Committee, the Trust Committee has access to and adopts Fayez Sarofim & Co.’s overall outlook for the economy, interest rates, and inflation. Both the Trust Committee and Fayez Sarofim & Co.’s Investment Committee rely on the investment professionals on Fayez Sarofim & Co.’s Fixed Income Investment Committee to establish the specific parameters for fixed income portfolios. The Fixed Income Investment Committee meets quarterly to set duration targets and sector emphasis and to review and approve the list of corporate bond issuers that may be utilized. Fayez Sarofim & Co.’s research analysts conduct fundamental credit analysis. They consider not only the current creditworthiness of an issuer but also the ability of the issuer to grow and finance its future business plans. The research analysts monitor the credit quality of existing holdings and recommend high quality corporate issuers to the Fixed Income Investment Committee for possible inclusion on the list of approved issuers. Within the framework set by the Fixed Income Investment Committee, fixed income portfolio managers structure portfolios to meet client requirements. Before transactions are executed, the portfolio managers utilize the CMS/Bond Edge portfolio management system to simulate the Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 17 of 37  transaction and its effect on the portfolio. This process includes an analysis of the effect on the portfolio’s duration, current yield, average maturity and other characteristics. The simulated portfolio can also be stress-tested under various interest rate assumptions. While we emphasize risk-averse management and capital preservation in our Core Fixed Income Product, clients who invest in this product can lose money, including losing a portion of their original investment. The prices of the securities in our portfolios fluctuate. We cannot guarantee any particular level of performance. Below is a representative list of the types of risks you should consider before investing in these products. While the discussion below often refers to an “account,” it enumerates certain risk factors that apply generally to an investment in an account or other fund, vehicle or portfolio managed by Sarofim Trust Co. • Call Risk. Some debt securities may be redeemed, or “called,” at the option of the issuer before their stated maturity date. In general, an issuer will call its debt securities if they can be refinanced by issuing new debt securities which bear a lower interest rate. An account is subject to the possibility that during periods of falling interest rates an issuer will call its high yielding debt securities. An account would then be forced to invest the proceeds at lower interest rates, likely resulting in a decline in the account’s income. • Debt Securities Risk. Investments in debt securities subject the holder to the credit risk of the issuer. Credit risk refers to the possibility that the issuer or other obligor of a security will not be able or willing to make payments of interest and principal when due. Generally, the value of debt securities will change inversely with changes in interest rates. To the extent that interest rates rise, certain underlying obligations may be paid off substantially slower than originally anticipated and the value of those securities may fall sharply. During periods of falling interest rates, the income received by an account may decline. If the principal on a debt security is prepaid before expected, the prepayments of principal may have to be reinvested in obligations paying interest at lower rates. Debt securities generally do not trade on a securities exchange making them generally less liquid and more difficult to value than common stock. • Extension Risk. Extension risk is the risk that, when interest rates rise, certain obligations will be paid off by the issuer (or other obligated party) more slowly than anticipated, causing the value of these debt securities to fall. Rising interest rates tend to extend the duration of debt securities, making their market value more sensitive to changes in interest rates. The value of longer-term debt securities generally changes more in response to changes in interest rates than shorter-term debt securities. As a result, in a period of rising interest rates, securities may exhibit additional volatility and may lose value. • Floating Rate Securities Risk. Floating rate securities are structured so that the security’s coupon rate fluctuates based upon the level of a reference rate. As a result, the coupon on floating rate securities will generally decline in a falling interest rate environment, causing an account to experience a reduction in the income it receives from the security. A floating rate security’s coupon rate resets periodically according to the terms of the security. Consequently, in a rising interest rate environment, floating rate securities with Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 18 of 37  coupon rates that reset infrequently may lag behind the changes in market interest rates. Floating rate securities may also contain terms that impose a maximum coupon rate the issuer will pay, regardless of the level of the reference rate which would decrease the value of the security. • Income Risk. An account’s income may decline when interest rates fall or if there are defaults in its portfolio. This decline can occur because an account may subsequently invest in lower-yielding securities as debt securities in its portfolio mature, are near maturity or are called, or an account otherwise needs to purchase additional debt securities. • Interest Rate Risk. Interest rate risk is the risk that the value of the debt securities in an account’s portfolio will decline because of rising market interest rates. Interest rate risk is generally lower for shorter term debt securities and higher for longer-term debt securities. An account may be subject to a greater risk of rising interest rates than would normally be the case due to the current period of historically low rates and the effect of potential government fiscal policy initiatives and resulting market reaction to those initiatives. • Prepayment Risk. Prepayment risk is the risk that the issuer of a debt security will repay principal prior to the scheduled maturity date. Debt securities allowing prepayment may offer less potential for gains during a period of declining interest rates, as an account may be required to reinvest the proceeds of any prepayment at lower interest rates. These factors may cause the value of an investment in an account to change. Other Risks • Cybersecurity Risk. Investments are susceptible to operational risks through breaches in cybersecurity. A breach in cybersecurity refers to both intentional and unintentional events that may cause a company (including Fayez Sarofim & Co. and the companies in which an account invests to lose proprietary information, suffer data corruption or lose operational capacity. Such events could cause such a company to incur regulatory penalties, reputational damage, additional compliance costs associated with corrective measures and/or financial loss. Cybersecurity breaches (including ransomware attacks) may involve unauthorized access to a company’s digital information systems through “hacking” or malicious software coding but may also result from outside attacks such as denial-of-service attacks through efforts to make network services unavailable to intended users. In addition, cybersecurity breaches of the issuers of securities in which an account invests or Sarofim Trust Co.’s third-party service providers, such as its administrator, transfer agent, custodian, or sub-adviser, as applicable, can also subject an account to many of the same risks associated with direct cybersecurity breaches. Although Sarofim Trust Co. has established risk management systems designed to reduce the risks associated with cybersecurity, there is no guarantee that such efforts will succeed. • Disease and Epidemics. The impact of disease and epidemics may have a negative impact on our business, our clients and their performance and financial position. Coronavirus, renewed outbreaks of other epidemics or the outbreak of new epidemics could result in health or other government authorities requiring the closure of offices or other Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 19 of 37  businesses, and could also result in a general economic decline. For example, such events may adversely impact economic activity through disruption in supply and delivery chains. Moreover, our operations and those of our clients or their investments could be negatively affected if personnel are quarantined as the result of, or in order to avoid, exposure to a contagious illness. Similarly, travel restrictions or operational issues resulting from the rapid spread of contagious illnesses may have a material adverse effect on business and results of operations. A resulting negative impact on economic fundamentals and consumer confidence may negatively impact market value, increase market volatility, cause credit spreads to widen, and reduce liquidity, all of which could have an adverse effect on our business, our clients and their investments. The duration of the business disruption and related financial impact caused by a widespread health crisis cannot be reasonably estimated. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 20 of 37  Item 9 – Disciplinary Information Sarofim Trust Co. and its management persons have not been subject to any material legal or disciplinary events required to be discussed in this brochure. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 21 of 37  Item 10 – Other Financial Industry Activities and Affiliations Sarofim Trust Co. is affiliated with three other registered investment advisers: Fayez Sarofim & Co., Sarofim International Management Company, and Sarofim Realty Advisors. While the firm and certain of its “management persons” have a relationship with the above-listed “related person” investment advisers, Sarofim Trust Co. does not believe that the relationship is material to the firm’s advisory business or to the firm’s clients or that the relationship may result in a material conflict of interest. For purposes of this response, the firm’s investment and administrative professionals are considered “management persons” since they are considered to have a controlling influence over the firm’s management or policies or the general investment advice given to the firm’s clients. A “related person” for purposes of this response includes all employees of the firm and its affiliates other than those performing only clerical, administrative support or similar functions. The firm seeks to avoid and mitigate all conflicts of interest and has adopted policies and procedures to be followed in determining and eliminating conflicts of interest. For example, please see the discussion in the response to Item 11 Code of Ethics, Participation or Interest in Client Transactions, and Personal Trading. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 22 of 37  Item 11 – Code of Ethics, Participation or Interest in Client Transactions, and Personal Trading As required by SEC rules and in line with what we believe to be good business practices, Sarofim Trust Co. has adopted a Code of Ethics for employees and certain on-site contractors. References to “employees” in this Item 11 include such on-site service providers. The Code of Ethics is designed to reinforce a culture of compliance within the firm and to ensure that we fulfill our fiduciary duty to our clients and prospective clients. To help our employees understand, appreciate and uphold their fiduciary responsibilities, the Code of Ethics sets standards of expected conduct and outlines prohibited conduct. The code requires that each employee must: • Comply with the spirit and the letter of the federal securities laws and the rules governing the capital markets • Act with competence, dignity, integrity, and in an ethical manner, when dealing with clients, the public, prospects, third-party service providers and fellow employees • Use reasonable care and exercise independent professional judgment when conducting investment analysis, making investment recommendations, trading, promoting Sarofim’s services, and engaging in other professional activities • Adhere to the highest standards with respect to any potential conflicts of interest with clients • Recognize that he or she should never benefit at the expense of any client • Conduct all personal securities transactions in a manner consistent with fiduciary obligations to clients, and avoid any actual improprieties, as well as the appearance of impropriety • Treat as confidential the identity of clients and their financial circumstances and security holdings Employees are required upon hire and annually thereafter to acknowledge that they have received, read, understood, and agree to comply with the Code of Ethics. Annual compliance training sessions, which are mandatory for all employees, review key precepts of the code. To help us enforce the Code of Ethics, we regulate and monitor employee securities trading activity and require certain periodic disclosures from employees. Within ten days of starting employment with the firm, an individual must submit an initial holdings report to the firm’s Chief Compliance Officer, detailing security holdings and the accounts in which they are held. An updated holdings report must be submitted semiannually by all employees. Employees must also have trade confirmations and monthly or quarterly statements sent to the firm. In addition, certain key employees are required to complete quarterly transactions reports. The firm’s Chief Compliance Officer or her designee reviews these reports periodically for accuracy and unusual trading activity. Employees must receive preclearance for most personal securities transactions. Sarofim may disapprove any proposed transaction, particularly if the transaction appears to pose a conflict of interest or otherwise appears improper. The firm maintains a “restricted list” which includes securities that are being traded in client accounts and securities that are being considered for Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 23 of 37  purchase in client accounts. Employee trades in securities on the restricted list may not be approved. Furthermore, employees are prohibited from engaging in securities transactions or recommending transactions for client accounts that place, or appear to place, their own interests above the interests of our clients or the firm. As an investment adviser, we hold many of the same securities that we recommend for our clients. A significant portion of the firm’s assets and our investment professionals’ net worth is invested in equity portfolios constructed and managed similarly to those of most of our clients; however, at times the firm and its employees may invest in directionally different ways from our clients. Consequently, the firm often effects transactions on behalf of clients in discretionary accounts or recommend transactions to clients with non-discretionary accounts that involve securities held in the firm’s account or in the accounts of employees. When this is the case, employee trading in the particular security must be conducted in accordance with the principles and procedures outlined in the Code of Ethics. Since Sarofim Trust Co. provides investment advice to various clients, including clients that routinely invest in various levels of the same issuer’s equity and debt securities, there are likely to be conflicts of interest relating to such investments that must be resolved by Sarofim Trust Co. Where multiple clients invest in different parts of the capital structure of an issuer, their respective interests generally will be conflicting, including in cases where the issuer becomes financially distressed. For example, it is possible for both an account employing an equity strategy and an account employing a debt strategy to be simultaneously invested in the same issuer that becomes financially distressed. In such cases, the interests of each client may be in direct conflict with another. Sarofim Trust Co. has adopted conflicts policies and procedures that generally provide that determinations are to be made in good faith in the collective best interests of such clients. Sarofim Trust Co. and our registered investment adviser affiliates have adopted and follow policies and procedures that prohibit trading while having material information that is not available to the public and during “blackout periods.” An individual employed by or associated with Sarofim Trust Co. may be an officer or director of a publicly traded company or a party to contractual arrangements with a publicly traded company. If so, such an individual may be prohibited by the policies of the public company from trading in the securities of that company during blackout periods imposed or recommended by the company. It is also the policy of Sarofim Trust Co. and our registered adviser affiliates that these individuals may not trade in securities of the public company during a blackout period. These policies also require that all directors, officers and other employees of Sarofim Trust Co. and our affiliates are subject to the same restrictions. Although trading in securities of the designated public company during a blackout period is prohibited in the personal accounts of employees and in the firm’s account, Sarofim Trust Co. and our affiliates may trade in securities of the public company on behalf of our discretionary investment advisory clients provided: • The individual who is the officer, director, or affiliate of the public company does not exercise sole investment discretion over the trading of these securities for client accounts during the blackout period; and Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 24 of 37  • This individual has not, does not and will not disclose material information that is not available to the public. In addition, our compliance policies and procedures require us to make certain disclosures if any of our employees have these types of relationships with a public company. Other topics discussed in the firm’s compliance policies and procedures, including the Code of Ethics, include: • Prohibition against insider trading • Restricting access to material non-public information • Approval for outside business affiliations • Contributions to candidates for political office • Communications with clients • Entertainment, gifts and gratuities Clients or prospective clients may receive a copy of the firm’s Code of Ethics by sending a written request to: Mrs. Raye G. White Executive Vice President and Chief Compliance Officer Sarofim Trust Co. Two Houston Center Suite 2907 Houston, Texas 77010 rgwhite@sarofim.com Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 25 of 37  Item 12 – Brokerage Practices Sarofim Trust Co. is not affiliated with a brokerage firm. The firm’s brokerage practices related to transactions in clients’ accounts may differ among clients depending on the degree of discretionary authority the client has given us. We prefer to have full discretionary authority to manage the investment of a client’s assets. Full discretionary authority includes brokerage discretion, which gives the firm the ability to select the broker to execute transactions in a client’s account and to negotiate the commission rate. In some instances, the firm’s brokerage discretion is limited by directions from the client or by agreements the client has entered into with third parties. The firm also has non-discretionary arrangements with clients. In certain non-discretionary arrangements, once the client has approved a particular transaction, the firm is authorized to place the order and select the broker to execute it. In other non-discretionary arrangements, the client places the order and selects the broker to execute the transaction. Please see also Item 16 Investment Discretion. Sarofim Trust Co.’s general policy when placing orders for the purchase or sale of securities in a client’s account is to seek to secure the best net execution, including both execution prices and commission rates. In selecting brokers or dealers to execute transactions, we consider such factors as: • • • • the price of the security the commission rate the size and difficulty of the order the reliability, integrity, financial condition and general execution and operational capabilities of competing brokers and dealers the research services that competing brokers provide • Orders are placed with brokers that we believe are responsible and will give effective execution of orders under conditions favorable to our clients. On an overall basis, we believe we obtain favorable executions and competitive commission rates for client transactions. However, it is possible that a more favorable execution or a lower commission rate would have been obtained if the order had been placed with another broker. In selecting brokers, we may give preference to brokers that provide research and other services to us so long as we believe that the objective of best net execution is not being sacrificed. A discussion of what is meant by research and other services and our policy governing procedures for giving preference to the brokers who provide them is included in the following section Research and Other Soft Dollar Benefits. The firm will not choose a broker to execute a transaction solely on the basis that the broker has referred clients or prospective clients to us. Please refer to the discussion on Brokerage for Client Referrals. When orders from our portfolio managers are received concurrently for more than one client account, the firm may seek to aggregate or batch the orders in an effort to obtain reduced Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 26 of 37  commission rates or more favorable execution. A broker may be selected to execute an aggregated order because of the broker’s ability to handle such executions, provided that the primary consideration of best net execution is met. Generally, when trades are aggregated, each client account within the block will receive the same price and commission. From time to time, the firm will evaluate the performance of the brokers that have been selected to execute orders for our clients’ accounts. If we believe a broker’s performance has been unsatisfactory, we will cease doing business with this broker entirely or until improvement has been demonstrated. The firm’s executive officers are available to discuss brokerage allocation with clients or prospective clients upon request. Research and Other Soft Dollar Benefits Brokers and dealers may provide research or other services in addition to the services required to execute an order. When a portion of the commission paid to a broker for the execution of an order is considered to be a payment for these additional services, this portion of the commission is often referred to as “soft dollars.” The additional research and other services received are sometimes referred to as “soft dollar benefits.” Sarofim Trust Co. uses the soft dollar benefits received from brokers to supplement our own internal research activities and to consider a broader range of information and opinions in formulating our investment decisions. The soft dollar benefits will be used in servicing all of our client accounts as well as the firm’s proprietary accounts, not just those accounts that paid commissions to the brokers providing the soft dollar benefits. A client account may pay a higher commission because of the soft dollar safe harbor benefits provided by a broker, but this will only occur if we have determined in good faith that this commission is reasonable in relation to the value of the soft dollar safe harbor benefits provided by the broker. However, the value we receive from these soft dollar benefits is difficult to quantify in a dollar amount. The use of soft dollar benefits may create conflicts of interest. One such conflict is that when client brokerage commissions are used to obtain research or other products and services, Sarofim Trust Co. receives a benefit because the firm does not have to produce or pay for the research, products, or services. Also, Sarofim Trust Co. may have an incentive to select broker-dealers based on the firm’s interest in receiving research or other products or services, rather than on the clients’ interest in receiving most favorable execution. Sarofim Trust Co. has adopted a soft dollar policy to address the conflicts of interest that may arise when the firm has discretionary authority to direct brokerage related to clients’ accounts to brokers from which we also receive soft dollar benefits. Under our soft dollar policy, Sarofim Trust Co. will only use soft dollars to obtain products and services that fall within the safe harbor provided by Section 28(e) of the Securities Exchange Act of 1934, as interpreted by the Securities and Exchange Commission. The following products and services fall within the definition of “research services” within the soft dollar safe harbor: Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 27 of 37  • Research reports; • Discussions with research analysts and meetings with corporate executives; • Fees to attend conferences or seminars that provide substantive content regarding issuers, industries, and/or securities; • Research related to the market for securities, such as trade analytics (including analytics available through order management systems), and advice on market color and execution strategies; • Market, financial, economic, and similar data; • Pre-trade and post-trade analytics used during the investment decision-making process; and • Proxy services that the adviser uses during the investment decision-making process, as opposed to services used to satisfy the adviser’s own voting, recordkeeping, or disclosure obligations. These safe harbor services do not include the referral of clients to Sarofim Trust Co. The Section 28(e) safe harbor applies to research products and services that are “provided” by a broker-dealer. In addition to proprietary research produced directly by a broker-dealer, the safe harbor also applies to third-party research. Sarofim Trust Co. may be involved in deciding what third-party research will be provided, and the third-party may send the research directly to us, but the broker-dealer must either (a) have a legal obligation to pay for the research, or (b) pay for the research directly, review the description of the research for red flags that would indicate that it was outside of the safe harbor, and develop and maintain procedures so that research payments are documented and paid for promptly. From time to time Sarofim Trust Co. may enter into commission sharing agreements with certain brokers that allow us to use client commissions to pay for research produced by someone other than the executing (or introducing or clearing) broker-dealer. It is our belief that such arrangements may offer efficient execution venues that provide high quality, low-cost execution while research providers compensated out of the shared commissions offer valuable research ideas that benefit our clients. Each commission sharing arrangement is evidenced by written agreement. We evaluate such arrangements on a case-by-case basis and negotiate each commission sharing agreement accordingly. In the event that a product or service has multiple uses, some of which are eligible under the soft dollar safe harbor, and others of which are not, Sarofim Trust Co. may only use soft dollars to pay for that portion of a product or service that falls within the safe harbor. We must use hard dollars to pay for the portion of the product or service’s costs that are outside of the safe harbor. In such a case, Sarofim Trust Co. will make a reasonable allocation of the cost of the product or service according to its use. We will maintain adequate books and records so as to be able to demonstrate that the allocation was made in good faith. We are subject to a conflict of interest when making any such allocation determination. Soft dollar credits are assets of Sarofim Trust Co.’s clients that must be treated with appropriate care. We review at least monthly soft dollar accrual and expenditure reports sent by broker- Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 28 of 37  dealers and reconcile such reports against our internal records. Any discrepancies should be promptly reported to the CCO. Sarofim Trust Co. will periodically review soft dollar credit and debit balances, and if we develop large credit balances, we will consider whether clients are paying unnecessarily high commissions. Conversely, if we develop large deficits, we will evaluate whether we should curtail our soft dollar spending or take other actions in order to avoid the appearance that we must trade accounts excessively in order to reduce our soft dollar deficits. Over the past year, the soft dollar benefits we have received have been limited to the research and other services that fall within the soft dollar safe harbor provisions of Section 28(e) of the Securities Exchange Act of 1934. Brokerage for Client Referrals Sarofim Trust Co. has a policy that precludes the firm from selecting a broker to execute transactions solely on the basis that this broker has referred clients or prospective clients to us. This practice is prohibited because of the conflicts of interest that could result. In exercising our brokerage discretion, we may select brokers that have referred clients or prospective clients to us to execute portfolio transactions, but this selection cannot be based solely on referrals and must be made in accordance with the general policies and procedures discussed throughout Item 12. Client-Directed Brokerage A client of Sarofim Trust Co. may direct the firm to give preference to certain brokers or dealers in allocating brokerage transactions for the client's account. The firm will comply so long as we, in good faith, believe that the objective of best net execution is not being sacrificed or that the amount of commission being paid to such broker or dealer is reasonable in relation to the value of the services provided. In some instances, the firm is directed to use a specific broker for executing transactions either as a result of instructions from a client or as a result of arrangements entered into by the client. In these instances, the designated broker may charge higher commission rates than those generally available to us. We will follow the client’s direction and seek to obtain the lowest commission rate and best net execution available from this broker as long as the client understands that this arrangement limits our ability to negotiate commissions on the client’s behalf and to aggregate or batch the client’s order with the orders of other clients to attain reduced commission rates or better executions. The client in these instances must understand that if the firm were free to select a broker, negotiate for institutional brokerage rates, and to batch orders, the client might pay rates below customary retail brokerage rates and might achieve better executions. When a broker has custody of a client’s securities, the client may direct us to use this custodial broker for executing trades in the client’s account. Often, a client and the custodial broker enter into a brokerage arrangement to contain the total costs related to a client’s account by avoiding the higher fees for trust, custody, or other services that may be charged by another custodian, such as a bank or trust company. In these instances, the firm will seek to obtain the lowest commission rate and best net execution available from the custodial broker. Despite the firm’s Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 29 of 37  efforts, however, the commission rate charged by the custodial broker may be higher or the executions less favorable than the firm could have achieved for the client if we had been granted brokerage discretion. From time to time, the firm will evaluate the performance of the custodial broker in executing portfolio transactions. If the firm believes the custodial broker’s executions are sufficiently unfavorable or the commissions charged sufficiently excessive considering the brokerage and custody services being provided by the custodial broker, we will advise the client of our assessment. We may also recommend that the client change the custodial broker. (See also Item 15 Custody.) For accounts subject to directed brokerage arrangements, Sarofim Trust Co. will not aggregate trades or seek better execution services or prices from other broker-dealers unless the client has allowed Sarofim Trust Co. some discretion with respect to brokerage. Generally, Sarofim Trust Co. will place trades on behalf of accounts subject to directed brokerage arrangements after trading on behalf of other client accounts. Consequently, the firm may not obtain best execution on behalf of clients that direct brokerage; such clients may pay materially disparate commissions, greater spreads, or other transaction costs, or receive less favorable net prices on transactions than would otherwise be the case. In order to meet directed brokerage mandates and trade in an efficient manner, Sarofim Trust Co. may ask clients that direct brokerage to permit the use of “step-out” trades. Traders will document any step-out trades on the relevant trade ticket and in our electronic trading system. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 30 of 37  Item 13 – Review of Accounts Sarofim Trust Co. accounts are managed within the guidelines set by Trust Committee. Teams of two to four investment professionals share the client servicing and portfolio management responsibilities for each account. We manage accounts on an individual basis, taking into consideration a client’s known financial resources, investment objectives, and needs. Each account is reviewed at least quarterly by one of the investment professionals assigned to the portfolio management team for the account. This review is conducted in conjunction with the quarterly reporting process discussed below. Several factors may prompt a more frequent review, including significant cash flows, unusual liquidity requirements, or changes in a client’s situation, investment objectives, or guidelines. Accounts may also be reviewed more frequently if there is a dramatic change in market conditions or a significant shift in the firm’s economic and market outlook. Matters reviewed include portfolio holdings, asset mix, cash flow and liquidity requirements, account-specific instructions or guidelines, and other pertinent factors. Portfolio reports are distributed to clients on a quarterly basis. In some instances, the report may be prepared monthly. These written reports typically include: • summary of investment performance, including current and longer-term results • S&P sector classifications of portfolio holdings • portfolio appraisal by individual security, including purchase cost, current market value, percent of portfolio, unrealized gains and losses, estimated current income and current yield income and expense report realized gains and losses • corporate capital changes and dividend changes • commission report • purchases and sales during the period • • This written portfolio report also strongly recommends that clients compare our portfolio appraisal with statements received from their custodians and to notify us immediately of any discrepancies. This recommendation is made in accordance with our obligation to protect client interests and is consistent with the SEC rules for investment advisers. Periodically, clients receive our commentary on the economy and the market outlook. One or more of the investment professionals assigned to an account will confer with the client from time to time. Clients may also request a conference to review their account. Client communication is an important part of our investment advisory services, and we encourage clients to contact us if they have questions. In addition to the information provided to all investors, the firm may provide certain investors with additional information or more frequent reports that other investors will not receive. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 31 of 37  Item 14 – Client Referrals and Other Compensation Sarofim Trust Co. does not have any written solicitation agreements in place. No accounts are to be solicited in states in which such solicitations are not in compliance with state laws. From time to time, brokers, dealers, or other persons may refer clients or prospective clients to Sarofim Trust Company, Fayez Sarofim & Co., or its other affiliates on an informal basis. The firms do not pay fees for these informal referrals. Furthermore, the firms will not select brokers or dealers to execute portfolio transactions solely on the basis that they have referred clients or prospective clients to the firm. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 32 of 37  Item 15 – Custody “Custody” means holding, directly or indirectly, client funds or securities or having authority to obtain possession of them. Most assets of clients of our firm are held by a “qualified custodian” as defined by the SEC, usually a bank or brokerage firm. If the firm inadvertently receives client funds related to accounts for which we do not act as trustee, we are generally required to return them to the sender within three business days. Before entering into an investment advisory agreement with Sarofim Trust Co., you must first establish an account with a qualified custodian. If you need assistance in selecting a custodian, the firm will make suggestions, taking into consideration the cost, the perceived quality of the custodial services, and the types of securities involved as well as other factors we think may be relevant. Clients should receive account statements from their qualified custodian on at least a quarterly basis. If you do not receive such statements, please notify us immediately. As a client, you should compare the quarterly portfolio report you receive from us with the account statements you receive from your qualified custodian. We urge you to notify us immediately if you find discrepancies. For tax purposes, the account statement you receive from your custodian is the official record of your transactions and assets. Sarofim Trust Co. also serves as the trustee of trusts. In these cases, Sarofim Trust Co., as trustee, will have custody of the assets and may engage the services of a third-party custodian. Because we are deemed to have custody of some of our trustee clients who are also advisory clients, we undergo surprise audits on an annual basis. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 33 of 37  Item 16 – Investment Discretion Sarofim Trust Co. will manage clients’ assets on a fully discretionary basis, a limited discretionary basis or a non-discretionary basis. Most of our clients have granted us full discretionary authority to manage the investment of the assets in their accounts, and we prefer to manage accounts on this basis. Before the firm may assume discretionary authority, the firm and the client must execute an investment advisory agreement. The investment advisory agreement includes: • A statement of the firm’s appointment as investment manager A discussion of the duties and powers of the firm as investment manager, including discretionary authority • A description of the duties of the client, including advising the firm of investment objectives and any specific restrictions • Other pertinent information on matters such as compensation and termination With full discretionary authority for an account, the firm is able to do the following without obtaining the client’s consent: • Determine which securities to buy or sell • Determine the total amount of securities to buy or sell, subject to available funds • Determine the broker or dealer through which securities are bought or sold • Negotiate with the selected broker regarding commission rates for securities transactions Unless the client notifies the firm in writing of specific restrictions, the investments made on behalf of the client are considered not to be restricted. The firm manages a number of accounts subject to client instructions that prohibit holding certain securities or types of securities or that limit weightings in individual sectors, industries, or securities. In certain instances, the firm’s discretion to determine the broker through which client securities are bought or sold is limited due to arrangements entered into by the client or directions from the client. For example, a particular broker may have custody of a client’s securities, and the client may direct the firm to use this custodial broker to purchase or sell securities in the client’s account. In other instances, the client may direct the firm to give preference to one or more brokers in allocating brokerage transactions for the account. For a discussion of the firm’s policies and procedures in these instances, please refer to Item 12 Brokerage Practices. When we provide services on a non-discretionary basis, we give the client investment advice, but we do not have the authority to implement our recommendations in the client’s portfolio without the client’s approval. The client may or may not follow the firm’s advice. In certain non- discretionary arrangements, once the client has approved a particular transaction, the firm is authorized to place the order and select the broker to execute it. In other non-discretionary arrangements, the client places the order and selects the broker to execute the transaction. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 34 of 37  Item 17 – Voting Client Securities Proxy Voting and Class Actions Policy A client may give Sarofim Trust Co. the authority to vote the proxies requested by the issuers of securities in the client’s account. To guide us as we exercise this authority and to comply with SEC rules, the firm has adopted a Proxy Voting and Class Actions policy and procedures. We evaluate each proxy on a case-by-case basis and generally seek to vote proxies in a way that maximizes the value of clients’ assets. In deciding how to vote on a particular proxy proposal, we rely, for the most part, on the business judgment of the management and directors of the issuer of the security, and the fiduciary responsibilities that the issuer’s directors have with respect to the issuer’s shareholders. If we decide the recommendation of the issuing company’s management is not in the best interests of shareholders, we will not follow management’s recommendation. To avoid conflicts of interest, no employee of Sarofim Trust Co. may participate in the voting process for a particular proxy if the employee meets any one of the following criteria: is an officer or director of the company issuing the proxy • • beneficially owns 5 percent or more of the outstanding shares of any class of securities of the company issuing the proxy • otherwise is interested in any way in the outcome of the vote, with the exception of being a beneficial owner of less than 5 percent of the outstanding shares of any class of securities of the company issuing the proxy Sarofim Trust Co., or a third party acting on the firm’s behalf, retains: records of votes cast on behalf of clients records of client requests for proxy voting information • copies of all proxy statements received regarding client securities • • • documents used or prepared by the firm that were material to deciding how to vote on a particular issue • copies of the Proxy Voting and Class Actions policy and procedures adopted by the firm Clients may obtain a copy of our Proxy Voting and Class Actions policy and procedures by writing to: Mrs. Raye G. White Executive Vice President and Chief Compliance Officer Sarofim Trust Co. Two Houston Center Suite 2907 Houston, Texas 77010 rgwhite@sarofim.com Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 35 of 37  Clients who have given us authority to vote proxies on their behalf may obtain an annual, semiannual or quarterly record of these votes by submitting a written request to Mrs. White at the address above. Clients who have given us authority to vote proxies but wish to direct a particular vote may do so by submitting their instructions in writing to Mrs. White. Clients may choose to retain the authority to vote the proxies related to securities in their accounts. In such instances, clients would receive the proxy statements from their custodians. Clients may contact Mrs. White at the address above if they have questions about a particular solicitation. Proxy Voting Procedures Fayez Sarofim & Co., the parent company of Sarofim Trust Co., has retained Glass Lewis & Co. (“Glass Lewis”) to assist in the proxy voting process. Charles Sheedy, Chairman of the Proxy Committee, or his delegatee manages Sarofim’s relationship with Glass Lewis. Glass Lewis provides the following services in connection with the voting of proxies by Sarofim Trust Co.: (i) analyses of proposals, (ii) vote recommendations, (iii) vote execution services and (iv) record keeping services. Glass Lewis provides its analyses of proposals and vote recommendations pursuant to and in accordance with the proxy voting guidelines furnished to it by the firm. Absent specific client instructions, Sarofim Trust Co. has adopted the following proxy voting procedures designed to ensure that proxies are properly identified and voted, and that any conflicts of interest are addressed appropriately. First, ISS analyzes the proxy proposal in accordance with a set of policy guidelines established by the firm’s Proxy Committee and makes a vote recommendation to the firm. This recommendation, which becomes the default position for the vote, is then sent to the analyst at our firm who is responsible for the research coverage of that security. If our analyst agrees with the vote recommendation submitted by Glass Lewis, he or she will instruct Glass Lewis to cast the vote according to that recommendation. If the analyst at our firm does not agree with the default recommendation provided by Glass Lewis, the analyst must provide a written explanation of the reasons for the different opinion. This written explanation is reviewed by the chairman of the firm’s Proxy Committee. If the chairman agrees with the analyst’s recommendation, that recommendation becomes final and binding, and Glass Lewis is instructed to vote according to the analyst’s recommendation. In the rare instance that the chairman and the analyst cannot reach an agreement, the matter is considered by all the investment professionals on the Proxy Committee. The decision of the group is final and binding. No employee of the firm may participate in the voting process for a particular proxy, if any one of the three disqualifying factors enumerated in the Proxy Voting Policy section above applies. Sarofim Trust Co. and Glass Lewis, acting on our behalf, maintain as permanent records the original proxy bulletin, the voting instructions, and the reasons for such votes. Class Actions Sarofim Trust Co. does not direct clients’ participation in class actions. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 36 of 37  Item 18 – Financial Information The disclosures required by Item 18 do not apply to Sarofim Trust Co. Sarofim Trust Co. does not require prepayment of management fees more than six months in advance or have any other events requiring disclosure under this item of the brochure. Sarofim Trust Co. has not been the subject of any bankruptcy petition. Sarofim Trust Co. Part 2A of Form ADV: Firm Brochure Page 37 of 37