Operations -
Accounts are not assigned to individual principals or associates. Each member of the firm is familiar with all accounts, and we urge clients to contact any principal or associate whenever they have questions.

The investment committee consists of all the principals of the Firm. When a committee member reviews an account, he presents his recommendations to the whole committee, which usually meets daily. The committee decides which securities are bought or sold and the quantity.  Generally, we will not purchase additional shares in any stock that results in the total holding in that issue exceeding 5% of the total portfolio.

Clients usually select their own broker/custodian.  We have made arrangements with several major securities firms for brokerage and custody at commission rates substantially lower that regular "full service" brokerage accounts.  On occasion, we help clients choose from one of these alternatives if they have no other preference.  Our written Investment Management Agreement with our clients grants us authority to negotiate lower commissions, and we have done so wherever possible.  In a limited number of circumstances, we execute trades at a broker other than the client’s custodian solely to improve pricing/execution.   A few brokers voluntarily send us research reports; however, this is not a factor in our placement of what little discretionary business we have, nor is it a factor in our negotiating lower commissions.  We do most of our research ourselves and it applies to all our clients.

As outlined in the paragraph above, non-affiliated brokerage firms - and not Stewart and Patten – always serve as custodians of client accounts.  However, Stewart and Patten Principals act as Trustee for a limited number of client accounts.  In these cases, Stewart and Patten would have custody of client assets as defined by the SEC.  Nevertheless, client assets are still held at a qualified custodian not affiliated with Stewart and Patten.  In addition, co-trustees and/or beneficiaries of these trusts receive all custodial/brokerage reports, quarterly reports from Stewart and Patten, and year-end principal and income accountings from Stewart and Patten.  These trusts represent slightly more than $11.4 million in client assets and 19 separate accounts as of January 31, 2010.

We furnish quarterly portfolio appraisals to each client.  We also prepare a year-end schedule of realized capital gains and losses based on the information from the records maintained in our office. Virtually all client records are electronically updated each business day and reconciled monthly.  Client account data is retained for at least five years.  In addition, each client receives directly from their custodian reports that include monthly summary statements and individual broker confirmations for each purchase and sale.

The frequency of review of a client's account varies.  Accounts with significant cash flows are reviewed immediately.  Copies of quarterly valuations are distributed to each investment committee member, resulting in committee review soon after release.  The companies owned by our clients are reviewed whenever earnings or significant news is announced, or after a principal visits the company or its representatives.  Other factors which will trigger a review of client accounts include: a significant change in stock prices, a change in a client's personal or financial situation, or a change in emphasis in particular investments such as a new candidate for purchase or sale.

Transactions for clients always have priority over the personal transactions of partners and associates.  Personal transactions of partners/associates never operate adversely to clients' interests.  Partners and associates occasionally buy or sell securities bought or sold for clients. Partners/associates are required to conduct all aspects of their personal business in such a manner to avoid any actual or potential conflict of interest.  Partners/associates are prohibited from placing personal trades for securities when there are open client orders for that security.  This effectively means that all trades for partners/associates take place at the end the day after all client trades have been completed.  The one exception would be periods when the firm makes a series of transactions in a given security for client accounts over a period of several days.  In this case, no personal trades in this security would be allowed until after all client transactions are complete.  The company maintains a file (updated quarterly) on all partners' and associates' transactions involving the purchase and sale of equity securities. 
 
We occasionally execute block trades with different brokers because client assets are held at different brokers as directed by clients.  We will purchase or sell a security as one block through a selected broker and then allocate that trade among the clients that have selected that broker as their custodian.  We then repeat that process for clients who have selected other brokers until the total transaction has been completed for all clients.  Although price and transaction costs may vary slightly from broker to broker, within each group of clients who share the same broker, average share price and transactions costs are shared on a pro rata basis.  Orders are placed with the small number of retail brokers utilized by some clients first in order to ensure that a connection is made with the broker during the trading day.  All other brokers are traded on-line.  The sequence in which block trades are placed with each broker group varies based on the size of the order and the liquidity of the security in the marketplace.