The Power of High-Conviction Portfolios August 2018 August 2018 September 2018

Wisdom “Wide diversification is only required when investors do not understand what they are doing.” - Warren Buffett

Discussion Points Concentration vs. diversification Active share defined Concentration, high active share, yet lower risk – so what? Introduction: Alta Select

Concentrated managers outperform diversified managers Source: eVestment, Lazard, 15 year period ended December 2014

Higher concentration, better performance Source: eVestment, Guardian Capital, 12/31/2017

Portfolios with high active share tend to outperform Y-axis represents outperformance vs. the benchmark, before fees and expenses. Source: Petajisto, For the 20 year period ended 2009

Higher active share, better performance Source: eVestment, Guardian Capital, 12/31/2017

Rise in ‘Closet Indexing’ “Indexes & closet indexers represented 1% of funds in 1980. Today, nearly 45%! The rise of closet indexers as ‘active managers’ helps explain the common perception that most active managers tend to underperform.” - Lazard

Examples of “Diversification” Vanguard Discretionary (VCR) % of Portfolio Amazon.com Inc 23.0 The Home Depot Inc 7.3 McDonald’s Corp 3.9 Nice Inc B 3.1 Booking Holdings Inc Total Top 5 40.4 Other 365 holdings 59.6 Vanguard Healthcare (VHT) % of Portfolio Johnson & Johnson 8.8 United Health Group Inc 6.0 Phizer Inc 5.9 Merck & Co Inc 4.4 AbbVie Inc 3.4 Total Top 5 28.5 Other 369 holdings 71.5

Higher concentration, greater downside protection Source: eVestment, Guardian Capital, 12/31/2017

Alta Select

Quality Defined Profitability throughout the economic cycle Low earnings per share variability Secular earnings growth Deep competitive moat Financial flexibility Valuation consciousness

Holdings Industrials 4.2 Middleby Corp Health Care 12.3 CVS Health Corp 3.6 Novo-Nordisk 2.6 Thermo Fisher Scientific 6.1 Consumer Staples 4.1 Walgreens Boots Alliance Consumer Discretionary 27.8 Booking Holdings 5.7 Dollar Tree Stores 4.7 Expedia Inc 5.8 Home Depot Inc 4.5 Starbucks 3.3 Walt Disney Co 3.6 Information Technology 32.3 Alphabet Inc Apple Computer 7.8 Cognizant Tech Solutions Facebook Inc 5.6 Visa 7.3 Financials 8.2 Markel Corp 4.7 Wells Fargo 3.5 Materials 10.2 Ecolab Inc 3.8 Sherwin Williams Co 6.3 Cash 0.4 Alta Select Composite Portfolio as of June 30, 2018. Holdings are to be considered supplemental information

Assessment Top 10 Holdings % of Portfolio Apple Inc 7.8 Visa 7.3 Sherwin Williams Co 6.3 Thermo Fisher Scientific 6.1 Cognizant Technology Solutions 5.8 Expedia Group Alphabet Inc 5.7 Booking Holdings Facebook Inc 5.6 Dollar Tree Stores 4.7 Capitalization Distribution Portfolio S&P 500 Mega Cap ($106.9 B <) 41.1 49.5 Large Cap ($29.5 B to $106.9 B) 39.1 31.0 Mid Cap ($3.8 B to $29.5 B) 19.7 19.5 Small Cap (< $3.8 B) - As of June 30, 2018. Index data sources: Morningstar Direct and Factset.

Rolling 5 Year Annualized Performance Rolling 5 Year Annualized Net returns shown are net of 0.40% fee. Please see attached Disclosure and Discussion. Past performance is no guarantee of future performance.

Metrics that Make a Difference Characteristics Portfolio S&P 500 % of Index Number of Holdings 20 506 4% 3 Yr. EPS Growth 13.4 11.1 121% Net Margin 15.7 14.2 111% Return on Equity 24.5 19.7 124% EPS Variability 29.7 41.1 72% Down Market Capture 86.6 100.0 86% Data represents Alta Select Portfolio as of June 30, 2018. Source: Morningstar Direct and BNY Mellon.

Altitude Conference Investment Discipline: Ignore at your own risk September 2018 Investment Discipline: Ignore at your own risk

Importance of Discipline “The best way to measure your investment success is not by whether you’re beating the market, but by whether you’ve put in place a financial plan and a behavioral discipline that are likely to get you where you want to go.” - Benjamin Graham “We don’t have to be smarter than the rest, we have to be more disciplined than the rest.” - Warren Buffet

The Importance of a Disciplined Approach in the Current Market Maintaining investment discipline will diminish the effect of emotions on your portfolio. The current bull market we are experiencing is unprecedented and will eventually end. A strong, disciplined investment strategy will protect you from the dangerous herd mentality.

How to Maneuver in the Historic Bull Market Do not try and time the market. The most important thing is your time in the market. Hold fast to your investment ideals, review them at least once each quarter. Take the long-term view, manage for the cycle, avoid the noise and be willing to be contrarian. Be confident and show conviction in your best ideas, as fortune favors the bold. Know your strengths and weaknesses, operate within your circle of competence.

Margin, ROE, ROIC, Liquidity, FCF …greatest long-term impact Source: Strategas Using Russell 3000 data gathered from 1991-2017, Strategas Research Partners analyzed the performance attribution of seventeen factors across four categories: Quality, Growth, Valuation and Market, looking at top quintile vs. bottom quintile companies in each category. Quality factors (Margin, ROE, ROIC, FCF growth) stand out as key differentiators over the long-term. 20

Metrics that Make a Difference Characteristics Portfolio R3000 % of Index Number of Holdings 31 3008 1% 3 Yr. EPS Growth 15.1 11.5 131% Net Margin 18.1 13.2 137% Return on Equity 31.4 17.6 178% EPS Variability 27.5 41.7 66% Down Market Capture 81.4 100.0 81% Data represents All Cap Quality Growth Portfolio as of June 30, 2018. Source: Morningstar Direct and BNY Mellon. .