Solaris Capital Llc Power Point Sep 2011

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Overview• Experience• Why Invest with Solaris?• The Investment Process• Performance Analysis• Solaris Clients• Case Studies• Questions and Comments

* This should not be deemed an offer to buy an interest in The Solstice Fund I, LP unless accompanied or preceded by a current Private Offering Memorandum and the documents relating thereto (“Offering Documents”) along with Solaris Capital LLC’ ADV. The attached material is subject to and qualified in its entirety by reference to the Offering Documents. Investment in the partnership carries certain risks including loss of principal. Past performance is no guarantee of future results and no representation is made that results similar to those shown can be achieved.

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Experience

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Jesse T. Ellington, IIIBiographical Sketch

Founding Principal, Solaris Capital, LLC $30MM plus assets under management with six year track record Proven performance in stock selection Developed proprietary event-driven investment strategy Outperformed the S & P 500 by over 400BP (six yr. compounded)

Investment management consultant, FDSI (affiliate of Wilshire Associates) Executed performance reviews, strategic asset allocation and management

searches for corporate and public pension funds

Investment analyst, Wells Fargo Investment Advisors Specialized in value analysis with focus on Basic Industries

Education MBA from Colgate Darden School of Business, 1990 Graduated with distinction from University of Virginia, 1985

Special Designations Series 65, RIA

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G. Chris Osborne, Jr. Biographical Sketch

Analyst, Head Trader, Solaris Capital LLC

Trader, Bank of America Specialists Served as an agent to institutional brokerage houses and acted as a

principal making markets in numerous NYSE listed securities

Analyst, Redfish Ventures Focused on wireless and alternative energy sectors

Education B.S. The University of the South, Sewanee, 1999

Special Designations Series 7, 65, RIA

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Carl MabryBiographical Sketch

Director of Marketing, Solaris Capital, LLC Lead Distressed Analyst, Delaware Investments

Focused on high yield/distressed bonds and bank debt in core-plus accounts Managed all workouts in the insurance and related portfolios

Distressed Analyst – Conseco Capital Management, Carmel, In

Senior Associate – Stubbs Perdue, Raleigh, NC Attorney specializing in Chapter 11 corporate reorganizations

Law Clerk – United States Bankruptcy Judge Middle District North Carolina

Education J.D. University of North Carolina at Chapel Hill, 1993 B.A. Duke University, 1988

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Why Invest With Solaris?

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Absolute Return Focus…

Overall investment approach offers robust strategy, risk transparency and consistent performance

Fund specializes in event-driven long/short equity investing within U.S.-listed securities

Net market exposure based on number of stocks passing event-driven screening process, price targets and sell discipline

Compounded annual returns for the Solstice Fund I of over 7.44% since 2005 with only one down calendar year. (S & P 500 was 2.99%). Returns of over 15% for Solaris Capital managed accounts since 1998

Lower Volatility with High Sharp Ratio and conservative drawdown

Investing strategy underscores market understanding and risk management

… consistent with capital preservation

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Investment Focus Changes in earnings expectations are key catalysts that drive

stock prices up or down

Solaris seeks to capitalize on the significant, unexpected corporate events that trigger those changes

Solaris Capital

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The Investment Process

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Principles Behind the Process Investment philosophy

Combines bottom-up approach coupled with corporate event-driven catalysts

Vigorous portfolio management Short to intermediate orientation allows us to dynamically

allocate capital

Proven methodology Three-tiered screen involves unexpected events, fundamental

analysis and technical confirmation

Combination of proven methodology Flexible investing parameters and nimble execution ability

provides distinct advantage

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Methodology at a glance…

Earnings outlook

• Accretive/Strategic acquisitions

• Positive industry trends– pricing/demand

•Charting patterns

•Congestion and consolidation

•Balance sheet strength

•Capital structure

•Industry sentiment

•Macro indicators

2000+headlinesEvent-driven Technical Analysis Fundamental

Analysis

15 - 20 securities

< 10 securities < 5 securities

+ + +

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Screening Process: Screen I

Press releases scanned for unexpected news – positive or negative – likely to impact future earnings expectations

Key catalysts include: Earnings Guidance Mergers and Acquisitions New Contracts/Business Agreements Industry Pricing Major Industry News New Product Announcements Balance Sheet Restructuring Divestitures Management Changes Government Stimulus

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Screening Process: Screen II Traditional tools of technical analysis assess charting

patterns

Key indicator is consolidation

a consolidated pattern confirms the news is unexpected

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Screening Process: Screen III Comprehensive fundamental

analysis includes: Equity Capital Structure – Does the

company have a secondary/convertible offering planned?

Income Statements – Has the company shown a consistency of earnings?

Industry Sentiment – How does the market perceive the industry’s potential?

Management Changes – Have any key personnel recently left the company?

Balance Sheet Strength – What are the current debt levels?

Short Positions – What is the current short position as a percentage of outstanding shares?

Market Sentiment – What is the overall market outlook as indicated by the S & P futures?

Comparative Industry Ratios – How does valuation compare with competitors as determined by (PEG), P/S), (P/E) ratios?

Macro-economic and Global Events – Are the major economic indicators favorable? What is the global risk outlook?

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Managing Investment Risk Front-end discipline

Instead of magnitude, consistency of return through steady profits is our goal

Investing universe limited to US listed securities; avoids fundamentally speculative and high-risk vehicles

Rigorous sell discipline No corporate mandate to be fully invested at all times –

absence of events, signals cash

No event screen ideas No new positions

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PerformanceAnalysis

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The Bigger Picture Monthly Return Summary 2006 – 2011 YTD

Performance returns are shown for the period ending 9/30/11 The performance returns have been calculated net of fees and expenses, including all management and reallocation fees. The returns include all reinvestment of dividends and interest income. The accounting firm of Bryan, Truesdale, Adkins & Williams has audited the historical returns and financial statements from 2005 through the year ending 2010. These returns are presented net of a 1% management fee paid quarterly. These calculations are computed on a monthly basis. The 20% net profit allocation to the General Partner is reflected in the net asset value. These calculations are computed on a monthly basis. Thus all monthly calculations shown above are net of the carried interest and the management fee. The monthly and annual returns are time weighted and geometrically linked. The fund’s investment minimum and fee structure may be altered at the discretion of the General Partner and with approval from the Limited Partners. This should not be deemed an offer to buy an interest in The Solstice Fund I, LP unless accompanied or preceded by a current Private Offering Memorandum and the documents relating thereto (“Offering Documents”) along with Solaris Capital LLC’ADV. The attached material is subject to and qualified in its entirety by reference to the Offering Documents. Investment in the partnership carries certain risks including loss of principal. Past performance is no guarantee of future results and no representation is made that results similar to those shown can be achieved.

2006 2007 2008 2009 2010 2011

January 5.62% 1.58% -2.10% -0.28% 0.87% -1.63%

February -0.49% 1.20% 0.97% -1.70% -0.85% 1.47%

March 2.00% 0.99% -1.05% 0.01% 0.63% 0.20%

April 2.76% 2.78% 2.17% 1.17% 2.91% 0.07%

May 0.61% 5.66% 4.38% 2.42% -0.89% 2.59%

June 0.93% 1.95% -0.28% -0.39% -1.12% 0.40%

July -1.80% -1.13% -0.09% 1.12% -1.28% -1.16%

August 0.65% 0.82% -0.63% -0.26% -0.76% -.0.82%

September 1.19% 1.28% -0.09% 1.42% 0.03% -1.06%

October 1.06% -0.38% -1.33% -0.36% -0.62%

November 1.60% -3.10% 1.04% 0.03% -0.49%

December 0.37% 0.39% 0.69% 0.22% 0.78%

Year Total 15.31% 12.35% 3.45% 3.68% -.1.13%

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Volatility Measures

7.63%15.31%

Statistical AnalysisCompound Rate of Return (Annual)

5.66%-3.10%

Standard Deviation36

% Beat S & P When S & P Down 84.00%

Correlation Coefficient (S & P 500) 0.41

Worst 12-month Return

Largest Monthly Loss

3.45%

34.67%% Beat S & P When S & P Up 16.00%

Net Long Exposure

Total Down Months 23

5.68%Total Positive Months

Best 12-month Return

Largest Monthly Gain

Statistical Summary

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Case Studies

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Case Study: Long InvestmentLayne Christensen’s Acquisition of Reynolds

IMMEDIATE RELEASE:Layne Christensen Announces Signed Letter of Intent to Purchase Reynolds, Inc. MISSION WOODS, KS, June 29, 2005

Layne Christensen Company (Nasdaq:LAYN) announced today it has signed a Letter of Intent to purchase 100% of the outstanding stock of Reynolds, Inc. ("Reynolds"). Founded in the mid 1930s, Reynolds, a privately held company, is a major supplier of product and services to the water and wastewater industries. Business lines include design/build water and wastewater treatment plants, water supply wells, Ranney collector wells, water intakes and water and wastewater transmission lines. In addition, Reynolds' Inliner Division is one of the largest providers of cured in place pipe (CIPP) services for sewer line rehabilitation in the United States.The purchase price for Reynolds will be sixty million dollars in cash and approximately 2.2 million shares of Layne Christensen Company stock. Reynolds had combined revenues of approximately $177 million for the year ended December 31, 2004, and EBITDA of approximately $16 million. The business is being sold debt free. Reynolds will also have certain incentives in place which could add an additional $15 million to the purchase price if achieved over the next three years. Jeff Reynolds will join Layne Christensen's board of directors upon closing of the transaction which is expected to be by September 1, 2005. The Letter of Intent sets forth certain conditions including the completion of due diligence by both parties and the signing of a definitive agreement.

Date: June 29, 2005 Catalyst: Acquisition

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Key Points:• Positive investment themes: mineral exploration, water resources,

energy• Positive liquidity from activist shareholder (Steel Partners)• Acquisition boosts strong water resources business • Solaris deems acquisition accretive to earnings• Chart indicates positive current entry point• Size of acquisition – “just right” • Almost no analyst coverage• Excellent growth prospects

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Valuation Metrics:• Current Price: $20.37• Fiscal 2006 Earnings Estimate: 1.03• Forward P/E: 19.77• Growth Rate: 33.7%

Projected Valuation Impact of Reynolds Merger:• 2007 Earnings Estimate: 1.23• Reynolds Impact: .26• Fiscal 2007 Earnings Projection: 1.49• Adjusted P/E for Higher G/R: 22.5• Growth Rate: 44.7%• Price Target: $33.25

Potential Risks:• Margin erosion beyond 150 basis points• Significant drop in commodity prices = negative impact on mineral and methane

businesses

Analysis of Results:• See chart

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Case Study: Long InvestmentGraham Corporation Reports a Significant Increase in Backlog

IMMEDIATE RELEASE:Graham Corporation Announces $8.8 million in New ContractsBATAVIA, NY, February 1, 2007

Graham Corporation Awarded $5 Million U.S. Gulf Coast Oil Refinery OrderBATAVIA, NY, March 27, 2007

Graham Corporation Awarded $5 Million U.S. Gulf Coast Oil Refinery OrderBATAVIA, NY, March 27, 2007

Graham Corporation Achieves Fourth Quarter Record Earnings and2007 Year-End Backlog• Year-end sales of $65.8 million; fourth quarter sales of $20.8 million• Gross margin of 29.2% in fourth quarter• Record backlog of $54.2 million and orders of $27.3 million in fourth quarter

Date: March 22, 2007 Catalyst: Backlog

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Key Points:• Graham’s record backlog represents significant earnings leverage• Projected P&L indicates 50% earnings growth• Margin improvement on new contracts • Increased international exposure • Excellent growth prospects• Positive investment theme• Consolidated chart at 15• Covered by two analysts


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Valuation Metrics:• Current Price: $14.95• Fiscal 2007 Earnings Estimate: 1.11• Forward P/E: 12.66• Growth Rate: 25%

Projected Valuation Impact of Increased Backlog:• 2007 Earnings Estimate: 1.11• Backlog Impact: .88• Fiscal 2008 Earnings Projection: 1.99• Industry Average P/E: 15• Growth Rate: 68.7%• Price Target: $30.00

Potential Risks:• Increased raw material costs/lower projected margins• Lower backlog turn due to labor issues

Analysis of Results:• See Chart


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Case Study: Long InvestmentEMC Sells WMware Stock through IPO

IMMEDIATE RELEASE:EMC to sell about 10% of VMware through IPOPALO ALTO, CA, February 7, 2007• EMC Corp. (EMC) intends to sell about 10% of it VMware unit through an initial

public offering of VMware stock.

Date: February 7, 2007 Catalyst: Divestiture

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Key Points:• EMC spin-off announcement does not reflect VMware valuation• VMware valuation projected at 10 to 12 billion, $7/share• EMC’s existing business worth 20x its earnings, $15/share• VMware first in space – premium valuation• Combined valuation $22/share


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Valuation Metrics:• 2/7/07 Price: $13.80; 2/8/07 Price: $14.50• EMC valuation excluding VMware: $15• VMware valuation: $7• Projected EMC price target: $22

Potential Risks:• Competition from Microsoft in desktop virtualization• VMware valuation



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Case Study: Long InvestmentCelanese Raises 2006 Guidance, Acetyl Supply/Demand Favorable

IMMEDIATE RELEASE:Celanese Corporation Presents Strategic Outlook and Updated View of 2005

Earnings at Investor ConferenceDALLAS, TX, December 12, 2005• Raises diluted adjusted EPS guidance for 2005 to $2.10 to $2.20 • Announces 2006 diluted adjusted EPS guidance of $2.50 to $2.90 • Confirms favorable acetyl industry supply/demand balance through 2008

Date: December 12, 2005 Catalyst: Pricing Power / Earnings Guidance

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Key Points:• Strong international demand for acetyl• Potential 30-50% price increase due to acetyl supply constraints• Company under-owned due to 1/25/05 IPO• Construction of world-scale vinyl acetate plant in China• Chart indicates positive current entry point• Purchase of German affiliate Celanese AG accretive• Positive valuation metrics (P/E 7, G/R 25%)• Restructuring of product lines (copolymer, emulsion powders

out/acetate in)

Valuation Metrics: • Current Price: $19.29• Fiscal 2005 Earnings Estimate: 2.15• Forward P/E: 8.97• Growth Rate: 16%


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Projected Valuation Impact of Price Increase/Guidance:• 2005 Earnings Estimate: 2.15• Pricing Impact: .31• Fiscal 2007 Earnings Projection: 2.69• Adjusted P/E for Higher G/R: 10• Growth Rate 25%• Price Target: $26

Risk Factors:• Dilution from private equity ownership (potential secondaries)• Acetyl price increases do not stick• Leveraged balance sheet



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Case Study: Short InvestmentIntevac Announces Significant Reduction in Backlog

IMMEDIATE RELEASE:Intevac Announces Results for the Third Quarter of 2007 SANTA CLARA, CA, November 1, 2007Intevac, Inc. (Nasdaq: IVAC) today reported financial results for the quarter and nine months ended

September 29, 2007. Order backlog totaled $31.2 million on September 29, 2007, compared to $57.5 million on June 30, 2007, and $129.7 million on September 30, 2006. Backlog as of September 29, 2007 includes one 200 Lean® system, compared to four on June 30, 2007 and twenty-four on September 30, 2006.

Date: November 1, 2007 Catalyst: Reduced Backlog

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Key Points:• Reduced backlog foreshadows downside earnings risk• Increased competition will pressure margins• Significant multiple compression expected• Semiconductor space under pressure• Negative street coverage

Valuation Metrics:• 11/1/07 Price: $17.57• 2007 EPS estimate: 1.20• P/E: 14.5


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Projections:• Projected 2008 EPS: 0.84 (based on Solaris pro-forma)• Projected P/E: 13• Price Target: $11

Risk Factors:• Increase in Lean System Orders• Wide acceptance of Gen II• Significant rebound in worldwide semi book to Bill

Analysis of Results• See chart


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Case Study: Long & WrongSynalloy Reports 405% Increase in Earnings; 151% Increase in Backlog

IMMEDIATE RELEASE:Synalloy Corporation Announces Surge in First Quarter Results SPARTANBURG, SC, April 20, 2007Synalloy Corporation (Nasdaq:SYNL), a producer of specialty chemicals,pigments,

stainless steel pipe, vessels and process equipment, announces that the first quarter of 2007 produced a 405% increase in net earnings to $3,525,000, or $.56 per share, on a 23% sales increase to $44,398,000. Piping systems’ backlog as of the end of the first quarter of 2007 continues to remain at an excellent level at $48,600,000 compared to $19,300,000 at the end of the first quarter of 2006. Management remains confident in the potential success of its fire retardant products over the balance of 2007.

Date: April 20, 2007 Catalyst: Increased Backlog

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Case Study: Long InvestmentSynalloy Reports 405% Increase in Earnings; 151% Increase in Backlog

Key Points• Expect earnings leverage due to increased backlog• Fire-retardant business should add $.40 to 2007 earnings• Specialty chemical business turn-arounds in process• Strong demand in specialty pipe• No street coverage• Significant increase in institutional ownership• Positive visit with management in April 2007

Valuation Metrics:• Current price: $35• 2006 EPS estimate: 1.18• P/E: 29• G/R: 65%

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Case Study: Long InvestmentSynalloy Reports 405% Increase in Earnings; 151% Increase in Backlog

Projections• Projected 2007 EPS: 1.98 (based on Solaris pro-forma)• Flame-retardant earnings: .40• Piping systems: .16• Projected P/E: 22• Price target: $43• G/R: 67%

Risk Factors• Poor flame-retardant sales• Backlog turn• Lower nickel surcharges

Analysis of Results• See chart

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Questions and Comments

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Value of $500,000 in the Solstice Fund I LP Since Inception vs. Indices

Value of $1000 in Solaris Since Inception vs Indices

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