Amidst a global economic meltdown, the continued downswing in the fortunes of the auto industry,
further anticipated bailout money for the U.S. auto industry contingent on their producing “greener”
vehicles, global warming and tighter regulation on emissions, we see a great opportunity arising in the
form of next-generation clean transportation enabled by advanced battery technologies hitherto
unavailable to the automotive industry. Although the concept of electric vehicles is not new, what is
different this time is the availability of reliable batteries that possess excellent energy and power
capabilities in a practical form factor. That technology is available, here and now, through companies
like A123, Altair Nano, Electrovaya, Ener1, Exide, Johnson Controls and Valence. Ultimately, we see
a larger portion of automobiles incorporating increasing degrees of electrification of the drivetrain, as
automakers begin to import hybrid drivetrain technologies from their core hybrid vehicle offerings to
a broader range of vehicle models.

We believe that advanced energy storage companies offer the best way for investors to participate in
the greening upgrade cycle of vehicles; this market could reach $10-15 billion annually in the 2015-
2020 time frame. We also see alternative fuel systems and specialized integrators of hybrid/electric
drivetrains as an attractive avenue for investors.

Although advanced battery technologies have been around for several years (such as in cell phones
and laptops), reliable large-format, mass-produced batteries for electrified vehicle drivetrains have
presented challenges in the past. Because these technologies are new, costly and have yet to meet the
high standards of the European and North American automotive industry, we would characterize
this as a high risk sector; however, we believe the reward can be very high for selective investors who
are willing to take this risk and carry a long-term investment horizon.

We expect to see high levels of capital raising activity over the next few years among advanced energy
storage companies, particularly in the United States, given the historical absence of a domestic
advanced battery supply infrastructure and automakers’ aggressive plans to make cars with increasing
levels of electrification. We see independent factories as well as battery assembly factories owned by
the automakers themselves evolving over time. Given the long-term trends in the sector, we expect
continued venture capital interest in the market place.

We are widening our research coverage of the Alternative Energy industry to include clean
transportation and energy storage technologies and are initiating coverage of Ener1, Inc. (HEV),
Exide Technologies (XIDE) and Maxwell Technologies (MXWL).

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