EMA GARP Fund, LP Page 1

Report for the First Quarter Ended March 31, 2011

Dear Limited Partner:

This is the EMA GARP Fund, L.P. report for the First Quarter ended March 31, 2011. The Fund declined
in value by 4.1% during the first quarter. Our net return from inception, January 2006, is +197%. Your
results vary depending upon when you invested.

Quarterly Return*

Q1 2011 -4.1%

Monthly Return*

Mar 2011 0.3%%

Feb 2011 11.8%
Jan 2011 -14.0%

Annual Return** Since Inception

2010 47.1% 209.5%

2009 33.2% 110.4%
2008 -5.8% 58.0%
2007 40.5% 67.9%
2006 19.5% 19.5%

* Net fees; incentive allocation is charged in December if the 10% hurdle is reached.
** Net fees and incentive allocation; audited. 2010 not audited yet.

Current Themes Investment Implications

Monetary Chaos Long gold, mining stocks.
Anti Garp Short as appropriate for deflation.
Emerging Markets Long Vietnam GARP

First Quarter Overview

In the first quarter of 2011 our return was -4.1%. We had a loss of 14.0% in January, earned profits of
11.8% in February and were breakeven (+0.3%) in March. The market for precious metals shares was
choppy in the first quarter. To begin with, they experienced a very large correction in January, followed
by a recovery bounce in February, then in March we saw further selling.

EMA GARP GP, LLC ■ 260 Bear Hill Road, Suite 302 ■ Waltham, Massachusetts 02451
781.209.1177 ■ Fax: 781.209.1177 ■ www.ema2.com
 EMA GARP Fund, LP Page 2

Overall, our weightings during the first quarter, shown below, did not change very much from those of
the previous quarter:

Category Weighting Positions

Gold Stocks 58% 37

Silver Stocks 30% 10
Gold Bullion 7%
Silver Bullion 3%
Vietnam & Other 4% 10
Private Deals 2% 4
Anti GARP 0% 0
Cash -1%
====== ==
Total 100% 80

We are not were pleased with the Fund’s performance this quarter, however all bull markets suffer
corrections. Below we present the quarterly and annual return figures for a number of relevant
comparables.

Investment 1st Quarter Return

EMA GARP Fund, LP -4.1%

DJIA 6.4%
S&P 500 Index 5.4%
Nasdaq 4.9%

XAU Gold/Silver Stocks -4.3%

HUI Gold/Silver Stocks 0.0%
GDX Gold Majors ETF -2.2%
GDXJ Gold Juniors ETF 0.9%

Gold bullion 0.8%

Silver bullion 17.9%

In the first quarter the EMA GARP Fund underperformed when compared to the general stock market and
had performance which was very similar to the gold and silver indices. It is noteworthy that silver bullion
continued to outperform gold bullion during the quarter and we shifted our weightings to favor silver
miners more heavily. The fact that the general stock market outperformed precious metals related
investments is in our opinion a function of the stock market catching up with the gigantic moves that
occurred last year in precious metals. Recall that we were up 47.1% last year while the Dow was up
11.0% and the S&P 500 was up 12.7%. Over time, we believe we are well positioned for good
performance, and that inflationary pressure will benefit the miners above all other stocks.

Monetary Chaos – Still Our Top Theme

We remain very committed to our current “monetary chaos” theme. Monetary chaos is occurring because
many entities (particularly governments) throughout the world are too indebted to service or pay back

EMA GARP GP, LLC ■ 260 Bear Hill Road, Suite 302 ■ Waltham, Massachusetts 02451
781.209.1177 ■ Fax: 781.209.1177 ■ www.ema2.com
 EMA GARP Fund, LP Page 3

their debts. These debts will either be defaulted on, or debased (paid with inflated currency). This theme
leads us to our top investment category, namely gold, silver and the companies that mine these monetary
replacement metals, an area where we see many outstanding growth-at-a-reasonable-price (GARP)
opportunities. If you need a refresher on the investment case for precious metals stocks please re-read our
last two quarterly reports.

They say a picture is worth a thousand words and in this particular case we agree. The chart below is
stunning in its simplicity and clarity. Want to understand what is happening to our currency? This chart
tells you everything you need to know. Notably, the Adjusted Monetary Base is up 18.7% calendar year-
to-date in 2011. Since we are only three months into the year the implications of this are rather grim.
Several years ago in response to US over-indebtedness and the debt crisis, the venerable market
commentator Richard Russell said the US must either “inflate or die”. Indeed.

Developments In The First Quarter of 2011

The first quarter was marked by a heavy flow of turbulent worldwide news events; including relatively
peaceful revolutions which led to changes of leadership in Tunisia and Egypt, and a more violent
revolution which is still ongoing in Libya. The revolt in all of these countries was in part caused by
rampant inflation in food prices which make it very hard for the poor to feed themselves.

Then to top it all off, Japan suffered the worst earthquake and tsunami in its history - an enormous human
tragedy. Unfortunately, the natural disaster part of this led to a man-made disaster as the storm damaged
several nuclear reactors which overheated and released radiation. The entire event is now being called
one of the worst nuclear accidents in history. We wonder what is next: drought, locusts?

Also, in the first quarter, the US Federal Reserve re-iterated that their aggressive policy of quantitative
easing (QE) will last until at least June, 2011. We have discussed this previously and we all know that

EMA GARP GP, LLC ■ 260 Bear Hill Road, Suite 302 ■ Waltham, Massachusetts 02451
781.209.1177 ■ Fax: 781.209.1177 ■ www.ema2.com
 EMA GARP Fund, LP Page 4

QE is a euphemism for printing money or inflation. Many FED governors have come out and said that
QE will end in June, but then others have said that if conditions warrant the FED may choose to continue
QE. We think that this entire debate is an elaborate form of stylized posturing, or Kabuki Theatre. The
FED needs to continue QE. If they do not, the US Government bond market will implode. We can
envision a policy where they stop temporarily, but once deflation re-appears we think QE3 is a certainty.
The FED is admittedly buying between 70 and 100% of the new bonds which are being issued to finance
the US Government deficit. Bill Gross, the well respected bond fund manager, has asked the rhetorical
question: if the FED stops buying the US Government debt, then who will buy it? He does not know the
answer, and neither do we. Presumably interest rates will have to rise sharply to attract buyers. With this
in mind Mr. Gross’s PIMCO Bond Fund has sold all of its holdings of US Treasury bonds. Thus, we can
conclude that he is not thinking bond prices are going up anytime soon. If the FED were to halt its QE
efforts the ramifications for the US economy would be very deflationary. The FED Chairman has
pledged to not let deflation take place on his watch.

It appears clear to us that the US Government and the FED are stuck between a rock and a hard place.
The economy is slow and will suffer deflation if interest rates go higher. Yet, the QE policy is clearly
fueling inflation. The policy makers are truly damned if they do and damned if they don’t, with respect to
more QE. We believe they will perceive that there is less risk in continuing QE than there is in stopping
it. However, we will be watching developments closely.

Of course, the principle driver of QE is the need for the US Government to finance its large budget
deficit. Unfortunately, the first quarter news on this front has not been good. To begin with, in January
the Congressional Budget Office (CBO) revised its forecast for the 2011 deficit upward from its original
estimate of $1.1 Trillion to $1.5 Trillion. This compares unfavorably to the 2010 deficit of $1.3 Trillion.
Subsequent to the CBO estimate, the Obama Administration released its own estimate that the 2011
deficit will be $1.65 Trillion. So, the entire notion that the deficit is decreasing as the result of an
economic recovery has now evaporated. Furthermore, the Government is borrowing $0.42 out of every
dollar it spends. This is a huge percentage and not just a little bit of overspending. The Government
needs to cut spending by 42% at these revenue levels to balance the budget. Imagine a household that
operated this way. Of course, the legislative branch of the Government went to work on coming up with
an expense cutting bill, and the House passed a bill which called for cuts in spending of $57 billion per
year. On March 9, 2011 this bill was soundly rejected in the Senate. Basically, a bill that proposed
spending cuts equal to 4% of the total deficit was rejected mostly along partisan lines. If the members of
the Senate and Congress cannot agree on how to cut 4% of the budget deficit, how is it possible that we
are ever going to eliminate the other 96%? In our opinion, as expressed in prior reports, this problem is
going to be avoided until a crisis occurs and the system is completely restructured.

The Gold Bubble: Not!

In the first quarter of 2011 gold climbed to a record high closing price of $1,444 on March 8. This
brought out lots of the commentators who all claim that gold is in a bubble. Of course the last time they
made that claim was in December, 2010 at the last record high of $1,426. At that time there were many
prominent analysts calling for the end of the bull market in the precious metals and they were saying that
shorting gold was the best trade of 2011. It may have been a good trade in January, but it has not worked
out so well since then.

EMA GARP GP, LLC ■ 260 Bear Hill Road, Suite 302 ■ Waltham, Massachusetts 02451
781.209.1177 ■ Fax: 781.209.1177 ■ www.ema2.com
 EMA GARP Fund, LP Page 5

Below we have compiled some excellent charts that demonstrate why gold is nowhere near entering
bubble territory. In fact, arguably gold cannot be in a bubble since it is real money. When you say gold
is in a bubble you have to ask: compared to what? Certainly not compared to the US dollar, which has no
fixed definition of value.

The first chart below presents the current gold market indexed against two other bull markets. The first is
the gold market from 1968 to 1980 and the second is the US NASDAQ stock market from 1988 to 2000.
Each of these bull markets took twelve years to peak and resulted in peak prices that were 23x and 14x
the base starting point. The present gold bull market is 10 years old and has only grown 5.5x its base
price. For gold to match these prior bull markets its current price would need to be either $3,640/oz. or
$5,980/oz. Both figures that are substantially above today’s $1,430/oz.price.

Source: The Aden Report.

Another way of looking at the issue is presented in the chart on the next page. Gold is money. It is a
substitute for currency, or rather currency is a substitute for gold. The schedule below shows the amount
of US currency in circulation in billions of dollars on the right scale. As you can see the currency in
circulation has risen from under $50 billion in 1975 to nearly $1.0 Trillion today. During the same time
period the price of gold, as measured in 1975 dollars, and thereby adjusted for inflation, has fallen from
just under $200 per oz. in 1975 to just over $100 per oz. (1975 dollars) today. In other words the price of
gold has not even kept up with inflation, much less with the growth of the money supply. The conclusion
we reach from this is that the gold price could increase by 5x in dollar terms and still not be overvalued
when compared to the growth in the money supply. If gold increases in value by 5x today’s price it will
be priced at $7,150 per oz. Furthermore, who is to say it will not overshoot fair value. Once it is clear
that gold is in a bull market it might exceed its fair value, much as it did in the 1980’s bull market.

EMA GARP GP, LLC ■ 260 Bear Hill Road, Suite 302 ■ Waltham, Massachusetts 02451
781.209.1177 ■ Fax: 781.209.1177 ■ www.ema2.com
 EMA GARP Fund, LP Page 6

And finally, we present two very well done charts that were compiled by Sprott Asset Management. In
the first chart we see a comparison of the total equity financings raised in two bull markets. We look at
the gold market in 2010 and notice that gold mining companies raised $12 billion. By comparison in the
last year of the Dotcom bubble (2000) over $212 billion dollars of equity financings were raised by
technology companies. No bubble here.

EMA GARP GP, LLC ■ 260 Bear Hill Road, Suite 302 ■ Waltham, Massachusetts 02451
781.209.1177 ■ Fax: 781.209.1177 ■ www.ema2.com
 EMA GARP Fund, LP Page 7

In the second chart we can see the in-flow of mutual fund money over the past 10 years (2000-2010).
Note how Gold and Precious Metals mutual funds attracted $12 billion during the decade, while general
equity mutual funds attracted $2,529 billion during the decade. Thus, the flow into precious metals funds
was one half of one percent of the flow into all mutual funds. How can you have a bubble in an asset
class that no one owns?

How Do You Feel, Mr. Dollar?

It is an axiom of economics that there is no such thing as a free lunch. In any economy if you change one
variable then there is a ripple effect in other areas. Ever since the Dotcom bubble burst in 2000 the FED
has had a policy of reducing interest rates to well below their free market level. This policy led to
excessive growth in credit, which created the housing bubble. It is simple: rates too low, people will
borrow too much. Following such a policy can create a “false boom” as we saw in the housing market,
but a rapid growth in dollar credit and dollar supply also makes the purchasing power of each dollar
smaller. This is inflation or said another way, dollar depreciation.

The chart on the next page shows the value of the dollar as measured against a weighted basket of the
world’s major currencies. Notice how the value of the dollar peaked in 2001 and has been slipping since.
In terms of world purchasing power, the dollar has lost 40% of its value since its peak. When the
financial crisis struck in 2008 the dollar rallied sharply as it became a “safe haven” in times of turbulence.
Since then it has zig zagged and it now looks like it is breaking below an established trend line. If the
dollar index trades below 75 and then 72 it will be a very ominous sign. Because the FED is actively
involved in printing dollars to fight deflation and economic malaise, we believe it is only a matter of time
before the dollar’s value takes out its old lows. When this happens it could start as a small trickle, and
then become a torrent.

EMA GARP GP, LLC ■ 260 Bear Hill Road, Suite 302 ■ Waltham, Massachusetts 02451
781.209.1177 ■ Fax: 781.209.1177 ■ www.ema2.com
 EMA GARP Fund, LP Page 8

Historically, this is how many hyperinflations have gotten started. First the government spends to excess;
then the government prints money to cover the deficits; then inflation becomes obvious and persistent;
finally people increasingly swap their currency for other more tangible assets since they can see that the
currency is constantly losing value. Once this trend becomes self-reinforcing the endpoint is when people
completely abandon the currency and it is effectively worthless. The only other alternative is to sharply
raise interest rates in an effort to defend the currency. Recall that in 1980 at the peak of the last bull
market in precious metals, and with inflation raging, Mr. Paul Volcker, FED Chairman, took this path and
pushed interest rates up into the 20% range in order to defend the currency and break the back of
inflation. We believe that this type of action is possible, but not likely with our current FED Chairman in
place. Also, we shudder when we think about the implications of 20% interest rates on our highly
leveraged economy.

To be clear, we hope that hyperinflation does not occur and, furthermore, we are not predicting that it
will. We believe reform will take place before we get to full blown hyperinflation. Having said that, we
do not think hyperinflation is impossible. Neither does John Williams of Shadow Government Statistics
in Oakland, California. Mr. Williams has been a professional economist for his entire career and received
his BA and MBA degrees with Distinction from Dartmouth College. He has consulted to many Fortune
500 companies and has been widely quoted and published. He is experienced and seasoned and does not
come across as an extremist. He is an analytical person. His view is that the U.S. faces a very great risk
of hyperinflation in the next few years and in almost any event before 2014. (For more information, visit
www.shadowstats.com).

The Road Ahead

It is very difficult to predict exactly how the changes we are seeing are going to unfold over the next few
years. There are lots of inputs, including: economic activity, individual actions, political policies, and

EMA GARP GP, LLC ■ 260 Bear Hill Road, Suite 302 ■ Waltham, Massachusetts 02451
781.209.1177 ■ Fax: 781.209.1177 ■ www.ema2.com
 EMA GARP Fund, LP Page 9

political protests. We believe a couple of things are clear. Inflation will continue and will get worse, at
least in essential goods like food and energy. Policy makers will try to kick the can down the road and
will respond to each new crisis in the way that they have in the past which is to provide liquidity. All of
this liquidity will make the inflation problem worse. Eventually inflation will become so severe and so
obvious that the political cry for a solution will become loud, overwhelming, and will lead to protests and
political pressure. Eventually something will have to give. At this point, we believe that there will be
some kind of political and monetary reform. The alternative will be just too painful. It is difficult to
predict the timing of the break down and the type of reform. We strongly believe that a stable monetary
system based upon metals like gold and silver is the surest means of solving the problem. If this comes to
pass then our investments will do extremely well. How we get from here to there is uncertain, but we are
pretty certain that this is where we are heading, sooner or later. In our opinion sooner would be better
because it would avoid lost time and pain. Along the way the road may have many zigs and zags but we
intend to keep our eyes focused on the long term and we believe this will serve us well.

Conclusion

Fundamentally, not much has changed in our present investment strategy. No doubt, there will be
corrections in this bull market for precious metals and mining shares; however, we believe that the long
term trend is still strongly upward. Until the issues associated with “monetary chaos” are resolved or
addressed we do not see how the bull market for gold mining shares can be over. In fact, even if the price
of gold stays flat, we still believe the mining shares will provide us with excellent returns because the
gold miners are growing production and are generating excellent returns on capital. Basically, the miners
represent Growth-At-A-Reasonable-Price (GARP).

As always, please call us if you have any questions or comments. Thank you for your support.

Sincerely,

Larry and Rich

EMA GARP GP, LLC ■ 260 Bear Hill Road, Suite 302 ■ Waltham, Massachusetts 02451
781.209.1177 ■ Fax: 781.209.1177 ■ www.ema2.com