757 Third Avenue, 20th FL New York, NY 10017 T: 212.376.5337 info@khromcapital.

com

May 14, 2013 Dear Limited Partners: In the first quarter ending March 31st, 2013, our Partnership returned 23.0% net of fees and expenses. On average, we held 41% of our assets in cash throughout this period.

S&P 500 2008 2009 2010 2011 2012 2013 YTD Annualized Return Since Inception
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K.I.F., gross (32.6%) 91.9% 23.8% 22.8% 46.8% 30.4% 29.8%

K.I.F., net (32.6%) 82.9% 18.6% 18.0% 36.4% 23.0% 23.3%

(31.1%) 26.5% 15.1% 2.1% 16.0% 10.6% 5.5%

Please refer to the disclosure at the end of this letter.

Investor vs. Trader We ended the quarter with 64% of the funds assets in casha historical high for us. This balance may soon shift. We are investigating new opportunities, which we cannot yet disclose. Hence, this letter will be short, as we adhere to Benjamin Franklins advice: Either write something worth reading, or do something worth writing. Though this quarter we have chosen the act of doing instead of writing, we still wish to remind Partners of our investment philosophy and how it differs from that of most market participants. Funds that invest in equities can be divided into two groups: traders and investors. Traders focus on the cash someone will eventually pay for an asset; investors focus on the cash that the asset will eventually

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payout. The investing frameworks within which the two groups operateeven if they have the same IRR hurdlelead to vastly different underwriting processes. Take as a simple example a business called ABC Co., which sells for $100 a share and produces $10 in annual earnings (lets ignore any potential growth or decline in those earnings.) An investor with a 20% IRR hurdle would conclude he could not pay more than $50 a share for this business ($10 / 20% = $50). In other words, the investor looks to achieve his IRR target by relying on what the asset itself can produce. A trader, however, may look at ABC Co.while also having the same 20% IRR hurdleand justify purchasing the shares. The typical trader argument would be that this business is worth more than the 10x earnings it sells forto someone else. This valuation would typically be justified by either using peer multiples, private transaction comps, value to a strategic acquirer, or simply a multiple re-rating by the market when it smartens up. In other words, the trader looks to achieve his IRR target by relying on what the asset could sell for. Though there is nothing inherently wrong with trading, such a strategy risks lowering the underwriting standards of a capital allocator. This temptation to lower valuation standards becomes especially acute when there is a dearth of great investment ideas. That is because even during times when asset prices are high, a relative value approach can always be used to justify still higher prices. On the other hand, an investor with an objective value approacha sole focus on the total cash that an asset can produce has only one way to justify a valuation that meets his IRR hurdle. Consequently, during frothy markets, a trader is susceptible to finding rationalizations for activity, while an investor is likely to be forced to hold cash. Trading, as opposed to investing, also comes with greater risk of ignorance. Since a trader expects to eventually flip the asset on to another buyer, he will rarely ask the same questions as the investor who acknowledges he may hold the asset forever. The essential question in a traders repertoire is, What will my return be when I sell it for X multiple? The investor instead asks, What will my return be if I hold the asset till the end of its life? That fundamentally different question leads to a drastically different research approach. The due diligence hurdle for an investor is higher, which leads to greater conviction and a more concentrated portfolio than that of a trader. Additionally, trading decreases the odds of finding an investment in which one has an edge. A trader opens the floodgates of information overflowusing a relative value approach, every asset for sale seems like an opportunity. An investor, however, substantially narrows the pipeline of opportunities that warrant his attentionusing an objective value approach, he knows there are few assets whose lifetime cash flows he can confidently predict. When an investor looks at an asset, he pictures the size of the cash pile it could generate throughout its life. When a trader looks at an asset, he pictures the size of the bid it could receive at a future auction.

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We find it hard enough to predict the future cash flow of an asset. The last thing we want is to add the extra variable of determining what someone else should pay for these cash flows; the fewer variables we have to underwrite the better. Our aim is not just to maximize profits, but to do so while consistently taking as little risk as possible. Therefore, we try to rely on only two things to meet our IRR hurdle: the performance of the asset over its life and the price we paid for it. Welcome Aboard We are excited to announce the addition of James Basili as Senior Advisor to Khrom Capital. Jim has been in the investment management business since 1999, and is currently the founder and Managing Partner of Blacktree Capital Management. Prior to Blacktree, Jim was a Principal at Geocapital Partners, a leading venture capital firm, and then co-founding Partner at Kinderhook Partners, an investment partnership focused on public equities. Over the past few years, we have had the pleasure of co-investing with Jim and Blacktree on numerous occasions, to great success. Jims informal advice and involvement as we have worked together has been invaluable, and after looking for ways to cooperate more formally, we are delighted to be able to make our association official through the position of Senior Advisor. As Senior Advisor, Jim will have a hybrid of two roles at Khrom Capital: that of a board member and that of a consulting general partner. In his role as a board member, Jim will provide advice and counsel on strategic issues, and another layer of risk management. As a consulting partner, he will be available to contribute to the due diligence process on potential investments, and to the monitoring of existing positions. Think of the first role as providing us with another set of eyes, and the second as providing another set of hands. Jim will invest his personal capital in the Partnership, aligning his interests with those of the Partnership's other investors. Should you ever wish to chat with Jim, feel free to reach out to him at jbasili@khromcapital.com. *** As always, virtually 100% of my net worth is invested in the Partnership as I aim to compound my wealth alongside yours. I look forward to writing to you again after the second quarter.

Sincerely, Eric E. Khrom Managing Partner Khrom Capital Management, LLC

Khrom Capital Management LLC www.khromcapital.com

DISCLOSURE:
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2008 performance only includes March 1st, 2008 to December 31st, 2008, due to fund inception date of March 1st, 2008.

Performance data of the S&P 500 Index is included to facilitate comparisons between the Partnerships returns and overall market performance. Due to the differences among the Partnerships investment strategies and the securities that compose the S&P 500 Index, the General Partner cautions potential investors that no such index is directly comparable to the Partnerships investment strategy. S&P 500 index performance results include the reinvestment of dividends. The results portrayed above are intended to show the investment performance that would have been experienced by a single limited partner of the Partnership who remained invested throughout each annual or partial year period shown, after the reinvestment of interest, dividends, and other earnings, and the deduction of costs and the profit allocation that the General Partner would have accrued as of the end of each year. Results are based on the Partnerships internal books and are subject to adjustment following the audit of its financial statements. Future investments may be made under different economic conditions and in different securities and using different investment strategies than were used during the time discussed herein. It should not be assumed that future investors will experience returns, if any, comparable to those of the Partnership discussed herein. The information given above is historic and should not be taken as any indication of future performance.
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The average cash balance is calculated based on month-end numbers provided by our fund administrators. This document does not constitute an offer to sell or the solicitation of an offer to purchase any security or investment product. Any such offer or solicitation to invest in Khrom Investments Fund LP (the Fund) may only be made by means of delivery of an approved confidential offering memorandum. Past results are no guarantee of future results and no representation is made that an investor will or is likely to achieve results similar to those shown. All investments involve risk including the loss of principal. Performance results in separately managed accounts will be different from the performance results of Khrom Investments Fund LP. Khrom Capital Management, LLC or affiliated entities (Khrom Capital) is not responsible for any liabilities resulting from errors contained in this communication. Khrom will not notify you of any errors that it identifies at a later date. An investment in any product managed or offered by Khrom Capital may be deemed speculative and is not intended as a complete investment program. It is designed only for sophisticated persons who are able to bear the risk of the substantial impairment or loss of their investment in the Fund. Products managed or offered by Khrom Capital are designed for investors who do not require regular current income and who can accept a certain degree of risk in their investments.

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Khrom Capital Management LLC www.khromcapital.com