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Khrom Capital Management LLC

www.khromcapital.com

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

July 31, 2014
Dear Limited Partners:
In the first half of 2014, our Partnership returned 0.5% net of fees and expenses. On average, we
held 33% of our assets in cash throughout this period.
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S&P 500
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K.I.F., gross K.I.F., net
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2008
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(31.1%) (32.6%) (32.6%)
2009 26.5% 91.9% 82.9%
2010 15.1% 23.8% 18.6%
2011 2.1% 22.8% 18.0%
2012 16.0% 46.8% 36.4%
2013 32.4% 33.6% 25.8%
2014 YTD 7.1% 1.1% 0.5%
Annualized Return
Since Inception
8.6% 24.0% 18.8%

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

Though rising asset prices have caused a decline in opportunities, we have found a few attractive
investments that require a long-term perspective. One particular example is brokerage firms
businesses that charge their customers a commission to trade financial securities. Though we expect
you are not familiar with these businesses because all your savings are surely entrusted with us
(right?), you may have friends with brokerage accounts. What you will find when you survey a typical
brokerage customer is that aside from paying commissions when they trade securities, there is
usually a cash balance that sits in their account.
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Khrom Capital Management LLC
www.khromcapital.com
That is the first factor explaining why brokerage firms earnings are currently depressed. Monetary
policies across the globe have converged over the last few years towards near-zero interest rates.
Billions of cash and other interest-earning assets sit at the brokerage companies we own, currently
earning close to nothing. Furthermore, non-existent interest rates also compress the income that
brokers make on margin loans to customers. This causes the current financials of these companies
to display only a fraction of their earnings power. But interest rates will eventually rise, and so too
will the profits of the brokerages we own.
Another condition of the current market environment has been the reduction of volatility across
asset classes, which has a severe dampening effect on trading activity. Volatility is at a historic low,
i.e., trading volume has dried up. As market volatility reverts to the normit always has after every
abnormally calm periodtrading volume and, therefore, commission revenues at our companies
will materially increase.
This tough environment can ironically be viewed as a positive for our companies, who have
competitive advantages in their respective niches. In a climate of lower rates and lower trading
volumes, it is harder for smaller-scale competitors to be profitable. Brokerage firms are largely fixed-
cost businessesexpenses do not decline as interest income and trading commissions evaporate.
And as if that was not enough to create havoc, new regulations have dealt an additional blow to this
industry. Regulations have become more onerous each year throughout the world, which has
increased the compliance cost of operating a brokerage firm. This twofold injury of decreased
revenues and increased costs has further weakened already weak competitors, creating an
opportunity for our companies to acquire them cheaply or simply wait until they close down.
When market conditions eventually return to average (or even above-average) levels, we expect our
companies to earn substantially more than they earn today, and to have strengthened their market
positions along the way. Today, the possibility of higher interest rates and trading volumes seems
remote. We like investing at prices that assume these conditions will last forever, and expect to
benefit when it becomes clear that this forever is shorter than most people think.
* * *
As the stewards of your capital, the course that we chart does not change based on transient market
conditions. In fact, the reason we think our process should continue to outperform is because we
focus on not changing it. When you become a limited partner, we hope it is because you want us to
follow this simple process: analyze the range of total cash that a business will produce over its
lifetime; allocate your capital to purchase those cash flows when they sell for a price that is likely to
yield double-digit annual returns; do not allocate your capital to a business that is priced to produce
less than that return.

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Khrom Capital Management LLC
www.khromcapital.com
That is our approach. It is conceptually simple, but the implementation is difficult. There is always
the temptation to rationalize trading activity when inactivity is required. We try to always focus our
analysis on figuring out the entire life of a business. This helps us avoid the game of basing our
projected return on premises like, we can sell this business later on for more than we paid for it
because This sometimes works and can become tempting to play, but it requires us to rely on
being bailed out by another buyer. Our investment program is to rely on the assetnot another
buyerfor our returns.
We continue to build up intangible capital at Khrom Capital by studying businesses whose final
destination we think we can predict. Over the years, the prices of these businesses will vary far more
than the reasonable estimates of their lifetime cash flows. We remain excited about our ability to
snap them up when the right price comes.
As it has been since inception, virtually my entire net worth is invested in the Partnership as I aim to
compound my wealth alongside yours. I look forward to writing to you again at the start of the new
year. Have a wonderful rest of the summer.
Sincerely,

Eric E. Khrom
Managing Partner
Khrom Capital Management, LLC
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Khrom Capital Management LLC
www.khromcapital.com
DISCLOSURE:
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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 may differ from the audited 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.
The average cash balance is calculated based on month-end balances as provided by our fund administrators.
2
2008 performance only includes March 1
st
, 2008 to December 31
st
, 2008, due to fund inception date of March 1
st
, 2008.
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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.
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.