Krensavage Asset Management LLC

Item 5        Fees and Compensation
A.     ADVISORY FEES AND BILLING PROCEDURES
KAM receives a quarterly management fee (“Management Fee”) equal to 0.5% (2.0% per
annum) of each Fund’s net asset value as of the beginning of each calendar quarter. The
Management Fee is calculated and payable quarterly in advance, as of the first day of each
quarter. A pro rata portion of the Management Fee is charged to Limited Partners or
Shareholders on any amounts accepted by the Funds during a quarter. KAM or relevant
General Partner, in their sole discretion, may waive or reduce Management Fees, for any
Limited Partner or Shareholder in a Fund.
B.     OTHER FEES AND EXPENSES
The Funds paid for their own organizational and initial offering expenses and pay for their
own operating expenses (subject to a cap for Krensavage Partners, as specified in the
applicable Memorandum), including, but not limited to, operating expenses include, but are
not limited to, (i) all expenses incurred in connection with the ongoing offer and sale of
interests, including, but not limited to, printing of the offering documents and exhibits and
documentation of performance and the admission of investors, (ii) all operating expenses of
the Funds such as tax preparation fees, governmental fees and taxes, administrator fees,
accounting fees, costs of communications with investors, and ongoing legal, accounting,
auditing, bookkeeping, consulting and other professional fees and expenses, (iii) all
“Transaction Expenses” of the Funds (as defined below), and (iv) all fees and other expenses
incurred in connection with the investigation, prosecution or defense of any claims, assertion
of rights or pursuit of remedies, by or against the Funds, as each of the foregoing is further
described in each Fund’s Memorandum. “Transaction Expenses” consist of all Fund research,
trading and investment related costs and expenses (e.g., research reports, due diligence on
portfolio companies, brokerage commissions, margin interest, expenses related to short sales,
custodial and banking fees, clearing and settlement charges, fees for data and pricing
information, and trade routing and order management fees. Krensavage Offshore, as the
feeder fund into Krensavage Partners, will bear a pro rata portion of expenses of Krensavage
Partners (the master fund).

Expenses that are common to more than one of the Funds will generally be shared among the
applicable Funds pro rata according to the relative net asset values of each Fund or otherwise
as KAM determines to be equitable.
Investors may be subject to an “early withdrawal penalty” of 3% applicable to any capital
contribution that it withdraws prior to the first anniversary of such contribution.
The general partner and KAM will pay for their own administrative and overhead expenses
incurred in connection with providing services to the Funds.
KAM’s Pricing and Allocation Committee (the “PAC”) generally oversees issues related to Fund
expenses at its regular semi-annual meeting.
C.        REFUND POLICY
No part of the Management Fee will be refunded in the event that a Limited Partner
withdraws, or Shareholder redeems, whether voluntarily or involuntarily, all or any of the
value in the Limited Partner’s capital account or Shareholder’s shares during any quarter.
D.        OTHER COMPENSATION
KAM does not accept any other compensation other than the fees as described in Item 5 and

Item 7        Types of Clients
KAM provides portfolio management services to the Funds only.
The minimum initial capital contribution for interests in Krensavage Partners is $500,000 and
the minimum initial subscription for shares in Krensavage Offshore is $500,000. KAM reserves
the right to reduce the minimum initial capital contribution and to accept subscriptions for
lesser amounts. Except as may be required by law, there are no minimum requirements for
maintaining an interest in the Funds.
Note that a Fund may from time-to-time enter into side letter agreements or other similar
agreements (collectively, "Side Letters") with one or more investors in a Fund which provide
them with additional and/or different rights (including, without limitation, with respect to
management fees, performance allocations, early withdrawal penalty, withdrawals, access to
information and minimum investment amounts) from other investors. The Fund’s General
Partner will not be required to notify any or all of the other investors of any such Side Letters
or any of the rights and/or terms or provisions thereof, nor will the General Partner be
required to offer such additional and/or different rights and/or terms to any or all of the other
investors.