Adirondack Research & Management Inc

Item 5: Fees and Compensation

ARMI is compensated for its advisory services based on the following:

Separately Managed Accounts:
The annual fees for investment management services are as follows:
      Asset Class             Annual Fee
      Money Market              0.00%
      Fixed Income               .50%
      Equities                  1.00%

In consideration for its services under this Investment Advisory Agreement, the Client
agrees to pay ARMI a fee in arrears after the last business day of each quarterly period.
Said fee shall be calculated for each asset based upon the fee schedule noted above.
Investment management fees will be calculated using the average month-end market

values for each asset class during the quarter. Accounts that are opened mid-month will
be charged a management fee that is prorated for the number of days the account is
opened in that month.

Client authorizes management fees to be deducted from the Account and will provide the
Account custodian written authorization to have fees deducted and paid to ARMI. ARMI
will provide the Account custodian with a fee statement. The Account custodian will send
Client a statement at least quarterly indicating all amounts disbursed from the Account
including the amount of advisory fees paid directly to ARMI. At present, fees are not
negotiable.

See Item 12 (Brokerage Practices) for a discussion of brokerage and brokerage/other
transaction costs.

The Adirondack Small Cap Fund:
ARMI charges a 1.08% annual management fee which is accrued on a daily basis and
deducted from the Net Asset Value. At present, fees are not negotiable.

See Item 12 (Brokerage Practices) for a discussion of brokerage and brokerage/other
transaction costs.

Item 7: Types of Clients

ARMI provides investment advice generally to individuals and investment companies.

Separately Managed Accounts:
Typically the minimum investment for the SMA is $200,000.

The Adirondack Small Cap Fund:
The Adirondack Small Cap Fund requires a minimum investment of $3,000 to open a
taxable account and $1,000 to open an IRA. The Fund will waive the required minimum
initial investment (for both regular accounts and tax qualified retirement plans) for
shareholders that are new to the Fund and that open their accounts with the automatic
investment option.