INVESTORS CAPITAL FUNDS, 497, 1999-10-18

INVESTORS CAPITAL FUNDS
497, 1999-10-18

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<PAGE>

Investors Capital Funds

Investors Capital Internet Fund
Investors Capital Twenty Fund

PROSPECTUS

October 18, 1999

The Securities and Exchange Commission has not approved or disapproved these
Securities or passed upon the adequacy of this prospectus. Any representation to
the contrary is a criminal offense.
<PAGE>

TABLE OF CONTENTS

THE FUNDS
Investors Capital Internet Fund
Investors Capital Twenty Fund

MANAGEMENT OF THE FUNDS

YOUR ACCOUNT
Buying Shares
Selling Your Shares
Additional Information on Buying and Selling Fund Shares

DIVIDENDS, DISTRIBUTIONS AND TAXES

OTHER INVESTMENT STRATEGIES AND RISKS

ADDITIONAL INFORMATION
<PAGE>

INVESTORS CAPITAL INTERNET FUND

FUND INVESTMENT OBJECTIVES
The Fund seeks long term growth of capital through investment in a
non-diversified portfolio of Internet and Internet-related company common
stocks.

PRINCIPAL INVESTMENT STRATEGIES OF THE FUND
The Fund invests primarily in the common stocks and securities convertible into
common stocks of domestic companies principally engaged in the Internet and
Internet-related activities. The Fund pursues its goal by investing under
normal conditions at least 65% of its assets in stocks of U.S. companies in
various industries that are principally engaged in the Internet or
Internet-related activities.

The Internet is a global matrix of computer networks that enables commercial and
professional organizations, government agencies and consumers to communicate
electronically, access and share information and conduct business around the
world. The term Intranet refers to the application of Internet tools and
concepts to a company's internal network.

A company is considered "principally engaged" in the Internet or
Internet-related business if at least 50% of its assets, gross income or net
profits are committed to, or derived from, the research, design, development,
manufacturing or distribution of products, processes or services for use in
connection with or through the Internet, Internet-related businesses or
Intranet-related businesses. The Fund considers the following as Internet and
Internet-related industries.

INTERNET ACCESS PROVIDERS: Companies that provide users with access to
the Internet.

SOFTWARE DEVELOPERS: Companies that develop software tools to access
the Internet, facilitate information gathering and distribution and
process Internet-based transactions.

HARDWARE MANUFACTURERS: Companies that develop and manufacture
communication equipment, such as modems, switches and routers, used to
facilitate access to the Internet, and those that develop and
manufacture workstations and Personal Communications Systems used to
facilitate access to, and process data across, the Internet and to
provide Internet services.

CONTENT DEVELOPERS: Companies that supply information and entertainment
content, such as games, music, advertisements and video on the
Internet.

PUBLISHING COMPANIES: Companies that provide information about the
Internet through the publication of books, magazines and newspapers,
either on the Internet or in traditional print format.

E-COMMERCE RETAILERS: Companies that conduct or propose to conduct a
significant portion of their business through e-commerce retailing
operations or companies that are developing or participating in
Internet distribution channels.

The portfolio manager identifies potential investments through quantitative and
fundamental research. In making individual stock selections, the portfolio
manager generally uses a "bottom up" approach to identify individual companies
with earnings growth potential that may not be recognized by the market at
large. Realization of income is not a significant consideration when choosing
investments for the Fund.

Although the Fund may invest in companies of any size, it typically
invests in companies with assets of $10 billion or more. To achieve the
Fund's objective, the Fund will concentrate its investments in a group
of industries engaged in Internet and Internet-related activities. The
Fund may also invest up to 35% of its assets in companies outside of
this group of industries and in short-term money market instruments.

The portfolio manager will typically sell a stock when it appears less
likely to benefit from the current market and economic environment,
shows deteriorating fundamentals or declining price momentum, or falls
short of the manager's expectations.

The Fund intends to pursue an investment strategy that may result in a
high turnover of positions. The Fund's annual portfolio turnover rate
may be higher than many other mutual funds, sometimes exceeding 300%.
High portfolio turnover may result in greater brokerage commissions and
acceleration of capital gains which are taxable when distributed to
shareholders. Greater brokerage commissions and taxes on gains may
adversely affect the Fund's performance.

TEMPORARY INVESTMENTS
To respond to adverse market, economic, political, foreign or other conditions,
the Fund may invest up to 100% of its assets in U.S. short-term money market
instruments as a temporary defensive measure. Some of these short-term
money market instruments include:

o Commercial paper;
o Certificates of deposit, demand and time deposits and banker's
acceptances;
o U.S. government securities; and
o Repurchase agreements.

To the extent that the Fund engages in a temporary, defensive strategy, the Fund
may not achieve its stated investment objective.

PRINCIPAL RISKS
Any of the following situations could cause the Fund to lose money or
underperform in comparison with its peer group:

STOCK MARKET RISKS: Movements in the stock market may affect the Fund's
share prices on a daily basis. The overall market and the specific
securities held by the Fund may decline in value and you could lose
money.

STOCK SELECTION RISKS: The stocks in the Fund's portfolio may decline
in value or not increase in value when the stock market in general is
increasing or decreasing in value.

LIQUIDITY RISKS: The advisor may not be able to sell stocks at an
optimal time or price.

INTERNET SPECIFIC RISKS: Internet and Internet-related companies are
generally subject to a more rapid rate of change in technology than
other industries. In addition, many products and services of companies
engaged in the Internet and Internet-related operations are also
subject to relatively high risks of rapid obsolescence caused by
progressive scientific and technological advances.

INDUSTRY CONCENTRATION: The Fund invests primarily in Internet and
Internet-related companies and this concentration may make the Fund
more susceptible to certain risks of that industry than a fund that
invests in a wide range of industry sectors.

TECHNOLOGY-RELATED COMPANIES: The value of companies involved in
computers and communication may be vulnerable to the risk of
obsolescence due to technological advances and aggressive competitive
pressures that may affect the profitability of the companies in the
Fund's portfolio.

MANAGEMENT: The advisor's skill in choosing appropriate investments
will play a large part in determining whether the Fund is able to
achieve its investment objective. The advisor has no previous
experience managing a retail mutual fund.

NON-DIVERSIFICATION: The Fund is non-diversified and may invest a
greater portion of its assets in the securities of a single issuer
than a diversified fund. As a result, the Fund may be more sensitive to
economic business, political or other changes affecting the prices of
such issuers' securities, which may result in greater fluctuation in
the value of the Fund's shares. The Fund intends, however, to meet
certain tax diversification requirements.

SUITABILITY
The Fund may be appropriate for investors who seek capital appreciation and who
are willing to accept a significant degree of volatility and risk. Investors who
are seeking current income or who have a conservative or short-term investment
approach may wish to consider alternative investments.

Because the Fund concentrates its investments in a single industry (the
Internet), its shares do not represent a complete investment program and the
value of the Fund's shares may fluctuate more than other funds' shares that are
invested in a broader range of industries.

PAST FUND PERFORMANCE
Although past performance of a fund is no guarantee of how it will perform in
the future, historical performance may give you some indication of the risks of
investing in a mutual fund. Performance demonstrates how a mutual fund's returns
have varied over time. The Fund is recently organized and therefore has no
performance history. Once the Fund has performance for at least one calendar
year, a Bar Chart and Performance Table will be included in the prospectus. The
Fund's annual returns will also be compared to the returns of a benchmark index.

FEES AND EXPENSES OF THE FUND

This table describes the fees and expenses that you could expect to pay as an
investor in the Fund. SHAREHOLDER FEES are one-time expenses paid directly from
your investment. ANNUAL FUND OPERATING EXPENSES come out of Fund assets and are
reflected in the Fund's total return.

CLASS A SHARES CLASS C SHARES
-------------- --------------
SHAREHOLDER FEES
(fees paid directly from your investment)
Maximum front-end sales charge (load) -
% of offering price 5.75% None
Redemption Fee(1) 1.00% 1.00%

ANNUAL FUND OPERATING EXPENSES:
(expenses deducted from fund assets)
Management Fees 1.50% 1.50%
Distribution and Service (12b-1) fees(2) 0.25% 1.00%
Other Expenses(3) 1.25% 1.25%
- --------------------------------------------------------------------------------
TOTAL ANNUAL OPERATING
EXPENSES 3.00% 3.75%

(1) The 1.00% redemption fee for Class A and Class C Shares applies only to
redemptions within 12 months of acquisition. The fee is not applied to
shares acquired through reinvestment of dividends or capital gains.

(2) Includes an annual distribution fee of 0.25% of the Class A Share's average
daily net assets, and an annual distribution fee of 0.75% and an annual
service fee of 0.25 % of the Class C Share's average daily net assets.

(3) "Other Expenses" are based on the estimated expenses that the Fund expects
to incur in its initial fiscal year.

EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

The example assumes that:

o you invest $10,000 in the Fund for the time periods indicated;
o you redeem all of your shares at the end of each time period;
o your investment has a 5% return each year;
o all distributions are reinvested; and
o the Fund's operating expenses remain the same.

This example is for comparison only. Actual returns and expenses will be
different and the Fund's performance and expenses may be higher or lower. Based
on the above assumptions, your costs for the Fund would be:

1 year 3 years
- --------------------------------------------------------------------------------
Class A $957 $1,449
Class C $479 $1,146

You would pay the following expenses if you did not redeem your shares:

1 year 3 years
- --------------------------------------------------------------------------------
Class A $861 $1,449
Class C $377 $1,146

INVESTORS CAPITAL TWENTY FUND

FUND INVESTMENT OBJECTIVES
The Fund seeks long-term growth of capital by investing primarily in common
stocks selected for their growth potential. The Fund normally concentrates its
investments in a core group of 20-30 common stocks.

PRINCIPAL INVESTMENT STRATEGIES OF THE FUND
The Fund will invest in common stocks of companies of any size, which may
include smaller emerging companies. Under normal conditions, the Fund will
invest at least 65% of its assets in a select group of 20-30 common stocks,
regardless of industry or sector, focusing on each individual company's growth
potential.

The advisor selects stocks by looking for companies with strong earnings growth
potential that has not been recognized in the overall market. Special emphasis
will be placed on mid cap and large cap companies that the advisor believes
demonstrate:

o Financial stability
o Strong earnings growth potential
o Dominant or strong market position
o Outstanding leadership.

Current income is not an important consideration in selecting the Fund's
investments.

The Fund intends to pursue an investment strategy that may result in a high
turnover of positions. The Fund's annual portfolio turnover rate may be higher
than many other mutual funds, sometimes exceeding 300%. High portfolio turnover
may result in greater brokerage commissions and acceleration of capital gains
which are taxable when distributed to shareholders. Greater brokerage
commissions and taxes on gains may adversely affect the Fund's performance.

TEMPORARY INVESTMENTS
To respond to adverse market, economic, political or other conditions, the Fund
may invest up to 100% of its assets in U.S. and foreign short-term money market
instruments as a temporary defensive measure. Some of the short-term
money market instruments include:

o Commercial paper
o Certificates of deposit, demand and time deposits and banker's
acceptances
o U.S. government securities
o Repurchase agreements.

To the extent that the Fund engages in a temporary, defensive strategy, the Fund
may not achieve its investment objective.

PRINCIPAL RISKS
Any of the following situations could cause the Fund to lose money or
underperform in comparison to its peer group:

STOCK SELECTION RISKS: The stocks in the Fund's portfolio may decline
in value or not increase in value when the stock market in general is
increasing or decreasing in value.

SMALL OR NEW COMPANIES. The Fund may invest in the securities of small
or newly public companies that may be subject to greater price
fluctuations and significant losses due to unseasoned management,
increased competition or entrance into new markets. Shares of a small
company may pose greater risks than shares of a large company because
of narrow product lines, limited financial resources, less depth of
management or a limited trading market for its stock.

TECHNOLOGY-RELATED COMPANIES: The value of companies involved in
computers and communication may be vulnerable to the risk of
obsolescence due to technological advances.

NON-DIVERSIFICATION: The Fund is non-diversified and may invest a
greater portion of its assets in the securities of a single issuer
than a diversified fund. As a result, the Fund may be more sensitive to
economics, business, political or other changes affecting the prices of
such issuers' securities, which may result in greater fluctuation in
the value of the Fund's shares. The Fund intends, however, to meet
certain tax diversification requirements.

MANAGEMENT. The advisor's skill in choosing appropriate investments
will play a large part in determining whether the Fund is able to
achieve its investment objective. The advisor has no previous
experience managing a retail mutual fund.

SUITABILITY
The Fund may be appropriate for investors who seek capital appreciation and who
are able to accept short-term fluctuations in return for the potential of
greater long-term growth. Investors who are seeking current income or who have a
conservative or short-term investment approach may wish to consider alternative
investments.

FEES AND EXPENSES OF THE FUND

(1) The 1.00% redemption fee for Class A and Class C shares applies only to
redemptions within 12 months of acquisition. The fee is not applied to
shares acquired through reinvestment of dividends or capital gains.

(3) "Other Expenses" are based on the estimated expenses that the Fund expects
to incur in its initial fiscal year.

EXAMPLE
This example is intended to help you compare the cost of investing in the Fund
with the cost of investing in other mutual funds.

The example assumes that:
o you invest $10,000 in the Fund for the time periods indicated;
o you redeem all of your shares at the end of each time period;
o your investment has a 5% return each year;
o all distributions are reinvested; and
o the Fund's operating expenses remain the same.

1 year 3 years
- --------------------------------------------------------------------------------
Class A $957 $1,449
Class C $479 $1,146

You would pay the following expenses if you did not redeem your shares:

1 year 3 years
- --------------------------------------------------------------------------------
Class A $861 $1,449
Class C $377 $1,146
<PAGE>

MANAGEMENT OF THE FUNDS

The Funds' investment advisor is:
Eastern Point Advisors, Inc.
230 Broadway East
Lynnfield, Massachusetts 01940-2320

The advisor is responsible for the selection, purchasing, monitoring and sale of
the securities in each Fund's investment portfolio. The advisor also arranges
for the transfer agency, custody and all other services necessary to operate the
Funds.

Eastern Point Advisors, Inc. was founded in 1995. In addition to the Funds, the
advisor manages private accounts, consisting primarily of individual accounts.
As of June 30, 1999, the advisor had approximately $100 million of assets under
management.

PORTFOLIO MANAGEMENT
Frederick F. Sears serves as the portfolio manager for each of the Funds. Mr.
Sears graduated from Boston University in 1990 with a Bachelor of Arts degree in
English and subsequently participated in Boston University's Masters of Business
Administration program. From 1994 to 1995, Mr. Sears researched and analyzed
companies for Boston-based FinNet, a financial services firm. From 1995 until
1998, Mr. Sears researched and analyzed companies for Boston-based Culverwell &
Company, a broker-dealer and investment banker specializing in small and
micro-cap securities. He is also the founder (1999) and General Partner of
Clermont Capital and the Clermont Fund, a United States-based long/short hedge
fund specializing in growth stocks.

MANAGEMENT FEES
Each Fund pays the advisor an annual fee of 1.50% of average daily net assets
payable monthly for providing investment advisory services.

The advisor has voluntarily undertaken to waive a portion of its advisory fee
and/or reimburse fund expenses so that each Fund's total operating expenses do
not exceed 5.00%.

The advisor has the right to terminate the fee waiver at any time with 60 days'
notice. Any waiver or reimbursement by the advisor is subject to repayment by
the Funds within the following three years if the Funds are able to make the
repayment without exceeding their current expense limits.

YEAR 2000 COMPLIANCE
The advisor is taking steps that it believes are reasonably designed to address
Year 2000 compliance issues with respect to its computer systems. The Funds'
other major service providers have informed the advisor that they have taken
comparable steps. However, there can be no assurance that these steps will be
sufficient to avoid any adverse impact on the business of the Funds.

Year 2000 issues may adversely affect companies in which the Funds invest where,
for example, such companies incur substantial costs to address Year 2000 issues
or suffer losses caused by the failure to do so adequately and in a timely
manner.

YOUR ACCOUNT

INVESTING IN THE FUNDS
Each Fund offers two classes of shares. Each class of shares has a different
combination of sales charges, fees and other features. You should consult your
financial advisor to determine which class best suits your investment goals and
time frame.

CHOOSING A SHARE CLASS

CLASS A SHARES

Class A shares have a maximum up-front sales charge of 5.75% that you pay when
you buy your shares. The front-end sales charge for the Class A shares decreases
with the amount you invest and is included in the offering price.

- --------------------------------------------------------------------------------
Sales charge as % of
Sales charge as % of amount invested
Amount invested offering price in each Fund
- --------------- -------------- ------------
less than $50,000 5.75% 6.10%
$50,000 but less than $100,000 4.75% 4.99%
$100,000 but less than $500,000 3.75% 3.90%
$500,000 but less than $1,000,000 2.75% 2.83%
$1,000,000 or more 1.00% 1.01%
- --------------------------------------------------------------------------------

Under certain circumstances, the sales charge for Class A shares may be waived.
Please see the Statement of Additional Information.

Class A shares are also subject to an annual 12b-1 fee of 0.25% of average daily
net assets, which is lower than the 12b-1 fee for the Class C shares.

WAYS TO REDUCE SALES CHARGES
Investors can reduce or eliminate sales charges on Class A shares under certain
conditions:

COMBINED PURCHASES
Purchase made at the same time by an individual, his or her spouse and any
children under the age of 21 are added together to determine the sales charge
rate.

RIGHT OF ACCUMULATION
If you already hold Class A shares of a Fund, the sales charge rate on
additional purchases can be based on your total Class A shares in the Fund.

LETTER OF INTENT
This non-binding agreement allows you to purchase Class A shares over a period
of 13 months with the sales charge that would have applied if you had purchased
them all at once.

COMBINATION PRIVILEGE
You can use the combined total of Class A shares of the Funds for the purpose of
calculating the sales charge.

PLEASE NOTE:
YOU MUST ADVISE YOUR DEALER, THE TRANSFER AGENT OR THE FUND IF YOU QUALIFY FOR A
REDUCTION AND/OR WAIVER IN SALES CHARGES.

CLASS C SHARES

o Class C shares have no up-front sales charge, so that the full amount of
your purchase is invested in the Funds.

o Class C shares are subject to an annual 12b-1 fee of 1.00%, of which 0.25%
are service fees paid to the distributor, dealers or others for providing
personal services and maintaining shareholder accounts.

o Because of the higher 12b-1 fees, Class C shares have higher expenses and
pay lower dividends than Class A shares.

Each Fund has adopted a separate 12b-1 plan that allows it to pay distribution
fees for the sales and distribution of its shares. Because these fees are paid
out of the Fund's assets on an ongoing basis, over time these fees will increase
the cost of your investment and may cost you more than paying other types of
sales charges.

BUYING SHARES
You can purchase shares of the Funds through broker-dealers or directly through
the advisor. You may buy shares in either Fund with an initial investment of
$250 or more. Additional investments may be made for as little as $50. The Funds
have the right to waive the minimum investment requirements for employees of the
Funds' investment advisor and its affiliates. The Funds also have the right to
reject any purchase order.

Purchase Price.
The price of the Fund's shares is based on the Net Asset Value (NAV) plus any
applicable front-end sales charge for Class A shares (the "Offering Price"). The
Funds calculate NAV by adding the total market value of the Fund's investments
and other assets, subtracting any liabilities, and then dividing that figure by
the total number of outstanding shares of the Fund (assets-liabilities/# of
shares = NAV). Each Fund's NAV is calculated at the close of regular trading of
the New York Stock Exchange ("NYSE"), normally 4 p.m. Eastern time.

If you pay a sales charge, your price will be the Fund's offering price. When
you buy shares at the offering price, the Fund deducts the appropriate sales
charge and invests the rest in the Fund. If you qualify for a sales charge
waiver, your price will be the Fund's NAV.

<TABLE>
TO BUY SHARES:
<CAPTION>

INITIAL INVESTMENT SUBSEQUENT INVESTMENTS
<S> <C> <C>
By Mail o Complete and sign the account o Make your check payable to the
registration. Fund in which you wish to invest.
o Make your check payable to the Fund in o Fill out an investment slip from an
which you wish to invest. account statement, include your name and
o Mail the application and your check to: account number. Mail to:
FIRST DATA INVESTOR SERVICES
GROUP, INC. FIRST DATA INVESTOR SERVICES GROUP, INC.
211 SOUTH GULPH ROAD 211 SOUTH GULPH ROAD
P.O. BOX 61767 P.O. BOX 61767
KING OF PRUSSIA, PA 19406 KING OF PRUSSIA, PA 19406
o Minimum Initial Investment is $250. o Minimum subsequent investment for all
accounts is $50.

By Wire o Call (877) IC FUNDS (877-423-8637) to o Call (877) IC FUNDS (877-423-8637) to
arrange for a wire purchase. For same day arrange for a wire purchase. For same day
purchase, the wire must be received by purchase, the wire must be received by
o Wire federal funds to: 4:00 p.m. Eastern time.
BOSTON SAFE DEPOSIT & TRUST o Wire federal funds to:
ABA #011001234 BOSTON SAFE DEPOSIT &TRUST
CREDIT: (INSERT NAME OF YOUR FUND) ABA #011001234
ACCT. #: CREDIT: (INSERT NAME OF YOUR FUND)
FBO: (INSERT YOUR NAME AND ACCT. #:
ACCOUNT NUMBER.) FBO: (INSERT YOUR NAME AND
o Mail completed account registration to ACCOUNT NUMBER.)
the address above. o Note: Your bank may charge a wire fee.
o Note: Your bank may charge a wire fee.

By Exchange o You may open an account by making an o You may add to an existing account by
exchange from an existing account. Exchanges making an exchange from an existing account.
can be made by mail, fax or telephone. Call Exchanges can be made by mail, fax or telephone.
(877) IC FUNDS (877-423-8637) for help. Call (877) IC FUNDS (877-423-8637) for help.
o Note: No fee or charge will apply, but o Completed authorization form must be on
there may be a capital gain or loss. file in advance.
o Exchanges are permitted only between the o Note: No fee or charge will apply, but
same classes of shares. there may be a capital gain or loss.
o Exchanges are permitted only between the
same classes of shares.

By Automatic o You must open a regular Fund account with o Call (877) IC FUNDS (877-423-8637) to request
the form.
Investment $250 minimum prior to participating in this o Complete and return the form and any
Plan plan. other required materials.
</TABLE>

Banks, brokers, 401(k) plans, financial advisors or financial supermarkets may
charge additional transaction fees, which would not be charged if shares were
purchased directly from the Funds.

The Funds may accept telephone orders. Unless you decline telephone privileges
on your account application, you may be responsible for any fraudulent telephone
orders as long as the Funds take reasonable measures to verify the orders.

Retirement Accounts
- -------------------
Shares of the Funds are available for purchase through individual retirement
accounts ("IRAs") and other retirement plans. Accounts established under such
plans must have all dividends reinvested in the Funds. For more information
about these plans or for an IRA application, please call (877) IC FUNDS
(877-423-8637).

SELLING YOUR SHARES
You may sell or "redeem" your shares on any day the NYSE is open, either
directly through the advisor or through your broker-dealer. The price you
receive will be the NAV next calculated after the Fund's transfer agent receives
your redemption request in proper order.

Selling Recently Purchased Shares
- ---------------------------------
The Funds will redeem shares that were recently purchased by check, but may
delay mailing the proceeds for up to 8 business days to allow the purchase
check to clear.

Signature Guarantees
- --------------------
A signature guarantee protects you against fraud by guaranteeing your signature
is authentic. A guarantee is required on all redemption requests over $10,000 or
when the redemption proceeds are to be sent to someone other than the owner of
record or to an address or bank account other than those of record. Most banks
or financial institutions can provide you with a signature guarantee, but a
notary public can not.

TO SELL SHARES:

By Mail o Submit a written request for redemption with:
|X| The Fund's name;
|X| Your Fund account number;
|X| The dollar amount or number of shares or percentage of
the account to be redeemed; and
|X| Signatures of all persons required to sign for
transactions, exactly as the shares are registered.
o Mail your request to:
First Data Investor Services Group, Inc.
211 South Gulph Road
P.O. Box 61767
King of Prussia, PA 19406
o A check will be mailed to the name
and address in which the account is
registered.

By Wire o This option must be elected either in the initial application
or subsequently in writing.
o Call (877) IC FUNDS (877-423-8637).
o Wire redemption requests must be received before 4:00 p.m. for
money to be wired the same business day.
o There is a $9.00 charge for redemptions under $10,000 made by
wire.

By Telephone o This service must be elected in advance, either in the initial
application or subsequently in writing.
o Call (877) IC FUNDS (877-423-8637) with your request.
o The Fund will use reasonable
procedures to confirm that the
request is genuine.
o Written confirmation will be provided.

By Systematic o Complete the appropriate section on the Account Registration
Withdrawal or call (877) IC FUNDS (877-423-8637) to request a form to
Plan add the plan.
o To participate, you must own or purchase shares with a value
of at least $10,000.
o Withdrawals can be monthly,
quarterly, semi-annually or
annually. The minimum amount is
$100. Redemption fees will not be
charged under this plan.

PLEASE NOTE THAT IF YOU USE A BROKER-DEALER OR FINANCIAL INSTITUTION TO ASSIST
YOU IN ANY OF THESE TRANSACTIONS, THEY MAY CHARGE A FEE FOR THIS SERVICE THAT
WOULD NOT BE CHARGED BY THE FUNDS.

ADDITIONAL INFORMATION ON BUYING AND SELLING FUND SHARES

General Policies
- ----------------
The Funds reserve the right to:

o reject any purchase order when the Funds determine that it is not in
the best interest of the Funds or their shareholders to accept such
order. The Funds will not permit market-timing or other abusive
trading practices in the Funds;
o make redemptions-in-kind (payments in portfolio securities rather
than cash) if the amount to be redeemed is large enough to affect
fund operations (for example, if it represents more than 1% of the
Fund's assets);
o change the minimum investment amounts;
o cancel any purchase order and impose a $20 returned check fee if the
purchase check does not clear;
o reject checks drawn on banks outside the United States or endorsed
over by a third party. All investments must be made in U.S. dollars.

Timing of Purchase or Sale Requests
- -----------------------------------
All requests received in good order by the transfer agent before the close of
the NYSE, typically 4:00 p.m. Eastern time, will be executed the same day, at
that day's NAV. Orders received after the close of the NYSE will be executed the
following day, at that day's NAV. Purchase and redemption orders are executed
only on days when the NYSE is open for trading. The NYSE is closed on New Year's
Day, Martin Luther King, Jr. Day, Presidents' Day, Good Friday, Memorial Day,
Independence Day, Labor Day, Thanksgiving Day and Christmas. If the NYSE closes
early, the deadlines for purchase and redemption orders will be accelerated to
the earlier closing time.

Determination of NAV
- --------------------
The NAV for the Funds is calculated at the close of regular trading hours of the
NYSE, which is normally 4:00 p.m. Eastern time. Each Fund calculates NAV by
adding up the total value of the Fund's investments and other assets,
subtracting liabilities, and then dividing that figure by the number of the
Fund's outstanding shares. The Fund's investments are valued based on market
value, or where market quotations are not available, on fair value as determined
in good faith by the Board of Trustees.

Redemption Policies
- -------------------
Payment for redemptions of Fund shares is usually made within one business day,
but no later than seven calendar days after receipt of your redemption request,
unless your purchase check has not yet cleared. The Funds may suspend the right
of redemption or postpone the date of payment for more than seven days during
any period when (1) trading on the NYSE is restricted or the NYSE is closed for
other than customary weekends and holidays, (2) the SEC has by order permitted
such suspension for the protection of the Funds' shareholders, or (3) an
emergency exists making disposal of portfolio securities or valuation of net
assets of the Funds not reasonably practicable.

Redemption Fees
- ---------------
To discourage short-term trading, purchases of Class A and Class C shares are
subject to a 1.00% redemption fee on shares redeemed within 12 months of
acquisition. Redemption fees are not imposed on shares acquired through the
reinvestment of dividends or capital gains distributions, or involuntarily
redeemed shares.

Minimum Balances
- ----------------
The Funds may redeem your remaining shares at net asset value if the balance of
your account falls below $250 due to redemptions. The Fund will notify you if
your balance has fallen below $250 and you will have 60 days to increase your
account balance before your shares are redeemed. The Fund may close any account
without notice if the account is inactive and the value of the account is $0.

Exchange Privileges
- -------------------
You may exchange all or part of your shares for shares of the same class in the
other Fund without paying a sales charge at the time of the exchange. Exchanges
are made based on the net asset value per share of each Fund at the time of the
exchange. You will not pay sales charges on shares acquired through reinvestment
of dividends. Exchanges are subject to the minimum investment requirements. You
may exchange shares by mail or telephone if authorized on the account
registration form. Telephone exchanges may be difficult to implement in times of
drastic economic or market changes. The Funds have the right to limit exchanges
to four times a year.

An exchange may result in a capital gain or loss for tax purposes. The Fund may
change or discontinue its exchange privilege, or temporarily suspend this
privilege during unusual market conditions.

Mailings to Shareholders
- ------------------------
The Funds mail quarterly statements summarizing the activity in your account(s)
and confirmations following each purchase or sale of your Fund shares. To reduce
expenses, the Funds will limit mailings of most financial reports, prospectuses
and account statements to one copy for each address that lists one or more
shareholders with the same last name. If you would like additional copies of
financial reports and prospectuses or separate mailings of account statements,
please call (877) IC FUNDS (877-423-8637).

DIVIDENDS, DISTRIBUTIONS AND TAXES

The Funds generally pay dividends and distributions of virtually all of their
net investment income and net realized capital gains at least once a year.

A dividend from net investment income represents the income the Fund earns from
dividends and interest paid on its investments, after payment of the Fund's
expenses.

A capital gain is the increase in value of a security that the Fund holds. The
gain is "unrealized" until the security is sold. Each realized capital gain is
either short-term or long-term depending on how long the Fund held the security,
regardless of how long you have held your shares. If the gain is on a security
held by the Fund one year or less, it is considered short term; a gain on a
security held more than one year by the Fund is considered long term.

Reinvestment Option
- -------------------
Dividend and capital gain distributions will be automatically reinvested in
additional shares of the Fund unless you elect to receive them by check on the
account application. You may change your dividend option at any time by
requesting a change in writing. You must have your dividends reinvested if you
participate in the Systematic Withdrawal Plan or any Retirement Plans. Dividends
are reinvested at the ex-dividend date at the NAV determined at the close of
business that day. There are no fees or charges on reinvestments.

Taxes on Dividends and Distributions
- ------------------------------------
Dividends you receive from a Fund, whether reinvested or taken in cash, are
generally taxable as ordinary income. Capital gains distributions are taxed
based on how long the Fund held the assets that generated the capital gain. This
is true no matter how long you have owned your shares or whether you reinvest
your distributions or receive them in cash.

The sale of Fund shares or the exchange of shares between two Funds is a taxable
event; you may realize a capital gain or loss on these transactions. You should
consult your own tax advisor for more specific information about federal, state
and local tax consequences.

You will receive an annual statement on the source and tax status of all
distributions for federal income tax purposes. You will also receive information
showing which portion of the distributions is not taxable in certain states.

Backup Withholding
- ------------------
Shareholders may have 31% of their distributions and proceeds withheld if the
Fund does not have complete, correct taxpayer information on file as required by
law.

OTHER INVESTMENT STRATEGIES AND RISKS
The Funds' main investment strategies are set out in the front of the
prospectus. The Funds may also use other investment strategies and invest in
securities that are not discussed in this prospectus, but which are described in
detail in the Funds' Statement of Additional Information (SAI). You may obtain a
copy of the SAI without charge by calling 800-000-00000.

Other Potential Risks
- ---------------------
Each Fund may, at times, invest a small portion of its assets in derivative
securities, such as future contracts and options. In addition, the Funds may
enter into interest rate, currency and swap agreements, which are deemed
derivatives. Derivatives can be illiquid, and a small investment in a derivative
could have a potentially large impact on the Fund's performance.

ADDITIONAL INFORMATION

For investors who want more information about the Funds, the following document
is available free upon request:

STATEMENT OF ADDITIONAL INFORMATION (SAI): The SAI provides more detailed
information about the Funds and is incorporated by reference into this
prospectus.

You can get free copies of the SAI, request other information and ask questions
about the Funds by contacting:

Investors Capital Funds
230 Broadway East
Suite 203
Lynnfield, MA 01940-2320
Telephone: (877) IC FUNDS (877-423-8637)
E-mail: [email protected]
Internet address: www.investorscapital.com

You can review the Funds' SAI at the Public Reference Room of the Securities and
Exchange Commission (SEC). You may obtain paper copies, by writing the Public
Reference Room of the SEC, Washington, D.C. 20549-6009. You may obtain
information about the operation of the Public Reference Room by calling:
800-SEC-0330. Note: The SEC charges a duplicating fee for paper copies.

You may also download a copy of this document from the SEC's Internet website
for no charge at http://www.sec.gov.

The Trust's SEC File No. is 811-0947.
<PAGE>

INVESTORS CAPITAL FUNDS

STATEMENT OF ADDITIONAL INFORMATION

INVESTORS CAPITAL INTERNET FUND
INVESTORS CAPITAL TWENTY FUND

October 18, 1999

This Statement of Additional Information is not a prospectus. It should be read
in conjunction with the Investors Capital Funds' prospectus dated October 18,
1999, which is incorporated by reference herein. The information in this
Statement of Additional Information expands on information contained in the
prospectus. The prospectus can be obtained without charge by contacting either
the dealer through whom you purchased shares or the Distributor at the phone
number or address below.

PRINCIPAL DISTRIBUTOR

Investors Capital Corporation
230 Broadway East
Suite 203
Lynnfield, Massachusetts 01940
(800) 949-1422
<PAGE>

TABLE OF CONTENTS

PAGE

Investors Capital Funds 1

Investment Strategies and Related Risks 1

Other Investment Practices and Risks 8

Investment Restrictions 10

Management of the Trust 11

Investment Management and Other Services 13

Description of Trust's Shares 16

Brokerage 17

Purchase, Redemption and Pricing of Shares 17

Net Asset Value 20

Taxes 21

Determination of Performance 24

Financial Statements 24

Appendix A - Description of Securities Ratings A-1
<PAGE>

INVESTORS CAPITAL FUNDS

Investors Capital Funds (the "Trust"), 230 Broadway East, Suite 203, Lynnfield,
Massachusetts 01940, is a non-diversified, open-end management investment
company registered under the Investment Company Act of 1940, as amended (the
"1940 Act"). The Trust was organized as a Delaware business trust on July 14,
1999.

The Trust offers shares of beneficial interest (the "shares") in the Investors
Capital Internet Fund and Investors Capital Twenty Fund (each a "Fund" and
collectively, the "Funds"). Each Fund is a separate portfolio of investments
with its own investment objective and offers two classes of shares: Class A
shares and Class C shares (referred to individually as a "class" and
collectively as the "classes").

INVESTMENT STRATEGIES AND RELATED RISKS

The prospectus describes the fundamental investment objectives and certain
restrictions applicable to the Funds. The following supplements the information
found in the prospectus concerning the investment policies of the Trust. The
investment practices described below, except for the discussion on portfolio
loan transactions, are not fundamental and may be changed by the Board of
Trustees without shareholder approval.

INTERNET AND INTERNET-RELATED COMPANIES. The Investors Capital Internet Fund
will invest in Internet and Internet-related companies, as defined in the
Prospectus, and will therefore be subject to risks in addition to those that
apply to the general equity and debt markets. Some events may disproportionately
affect the Internet-related sector as a whole or a particular industry in this
sector. Accordingly, this Fund may be subject to greater market volatility than
a fund that does not concentrate in a particular economic sector or industry.

In addition, some Internet-related companies are subject to governmental
regulation, which may limit their activities and may affect their ability to
earn a profit from a given line of business. Some Internet-related businesses
are subject to intense competitive pressures, including market share and price
competition.

COMMON STOCK. The Funds will generally invest in common stocks. Common stock
represents an equity (ownership) interest in a company or other entity. This
ownership interest often gives the Funds the right to vote on measures affecting
the company's organization and operations. Although common stocks generally have
a history of long-term growth in value, common stock prices are often volatile
in the short-term and can be influenced by general market risk and specific
corporate risks.

CONVERTIBLE SECURITIES. The Fund may invest in convertible securities.
Convertible securities may be bonds, preferred stock or other securities that
pay a fixed rate of interest or dividends, but offer the owner the option of
converting the security into common stock. The value of convertible securities
will change based on the price of the underlying common stock. Convertible
securities generally pay less interest or dividend income than similar
non-convertible securities, but a non-convertible security's income provides a
cushion against the stock's price declines.

SMALL CAPITALIZATION COMPANIES. The Funds may invest in companies with market
capitalizations of $1 billion or less. Investing in the common stock of smaller
companies involves special risks and considerations not typically associated
with investing in the common stock of larger companies. The securities of
smaller companies may experience more market price volatility than the
securities of larger companies. These companies are typically subject to more
dramatic changes in earnings and business prospects than larger, more
established companies. In addition, the securities of smaller companies are less
liquid because they tend to trade over-the-counter or on regional exchanges, and
the frequency and volume of their trading are often substantially less than for
securities of larger companies.

FOREIGN SECURITIES. Each Fund may invest directly in foreign securities or
indirectly in foreign securities through American Depository Receipts and
European Depository Receipts ("ADRs" and "EDRs"). For many foreign securities,
there are U.S. dollar denominated ADRs, which are bought and sold in the United
States and are issued by domestic banks. ADRs represent the right to receive
securities of foreign issuers deposited in the domestic bank or a correspondent
bank. Generally, there is a large, liquid market in the United States for most
ADRs. Each Fund may also invest in EDRs, which are receipts evidencing an
arrangement with a European bank similar to that for ADRs and are designed for
use in the European securities markets. EDRs are not necessarily denominated in
the currency of the underlying security. The Funds will not invest in
unsponsored ADRs and EDRs.

RISKS OF FOREIGN SECURITIES. Investments in foreign securities may involve a
greater degree of risk than securities of U.S. issuers. There may be less
information about foreign companies in the form of reports and ratings than
about U.S. issuers. Foreign issuers may not be subject to uniform accounting,
auditing and financial reporting requirements comparable to those applicable to
U.S. issuers. Foreign markets may not be as developed or efficient as those in
the United States and there is generally less government supervision and
regulation of securities exchanges, brokers and listed issuers than in the
United States.

Additionally, there is the possibility of adverse changes in investment or
exchange control regulations, expropriation, nationalization, foreign taxation,
limitations on the removal of assets of a Fund from a country, political or
social instability, or diplomatic developments.

If a Fund's foreign securities are denominated in currencies other than the U.S.
dollar, changes in foreign currency exchange rates will affect the Fund's net
asset value, the value of dividends and interest earned, gains and losses
realized on the sale of securities, and any net investment income and gains that
the Fund distributes to shareholders.

RESTRICTED SECURITIES. The Funds may purchase securities that are not registered
under the Securities Act of 1933, as amended (the "1933 Act") and which are
subject to restrictions on transfer. Each Fund will limit investments in
restricted securities to no more than 15% of the Fund's total assets, excluding
restricted securities eligible for resale pursuant to Rule 144A that have been
determined to be liquid by the Funds' Board of Trustees.

RULE 144A SECURITIES. Each Fund may purchase securities which are not registered
under the 1933 Act but which can be sold to "qualified institutional buyers" in
accordance with Rule 144A under the 1933 Act. These securities may be classified
as "illiquid securities", however, any such security will not be considered
illiquid if it is determined by the Advisor, under guidelines approved by the
Funds' Board of Trustees, that an adequate market exists for that security. This
investment practice could have the effect of raising the level of illiquidity in
a Fund during any period in which qualified institutional buyers are not
interested in purchasing these restricted securities.

ILLIQUID SECURITIES. Each Fund may invest up to 15% of its net assets in
securities that are illiquid because of restrictions on transferability or other
reasons. Illiquid securities generally include securities that cannot be sold
within seven business days in the ordinary course of business at approximately
the price at which the Fund has valued the securities. Repurchase agreements
with maturities in excess of seven business days and securities that are not
registered under the 1933 Act, but that may be purchased by institutional buyers
pursuant to Rule 144A under the Securities Act, are subject to this 15% limit
(unless such securities are variable amount master demand notes with maturities
of nine months or less or unless the Board determines that a liquid trading
market exists).

WHEN-ISSUED SECURITIES. The Funds may invest in securities prior to their date
of issue. These securities could rise or fall in value by the time they are
actually issued, which may be any time from a few days to over a year.

FIXED-INCOME SECURITIES. Each Fund may invest in fixed-income securities. Even
though interest-bearing securities are investments which promise a stable
stream of income, the prices of such securities are affected by changes in
interest rates. In general, bond prices rise when interest rates fall and fall
when interest rates rise. The values of fixed-income securities also may be
affected by changes in the credit rating or financial condition of the issuing
entities. Once the rating of a portfolio security has been changed, the Fund
will consider all circumstances deemed relevant in determining whether to
continue to hold the security.

U.S. GOVERNMENT SECURITIES. Each Fund may invest in certain securities issued or
guaranteed by the U.S. government or its agencies or instrumentalities,
including U.S. Treasury securities, which differ in their interest rates,
maturities and times of issuance. Treasury bills have a maturity of one year or
less. Treasury notes have a maturity of one to ten years and Treasury bonds
generally have maturities of greater than ten years at the date of issuance.
Some obligations issued or guaranteed by U.S. government agencies and
instrumentalities, such as Government National Mortgage Association pass-through
certificates, are supported by the full faith and credit of the U.S. Treasury.
Other obligations such as those of the Federal Home Loan Bank, are supported
only by the credit of the instrumentalities. Government securities may have
fixed, floating or variable rates of interest. Principal and interest may
fluctuate based on generally recognized reference rates or the relationship of
rates. No assurance can be given that the U.S. government would provide
financial support to U.S. government instrumentalities as it is not obligated to
do so by law.

CREDIT RATINGS. When investing in fixed income securities, the Funds will
purchase only those securities rated at the time of purchase within the four
highest grades assigned by Standard & Poor's Rating Group ("S&P") (AAA, AA, A,
BBB, BB) or Moody's Investor's Service, Inc. (Moody's) (Aaa, Aa, A, Baa)

Generally, the ratings of Moody's and S&P represent the opinions of these
agencies as to the credit quality of the securities, which they rate. These
ratings are subjective and are not absolute standards of quality. Changes in the
rating of any fixed-income security or in the ability of the issuer to make
payments of interest and principal will affect the value of the security.

A Fund may invest in eligible unrated securities, which, in the opinion of the
Advisor, offer comparable risks to permissible rated securities. A security may
cease to be rated or its rating may be reduced below the minimum required for
purchase by the Fund after purchase. Neither of these events will necessarily
require the Fund to sell the securities.

Fixed-Income investments bear certain risks, including Credit Risk, or the
ability of an issuer to pay interest and principal as they become due.
Generally, higher yielding bonds are subject to more credit risk than higher
quality bonds. Interest rate risk refers to the fluctuations in value of
fixed-income securities resulting from the inverse relationship between the
market value of outstanding fixed-income securities and changes in interest
rates. An increase in interest rates will generally reduce the market value of
fixed-income investments, and a decline in interest rates will tend to increase
their value.

Call risk is the risk that an issuer will pay principal on an obligation earlier
than scheduled or expected, which would accelerate cash flows from, and shorten
the average life of, the security. Bonds are typically called when interest
rates have declined. In the event of a bond being called, the Advisor may have
to reinvest in lower yielding securities to the detriment of the Fund.

Extension risk is the risk that an issuer may pay principal on an obligation
slower than expected, having the effect of extending the average life and
duration of the obligation. This typically happens when interest rates have
increased.

REPURCHASE AGREEMENTS. The Funds may enter into repurchase agreements with
approved banks and broker-dealers. In a repurchase agreement, a Fund purchases
securities with the understanding that they will be repurchased by the seller at
a set price on a set date.

Repurchase agreements involve some credit risk. For example, if a seller
defaults, a fund will suffer a loss if the proceeds from the sale of the
collateral are lower than the repurchase price. To minimize risk, collateral
must be held with the Funds' custodian at least equal to the repurchase price,
including any accrued interest.

DERIVATIVES. The Funds may invest in derivative instruments, which are financial
instruments whose performance and value are derived, at least in part, from
another source, such as the performance of an underlying asset or security.
Derivatives may be purchased for hedging purposes, to enhance returns, as a
substitute for purchasing or selling securities, to maintain liquidity or in
anticipation of changes in the composition of its portfolio holdings. The Funds'
transactions in derivative instruments may include the purchase and writing of
options on securities.

WRITING COVERED OPTIONS. A call option on securities obligates the Fund to sell
specified securities to the holder of the option at a specified price if the
option is exercised at any time before the option's expiration date. A put
option on securities obligates the Fund to purchase specified securities from
the option holder at a specified price if the option is exercised at any time
before the option's expiration date. Writing covered call options may deprive a
Fund of the opportunity to profit from an increase in the market price of the
securities in its portfolio. Writing covered put options may deprive a Fund of
the opportunity to profit from a decrease in the market price of the securities
to be acquired for its portfolio.

All call and put options written by the Funds are covered by (1) maintaining
cash or liquid securities in a segregated account with a value at least equal to
a Fund's obligation under the option, (2) entering into an offsetting forward
commitment and/or (3) purchasing an offsetting option or any other option which,
by virtue of its exercise price or otherwise, reduces the Fund's net exposure on
its written option position. A written call option on securities is typically
covered by maintaining the securities that are subject to the option in a
segregated account.

A Fund may terminate its obligations under an exchange-traded call or put option
by purchasing an option identical to the one it has written. Obligations under
over-the-counter options may be terminated only by entering into an offsetting
transaction with the other party to the option. These purchases are referred to
as "closing purchase transactions."

PURCHASING OPTIONS. A Fund would normally purchase call options in anticipation
of an increase, or put options in anticipation of a decrease ("protective puts")
in the market value of securities of the type in which it may invest. A Fund may
also sell call and put options to close out its purchased options.

The purchase of a call option enables a fund to purchase specified securities at
a set price during the option period, in return for the premium paid. A fund
would ordinarily realize a gain on the purchase of a call option if, during the
option period, the value of such securities exceeded the sum of the exercise
price, the premium paid and transaction costs; otherwise the fund would realize
either no gain or a loss on the purchase of the call option.

The purchase of a put option enables a fund to sell specified securities at a
specified price during the option period, in exchange for the premium paid. The
purchase of protective puts is designed to offset or hedge against a decline in
the market value of a fund's portfolio securities. Put options may also be
purchased for the purpose of benefiting from a decline in the price of
securities, which it does not own. A fund would ordinarily realize a gain if,
during the option period, the value of the underlying securities decreased below
the exercise price sufficiently to cover the premium and transaction costs;
otherwise the fund would realize either no gain or a loss on the purchase of the
put option. Gains and losses on the purchase of put options may be offset by
compensating changes in the value of the fund's portfolio securities.

RISKS ASSOCIATED WITH OPTIONS TRANSACTIONS. The success of transactions in
derivative instruments depends on the Advisor's judgment as to their potential
risks and rewards. Use of derivatives exposes a fund to additional investment
risks and transaction costs. Risks inherent in the use of derivative instruments
include: adverse movements in the prices of securities or currencies and the
possible absence of a liquid secondary market for any particular instrument.

OTHER INVESTMENT PRACTICES AND RISKS

LENDING PORTFOLIO SECURITIES. The Funds may lend their portfolio securities.
These loans are secured by the delivery to a Fund of cash collateral, which may
be invested in short-term debt securities and money market funds. The Funds may
make loans only to broker-dealers who are members of the New York Stock Exchange
(NYSE), or who have net capital of at least $10,000,000. Such loans will not be
made against less than 100% cash collateral maintained at 100% of the market
value (marked-to-market daily) of the loaned securities. Loans will be made only
if a Fund can terminate the loan at any time.

When a Fund lends portfolio securities, there is a risk that the borrower may
fail to return the securities. As a result, a Fund may incur a loss or, in the
event of a borrower's bankruptcy, may be prevented from or delayed in,
liquidating the collateral.

REVERSE REPURCHASE AGREEMENTS. The Funds may enter into reverse repurchase
agreements under which a Fund sells portfolio assets with an agreement to
repurchase the assets at a later date at a set price. The Fund continues to
receive principal and interest payments on these securities. The Funds will
maintain a segregated custodial account consisting of cash or liquid securities
of any type or maturity, having a value at least equal to the repurchase price,
plus accrued interest.

Reverse repurchase agreements involve the risk that the value of the securities
sold by a fund may decline below the price of the securities the fund is
obligated to repurchase. Reverse repurchase agreements are borrowings by a fund
and are subject to its investment restrictions on borrowing.

NON-DIVERSIFICATION. The Funds are classified as "non-diversified" under the
1940 Act. Non-diversification means that the proportion of a fund's assets that
may be invested in the securities of a single issuer is not limited by the 1940
Act. Since they may invest a larger proportion of their assets in a single
issuer, an investment in these Funds may be subject to greater fluctuations in
value than an investment in a diversified fund.

PORTFOLIO TURNOVER. Each Fund's portfolio turnover rate is calculated by
dividing the lesser of the purchases or sales of portfolio investments for the
reporting period by the monthly average value of the portfolio investments owned
during the reporting period.

Under certain market conditions, the Internet Fund's portfolio turnover rate may
be higher than that of other mutual funds. The Fund may engage in short-term
trading (purchase and sale of security in a relatively brief period of time) in
response to stock market conditions or changes in economic trends and
developments. Although the Internet Fund's annual portfolio turnover rate cannot
be accurately predicted, it is estimated this rate will not exceed approximately
300% for the current fiscal year. The fact that the Internet Fund's turnover
rate may be higher than that of other mutual funds may be dictated by the nature
of the industry in which it is investing. Historically, stock in Internet and
Internet-related companies has experienced significant fluctuations in price
within short periods of time. As such, in order to achieve the Internet Fund's
stated objective, it may be necessary to buy and sell portfolio securities
within shorter than normal time periods.

The Investors Capital Twenty Fund may have a portfolio turnover rate higher than
that of other mutual funds with a similar objective. Although the Fund's annual
portfolio turnover rate cannot be accurately predicted, it is estimated this
rate will not exceed approximately 300% for the current fiscal year.

High rates of portfolio turnover (100% or more) entail certain costs, including
increased taxable income for the Funds' shareholders. Also, the higher the
turnover, the higher the overall brokerage commissions, dealer mark-ups and
markdowns, and other transactions costs incurred. The Advisor takes these costs
into account, since they affect the Funds' overall investment performance and
reduce shareholders' return.

TEMPORARY INVESTMENTS. To maintain cash for redemptions and distributions and
for temporary defensive purposes, the Funds may invest in money market mutual
funds and in investment grade short-term fixed income securities including, but
not limited to, short-term U.S. government securities, negotiable certificates
of deposit, commercial paper, banker's acceptances and repurchase agreements.

OTHER INVESTMENTS. Subject to prior disclosure to shareholders, the Trustees
may, in the future, authorize the Funds to invest in securities other than those
listed here and in the prospectus, provided that such investment would be
consistent with the Fund's investment objective and that it would not violate
any fundamental investment policies or restrictions applicable to the Funds.

INVESTMENT RESTRICTIONS

FUNDAMENTAL INVESTMENT RESTRICTIONS. The following investment restrictions are
considered fundamental, which means they may be changed only with the approval
of the holders of a majority of a Fund's outstanding voting securities, defined
in the 1940 Act as the lesser of: (1) 67% or more of a fund's outstanding shares
present at a meeting, if the holders of more than 50% of the fund's outstanding
shares are present in person or represented by proxy, or (2) more than 50% of
such funds outstanding shares. Except as otherwise stated in the prospectus,
each Fund may not:

1. Borrow money or issue senior securities, except to the extent permitted by
the 1940 Act.

2. Underwrite securities of other issuers, except insofar as a Fund may be
deemed an underwriter under the 1933 Act when selling its own portfolio
securities.

3. Purchase, sell or invest in real estate, real estate investment trust
securities, real estate limited partnership interests, but the Funds may
purchase and sell securities that are secured by real estate and may
purchase and sell securities issued by companies that invest or deal in real
estate.

4. Invest in commodities or commodity futures contracts, or invest in oil, gas
or other mineral leases, or exploration or development programs, except for
transactions in financial derivative contracts, such as forward currency
contracts; financial futures contracts and options on financial futures
contracts; options on securities, and currencies.

5. Make loans to other persons, except loans of securities not exceeding
one-third of the Fund's total assets. For purposes of this limitation,
investments in debt obligations and transactions in repurchase agreements
shall not be treated as loans.

6. Invest in the securities of any one industry (except securities issued or
guaranteed by the U.S. government, its agencies and instrumentalities), if
as a result more than 25% of the Fund's total assets would be invested in
the securities of such industry. This does not apply to the Investors
Capital Internet Fund, which will be at least 65% invested in securities of
Internet and Internet-related companies as defined in the prospectus.

NON-FUNDAMENTAL INVESTMENT RESTRICTIONS. The following restrictions may be
modified by the Trustees without shareholder approval. Each Fund may not:

1. Invest more than 15% of its net assets in illiquid securities. A security is
illiquid if it cannot be sold in seven business days at a price
approximately equal to the price at which the Fund is valuing the security.
Restricted securities and repurchase agreements with maturities in excess of
seven business days are subject to this 15% limitation.

2. Invest in other open-end investment companies except to the extent allowed
in the 1940 Act. Under the 1940 Act, funds may acquire securities of other
investment companies if, immediately after the acquisition, the fund does
not own in the aggregate (1) more than 3% of the total outstanding voting
stock of such other investment company, (2) more than 5% of the value of the
fund's total assets in any other investment company, or (3) securities
issued by such other investment companies having an aggregate value in
excess of 10% of the value of the fund's total assets.

3. Invest in a company for the purpose of exercising control or management of
the company.

4. Write or purchase options in excess of 5% of the value of the Fund's total
net assets.

5. Purchase securities on margin, except for such short-term credits as are
necessary for the clearance of transactions. The Funds may engage in short
sales against the box for tax strategy purposes.

Except with respect to 300% asset coverage for borrowing, whenever any
investment restriction states a maximum percentage of a Fund's assets that may
be invested in any security, such percentage limitation will be applied only at
the time the Fund acquires such security and will not be violated by subsequent
increases in value relative to other assets held by the Fund.

MANAGEMENT OF THE TRUST

TRUSTEES AND OFFICERS OF THE TRUST. The direction and supervision of the Trust
is the responsibility of the Board of Trustees. The Trustees have been elected
by the shareholders of the Trust. The Board establishes each Fund's policies and
oversees and reviews the management of each Fund. The Board meets regularly to
review the activities of the officers, who are responsible for day-to-day
operations of the Funds. The Board also reviews the various services provided by
the Advisor and the administrator to ensure that each Fund's general investment
policies and programs are being carried out and administrative services are
being provided in a satisfactory manner. The Trustees and officers of the Trust
and their principal occupations during the past five years are set forth below:

Positions Held with Principal Occupation
Name, Address and Age the Funds During the Past 5 Years
- ------------------------ ---------------------- --------------------------
Theodore E. Charles, 56* Chairman of the Board Chairman, Investors Capital
of Trustees, President Holdings (1995 to present);
and Trustee Chief Financial Officer,
Investor Capital
Corporation (1991 to
present); Director, Revere
Federal Savings Bank
(1996 to present).

Timothy B. Murphy, 35* Treasurer and Trustee President, Investors
Capital Corporation (1994
to present); President,
Eastern Point Advisors
(1995 to present);
Treasurer and Director,
Investors Capital Holdings
(1995 to present).

David Weller, 42 Secretary Compliance Officer and
Legal Counsel, Investors
Capital Corporation (1999
to present), Manager,
Compliance and Investment
Planning, Hancock Partners
Insurance, LLP (1995-1999),
Director of Advance Sales
And Compliance, Mony New
England (1991-1995).

Robert T. Martin, 32 Trustee Director of Operations,
Ipswich Brewing Co., (1995
to present); Manager,
Products for Research,
Inc., a scientific
equipment firm (1994-1995).

John S. Rando, Jr., 36 Trustee Owner/Manager, Wal-Lex
Shopping Center
(1986-present).

Arthur E. Stickney, 65 Trustee President and Treasurer,
Stickney & Associates,
Inc., an advertising firm
(1985-present); President
and Treasurer, Kenmore
Industries, an entryways
distributor (1985-present).

The mailing address for all Officers and Trustees of the Funds is c/o Investors
Capital Funds, 230 Broadway East, Suite 203, Lynnfield, MA 01940-2320.

* Trustee who may be deemed to be an "interested person" (as defined by the
Investment Company Act of 1940, as amended) of the Funds.

COMPENSATION OF TRUSTEES AND OFFICERS. Trustees and officers affiliated with the
Distributor or the Advisor are not compensated by the Trust for their services.
Each Trustee who is not an affiliated person of the Advisor or Distributor, as
defined in the 1940 Act, receives $500 per meeting attended, as well as
reimbursement for expenses incurred in connection with attendance at such
meetings.

The following table sets forth the compensation expected to be paid by the Trust
to the non-interested Trustees during the Funds' fiscal year ending September
30, 2000.

Total Compensation Total Compensation from
Name and Position from the Trust the Trust and Fund Complex
- ----------------- -------------- --------------------------
Robert T. Martin $2,000 $2,000

John S. Rando, Jr. $2,000 $2,000

Arthur E. Stickney $2,000 $2,000

The Trust does not compensate the Trustees and officers affiliated with the
Advisor for their services. The Funds do not have any retirement plan for their
Trustees.

CONTROL PERSONS AND PRINCIPAL HOLDERS OF SECURITIES. As of September 15, 1999,
there were no control persons or principal holders of securities of either of
the Funds. Control persons are those that own beneficially more than 25% of a
fund's outstanding shares. Principal holders are persons that own beneficially
5% or more of a fund's outstanding shares. On September 15, 1999, the Trustees
and officers, as a group, owned less than 1% of the outstanding shares of the
Trust, its series or classes.

INVESTMENT MANAGEMENT AND OTHER SERVICES

INVESTMENT ADVISOR. The Funds have employed Eastern Point Advisors, Inc. (the
"Advisor") as their investment advisor. As of June 30, 1999, the Advisor managed
approximately $100 million of assets, consisting primarily of non-discretionary
brokerage accounts. Through his ownership and voting control of more than 25% of
the outstanding shares of the Advisor and the Advisor's parent, Investors
Capital Holdings, Ltd., Theodore E. Charles is considered to control the
Advisor. Investors Capital Holdings, Ltd. is the parent corporation of Investors
Capital Corporation, the Funds' distributor.

In addition to managing each Fund's investments consistent with its investment
objectives, policies and limitations, the Advisor makes recommendations with
respect to other aspects and affairs of the Funds. The Advisor also furnishes
the Funds with certain administrative services, office space and equipment. All
other expenses incurred in the operation of the fund are borne by the Funds.
Under the Investment Advisory Agreement, the Advisor will not be liable for any
error of judgment or mistake of fact or law or for any loss by the Funds in
connection with the performance of the Investment Advisory Agreement, except a
loss from a breach of a fiduciary duty with respect to the receipt of
compensation for services or a loss resulting from willful misfeasance, bad
faith or gross negligence on its part in the performance of its duties or from
reckless disregard of its obligations or duties under the Investment Advisory
Agreement.

For providing investment advisory and other services and assuming certain Fund
expenses, each Fund pays the Advisor a monthly fee at the annual rate of 1.50%
of the value of the Fund's average daily net assets. For the Funds' initial
fiscal year ending September 30, 2000, the Advisor has voluntarily agreed to
waive its fees and reimburse expenses so that the Fund's annual operating
expenses will not exceed 5.00% for the Investors Capital Internet Fund and 5.00%
for the Investors Capital Twenty Fund. The Advisor may terminate this waiver at
any time. Any waiver or reimbursement by the Advisor is subject to reimbursement
by the Funds within the following three years, to the extent such reimbursement
by the Funds would not cause total operating expenses to exceed any current
expense limitation. Additionally, the Advisor has agreed to reimburse all
expenses incurred in connection with the organization of the Funds, subject to
the same recapture provisions described above.

The Investment Advisory Agreement is for an initial term of two years and
continues in effect from year to year thereafter if such continuance is approved
annually by the Trustees or by a vote of a majority of the outstanding shares of
the Fund, and, in either case, by the vote of a majority of the Trustees who are
not parties to the Investment Advisory Agreement or "interested persons" of any
party to the Investment Advisory Agreement, voting in person at a meeting called
for the purpose of voting on such approval. The Investment Advisory Agreement
may be terminated at any time without penalty by the Trustees, by vote of a
majority of the outstanding shares of the fund or by the Advisor, upon sixty
days' written notice. The Investment Advisory Agreement terminates automatically
if assigned.

The Funds pay all expenses not assumed by the Advisor, including, but not
limited to: Trustees' expenses, audit fees, legal fees, interest expenses,
brokerage commissions, fees for registration and notification of shares for sale
with the Securities and Exchange Commission (the "SEC") and various state
securities commissions, taxes, insurance premiums, fees of the Fund's
administrator, transfer agent, fund accounting agent or other service providers,
and costs of obtaining quotations for portfolio securities and the pricing of
fund shares.

ADMINISTRATOR. First Data Investor Services Group, Inc., 3200 Horizon Drive,
King of Prussia, PA serves as administrator to the Funds pursuant to a Services
Agreement. Under the Services Agreement, the Administrator provides the Funds
with office space and personnel to assist the Funds in managing their affairs.
The administrator's duties require it to supervise the day-to-day administration
of matters necessary to each Fund's operations, maintenance of records and the
books of the Trust, preparation of reports, filings with the SEC and compliance
monitoring of its activities. For its services to the Funds, the administrator
is paid by the Funds at the following annual percentage of each Fund's average
daily net assets:

AVERAGE DAILY NET ASSETS ADMINISTRATION FEE

For amounts up to $50,000,000 0.15%
$50,000,000 to 100,000,000 0.10%
Over $100,000,000 0.05%

These fees are subject to an annual minimum of $55,000.

DISTRIBUTOR. The Advisor, on behalf of the Funds, has entered into a
Distribution Agreement with Investors Capital Corporation (the "Distributor").
Under the Distribution Agreement, the Distributor is obligated to use its best
efforts to sell shares of each class of the Funds. Shares of the Funds are also
sold by selected broker-dealers (the "Selling Brokers") who have entered into
selling agency agreements with the Distributor. The Distributor accepts orders
for the purchase of shares of the Funds, which are continually offered at net
asset value next determined, plus any applicable sales charge. The Distributor
may pay extra compensation to financial services firms selling large amounts of
Fund shares. This additional compensation would be calculated as a percentage of
Fund shares sold by the firm.

Under the Distribution Agreement, the Trust and the Funds may use the name
"Investors Capital" or any name derived from or similar to it only for so long
as the Distribution Agreement or any extension, renewal or amendment thereof
remains in effect. If the Distribution Agreement is no longer in effect, the
Trust and the Funds (to the extent that they lawfully can) will cease to use
such a name or any other name indicating that it is advised by or otherwise
connected with the Advisor.

DISTRIBUTION PLANS. The Trust has adopted distribution plans for the Class A and
Class C Shares of each Fund (the "Plans") in accordance with Rule 12b-1 under
the 1940 Act. The Plans compensate the Distributor for its services and
distribution expenses under the Distribution Agreement. The principal services
and expenses for which such compensation may be used include: compensation to
employees or account executives and reimbursement of their expenses; overhead
and telephone costs of such employees or account executives; printing of
prospectuses or reports for prospective shareholders; advertising; preparation,
printing and distribution of sales literature; and allowances to other
broker-dealers. A report of the amounts expended under each Plan is submitted to
and approved by the Trustees each quarter.

The Plans are subject to annual approval by the Trustees. The Plans are
terminable at any time by vote of the Trustees or by vote of a majority of the
shares of the applicable class or Fund. Pursuant to each Plan, a new Trustee who
is not an interested person (as defined in the 1940 Act) must be nominated by
existing Trustees who are not interested persons.

If a Plan is terminated (or not renewed) with respect to any one or more classes
or Funds, the Plan may continue in effect with respect to a class or fund as to
which it has not been terminated (or has been renewed). Although there is no
obligation for the Trust to pay expenses incurred by the Distributor in excess
of those paid to the Distributor under a Plan, if the Plan is terminated, the
Board will consider how to treat such expenses. Any expenses incurred by the
Distributor but not yet recovered through distribution fees could be recovered
through future distribution fees. If the Distributor's actual distribution
expenditures in a given year are less than the Rule 12b-1 payments it receives
from the funds for that year, and no effect is given to previously accumulated
distribution expenditures in excess of the Rule 12b-1 payments borne by the
Distributor out of its own resources in other years, the difference would be
profit to the Distributor for that year.

Because amounts paid pursuant to a Plan are paid to the Distributor, the
Distributor and its officers, directors and employees may be deemed to have a
financial interest in the operation of the Plans. None of the Trustees who are
not an interested person of the Trust has a financial interest in the operation
of any Plan.

The Plans were adopted because of their anticipated benefits to the Funds. These
anticipated benefits include: increased promotion and distribution of the Funds'
shares, an enhancement in each fund's ability to maintain accounts and improve
asset retention, increased stability of net assets for the Funds, increased
stability in each fund's positions, and greater flexibility in achieving
investment objectives. The costs of any joint distribution activities between
the Funds will be allocated between the Funds in proportion to their net
assets.

CUSTODIAN. The Bank of New York, 1 Wall Street, New York, NY 10286, serves as
custodian for the Funds. The custodian is responsible for, among other things,
safeguarding and controlling each Fund's cash and securities, handling the
receipt and delivery of securities and collecting interest and dividends on each
Fund's investments.

TRANSFER AGENT AND DIVIDEND PAYING AGENT. First Data Investor Services Group,
Inc, 211 S. Gulph Road, King of Prussia, PA 19406, is transfer and dividend
paying agent for the Funds.

INDEPENDENT ACCOUNTANTS. Briggs, Bunting & Dougherty, LLP, 2121 Two Logan
Square, 18th & Arch Streets, Philadelphia, Pennsylvania 19103-4901 are the
independent accountants for the Trust. In addition to reporting annually on the
financial statements of the Trust, the accountants assist and consult with the
Trust in connection with the preparation of certain filings of the Trust with
the SEC.

DESCRIPTION OF THE TRUST'S SHARES

The Trust is a business trust organized on July 14, 1999 under Delaware law. The
Trustees are responsible for the management and supervision of the Funds. The
Trust Instrument permits the Trustees to issue an unlimited number of full and
fractional shares of beneficial interest of the Funds, with $0.001 par value.
Under the Trust Instrument, the Trustees have the authority to create and
classify shares of beneficial interest in separate series, without further
action by shareholders. As of the date of this Statement of Additional
Information, the Trustees have authorized shares only of the Funds described in
the prospectus. Additional series may be added in the future. The Trust
Instrument also authorizes the Trustees to classify and reclassify the shares of
the Funds, or any other series of the Trust, into one or more classes.

Each share of a Fund represents an equal proportionate interest in the assets
belonging to that Fund and has equal dividend rights. When issued, shares are
fully paid and non-assessable. In the event of liquidation of a Fund,
shareholders are entitled to share pro rata in the net assets of the Fund
available for distribution to such shareholders. Shares of a Fund are freely
transferable and have no preemptive, subscription or conversion rights.

In accordance with the provisions of the Trust Instrument, the Trustees have
initially determined that shares entitle their holders to one vote per share on
any matter on which such shares are entitled to vote. The Trustees may determine
in the future, without the vote or consent of shareholders, that each dollar of
net asset value (number of shares owned times net asset value per share) will be
entitled to one vote on any matter on which such shares are entitled to vote.

Unless otherwise required by the 1940 Act or the Trust Instrument, the Funds
have no intention of holding annual meetings of shareholders. Shareholders may
remove a Trustee by the affirmative vote of at least two-thirds of the Trust's
outstanding shares. At any time that less than a majority of the Trustees
holding office were elected by the shareholders, the Trustees will call a
special meeting of shareholders for the purpose of electing Trustees.

BROKERAGE

The Funds intend to place substantially all of their securities transactions
through their affiliated Distributor in accordance with procedures set forth in
Rule 17e-1 under the 1940 Act. These procedures, which have been adopted by the
Trustees, including a majority of the non-interested Trustees, are reasonably
designed to provide that any commissions, fees or other compensation paid to the
Distributor are fair and reasonable when compared to commissions, fees and other
compensation received from other firms who engage in comparable transactions.
The Funds will not effect transactions with the Distributor acting as principal
for its own account.

The Advisor may also use non-affiliated brokers, dealers or members of a
securities exchange to execute portfolio transactions on behalf of the Funds.
Purchases and sales of portfolio securities are generally placed with
broker-dealers who provide the best price (including brokerage commissions) and
execution for orders. Transactions may also be allocated to broker-dealers who
provide research. Higher fees may be paid to brokers that do not furnish
research or furnish less valuable research if a good faith determination is made
that the commissions paid are reasonable in relation to the value of the
brokerage and research services provided. Among these services are those that
brokerage houses customarily provide to institutional investors, such
statistical and economic data and research reports on companies and industries.

PURCHASE, REDEMPTION AND PRICING OF SHARES

PURCHASE OF SHARES. Each Fund offers Class A and Class C shares. The Trustees
and officers reserve the right to change or waive a Fund's minimum investment
requirements and to reject any order to purchase shares (including purchases by
exchange) when in their judgment the rejection is in the Fund's best interest.

INITIAL SALES CHARGES ON CLASS A SHARES. Class A shares are offered at a price
equal to their net asset value plus a sales charge which is imposed at the time
of purchase. The sales charges applicable to purchases of shares of Class A
shares of each Fund are described in the prospectus. Up to 100% of the sales
charge may be re-allowed to dealers who achieve certain levels of sales or who
have rendered coordinated sales support efforts. These dealers may be deemed
underwriters. Other dealers will receive the following compensation:

Amount Invested Dealer Concession as a %
of Offering Price of
Shares Purchased

Less than $50,000 5.00%
$50,000 but less than $100,000 4.00%
$100,000 but less than $500,000 3.00%
$500,000 but less than $1,000,000 2.00%
$1,000,000 or more 1.00%

OBTAINING A REDUCED SALES CHARGE FOR CLASS A SHARES. Methods of obtaining a
reduced sales charge referred to in the prospectus are described in more detail
below.

No sales charge will be imposed on increases in net asset value, dividends or
capital gain distributions, or reinvestment of distributions in additional Class
A shares.

RIGHTS OF ACCUMULATION (Class A Shares). If you already hold Class A shares, you
may qualify for a reduced sales charge on your purchase of additional Class A
shares. If the value of the Class A shares you currently hold plus the amount
you wish to purchase is $50,000 or more, the sales charge on the Class A shares
being purchased will be at the rate applicable to the total aggregate amount.
The Distributor's policy is to give investors the lowest commission rate
possible under the sales charge structure. However, to take full advantage of
rights of accumulation, at the time of placing a purchase order, the investor or
his dealer must request the discount and give the Distributor sufficient
information to determine and confirm whether the purchase qualifies for the
discount. Rights of accumulation may be amended or terminated at any time as to
all purchases occurring thereafter.

LETTER OF INTENT (Class A Shares). If you intend to purchase Class A shares
valued at $50,000 or more during a 13-month period, you may make the purchases
under a Letter of Intent so that the initial Class A shares you purchase qualify
for the reduced sales charge applicable to the aggregate amount of your
projected purchase. Your initial purchase must be at least 5% of the intended
purchase. Purchases made within 90 days before the signing of the Letter of
Intent may be included in such total amount and will be valued on the date of
the Letter of Intent. The Letter of Intent will not impose a binding obligation
to buy or sell shares on either the purchaser or the Fund.

During the period of the Letter of Intent, the transfer agent will hold shares
representing 3% of the intended purchase in escrow to provide payment of
additional sales charges that may have to be paid if the total amount purchased
under the Letter of Intent is reduced. These shares will be released upon
completion of the intended investment. If the total Class A shares covered by
the Letter of Intent are not purchased, a price adjustment is made, depending
upon the actual amount invested within the period covered by the Letter of
Intent, by a redemption of sufficient shares held in escrow for the account of
the investor. A Letter of Intent can be amended: (a) during the 13-month period
if the purchaser files an amended Letter of Intent with the same expiration date
as the original; and (b) automatically after the end of the period, if the total
purchases of Class A shares credited to the Letter of Intent qualify for an
additional reduction in the sales charge. For more information concerning the
Letter of Intent, see the application form or contact the Distributor.

SALES CHARGE WAIVERS (CLASS A SHARES). Under certain conditions, Class A shares
may be sold without a sales charge to officers, directors, trustees and
employees of the Advisor, the Fund's distributor and any of their affiliated
companies, and immediate family members of any of these people. Class A shares
may also be sold without a sales charge to individuals with an investment
account or relationship with the Advisor; fee-based financial planners acting
for the account of their clients; broker-dealers who have entered into selling
agreements with the Distributor for their own accounts; and banks and other
financial institutions that have entered into agreements with the Funds to
provide shareholder services for customers.

CLASS C SHARE PURCHASES. Purchases of Class C shares will be processed at net
asset value next determined after receipt of your purchase order. Class C shares
are not subject to an initial sales charge, but may pay higher fees than Class A
shares. Class C shares are subject to a 1.00% redemption fee for a period of 12
months based upon the anniversary date of purchase.

TERMS OF REDEMPTIONS. The amount of your redemption proceeds will be based on
the net asset value per share next computed after the Distributor, the Funds or
the transfer agent receives the redemption request in proper form. Payment for
your redemption normally will be mailed to you, except as provided below. Your
redemption proceeds will normally be mailed or wired the day after your
redemption is processed. If you have purchased shares by check, the payment of
your redemption proceeds may be delayed until the purchase check has cleared,
which may take fifteen or more days. This potential delay can be avoided by
purchasing shares with federal funds or a certified check.

Beneficial owners of shares held of record in the name of the Distributor or a
participating dealer may redeem their shares only through that firm. The right
of redemption may be suspended or the date of payment postponed under certain
emergency or extraordinary situations, such as suspension of trading on the New
York Stock Exchange, or when trading in the markets a Fund normally uses is
restricted or an emergency exists, as determined by the SEC, so that disposal of
a Fund's assets or determination of its net asset value is not reasonably
practicable, or for such other periods as the Commission by order may permit.

Each Fund reserves the right to redeem your account if its value is less than
$250 due to redemptions. The affected Fund will give the shareholder 30 days'
notice to increase the account value to at least $250. Redemption proceeds will
be mailed in accordance with the procedures described above.

REDEMPTIONS-IN-KIND. Although the Funds would not normally do so, each Fund has
the right to pay the redemption price of shares of the Fund in whole or in part
in portfolio securities as prescribed by the Trustees. When the shareholder
sells portfolio securities received in this fashion, a brokerage charge would be
incurred. The Funds will value securities distributed in an in-kind redemption
at the same value as is used in determining NAV.

REDEMPTION FEES (CLASS A AND CLASS C SHARES). To discourage short-term trading,
purchases of Class A and Class C shares are subject to a 1.00% redemption fee on
shares redeemed within 12 months of acquisition. Redemption fees are not imposed
on shares acquired through the reinvestment of dividends or capital gains
distributions or involuntary redemptions. Redemption fees are paid to the Funds
to help defray transaction costs.

WAIVER OF REDEMPTION FEES (CLASS A AND CLASS C SHARES). The redemption fee will
be waived in the event of redemptions following the death or disability of a
shareholder as defined in Section 72(m)(7) of the Internal Revenue Code, as
amended.

REINSTATEMENT PRIVILEGE (CLASS A SHARES)
A shareholder of Class A shares who has redeemed such shares and has not
previously exercised the reinstatement privilege may reinvest any portion or all
the redemption proceeds in Class A shares at net asset value, provided that such
reinstatement occurs within 120 calendar days after such redemption and the
account meets the minimum account size requirement. This privilege may be
modified or terminated at any time by the Funds.

In order to use this privilege, the shareholder must clearly indicate by written
request to the applicable Fund that the purchase represents a reinvestment of
proceeds from previously redeemed Class A shares. If a shareholder realizes a
gain on redemption of shares, this gain is taxable for federal income tax
purposes even if all of such proceeds are reinvested. If a shareholder incurs a
loss on a redemption and reinvests the proceeds in the same Fund, part or all of
such loss may not be deductible for such tax purposes. Redemption fees are not
reimbursed in the event of using the reinstatement privilege.

THE REINSTATEMENT PRIVILEGE MAY BE USED BY EACH SHAREHOLDER ONLY ONCE,
REGARDLESS OF THE NUMBER OF SHARES REDEEMED OR REPURCHASED. However, the
privilege may be used without limit in connection with transactions for the sole
purpose of transferring a shareholder's interest in a Fund to his or her
Individual Retirement Account or other tax-qualified retirement plan account.

NET ASSET VALUE

Each Fund determines its net asset value per share (NAV) each business day at
the close of regular trading (currently 4:00 p.m. eastern time) on the New York
Stock Exchange (NYSE) by dividing the Fund's net assets by the number of its
shares outstanding. If the NYSE closes early, the Funds accelerate the
determination of NAV to the closing time. The Funds use the following procedures
for purposes of calculating the NAV of Fund shares.

The Funds generally value equity securities traded on a national exchange or the
Nasdaq Stock Market at their last sale price on the day of valuation. The Funds
generally value equity securities for which no sales are reported on a valuation
day, and securities traded over-the-counter, at the last available bid price.

The Funds value debt securities on the basis of valuations furnished by a
principal market maker or a pricing service, both of which generally use
electronic data processing techniques (matrix pricing) to value normal
institutional size trading units of debt securities without exclusive reliance
upon quoted prices.

The Funds value short-term debt instruments that have a remaining maturity of 60
days or less at the time of purchase at amortized cost, which approximates
market value.

The Funds may determine the fair value of any security in good faith in
accordance with procedures approved by the Trustees if market quotations are not
readily available, or if in the opinion of the Advisor any quotation or market
price is not representative of true market value.

The Funds value foreign securities, if any, on the basis of quotations from the
primary market in which they are traded. The Funds' custodian translates assets
or liabilities expressed in foreign currencies into U.S. dollars based on London
currency quotations as of 5:00 p.m., London time (12:00 noon, New York time) on
the date of determining a Fund's NAV. If quotations are not readily available,
or the value of foreign securities has been materially affected by events
occurring after the closing of a foreign market, the Funds may value their
assets by a method that the Trustees believe accurately reflects fair value.

On any day an international market is closed and the NYSE is open, any foreign
securities will be valued at the prior day's close with the current day's
exchange rate. Trading of foreign securities may take place on Saturdays and
U.S. business holidays on which a Fund's NAV is not calculated. Consequently, a
fund's portfolio securities may trade and the NAV of that Fund's shares may be
significantly affected on days when a shareholder has no access to that Fund.

TAXES

Below is a discussion of certain U.S. federal income tax issues concerning the
funds and the purchase, ownership, and disposition of fund shares. This
discussion does not purport to deal with all aspects of federal income taxation
relevant to shareholders in light of their particular circumstances. This
discussion is based upon the Internal Revenue Code of 1986, as amended (the
"Code"), the regulations promulgated thereunder, and judicial and administrative
ruling authorities, all of which are subject to change, which change may be
retroactive. Prospective investors should consult their own tax advisors with
regard to the federal tax consequences of the purchase, ownership, or
disposition of fund shares, as well as the tax consequences arising under the
laws of any state, foreign country, or other taxing jurisdiction.

TAX STATUS OF THE FUNDS. The Funds intend to be taxed as a regulated investment
company under Subchapter M of the Code. Accordingly, each Fund must, among other
things, (a) derive in each taxable year at least 90% of its gross income from
dividends, interest, payments with respect to certain securities loans, and
gains from the sale or other disposition of stock, securities or foreign
currencies, or other income derived with respect to its business of investing in
such stock, securities or currencies; and (b) diversify its holdings so that, at
the end of each fiscal quarter, (i) at least 50% of the value of the fund's
total assets is represented by cash and cash items, U.S. Government securities,
the securities of other regulated investment companies and other securities,
with such other securities limited, in respect of any one issuer, to an amount
not greater than 5% of the value of the fund's total assets and 10% of the
outstanding voting securities of such issuer, and (ii) not more than 25% of the
value of its total assets is invested in the securities of any one issuer (other
than U.S. Government securities and the securities of other regulated investment
companies). If the funds fail to qualify as a regulated investment company, the
funds will be subject to U.S. federal income tax.

As a regulated investment company, the funds generally are not subject to U.S.
federal income tax on income and gains that it distributes to shareholders, if
at least 90% of the fund's investment company taxable income (which includes,
among other items, dividends, interest and the excess of any net short-term
capital gains over net long-term capital losses) for the taxable year is
distributed to shareholders. The funds intend to distribute substantially all of
such income. Given the investment objectives of the Funds, dividend income will
not be substantial.

Amounts not distributed in accordance with certain requirements are subject to a
nondeductible 4% excise tax at the fund level. To avoid the tax, each fund must
distribute during each calendar year an amount equal to the sum of (1) at least
98% of its ordinary income (not taking into account any capital gains or losses)
for the calendar year, (2) at least 98% of its capital gains in excess of its
capital losses (adjusted for certain ordinary losses) for a one-year period
generally ending on October 31 of the calendar year, and (3) all ordinary income
and capital gains for previous years that were not distributed during such
years. The funds intend to avoid application of the excise tax.

A distribution will be treated as paid on December 31 of a calendar year if it
is declared by the fund in October, November or December of that year with a
record date in such a month and paid by the fund during January of the following
year. Such distributions will be taxable to shareholders in the calendar year in
which the distributions are declared, rather than the calendar year in which the
distributions are received.

DISTRIBUTIONS. Distributions of investment company taxable income are taxable to
a U.S. shareholder as ordinary income, whether paid in cash or shares. Dividends
paid by the funds to a corporate shareholder, to the extent such dividends are
attributable to dividends received by the funds from U.S. corporations, may,
subject to limitation, be eligible for the dividends received deduction.
However, the alternative minimum tax applicable to corporations may reduce the
value of the dividends received deduction.

The excess of net long-term capital gains over the short-term capital losses
realized and distributed by a fund, whether paid in cash or reinvested in fund
shares, will generally be taxable to shareholders as long-term gain, regardless
of how long a shareholder has held fund shares. Net capital gains from assets
held for one year or less will be taxed as ordinary income.

Shareholders will be notified annually as to the U.S. federal tax status of
distributions, and shareholders receiving distributions in the form of newly
issued shares will receive a report as to the net asset value of the shares
received.

If the net asset value of shares is reduced below a shareholder's cost as a
result of a distribution by the fund, such distribution generally will be
taxable even though it represents a return of invested capital. Investors should
be careful to consider the tax implications of buying shares of the fund just
prior to a distribution. The price of shares purchased at this time will include
the amount of the forthcoming distribution, but the distribution will generally
be taxable to the shareholder.

DISPOSITIONS. Upon a redemption or sale of shares of the fund, a shareholder may
realize a taxable gain or loss depending upon his or her basis in the shares. A
gain or loss will be treated as capital gain or loss if the shares are capital
assets in the shareholder's hands, and the rate of tax will depend upon the
shareholder's holding period for the shares. Any loss realized on a redemption,
sale or exchange will be disallowed to the extent the shares disposed of are
replaced (including through reinvestment of dividends) within a period of 61
days, beginning 30 days before and ending 30 days after the shares are disposed
of. In such a case the basis of the shares acquired will be adjusted to reflect
the disallowed loss. If a shareholder holds fund shares for six months or less
and during that period receives a distribution taxable to the shareholder as
long-term capital gain, any loss realized on the sale of such shares during such
six-month period would be a long-term loss to the extent of such distribution.

BACKUP WITHHOLDING. The Funds generally will be required to withhold federal
income tax at a rate of 31% ("backup withholding") from dividends paid, capital
gain distributions, and redemption proceeds to shareholders if (1) the
shareholder fails to furnish the fund with the shareholder's correct taxpayer
identification number or social security number, (2) the IRS notifies the
shareholder or the fund that the shareholder has failed to report properly
certain interest and dividend income to the IRS and to respond to notices to
that effect, or (3) when required to do so, the shareholder fails to certify
that he or she is not subject to backup withholding. Any amounts withheld may be
credited against the shareholder's federal income tax liability. The Funds, the
Distributor or the transfer agent will not be able to recredit the account for
any amount withheld.

OTHER TAXATION. Distributions may be subject to additional state, local and
foreign taxes, depending on each shareholder's particular situation. Non-U.S.
shareholders may be subject to U.S. tax rules that differ significantly from
those summarized above, including the likelihood that ordinary income dividends
to them would be subject to withholding of U.S. tax at a rate of 30% (or a lower
treaty rate, if applicable).

DETERMINATION OF PERFORMANCE

AVERAGE ANNUAL TOTAL RETURN
The Funds may quote their performance in terms of average annual total return in
communications to shareholders, or in advertising material. Average annual total
return is calculated according to the following formula:

P (1 + T)n = ERV

Where:

P = a hypothetical initial payment of $1,000,
T = average annual total return, and
n = number of years.

ERV=ending redeemable value of a hypothetical $1,000 payment made at the
beginning of the 1-, 5-, or 10-year periods at the end of the 1-, 5-, or 10-year
periods (or fractional portion).

In calculating the above, it is assumed that the maximum sales load (or other
charges deducted from payments) is deducted from the initial $1,000 payment and
all recurring fees that are charged to all shareholder accounts are included. It
is also assumed that all dividends and capital gains distributions made by the
Fund during the period are reinvested in additional shares.

Each Fund's performance depends on market conditions, portfolio composition and
expenses. Investment yields, current distributions or total returns may differ
from past results, and there is no assurance that historical performance will
continue.

A Fund may also quote its yield in advertisements and investor communications.
The yield computation is determined by dividing the net investment income per
share earned during a recent 30-day (or one month) period by the maximum
offering price per share on the last day of that period and annualizing the
resulting figure, according to the following formula:

a-b 6
YIELD = 2 [(--- +1) -1]
cd

Where:
a - dividends and interest earned during the period;
b - expenses accrued for the period (net of reimbursements)
c - the average daily number of shares outstanding during the period
that were entitled to receive dividends; and
d - the maximum offering price per share on the last day of the
period.

FINANCIAL STATEMENTS

REPORTS TO SHAREHOLDERS. Shareholders will receive unaudited semi-annual reports
describing the funds' investment operations and annual financial statements
audited by independent certified public accountants.

<PAGE>

INVESTORS CAPITAL TWENTY FUND

STATEMENT OF ASSETS AND LIABILITIES

October 8, 1999
- --------------------------------------------------------------------------------

ASSETS
Cash $100,000

LIABILITIES --

NET ASSETS $ 100,000
========

COMPUTATION OF OFFERING PRICE:
Net asset value and redemption price per share
Class A (net assets of $100,000 divided by 10,000
shares outstanding) $ 10.00
========

Offering price (a)
Class A (net asset value per share of $10.00
divided by 94.25%) $ 10.61
========

At October 8, 1999 the components of net assets
were as follows:
Paid-in capital $100,000
========

(a) On investments of $50,000 or more the offering price is reduced.

See notes to statement of assets and liabilities
<PAGE>

INVESTORS CAPITAL TWENTY FUND

NOTES TO STATEMENT OF ASSETS AND LIABILITIES

October 8, 1999
- --------------------------------------------------------------------------------

(1) ORGANIZATION

Investors Capital Funds (the "Trust") was organized as a Delaware business
trust on July 14, 1999 and is registered under the Investment Company Act
of 1940 (the "1940 Act") as a non-diversified open-end management
investment company. The Trust currently consists of two non-diversified
series: the Investors Capital Twenty Fund (the "Fund") and the Investors
Capital Internet Fund. Between the date of organization and October 8,
1999, the Fund had no operations other than those relating to
organizational matters and the sale of 10,000 Class A shares to Eastern
Point Advisors, Inc. ("Eastern Point"), the Trust's advisor, for $100,000.

The Trust is authorized to issue an unlimited number of shares of
beneficial interest of $.001 par value. The Fund currently offers two
Classes of shares ("Class A" and "Class C"). Each Class of shares has equal
rights as to earnings, assets and voting privileges, except that each Class
bears different distribution expenses. Each Class of shares has exclusive
voting rights with respect to matters that affect just that Class. Income,
expenses (other than expenses attributable to a specific Class) and
realized and unrealized gains or losses on investments are allocated to
each Class of shares based on relative net assets.

(2) SIGNIFICANT ACCOUNTING POLICIES

The Fund seeks long-term growth of capital by investing primarily in common
stocks selected for their growth potential. The Fund normally concentrates
its investments in a core group of 20-30 common stocks. Due to the inherent
risk in any investment program, the Fund cannot ensure that its investment
objectives will be realized.

The following is a summary of significant accounting policies consistently
followed by the Fund in the preparation of its financial statement.

A. FEDERAL INCOME TAXES

It is the policy of the Fund to comply with the requirements of
Internal Revenue Code applicable to regulated investment companies
and to distribute substantially all of its taxable income to its
shareholders in a manner which results in no tax to the Fund.
Therefore, no federal income or excise tax provision is required.

B. ORGANIZATION EXPENSES

Eastern Point has agreed to bear all of the costs incurred in
connection with the organization and registration of the Trust's
shares.

C. USE OF ESTIMATES

In preparing financial statements in accordance with generally
accepted accounting principles, management is required to make
estimates and assumptions that affect the reported amounts of assets
and liabilities and the disclosure of contingent assets and
liabilities at the date of the financial statements. Actual results
could differ from those estimates.
<PAGE>
INVESTORS CAPITAL TWENTY FUND

NOTES TO STATEMENT OF ASSETS AND LIABILITIES - (Continued)

October 8, 1999
- --------------------------------------------------------------------------------

(3) INVESTMENT ADVISOR

Eastern Point Advisors, Inc. serves as the Fund's advisor. Pursuant to the
terms of the Investment Advisory Agreement, Eastern Point shall have full
discretion to manage the assets of the Fund in accordance with its
investment objective. As compensation for its services Eastern Point
receives, on a monthly basis, an investment advisory fee calculated at the
annual rate of 1.50% of the Fund's average daily net assets.

Eastern Point has also voluntarily agreed to waive its advisory fees or
reimburse other Fund expenses so that the Fund's annual operating expenses
will not exceed 5.00% of the Fund's average daily net assets. This waiver
may be terminated by Eastern Point at any time.

(4) ADMINISTRATOR

First Data Investors Services Group, Inc. (the "Administrator") serves as
the Fund's administrator pursuant to a service agreement. Under the
agreement, the Administrator provides the Fund with office space and
personnel to assist the Fund in managing its daily business affairs. As
compensation for its services, the Administrator receives a monthly fee
calculated at the annual rate of 0.15% on the first $50 million of the
Fund's average daily net assets, subject to a minimum annual fee of
$55,000. The fee is reduced on average daily net assets in excess of $50
million.

(5) DISTRIBUTION PLAN AND OTHER TRANSACTIONS WITH AFFILIATES

Investors Capital Corporation (the "Distributor") serves as the Fund's
principal distributor pursuant to a Distribution Agreement. The Distributor
is an affiliate of Eastern Point.

Class A - The Class A shares of the Fund have adopted a Rule 12b-1
Distribution Plan (the "Class A Plan") pursuant to Rule 12(b)-1 under the
1940 Act. The Class A Plan provides that the Fund will compensate the
Distributor for payments to dealers or others a distribution fee at the
rate of 0.25% per annum of the average daily net assets of the Class A
shares of the Fund. The fees payable under the Class A Plan shall be used
to compensate the Distributor for any expenses primarily intended to result
in the sale of the Fund's shares, including, but not limited to: payments
the Distributor makes to broker-dealers or other financial institutions and
industry professionals for providing distribution assistance and
administrative support services to the holders of the Fund's Class A
shares, payments made for the preparation, printing and distribution of
advertisements and sales literature, and payments made for printing and
distributing prospectuses and shareholders reports to other than existing
shareholders of the Fund.

Class C - The Class C shares of the Fund have also adopted a Rule 12b-1
Distribution Plan (the "Class C Plan") pursuant to Rule 12(b)-1 under the
1940 Act. The Class C Plan provides that the Fund will compensate the
Distributor for payments to dealers or others a distribution fee at the
rate of 0.75% per annum of the average daily net assets of the Class C
shares of the Fund. The fees payable under the Class C Plan shall be used
to compensate the Distributor for any expenses primarily intended to result
in the sale of the Fund's shares, including, but not limited to: payments
the Distributor makes to broker-dealers or other financial institutions and
industry professionals for providing distribution assistance and
administrative support services to the holders of the Fund's
<PAGE>

INVESTORS CAPITAL TWENTY FUND

NOTES TO STATEMENT OF ASSETS AND LIABILITIES - (Continued)

October 8, 1999
- --------------------------------------------------------------------------------

Class C shares, payments made for the preparation, printing and
distribution of advertisements and sales literature, and payments made for
printing and distributing prospectuses and shareholders reports to other
than existing shareholders of the Fund.

The Class C Plan also provides that the Fund will compensate the
Distributor with a servicing fee at the rate of 0.25% per annum of the
average daily net assets of the Class C shares of the Fund. The servicing
fee shall be used to pay, among other things, for assisting in establishing
and maintaining customer accounts and records; assisting with purchase and
redemption requests; arranging for bank wires; monitoring dividend payments
from the Trust on behalf of customers, furnishing personal services and
maintaining shareholder accounts, facilitating certain shareholder
communications from the Trust to customers; receiving and answering
correspondence; and aiding in maintaining the investment of the Fund's
Class C shareholders.

An officer of the Trust is also an officer and has a more than 25%
ownership interest in both Eastern Point and the Distributor.

(6) REDEMPTION FEES

Class A shares redeemed within twelve months of their purchase are subject
to a 1.00% redemption fee which is payable to the Fund. Class C shares
redeemed within eighteen months of their purchase are subject to a 1.50%
redemption fee which is also payable to the Fund. Redemption fees are not
imposed on the redemption of shares acquired through the reinvestment of
dividends or capital gain distributions. Redemption fees are also waived on
redemptions following the death or disability of a Fund shareholder.
<PAGE>

REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS

To the Shareholders and Board of Trustees of
Investors Capital Funds
Lynnfield, Massachusetts

We have audited the accompanying statement of assets and liabilities of the
Investors Capital Twenty Fund (one of the funds constituting the Investors
Capital Funds) as of October 8, 1999. This financial statement is the
responsibility of the Fund's management. Our responsibility is to express an
opinion on this financial statement based on our audit.

We conducted our audit in accordance with generally accepted auditing standards.
Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the statement of assets and liabilities is free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the statement of assets and
liabilities. An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audit provides a reasonable
basis for our opinion.

In our opinion, the statement of assets and liabilities referred to above
presents fairly, in all material respects, the financial position of the
Investors Capital Twenty Fund of the Investors Capital Funds as of October 8,
1999 in conformity with generally accepted accounting principles.

BRIGGS, BUNTING & DOUGHERTY, LLP

Philadelphia, Pennsylvania
October 8, 1999
<PAGE>

APPENDIX A -- DESCRIPTIONS OF SECURITIES RATINGS

COMMERCIAL PAPER RATINGS.

MOODY'S INVESTORS SERVICE, INC. (MOODY'S): "PRIME-1" and "PRIME-2" are
Moody's two highest commercial paper rating categories. Moody's evaluates the
salient features that affect a commercial paper issuer's financial and
competitive position. The appraisal includes, but is not limited to the review
of such factors as:

1. Quality of management.
2. Industry strengths and risks.
3. Vulnerability to business cycles.
4. Competitive position.
5. Liquidity measurements.
6. Debt structures.
7. Operating trends and access to capital markets.

Differing degrees of weight are applied to the above factors as deemed
appropriate for individual situations.

STANDARD & POOR'S RATINGS GROUP, A DIVISION OF MCGRAW-HILL COMPANIES,
INC. (S&P): "A-1" and "A-2" are S&P's two highest commercial paper rating
categories and issuers rated in these categories have the following
characteristics:

1. Liquidity ratios are adequate to meet cash requirements.
2. Long-term senior debt is rated A or better.
3. The issuer has access to at least two additional channels of
borrowing.
4. Basic earnings and cash flow have an upward trend with allowance
made for unusual circumstances.
5. Typically, the issuer is in a strong position in a well-established
industry or industries.
6. The reliability and quality of management is unquestioned.

Relative strength or weakness of the above characteristics determine whether an
issuer's paper is rated "A-1" or "A-2". Additionally, within the "A-1"
designation, those issues determined to possess overwhelming safety
characteristics are denoted with a plus (+) rating category.