[LOGO OF INVESTORS CAPITAL FUNDS OMITTED]
INVESTORS CAPITAL TWENTY FUND
INVESTORS CAPITAL INTERNET AND TECHNOLOGY FUND
ANNUAL REPORT
SEPTEMBER 30, 2000
<PAGE>
A MESSAGE TO SHAREHOLDERS
--------------------------------------------------------------------------------
Dear Shareholder:
Investors Capital would like to take this opportunity to personally thank each
of the shareholders who have invested in our two mutual funds. The Investors
Capital Twenty Fund has performed extremely well since its launch on October 18,
1999. The Internet and Technology Fund has also shown above average returns in
spite of the recent market conditions in the High Tech industry.
Many investors have taken a hit in the market recently. Some have been hurt as a
result of using margin, reliance on their neighbor's stock tips or their
investment in IPO's (Initial Public Offerings). It is Investors Capital's view
that it is extremely important to invest in companies with earnings. There is
significant benefit, in our opinion, to utilize a stop loss in order that one
might reduce the risk of significant losses.
In order to minimize many of the pitfalls that a number of funds have fallen
into, Investors Capital has utilized these two strategies. The stop loss
philosophy takes away the emotion of holding or selling a stock, and by doing
so, we put ourselves in a better position to realize our clients' goal of
capital appreciation within their investment.
Again, we want to thank everyone for their support and wish them a prosperous
year.
Best regards,
Investors Capital Funds
1
<PAGE>
COMPARATIVE PERFORMANCE September 30, 2000
--------------------------------------------------------------------------------
INVESTORS CAPITAL TWENTY FUND
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Investors Capital Twenty Fund
Class A S&P 500 Index
10/19/99 9,425 10,000
12/31/99 12,479 11,678
3/31/00 15,391 11,991
6/30/00 13,977 11,610
9/30/00 14,430 11,480
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Investors Capital Twenty Fund
Class C S&P 500 Index
10/29/99 10,000 10,000
12/31/99 12,430 10,804
3/31/00 15,330 11,072
6/30/00 13,920 10,747
9/30/00 14,340 10,635
Past performance is not predictive of future performance.
Note 1: These graphs compare the increase in value of a $10,000 investment in
the Investors Capital Twenty Fund with the performance of the Standard &
Poor's 500 Index. Unlike a mutual fund, an unmanaged index assumes no
transaction costs, taxes, management fees or other expenses.
Note 2: Class A Shares reflect the impact of sales charges on purchases. The
maximum sales charge for the period indicated was 5.75%.
Note 3: Class A and Class C performance reflects a redemption fee of 1%
applied to redemptions within 12 months of acquisition.
TOTAL RETURN SINCE INCEPTION
-----------------------------
Class A ................. 44.30%*
Class A ................. 54.10%
Class C ................. 43.40%**
Class C ................. 44.40%
* includes sales load and redemption fee
**includes redemption fee
Please see accompanying notes to financial statements.
2
<PAGE>
COMPARATIVE PERFORMANCE September 30, 2000
--------------------------------------------------------------------------------
INVESTORS CAPITAL INTERNET AND TECHNOLOGY FUND
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Investors Capital Internet and Technology Fund
Class A S&P 500 Index
11/18/99 9,425 10,000
12/31/99 10,547 10,325
3/31/00 11,433 10,569
6/30/00 9,670 10,272
9/30/00 9,726 10,170
[GRAPHIC OMITTED]
EDGAR REPRESENTATION OF DATA POINTS USED IN PRINTED GRAPHIC
Investors Capital Internet and Technology Fund
Class C S&P 500 Index
11/19/99 10,000 10,000
12/31/99 11,450 10,346
3/31/00 12,400 10,591
6/30/00 10,490 10,294
9/30/00 10,510 10,191
Past performance is not predictive of future performance.
Note 1: These graphs compare the increase in value of a $10,000 investment in
the Investors Capital Internet and Technology Fund with the performance
of the Standard & Poor's 500 Index. Unlike a mutual fund, an unmanaged
index assumes no transaction costs, taxes, management fees or other
expenses.
Note 2: Class A Shares reflect the impact of sales charges on purchases. The
maximum sales charge for the period indicated was 5.75%.
Note 3: Class A and Class C performance reflects a redemption fee of 1%
applied to redemptions within 12 months of acquisition.
TOTAL RETURN SINCE INCEPTION
----------------------------
Class A ................ -2.73%*
Class A ................ 4.20%
Class C ................ 5.10%**
Class C ................ 6.10%
* includes sales load and redemption fee
**includes redemption fee
Please see accompanying notes to financial statements.
3
<PAGE>
SCHEDULE OF INVESTMENTS September 30, 2000
--------------------------------------------------------------------------------
INVESTORS CAPITAL TWENTY FUND
MARKET
VALUE
SHARES (NOTE 2A)
-------- -----------
COMMON STOCK -- 100.9%
8,900 BEA Systems, Inc. .................................... $ 693,087
5,400 Cisco Systems, Inc. .................................. 298,350
3,900 Cree, Inc. ........................................... 453,375
13,500 Elan Corporation Plc, ADR ............................ 739,125
7,700 EMC Corporation ...................................... 763,262
6,500 Flextronics International, Ltd. ...................... 533,812
3,600 i2 Technologies, Inc. ................................ 673,425
6,300 Immunex Corporation .................................. 274,050
8,500 Integrated Device Technology, Inc. ................... 769,250
6,600 Intel Corporation .................................... 274,313
19,500 KEMET Corporation .................................... 538,688
12,100 Koninklijke (Royal) Philips Electronics N.V. ......... 514,250
12,000 LSI Logic Corporation ................................ 351,000
8,200 Merrill Lynch & Co., Inc. ............................ 541,200
21,500 NBC Internet Inc., Class A ........................... 141,094
10,800 Nokia Oyj Corporation, ADR ........................... 429,975
8,400 Rambus, Inc. ......................................... 663,075
6,900 SanDisk Corp ......................................... 460,575
13,000 Schwab (Charles) Corporation ......................... 461,500
12,000 Tyco International, Ltd. ............................. 622,500
21,000 Vintage Petroleum, Inc. .............................. 477,750
11,900 Vishay Intertechnology, Inc. ......................... 365,925
-----------
Total Common Stock (Cost $10,248,562) ................ 11,039,581
-----------
TOTAL INVESTMENTS -- 100.9%
(Cost $10,248,562*) ................................. 11,039,581
-----------
OTHER ASSETS AND LIABILITIES (NET) -- (0.9%) ......... (100,262)
-----------
NET ASSETS -- 100.0% ................................. $10,939,319
===========
------------------------
Non-income producing security.
* Aggregate cost for Federal tax purposes.
ADR - American Depository Receipt.
INDUSTRY DIVERSIFICATION
ON SEPTEMBER 30, 2000, SECTOR DIVERSIFICATION OF THE FUND WAS AS FOLLOWS:
<TABLE>
<CAPTION>
% OF TOTAL % OF TOTAL
INVESTMENT IN SECURITIES INVESTMENT IN SECURITIES
------------------------ ------------------------
<S> <C> <C> <C>
Electronic Components/ Computer Industry 6.91%
Semi-conductors 35.60% Diversified Manufacturing 5.64%
Internet Software/Retail 12.38% Oil &Gas 4.33%
Pharmaceuticals 9.18% Telecommunication 3.89%
Financial Services 9.08% Networking Products 2.70%
Technology 9.01% E-Commerce 1.28%
-------
TOTAL INVESTMENTS 100.00%
=======
</TABLE>
Please see accompanying notes to financial statements.
4
<PAGE>
SCHEDULE OF INVESTMENTS September 30, 2000
--------------------------------------------------------------------------------
INVESTORS CAPITAL INTERNET AND TECHNOLOGY FUND
MARKET
VALUE
SHARES (NOTE 2A)
-------- ----------
COMMON STOCK -- 99.6%
300 Adobe Systems, Inc. ................................ $ 46,575
250 Applied Micro Circuits Corporation ................. 51,766
250 Ariba, Inc. ........................................ 35,816
150 Avanex Corporation ................................. 16,153
900 BEA Systems, Inc. .................................. 70,087
200 Broadcom Corporation - Class A ..................... 48,750
200 Brocade Communications Systems, Inc. ............... 47,200
300 CacheFlow, Inc. .................................... 42,900
400 Check Point Software Technologies, Ltd. ............ 63,000
350 CIENA Corporation .................................. 42,984
150 Corning, Inc. ...................................... 44,550
500 Elantec Semiconductor, Inc. ........................ 49,812
250 EMC Corporation .................................... 24,781
500 Exodus Communications, Inc. ........................ 24,687
450 Extreme Networks, Inc. ............................. 51,525
1,000 Finisar Corporation ................................ 48,375
400 i2 Technologies, Inc. .............................. 74,825
400 Inktomi Corporation ................................ 45,600
300 JDS Uniphase Corporation ........................... 28,406
200 Juniper Networks, Inc. ............................. 43,787
500 Macrovision Corporation ............................ 40,500
600 Mercury Interactive Corporation .................... 94,050
500 Network Appliance, Inc. ............................ 63,688
250 Newport Corporation ................................ 39,816
1,500 Oak Technology, Inc. ............................... 41,063
400 ONI Systems Corporation ............................ 34,525
8 Opus360 Corporation ................................ 19
200 PMC-Sierra, Inc. ................................... 43,050
600 Rational Software Corporation ...................... 41,625
300 Redback Networks, Inc. ............................. 49,181
500 SanDisk Corporation ................................ 33,375
400 Siebel Systems, Inc. ............................... 44,525
200 StorageNetworks, Inc. .............................. 20,438
300 Sun Microsystems, Inc. ............................. 35,025
400 Sycamore Networks, Inc. ............................ 43,200
400 Tollgrade Communications, Inc. ..................... 55,525
600 TranSwitch Corporation ............................. 38,250
200 VeriSign, Inc. ..................................... 40,513
300 VERITAS Software Corporation ....................... 42,600
500 Vitesse Semiconductor Corporation .................. 44,469
Please see accompanying notes to financial statements.
5
<PAGE>
SCHEDULE OF INVESTMENTS September 30, 2000
--------------------------------------------------------------------------------
INVESTORS CAPITAL INTERNET AND TECHNOLOGY FUND
MARKET
VALUE
SHARES (NOTE 2A)
-------- -----------
COMMON STOCK -- (CONTINUED)
1,000 Vitria Technology, Inc. ........................... $ 46,625
500 Xilinx, Inc. ...................................... 42,813
----------
Total Common Stock (Cost $1,586,734) .............. 1,836,454
----------
TOTAL INVESTMENTS -- 99.6%
(Cost $1,586,734*) .............................. 1,836,454
----------
OTHER ASSETS AND LIABILITIES (NET) -- 0.4% ........ 7,869
----------
NET ASSETS -- 100.0% .............................. $1,844,323
==========
----------------------
Non-income producing security.
* Aggregate cost for Federal tax purposes.
INDUSTRY DIVERSIFICATION
ON SEPTEMBER 30, 2000, SECTOR DIVERSIFICATION OF THE FUND WAS AS FOLLOWS:
<TABLE>
<CAPTION>
% OF TOTAL % OF TOTAL
INVESTMENT IN SECURITIES INVESTMENT IN SECURITIES
------------------------ ------------------------
<S> <C> <C> <C>
Internet Software/Retail 19.60% Technology 9.05%
Electronic Components/ Computer Industry 8.27%
Semi-conductors 18.55% Computer Software/
Fiber Optics 14.35% System 4.86%
Networking Products 10.54% Telecommunication 3.02%
Application Software 9.81% E-Commerce 1.95%
-------
TOTAL INVESTMENTS 100.00%
=======
</TABLE>
Please see accompanying notes to financial statements.
6
<PAGE>
STATEMENTS OF ASSETS AND LIABILITIES
--------------------------------------------------------------------------------
September 30, 2000
INVESTORS INVESTORS CAPITAL
CAPITAL INTERNET AND
TWENTY FUND TECHNOLOGY FUND
---------------- ---------------
ASSETS:
Investments, at value (Cost $10,248,562 and
$1,586,734, respectively)(Note 2) ....... $11,039,581 $ 1,836,454
Cash ....................................... 154,264 --
Dividends and interest receivable .......... 1,226 128
Receivable for investment securities sold .. -- 87,665
Receivable for capital stock sold .......... 15,612 --
Due from Advisor (Note 3) .................. -- 45,647
Prepaid expenses and other assets .......... 2,359 4,621
----------- ------------
Total Assets ............................... 11,213,042 1,974,515
----------- ------------
LIABILITIES:
Payable for investment securities purchased 149,590 77,959
Payable for capital stock redeemed ......... 21,084 --
Due to custodian ........................... -- 4,244
Distribution fee payable (Note 5) .......... 6,662 1,109
Accrued expenses ........................... 60,363 46,880
Other liabilities .......................... 36,024 --
----------- ------------
Total Liabilities .......................... 273,723 130,192
----------- ------------
NET ASSETS ................................. $10,939,319 $ 1,844,323
=========== ============
NET ASSETS CONSIST OF:
Par value (Note 1) ......................... $ 716 $ 177
Paid-in capital (Note 1) ................... 10,084,623 1,928,506
Accumulated net realized gain/(loss) on
investments sold ......................... 62,961 (334,080)
Unrealized appreciation on investments ..... 791,019 249,720
----------- ------------
Total Net Assets ........................... $10,939,319 $ 1,844,323
=========== ============
NET ASSETS
Class A .................................... $ 9,587,646 $ 1,668,531
Class C .................................... 1,351,673 175,792
----------- ------------
Total ...................................... $10,939,319 $ 1,844,323
=========== ============
SHARES OUTSTANDING
Class A .................................... 622,103 160,090
Class C .................................... 93,580 16,567
----------- ------------
Total ...................................... 715,683 176,657
=========== ============
NET ASSET VALUE AND REDEMPTION PRICE PER SHARE
Class A .................................... $ 15.41* $ 10.42**
=========== ============
Class C .................................... $ 14.44 $ 10.61
=========== ============
----------------------
* Maximum offering per share ($15.41 (DIVIDE) 0.9425 = $16.35)
** Maximum offering per share ($10.42 (DIVIDE) 0.9425 = $11.06)
Please see accompanying notes to financial statements.
7
<PAGE>
STATEMENTS OF OPERATIONS
--------------------------------------------------------------------------------
For the Period Ended
September 30, 2000
INVESTORS INVESTORS CAPITAL
CAPITAL INTERNET AND
TWENTY FUND* TECHNOLOGY FUND**
--------------- -----------------
INVESTMENT INCOME:
Interest income (Note B) ................ $ 9,415 $ 8,870
Dividend income (Note B) ................ 9,769 118
----------- -----------
Total Investment Income ................. 19,184 8,988
----------- -----------
EXPENSES:
Investment advisory fees (Note 3) .......... 79,659 17,684
Administration fees (Note 4) ............... 46,935 38,904
Distribution fees (Note 5)
Class A ................................ 11,646 2,659
Class C ................................ 6,532 1,152
Accounting fees ............................ 35,841 32,757
Custodian fees ............................. 21,825 13,986
Legal and Audit fees ....................... 13,008 10,000
Trustees' fees and expenses ................ 2,803 698
Transfer agent fees ........................ 106,416 50,846
Registration and filing fees ............... 34,089 29,798
Other expenses ............................. 21,531 10,409
----------- -----------
Total Gross Expenses ....................... 380,285 208,893
Less: Expenses reimbursed .................. (109,858) (149,179)
Expenses waived - Distribution
fees - Class C ..................... (2,124) (436)
----------- -----------
Net Expenses ............................... 268,303 59,278
----------- -----------
NET INVESTMENT LOSS .......................... (249,119) (50,290)
----------- -----------
REALIZED AND UNREALIZED GAIN/(LOSS)
FROM INVESTMENTS (NOTE 2):
Net realized gain/(loss) on investments sold 328,185 (334,080)
Net realized loss on investments sold short (16,105) --
Unrealized appreciation on investments ..... 791,019 249,720
----------- ----------
Net realized and unrealized gain/(loss)
on investments ........................... 1,103,099 (84,360)
----------- -----------
NET INCREASE (DECREASE) IN NET ASSETS
RESULTING FROM OPERATIONS ................ $ 853,980 $ (134,650)
=========== ===========
-----------------------
* Investors Capital Twenty Fund SEC effective, October 18, 1999 and commenced
operations October 19, 1999.
**Investors Capital Internet and Technology Fund SEC effective, October 18, 1999
and commenced operations November 18, 1999.
Please see accompanying notes to financial statements.
8
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS
----------------------------------------------------------------------------------------
INVESTORS CAPITAL
INVESTORS CAPITAL INTERNET AND
TWENTY FUND* TECHNOLOGY FUND**
-------------------- --------------------
FOR THE PERIOD ENDED FOR THE PERIOD ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
-------------------- --------------------
<S> <C> <C>
NET ASSETS, AT BEGINNING OF PERIOD ....... $ 85,000 $ 15,000
INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS:
Net investment loss .................... (249,119) (50,290)
Net realized gain/(loss) on
investments sold ..................... 312,080 (334,080)
Net change in unrealized appreciation
on investments ...................... 791,019 249,720
----------- ----------
Net increase (decrease) in net assets
resulting from operations ........... 853,980 (134,650)
----------- ----------
CAPITAL STOCK TRANSACTIONS
CLASS A
Shares sold ............................ 9,435,601 2,075,663
Shares redeemed ........................ (670,188) (300,665)
----------- ----------
Net increase Class A shares ......... 8,765,413 1,774,998
----------- ----------
CLASS C
Shares sold ............................ 1,396,190 206,543
Shares redeemed ........................ (161,264) (17,568)
----------- ----------
Net increase Class C shares ......... 1,234,926 188,975
----------- ----------
Net increase in net assets
from capital stock transactions ..... 10,000,339 1,963,973
----------- ----------
Net increase in net assets ............. 10,854,319 1,829,323
----------- ----------
NET ASSETS, AT END OF PERIOD ........... $10,939,319 $1,844,323
=========== ==========
CAPITAL SHARE TRANSACTIONS:
CLASS A
Shares sold ............................ 660,241 186,646
Shares redeemed ........................ (46,638) (28,056)
----------- ----------
Net increase in Class A shares
outstanding ....................... 613,603 158,590
=========== ==========
CLASS C
Shares sold ............................ 104,565 17,359
Shares redeemed ........................ (10,985) (792)
----------- ----------
Net increase in Class C shares
outstanding ....................... 93,580 16,567
=========== ==========
Increase in shares outstanding ......... 707,183 175,157
=========== ==========
----------------------
<FN>
* Investors Capital Twenty Fund SEC effective, October 18, 1999 and commenced
operations October 19, 1999.
**Investors Capital Internet and Technology Fund SEC effective, October 18,
1999 and commenced operations November 18, 1999.
</FN>
</TABLE>
Please see accompanying notes to financial statements.
9
<PAGE>
<TABLE>
<CAPTION>
FINANCIAL HIGHLIGHTS -- For a share outstanding throughout the period
-----------------------------------------------------------------------------------
INVESTORS CAPITAL
INVESTORS CAPITAL INTERNET AND
TWENTY FUND* TECHNOLOGY FUND**
-------------------- --------------------
FOR THE PERIOD ENDED FOR THE PERIOD ENDED
SEPTEMBER 30, 2000 SEPTEMBER 30, 2000
------------------------------------------
CLASS A CLASS C CLASS A CLASS C
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net Asset Value, beginning of period .. $ 10.00 $ 10.00 $ 10.00 $ 10.00
------- ------- ------- -------
INCOME FROM INVESTMENT OPERATIONS:
Net investment loss (c) ............... (0.65) (0.74) (0.38) (0.45)
Net realized and unrealized gain
on investments (c) ................. 6.06 5.18 0.80 1.06
------- ------- ------- -------
Total from Investment Operations ...... 5.41 4.44 0.42 0.61
------- ------- ------- -------
Net Asset Value, at end of period ..... $ 15.41 $ 14.44 $ 10.42 $ 10.61
======= ======= ======= =======
Total Return (b) ...................... 54.10% 44.40% 4.20% 6.10%
RATIOS/SUPPLEMENTAL DATA:
Net Assets, end of period (000s) ...... $9,587 $1,352 $1,668 $176
Ratios to average net assets:
Net investment loss (a) ............... (4.64)% (4.98)% (4.24)% (4.60)%
Operating expenses (a) ................ 5.00% 5.34% 5.00% 5.36%
Operating expenses excluding
reimbursements and waivers (a) ..... 7.07% 7.82% 17.64% 18.39%
Net investment income excluding
reimbursements and waivers (a) ..... (6.71)% (7.46)% (16.88)% (17.63)%
Portfolio Turnover Rate ............... 606% 606% 835% 835%
--------------------
<FN>
* The Investors Capital Twenty Fund SEC effective, October 18, 1999.
Class A commenced operations on October 19, 1999
Class C commenced operations on October 29, 1999
** The Investors Capital Internet and Technology Fund SEC effective, October 18, 1999.
Class A commenced operations on November 18, 1999
Class C commenced operations on November 19, 1999
(a)Annualized.
(b)Total return from inception.
(c)Based on weighted average share method.
</FN>
</TABLE>
Please see accompanying notes to financial statements.
10
<PAGE>
INVESTORS CAPITAL FUNDS
NOTES TO FINANCIAL STATEMENTS September 30, 2000
--------------------------------------------------------------------------------
(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, as amended, (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 and the Investors Capital Internet
Fund (each a "Fund" and collectively, the "Funds"). Effective April 1, 2000,
the Investors Capital Internet Fund changed its name to Investors Capital
Internet and Technology Fund.
On October 8, 1999 the Fund sold 10,000 Class A shares of the Investors Capital
Twenty Fund at $10.00 per share to Eastern Point Advisors, Inc., the Fund's
Investment Advisor. Between October 8, 1999 and the respective dates of
commencement of operations of each class of the Funds, the Trust had no other
activities than those relating to organizational matters. On November 18, 1999,
1,500 of these initial shares were exchanged for 1,500 shares of the Investors
Capital Internet and Technology Fund.
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 Funds seek long-term growth of capital by investing primarily in common
stocks selected for their growth potential. The Investors Capital Twenty
Fund normally concentrates its investments in a core group of 20-30 common
stocks. The Investors Capital Internet and Technology Fund seeks long term
growth of capital through investments in a portfolio of Internet,
Internet-related and technology common stocks. Due to the inherent risk in
any investment program, the Funds cannot ensure that the investment
objectives will be realized.
The following is a summary of significant accounting policies consistently
followed by the Funds in the preparation of the financial statements. The
policies are in conformity with generally accepted accounting principles.
The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts and disclosures
in the financial statements. Actual results could differ from those
estimates.
11
<PAGE>
NOTES TO FINANCIAL STATEMENTS September 30, 2000 (continued)
--------------------------------------------------------------------------------
A. SECURITIES VALUATION:
Fund determines its net asset value per share (NAV) each business day at
the close of regular trading on the New York Stock Exchange. The net
asset value per share is computed by adding the value of all securities
and other assets in the portfolio, deducting any liabilities (expenses
and fees are accrued daily) and dividing by the number of shares
outstanding. The equity securities of each Fund listed or traded on a
stock exchange are valued at the last sale prices on its principal
exchange. If no sale price is reported, the mean of the last bid and
asked price is used. Securities traded over-the-counter are priced at
the last available bid price. 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 of market price is not
representative of true market value.
B. SECURITIES TRANSACTION AND RELATED INCOME:
Securities transactions are accounted for on the date the securities are
purchased or sold (trade date). Cost is determined and gains and losses
are based on the identified cost basis for both financial statement and
federal income tax purposes. Dividend income is reported on the
ex-dividend date. Interest income and expenses are accrued daily.
C. DISTRIBUTIONS TO SHAREHOLDERS:
The Funds will distribute substantially all net investment income and
long term capital gains, if any, annually. Distributions to shareholders
are recorded on the ex-dividend date. 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.
(3) INVESTMENT ADVISOR
Eastern Point Advisors, Inc. serves as the Funds' advisor. Pursuant to the
terms of the Investment Advisory Agreement, Eastern Point shall have full
discretion to manage the assets of the Funds in accordance with their
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 each of the Funds' average daily net assets.
12
<PAGE>
NOTES TO FINANCIAL STATEMENTS September 30, 2000 (continued)
--------------------------------------------------------------------------------
Eastern Point has also voluntarily agreed to waive its advisory fees or
reimburse other Fund expenses so that each 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. Effective June 1, 2000, the
Advisor voluntarily waived a portion of its advisory fee and/or reimbursed
fund expenses so that total operating expenses of each Fund do not exceed
5.00% for Class A shares and 5.75% for Class C shares.
For the period ended September 30, 2000, the advisor reimbursed expenses as
follows:
Investors Capital Twenty Fund $109,858
Investors Capital Internet and Technology Fund $149,179
Eastern Point Advisors, Inc., has agreed to bear all of the costs incurred
in connection with the organization of the Funds.
(4) ADMINISTRATOR
PFPC Inc. ("PFPC"), (formerly, First Data Investors Services Group, Inc.)
(the "ADMINISTRATOR") serves as the Funds' administrator pursuant to a
service agreement. Under the agreement, the Administrator provides the Funds
with office space and personnel to assist the Funds in managing daily
business affairs.
(5) DISTRIBUTION PLAN AND OTHER TRANSACTIONS WITH AFFILIATES
Investors Capital Corporation (the "DISTRIBUTOR") serves as the Funds'
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.
13
<PAGE>
NOTES TO FINANCIAL STATEMENTS September 30, 2000 (continued)
--------------------------------------------------------------------------------
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 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.
During the period ended May 31, 2000, the Advisor waived 0.75% of
distribution/service fees to maintain the expense cap at 5.00% for Class C
of both Funds.
An officer of the Trust is also an officer of the Distributor and has more
than 25% ownership interest in both Eastern Point and the Distributor.
A. BROKER COMMISSIONS
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. The Advisor may
also use non-affiliated brokers to execute portfolio transactions on
behalf of the Funds. Investors Capital Corporation, Inc., provided
brokerage services to the Funds. For the period ended September 30, 2000
Investors Capital Twenty Fund and Investors Capital Internet and
Technology Fund incurred $16,625 and $14,683, respectively, in brokerage
commissions with Investors Capital Corporation.
14
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NOTES TO FINANCIAL STATEMENTS September 30, 2000 (continued)
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During the period ended September 30, 2000, Investors Capital Corp.,
Inc. received underwriting fees of $27,851 and also retained dealer's
commission of $430,394 in connection with the sale of the funds' capital
shares.
Certain officers and Trustees of the Funds are affiliated persons of the
Advisor and the Distributor. No officer, Trustee or employee of the Advisor,
PFPC Inc., or any affiliate thereof, received any compensation from the
Trust for serving as an officer or Trustee of the Trust.
(6) SECURITIES TRANSACTIONS
For the period ended September 30, 2000, aggregate cost of purchases and
proceeds from sales of securities, other than short-term investments, was as
follows:
PURCHASES SALES
----------- -----------
Investors Capital Twenty Fund $41,280,979 $31,427,412
Investors Capital Internet and Technology Fund $10,750,041 $ 8,829,227
The aggregate gross unrealized appreciation and depreciation, as computed on
a federal income tax basis, at September 30, 2000 for each Fund is as
follows:
UNREALIZED UNREALIZED
APPRECIATION (DEPRECIATION) NET
------------ ----------- --------
Investors Capital Twenty Fund $1,496,656 $(705,637) $791,019
Investors Capital Internet &
Technology Fund $ 296,843 $ (47,123) $249,720
(7) CAPITAL LOSSES
The Investors Capital Internet and Technology Fund realized capital losses
of $334,080 after October 31, 1999 which have been deferred for Federal
income tax purposes until the first day of the Fund's next fiscal year.
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REPORT OF INDEPENDENT
CERTIFIED PUBLIC ACCOUNTANTS September 30, 2000
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To the Shareholders and Board of Trustees of
Investors Capital Funds
Lynnfield, Massachusetts
We have audited the accompanying statements of assets and liabilities of
Investors Capital Funds (comprising, respectively, the Investors Capital
Twenty Fund and the Investors Capital Internet and Technology Fund),
including the schedules of investments, as of September 30, 2000, and the
related statements of operations and changes in net assets, and the
financial highlights for the respective periods from commencement of
operations to September 30, 2000. These financial statements and financial
highlights are the responsibility of the Fund's management. Our
responsibility is to express an opinion on these financial statements and
financial highlights 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 financial statements and
financial highlights are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures
in the financial statements. Our procedures included confirmation of
securities owned as of September 30, 2000, by correspondence with the
custodian and brokers. 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 financial statements and financial highlights referred
to above present fairly, in all material respects, the financial position of
each of the Funds comprising Investors Capital Funds as of September 30,
2000, and the results of their operations, the changes in their net assets
and the financial highlights for the respective periods from commencement of
operations to September 30, 2000 in conformity with generally accepted
accounting principles.
BRIGGS, BUNTING & DOUGHERTY, LLP
Philadelphia, Pennsylvania
October 20, 2000
16
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[LOGO OF INVESTORS CAPITAL FUNDS OMITTED]
BOARD OF TRUSTEES AND OFFICERS
Theodore E. Charles, Robert T. Martin,
President Trustee
Timothy B. Murphy, John S. Rando,
Treasurer Trustee
C. David Weller, Arthur E. Stickney,
Secretary Trustee
Legal Counsel
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DISTRIBUTOR
Investors Capital Corporation
230 Broadway East, Suite 203
Lynnfield, MA 01940
CUSTODIAN AUDITOR
The Bank of New York Briggs, Bunting & Dougherty, LLP
1 Wall Street 2121 Two Logan Square
New York, NY 10286 Philadelphia, PA 19103-4901
TRANSFER AGENT
PFPC Inc.
211 S. Gulph Road
King of Prussia, PA 19406
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This report is submitted for the general information of the shareholders of The
Investors Capital Funds. It is not authorized for distribution to prospective
investors unless preceded or accompanied by a current prospectus.
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A01-AR9/00
