UNITED STATES

                       SECURITIES AND EXCHANGE COMMISSION
                             Washington, D.C. 20549

                                  -------------

                                    FORM 10-K

                  ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
                     OF THE SECURITIES EXCHANGE ACT OF 1934

                            FOR THE FISCAL YEAR ENDED
                                 MARCH 31, 2006

                           COMMISSION FILE NO. 1-16349

                        INVESTORS CAPITAL HOLDINGS, LTD.
                    (Exact name of registrant in its charter)

            MASSACHUSETTS                                   04-3284631
   (State or other jurisdiction of                       (I.R.S. Employer
    incorporation or organization)                       Identification No.)

                                230 Broadway East
                         Lynnfield, Massachusetts 01940
                                 (781) 593-8565
    (Address, including zip code, and telephone number, including area code,
                  of Registrant's principal executive offices)

           SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:

       Title of Each Class            Name of Each Exchange on Which Registered
       -------------------            -----------------------------------------
  Common Stock, $0.01 par value             The American Stock Exchange

           SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT:

                                      None
                                (Title of class)


     Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports) and (2) has been subject to such
filing requirements for the past 90 days.  Yes {X}  No { }

     Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. { }


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     Indicate by check mark whether the registrant is an accelerated filer (as
defined in Rule 12b-2 of the Act).  Yes{ }  No {X}

     The aggregate market value of the shares of the registrant's common equity
held by non-affiliates, computed by reference to the price at which the common
equity was last sold, as of the last business day of the registrant's most
recently completed second fiscal quarter, was $6,419,252.

     As of June 26, 2006, there were outstanding 6,131,472 shares of the $0.01
par value per share Common Stock of the registrant.

                       Documents Incorporated by Reference

     Certain portions of the registrant's definitive proxy statement for the
Annual Meeting of Stockholders to be held on August 08, 2006 are incorporated by
reference in Items 10 through 13 of Part III of this Annual Report on Form 10-K.

                            www.investorscapital.com

                   Investor Relations Contact: Darren Horwitz



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                                   The Company

     Investors Capital Holdings, Ltd. and its wholly-owned subsidiaries,
Investors Capital Corporation ("ICC"), Eastern Point Advisors, Inc. ("EPA"), ICC
Insurance Agency, Inc. and Investors Capital Holdings Securities Corporation
("ICH Securities") are often referred to in this report, both individually and
collectively, as the "Company" or with terms such as "we", "us", "our" and the
like. When being referred to individually without reference to the other
components of the Company, Investors Capital Holdings, Ltd., Investors Capital
Corporation and Eastern Point Advisors, Inc. are often referred to in this
report as "ICH", "ICC" and "EPA", respectively.

                           Forward-Looking Statements

     The statements, analyses, and other information contained herein relating
to trends in our operations and financial results, the markets for our products,
the future development of our business, and the contingencies and uncertainties
to which we may be subject, as well as other statements including words such as
"anticipate," "believe," "plan," "estimate," "expect," "intend," "will,"
"should," "may," and other similar expressions, are "forward-looking statements"
under the Private Securities Litigation Reform Act of 1995. Such statements are
made based upon management's current expectations and beliefs concerning future
events and their effects on the Company. Our actual results may differ
materially from the results anticipated in these forward-looking statements.

     These forward-looking statements are subject to risks and uncertainties
including, but not limited to, the risks that (1) losses may be incurred if our
investment professionals fail to comply with regulatory requirements; (2) the
loss of either Theodore E. Charles or Timothy B. Murphy may adversely affect our
business and financial condition through the loss of significant business
contacts, which may be difficult to replace; (3) customer fraud could harm our
earnings and profits by requiring us to expend time, money and incur actual
loss, exposing us to the potential for arbitration; (4) investment professional
and employee fraud and misconduct could harm our profits and earnings by causing
us to expend time and money, to incur actual loss, and to be exposed to the
potential for litigation; (5) any failure to implement and maintain adequate
internal controls could severely restrict our profitability through the
imposition of regulatory sanctions and fines; (6) involvement in material legal
proceedings could have a significant impact on our earnings and profits to the
extent that we are found liable in such proceedings; (7) a change in our
clearing firm could result in the inability of our customers to transact
business in a timely manner due to delays and errors in the transfer of their
accounts, which, on a temporary basis, could affect our earnings and profits.
See Part I, Item 1A - "Risk Factors".

     Readers are also directed to other descriptions and discussions of risks
and uncertainties that may be found in this report and other documents filed by
the Company with the United States Securities and Exchange Commission (the
"SEC"). We specifically disclaims any obligation to update or revise any
forward-looking information, whether as a result of new information, future
developments, or otherwise.


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                                     PART I

ITEM 1.  BUSINESS

Overview

     Incorporated in 1995, ICH is a financial services holding company that
operates primarily through its subsidiary, ICC, in two segments of the financial
services industry:

o    Broker-dealer services in support of trading and investment in corporate
     equity and debt securities, U.S. Government securities, municipal
     securities, mutual funds, variable annuities and variable life insurance,
     including provision of market information, Internet trading, portfolio
     tracking facilities, records management, and

o    Investment Advisory and Asset Management Services, including, until the
     third quarter of our most recently completed fiscal year, management of two
     retail mutual funds.

     Financial information pertaining to the Company for the fiscal years ended
March 31, 2006, 2005 and 2004 is included in Part II of this document including,
without limitation, selected financial data in Item 6 and financial statements
and supplementary data in Item 8 thereof.

Broker-Dealer Services

     Investors Capital Corporation

     Investors Capital Corporation ("ICC") is a securities broker-dealer that is
registered with the National Association of Securities Dealers ("NASD"), the
Securities and Exchange Commission ("SEC"), the Municipal Securities Rule Making
Board ("MSRB") and the Securities Investor Protection Corporation ("SIPC").
Headquartered in Lynnfield, Massachusetts, the wholly-owned subsidiary of ICH
also is duly registered and doing business as a broker-dealer in all 50 states,
the Commonwealth of Puerto Rico and the District of Columbia. ICC makes
available multiple investment products and provides support, technology and
back-office services to a network of approximately 734 independent registered
representatives ("representatives"). Commissions and fees derived from the
provision of services and products to ICC's registered representatives
represented approximately 97.6% of the Company's total revenues for the fiscal
year ended March 31, 2006.

     Broker-Dealer Representatives

     Our representatives sell investment products that are securities under
federal and state law. Accordingly, they are required to qualify and register as
representatives with our broker-dealer subsidiary under federal and state law.
Depending upon their activities, they also may be required to qualify and
register as investment advisor representatives. Our in-house training programs
for representatives emphasize the long-range aspects of financial planning and
investment products. We believe that the continuing education and support we
provide to our registered representatives enables them to better inform and
serve their clients.

     Continuing to add productive registered representatives is an integral part
of our growth strategy. We seek to recruit primarily experienced registered
representatives who focus on assisting their clients in attaining their
long-range financial goals. Once recruited, we focus on enhancing our
representatives' professional knowledge, skills and value to their clients.
During the fiscal year ended March 31, 2006, our average revenue per registered
representative increased more than 33.3% to $90,353 compared to the previous
fiscal year, more than offsetting a 7.1% decrease in the number of
representatives in our national network.


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<PAGE>

     In addition to a variety of valuable products and services, we offer
prospective representatives an attractive commission payout and the independence
of owning and operating their own offices. Generally, our representatives pay
substantially all of the costs associated with their offices and operations,
while we concentrate on providing technical, regulatory, supervisory, compliance
and other support services to our independent investment professionals. This
allows expansion of our operations with relatively minimal capital outlay.

     Compensation to Representatives

     Commission payouts to our registered representatives are negotiated and
currently average approximately 82.3% of the gross dealer concession generated
from the sale of securities. Pursuant to the terms of our agreement with our
registered representatives, and as permitted by current NASD rules, we provide
our representatives, or their named beneficiaries, with continuing commissions
on pre-existing business in the event of their retirement from the securities
industry or death. Representatives grant to us the right to offset against
commissions certain losses we may sustain as a result of their actions,
omissions and errors. Our agreement with our representatives are terminable by
either party with 15 days prior written notice, and do not contain either a
confidentiality or non-compete provision.

     Support to Representatives

     We provide a variety of services and products to our representatives to
enhance their professionalism and productivity.

     Technology Resources. Advanced technology, including client and corporate
Web sites, enable our representatives and their clients to perform many tasks
online, including:

o    Opening of new accounts
o    Monitoring of existing accounts
o    Updating of client accounts
o    Initiating and executing trading activities
o    Viewing and downloading commission data
o    Locating and exploring financial products
o    Downloading client data
o    Researching reports or inquiries on companies, securities and other
     pertinent financial topics

     Approved Investment Products. We allow our representatives to offer a wide
variety of approved investment products to their clients that are sponsored by
well-respected and financially sound companies. We believe that this is critical
to the success of our registered representatives and the Company. We follow a
selective process in determining approved products to be offered to clients by
our representatives, and we continuously monitor the product list for continued
approved status.

     Marketing. We provide advertising and public relations assistance to our
representatives that enhance their competence and professional stature in the
public's eye, including NASD-approved marketing materials, corporate and product
brochures and client letters.

     Supervision/Compliance. We maintain a strong broker-dealer compliance
program. In addition to a sixteen-member home office staff that includes two
dedicated compliance attorneys, we retain experienced field supervisors in
NASD-recognized Offices of Supervisory Jurisdiction across the country that are
charged with compliance responsibilities for defined groups of registered
representatives. By positioning these compliance individuals in the field, we
are able to reasonably closely supervise and monitor the activities of our
representatives, thereby ensuring their commitment to compliance with requisite
rules and regulations. Our compliance efforts are further enhanced by in-house
computer systems and programs, including routine internal audits to ensure our
compliance with anti-money laundering standards and other regulations under the
USA Patriot Act.


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<PAGE>

     Our representatives seek and value assistance in the area of compliance
and, in keeping step with the latest industry regulations, our compliance
department provides to our representatives, among other things:

o    Advertising and sales literature review
o    Field inspections, followed up with written findings and recommendations
o    Weekly faxes and monthly conference calls on selected compliance topics
o    Assistance with customer complaints and regulatory inquiries
o    Workshops, seminars and in-house publications on various compliance matters
o    Regional and national meetings
o    Interpretation of Rules and Regulations and General Compliance Training

     Clearing. We utilize the services of a clearing firm to clear our
transactions on a fee-for-service basis. Our clearing firm processes most of the
securities transactions for our account and the accounts of our clients.
Services of our clearing firm include billing and credit extension, and control,
receipt, custody and delivery of securities. We pay a transaction charge for
these services, relying on the operational capacity and the ability of our
clearing firm for the orderly processing of security transactions. In addition,
by engaging the processing services of a clearing firm, certain capital reserve
requirements and other complex regulatory requirements imposed by federal and
state securities laws are rendered inapplicable.

     Insurance Operations

     In certain states, a separately licensed insurance entity is required in
order for ICC broker-dealer representative to sell certain life insurance and
annuity products to their clients. Accordingly, the Company established ICC
Insurance Agency, Inc., a wholly-owned subsidiary of ICH that is duly licensed
for such purposes in all states in which such licensing is required. All revenue
realized by this entity flow through as revenue to ICC.

     ICH Securities

     In March 2005 Investors Capital Holdings Securities, Inc., ("ICH
Securities"), a wholly-owned subsidiary of ICH, was formed to hold cash for tax
benefit purposes at the state level.

     Investment Center Model

     The Company operates retail investment centers in Topsfield and Braintree,
Massachusetts; Portsmouth, New Hampshire; New York, New York and Miami,
Florida. Unlike the arrangement the Company has with its typical independent
contractor representative, the Company funds the overhead operational cost of
the investment centers and staffs the locations with registered representatives.
The investment center representatives are typically on a lower payout schedule
intended to offset the overhead costs incurred by the Company. The Company's
continued investment in this business model is contingent on the model's
sustained growth and profit margin.


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     Broker-Dealer Revenue

     Commission revenue generated by ICC during the last three fiscal years was
derived from the following activities:

                                  Fiscal Years Ended March 31,
Source of Commission Revenue                              2006    2005    2004
----------------------------                              ----    ----    ----

Sale of mutual funds and unit investment trusts(1):        23%     19%     20%
Sale of variable annuities and variable life insurance:    38%     39%     38%
Sale of individual stocks and bonds:                       22%     23%     25%
Sale of direct participation programs:                     14%     11%      8%
Other activities:                                           3%      8%      9%
Total                                                     100%    100%    100%

     Direct participation programs predominantly involve equity investments in
limited partnerships and real estate investment trusts ("REITS"). The increase
in sales of this product type was directly correlated to the performance of the
oil and gas programs and the real estate market since REITS and oil & gas
programs make up 96% of this revenue category. As with other broker dealer
products, sales commissions on REITS and oil and gas programs are comprised of a
gross dealer concession on the invested amount.

     Commission revenue from our mutual funds and variable annuity products
continues to make up most of the revenue source; however, this trend may not
continue as our revenue mix becomes more diversified.

     We believe there may be a trend in the future for commissions from stocks
and bonds, as a percentage of total commissions, to increase due to our
continued recruiting efforts in attracting sophisticated representatives to our
firm.

     Investment Advisory Services

     Historically since its inception in 1995, Eastern Point Advisors, Inc.
("EPA"), served as our dedicated investment adviser subsidiary, providing
investment advisory services to the investing public through its advisory
service programs. These programs, which featured EPA-managed portfolios of load
and no-load mutual funds, variable and /or individual securities, were provided
to the public through as many as 100 investment adviser representatives. In
order to minimize duplication within EPA of needed administrative capabilities
that were already possessed by ICC, extensive legal, data processing and other
back office services were provided by ICC to EPA in support of these activities.

     The consequent involvement of two separate entities in servicing a single
business line resulted in management overlap and other inefficiencies that, in
addition to increasing costs, complicated compliance with internal oversight and
regulatory filing requirements. Further, these arrangements hindered the full
exploitation of ICC's clearing firm's emerging state-of-the-art trading and
asset management technology platform to provide superior asset management
services to representatives and their customers, such as portfolio performance
reporting and account rebalancing.

     To address these structural problems, management determined to transition
the bulk of EPA's advisory services to ICC, which commenced operations as a
registered investment adviser in November 2003 doing business as Investment
Capital Advisory Services ("ICA"). The transfer of EPA-managed assets to ICA
Management commenced in fiscal year ended 2004 and was completed in fiscal year
ended 2006.

     Additionally, ICA has been encouraging movement away from centralized
delivery of advisory services to a more personalized delivery system that
emphasizes close, technology-enabled interaction between independent
representative and customer that can lead to more agile decision making and
enhanced customer satisfaction and program participation. In support of this new
business model, ICA has focused on recruiting additional registered investment
adviser representatives and increasing the qualifications, technical competence
and motivation of existing representatives. As of March 31, 2006, ICA had 349
registered investment advisors, for a 21.6% increase over the year earlier
complement.

     (1) Sale of mutual funds includes both sales of mutual funds through direct
"check and application" and sales from our trading platform.


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<PAGE>

     The success of these initiatives is reflected in the fact that the market
value of assets under management by the Company as of March 31, 2006 rose to
$313.80 million, representing a 129% increase over the market value two years
earlier. The maximum annual fee charged for by ICA for these services is 2.9% of
market value, which is paid by the customer in quarterly installments. Revenue
from ICA and EPA asset management services totaled $5.15 million for the fiscal
year ended March 31, 2006, or approximately 7.60% of total Company revenues for
that period.

     Currently, EPA's business operations are limited to third party service
agreements assisting in the conversion of investor representatives to the
current ICA business model. EPA no longer has any licensed representatives other
than its principals.

     Retail Mutual Funds

     The Company ceased its mutual fund management services, which had been
provided by EPA, during the third quarter of the most recent fiscal year.
Management believed the risk/reward equation was beginning to shift away from
the reward side as a result of increased costs to maintain their two funds, the
Eastern Point Advisors Capital Appreciation Fund (previously named the Twenty
Fund) and the Eastern Point Advisors Rising Dividend Growth Fund. Primarily,
these increased costs were related to legal costs to meet new reporting and
compliance requirements. In addition, management believed that providing mutual
fund management services was straying from our core business of recruiting and
providing quality customer service and technology to the firm's base of highly
sophisticated financial representatives.

     On October 24, 2005 Eastern Point Advisors, Inc. ("EPA"), a wholly-owned
subsidiary of ICH, entered into a definitive agreement (the "Transition
Agreement") with Dividend Growth Advisors, LLC ("DGA"). Pursuant to the
Transition Agreement, EPA agreed to terminate its Investment Advisory Agreement
with Eastern Point Advisors Funds Trust (the "Trust") effective October 18, 2005
to permit the appointment by the Trust of DGA to supersede EPA as the Trust's
investment advisor. EPA had served since 1999 as investment advisor for the
Funds, which are sponsored by the Trust, and DGA had provided investment
advisory services to the Trust since 2004 pursuant to a subcontract with EPA.
DGA entered into a new advisory agreement directly with the Trust.

     Investment Advisor Representatives

     Each of our investment adviser representatives must satisfy the state
licensing requirements in the states in which they operate prior to their
clients utilizing our investment advisory services. As of March 31, 2006 ICA
had approximately 349 investment adviser representatives registered with the
various state securities departments.

     Asset Allocation Strategy

     These registered investment advisors (RIA) provide advisory services
through asset allocation in our representative-direct program where the asset
allocation is performed directly by the independent representative. 1760
investors participated in this program as of March 31, 2006. Also we had 933
investors in our other advisory services programs where asset allocation is
performed by ICA as the advisor.

     This asset allocation strategy is based on the principle that, by investing
in a combination of asset classes, risk may be reduced while seeking enhanced
returns. By combining asset classes that typically do not fluctuate in tandem,
the volatility of the customer's investment portfolio may be lowered while, at
the same time, providing the opportunity for possible increased long-term
returns. The Company utilizes the following steps in implementing this asset
allocation strategy for each individual customer:


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     We determine the customer's risk tolerance, investment goals, age, time
horizon, investment experience and financial and personal circumstances using
detailed questionnaires that are completed during personal interviews. Based
upon these facts, we recommend an overall investment allocation consisting of a
suggested percentage of stocks, bonds, cash and/or other investment products.

     Should the customer agree with the recommended overall investment
allocation, we then select what we believe to be appropriate investment vehicles
for the particular customer from a universe of mutual funds, variable annuities
and individual securities and other investment products.

     Following implementation of the recommended portfolio, we monitor portfolio
performance, communicate the model's performance to the client quarterly, and
make portfolio changes based upon performance, the customer's financial
situation, goals and risk tolerance and other relevant factors.

     Fee-Based Compensation Structure

     As required by the Investment Advisers Act of 1940, compensation for
investment advisory services is based on an annual fee calculated as a
percentage of total assets under management rather than a transaction-based
commission or performance fee.

Our Strategy

     Key elements to achieve our corporate objectives include:

     Increase brand awareness. We plan to increase our brand recognition to
attract new clients and representatives. We are executing a comprehensive
marketing plan to attract more clients and experienced representatives, build
market awareness, educate the investing public and maintain customer loyalty
through direct marketing, advertising through our marketing department, use of
our Web site, various public relations programs, Web and live seminars, print
advertising, radio, and television air time. In addition, we have committed to
opening Company-operated offices in selected strategic locations across the
country.

     Provide value-added services to our clients. We continue to provide our
clients with access to a pool of well-trained representatives, access to
up-to-date market and other financial information, and direct access to our
trade desk that is online with various stock exchanges and institutional buyers
and sellers. We will also continue to provide trading before and after
traditional market hours to our clients.

     Create technologically innovative solutions to satisfy client needs. We
continue our active efforts in pursuing additional technologies to service the
rapidly evolving financial services industry. Specifically, we are enhancing our
Web site to augment our clients' ability to trade equity securities more
efficiently via the Internet, monitor on-line the history and current status of
their accounts at any time and access all types of financial and other
information to enhance their situations. Also, we have developed personalized
Internet Web sites for our representatives to provide their clients, through the
use of passwords and firewalls, a secure and private interface directly to our
proprietary Web site. This allows these clients to perform market research, buy
and sell securities on-line, monitor their accounts and utilize financial
calculators.

     Provide technological solutions to our representatives. We believe that it
is imperative that we continue to utilize state-of-the-art technology from our
clearing firm. This will enable our employees and independent registered
representatives to effectively facilitate record and measure business activity
in a timely and efficient manner. By continuing our commitment to provide this
technology platform to process business, we believe that the Company can achieve
economies of scale and potentially reduce the need to hire additional personnel.


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     Build and expand our corporate presence. We plan to continue expanding our
branch office locations to strategically situated metropolitan locations
throughout the United States. We have expanded in Massachusetts, New York, New
Hampshire, California and Florida. We also continue to explore strategic
alliances, acquisitions and other opportunities to provide our clients with the
best possible services and products.

     Expand our product and service offering through strategic relationships. We
continue to actively pursue alliances with various companies to increase trading
volume, capitalize on cross-selling opportunities, create additional markets for
our asset management programs and mutual fund sales, take advantage of emerging
market trends and create operational efficiencies and further enhance our name
recognition. We have no present agreements, plans, arrangements or
understandings regarding any acquisitions and have not identified any specific
criteria that such acquisitions must meet.

     Competition

     Our competitors vary in size, scope and breadth of services offered. We
encounter direct competition from numerous established full-commission and
discount brokerage firms that have electronic brokerage services and full
research capabilities. We also encounter competition from insurance companies
with securities brokerage subsidiaries, financial institutions, mutual fund
sponsors and others who utilize financial services representatives paying their
own office costs and expenses.

     Some competitors of our broker-dealer and investment advisory services have
greater financial, technical, marketing and other resources than we and certain
of our competitors also offer a wider range of services and financial products
and have greater name recognition and more extensive client bases.

     We believe that our ability to compete in the broker-dealer and investment
advisory segments of our business depends upon many factors both within and
outside our control, including:

o    Our ability to attract and retain a network of experienced investment
     professionals
o    The effectiveness, ease of use, performance of our technology, services and
     overall client satisfaction.
o    The price and quality of our services
o    The volatility of financial markets and the world economy
o    Our ability to service our clients effectively and efficiently
o    Our reputation in the financial services industry

Our Process

     Check and Application

     The majority of transactions are conducted through a check and application
process whereby a check and an investment company's particular product
application is delivered to us for processing. This includes principal review
and submission to the investment company.

     Online Trading

     Through the use of our remote electronic entry trading platform registered
representatives can efficiently submit a wide range of security investment
products online.

     Bond Trading

     The Company's fixed-income trading desk uses a network of regional and
primary dealers to execute trades across all fixed-income assets classes. The
desk also utilizes several dealer-only electronic services that allow the desk
to offer inventory and to execute trades.


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     Asset Allocation

     Allocation Asset services are available through Investors Capital Advisory,
the Company's registered investment advisor subsidiary. The allocation services,
for the most part, are conducted through our on-line trading platform. The other
allocation services are performed with the fund company directly.

How We Are Regulated

     Broker-Dealer Regulation

     The securities industry is subject to extensive regulation under both
federal and state law. The SEC is the federal agency responsible for
administering the federal securities laws that apply to broker-dealers. ICC is a
broker-dealer registered with the SEC. Under the Securities Exchange Act of
1934, every registered broker-dealer that conducts business with the public is
required to be a member of and subject to the rules of NASD.

     NASD has established conduct rules for all securities transactions among
broker-dealers and private investors, trading rules for the over-the-counter
markets and operational rules for its member firms. NASD conducts examinations
of member firms, investigates possible violations of the federal securities laws
and its own rules and conducts disciplinary proceedings involving member firms
and associated individuals. NASD administers qualification testing for all
securities principals and registered representatives for its own account and on
behalf of the state securities authorities. We are also subject to regulation
under state law. We are currently registered as a broker-dealer in all 50
states, Puerto Rico and the District of Columbia.

     The SEC and other regulatory bodies in the United States have rules with
respect to net capital requirements that affect our broker-dealer subsidiary.
These rules are designed to ensure that broker-dealers maintain adequate capital
in relation to their liabilities, types of securities business conducted and the
size of their customer business. These rules have the effect of requiring that a
substantial portion of a broker-dealer's assets be kept in cash or highly liquid
investments. Failure to maintain the required net capital may subject a firm to
suspension or revocation of its registration with the SEC and suspension and
expulsion by the NASD and other regulatory bodies, and ultimately may require
its liquidation. The rules could restrict underwriting, trading activities, our
ability to withdraw capital, pay dividends, pay interest on and repay the
principal of any debt, among other matters.

     Registered Investment Adviser Regulation

     The Investment Advisors Act of 1940 (the "Advisors Act") regulates the
registration and compensation of investment advisers. Investment advisers are
subject to a similar level of oversight by the SEC and the various states as are
broker-dealers. Investment advisers are required to register with the SEC and/or
appropriate state regulatory agencies, are required to periodically file
reports, and are subject to periodic or special examinations. Rules promulgated
under the Advisers Act govern advertisements by investment advisers and the
custody or possession of funds or securities of a client. Most states require
registration by investment advisers unless an exemption is available and impose
annual registration fees. Some states also impose minimum capital requirements.
There can be no assurance that compliance with existing and future requirements
and legislation will not be costly and time consuming or otherwise adversely
impact our business in this area.

     As a registered investment adviser under the Investment Advisors Act of
1940, EPA and ICA are subject to regulations that cover various aspects of their
business, including compensation arrangements. Under the Advisers Act, every
investment advisory agreement with clients must expressly provide that such
contract may not be assigned by the adviser without the consent of the client.
Under the Investment Company Act of 1940, every investment adviser's agreement
with a registered investment company must provide for the agreement's automatic
termination in the event it is assigned. Under both the Advisors Act and the
Investment Company Act, an investment advisory agreement is deemed to have been
assigned when there is a direct or indirect transfer of the Agreement, including
a direct assignment or a transfer of a "controlling block" of the adviser's
voting securities or, under certain circumstances, upon the transfer of a
"controlling block" of the voting securities of its parent corporation. A
transaction is not, however, an assignment under the Advisers Act or the
Investment Company Act if it does not result in a change of actual control or
management of the investment adviser. Any assignment of the Company's investment
advisory agreements would require, as to any registered investment company
client, the approval of a majority of its shareholders, and as to other advisory
clients, the consent of such clients to such assignments.


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<PAGE>

     Regulations Applicable to the Use of the Internet

     Due to the established popularity and use of the Internet and other online
services, various regulatory authorities are considering laws and/or regulations
with respect to the Internet or other online services covering issues such as
user privacy, pricing, content copyrights and quality of services. In addition,
the growth and development of the market for online commerce may prompt more
stringent consumer protection laws that may impose additional burdens on those
companies conducting business online.

     The recent industry increase in the number of complaints by online traders
could lead to more stringent regulations of online trading firms and their
practices by the SEC, NASD and other regulatory agencies. The applicability to
the Internet and other online services of existing laws in various jurisdictions
governing issues such as property ownership, sales and other taxes and personal
privacy is also uncertain and may take years to resolve. Finally, as our
services are available over the Internet in multiple states, and as we have
numerous clients residing in these states, these jurisdictions may claim that we
are required to qualify to conduct business as a foreign corporation in each
such state. While ICC currently is registered as a broker-dealer in all 50
states, Puerto Rico and the District of Columbia, we are qualified to conduct
business as a foreign corporation in only a few states. Failure by our company
to qualify as a broker-dealer in other jurisdictions or as an out-of-state or
"foreign" corporation in a jurisdiction where it is required to do so could
subject us to taxes and penalties for the failure to qualify. Our business could
be harmed by any new legislation or regulation, the application of laws and
regulations from jurisdictions whose laws do not currently apply to our business
or the applications of existing laws and regulations to the Internet and other
online services.

     Employees

     As of March 31, 2006, we had 83 full-time employees, the majority of which
are located at our principal office in Lynnfield, Massachusetts. No employee is
covered by a collective bargaining agreement or is represented by a labor union.
We consider our employee relations to be excellent. We also enter into
independent contractor arrangements with other individuals on an as-needed basis
to assist with programming and developing proprietary technologies.

     Available information

     The Company is subject to the informational requirements of the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), and in accordance
therewith files reports, proxy statements and other information with the
Securities and Exchange Commission (the "Commission"). Such reports, proxy
statements and other information filed with the Commission by the Company can be
inspected and copied at the public reference facilities maintained by the
Commission at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain
information on the operation of the Public Reference Room by calling the
Commission at 1-800-SEC-0330. The Commission maintains an Internet site that
contains reports, proxy and information statements, and other information
regarding issuers that file electronically with the Commission located at
http://www.sec.gov.

     Our Web site address is http://www.investorscapital.com. We make available
free of charge on or through our Web site, our annual report on Form 10-K,
quarterly reports on Form 10-Q, current reports on Form 8-K, and amendments to
those reports filed or furnished pursuant to Section 13(a) or 15(d) of the
Securities Exchange Act of 1934, as soon as reasonably practicable after we
electronically file such material with, or furnish it to, the SEC. The
information found on our Web site is not part of this or any other report we
file with or furnish to the SEC. All such documents are also available in print
at no charge to any shareholder who requests them in writing to Darren Horwitz,
Manager Corporate Communications, 230 Broadway East, Lynnfield, MA 01940.


                                       12
<PAGE>

ITEM 1A.  RISK FACTORS

     An investment in ICH common stock involves risk. Current and prospective
investors should consider carefully the following risk factors, in addition to
the other information contained in this and other reports and documents filed by
us with the SEC, including documents incorporated herein by reference, before
making decisions to purchase, hold or sell ICH common stock.



Any failure of our investment professionals to comply with regulatory
requirements may cause us to incur losses or suffer substantial harm to our
business and operations.

     Our investment professionals are required by law to be licensed with our
subsidiaries as registered broker-dealer representatives and/or investment
adviser representatives and solicitors. Pursuant to these requirements, these
investment professionals are subject to our supervision in the area of
compliance with applicable federal and state securities laws, rules and
regulations, as well as the rules and regulations of self-regulatory
organizations such as the NASD. The violation of any regulatory requirements by
us or our investment professionals could jeopardize our broker-dealer or
investment adviser license and could subject us to fines and liability to
customers. As an example, a pending administrative complaint brought by the
Massachusetts Securities Division alleges that our broker-dealer subsidiary
violated its supervisory obligations in connection with sales of equity-indexed
annuities by certain of its independent representatives. The complaint seeks,
among other things, a fine, restitution of customer losses and suspension or
revocation of the firm's Massachusetts broker-dealer license. An adverse
disposition of this proceeding, which is being vigorously contested by the
Company, could have a material adverse effect on our financial position and
results of operations.



Any loss of key personnel could adversely affect our business and financial
condition through the loss of significant business relationships that may not be
easily recreated.

     Our success is largely dependent on the skills, experience and performance
of certain key personnel, particularly Theodore E. Charles, our chairman, chief
executive officer and president whose long-term relationships with our
investment professionals and business partners has been and continues to be the
driving force to our company's success, and Timothy B. Murphy, our executive
vice president, treasurer and chief financial officer as well as the president
of our broker-dealer subsidiary. The loss of Messrs. Mr. Charles and/or Murphy
or other senior management could have an adverse effect on our business,
financial condition and results of operations.



Consumer fraud could harm our earnings and profits by requiring us to expend
time and money and exposing us to financial loss and the potential for
arbitration or other legal proceedings.

     We are constantly exposed to the risk of significant losses as a result of
customer fraud. Activities such as authorizing trades and not accepting those
trades if anticipated stock movement is not achieved; paying for transactions
with bad funds; improperly stating investment experience, net worth, income
amount and tolerance for risk, could result in the expenditure of time, money
and actual loss, with the latter exposing us to the potential for arbitration.



Actual or alleged fraud and misconduct by investment professionals and employees
has resulted in and exposes us to an ongoing potential for litigation and
regulatory sanctions that could substantially harm our business and results of
operations.

     Employees and investment professionals constantly expose us to the risk of
significant losses as a result of employee errors, investment professional
misconduct and fraud. Such misconduct could include binding us to transactions
that exceed authorized limits or present unacceptable risks, or hiding from us
unauthorized, unsuccessful or improper activities. It is not always possible to
deter employee or independent contractor misconduct, and the precautions we take
to prevent and detect this activity may not be effective in all cases.


                                       13
<PAGE>

Any failure to maintain adequate internal controls could result in regulatory
sanctions that could result in substantial fines and could restrict our ability
to make money.

     In the past our broker-dealer subsidiary had not been in compliance with
its required net capital reserve because of an accounting oversight relating to
under-accrued commissions. These under-accrued commissions occurred in the last
five days of a month where the receipt of income did not have a corresponding
commission payable expense item applied against it. We made a capital infusion
into our broker-dealer subsidiary in the amount of $200,000 in order to correct
the net capital deficiency and, at the same time, notified the regulatory
authorities of the net capital problem and our corrective action. No regulatory
action was taken against our broker-dealer subsidiary. Any similar or other
failure to maintain adequate accounting procedures and internal controls could
result in regulatory sanctions being applied against our broker-dealer
subsidiary, which sanctions could severely restrict our activities, require us
to pay substantial fines and limit our ability to make money.



We are routinely involved in legal proceedings that can burden our resources and
pose an ongoing risk of adverse dispositions that could negatively impact our
earnings and profits.

     By the nature of our business, we are continually involved with various
judicial, regulatory and arbitration proceedings concerning matters arising in
connection with the conduct of our business. At March 31, 2006, the Company was
the co-defendant in several lawsuits with claims totaling approximately $4.10
million. Although we currently have insurance that may limit our exposure in
these cases, if we are found liable in material amounts in these or other legal
proceedings, such eventuality may result in restricting the availability and/or
increasing the cost of insurance against such risks and may have a significant
adverse effect on our earnings and profits.



Any change in our clearing firm could result in our inability to process
transactions in a timely manner which could adversely affect our business
operations and profits.

     Our current clearing agreement is with Pershing, which processes most of
the securities transactions for our account and the accounts of our customers.
We also rely on our clearing firm for our Internet securities trading
activities, which is a growing portion of our business. Our agreement with
Pershing may be terminated by either party on ninety days written notice. A
change in our clearing firm could result in the inability of our customers to
transact business in a timely manner due to delays and errors in the transfer of
their accounts, which, on a temporary basis, could affect our earnings and
profits.



Management's ownership of our common stock assures their control of most
corporation actions requiring a shareholder vote.

     The Company's executive officers beneficially own in the aggregate a
majority of the Company's common stock. Accordingly, they collectively are able
to determine the outcome of virtually all corporate actions requiring approval
by the stockholders of the Company, including, without limitation, the election
of directors and the approval of the sale of the Company or its assets.



We face vigorous competition.

     The financial industry segments in which the Company and its subsidiaries
operate are highly competitive, and many of our current and potential
competitors have considerably greater financial, technical, marketing and other
resources than are available to us.



The price of our common stock may continue to be volatile.

     The market price of our common stock has fluctuated substantially in the
past including during the last twelve months. The price of our common stock may
be subject to fluctuations in the future in response to operating results,
regulatory and other legal proceedings, general market movements and other
factors. In addition, the stock market in recent years has experienced price and
volume fluctuations that often have been unrelated or disproportionate to the
operating performance of companies. These fluctuations, as well as general
economic and market conditions, may adversely affect the market price of our
common stock.



Any market decline could adversely affect our revenues and earnings.

     Because our revenues and earnings are derived from investments made by
consumers, a substantial market decline, similar to the period after September
11, 2001, can impact the investment decisions made by consumers. Our market is
speculative and is subject to volatility as a result of unfortunate events.


                                       14
<PAGE>

                      EXECUTIVE OFFICERS OF THE REGISTRANT

     The following sets forth, as of June 29, 2006, certain information with
respect to each of the executive officers of ICH:

     Theodore E. Charles, age 63, principal executive officer. A founder of
Investors Capital Holdings, Mr. Charles has served as the Company's chairman of
the board, chief executive officer and president since its inception in 1995.
Mr. Charles also has served as the chief executive officer of our subsidiaries,
Investors Capital Corporation ("ICC") and Eastern Point Advisors, Inc ("EPA")
since their founding in 1994 and 1995, respectively. Mr. Charles served on the
Board of Directors of Revere Savings Bank of Massachusetts from 1997 to 2001 and
served on the Advisory Board of Danvers Savings Bank from 2001 to 2003. Mr.
Charles currently holds various securities licenses, including series 6, 63, 7
and 24, has been a member of the Financial Planning Association since 1985 and
formerly served as Chairman of the Shareholder Advisory Board of Life USA
Insurance Company.

     Timothy B. Murphy, age 41, principal financial officer and principal
accounting officer. A founder of the Company, Mr. Murphy has served as executive
vice president, treasurer and chief financial officer of the Company since its
inception, and as president of its subsidiaries, ICC and EPA, since their
respective inceptions. He entered the securities industry in 1991 as an
operations manager in the Boston regional office of Clayton Securities. By 1994,
he was serving as compliance officer of Baybanks Brokerage and a vice president
of G.R. Stuart & Company, another brokerage firm. Mr. Murphy holds various
securities licenses including series 4, 7, 24, 27, 53, 63 and 65.

     Steven C. Preskenis, age 36. Mr. Preskenis has served as Chief Operating
Officer of ICC, and has performed similar policy-making functions for ICH, since
February 2006. Mr. Preskenis, who joined the Company in August 2000 as a
compliance attorney, also has served as General Counsel of ICC, and has
performed similar functions for ICH, since March 2003, and has served as
Secretary of ICH since September 2005. Prior to joining ICC in August 2000, Mr.
Preskenis served as an Alternative Dispute Resolution attorney with John Hancock
Life Insurance Company commencing in 1998. Mr. Preskenis is a member of the
Massachusetts Bar and a graduate of Suffolk University Law School.

ITEM 2.  PROPERTIES.

     Our principal executive offices are located in a 9,068 square foot facility
at 230 Broadway East, Lynnfield, Massachusetts 01940. This facility is comprised
of several office condominiums owned by different entities, which lease the
office space to the Company. A portion of the space which is leased to the
Company, including ICC and EPA, is owned by Arlsburg Trust, the trustee of which
is the principal stockholder of ICH, and Investors Realty, LLC, the principal
member of which is the principal stockholder of ICH. The remainder is leased
from an unrelated entity. The combined current annual rent was $271,121 and is
comparable to current market rates for similar space in our geographic area. The
leases expired in March 2005 and were subsequently renewed for a three year
period expiring on March 31 2008. In addition, the Company leases office space
from the Arlsburg Trust for its investment center located in Topsfield,
Massachusetts. Rent expense for the investment center was $36,000 for the year
ended March 31, 2006. ICC leases an additional 1,832 square feet of office space
from Investors Realty, LLC at fair market value. The Company has leases from
unrelated parties for its investment centers located in Portsmouth, New
Hampshire; Manhattan, New York; Braintree, Massachusetts; and Miami, Florida.
The rent expense for these investment centers for the year ended March 31, 2006
totaled $49,606.

ITEM 3.  LEGAL PROCEEDINGS.

     By administrative complaint dated November 16, 2005, the Securities
Division (the "Division") of the Secretary of the Commonwealth of Massachusetts
(the "State") brought an adjudicatory proceeding (the "Massachusetts
Proceedings") against ICC alleging violation of ICC's supervisory obligations
under State securities laws in connection with certain past sales of
equity-indexed annuities. The complaint alleges, among other things, that ICC
failed to properly supervise associated persons, thereby allowing allegedly
unsuitable sales of these insurance products. The complaint, which seeks an
order instructing ICC to cease such violations and to pay an unspecified
administrative fine, also requests that ICC's registration as a securities
broker-dealer in Massachusetts be suspended or revoked, that the firm be
censured, and that it be ordered to fairly compensate purchasers of the
insurance products for any losses attributable to wrongdoing by ICC.


                                       15
<PAGE>

     In its vigorous self-defense, ICC vehemently denies any wrongdoing and has
filed an answer to the administrative complaint that asserts its defenses,
including that it did not recommend, encourage, assist, receive any remuneration
from, or have any role in or contemporaneous knowledge of the allegedly
unsuitable sales identified in the administrative complaint. Equity-indexed
annuities are regulated by the State's Insurance Department, which has approved
the sale of upwards of 200 versions of this type of insurance product by a
number of insurance companies.

     Based upon statutory provisions and precedent, ICC has asserted its
position that these insurance products are not considered to be securities under
State and Federal laws and regulation or National Association of Securities
Dealers (NASD) rules, and that the Division is not empowered to require ICC to
supervise the sale of these insurance products by its associated persons.
Nonetheless, ICC since the summer of 2005 has been in the forefront of a
gathering industry trend, based upon recent NASD guidance, towards voluntarily
implementing procedures to supervise the sales of equity-indexed annuities by
associated persons.

     We are unable to reasonably estimate any possible range of loss related to
these proceedings due to their uncertain resolution. However, a conclusion of
these matters favorable to the Division could have a material adverse effect on
our financial position and results of operations.

     The Company operates in a highly litigious and regulated business and, as
such, is a defendant or codefendant in various other lawsuits and arbitrations
additional to the Massachusetts Proceedings that are incidental to our
securities business. The Company is vigorously contesting the allegations of the
complaints in these cases and believes that there are meritorious defenses in
each. Counsel is unable to respond concerning the likelihood of an outcome,
whether favorable or unfavorable, because of inherent uncertainty routine in
these matters. For the majority of pending claims, the Company's errors and
omissions (E&O) policy limits the maximum exposure in any one case to between
$75,000 and $100,000 and, in certain of these cases, the Company has the
contractual right to seek indemnity from related parties. Management, in
consultation with counsel, believes that resolution of pending litigation will
not have a material adverse effect on the consolidated financial results of the
Company.

ITEM 4.  SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

     No matter was submitted to a vote of Security Holders of ICH during the
fourth quarter of the fiscal year covered by this report.


                                       16
<PAGE>


                                     PART II

ITEM 5.  MARKET FOR REGISTRANT'S COMMON EQUITY, RELATED STOCKHOLDER MATTERS AND
ISSUER PURCHASES OF EQUITY SECURITIES.

     ICH's common stock has been trading on The American Stock Exchange (AMEX)
under the symbol "ICH" since February 8, 2001. Prior to such date, there was no
established public trading market for the common stock. As of June 26, 2006,
there were 6,131,472 shares outstanding.

     The following table presents the high and low closing prices for the common
stock of ICH on the AMEX for the periods indicated.

                                                              High      Low
                                                              ----      ---
         Fiscal 2006
         January 1, 2006 through March 31, 2006              $3.24    $2.20
         October 1, 2005 through December 31, 2005           $4.01    $3.00
         July 1, 2005 through September 30, 2005             $4.53    $3.71
         April 1, 2005 through June 30, 2005                 $4.99    $4.03

         Fiscal 2005
         January 1, 2005 through March 31, 2005              $5.51    $3.91
         October 1, 2004 through December 31, 2004           $4.79    $3.40
         July 1, 2004 through September 30, 2004             $5.06    $4.27
         April 1, 2004 through June 30, 2004                 $5.65    $4.10


     Investors Capital Holdings, Ltd. paid a $.02/share dividend on May 16, 2005
for shareholders of record as of May 2, 2005. A $0.04/share dividend was
declared on May 12, 2006 for shareholders of record dated June 15, 2006. This
dividend will be paid on June 29, 2006.

     Future dividend decisions will be based on, and affected by, a number of
factors, including the operating results and financial requirements of the
Company and the impact of regulatory restrictions. See Regulation and
Management's Discussion and Analysis--Liquidity and Capital Resources, included
elsewhere in this Form 10-K.


                                       17
<PAGE>

ITEM 6.  SELECTED FINANCIAL DATA.

     The following table sets forth certain selected historical consolidated
financial data. The selected income statement data for each of the three years
ended March 31, 2006, 2005 and 2004 and balance sheet data as of March 31, 2006
and 2005 have been derived from our audited consolidated financial statements
and related notes included elsewhere in this Form 10-K and should be read in
conjunction with those financial statements and Management's Discussion and
Analysis of Financial Condition and Results of Operations, also included
elsewhere in this Form 10-K. The following selected income statement data for
the years ended March 31, 2003 and 2002 and balance sheet data as of March 31,
2004, 2003 and 2002 are derived from our audited consolidated financial
statements not included herein. The following selected consolidated financial
data has been prepared in accordance with accounting principals generally
accepted in the United States of America. Due to certain reclassifications,
commission and advisory fee income has changed from the amounts reported in
previous SEC filings; however, these reclassifications did not change the
information presented for the comparative years mentioned above.
<TABLE>
<CAPTION>

                                                                       For the Years Ended March 31,
                                                 2006             2005             2004             2003             2002
                                                 ----             ----             ----             ----             ----

Income Statement Data:

<S>                                              <C>              <C>              <C>              <C>              <C>
Total Revenues                                   $67,978,868      $55,165,534      $48,964,074      $34,797,047      $29,519,260

Operating Income                                    $895,188         $959,654       $1,439,657         $311,799         $160,368

Operating Income per share, basic                      $0.16            $0.17            $0.25            $0.06            $0.03

Operating Income  per share, diluted                   $0.15            $0.17            $0.25            $0.05            $0.03

Net Income                                          $449,638         $619,109         $790,413         $115,891           $4,137

Net Income (loss) per share, basic                     $0.08            $0.11            $0.14            $0.02            $0.00

Net Income (loss) per share , diluted                  $0.08            $0.10            $0.14            $0.02            $0.00

Weighted average common shares
outstanding, basic                                 5,766,686        5,735,287        5,720,843        5,717,380        5,717,931

Weighted average common shares
outstanding, diluted                               5,911,029        5,922,204        5,877,075        5,790,060        5,818,695

Cash dividends declared per share                      $0.02                -                -                -                -


                                                                             As of March 31,
                                                 2006             2005             2004             2003             2002
                                                 ----             ----             ----             ----             ----

Balance Sheet Data:

Total assets                                     $15,325,827      $14,109,638      $13,388,879      $10,642,940      $10,114,532

Shareholders' equity                             $10,586,083      $10,182,783       $9,404,939       $8,248,640       $8,057,066

Shares outstanding                                 5,790,361        5,753,463        5,727,713        5,717,380        5,717,380

Equity per share at end                                $1.83            $1.77            $1.64            $1.44            $1.41
</TABLE>


                                       18
<PAGE>

ITEM 7.  MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.

     Management's discussion and analysis reviews our consolidated financial
condition as of March 31, 2006 and 2005, the consolidated results of operations
for the years ended March 31, 2006, 2005 and 2004 and, where appropriate,
factors that may affect future financial performance. The discussion should be
read in conjunction with the consolidated financial statements and related notes
included elsewhere in this Form 10-K.

     Forward-Looking Statements

     The reader is urged to read the information contained in the
"Forward-Looking Statements" and "Risk Factors" sections at the beginning of
this report for a discussion of the use of forward-looking statements in this
report as well as risks and uncertainties in attempting to predict our future
performance based upon such statements.

     Overview

     We are a financial services holding company that, primarily through our
subsidiaries, provides broker-dealer, investment advisory, asset management,
financial planning, insurance and related services. We operate in a highly
regulated and competitive industry that is influenced by numerous external
factors such as economic conditions, marketplace liquidity and volatility,
monetary policy, global and national political events, regulatory developments,
competition and investor preferences. Our revenues and net earnings may be
either enhanced or diminished from period to period by one or more of such
external factors.

     Critical Accounting Policies

     Our consolidated financial statements are prepared in accordance with
accounting principles generally accepted in the United States of America. The
Company believes that of its significant accounting policies, those described
below involve a high degree of judgment and complexity. These critical
accounting policies require estimates and assumptions that affect the amounts of
assets, liabilities, revenues and expenses reported in the consolidated
financial statements. Due to their nature, estimates involve judgment based upon
available information. Actual results or amounts could differ from estimates and
the difference could have a material effect on the consolidated financial
statements. Therefore, understanding these policies is important to
understanding the reported results of operations and the financial position of
the Company.

     Valuation of Securities and Other Assets

     Substantially all financial instruments are reflected in the consolidated
financial statements at fair value or amounts that approximate fair value. These
include cash; cash equivalents; securities purchased under agreements to resell;
deposits with clearing organizations; securities owned; and securities sold but
not yet purchased. In accordance with FAS 115, certain financial instruments are
classified as trading and available for sale. The realized gains and losses are
recorded in the income statement in the period in which the transactions
occurred. The unrealized gains and losses related are reflected in other
comprehensive income depending on the underlying purpose of the instrument.
Where available, the Company uses prices from independent sources such as listed
market prices, or broker or dealer price quotations. Fair values for certain
derivative contracts are derived from pricing models that consider current
market and contractual prices for the underlying financial instruments or
commodities, as well as time value and yield curve or volatility factors
underlying the positions. In addition, even where the value of a security is
derived from an independent market price or broker or dealer quote, certain
assumptions may be required to determine the fair value. For instance, the
Company generally assumes that the size of positions in securities that the
Company holds would not be large enough to affect the quoted price of the
securities if the Company were to sell them, and that any such sale would happen
in an orderly manner. However, these assumptions may be incorrect and the actual
value realized upon disposition could be different from the current carrying
value.


                                       19
<PAGE>

     Revenue Recognition

     The Company has established revenue recognition policies for each of the
following income item areas: Mutual Funds/Variable Annuities, .
Administration fees on Errors and Omissions Insurance ("E&O") and Renewals,
Advisory Fees and Trading Revenue. A description of the revenue recognition
process related to each category is presented below. The revenue recognition
policies the Company maintains are in compliance with SEC Staff Accounting
Bulletin ("SAB") 104 "Revenue Recognition in Financial Statements".

     Mutual Funds/Variable Annuities. Mutual Funds/Variable Annuity revenue is
recognized upon receipt of commissions related to each sale, which generally is
settled on the trade date. The earnings process is substantially complete at the
point that the fund company distributes payment to the Company.

     Trading. The Company earns commissions through stock purchases and sale
transactions, mutual fund purchases, government and corporate bonds
transactions, fee-based managed accounts, and ticket charges. The Company also
earns revenue in the form of 12b1 fees and interest on account balances. The
earnings process is substantially complete at trade date in accordance with the
rules of the National Association of Securities Dealers ("NASD") and the
Securities and Exchange Commissions ("SEC").

     The Company also receives credit adjustments for clearing charge
adjustments that are netted against any clearing charges the Company may incur
for the period. These adjustments are recognized as income in the period
received unless otherwise noted by the clearing firm.

     Unrealized gains and losses are recorded at the time that the Company
reconciles its trading positions with the market value. The unrealized gains or
losses are adjusted to market until the position is settled or the trade is
cancelled.

     Advisory Fees. Our advisory fees are based on the amount of assets managed
per the ADV agreement between the advisor and the advisor's client. These
revenues are recorded quarterly as and when billed and are calculated on the
quarter ending market value. The Company recognizes advisory fee income at the
end of each quarter on fees billed for services performed during that quarter.

     Advisory fees relating to the management of mutual funds have been based on
average daily net fund assets as specified in the Company's advisory agreement
and disclosed in the funds' prospectuses. These fees have been recognized
monthly based on the fund Trustee's administrative fee report detailing the
amounts that were earned for the month. The Company in the past has elected to
waive certain of these fees to allow for one of the funds to maintain its
ceiling on administrative expenses. Per agreement with the trustee of the funds,
the waived fees have been subject to a three-year recovery period, at the end of
which any uncollected fees have been permanently waived and, consequently,
charged against earnings. Effective October 18, 2005, the Company ceased its
mutual funds advisory services, and its successor as fund advisor has agreed to
pay to the Company all such waived amounts with interest. See "Note 5. Note
Receivable - Sale of Asset."

     Administration Fees. Administration fees for services rendered to its
representatives respecting annual NASD license renewals and E&O insurance are
recognized as revenue upon registration of the representative with NASD and
listing of the registered representative with the E&O insurance carrier. The
funds received from the registered representative are initially recorded as
unearned revenue. The amounts, if any, collected in excess of the E & O
insurance premium and/or fees due NASD are recognized as revenue.

     Marketing Revenue. Revenue from marketing associated with product sales is
recognized quarterly based on production levels. Marketing event revenues are
recognized at the commencement of the event offset by its costs.


                                       20
<PAGE>

     Accounts Receivable - Allowance for Doubtful Accounts

     Our policies for determining whether a receivable is considered
uncollectible are as follows.

     Loans to representatives. In accordance with SFAS No. 5, we perform
periodic credit evaluations and provide allowance based on our assessment of
specifically identified unsecured receivables and other factors, including the
representative's payment history. Once it is determined that it is both probable
that a loan has been impaired and the amount of loss can reasonably be
estimated, the portion of the loan balance estimated to be uncollectible is so
classified and written off.

     Advisory fees from our mutual funds. As disclosed in the respective mutual
funds' prospectuses, the Company has attempted to recoup all waived advisory
service fees within a three-year period. If management believed that the
likelihood of collecting that receivable within the three-year period was
doubtful, then the Company provided for an allowance in accordance with SFAS No.
5. Determinations whether to write off such fees were made annually. Effective
October 18, 2005, the Company no longer provides advisory services to mutual
funds and is entitled to payment of all previously waived advisory fees by its
successor as fund advisor. See "Note 3. Note Receivable - Sale of Asset."

     Advisory Fees on Asset Managed Accounts. Uncollected balances are written
off before the subsequent quarter billing.

     Trade receivables. As prescribed by the SEC, trade receivables usually
settle within three days. If a trade error results, the Company will pursue
remedies to collect on that trade error. The Company does not record a
receivable resulting from a trade error that is in litigation or whose outcome
is otherwise not reasonably determinable. In such a case, the Company applies
any proceeds from settlements or insurance against any trade losses incurred.

     Capitalized Software

     We capitalize certain software development costs that meet established
criteria, in accordance with Statement of Position 98.1. "Accounting for costs
of computer systems developed or obtained for internal use."

     Off Balance Sheet Risk

     The Company is engaged in various trading and brokerage activities whose
counterparties primarily include the general public. In the event that
counterparties do not fulfill their obligations, the Company may be exposed to
risk. Securities sold, but not yet purchased, represent obligations of the
Company to purchase the security in the market at the prevailing prices to the
extent that the Company does not already have the securities in its possession.
Accordingly, these transactions result in off-balance sheet risk when the
Company's satisfaction of the obligations exceeds the amount recognized in the
balance sheet. The risk of default depends on the creditworthiness of the
counterparty or issuer of the instrument. It is the Company's policy to review,
as necessary, the credit standings of each counterparty with which it conducts
business. Commission receivables from one source were 21.30% and 20.51% of total
receivables for the years ended March 31, 2006 and 2005, respectively.

     Reserves

     The Company records reserves related to legal proceedings in "accrued
expenses" in the consolidated balance sheet. The determination of these reserve
amounts requires significant judgment on the part of management. Management
considers many factors including, but not limited to: the amount of the claim;
the amount of the loss in the client's account; the basis and validity of the
claim; the possibility of wrongdoing on the part of an employee or
representative of the Company; previous results in similar cases; and legal
precedents and case law. Each legal proceeding is reviewed with counsel in each
accounting period and the reserve is adjusted as deemed appropriate by
management. Any change in the reserve amount is recorded in the consolidated
financial statements and is recognized as a charge/credit to earnings in that
period. The assumptions of management in determining the estimates of reserves
may be incorrect and the actual disposition of a legal proceeding could be
greater or less than the reserve amount.


                                       21
<PAGE>

Results of Operations
<TABLE>
<CAPTION>

Results of Operations:

Comparative Consolidated Statements of Income
                                                                                  Percent of Revenue       Percent Change
                                                                                ------------------------ -------------------
                                               Year Ended March 31,               Year Ended March 31,      2006     2005
                                   -------------------------------------------- ------------------------
                                       2006           2005           2004         2006    2005    2004    vs. 2005 vs. 2004
                                       ----           ----           ----         ----    ----    ----    -------- --------
Revenues:
<S>                                 <C>            <C>            <C>           <C>     <C>     <C>        <C>      <C>
Commission                          $ 60,028,731   $ 48,660,052   $ 44,831,827   88.30%  88.20%  91.56%     23.36%    8.54%
Advisory                               5,147,907      3,702,556      2,288,658    7.57%   6.71%   4.67%     39.04%   61.78%
Other fee income                       1,142,454      1,189,737        673,418    1.68%   2.16%   1.38%     -3.97%   76.67%
Marketing revenue                      1,013,828      1,140,098        836,428    1.49%   2.07%   1.71%    -11.08%   36.31%
Other income                             645,948        473,091        333,743    0.96%   0.86%   0.68%     36.54%   41.75%


                                   --------------------------------------------
Total Revenue                         67,978,868     55,165,534     48,964,074  100.00% 100.00% 100.00%     23.23%   12.67%
                                   ============================================


Commission and advisory fees          54,609,596     44,025,004     39,295,954   80.33%  79.81%  80.25%     24.04%   12.03%

Gross Profit                          13,369,272     11,140,530      9,668,120   19.67%  20.19%  19.75%     20.01%   15.23%

Operating Expenses:

Advertisement and marketing              895,658        763,192        611,435    1.32%   1.38%   1.25%     17.36%   24.82%
Communications                           603,964        536,386        419,749    0.89%   0.97%   0.86%     12.60%   27.79%
                                   --------------------------------------------


Selling Expenses                       1,499,622      1,299,578      1,031,184    2.21%   2.36%   2.11%     15.39%   26.03%

Compensation and benefits              6,344,945      5,713,028      4,569,398    9.33%  10.36%   9.33%     11.06%   25.03%
Regulatory, legal and professional     2,965,689      1,527,256      1,028,901    4.36%   2.77%   2.10%     94.18%   48.44%
Occupancy                                695,003        585,646        474,998    1.02%   1.06%   0.97%     18.67%   23.29%
Other administrative expenses            968,825      1,055,368      1,123,982    1.43%   1.91%   2.30%     -8.20%   -6.10%
                                   --------------------------------------------


Administrative Expenses               10,974,462      8,881,298      7,197,279   16.14%  16.10%  14.70%     23.57%   23.40%

Total Operating Expenses              12,474,084     10,180,876      8,228,463   18.35%  18.46%  16.81%     22.52%   23.73%
                                   ============================================


Operating Income                         895,188        959,654      1,439,657    1.32%   1.74%   2.94%     -6.72%  -33.34%

Other Expense:
Interest expense                          47,782         40,440         39,326    0.07%   0.07%   0.08%     18.16%    2.83%
Gain on sale of asset                     23,560              -              -    0.03%   0.00%   0.00%       N/A      N/A
Loss on disposal of equipment                  -         31,072              -    0.00%   0.06%   0.00%       N/A      N/A
Total other expense                       24,222         71,512         39,326    0.04%   0.13%   0.08%    -66.13%   81.84%
                                   ============================================


Income before taxes                      870,966        888,142      1,400,331    1.28%   1.61%   2.86%     -1.93%  -36.58%
Provision for income taxes               421,328        269,033        609,918    0.62%   0.49%   1.25%     56.61%  -55.89%
                                   --------------------------------------------


Net Income                          $    449,638   $    619,109   $    790,413    0.66%   1.12%   1.61%    -27.37%  -21.67%
                                   ============================================
</TABLE>


                                       22
<PAGE>

<TABLE>
<CAPTION>
                                                                                                                  2006        2005
                             2006         2005         2004     2006    2005    2004    2006    2005    2004    vs. 2005    vs. 2004
                             ----         ----         ----     ----    ----    ----    ----    ----    ----    --------    --------

Gross Margin:
<S>                   <C>          <C>           <C>         <C>     <C>     <C>      <C>     <C>     <C>        <C>         <C>
Commission -
Mutual Funds,
Variable Annuities,
 etc.                  $4,950,592   $4,467,235   $4,299,936   12.01%  13.20%  13.00%  37.03%  40.10%  44.48%      10.82%       3.89%

Commission -
Trading                 3,638,391    2,050,086    2,484,005   19.71%  14.40%  21.80%  27.21%  18.40%  25.69%      77.48%     -17.47%

Commission -
Insurance Products        281,489      342,978      173,347   95.77%  98.30%  72.00%   2.11%   3.08%   1.79%     -17.93%      97.86%

Commission -
Underwriting                6,907       17,766       31,861   10.00%  15.30%  24.20%   0.05%   0.16%   0.33%     -61.12%     -44.24%

Advisory Services
and Administration
Fees                    2,005,401    1,647,048    1,147,176   37.50%  42.60%  45.50%  15.00%  14.78%  11.87%      21.76%      43.57%

Licensing                 911,692    1,004,307      340,283  100.00% 100.00% 100.00%   6.82%   9.01%   3.52%      -9.22%     195.14%

Marketing               1,013,828    1,140,098      836,428     n/a     n/a     n/a    7.58%  10.23%   8.65%     -11.08%      36.31%

Other income              560,972      471,012      355,084     n/a     n/a     n/a    4.20%   4.24%   3.67%      19.10%      32.65%
                      --------------------------------------


Total Gross Margin    $13,369,272  $11,140,530   $9,668,120   19.70%  20.20%  19.70% 100.00% 100.00% 100.00%      20.01%      15.23%
                      ======================================
</TABLE>


Fiscal Year Ended March 31, 2006 Compared with Fiscal Year Ended March 31, 2005:
-------------------------------------------------------------------------------

     Revenues

     Our revenues rose $12.81 million, or 23.2%, to $67.98 million despite the
effects on the economy of increases in interest rates and energy prices.
Revenues from commissions increased by $11.37 million or 23.4% for the current
period compared to the prior period. Advisory services revenue also increased by
$1.45 million or 39.0% between the same comparative periods. The significant
increase in our revenues reflects general revenue growth in the diversified
investment sector of the financial services industry as well as other factors
discussed below.

     Revenue growth continues to be supported by our efforts in recruiting
sophisticated and experienced representatives who are qualified and likely to
engage in brokerage services. We had a 19.82% increase in recruitment of new
representatives during fiscal year ended March 31, 2006 compared to the prior
year. Revenue growth from these new recruits generated a $2.20 million or 90.80%
increase in corresponding revenues.

     Revenues of $1.22 million or 55.29% of this $2.20 million increase, and
44.16% of all current period revenues from representatives, were derived from
trading or brokerage services. Our progress in recruiting representatives who
are qualified and likely to engage in trading services have resulted in a
145.78% increase in trading services revenue from new recruits for the year
ended March 31, 2006 compared to the fiscal year ended March 31, 2005.


                                       23
<PAGE>

<TABLE>
<CAPTION>

                                                                          2006             2005    2006 vs. 2005    2006 vs. 2005

Product Type
------------
<S>                                                                 <C>              <C>              <C>                 <C>
Mutual Funds, Variable Annuities, Direct Participation
 Programs, Other                                                    $2,186,700       $1,293,029         $893,671           69.11%
Trading Services (brokerage)                                         2,054,522          835,935       $1,218,587          145.78%
Advisory Services                                                      390,164          298,421          $91,743           30.74%
                                                                ---------------  ---------------  ---------------  ---------------

Total                                                               $4,631,386       $2,427,385       $2,204,001           90.80%
                                                                ===============  ===============  ===============  ===============

Representatives Recruited                                                  133              111               22           19.82%
</TABLE>



     Commissions. Commissions from variable annuities and trading made up the
largest increase in commission revenue. Variable annuities and trading
commissions represented $7.68 million or 67.53%, of the increase during the
current period when compared to the prior period. Also, commissions from direct
participation programs, which predominantly include REIT's (Real Estate
Investment Trusts) and oil and gas programs increased by $2.71 million or
47.28%.

<TABLE>
<CAPTION>


                                                                                                              Percentage
                                                                                          Percent of Total     Increase
Product Type                                     2006             2005     2006 vs 2005       Increase       2006 vs 2005
<S>                                     <C>              <C>              <C>                    <C>               <C>
Variable Annuities                      $  22,766,073    $  19,300,208    $   3,465,865           30.49%           17.96%
Trading (brokerage)(1)                     18,457,135       14,245,778        4,211,357           37.04%           29.56%
Mutual Funds                                8,665,442        7,874,316          791,126            6.96%           10.05%
Direct Participation Programs               8,436,466        5,728,231        2,708,235           23.82%           47.28%
Other                                       1,703,615        1,511,519          192,096            1.69%           12.71%

                                       ---------------  ---------------  ---------------  ---------------  ---------------
Total Commission Revenue                   60,028,731       48,660,052    $  11,368,679          100.00%           23.36%
                                       ===============  ===============  ===============  ===============  ===============

-------------------------------------
1. Revenue designated as Trading (brokerage) includes revenue from mutual funds
sold through our trading platform.
</TABLE>


     Although commissions from variable annuities comprise the largest component
of commission revenue, the Company's revenue base has been shifting toward the
brokerage area, which represented 37.04% of the total increase in commission
revenues. An increasing number of our representatives conduct their business in
brokerage accounts which, in turn, improves our margins.

     The trend toward brokerage reflects a concerted effort on our part to
recruit sophisticated representatives with series 7 licenses who utilize our
brokerage platform. As a result of the shift toward brokerage products, the
Company experienced higher overall profit margins from sales of the resulting
product mix during the current period compared to the prior period. See "--
Gross Margins".

     Advisory Fees. Advisory services typically provide significantly higher
margins than traditional broker-dealer products such as variable annuities and
mutual funds. See " - Gross Margins". Accordingly, we have been encouraging our
representatives to convert more of their business to advisory services. Although
we do not control which advisory services our representatives provide for their
clients, we continue to make concerted efforts to attract them to our
proprietary advisory services programs through seminars, trade shows and direct
marketing.

     Fees from our rep-directed asset-managed program, A-MAP, where asset
allocation and other investment advisory services are provided directly by our
independent representatives, continue to be the leading source of revenue in
this category. Revenues from this program grew by $1.03 million or 61.5% to
$2.71 million compared to $1.68 million the prior period. Supported by our
clearing firm's trading platform this program is becoming increasingly popular
with our representatives because of the opportunities it provides to deliver to
their clients superior asset management services at a potentially lower cost and
the potential for increased overall market performance.


                                       24
<PAGE>

     Revenues from our fund-managed F-MAP and separately managed S-MAP accounts,
where investment advisory services are provided by EPA and ICA instead of our
independent representatives, increased by $0.50 million or 42.8% between the
comparative periods. Over recent quarters revenues from the fund-managed
category have slightly declined due to the termination of accounts where asset
values have fallen below a minimum level. Also, management has not been
aggressively marketing this program compared to the rep-directed asset-managed
program and S-MAP program.

     Revenues from asset-managed programs where investment services are provided
by outside advisors, decreased slightly for the year ended March 31, 2006. EPA,
and more recently, ICA have been continuing to direct their marketing efforts
away from these third party management programs and more toward their internal,
proprietary asset-managed models. EPA and ICA have been providing sales,
marketing, trading platform and other technical support to our representatives
to enable them to deliver improved investment advisory services.

     Revenues from advisory services provided to mutual funds decreased by $0.07
million when compared to the prior period, reflecting the termination during the
current year of the Company's management agreement pursuant to which it had been
providing advisory services to mutual funds. Our mutual funds constituted only
$0.25 million or 6.8% of the total advisory services revenue category for the
year ended March 31, 2006, and $0.18 million or 3.6% for the fiscal year ended
March 31, 2005.

     Our current success to our advisory services program recently has been a
result of an enhanced online platform that we offer to our representatives, from
our clearing firm. This enables them to perform their services of asset
allocation in a more cost effective way. In addition, these savings have been
passed on to the client, resulting in lower fees charged for an improved
service.

     Other Fee Income. Other fee income decreased by $0.05 million or 4.00%,
resulting mostly from a $0.18 million decrease in administrative fees for
providing regulatory services to our representatives in connection with annual
renewals of their NASD licenses and errors and omissions (E&O) policy
enrollment. Most of this change stems from the timing in the collection of an
(E&O) adjustment during the first quarter for year ended March 31, 2005. There
was no (E&O) adjustment for year ended March 31, 2006.

     Offsetting the above-mentioned decrease was a $0.09 million increase in
financial planning fees from sophisticated representatives providing portfolio
strategy for their clients' asset-managed accounts. In addition, we experienced
a $0.10 million dollar increase in other administrative fees to cover the
increase in compliance costs for the maintenance of books and records.

     Finally, there was a $0.06 million decrease in administration fees on
asset-managed accounts as a result of the termination of several of these
accounts when asset balances fell below minimum levels.

     Marketing Revenue. Net marketing revenues decreased by $0.13 million or
11.1%, reflecting a $0.23 million increase in the cost to host our annual
national convention held in Boston in October 2005 and our Diamond Achiever
conference in March 2006. Offsetting this decrease was a $0.87 million dollar
increase in marketing support revenues from product companies. We also saw a
$0.02 million increase in marketing support revenues from our regional meetings
and sales of ancillary items such as apparel, bags, hats with our logo and blast
email services.

     Other Income. Other income, consisting primarily of interest and dividends
and gains or losses on investments, increased by $0.17 million for the
comparative current period to the prior period. The majority of the increase
came primarily from interest earned on account balances due to the increase in
its daily average balance.


                                       25
<PAGE>

     Gross Margins

     Gross margin rose by $2.23 million or 20.0% to $13.40 million for the
current period primarily due to a $1.60 million or 77.5% increase in gross
margin derived from trading over the prior period.

     Trading. The increase in gross margin from trading reflects an increase in
brokerage commissions and a reduction in clearing charges due to increased sales
volume, increased commission retention rates, and more fee income within
corporate accounts.

     Contributing to this improvement in gross margins from trading was a $0.38
million increase in the margin from our trails and from money market on account
balances and a $1.22 million contribution from net trading commissions. The
primary increase in gross margins from trading commission is derived from a
$1.10 million increase in net trade commissions from lower producing / payout
representatives.

     The combined effect of these factors was an increase in our average payout
retention in brokerage services from 24.6% in the prior period to 30.7% in the
current period which, in turn, contributed to an increase in our gross trading
margin from 14.40% to 19.7%. Through our efforts we are continuing to recruit
more capable and experiences representatives who can offer a broader range of
brokerage products which have a greater profit margin compared to the normal
mutual fund and variable annuity products.

     Another factor contributing to the increase in gross margin from trading
was that there was a $0.21 million trading error in April of 2004 that was
realized in fiscal year ended March 31, 2005. There was no trade error that had
a material impact on our financials during fiscal year ended March 31, 2006.

     Advisory Services. Advisory services profit margin increased by $0.36
million or 21.80% for the current period to the prior period. The majority of
the profit margin in advisory services stems from our rep-directed asset-managed
programs that make it possible for representatives managing client accounts to
trade directly online using our automated trading platform. Resulting increases
in the representative's trading volume effectively increase the Company's
commission revenues and gross margin. Additionally, by processing more
transactions at a stable fixed cost, our enhanced trading technology fosters
economies of scale that control operating expenses required to process the
increased trade volume.

     Although we experienced an increase in profit margin from advisory services
during the comparative period, our retention rate decreased from 42.6% to 37.5%.
There were a couple of factors contributing to this retention percentage
decrease. Advisory fee rates derived from rep-directed business declined
slightly, reflecting decreases in the commission retention rate for client
accounts whose balances reached levels that trigger automatic retention rate
reductions. Also, as a result of terminating the management agreement associated
with the mutual funds we no longer receive any advisory fees from that revenue
component which directly contributed to our margin.

     Although our retention rate from advisory services decreased compared to
the prior period, this category on a percentage-retention basis still retains a
higher profit margin than most of the other products or services we and our
representatives provide. (See -"Gross Margin Table").

     Mutual Funds, Variable Annuities, Etc. Profit margins from mutual fund
sales, variable annuity sales, direct participation programs and other check and
application distribution programs contributed $4.95 million or 37.03% of the
total gross margin compared to $4.47 million or 40.10% during the prior period.
As presented in the previous gross margin table, margin from our check and
application distribution programs comprised the greatest contribution to our
overall profit margin; however, trading achieved the largest percentage increase
for the comparative period of March 31, 2006 versus March 31, 2005.


                                       26
<PAGE>

     Commission Expenses

     Commission payouts to our independent representatives, as a percentage of
commissioned revenues, remained virtually steady at 82.3% for this fiscal year
ended March 31, 2006 versus 82.2% for the fiscal year ended March 31, 2005.
Management is continuing efforts to improve commission retention rates by
refining our business model to emphasize the recruitment and retention of
sophisticated representatives. These individuals can offer a variety of
brokerage and advisory products and services that result in us better commission
retention rates than those obtained from mutual funds and variable annuities. We
experienced higher margins from trading as a result of ticket charges and fees
pertaining to increases in account balances that flow entirely to the profit
margin. From advisory services we receive fees on the asset balance in the
account that go directly to the firm. Refer to the revenue recognition policy.

     Operating Expenses

     Operating expenses, which experienced a $2.29 million or 22.5% increase for
the year ended March 31, 2006, are discussed in detail below:

     Compensation and benefits. The largest component of operating expenses is
compensation and benefits which increased by $0.63 million or 11.1% during the
current period. This is substantially below the absolute and percentage growth
rates achieved in revenues and gross margins. This change includes primarily an
increase in general salaries of $0.67 million offset by a decrease in officer's
salary of $.07 million primarily as a result of the resignation of EPA's
president during our fiscal quarter ended June 30, 2005. There was also a $0.08
million decrease in stock option compensation due to a reduction in the value of
stock options distributed based on the "Black-Scholes Method" of option
valuation for the comparative years ended March 31, 2006 versus March 31, 2005.

     The Company sustained a $0.11 million increase in compensation expenses
from 401(k) contributions, health insurance and payroll taxes in the current
period versus the prior period. This increase along with the increase in general
salaries primarily was the result of the hiring of 18 additional personnel. The
Company went from having 65 full time employees at March 31, 2005 to 83 full
time employees at March 31, 2006 to support continued growth of the Company.

     There was a $0.23 million increase in additional personnel expense that was
needed to support the increase in business from the trading and operations
sector. Resources were committed to ensure that the Company continues to provide
quality customer service to our sophisticated representative force. Also, $0.4
million of addition expense was incurred in connection with the hiring of
additional personnel in the area of compliance. Resources were devoted in this
area to meet the growing needs within the industry of providing an adequate
framework of internal control, quality supervision and continuing education to
our independent representative force.

     Regulatory, legal and professional. Regulatory, legal and professional
expenses increased by $1.44 million or 94.2%. The largest component of this
increase was a $0.87 million or 264% increase in non-in-house legal fees, $0.74
million of which was incurred in connection with the Massachusetts Proceedings
described in detail in Part I, Item 3 "Legal Proceedings". An additional $0.13
million of this increase arose from other actions that management believes, with
advice of counsel, are of the exposures likely to be presented by our ongoing
operations.

     There were $0.31 million in legal settlements from dealings unrelated to
our brokerage business that contributed to the $0.54 million increase in lawsuit
settlement expenses. We also experienced a $0.23 million dollar increase in
lawsuit settlements arising from transactions conducted in the normal course of
business.

     We increased our accruals for legal expenses from $0.25 million for the
prior period to $0.43 million for the current period. Please refer to Footnote
15 to the Consolidated Financial Statements. In addition, since we operate in an
industry embedded with regulation, we will continue to invest significant
resources to reduce the likelihood of future litigation by promoting accuracy,
ensuring sound operational techniques and providing appropriate compliance
measures.


                                       27
<PAGE>

     Finally, we experienced a $0.04 million increase in accounting expenses,
primarily audit-related, while regulatory and professional expenses remained
essentially flat for the comparative periods.

     Advertisement and Marketing. Advertising expenses increased overall by
$0.13 million or 17.36% due to a change in the overall marketing approach in our
recruitment process. Management determined that it was more effective to
communicate to a potential representative force with general marketing
materials. As a result of this marketing strategy, general marketing expenses
increased by $0.09 million offset by a $0.05 million decline in advertising
expenses (magazines, brochures). Also there was $0.10 million dollar increase in
meals and entertainment as a result of the Company continuing to  meet
potential representatives.

     Communications. Communications expenses increased by $0.07 million or
12.6%, primarily due to increases in printing and Web site expenses
approximating $0.02 million and $0.04 million, respectively. These costs were
incurred to target new revenue streams by providing access to information
through the Internet and other publications. Communication efforts and related
expenses, which also include investor/public relations, conference, and
telephone, have historically been positively correlated with the overall growth
of our business. Our Web site and newsletter "The Capitalist" have become
effective medium to communicate to potential qualified representatives for
recruitment purposes.

     Occupancy. Occupancy expenses increased by $0.11 million or 18.70%
primarily as a result from $0.04 million in added costs for rent and condominium
fees and a $0.04 million increase in depreciation. In the current period we
added two new investment centers in Braintree, Massachusetts and New York, New
York. We acquired additional fixed assets in new computers for the additional
staff, leasehold improvements and additional furniture and fixtures to the home
office in Lynnfield, Massachusetts to accommodate the increase in number of
employees.

     Other administrative. Other administrative expenses, which include various
insurance, postage, office and computer-related expenses, decreased by $0.09
million or 8.20%. The Company experienced a $0.08 million increase in office
expenses related primarily to the opening of a new recruitment office in Miami,
Florida and the cost of a full year of operations for our Los Angeles,
California recruitment office. Increases in other administrative expenses also
included $0.01 million of additional office supply expense, a $0.03 million
increase in bank charges resulting from a heavy volume credit card transactions
to process representative license renewals, a $0.02 million increase in other
taxes due to the prior year's adjustment regarding sales and use tax, and a
$0.01 million increase in charitable donations.

     Offsetting those increases, computer maintenance services declined by $0.07
million reflecting a greater reliance on in-house staff to service our computer
systems and maintain our Web site. Postage decreased by $0.02 million as a
result of paying commissions through Electronic Funds Transmission (EFT) and
providing commission reports to our representatives over our Web site versus
mailing out their check and commission statement. Also, the Company utilized the
United States Post Office for overnight deliveries, which is less expensive than
other parcel couriers.

     Other declines in office-related expenses were from mutual fund expenses
which experienced a $0.08 million decline due to the termination of the
management agreement for the mutual funds, and a $0.07 million decline in bad
debt expenses from the write off of bad debt related to loans extended to our
representatives. No loans were written off during the fiscal year ended March
31, 2006.

     Operating Income

     Operating income decreased by $0.06 million or 6.72% due to an increase in
operating expenses of 22.5%. The most significant contributors to the increase
in operating expenses were $0.74 million in legal fees in the Massachusetts
Proceedings and an additional $1.05 million in legal fees and settlements
incurred in other legal proceedings that the Company believes in the aggregate
will prove to be atypically heavy when compared with legal related expenses
incurred in the course of future operations.


                                       28
<PAGE>

     We will continue to make substantial investments in our selling and
administrative services capabilities, including additions to management,
personnel and service infrastructure, as part of a concerted strategy to
increase revenues and profitability. Management firmly believes that a sustained
focus on enhancing our state-of-the-art business platform will facilitate
accelerated recruitment of independent representatives that are focused on
growing revenues, particularly in high margin lines such as advisory and trading
services. As part of this effort, the Company continues to invest in an
automated trading system that enables sophisticated representatives to enhance
client base and activity.

     Net Income

     Net income decreased by approximately $0.17 million or 27.40%, or $0.03 per
basic and $0.02 per diluted share, due to a decrease in operating income and a
related increase in the provision for income taxes due to deferred tax items.
The decrease in operating income is a result of incurring more operating
expenses, primarily legal expenses, proportionate to the increase in revenues
and profit margins compared to the fiscal year ended March 31, 2005. In partial
offset, we experienced a $0.02 million gain on the sale of an asset during the
current period. See Footnote 3 to our Consolidated Financial Statements. There
was no such gain in the prior period; however, there was a $0.03 million dollar
loss on early disposal of computer equipment.

Fiscal Year Ended March 31, 2005 Compared with Fiscal Year Ended March 31, 2004:
-------------------------------------------------------------------------------

     Revenues

     Revenues increased 12.70% for fiscal year 2005 versus 2004. The Company
still managed growth over the comparative year although overall market
conditions negatively affected the industry. The presidential election, the war
in Iraq, rising energy costs, and a potential increase in interest rates created
skepticism within the financial service sector; however, the Company, through
it's recruiting process, continued to attract sophisticated representatives who
offered a broad and diversified product base to clients. As a result, the
Company was able to obtain an increase in overall sales even during difficult
market conditions.


                                       29
<PAGE>

<TABLE>
<CAPTION>
<S>                                             <C>          <C>             <C>        <C>              <C>
Revenues

                                                        Revenue           Percent of Revenue           Revenue
                                                  Year Ended March 31,    Year Ended 'March 31  Percent Change
                                                ------------------------  --------------------  --------------
                                                                                                          2005
                                                       2005         2004      2005       2004         vs. 2004
                                                       ----         ----      ----       ----         --------
Revenues:

Commission- Mutual Funds and Variable Annuity   $33,967,125  $33,076,432     61.60%     67.50%           2.70%

Commission-Trading                               14,245,778   11,384,745     25.80%     23.30%          25.10%

Commission-Insurance Products                       348,787      240,649      0.60%      0.50%          44.90%

Commission-Underwriting                             116,338      131,540      0.20%      0.30%         -11.60%

Advisory Services and Administration Fees         3,863,090    2,519,554      7.00%      5.10%          53.30%

Licensing                                         1,004,307      340,283      1.80%      0.70%         195.10%

Marketing                                         1,140,098      836,428      2.10%      1.70%          36.30%

Other income                                        480,011      434,443      0.90%      0.90%          10.50%
                                                ------------------------

Total Revenue                                   $55,165,534  $48,964,074    100.00%    100.00%          12.70%
                                                ========================
</TABLE>


     The effect of recruiting suitable representatives is demonstrated in the
preceding Revenue table. Sales of mutual funds and variable annuities, as a
percentage of revenue, decreased to 61.60% in fiscal year ended March 31, 2005
compared to 67.60% for the previous year. On the other hand, sales from trading,
as a percentage of revenue, increased from 23.30% to 25.80% compared to the
prior year, and advisory services sales, as a percentage of revenue, increased
from 5.10% to 7.00%.

     By recruiting representatives who are licensed to sell a variety of
investments that meet the needs of their clients, we achieved a significant
shift of sales towards higher margin products. This contributed to an increase
in the overall profit margin. The gross margin table illustrates that sales in
mutual funds and variable annuities generated on average a 13.00% margin
retention during fiscal years ended 2005 and 2004; whereas sales from trading
produced profit margin retentions of 14.40% and 21.80% for fiscal years ended
2005 and 2004 respectively. Even more tellingly, Advisory Services sales for
those comparative years ended March 31, 2005 and 2004 yielded an average margin
retention of 44.00%.


                                       30
<PAGE>

<TABLE>
<CAPTION>
<S>                          <C>            <C>                 <C>       <C>            <C>       <C>             <C>

Gross Margin
                                                                                          Percent of
                                                           Gross Margin Retention      Total Gross Margin
                                  Gross Margin                   Year Ended               Year Ended
                              Year Ended March 31,                March 31,                March 31,
                         ------------------------------     --------------------     --------------------     ----------
                                                                                                                   2005
                              2005           2004             2005      2004           2005      2004          vs. 2004
                              ----           ----             ----      ----           ----      ----         ----------
Gross Margin:

Commission -
Mutual Funds,
Variable Annuities, etc      $4,467,235     $4,299,936          13.20%    13.00%         40.10%    44.48%          3.89%

Commission -
Trading                       2,050,086      2,484,005          14.40%    21.80%         18.40%    25.69%        -17.47%

Commission -
Insurance Products              342,978        173,347          98.30%    72.00%          3.08%     1.79%         97.86%

Commission -
Underwriting                     17,766         31,861          15.30%    24.20%          0.16%     0.33%        -44.24%

Advisory Services
and Administration
Fees                          1,647,048      1,147,176          42.60%    45.50%         14.78%    11.87%         43.57%

Licensing                     1,004,307        340,283         100.00%   100.00%          9.01%     3.52%        195.14%

Marketing                     1,140,098        836,428            n/a       n/a          10.23%     8.65%         36.31%

Other income                    471,012        355,084            n/a       n/a           4.24%     3.67%         32.65%
                         ------------------------------


Total Gross Margin          $11,140,530     $9,668,120          20.20%    19.70%        100.00%   100.00%         15.23%
                         ==============================
</TABLE>

   Gross margin contribution in advisory services went from $1.10 million in
2004 to $1.60 million in 2005. We have enhanced our advisory services model by
implementing ICA's advisory service program, an advisor directed asset managed
program that accounted for most of the greatest increase in advisory sales.

   Gross margin contribution from trading declined to $2.10 million in fiscal
year ended 2005 as the result of several factors. In fiscal year 2005 we had a
net trading error of approximately $0.22 million. In addition, a number of our
representatives increased sales through our online trading platform. These
representatives tend to execute fewer, but higher volume, trades than our other
representatives, resulting in less ticket revenue for the Company. Also, these
representatives generally command a higher payout. In light of the increases in
trading sales volume and assets under management, we will continue to focus our
attention on recruiting high-level and experienced representatives to improve
our overall profit margin and at the same time meet the financial needs of our
clients.


                                       31
<PAGE>

Payouts to Representatives

   Payouts to representatives in commissions, advisory, and other fees have held
steadily at approximately 82.20% of sales for the comparative fiscal years 2005
and 2004. Management continually monitors and adjusts its payout structure
accordingly.

Operating Expenses

   Advertising. Advertising expenses increased by approximately 25.0% over the
previous year due to added marketing efforts that are necessary to promote the
Company and enhance its brand name recognition. The national presence of the
Company has demanded a wider scope of advertising. Additionally, travel and its
associated costs have been required in order to support our marketing efforts.

   Communications. Communications expenses increased by approximately 28.0% over
the prior year due to costs in the areas of printing, investor/public relations,
Web site infrastructure, conferences, and telephone. These expenses are heavily
correlated with growth in the Company and its overall business activity.

   Compensation and Benefits. Compensation and benefits expenses increased by
25.0% over the prior year due to our commitment to place individuals with strong
industry expertise into positions of leadership where essential decisions can be
formed. On an overall basis, additional compensation benefits allow the Company
to grow and provide better service.

   Regulatory, Legal and Professional. Regulatory, legal and professional
expenses increased by approximately 48.0% over fiscal year 2004. With the growth
in our broker-dealer, advisory, and asset management business, and the
associated regulatory scrutiny commonplace in the industry, the Company had
increased its utilization of professional services. The Company remitted full
payment during 2005 on a sizeable liability related to regulatory matters, thus
fully satisfying its related obligations. The overall current market risk of the
industry is a factor that remains uncertain. Management believes that costs
related to regulatory, legal and professional activities can be stabilized in
the future under an improved overall investment environment and increasingly
effective risk management.

   Occupancy. Occupancy expenses had increased by approximately 23.0% from the
prior year mainly due to increases in rent and depreciation of fixed assets. As
the Company continues to expand, additional fixed asset expenditures may be
required.

   Other Administrative. Other administrative expenses decreased by
approximately 6.0% over the past year, demonstrating that the Company is
controlling operating expenses related to company wide items. The other
administrative expense categories include various insurance items, postage,
office expenses, and computer maintenance.

Operating Income

   Operating income declined from $1.40 million, or 2.9% of revenues, to $1.00
million, or 1.7% of revenues, compared to 2004. In fiscal year March 31, 2005
versus fiscal year March 31, 2004 we made a substantial financial commitment to
acquire seasoned personnel, including senior management with extensive and
responsible industry expertise, in an effort to increase sales, particularly by
restructuring the Company's product mix to emphasize the advisory services
sector. Management's efforts were to continue to refine the business model,
particular regarding recruitment of key personnel and quality producing
representatives with the view of growing the high margin advisory services
sector and trading or brokerage sector and improving operating income and
earnings per share.


                                       32
<PAGE>

Net Income

   In comparative fiscal years 2005 and 2004, net income decreased by
approximately $0.17 million, or $0.03 per basic share and $0.04 per diluted
share. In an ever changing and increasingly competitive environment, our
long-term plan is to increase net income and earnings per share on a sustainable
basis. Key to this effort will be to continue attracting and servicing high
quality, professional representatives who will enable us to efficiently exploit
our market niche, grow assets under management, and increase our overall
profitability.

Liquidity and Capital Resources

   The Company believes that achieving its return on equity goals requires the
efficient use of capital. We have financed our operations primarily with
internally generated cash flow.

   Cash inflows historically come mainly from the profitability of the Company's
core services and investment products. For the last several years, profitability
has typically followed an annual cycle of relatively average profitability
during the first and third fiscal quarters, relatively low profitability during
the second fiscal quarter (when several representatives and their clients are on
summer vacation), and relatively high profitability during the fourth fiscal
quarter (when several representatives and their clients start a new business and
investment year).

   In addition to the annual profitability cycle, uncertainty in the financial
markets can have a negative impact on cash flow. The Company works to minimize
this impact by aggressively recruiting sophisticated representatives who can
offer diversified products that continue to meet the needs of their clients,
despite changing market conditions.

   The Company takes a proactive approach to minimizing, if not preventing, the
occurrence of other events that may lead to unexpected cash outflows, including
lawsuits, trade errors and fines from regulatory agencies such as the NASD or
the SEC. A key to this approach is ensuring that adequate controls over our
operations and those of our representatives are implemented and periodically
updated. As part of this effort, substantial resources have been committed to
enhancing the capabilities of our compliance team members, whose tasks include
assuring that our representatives give proper weight to the circumstances and
interests of their clients when recommending investment options. The Company
also allocates resources to stay current with the many rules and regulations
applicable to our business by assisting in the education and training of our
sales representatives and staff.

   As of March 31, 2006, cash and cash equivalents totaled $7.72 million as
compared to $8.62 million as of March 31, 2005. Working capital as of March 31,
2006 was $8.04 million as compared to $9.08 million as of March 31, 2005. The
ratio of current assets to current liabilities was 2.70 to 1 as of March 31,
2006 as compared to 3.31 to 1 as of March 31, 2005.

   Operations provided $0.01 million in cash for the year ended March 31, 2006
as compared to providing $0.96 million cash for year ended March 31, 2005. Cash
flow from operations in comparing the current period to the prior period
decreased by $0.95 million as a result of several factors. We experienced a
$0.17 million decrease in net income. We had a cash flow decrease of $1.60
million from our trade receivables and a $0.40 million decrease in accounts
receivable "asset held for sale". Offsetting this decrease was a $0.78 million
cash flow increase from income taxes, a $0.32 million decrease from current
payables in accounts payable and accrued expenses and a $0.74 million increase
resulting from commission payables.

   Cash outflows from investing activities for the current period comprised
$0.92 million of which $0.41 million was for purchasing equipment as well as
technology and leasehold improvements. $0.35 million was used to grant loans to
registered representatives to help grow their businesses. Also, we had a $0.15
million cash outflow for an investment through a private placement.

   Finally, from financing activities we paid a $0.12 million cash dividend on
May 16, 2005 to shareholders of record as of May 2, 2005, offset by $0.09
million received in financing debt for our insurance premiums.


                                       33
<PAGE>

     Cash disbursements contributing significantly to year end cash outflows
during our most recent quarter included $0.68 million for legal related matters.
Also, we had $1.20 million in cash disbursements for payment to our errors and
omissions insurance carrier offset by $1.70 million for insurance premium
collections.

     Management anticipates that the current period net cash outflows for legal
are not indicative of a future cash outflow trend but, rather, reflected payment
on an atypical lawsuit that was not covered by our insurance policy and for
legal fees paid to defend against the Massachusetts Proceedings. However, those
disbursements during the current quarter did have a significant impact on our
brokerage firm's net capital ratio.

   The SEC Uniform Net Capital Rule (Rule 15c3-1) requires that ICC, our
broker-dealer subsidiary, maintain net capital of $100,000 and a ratio of
aggregate indebtedness to net capital (a "net capital ratio") not to exceed 15
to 1. Under the rule, indebtedness generally includes all money owed by a
company, and net capital includes cash and assets that are easily converted into
cash. SEC rules also prohibit "equity capital" (which, under the net capital
rule, includes subordinated loans) from being withdrawn, cash dividends from
being paid and other specified actions of similar effect from being taken, if,
among other specified contingencies, the Company's net capital ratio would
exceed 10 to 1 or if we would have less than 120% of our minimum required net
capital. As of March 31, 2006, ICC had net capital of $0.96 million (i.e., an
excess of $0.53 million) and a 6.63 to 1 net capital ratio as compared to net
capital of approximately $1.70 million (i.e., an excess of $1.40 million) and a
2.43 to 1 net capital ratio as of March 31, 2005.

    The company's legal accrual increased to $0.43 million from $0.25 million as
a result of the Massachusetts Proceedings. During the current period the
increase in our legal accrual had impacted ICC's net capital ratio and excess
net capital. The Company does not consider this to be a trend and does not
currently anticipate that similar accrual increases will be a recurring
necessity. See Footnote 15 to our Consolidated Financial Statements.

    The Company currently has ample cash to cover additional accruals and
disbursements resulting from these proceedings. Despite these legal proceedings,
that increased our legal accrual, the Company remains focused on committing
their resources necessary for continued growth.

     In its role as investment advisor to the Eastern Point Advisors Funds Trust
family of mutual funds, Company disbursements to pay fund expenses that exceed
their respective ceiling caps averaged $0.08 million per quarter during the
duration of this current fiscal year. As previously noted, the Company agreed to
terminate its management contract with the Trust and, accordingly, the Company
received a relative cash flow infusion of $0.18 million for the year ended March
31, 2006 versus a $0.39 million cash flow outlay for the year ended March 31,
2005. See Footnote 3 to our Consolidated Financial Statements.

   By comparison, for the year ended March 31, 2005, cash inflows primarily came
from net income, which contributed $0.62 million as well as the collection of
$0.42 million of accounts receivable and $0.59 million from current liabilities
in accrued expenses and accounts payable. Cash outflows included $0.58 million
for payment of taxes, $0.19 million for payment of commissions. From investing
activities we had cash outflows of $0.27 million for equipment and technology
and $0.18 million in loans to representatives to help them grow their business.
From financing activities we received cash inflows of $0.07 million from the
issuance of stock to employees and exercise of stock options. Finally we had a
cash outflow of $0.15 million to the NASD to pay a note in full.

   ICC made a business decision in fiscal year ending March 31, 2003 to conclude
an NASD investigation into supervisory procedures relating to the period of
January of 2000 through July of 2002. While we considered disputing the
allegations in a formal proceeding, we estimated the cost of doing so to be
prohibitive. Furthermore, we sought to avoid disruption of our operations.
Accordingly, while neither admitting nor denying the allegations, we consented
to a number of findings in order to resolve the matter in its initial stages.
Repayment of the resulting settlement note to NASD did not have a material
effect on cash flow at any time during the current period as the note was fully
paid on August 19, 2004. The Company has implemented and maintains an adequate
system of supervisory and regulatory procedures and does not foresee any
material deficiencies in the future in this regard.


                                       34
<PAGE>

   During fiscal year ended March 31, 2004 cash and cash equivalents increased
by $1.02 million primarily from $0.8 million in net income. Other operating
activity items contributing to this increase were a $0.58 million increase in
cash flows from income taxes and a $0.95 million cash flow increase from
commission payable offset by a $1.84 million decrease in accounts receivable
related items primarily from trade blotter. We had cash outflow items in
investing activities from purchases of equipment totaling $0.12 million.

<TABLE>
<CAPTION>
<S>              <C>                      <C>          <C>              <C>                  <C>             <C>

Contractual Obligations                               Payments Due by period
------------------------------------------------------------------------------------------------------------------
                                                   April 01,2006-
Period                                             March 31,2007    April 01,2007-   April 01,2010-   April 01,2012-
                                                    less than 1     March 31,2010    March 31,2012    March 31,xxxx
                                          Total        year           1-3 years        4-5 years      After 5 years

Fiscal Years Ended March 31,                                                                           2013 and
                                                       2007           2008-2010        2011-2012       thereafter
------------------------------------------------------------------------------------------------------------------

short- term loans and notes payable:1
    Lines of credit and other short-
     term
    borrowings                             94,573       94,573

Operating leases:2                        722,324      381,378          340,946              0               0

                                        --------------------------------------------------------------------------
Total Contractual Obligations            $816,897     $475,951         $340,946              0               0
                                        --------------------------------------------------------------------------

1 Refer to Note 11 of the Notes to Consolidated Financial Statements for information regarding short- term loans
and notes payable.

2 Refer to Note 14 of the Notes to Consolidated Financial Statements for information regarding operating leases.
</TABLE>

 Recently Issued Accounting Standards

     In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections" ("SFAS No. 154"). This statement replaces APB Opinion No. 20,
"Accounting Changes", and FASB Statement No. 3, "Reporting Accounting Changes in
Interim Financial Statements", and changes the requirements for the accounting
for and reporting of a change in accounting principle. SFAS No. 154 requires
retrospective application to prior periods' financial statements of changes in
accounting principle, unless it is impracticable to determine either the
period-specific effects or the cumulative effect of the change. This statement
also requires that a change in depreciation, amortization, or depletion method
for long-lived, non-financial assets be accounted for as a change in accounting
estimate affected by a change in accounting principle. The Company was required
to adopt SFAS No. 154 on April 1, 2006; however, management does not expect the
adoption of SFAS No. 154 to have a material impact on the Company's cash flows,
results of operations, or financial position.

In December 2004, the FASB issued SFAS No. 123 (Revised 2004), "Share-Based
Payment" ("SFAS No. 123R"). SFAS No. 123R addresses all forms of share-based
payment ("SBP") awards, including shares issued under employee stock purchase
plans, stock options, restricted stock, and stock appreciation rights. SFAS No.
123R requires the Company to expense SBP awards with compensation cost for SBP
transactions measured at fair value. The FASB originally stated a preference for
a lattice model because it believed that a lattice model more fully captures the
unique characteristics of employee stock options in the estimate of fair value,
as compared to the Black-Scholes model, which the Company currently uses for its
disclosure. The FASB decided to remove its explicit preference for a lattice
model and not require a single valuation methodology. SFAS No. 123R required the
Company to adopt the new accounting provisions beginning April 1, 2006. The
Company has evaluated the impact of applying the various provisions of SFAS No.
123R and has determined that there is no impact on the financial statements.

   Please refer to Note 2 "Accounting Policies" of the notes to the consolidated
financial statements contained herein.


                                       35
<PAGE>

ITEM 7A.  QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK.

   Market risk is present in our business due to, among other things, price
changes in equities, changes in interest rates, and credit ratings in debt
instruments. We are also exposed to market risk as a result of asset management
of a client's portfolio. Market risk is present in our normal business activity
as a result of our involvement as principal in the execution of trading activity
and delivery of fixed and variable investment products. We conduct our business
as a brokerage and advisory firm clearing through another broker dealer on a
fully disclosed basis to minimize our market risk. Additional information
pertaining to market risk is contained in "Managements' Discussion and Analysis
of Financial Condition and Results of Operations" under the caption " Risk
Management" of this Form 10-K.

Risk Management

   Risk is an inherent part of the Company's business and activities. Risk
management is critical to the Company's financial strength and profitability and
requires robust auditing, constant communications, judgment and knowledge of
financial trends and the economy as a whole.

   Senior management takes an active role in the risk management process. The
principal risks involved in the Company's business activities are market,
operational, regulatory and legal.

Market Risk

   Market risk is the risk attributable to common macroeconomic factors such as
gross domestic product, employment, inflation, interest rates, budget deficits
and consumer sentiment. Consumer and producer sentiment is critical to our
business. The level of consumer confidence determines their willingness to
spend, especially in the financial markets. It is this willingness to spend in
the financial markets that is key to our business. A shift in spending in this
area could negatively impact us. However, senior management is constantly
monitoring these economic trends in order to enhance our product line to offset
any potential negative impact. See, also, "ITEM 7A. Quantitative and Qualitative
Disclosures About Market Risk".

Operational Risk

   Operational risk refers to the risk of loss resulting from the Company's
operations, including, but not limited to, improper or unauthorized execution
processing of transactions, deficiencies in the Company's technology or
financial or financial operating systems and inadequacies or breaches in the
Company's control processes. Managing these risks is critical, especially in a
rapidly changing environment with increasing transaction volume. Failure to
manage these risks could result in material financial loss to the Company. To
mitigate these risks, the Company has developed specific policies and procedures
designed to identify and manage operational risk. These policies and procedures
are reviewed and updated on a continuing basis to ensure that this risk is
minimized.

Regulatory and Legal Risk

   Regulatory and legal risk includes non-compliance with applicable legal and
regulatory requirements and the risk of a large number of customer claims that
could result in adverse judgments against the Company. The Company is subject to
extensive regulation in all jurisdictions in which it operates. In this regard,
the Company has instituted comprehensive procedures to address issues such as
regulatory capital requirements, sales and trading practices, use of and
safekeeping of customer funds, credit granting, collection activities,
money-laundering and record-keeping. However, as evidenced by the bringing and
maintenance of the Massachusetts Proceedings and other pending litigation (see
Part I, Item 3 - Legal Proceedings), there can be no assurances that such
compliance procedures will prevent future regulatory and legal proceedings, the
outcomes and consequences of which cannot now be reasonably foreseen or
quantified.

                                       36
<PAGE>

Effects of Inflation

   The Company's assets primarily are liquid in nature and not significantly
affected by inflation. Management believes that the replacement cost of property
and equipment will not materially affect operating results. However, the rate of
inflation affects our expenses, including employee compensation and benefits,
communications and occupancy, which may not be readily recoverable through
charges for services provided.

ITEM 8.  FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.





                                       37
<PAGE>




To the Board of Directors and Stockholders of Investors Capital Holdings, Ltd.
and Subsidiaries Lynnfield, Massachusetts


            REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We have audited the accompanying consolidated balance sheets of Investors
Capital Holdings, Ltd. and Subsidiaries (the "Company") as of March 31, 2006 and
2005, and the related consolidated statements of income, changes in
stockholders' equity, and cash flows for each of the three years in the period
ended March 31, 2006. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express an
opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with the standards of the Public Company
Accounting Oversight Board (United States). Those standards require that we plan
and perform the audit to obtain reasonable assurance about whether the financial
statements are free of material misstatement. We were not engaged to perform an
audit of the Company's internal control over financial reporting. Our audits
included consideration of internal control over financial reporting as a basis
for designing audit procedures that are appropriate in the circumstances, but
not for the purpose of expressing an opinion on the effectiveness of the
Company's internal control over financial reporting. Accordingly, we express no
such opinion. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall consolidated financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.

In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of the Company as of
March 31, 2006 and 2005 and the results of its operations and its cash flows for
each of the three years in the period ended March 31, 2006 in conformity with
accounting principles generally accepted in the United States of America.


/s/ Brown and Brown, LLP
------------------------
Boston, Massachusetts
May 17, 2006





                                       38
<PAGE>

<TABLE>
<CAPTION>
<S>                                                       <C>                  <C>

          INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
                     CONSOLIDATED BALANCE SHEETS

                                                      March 31,            March 31,
                                                        2006                 2005
 Assets

 Current Assets

 Cash and cash equivalents                                $7,718,682           $8,618,261
 Deposit with clearing organization, restricted              175,000              175,000
 Accounts receivable                                       4,163,658            3,003,459
 Note receivable-sale of asset (current)                       8,561                    -
 Accounts receivable asset held for sale                           -              358,050
 Loans receivable from registered
  representatives(current)                                   379,222              173,875
 Prepaid income taxes                                              -              100,889
 Marketable securities, at market value                       73,702              330,380
 Prepaid expenses                                            261,888              247,421
                                                 -------------------- --------------------
                                                          12,780,713           13,007,335

 Property and equipment, net                                 772,498              571,198

 Long Term Investments
 Loans receivable from registered representatives            223,019               77,270
 Note Receivable-sale of asset                               747,617
 Equity Investments,at cost                                  190,000               40,000
 Investments                                                 159,150              142,816
 Cash surrender value life insurance policies                181,872               91,882
                                                 -------------------- --------------------
                                                           1,501,658              351,968
 Other Assets
 Other assets                                                 22,644               29,666
 Deferred tax asset, net                                     248,314              149,471
                                                 -------------------- --------------------

                                                             270,958              179,137

 TOTAL ASSETS                                             15,325,827           14,109,638
                                                 ==================== ====================

 Liabilities and Stockholders' Equity

 Current Liabilities

 Accounts payable                                          1,210,086            1,045,314
 Accrued expenses                                            648,298              552,088
 Notes payable                                                94,573                9,433
 Unearned revenues                                           104,779              106,775
 Commissions payable                                       2,432,596            1,885,340
 Income taxes payable                                        198,026                   --
 Securities sold, not yet purchased,
  at market value                                             51,386              327,905
                                                 -------------------- --------------------
                                                           4,739,744            3,926,855

 Total liabilities                                         4,739,744            3,926,855
                                                 -------------------- --------------------

 Commitments and contingencies (Note 14)

 Stockholders' Equity:

 Common stock, $.01 par value, 10,000,000
 shares authorized;5,794,246  issued and
  5,790,361 outstanding in 2006; 5,757,348
  issued and 5,753,463 outstanding in 2005.                   57,942               57,573
 Additional paid-in capital                                8,740,780            8,691,566
 Retained earnings                                         1,797,789            1,463,779
 less: Treasury stock, 3,885 shares at cost                  (30,135)             (30,135)
 Accumulated other comprehensive income                       19,707                   --
                                                 -------------------- --------------------

 Total stockholders' equity                               10,586,083           10,182,783

 TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY               15,325,827           14,109,638
                                                 ==================== ====================

 The accompanying notes are an integral part of these consolidated financial statements.

</TABLE>
                                       39
<PAGE>

<TABLE>
<CAPTION>
<S>                                                    <C>             <C>             <C>

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF INCOME

                                                                     YEARS ENDED
                                                                      March 31,
                                                              2006            2005            2004
Revenues:
Commission                                             $60,028,731     $48,660,052     $44,831,827
Advisory fees                                            5,147,907       3,702,556       2,288,658
Other fee income                                         1,142,454       1,189,737         673,418
Marketing revenue                                        1,013,828       1,140,098         836,428
Other income                                               645,948         473,091         333,743
                                                   ---------------- --------------- ---------------
Total revenue                                           67,978,868      55,165,534      48,964,074

Commission and advisory fees                            54,609,596      44,025,004      39,295,954
                                                   ---------------- --------------- ---------------
Gross profit                                            13,369,272      11,140,530       9,668,120
                                                   ---------------- --------------- ---------------
Operating expenses:

Advertisement and marketing                                895,658         763,192         611,435
Communications                                             603,964         536,386         419,749
                                                   ---------------- --------------- ---------------
Selling                                                  1,499,622       1,299,578       1,031,184
                                                   ---------------- --------------- ---------------
Compensation and benefits                                6,344,945       5,713,028       4,569,398
Regulatory, legal and professional                       2,965,689       1,527,256       1,028,901
Occupancy                                                  695,003         585,646         474,998
Other  Admistrative expenses                               968,825       1,055,368       1,123,982
                                                   ---------------- --------------- ---------------
Administrative                                          10,974,462       8,881,298       7,197,279
                                                   ---------------- --------------- ---------------
Total operating expenses                                12,474,084      10,180,876       8,228,463
                                                   ---------------- --------------- ---------------
Operating income                                           895,188         959,654       1,439,657

Other (expense) income :

Interest expense                                           (47,782)        (40,440)        (39,326)
Gain on sale of asset                                       23,560
Loss on disposal of equipment                                    -         (31,072)               -
                                                   ---------------- --------------- ---------------

Total other (expense)                                      (24,222)        (71,512)        (39,326)
                                                   ---------------- --------------- ---------------
Income before taxes                                        870,966         888,142       1,400,331
Provision for income taxes                                 421,328         269,033         609,918
                                                   ---------------- --------------- ---------------
Net income                                                $449,638        $619,109        $790,413
                                                   ================ =============== ===============
Earnings per common share
Basic earnings per common share:                              0.08            0.11            0.14
                                                   ================ =============== ===============
Diluted earnings per common share:                           $0.08           $0.10           $0.14
                                                   ================ =============== ===============
Share Data:
Weighted average shares used in basic
 earnings per common share calculations                  5,766,686       5,735,287       5,720,843

Plus:Incremental shares from assumed
 exercise of stock options                                 144,343         186,917         156,232
                                                   ---------------- --------------- ---------------
Weighted average shares used in diluted
 earnings per common share calculations                  5,911,029       5,922,204       5,877,075
                                                   ================ =============== ===============


</TABLE>
                                       40
<PAGE>

<TABLE>
<CAPTION>
<S>              <C> <C>      <C>          <C>    <C>                         <C>      <C>           <C>      <C>

                           INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
                           -------------------------------------------------
                       CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS' EQUITY
                       ----------------------------------------------------------
                               Years Ended March 31, 2006, 2005 and 2004
                               -----------------------------------------

                                Common    Amount  Additional Comprehensive  Retained  Treasury  Accumulated
                                Stock              Paid-In      Income      Earnings   Stock       Other
                                Shares             Capital                 (Deficit)           Comprehensive   Total
                                                                                               Income (Loss)

                                        --------------------------------------------------------------------------------
Balance at March 31, 2003     5,721,265    57,213 8,169,292              -    54,257   (30,135)      (1,987)  8,248,640
                                        ================================================================================

Stock based compensation         10,333       103   351,639                                                     351,742

Comprehensive income:
   Net income                                                      790,413   790,413
Other Comprehensive Income:
   Unrealized gain on
    securities:
unrealized holding gains
 arising during
period no tax effect                                                14,144
                                                            ---------------
no reclassification adjustment
 required                                                                -
                                                            ---------------                    -------------
                                                            ---------------
Other Comprehensive Income                                          14,144                           14,144
                                                            ---------------                    -------------
                                                            ---------------
   Comprehensive Income                                            804,557                                      804,557
                                                            ===============
                                                            ---------------                    -------------
Balance at March 31, 2004     5,731,598    57,316 8,520,931              -   844,670   (30,135)      12,157   9,404,939
                                                            ===============                    =============

Stock based compensation         25,750       257   170,635                                                     170,892

Comprehensive income:
   Net income                                                      619,109   619,109

Other Comprehensive Income:
   Unrealized gain on
    securities:                                                                                           -
                                                                                               -------------
Unrealized holding losses
 arising during                                                       (385)
 period no tax effect
                                                            ---------------                    -------------
                                                            ---------------                    -------------
Less: reclassification
 adjustment for gain
 included in net income no tax
 effect                                                            (11,772)
                                                            ---------------
                                                            ---------------                    -------------
Other Comprehensive Income                                         (12,157)                         (12,157)
                                                            ===============                    =============
   Comprehensive Income                                            606,952                                      606,952
                                                            ---------------
                                                            ===============
Balance at March  31, 2005    5,757,348    57,573 8,691,566              - 1,463,779   (30,135)           -  10,182,783
                                        --------------------------------------------------------------------------------
Stock based compensation         36,898       369    49,214                                                      49,583

Comprehensive income:
   Net income                                                      449,638   449,638

Other Comprehensive Income:
   Unrealized gain on
    securities:
Unrealized holding gains
 arising during                                                     19,707
 period no tax effect

no reclassification adjustment
 required                                                                -
                                                            ---------------
                                                                                               -------------
Other Comprehensive Income                                          19,707                           19,707
                                                            ===============                    -------------
                                                            ---------------
   Comprehensive Income                                            469,345                                      469,345
                                                            ===============
   Dividend payment to
    shareholders                                                            (115,628)                          (115,628)
                              ------------------------------------------------------------------------------------------
Balance at March 31,2006      5,794,246    57,942 8,740,780              - 1,797,789   (30,135)      19,707  10,586,083
                              ==========================================================================================
</TABLE>


Reclassification disclosure:

   There was no reclassification adjustment required for an unrealized gain of
19,707 on available-for-sale securities for the year ended March 31, 2006.

   Net unrealized losses on available-for-sale securities for the year ended
March 31, 2005 were $385. Such amount has been adjusted to $12,157 to reflect a
reclassification of the gain of $11,772 on the sale of a security, with no tax
effect, when the asset was sold.

   For year ended March 31, 2004 the unrealized gain of 14,144 was on
investments held under the equity method; and no reclassification adjustment was
required.

   The accompanying notes are an integral part of these consolidated financial
statements.


                                       41
<PAGE>

<TABLE>
<CAPTION>
<S>                                                       <C>         <C>         <C>

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

Years Ended March 31, 2006, 2005 and 2004

                                                             2006        2005        2004
                                                      ------------------------------------
Cash flows from operating activities:

Net income                                                449,638     619,109     790,413
Adjustments to reconcile net income to net cash
provided by (used in) operating activities:
Depreciation and amortization                             213,214     172,153     138,093
Realized(gain) on securities                                    -     (11,772)          -
Change in deferred taxes                                  (98,843)    (79,750)    (97,753)
Stock option compensation                                  15,814      97,841     319,606
Change in marketable securities                           (19,841)    (75,095)     97,818
Unrealized gain on investments                                  -           -       7,500
Loss on disposal of equipment                                   -      31,072           -
Income (loss) on investment                                 3,373        (990)    (21,325)

Change in operating assets and liabilities
Decrease (increase) in accounts receivable             (1,160,199)    423,914  (1,844,973)
(Increase) in accounts receivable asset held
 for sale                                                (398,128)          -           -
Increase(decrease)prepaid expenses and other assets        (7,445)     40,596     (44,143)
(Increase)decrease prepaid income taxes                   100,889    (100,889)     60,113
Decrease in loans receivable from officers                      -      64,400      39,688
(Decrease)Increase in taxes payable                       198,026    (582,721)    582,721
Increase in accounts payable                              164,772     475,078     166,792
Increase in accrued expenses                               96,210     117,021      57,284
(Decrease)Increase  in commissions payable                547,256    (192,856)    947,657
(Decrease)Increase in unearned revenues                    (1,996)    106,775           -
(Payments) on NASD settlement                                   -    (148,679)   (101,321)
Cash surrender value life insurance policy                (89,990)          -           -
Net cash provided by operating activities                  12,750     955,207   1,098,170


Cash flows from investing activities:

Purchases of property and equipment                      (414,514)   (271,107)   (116,235)
Purchase of Investment in unconsolidated affiliate              -     (56,006)          -
Purchase of Investment in private placement              (150,000)          -           -
Sale of Investment available for sale                           -      55,954           -
Loans receivable from registered representatives         (351,096)   (181,839)     26,083


Net cash used in investing activities                    (915,610)   (452,998)    (90,152)

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>

                                       42
<PAGE>

<TABLE>
<CAPTION>
<S>                                                         <C>        <C>         <C>

INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES

CONSOLIDATED STATEMENTS OF CASH FLOWS -- (CONTINUED)


                                                              2006        2005        2004
Cash flows from financing activities:

Note Payable:

Proceeds (Payment) from Note Payable                        85,140     (69,566)    (18,230)
Payment of dividends                                      (115,628)          -           -
Additional paid in capital:
Issuance of employee stock                                  29,181      45,520      31,400
Exercise of stock options                                    4,219      27,274         633
Additional public offering cost

Common stock:

Issuance of employee stock                                     348         120         100
Exercise of stock options                                       21         137           3
                                                         ---------   ---------   ---------
Net cash provided by in financing activities                 3,281       3,485      13,906
                                                         ---------   ---------   ---------
Net (decrease) increase in cash and cash equivalents      (899,579)    505,694   1,021,924

Cash and cash equivalents, beginning of year             8,618,261   8,112,567   7,090,643
                                                         ---------   ---------   ---------
Cash and cash equivalents, end of year                   7,718,682   8,618,261   8,112,567
                                                         =========   =========   =========

Supplemental disclosures of cash flow information:

Interest paid                                               47,782      40,440      39,326
Income taxes paid                                          212,256   1,020,000     124,000

Supplemental Disclosure of Non-Cash Flow Information       747,617
Financing sale accounts receivable "Mutual Fund
 Management Agreement"

The accompanying notes are an integral part of these consolidated financial statements.
</TABLE>


                                       43
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
                   NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 1 - NATURE OF OPERATIONS

   Investors Capital Holdings, Ltd., (the Company or "ICH") and its wholly-owned
subsidiaries, Investors Capital Corporation ("ICC"), Eastern Point Advisors,
Inc. ("EPA"), ICC Insurance Agency, Inc. and Investors Capital Holdings
Securities Corporation ("ICH Securities") are engaged throughout the United
States in the financial services industry as general securities brokers and
asset managers. ICC is a duly registered broker-dealer under the Securities
Exchange Act of 1934 and a Registered Investment Advisor with a national network
of independent financial representatives. These representatives are licensed to
sell securities through ICC, with the National Association of Securities Dealers
the "NASD") and the Securities and Exchange Commission (the "SEC") acting as the
requisite federal and local regulatory agencies. The Company clears its public
customer accounts on a fully disclosed basis through a clearing broker. EPA is a
federally regulated Investment Advisor subject to the Securities and Exchange
Commission under the Investment Adviser's Act of 1940. The primary activity of
EPA is to provide portfolio and mutual fund management services to both
individual investors and institutional clients, such as banking institutions,
pension funds, endowments, and trusts on a fee basis. ICC Insurance Agency, Inc.
facilitates the sale of insurance and annuities by our registered
representatives. ICH Securities is a Massachusetts securities corporation and
was established in March 2005. ICH Securities primary activity consists of
acting as a holding company for the cash and cash equivalents and interest and
dividend income for ICH.

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

   The significant accounting policies of the Company are summarized below to
assist the reader to better understand the consolidated financial statements and
other data contained herein.

BASIS OF PRESENTATION:

   The consolidated financial statements include the accounts of the Company and
its wholly-owned subsidiaries, ICC, EPA, ICC Insurance Agency, Inc., and ICH
Securities. All significant inter-company items and transactions have been
eliminated in the consolidation.

USE OF ESTIMATES AND ASSUMPTIONS:

   The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires
management to make estimates and assumptions that affect the reported amounts of
assets and liabilities, and disclosure of contingent assets and liabilities, if
any, at the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results could differ
from those estimates.

RECLASSIFICATIONS:

   Certain amounts in 2004 and 2005 were reclassified to provide comparison with
2006 classifications. Included in these reclassifications, were amounts of
marketing and interest and dividend income all of which, either individually or
in the aggregate, had no impact on previously reported net income and retained
earnings.

REVENUE RECOGNITION:

   The Company has established revenue recognition policies for each of the
following income item areas: Mutual Funds/Variable Annuities, Marketing Revenue
on production and for regional and national events, Administration fees on
Errors and Omissions ("E&O") and Renewals, Advisory Fees and Trading Revenue. A
description of the revenue recognition process related to each category is
presented below. The revenue recognition policy the Company maintains is in
compliance with SEC Staff Accounting Bulletin ("SAB") 104 "Revenue Recognition
in Financial Statements".

   Mutual Funds/Variable Annuities. The Mutual Funds/Variable Annuity revenue is
recognized upon receipt of commissions related to each sale, which generally is
settled on the trade date. The earnings process is substantially complete at the
point that the fund company distributes payment to the Company.

   Trading. The Company earns commissions through stock purchases and sale
transactions, mutual fund purchases, government and corporate bonds
transactions, fee-based managed accounts, and ticket charges. The Company also
earns revenue in the form of 12b1 fees and interest on account balances. The
earnings process is substantially complete at trade date in accordance with the
rules of the NASD and SEC.

   The Company also receives credit adjustments for clearing charge adjustments
that are netted against any clearing charges the Company may incur for the
period. These adjustments are recognized as income in the period received unless
otherwise noted by the clearing firm.


                                       44
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

   Unrealized gains and losses are recorded at the time that the Company
reconciles its trading positions with the market value. The unrealized gains or
losses are adjusted to market until the position is settled or the trade is
cancelled.

   Advisory Fees. Our managed accounts advisory fees are based on the amount of
assets managed per agreement between the advisor and the advisor's client. These
revenues are recorded quarterly as and when billed and any portion remaining
uncollected at the end of the subsequent quarter are charged against earnings at
that time.

   Advisory fees relating to the management of mutual funds have been based on
average daily net fund assets as specified in the Company's advisory agreement
and disclosed in the funds' prospectuses. These fees have been recognized
monthly based on the fund Trustee's administrative fee report detailing the
amounts that were earned for the month. The Company in the past has elected to
waive certain fees to allow for one of the funds to maintain its ceiling on
administrative expenses. Per agreement with the trustee of the funds, the waived
fees have been subject to a three-year recovery period, at the end of which any
uncollected fees have been permanently waived and, consequently, charged against
earnings. Effective October 18, 2005, the Company ceased its mutual funds
advisory services, and its successor as fund advisor has agreed to pay to the
Company all such waived amounts with interest. See "Note 3. Note Receivable -
Sale of Asset."

    Administration Fees. Administration fees for services rendered to its
representatives respecting annual NASD license renewals and E&O insurance are
recognized as revenue upon registration of the representative with NASD and
listing of the registered representative with the E&O insurance carrier. The
funds received from the registered representative are initially recorded as
unearned revenue. The amounts, if any, collected in excess of the E & O
insurance premium and/or fees due NASD are recognized as revenue.

   Marketing Revenue. Revenue from marketing associated with product sales is
recognized quarterly based on production levels. Marketing event revenues are
recognized at the commencement of the event offset by its costs.

CASH AND CASH EQUIVALENTS:

   For purposes of reporting cash flow, cash and cash equivalents includes cash
in checking and savings accounts, cash at a clearing broker-dealer and
short-term investments with original maturities of 90 days or less.

CUSTOMER ACCOUNTS:

   The Company's customer accounts are reported by the various custodians on a
fully disclosed basis.

FINANCIAL INSTRUMENTS:

   The financial instruments of the Company are reported in the consolidated
balance sheets at market or fair value, or at carrying amounts that approximate
fair value because of the short maturity of the instruments, except loans
receivable. The fair value for loans receivable are estimated using discounted
cash flow analyses, using interest rates currently being offered for loans with
similar terms to borrowers of similar credit quality.

MARKETABLE SECURITIES:

   The Company accounts for its investments in accordance with Statement of
Financial Accounting Standards (SFAS) No. 115, "Accounting for certain
investments in debt and equity securities". SFAS No. 115 requires companies to
classify their short-term investments as trading, available-for-sale, or
held-to-maturity. The Company's marketable securities consist of fixed income
instruments and mutual funds and have been classified by management as trading.
Accordingly, realized and unrealized gains and losses at year-end are included
in the earnings of the Company. The fair market value of these securities was
determined based on quoted market prices.

   The Company conducts its principal trading through two designated trading
accounts. One of these accounts is used to facilitate fixed income trading on a
same day buy-sell basis. The second account is used to facilitate fixed income
trading for representatives and may carry positions overnight. These securities
are normally held in the account for no longer than 30 days and are recorded at
fair market value.

PROPERTY AND EQUIPMENT:

   Furniture, equipment, leasehold improvements and software are stated at cost.
Maintenance and repairs are charged to operations as incurred. Depreciation is
provided utilizing the straight-line method over the shorter of either their
estimated useful lives or lease term, if applicable. For software and equipment
we use a 5-year straight-line method and for furniture and fixtures we use a
7-year straight-line method.


                                       45
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

ADVERTISING:

   The Company expenses all promotional costs as incurred.

INCOME TAXES:

   The Company accounts for income taxes under provisions of Statement of
Financial Accounting Standards ("SFAS") SFAS No. 109, "Accounting for income
taxes", which uses the asset and liability method. Deferred tax assets and
liabilities are recognized for the future tax consequences attributable to
differences between the financial statement carrying amounts of the existing
assets and liabilities and their respective tax bases and operating loss
carry-forwards. Deferred tax assets and liabilities are measured using enacted
tax rates expected to apply to taxable income in the years in which the
temporary differences are expected to be realized or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is recognized in
income in the period that includes the enactment date. Valuation allowances are
established when necessary to reduce deferred tax assets to the amount expected
to be realized. The Company management has not recorded a valuation allowance
against the deferred tax assets as management believes it is more likely than
not that they will be realized.

EARNINGS PER SHARE:

   The Company reports net income per share in accordance with the SFAS No. 128,
"Earnings per share". Diluted earnings per share do not include the effect of
stock options as it has an anti dilutive effect on EPS (See Note 16). In
accordance with SFAS No. 128, basic and diluted net income per common share was
determined by dividing net income by the weighted average number of common
shares outstanding during the period.

STOCK BASED COMPENSATION:

   The Company applies Accounting Principles Board Opinion No. 25, "Accounting
for Stock Issued to Employees" and related interpretations in accounting for its
stock option plans. The following table illustrates the effect on net income had
the Company adopted the fair value based model of accounting for stock-based
employee compensation for all periods presented:

                                2006                2005                2004
                          -----------         -----------         -----------
Net income, as reported     $449,638            $619,109            $790,413
                          -----------         -----------         -----------
Deduct: Total stock-
 based employee
 compensation expense
 determined under fair
 value based method for
 all awards, net of
 related tax effects               -                   -              (9,903)
                          -----------         -----------         -----------
Pro forma net income         449,638             619,109             780,510
                          -----------         -----------         -----------

Earnings per share:

Basic - as reported            $0.08               $0.11               $0.14

Basic - pro forma              $0.08               $0.11               $0.14

Diluted - as reported          $0.08               $0.10               $0.14

Diluted - pro forma            $0.08               $0.10               $0.14


                                       46
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

   There was no expense that would have been reported for stock- based employee
compensation for the year ended March 31, 2006 had we adopted SFAS 123. This
calculation was based on the Black-Scholes method for valuing options under a
graded vested period of five years.

SEGMENT REPORTING:

   The Company makes disclosures about products and services, geographic areas,
and major customers in accordance with SFAS No. 131, "Disclosures about Segments
of an Enterprise and Related Information."

RECENTLY ISSUED ACCOUNTING STANDARDS:

     In May 2005, the FASB issued SFAS No. 154, "Accounting Changes and Error
Corrections" ("SFAS No. 154"). This statement replaces APB Opinion No. 20,
"Accounting Changes", and FASB Statement No. 3, "Reporting Accounting Changes in
Interim Financial Statements", and changes the requirements for the accounting
for and reporting of a change in accounting principle. SFAS No. 154 requires
retrospective application to prior periods' financial statements of changes in
accounting principle, unless it is impracticable to determine either the
period-specific effects or the cumulative effect of the change. This statement
also requires that a change in depreciation, amortization, or depletion method
for long-lived, non-financial assets be accounted for as a change in accounting
estimate affected by a change in accounting principle. The Company was required
to adopt SFAS No. 154 on April 1, 2006; however, management does not expect the
adoption of SFAS No. 154 to have a material impact on the Company's cash flows,
results of operations, or financial position.

   In December 2004, the FASB issued SFAS No. 123 (Revised 2004), "Share-Based
Payment" ("SFAS No. 123R"). SFAS No. 123R addresses all forms of share-based
payment ("SBP") awards, including shares issued under employee stock purchase
plans, stock options, restricted stock, and stock appreciation rights. SFAS No.
123R will require the Company to expense SBP awards with compensation cost for
SBP transactions measured at fair value. The FASB originally stated a preference
for a lattice model because it believed that a lattice model more fully captures
the unique characteristics of employee stock options in the estimate of fair
value, as compared to the Black-Scholes model, which the Company currently uses
for its disclosure. The FASB decided to remove its explicit preference for a
lattice model and not require a single valuation methodology. SFAS No. 123R
requires the Company to adopt the new accounting provisions beginning April 1,
2006. The Company has evaluated the impact of applying the various provisions of
SFAS No. 123R and has determined that there is no impact on the financial
statements.

ACCOUNTS RECEIVABLE - ALLOWANCE FOR DOUBTFUL ACCOUNTS:

   Our policies for determining whether a receivable is considered uncollectible
are as follows.

   Loans to representatives. In accordance with SFAS No. 5, we perform periodic
credit evaluations and provide allowance based on our assessment of specifically
identified unsecured receivables and other factors, including the
representative's payment history. Once it is determined that it is both probable
that a loan has been impaired and the amount of loss can reasonably be
estimated, the portion of the loan balance estimated to be uncollectible is so
classified and written off.

   Advisory fees from our mutual funds. As disclosed in the respective mutual
funds' prospectuses, the Company has attempted to recoup all waived advisory
service fees within a three-year period. If management believed that the
likelihood of collecting that receivable within the three-year period was
doubtful, then the Company provided for an allowance in accordance with SFAS No.
5. Determinations whether to write off such fees were made annually. Effective
October 18, 2005, the Company no longer provides advisory services to mutual
funds and is entitled to payment of all previously waived advisory fees by its
successor as fund advisor. See "Note 3". Note Receivable.

    Trade receivables. As prescribed by the SEC, trade receivables usually
settle within three days. If a trade error results, the Company will pursue
remedies to collect on that trade error. The Company does not record a
receivable resulting from a trade error that is in litigation or whose outcome
is otherwise not reasonably determinable. In such a case, the Company applies
any proceeds from settlements or insurance against any trade losses incurred.



                                       47
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

VARIABLE INTEREST ENTITIES:

   Effective January 2005, the Company adopted Financial Accounting Standards
Board ("FASB") Interpretation No. 46R, "Consolidation of Variable Interest
Entities" ("FIN No. 46R"). This interpretation addresses consolidation by
business enterprises of variable interest entities in which the equity
investment at risk is not sufficient to permit the entity to finance its
activities without additional subordinated financial support from other parties
or in which the equity investors do not have the characteristics of a
controlling financial interest. The interpretation requires a company to
consolidate a variable interest entity ("VIE") if the company has variable
interests that give it a majority of the expected losses from the VIE's
activities or entitle it to receive a majority of the expected residual returns
of the entity. FIN No. 46R also requires disclosure about VIEs that the company
is not required to consolidate, including the nature, purpose, size, and
activities of the variable interest entity and the enterprise's maximum exposure
to loss as a result of its involvement with the variable interest entity.
Management has determined that no variable interest entities exist which would
require disclosure or consolidation in the financial statements as of March 31,
2006.

NOTE 3 - NOTE RECEIVABLE

   On October 24, 2005, the Company entered into a definitive agreement (the
"Transition Agreement") with Dividend Growth Advisors, LLC ("DGA").Pursuant to
the Transition Agreement, the Company agreed to terminate its Investment
Advisory Agreement with Eastern Point Advisors Funds Trust (the "Trust")
effective October 18, 2005 to permit the appointment by the Trust of DGA to
supersede the Company as the Trust's investment advisor. The Company had served
since 1999 as Investment Advisor for the Funds, which are sponsored by the
Trust, and DGA had provided investment advisory services to the Trust since 2004
pursuant to a subcontract with the Company. DGA entered into a new advisory
agreement directly with the Trust.

   Under the terms of the Transition Agreement and an associated promissory
note, the receivable owed by the Funds to the Company was assigned to DGA and
DGA agreed to pay the Company an amount equal to the total of all fees that the
Company had waived or remitted to a fund in the Trust through October 18, 2005.
In addition, DGA has agreed to pay the Company 10 basis points on the assets
raised by the Company's broker dealer ICC at the effective time of transition,
October 18, 2005 subject to "market to market" adjustments. These fees are to be
paid to the Company on a quarterly basis. Although these payments are part of
the agreement between DGA and the Trust, they are not part of the terms of the
note and are deemed totally separate.

   The note provides for a principle amount of $747,617, quarterly payments of
interest accruing thereon at a 5.5% annual rate, and a full payment on or before
October 31, 2010. Prepayments are permitted without penalty.

NOTE 4 - NET CAPITAL

   The Company's wholly owned subsidiary, ICC, is subject to the SEC's
regulations and operating guidelines, which require ICC to maintain a specified
amount of net capital, as defined, and a ratio of aggregate indebtedness to net
capital, as defined, not exceeding 15 to 1.

   ICC's net capital as computed under SEC Uniform Net Capital Rule (Rule15c3-1)
was $957,424 at March 31, 2006, which resulted in excess net capital of
$534,402 over the required net capital of $423,022. The ratio of aggregate
indebtedness to capital at March 31, 2006 was 6.63 to 1.

   ICC's net capital as computed under SEC Uniform Net Capital Rule (Rule
15c3-1) was $1,692,787 at March 31, 2005, which resulted in excess net capital
of $1,418,238 over the required net capital of $274,549. The ratio of aggregate
indebtedness to capital at March 31, 2005 was 2.43 to 1.




                                       48
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 5 - SECURITIES OWNED AND SOLD, NOT YET PURCHASED

   Securities owned and sold, not yet purchased, consist of available-for-sale
securities and investment securities at market values.

   The carrying amount of investment securities at market values are as follows:


                                     March 31, 2006
                             ------------------------------

                                                Sold, Not
                                                    Yet
                               Owned             Purchased
                             ----------         -----------

Corporate equity                $2,042             $50,432
Corporate bonds                 15,024                   -
Municipal bonds                  7,768                   -
Mortgage backed securities      45,481                   -
Mutual funds                       422                 954
Certificate of Deposit           1,995                   -
Treasury bonds                     970                   -
                             ----------         -----------
                               $73,702             $51,386
                             ==========         ===========

                                     March 31, 2005
                             ------------------------------

                                                Sold, Not
                                                    Yet
                               Owned             Purchased
                             ----------         -----------

Corporate equity              $132,964            $291,124
Unit investment trust            7,287              36,781
Municipal bonds                107,317                   -
Mortgage backed securities      54,143                   -
Mutual funds                    28,669                   -
                             ----------         -----------
                              $330,380            $327,905
                             ==========         ===========




                                       49
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 6 - OTHER INVESTMENTS

    Securities not readily marketable include investment securities (a) for
which there is no market on a securities exchange or no independent publicly
quoted market, (b) that cannot be publicly offered or sold unless registration
has been effected under the Securities Act of 1933, or (c) that cannot be
offered or sold because of other arrangements, restrictions, or conditions
applicable to the securities or to the Company. At March 31, 2006 the Company
recorded its private equity holdings at cost of $190,000. For the comparative
year 2005, the Company recorded its private equity holdings at cost of $40,000.
The Company, during the respective periods in accordance with Accounting
Principles Board No. 18 "The Equity Method of Accounting for Investments in
Common Stock" (APB 18), did not exercise significant influence over these equity
investments.

NOTE 7 - INVESTMENT

   As of March 31, 2006, the Company held a 2.6% ownership interest in The
Eastern Point Advisors Capital Appreciation Fund, which had a fair market value
of $94,767.

   As of March 31, 2006, the Company held a 0.17% ownership interest in the
Eastern Point Advisors Rising Dividend Fund, which had a fair market value of
$64,383.

   As of March 31, 2005, the Company held a 2.4% ownership interest in The
Eastern Point Advisors Capital Appreciation Fund, which had a fair market value
of $84,403.

   During October 2004, the Company purchased approximately 5,484 shares of the
Eastern Point Advisors Rising Dividend Fund. As of March 31, 2005, the Company
held 0.2% ownership in this mutual fund, which had a fair market value of
$58,413.

NOTE 8 - FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF
         CREDIT RISK

   The Company is engaged in various trading and brokerage activities whose
counterparties primarily include the general public. In the event counterparties
do not fulfill their obligations, the Company may be exposed to risk. Securities
sold, but not yet purchased, represent obligations of the Company to purchase
the security in the market at the prevailing prices to the extent that the
Company does not already have the securities in possession. Accordingly, these
transactions result in off-balance sheet risk when the Company's satisfaction of
the obligations exceeds the amount recognized in the balance sheet. The risk of
default depends on the creditworthiness of the counterparty of issuer of the
instrument. It is the Company's policy to review, as necessary, the credit
standings of each counterparty with which it conducts business. Commission's
receivables from one source were 21.30% and 20.51% of total receivables
for the years ended March 31, 2006, abd 2005, respectively.

   At March 31, 2006, the carrying amount of the Company's cash and cash
equivalents was $7,718,682. Of the bank statement balance, $100,000 was covered
by federal depository insurance and $5,468,507 was covered by the Depositors
Insurance Fund of Massachusetts. The Company's cash and cash equivalents as of
March 31, 2006 also include $2,886,093 at its clearing broker-dealer of which
$500,000 is fully insured by the Securities Investor Protection Corporation
(SIPC).

   At March 31, 2005, the carrying amount of the Company's cash and cash
equivalents was $8,618,261. Of the bank statement balance, $100,000 was covered
by federal depository insurance and $6,610,915 was covered by the Depositors
Insurance Fund of Massachusetts. The Company's cash and cash equivalents as of
March 31, 2005 also include $2,314,545 at its clearing broker-dealer of which
$500,000 is fully insured by the Securities Investor Protection Corporation
(SIPC).

NOTE 9 - TRANSACTIONS WITH RELATED PARTIES

   ICH has arrangements with several related parties pertaining to a variety of
transactions. These transactions are incurred in the normal course of business
and are fully arms-length in nature.

   ICH was paid management fees of $1,130,463, $1,324,733 and $1,315,306 for
the years ended March 31, 2006, 2005 and 2004 respectively, from its
subsidiaries ICC and EPA. During fiscal year end 2004, the management fees were
allocated from ICH to ICC based on a 70% allocation of direct operating expenses
and a 30% allocation to EPA. During fiscal year end 2005, an updated time study
was prepared which, based on information provided, resulted in an allocation of
90% of direct operating expenses for ICC and a 10% allocation for EPA. In fiscal
year end 2006 management assessed the ongoing operations of EPA and decided to
keep it operational only for third party (outside) advisory services. This
resulted in a modified allocation of 100% to ICC and 0% to EPA commencing during
the quarter ended March 31, 2006.

   At March 31, 2006, ICH was owed $1,660,651 from ICC, and owed EPA $877,029
for inter-company fund transfers and 100% allocation of the income tax owed for
the controlled group ICH as the parent from its operating subsidiaries EPA and
ICC. At March 31, 2005, ICH was owed $99,098 and $351,770 from ICC and EPA
respectively, for the same items mentioned above.


                                       50
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 9 - TRANSACTIONS WITH RELATED PARTIES (Continued)

   The Company leases office space from the Arlsburg Trust, the trustee of whom
is the principal stockholder of the Company, and Investors Realty, LLC, the
principal member of whom is the principal stockholder of the Company. Rent
expense for these leases amounted to $248,471, $225,671 and $192,423 for the
years ending March 31, 2006, 2005 and 2004, respectively.

   Two former members of the Board of Directors were also registered
representatives and received compensation related to commissions or consulting
fees in the years ending March 31, 2005 and 2004 of $117,292 and
$176,652,respectively. For year ended March 31, 2006 both of these directors had
resigned; and therefore, there were no related party transactions conducted
between these former board members and ICH.

   Loans Receivable from Registered Representatives consist of promissory notes
that bear interest at the rates ranging from 3% to 8% per annum and are payable
within 18 or 24 months of the date of the note in weekly installments. The notes
are secured by various pledges of brokerage accounts and/or personal assets of
the registered representatives. As of March 31, 2006 and 2005 these loans
amounted to $602,241 and $251,145 respectively.

   The Company had previously recorded a receivable for funds it was owed from
senior executives. As of March 31, 2005, the loans had been paid in full. The
senior executives remain in compliance with section 402 of the Sarbanes-Oxley
Act on rules for loans to officers. As of March 31, 2006 there were no loans to
the senior executives of the corporation.

   Investors Marketing Services, Inc. is jointly owned by the Company's
principal stockholder and his spouse. This entity performs a fulfillment
function for subsidiaries of the Company by preparing, collating and mailing
registration kits to registered representatives, and creates graphics and other
artwork for various marketing materials produced for these subsidiaries. It also
prepares the assembly, shipping and postage of literature pertaining to the
subsidiaries. For the years ended March 31, 2006, and 2005 the cost
paid for these services was $55,498 and $33,723 respectively.

   Accounts receivable at March 31, 2005 included amounts due to EPA from the
Eastern Point Advisors Capital Appreciation Fund (the "Fund") of $102,483. As
compensation for services that EPA performs on behalf of the Fund, EPA receives
a monthly investment advisory fee calculated at the annual rate of 1.5% of the
Fund's exercised daily net assets. EPA has 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% for Class A shares and 5.75% for Class
C shares, of the average daily net assets of the respective class. The waiver
may be terminated by EPA at any time. EPA has three years to recoup any expenses
it pays for on behalf of the Fund; otherwise the receivable relating to the
current fiscal year in which it is deemed unrecoverable is charged against
earnings by EPA. On November 1, 2004, the Fund had modified the ceiling on its
annual operating expenses from 5.00% to 2.5% on Class A shares and to 3.25% from
5.75% on its class C shares.

   In addition, The Eastern Point Advisors Rising Dividend Growth Fund ("ICRDX")
owed EPA $158,029 as of March 31, 2005 for reimbursement of expenses (not to
exceed 1.65% for Class A shares and 2.75% for class C shares). Additionally,
both funds owed EPA for legal fees incurred on each of their behalf throughout
the fiscal year March 31, 2005 in the amount of $97,538.

   As disclosed in the Eastern Point Advisors Funds Trust prospectus, we have
three years to recoup any payments that we may advance on behalf of the funds.
During the fiscal years ended March 31, 2005 receivables resulting from such
advances were determined to be uncollectible within the three year recovery
period. At March 31, 2005 the receivable balance of $46,336 was written off.

   Management concluded that this receivable was not going to be collected at
the end of the recovery period ending September 30, 2005.There were no
write-offs of receivables pertaining to these funds during fiscal year end March
31, 2006.

   See "Note 2 - Summary of Significant Accounting Policies - Account Receivable
Allowance for Doubtful Accounts" and "Item 7 -Management's Discussion and
Analysis of Financial Condition and Results of Operations - "Advisory Fees From
Our Mutual Funds" for further information regarding our accounting for doubtful
accounts receivable.


                                       51
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 9 - TRANSACTIONS WITH RELATED PARTIES (Continued)

<TABLE>
<CAPTION>
<S>       <C>             <C>                  <C>                          <C>

                                  The Capital Appreciation Fund

        2006       2005      2004        Reimbursable Fund
      Amount    Amount     Amount            Year End              Expiration Date

          $-          -   $60,969              2002               September 30,2005
           -     17,786         -              2003               September 30,2006
           -          -         -              2004               September 30,2007
           -     84,697         -              2005               September 30,2008
   -------------------------------
          $-   $102,483   $60,969
   ===============================

                                  The Rising Dividend Growth Fund

        2006       2005      2004        Reimbursable Fund
      Amount    Amount     Amount            Year End              Expiration Date

          $-     38,057        $-              2004               September 30,2007
           -    119,972         -              2005               September 30,2008
   -------------------------------
          $-   $158,029        $-
   ===============================
</TABLE>


   The 2003 Reimbursable Fund Year End amount outstanding of $17,786 for The
Capital Appreciation Fund consists of waived advisory fees for which management
has completely recovered in 2005.

   The receivable amounts escalated to $237,239 from the Capital Appreciation
Fund and $475,310 from The Rising Dividend Growth Fund, during fiscal year ended
March 31,2006.The expiration date to collect the majority of the receivable from
these funds was September 30, 2008;however, as is disclosed in Note 3, on
October 24, 2005, the Company sold all of its rights to manage the mutual funds
described above for $747,617 and will no longer be receiving the advisory fees
derived from the management of these funds.

NOTE 10 - PROPERTY AND EQUIPMENT, NET

   Property and equipment consisted of the following at March 31:

                                                       2006         2005
                                                ------------  -----------

Equipment                                          $804,554     $617,816
Furniture and fixtures                              223,959      167,381
Leasehold improvements                              362,482      253,998
Computer Software                                   179,229      116,515
                                                ------------  -----------
                                                 $1,570,224   $1,155,710

Accumulated depreciation and amortization          (797,726)    (584,512)

                                                -------------------------
Property, equipment,computer software net          $772,498     $571,198
                                                =========================


                                       52
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 11 - NOTES PAYABLE

   At March 31, 2006 and 2005 notes payable consisted of debt to finance
insurance premiums. The balances as of for this note were $94,573 and $9,433
respectively for years ended March 31.2006 and March 31, 2005. The annual rate
of interest on the outstanding loan balances, were 6.95% and 6% for the
comparative periods. The current note matures on November 8, 2006.

   For the comparative years March 31, 2006 and March 31, 2005 there was no long
term debt outstanding.

NOTE 12 - INCOME TAXES

   The provision (benefit) for income taxes is as follows for the years ended
March 31:

Current:                          2006       2005      2004

Federal                        407,620    335,333   535,555
State                          112,551    103,531   165,788
                             -------------------------------
                               520,171    438,864   701,343
                             -------------------------------

Deferred:
Federal                        (75,525)  (129,766)  (82,740)
State                          (23,318)   (40,065)   (8,685)
Increase in valuation
 allowance                           -          -         -
                             -------------------------------
                               (98,843)  (169,831)  (91,425)

Total Income Taxes             421,328    269,033   609,918
                             ===============================

     Deferred income taxes are the result of timing differences between book and
taxable income and consist primarily of deferred compensation, legal accruals
unrealized gains, mutual fund start up costs and differences between
depreciation expenses for financial statement purposes versus tax return
purposes.


                                       53
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 12 - INCOME TAXES (Continued)

   Net deferred tax assets (liabilities) within each tax jurisdiction consisted
of the following at:

                          March 31,2006
                  Asset     Liability      Net

Federal            254,782    (65,048)     189,734
State               78,663    (20,083)      58,580
               ------------------------------------
Total              333,445    (85,131)     248,314
               ====================================

                          March 31,2005
                  Asset     Liability      Net

Federal            162,197    (35,998)     126,199
State               29,911     (6,639)      23,272
               ------------------------------------
Total              192,108    (42,637)     149,471
               ====================================

   The following is a summary of the significant components of the Company's
deferred tax assets and liabilities:


                               Years Ended March 31,
                            ---------------------------
                               2006             2005
                            ----------      -----------
Deferred tax
 assets(liabilities):
Mutual Fund Start Up Costs     21,783           24,002
Deferred compensation         172,605          168,106
Accrued legal                 139,057                -
Unrealized gain               (10,806)         (10,806)
Depreciation and other        (74,325)         (31,831)
                            ----------      -----------
Total Deferred Tax Assets     248,314          149,471
                            ==========      ===========


                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 12 - INCOME TAXES (Continued)

    The total income tax provision (benefit) differs from the income tax at the
statutory federal income tax rate due to the following:


                                       54
<PAGE>

                                   Years Ended March 31,
                               ------------------------------
                                   2006      2005      2004
                               ------------------------------

Tax at U.S. statutory rate       296,129   357,770   471,876
State taxes,net of federal
 benefit                          54,610         -    95,009
Unallowable expenses              23,651   (88,737)   16,429
Other adjustments                 46,938
Change in valuation allowance          -         -    26,604
                               ------------------------------

Provision for income taxes       421,328   269,033   609,918
                               ==============================

NOTE 13 - SEGMENT INFORMATION

    The accounting policies of the segments are described in the summary of
significant accounting policies. The Company evaluates performance based on
profit and loss from operations after income taxes.

   The Company accounts for inter-segment services and transfers as if the
services or transfers were to third parties, that is, at current market prices.
The Company's reportable segments are strategic business units that offer
different services. They are managed separately because each business requires
different technology and marketing strategies.

   The Company's reportable segments include investment services offered through
ICC and asset management services offered through. EPA. Asset management
services are also offered through ICC which, in addition to being a
broker-dealer, is a registered investment advisor doing business as ICA.

   This investment services segment includes securities, insurance, financial
planning and related services. ICC earns commissions as a broker for its
customers in the purchase and sale of securities on major exchanges. Asset
management services generate recurring annual revenue from fees received on the
management of customer accounts.

   EPA provides money management services to a variety of investors and, until
October 18, 2005, provided asset management and portfolio design services to two
mutual funds. ICA's primary mission is to offer clients investment advisory and
asset management procedures grounded on sound investment principles of asset
allocation, performance monitoring and portfolio rebalancing.

   Under the guidelines of FAS 131 "Disclosures about Segments of an Enterprise
and Related Information", commencing with the quarter ended December 31, 2005,
management began reporting its segments on a management approach whereby our
business is organized into segments reflecting the way we make operating
decisions and assess performance. Accordingly, ICA is now reported as part of
the asset management services segment. Segments are currently reported based
upon the services provided, whereas they were previously segmented according to
legal entity.

   In presenting segment data, all corporate overhead items are allocated to the
segments, and inter-segment revenue, expense, receivables and payables are
eliminated. Currently it is impractical to report segment information using
geographical concentration.

   Assets are allocated among ICH and its subsidiaries based upon legal
ownership and the services provided. Total period-end assets are presented in
this Note 13 on a stand-alone basis, i.e., without inter-company eliminations.
Corporate items and eliminations are presented in the following table for the
purpose of reconciling the stand-alone asset amounts to total consolidated
assets.


                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 13 - SEGMENT INFORMATION (Continued)


                                       55
<PAGE>

<TABLE>
<CAPTION>
<S>                                  <C>                    <C>                     <C>

                                                           Years Ended March 31,
                                           2006                    2005                    2004
                                   -------------          --------------          --------------

Inter-company eliminations          $(1,575,199)            $(1,779,540)            $(1,370,852)
Classification items (stand alone)            -                       -                       -
Deferred income taxes                    (2,613)                (31,830)                (47,804)
Income Taxes                                  -                (491,664)                      -
                                   -------------          --------------          --------------

Total Corporate items and
 eliminations                       $(1,577,812)            $(2,303,034)            $(1,418,656)
                                   =============          ==============          ==============
</TABLE>



                                       56
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 13 - SEGMENT INFORMATION (Continued)
<TABLE>
<CAPTION>
<S>                                             <C>               <C>              <C>


                                                           Years Ended March 31,
                                                      2006              2005             2004
                                              -------------     -------------    -------------
Non-interest revenues:
ICC,brokerage services                          62,070,480        50,871,854       46,093,464
EPA,ICA asset management services.               5,329,859         3,880,590        2,529,367
ICH investments (loss) gain                         (4,135)           12,763           21,324
                                              -------------     -------------    -------------

         Total                                  67,396,204        54,765,207       48,644,155
                                              =============     =============    =============

Revenues from transaction with other operating
 segments:
ICC,brokerage services                             983,910        $1,196,277          920,714
EPA,ICA asset management services.                 146,553           128,456          394,592
                                              -------------     -------------    -------------

         Total                                   1,130,463         1,324,733        1,315,306
                                              =============     =============    =============

Interest and dividend income,net:
ICC,brokerage services                             404,990           236,175          177,090
EPA,ICA asset management services.                  21,026               950                -
ICH                                                  9,447           151,612          142,829
ICH Securities                                     147,201            11,590                -
                                              -------------     -------------    -------------

        Total                                      582,664           400,327          319,919
                                              =============     =============    =============

Depreciation and amortization expenses:
ICC,brokerage services                             205,905           163,318          131,056
EPA,ICA asset management services.                   7,309             8,835            7,037
                                              -------------     -------------    -------------

        Total                                      213,214           172,153          138,093
                                              =============     =============    =============

Income tax provision (benefit):
ICC,brokerage services                             208,600           289,921          892,296
EPA,ICA asset management services.                 310,812           (38,678)        (292,864)
ICH                                                (98,084)           17,790           10,486
                                              -------------     -------------    -------------

        Total                                      421,328           269,033          609,918
                                              =============     =============    =============

Income (loss) :
ICC,brokerage services                             348,720           335,629        1,293,437
EPA,ICA asset management services.                 214,392           125,306         (434,437)
ICH                                               (260,605)          146,584          (68,587)
ICH Securities                                     147,131            11,590                -
                                              -------------     -------------    -------------

        Total                                      449,638           619,109          790,413
                                              =============     =============    =============

Period end total assets:
ICC,brokerage services                          10,082,597         9,429,559        8,256,043
EPA,ICA asset management services.               1,917,164           770,263          493,990
ICH                                              1,503,104         1,459,207        6,057,502
ICH Securities                                   3,400,774         4,753,643
Corporate items and eliminations                (1,577,812)       (2,303,034)      (1,418,656)
                                              -------------     -------------    -------------

        Total                                   15,325,827        14,109,638       13,388,879
                                              =============     =============    =============
</TABLE>



                                       57
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 14 - COMMITMENTS AND CONTINGENCIES

   The Company is obligated under various lease agreements covering offices and
equipment. These agreements are considered to be operating leases in accordance
with the requirements under FASB 13 "Accounting for Leases". The terms of the
leases expire between fiscal year 2006 and 2009. Options to renew for additional
terms are included under the lease agreements. The total minimum rental due in
future periods under these existing agreements is as follows as of March 31,
2006:

                  Year ending March 31, 2007           $381,378
                  Year ending March 31, 2008            279,906
                  Year ending March 31, 2009             61,040
                  Year ending March 31, 2010                 --
                                                       ---------
                  Total minimum lease payments         $722,324
                                                       =========

   Certain leases contain provisions for escalation of minimum lease payments
contingent upon increases in real estate taxes. The total lease expense amounted
to $440,326 for fiscal year ended March 31, 2006, $382,809 for fiscal year ended
March 31, 2005, and $322,846 for fiscal year ended March 31, 2004. The related
party lease expense to Arlsburg Trust and Investors Realty, LLC. was $248,471
for fiscal year ended March 31, 2006. See Note 9 for related party leases.

NOTE 15 - LITIGATION

   The Company is involved with various judicial, regulatory and arbitration
proceedings concerning matters arising in connection with the conduct of its
business.

   MASSACHUSETTS PROCEEDINGS

   By administrative complaint dated November 16, 2005, the Securities Division
(the "Division") of the Secretary of the Commonwealth of Massachusetts (the
"State") brought an adjudicatory proceeding against Investors Capital
Corporation ("ICC") alleging violation of its supervisory obligations under
State securities laws in connection with sales of equity-indexed annuities by a
few of ICC's independent registered representatives. The complaint alleges,
among other things, that ICC failed to properly supervise these representatives,
thereby allowing allegedly unsuitable sales of these insurance products, and
that ICC's actions constituted unethical or dishonest. The complaint, which
seeks an order instructing ICC to cease such violations and to pay an
unspecified administrative fine, also requests that ICC's registration as a
securities broker-dealer in Massachusetts be suspended or revoked, that the firm
be censured, and that it be ordered to fairly compensate purchasers of the
insurance products for any losses attributable to wrongdoing by ICC.

We are unable to reasonably estimate any possible range of loss related to these
proceedings due to their uncertain resolution. However, any conclusion of these
matters favorable to the Division could have a material adverse effect on our
financial position and results of operations.






   OTHER PROCEEDINGS

   At March 31, 2006, the Company was the co-defendant in various other
lawsuits. Management believes, based on currently available information, that
the results of such proceedings, in the aggregate, will not have a material
adverse effect on the firm's financial condition. The Company has Errors and
Omissions ("E&O") insurance to protect itself from potential damages and/or
legal costs associated with the aforementioned lawsuits and, as a result, in the
majority of cases the Company's exposure is limited to between $75,000 and
$100,000 per case, subject to policy limitations and exclusions. In accordance
with Financial Accounting Standards Board ("FASB") Statement No. 5, "Accounting
for Contingencies", the Company had accrued expenses of approximately $434,000
for the year ended March 31, 2006 of which $122,000 is related to legal defense
fees incurred as a result of the State proceeding as noted above. In addition,
this accrual includes estimated probable settlement costs relating to the
Company's defense in such lawsuits. For the year ended March 31, 2005 the
Company had accrued expenses of approximately $247,000.


                                       58
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 16 - BENEFIT PLANS

   Stock Option Plans. As of September 1, 1994, the Company adopted a stock
option plan (the "1994 Plan") that provided for the granting of options to an
officer of the Company to purchase shares of the common stock of the Company.
Following a three for two stock split in 1997, a maximum of 150,000 shares of
common stock were issuable under the 1994 Plan. The number of options and grant
date were determined at the discretion of the Company's Board of Directors (the
"Board"). Options outstanding under the 1994 Plan are fully exercisable and have
no stated expiration.

   As of October 1, 1997, the Board of Directors adopted the 1996 Incentive
Stock Option Plan (the "1996 Plan"). Key employees, directors and the Company's
registered representatives are eligible to receive options and the aggregate
number of shares to be delivered under the 1996 Plan cannot exceed 300,000. Each
grant of options, the number of options granted and the vesting schedules of
such options subject thereto were determined by the Board. The stock options
outstanding are fully vested after two years from grant date, are exercisable
for an additional three years after vesting and, unless exercised, are forfeited
thirty days after termination.

   As of March 12, 2001, the Board of Directors adopted the 2001 Equity
Incentive Plan (the "2001 Plan"). Key employees, directors and the Company's
registered representatives are eligible to receive stock grants and/or stock
options to purchase shares of the common stock of the Company. The aggregate
number of shares issuable under the 2001 Plan cannot exceed 250,000. The number
of shares subject to each stock grant or stock option and any vesting
requirements are determined by the Board. To date, only options have been
awarded under the 2001 Plan. The stock options outstanding fully vest two years
after grant, are exercisable for an additional three years after vesting and are
forfeited ninety days after termination of employment with the Company.

   The Investors Capital Holdings, Ltd. 2005 Equity Incentive Plan (the "2005
Plan") was adopted by the Board on May 17, 2005, and was approved by vote of the
Company's stockholders at the meeting September 21, 2005. The purpose of the
2005 Plan is (i) to attract and retain employees, directors, officers,
representatives and other individuals upon whom the responsibilities of the
successful administration, management, planning and/or organization of the
Company may rest, and whose present and potential contributions to the welfare
of the Company, a parent corporation or a subsidiary are of importance ("Key
Contributors"), and (ii) to motivate Key Contributors with a view toward
enhancing profitable growth of the Company over the long term.

   Options to purchase the Company's common stock, and grants of common stock,
may be awarded under the 2005 Plan. Options may, but need not, be designated as
incentive stock options ("ISOs") within the meaning of Section 422 of the
Internal Revenue Code of 1986.

   A summary of the company's shares issued under the 2005 Plan as of March 31,
2006 is presented below. This plan was not adopted or approved for fiscal years
ended March 31, 2005 and 2004.

<TABLE>
<CAPTION>
<S>                                                 <C>              <C> <C>       <C>
                                                    Shares   Date of grant     Price at    Remaining
                                                                                grant    vested period

Stock awards to a registered representative         2,700  September 21, 2005      $4.03  fully vested
Stock awards to a consultant                          580  September 21, 2005      $4.03  fully vested
Stock awards to registered representatives         29,998  December   2, 2005      $3.08   32 months
Stock awards to a consultant                        1,500  September 21, 2005      $4.03  fully vested
                                                ----------
Total                                              34,778
                                                ==========
</TABLE>

   The stock compensation for year ended March 31, 2006 for shares issued under
this plan was $29,529.

                                       59
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 16 - BENEFIT PLANS (Continued)

     A summary of the status of the Company's employee and Directors' fixed
stock options as of March 31, 2006, 2005 and 2004 and changes during the years
ending on those dates is presented below:

<TABLE>
<CAPTION>
<S>                                   <C>           <C>       <C>          <C>       <C>             <C>

Employee                                    2006                    2005                    2004
                                    ----------------------  ---------------------  ------------------------
Fixed Options                                  Weighted-               Weighted-               Weighted-
                                                 Average                Average                  Average
                                      Shares   Exercise       Shares   Exercise      Shares  Exercise Price
                                                  Price                  Price

Outstanding at beginning of year      198,934       $2.46     199,923      $2.45     207,709         $2.65

Granted                                     -                       -                      -
Forfeited                             (40,256)      $8.00           -                 (7,453)        $8.00
Exercised                                   -                    (989)     $1.91        (333)        $1.91
Reclassified(non-employee)             (5,346)      $1.91
                                    -----------------------------------------------------------------------

Outstanding at year end               153,332       $1.02     198,934      $2.46     199,923         $2.45

Options exercisable at year-end       151,999                 192,934                192,189

Weighted-average fair value of
options granted during the year             -                       -                      -


    The fair value of options granted to employees in 2006, 2005 and 2004 is
estimated on the date of grant using the Black-Scholes option-pricing model
based on the following assumptions:

                                              2006     2005     2004

Dividend                                      0.16%    0.10%       0%
Volatility                                   47.00%   41.00%   44.00%
Risk-free interest rate                       4.85%    3.86%    2.36%
Expected Life in years                        1.75     2.75     3.75


   The following table summarizes information about employee and Directors'
fixed stock options outstanding as of March 31, 2006:

     Options Outstanding                                 Options Exercisable
-------------------------------   ----------------------------------------------------------------
                                   Weighted-Average
     Range Of        Number            Remaining                      Number     Weighted-Average
 Exercise Prices   Outstanding     Contractual Life  Exercise Price Exercisable   Exercise Price

            $1.00   150,000       No Stated Maturity         $1.00   150,000                $1.00

            $1.91     3,332                   1.75         $1.91       1,999                $1.91
                    -------                                          -------
                    153,332                   1.75(1)        $1.02   151,999                $1.01
                    =======                                          =======

(1) Includes only stock options with stated maturity


</TABLE>

                                       60
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 16 - BENEFIT PLANS (Continued)

   The following table summarizes information about ex-directors' fixed stock
options outstanding as of March 31, 2006:
<TABLE>
<CAPTION>
<S>        <C>            <C>                  <C>           <C>          <C>              <C>

        Options Outstanding                                     Options Exercisable
----------------------------------  ----------------------------------------------------------------
                                     Weighted-Average
      Range Of          Number           Remaining                       Number    Weighted-Average
  Exercise Prices    Outstanding     Contractual Life  Exercise Price Exercisable   Exercise Price

           $1.91          5,346                 1.75          $1.91        2,678           $1.91


   A summary of the status of the Company's independent registered
representatives' fixed stock options as of March 31, 2006, 2005 and 2004 and
changes during the years ending on those dates is presented below:


Independent Representatives
                              2006                    2005                    2004
                     ----------------------  ----------------------  ----------------------
Fixed Options                   Weighted-               Weighted-               Weighted-
                                  Aver.                   Aver.                   Aver.
                      Shares    Exercise      Shares    Exercise      Shares    Exercise
                                  Price                   Price                   Price

Outstanding at
beginning of year     372,142        $5.42    352,895        $5.43    296,022        $6.12

Granted                     -        $0.00     49,509        $4.55     93,901        $3.50
Forfeited            (184,941)       $6.66    (17,501)       $6.46    (37,028)       $6.09
Exercised              (2,120)       $2.00    (12,761)       $2.00          -

Outstanding at year
 end                  185,081        $3.35    372,142        $5.42    352,895        $5.43


   Stock-based compensation for grants to registered representatives amounted
to $15,814, $97,841 and $319,606 for the years ended March 31, 2006, 2005 and
and 2004, respectively. This compensation was calculated using the Black-Scholes
option-pricing during fiscal year ended March 31, 2006. The fair value per share
was $1.41 per the July 01, 2002 lot, $0.92 per the August 15, 2003 lot, and
$0.90 per the November 01, 2004 lot. The following assumptions were applied at
March 31, 2006 to grants for the years ending March 31:

                                       2006                          2005                           2004

                          July 2002  Aug 2003  Nov 2004  July 2002  Aug 2003  Nov 2004   July 2002  Aug 2003

Dividend                      0.16%     0.16%     0.16%      0.10%     0.10%     0.10%          0%        0%
Volatility                      47%       47%       47%        41%       41%       41%         44%       44%
Risk-free interest rate       4.88%     4.84%     4.86%      3.73%     3.90%     4.05%       1.94%     2.30%
Expected Life in years        1.25      2.38      3.58       2.25      3.38      4.58        3.25      4.38
</TABLE>


                                       61
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 16 - BENEFIT PLANS (Continued)

   The following table summarizes information about independent registered
representatives' fixed stock options outstanding as of March 31, 2006:

<TABLE>
<CAPTION>
<S>          <C>                                           <C>

         Options Outstanding                             Options Exercisable
-------------------------------------------------------------------------------------------------

                                        Weighted-
                                         Average
                                        Remaining
     Range Of        Number           Contractual     Exercise      Number     Weighted-Average
  Exercise Prices  Outstanding             Life         Price     Exercisable   Exercise Price

      $8.00               -                 -           $8.00                               -
      $3.90          10,000              0.16           $3.90       10,000               0.28
      $2.00          52,943              1.25           $2.00       52,943               0.76
      $3.50          76,414              2.38           $3.50       76,414               1.92
      $4.55          45,724              3.58           $4.55
                   ---------             ----           -----      --------         ----------
                    185,081              2.23           $3.35      139,357              $2.96
</TABLE>

       Retirement Plans: The Company has a 401(k) retirement plan that allows
participation by all employees with at least three months of service.
Individuals employed on the plan's effective date did not have to satisfy the
service requirement. The Company's contribution was based on matching 100% of
the first 3% of the amount of elected salary deferral elected by each eligible
employee. Effective May 29, 2001 the Company's contribution was increased to
matching 100% of the first 6% of the amount of elected salary deferral, with
matching dollars to be in the form of the Company's common stock. The Company's
contribution expense for the years ended March 31, 2006, 2005 and 2004 were
$144,740, $109,641 and $92,373, respectively.

   There were no deferred compensation plans established for the fiscal years
ended March 31, 2006, 2005 or 2004.

NOTE 17 - EMPLOYMENT AGREEMENTS

   The Company entered into separate employment agreements with its President
and Chief Financial Officer. The employment agreements provide for continued
payments of specified compensation and benefits for specified benefits. The
employment agreements also provide for severance benefits if the President or
Chief Financial Officer resign for just cause, as defined in the employment
agreements, just cause including a significant decrease by the Board of
Directors of their duty or authority. Severance benefits include, among other
things, sixty months of base salary for the President and thirty-six months of
base salary for the Chief Financial Officer.

NOTE 18 - EARNINGS PER COMMON SHARE

   Basic earnings per share represent income available to common stockholders
divided by the weighted-average number of common shares outstanding during the
period. Diluted earnings per share reflect additional common shares that would
have been outstanding if dilutive potential common shares had been issued, as
well as any adjustment to income that would result from the assumed issuance.

Potential common shares that may be issued by the Company relate solely to
outstanding stock options, and are determined using the treasury stock method.
Options to purchase common stock totaling 55,724, 207,632, and 226,951 at March
31, 2006, 2005 and 2004, respectively, were not included in the computation of
diluted earnings per share as their effect would have been antidilutive.


                                       62
<PAGE>

                INVESTORS CAPITAL HOLDINGS, LTD. AND SUBSIDIARIES
             NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
                    Years Ended March 31, 2006, 2005 and 2004

NOTE 19 - UNAUDITED QUARTERLY RESULTS OF OPERATIONS

<TABLE>
<CAPTION>
<S>                                  <C>                <C>                <C>              <C>
The unaudited quarterly amounts may differ due to the reclassifications.
Refer to Note 2 -- Summary of Significant Accounting Policies.

                                    June 30, 2005 September 30, 2005  December 31, 2005   March 31, 2006

Revenues                             $15,193,236        $16,170,245        $17,004,416      $19,610,971
Expenses                              15,086,010         16,213,081         16,802,932       19,427,207
Net Income (Loss)                        107,226            -42,836            201,484          183,764
Basic Earnings (Loss) per Share            $0.02             -$0.01              $0.03            $0.04
Diluted Earnings (Loss) per Share          $0.02             -$0.01              $0.03            $0.04

                                    June 30, 2004 September 30, 2004  December 31, 2004   March 31, 2005

Revenues                             $14,315,198        $12,440,188        $13,580,861      $14,829,287
Expenses                              14,111,182         12,589,685         13,225,638       14,619,920
Net Income (Loss)                        204,016           -149,497            355,223          209,367
Basic Earnings (Loss) per Share            $0.04             -$0.03              $0.06            $0.04
Diluted Earnings (Loss) per Share          $0.03             -$0.03              $0.06            $0.04
</TABLE>

NOTE 20 - TRADING ERROR

   In the financial statements for the year ended March 31, 2004, the Company
disclosed a trading error as a subsequent event. This error was the result of a
trade initiated by a registered representative during the normal course of
business on April 20, 2004. The potential impact disclosed was estimated to be a
$530,000 decrease to the statement of income. The Company pursued all remedies,
including insurance, recourse from the clearing firm and recovery from the
registered representative. The outcome of such remedies was $315,010. Therefore,
the net loss realized from the trade error was $214,337 that is included in cost
of sales for the year ended March 31, 2005. There was no trading error that had
material effect on the financial statements for the year ended March 31,2006.

NOTE 21 - SUBSEQUENT EVENT

   A $0.04/share dividend was declared on May 12, 2006 for shareholders of
record dated June 15, 2006. This dividend will be paid on June 29, 2006.


ITEM 9.  CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANT ON ACCOUNTING AND
         FINANCIAL DISCLOSURE.

   None.

ITEM 9A.  CONTROLS AND PROCEDURES.

   Based on an evaluation by our management in which they or persons performing
similar functions participated, our principal executive and financial officers
have concluded that reasonably effective controls and procedures were in place
as of the end of the period covered by this report to ensure that information
required to be disclosed in our reports filed under the Securities Exchange Act
of 1934 is recorded, processed, summarized and reported within the time periods
specified in the rules and forms of the Securities and Exchange Commission.

ITEM 9B.  OTHER INFORMATION.

   None.

                                       63
<PAGE>

                                    PART III


ITEM 10. EXECUTIVE OFFICERS OF THE REGISTRANT

   The following sets forth, as of June 29, 2006, certain information with
respect to each of the executive officers of ICH:

Incorporated by Reference

   Item 11 -- "Executive Compensation", Item 12 -- "Security Ownership of
Certain Beneficial Owners and Management and Related Stockholder Matters", Item
13 -- "Certain Relationships and Related Transactions" and Item 14 - "Principal
Accountant Fees and Services" are incorporated herein by this reference to the
Company's definitive proxy statement for its 2006 annual meeting of
stockholders, which definitive proxy statement is expected to be filed with the
Commission not later than 120 days after the end of the fiscal year to which
this report relates.

                                     PART IV

ITEM 15.  EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.

Documents Filed as a Part of this Report:
<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

1.       Financial Statements:                                                                            Page
         ---------------------                                                                            ----

         Independent Auditors' Report                                                                       38

         Consolidated Balance Sheets as of March 31, 2006 and 2005                                          39

         Consolidated Statements of Income for the years ended March 31, 2006, 2005 and 2004                40

         Consolidated Statements of Changes in Stockholders' Equity for the years ended March 31,
            2006, 2005 and 2004                                                                             41

         Consolidated Statements of Cash Flows for the years ended March 31, 2006, 2005 and 2004            42

         Notes to Consolidated Financial Statements                                                         44


2.       Financial Statement Schedules:
         ------------------------------

   No financial schedules are listed since they are not applicable or are not
required, or because the required information is included in the consolidated
financial statements or notes thereto.


3.       Exhibits:
         ---------
Exhibit
Number                              Description                               Location
-------                             -----------                               --------

3.1         Articles of Organization, as amended                                        (2)(Exh. 3.1)

3.2         By-Laws                                                                     (2)(Exh. 3.2)

4.1         Form of Stock Certificate                                                   (2)(Exh. 4.1)

</TABLE>

                                       64
<PAGE>

<TABLE>
<CAPTION>
<S>     <C>    <C>    <C>    <C>    <C>    <C>

10.1        Employment Agreement with Theodore E. Charles (3)                           (2)(Exh. 10.1)

10.2        Employment Agreement with Timothy B. Murphy (3)                             (2)(Exh. 10.2)

10.3        The 1994 Stock Option Plan                                                  (4)(Exh. 10.3)

10.4        The 2005 Equity Incentive Plan                                              (5)(Exh. 4.5)

14.1        Code of Ethics                                                              (4)(Exh. 14.1)

21.1        Subsidiaries of Investors Capital Holdings, Ltd. as of March 31, 2006                  (1)

31.1        Certification of Theodore E. Charles pursuant to Rule 13a-14(a)                        (1)

31.2        Certification of Timothy B. Murphy pursuant to Rule 13a-14(a)                          (1)

32.1        Certification of Theodore E. Charles pursuant to 18 U.S.C. Section 1350                (1)

32.2        Certification of Timothy B. Murphy pursuant to 18 U.S.C. Section 1350                  (1)

</TABLE>

------------------------------------

(1)  Filed herewith.

(2)  Incorporated by reference to the indicated exhibit to the Registrant's
     Registration Statement on Form SB-2 (File No. 333-05327) filed August 14,
     2000.

(3)  A management contract or compensatory plan or arrangement required to be
     filed as an exhibit pursuant to Item 15(b) of this report.

(4)  Incorporated by reference to the indicated exhibit to the Registrant's
     Annual Report on Form 10-K filed June 30, 2005.

(5)  Incorporated by reference to the indicated exhibit to the Registrant's
     Registration Statement on Form S-8 (File No. 333-43664) filed June 9, 2006.

   Any exhibit not included with this Form 10-K when furnished to any
shareholder of record will be furnished to such shareholder upon written request
and payment of up to $.25 per page plus postage. Such requests should be
directed to Investors Capital Holdings, Ltd., 230 Broadway East, Lynnfield, MA
01940-2320.


                                       65
<PAGE>

                                   SIGNATURES


   Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned, thereunto duly authorized.


                                        INVESTORS CAPITAL HOLDINGS, LTD.

                                        By:/s/ Timothy B. Murphy
                                           ------------------------------------
                                           Chief Financial Officer
                                           Date: June 29, 2006


   Pursuant to the requirements of the Securities Act of 1933, this Annual
Report on Form 10-K has been signed by the following persons in the capacities
and as of the dates indicated.

<TABLE>
<CAPTION>
<S>                                                                                     <C> <C>

Signature                           Capacity(ies)                                  Date
---------                           -------------                                  ----

/s/ Theodore E. Charles             Principal Executive Officer                    June 29, 2006
---------------------------------
Theodore E. Charles


/s/ Timothy B. Murphy               Principal Financial and Accounting Officer     June 29, 2006
---------------------------------
Timothy B. Murphy


/s/ Arthur J. Stickney              Director                                       June 29, 2006
---------------------------------
Arthur J. Stickney

/s/ William Atherton                Director                                       June 29, 2006
---------------------------------
William Atherton

/s/ Robert Martin.                  Director                                       June 29, 2006
---------------------------------
Robert Martin
</TABLE>


                                       66

<PAGE>

                                  EXHIBIT INDEX
                                  -------------

              (Exhibits being initially filed with this Form 10-K)


21.1    Subsidiaries of Investors Capital Holdings, Ltd. as of March 31, 2006

31.1    Certification of Theodore E. Charles pursuant to Rule 13a-14(a)

31.2    Certification of Timothy B. Murphy pursuant to Rule 13a-14(a)

32.1    Certification of Theodore E. Charles pursuant to 18 U.S.C. Section 1350

32.2    Certification of Timothy B. Murphy pursuant to 18 U.S.C. Section 1350



                                       67
<PAGE>

                                  Exhibit 21.1

                Subsidiaries of Investors Capital Holdings, Ltd.


Subsidiary                                        Jurisdiction of Incorporation

Investors Capital Corporation                           MA

Eastern Point Advisors, Inc.                            MA

ICC Insurance Agency, Inc.                              MA

Investors Capital Holdings Securities Corporation       MA





All subsidiaries are wholly-owned by Investors Capital Holdings, Ltd.



                                       68