April 30, 1998
ICAP FUNDS, INC.
225 West Wacker Drive, Suite 2400
Chicago, Illinois 60606
1-888-221-ICAP
(1-888-221-4227)
www.icapfunds.com
ICAP FUNDS, INC. is an open-end, management
investment company, known as a mutual fund (the
"Company"). The Company is currently comprised of the
following four portfolios, the first two of which are
diversified portfolios and the last two of which are
non-diversified portfolios: the ICAP DISCRETIONARY
EQUITY PORTFOLIO (the "Discretionary Equity
Portfolio"), the ICAP EQUITY PORTFOLIO (the "Equity
Portfolio"), the ICAP SELECT EQUITY PORTFOLIO (the
"Select Equity Portfolio") and the ICAP EURO SELECT
EQUITY PORTFOLIO (the "Euro Select Portfolio")
(collectively referred to as the "Portfolios"). The
Portfolios are 100% "no-load." There are no sales,
redemption or 12b-1 fees.
The investment objective of both the Discretionary
Equity and Equity Portfolios is to seek a superior
total return with only a moderate degree of risk. This
investment objective is relative to and measured
against the Standard & Poor's 500 Stock Index (the "S&P
500"); the Discretionary Equity and Equity Portfolios
each seek to achieve a total return greater than the
S&P 500 with an equal or lesser degree of risk than the
S&P 500. Both Portfolios seek to achieve this
investment objective primarily through the capital
appreciation of investments in U.S. dollar-denominated
equity securities of companies with market
capitalizations of at least $500 million. The
Discretionary Equity and Equity Portfolios are
distinguished in the following manner: the
Discretionary Equity Portfolio has the discretion to
invest up to 35% of its total assets and, for temporary
defensive purposes, up to 100% of its total assets, in
cash and short-term fixed income securities, hence the
name "Discretionary" Equity Portfolio, while the Equity
Portfolio will not invest in cash or short-term fixed
income securities for investment purposes, but rather
intends, under normal market conditions, to be
virtually fully invested at all times.
The investment objective of the Select Equity
Portfolio is to seek a superior total return. This
investment objective is relative to and measured
against the S&P 500; the Select Equity Portfolio seeks
to achieve a total return greater than the S&P 500.
The Select Equity Portfolio seeks to achieve its
investment objective primarily through the capital
appreciation of investments in U.S. dollar-denominated
equity securities of companies with market
capitalizations of at least $500 million. While the
Select Equity, Discretionary Equity and Equity
Portfolios are similar in terms of the types of
securities in which each Portfolio may invest, the
Select Equity Portfolio will concentrate its
investments in fewer securities and/or companies than
the Discretionary Equity and Equity Portfolios. The
Select Equity Portfolio has the discretion to invest up
to 35% of its total assets and, for temporary defensive
purposes, up to 100% of its total assets, in cash and
short-term fixed income securities.
The investment objective of the Euro Select
Portfolio is to seek a superior total return with
income as a secondary objective. This investment
objective is relative to and measured against the
Morgan Stanley Capital International European Index
(the "Euro Index"); the Euro Select Portfolio seeks to
achieve a total return greater than the Euro Index.
The Euro Select Portfolio seeks to achieve its
investment objective primarily through the capital
appreciation of investments in equity securities,
predominantly American Depository Receipts ("ADRs"), of
established European companies with market
capitalizations of at least $1 billion. At any time,
the Euro Select Portfolio will be invested in a
relatively limited number of securities and/or
companies. The Euro Select Portfolio has the
discretion to invest up to 35% of its total assets and,
for temporary defensive purposes, up to 100% of its
total assets, in cash and short-term fixed income
securities.
This Prospectus sets forth concisely the
information that you should be aware of prior to
investing in the Company. Please read this Prospectus
carefully and retain it for future reference.
Additional information regarding the Company is
included in the Statement of Additional Information
dated April 30, 1998, which has been filed with the
Securities and Exchange Commission (the "SEC") and is
incorporated in this Prospectus by reference. A copy
of the Company's Statement of Additional Information is
available without charge by writing to the Company at
ICAP Funds, Inc., c/o Sunstone Investor Services, LLC,
P.O. Box 2160, Milwaukee, Wisconsin 53201-2160 or by
calling 1-888-221-ICAP (1-888-221-4227). It is also
available, along with other related materials, on the
SEC's Internet Web Site (http://www.sec.gov).
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED
BY THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION, NOR HAS THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A
CRIMINAL OFFENSE.
<PAGE>
TABLE OF CONTENTS
Page
HIGHLIGHTS 2
SUMMARY OF PORTFOLIO EXPENSES 3
FINANCIAL HIGHLIGHTS 5
PRIOR PERFORMANCE OF PRIVATE ACCOUNTS OF THE
ADVISER 7
INVESTMENT OBJECTIVES AND POLICIES 9
Discretionary Equity Portfolio 9
Equity Portfolio 10
Select Equity Portfolio 10
Euro Select Portfolio 10
INVESTMENT TECHNIQUES AND RISKS 11
INVESTMENT RESTRICTIONS 14
MANAGEMENT 15
HOW TO PURCHASE SHARES 16
HOW TO REDEEM SHARES 17
EXCHANGE PRIVILEGE 19
TAX-SHELTERED RETIREMENT PLANS 19
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX
TREATMENT 19
DETERMINATION OF NET ASSET VALUE 20
SHAREHOLDER REPORTS 21
FINANCIAL INTERMEDIARIES 21
ORGANIZATION 21
ADMINISTRATOR AND FUND ACCOUNTANT 22
CUSTODIAN AND TRANSFER AGENT 22
YEAR 2000 ISSUE 22
COMPARISON OF INVESTMENT RESULTS 22
No person has been authorized to give any information
or to make any representations other than those
contained in this Prospectus and the Statement of
Additional Information, and if given or made, such
information or representations may not be relied upon
as having been authorized by the Company. This
Prospectus does not constitute an offer to sell
securities in any state to any person to whom it is
unlawful to make such offer in such state.
<PAGE>
HIGHLIGHTS
Investment Objectives
General. The Company is currently comprised of
the following four portfolios, the first two of which
are diversified portfolios and the last two of which
are non-diversified portfolios: the Discretionary
Equity Portfolio, the Equity Portfolio, the Select
Equity Portfolio and the Euro Select Portfolio.
Discretionary Equity and Equity Portfolios. The
investment objective of both the Discretionary Equity
and the Equity Portfolios is to seek a superior total
return with only a moderate degree of risk. This
investment objective is relative to and measured
against the S&P 500. Both Portfolios seek to achieve
this investment objective primarily through the capital
appreciation of investments in U.S. dollar-denominated
equity securities of companies with market
capitalizations of at least $500 million. The
distinction between the two Portfolios is that the
Discretionary Equity Portfolio may invest up to 35% of
its total assets and, for temporary defensive purposes,
up to 100% of its total assets, in cash and short-term
fixed income securities, while the Equity Portfolio
intends, under normal market conditions, to be
virtually fully invested at all times.
Select Equity Portfolio. The investment objective
of the Select Equity Portfolio is to seek a superior
total return. This investment objective is relative to
and measured against the S&P 500. The Select Equity
Portfolio seeks to achieve its investment objective
primarily through the capital appreciation of
investments in U.S. dollar-denominated equity
securities of companies with market capitalizations of
at least $500 million. At any time, the Select Equity
Portfolio will be invested in a relatively limited
number of securities and/or companies.
Euro Select Portfolio. The investment objective
of the Euro Select Portfolio is to seek a superior
total return with income as a secondary objective. The
investment objective of the Euro Select Portfolio is
relative to and measured against the Euro Index. The
Euro Select Portfolio seeks to achieve its investment
objective primarily through the capital appreciation of
investments in equity securities, predominantly ADRs,
of established European companies with market
capitalizations of at least $1 billion. At any time,
the Euro Select Portfolio will be invested in a
relatively limited number of securities and/or
companies.
Each Portfolio's investments are subject to market
risk and the value of its shares will fluctuate with
changing market valuations of its portfolio holdings.
See "INVESTMENT OBJECTIVES AND POLICIES" and
"INVESTMENT TECHNIQUES AND RISKS."
Investment Adviser
Institutional Capital Corporation ("ICAP") is the
investment adviser to the Portfolios. ICAP was
organized in 1970 and acts as the investment adviser to
individual and institutional clients. As of March 31,
1998, ICAP had approximately $12 billion under
management. See "MANAGEMENT."
Purchases and Redemptions
Shares of the Portfolios are sold and redeemed at
net asset value without the imposition of any sales or
redemption charges. The minimum initial investment
required by each Portfolio is $10,000. The minimum
subsequent investment is $1,000. These minimums may be
changed or waived at any time at the discretion of the
Company. See "HOW TO PURCHASE SHARES" and "HOW TO
REDEEM SHARES." Shares in one Portfolio may be
exchanged for shares in another Portfolio at their
relative net asset values. See "EXCHANGE PRIVILEGE."
Shareholder Services
Questions regarding the Portfolios may be directed
to the Company at the address and telephone number
below:
ICAP Funds, Inc.
c/o Sunstone Investor Services, LLC
P.O. Box 2160
Milwaukee, Wisconsin 53201-2160
1-888-221-ICAP
(1-888-221-4227)
<PAGE>
SUMMARY OF PORTFOLIO EXPENSES
The purpose of the following Fee Tables and
Example is to assist you in understanding the various
costs and expenses that you will bear directly
(shareholder transaction expenses) or indirectly
(annual fund operating expenses) should you invest in
one or more of the Portfolios.
Fee Tables
<TABLE>
<CAPTION>
Shareholder Transaction Expenses Discretionary
Equity Equity Select Equity Euro Select
Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C>
Sales Load Imposed on Purchases NONE NONE NONE NONE
Sales Load Imposed on
Reinvested Dividends NONE NONE NONE NONE
Deferred Sales Load Imposed
on Redemptions NONE NONE NONE NONE
Redemption Fees NONE NONE NONE NONE
Exchange Fees NONE NONE NONE NONE
</TABLE>
Annual Operating Expenses (after waivers and/or
reimbursements) (as a percentage of average net assets)
<TABLE>
<CAPTION>
Discretionary
Equity Equity Select Equity Euro Select
Portfolio Portfolio Portfolio Portfolio
<S> <C> <C> <C> <C>
Management Fees 0.80% 0.80% 0.80% 1.00%
12b-1 Fees NONE NONE NONE NONE
Other Expenses (net of
reimbursements) 0% 0% 0% 0%
TOTAL OPERATING EXPENSES 0.80% 0.80% 0.80% 1.00%
(after waivers and/or reimbursements)
</TABLE>
For the year ended December 31, 1997, the
Portfolios' investment adviser, ICAP, voluntarily
agreed to waive its management fee and/or reimburse the
operating expenses of the Discretionary Equity and
Equity Portfolios to the extent necessary to ensure
that neither Portfolio's total operating expenses
exceeded 0.80% of that Portfolio's average net assets.
Absent these waivers/reimbursements, other expenses and
total operating expenses for the Discretionary Equity
Portfolio would have been 0.22% and 1.02%,
respectively, and other expenses and total operating
expenses for the Equity Portfolio would have been 0.17%
and 0.97%, respectively. ICAP has voluntarily agreed
to continue this waiver/reimbursement policy for the
year ending December 31, 1998, and for an indefinite
amount of time beyond that date.
For the year ending December 31, 1998, and for an
indefinite period of time beyond that date, ICAP has
also voluntarily agreed to waive its management fee
and/or reimburse the operating expenses of the Select
Equity and Euro Select Portfolios to the extent
necessary to ensure that the Select Equity Portfolio's
total operating expenses do not exceed 0.80% of the
Portfolio's average net assets, and the Euro Select
Portfolio's total operating expenses do not exceed
1.00% of the Portfolio's average net assets. Absent
these waivers/reimbursements, other expenses and total
operating expenses for the Select Equity Portfolio are
estimated to be 0.50% and 1.30%, respectively, for the
year ending December 31, 1998, and other expenses and
total operating expenses for the Euro Select Portfolio
are estimated to be 0.51% and 1.51%, respectively, for
the year ending December 31, 1998. For additional
information concerning fees and expenses, see
"MANAGEMENT."
There are certain charges associated with certain
services offered by the Portfolios, such as a service
fee of $10.00 for redemptions effected via wire
transfer. See "HOW TO REDEEM SHARES." Purchases and
redemptions may also be made through broker/dealers or
others who may charge a commission or other transaction
fee for their services.
<PAGE>
Example
You would pay the following expenses on a $1,000
investment, assuming (i) 5% annual return and (ii)
redemption at the end of each time period:
Discretionary
Equity Equity Select Equity Euro Select
Portfolio Portfolio Portfolio Portfolio
1 Year $8 $8 $8 $11
3 Years $26 $26 $26 $33
5 Years $46 $46 $46 $57
10 Years $102 $102 $102 $126
The Example is based on the total operating
expenses specified in the Annual Operating Expenses
table above. The amounts in the Example may increase
absent the waivers and/or reimbursements. Please
remember that the Example should not be considered
representative of past or future expenses and that
actual expenses may be greater or lesser than those
shown. The assumption in the Example of a 5% annual
rate of return is required by regulations of the SEC
applicable to all mutual funds. This return is
hypothetical and should not be considered
representative of the past or future performance of the
Portfolios.
<PAGE>
FINANCIAL HIGHLIGHTS
Discretionary Equity Portfolio
The following Financial Highlights of the
Discretionary Equity Portfolio for the years ended
December 31, 1997, 1996 and 1995 have been audited by
Coopers & Lybrand L.L.P., independent certified public
accountants. Their report is included in the Company's
Annual Report for the year ended December 31, 1997.
The Annual Report is incorporated by reference into the
Statement of Additional Information for the Portfolios.
The Financial Highlights should be read in conjunction
with the financial statements and related notes
included in the Annual Report, a copy of which may be
obtained without charge by writing to or calling the
Company at ICAP Funds, Inc., c/o Sunstone Investor
Services, LLC, P.O. Box 2160, Milwaukee, Wisconsin
53201-2160, 1-888-221-ICAP (1-888-221-4227). The
Discretionary Equity Portfolio commenced operations
after the close of business on December 31, 1994.
Financial information for the Select Equity and Euro
Select Portfolios will be provided supplementally, as
neither Portfolio commenced operations until after the
close of business on December 31, 1997.
Year Ended December 31,
(For a share outstanding 1997 1996 1995
throughout the year)
Net asset value, beginning of $29.55 $25.42 $20.00
year
Income from investment
operations:
Net investment income 0.48 0.36 0.31
Net realized and unrealized 7.80 6.09 6.70
gain on investments
Total income from investment 8.28 6.45 7.01
operations
Less distributions:
From net investment income (0.48) (0.36) (0.31)
In excess of book net (0.01) -- --
investment income
From net realized gain on (7.00) (1.80) (1.27)
investments
In excess of book net realized -- (0.16) (0.01)
gain on investments
Total distributions (7.49) (2.32) (1.59)
Net asset value, end of year $30.34 $29.55 $25.42
Total return 28.60% 25.55% 35.21%
Supplemental data and ratios:
Net assets, end of year $157,137 $110,280 $37,362
(in thousands)
Ratio of expenses to average 0.80% 0.80% 0.80%
net assets(1)
Ratio of net investment income 1.37% 1.35% 1.71%
to average net assets(1)
Portfolio turnover rate 131% 138% 102%
Average commission rate paid $0.0354 $0.0356 N/A
on portfolio investment
transactions
_______________
(1) Net of waivers by ICAP. Without waivers of
expenses, the ratio of expenses to average net
assets would have been 1.02%, 1.11% and 1.56%, and
the ratio of net investment income to average net
assets would have been 1.15%, 1.04% and 0.95% for
the years ended December 31, 1997, 1996 and 1995,
respectively.
<PAGE>
FINANCIAL HIGHLIGHTS
Equity Portfolio
The following Financial Highlights of the Equity
Portfolio for the years ended December 31, 1997, 1996
and 1995 have been audited by Coopers & Lybrand L.L.P.,
independent certified public accountants. Their report
is included in the Company's Annual Report for the year
ended December 31, 1997. The Annual Report is
incorporated by reference into the Statement of
Additional Information for the Portfolios. The
Financial Highlights should be read in conjunction with
the financial statements and related notes included in
the Annual Report, a copy of which may be obtained
without charge by writing to or calling the Company at
ICAP Funds, Inc., c/o Sunstone Investor Services, LLC,
P.O. Box 2160, Milwaukee, Wisconsin 53201-2160,
1-888-221-ICAP (1-888-221-4227). The Equity Portfolio
commenced operations after the close of business on
December 31, 1994. Financial information for the
Select Equity and Euro Select Portfolios will be
provided supplementally, as neither Portfolio commenced
operations until after the close of business on
December 31, 1997.
Year Ended December 31,
(For a share outstanding 1997 1996 1995
throughout the year)
Net asset value, beginning of $31.16 $26.03 $20.00
year
Income from investment
operations:
Net investment income 0.37 0.31 0.28
Net realized and unrealized gain 8.57 6.49 7.45
on investments
Total income from investment 8.94 6.80 7.73
operations
Less distributions:
From net investment income (0.37) (0.30) (0.28)
In excess of book net (0.01) -- --
investment income
From net realized gain on (4.59) (1.30) (1.41)
investments
In excess of book net realized (0.01) (0.07) (0.01)
gain on investments
Total distributions (4.98) (1.67) (1.70)
Net asset value, end of year $35.12 $31.16 $26.03
Total return 29.08% 26.26% 38.85%
Supplemental data and ratios:
Net assets, end of year (in $371,402 $149,125 $46,788
thousands)
Ratio of expenses to average 0.80% 0.80% 0.80%
net assets(1)
Ratio of net investment income 1.06% 1.15% 1.49%
to average net assets(1)
Portfolio turnover rate 121% 125% 105%
Average commission rate paid $0.0330 $0.0365 N/A
on portfolio investment
transactions
______________
(1) Net of waivers by ICAP. Without waivers of
expenses, the ratio of expenses to average net
assets would have been 0.97%, 1.12% and 1.44%, and
the ratio of net investment income to average net
assets would have been 0.89%, 0.83% and 0.85% for
the years ended December 31, 1997, 1996 and 1995,
respectively.
<PAGE>
PRIOR PERFORMANCE OF PRIVATE ACCOUNTS OF THE ADVISER
The performance information set forth below for
the private accounts of the Adviser has been calculated
in accordance with recommended standards of the
Association of Investment Management and Research
("AIMR"), retroactively applied to all time periods.
All returns presented were calculated on a total return
basis and include all dividends and interest, if any,
accrued income, if any, and realized and unrealized
gains and losses, if any. Total return is calculated
quarterly in accordance with the "time-weighted" rate
of return method provided for by AIMR standards,
accounted for on a trade-date and accrual basis.
Principal additions and withdrawals are weighted in
computing the quarterly returns based on the timing of
these transactions. The quarterly returns are
geometrically linked to derive annual total returns.
Since 1970, ICAP has managed separate private
accounts (the "Private Accounts") which pursue
substantially the same investment objective, policies
and strategies, and which are managed in the same
manner, as the Discretionary Equity Portfolio, and
since 1991, ICAP has managed Private Accounts which
pursue substantially the same investment objective,
policies and strategies, and which are managed in the
same manner, as the Equity Portfolio. ICAP believes
that it has produced outstanding investment results
over time for its Private Accounts. The Private
Accounts are not subject to the same types of expenses
to which the Discretionary Equity and Equity Portfolios
are subject nor to the specific tax restrictions and
investment limitations imposed on the Portfolios by the
Internal Revenue Code of 1986, as amended (the "Code"),
and the Investment Company Act of 1940, as amended (the
"1940 Act"), respectively. The following chart
illustrates how the performance of ICAP's Discretionary
Equity Composite (a composite including all of ICAP's
discretionary equity Private Accounts) and its Equity
Composite (a composite including all of ICAP's equity
Private Accounts) compares, where applicable, to the
average performance of the S&P 500 for the most recent
1-, 3-, 5- and 10-year periods ended March 31, 1998.
Also included in the chart is the performance of the
Discretionary Equity and Equity Portfolios. The
performance results of the composites described below
could have been adversely affected if the Private
Accounts included in the composites had been regulated
as investment companies under the federal tax and
securities laws.
ICAP's Discretionary Equity and Equity Composites
and Discretionary Equity and Equity Portfolios
Annualized Performance vs. S&P 500
Performance through March 31, 1998
Average Annualized Total Return
<TABLE>
ICAP Discretionary Discretionary ICAP Equity Equity
Time Period Equity Composite Equity Portfolio Composite Portfolio S&P 500
<S> <C> <C> <C> <C> <C>
1 year 37.5% 37.8% 39.1% 39.3% 48.0%
3 years 30.4% 30.8% 31.9% 32.4% 32.8%
5 years 22.0% N/A 23.4% N/A 22.4%
10 years 18.6% N/A N/A N/A 18.9%
</TABLE>
<PAGE>
The ICAP composite performance presented above
reflects the performance of the Private Accounts
included in the Discretionary Equity and Equity
Composites reduced by the annual total operating
expenses (before waivers and/or reimbursements) for the
Discretionary Equity and Equity Portfolios,
respectively, as set forth in "SUMMARY OF PORTFOLIO
EXPENSES." The performance of the Discretionary Equity
and Equity Portfolios presented above reflects the
performance of each Portfolio reduced by the total
operating expenses actually incurred by each Portfolio
for the period indicated. The S&P 500 returns assume
reinvestment of all dividends paid by the stocks
included in the index, but do not include brokerage
commissions or other fees an investor would incur by
investing in the portfolio of stocks comprising the
index. The Discretionary Equity and Equity Composites
represent ICAP's past performance in managing private
accounts and should not be interpreted as indicative of
the past or future performance of the Discretionary
Equity or Equity Portfolios. See "FINANCIAL
HIGHLIGHTS."
In addition to the Private Accounts, from January
through December 1997, ICAP funded and managed a single
separate account (the "Account") which pursued
substantially the same investment objective, policies
and strategies, and employed the same management style,
as that of the Euro Select Portfolio. After the close
of business on December 31, 1997, all of the assets in
the Account were contributed to the Euro Select
Portfolio in exchange for shares in such Portfolio.
Like the Private Accounts, the Account was not subject
to the same types of expenses to which the Euro Select
Portfolio is subject nor to the specific tax
restrictions and investment limitations imposed on the
Portfolio by the Code and the 1940 Act, respectively.
The following chart compares the performance of the
Account to the average performance of the Euro Index
for each of the four quarters ended December 31, 1997
and for the period from January 1, 1997 to December 31,
1997. The performance results of the Account described
below could have been adversely affected if the Account
had been regulated as an investment company under the
federal tax and securities laws.
ICAP's Account Performance vs. Euro Index
Performance through December 31, 1997
Total Return
Time Period ICAP Account Euro Index
1st Quarter 6.6% 4.9%
2nd Quarter 13.6% 8.9%
3rd Quarter 10.4% 8.3%
4th Quarter (3.3)% 0.1%
1/1/97 - 12/31/97 29.4% 23.8%
The ICAP performance presented above reflects the
performance of the Account reduced by the estimated
annual total operating expenses (before waivers and/or
reimbursements) for the Euro Select Portfolio as set
forth in "SUMMARY OF PORTFOLIO EXPENSES." The Euro
Index returns assume reinvestment of all dividends paid
by the stocks included in the index net of foreign
withholding taxes, but do not include brokerage
commissions or other fees an investor would incur by
investing in the portfolio of stocks comprising the
index. The Account performance represents ICAP's past
performance in managing a private account and should
not be interpreted as indicative of future performance
of the Euro Select Portfolio.
The performance of the Euro Select Portfolio from
January 1, 1998 through March 31, 1998 as compared to
the average performance of the Euro Index for the same
period is as follows:
Euro Select
Time Period Portfolio Euro Index
1/1/98 - 3/31/98 21.2% 20.3%
The Euro Select Portfolio commenced operations
after the close of business on December 31, 1997. The
performance of the Euro Select Portfolio presented
above reflects the performance of such Portfolio
reduced by the total operating expenses actually
incurred by the Portfolio for the period indicated.
<PAGE>
INVESTMENT OBJECTIVES AND POLICIES
The initial step in the investment process focuses
on top-down research. ICAP develops an economic
framework (including an interest rate, inflation and
business cycle outlook) and analyzes strategic economic
and/or industry themes to identify appropriate
investments.
The key to the investment process is bottom-up
stock selection and the identification of a catalyst.
A variety of proprietary research techniques and
computer models are used to search for issuers
possessing the best relative value based on proprietary
price/earnings projections and analysis of earnings
momentum. Furthermore, a clear catalyst, either stock-
specific, industry or economic, which ICAP believes
will trigger significant price appreciation in a
definable time period must exist. In order to enhance
its internal research, ICAP also utilizes a wide
variety of external sources for investment information
including recognized strategists, economists, technical
and fundamental analysts, corporate executives and
industry sources.
For each investment, ICAP establishes an upside
price target and a downside risk potential. This
strategy allows for continuous monitoring of
fundamental conditions and stock price performance.
Although ICAP typically expects the investment
potential of each investment to be realized over a nine
to fifteen month time period, it is not unusual for
equities to be held for a longer period if the
potential is justified. Investments that underperform
the market are reviewed intensively. If the
risk/reward of a particular investment becomes
unattractive or the reasons for owning the security no
longer appear valid, the investment is typically sold
expeditiously to avoid future underperformance.
The investment objectives presented below may not
be changed without shareholder approval. Since all
investments are subject to inherent market risks, there
is no assurance that these objectives will be realized.
Except for each Portfolio's investment objective and
the investment restrictions enumerated in the Company's
Statement of Additional Information, a Portfolio's
investment policies may be changed without a vote of
the Portfolio's shareholders.
Discretionary Equity Portfolio
Investment Objective. The Discretionary Equity
Portfolio's investment objective is to seek a superior
total return with only a moderate degree of risk. This
investment objective is relative to and measured
against the S&P 500; the Portfolio seeks to achieve a
total return greater than the S&P 500 with an equal or
lesser degree of risk than the S&P 500. The
distinction between the Discretionary Equity Portfolio
and the Equity Portfolio is that the Discretionary
Equity Portfolio may invest up to 35% of its total
assets and, for temporary defensive purposes, up to
100% of its total assets, in cash and short-term fixed
income securities while the Equity Portfolio intends to
be virtually fully invested in equity securities at all
times.
Investment Policies. The Discretionary Equity
Portfolio will seek, under normal market conditions, to
achieve its investment objective by investing its
assets primarily in U.S. dollar-denominated equity
securities of companies with market capitalizations of
at least $500 million, which include, but are not
limited to, common stocks; preferred stocks; warrants
to purchase common or preferred stocks; ADRs; and
securities convertible into common or preferred stocks,
such as convertible bonds and debentures rated Baa or
higher by Moody's Investors Service ("Moody's"), BBB or
higher by Standard & Poor's Corporation ("S&P"), Duff &
Phelps, Inc. ("D&P") or Fitch IBCA Information, Inc.
("Fitch"), or unrated securities of comparable quality
as determined by ICAP (i.e., investment-grade debt
securities). Under normal market conditions, the
Discretionary Equity Portfolio will invest at least 65%
of the value of its total assets in equity securities.
In addition, the Discretionary Equity Portfolio may
invest up to 35% of its total assets in cash and short-
term fixed income securities for any purpose, including
pending investment or reinvestment, and may invest up
to 100% of its total assets in such instruments as a
temporary defensive measure.
<PAGE>
Equity Portfolio
Investment Objective. The Equity Portfolio's
investment objective is to seek a superior total return
with only a moderate degree of risk. This investment
objective is relative to and measured against the S&P
500; the Portfolio seeks to achieve a total return
greater than the S&P 500 with an equal or lesser degree
of risk than the S&P 500. The Equity Portfolio intends
to be virtually fully invested at all times with only
nominal cash or short-term fixed income positions held
at any time. If cash or short-term fixed income
securities are held, however, the purpose of such
holdings would be to meet anticipated redemption
requests, pay expenses and pending investment, which,
in any case, generally would not exceed 5% of the
Equity Portfolio's total assets. The Equity Portfolio
may, however, temporarily exceed this 5% limitation,
but only in circumstances pending investment and only
for short periods of time. Because the Equity
Portfolio will hold only nominal cash and short-term
fixed income positions, it may be subject to greater
risk in times of market volatility than the other
Portfolios.
Investment Policies. The Equity Portfolio will
seek to achieve its investment objective by investing
its assets primarily in U.S. dollar-denominated equity
securities of companies with market capitalizations of
at least $500 million, which include, but are not
limited to, common stocks; preferred stocks; warrants
to purchase common or preferred stocks; ADRs; and
securities convertible into common or preferred stocks,
such as convertible bonds and debentures which are
rated investment-grade or unrated securities of
comparable quality as determined by ICAP. Under normal
market conditions, at least 65% of the value of the
Equity Portfolio's total assets will be invested in
such equity securities. The Equity Portfolio will only
hold cash or short-term fixed income securities to meet
anticipated redemption requests, pay expenses and
pending investment. As a result, the Equity
Portfolio's investment in such securities generally
will not exceed 5% of its total assets.
Select Equity Portfolio
Investment Objective. The Select Equity
Portfolio's investment objective is to seek a superior
total return. This investment objective is relative to
and measured against the S&P 500; the Portfolio seeks
to achieve a total return greater than the S&P 500.
Under normal market conditions, the Select Equity
Portfolio will invest at least 65% of its total assets
in U.S. dollar-denominated equity securities of
companies with market capitalizations of $500 million
or more. At any time, the Select Equity Portfolio will
be invested in a relatively limited number of
securities and/or companies.
Investment Policies. The Select Equity Portfolio
will seek to achieve its investment objective by
investing its assets in U.S. dollar-denominated equity
securities of at least 15 companies with market
capitalizations of $500 million or more. These
securities include, but are not limited to, commons
stocks; preferred stocks; warrants to purchase common
or preferred stocks; ADRs; and securities convertible
into common or preferred stocks, such as convertible
bonds and debentures which are rated investment-grade
or unrated securities of comparable quality as
determined by ICAP. Under normal market conditions,
the Select Equity Portfolio will invest at least 65% of
its total assets in such securities. In addition, the
Select Equity Portfolio may invest up to 35% of its
total assets in cash and short-term fixed income
securities for any purpose, including pending
investment or reinvestment, and may invest up to 100%
of its total assets in such instruments as a temporary
defensive measure.
Euro Select Portfolio
Investment Objective. The Euro Select Portfolio's
investment objective is to seek a superior total return
with income as a secondary objective. This investment
objective is relative to and measured against the Euro
Index; the Euro Select Portfolio seeks to achieve a
total return greater than the Euro Index. Under normal
market conditions, the Euro Select Portfolio will
invest at least 65% of its total assets in equity
securities, predominately ADRs, of established European
companies with market capitalizations of $1 billion or
more. At any time, the Euro Select Portfolio will be
invested in a relatively limited number of securities
and/or companies.
Investment Policies. The Euro Select Portfolio
will seek to achieve its investment objective by
investing its assets in the equity securities of at
least 15 companies which generally pay dividends and
which have market capitalizations of $1 billion or
more. These securities include, but are not limited
to, common stocks; preferred
<PAGE>
stocks; warrants to
purchase common or preferred stocks; ADRs; and
securities convertible into common or preferred stocks,
such as convertible bonds and debentures which are
rated investment-grade or unrated securities of
comparable quality as determined by ICAP. Under normal
market conditions, the Euro Select Portfolio will
invest at least 65% of its total assets in such
securities. In addition, the Euro Select Portfolio may
invest up to 35% of its total assets in cash and short-
term fixed income securities for any purpose, including
pending investment or reinvestment, and may invest up
to 100% of its total assets in such instruments as a
temporary defensive measure.
INVESTMENT TECHNIQUES AND RISKS
None of the Portfolios will invest more than 5% of
their net assets in any one of the following types of
investments: investment-grade debt securities; non-
investment-grade debt securities (commonly referred to
as "junk bonds"); and illiquid securities.
Short-Term Fixed Income Securities
The Discretionary Equity, Select Equity and Euro
Select Portfolios may invest up to 35% of their
respective total assets in cash and short-term fixed
income securities, while the Equity Portfolio may
generally not invest more than 5% of its total assets
in such instruments. In addition, when ICAP believes
that market conditions warrant, the Discretionary
Equity, Select Equity and Euro Select Portfolios may
invest up to 100% of their respective total assets in
such instruments for temporary defensive purposes.
Short-term fixed income securities must be rated at
least A-1 or higher by S&P, Prime-1 or higher by
Moody's, F-2 or higher by Fitch or D-2 or higher by D&P
or determined by ICAP to be of comparable quality, and
include, without limitation, the following securities,
each of which has a stated maturity of one year or less
from the date of purchase unless otherwise indicated:
U.S. government securities, including bills, notes and
bonds, differing as to maturity and rate of interest,
which are either issued or guaranteed by the U.S.
Treasury or U.S. governmental agencies or
instrumentalities; certificates of deposit issued
against funds deposited in a U.S. or foreign bank and
its subsidiaries and branches, or a U.S. savings and
loan association; bank time deposits, which are monies
kept on deposit with U.S. and foreign banks and their
subsidiaries and branches, or U.S. savings and loan
associations for a stated period of time at a fixed
rate of interest; bankers' acceptances which are short-
term credit instruments used to finance commercial
transactions; commercial paper and commercial paper
master notes (which are demand instruments without a
fixed maturity bearing interest at rates which are
fixed to known lending rates and automatically adjusted
when such lending rates change); and repurchase
agreements entered into only with respect to
obligations of the U.S. government, its agencies or
instrumentalities. Repurchase agreements could involve
certain risks in the event of the default or insolvency
of the other party to the agreement, including possible
delays or restrictions upon a Portfolio's ability to
dispose of the underlying securities.
When-Issued Securities
Each Portfolio may invest without limitation in
securities purchased on a when-issued or delayed
delivery basis ("when-issued securities"). Although
the payment and terms of these securities are
established at the time the purchaser enters into the
commitment, these securities may be delivered and paid
for at a future date, generally within 45 days.
Purchasing when-issued securities allows a Portfolio to
lock in a fixed price on a security it intends to
purchase. Each Portfolio will segregate and maintain
cash or other liquid assets in an amount at least equal
to the amount of outstanding commitments for when-
issued securities at all times. Such securities
involve a risk of loss if the value of the security to
be purchased declines prior to the settlement date.
Warrants
Each Portfolio may invest without limitation in
warrants. Investing in warrants is purely speculative
in that they have no voting rights, pay no dividends
and have no rights with respect to the assets of the
corporation issuing them. Warrants basically are
options to purchase equity securities at a specific
price for a specific period of time. They do not
represent ownership of the securities but only the
right to buy them. Warrants are issued by the issuer
of the security, which may be purchased on their
exercise. The prices of warrants do not necessarily
parallel the prices of the underlying securities.
<PAGE>
Real Estate Investment Trust Securities ("REITs")
Each Portfolio may invest without limitation in
the equity securities of REITs. REITs are pooled
investment vehicles which invest primarily in income
producing real estate or real estate related loans or
interests. REITs are generally classified as equity
REITs, mortgage REITs or a combination of equity and
mortgage REITs. Equity REITs invest the majority of
their assets directly in real property and derive
income primarily from the collection of rents. Equity
REITs can also realize capital gains by selling
properties that have appreciated in value. Mortgage
REITs invest the majority of their assets in real
estate mortgages and derive income primarily from the
collection of interest payments. Similar to investment
companies, REITs are not taxed on income distributed to
shareholders provided they comply with several
requirements of the Code. A Portfolio which invests in
REITs will indirectly bear its proportionate share of
the expenses incurred by the REITs in addition to the
expenses incurred directly by the Portfolio.
Investments in REITs may subject a Portfolio to risks
similar to those associated with direct ownership of
real estate (in addition to securities markets risks).
REITs are sensitive to factors such as changes in real
estate value and property taxes, interest rates, cash
flow of underlying real estate assets, supply and
demand and the management skill and creditworthiness of
the issuer. REITs may also be affected by tax and
regulatory requirements.
ADRs and Foreign Securities
Each Portfolio may invest without limitation in
ADRs and other foreign instruments denominated in U.S.
dollars. ADRs are securities, typically issued by a
U.S. financial institution (a "depositary"), which
evidence ownership interests in a security or pool of
securities issued by a foreign company which have been
deposited with the depositary. ADRs are denominated in
U.S. dollars and trade in the U.S. securities markets.
ADRs may be "sponsored" or "unsponsored." Sponsored
ADRs are established jointly by a depositary and a
foreign company, whereas unsponsored ADRs may be
established by a depositary without participation by
the underlying foreign company. Holders of unsponsored
ADRs generally bear all the costs associated with
establishing the unsponsored ADR. The depositary of an
unsponsored ADR is under no obligation to distribute
shareholder communications, including financial
statements, received from the foreign company or to
pass through to the holders of the unsponsored ADR
voting rights with respect to the deposited securities
or pool of securities. While the Portfolios may invest
without limitation in sponsored or unsponsored ADRs,
the ADRs purchased by the Portfolios will generally be
sponsored. In addition to ADRs, the Euro Select
Portfolio may invest directly and without limitation in
foreign securities.
Investments in securities of foreign issuers
involve risks which are in addition to the usual risks
inherent in domestic investments. An investment in
ADRs is subject to some of the same risks as direct
investments in foreign securities. In many countries
there is less publicly available information about
issuers than is available in the reports and ratings
published about companies in the U.S. Additionally,
foreign companies are not subject to uniform
accounting, auditing and financial reporting standards.
Other risks inherent in foreign investment include
expropriation; confiscatory taxation; withholding taxes
on dividends and interest; less extensive regulation of
foreign brokers, securities markets and issuers; costs
incurred in conversions between currencies; the
illiquidity and volatility of foreign securities
markets; the possibility of delays in settlement in
foreign securities markets; limitations on the use or
transfer of assets (including suspension of the ability
to transfer currency from a given country); the
difficulty of enforcing obligations in other countries;
diplomatic developments; and political or social
instability. Foreign economies may differ favorably or
unfavorably from the U.S. economy in various respects,
and many foreign securities are less liquid and their
prices are more volatile than comparable U.S.
securities. From time to time, foreign securities may
be difficult to liquidate rapidly without adverse price
effects. Certain costs attributable to foreign
investing, such as custody charges and brokerage costs,
are higher than those attributable to domestic
investing.
Options and Futures Transactions
Each Portfolio may engage in options and futures
transactions which are sometimes referred to as
"derivative" transactions. A Portfolio's options and
futures transactions may include instruments such as
stock index options and futures contracts. Such
transactions may be used for several reasons, including
hedging unrealized portfolio gains. The Commodity
Futures Trading Commission (the "CFTC") regulates the
trading of futures and options on futures
<PAGE>
transactions.
The Portfolios will only engage in futures and options
on futures transactions which must, pursuant to
regulations promulgated by the CFTC, constitute bona
fide hedging or other permissible risk management
transactions and will not enter into such transactions
if the sum of the initial margin deposits and premiums
paid for unexpired options exceeds 5% of a Portfolio's
net assets. In addition, with respect to both its
options and futures (including options on futures)
transactions, no Portfolio will enter into any such
transaction if more than 30% of the Portfolio's net
assets would be committed to such instruments. A
Portfolio may hold an options or futures position until
its expiration, or it can close out such a position
before then at current value if a liquid secondary
market is available. If a Portfolio cannot close out a
position, it may suffer a loss apart from any loss or
gain experienced at the time the Portfolio decided to
close the position. When required by guidelines of the
SEC or the CFTC, a Portfolio will set aside permissible
liquid assets in a segregated account to secure its
potential obligations under its options or futures
positions.
The use of derivative instruments, such as options
and futures, involves risks and special considerations
which include, among others, the following:
Correlation Risk. When a derivative transaction
is used to completely hedge another position, changes
in the market value of the combined position (the
derivative instrument plus the position being hedged)
can result from an imperfect correlation between the
price movements of the two instruments. With a perfect
hedge, the value of the combined position remains
unchanged for any change in the price of the underlying
asset. With an imperfect hedge, the value of the
derivative instrument and its hedge are not perfectly
correlated. Correlation risk is the risk that there
might be imperfect correlation, or even no correlation,
between price movements of a derivative instrument and
price movements of investments being hedged.
Liquidity Risk. Derivatives are also subject to
liquidity risk. Liquidity risk is the risk that a
derivative instrument cannot be sold, closed out or
replaced quickly at or very close to its fundamental
value. Generally, exchange-traded contracts are very
liquid because the exchange clearinghouse is the
counterparty of every contract. Over-the-counter
transactions are less liquid than exchange-traded
derivatives since they often can only be closed out
with the other party to the transaction.
In addition to the foregoing risks, there is the
risk of potentially unlimited losses that may result
from investing in certain derivatives. For additional
information, please see the Statement of Additional
Information.
Foreign Currency Hedging Transactions
The Euro Select Portfolio may enter into forward
foreign currency exchange contracts ("forward
contracts") and foreign currency futures contracts and
options thereon. See "Options and Futures
Transactions," above. Forward contracts provide for
the purchase, sale or exchange of an amount of a
specified foreign currency at a future date. The Euro
Select Portfolio will enter into forward contracts for
hedging purposes only; that is, only to protect against
the effects of fluctuating rates of currency exchange
and exchange control regulations between trade and
settlement dates, dividend declaration and distribution
dates and purchase and sale dates. A foreign currency
futures contract is a standardized contract for the
future delivery of a specified amount of a foreign
currency at a future date at a price set at the time of
the contract. Foreign currency futures contracts and
options thereon traded in the U.S. are traded on
regulated exchanges. Parties to a futures contract
must make "margin" deposits to secure performance of
the contract, which generally range from 2% to 5% of
the contract price, and may be required to make
"variation" margin deposits as the value of the futures
contract fluctuates. The Euro Select Portfolio will
enter into foreign currency futures and options
transactions for hedging and other permissible risk
management purposes only and may segregate assets to
cover its futures contracts obligations.
At the maturity of a forward or futures contract,
the Euro Select Portfolio may either accept or make
delivery of the currency specified in the contract or,
prior to maturity, enter into a closing purchase
transaction involving the purchase or sale of an
offsetting contract. Closing purchase transactions
with respect to forward contracts are usually effected
with the currency trader who is a party to the original
forward contract. Closing purchase transactions with
respect to futures contracts are effected on an
exchange. The Euro Select Portfolio will only enter
into such a forward or futures contract if it is
expected that there will be a liquid market in which to
close
<PAGE>
out such contract. There can, however, be no
assurance that such a liquid market will exist in which
to close a forward or futures contract, in which case
the Euro Select Portfolio may suffer a loss.
The Euro Select Portfolio may attempt to
accomplish objectives similar to those described above
with respect to forward and futures contracts for
currency by means of purchasing put or call options on
foreign currencies on exchanges. A put option gives
the Portfolio the right to sell a currency at the
exercise price until the expiration of the option. A
call option gives the Portfolio the right to purchase a
currency at the exercise price until the expiration of
the option. The Euro Select Portfolio will not enter
into foreign currency forwards, futures or related
options on futures contracts if, along with the
Portfolio's investments in other options, more than 30%
of its net assets would be committed to such
instruments.
Non-Diversification of the Select Equity and Euro
Select Portfolios
The Select Equity and Euro Select Portfolios are
"non-diversified" and, as such, are permitted to invest
their respective assets in a more limited number of
issuers than other investment companies. Under the
Code, however, for income tax purposes, neither
Portfolio may (i) invest more than 25% of its total
assets in the securities of any one company or in the
securities of any two or more companies controlled by
the Portfolio which, pursuant to regulations under the
Code, may be deemed to be engaged in the same, similar
or related trades or businesses, and (ii) with respect
to 50% of its total assets, invest more than 5% of its
total assets in the securities of any one company or
own more than 10% of the outstanding voting securities
of a single company. Thus, as a "non-diversified"
fund, each Portfolio may invest (i) up to 50% of its
total assets in the securities of as few as two
companies, up to 25% each, so long as the Portfolio
does not control the two companies and the two
companies are engaged in different businesses, and (ii)
up to 50% of its total assets in the securities of as
few as ten companies, up to 5% each, so long as the
Portfolio does not own in excess of 10% of any
company's outstanding voting stock. This practice
involves an increased risk of loss to the Select Equity
and Euro Select Portfolios if the market value of a
security should decline or its issuer were otherwise
unable to meet its obligations.
Portfolio Turnover
The Discretionary Equity and Equity Portfolios'
historical portfolio turnover rate is listed under
"FINANCIAL HIGHLIGHTS." Under normal market
conditions, each of these Portfolios anticipate that
its portfolio turnover rate will generally not exceed
150% and is expected to be between 100% and 125%. The
Select Equity and Euro Select Portfolios anticipate
that their respective portfolio turnover rates will
generally not exceed 200% and are expected to be
between 100% and 150%. The portfolio turnover rate is
calculated by dividing the lesser of a Portfolio's
annual purchases or proceeds from sales of securities
(exclusive of purchases or sales of securities whose
maturities at the time of acquisition were one year or
less) by the monthly average value of long-term
securities held during the year. High portfolio
turnover involves correspondingly greater transaction
costs in the form of dealer spreads and brokerage
commissions, which are borne directly by the
Portfolios.
INVESTMENT RESTRICTIONS
The Company has adopted several restrictions on
the investments and other activities of the Portfolios
that may not be changed without shareholder approval.
For example, no Portfolio may:
(1) Borrow money, except that the Portfolio may
(i) borrow money from banks for temporary or emergency
purposes (but not for leverage or the purchase of
investments) and (ii) make other investments or engage
in other transactions permissible under the 1940 Act
which may involve a borrowing, provided that the
combination of (i) and (ii) shall not exceed 33 1/3% of
the value of the Portfolio's total assets (including
the amount borrowed), less the Portfolio's liabilities
(other than borrowings); or
(2) Act as an underwriter of another issuer's
securities, except to the extent that the Portfolio may
be deemed to be an underwriter within the meaning of
the Securities Act of 1933, as amended, in connection
with the purchase and sale of portfolio securities.
<PAGE>
In addition, since the Discretionary Equity and
Equity Portfolios are "diversified," neither Portfolio
may, with respect to 75% of its total assets, purchase
the securities of any issuer (except securities issued
or guaranteed by the U.S. government or any agency or
instrumentality thereof) if, as a result, (i) more than
5% of the Portfolio's total assets would be invested in
securities of that issuer or (ii) the Portfolio would
hold more than 10% of the outstanding voting securities
of that issuer.
For additional investment restrictions, see the
Company's Statement of Additional Information.
MANAGEMENT
Under the laws of the State of Maryland, the Board
of Directors is responsible for managing the Company's
business and affairs. The Company has entered into an
investment advisory agreement with ICAP dated as of
December 30, 1994, as amended (the "Advisory
Agreement"), pursuant to which ICAP manages the
investments and business affairs of each of the
Portfolios, subject to the supervision of the Company's
Board of Directors. The Board of Directors also
oversees duties required by applicable state and
federal law.
ICAP, an independent investment advisory firm, was
founded in 1970 and is located at 225 West Wacker
Drive, Suite 2400, Chicago, Illinois 60606. With
respect to the Advisory Agreement as it relates to the
Discretionary Equity and Equity Portfolios, each
Portfolio compensates ICAP for its investment advisory
services at the annual rate of 0.80% of the Portfolio's
average net assets. For the year ended December 31,
1997, ICAP voluntarily agreed to waive its management
fee and/or reimburse each Portfolio's operating
expenses to the extent necessary to ensure that neither
Portfolio's total operating expenses exceeded 0.80% of
the Portfolio's average net assets. ICAP has
voluntarily agreed to continue this
waiver/reimbursement policy for the year ending
December 31, 1998 and for an indefinite amount of time
beyond that date. Any such waiver or reimbursement
will have the effect of lowering the overall expense
ratio for the Portfolio and increasing the Portfolio's
overall return to investors for the time any such
amounts were waived and/or reimbursed.
With respect to the Advisory Agreement as it
relates to the Select Equity and Euro Select
Portfolios, the Select Equity Portfolio compensates
ICAP for its investment advisory services at the annual
rate of 0.80% of the Portfolio's average net assets,
while the Euro Select Portfolio compensates ICAP at the
annual rate of 1.00% of the Portfolio's average net
assets. For the year ending December 31, 1998, and for
an indefinite amount of time beyond that date, ICAP has
voluntarily agreed to waive its management fee and/or
reimburse each Portfolio's operating expenses to the
extent necessary to ensure that the Select Equity
Portfolio's total operating expenses do not exceed an
annual rate of 0.80% of the Portfolio's average net
assets, and the Euro Select Portfolio's total operating
expenses do not exceed an annual rate of 1.00% of the
Portfolio's average net assets.
The investment decisions for each Portfolio are
made through a team approach, with all of the ICAP
investment professionals contributing to the process.
Each of the officers and other investment professionals
of ICAP has developed an expertise in at least one
functional investment area, including equity research,
strategy, fixed income analysis, quantitative research,
technical research and trading. A key element in the
decision-making process is a formal investment
committee meeting generally held several times each
week and attended by all the investment professionals.
At this meeting, a comprehensive review of ICAP's
investment position is undertaken. Pertinent
information from outside sources is shared and
incorporated into the investment outlook. The
investment strategy, each asset sector and each
individual security holding are reviewed to verify
their continued appropriateness. Investment
recommendations are presented to the committee for
decisions.
ICAP provides continuous advice and
recommendations concerning each Portfolio's investments
and is responsible for selecting the broker/dealers who
execute the portfolio transactions. In executing such
transactions, ICAP seeks to obtain the best net results
for the Portfolios. ICAP provides office space for the
Company and pays the salaries, fees and expenses of all
officers and directors of the Company who are
interested persons of ICAP. ICAP also serves as
investment adviser to pension and profit-sharing plans,
and other institutional and private investors. As of
<PAGE>
March 31, 1998, ICAP had approximately $12 billion
under management. Mr. Robert H. Lyon, President of
ICAP, owns shares representing 51% of the voting rights
of ICAP, which constitutes a controlling interest.
HOW TO PURCHASE SHARES
Shares of the Portfolios are offered and sold on a
continuous basis at the next offering price calculated
after receipt of the purchase order by the Portfolio.
This price is the net asset value of the Portfolio and
is determined as of the close of trading (generally
4:00 p.m., Eastern Time, or the close of the New York
Stock Exchange (the "NYSE") if different) on each day
the NYSE is open. See "DETERMINATION OF NET ASSET
VALUE." The price at which your purchase will be
effected is based on the Portfolio's net asset value
next determined after the Portfolio receives your
request in proper form. A confirmation indicating the
details of the transaction will be sent to you
promptly. Shares are credited to your account, but
certificates are not issued. However, you will have
full shareholder rights.
The minimum initial investment required by each
Portfolio is $10,000. Subsequent investments may be
made by mail or wire with a minimum subsequent
investment of $1,000. The Company reserves the right
to change or waive these minimums at any time.
Shareholders will be given at least 30 days' notice of
any increase in the minimum dollar amount of purchases.
Payment may be delayed for up to seven business
days on redemption requests for recent purchases made
by check in order to ensure that the check has cleared.
This is a security precaution only and does not affect
your investment.
Initial Investment - Minimum $10,000
You may purchase shares of a Portfolio by
completing a Purchase Application (which can be
obtained by calling 1-888-221-ICAP (1-888-221-4227))
and mailing it along with a check or money order
payable to "ICAP Funds" to: ICAP Funds, Inc., c/o
Sunstone Investor Services, LLC (the "Transfer Agent"),
P.O. Box 2160, Milwaukee, Wisconsin 53201-2160. For
overnight deliveries, please use 207 East Buffalo
Street, Suite 315, Milwaukee, Wisconsin 53202-5712.
Purchases must be made in U.S. dollars and all checks
must be drawn on a U.S. bank. Cash, credit cards,
third-party checks and credit card checks will not be
accepted. If your check does not clear, you will be
charged a $23 service fee. You will also be
responsible for any losses suffered by the Portfolio as
a result. All applications to purchase shares of a
Portfolio are subject to acceptance by the Company and
are not binding until so accepted. The Company
reserves the right to decline to accept a purchase
order application in whole or in part.
Alternatively, you may place an order to purchase
shares of a Portfolio through a broker/dealer. Broker/
dealers may charge a transaction fee for placing orders
to purchase Portfolio shares. It is the responsibility
of the broker/dealer to place the order with the
appropriate Portfolio on a timely basis.
In addition, you may purchase shares of a
Portfolio by wire. To purchase shares by wire
transfer, please follow the wire instructions listed on
the next page.
Subsequent Investments - Minimum $1,000
Additions to your account in amounts of $1,000 or
more may be made by mail or by wire. When making an
additional purchase by mail, enclose a check payable to
"ICAP Funds" along with the additional investment form
provided on the lower portion of your account statement
and send both the check and the form to ICAP Funds,
Inc., c/o Sunstone Investor Services, LLC, P.O. Box
2160, Milwaukee, Wisconsin 53201-2160. For overnight
deliveries, please use 207 East Buffalo Street, Suite
315, Milwaukee, Wisconsin 53202-5712. To make an
additional purchase by wire, please follow the wire
instructions listed below.
<PAGE>
Wire Instructions
To establish a new account by wire transfer,
please call the Transfer Agent at 1-888-221-ICAP
(1-888-221-4227). The Transfer Agent will assign an
account number to you at that time.
Initial and subsequent investments should be wired
through the Federal Reserve System as follows:
UMB Bank, n.a.
ABA Number 101000695
For credit to ICAP Funds, Inc.
Account Number 987-0609665
For further credit to ICAP Funds, Inc.
(investor account number)
(name or account registration)
(social security or taxpayer
identification number)
(identify which Portfolio to purchase)
Wired funds are considered received and accepted
on the day they are deposited in the Portfolio's
account if they reach the account by the Portfolio's
cut-off time for purchases and all required information
is provided in the wire instructions. The Company is
not responsible for the consequences of delays
resulting from the banking or Federal Reserve Wire
System.
Automatic Investment Plan
The Company offers an automatic investment plan
("AIP") whereby you may automatically make purchases of
Portfolio shares on a regular, convenient basis ($250
minimum per transaction). A $5,000 minimum initial
investment must be met before the AIP may be
established. In addition, the Company requires 10
business days after receipt of your request to initiate
the AIP to verify your account information. Under the
AIP, your designated bank or other financial
institution debits a preauthorized amount in your
account each month and applies the amount to the
purchase of Portfolio shares. No service fee is
currently charged by the Company for participating in
the AIP; however, a $23 fee will be imposed by the
Transfer Agent if sufficient funds are not available in
your account at the time of the automatic transaction.
Applications to establish the AIP are available from
the Transfer Agent. Investors who wish to make a
change in investments made through the AIP may do so by
calling 1-888-221-ICAP (1-888-221-4227).
HOW TO REDEEM SHARES
You may request redemption of part or all of your
Portfolio shares at any time. The price you receive
will be the net asset value next determined after the
Portfolio receives your request in proper form. Once
your redemption request is received in proper form, the
Portfolio normally will mail or wire your redemption
proceeds the next business day and, in any event, no
later than seven business days after receipt of a
redemption request. In addition, payment may be
delayed for up to seven business days on redemption
requests for recent purchases made by check in order to
ensure that the check has cleared. In addition to the
redemption procedures described below, redemptions may
also be made through broker/dealers who may charge a
commission or other transaction fee.
Written Redemption
You may redeem your Portfolio shares by mailing a
written, unconditional request to: ICAP Funds, Inc.,
c/o Sunstone Investor Services, LLC, P.O. Box 2160,
Milwaukee, Wisconsin 53201-2160. For redemption
requests sent via overnight delivery, please use 207
East Buffalo Street, Suite 315, Milwaukee, Wisconsin
53202-5712. If your redemption request is
inadvertently sent to ICAP, the investment adviser to
the Portfolios, it will be forwarded to Sunstone
Investor Services, LLC, but the effective date of
redemption will be delayed until the request is
received by Sunstone Investor Services, LLC. The
request must (i) be signed exactly as the shares are
registered, including the
<PAGE>
signature of each owner and
(ii) specify the number of Portfolio shares or dollar
amount to be redeemed. Additional documentation may be
requested from corporations, executors, administrators,
trustees, guardians, agents or attorneys-in-fact. If
you have any questions concerning the nature of such
documentation, please contact the Transfer Agent at
1-888-221-ICAP (1-888-221-4227). Redemption proceeds
may be wired to a commercial bank authorized on your
account application. However, you will be charged a
$10.00 service fee for such wire redemptions.
Telephone Redemption
You may also redeem your Portfolio shares via
telephone by simply calling the Transfer Agent at
1-888-221-ICAP (1-888-221-4227). You may redeem
between $500 and $50,000 per account per day by
telephone. You must make your telephone redemption
request by 3:00 p.m., Central Time (or by the close of
the NYSE, if earlier). If you did not authorize
telephone redemptions in your original Purchase
Application, you may do so by contacting the Transfer
Agent and requesting the relevant documentation
necessary to authorize such transactions; a signature
guarantee will be required at that time. Proceeds from
telephone redemptions will be mailed or wired only to
your address or bank of record. You should realize
that in using the telephone redemption service, you may
be giving up a measure of security that you may have
had if you redeemed your Portfolio shares in writing.
Neither the Company nor its agents will be liable for
following instructions communicated by telephone that
they reasonably believe to be genuine. Reasonable
procedures will be employed on behalf of each Portfolio
to confirm that instructions communicated by telephone
are genuine. Such procedures may include providing
written confirmation of telephone transactions, tape
recording telephone instructions or requiring specific
personal information prior to acting upon telephone
instructions.
Systematic Withdrawal Plan
You may set up automatic withdrawals from your
Portfolio account at regular intervals. To begin
distributions, you must have an initial balance of
$10,000 in your account and withdraw at least $1,000
per payment. To establish the systematic withdrawal
plan ("SWP"), you must complete a SWP Application and
return it to ICAP Funds, Inc., c/o Sunstone Investor
Services, LLC, P.O. Box 2160, Milwaukee, Wisconsin
53201-2160. For overnight delivery, please use 207
East Buffalo Street, Suite 315, Milwaukee, Wisconsin
53202-5712. Redemptions will take place on the 5th
and/or 20th day of the month (or the following business
day), as indicated on your SWP Application. Depending
upon the size of the account and the withdrawals
requested (and fluctuations in the net asset value of
the shares redeemed), redemptions for the purpose of
satisfying such withdrawals may reduce or even exhaust
your account. If the amount remaining in your account
is not sufficient to meet a plan payment, the remaining
amount will be redeemed and the SWP will be terminated.
Signature Guarantees
Except in the case of custodian-to-custodian IRA
transfers, as a protection to both you and the Company,
the Company requires a signature guarantee for all
authorized owners of an account: (i) if you request
that redemption proceeds be mailed or wired to a person
other than the registered owner(s) of the shares; (ii)
if you request that redemption proceeds be mailed or
wired to other than the address or bank account of
record; or (iii) if you submit a redemption request
within 30 days of an address change. A signature
guarantee may be obtained from any eligible guarantor
institution, as defined by the SEC. These institutions
include banks, savings and loan associations, credit
unions, brokerage firms and others. Please note that a
notary public stamp or seal is not acceptable.
Your account may be terminated by the Company on
not less than 30 days' notice if, at the time of any
redemption of shares in your account, the value of the
remaining shares in the account falls below $1,000.
Upon any such termination, a check for the redemption
proceeds will be sent to the account of record within
seven business days of the redemption.
<PAGE>
EXCHANGE PRIVILEGE
You may exchange your shares in a Portfolio for
shares in any other Portfolio of the Company at any
time by written request. You may also make exchange
requests by telephone. If you did not authorize the
use of the telephone exchange service in your original
Purchase Application, you may do so by contacting the
Transfer Agent and requesting the relevant
documentation necessary to authorize such service. The
value of the shares to be exchanged and the price of
the shares being purchased will be the net asset value
next determined after receipt and acceptance of
instructions for exchange. An exchange from one
Portfolio to another is treated the same as an ordinary
sale and purchase for federal income tax purposes and
you will realize a capital gain or loss. This is not a
tax-free exchange. Written exchange requests should be
directed to: ICAP Funds, Inc., c/o Sunstone Investor
Services, LLC, P.O. Box 2160, Milwaukee, Wisconsin
53201-2160. For exchange requests sent via overnight
delivery, please use 207 East Buffalo Street, Suite
315, Milwaukee, Wisconsin 53202-5712. Telephone
exchange requests may be made by calling the Transfer
Agent at 1-888-221-ICAP (1-888-221-4227). Neither the
Company nor its agents will be liable for following
exchange instructions communicated by telephone that
they reasonably believe to be genuine. Reasonable
procedures will be employed on behalf of each Portfolio
to confirm that instructions communicated by telephone
are genuine. Exchange requests may be subject to
limitations, including those relating to frequency,
that may be established from time to time to ensure
that the exchanges do not disadvantage the Portfolios
or their investors. The Company reserves the right to
modify or terminate the exchange privilege upon 60
days' written notice to each shareholder prior to the
modification or termination taking effect.
TAX-SHELTERED RETIREMENT PLANS
Through its custodian, UMB Bank, n.a. (the
"Custodian"), the Company offers several qualified
retirement plans for adoption by individuals and
employers (including, but not limited to, IRAs, SEP-
IRAs and Roth IRAs). For further information, please
call 1-888-221-ICAP (1-888-221-4227) or write to ICAP
Funds, Inc., c/o Sunstone Investor Services, LLC, at
P.O. Box 2160, Milwaukee, Wisconsin 53201-2160.
DIVIDENDS, CAPITAL GAIN DISTRIBUTIONS AND TAX TREATMENT
Each Portfolio intends to operate as a "regulated
investment company" under Subchapter M of the Code, and
therefore will not be liable for federal income taxes
to the extent earnings are distributed on a timely
basis.
For federal income tax purposes, all dividends
paid by the Portfolios and net realized short-term
capital gains are taxable as ordinary income whether
reinvested or received in cash unless you are exempt
from taxation or entitled to a tax deferral.
Distributions paid by a Portfolio from net capital
gains, whether received in cash or reinvested in
additional shares, are taxable as a capital gain. The
capital gain holding period is determined by the length
of time the Portfolio has held the security and not the
length of time you have held shares in the Portfolio.
Investors are informed annually as to the amount and
nature of all dividends and capital gains paid during
the prior year. Such capital gains and dividends may
also be subject to state or local taxes. If you are
not required to pay taxes on your income, you are
generally not required to pay federal income taxes on
the amounts distributed to you.
Dividends are usually distributed quarterly and
capital gains, if any, are usually distributed annually
in December. When a dividend or capital gain is
distributed, a Portfolio's net asset value decreases by
the amount of the payment. If you purchase shares
shortly before a distribution, you will be subject to
income taxes on the distribution, even though the value
of your investment (plus cash received, if any) remains
the same. All dividends or capital gain distributions
will automatically be reinvested in Portfolio shares at
the then prevailing net asset value unless an investor
specifically requests that dividends or capital gains
or both be paid in cash. The election to receive
distributions in cash or to reinvest them in shares may
be changed by writing to: ICAP Funds, Inc., c/o
Sunstone Investor Services, LLC, P.O. Box 2160,
Milwaukee, Wisconsin 53201-2160. For overnight
deliveries, please use 207 East Buffalo Street, Suite
315, Milwaukee, Wisconsin 53202-5712. Such notice must
be received at least five days prior to the record date
of any dividend or capital gain distribution.
<PAGE>
If you have elected to receive dividends and/or
capital gain distributions in cash and the postal or
other delivery service is unable to deliver checks to
your address of record, your distribution option will
automatically be converted to having all dividend and
other distributions reinvested in additional shares.
No interest will accrue on amounts represented by
uncashed distribution or redemption checks.
If you do not furnish the Company with your
correct Social Security Number or Taxpayer
Identification Number, or if required by another
section of the Code, the Company is required by federal
law to withhold federal income tax from your
distributions and redemption proceeds at a rate of 31%.
This section is not intended to be a full
discussion of federal income tax laws and the effect of
such laws on you. There may be other federal, state or
local tax considerations applicable to a particular
investor. You are urged to consult your own tax
advisor.
DETERMINATION OF NET ASSET VALUE
Each Portfolio's net asset value per share is
determined as of the close of trading of the NYSE
(generally 4:00 p.m., Eastern Time, unless the NYSE
closes at a different time) on each day the NYSE is
open for business. Purchase orders received or shares
tendered for redemption on a day the NYSE is open for
trading, prior to the close of trading on that day,
will be valued as of the close of trading on that day.
Applications for purchase of shares and requests for
redemption of shares received after the close of
trading on the NYSE will be valued as of the close of
trading on the next day the NYSE is open. A
Portfolio's net asset value is not required to be
calculated on days during which a Portfolio receives no
orders to purchase shares and no shares are tendered
for redemption. Net asset value is calculated by
taking the fair value of the Portfolio's total assets,
including interest or dividends accrued but not yet
collected, less all liabilities and dividing by the
total number of shares outstanding. The result,
rounded to the nearest cent, is the net asset value per
share.
In determining the net asset value, expenses are
accrued and applied daily and securities and other
assets for which market quotations are available are
valued at market value. Common stocks and other equity-
type securities are valued at the last sales price on
the national securities exchange or Nasdaq on which
such securities are primarily traded; however,
securities traded on a national securities exchange or
Nasdaq for which there were no transactions on a given
day and securities not listed on a national securities
exchange or Nasdaq are valued at the most recent bid
prices. Other exchange traded securities (generally
foreign securities) will be valued based on market
quotations.
Securities quoted in foreign currency will be
valued in U.S. dollars at the foreign currency exchange
rates that are prevailing at the time the daily net
asset value per share is determined. Although foreign
assets are valued in U.S. dollars on a daily basis,
foreign assets are not converted into U.S. dollars on a
daily basis. Foreign currency exchange rates are
generally determined prior to the close of trading on
the NYSE. Occasionally, events affecting the value of
foreign investments and such exchange rates occur
between the time at which they are determined and the
close of trading on the NYSE. Such events would not
normally be reflected in the calculation of a
Portfolio's net asset value on that day. If events
that materially affect the value of a Portfolio's
foreign investments or the foreign currency exchange
rates occur during such period, the investments will be
valued at their fair value as determined in good faith
by or under the direction of the Board of Directors of
the Company, or its delegate. Certain of the
securities holdings of the Portfolios may, from time to
time, be listed primarily on foreign exchanges that
trade on other days than those on which the NYSE is
open for business. As a result, the net asset value of
the applicable Portfolio may be significantly affected
by such trading on days when investors cannot effect
transactions in their accounts.
Debt securities are valued by a pricing service
that utilizes electronic data processing techniques to
determine values for normal institutional-sized trading
units of debt securities without regard to the
existence of sale or bid prices when such values are
believed to more accurately reflect the fair value of
such securities; otherwise, actual sale or bid prices
are used. Any securities or other assets for which
market quotations are not readily available are valued
at fair value as determined in good faith by the Board
of Directors or its delegate. Debt securities having
remaining maturities of 60 days or less when purchased
are valued by the amortized cost method when the Board
of Directors determines that the fair value of such
securities is their amortized cost. Under this method
of valuation, a security is initially valued
<PAGE>
at its
acquisition cost and, thereafter, amortization of any
discount or premium is assumed each day, regardless of
the impact of fluctuating interest rates on the value
of the security. Regardless of the method employed to
value a particular security, all valuations are subject
to review by the Company's Board of Directors or its
delegate who may determine the fair value of a security
pursuant to the Company's pricing procedures.
SHAREHOLDER REPORTS
You will be provided at least semi-annually with a
report showing the Portfolio's or Portfolios' holdings
and annually after the close of the Company's fiscal
year, which ends December 31, with an annual report
containing audited financial statements. In addition,
an individual account statement will be sent to you by
the Transfer Agent at least quarterly. You will also
receive an annual statement after the end of the
calendar year listing all transactions in shares of the
Portfolios during such year.
If you have questions about your account(s), the
Portfolios or the Company, you should call the Transfer
Agent at 1-888-221-ICAP (1-888-221-4227) or write to
ICAP Funds, Inc., c/o Sunstone Investor Services, LLC,
P.O. Box 2160, Milwaukee, Wisconsin 53201-2160.
FINANCIAL INTERMEDIARIES
Broker/dealers, financial institutions and other
financial intermediaries that have entered into
agreements with ICAP may enter purchase or redemption
orders on behalf of their customers. If you purchase
or redeem shares of a Portfolio through a financial
intermediary, certain features of the Portfolio
relating to such transactions may not be available or
may be modified in accordance with the terms of the
intermediaries' agreement with ICAP. In addition,
certain operational policies of a Portfolio, including
those related to settlement and dividend accrual, may
vary from those applicable to direct shareholders of
the Portfolio and may vary among intermediaries. We
urge you to consult your financial intermediary for
more information regarding these matters. In addition,
a Portfolio may pay, directly or indirectly through
arrangements with ICAP, amounts to financial
intermediaries that provide transfer agent and/or other
administrative services relating to the Portfolio to
their customers provided, however, that the Portfolio
will not pay more for these services through
intermediary relationships than it would if the
intermediaries' customers were direct shareholders in
the Portfolio. Certain financial intermediaries may
charge a commission or other transaction fee for their
services. You will not be charged for such fees if you
purchase or redeem your Portfolio shares directly from
a Portfolio without the intervention of a financial
intermediary.
ORGANIZATION
The Company was organized as a Maryland
corporation on November 1, 1994. The Company is
authorized to issue 200,000,000, $.01 par value shares,
in addition to the 100,000,000, $.01 par value shares
of the Discretionary Equity Portfolio, the 100,000,000,
$.01 par value shares of the Equity Portfolio, the
50,000,000, $.01 par value shares of the Select Equity
Portfolio and the 50,000,000, $.01 par value shares of
the Euro Select Portfolio. The assets belonging to the
Discretionary Equity, Equity, Select Equity and Euro
Select Portfolios are held separately by the Custodian,
and if the Company were to issue additional series,
each additional series would be held separately. In
effect, each series is a separate portfolio.
Each share, irrespective of Portfolio, is entitled
to one vote on all questions, except that matters
affecting only one Portfolio are voted upon only by
that Portfolio. Shares have non-cumulative voting
rights, which means that the holders of more than 50%
of the shares voting for the election of directors can
elect all of the directors if they choose to do so and,
in such event, the holders of the remaining shares will
not be able to elect any person or persons to the Board
of Directors.
The Company will not hold annual shareholders
meetings except when required by the 1940 Act. The
Company has adopted procedures in its Bylaws for the
removal of directors by the shareholders as well as by
the Board
<PAGE>
of Directors. As of March 31, 1998, no
person owned a controlling interest (i.e., more than
25%) in the Company. For information on persons who
owned of record or are known by the Company to have
owned of record or beneficially 5% or more of the
outstanding shares of one or more of the Portfolios as
of such date, please see the Statement of Additional
Information.
ADMINISTRATOR AND FUND ACCOUNTANT
Pursuant to an Administration and Fund Accounting
Agreement, Sunstone Financial Group, Inc. (the
"Administrator"), 207 East Buffalo Street, Suite 400,
Milwaukee, Wisconsin 53202-5712, calculates the daily
net asset value of each Portfolio and provides
administrative services (which include clerical,
compliance and regulatory services such as filing all
federal income and excise tax returns and state income
tax returns, assisting with regulatory filings,
preparing financial statements and monitoring expense
accruals). For the foregoing, the Administrator
receives from the Portfolios a fee, computed daily and
payable monthly based on each Portfolio's average
annual net assets at the annual rate of .175 of 1% on
the first $50,000,000, .10 of 1% on the next
$50,000,000, .05 of 1% on the next $150,000,000 and .03
of 1% on average annual net assets in excess of
$250,000,000, subject to an annual aggregate minimum
from all Portfolios of $230,000, plus out-of-pocket
expenses.
CUSTODIAN AND TRANSFER AGENT
UMB Bank, n.a., 928 Grand Boulevard, Kansas City,
Missouri 64141-6226 acts as Custodian of each
Portfolio's assets. Sunstone Investor Services, LLC,
207 East Buffalo Street, Suite 315, P.O. Box 2160,
Milwaukee, Wisconsin 53201-2160 acts as Dividend-
Disbursing and Transfer Agent for the Portfolios.
YEAR 2000 ISSUE
The Portfolios' operations depend on the seamless
functioning of computer systems in the financial
service industry, including those of ICAP, the
Custodian and the Transfer Agent. Many computer
software systems in use today cannot properly process
date-related information after December 31, 1999
because of the method by which dates are encoded and
calculated. This failure, commonly referred to as the
"Year 2000 Issue," could adversely affect the handling
of security trades, pricing and account servicing for
the Portfolios.
ICAP has made compliance with the Year 2000 Issue
a high priority and is taking steps that it believes
are reasonably designed to address the Year 2000 Issue
with respect to its computer systems. ICAP has also
been informed that comparable steps are being taken by
the Portfolios' other major service providers. ICAP
does not currently anticipate that the Year 2000 Issue
will have a material impact on its ability to continue
to fulfill its duties as investment adviser to the
Portfolios.
COMPARISON OF INVESTMENT RESULTS
Each Portfolio may, from time to time, compare its
investment results to various passive indices or other
mutual funds and cite such comparisons in reports to
shareholders, sales literature and advertisements. The
results may be calculated on the basis of average
annual total return, total return or cumulative total
return.
All total return figures assume the reinvestment
of all dividends and measure the net investment income
generated by, and the effect of, any realized and
unrealized appreciation or depreciation of the
underlying investments in each Portfolio over a
specified period of time. Average annual total return
figures are annualized and therefore represent the
average annual percentage change over the specified
period. Total return figures are not annualized and
represent the aggregate percentage or dollar value
change over the period. Cumulative total return simply
reflects a Portfolio's performance over a stated period
of time.
<PAGE>
Average annual total return, total return and
cumulative total return are based upon the historical
results of each Portfolio and are not necessarily
representative of the future performance of the
respective Portfolio. Additional information
concerning the performance of the Discretionary Equity
and Equity Portfolios appears in the Annual Report of
the Discretionary Equity and Equity Portfolios, a copy
of which may be obtained without charge by calling or
writing to the Company. Since the Select Equity and
Euro Select Portfolios did not commence operations
until after the close of business on December 31, 1997,
performance information will not be provided for such
Portfolios until the 1998 Semi-Annual Report is
available.
The Company reserves the right to change any of the
policies, practices and procedures described in this
Prospectus with respect to any Portfolio, including the
Statement of Additional Information, without
shareholder approval except in those instances where
shareholder approval is expressly required.
<PAGE>
DIRECTORS INVESTMENT ADVISER
Pamela H. Conroy Institutional Capital
Senior Vice President, Corporation
Secretary and Director, 225 West Wacker Drive, Suite 2400
Institutional Capital Chicago, Illinois 60606-1229
Corporation
Dr. James A. Gentry
Professor of Finance, CUSTODIAN
University of Illinois
UMB Bank, n.a.
Joseph A. Hays 928 Grand Boulevard
Retired Vice Kansas City, Missouri 64141-6226
President/Corporate Relations,
Tribune Company
Robert H. Lyon DIVIDEND-DISBURSING AND
President, Chief Investment TRANSFER AGENT
Officer and Director,
Institutional Capital Sunstone Investor Services, LLC
Corporation P.O. Box 2160
Milwaukee, Wisconsin 53201-2160
Gary S. Maurer
Executive Vice President and
Director,
Institutional Capital ADMINISTRATOR AND FUND
Corporation ACCOUNTANT
Harold W. Nations Sunstone Financial Group, Inc.
Partner, Holleb & Coff 207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202-5712
Donald D. Niemann
Executive Vice President and
Director,
Institutional Capital
Corporation AUDITORS
Barbara C. Schanmier Coopers & Lybrand L.L.P.
Senior Vice President and 411 East Wisconsin Avenue
Director, Milwaukee, Wisconsin 53202-9905
Institutional Capital
Corporation
LEGAL COUNSEL
OFFICERS
Godfrey & Kahn, S.C.
Robert H. Lyon 780 North Water Street
President Milwaukee, Wisconsin 53202-3590
Pamela H. Conroy
Vice President and Treasurer
Donald D. Niemann
Vice President and Secretary
