ICAP FUNDS
Annual Report
DECEMBER 31, 1999
-----------------------------------
DISCRETIONARY EQUITY PORTFOLIO
EQUITY PORTFOLIO
SELECT EQUITY PORTFOLIO
EURO SELECT EQUITY PORTFOLIO
(LOGO)
ICAP
Institutional Capital/R
<PAGE>
Table of Contents
Letter to Shareholders...................................................1
Investment Highlights and Schedules of Investments
Discretionary Equity Portfolio.........................................4
Equity Portfolio.......................................................8
Select Equity Portfolio...............................................12
Euro Select Equity Portfolio..........................................15
Statements of Assets and Liabilities....................................18
Statements of Operations................................................19
Statements of Changes in Net Assets
Discretionary Equity Portfolio........................................20
Equity Portfolio......................................................21
Select Equity Portfolio...............................................22
Euro Select Equity Portfolio..........................................23
Financial Highlights
Discretionary Equity Portfolio........................................24
Equity Portfolio......................................................25
Select Equity Portfolio...............................................26
Euro Select Equity Portfolio..........................................27
Notes to Financial Statements...........................................28
Report of Independent Accountants.......................................31
<PAGE>
January 2000
Dear Fellow Shareholders:
(PHOTO)
ROBERT H. LYON
PRESIDENT AND CHIEF INVESTMENT OFFICER
Throughout 1999 evidence began to accumulate that the huge drag on global
growth, prices and profits generated by the Asian/Russian crisis was winding
down. As we entered 1999, we were optimistic about a rebound in non-Japan Asia,
but concerned about growth in Russia, Brazil, China and Japan. However, as world
central banks continued to aggressively supply liquidity through the spring of
1999, the seeds of a synchronous expansion were sown and fertilized. The three
deflationary forces engendered by the Asian crisis began to reverse: consumption
in the affected areas has gone from negative to positive; demand for raw
materials has reversed from living off inventories to reordering; and instead of
dumping manufactured products onto global markets, goods are now being priced to
attain some type of economic profit. The bottom line is that import prices have
gone from being sharply negative to now increasing modestly on a year-over-year
basis, implying a less deflationary environment.
As we move into 2000, the sustainability of the global expansion is on firm
ground, despite the move to a more neutral stance by key central banks. Around
the world, employment is increasing, inventories are low, orders are increasing,
and access to capital has improved. Moreover, there has been some (although not
enough) structural improvement in the Asian financial system, and the world
continues to move closer toward a global free market system. All of this bodes
well for the global economy, and has been partially reflected in the strength
during 1999 of the basic industry and energy S&P 500 groups, which were up 32%
and 19%, respectively.
However, the story of the rebound of the global economy was nearly drowned out
by the hype surrounding the speculative bubble in the technology sector. After
an 85% increase in 1998, the Nasdaq 100 added another 102% in 1999, exiting the
year at 100x earnings estimates for 2000. The S&P 500 technology sector was up
77%, and accounted for about 70% of the gain in the S&P 500 itself (which was up
21% for the year). Moreover, about a dozen tech stocks accounted for the
majority of the gain in the S&P 500. Consequently, despite some widening in
breadth to include the cyclically sensitive raw material sectors, more than one-
half of the stocks in the S&P 500 had negative returns in 1999. The median
return was 0%.
This excitement was not contained to the handful of key tech stocks that are
driving the "new economy," but spread to a vast number of new issues. 1999 saw
an IPO crop of nearly 600 new issues which raised a record $69 billion in
proceeds. By year end, the capitalization of 1999's new issues had exploded to
nearly $700 billion, and many new issues were up hundreds of percent from their
IPO price. A classic example of this spontaneous combustion is illustrated by
the shares of Akamai Technologies. Akamai, headquartered in Boston, is an
interesting, and relatively proprietary, play on enhancing the speed and quality
of web sites. It went public at $26, and now trades at $327, giving it a
capitalization of $30 billion. Akamai's 1999 estimated sales were a mere $3
million, and it has only a handful of employees. However, its employees must
surely be happy. Summer interns from MIT who took their pay in options are now
multimillionaires, and their CFO of six months saw his options on a million
shares turn into a paper net worth of a quarter billion dollars. This frenzy to
attribute multi-billion dollar capitalizations to start-up companies happened in
an environment where "old economy" companies were dramatically penalized for
both large and small shortfalls.
<PAGE>
In essence, the market has, perversely, lowered the cost of capital for the
riskiest class of assets (unseasoned companies with no tangible assets or
recurring earnings), while simultaneously raising the cost of capital for mature
companies, many of which are enjoying improved demand and facing a consolidation
among their competitors. While this was initially a U.S. phenomenon, by the end
of the year this speculative frenzy had spread across both the Atlantic and
Pacific.
While there is no doubt that the Internet is obsoleting many traditional
business models, the market is ignoring the possibility of Internet companies
obsoleting each other, and traditionally dominant companies reinventing
themselves (with the business to business purchasing consortiums being developed
by Ford and General Motors as interesting examples). Ultimately, the leadership
of the global economy will pass to the small number of Internet survivors, and
the "old paradigm" companies that successfully reinvent themselves. But the
stock prices of many of these new companies may already discount all of this ...
despite the best efforts of creative investment bankers and security analysts to
define new, non-cash valuation metrics to justify unsustainable capitalizations.
Veteran investors know that Wall Street is a perpetual daisy chain. The cycle
outlasts all. Successful IPO's breed more venture capital. Greed overtakes fear
(one only has to go back to October 1998 to remember the fear that can affect
investors). More venture capital breeds more new competitors until marginal
profits are competed away.
The real question is how much of the future losses will be borne by the drop in
the paper profits of entrepreneurs, venture capitalists and the "mad money" of
sophisticated investors, and how much of the losses will be borne by the world's
new class of rubes.
More importantly, how much of any decline will be borne by fiduciaries charged
with the prudent investing of the retirement assets of the American public. It
is this last class of involuntary investors who has the most to lose. They may
not understand the unprecedented risks that are being taken in their behalf in
the name of performance, and in the absence of solid research.
We at ICAP have a long heritage of generating solid returns, while having a
healthy respect for risk. Almost all of the assets we manage represent
retirement and endowment assets that cannot be easily replaced. As we enter
2000, our message remains consistent:
- WE EXPECT THE GLOBAL ECONOMIC EXPANSION TO CONTINUE, AND TO BROADEN OUT.
- WE EXPECT THE DEMAND FOR RAW MATERIALS TO CONTINUE TO BE STRONG.
- CONVERSELY, WE EXPECT THE INTERNET TO CONTINUE TO SQUEEZE THE PROFITABILITY
OF THE WHOLESALE/RETAIL SUPPLY CHAIN, HELPING TO KEEP A LID ON OVERALL
INFLATION.
- WE EXPECT GROWTH OUTSIDE THE U.S. TO CONTINUE TO ACCELERATE, WHILE GROWTH
IN THE U.S. EVENTUALLY MODERATES.
<PAGE>
Consequently,
- WE CONTINUE TO FOCUS ON KEY BENEFICIARIES OF IMPROVING GLOBAL GROWTH IN THE
BASIC INDUSTRY SECTOR (ALCAN, DOW CHEMICAL (THROUGH UNION CARBIDE), AND
WEYERHAEUSER), AS WELL AS THE ENERGY GROUP (THROUGH CONOCO, TEXACO, AND
EXXONMOBIL), AND THE REBOUND OF THE ELECTRONICS INDUSTRY IN ASIA (THROUGH
MOTOROLA AND PHILIPS ELECTRONICS). OTHER KEY PLAYS ON STRONGER GROWTH IN
ASIA INCLUDE COMPANIES RANGING FROM CITIGROUP TO NORTHWEST AIRLINES.
- WE CONTINUE TO FOCUS ON REASONABLY PRICED PLAYERS WHO WILL BENEFIT FROM THE
EXPANSION OF THE INFRASTRUCTURE OF THE NEW ECONOMY (THROUGH COMPANIES
RANGING FROM ELECTRONIC DATA SYSTEMS, NORTEL, AND IBM, TO AT&T, CABLE &
WIRELESS, AND QWEST (THROUGH U S WEST)).
- WE ARE ALSO FOCUSING ON "OLD ECONOMY" COMPANIES THAT HAVE STRONG BUSINESS
FRANCHISES AND THAT ARE REPOSITIONING FOR THE FUTURE SUCH AS FORD, WELLS
FARGO, FEDERATED DEPARTMENT STORES, NEWS CORP., SEAGRAM AND AMERICAN
AIRLINES (THROUGH ITS SABRE AND TRAVELOCITY SUBSIDIARIES).
Our analysts will be busy in 2000 continuing to add positions consistent with
these themes, while avoiding the "value traps" which abound in this changing
environment. Our antennae will also be raised to detect the possible collision
between faster global growth and slower monetary expansion. As strong as 1999
was for equity investors, it was an awful year for fixed-income investors and
traditional growth stocks whose revenues are now lagging (ranging from Coke to
Merck). If interest rates in 2000 push up toward the 7% level, a distinct
possibility, even more pressure will build on speculative issues and companies
that are not well positioned. ICAP's research team has never been stronger and
is well prepared to navigate through these challenging times.
As always, we continue to thank you for your confidence in ICAP and your
additions to our family of funds.
/s/Robert H. Lyon
Robert H. Lyon
President and Chief Investment Officer
The ICAP Funds are actively managed. The companies mentioned may not be held in
all of the Funds.
(PHOTOS)
ICAP INVESTMENT TEAM
<PAGE>
Discretionary Equity Portfolio
Investment Highlights
December 31, 1999
FUND DESCRIPTION
The Discretionary Equity Portfolio invests primarily in U.S. dollar-denominated
equity securities of companies with market capitalizations of at least $500
million. The Portfolio may invest up to 35% of its total assets in cash and cash
equivalents for any purpose, and may invest up to 100% of its total assets in
such instruments for temporary defensive purposes. The Portfolio will typically
hold between 40 and 45 securities.
AVERAGE ANNUALIZED TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
SINCE
INCEPTION
1 YEAR 3 YEARS 5 YEARS (12/31/94)
- --------------------------------------------------------------------------------
ICAP DISCRETIONARY
EQUITY PORTFOLIO 14.85% 17.62% 22.54% 22.54%
GROWTH OF $10,000
- --------------------------------------------------------------------------------
ICAP Discretionary S&P 500 S&P/BARRA
Equity Portfolio Stock Index Value Index
------------------ ------------------ ------------------
12/31/94 10,000 10,000 10,000
12/31/95 13,521 13,758 13,700
12/31/96 16,976 16,917 16,713
12/31/97 21,831 22,560 21,725
12/31/98 24,053 29,008 24,913
12/31/99 27,625 35,112 28,082
This chart assumes an initial gross investment of $10,000 made on 12/31/94.
Returns shown include the reinvestment of all dividends. Past performance is not
predictive of future results. Investment return and principal value will
fluctuate so that shares, when redeemed, may be worth more or less than the
original cost. In the absence of existing fee waivers, total return would be
reduced.
The Fund's portfolio may differ significantly from the securities in the
Indices. The Indices are unmanaged and therefore do not reflect the cost of
portfolio management or trading.
A direct investment in any of these Indices is not possible.
<PAGE>
Discretionary Equity Portfolio
Schedule of Investments by Sector
December 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS 97.0%
BASIC INDUSTRIES 7.9%
93,800 Akzo Nobel N.V. ADR $ 4,666,550
94,250 Alcan Aluminum Ltd. 3,881,922
60,750 Union Carbide Corp. 4,055,063
70,200 Weyerhaeuser Co. 5,041,238
------------
17,644,773
------------
CAPITAL GOODS 2.8%
61,200 General Dynamics Corp. 3,228,300
56,100 TRW Inc. 2,913,694
------------
6,141,994
------------
COMMUNICATIONS 12.4%
88,050 AT&T Corp. 4,468,537
96,450 Bell Atlantic Corp. 5,937,703
58,400 Cable & Wireless plc ADR 3,091,550
43,400 General Motors Corp., Class H<F1> 4,166,400
31,350 MediaOne Group, Inc.<F1> 2,408,072
104,500 U S WEST, Inc. 7,524,000
------------
27,596,262
------------
CONSUMER DURABLES 6.6%
139,100 Ford Motor Co. 7,433,156
100,750 General Motors Corp. 7,323,266
------------
14,756,422
------------
CONSUMER SERVICES 6.8%
222,600 News Corp. Ltd. Class A ADR 7,443,187
116,210 R.H. Donnelley Corp.<F1> 2,193,464
123,800 Seagram Company Ltd. 5,563,262
------------
15,199,913
------------
CONSUMER STAPLES 4.6%
58,200 Avon Products, Inc. 1,920,600
89,500 Kimberly-Clark Corp. 5,839,875
64,600 Tricon Global Restaurants, Inc.<F1> 2,495,175
------------
10,255,650
------------
See notes to financial statements.
<F1> Non-income producing.
<PAGE>
Discretionary Equity Portfolio
Schedule of Investments by Sector (continued)
December 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
ENERGY 7.5%
191,700 Conoco Inc., Class B $ 4,768,538
24,800 ExxonMobil Corp. 1,997,950
71,700 Texaco Inc. 3,894,206
85,557 Total Fina SA ADR 5,924,822
------------
16,585,516
------------
FINANCIAL 14.1%
180,800 Associates First Capital Corp., Class A 4,960,700
132,100 Citigroup Inc. 7,339,806
73,550 Hartford Financial Services Group, Inc. 3,484,431
138,200 Household International, Inc. 5,147,950
38,450 Providian Financial Corp. 3,501,353
177,700 U.S. Bancorp 4,231,481
63,800 Wells Fargo & Co. 2,579,913
------------
31,245,634
------------
HEALTHCARE 10.5%
130,500 American Home Products Corp. 5,146,594
116,455 Aventis SA ADR 6,623,369
79,900 Baxter International Inc. 5,018,719
104,950 Becton, Dickinson and Co. 2,807,412
56,450 Bristol-Myers Squibb Co. 3,623,384
------------
23,219,478
------------
RETAIL 5.8%
88,600 Dayton Hudson Corp. 6,506,562
106,192 Federated Department Stores, Inc.<F1> 5,369,333
70,300 Toys "R" Us, Inc.<F1> 1,006,169
------------
12,882,064
------------
TECHNOLOGY 15.5%
75,600 Electronic Data Systems Corp. 5,060,475
59,100 International Business Machines Corp. 6,382,800
48,708 Motorola, Inc. 7,172,253
58,800 Nortel Networks Corp. 5,938,800
72,894 Philips Electronics N.V. 9,840,690
------------
34,395,018
------------
See notes to financial statements.
<F1> Non-income producing.
<PAGE>
Discretionary Equity Portfolio
Schedule of Investments by Sector (continued)
December 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
TRANSPORTATION 2.5%
52,800 AMR Corp.<F1> $ 3,537,600
88,500 Northwest Airlines Corp.<F1> 1,969,125
------------
5,506,725
------------
TOTAL COMMON STOCKS
(cost $174,068,506) 215,429,449
------------
PRINCIPAL
AMOUNT
- ---------
SHORT-TERM INVESTMENTS 2.9%
MONEY MARKET 1.7%
$3,874,229 UMB Bank Money Market Fiduciary 3,874,229
------------
COMMERCIAL PAPER 1.2%
700,000 Coca-Cola, 5.88%, Due 1/10/2000 699,003
2,000,000 Campbell Soup Co., 5.84%, Due 1/24/2000 1,992,720
------------
2,691,723
------------
TOTAL SHORT-TERM INVESTMENTS
(cost $6,565,952) 6,565,952
------------
TOTAL INVESTMENTS 99.9%
(cost $180,634,458) 221,995,401
Cash and Other Assets,
less Liabilities 0.1% 115,627
------------
NET ASSETS 100.0% $222,111,028
============
See notes to financial statements.
<F1> Non-income producing.
<PAGE>
Equity Portfolio
Investment Highlights
December 31, 1999
FUND DESCRIPTION
The Equity Portfolio invests primarily in U.S. dollar-denominated equity
securities of companies with market capitalizations of at least $500 million.
The Portfolio intends to be virtually fully invested in equity securities at all
times. The Portfolio will typically hold between 40 and 45 securities.
AVERAGE ANNUALIZED TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
SINCE
INCEPTION
1 YEAR 3 YEARS 5 YEARS (12/31/94)
- --------------------------------------------------------------------------------
ICAP
EQUITY PORTFOLIO 16.28% 18.70% 24.00% 24.00%
GROWTH OF $10,000
- --------------------------------------------------------------------------------
ICAP S&P 500 S&P/BARRA
Equity Portfolio Stock Index Value Index
------------------ ------------------ ------------------
12/31/94 10,000 10,000 10,000
12/31/95 13,885 13,758 13,700
12/31/96 17,531 16,917 16,713
12/31/97 22,630 22,560 21,725
12/31/98 25,215 29,008 24,913
12/31/99 29,321 35,112 28,082
This chart assumes an initial gross investment of $10,000 made on 12/31/94.
Returns shown include the reinvestment of all dividends. Past performance is not
predictive of future results. Investment return and principal value will
fluctuate so that shares, when redeemed, may be worth more or less than the
original cost. In the absence of existing fee waivers, total return would be
reduced.
The Fund's portfolio may differ significantly from the securities in the
Indices. The Indices are unmanaged and therefore do not reflect the cost of
portfolio management or trading.
A direct investment in any of these Indices is not possible.
<PAGE>
Equity Portfolio
Schedule of Investments by Sector
December 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS 96.9%
BASIC INDUSTRIES 8.3%
439,250 Akzo Nobel N.V. ADR $ 21,852,688
400,800 Alcan Aluminum Ltd. 16,507,950
271,350 Union Carbide Corp. 18,112,613
317,900 Weyerhaeuser Co. 22,829,194
------------
79,302,445
------------
CAPITAL GOODS 2.8%
273,400 General Dynamics Corp. 14,421,850
246,550 TRW Inc. 12,805,191
------------
27,227,041
------------
COMMUNICATIONS 13.5%
404,179 AT&T Corp. 20,512,084
441,050 Bell Atlantic Corp. 27,152,141
266,000 Cable & Wireless plc ADR 14,081,375
254,050 General Motors Corp., Class H<F1> 24,388,800
136,050 MediaOne Group, Inc.<F1> 10,450,341
464,250 U S WEST, Inc. 33,426,000
------------
130,010,741
------------
CONSUMER DURABLES 6.2%
611,850 Ford Motor Co. 32,695,734
365,375 General Motors Corp. 26,558,195
------------
59,253,929
------------
CONSUMER SERVICES 6.5%
833,100 News Corp. Ltd. Class A ADR 27,856,781
516,760 R.H. Donnelley Corp.<F1> 9,753,845
561,250 Seagram Company Ltd. 25,221,172
------------
62,831,798
------------
CONSUMER STAPLES 4.8%
250,500 Avon Products, Inc. 8,266,500
403,800 Kimberly-Clark Corp. 26,347,950
291,500 Tricon Global Restaurants, Inc.<F1> 11,259,187
------------
45,873,637
------------
See notes to financial statements.
<F1> Non-income producing.
<PAGE>
Equity Portfolio
Schedule of Investments by Sector (continued)
December 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
ENERGY 7.5%
822,600 Conoco Inc., Class B $ 20,462,175
111,800 ExxonMobil Corp. 9,006,887
308,300 Texaco Inc. 16,744,544
375,934 Total Fina SA ADR 26,033,430
------------
72,247,036
------------
FINANCIAL 13.7%
806,100 Associates First Capital Corp., Class A 22,117,369
527,499 Citigroup Inc. 29,309,163
232,650 Hartford Financial Services Group, Inc. 11,021,794
621,950 Household International, Inc. 23,167,637
176,150 Providian Financial Corp. 16,040,659
796,100 U.S. Bancorp 18,957,131
275,600 Wells Fargo & Co. 11,144,575
------------
131,758,328
------------
HEALTHCARE 10.7%
579,400 American Home Products Corp. 22,850,087
512,944 Aventis SA ADR 29,173,684
352,050 Baxter International, Inc. 22,113,141
451,200 Becton, Dickinson and Co. 12,069,600
255,350 Bristol-Myers Squibb Co. 16,390,278
------------
102,596,790
------------
RETAIL 5.2%
312,350 Dayton Hudson Corp. 22,938,203
437,408 Federated Department Stores, Inc.<F1> 22,116,442
317,200 Toys "R" Us, Inc.<F1> 4,539,925
------------
49,594,570
------------
TECHNOLOGY 15.1%
344,050 Electronic Data Systems Corp. 23,029,847
265,400 International Business Machines Corp. 28,663,200
218,902 Motorola, Inc. 32,233,319
147,250 Nortel Networks Corp. 14,872,250
338,058 Philips Electronics N.V. 45,637,830
------------
144,436,446
------------
See notes to financial statements.
<F1> Non-income producing.
<PAGE>
Equity Portfolio
Schedule of Investments by Sector (continued)
December 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
TRANSPORTATION 2.6%
237,700 AMR Corp.<F1> $ 15,925,900
408,200 Northwest Airlines Corp.<F1> 9,082,450
------------
25,008,350
------------
TOTAL COMMON STOCKS
(cost $762,450,134) 930,141,111
------------
PRINCIPAL
AMOUNT
- ---------
SHORT-TERM INVESTMENT 3.0%
MONEY MARKET 3.0%
$28,806,766 UMB Bank Money Market Fiduciary 28,806,766
------------
TOTAL SHORT-TERM INVESTMENT
(cost $28,806,766) 28,806,766
------------
TOTAL INVESTMENTS 99.9%
(cost $791,256,900) 958,947,877
Cash and Other Assets,
less Liabilities 0.1% 579,237
------------
NET ASSETS 100.0% $959,527,114
============
See notes to financial statements.
<F1> Non-income producing.
<PAGE>
Select Equity Portfolio
Investment Highlights
December 31, 1999
FUND DESCRIPTION
The Select Equity Portfolio invests primarily in U.S. dollar-denominated equity
securities of companies with market capitalizations of at least $500 million.
The Portfolio will concentrate its investments in fewer securities than the
Discretionary Equity and Equity Portfolios, typically holding between 15 and 25
securities.
AVERAGE ANNUALIZED TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
SINCE
INCEPTION
1 YEAR (12/31/97)
- --------------------------------------------------------------------------------
ICAP SELECT EQUITY PORTFOLIO 27.17% 21.10%
GROWTH OF $10,000
- --------------------------------------------------------------------------------
ICAP Select S&P 500 S&P/BARRA
Equity Portfolio Stock Index Value Index
------------------ ------------------ ------------------
12/31/97 10,000 10,000 10,000
6/30/98 11,698 11,771 11,213
12/31/98 11,533 12,858 11,467
6/30/99 14,158 14,450 13,068
12/31/99 14,666 15,564 12,926
This chart assumes an initial gross investment of $10,000 made on 12/31/97.
Returns shown include the reinvestment of all dividends. Past performance is not
predictive of future results. Investment return and principal value will
fluctuate so that shares, when redeemed, may be worth more or less than the
original cost. In the absence of existing fee waivers, total return would be
reduced.
The Fund's portfolio may differ significantly from the securities in the
Indices. The Indices are unmanaged and therefore do not reflect the cost of
portfolio management or trading.
A direct investment in any of these Indices is not possible.
<PAGE>
Select Equity Portfolio
Schedule of Investments by Sector
December 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS 97.1%
BASIC INDUSTRIES 12.8%
25,000 Alcan Aluminum Ltd. $1,029,688
15,000 Union Carbide Corp. 1,001,250
14,000 Weyerhaeuser Co. 1,005,375
------------
3,036,313
------------
COMMUNICATIONS 11.8%
21,000 Cable & Wireless plc ADR 1,111,687
22,000 MediaOne Group, Inc.<F1> 1,689,875
------------
2,801,562
------------
CONSUMER DURABLES 6.1%
20,000 General Motors Corp. 1,453,750
------------
CONSUMER SERVICES 10.6%
25,000 News Corp. Ltd. Class A ADR 835,937
35,000 R.H. Donnelley Corp.<F1> 660,625
23,000 Seagram Company Ltd. 1,033,562
------------
2,530,124
------------
CONSUMER STAPLES 3.7%
23,000 Tricon Global Restaurants, Inc.<F1> 888,375
------------
ENERGY 6.8%
30,000 Texaco Inc. 1,629,375
------------
FINANCIAL 13.8%
17,000 Citigroup Inc. 944,563
37,000 Household International, Inc. 1,378,250
40,000 U.S. Bancorp 952,500
------------
3,275,313
------------
HEALTHCARE 7.8%
22,000 American Home Products Corp. 867,625
14,600 Bausch & Lomb Inc. 999,188
------------
1,866,813
------------
RETAIL 4.0%
13,000 Dayton Hudson Corp. 954,688
------------
See notes to financial statements.
<F1> Non-income producing.
<PAGE>
Select Equity Portfolio
Schedule of Investments by Sector (continued)
December 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
TECHNOLOGY 15.8%
8,000 Motorola, Inc. $ 1,178,000
19,080 Philips Electronics N.V. 2,575,800
------------
3,753,800
------------
TRANSPORTATION 3.9%
14,000 AMR Corp.<F1> 938,000
------------
TOTAL COMMON STOCKS
(cost $19,522,246) 23,128,113
------------
PRINCIPAL
AMOUNT
- ---------
SHORT-TERM INVESTMENT 2.9%
MONEY MARKET 2.9%
$691,290 UMB Bank Money Market Fiduciary 691,290
------------
TOTAL SHORT-TERM INVESTMENT
(cost $691,290) 691,290
------------
TOTAL INVESTMENTS 100.0%
(cost $20,213,536) 23,819,403
Cash and Other Assets,
less Liabilities 0.0% 1,908
------------
NET ASSETS 100.0% $23,821,311
============
See notes to financial statements.
<F1> Non-income producing.
<PAGE>
Euro Select Equity Portfolio
Investment Highlights
December 31, 1999
FUND DESCRIPTION
The Euro Select Equity Portfolio invests primarily in equity securities,
predominantly American Depositary Receipts ("ADRs"), of established European
companies with market capitalizations of at least $1 billion. The Portfolio will
typically hold between 15 and 25 securities.
AVERAGE ANNUALIZED TOTAL RETURNS FOR THE PERIODS ENDED DECEMBER 31, 1999
- --------------------------------------------------------------------------------
SINCE
INCEPTION
1 YEAR (12/31/97)
- --------------------------------------------------------------------------------
ICAP EURO SELECT EQUITY PORTFOLIO 22.03% 24.69%
GROWTH OF $10,000
- --------------------------------------------------------------------------------
Morgan Stanley
ICAP Euro Select Capital International
Equity Portfolio Europe Index
------------------ ------------------
12/31/97 10,000 10,000
6/30/98 13,368 12,649
12/31/98 12,740 12,853
6/30/99 13,204 12,543
12/31/99 15,546 14,896
This chart assumes an initial gross investment of $10,000 made on 12/31/97.
Returns shown include the reinvestment of all dividends. Past performance is not
predictive of future results. Investment return and principal value will
fluctuate so that shares, when redeemed, may be worth more or less than the
original cost. In the absence of existing fee waivers, total return would be
reduced.
The Fund's portfolio may differ significantly from the securities in the Index.
The Index is unmanaged and therefore does not reflect the cost of portfolio
management or trading.
A direct investment in this Index is not possible.
<PAGE>
Euro Select Equity Portfolio
Schedule of Investments by Sector
December 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
COMMON STOCKS 97.1%
BASIC INDUSTRIES 13.7%
23,800 Akzo Nobel N.V. ADR $1,184,050
39,800 Jefferson Smurfit Group plc ADR 1,154,200
29,400 Pechiney SA ADR 1,067,587
22,700 UPM-Kymmene Corp. ADR 970,425
------------
4,376,262
------------
COMMUNICATIONS 15.7%
24,800 Cable & Wireless plc ADR 1,312,850
20,700 Deutsche Telekom AG ADR 1,469,700
12,900 KPN NV ADR 1,240,013
91,500 Portugal Telecom SA ADR 995,062
------------
5,017,625
------------
CONSUMER SERVICES 13.3%
127,700 Granada Group plc 1,291,481
242,900 Independent News & Media plc 1,624,637
39,800 Peninsular & Oriental Steam Navigation Co. ADR 1,318,841
------------
4,234,959
------------
CONSUMER STAPLES 8.6%
40,800 Diageo plc ADR 1,305,600
15,650 Nestle SA ADR 1,425,945
------------
2,731,545
------------
ENERGY 7.3%
22,900 ENI SpA ADS 1,262,362
15,172 Total Fina SA ADR 1,050,661
------------
2,313,023
------------
FINANCIAL 18.1%
92,100 Bank Austria AG ADR 1,033,887
15,800 Deutsche Bank AG ADR 1,327,884
38,229 ING Groep N.V. ADR 2,331,969
185,500 Merita plc 1,085,806
------------
5,779,546
------------
HEALTHCARE 7.2%
40,210 Aventis SA ADR 2,286,947
------------
See notes to financial statements.
<PAGE>
Euro Select Equity Portfolio
Schedule of Investments by Sector (continued)
December 31, 1999
- --------------------------------------------------------------------------------
NUMBER
OF SHARES VALUE
- --------------------------------------------------------------------------------
TECHNOLOGY 9.5%
22,534 Philips Electronics N.V. $ 3,042,090
------------
UTILITIES 3.7%
64,800 Vivendi ADR 1,164,534
------------
TOTAL COMMON STOCKS
(cost $24,909,330) 30,946,531
------------
PRINCIPAL
AMOUNT
- ---------
SHORT-TERM INVESTMENT 2.8%
MONEY MARKET 2.8%
$897,587 UMB Bank Money Market Fiduciary 897,587
------------
TOTAL SHORT-TERM INVESTMENT
(cost $897,587) 897,587
------------
TOTAL INVESTMENTS 99.9%
(cost $25,806,917) 31,844,118
Cash and Other Assets,
less Liabilities 0.1% 22,989
------------
NET ASSETS 100.0% $31,867,107
============
Euro Select Equity Portfolio country composition as of December
31, 1999:
COUNTRY %
-------------------------------------
Netherlands 25.2
France 18.0
United Kingdom 16.9
Germany 9.0
Ireland 9.0
Finland 6.7
Switzerland 4.6
Italy 4.1
Austria 3.3
Portugal 3.2
-------------------------------------
TOTAL 100.0%
-------------------------------------
See notes to financial statements.
<PAGE>
Statements of Assets and Liabilities
December 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DISCRETIONARY SELECT EURO SELECT
EQUITY EQUITY EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
ASSETS:
Investments, at cost $180,634,458 $791,256,900 $20,213,536 $25,806,917
============= ============= ============= =============
Investments, at value $221,995,401 $958,947,877 $23,819,403 $31,844,118
Dividends and interest receivable 159,227 592,099 8,287 1,757
Tax reclaim receivable 104,253 433,443 15,311 56,485
Other assets 22,652 260,435 15,137 11,538
------------- ------------- ------------- -------------
Total Assets 222,281,533 960,233,854 23,858,138 31,913,898
------------- ------------- ------------- -------------
LIABILITIES:
Accrued investment advisory fee 122,670 595,398 5,658 12,400
Accrued expenses and other liabilities 47,835 111,342 28,229 34,391
Dividends payable - - 2,940 -
------------- ------------- ------------- -------------
Total Liabilities 170,505 706,740 36,827 46,791
------------- ------------- ------------- -------------
NET ASSETS $222,111,028 $959,527,114 $23,821,311 $31,867,107
============= ============= ============= =============
NET ASSETS CONSIST OF:
Capital stock $ 65,920 $ 222,434 $ 8,537 $ 11,416
Paid-in capital in excess of par 181,966,402 786,376,235 20,630,595 24,159,908
Undistributed net investment income 29,756 117,845 - 5,365
Accumulated net realized
gain (loss) on investments and
foreign currency transactions (1,311,993) 5,119,623 (423,688) 1,653,217
Net unrealized appreciation
on investments 41,360,943 167,690,977 3,605,867 6,037,201
------------- ------------- ------------- -------------
NET ASSETS $222,111,028 $959,527,114 $23,821,311 $31,867,107
============= ============= ============= =============
CAPITAL STOCK, $0.01 PAR VALUE
Authorized 100,000,000 100,000,000 100,000,000 100,000,000
Issued and outstanding 6,592,045 22,243,357 853,653 1,141,618
NET ASSET VALUE, REDEMPTION PRICE
AND OFFERING PRICE PER SHARE $33.69 $43.14 $27.91 $27.91
====== ====== ====== ======
</TABLE>
See notes to financial statements.
<PAGE>
Statements of Operations
For the Year Ended December 31, 1999
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DISCRETIONARY SELECT EURO SELECT
EQUITY EQUITY EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
INVESTMENT INCOME:
Dividends<F1> $ 4,054,866 $ 16,829,362 $ 490,906 $ 684,097
Interest 557,792 837,449 20,276 28,168
------------- ------------- ------------- -------------
Total investment income 4,612,658 17,666,811 511,182 712,265
------------- ------------- ------------- -------------
EXPENSES:
Investment advisory fees 1,747,696 6,993,450 168,029 263,142
Fund administration and accounting fees 189,231 329,836 55,000 58,625
Shareholder servicing 26,575 57,070 17,639 18,023
Custody fees 25,416 68,988 4,296 8,935
Federal and state registration fees 21,948 75,871 18,413 14,773
Directors' fees and expenses 15,200 15,200 15,199 15,200
Reports to shareholders 14,959 15,018 15,006 14,913
Legal fees 14,558 14,558 14,545 14,783
Audit fees 13,799 13,800 9,800 9,800
Amortization of organizational costs 7,263 7,263 - -
Other 6,473 8,989 4,135 4,626
------------- ------------- ------------- -------------
Total expenses before waivers
and reimbursements 2,083,118 7,600,043 322,062 422,820
Waivers and reimbursements
of expenses by Adviser (335,422) (606,593) (154,033) (159,678)
------------- ------------- ------------- -------------
Net expenses 1,747,696 6,993,450 168,029 263,142
------------- ------------- ------------- -------------
NET INVESTMENT INCOME 2,864,962 10,673,361 343,153 449,123
------------- ------------- ------------- -------------
REALIZED AND UNREALIZED GAIN
ON INVESTMENTS:
Net realized gain on investments 17,473,884 46,250,153 477,674 4,077,211
Change in net unrealized appreciation
on investments 9,250,935 70,593,800 2,406,217 1,337,212
------------- ------------- ------------- -------------
Net gain on investments 26,724,819 116,843,953 2,883,891 5,414,423
------------- ------------- ------------- -------------
NET INCREASE IN NET ASSETS
RESULTING FROM OPERATIONS $29,589,781 $127,517,314 $3,227,044 $5,863,546
============= ============= ============= =============
</TABLE>
<F1> Net of $127,080, $567,780, $19,412 and $67,678 in foreign withholding
taxes, respectively.
See notes to financial statements.
<PAGE>
Discretionary Equity Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- --------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 2,864,962 $ 3,134,884
Net realized gain on investments 17,473,884 3,179,531
Change in net unrealized appreciation
on investments 9,250,935 13,361,843
------------- -------------
Net increase in net assets resulting
from operations 29,589,781 19,676,258
------------- -------------
DISTRIBUTIONS PAID FROM:
Net investment income (2,873,033) (3,106,991)
Net realized gain on investments (15,834,976) (5,568,769)
------------- -------------
Net decrease in net assets resulting
from distributions paid (18,708,009) (8,675,760)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 17,226,422 57,481,356
Reinvested distributions 18,520,739 8,428,247
Shares redeemed (29,886,775) (28,677,907)
------------- -------------
Net increase in net assets resulting
from capital share transactions 5,860,386 37,231,696
------------- -------------
TOTAL INCREASE IN NET ASSETS 16,742,158 48,232,194
NET ASSETS:
Beginning of period 205,368,870 157,136,676
------------- -------------
End of period $222,111,028 $205,368,870
============= =============
TRANSACTIONS IN SHARES:
Shares sold 499,065 1,869,143
Reinvested distributions 550,877 262,025
Shares redeemed (874,276) (893,947)
------------- -------------
Net increase 175,666 1,237,221
============= =============
See notes to financial statements.
<PAGE>
Equity Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- --------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 10,673,361 $ 8,012,437
Net realized gain (loss) on investments 46,250,153 (13,842,012)
Change in net unrealized appreciation
on investments 70,593,800 63,286,668
------------- -------------
Net increase in net assets resulting
from operations 127,517,314 57,457,093
------------- -------------
DISTRIBUTIONS PAID FROM:
Net investment income (10,669,849) (7,958,317)
Net realized gain on investments (26,832,819) -
------------- -------------
Net decrease in net assets resulting
from distributions paid (37,502,668) (7,958,317)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 285,844,608 407,643,663
Reinvested distributions 36,065,337 7,620,729
Shares redeemed (169,664,251) (118,898,372)
------------- -------------
Net increase in net assets resulting
from capital share transactions 152,245,694 296,366,020
------------- -------------
TOTAL INCREASE IN NET ASSETS 242,260,340 345,864,796
NET ASSETS:
Beginning of period 717,266,774 371,401,978
------------- -------------
End of period $959,527,114 $717,266,774
============= =============
TRANSACTIONS IN SHARES:
Shares sold 6,850,240 10,993,859
Reinvested distributions 843,301 197,225
Shares redeemed (4,018,060) (3,197,801)
------------- -------------
Net increase 3,675,481 7,993,283
============= =============
See notes to financial statements.
<PAGE>
Select Equity Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- --------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 343,153 $ 107,011
Net realized gain (loss) on investments 477,674 (384,674)
Change in net unrealized appreciation
on investments 2,406,217 1,199,650
------------- -------------
Net increase in net assets resulting
from operations 3,227,044 921,987
------------- -------------
DISTRIBUTIONS PAID FROM:
Net investment income (347,672) (109,221)
Net realized gain on investments (516,699) -
------------- -------------
Net decrease in net assets resulting
from distributions paid (864,371) (109,221)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 21,649,178 10,047,431
Reinvested distributions 828,297 105,755
Shares redeemed (10,599,686) (1,385,103)
------------- -------------
Net increase in net assets resulting
from capital share transactions 11,877,789 8,768,083
------------- -------------
TOTAL INCREASE IN NET ASSETS 14,240,462 9,580,849
NET ASSETS:
Beginning of period 9,580,849 -
------------- -------------
End of period $23,821,311 $9,580,849
============= =============
TRANSACTIONS IN SHARES:
Shares sold 809,090 481,241
Reinvested distributions 30,285 4,740
Shares redeemed (406,555) (65,148)
------------- -------------
Net increase 432,820 420,833
============= =============
See notes to financial statements.
<PAGE>
Euro Select Equity Portfolio
Statements of Changes in Net Assets
- --------------------------------------------------------------------------------
YEAR ENDED YEAR ENDED
DECEMBER 31, 1999 DECEMBER 31, 1998
- --------------------------------------------------------------------------------
OPERATIONS:
Net investment income $ 449,123 $ 409,656
Net realized gain (loss) on investments 4,077,211 (152,423)
Change in net unrealized appreciation
on investments 1,337,212 4,699,989
------------- -------------
Net increase in net assets resulting
from operations 5,863,546 4,957,222
------------- -------------
DISTRIBUTIONS PAID FROM:
Net investment income (443,758) (426,390)
Net realized gain on investments (1,322,801) (938,757)
------------- -------------
Net decrease in net assets resulting
from distributions paid (1,766,559) (1,365,147)
------------- -------------
CAPITAL SHARE TRANSACTIONS:
Shares sold 9,958,444 38,237,521
Reinvested distributions 1,764,616 1,365,033
Shares redeemed (11,986,763) (15,160,806)
------------- -------------
Net increase (decrease) in net
assets resulting from capital
share transactions (263,703) 24,441,748
------------- -------------
TOTAL INCREASE IN NET ASSETS 3,833,284 28,033,823
NET ASSETS:
Beginning of period 28,033,823 -
------------- -------------
End of period $31,867,107 $28,033,823
============= =============
TRANSACTIONS IN SHARES:
Shares sold 399,604 1,746,129
Reinvested distributions 66,002 58,865
Shares redeemed (476,595) (652,387)
------------- -------------
Net increase (decrease) (10,989) 1,152,607
============= ==============
See notes to financial statements.
<PAGE>
Discretionary Equity Portfolio
Financial Highlights
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
(For a share outstanding throughout the year) 1999 1998 1997 1996 1995<F1>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $32.01 $30.34 $29.55 $25.42 $20.00
Income from investment operations:
Net investment income 0.46 0.52 0.48 0.36 0.31
Net realized and unrealized gain on investments 4.26 2.57 7.80 6.09 6.70
----------- ----------- ----------- ----------- -----------
Total income from investment operations 4.72 3.09 8.28 6.45 7.01
----------- ----------- ----------- ----------- -----------
Less distributions:
From net investment income (0.46) (0.52) (0.48) (0.36) (0.31)
In excess of book net investment income - - (0.01) - -
From net realized gain on investments (2.58) (0.90) (7.00) (1.80) (1.27)
In excess of book net realized gain on
investments - - - (0.16) (0.01)
----------- ----------- ----------- ----------- -----------
Total distributions (3.04) (1.42) (7.49) (2.32) (1.59)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF YEAR $33.69 $32.01 $30.34 $29.55 $25.42
=========== =========== =========== =========== ===========
TOTAL RETURN 14.85% 10.17% 28.60% 25.55% 35.21%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of year
(in thousands) $222,111 $205,369 $157,137 $110,280 $37,362
Ratio of expenses to average net assets:
Before expense reimbursement 0.95% 0.98% 1.02% 1.11% 1.56%
After expense reimbursement 0.80% 0.80% 0.80% 0.80% 0.80%
Ratio of net investment income to
average net assets:
Before expense reimbursement 1.16% 1.47% 1.15% 1.04% 0.95%
After expense reimbursement 1.31% 1.65% 1.37% 1.35% 1.71%
Portfolio turnover rate 137% 129% 131% 138% 102%
</TABLE>
<F1> Commencement of operations after the close of business on December 31,
1994.
See notes to financial statements.
<PAGE>
Equity Portfolio
Financial Highlights
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
(For a share outstanding throughout the year) 1999 1998 1997 1996 1995<F1>
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
NET ASSET VALUE,
BEGINNING OF YEAR $38.63 $35.12 $31.16 $26.03 $20.00
Income from investment operations:
Net investment income 0.51 0.50 0.37 0.31 0.28
Net realized and unrealized gain on investments 5.75 3.51 8.57 6.49 7.45
----------- ----------- ----------- ----------- -----------
Total income from investment operations 6.26 4.01 8.94 6.80 7.73
----------- ----------- ----------- ----------- -----------
Less distributions:
From net investment income (0.51) (0.50) (0.37) (0.30) (0.28)
In excess of book net investment income - - (0.01) - -
From net realized gain on investments (1.24) - (4.59) (1.30) (1.41)
In excess of book net realized gain on
investments - - (0.01) (0.07) (0.01)
----------- ----------- ----------- ----------- -----------
Total distributions (1.75) (0.50) (4.98) (1.67) (1.70)
----------- ----------- ----------- ----------- -----------
NET ASSET VALUE, END OF YEAR $43.14 $38.63 $35.12 $31.16 $26.03
=========== =========== =========== =========== ===========
TOTAL RETURN 16.28% 11.42% 29.08% 26.26% 38.85%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of year
(in thousands) $959,527 $717,267 $371,402 $149,125 $46,788
Ratio of expenses to average net assets:
Before expense reimbursement 0.87% 0.91% 0.97% 1.12% 1.44%
After expense reimbursement 0.80% 0.80% 0.80% 0.80% 0.80%
Ratio of net investment income to
average net assets:
Before expense reimbursement 1.15% 1.28% 0.89% 0.83% 0.85%
After expense reimbursement 1.22% 1.39% 1.06% 1.15% 1.49%
Portfolio turnover rate 118% 133% 121% 125% 105%
</TABLE>
<F1> Commencement of operations after the close of business on December 31,
1994.
See notes to financial statements.
<PAGE>
Select Equity Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
(For a share outstanding throughout the year) 1999 1998<F1>
- --------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $22.77 $20.00
Income from investment operations:
Net investment income 0.38 0.28
Net realized and unrealized gain on
investments 5.78 2.78
----------- -----------
Total income from investment
operations 6.16 3.06
----------- -----------
Less distributions:
From net investment income (0.39) (0.29)
From net realized gain on investments (0.63) -
----------- -----------
Total distributions (1.02) (0.29)
----------- -----------
NET ASSET VALUE, END OF YEAR $27.91 $22.77
=========== ===========
TOTAL RETURN 27.17% 15.33%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of year
(in thousands) $23,821 $9,581
Ratio of expenses to average net assets:
Before expense reimbursement 1.53% 3.34%
After expense reimbursement 0.80% 0.80%
Ratio of net investment income (loss)
to average net assets:
Before expense reimbursement 0.90% (0.72)%
After expense reimbursement 1.63% 1.82%
Portfolio turnover rate 375% 250%
<F1> Commencement of operations after the close of business on December 31,
1997.
See notes to financial statements.
<PAGE>
Euro Select Equity Portfolio
Financial Highlights
- --------------------------------------------------------------------------------
YEAR ENDED DECEMBER 31,
(For a share outstanding throughout the year) 1999 1998<F1>
- --------------------------------------------------------------------------------
NET ASSET VALUE, BEGINNING OF YEAR $24.32 $20.00
Income from investment operations:
Net investment income 0.45 0.35
Net realized and unrealized gain on
investments 4.80 5.07
----------- -----------
Total income from investment
operations 5.25 5.42
----------- -----------
Less distributions:
From net investment income (0.44) (0.37)
From net realized gain on investments (1.22) (0.73)
----------- -----------
Total distributions (1.66) (1.10)
----------- -----------
NET ASSET VALUE, END OF YEAR $27.91 $24.32
=========== ===========
TOTAL RETURN 22.03% 27.40%
SUPPLEMENTAL DATA AND RATIOS:
Net assets, end of year
(in thousands) $31,867 $28,034
Ratio of expenses to average net assets:
Before expense reimbursement 1.61% 1.67%
After expense reimbursement 1.00% 1.00%
Ratio of net investment income
to average net assets:
Before expense reimbursement 1.10% 1.02%
After expense reimbursement 1.71% 1.69%
Portfolio turnover rate 245% 272%
<F1> Commencement of operations after the close of business on December 31,
1997.
See notes to financial statements.
<PAGE>
Notes to Financial Statements
December 31, 1999
ORGANIZATION
ICAP Funds, Inc. ("ICAP") was incorporated on November 1, 1994 under the laws of
the State of Maryland and is registered as an open-end management investment
company under the Investment Company Act of 1940. ICAP is comprised of four
portfolios, the Discretionary Equity Portfolio, the Equity Portfolio, the Select
Equity Portfolio and the Euro Select Equity Portfolio (the "Portfolios"), the
first two of which are diversified portfolios and the last two of which are non-
diversified portfolios. Institutional Capital Corporation is the investment
adviser (the "Adviser") to the Portfolios. The Discretionary Equity and Equity
Portfolios commenced operations after the close of business on December 31, 1994
and the Select Equity and Euro Select Equity Portfolios commenced operations
after the close of business on December 31, 1997.
SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently
followed by ICAP in the preparation of its financial statements. These policies
are in conformity with generally accepted accounting principles.
a) Investment Valuation - Common stocks and other equity-type securities are
valued at the last sales price on a recognized U.S. or foreign securities
exchange or Nasdaq on which such securities are primarily traded; however,
securities traded on a recognized U.S. or foreign securities exchange or Nasdaq
for which there were no transactions on a given day or securities not listed on
an exchange or Nasdaq are valued at the most recent bid prices. 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 for
which market quotations are not readily available are valued at fair value as
determined in good faith by the Board of Directors. 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 at its acquisition cost, and thereafter,
amortization of any discount or premium is recognized daily.
b) Foreign Currency Translations - Values of investments denominated in foreign
currencies are converted into U.S. dollars using the spot market rate of
exchange at the time of valuation. Purchases and sales of investments and
dividend income are translated into U.S. dollars using the spot market rate of
exchange prevailing on the respective dates of such transactions. The effect of
changes in foreign exchange rates on realized and unrealized security gains or
losses is reflected as a component of such gains or losses. Foreign denominated
assets may involve greater risks than domestic transactions, including currency,
political and economic, regulatory and market risks.
c) Federal Income and Excise Taxes - It is each Portfolio's policy to meet the
requirements of the Internal Revenue Code applicable to regulated investment
companies and to distribute substantially all investment company net taxable
income and net capital gains to shareholders in a manner which results in no tax
cost to the Portfolio. Therefore, no federal income or excise tax provision is
required.
<PAGE>
d) Distributions to Shareholders - Distributions to shareholders are recorded on
the ex-dividend date. Dividends from net investment income are declared and paid
quarterly. Distributions of net realized capital gains, if any, will be declared
at least annually. The character of distributions made during the year from net
investment income or net realized gain may differ from the characterization for
federal income tax purposes due to differences in the recognition of income,
expense and gain items for financial statement and tax purposes. Where
appropriate, reclassifications between net asset accounts are made for such
differences that are permanent in nature. Accordingly, at December 31, 1999,
reclassifications were recorded to increase undistributed net investment income
by $4,067, $4,067 and $167; decrease accumulated net realized loss on
investments by $0, $0 and $11; and decrease paid-in capital in excess of par by
$4,067, $4,067 and $178 for the Discretionary Equity, Equity and Select Equity
Portfolios, respectively.
e) Short-Term Investments - The Portfolios maintain uninvested cash in a bank
overnight investment vehicle at their custodian. This may present credit risk to
the extent the custodian fails to perform in accordance with the custody
agreement. The creditworthiness of the custodian is monitored and this
investment is considered to present minimal credit risk by the Portfolios'
Adviser.
f) Estimates - The preparation of financial statements in conformity with
generally accepted accounting principles requires management to make estimates
and assumptions that affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of increases and decreases in net assets
from operations during the reporting period. Actual results could differ from
those estimates.
g) Other - Investment transactions are accounted for on the trade date. The
Portfolios determine the gain or loss realized from the investment transactions
by comparing the identified original cost of the security lot sold with the net
sales proceeds. Dividend income is recognized on the ex-dividend date and
interest income is recognized on an accrual basis. Dividends from foreign
securities are recorded on the ex-dividend date, or as soon as the information
is available. Any non-cash dividends are recognized as investment income at the
fair value of the property received.
INVESTMENT TRANSACTIONS
The aggregate purchases and sales of securities, excluding short-term
investments and U.S. government obligations, for the Portfolios for the year
ended December 31, 1999, are summarized below:
- --------------------------------------------------------------------------------
DISCRETIONARY SELECT EURO SELECT
EQUITY EQUITY EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- --------------------------------------------------------------------------------
Purchases $282,773,590 $1,111,246,283 $86,386,255 $62,677,928
Sales $296,390,215 $995,330,311 $75,400,123 $64,537,993
There were no purchases or sales of U.S. government obligations.
<PAGE>
FEDERAL INCOME TAX INFORMATION
At December 31, 1999, gross unrealized appreciation and depreciation of
investments, based on cost for federal income tax purposes of $181,605,933,
$795,267,198, $20,637,224 and $26,026,929 for the Discretionary Equity, Equity,
Select Equity and Euro Select Equity Portfolios, respectively, were as follows:
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------------------------------------
DISCRETIONARY SELECT EURO SELECT
EQUITY EQUITY EQUITY EQUITY
PORTFOLIO PORTFOLIO PORTFOLIO PORTFOLIO
- ------------------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Unrealized appreciation $47,438,864 $193,942,259 $3,617,372 $6,501,048
Unrealized depreciation (7,049,396) (30,261,580) (435,193) (683,859)
------------ ------------- ------------ ------------
Net unrealized appreciation
on investments $40,389,468 $163,680,679 $3,182,179 $5,817,189
============ ============ ============ ============
</TABLE>
At December 31, 1999, the Discretionary Equity Portfolio had net realized
capital losses from transactions between November 1, 1999 and December 31, 1999
of $500,499, which for tax purposes are deferred and will be recognized in 2000.
For the year ended December 31, 1999, capital loss carryforwards of $1,333,712
and $135,320 were utilized for the Equity and Select Equity Portfolios,
respectively.
For the year ended December 31, 1999, 20%, 40%, 28% and 0% of dividends paid
from net investment income, including net short-term capital gains, qualifies
for the dividends received deduction available to corporate shareholders of the
Discretionary Equity, Equity, Select Equity and Euro Select Equity Portfolios,
respectively (unaudited). For the year ended December 31, 1999, the
Discretionary Equity, Equity, Select Equity and Euro Select Equity Portfolios
designated $6,680,777, $12,663,927, $239,191 and $0 in capital gain
distributions, respectively (unaudited).
INVESTMENT ADVISORY AGREEMENT
The Discretionary Equity, Equity and Select Equity Portfolios each pay the
Adviser an annual management fee of 0.80% of the Portfolio's average net assets
and the Euro Select Equity Portfolio pays the Adviser an annual management fee
of 1.00% of average net assets. Pursuant to an expense cap agreement dated April
30, 1999 between the Adviser and the Portfolios, the Adviser agreed to waive its
management fee and/or reimburse each Portfolio's operating expense to the extent
necessary to ensure that the Discretionary Equity, Equity and Select Equity
Portfolio's expenses would not exceed 0.80% of its average net assets and that
the Euro Select Equity Portfolio would not exceed 1.00% of its average net
assets. The term of this expense cap agreement is 12 months. Since inception of
the Portfolios, the Adviser has voluntarily reimbursed each Portfolio's
operating expenses to the extent necessary to ensure that the Discretionary
Equity, Equity and Select Equity Portfolios would not exceed 0.80% of its
average net assets and that the Euro Select Equity Portfolio would not exceed
1.00% of its average net assets.
<PAGE>
Report of Independent Accountants
TO THE BOARD OF DIRECTORS AND SHAREHOLDERS OF ICAP FUNDS, INC.
In our opinion, the accompanying statements of assets and liabilities, including
the schedules of investments by sector, and the related statements of operations
and of changes in net assets and the financial highlights present fairly, in all
material respects, the financial position of the Discretionary Equity Portfolio,
Equity Portfolio, Select Equity Portfolio and Euro Select Equity Portfolio
(constituting the ICAP Funds, Inc., hereafter referred to as the "Fund") at
December 31, 1999, the results of each of their operations, the changes in each
of their net assets and the financial highlights for each of the periods
indicated, in conformity with accounting principles generally accepted in the
United States. These financial statements and financial highlights (hereinafter
referred to as the "financial statements") are the responsibility of the Fund's
management; our responsibility is to express an opinion on these financial
statements based on our audits. We conducted our audits of these financial
statements in accordance with auditing standards generally accepted in the
United States which require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits, which included confirmation of securities at December 31, 1999 by
correspondence with the custodian, provide a reasonable basis for the opinion
expressed above.
PricewaterhouseCoopers LLP
Milwaukee, Wisconsin
January 28, 2000
<PAGE>
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<PAGE>
DIRECTORS
Pamela H. Conroy
Senior Vice President, Secretary and Director,
Institutional Capital Corporation
Dr. James A. Gentry
Professor of Finance, University of Illinois
Joseph A. Hays
Retired Vice President/Corporate Relations,
Tribune Company
Robert H. Lyon
President, Chief Investment Officer and Director,
Institutional Capital Corporation
Gary S. Maurer
Executive Vice President and Director,
Institutional Capital Corporation
Harold W. Nations
Partner, Holleb & Coff
Donald D. Niemann
Executive Vice President and Director,
Institutional Capital Corporation
Barbara C. Schanmier
Senior Vice President and Director,
Institutional Capital Corporation
OFFICERS
Robert H. Lyon
President
Pamela H. Conroy
Vice President and Treasurer
Donald D. Niemann
Vice President and Secretary
INVESTMENT ADVISER
Institutional Capital Corporation
225 West Wacker Drive, Suite 2400
Chicago, Illinois 60606-1229
www.icapfunds.com
CUSTODIAN
UMB Bank, n.a.
928 Grand Boulevard
Kansas City, Missouri 64141-6226
DIVIDEND - DISBURSING AND TRANSFER AGENT
Sunstone Financial Group, Inc.
P.O. Box 2160
Milwaukee, Wisconsin 53201-2160
ADMINISTRATOR AND FUND ACCOUNTANT
Sunstone Financial Group, Inc.
207 East Buffalo Street, Suite 400
Milwaukee, Wisconsin 53202-5712
AUDITOR
PricewaterhouseCoopers LLP
100 East Wisconsin Avenue, Suite 1500
Milwaukee, Wisconsin 53202-9845
LEGAL COUNSEL
Godfrey & Kahn, S.C.
780 North Water Street
Milwaukee, Wisconsin 53202-3590
This Annual Report is submitted for the general information of the shareholders
of the ICAP Funds. It is not authorized for distribution to prospective
investors unless preceded or accompanied by a current prospectus.
<PAGE>
(LOGO)
ICAP
Institutional Capital/R
ICAP Funds
225 West Wacker Drive, Suite 2400
Chicago, IL 60606
(888) 221-ICAP (4227)
www.icapfunds.com
R/COPYRIGHT 2000 INSTITUTIONAL CAPITAL CORPORATION
49-0200-4M
IC-408-0200
