NOTES TO FINANCIAL STATEMENTS
December 31, 1996
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.
Both the Discretionary Equity and Equity Portfolios (the "Portfolios") are diversified portfolios of ICAP. The
Discretionary Equity and Equity Portfolios issued and sold 4,950 and 50 shares of common stock, respectively
("initial shares") at $20 per share to Institutional Capital Corporation. Institutional Capital Corporation is the
investment adviser (the "Adviser") to the Portfolios. Both Portfolios commenced operations on January 1, 1995.
2. 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
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 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 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. Debt securities having remaining maturities of 60
days or less when purchased are valued b