225 West Wacker Drive, Suite 2400
Chicago, Illinois 60606

March 4, 2004

Jonathan G. Katz, Secretary
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, D.C. 20549-0609

RE: Proposed Rules Relating to Investment Company Governance (File No. S7-03-04)

Dear Mr. Katz:

We are members of the Board of Directors of the ICAP Funds, Inc. (File Nos. 33-86006; 811-8850) (the "Fund"), and are currently the only disinterested directors on the Board. The Fund consists of four separate series with combined net assets of approximately $1.3 billion. The Fund's Board is comprised of five directors: two "interested" directors and the three of us as "disinterested" directors. The composition of the Fund's Board, with a majority of disinterested directors, permits the Fund to avail itself of certain exemptive rules under the Investment Company Act of 1940, as amended (the "1940 Act"), on which the Fund relies.

At the last meeting of the Board of Directors of the Fund, we discussed at length the rule proposals referred to above. Based on this discussion, we made a determination to comment on two of the proposed changes. Accordingly, what follows is a summary of our comments.

1. Independent Directors as a Super-Majority of the Board - Proposed Board Composition Requirements

The SEC proposes to amend certain exemptive rules under the 1940 Act to require funds relying on such rules, such as the Fund, to have a board of directors whose disinterested directors constitute at least seventy-five percent of the board. Currently, these exemptive rules require funds relying on such rules to have a board with at least a majority of disinterested directors. The SEC requests comment on whether any change from the current requirement is necessary.

We are of the view that if a simple majority of a fund's board is independent, this is sufficient to allow the disinterested directors to exercise their role as the independent "watchdogs" of fund management. This is particularly true if the charter of the fund requires the approval of a majority (not a super-majority) of the fund's directors for action on various matters, which is true with respect to the Fund's charter. We previously expressed this view to the SEC in 2000 when the SEC was considering rules similar to those being proposed today and continue to believe that a simple majority of disinterested directors is sufficient to advance the goals of providing independent oversight of fund management.

Should funds be required to increase the independence of their boards from a simple majority to a super-majority, many smaller fund complexes, like ours, will be faced with the following dilemma: whether to ask one of the interested directors to resign, or whether to add additional disinterested directors to the board. In either case, we believe the interests of Fund shareholders are not served. If one of our interested directors were to resign, we would no longer have the benefit of that person's experience and insight on fundamental matters affecting the Fund. In our particular situation, it would result in the loss of the Fund's chief operating officer-the person most familiar with the daily operations of the Fund. On the other hand, if we were to decide instead to add additional disinterested directors to the board, we would be required to call a special meeting of shareholders to do so, which would be costly and time consuming. Given our current board size, we would need to double the number of disinterested directors from three to six in order to retain the two existing interested directors, which would, in turn, result in a corresponding increase in compensation expenses. Moreover, by adding additional directors to the board, we would be increasing the Fund's administrative expenses and complicating the scheduling of meetings. Neither result is appealing, but for smaller fund complexes, this is the choice we will face if the proposed rule is adopted in its current form.

Based on the foregoing, we believe the current board composition requirements are sufficient to protect the integrity of fund boards and the interests of fund shareholders, and that a super-majority requirement serves no additional useful purpose and, in fact, could prove to be quite detrimental, particularly for smaller fund complexes, like ours. We believe that a "high degree of rigor and skeptical objectivity to the evaluation of management and its plans and proposals" can be accomplished by focusing attention on the quality, not merely the quantity, of the disinterested directors.

2. Proposed Independent Chairman of the Board

The SEC proposes to require fund boards to have a chairman who is a disinterested director. As background, our chairman is the president, chief investment officer and controlling shareholder of the adviser to the Fund. For his services as chairman of the Fund, he receives no compensation.

We are of the view that requiring the chairman of a fund board to be a disinterested director will not strengthen the role of the disinterested directors or prevent fund management from dominating the board. If the fund charter requires a majority vote for various matters, and a majority of the fund's board members are disinterested directors, the chairman of the board is already aware that the disinterested directors must approve most actions that the chairman proposes. Accordingly, the chairman is not free to avoid the questions asked by, or avoid responding to the concerns of, the disinterested directors. In addition, the 1940 Act already bolsters the independence and strength of disinterested directors by requiring a separate vote of the disinterested directors to approve certain important decisions, such as the approval of the investment advisory agreement, underwriting agreement and Rule 12b-1 plans.

Further, for a disinterested director, the position of chairman of the board would be a full-time job. The chairman would be required to devote substantial time to understanding the fund's day-to-day operations, discussing with fund management the issues currently confronting the fund, setting the board agenda based on those discussions, and ensuring sufficient board materials were prepared and delivered to permit the board members to make informed decisions at the meeting. In the case of smaller fund complexes, such as ours, disinterested directors often hold full-time positions outside of their director duties. The additional duties of chairman would not be easily undertaken by a director who has full-time outside employment. As a result, smaller fund groups, like ours, may be forced to hire a full-time chairman and pay a commensurate salary. In such a case, the additional cost would be borne by fund shareholders. Even with a full-time chairman, any individual, no matter how accomplished, will not be as experienced as a chairman who has been involved on a daily basis for 30 years in the business of providing investment management services, whose net worth is directly related to the performance of the adviser and who has a significant investment in the Fund.

As an alternative, we suggest the SEC consider requiring disinterested directors to designate a lead disinterested director. This lead director could coordinate the activities of the disinterested directors, act as a spokesperson for the disinterested directors in between meetings of the board, raise and discuss issues with counsel on behalf of the disinterested directors, chair separate meetings of the disinterested directors and help shape the agenda of board meetings. The additional duties of the lead disinterested director would not be as onerous as the additional duties of chairman. In addition, the elevation of a lead disinterested director could improve the boardroom culture by creating a position seen as roughly equal to the chairman, without imposing the significant burden of serving in that capacity on the disinterested director.

* * * * * *

Thank you for your time and consideration. If you have any questions regarding this letter, please contact the Fund's attorneys, either Carol A. Gehl or Pamela M. Krill at 414-273-3500, and they will be able to reach us. Very truly yours,

Very truly yours,
the Disinterested Directors of ICAP FUNDS, INC.

/s/ Dr. James A. Gentry
Dr. James A. Gentry

/s/ Joseph Andrew Hays
Joseph Andrew Hays

/s/ Harold W. Nations
Harold W. Nations