Registration No. 33-20943
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM N-1A
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
Post-Effective Amendment No. 9
and
REGISTRATION STATEMENT
UNDER
THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 12
PHILLIPS CAPITAL INVESTMENTS, INC.
(Exact Name as Specified in Charter)
15400 Knoll Trail, Suite 100
Dallas, Texas 75248 75248
(Address of Principal Executive Offices) (Zip Code)
Registrants' Telephone Number, including Area Code: (972) 458-2448
Guy Frank Phillips, Jr.
15400 Knoll Trail, Suite 100
Dallas, Texas 75248
(Name and Address of Agent for Service)
Copy to:
Joseph V. Del Raso
Stradley, Ronon, Stevens & Young
2600 One Commerce Square
Philadelphia, Pennsylvania 19103
It is proposed that this filing will become effective on April 29, 1997 pursuant
to paragraph (b) under Rule 485 of the Securities Act of 1933.
The Registrant has registered an indefinite number of its capital shares under
the Securities Act of 1933 pursuant to Rule 24f-2 under the Investment Company
Act of 1940. The Registrant filed a Rule 24f-2 notice for its fiscal year ended
December 31, 1996 on February 10, 1997.
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
Cross Reference Sheet Pursuant to Rule 495
Form N1-A Item Page(s)
Part A Prospectus
Item 1. Cover Page 3
Item 2. Synopsis 4
Item 3. Condensed Financial Information 4
Item 4. General Description of Registrant 5, 6, 7
Item 5. Management of the Fund 10, 11, 12
Item 6. Capital Stock and Other Securities 12, 13
Item 7. Purchase of Securities Being Offered 8, 9,10
Item 8. Redemption or Repurchase 9,10
Item 9. Pending Legal Proceeding 13
Part B Statement of Additional Information
Item 10. Cover Page 15
Item 11. Table of Contents 15
Item 12. General Information and History 16
Item 13. Investment Objectives and Policies 16, 17, 18
Item 14. Management of the Fund 18, 19
Item 15. Control Persons and Principal Holders of Securities 21
Item 16. Investment Advisory and Other Services 18, 19, 21
Item 17. Brokerage Allocation and Other Practices 20
Item 18. Capital Stock and Other Securities 16
Item 19. Purchase, Redemption and Pricing of Securities 18
Item 20. Tax Status 20
Item 21. Underwriters *
Item 22. Calculations of Yield Quotations *
Item 23. Financial Statements 22 to 31
Part C
Item 24. Financial Statements and Exhibits 32
Item 25. Persons Controlled or Under Common Control 32
Item 26. Number of Holders of Securities 32
Item 27. Indemnification 32
Item 28. Business and Other Connections of Adviser 32
Item 29. Principal Underwriters 33
Item 30. Location of Accounts and Records 33
Item 31. Management Services 33
Item 32. Undertakings 33
Other Enclosures
Signature Page 34
Exhibit A: Auditor's Consent Letter 35
Exhibit B: Attorney's Rule 485 (b) Letter 36
Exhibit C: Financial Data Schedule 37, 38
- --------------
*Inapplicable.
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
P.O. BOX 796787 DALLAS, TEXAS 75379
(972) 458-2448
PROSPECTUS APRIL 30, 1997
The Company & Investment Objective
PHILLIPS CAPITAL INVESTMENTS, INC. (the "Company") is registered under the
Investment Company Act of 1940 (the "Act") as a diversified, open-end management
investment company. Its investment adviser is Phillips Capital Management, Inc.
(the "Adviser"). The Company's investment objective is maximum total return
(capital appreciation plus current income) without undue risk, which it
primarily seeks to achieve through investing in common stocks issued by U.S.
companies. However, subject only to its investment policies and restrictions,
the Company may invest in common stocks of foreign issuers, preferred stocks,
convertible preferred stocks, convertible bonds, debt securities (including
money market instruments), rights and warrants.
Share Purchases
The shares of the Company may only be purchased directly from the Company at net
asset value as next determined after receipt of order. The minimum initial
purchase is $5,000 with subsequent purchases requiring a minimum of $2,000. No
sales commissions are charged by the Company for purchase of its shares. A
redemption fee of 1% of the amount redeemed is charged by the Company on any
shares redeemed within six months of purchase.
Additional Information
This Prospectus concisely sets forth information about the Company that a
prospective investor ought to know before investing. Investors are advised to
read this Prospectus and to retain it for future reference. A "Statement of
Additional Information" dated April 30, 1997 containing further information
about the Company has been filed with the Securities and Exchange Commission.
Such Statement is incorporated herein by reference. A copy of the Statement may
be obtained without charge by writing or calling the Company at the address or
telephone number listed above.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE
SECURITIES AND EXCHANGE COMMISSION NOR HAS THE COMMISSION PASSED
UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<PAGE>
COMPANY EXPENSES
The following table is intended to assist you in understanding the various costs
and expenses that an investor in the Company will bear, directly or indirectly.
"Other Expenses", and therefore "Total Company Operating Expenses", as shown in
the table are for the year ended December 31, 1996.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases ......................................None
Sales Load Imposed on Reinvested Dividends ...........................None
Redemption Fees ......................................................None
(A redemption fee of 1% of the redemption price
is imposed on shares held less than 6 months.)
Exchange Fees ........................................................None
Annual Fund Operating Expenses
Management Fees ......................................................0.90%
12b-1 Fees ...........................................................None
Other Expenses .......................................................0.30%
-----
Total Company Operating Expenses .....................................1.20%
=====
The following example illustrates the expenses that you would pay on a
$1,000 investment over various time periods assuming (1) a 5% annual rate of
return, (2) the same operating expense percentage that the Company had for the
year ended December 31, 1996, (3) reinvestment of all dividends and capital gain
distributions and (4) redemption at the end of each time period.
1 year 3 years 5 years 10 years
$13 $39 $68 $149
This example should not be considered a representation of past or future
expenses or performance. Actual expenses may be greater or less than those
shown.
FINANCIAL HIGHLIGHTS
(for a share of the COMPANY outstanding throughout each period)
The following information has been examined by McCarthy, Rose & Mills,
independent public accountants. The per share income and capital changes should
be read in conjunction with the financial statements and related notes, which
along with the auditor's report thereon are included in the "Statement of
Additional Information."
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992 1991 1990 1989 1988
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Net Asset Value, Beginning of Period ....... $14.65 $ 13.43 $ 13.88 $ 13.22 $ 12.63 $ 11.09 $ 11.73 $ 11.00 $ 10.14
------ ------- -------- -------- -------- -------- -------- --------- --------
Income From Investment Operations:
Net investment income ................ .30 .49 .31 .19 .32 .74 .52 .54 .43
Net realized and unrealized gain (loss)
on investments ..................... 1.07 1.58 (.21) .77 .92 2.00 (.63) 1.20 1.15
------ ------- -------- -------- -------- -------- -------- --------- --------
Total from investment operations ... 1.37 2.07 .10 .96 1.24 2.74 (.11) 1.74 1.58
------ ------- -------- -------- -------- -------- -------- --------- --------
Less Distributions:
Dividends from net investment income.. (.29) (.49) (.31) (.19) (.32) (.73) (.53) (.54) (.52)
Distributions from net realized long-term
gains on securities ................ (1.99) (.36) (.24) (.11) (.33) (.47) -- (.47) (.20)
------ ------- -------- -------- -------- -------- -------- --------- --------
Total distributions ................ (2.28) (.85) (.55) (.30) (.65) (1.20) (.53) (1.01) (.72)
------ ------- -------- -------- -------- -------- -------- --------- --------
Net Asset Value, End of Period ............. $13.74 $ 14.65 $ 13.43 $ 13.88 $ 13.22 $ 12.63 $ 11.09 $ 11.73 $ 11.00
====== ======= ======== ======== ======== ======== ======== ========= ========
Total Return ............................... 9.35% 15.41% 0.72% 7.26% 9.82% 24.71% (0.94)% 15.82% 15.58%
Ratios/Supplemental Data:
Net Assets, End of Year (in 000's) ....... 4,882 5,041 5,630 5,690 4,853 3,872 3,191 2,317 1,390
Ratio of expenses to average net assets .. 1.20% 1.11% 1.11% 1.14% 1.18% 1.23% 1.34% 1.44% 1.45%
Ratio of net income to average net assets 1.96% 2.98% 2.19% 1.45% 2.09% 3.32% 5.00% 5.00% 3.68%
Portfolio turnover rate .................. 19.08% 28.17% 37.62% 3.10% 20.42% 28.20% 14.88% 46.43% 20.30%
Average Commission Rate Paid ............. 0.9488% N/A N/A N/A N/A N/A N/A N/A N/A
</TABLE>
The Company's Annual Report to Shareholders contains additional performance
information. A copy of such Report may be obtained without charge by writing or
calling the Company at the address or telephone number listed on the cover page
of this Prospectus.
2
<PAGE>
TABLE OF CONTENTS
Financial Highlights .......................................2
Company Expenses ...........................................2
Investment Objective and Policies ..........................3
Investment Restrictions ....................................4
Investment Considerations ..................................5
Purchase of Shares .........................................6
Redemption of Shares .......................................7
Net Asset Value ............................................8
Management of the Company ..................................8
Distributions and Tax Status ..............................10
Custodian and Shareholder Services ........................10
Reports to Shareholders ...................................10
Auditors and Litigation ...................................11
Description of Common Stock ...............................11
Other Information .........................................11
Share Purchase Application ................................12
INVESTMENT OBJECTIVE AND POLICIES
The Company's investment objective is maximum total return without undue risk,
which it primarily seeks to achieve through investing in common stocks issued by
U. S. companies. However, subject only to its investment policies and
restrictions, the Company may invest in common stocks of foreign issuers,
preferred stocks, convertible preferred stocks, convertible bonds, debt
securities (including money market instruments), rights and warrants.
The Company seeks to invest in securities of companies which the Adviser
believes are priced lower than justified based on their fundamental value. In
selecting such "undervalued" securities the Adviser considers such factors as
price/earnings ratios, price to cash flow, price to book value and price to
liquidation value. The Company may invest in securities of large, well-known
companies or securities of small, less well-known companies. Such securities may
be listed on a recognized securities exchange or traded in the over-the-counter
market. The Company normally considers companies with market capitalizations of
less than $200 million to be small companies. Small companies may have limited
management depth, financial resources, product lines or product markets.
Securities of small companies often have limited marketability and may
experience greater market price fluctuation than securities of large companies
or the market in general. The Company may invest no more than 5 percent of its
total assets (at the time of purchase) in companies with market values of less
than $10 million.
From time to time the Company may invest in companies that are determined
by the Adviser to possess "special situation" characteristics. In general, a
special situation company is a company which has experienced a development
particularly or uniquely applicable to the company. Developments that may create
special situations include, among others, a liquidation, reorganization,
recapitalization or potential merger, material litigation, technological
breakthrough and new management or mangement policies. The principal risk
associated with investments in special situation companies is that the
development which created the special situation may not result in favorable
operating or financial performance by the company and the investments therefore
may not appreciate in value or may decline in value.
The Company may invest up to 45 percent of its total assets (at the time of
purchase) in securities of foreign issuers domiciled in generally recognized
developed countries. Foreign investments will usually be made by purchasing
American Depository Receipts ("ADRs"). Investments in securities of foreign
issuers, other than ADRs, will not be effected unless the Company has made
proper custodial arrangements pursuant to provisions of the Act and rules
adopted thereunder. Generally, ADRs are registered receipts typically issued by
a U.S. bank or trust company evidencing ownership of the underlying foreign
securities. These securities will not be denominated in the same currency as the
securities into which they may be converted.
3
<PAGE>
The Company may invest in preferred stocks, convertible preferred stocks,
convertible bonds, and warrants or rights, but only to the extent that no more
than 5 percent of the Company's total assets (at the time of purchase) are
invested in each type of such securities. Warrants or rights acquired by the
Company in units or attached to securities are not included in the
aforementioned 5 percent limitation.
Subject to its investment policies and restrictions, the Company may invest
in debt securities (including money market instruments) to seek its investment
objective.
The Company may hold cash on occasion, and without limitation as to overall
amount, for temporary defensive purposes.
The Company intends to purchase and hold securities for maximum total
return and it is not anticipated that frequent portfolio changes will be made
for short-term trading purposes. However, changes may be made in the portfolio
consistent with the investment objective and policies of the Company whenever
such changes are believed to be in the best interests of the Company and its
shareholders. It is anticipated that the annual portfolio turnover rate normally
will not exceed 50 percent. The portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities by the average
monthly value of the Company's portfolio securities.
INVESTMENT RESTRICTIONS
The Company operates under the following investment restrictions. All
percentage limitations set forth below apply immediately after a purchase or
initial investment and any subsequent change in any applicable percentage
resulting from market fluctuations does not require elimination of any security
from the portfolio. The Company may not:
(1) With respect to 75 percent of its total assets, invest in securities of
any one issuer if immediately after and as a result of such investment more than
5 percent of the total assets of the Company, taken at market value, would be
invested in the securities of such issuer. This restriction does not apply to
investments in U.S. Government Securities.
(2) Invest more than 25 percent of its total assets in securities of
issuers in any one particular industry. This restriction does not apply to
investments in U.S. Government Securities.
(3) Purchase more than 10 percent of the outstanding voting securities, or
any class of securities, of any one issuer.
(4) Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition or reorganization, if more than 10
percent of the Company's total assets would be invested in securities of other
investment companies, more than 5 percent of its total assets would be invested
in the securities of any other one investment company or the Company would own
more than 3 percent of any other investment company's securities.
(5) Invest more than 5 percent of the Company's total assets in warrants,
whether or not listed on the New York or American Stock Exchange, including no
more than 2 percent of its total assets which may be invested in warrants that
are not listed on those exchanges. Warrants acquired by the Company in units or
attached to securities are not included in this restriction.
(6) Invest more than 45 percent of the Company's total assets in securities
of foreign issuers, and then no more than 5 percent of its total assets in
foreign securities which are not listed on a recognized United States or foreign
securities exchange.
(7) Invest more than 10 percent of the Company's total assets in securities
that at the time of purchase have legal or contractual restrictions on resale or
which are not readily marketable (including repurchase agreements maturing in
more than 7 days and O-T-C options).
4
<PAGE>
(8) Borrow money, except that the Company may borrow money on a secured or
unsecured basis from banks as a temporary measure for extraordinary or emergency
purposes including, but not limited to, the purchase of its own common stock.
Such temporary borrowings may not exceed 5 percent of the value of the Company's
total assets at the time any loan is made. No more than 10 pecent of the value
of the Company's total assets at the time any loan is made may be pledged as
collateral for such temporary borrowings.
The "Statement of Additional Information" contains other investment
restrictions. The Company's investment objective and the above listed investment
restrictions are fundamental policies which can only be changed by a vote of the
holders of a majority of the Company's common stock. Except for the investment
objective and those restrictions specifically identified as fundamental, all
investment policies and practices described in this Prospectus and the Statement
of Additional Information are not fundamental, so that the Board of Directors
may change them without shareholder approval. When used throughout this
Prospectus, a vote of the holders of a majority of the Company's common stock
means the vote, at the annual or a special meeting of the shareholders of the
Company duly called of (i) 67 percent or more of the voting securities present
at such meeting, if the holders of more than 50 percent of the outstanding
voting securities of the Company are present or represented by proxy, or (ii)
more than 50 percent of the outstanding voting securities of the Company,
whichever is less.
INVESTMENT CONSIDERATIONS
All investments have risks and there can be no guarantee against loss
resulting from an investment in the Company. Diversification does not eliminate
risk and there can be no assurance that the Company's investment policies will
be successful or that its investment objective will be achieved. The Company is
intended for investors who understand and accept the risks involved in seeking
maximum total return and is not intended for those desiring to play short-term
swings in the market. Investment in the shares of the Company should not be
considered a balanced or complete investment program. Investors should consider
their own investment objectives and their other investments in general when
considering the purchase of shares in the Company.
Subject to its investment policies and restrictions, the Company may hold
cash or invest in debt securities and money market instruments. Debt securities
will be bonds (including debentures) and notes rated A or better at the time of
purchase by Standard & Poor's Corporation ("S&P") or Moody's Investors Service,
Inc. ("Moody's"). Money market instruments will be commercial paper which is
rated A-1 or higher by S&P or Prime-1 by Moody's; bankers acceptances, cash or
maximum total return (maturities of 6 months or less, and then no more than 10%
of the Company's total assets) in U.S. banks or savings and loans which are
members of the Federal Deposit Insurance Corporation or the Federal Savings and
Loan Insurance Corporation; obligations of, or guaranteed by, the United States
Government, its agencies, or instrumentalities (U.S. Government Securities); and
money market mutual funds which invest primarily in U.S. Government Securities.
Uninvested cash will not earn investment income and will not be invested so
as to attain the Company's investment objective. The prices of debt securities
are inversely affected by changes in interest rates and, therefore, are subject
to the risk of market price fluctuations. Their values also may be affected by
changes in the credit rating or financial condition of the issuing entities.
Cash and time deposits in banks and savings and loans
5
<PAGE>
may not benefit from insurance from the Federal Deposit Insurance Corporation or
the Federal Savings and Loan Insurance Corporation and therefore may be subject
to loss of some or all of principal plus any applicable accrued interest.
The Company may invest in shares of other registered investment companies,
subject to its investment restrictions and limitations imposed under the Act,
and as such will bear its ratable share of those investment company's expenses,
including management fees, while at the same time remaining subject to payment
of the advisory fee to the Adviser with respect to those assets.
Subject to its investment policies and restrictions, the Company may invest
in securities of foreign issuers. Investing in foreign securities involves
substantial risks not typically associated with investing in securities of
domestic companies. Investing in securities of foreign issuers and the attendant
holding of foreign currencies could cause the Company to be affected favorably
or unfavorably by changes in currency exchange rates. In addition, less
information may be available about foreign companies than about domestic
companies and foreign companies may not be subject to reporting or accounting
standards and requirements comparable to those applicable to domestic companies.
Foreign securities and their markets may not be as liquid as domestic securities
and their markets. Securities of some foreign companies may involve greater
market risk than securities of domestic companies and foreign brokerage
commissions and other fees are generally higher than those in the United States.
Certain costs, including currency exchange price spreads, are often incurred to
cover currency exchange service charges. Investments in foreign securities may
also be subject to local economic or political risks, including instability of
some foreign governments, the imposition of withholding taxes on dividend or
interest payments, foreign exchange controls (which could suspend the ability to
transfer currency from a given country) and the potential for expropriation,
confiscatory taxation or nationalization of the assets of the companies issuing
the securities.
PURCHASE OF SHARES
Shares of the Company may be purchased at the net asset value per share
next determined after receipt of a purchase order by the Company. There are no
sales charges or underwriting commissions. Initial purchase of shares of the
Company may be made only by application submitted to the Company. A Share
Purchase Application form is provided with this Prospectus. The minimum initial
purchase of shares is $5,000. Subsequent purchases may be made by mail to the
address given in the Prospectus and must be for a minimum of $2,000. All
purchase requests are subject to acceptance or rejection upon receipt by the
Company and are not binding until accepted.
The Company does not consider the U.S. Postal Service or other independent
delivery services to be its agents. Therefore, deposit in the mail or with such
services, or receipt at the Company's Post Office Box or the Post Office Box of
its designated agents, of purchase requests does not constitute receipt by the
Company.
The Company does not issue certificates for shares purchased. All
shareholders will be mailed confirmations showing purchases, redemptions and net
shares owned. The Company will sell fractional shares (such shares being rounded
to the third decimal) having pro rata all the rights of whole shares, including,
without limitation, the right to vote and receive dividends.
6
<PAGE>
REDEMPTION OF SHARES
Shares will be redeemed on request of the shareholder in "proper form" to
the Company. "Proper form" means that the request to redeem must meet all the
following requirements:
(1) It must be in writing sent to the Company at P.O. Box 796787, Dallas,
Texas 75379.
(2) It must be signed by the shareholder (or shareholders) exactly in the
manner as the shares are registered, and must specify either the number of
shares, or the dollar amount of shares, to be redeemed.
(3) The signature (or signatures) of the redeeming shareholder (or
shareholders) must be guaranteed by a domestic commercial or savings bank, a
member firm of the New York Stock Exchange, or any other "eligible guarantor
institution" as defined in Rule 17Ad-15 under the Securities Exchange Act of
1934. If the shares are registered in more than one name, then the signature of
each of the shareholders must be guaranteed separately.
(4) If the shares being redeemed are registered in the name of an estate,
trust, custodian, guardian, retirement plan or the like, or in the name of a
corporation or partnership, documents must also be included which, in the
judgment of the Company or its designated agent, are sufficient to legally
establish the authority of the person (or persons) signing the request, with
signature (or signatures) guaranteed in the same manner as described in number 3
above.
(5) The signature guarantee requirements in numbers 3 and 4 above may be
waived if the redeeming shareholder is personally known by an officer or
director of the Company and such officer or director satisfies the Company that
the applicable request for redemption is valid.
The redemption price will be the net asset value per share next determined
after the request is received in proper form by the Company for redemption of
shares. In the event of redemption within six months of purchase of the shares
redeemed, 1% of the redemption amount will be charged by the Company to defray
administrative costs incurred. The fee is treated by the Company as other
income. The proceeds received by the shareholder may be more or less than his
cost of such shares, depending upon the net asset value per share at the time of
redemption. If, as a result of redemption, the net asset value of a
shareholder's remaining shares is less than $2,000, the Company may
involuntarily redeem such remaining shares. Prior to any such involuntary
redemption, a redemption notice will be sent by first class mail to the
shareholder at the address on the Company's records. The notice will specify a
date no less than thirty days from the date it is mailed, and the remaining
shares will be redeemed at net asset value on such date unless the shareholder
purchases sufficient additional shares to raise the net asset value of his
aggregate share holdings to $2,000 by that date.
The Company does not consider the U.S. Postal Service or other independent
delivery services to be its agents. Therefore, deposit in the mail or with such
services, or receipt at the Company's Post Office Box or the Post Office Box of
its designated agents, of any request for redemption does not constitute receipt
by the Company.
Payment by the Company will ordinarily be made within seven (7) days of
receipt of the shareholder's request for redemption in "proper form." However,
if shares have been purchased by check, the Company will make redemption
proceeds available upon the clearance of the shareholder's purchase check by the
shareholder's bank, which, depending on the location of such bank, could take up
to fifteen days or more.
The Company reserves the right to suspend or postpone redemptions during
any period when
7
<PAGE>
the New York Stock Exchange is closed for other than customary weekend and
holiday closings or during which trading on the New York Stock Exchange is
restricted; or during which an emergency exists such as would make disposal of
securities owned by the Company unreasonable or impracticable or would make
determination of the Company's net asset value impracticable; or for such other
periods as the Securities and Exchange Commission may by order permit for
protection of the Company's shareholders.
NET ASSET VALUE
The net asset value for the Company's shares is determined as of the close
of trading on each day the New York Stock Exchange is open by dividing the net
asset value (assets minus liabilities) of the Company by the number of shares
outstanding, the result being adjusted to the nearest whole cent. Except on the
last business day of each calendar month, the Company may omit the determination
of net asset value on days when no share purchase or share redemption requests
are received. In computing the net asset value of the Company, securities listed
on the New York Stock Exchange, American Stock Exchange or other security
exchanges, and securities traded in the Over-The-Counter market shall be valued
at their closing sales prices. If no sale has been reported for that day, the
last published sale or the last recorded bid price, whichever is the more
recent, shall be used, unless in the opinion of the Board of Directors the value
thus obtained may not fairly indicate the actual market value, in which case
these securities, and any other assets for which market quotations are not
readily available, shall be valued at fair value as determined by the management
and approved in good faith by the Board of Directors. An investment purchased
and awaiting payment against delivery shall be included for valuation purposes
as a security held, and the cash accounts of the Company shall be adjusted by
the deduction of purchase price, including brokers' commissions and other
expenses of the purchase. An investment sold but not delivered pending receipt
of proceeds shall be valued at the net sales price after deducting brokers'
commissions and other expenses of the sale. Interest accrued and uncollected
since the last valuation, dividends declared since said date but not paid on
shares of stock where the market quotation used in determining the value thereof
is ex-dividend, and the value of any other assets determined by the Board of
Directors to be income shall be added to the total net asset value. To the
aggregate value of investments determined in the manner aforementioned there
shall be added the cash and cash equivalents adjusted for all liabilities (fixed
or accrued) determined in accordance with generally accepted accounting
principles.
MANAGEMENT OF THE COMPANY
The overall business and affairs of the Company are the responsibility of
the Company's Board of Directors, the members of which are elected by the
shareholders. The day-to-day operations of the Company are managed by the
Company's President subject to the bylaws of the Company and review by the Board
of Directors. Information relating to the directors and officers of the Company
is provided in the "Statement of Additional Information."
The Company has entered into an Investment Advisory Contract (the
"Contract") with Phillips Capital Management, Inc. (the "Adviser"), 15400 Knoll
Trail, Suite 100, Dallas, Texas 75248. The Adviser, which is registered with the
Securities and Exchange Commission under the Investment Advisers Act of 1940,
manages the investment and reinvestment of the assets of the Company in
8
<PAGE>
accordance with the Company's investment objective, policies, and restrictions.
The Adviser has no previous experience in, or current agreement for, providing
investment management services to any other registered investment company. Guy
F. (Phil) Phillips, Jr. is the sole shareholder of the Adviser and is
responsible for all its investment decisions, including the day-to-day
management of the Company's portfolio. There can be no assurance that the
Adviser could find a suitable replacement for Mr. Phillips in the event of his
death or disability. Mr. Phillips also serves as the President and a Director of
the Company. Prior to forming the Adviser in 1987 to manage discretionary
investment accounts for corporations, retirement funds, individuals and others,
Mr. Phillips was affiliated from 1978 with another investment adviser which
provided similar services.
Although investment decisions for the Company are made independently from
those of the other accounts managed by the Adviser, investments of the kind made
for the Company may also be made for those other accounts. At such times,
opportunities to purchase or sell securities will be allocated at the discretion
of the Adviser by such means as will result in fair and equal treatment of the
Company. The Adviser intends to aggregate orders for purchases and sales of
securities of the same issuer on the same day among the Company and other
managed accounts and the price paid to or received by the Company and those
accounts will be the average obtained in those orders. In some cases, the
foregoing aggregation and allocation procedures may affect adversely the price
paid or received by the Company or the size of the position purchased or sold
for the Company.
The Adviser is paid a monthly fee computed at an annual rate of 9/10 of 1%
of the average daily net assets of the Company not exceeding $30,000,000, 3/4 of
1% of such assets exceeding $30,000,000 but not exceeding $60,000,000, and 3/5
of 1% of such assets exceeding $60,000,000. This fee is higher than the fee paid
to most advisers for similar services.
The Adviser pays all the salaries and related expenses (such as health
insurance premiums and similar benefits) of the officers of the Company,
provides office space for the Company and pays all distribution expenses of the
Company. The Adviser permits, if desired by the Company, for officers of the
Adviser to serve, without compensation from the Company, as directors, officers
or agents of the Company if duly elected or appointed to such positions.
In addition to the fee of the Adviser, the Company assumes and pays any
expenses for services rendered by any custodian for the safekeeping of the
Company's securities or other property, for keeping its books of account, for
any other charges of a custodian and for calculating the net asset value of the
Company. The Company also assumes and pays the expenses of its operations,
including compensation of the directors (other than those affiliated with the
Adviser), expenses of independent accounting services and auditors, of legal
counsel, of any transfer or dividend disbursing agent or any registrar of the
Company, costs of acquiring and disposing of portfolio securities, interest, if
any, on obligations incurred by the Company, costs of share certificates,
association membership dues, salaries and related expenses of administrative and
clerical personnel who are not officers of the Company, costs of reports and
notices to shareholders, other like miscellaneous or related expenses and all
taxes and fees payable to federal, state or other governmental agencies by the
Company.
The contract between the Company and its Adviser is effective through June
30, 1997. Unless earlier terminated as described below, the contract will remain
in effect from year to year thereafter if approved annually (1) by the Board of
Directors of the Company or by the holders of a majority of the Company's common
stock, and (2) by a majority of the Company's disinterested directors. The
contract terminates on its assignment by either party, and may be terminated
without penalty on sixty days written notice by either party. The Company may
effect termination by action of the Board of
9
<PAGE>
Directors or by vote of the holders of a majority of the Company's common stock.
The Adviser will reduce its fees to limit the total annual expenses of the
Company (including the Adviser's fee, but excluding interest, taxes, fees
incurred in acquiring and disposing of portfolio securities and certain
extraordinary expenses) to 2.0% of the first $10,000,000 of average daily
assets, 1.5% of the next $20,000,000 of such assets, and 1.0% of such assets
over $30,000,000.
DISTRIBUTIONS AND TAX STATUS
The Company intends to distribute, at least annually, ordinary dividends
and net capital gains substantially equal to the Company's net investment income
and net capital gains for each year. There can be no guarantee that the Company
will have such net investment income or net capital gains for annual
distribution. All distributions will be automatically reinvested in shares of
the Company, unless the shareholder makes a written request for distributions in
cash. Such request must be sent to the Company at its current mailing address.
The Company intends to qualify as a "regulated investment company" under
Subchapter M of the Internal Revenue Code. As such, the Company will not be
subject to Federal corporate income tax on net investment income and net capital
gains distributed to its shareholders. Shareholders may be proportionately
liable for taxes on income and gains of the Company, but shareholders not
subject to tax on their income will not be required to pay tax on amounts
distributed to them. Any distributions paid shortly after a purchase of shares
by an investor will have the effect of reducing the net asset value per share by
the amount of such distributions. These distributions, although in effect a
return of capital, are subject to taxation.
The Company will inform shareholders each year of the amount and nature of
the distributions which are taxable to shareholders. Shareholders should consult
their own financial adviser concerning the federal, state, and local tax
consequences of share ownership. Further tax information is included in the
"Statement of Additional Information."
CUSTODIAN AND SHAREHOLDER SERVICES
The Company currently acts as its own custodian subject to provisions of
the Act and rules adopted thereunder. The Company may enter into a custodial
agreement with an external entity which in turn may enter into foreign
sub-custodial agreements pursuant to the Act and rules adopted thereunder. Such
foreign sub-custodial agreements would enable the Company to purchase and sell
securities of foreign issuers other than ADRs. The Company also acts as its own
transfer agent.
The Company does not act as trustee for individual or other retirement
accounts, nor has the Company entered into any agreement with another party to
provide such services. Purchase applications for retirement accounts must
therefore be submitted by trustees independent of the Company or its agents.
REPORTS TO SHAREHOLDERS
The Company sends all shareholders annual reports containing certified
financial statements. In addition, at least semiannually, the Company sends all
shareholders reports containing unaudited financial statements.
10
<PAGE>
AUDITORS AND LITIGATION
McCarthy, Rose & Mills, independent certified public accountants, 600 North
Pearl, Suite 440, Dallas, Texas 75201, act as independent accountants and
auditors for the Company and the Adviser.
As of the date of this Prospectus, there was no pending or threatened
litigation involving the Company or its Adviser.
DESCRIPTION OF COMMON STOCK
The Company was incorporated in Texas on September 2, 1987 with 10,000,000
authorized shares of common stock, $1.00 par value. There were 325,533.138
shares issued and outstanding as of April 15, 1997. All the outstanding shares
are, and the shares to be issued as contemplated herein will be, duly
authorized, fully paid and nonassessable. Each issued and outstanding share has
full voting rights and is entitled to one vote on all matters submitted to the
shareholders, including the right to vote at the annual meeting of shareholders
on the election of directors and the selection of independent certified public
accountants. No shareholder is entitled to cumulative voting rights or to any
preemptive right to acquire securities of the Company. Each share has equal
dividend, distribution, and liquidation rights.
OTHER INFORMATION
This Prospectus does not contain all the information set forth in the
registration statement the Company has filed with the Securities and Exchange
Commission. The complete registration statement may be obtained from the
Securities and Exchange Commission upon payment of the fee prescribed by its
rules and regulations. Shareholders may also direct inquiries to the Company by
writing or calling the Company at the address or telephone number provided on
the first page of this Prospectus.
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 dated April 30, 1997 and, if given or made, such
information or representations may not be relied upon as having been authorized
by PHILLIPS CAPITAL INVESTMENTS, INC. This Prospectus does not constitute an
offer to sell securities in any state or jurisdiction in which such offering may
not lawfully be made. The delivery of this Prospectus at any time shall not
imply that there has been no change in the affairs of PHILLIPS CAPITAL
INVESTMENTS, INC. since the date hereon.
11
<PAGE>
SHARE PURCHASE APPLICATION
Please make checks payable to: PHILLIPS CAPITAL INVESTMENTS, INC.
P.O. Box 796787 - Dallas, Texas 75379
Amount of Investment Attached $____________ (minimum initial purchase $5,000)
All applications are accepted in Texas and under Texas laws.
- --------------------------------------------------------------------------------
INSTRUCTIONS Please Type or Print Clearly
Fill in where applicable
- --------------------------------------------------------------------------------
Individual
1. - -
- --------------------------------------------------------------------------------
First Name Initial Last Name Social Security Number
Joint Tenant, if any,
(with right of survivorship)
2. - -
- --------------------------------------------------------------------------------
First Name Initial Last Name Social Security Number
- --------------------------------------------------------------------------------
Uniform Gift to Minors
3.
- --------------------------------------------------------------------------------
Custodian's Name (Only one allowed by law) Minor's State of Residence
- -
- --------------------------------------------------------------------------------
Minor's Name (Only one allowed by Law) Minor's Social Security No.
- --------------------------------------------------------------------------------
Other
(Corporations, Trusts,
Associations, Partnerships
and Retirement Accounts)
4.
- --------------------------------------------------------------------------------
-
- --------------------------------------------------------------------------------
Tax Identification No.
- --------------------------------------------------------------------------------
Full Address
Number and Street -----------------------------------------------------------
City -------------------------------------- State ----- Zip -----------
Citizen of : |_| United States |_| Other (Specify) -----------
Home Telephone No. ----------------- Business Telephone No. -------------------
- --------------------------------------------------------------------------------
Signature
The undersigned has received a current copy of the Company's Prospectus,
understands that dividends and distributions will be reinvested in additional
shares unless payment in cash is requested in writing, certifies under penalty
of perjury that the applicant is not subject to back up withholding for
underreporting interest or dividends and the applicant's correct social security
(taxpayer identification) number is printed above, and has full authority and
legal capacity to purchase shares of the Company.
- ------------------------------------ -----------------------------------------
Individual (or Custodian) Corporate Officer of Trustee
- ------------------------------------ -----------------------------------------
Joint Tenant (if any) Title of Corporate Officer or Trustee
- --------------------------------------------------------------------------------
12
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
P.O. Box 796787
Dallas, Texas 75379
(972) 458-2448
STATEMENT OF ADDITIONAL INFORMATION
April 30, 1997
THIS STATEMENT is not a PROSPECTUS and should be read in conjunction with the
current Prospectus for PHILLIPS CAPITAL INVESTMENTS, INC. (the "Company"). Such
Prospectus is dated April 30, 1997 and may be obtained by writing or calling the
Company at the address or telephone number listed above.
TABLE OF CONTENTS
The Company ...................................................................2
Investment Objective and Policies .............................................2
Investment Restrictions .......................................................2
Portfolio Securities ..........................................................4
Share Purchases and Redemptions ...............................................4
Net Asset Value ...............................................................4
Management of the Company .....................................................4
Portfolio Turnover/Brokerage ..................................................6
Tax Information ...............................................................6
Custodian and Shareholder Services ............................................7
Auditors ......................................................................7
Principal Shareholders ........................................................7
Auditor's Report for Audited Financial Statements .............................8
Audited Financial Statements ..................................................9
Notes to Audited Financial Statements ........................................15
Selected Per Share Data and Ratios ...........................................17
<PAGE>
THE COMPANY
The Company is registered as a diversified, open-end management investment
company. It was incorporated in Texas on September 2, 1987 and its registered
office is in Dallas, Texas. The Company has 10,000,000 authorized shares of
common stock, $1.00 par value. All of the outstanding shares are, and the shares
to be issued as contemplated will be, duly authorized, fully paid and
nonassessable. Each issued and outstanding share has full voting rights and is
entitled to one vote on all matters submitted to a vote of the shareholders,
including the right to vote at the annual meeting of shareholders on the
election of directors and the selection of independent certified public
accountants. No shareholder is entitled to cumulative voting rights or to any
preemptive right to acquire any securities of the Company. Each share has equal
dividend, distribution, and liquidation rights.
INVESTMENT OBJECTIVE AND POLICIES
The investment objective and policies of the Company are described in the
Prospectus under the heading "Investment Objective and Policies."
INVESTMENT RESTRICTIONS
The following are the Company's investment restrictions in their entirety.
The first eight investment restrictions listed below are fundamental policies
which can only be changed by a vote of the holders of a majority of the common
stock of the Company. (A vote of the holders of a majority of the Company's
common stock means the vote, at the annual or a special meeting of the
shareholders of the Company duly called of (i) 67 percent or more of the voting
securities present at such meeting, if the holders of more than 50 percent of
the outstanding voting securities of the Company are present or represented by
proxy, or (ii) more than 50 percent of the outstanding voting securities of the
Company, whichever is less.) All percentage limitations set forth below apply
immediately after a purchase or initial investment and any subsequent change in
any applicable percentage resulting from market fluctuations does not require
elimination of any security from the portfolio. The Company may not:
(1) With respect to 75 percent of its total assets, invest in securities of
any one issuer if immediately after and as a result of such investment more than
5 percent of the total assets of the Company, taken at market value, would be
invested in the securities of such issuer. This restriction does not apply to
investments in obligations of, or guaranteed by, the United States Government,
its agencies or instrumentalities (U.S. Government Securities).
(2) Invest more than 25 percent of its total assets in securities or
issuers in any one particular industry. This restriction does not apply to
investments in U.S. Government Securities.
(3) Purchase more than 10 percent of the outstanding voting securities, or
any class of securities, of any one issuer.
(4) Purchase securities of other investment companies, except in connection
with a merger, consolidation, acquisition or reorganization, if more than 10
percent of the Company's total assets would be invested in securities of other
investment companies, more than 5 percent of its total assets would be invested
in the securities of any other one investment company or the Company would own
more than 3 percent of any other investment company's securities.
2
<PAGE>
(5) Invest more than 5 percent of the Company's total assets in warrants,
whether or not listed on the New York or American Stock Exchange, including no
more than 2 percent of its total assets which may be invested in warrants that
are not listed on those exchanges. Warrants acquired by the Company in units or
attached to securities are not included in this restriction.
(6) Invest more than 45 percent of the Company's total assets in securities
of foreign issuers, and then no more than 5 percent of its total assets in
foreign securities which are not listed on a recognized United States or foreign
securities exchange.
(7) Invest more than 10 percent of the Company's total assets in securities
that at the time of purchase have legal or contractual restrictions on resale or
which are not readily marketable (including repurchase agreements maturing in
more than 7 days and O-T-C options).
(8) Borrow money, except that the Company may borrow money on a secured or
unsecured basis from banks as a temporary measure for extraordinary or emergency
purposes including, but not limited to, the purchase of its own common stock.
Such temporary borrowings may not exceed 5 percent of the value of the Company's
total assets at the time any loan is made. No more than 10 percent of the value
of the Company's total assets at the time any loan is made may be pledged as
collateral for such temporary borrowings.
(9) Purchase or sell commodities or real estate; provided that the Company
may invest in securities secured by real estate or interests therein or issued
by companies which invest in real estate or interests therein.
(10) Purchase any securities on margin or make short sales of securities,
except that the Company may obtain such short-term credit as may be necessary
for the clearance of purchases and sales of portfolio securities.
(11) Make loans of money, except by the purchase of debt obligations in
which the Company may invest consistent with its investment objective and
policies.
(12) Issue senior securities, as defined in the Investment Company Act of
1940, or mortgage, pledge, hypothecate or in any manner transfer, as security
for indebtedness, any securities owned or held by the Company except as may be
necessary in connection with borrowings mentioned in number 8 above, and then
only to the extent there mentioned.
(13) Underwrite securities of other issuers except insofar as the Company
may be deemed an underwriter under the Securities Act of 1933, as amended, in
selling portfolio securities.
(14) Invest more than 5 percent of the value of the Company's total assets
in securities of issuers which have been in continuous operation less than three
years.
(15) Purchase or retain securities of a company in which directors and
officers of the Company or its investment adviser individually own more than 1/2
percent of the securities of the company and collectively own more than 5
percent of such securities.
(16) Purchase or write call or put options, or purchase or sell futures
contracts.
3
<PAGE>
PORTFOLIO SECURITIES
Though the Company primarily intends to invest in publicly traded common
stocks, the following information provides brief descriptions of certain other
securities in which the Company may invest. Prospective investors should read
and understand the risk factors disclosed in the "Investment Considerations"
section of the Prospectus before purchasing shares in the Company.
Subject to certain investment restrictions, the Company may invest in
warrants. A warrant gives the holder the right to purchase a specified amount of
a company's common stock at a stipulated price for a specified period of time.
Due to the leverage characteristics of warrants, market price volatility of
these securities is usually much greater than that of the related common stock.
Rights normally have a significantly shorter-term life than warrants and
give the holder the opportunity to purchase a specified number of shares of a
new issue of a company at a specified price. Foreign companies frequently issue
additional stock by means of rights offerings to existing shareholders at a
price below the market price of the shares. The failure to exercise such rights
results in a dilution of a shareholder's interest in the company.
The Company does not currently intend to enter into repurchase agreements
or reverse repurchase agreements, or purchase options or futures contracts.
SHARE PURCHASES AND REDEMPTIONS
The Prospectus describes the manner in which the Company's shares may be
purchased or redeemed. See "Purchase of Shares" and "Redemption of Shares" in
the Prospectus.
NET ASSET VALUE
The Prospectus, under the heading "Net Asset Value", describes how and when
the Company's net asset value is determined.
MANAGEMENT OF THE COMPANY
The overall business and affairs of the Company are the responsibility of
the Company's Board of Directors, the members of which are elected by the
shareholders. The day-to-day operations of the Company are managed by the
Company's President subject to the bylaws of the Company and review by the Board
of Directors. The following persons are directors and/or officers of the
Company.
Name, Age, Position with Principal Occupation
Company and Address For Last Five Years
Guy F. Phillips, Jr.* (45) President/sole shareholder of the
President, Treasurer & Director Adviser since 1987.
15400 Knoll Trail, Suite 100
Dallas, Texas 75248
L. Randall Yazbeck* (43) Attorney At Law, private practice
Secretary & Director since 1986.
5050 Quorum Drive, Suite 330
Dallas, Texas 75240
4
<PAGE>
Richard K. Spires* (39) Director-Physician Practice Management,
Vice President & Director PhyCor IPA Management Co. (formerly
3811 Turtle Creek Blvd, Suite 800 SPACO Management Co.) since 1995.
Dallas, Texas 75219 Private practice as Certified Public
Accountant & Consultant (1988-1995).
Rodger L. Ehrlish (45) Vice President-Taxation and
Director Information Services, Harken Energy
522 Goodwin Drive Corp. since 1997.
Richardson, Texas 75081 Private practice as Certified Public
Accountant & Consultant (1990-1997).
David M. Buhner, M.D. (43) Post graduate studies (University of
Director Texas-Arlington) since 1996.
316 Holly Park Drive, #2079 Private medical practice in Rheumatology
Arlington, Texas 76014 (1985-1996).
Bette M. McCormick* (61) Administrative Secretary to the
Assistant Secretary Vice President, Corporate
1600 Promenade Bank Tower, National Accounts of C.R. Bard, Inc.
Suite 350 (medical supplies) since 1977.
Richardson, Texas 75080
Susan S. Ord (36) Assistant to the President of the
Assistant Vice President Adviser since 1990.
15400 Knoll Trail, Suite 100
Dallas, Texas 75248
* Indicates an "interested person" as defined in the Investment Company Act
of 1940.
Directors and officers as a group were beneficial owners of 9.84 percent of
the outstanding shares of the Company as of April 15, 1997.
The following table shows aggregate compensation paid to the Fund's
directors by the Fund in fiscal year ended December 31,1996.
<TABLE>
<CAPTION>
(1) (2) (3) (4) (5)
Name of Person, Aggregate Pension or Estimated Annual Total Compensation
Position Compensation Retirement Benefits Benefits Upon from Registrant and
From Registrant Accrued as Part of Retirement Fund Complex Paid
Fund Expenses to Directors
<S> <C> <C> <C> <C>
L. Randall Yazbeck $500.00 - 0 - - 0 - $500.00
Director
Richard K. Sprires $500.00 - 0 - - 0 - $500.00
Director
Rodger L. Ehrlish $250.00 - 0 - - 0 - $250.00
Director
David M. Buhner $375.00 - 0 - - 0 - $375.00
Director
</TABLE>
5
<PAGE>
The Company has entered into an Investment Advisory Contract (the
"Contract") with Phillips Capital Management, Inc. (the "Adviser"), 15400 Knoll
Trail, Suite 100, Dallas, Texas 75248. The Adviser, which is registered with the
Securities and Exchange Commission under the Investment Advisers Act of 1940,
manages the investment and reinvestment of the assets of the Company in
accordance with the Company's investment objective, policies, and restrictions.
The Adviser has no previous experience in, or current agreement for, providing
investment management services to any other registered investment company. Guy
F. (Phil) Phillips, Jr. is the sole shareholder of the Adviser and is
responsible for all its investment decisions, including the day-to-day
management of the Company's portfolio. There can be no assurance that the
Adviser could find a suitable replacement for Mr. Phillips in the event of his
death or disability. Mr. Phillips also serves as the President and a Director of
the Company. Prior to forming the Adviser in 1987 to manage discretionary
investment accounts for corporations, retirements funds, individuals and others,
Mr. Phillips was affiliated from 1978 with another investment adviser which
provided similar services. The "Management of the Company" section of the
Prospectus contains further information about the Adviser and certain details of
the Contract. For the fiscal years ended December 31, 1996, 1995 and 1994, the
Fund paid the Adviser fees of $41,951.47, $52,383.99, and $51,485.47,
respectively.
PORTFOLIO TURNOVER/BROKERAGE
The Company intends to purchase and hold securities for long-term capital
growth and it is not anticipated that frequent portfolio changes will be made
for short-term trading purposes or to take advantage of short-term swings in the
market. However, changes may be made in the portfolio consistent with the
investment objective and policies of the Company whenever such changes are
believed by the Adviser to be in the best interests of the Company and its
shareholders. It is anticipated that the annual portfolio turnover rate normally
will not exceed 50 percent. The portfolio turnover rate is calculated by
dividing the lesser of purchases or sales of portfolio securities by the average
monthly value of the Company's portfolio securities.
The Company and its Adviser have no obligation to deal with any broker or
group of brokers in executing transactions in portfolio securities. Subject to
the Company's investment objective, policies, and restrictions, the Adviser is
primarily responsible for the execution of the Company's portfolio transactions
and the allocation of brokerage. In executing such transactions, the Adviser
seeks to obtain the best price and execution for the Company, taking into
account such facts as price, size of order and difficulty of execution. While
the Adviser generally seeks reasonably competitive commission rates, brokers who
provide supplemental research, market and statistical information to the Company
and its Adviser may receive orders for transactions for the Company at
commission rates which are not necessarily the lowest available. Transactions in
over-the-counter and third markets are executed with primary market makers
acting as principal except where it is believed that better prices and execution
may be obtained otherwise. The aggregate amount of brokerage commissions paid by
the Fund for the fiscal years ended December 31, 1996, 1995 and 1994 were
$13,301.17, $5,742.10, and $4,222.50, respectively.
TAX INFORMATION
The Company intends to comply with all the requirements for qualification
as a regulated investment company; however, there can be no assurance that the
Company will so qualify and maintain its status as a regulated investment
company. If the Company were unable for any reason to maintain its status as a
regulated investment company for any taxable year, the Company would be subject
to Federal income tax as an ordinary corporation on its taxable income, if any,
without any deduction for distributions to shareholders. In such an event, the
amount of cash available for distributions to shareholders would be reduced
because of the Company's tax liability and all distributions made to
shareholders (other than in liquidation) would be treated as ordinary income to
the extent of the Company's earnings and profits.
6
<PAGE>
If the Company is liable for foreign taxes, the Company may make an
election pursuant to which certain foreign taxes paid by it would be treated as
having been paid directly by its shareholders, so long as more than 50% of the
value of the Company's total assets at the close of its taxable year consist of
securities of foreign corporations. The Company does not expect to be eligible
to make this election; however, if the Company becomes eligible, it expects to
so elect. In that event, the amount of foreign taxes paid by the Company will be
included in the income of shareholders, and shareholders may, subject to certain
limitations, claim either a credit or deduction for the taxes. Each shareholder
will be notified after the close of the Company's taxable year if the foreign
taxes paid by the Company will "pass through" for that year and, if so, such
notification will designate (1) the shareholder's portion of the foreign taxes
paid to each such country and (2) the portion of the dividend which represents
income derived from sources within each such country.
A description of the tax consequences of share ownership is contained in
the Prospectus under "Distributions and Tax Status".
CUSTODIAN AND SHAREHOLDER SERVICES
The Company currently acts as its own custodian in accordance with the
provisions of Rule 17f-2 under the Act. Rule 17f-2 generally requires securities
of a registered management investment company be maintained with a bank or other
company whose functions and physical facilities are supervised by Federal or
State Authority. Securities must be physically segregated at all times from
those of any other person or entity, and may be accessed only by persons
approved by the Board of Directors. Special procedures must be followed by such
access persons regarding deposits and withdrawals of securities, and specific
verifications of security holdings must be performed from time to time by an
independent public accountant.
The Company may enter into custodial arrangements with an external entity,
which in turn may enter into foreign sub-custodial agreements pursuant to Rule
17f-5 under the Act to enable the Company to purchase and sell securities of
foreign issuers other than ADRs. The Company serves as its own transfer agent.
The Company does not act as trustee for individual or other retirement accounts,
nor has the Company entered into any agreement with another party to provide
such services. Purchase applications for retirement accounts must therefore be
submitted by trustees independent of the Company or its agents.
AUDITORS
McCarthy, Rose & Mills, independent certified public accountants, 600 North
Pearl, Suite 440, Dallas, Texas 75201, act as independent accountants and
auditors for the Company. As such they perform an annual audit of the Company at
the end of each fiscal year, prepare the Company's tax return, and conduct
examinations three times each year to verify the Company's investments.
PRINCIPAL SHAREHOLDERS
As of April 15, 1997 the following individuals each owned beneficially and
of record 5% or more of the 325,533.138 outstanding shares of the Company.
Owner # of Shares % of Total
Frank T. Hundley(1) 56,095.832 17.23
Gregory D. Potter 36,843,090 11.32
Mark E. Hennes 24,866.042 7.64
Bette M. McCormick (2) 23,070.591 7.09
Ewell L. Tankersley 21,030.445 6.46
(1) The shares shown as owned beneficially by Mr. Hundley include 26,198.183
shares which are held in a Trust for the joint benefit of Mr. Hundley and
his wife.
(2) Ms. McCormick is Assistant Secretary of the Company.
7
<PAGE>
McCARTHY, ROSE & MILLS, L.L.P.
Certified Public Accountants
600 North Pearl Street, Suite 440
Dallas, Texas 75201-7465
Tel: (214) 969-0400 Fax (214) 855-0366
INDEPENDENT AUDITORS' REPORT
Shareholders and Board of Directors
Phillips Capital Investments, Inc.
Dallas, Texas
We have audited the statement of assets and liabilities of Phillips
Capital Investments, Inc., including the schedule of portfolio investments, as
of December 31, 1996 and 1995, and the related statements of operations and
changes in net assets for the years then ended, and selected per-share data and
ratios for each of the five years in the period then ended. These financial
statements and per-share data and ratios are the responsibility of management.
Our responsibility is to express an opinion on these financial statements and
per-share data and ratios based on our audits.
We conducted our audits in accordance with standards established by the
American Institute of Certified Public Accountants. Those standards require that
we plan and perform the audit to obtain reasonable assurance about whether the
financial statements and per-share data and ratios are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. Our procedures included
confirmation of securities owned as of December 31, 1996 and 1995, by
correspondence with the custodian and brokers. An audit also includes assessing
the accounting principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and selected per share data
and ratios referred to above present fairly, in all material respects, the
financial position of Phillips Capital Investments, Inc. as of December 31, 1996
and 1995, and, the results of its operations and the changes in its net assets
for the years then ended, and selected per-share data and ratios for each of the
five years in the period then ended in conformity with generally accepted
accounting principles.
/s/ McCarthy, Rose & Mills, L.L.P.
January 29, 1997
Dallas, Texas
8
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
December 31,
1996 1995
<S> <C> <C>
Assets:
Investments in securities, at value -
amortized cost $3,550,952.16 in 1996 and
$3,590,222.63 in 1995 - Note A $4,503,809.98 $4,844,148.96
Cash 353,107.63 509,731.11
Receivables - Note A
Interest 23,092.02 29,283.85
Dividends 8,545.69 4,578.55
Investment securities sold - 32,440.00
Deferred registration expenses - Note B 1,336.97 675.97
Prepaid insurance 391.80 391.80
------------- -------------
Total assets 4,890,284.09 5,421,250.24
------------- -------------
Liabilities:
Accrued accounting fees 4,650.00 4,450.00
Federal income tax payable 790.00 375.00
Miscellaneous accounts payable 683.42 354.12
Due shareholders on sale 2,076.95 375,018.64
------------- -------------
Total liabilities 8,200.37 380,197.76
------------- -------------
Net Assets:
Net assets (equivalent to $13.74 and
$14.65 per share based on 355,399.640
and 343,987.019 shares of capital stock
outstanding at December 31, 1996 and
1995, respectively) - Note C $4,882,083.72 $5,041,052.48
============= =============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
9
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
INVESTMENTS IN SECURITIES
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Principal
Amount or
COMMON STOCKS: 53.86% Shares Market Value
<S> <C> <C>
Energy Sources & Related: 8.02%
Alamco, Inc. 5,200 $ 58,500.00
Norsk Hydro 1,500 80,437.50
Phillips Petroleum 1,400 61,950.00
Snyder Oil Corp. 4,000 69,500.00
USX Marathon Group 3,000 71,625.00
Wiser Oil 2,500 49,375.00
--------------
391,387.50
--------------
Insurance: 6.09%
American Bankers Insurance Group 1,700 86,912.50
ReliaStar Financial Corp. 1,200 69,300.00
RLI Corp. 2,500 83,437.50
Western National 3,000 57,750.00
--------------
297,400.00
--------------
Electric Utilities: 4.60%
Houston Industries 2,000 45,250.00
PacifiCorp 2,000 41,000.00
Southern Company 2,500 56,562.50
Texas Utilities 900 36,675.00
WPL Holdings 1,600 45,000.00
--------------
224,487.50
--------------
Chemicals: 3.94%
Akzo N.V. ADS 1,000 67,500.00
Dow Chemical 600 47,025.00
Monsanto 2,000 77,750.00
--------------
192,275.00
--------------
Health Products and Services: 3.88%
Beverly Enterprises 3,000 38,250.00
Grancare 2,400 42,900.00
Tenet Health Care 1,800 39,375.00
Universal Health Services "B" 2,400 68,700.00
--------------
189,225.00
--------------
Merchandising: 3.74%
Burlington Coat Factory 4,500 58,500.00
KMart 5,500 57,062.50
Intertan 6,100 29,737.50
Service Merchandise 9,000 37,125.00
--------------
182,425.00
--------------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
10
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
INVESTMENTS IN SECURITIES (Continued)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Principal
Amount or
Common Stocks, continued Shares Market Value
<S> <C> <C>
Consumer Products and Services: 3.52%
Showbiz Pizza 6,000 108,750.00
Spaghetti Warehouse, Inc. 12,000 63,000.00
-------------
171,750.00
-------------
Shipping and Transportation: 3.44%
Sea Containers, Ltd. "A" 5,000 78,125.00
Transport Corp. of America 5,000 53,750.00
Rush Enterprises 3,000 36,000.00
-------------
167,875.00
-------------
Investment Co./Foreign Securities: 3.14%
First Australian Fund 3,500 30,406.25
Growth Fund of Spain 5,425.757 69,178.40
New Germany Fund, Inc. 4,000 53,500.00
-------------
153,084.65
-------------
Media/Entertainment: 2.90%
Pulitzer Publishing 933 43,267.88
TCI Satellite Entertainment, Inc. 300 2,962.50
Telecommunications "A" 3,000 39,187.50
Time Warner 1,500 56,250.00
-------------
141,667.88
-------------
Construction Products and Services: 2.74%
Centex Corp. 1,500 56,437.50
Oriole Homes "B" 4,000 28,000.00
Ply-Gem Industries 3,900 49,237.50
-------------
133,675.00
-------------
Business Products and Services: 2.15%
DH Technology 3,000 72,000.00
Pronet, Inc. 7,500 32,812.50
-------------
104,812.50
-------------
Banking and Financial Services: 2.06%
FirstFed Financial Corp. 1,400 30,800.00
Great Western Financial 2,000 58,000.00
MS Financial 12,500 11,718.75
-------------
100,518.75
-------------
Multi-Industries: 2.05%
Canadian Pacific 2,000 53,000.00
Hanson, PLC 7,000 47,250.00
-------------
100,250.00
-------------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
11
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
INVESTMENTS IN SECURITIES (Continued)
DECEMBER 31, 1996
<TABLE>
<CAPTION>
Principal
Amount or
Common Stocks, continued Shares Market Value
<S> <C> <C>
Metal Products/Misc.: 1.17%
Commonwealth Aluminum 1,800 27,675.00
IMCO Recycling, Inc. 2,000 29,250.00
-------------
56,925.00
-------------
Forest Paper & Products: .44%
Georgia Pacific Corp. 300 21,600.00
-------------
TOTAL COMMON STOCKS (Cost $1,676,980.07) 2,629,358.78
-------------
SHORT-TERM TIME DEPOSITS: 9.73%
Beal Banc CD 5.63% Due 3/7/97 95,000.00
Guaranty Fed CD 5.29% Due 2/14/97 95,000.00
LTCB Tr Co NY CD 5.25% Due 6/18/97 95,000.00
Bluebonnet Svgs CD 5.15% Due 6/11/97 95,000.00
Western American CD 5.5% Due 4/30/97 95,000.00
-------------
TOTAL SHORT-TERM TIME DEPOSITS
(Cost $475,000.00) 475,000.00
-------------
OTHER SHORT-TERM SECURITIES: 28.67%
Institutional Liquid Assets - Treasury $ 200,263.70 200,263.70
U.S. T-Notes 4.75% of 2/15/97 1,000,000.00 999,062.50
U.S. T-Notes 5.625% of 8/31/97 200,000.00 200,125.00
-------------
TOTAL OTHER SHORT-TERM SECURITIES
(Cost $1,398,972.09) 1,399,451.20
-------------
TOTAL INVESTMENTS IN SECURITIES:
(Cost $3,550,952.16) 4,503,809.98
-------------
OTHER ASSETS (NET OF LIABILITIES): 7.75% 378,273.74
-------------
NET ASSETS: 100% $4,882,083.72
=============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
12
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
<S> <C> <C>
Investment Income
Income - Note A
Interest $ 109,879.61 $ 192,844.23
Dividends 38,483.50 42,855.80
-------------- --------------
Total income 148,363.11 235,700.03
-------------- --------------
Expenses
Investment advisory fees - Note E 41,951.47 52,383.99
Accounting fees 5,425.00 5,100.00
Registration fees and expenses 1,484.00 763.00
Directors' fees 1,625.00 1,875.00
Insurance 1,359.00 1,359.00
Postage and delivery 85.00 255.30
Printing 1,376.54 411.87
Professional fees 1,539.00 944.76
Other 820.34 639.82
Federal income tax 790.00 375.00
-------------- --------------
Total expenses 56,455.35 64,107.74
-------------- --------------
Investment income - net 91,907.76 171,592.29
-------------- --------------
Realized and Unrealized Gain on
Investments - Note D
Net realized gain on investments 612,312.46 126,098.67
Change in unrealized appreciation
of investments for the period (301,068.52) 534,137.79
-------------- --------------
Net gain (loss) on investments 311,243.94 660,236.46
-------------- --------------
Net increase in net assets
resulting from operations $ 403,151.70 $ 831,828.75
============== ==============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
13
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995
<S> <C> <C>
Increase in Net Assets from Operations
Investment income - net $ 91,907.76 $ 171,592.29
Net realized gain on investments 612,312.46 126,098.67
Change in unrealized appreciation (301,068.52) 534,137.79
---------------- ----------------
Net increase in net assets resulting
from operations 403,151.70 831,828.75
---------------- ----------------
Dividends Paid to Shareholders - Note F
Investment income (90,896.34) (171,167.97)
Net realized capital gains (611,624.32) (125,756.05)
---------------- ----------------
Total dividends paid to shareholders (702,520.66) (296,924.02)
---------------- ----------------
Capital Share Transactions 140,400.20 (1,123,961.00)
---------------- ----------------
Net increase (decrease) (158,968.76) (589,056.27)
Net Assets
Beginning of year (including undistributed
investment income of $3,819.67) 5,041,052.48 5,630,108.75
---------------- ----------------
End of year (including undistributed
investment income of $4,831.09) $ 4,882,083.72 $ 5,041,052.48
================ ================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
14
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1996
Note A - Summary of Significant Accounting Policies
The Company is operated as a diversified, open-end management investment
company.
Security valuation: Investments in securities listed on the New York Stock
Exchange, American Stock Exchange or other security exchanges, and securities
traded in the Over-The-Counter market are valued at their closing sales price.
If no sale has been reported for that day, the last published sale or the last
recorded bid price, whichever is the more recent, is used, unless in the opinion
of the Board of Directors the value thus obtained may not fairly indicate the
actual market value, in which case these securities, and any other assets for
which market quotations are not readily available, are valued at fair value as
determined by the management and approved in good faith by the Board of
Directors.
Federal income taxes: For tax years beginning after December 31, 1987, it
is the Company's intention to comply with the provisions of the Internal Revenue
Code applicable to regulated investment companies and to distribute
substantially all of its capital gains and investment income to its
shareholders. Therefore, provision has been made for Federal income taxes only
on the undistributed income which is immaterial.
Other: The Company follows industry practice and records security
transactions on the trade date. Dividend income is recognized on the ex-dividend
date, and interest is accrued on all debt securities on a daily basis. Discounts
and premiums on securities purchased are amortized over the life of the
respective securities.
Note B - Registration Expenses
Registration expenses will be amortized as new shares are issued.
Note C - Capital Share Transactions
As of December 31, 1996 and 1995 there were 10,000,000 shares of $1.00 par
value capital stock authorized. Capital paid-in aggregated $3,566,938.75 and
$3,437,951.17 at December 31, 1996 and 1995, respectively.
Transactions in capital stock for the period were as follows:
<TABLE>
<CAPTION>
Shares Amount
1996 1995 1996 1995
<S> <C> <C> <C> <C>
Shares sold 22,304.946 2,894.969 $ 339,000.00 $ 43,000.00
Shares issued in reinvestment
of dividends 47,427.703 20,407.146 652,605.19 296,924.02
---------- --------- ------------ --------------
69,732.649 23,302.115 991,605.19 339,924.02
Shares redeemed 58,320.028 98,445.797 851,204.99 1,463,885.02
---------- --------- ------------ --------------
Net increase (decrease) 11,412.621 (75,143.682) $ 140,400.20 ($1,123,961.00)
========== =========== ============ ==============
</TABLE>
15
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1996
Note D - Investment Transactions
Purchases of common stocks during the year were $588,358.81 in 1996 and
$399,110.80 in 1995; sales were $998,015.67 and $368,935.91 in 1996 and 1995,
respectively. Purchases of U.S. government obligations were $1,793,567.93 in
1996 and $1,663,734.38 in 1995, and $2,300,000.00 and $2,692,656.25 were
sold/matured in 1996 and 1995, respectively.
As of December 31, 1996 and 1995, the unrealized appreciation of securities
was $952,857.81 and $1,253,926.33, respectively; accumulated undistributed net
realized gains on investment transactions totaled $2,056.43 and $1,368.29 at
December 31, 1996 and 1995, respectively.
Note E - Investment Advisory Fees
The Company pays advisory fees for investment management and advisory
services under a management agreement (Agreement) that provides for fees to be
computed monthly at an annual rate of 0.9 percent of the Company's average daily
net assets up to $30,000,000, 0.75 percent of assets from $30,000,000 to
$60,000,000 and 0.6 percent for those assets in excess of $60,000,000. The
Agreement provides for an expense reimbursement from the investment advisor if
the Company's total expenses exceed 2.0 percent of the Company's average daily
net assets for any year.
Note F - Distributions to Shareholders
On December 27, 1996, a distribution of $1.985 per share, aggregating
$611,624.32, was declared from net realized gains from investment transactions
and a dividend of $0.295 per share, aggregating $90,896.34 was declared from net
investment income. The distribution and dividend were paid on December 27, 1996
to shareholders of record on December 26, 1996.
On December 20, 1995, a distribution of $0.36 per share, aggregating
$125,756.05, was declared from net realized gains from investment transactions
and a dividend of $0.49 per share, aggregating $171,167.97 was declared from net
investment income. The distribution and dividend were paid on December 28, 1995
to shareholders of record on December 27, 1995.
16
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
SUPPLEMENTARY INFORMATION - SELECTED PER-SHARE DATA AND RATIOS*
<TABLE>
<CAPTION>
Year Ended December 31,
1996 1995 1994 1993 1992
<S> <C> <C> <C> <C> <C>
Per-Share Data:
Investment income $ .48 $ .67 $ .47 $ .34 $ .47
Expenses .18 .18 .16 .15 .15
--------- --------- --------- --------- ---------
Investment income - net .30 .49 .31 .19 .32
Distributions from net investment income (.29) (.49) (.31) (.19) (.32)
Net realized and unrealized gain (loss)
on securities 1.07 1.58 (.21) .77 .92
Distributions from net realized
long-term gains on securities (1.99) (.36) (.24) (.11) (.33)
--------- --------- --------- --------- ---------
Net increase (decrease) in net
asset value (.91) 1.22 (.45) .66 .59
Net asset value:
Beginning of year 14.65 13.43 13.88 13.22 12.63
--------- --------- --------- --------- ---------
End of year $ 13.74 $ 14.65 $ 13.43 $ 13.88 $ 13.22
========= ========= ========= ========= =========
Ratios (Annualized)
Ratio of expenses to average net assets 1.20% 1.11% 1.11% 1.14% 1.18%
Ratio of net investment income to
average net assets 1.96% 2.98% 2.19% 1.45% 2.09%
Portfolio turnover rate 19.08% 28.17% 37.62% 3.10% 20.42%
Average commission rate paid 0.9488% N/A N/A N/A N/A
Shares Outstanding at End of Year 355,399.640 343,987.019 419,130.701 409,961.200 367,041.839
</TABLE>
* Selected data for a share of capital stock outstanding throughout the year.
17
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
P.O. Box 796787
Dallas, Texas 75379
(972) 458-2448
Part C
Item 24. (a) Financial Statements
(1) Statement of Assets and Liabilities - Part B
(2) Statement of Changes in Net Assets - Part B
(3) Statement of Operations - Part B
(4) Investments in Securities - Part B
(b) Exhibits
(1) Articles of Incorporation*
(2) Bylaws of the Company*
(3) Voting Trust Agreement - Not Applicable
(4) Specimen of Capital Stock*
(5) Investment Advisory Contract (With Revision)*
(6) Underwriting or Distribution Contract - Not
Applicable
(7) Pension, Bonus or Similar Contracts - Not
Applicable
(8) Custodian Agreement or Depository Contract - Not
Applicable
(9) Other Material Contracts - Not Applicable
(10) Opinion and Consent of Counsel *
(11) A: Auditor's Consent Letter - Exhibit A
B: Letter From Stradley, Ronon, Stevens, &
Young, L.L.P. regarding the use of Rule
485 (b) - Exhibit B
(12) Other Financial Statements - Not Applicable
(13) Initial Capital Agreements - Not Applicable
(14) Model Retirement Plan - Not Applicable
(15) Rule 12b-1 Plan - Not Applicable
(16) Performance Data Schedule - not applicable
(17) Financial Data Schdule - Exhibit C
* Filed by previous amendment (Pre-Effective Amendment No. 3)
Item 25. No Person is directly or indirectly controlled by, or under common
control with, the Company.
Item 26. Title of Class Number of Record Holders
Capital Stock 50 (as of April 15, 1997)
Item 27. The Bylaws of the Company deny indemnification to any Officer or
Director for "reason of willful misfeasance, bad faith, gross
negligence or reckless disregard of the duties involved in the conduct
of his office".
<PAGE>
Item 28. The President and sole shareholder of the Adviser was an Executive
Vice President and Director of Lee Financial Corporation (a registered
investment adviser) from 1978 to 1987. There have been no other
"business or other connections of a substant ial nature" in which the
Adviser or its employees have been involved during the last two fiscal
years.
Item 29. The Company is the sole underwriter of its shares. No commissions
are charged by the Company, or paid to another party.
Item 30. The accounts, books and other documents required by Section 31(a)
of the 1940 Act and the rules promulgated thereunder are maintained at
the office of the Company, 15400 Knoll Trail, Suite 100, Dallas, Texas
75248.
Item 31. Except as discussed in Part A and Part B of this Form, the Company
has no management-related service contracts.
Item 32. The Registrant hereby undertakes to furnish each person to whom
its Prospectus is delivered with a copy of the Registrant's most
current Annual Report to Shareholders, upon request and without
charge.
2
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940 the Registrant certifies that it meets all of the
requirements for effectiveness of this Registration Statement pursuant to Rule
485(b) under the Securities Act of 1933 and has duly caused this amended
Registration Statement to be signed on its behalf by the undersigned, thereto
duly authorized, in the City of Dallas, and State of Texas on the 24th day of
April, 1997.
PHILLIPS CAPITAL INVESTMENTS, INC.
By: /s/ GUY F. PHILLIPS, JR.
--------------------------------
Guy F. Phillips, Jr. - President
Pursuant to the requirements of the Securities Act of 1933, this amended
Registration Statement has been signed below by the following persons in the
capacities and on the date indicated.
/S/Guy F. Phillips, Jr. President & Director April 24, 1997
- --------------------------- --------------------------- --------------
Guy F. Phillips, Jr. Title Date
/S/L. Randall Yazbeck Secretary & Director April 24, 1997
- --------------------------- --------------------------- --------------
L. Randall Yazbeck Title Date
/S/Richard K. Spires Vice President & Director April 24, 1997
- --------------------------- --------------------------- --------------
Richard K. Spires Title Date
/S/Rodger L. Ehrlish Director April 24, 1997
- --------------------------- --------------------------- --------------
Rodger L. Ehrlish Title Date
/S/David M. Buhner, M.D. Director April 24, 1997
- --------------------------- --------------------------- --------------
David M. Buhner, M.D. Title Date
EXHIBIT "A"
McCarthy, Rose & Mills, L.L.P.
Certified Public Accountants
600 North Pearl Street, Suite 440
Dallas, Texas 75201-7465
February 19, 1997
Board of Directors
Phillips Capital Investments, Inc.
15400 Knoll Trail, #100
Dallas, Texas 75248
Gentlemen:
We hereby consent to the use of our Auditor's Report dated January 29, 1997
for Phillips Capital Investments, Inc. in the Statement of Additional
Information of Phillips Capital Investments, Inc. dated April 30, 1997 and in
the revised Prospectus for Phillips Capital Investments, Inc. dated April 30,
1997.
As discussed, please forward for our files copies of the final documents as
submitted to the Securities and Exchange Commission.
Very truly yours,
/S/McCarthy, Rose and Mills
McCarthy, Rose and Mills, L.L.P
[LETTERHEAD]
April 28, 1997
U.S. Securities and Exchange Commission
Judiciary Plaza
450 Fifth Street, N.W.
Washington, D.C. 20549
Re: Phillips Capital Investments, Inc.
Gentlemen:
We are counsel to Phillips Capital Investments, Inc. (the "Fund"). As such,
we have reviewed Post-Effective Amendment No. 9 to the Registration Statement of
the Fund to be filed pursuant to paragraph (b) of Rule 485 promulgated under the
Securities Act of 1933.
In our judgment, Post-Effective Amendment No. 9 to the Registration
Statement does not contain disclosures which would render it ineligible to
become effective pursuant to paragraph (b) of Rule 485.
We consent to the inclusion of this written representation as an Exhibit to
Post-Effective Amendment No. 9 to the Registration Statement of the Fund.
Very truly yours,
STRADLEY RONON STEVENS & YOUNG, LLP
Joseph V. Del Raso
JDR/go
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000826659
<NAME> PHILLIPS CAPITAL INVESTMENTS, INC.
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<INVESTMENTS-AT-COST> 3,550,952
<INVESTMENTS-AT-VALUE> 4,503,810
<RECEIVABLES> 31,638
<ASSETS-OTHER> 353,108
<OTHER-ITEMS-ASSETS> 1,729
<TOTAL-ASSETS> 4,890,284
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 8,200
<TOTAL-LIABILITIES> 8,200
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 3,566,939
<SHARES-COMMON-STOCK> 355,400
<SHARES-COMMON-PRIOR> 343,987
<ACCUMULATED-NII-CURRENT> 4,831
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,056
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 952,858
<NET-ASSETS> 4,882,084
<DIVIDEND-INCOME> 38,484
<INTEREST-INCOME> 109,880
<OTHER-INCOME> 0
<EXPENSES-NET> 56,455
<NET-INVESTMENT-INCOME> 91,908
<REALIZED-GAINS-CURRENT> 612,312
<APPREC-INCREASE-CURRENT> (301,069)
<NET-CHANGE-FROM-OPS> 403,152
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 90,896
<DISTRIBUTIONS-OF-GAINS> 611,624
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 22,305
<NUMBER-OF-SHARES-REDEEMED> 58,320
<SHARES-REINVESTED> 47,428
<NET-CHANGE-IN-ASSETS> (158,969)
<ACCUMULATED-NII-PRIOR> 3,820
<ACCUMULATED-GAINS-PRIOR> 1,368
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 41,951
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 56,455
<AVERAGE-NET-ASSETS> 4,700,000
<PER-SHARE-NAV-BEGIN> 14.65
<PER-SHARE-NII> .30
<PER-SHARE-GAIN-APPREC> 1.99
<PER-SHARE-DIVIDEND> .295
<PER-SHARE-DISTRIBUTIONS> 1.985
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 13.74
<EXPENSE-RATIO> 1.20
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
