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Previous: PHILLIPS CAPITAL INVESTMENTS INC, NSAR-B, 1998-02-27 |
Next: MFS INTERMEDIATE INCOME TRUST, POS AMI, 1998-02-27 |
PHILLIPS CAPITAL INVESTMENTS, INC.
ANNUAL REPORT TO SHAREHOLDERS
FOR THE YEAR ENDED
DECEMBER 31, 1997
<PAGE>
CONTENTS
Independent Auditors' Report.........................................Page 1
Statement of Assets and Liabilities.................................. 2
Investment in Securities as of December 31, 1997..................... 3 - 5
Statement of Operations.............................................. 6
Statement of Changes in Net Assets................................... 7
Notes to Financial Statements........................................ 8 - 9
Supplementary Information -
Selected Per-Share Data and Ratios............................... 10
<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, 1997 and 1996, 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, 1997 and 1996, 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, 1997 and 1996,
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 26, 1998
Dallas, Texas
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
STATEMENT OF ASSETS AND LIABILITIES
<TABLE>
<CAPTION>
December 31,
1997 1996
<S> <C> <C>
Assets:
Investments in securities, at value -
amortized cost $3,630,576.89 in 1997 and
$3,550,952.16 in 1996 - Note A $ 5,028,727.83 $ 4,503,809.98
Cash 44,005.87 353,107.63
Receivables - Note A
Interest 23,576.95 23,092.02
Dividends 18,865.05 8,545.69
Investment securities sold 2,677.63 --
Deferred registration expenses - Note B 1,169.79 1,336.97
Prepaid insurance 316.73 391.80
---------------- ----------------
Total assets 5,119,339.85 4,890,284.09
---------------- ----------------
Liabilities:
Accrued accounting fees 5,350.00 4,650.00
Federal income tax payable 300.00 790.00
Miscellaneous accounts payable 581.28 683.42
Due shareholders on sale -- 2,076.95
---------------- ----------------
Total liabilities 6,231.28 8,200.37
---------------- ----------------
Net Assets:
Net assets (equivalent to $15.06 and $13.74
per share based on 339,582.628
and 355,399.640 shares of capital
stock outstanding at December 31, 1997
and 1996, respectively) - Note C $ 5,113,108.57 $ 4,882,083.72
================ ================
</TABLE>
The accompanying notes are an integral part of these
financial statements.
2
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
INVESTMENTS IN SECURITIES
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Principal
Amount or
COMMON STOCKS: 54.60% Shares Market Value
<S> <C> <C>
Insurance: 8.35%
American Bankers Insurance Group 2,500 $114,843.75
ReliaStar Financial Corp. 2,400 98,850.00
RLI Corp. 2,500 124,531.25
Western National 3,000 88,875.00
-----------
427,100.00
-----------
Energy Sources & Related: 7.34%
Norsk Hydro 1,500 76,500.00
Phillips Petroleum 1,400 68,075.00
Snyder Oil Corp. 4,000 73,000.00
USX Marathon Group 3,000 101,250.00
Wiser Oil 4,000 56,500.00
-----------
375,325.00
-----------
Shipping and Transportation: 5.33%
Sea Containers, Ltd. "A" 5,000 160,000.00
Transport Corp. of America 5,000 78,750.00
Rush Enterprises 4,200 33,600.00
-----------
272,350.00
-----------
Electric Utilities: 5.15%
Houston Industries 2,000 53,500.00
PacifiCorp 2,000 54,625.00
Southern Company 2,500 64,687.50
Texas Utilities 900 37,350.00
WPL Holdings 1,600 53,000.00
-----------
263,162.50
-----------
Media/Entertainment: 4.60%
Pulitzer Publishing 933 58,604.06
Telecommunications "A" 3,000 83,812.50
Time Warner 1,500 93,000.00
-----------
235,416.56
-----------
Health Products and Services: 4.57%
Beverly Enterprises 3,000 39,000.00
PharMerica 1,365 14,161.88
Tenet Health Care 1,800 59,625.00
Universal Health Services "B" 2,400 120,900.00
-----------
233,686.88
-----------
Chemicals: 4.53%
Akzo N.V. ADS 1,000 86,875.00
Dow Chemical 600 60,900.00
Monsanto 2,000 84,000.00
-----------
231,775.00
-----------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
3
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
INVESTMENTS IN SECURITIES (Continued)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Principal
Amount or
Common Stocks, continued Shares Market Value
<S> <C> <C>
Investment Co./Foreign Securities: 3.33%
First Australian Fund 6,000 $43,500.00
Growth Fund of Spain 4,425.757 72,748.38
New Germany Fund, Inc 4,000 54,000.00
-------------
170,248.38
-------------
Consumer Products and Services: 3.15%
Showbiz Pizza 4,000 92,000.00
Spaghetti Warehouse, Inc. 12,000 69,000.00
-------------
161,000.00
-------------
Merchandising: 2.38%
KMart 5,500 63,250.00
Intertan 6,100 32,787.50
Service Merchandise 12,000 25,500.00
-------------
121,537.50
-------------
Construction Products and Services: 2.02%
Centex Corp. 1,500 94,406.25
Oriole Homes "B" 2,000 8,750.00
-------------
103,156.25
-------------
Metals/Mining: 1.90%
Commonwealth Industries 1,800 26,100.00
IMCO Recycling, Inc. 2,000 32,125.00
The Energy Group PLC 875 38,992.19
-------------
97,217.19
-------------
Multi-Industries: 1.46%
Canadian Pacific 2,000 54,500.00
Hanson, PLC 875 20,125.00
-------------
74,625.00
-------------
Forest Paper & Products: .49%
Georgia Pacific Corp. 300 18,225.00
Georgia Pacific Timber 300 6,806.25
-------------
25,031.25
-------------
TOTAL COMMON STOCKS (Cost $1,391,913.77) 2,791,631.51
-------------
PREFERRED STOCKS: 1.73%
ConAgra Capital LC Preferred 2,000 44,375.00
Texaco Capital Preferred "B" 2,000 44,000.00
-------------
TOTAL PREFERRED STOCKS (Cost $89,800.00) 88,375.00
-------------
</TABLE>
The accompanying notes are an integral part of these
financial statements.
4
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
INVESTMENTS IN SECURITIES (Continued)
DECEMBER 31, 1997
<TABLE>
<CAPTION>
Principal
Amount or
Shares Market Value
<S> <C> <C>
SHORT-TERM DEPOSITS: 8.90%
Beal Banc CD 5.87% Due 7/7/98 $95,000.00
MashreqBank CD 5.6% Due 6/30/98 75,000.00
1st Fed Calif CD 5.5% Due 3/18/98 95,000.00
Gty Fed CD 5.39% Due 1/14/98 95,000.00
Western American CD 6.0% Due 4/03/98 95,000.00
-------------
TOTAL SHORT-TERM TIME DEPOSITS
(Cost $455,000.00) 455,000.00
-------------
OTHER SHORT-TERM SECURITIES: 33.12%
Institutional Liquid Assets - Treasury $199,971.32 199,971.32
U.S. T-Notes 5% of 1/31/98 800,000.00 799,500.00
U.S. T-Notes 5.375% of 5/31/98 400,000.00 399,750.00
AMEX CR Corp Comm Paper Due 3/24/98 147,230.00 147,230.00
Ford Motor CR Comm Paper Due 01/09/98 147,270.00 147,270.00
-------------
TOTAL OTHER SHORT-TERM SECURITIES
(Cost $1,693,863.12) 1,693,721.32
-------------
TOTAL INVESTMENTS IN SECURITIES
(Cost $3,630,576.89) 5,028,727.83
-------------
OTHER ASSETS (NET OF LIABILITIES): 1.65% 84,380.74
-------------
NET ASSETS: 100.00% $5,113,108.57
=============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
5
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
STATEMENT OF OPERATIONS
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
<S> <C> <C>
Investment Income
Income - Note A
Interest $112,639.25 $109,879.61
Dividends 47,191.17 38,483.50
----------- -----------
Total income 159,830.42 148,363.11
----------- -----------
Expenses
Investment advisory fees - Note E 43,693.37 41,951.47
Accounting fees 5,450.00 5,425.00
Registration fees and expenses 679.73 1,484.00
Directors' fees 1,500.00 1,625.00
Insurance 1,176.06 1,359.00
Postage and delivery 153.50 85.00
Printing - 1,376.54
Professional fees 1,454.52 1,539.00
Other 3,522.01 820.34
Federal income tax 300.00 790.00
----------- -----------
Total expenses 57,929.19 56,455.35
----------- -----------
Investment income - net 101,901.23 91,907.76
----------- -----------
Realized and Unrealized Gain on
Investments - Note D
Net realized gain on investments 304,539.34 612,312.46
Change in unrealized appreciation
of investments for the period 445,293.12 (301,068.52)
----------- -----------
Net gain (loss) on investments 749,832.46 311,243.94
----------- -----------
Net increase in net assets
resulting from operations $851,733.69 $403,151.70
=========== ===========
</TABLE>
The accompanying notes are an integral part of these
financial statements.
6
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
STATEMENT OF CHANGES IN NET ASSETS
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996
<S> <C> <C>
Increase in Net Assets from Operations
Investment income - net $101,901.23 $91,907.76
Net realized gain on investments 304,539.34 612,312.46
Change in unrealized appreciation 445,293.12 (301,068.52)
------------- -------------
Net increase in net assets resulting
from operations 851,733.69 403,151.70
------------- -------------
Dividends Paid to Shareholders - Note F
Investment income (101,452.98) (90,896.34)
Net realized capital gains (304,358.85) (611,624.32)
------------- -------------
Total dividends paid to shareholders (405,811.83) (702,520.66)
------------- -------------
Capital Share Transactions (214,897.01) 140,400.20
------------- -------------
Net increase (decrease) 231,024.85 (158,968.76)
Net Assets
Beginning of year (including undistributed
investment income of $4,831.09) 4,882,083.72 5,041,052.48
------------- -------------
End of year (including undistributed
investment income of $5,279.34) $5,113,108.57 $4,882,083.72
============= =============
</TABLE>
The accompanying notes are an integral part of these
financial statements.
7
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS
DECEMBER 31, 1997
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, 1997 and 1996 there were 10,000,000 shares of $1.00 par
value capital stock authorized. Capital paid-in aggregated $3,367,858.76 and
$3,566,938.75 at December 31, 1997 and 1996, respectively.
Transactions in capital stock for the period were as follows:
<TABLE>
<CAPTION>
Shares Amount
1997 1996 1997 1996
<S> <C> <C> <C> <C>
Shares sold 11,990.444 22,304.946 $167,000.00 $339,000.00
Shares issued in reinvestment
of dividends 27,419.715 47,427.703 405,811.83 652,605.19
----------- ---------- ------------ -----------
39,410.159 69,732.649 572,811.83 991,605.19
Shares redeemed 55,227.171 58,320.028 787,708.84 851,204.99
----------- ---------- ------------ -----------
Net increase (decrease) (15,817.012) 11,412.621 ($214,897.01) $140,400.20
=========== ========== ============ ===========
</TABLE>
8
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
NOTES TO FINANCIAL STATEMENTS (Continued)
DECEMBER 31, 1997
Note D - Investment Transactions
Purchases of common stocks during the year were $154,285.00 in 1997 and
$588,358.81 in 1996; sales were $651,731.14 and $998,015.67 in 1997 and 1996,
respectively. Purchases of U.S. Government obligations were $1,195,781.20 in
1997 and $793,567.93 in 1996, and $1,200,000.00 and $2,300,000.00 were
sold/matured in 1997 and 1996, respectively.
As of December 31, 1997 and 1996, the unrealized appreciation of securities
was $1,398,150.93 and $952,857.81, respectively; accumulated undistributed net
realized gains on investment transactions totaled $2,236.96 and $2,056.43 at
December 31, 1997 and 1996, 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 16, 1997, a distribution of $0.975 per share, aggregating
$304,358.85, was declared from net realized gains from investment transactions
and a dividend of $0.325 per share, aggregating $101,452.98 was declared from
net investment income. The distribution and dividend were paid on December 18,
1997 to shareholders of record on December 17, 1997.
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.
9
<PAGE>
PHILLIPS CAPITAL INVESTMENTS, INC.
SUPPLEMENTARY INFORMATION - SELECTED PER-SHARE DATA AND RATIOS*
<TABLE>
<CAPTION>
Year Ended December 31,
1997 1996 1995 1994 1993
<S> <C> <C> <C> <C> <C>
Per-Share Data:
Investment income $.53 $.48 $.67 $.47 $.34
Expenses .19 .18 .18 .16 .15
------ ------ ------ ------ ------
Investment income - net .34 .30 .49 .31 .19
Distributions from net investment income (.33) (.29) (.49) (.31) (.19)
Net realized and unrealized gain (loss)
on securities 2.28 1.07 1.58 (.21) .77
Distributions from net realized
long-term gains on securities (.97) (1.99) (.36) (.24) (.11)
------ ------ ------ ------ ------
Net increase (decrease) in net
asset value 1.32 (.91) 1.22 (.45) .66
Net asset value:
Beginning of year 13.74 14.65 13.43 13.88 13.22
------ ------ ------ ------ ------
End of year $15.06 $13.74 $14.65 $13.43 $13.88
====== ====== ====== ====== ======
Ratios (Annualized)
Ratio of expenses to average net assets 1.19% 1.20% 1.11% 1.11% 1.14%
Ratio of net investment income to
average net assets 2.10% 1.96% 2.98% 2.19% 1.45%
Portfolio turnover rate 5.71% 19.08% 28.17% 37.62% 3.10%
Shares Outstanding at End of Year 339,582.628 355,399.640 343,987.019 419,130.701 409,961.200
</TABLE>
* Selected data for a share of capital stock outstanding throughout the year.
10
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