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SIGNATURE RICHARD SPIRES
TITLE VICE PRESIDENT
<TABLE> <S> <C>
<ARTICLE> 6
<CIK> 0000826659
<NAME> PHILLIPS CAPITAL INVESTMENTS, INC.
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<INVESTMENTS-AT-COST> 3,962,344
<INVESTMENTS-AT-VALUE> 5,287,541
<RECEIVABLES> 38,478
<ASSETS-OTHER> 82,254
<OTHER-ITEMS-ASSETS> 1,254
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</TABLE>
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
AUDITORS' REPORT
To the Shareholders and Board of Directors
PHILLIPS CAPITAL INVESTMENTS, INC.
Dallas, Texas
In planning and performing our audit of the financial statements of
Phillips Capital Investments, Inc. for the year ended December 31, 1998, we
considered its internal control structure, including procedures for safeguarding
securities, in order to determine our auditing procedures for the purpose of
expressing our opinion on the financial statements and to comply with the
requirements of Form N-SAR, not to provide assurance on the internal control
structure.
The management of Phillips Capital Investments, Inc. is responsible for
establishing and maintaining an internal control structure. In fulfilling this
responsibility, estimates and judgments by management are required to assess the
expected benefits and related costs of internal control policies and
procedures. Two of the objectives of an internal control structure are to
provide management with reasonable, but not absolute, assurance that assets are
safeguarded against loss from unauthorized use or disposition and that
transactions are executed in accordance with management's authorization and
recorded properly to permit preparation of financial statements in conformity
with generally accepted accounting principles.
Because of inherent limitations in any internal control structure, errors
or irregularities may occur and not be detected. Also, projection of any
evaluation of the structure to future periods is subject to the risk that it may
become inadequate because of changes in conditions or that the effectiveness of
the design and operations may deteriorate.
Our consideration of the internal control structure would not necessarily
disclose all matters in the internal control structure that might be material
weaknesses under standards established by the American Institute of Certified
Public Accountants. A material weakness is a condition in which the design or
operation of the specific internal control structure elements does not reduce to
a relatively low level the risk that errors or irregularities in amounts that
would be material in relation to the financial statements being audited may
occur and not be detected within a timely period by employees in the normal
course of performing their assigned functions. However, we noted no matters
involving the internal control structure, including procedures for safeguarding
securities, that we consider to be material weaknesses as defined above as of
December 31, 1998.
This report is intended solely for the use of management and the Securities
and Exchange Commission.
/s/ McCarthy, Rose & Miller, L.L.P.
January 26, 1999
Dallas, Texas
