To Our Shareholders:
Armstrong Associates, Inc.'s fiscal year ended June 30, 1997. Total assets at
the end of the year amounted to $14,267,008 and the per share price of the fund
was $11.61. Not included in the year end price were per share income and capital
gain distributions made in December 1996 totaling $0.54 per share.
The fiscal year covered a period of generally positive, but sometimes volatile,
equity markets. Overall, market leadership was concentrated in a relatively
narrow group of stocks of companies with particularly large market
capitalizations although stocks of companies with medium sized and smaller
capitalizations also, on balance, showed positive results. The Value Line Index,
which represents approximately 1,700 stocks (unweighted-price only), and is, we
believe, a good representation of stock performance in general, gained +18.5%
for the twelve month period. For comparative purposes long term bonds, as
reflected by the Lehman Brothers U.S. Treasury Composite Index, had a total
return of +7.2% and the average money market fund listed by Lipper Analytical
Services, Inc., had a return of +4.8%. The Armstrong portfolio, which included a
blend of diversified investments in stocks of large, mid-sized and some smaller
capitalized companies as well as some cash equivalent investments, in
recognition of the current level of the market, recorded a total return of
+17.2% for the year.
Much investment attention over the past few months has been focused on the
interest rate and inflation outlook and possible actions that might be taken by
the Federal Reserve. At this point in time, it appears that the U.S. economy
should be able to continue to enjoy the benefits of relatively low unemployment
without serious price and wage dislocations. While market leadership has been
uncomfortably narrow and may be over-extended, we continue to believe that
investor interest will likely broaden into other areas of the equity market over
the next year, generating positive results for new investment opportunities.
Longer term, we rate the investment prospects for the United States equity
market very highly and believe that investors should use periods of market
weakness as buying opportunities.
Please call or write us if you have any questions concerning your Armstrong
investment.
Sincerely,
C.K. Lawson
August 15, 1997
<PAGE>
Armstrong Associates, Inc.
SHAREHOLDERS REPORT June 30, 1997
OFFICERS AND DIRECTORS
C.K. Lawson
President, Treasurer
and Director
Candace L. King
Vice President and
Secretary
Eugene P. Frenkel, M.D.
Director
Professor of Internal
Medicine and Radiology
Southwestern Medical
School
Douglas W. Maclay
Director
President, Maclay
Development Company
R.H. Stewart Mitchell
Director
Private Investor
Cruger S. Ragland
Director
President
Ragland Insurance
Agency, Inc.
Ann Reed Dittmar
Director
Private Investor
Custodian
The Union Bank of California, N.A.
San Francisco, California
Transfer Agent
Portfolios, Inc.
Dallas, Texas
Auditors
Grant Thornton LLP
Dallas, Texas
Investment Advisor
Portfolios, Inc.
Dallas, Texas
This report is prepared for the information of the shareholders of Armstrong
Associates, Inc. It is not authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an effective prospectus.
Armstrong Associates, Inc.
750 N. St. Paul, Suite 1300, L.B. 13
Dallas, Texas 75201-3250
(214) 720-9101 Fax: (214) 871-8948
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS IN SECURITIES--JUNE 30, 1997
Shares or principal amount Cost Market value (a)
- -------------------------------------------------------------------------------------------------------------------
COMMON STOCK (84.64%) Industry and issue:
Broadcasting, Media and Publishing (5.1%):
<S> <C> <C> <C>
A.H. Belo Corp. 6,000 $171,285 $249,750
Time Warner, Inc. 10,000 208,193 482,500
- -------------------------------------------------------------------------------------------------------------------
379,478 732,250
- -------------------------------------------------------------------------------------------------------------------
Chemicals and Related (6.6%):
Avery Dennison Corp. 15,000 211,200 601,875
Praxair, Inc. 6,000 212,890 336,000
- -------------------------------------------------------------------------------------------------------------------
494,090 937,875
- -------------------------------------------------------------------------------------------------------------------
Computer Software and Related (7.7%):
Cadence Design Systems* 5,000 180,800 167,500
Cisco Systems, Inc.* 3,000 126,000 201,375
Oracle Systems Corp.* 11,250 158,750 566,719
3Com Corporation* 3,500 141,500 157,500
- -------------------------------------------------------------------------------------------------------------------
607,050 1,093,094
- -------------------------------------------------------------------------------------------------------------------
Consumer Products and Services (9.0%):
Black & Decker Corp. 10,000 216,760 372,500
The Gillette Company 3.616 166,636 342,616
Kimberly Clark Corp. 6,000 230,820 298,500
Wal-Mart Stores, Inc. 8,000 196,800 271,000
- -------------------------------------------------------------------------------------------------------------------
811,016 1,284,616
- -------------------------------------------------------------------------------------------------------------------
Electronics, Semiconductors and Related (8.9%):
AMP, Inc. 5,000 196,230 208,750
Lucent Technologies, Inc. 4,213 119,604 303,863
Motorola, Inc. 10,000 140,550 761,250
- -------------------------------------------------------------------------------------------------------------------
456,384 1,273,863
- -------------------------------------------------------------------------------------------------------------------
Food, Beverages and Related (10.3%):
CPC International, Inc. 5,000 214,288 461,875
Dole Foods, Inc. 6,000 209,775 256,500
PepsiCo, Inc. 20,000 126,400 752,500
- -------------------------------------------------------------------------------------------------------------------
550,463 1,470,875
- -------------------------------------------------------------------------------------------------------------------
Diversified Operations (6.1%):
Corning, Inc. 12,000 196,567 667,500
ITT Industries, Inc. 8,000 74,753 206,000
- -------------------------------------------------------------------------------------------------------------------
271,320 873,500
- -------------------------------------------------------------------------------------------------------------------
Insurance and Finance (4.6%):
Hartford Financial Services 8,000 160,875 662,000
- -------------------------------------------------------------------------------------------------------------------
Medical and Related (13.8%):
Abbott Laboratories 15,000 182,380 1,001,250
Biogen Inc.* 4,000 158,625 135,500
Boston Scientific Corp.* 5,000 234,785 307,500
Medtronics, Inc. 5,000 190,438 412,500
VISX, Inc.* 5,000 137,500 118,750
- -------------------------------------------------------------------------------------------------------------------
903,728 1,975,500
- -------------------------------------------------------------------------------------------------------------------
Natural Gas and Related (1.6%):
Tenneco, Inc. 5,000 192,511 226,250
- -------------------------------------------------------------------------------------------------------------------
Photography and Equipment (3.2%):
Eastman Kodak Company 6,000 183,894 460,500
- -------------------------------------------------------------------------------------------------------------------
Telecommunications (3.2%):
AT&T Corp. 13,000 300,197 456,625
- -------------------------------------------------------------------------------------------------------------------
Transportation (1.9%):
Ryder System, Inc. 8,000 196,960 264,000
- -------------------------------------------------------------------------------------------------------------------
Water Treatment and Pollution control (2.6%):
Ionics, Inc.* 8,000 186,800 364,000
- -------------------------------------------------------------------------------------------------------------------
Total common stocks $5,624,766 $12,074,948
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
PORTFOLIO OF INVESTMENTS IN SECURITIES--JUNE 30, 1997, continued
<TABLE>
<CAPTION>
Shares or principal amount Cost Market value (a)
- -------------------------------------------------------------------------------------------------------------------
SHORT-TERM DEBT (13.25%):
<S> <C> <C> <C>
U.S. Treasury Bills, due July 1997 615,000 $607,258 $607,258
U.S. Treasury Bills, due August 1997 800,000 790,084 790,084
U.S. Treasury Bills, due September 1997 500,000 493,435 493,435
- -------------------------------------------------------------------------------------------------------------------
Total short-term debt 1,890,777 1,890,777
- -------------------------------------------------------------------------------------------------------------------
Total investment securities--97.89% $7,515,543 $13,965,725
- -------------------------------------------------------------------------------------------------------------------
Other assets less liabilities--2.11% 301,283
- -------------------------------------------------------------------------------------------------------------------
Net assets--100% $14,267,008
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Notes:
(a) All common stocks are listed on a national securities exchange or reported
on the NASDAQ national market and are valued at the closing price.
Short-term debt is carried at cost, which approximates market value.
(b) Aggregate cost for Federal income tax purposes is $7,515,543.
* Non-income producing security
See accompanying notes to financial statements.
STATEMENT OF OPERATIONS--YEAR ENDED JUNE 30, 1997
<TABLE>
<CAPTION>
Investment Income
<S> <C> <C>
Dividends $155,902
Interest 104,703
- -------------------------------------------------------------------------------------------------
Total income 260,605
Operating expenses
Investment advisory fees $104,381
Administrative fees 16,000
Custodian fees 7,351
Transfer agent fees 8,650
Legal fees 14,859
Accounting fees 13,700
Registration fees, licenses and other 3,990
Reports and notices to shareholders 15,973
Directors' fees and expenses 5,047
Insurance expense 1,770 191,721
- -------------------------------------------------------------------------------------------------
Net investment income 68,884
- -------------------------------------------------------------------------------------------------
Realized and unrealized gains on investments
Realized gains (excluding short-term debt obligations):
Proceeds from sales 1,548,257
Cost of securities sold 1,106,385
- -------------------------------------------------------------------------------------------------
Net realized gains 441,872
- -------------------------------------------------------------------------------------------------
Unrealized appreciation
Beginning of year 4,856,475
End of year 6,450,182
- -------------------------------------------------------------------------------------------------
Increase in unrealized appreciation 1,593,707
- -------------------------------------------------------------------------------------------------
Net realized and unrealized gains on investments 2,035,579
- -------------------------------------------------------------------------------------------------
Net increase in net assets from operations $2,104,463
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES--JUNE 30, 1997
<TABLE>
<CAPTION>
Assets:
<S> <C>
Investments in securities, at market value (identified cost $7,515,543) $13,965,725
Cash 60,184
Receivable from sales of securities 224,745
Dividends receivable 16,560
Interest receivable 10,464
Prepaid expenses and other assets 2,428
- -------------------------------------------------------------------------------------------------
14,280,106
Liabilities:
Accrued expenses and other liabilities 13,098
- -------------------------------------------------------------------------------------------------
Net assets $14,267,008
- -------------------------------------------------------------------------------------------------
Net assets consist of
Paid in capital $7,312,208
Undistributed net investment income 7,311
Accumulated undistributed net realized gains on investments 497,307
Net unrealized appreciation on investments 6,450,182
- -------------------------------------------------------------------------------------------------
Net assets applicable to 1,228,623 shares outstanding $14,267,008
- -------------------------------------------------------------------------------------------------
Net asset value per share $11.61
- -------------------------------------------------------------------------------------------------
</TABLE>
See accompanying notes to financial statements.
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS--YEARS ENDED JUNE 30, 1997 AND 1996
1997 1996
- -------------------------------------------------------------------------------------------------------------------
Operations:
<S> <C> <C>
Net investment income $ 68,884 $ 64,904
Net realized gains on investments 441,872 974,571
Increase in unrealized appreciation of investments 1,593,707 392,174
- -------------------------------------------------------------------------------------------------------------------
Net increase in net assets resulting from operations 2,104,463 1,431,649
Distributions to shareholders:
Dividends paid from net investment income (85,666) (24,647)
Distributions from net realized gains (575,189) (468,286)
- -------------------------------------------------------------------------------------------------------------------
Net decrease in net assets resulting from distributions (660,855) (492,933)
Capital share transactions:
Net proceeds from sale of capital stock 210,399 375,861
Net asset value of shares issued to shareholders in reinvestment of
net investment income and net realized gains on investments 619,796 466,053
- -------------------------------------------------------------------------------------------------------------------
830,195 841,914
Less cost of shares repurchased 1,106,595 641,510
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in net assets resulting from capital share transactions (276,400) 200,404
Total increase in net assets 1,167,208 1,139,120
Net assets:
Beginning of year 13,099,800 11,960,680
- -------------------------------------------------------------------------------------------------------------------
End of year (note) $14,267,008 $13,099,800
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Note: At June 30, 1997 and 1996, undistributed net realized investment gains
were $497,307 and $630,624, respectively, and at June 30, 1997 and 1996,
undistributed net investment income was $7,311 and $24,093, respectively.
See accompanying notes to financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS--JUNE 30, 1997
Note A--Nature of Operations and Summary of Accounting Policies
A summary of the significant accounting policies consistently applied in
the preparation of the accompanying financial statements follows:
Nature of Operations
Armstrong Associates, Inc. (the Company) is registered under the Investment
Company Act of 1940, as amended, as a diversified, open-end investment
management company.
Valuation of Securities
The Company's investments in common stocks are carried at market value.
Short-term debt securities are carried at cost which approximates market.
Investment Transactions and Investment Income
Investment transactions are recorded on a trade date basis, and realized
gains and losses are calculated using the identified cost method. Dividend
income and distributions to shareholders are recorded on the ex-dividend date.
Interest income is recorded on the accrual basis.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Note B--Federal Income Taxes
As of June 30, 1997, the Company qualified and intends to continue to
qualify each fiscal year as a "regulated investment company" under Subchapter M
of the Internal Revenue Code, as amended. By qualifying, the Company will not be
subject to Federal income taxes to the extent that it distributes all of its
taxable income for its fiscal year.
Note C--Purchases and Sales of Securities
For the year ended June 30, 1997, purchases and sales of securities,
excluding short-term debt securities, aggregated $809,500 and $1,106,385,
respectively.
The Company paid total brokerage commissions aggregating $7,183 in 1997 on
purchases and sales of investment securities. All commissions were paid to
unaffiliated broker-dealers.
Note D--Investment Advisory, Transfer Agent and Administrative Fees
The Company has agreed to pay its investment adviser, Portfolios, Inc.
(Portfolios), a fee of .80% per annum of the average net asset value of the
Company. For the year ended June 30, 1997, investment advisory fees to
Portfolios amounted to $104,381. In order to effectively limit the expenses of
the Company, the advisor has agreed to reimburse the Company for all expenses
(including the advisory fee but excluding brokerage commissions, taxes and
interest and extraordinary charges such as litigation costs) incurred by the
Company in any fiscal year in excess of 2% of the first $10 million of its
average daily net assets for the fiscal year, 1.5% of the next $20 million of
average daily net assets and 1% of the remainder. No reimbursements were
required in 1997.
Effective January 1, 1995, Portfolios became the transfer agent for the
Company. Applicable fees of $8,650 were incurred by the Company for the year
ended June 30, 1997. In addition, under the terms of an administrative services
agreement between Portfolios and the Company, Portfolios provides accounting
services to the Company for an annual fee of $16,000 payable in equal monthly
installments.
At June 30, 1997, the Company owed Portfolios $11,684 in accrued fees.
Note E--Capital Stock
At June 30, 1997, there were 6,000,000 shares of $1 par value capital stock
authorized, and capital paid in was $7,312,208. Transactions in capital stock
for the years ended June 30, 1997 and 1996 were as follows:
<TABLE>
<CAPTION>
1997 1996
- -------------------------------------------------------------------------------------------------------------------
<S> <C> <C>
Shares sold 20,371 37,634
Additional shares purchased from reinvested dividends 62,923 47,124
- -------------------------------------------------------------------------------------------------------------------
83,294 84,758
Shares redeemed (107,722) (64,337)
- -------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in shares outstanding (24,428) 20,421
- -------------------------------------------------------------------------------------------------------------------
</TABLE>
Note F--Dividends
Dividends from net investment income paid during the year ended June 30,
1997 and 1996 amounted to $.07 and $.02 per share, respectively. Distributions
from net realized gains paid during the years ended June 30, 1997, and 1996,
amounted to $.47 and $.38 per share, respectively.
<PAGE>
CONDENSED FINANCIAL INFORMATION
<TABLE>
<CAPTION>
Selected Per Share Data and Ratios
Per share income and capital changes for a share outstanding throughout the year ended June 30 (a)
-------------------------------------------------------------------------------------------------
1997 1996 1995 1994 1993 1992 1991 1990
- ------------------------------------------------------------------------------------------------------
Net asset value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $10.45 $9.70 $8.19 $8.26 $7.08 $6.87 $7.38 $7.74
Income (loss) from
investment operations
Net investment income .06 .05 .02 -- .02 .06 .16 .23
Net realized and unrealized
gains (losses) on investments 1.64 1.10 2.12 .10 1.19 .33 (.27) .19
- ------------------------------------------------------------------------------------------------------
Total from investment operations 1.70 1.15 2.14 .10 1.21 .39 (.11) .42
Less distributions
Dividends from net
investment income .07 .02 .04 -- .02 .15 .23 .24
Distributions from net
realized gains .47 .38 .59 .17 .01 .03 .17 .54
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $11.61 $10.45 $9.70 $8.19 $8.26 $7.08 $6.87 $7.38
- ------------------------------------------------------------------------------------------------------
Total return 17.19% 12.09 27.32 1.13 17.12 5.79 (.92) 5.93
Ratios/supplemental data
Net assets, end of period (000's) $14,300 13,100 11,961 9,255 9,680 9,366 9,228 9,770
Ratio of expenses to average
net assets 1.4 1.4 1.8 1.8 1.8 1.9 1.9 1.8
Ratio of net investment income
to average net assets .5 .5 .2 -- .2 .8 2.3 2.9
Average brokerage commission rate(c) .1503 .1442
Portfolio turnover rate 7% 19 12 15 17 35 24 44
<CAPTION>
Selected Per Share Data and Ratios (continued)
Per share income and capital changes for a share outstanding throughout the year ended June 30 (a)
-------------------------------------------------------------------------------------------------
1989 1988 1987 1986 1985 1984 1983 1982
- ------------------------------------------------------------------------------------------------------
Net asset value
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $7.17 $9.66 $8.72 $7.65 $7.29 $10.22 $7.10 $9.37
Income (loss) from
investment operations
Net investment income .24 .09 .10 .14 .24 .16 .21 .41
Net realized and unrealized
gains (losses) on investments .67 (.53) 1.51 1.17 1.02 (2.51) 3.72 (1.28)
- ------------------------------------------------------------------------------------------------------
Total from investment operations .91 (.44) 1.61 1.31 1.26 (2.35) 3.93 (.87)
Less distributions
Dividends from net
investment income .11 .14 .16 .24 .14 .20 .43 .19
Distributions from net
realized gains .23 1.91 .51 -- .76 .38 .38 1.21
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $7.74 $7.17 $9.66 $8.72 $7.65 $7.29 $10.22 $7.10
- ------------------------------------------------------------------------------------------------------
Total return 13.23 (6.27) 20.00 17.80 19.10 (24.01) 61.27 (9.87)
Ratios/supplemental data
Net assets, end of period (000's) 9,887 10,435 12,294 11,714 10,957 9,788 12,869 7,669
Ratio of expenses to average
net assets 1.9 2.0 1.7 1.6 1.7 1.6 1.6 1.7
Ratio of net investment income
to average net assets 3.0 1.3 1.0 1.6 3.1 1.9 2.4 5.6
Average brokerage commission rate(c)
Portfolio turnover rate 46 20 51 54 53 96 59 34
<CAPTION>
Selected Per Share Data and Ratios (continued)
Per share income and capital changes for a share outstanding throughout the year ended June 30 (a)
-------------------------------------------------------------------------------------------------
1981 1980 1979 1978 1977 1976 1975
- ------------------------------------------------------------------------------------------------------
Net asset value
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $7.74 $7.06 $6.50 $5.68 $5.30 $3.81 $2.74
Income (loss) from
investment operations
Net investment income .24 .23 .16 .08 .04 .03 .07
Net realized and unrealized
gains (losses) on investments 2.62 1.40 .84 .78 .38 1.53 1.04
- ------------------------------------------------------------------------------------------------------
Total from investment operations 2.86 1.63 1.00 .86 .42 1.56 1.11
Less distributions
Dividends from net
investment income .23 .13 .11 .04 .04 .07 .04
Distributions from net
realized gains 1.00 .82 .33 -- -- -- --
- ------------------------------------------------------------------------------------------------------
Net asset value, end of period $9.37 $7.74 $7.06 $6.50 $5.68 $5.30 $3.81
- ------------------------------------------------------------------------------------------------------
Total return 38.04 24.08 15.17 15.31 8.05 42.06 41.46%
Ratios/supplemental data
Net assets, end of period (000's) 8,277 5,777 4,538 3,886 3,649 3,785 $2,892
Ratio of expenses to average
net assets 1.5 1.6 1.5 1.5 1.5 1.5 1.5
Ratio of net investment income
to average net assets 2.7 3.2 2.3 1.6 1.9 .8 2.7
Average brokerage commission rate(c)
Portfolio turnover rate 60 131 97 151 113 113 210%
</TABLE>
(a) For a share outstanding throughout the year. Per share data has been
rounded to nearest cent and adjusted to give effect to a 2-for-1 stock
split, effective October 16, 1978, by means of a stock distribution.
(b) The Fund had no senior securities or outstanding debt during the
twenty-three-year period ended June 30, 1997.
(c) Total commissions paid divided by number of shares of applicable investment
securities transactions. Disclosure requirement beginning with fiscal year
ended June 30, 1996. Information for fiscal years prior to June 30, 1996,
is not applicable.
See accompanying notes to financial statements.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Shareholders and Board of Directors
Armstrong Associates, Inc.
We have audited the accompanying statement of assets and liabilities of
Armstrong Associates, Inc., including the schedule of portfolio of investments
in securities, as of June 30, 1997, and the related statement of operations for
the year then ended, the statements of changes in net assets for each of the two
years in the period then ended and the selected per share data and ratios for
each of the six years in the period then ended. These financial statements and
per share data and ratios are the responsibility of the Company's management.
Our responsibility is to express an opinion on these financial statements and
per share data and ratios based on our audits. The selected per share data and
ratios for each of the seventeen years in the period ended June 30, 1991 were
audited by other independent certified public accountants whose report thereon
dated July 19, 1991, expressed an unqualified opinion.
We conducted our audits in accordance with generally accepted auditing
standards. 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 June
30, 1997, by correspondence with the custodian. 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 Armstrong Associates, Inc. as of June 30, 1997, the results of its
operations for the year then ended, the changes in its net assets for each of
the two years in the period then ended, and the selected per share data and
ratios for each of the six years in the period then ended, in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Dallas, Texas
July 23, 1997
