FILE NO. 2-27539
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON OCTOBER 28, 1997
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM N-1A
REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 [ ]
Pre-Effective Amendment No. ____ [ ]
Post-Effective Amendment No. 42 [ x ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 28 [ x ]
(Check appropriate box or boxes)
ARMSTRONG ASSOCIATES, INC.
(Exact Name of Registrant as Specified in Charter)
750 North St. Paul, LB 13, Suite 1300, Dallas, Texas 75201
(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including Area Code: (214) 720-9101
C. K. Lawson
President
Armstrong Associates, Inc.
750 North St. Paul, LB 13
Suite 1300
Dallas, Texas 75201
(Name and Address for Agent for Service)
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Approximate Date of Proposed Public Offering: October 28, 1997
It is proposed that this filing will become effective (check appropriate box)
[ x ] immediately upon filing [ ] on (date) pursuant to
pursuant to paragraph (b) paragraph (a)(i)
[ ] on (date) pursuant to [ ] 75 days after filing pursuant to
paragraph (b) paragraph (a)(ii)
[ ] 60 days after filing pursuant [ ] on (date) pursuant to paragraph
to paragraph (a)(i) (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective amendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities Being Registered..............Common Stock ($1.00 Par Value)
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CROSS REFERENCE SHEET
Between Items of Part A of Form N-1A and Prospectus
Form N-1A Item Location in Prospectus
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1. Cover Page............................ Cover Page
2. Synopsis.............................. Summary of Fund Expenses
3. Condensed Financial Information....... Condensed Financial Information
4. General Description of Registrant..... Introduction to Armstrong Associates,
Inc.; Investment Objective and
Policies of Armstrong; Information
on Shares of the Fund
5. Management of the Fund................ Operation of the Fund; Brokerage
Allocation
5A. Management's Discussion of
Fund Performance...................... Management's Discussion of Fund
Performance
6. Capital Stock and Other Securities.... Information on Shares of the Fund;
Dividends, Capital Gains
Distributions and Federal Tax
Information
7. Purchase of Securities Being Offered.. Pricing of Fund Shares for Purchase
and Redemption; How to Purchase
Shares of the Fund; Tax-Sheltered
Retirement Plans; Shareholder
Services; Information on Shares of
the Fund
8. Redemption or Repurchase.............. Redemption of Fund Shares
9. Legal Proceedings..................... *
Between Items of Part B of Form N-1A and Statement of Additional Information
Location in Statement
Form N-1A Item of Additional Information
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10. Cover Page............................ Cover Page
11. Table of Contents..................... Table of Contents
12. General Information and History....... *
13. Investment Objectives and Policies.... Investment Objective and Policies
14. Management of the Registrant.......... Directors and Officers
15. Control Persons and Principal
Holders of Securities............... Directors and Officers
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16. Investment Advisory and Other Investment Adviser; Other
Services ............................ Information
17. Brokerage Allocation................... Brokerage Allocation
18. Capital Stock and Other Securities..... Information on Shares of the Fund
(in the Prospectus)
19. Purchase, Redemption and Pricing of Pricing of Shares; Redemption of
Securities Being Offered............. Shares
20. Tax Status............................. Dividends and Federal Income Taxes
21. Underwriters........................... *
22. Calculation of Performance Data........ Calculation of Performance Data
23. Financial Statements................... Financial Statements
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* Inapplicable or negative
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[LOGO] armstrong associates inc.
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A NO-LOAD MUTUAL FUND
Armstrong Associates is a no-load mutual fund. There are no sales
commissions charged by the Fund when you buy or redeem shares.
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INVESTMENT OBJECTIVE
Armstrong's investment objective is capital growth. The Fund seeks to
obtain this objective through emphasis on investments in common stocks and
by varying the proportions of common stocks and short-term debt investments
in its portfolio.
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PROSPECTUS INFORMATION
This Prospectus concisely sets forth information an investor should know
about the Fund before investing. It should be retained for future
reference.
A Statement of Additional Information about the Fund has been filed with
the Securities and Exchange Commission and is incorporated herein by
reference. The statement is available without charge from the Fund upon
request.
For additional information call or write:
Armstrong Associates, Inc.
750 N. St. Paul, LB 13
Suite 1300
Dallas, Texas 75201-3250
(214)720-9101
(214)871-8948 FAX
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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.
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The date of this Prospectus and the Statement of Additional Information is
October 28, 1997.
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1
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[LOGO] armstrong associates inc.
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SUMMARY OF FUND EXPENSES
The following table illustrates all expenses and fees that a shareholder of
the Fund will incur. The purpose of this table is to assist the investor in
understanding the various expenses that an investor in the Fund will bear
directly or indirectly.
Shareholder Transaction Expenses
Sales Load Imposed on Purchases none
Sales Load Imposed on Reinvested
Dividends none
Deferred Sales Load none
Redemption Fees none
Annual Fund Operating Expenses
(as a percentage of average net assets)
Management Fees 0.80%
12b-1 Fees none
Other Expenses
Accounting Services Fees 0.10%
Misc. Expenses 0.56%
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Total Other Expenses 0.66%
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Total Operating Expenses 1.46%
======
The following example illustrates the expenses that you would pay on a
$1,000 investment over various time periods assuming (1 ) a 5% rate of
return and (2) redemption at the end of each time period. As noted in the
table above, the Fund charges no redemption fees of any kind.
1 Year 3 Years 5 Years 10 Years
----- ------- ------- --------
$15 $47 $81 $184
This example assumes that the percentages set forth under "Annual Fund
Operating Expenses" remain the same during each of the periods shown, and
applies such percentages to a hypothetical $1,000 investment. The example
does not reflect or project investment return or the resulting value of an
investment. The assumed 5% annual rate of return is required by applicable
rules to be applied by all investment companies in projecting assumed
expenses beyond the first year and serves to reflect an assumed increase in
expenses over the years. Such 5% assumption does not in any way reflect
prior investment performance or project future investment performance.
Actual expenses may be greater or lesser than those shown.
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CONDENSED FINANCIAL INFORMATION
The following condensed financial information has been audited by Grant
Thornton LLP, independent certified public accountants, beginning with the
year ended June 30, 1992. The report of such independent certified public
accountants appears in the Statements of Additional Information. The
information for years prior to 1992 has been audited by other independent
auditors whose report thereon is not included.
<TABLE>
<CAPTION>
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1997 1996 1995 1994 1993 1992 1991 1990
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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
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Net asset value, end of period $11.61 $10.45 $9.70 $8.19 $8.26 $7.08 $6.87 $7.38
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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>
Condensed Financial Information (Continued)
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1989 1988 1987 1986 1985 1984 1983 1982
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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)
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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
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Net asset value, end of period $7.74 $7.17 $9.66 $8.72 $7.65 $7.29 $10.22 $7.10
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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>
Condensed Financial Information (Continued)
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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 -- -- -- --
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Net asset value, end of period $9.37 $7.74 $7.06 $6.50 $5.68 $5.30 $3.81
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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.
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INFORMATION ON THE CALCULATION OF TOTAL RETURN
The Fund's total return is based on the percentage increase (or decrease)
in a hypothetical $1,000 invested in the Fund at the beginning of a
specified annual period and valued at the end of the specified period,
assuming the reinvestment of any dividends and distributions paid by the
Fund during such period. The Fund does not impose any sales charge or
redemption fee on the purchase or redemption of its shares. Any total
return figures shown are based on historical results and are not intended
to indicate future performance. The value of shares of the Fund will
fluctuate so that an investor's shares, when redeemed, may be worth more or
less than their original cost.
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2 - 3
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WHAT IS A MUTUAL FUND?
Briefly stated, a mutual fund combines money from investors and invests in
a portfolio of securities selected in line with the particular investment
objective of the fund. Investors own an undivided, pro-rata interest in the
portfolio, represented by the shares of the fund. In the case of a no-load
fund, such as Armstrong Associates, fund shares are purchased and redeemed
at net asset value, which means that no sales commissions are added to or
deducted from the value of the fund shares on purchase or redemption.
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INTRODUCTION TO ARMSTRONG ASSOCIATES, INC.
Armstrong Associates, Inc. ("Armstrong" or the "Fund") is a no-load,
diversified, open-end mutual fund which offers investors a participation in
a diversified portfolio of common stocks that is professionally managed
with the objective of capital growth.
Investors in the Fund have an investment that is liquid. Fund shares can be
purchased or redeemed at net asset value with no sales commissions. In
addition to providing diversification, liquidity and professional
management, the Fund provides the recordkeeping and brokerage commission
negotiation and arranges for safekeeping of securities involved with the
day-to-day operation of a securities portfolio.
The Fund is designed for long-term investors who are seeking the
opportunity for higher long-term investment returns than the returns
available through fixed income investments and who can accept the inherent
market volatility associated with investments in common stocks selected for
capital growth. While the Fund shares can be expected to fluctuate based on
market conditions, Armstrong is not designed as a vehicle for playing
short-term market swings. Dividend and interest income from the investors
of the Fund is incidental to the primary objective of capital growth.
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INVESTMENT OBJECTIVE AND POLICIES OF ARMSTRONG
The investment objective of the Fund is capital growth. The Fund seeks to
obtain its investment objective through emphasis on investments in common
stocks and by varying the proportions of common stocks and short-term debt
investments in its portfolio.
The Fund normally invests in common stocks which offer the prospect of
earnings growth or asset enhancement over a one to three year period.
However, the Fund may sell securities within a relatively short period if
developments with the investment, the equity markets or the economy
indicate that a change would be advisable.
Short-term debt investments (typically U.S. government obligations or high
grade commercial paper with a life to maturity at the time of acquisition
of less than one year) are utilized to reduce portfolio exposure to equity
markets as a mechanism to moderate market risk and to seek to capitalize on
potential market declines and to obtain a return on funds not committed to
common stocks. Although common stocks are emphasized in its portfolio, the
Fund may also invest in securities convertible into, and warrants and
rights to subscribe for, common stock. The amount invested in warrants,
valued at the lower of cost or market, will not exceed 5% of the Fund's net
assets, and the amount invested in warrants which are not listed on the New
York or American Stock Exchanges will not exceed 2% of the net assets.
There can be no assurance that the Fund will achieve its objective of
capital growth. The market value of the securities in the portfolio of any
mutual fund which invests in stocks will fluctuate.
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4
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armstrong associates inc.
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The principal risk factor associated with any investment in such a mutual
fund is that the market value of the portfolio securities may decrease and
result in a decrease in the value of the fund shares.
As a matter of fundamental policy, the Fund will not (1) acquire more than
10% of any class of securities of any issuer, (2) with respect to 75% of
its total assets, invest more than 5% of the value of its total assets at
the time of purchase in the securities of any one issuer, (3) invest more
than 25% of its assets in any one industry, (4) invest more than 15% of the
value of its total assets in securities with a limited trading market, (5)
make short sales of securities, or (6) borrow money except for temporary
purposes and then only in an amount not exceeding 5% of the value of the
total assets of the Fund at the time when the loan is made. These
fundamental policies, as well as the investment objective of the Fund, will
not be changed unless authorized by a vote of the majority of the
outstanding shares of the Fund, although the policies and techniques for
seeking to attain the objective of the Fund may be changed without
shareholder approval.
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MANAGEMENT'S DISCUSSION OF FUND PERFORMANCE AND HISTORICAL DATA
The Armstrong Associates fiscal year which ended June 30, 1997 covered a
period of generally positive, but sometimes volatile, equity markets.
Overall, market leadership was concentrated in a fairly narrow group of
stocks of companies with relatively large market capitalizations which had
a disproportionate impact on capitalization-weighted market indexes such as
the Standard and Poor's 500 which was up +32.0% in price for the year.
Indexes reflecting stocks of companies with medium sized and smaller market
capitalizations also, on balance, showed positive results as indicated by
the Russell 2000 Index, consisting of companies with relatively small
market capitalizations, which had a price gain of +14.4% for the same
period. For a more balanced view of market results, the Value Line Index,
which represents approximately 1,700 stocks (unweighted-price only), and
is, in our view, a good representation of stock performance in general,
gained +18.5% for the same 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 recorded a total return of +17.2% for
the year.
In terms of specific investment areas within the Armstrong portfolio,
technology holdings, medical issues, consumer product companies, spin-offs
from corporate restructurings and specialty chemical issues represented the
best performing portions of the portfolio and added positively to
Armstrong's results for the year. Cash equivalents held as buying reserves
for purchase opportunities tended to hold back the overall return of the
portfolio while communication issues had a generally negative impact on the
portfolio.
Historically, the Fund has varied the proportions of common stocks and
short-term debt in its portfolio depending on the risk level perceived in
the stock market, the availability of what might be considered appropriate
and attractive equity investments, and in order to have adequate liquidity
to take advantage of investment opportunities that might become available
without disturbing existing portfolio investments. Over the past five
years, as of the June 30 fiscal year end, the portion of the portfolio
represented by common stock ranged from a low of +75.0% to a high of
+90.2%. During the same five year period, the portion of the portfolio
invested in short term debt securities ranged from a high of +25.0% to a
low of +9.8%. The percentage of the Fund's portfolio invested in common
stock can be expected to continue to fluctuate in the future and may at any
time be higher or lower than the historical range reported for the last
five years.
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5
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
ARMSTRONG ASSOCIATES, INC., THE S&P 500 INDEX
AND THE VALUE LINE COMPOSITE INDEX
FOR THE 10 YEARS ENDING JUNE 30,1997
AVERAGE ANNUAL TOTAL RETURN
OF ARMSTRONG ASSOCIATES, INC.
FOR PERIODS ENDING JUNE 30, 1997
1 Year 5 Year 10 Year
------ ------ -------
17.19% 14.96% 9.26%
$39,173.40
$23,337.20
$15,632.38
FISCAL YEAR ENDED JUNE 30
A - Armstrong Associates
B - S&P 500 (Composite)
C - Value Line Composite
Past performance is not predictive of future performance.
Data Source: Micropal, Inc.
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6
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armstrong associates inc.
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COMPARISON OF CHANGE IN VALUE OF $10,000 INVESTMENT IN
ARMSTRONG ASSOCIATES, INC., THE S&P 500 INDEX
AND THE VALUE LINE COMPOSITE INDEX
FOR THE 23 YEARS ENDING JUNE 30,1997
AVERAGE ANNUAL TOTAL RETURN
OF ARMSTRONG ASSOCIATES, INC.
FOR PERIODS ENDING JUNE 30, 1997
23 Years
--------
15.70%
$254,292.64
$214,323.91
$ 65,015.48
FISCAL YEAR ENDED JUNE 30
A - Armstrong Associates
B - S&P 500 (Composite)
C - Value Line Composite
Past performance is not predictive of future performance.
Data Source: Micropal, Inc.
The graphs set forth above compare the change in value over the past ten
and twenty-three years of $10,000 invested in the Fund compared to the same
investment over the same periods in the Standard & Poors Composite Index of
500 Stocks (the "S&P 500") and the Value Line Composite Index, which
consists of approximately 1,700 issues (the "Value Line Index"). The graphs
assume that investment in the Fund was made at the Fund's net asset value
(the Fund has no sales charge and no redemption charge) at the beginning of
the 10 and 23 year periods and reflect the net asset value of the
investment at the end of each of the years indicated in the period with all
dividends and distributions by the Fund reinvested at the Fund's net asset
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value on the applicable reinvestment dates. Brokerage fees paid by the Fund
on portfolio transactions and management fees and other operating expenses
are reflected in the results shown for the Fund. In contrast, the S&P 500
and the Value Line Index are unmanaged, expense-free, broad-based indices
which serve only as bench-marks for the performance of the stock market and
are not securities available for purchase by investors. The S&P 500 is
adjusted to reflect reinvestment of dividends paid by securities in the
index, but the Value Line Index is not so adjusted and reflects only
changes in the prices of the securities covered thereby. Investors should,
therefore, note that the two indices are not comparable to each other in
respect of the assumed reinvestment of dividends and that neither index is
comparable to the Fund because neither index reflects any transaction or
management expenses in relation to the performance of the securities in the
index.
The Fund has never been managed to emulate any particular market index. The
Fund seeks to obtain its objective of capital growth through investments in
common stocks and by varying the proportions of common stocks and
short-term debt investments in its portfolio. The short-term debt
investments are used to reduce portfolio exposure to equity markets and to
obtain a return on funds not committed to common stocks. These short-term
debt investments tend to serve as a damper on the Fund's net asset growth
during period of rising markets and can cushion declines in negative
markets. The S&P 500 and the Value Line Index both are fully invested in
the equities surveyed at all times. The S&P 500 is a market value-weighted
index and, as a result, companies with the largest market capitalizations
have a disproportionate impact on the overall performance of the index,
while stocks included in the Value Line Index are equally weighted to
reflect the average price change in the stocks included in the index.
The information set forth above should be considered in the light of the
Fund's investment policies and objectives and other information contained
in this prospectus. The results shown are a record of the past and should
not be regarded as a representation of future performance. No adjustments
have been made for income taxes that might have been payable by
shareholders on dividends and capital gains distributions. Past performance
is not predictive of future performance.
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OPERATION OF THE FUND
Directors and Officers
The officers of the Fund manage its day-to-day operations, and are directly
responsible to the Fund's Board of Directors. The Board of Directors,
elected by shareholders, is generally responsible for the management of the
Fund and elects its officers. The directors and officers of the Fund are:
Eugene P. Frenkel, M.D. - Director of the Fund; Professor of Internal
Medicine and Radiology, Southwestern Medical School.
C.K. Lawson - President, Treasurer and a director of the Fund and of
Portfolios, Inc., the Fund's investment adviser (the "Adviser"). Mr. Lawson
is a chartered financial analyst.
Douglas W. Maclay - Director of the Fund and President of Maclay
Development Company, real estate investments.
R.H. Stewart Mitchell, Jr. - Director of the Fund; former Vice Chairman of
the Board of Directors of Tracy-Locke/BBDO, advertising and public
relations, and now retired.
Cruger S. Ragland - Director of the Fund and President of Ragland Insurance
Agency, Inc.
Ann Reed Dittmar - Director of the Fund and a private investor.
Candace L. King - Vice President and Secretary of the Fund and of the
Adviser.
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armstrong associates inc.
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Investment Adviser
The investments of the Fund are managed by Portfolios, Inc. (the
"Adviser"). The Adviser was incorporated in 1971 and is engaged in the
business of providing investment management services to individual and
institutional investors. As compensation for its investment management
services to the Fund, the Adviser is paid monthly a fee at the annual rate
of 0.8% of the Fund's average daily net assets for each fiscal year. See
"Financial Highlights." The Adviser furnishes to the Fund, without
additional charge, office space, local telephone service and utilities. All
other expenses of the Fund's operations are the responsibility of the Fund.
The Adviser's address is 750 N. St. Paul, LB 13, Suite 1300, Dallas, Texas
75201-3250. It is a wholly-owned subsidiary of Lawson Investments, Inc., a
corporation controlled by C. K. Lawson and whose business relates primarily
to the Adviser.
C. K. Lawson is the individual employed by the Adviser who is primarily
responsible for the day-to-day management of the Fund's portfolio. Mr.
Lawson has been primarily responsible for the management of the Fund's
portfolio since the Adviser's formation in 1971. During the past five
years, Mr. Lawson has been the President, Treasurer and a director of the
Fund and the Adviser.
Transfer Agent, Dividend Disbursing Agent, Custodian and Accounting
Services In addition to acting as investment adviser, Portfolios, Inc. acts
as the Fund's transfer agent ("Transfer Agent") and dividend disbursing
agent ("transfer agent services") and also provides certain accounting
services to the Fund. For its accounting services, the Adviser receives an
annual fee of $16,000 and for its transfer agent services, it receives
$8,400 per annum.
The Union Bank of California, N.A., 475 Sansome Street, 15th Floor, San
Francisco, California 94111 serves as the custodian of the Fund's portfolio
securities and is custodian for the Fund's tax-sheltered retirement plans,
including Individual Retirement Accounts and Prototype Profit Sharing
Plans.
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PRICING OF FUND SHARES FOR PURCHASE AND REDEMPTION
The purchase and redemption price of the Fund's shares is equal to the
Fund's net asset value per share. The Fund determines its net asset value
per share by subtracting the Fund's liabilities (including accrued expenses
and dividends payable) from its total assets (the market value of the
securities the Fund holds plus cash and other assets, including interest
accrued but not yet received and dividends "ex" but not paid) and dividing
the result by the total number of shares outstanding. The net asset value
per share of the Fund is calculated following the close of trading on the
New York Stock Exchange (usually 4:00 p.m., New York time) each day the
Exchange is open for business.
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HOW TO PURCHASE SHARES OF THE FUND
Initial investments: To purchase shares of Armstrong for an account which
does not currently own Armstrong shares, you should complete the Purchase
Application on pages 13 and 14 and mail it together with a check made
payable to Armstrong Associates, Inc., to the Fund at 750 N. St. Paul, LB
13, Suite 1300, Dallas, Texas 75201-3250. There is a $250 minimum on
initial investments.
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Subsequent investments: To purchase additional shares for an existing
Armstrong account, you should send a check made payable to Armstrong
Associates, Inc., and include your Armstrong shareholder account name and
number. Checks can be sent to Armstrong Associates, Inc., 750 N. St. Paul,
LB 13, Suite 1300, Dallas, Texas 75201-3250.
Purchase Price and Effective Date: Your shares will be priced at the net
asset value per share next determined after your order has been received by
the Fund and accepted. The Transfer Agent will mail confirmation of your
purchase to your account address after receipt of your order and funds. The
Fund reserves the right to refuse any order for the purchase of its shares.
Stock Certificates: Stock certificates for your shares will not be issued
unless you request them. Certificates for fractional shares will not be
issued. In order to facilitate redemptions and transfers, most shareholders
elect not to receive certificates. If you lose your certificate, you may
incur an expense to replace it.
- --------------------------------------------------------------------------------
REDEMPTION OF FUND SHARES
If a Stock Certificate Has Not Been Issued
If no certificate for your shares has been issued, redemption can normally
be accomplished by your written request to the Fund with the appropriate
shareholder signature guarantee. Under certain circumstances additional
documentation may be required.
If a Stock Certificate Has Been Issued
You can redeem shares for which a certificate has been issued by written
request to the Fund accompanied by the certificate representing the shares
being redeemed properly endorsed for transfer with the appropriate
shareholder signature guarantee. Under certain circumstances additional
documentation may be required.
Timing of Redemption
Shares are redeemed at the net asset value next determined after the
receipt in proper form of your written request for redemption accompanied
by all necessary documentation.
Distribution of Proceeds
Proceeds are normally mailed within four days of receipt of the written
redemption request along with the proper documentation, provided that
redemption proceeds will not be mailed until sufficient time has passed to
provide reasonable assurance that checks or drafts (including certified or
cashier's checks) have cleared (which may take up to 15 calendar days from
the purchase date). Proceeds are mailed to the shareholder's address of
record unless specific written instructions are received from the
shareholder to the contrary.
Signature Guarantees
To ensure that you are the person who has authorized a redemption from your
account, the Fund requires that the signatures of the appropriate persons
signing or endorsing any redemption request or stock certificate be duly
guaranteed by a commercial bank, a member firm of a national securities
exchange or another eligible guarantor institution.
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10
<PAGE>
armstrong associates inc.
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Transactions Through Brokers
Investors who purchase or redeem shares of the Fund through broker-dealers
may be subject to service fees imposed by them with respect to the services
they provide. The Fund has no control over or involvement with any charges
which any broker-dealer may impose. There are no fees charged by the Fund
if shares are purchased or redeemed directly from the Fund.
DIVIDENDS, CAPITAL GAINS DISTRIBUTIONS AND FEDERAL TAX INFORMATION
Armstrong earns income from dividends and interest on its investments. The
Fund also realizes capital gains or losses from the sale of securities. It
is the policy of the Fund to distribute substantially all of its net income
and net capital gains each year. These distributions ordinarily will be
taxable, although shareholders not subject to Federal income tax will not
be required to pay taxes on distributions from the Fund. Advice as to the
Federal income tax status of dividends and distributions will be mailed
annually to each shareholder.
The Fund intends to continue to qualify for treatment as a "regulated
investment company" under Federal tax law. By so qualifying, the Fund will
not be liable for Federal income taxes on its income to the extent
distributed to shareholders, thereby avoiding double taxation of the income
of the Fund.
Unless you elect otherwise, dividends and capital gains distributions will
be reinvested, which means they will be paid to you in additional shares of
the Fund which will be credited to your account.
- --------------------------------------------------------------------------------
BROKERAGE ALLOCATION
In the allocation of brokerage, it is the Fund's policy to seek the best
price and execution. The Fund, however, does not consider that this
objective is served by seeking the lowest commission rates available. It
gives preference, and may pay higher commission rates, to brokers which, in
addition to having the capability of obtaining the best price for the
security itself and of executing the order with speed, efficiency and
confidentiality, also provide research and statistical and similar
information and services to the Adviser. Subject to the policy of seeking
best price and execution, sales of Fund shares also may be a factor
considered in the selection of brokers to execute portfolio transactions.
- --------------------------------------------------------------------------------
TAX-SHELTERED RETIREMENT PLANS
The Fund offers prototype tax-sheltered retirement plans for investments in
shares of the Fund. The prototypes available include:
Individual Retirement Account ("IRA")
Defined Contribution Plans for corporations, partnerships and
proprietorships.
Anyone interested in establishing a retirement plan should request further
information, including copies of the plan documents and more detailed
descriptions of the plans, from the Fund.
- --------------------------------------------------------------------------------
11
<PAGE>
[LOGO]
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SHAREHOLDER SERVICES
Systematic Cash Withdrawal Plan: A shareholder may establish a systematic
cash withdrawal plan under which the Fund's transfer agent, acting as the
shareholder's agent, will hold all of his shares of the Fund and redeem
sufficient shares to send regular monthly payments to him in any designated
amount (not less than $50).
Bank Draft Purchase Plan: After a minimum initial investment of $250, a
shareholder may authorize investments in additional Fund shares which are
automatically made through the shareholder's checking account via bank
draft each month or quarter.
Further Information: Additional information regarding the Systematic Cash
Withdrawal Plan and the Bank Draft Purchase Plan may be obtained from the
Fund.
INFORMATION ON SHARES OF THE FUND
The Fund was incorporated under Texas law in 1967 and has an authorized
capital of 6,000,000 shares of common stock, par value $1 per share. Each
share outstanding is entitled to one vote at all meetings of shareholders
(cumulative voting is not permitted) and to share equally in dividends and
other distributions and in the Fund's net assets on liquidation. Annual
meetings of shareholders will not be held except as required by applicable
law. Shares when issued will be fully paid and non-assessable, will have no
preemptive rights and will be redeemable as set forth under "Redemption of
Fund Shares." Shareholder inquires should be made to Armstrong Associates,
Inc., 750 N. St. Paul, LB 13, Suite 1300, Dallas, Texas 75201-3250
(telephone (214) 720-9101).
ADDITIONAL INFORMATION
The Statement of Additional Information includes the Fund's financial
statements and further details about the management and operation of the
Fund and is available from the Fund on request.
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12
<PAGE>
[LOGO] armstrong associates inc.
PURCHASE APPLICATION
See page 15 for instructions
- --------------------------------------------------------------------------------
TO OPEN ACCOUNT
My check for $______ (minimum $250 on initial investment) made payable to
Armstrong Associates, Inc. is enclosed to purchase shares of Armstrong
Associates, Inc. at the net asset value applicable when my order is
received and accepted.
- --------------------------------------------------------------------------------
REGISTRATION
Please register my shares as follows (see page 15 for registration
instructions)
---------------------------------------------------------------------------
name
---------------------------------------------------------------------------
street address
---------------------------------------------------------------------------
city state zip
---------------------------------------------------------------------------
home telephone (including area code)
---------------------------------------------------------------------------
business telephone (including area code)
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SOCIAL SECURITY OR TAX IDENTIFICATION NUMBER
---------------------------------------------------------------------------
- --------------------------------------------------------------------------------
DIVIDEND REINVESTMENT
____ Reinvest all my dividends and capital gains distributions in full and
fractional shares.
____ Reinvest all my capital gains distributions in full and fractional
shares but send my dividends to me in cash.
____ Remit all dividends and distributions to me in cash.
- --------------------------------------------------------------------------------
STOCK CERTIFICATES
All shares purchased will be credited to the shareholder's account at the
Fund. A certificate for any number of full shares in the account may be
obtained at any time by written request to the Fund. No fractional shares
will be issued.
(over)
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13
<PAGE>
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SIGNATURE INFORMATION
Your signature should correspond to the name used in registration. If there
are co-owners, both must sign.
CERTIFICATION AND ACKNOWLEDGEMENT
I acknowledge that I have received a copy of the current prospectus of
Armstrong Associates.
I certify, under penalties of perjury, that the Tax Identification/Social
Security number given above is correct and I am not subject to back-up
withholding (see page 15).
The Internal Revenue Service does not require your consent to any provision
of this document other than the certifications required to avoid backup
withholding.
X X
----------------------------------- --------------------------------------
signature of applicant signature of co-owner (if applicable)
-----------------------------------
date
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14
<PAGE>
[LOGO] armstrong associates inc.
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INSTRUCTIONS FOR OPENING ACCOUNT
Complete the Purchase Application on pages 13 and 14 and mail it, together
with your check made payable to Armstrong Associates, Inc., to:
Armstrong Associates, Inc.
750 N. St. Paul, LB 13
Suite 1300
Dallas, Texas 75201
Call Armstrong at (214) 720-9101 in you have any questions on completing
the Purchase Application.
DO NOT USE THE PURCHASE APPLICATION ON PAGES 13 AND 14 TO OPEN AN IRA OR
CORPORATE PROFIT SHARING ACCOUNT. APPROPRIATE FORMS FOR THESE TAX SHELTERED
ACCOUNTS ARE AVAILABLE ON REQUEST.
- --------------------------------------------------------------------------------
REGISTRATION INSTRUCTIONS (Purchase by one individual)
State applicant's full name. A married woman must use her own given name.
Example: Mrs. Jane S. Jones (NOT Mrs. John R. Jones)
- --------------------------------------------------------------------------------
JOINT REGISTRANTS
1. Joint tenants with rights of survivorship and not as tenants in common.
When two persons register shares jointly with the desire that the survivor
receive total holdings on the death of the other, shares should be
registered in this manner. Example: "John R. Jones and Jane S. Jones,
JT.TEN.WROS."
2. Tenants in Common. Where each registrant wants his position to go to his
estate in the event of his death, shares should be registered in this
manner. Example: "John R. Jones and Jane S. Jones, ATIC."
Joint tenants with rights of survivorship will be assumed if shares are
registered jointly and no specification is made.
- --------------------------------------------------------------------------------
CUSTODIAN FOR A MINOR
The following form of registration should be used: "Robert Smith (one adult
only) as custodian for Nancy Smith (one minor only) under (state of
residence of minor) Uniform Gifts to minors Act." The tax identification
number provided should be that of the minor.
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PARTNERSHIPS
Accounts may be registered in the name of a partnership. The application
must be signed by a duly authorized partner.
- --------------------------------------------------------------------------------
CORPORATIONS
Shares to be registered in the name of a corporation must be registered in
the exact legal title of the organization and the application must be
signed by a duly authorized officer.
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BACKUP WITHHOLDING
You are not subject to backup withholding if the Internal Revenue Service
(a) has not notified you that you are subject to such withholding or (b)
has notified you that you are no longer subject to such withholding. If you
are subject to backup withholding, cross out the words "and that I am not
subject to backup withholding" on page 14 (Purchase Application) above the
signature, and the appropriate withholding instructions will be applied to
your account.
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15
<PAGE>
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TABLE OF CONTENTS
Page No.
Summary of Fund Expenses.........................2
Condensed Financial Information................2-3
What is a Mutual Fund?...........................4
Introduction to Armstrong Associates, Inc........4
Investment Objective and Policies
of Armstrong................................4-5
Management's Discussion of
Fund Performance and Historical Data........5-8
Operation of the Fund..........................8-9
Pricing of Fund Shares for Purchase
and Redemption................................9
How to Purchase Shares of the Fund............9-10
Redemption of Fund Shares....................10-11
Dividends, Capital Gains Distributions
and Federal Tax Information..................11
Brokerage Allocation............................11
Tax-Sheltered Retirement Plans..................11
Shareholder Services............................12
Information on Shares of the Fund...............12
Additional Information..........................12
Purchase Application.........................13-14
Instructions for Purchase Application...........15
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armstrong associates inc.
750 N. St. Paul, LB 13
Suite 1300
Dallas, Texas 75201
(214) 720-9101
FAX (214) 871-8948
[LOGO]
- --------------------------------------------------------------------------------
PROSPECTUS October 28, 1997
armstrong associates, inc.
<PAGE>
Rule 497(c)
File No. 2-27539
ARMSTRONG ASSOCIATES, INC.
750 North St. Paul, LB 13, Suite 1300
Dallas, Texas 75201-3250
Telephone (214) 720-9101
STATEMENT OF ADDITIONAL INFORMATION
Armstrong Associates, Inc. is a no-load mutual fund which continuously
offers its shares to the public at the net asset value per share next computed
after receipt of an order. The Fund is a diversified, open-end investment
management company whose investment objective is capital growth.
This Statement of Additional Information of the Fund is not a
prospectus and should be read in conjunction with the Prospectus of the Fund
(the "Prospectus") which has been filed with the Securities and Exchange
Commission. The Prospectus can be obtained by calling or by writing the Fund at
the above telephone number or address.
TABLE OF CONTENTS
Page
----
Investment Objective and Policies.............................. 2
Directors and Officers......................................... 3
Investment Adviser............................................. 4
Brokerage Allocation........................................... 5
Pricing of Shares.............................................. 6
Redemption of Shares........................................... 6
Calculation of Performance Data................................ 7
Dividends and Federal Income Tax Status........................ 7
Other Information.............................................. 7
Custodian............................................... 7
Transfer Agent.......................................... 7
Independent Auditors.................................... 7
Legal Counsel........................................... 8
Financial Statements........................................... 9
--------------------
The date of this Statement of Additional Information and the Prospectus is
October 28, 1997.
<PAGE>
INVESTMENT OBJECTIVE AND POLICIES
The investment objective of the Fund is capital growth. This objective will
not be changed unless authorized by a vote of a majority of the outstanding
shares of the Fund, but the policies and techniques described in the next two
paragraphs for seeking to attain such objective may be changed without
shareholder approval.
The Fund normally invests in common stocks that offer the prospect of
earnings growth or asset enhancement over a one to three year period. However,
the Fund may sell securities within a relatively short period if developments
with the investment, the equity markets or the economy indicate that a change
would be advisable. Short-term debt investments are utilized to reduce portfolio
exposure to equity markets and to obtain a return on funds not committed to
common stocks.
Although common stocks are emphasized in its portfolio, the Fund also
invests in securities convertible into, and warrants and rights to subscribe
for, common stock. The amount invested in warrants, valued at the lower of cost
or market, will not exceed 5% of the Fund's net assets, and the amount invested
in warrants which are not listed on the New York or American Stock Exchanges
will not exceed 2% of the net assets. The Fund also invests in securities of
issuers engaged in securities related businesses, but during the fiscal year
ended June 30, 1996 none of those issuers was among the firms which executed
portfolio transactions for the Fund as either broker or dealer or which sold
Fund shares.
The Fund operates under certain restrictions on investment policy that are
fundamental policies and cannot be changed without approval by the holders of a
majority of the outstanding shares of the Fund. Under these restrictions, the
Fund cannot: (a) borrow money except for temporary purposes and then only in an
amount not exceeding 5% of the value of the total assets of the Fund at the time
when the loan is made; (b) issue senior securities; (c) invest in any real
estate, but this limitation does not preclude an investment in the marketable
securities of an issuer the business of which involves the purchase or sale of
real estate or interests therein; (d) engage in the purchase or sale of any
commodity or commodities futures contract; (e) make loans of its assets to other
persons except through the purchase of a portion of an issue of publicly
distributed bonds, debentures or other debt securities; (f) purchase any
securities on margin except such short-term credits that are necessary for the
clearance of transactions, nor participate on a joint or joint and several basis
in any trading account in securities; (g) make short sales of securities; (h)
acquire more than 10% of any class of securities of any issuer; (i) invest in
securities for the purpose of exercising control of management; (j) invest in
securities of any other investment company; (k) underwrite the securities of
other issuers or knowingly purchase securities of other issuers which are
subject to contractual restrictions on resale or under circumstances where if
the securities are later publicly offered or sold by the Fund, the Fund might be
deemed to be an underwriter for the purpose of the Securities Act of 1933; (l)
invest more than 15% of the value of its total assets in securities with a
limited trading market; (m) invest more than 25% of its assets in any one
industry; (n) write, purchase or sell puts, calls or combinations thereof; or
(o) with respect to 75% of its total assets, invest more than 5% of the value of
its total assets at the time of purchase in the securities of any one issuer.
2
<PAGE>
The Fund has no specific limitations on its portfolio turnover rate, which
has tended to fluctuate from year to year in response to stock market
conditions. See " Financial Highlights" in the Prospectus.
DIRECTORS AND OFFICERS
The directors and executive officers of the Fund, together with their
principal business occupations during the last five years as well as their
positions with the Adviser, are shown below. Each director who is deemed an
"interested person" of the Fund, as defined in the Investment Company Act of
1940, is indicated by an asterisk.
EUGENE P. FRENKEL, M.D. - Director of the Fund, age 68, - is a Professor of
Internal Medicine and Radiology, Southwestern Medical School, in Dallas, Texas,
with which he has been associated since 1962. Dr. Frenkel's address is
Department of Internal Medicine, University of Texas Health Science Center at
Dallas, 5323 Harry Hines, Dallas, Texas.
C. K. LAWSON* - President, Treasurer and Director of the Fund, age 61, - is
President, Treasurer and a director of the Adviser and its parent, Lawson
Investments, Inc. See "Investment Adviser." Decisions to buy and sell securities
for the Fund's portfolio are made by Mr. Lawson as an officer of the Adviser,
and he also selects brokers to handle the transactions and negotiates the
brokerage commissions. Mr. Lawson is a chartered financial analyst. His address
is 750 North St. Paul, LB 13, Suite 1300, Dallas, Texas.
DOUGLAS W. MACLAY - Director of the Fund, age 69, - has been President of
Maclay Development Company, real estate investments, of Dallas, Texas and its
predecessors, since 1974. Mr. Maclay's address is 3500 Oak Lawn, Dallas, Texas.
R. H. STEWART MITCHELL, JR. - Director of the Fund, age 67, - is retired;
he formerly was Vice-Chairman of the Board of Directors of Tracy-Locke/BBDO,
advertising and public relations, of Dallas, Texas, with which he was associated
from 1959 to 1983. Mr. Mitchell's address is 7371 Paldao Drive, Dallas, Texas.
CRUGER S. RAGLAND - Director of the Fund, age 64, - is President of Ragland
Insurance Agency, Inc. of Dallas, Texas, with which he has been associated since
1959. Mr. Ragland's address is 500 Two Turtle Creek Village, Dallas, Texas.
ANN REED DITTMAR - Director of the Fund, age 64, - is a private investor
whose address is 3608 Lexington, Dallas, Texas.
CANDACE L. KING - Vice President and Secretary of the Fund, age 49, - is
Vice President and Secretary of the Adviser, with which she has been associated
since 1973. Ms. King's address is 750 North St. Paul, LB 13, Suite 1300, Dallas,
Texas.
3
<PAGE>
Directors are elected by the shareholders to serve until the next meeting
of shareholders and until their respective successors are elected. The Fund does
not have annual meetings of shareholders.
All officers of the Fund are employees of the Adviser, and they receive no
salary from the Fund. The directors of the Fund who are not affiliated with the
Adviser (5 persons) received fees for retainers and for Board of Directors
meetings attended which aggregated $5,400 during the fiscal year ended June 30,
1997. No pension or retirement benefits are accrued as part of fund expenses.
The compensation paid by the Fund to the Fund's directors for the fiscal year
ended June 30, 1997 was as follows:
COMPENSATION TABLE*
- --------------------------------------------------------------------------------
AGGREGATE
COMPENSATION
NAME POSITION FROM FUND
- --------------------------------------------------------------------------------
Eugene P. Frenkel, M.D. Director $1,200
Douglas W. Maclay Director $ 600
R. H. Stewart Mitchell, Jr. Director $1,200
Cruger S. Ragland Director $1,200
Ann Reed Dittmar Director $1,200
*C. K. Lawson, President and a director of the Fund, and C. L. King, Vice
President and Secretary of the Fund, are officers of the Adviser and are
compensated by the Adviser. See "Investment Adviser." The Fund does not have any
retirement or pension plan for its directors or officers, and is not part of any
mutual fund complex.
On August 1, 1997 the officers and directors named above, as a group,
beneficially owned approximately 18.2% of the outstanding shares of the Fund,
including approximately 7.9% beneficially owned by Mr. Mitchell. To the
knowledge of the Fund, no other person beneficially owned 5% or more of its
outstanding shares.
INVESTMENT ADVISER
Since its organization in 1971, Portfolios, Inc. has been the investment
adviser of the Fund. Pursuant to an investment advisory agreement dated October
30, 1981 (the "Advisory Agreement"), the Adviser manages the Fund's investments.
The Advisory Agreement provides that, as compensation for its services, the
Adviser will be paid monthly a fee at the annual rate of 0.8% of the Fund's
average daily net assets for each fiscal year. The Adviser furnishes to the
Fund, at the Adviser's expense, office space, local telephone service and
utilities, and is responsible for the compensation of directors, officers and
employees of the Fund who are interested persons of the Adviser. Expenses of the
Fund not paid by the Adviser are borne by the Fund and include, but are
4
<PAGE>
not limited to, fees and expenses of the Fund's legal counsel, of its
independent auditors and of its custodian and transfer agent, printing costs
incurred by the Fund and compensation of directors who are not interested
persons of the Adviser. The Adviser also performs for the Fund certain
accounting services pursuant to an administrative services agreement dated
October 25, 1985, for which the Fund compensates the Adviser at the rate of
$16,000 per annum.
The Advisory Agreement provides that the Adviser shall reimburse the Fund
for all expenses (including the advisory and administrative fees but excluding
interest, taxes, brokerage commissions and extraordinary charges such as
litigation costs) incurred by the Fund with respect to any fiscal year in excess
of the following percentages of its average daily net assets for the fiscal
year: 2% of the first $10 million of average daily net assets; 1.5% of the next
$20 million of average daily net assets; and 1% of the remaining average daily
net assets. For the fiscal years ended June 30, 1995, 1996 and 1997, the Fund
paid investment advisory fees of $83,927, $100,839 and $104,831, respectively.
Effective January 1, 1995, the Adviser became the Fund's transfer agent,
registrar, redemption agent and dividend disbursing agent. As the Transfer Agent
the Adviser receives $700 per month, plus reimbursement for certain out of
pocket expenses, including without limitation costs of forms, statements,
envelopes, postage, shipping, telephone, insurance, legal fees and statement
microfiche copies. The Adviser is a subagent with respect to certain
recordkeeping and administrative services for certain individual retirement
accounts, pursuant to an arrangement with The Union Bank of California, N. A.
(the "Bank"), pursuant to which the Bank acts as custodian for the individual
retirement accounts and the Adviser pays the Bank $7.50 per account, per year,
which charge is passed through to the account holder without markup. The Adviser
receives no other compensation from the Fund or its shareholders with respect to
this arrangement.
The Adviser is engaged in the business of providing investment advisory and
management services to individual and institutional investors. Lawson
Investments, Inc., a corporation controlled by C. K. Lawson, owns all of the
outstanding stock of the Adviser. See "Directors and Officers."
BROKERAGE ALLOCATION
In the allocation of brokerage, it is the Fund's policy to seek the best
price and execution. The Fund, however, does not consider that this objective is
served by seeking the lowest commission rates available. It gives preference,
and may pay higher commission rates, to brokers that, in addition to having the
capability of obtaining the best price for the security itself and of executing
the order with speed, efficiency and confidentiality, also provide research and
statistical and similar information and services ("Research") to the Adviser.
Subject to the Fund's policy to normally effect its principal transactions with
principal market makers, the Fund may effect principal transactions with dealers
that provide Research to the Fund. Research furnished by brokers through whom
the Fund effects securities transactions includes written reports analyzing
economic and financial characteristics of industries and companies and telephone
communications with securities analysts and others, and is used by the Adviser
in servicing all of its accounts, although not all of the Research is used by
the Adviser in connection with the Fund. There is no reduction in the fees paid
to the Adviser as a consequence of its receipt of such Research.
5
<PAGE>
The Adviser selects the brokers through whom the Fund's securities
transactions are executed and negotiates the commission rates for all brokerage
transactions on national securities exchanges. The amount of the brokerage
commission is typically negotiated after the completion of the transaction. The
Adviser, however, must determine in good faith that the amount of the commission
is reasonable in relation to the value of the brokerage services and Research
provided by the broker, viewed in terms of either the particular transaction or
the Adviser's overall responsibilities with respect to the accounts as to which
it exercises investment discretion. In fiscal 1997 all of the Fund's brokerage
commissions were paid to brokers that supplied Research to the Adviser. However,
neither the Fund nor the Adviser has any agreement or understanding, or any
internal allocation arrangement, to direct any of the Fund's brokerage
transactions to any particular broker because of Research provided.
Subject to the policy of seeking best price and execution, brokerage
commissions for the execution of portfolio transactions may be paid to brokers
that have affiliated persons in common with the Adviser, but no brokerage
commissions were paid to such persons during the three years ended June 30,
1997. Sales of Fund shares may be a factor considered in the selection of
brokers to execute portfolio transactions.
For the fiscal years ended June 30, 1995, 1996 and 1997 the Fund paid
aggregate brokerage commissions of $9,650, $14,282 and $7,183, respectively.
Year-to-year fluctuations in the aggregate levels of brokerage commissions are
attributable primarily to fluctuations in the volume of portfolio brokerage
transactions as a result of changing market conditions.
PRICING OF SHARES
The public offering price of the Fund's shares is equal to the Fund's net
asset value per share. The entire offering price from the sale of the Fund's
shares accrues to the Fund.
The net asset value of the Fund's shares is determined following the close
of trading of the New York Stock Exchange on each day on which the Exchange is
open for business. The New York Stock Exchange is closed, and the Fund's net
asset value will not be computed, on the following national holidays: New Year's
Day, Thanksgiving Day and Christmas Day. The Fund determines its net asset value
per share by subtracting the Fund's liabilities (including accrued expenses and
dividends payable) from its total assets (the market value of the securities the
Fund holds plus cash or other assets, including interest accrued but not yet
received and dividends "ex" but not paid) and dividing the result by the total
number of shares outstanding. A security quoted on the New York Stock Exchange
Composite Tape or on the NASDAQ National Market shall be valued at its last sale
price as reported thereon prior to the time as of which assets are valued. A
security not quoted on the New York Stock Exchange Composite Tape or the NASDAQ
National Market shall be valued (i), in the case of an exchange listed security,
at the last reported sale price on that exchange where it is quoted prior to the
time as of which assets are valued and (ii), in the case of securities not
traded on an exchange for which over-the-counter market quotations are readily
available, on the basis of the last current bid price prior to the time as of
which assets are valued. When market quotations are not readily available or
when restricted securities are being valued, the security shall be valued at the
fair value determined in good faith by the Board of Directors of the Fund. In
the event that
6
<PAGE>
the Fund should have other assets, they would be valued at fair value as
determined in good faith by the Board of Directors.
REDEMPTION OF SHARES
The Fund will redeem shares from stockholders of record at the per share
net asset value next determined after receipt of a written request that the
shares be redeemed, together with proper documentation, as discussed under
"Redemption of Fund Shares" in the Prospectus.
As stated under "Redemption of Fund Shares - Signature Guarantees" in the
Prospectus, the signature of the appropriate persons signing or endorsing any
redemption request or stock certificate must be duly guaranteed by an eligible
guarantor institution. "Eligible guarantor institutions," as defined in Rule
17Ad-15 under the Securities Exchange Act of 1934, include banks, brokers,
dealers, credit unions, national securities exchanges, registered securities
associations, clearing agencies and savings associations. A broker-dealer
guaranteeing signatures must be a member of a clearing corporation or maintain
net capital of at least $100,000. Credit unions must be authorized to issue
signature guarantees. Signature guarantees will be accepted from any eligible
guarantor institution which participates in a signature guarantee program.
Payment for shares redeemed will be made by the Fund within seven days of
receipt of the written redemption request along with the proper documentation.
Redemption of shares or payment may be suspended at times (a) when the New York
Stock Exchange is closed, (b) when trading on the Exchange is restricted, (c)
when an emergency exists as a result of which disposal by the Fund of securities
owned by it is not reasonably practicable or it is not reasonably practicable
for the Fund fairly to determine the value of its net assets, or (d) during any
other period when the Securities and Exchange Commission, by order, so permits.
Payment for shares redeemed may be made either in cash or in portfolio
securities, or partly in cash and partly in portfolio securities. However,
payments will be made wholly in cash unless the Board of Directors believes that
market conditions exist which would make such a practice detrimental to the best
interests of the Fund. If payments for shares redeemed are made wholly or partly
in portfolio securities, the securities will be valued at the value used in
calculating the value of the shares to be redeemed and brokerage costs may be
incurred by the investor in converting the securities to cash.
CALCULATION OF PERFORMANCE DATA
From time-to-time the Fund may advertise its total return. TOTAL RETURN
FIGURES ARE BASED ON HISTORICAL PERFORMANCE RESULTS AND ARE NOT INTENDED TO
INDICATE FUTURE PERFORMANCE. The total return of the Fund refers to the average
annual compounded percentage rate of return over a specified period that would
equate an initial amount invested at the beginning of a stated period to the
ending redeemable value of the investment, assuming the reinvestment of all
dividend and capital gains distributions. The Fund may also compute a total
return for multi year and partial year periods computed in the same manner but
7
<PAGE>
without annualizing the total return. The Fund does not impose any sales charge
or redemption fee on the purchase or redemption of its shares.
Quotations of average annual total return are expressed in terms of the
average annual compounded rate of return of a hypothetical $1,000 investment in
the Fund over various specified annual periods that end on the date of the most
recent balance sheet in the Fund's registration statement that would equate the
initial amount invested to the ending redeemable value, according to the
following formula:
P(1+T)n = ERV
Where: P = A hypothetical initial investment of $1,000
T = Average annual total return
n = Number of years
ERV = Ending redeemable value of the hypothetical $1,000
payment made at the beginning of the specified period
at the end of the period (or fractional portion
thereof).
The total return for the Fund will vary from period-to-period and no reported
performance figure should be considered an indication of performance which may
be expected in the future.
DIVIDENDS AND FEDERAL INCOME TAX STATUS
The Fund has met the requirements for qualification as a regulated
investment company under Subchapter M of the Internal Revenue Code since it
commenced doing business as an investment company and intends to maintain such
qualification. As a regulated investment company, the Fund is not taxed on its
ordinary income or net capital gains to the extent distributed to shareholders.
OTHER INFORMATION
Custodian. The Union Bank of California, N.A., 475 Sansome Street, 15th
Floor, San Francisco, California 94111 is the custodian of the Fund's portfolio
securities and custodian for the Fund's tax-sheltered retirement plans.
Transfer Agent. Portfolios, Inc., 750 N. St. Paul, LB 13, Suite 1300,
Dallas, Texas 75201-3250 is the Fund's transfer agent and dividend disbursing
agent.
Independent Auditors. Grant Thornton, L.L.P., 1445 Ross Avenue, Suite 3600,
Dallas, Texas 75202, are independent auditors for the Fund. The statements of
assets and liabilities and portfolio of investments in securities as of June 30,
1997 of the Fund, and the related statement of operations for the year then
ended, the related statements of changes in net assets for each of the two years
in the period then ended, and selected per share data and ratios for each of the
six years in the period then ended, included in this Statement of Additional
Information have been so included in
8
<PAGE>
reliance on the report of Grant Thornton, L.L.P., and upon the authority of said
firm as experts in auditing and accounting.
Legal Counsel. Jackson & Walker, L.L.P., 901 Main Street, Suite 6000,
Dallas, Texas 75202-3797, are legal counsel to the Fund.
9
<PAGE>
Report of Independent Certified Public Accountants
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
<PAGE>
Armstrong Associates, Inc.
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>
The accompanying notes are an integral part of this statement.
3
<PAGE>
<TABLE>
<CAPTION>
Armstrong Associates, Inc.
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
- -------------------------------------------------------------------------------------------------------------------
424,090 937,875
- -------------------------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of this statement.
4
<PAGE>
Armstrong Associates, Inc.
PORTFOLIO OF INVESTMENTS IN SECURITIES - CONTINUED
June 30, 1997
Shares or principal amount Cost Market value (a)
- -------------------------------------------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------------------------------------------
SHORT-TERM DEBT (13.25%):
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>
The accompanying notes are an integral part of this statement.
5
<PAGE>
Armstrong Associates, Inc.
PORTFOLIO OF INVESTMENTS IN SECURITIES - CONTINUED
June 30, 1997
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
The accompanying notes are an integral part of this statement.
6
<PAGE>
Armstrong Associates, Inc.
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>
The accompanying notes are an integral part of this statement.
<PAGE>
Armstrong Associates, Inc.
STATEMENTS OF CHANGES IN NET ASSETS
Years Ended June 30
<TABLE>
<CAPTION>
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.
The accompanying notes are an integral part of these statements.
<PAGE>
Armstrong Associates, Inc.
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.
9
<PAGE>
Armstrong Associates, Inc.
NOTES TO FINANCIAL STATEMENTS - CONTINUED
June 30, 1997
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:
1997 1996
- -------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
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.
10
<PAGE>
Armstrong Associates, Inc.
CONDENSED FINANCIAL INFORMATION
Selected per Share Data and Ratios
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------------------------------
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>
- -----------------------------------------------------------------------------------------------------
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>
- ---------------------------------------------------------------------------------------------
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 report of independent certified public accountants.
<PAGE>
PART C: OTHER INFORMATION
Item 24. Financial Statements and Exhibits
---------------------------------
(a) Financial Statements:
(i) Included in Part A:
None
(ii) Included in Part B:
Report of Independent Certified Public Accountants
Statement of Assets and Liabilities - June 30, 1997
Portfolio of Investments in Securities - June 30, 1997
Statement of Operations - Year ended June 30, 1997
Statements of Changes in Net Assets - Years ended June 30, 1996
and 1997
Notes to Financial Statements
(b) Exhibits:
1.1 Restated Articles of Incorporation of the Fund filed October 28,
1983 [Exhibit 1.1, Form N-1A Post-Effective Amendment No. 27]
2.1 Bylaws of the Fund as amended through August 27, 1987 [Exhibit
2.1, Form N-1A Post-Effective Amendment No. 31]
2.2 Amendment to Bylaws of the Fund, effective August 25, 1993
[Exhibit 2.2, Form N-1A Post-Effective Amendment No. 37]
4.1 Specimen stock certificate [Exhibit 4.1, Form N-1A Post-Effective
Amendment No. 30]
4.2 Purchase Application [Exhibit 4.2, Form N-1A Post-Effective
Amendment No. 41]
5.1 Investment Advisory Agreement dated October 30, 1981 between the
Fund and the Adviser [Exhibit 5.1, Form N-1A Post-Effective
Amendment No. 28]
8.1 Custodian Agreement dated March 4, 1988 between the Fund and The
First Jersey National Bank [Exhibit 8.1, Form N-1A Post-Effective
Amendment No. 32]
1
<PAGE>
8.1.1 Letter dated August 31, 1988 from Fund/Plan Services, Inc. to
the Fund re: change of name of First Jersey National Bank to
National Westminster Bank, NJ [Exhibit 8.1.1, Form N-1A
Post-Effective Amendment No. 33]
8.2 Administration Agreement dated June 27, 1983 between the Fund and
First Pennsylvania Bank, N.A. [Exhibit 8.2, Form N-1
Post-Effective Amendment No. 25]
8.3 Amendment dated February 25, 1986 to the Administration Agreement
filed as Exhibit 8.2 [Exhibit 8.3, Form N-1A Post-Effective
Amendment No. 30]
8.4 Custody Agreement dated September 9, 1994 between the Fund and
The Bank of California, N.A. [Exhibit 8.4, Form N-1A,
Post-Effective Amendment No. 39]
8.5 Amended and Restated Transfer Agent Agreement dated May 17, 1995
[Exhibit 8.5, Form N-1A Post Effective Amendment No. 40]
9.1 Administrative Services Agreement dated October 24, 1985 between
the Fund and the Adviser [Exhibit 9.1, Form N-1A Post-Effective
Amendment No. 30]
* 10.1 Opinion of Jackson & Walker, L.L.P. as to legality of securities
being registered and related consent
* 11.1 Consent of Grant Thornton LLP
14.1 Individual Retirement Account documents [Exhibit No. 14.1, Form
N-1 Post-Effective Amendment No. 25]
14.2 Prototype Profit Sharing Plan, Custody Agreement, and
Standardized and Non-Standardized Adoption Agreement documents
[Exhibit 14.4, Form N-1A Post-Effective Amendment No. 35]
15 Power of Attorney [Signature Page, Form N-1A Post Effective
Amendment No. 41]
- ------------
*Exhibit is being filed herewith. All other exhibits have been
previously filed with the Commission as an exhibit to the Post-Effective
Amendment to the Fund's Registration Statement on Form N-1 or N-1A (No. 2-27539)
designated in brackets and are incorporated herein by this reference.
2
<PAGE>
Item 25. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
None
Item 26. Number of Holders of Securities
-------------------------------
As of August 1, 1997, there were 1,024 record holders of shares
of the Fund's outstanding common stock.
Item 27. Indemnification
---------------
Article 2.02-1 of the Texas Business Corporation Act and Article
XI of the Bylaws of the Fund provide for the indemnification of
directors and officers of the Fund against certain liabilities.
Insofar as indemnification for liability arising under the
Securities Act of 1933 may be permitted to directors, officers and
controlling persons of the Fund pursuant to the foregoing provisions,
or otherwise, the Fund has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against
public policy as expressed in the Act and is, therefore,
unenforceable. In the event that a claim for indemnification against
such liabilities (other than the payment by the Fund of expenses
incurred or paid by a director, officer or controlling person of the
Fund in the successful defense of any action, suit or proceeding) is
asserted by such director, officer or controlling person in connection
with the securities being registered, the Fund will, unless in the
opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question
whether such indemnification by it is against public policy as
expressed in the Act and will be governed by the final adjudication of
such issue.
Item 28. Business and Other Connections of Investment Adviser
----------------------------------------------------
In addition to serving as investment adviser to the Fund, the
Adviser serves as investment adviser to a number of other persons,
none of whom is believed to be an investment company.
Positions and Offices Positions and Offices
Name with the Adviser with the Fund
---- --------------------- ---------------------
C. K. Lawson(a) President, Treasurer President, Treasurer
and Director and Director
Candace L. King(b) Secretary Vice President
and Secretary
John P. Chilton(c) Director None
3
<PAGE>
(a) Mr. Lawson is President, Treasurer and a director of Lawson
Investments, Inc. ("LII"), a corporation which owns all of the
outstanding stock of the Adviser and the principal business address of
which is 750 North St. Paul, LB 13, Suite 1300, Dallas, Texas 75201.
(b) Ms. King is Vice President and Secretary of LII.
(c) Mr. Chilton is a Vice President and registered representative
of Weber Investments Corporation, a broker-dealer registered under the
Securities Exchange Act of 1934 which has its principal place of
business at 1600 Pacific Building, 1525 Elm Street, Dallas, Texas
75201. Mr. Chilton is also a director of LII.
Item 29. Principal Underwriters
----------------------
Not Applicable.
Item 30. Location of Accounts and Records
--------------------------------
Physical possession of all accounts, books and other documents
required to be maintained by the Fund and the Adviser pursuant to '31
of the Investment Company Act of 1940 and the rules promulgated
thereunder are maintained by the Fund and the Adviser at 750 North St.
Paul, LB 13, Suite 1300, Dallas, Texas, except that certain records
are maintained at the offices of the Fund's custodian, The Union Bank
of California, N.A., 475 Sansome Street, 15th Floor, San Francisco,
California 94111.
Item 31. Management Services
-------------------
Not applicable.
Item 32. Undertakings
------------
Not applicable.
4
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933 and the
Investment Company Act of 1940, the Registrant has duly caused this Registration
Statement to be signed on its behalf by the undersigned, thereunto duly
authorized, in the City of Dallas, and State of Texas, on October 27, 1997.
ARMSTRONG ASSOCIATES, INC.
By: /s/ Candace L. King
--------------------------------
Candace L. King, Vice President
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed below by the following persons in the
capacities indicated below on October 27, 1997.
Signature Title
--------- -----
President, Treasurer and Director
C.K. LAWSON* (Principal Executive Officer and
Principal Financial and Accounting
Officer)
EUGENE P. FRENKEL* Director
DOUGLAS W. MACLAY* Director
R.H. STEWART MITCHELL, JR.* Director
CRUGER S. RAGLAND* Director
ANN REED DITTMAR* Director
*By: /s/ Candace L. King
--------------------------------
Candace L. King
Attorney-in-Fact under Power of
Attorney filed as Exhibit 15
5
<PAGE>
INDEX TO ATTACHED EXHIBITS
Exhibit Page
10.1 Opinion of Jackson & Walker, L.L.P. E-1
as to legality of securities being registered
and related consent
11.1 Consent of Grant Thornton LLP E-2
6
EXHIBIT 10.1
[Jackson Walker L.L.P. Letterhead}
October 27, 1997
Armstrong Associates, Inc.
750 North St. Paul, Suite 1300
Dallas, Texas 75201
Re: Armstrong Associates, Inc.
Gentlemen:
We have acted as counsel for Armstrong Associates, Inc., a Texas
corporation (the "Company"), solely for purposes of rendering this opinion in
connection with the Company's registration of an indefinite number of shares
("Shares") of its Common Stock, par value $1.00 per share, pursuant to
Post-Effective Amendment No. 42 to its Registration Statement on Form N-1A (No.
2-27539) (the "Registration Statement") under the Securities Act of 1933, as
amended (the "Act"), and Post-Effective Amendment No. 28 to the Registration
Statement under the Investment company Act of 1940, as amended. As such counsel
we have examined and relied upon the originals, or copies identified to our
satisfaction, of such corporate records, documents, certificates and other
instruments that in our judgment are necessary or appropriate to enable us to
render the opinion hereinbelow set forth.
We are of the following opinion:
(1) The company is a corporation duly incorporated and validly existing
under the laws of the State of Texas with authorized capital stock consisting
solely of 6,000,000 shares of Common Stock, par value of $1.00 per share.
(2) When payment, in an amount per Share equal to the net asset value
per Share of the Company calculated in the manner described in the Registration
Statement, but in no event in an amount less than $1.00 per Share, has been
received by the company for the sale of Shares, such Shares, up to a maximum
aggregate of 6,000,000 Shares, when issued, will be validly issued, fully-paid
and nonassessable.
We consent to the filing of this opinion as an exhibit to the
Registration Statement.
Very truly yours,
/s/Jackson Walker L.L.P.
EXHIBIT 11.1
Consent of Independent Certified Public Accountants
We have issued our report dated July 23, 1997, accompanying the financial
statements and selected per share data and ratios of Armstrong Associates, Inc.
We consent to the use of the aforementioned report and to the use of our name as
it appears in the Prospectus under the caption "Condensed Financial Information"
and in the Statement of Additional Information under the caption "Other
Information - Independent Auditors".
GRANT THORNTON LLP
Dallas, Texas
October 24, 1997
<TABLE> <S> <C>
<ARTICLE> 6
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF THE COMPANY FOR THE TWELVE MONTHS ENDED JUNE 30, 1997,
AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> JUN-30-1997
<PERIOD-START> JUL-01-1996
<PERIOD-END> JUN-30-1997
<INVESTMENTS-AT-COST> 7,515,543
<INVESTMENTS-AT-VALUE> 13,965,725
<RECEIVABLES> 314,381
<ASSETS-OTHER> 0
<OTHER-ITEMS-ASSETS> 0
<TOTAL-ASSETS> 14,280,106
<PAYABLE-FOR-SECURITIES> 0
<SENIOR-LONG-TERM-DEBT> 0
<OTHER-ITEMS-LIABILITIES> 0
<TOTAL-LIABILITIES> 13,098
<SENIOR-EQUITY> 0
<PAID-IN-CAPITAL-COMMON> 0
<SHARES-COMMON-STOCK> 0
<SHARES-COMMON-PRIOR> 0
<ACCUMULATED-NII-CURRENT> 0
<OVERDISTRIBUTION-NII> 0
<ACCUMULATED-NET-GAINS> 2,035,579
<OVERDISTRIBUTION-GAINS> 0
<ACCUM-APPREC-OR-DEPREC> 6,450,182
<NET-ASSETS> 14,267,008
<DIVIDEND-INCOME> 155,902
<INTEREST-INCOME> 104,703
<OTHER-INCOME> 0
<EXPENSES-NET> 191,721
<NET-INVESTMENT-INCOME> 68,884
<REALIZED-GAINS-CURRENT> 441,872
<APPREC-INCREASE-CURRENT> 1,593,707
<NET-CHANGE-FROM-OPS> 2,104,463
<EQUALIZATION> 0
<DISTRIBUTIONS-OF-INCOME> 85,666
<DISTRIBUTIONS-OF-GAINS> 575,189
<DISTRIBUTIONS-OTHER> 0
<NUMBER-OF-SHARES-SOLD> 20,371
<NUMBER-OF-SHARES-REDEEMED> 107,722
<SHARES-REINVESTED> 62,923
<NET-CHANGE-IN-ASSETS> 0
<ACCUMULATED-NII-PRIOR> 0
<ACCUMULATED-GAINS-PRIOR> 0
<OVERDISTRIB-NII-PRIOR> 0
<OVERDIST-NET-GAINS-PRIOR> 0
<GROSS-ADVISORY-FEES> 104,381
<INTEREST-EXPENSE> 0
<GROSS-EXPENSE> 191,721
<AVERAGE-NET-ASSETS> 0
<PER-SHARE-NAV-BEGIN> 10.45
<PER-SHARE-NII> 0.06
<PER-SHARE-GAIN-APPREC> 1.64
<PER-SHARE-DIVIDEND> 0.07
<PER-SHARE-DISTRIBUTIONS> 0.47
<RETURNS-OF-CAPITAL> 0
<PER-SHARE-NAV-END> 11.61
<EXPENSE-RATIO> 0.5
<AVG-DEBT-OUTSTANDING> 0
<AVG-DEBT-PER-SHARE> 0
</TABLE>
