To Our Shareholders
On December 31, 1996, Armstrong Associates, Inc. had total net assets of
$12,600,382 and a per share price of $10.12. During calendar 1996 a total
of $0.54 in ordinary income and capital gains was paid to shareholders of
record December 13, 1996 and is not included in Armstrong's year-end price.
Equity investments generally had positive results for calendar 1996 as
indicated by a +13.38% price advance in the Value-Line Index which
represents approximately 1,700 stocks (unweighted-price only). For the same
period long term bond prices were generally lower as reflected by the
Lehman Brothers U.S. Treasury Composite Index which showed a +2.77% total
return. As an indication of returns on cash equivalents, Lipper Analytical
Services, Inc., reported that the average non-government taxable money
market fund return for 1996 was 4.80%. Armstrong reported a total return of
+9.49% for the 1996 calendar year.
Looking ahead into the 1997-98 period, we anticipate a volatile and, on
balance, positive equity market environment. In our view, inflation should
continue to be under control, long term interest rates should stay within
the range seen over the past two years and corporate earnings should
continue to grow although at a modest pace overall. While most of the
broader based market indices are currently near all time highs, a
significant portion of the performance in the weighted averages has been
driven by a fairly concentrated group of stocks. At some point, we expect
investment interest to broaden into opportunities that have not been as
fully exploited as those issues that led equity markets to
current levels.
Please call or write if you have any questions concerning your Armstrong
investment.
Sincerely,
C.K. Lawson
February 15, 1997
<PAGE>
Investment Portfolio as of December 31, 1996
No of % of
shares Industry & Issue Market value assets
Broadcasting & Related (4.7%)
6,000 A.H. Belo $ 209,250 1.7%
10,000 Time Warner, Inc. 378,750 3.0
Chemicals & Related (7.8%)
10,000 Avery Dennison Corp. 707,500 5.6
6,000 Praxair, Inc. 276,750 2.2
Computer, Software & Related (6.3%)
3,000 Cisco Systems 190,875 1.5
11,250 Oracle Systems Corp. 469,688 3.7
2,000 U.S. Robotics 144,000 1.1
Consumer Products (8.3%)
10,000 Black & Decker Corporation 301,250 2.4
4,000 Duracell Internatioal 279,500 2.2
3,000 Kimberly Clark 285,750 2.3
8,000 Wal-Mart Stores 182,000 1.4
Electronics, Semiconductors & Related (6.4%)
5,000 AMP, Inc. 191,875 1.5
10,000 Motorola, Inc. 612,500 4.9
Energy (.2%)
465 El Paso Energy 23,483 .2
Food, Beverages & Related (9.4%)
5,000 CPC International 387,500 3.1
6,000 Dole Food Co. 203,250 1.6
20,000 Pepsico, Inc. 587,500 4.7
Hotel (2.8%)
8,000 ITT Corporation 347,000 2.8
Industrial Conglomerate (6.0%)
12,000 Corning, Inc. 555,000 4.4
8,000 ITT Industries 196,000 1.6
Insurance (4.3%)
8,000 ITT Hartford 540,000 4.3
<PAGE>
Medical & Related (13.2%)
15,000 Abbott Laboratories 761,250 6.0
4,000 Biogen, Inc. 155,000 1.2
5,000 Boston Scientific 300,000 2.4
5,000 Medtronics, Inc. 340,000 2.7
5,000 VISX, Inc. 110,625 .9
Natural Gas & Related (1.8%)
5,000 Tenneco, Inc. 225,625 1.8
Photography & Equipment (3.8%)
6,000 Eastman Kodak Company 481,500 3.8
Telecommunications (7.0%)
13,000 AT&T Corp. 563,875 4.5
4,213 Lucent Technologies 194,851 1.5
20,000 Paging Network 122,000 1.0
Transportation (1.9%)
1,000 Newport News Shipbuilding 15,000 .1
8,000 Ryder Systems 225,000 1.8
Water Treatment/Pollution Control (3.0%)
8,000 Ionics, Inc. 384,000 3.0
CASH, SHORT-TERM DEBT AND RECEIVABLES
LESS LIABILITIES 1,652,235 13.1
Total Net Assets $12,600,382 100.0%
<PAGE>
Statement of Net Assets for December 31, 1996
Assets
Investment in securities at market value $12,554,306
Cash held by custodian 48,376
Prepaid expenses 2,460
Interest receivable 13,126
Dividends receivable 10,900
Receivable for fund shares purchased 750
Total Assets $12,629,918
Liabilities
Accounts payable and accrued expenses (3,716)
Payable for fund shares redeemed 33,252
Total Liabilities $29,536
Net Assets-equivalent to $10.12 per share with
1,245,710.944 shares outstanding $12,600,382
Statement of Changes in Net Assets-6 Months Ended December 31, 1996
Operations:
Net investment income $ 41,443
Net realized gains from security transactions 73,588
Decrease in unrealized appreciation of investments 140,646
Net increase in net assets resulting from operations $ 255,677
Distributions to shareholders
Dividends paid from net investment income 85,666
Distributions from net realized gains 575,189
660,855
Capital share transactions
Net proceeds from sale of capital stock 98,866
Net asset value of shares issued to shareholders in
reinvestment of net investment income and net realized
gains on security transactions 620,103
718,969
Less cost of shares repurchased 813,209
(94,240)
Net increase in net assets (499,419)
Net assets:
Beginning of period $13,099,800
End of period $12,600,382
<PAGE>
Statement of Operations-6 Months Ended December 31, 1996
Investment Income
Income:
Dividends $ 73,220
Interest 60,067
Total income 133,287
Operating expenses:
Advisory and management fees 50,003
Administrative fees 7,957
Custodian fees 3,593
Transfer agent fees 4,200
Registration fees, licenses and other 1,112
Legal fees 6,891
Accounting fees 7,160
Director's fees 3,076
Reports and notices to shareholders 7,411
Insurance 441 91,844
Net investment income 41,443
Realized and unrealized gains and losses on investments
Realized gains from security transactions
(excluding short-term obligations)
Proceeds from sales 672,913
Cost of securities sold 599,325
Net realized gains from security transactions 73,588
Unrealized appreciation (depreciation) of investments
Beginning of period 4,856,475
End of period 4,997,121
Increase/decrease in unrealized appreciation 140,646
Net realized and unrealized gain on investments $ 214,234
<PAGE>
Officers and Directors
C.K. Lawson
President, Treasurer and Director
Candace L. King
Vice President and Secretary
Eugene P. Frenkel, M.D.
Director
Professor of Internal Medicine and Radiology
Southwestern Medical School
Douglas W. Maclay
Director
President, Maclay Properties Company
R.H. Stewart Mitchell
Director
Private Investor
Cruger S. Ragland
Director
President, Ragland Insurance Agency, Inc.
Ann Reed Dittmar
Director
Private Investor
<PAGE>
Custodian
Union Bank of California, N.A.
San Francisco, California
Transfer Agent
Portfolios, Inc.
Dallas, Texas
Auditors
Grant Thornton
Dallas, Texas
Investment Advisor
Portfolios, Inc.
Dallas, Texas
This report is prepared for the information of the share- holders of Armstrong
Associates, Inc. It is not authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an effective prospectus.
