ARMSTRONG ASSOCIATES INC.
SHAREHOLDERS REPORT
JUNE 30, 1998
TO OUR SHAREHOLDERS:
Armstrong Associates, Inc. ended its most recent fiscal year on June 30, 1998,
with total assets of $15,212,805 and a per share price of $12.14. Not reflected
in the fiscal year-end price were distributions totaling $0.88 per share of
capital gains and income which were made in December 1997.
Equity results for the twelve months ending June 30 were largely positive
although there was a wide divergence in results between individual stocks based
on capitalization size with larger capitalized stocks generally outperforming
smaller capitalized stocks. For the year under review, Armstrong recorded a
total investment return of +13.31%. In comparison, the Value Line Index, which
represents approximately 1,700 stocks (unweighted-price only), and is, we
believe, a good representation of stock performance in general, posted a twelve
month gain of +12.98%.
Serious financial problems in the economies of many of our international trading
partners have the potential to have both a depressing effect on the overall
United States economy and an unstabilizing influence of our stock market. At the
same time, the relative strength of the U.S. economy increases the
attractiveness of the United States as an investment haven. The expectation of a
continued low level of inflation and the growing possibility of some monetary
ease from the Federal Reserve in the second half of calendar 1998 adds a
positive bias to the long term investment outlook. While we believe market
volatility will remain high over the near term as the impact of foreign
financial problems sort out, we also expect to see market leadership broaden and
feel equities continue to offer positive opportunities for long term investment.
Please call or write if you have any questions concerning your investment in
Armstrong.
Sincerely,
C.K. Lawson
August 10, 1998
<PAGE>
NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 1998
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, 1998, 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, 1998, purchases and sales of securities,
excluding short-term debt securities, aggregated $3,416,125 and $1,440,415,
respectively.
The Company paid total brokerage commissions aggregating $15,694 in 1998 on
purchases and sales of investment securities. All commissions were paid to
unaffiliated broker-dealers.
NOTE D--INVESTMENT ADVISORY, TRANSFER AGENT AND ADMINISTRATIVE FEES
The Company has agreed to pay its investment adviser, Portfolios, Inc.
(Portfolios), a fee of .80% per annum of the average net asset value of the
Company. For the year ended June 30, 1998, investment advisory fees to
Portfolios amounted to $116,367. In order to effectively limit the expenses of
the Company, the adviser 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 1998.
Portfolios is the transfer agent for the Company. Applicable fees of $9,502
were incurred by the Company for the year ended June 30, 1998. 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, 1998, the Company owed Portfolios $12,367 in accrued fees.
NOTE E--CAPITAL STOCK
At June 30, 1998, there were 6,000,000 shares of $1 par value capital stock
authorized, and capital paid in was $7,442,861. Transactions in capital stock
for the years ended June 30, 1998 and 1997 were as follows:
1998 1997
Shares sold 63,588 20,371
Shares issued as reinvestment of dividends 93,981 62,923
157,569 83,294
Shares redeemed (133,173) (107,722)
Net increase (decrease) in shares outstanding 24,396 (24,428)
<PAGE>
NOTE F--DIVIDENDS
Dividends from net investment income paid during the year ended June 30,
1998 and 1997 amounted to $.05 and $.07 per share, respectively. Distributions
from net realized gains paid during the years ended June 30, 1998, and 1997,
amounted to $.83 and $.47 per share, respectively.
<PAGE>
<TABLE>
<CAPTION>
PORTFOLIO OF INVESTMENTS IN SECURITIES -- JUNE 30, 1998
Shares or
principal Market
amount Cost value (a)
COMMON STOCK (97.14%)
Industry and issue
AEROSPACE (1.2%)
<S> <C> <C> <C>
The Boeing Company 4,000 $ 236,300 $ 178,500
BROADCASTING AND MEDIA (8.8%)
A.H. Belo Corporation 6,000 171,285 292,500
New York Times Company 2,500 197,188 198,125
Time Warner, Inc. 10,000 208,192 855,000
576,665 1,345,625
CHEMICALS AND RELATED (7.1%)
Avery Dennison Corp. 15,000 211,200 806,250
Praxair, Inc. 6,000 212,890 281,250
424,090 1,087,500
COMPUTER, SOFTWARE, AND RELATED (10.0%)
Cadence Design Systems, Inc.* 10,000 180,800 312,500
International Business Machines Corp. 2,500 249,675 287,188
Lernout & Hauspie Speech Products* 8,000 189,060 478,000
MRV Communications, Inc.* 6,000 217,312 124,500
Oracle Systems Corporation* 13,000 122,330 319,312
959,177 1,521,500
CONSUMER PRODUCTS (14.2%)
Black & Decker Corporation 10,000 216,760 610,000
The Gillette Company 3,616 166,636 411,320
Kimberly Clark Corporation 6,000 230,820 275,250
Sherwin Williams Company 6,000 198,150 198,750
Staples, Inc.* 6,000 175,875 173,625
Wal-Mart Stores, Inc. 8,000 196,800 485,000
1,185,041 2,153,945
DIVERSIFIED OPERATIONS (4.7%)
Corning, Inc. 12,000 196,566 417,000
ITT Industries, Inc. 8,000 74,752 299,000
271,318 716,000
EDUCATIONAL SERVICES (1.9%)
DeVRY Inc.* 6,000 132,660 131,625
Sylvan Learning Systems, Inc.* 5,000 163,750 163,750
296,410 295,375
ELECTRONICS, SEMICONDUCTORS AND RELATED (1.4%)
AMP, Inc. 6,000 240,948 206,250
FINANCIAL AND RELATED (8.0%)
Hartford Financial Services Corporation 8,000 160,875 915,000
NationsBank Corporation 4,000 240,350 307,000
401,225 1,222,000
FOOD, BEVERAGES AND RELATED (14.0%)
Bestfoods 10,000 199,538 581,250
Crown Cork & Seal Company, Inc. 5,000 239,438 237,500
Dole Food Company 6,000 209,775 298,500
Pepsico, Inc. 20,000 116,802 825,000
Tricon Global Restaurants, Inc.* 6,000 137,198 190,500
902,751 2,132,750
MEDICAL AND RELATED (17.8%)
Abbott Laboratories 15,000 182,381 1,230,000
Agouron Pharmaceuticals, Inc.* 5,000 170,000 151,875
Biogen, Inc.* 4,000 158,625 196,000
Boston Scientific Corporation* 5,000 234,785 358,125
Medtronics, Inc. 10,000 190,438 637,500
Schein Pharmaceutical, Inc.* 5,000 133,775 133,125
1,070,004 2,706,625
NATURAL GAS AND RELATED (1.3%)
Tenneco, Inc. 5,000 192,511 190,625
<PAGE>
OFFICE SUPPLIES (2.0%)
Xerox Corporation 3,000 253,065 304,875
TRANSPORTATION (1.7%)
Ryder System, Inc. 8,000 196,960 252,500
WATER TREATMENT AND POLLUTION CONTROL (3.0%)
Ionics, Inc.* 8,000 186,800 295,000
U. S. Filter Corporation* 6,000 207,210 167,883
394,010 462,883
Total common stocks $ 7,600,475 $ 14,776,953
SHORT-TERM DEBT (6.64%)
U.S. Treasury bills, due July 1998 $ 695,000 $ 688,540 $ 688,540
U.S. Treasury bills, due August 1998 $ 325,000 321,999 321,999
Total short term debt 1,010,539 1,010,539
Total investment securities -103.78% $ 8,611,014 $ 15,787,492
Other assets less liabilities - (3.78)% (574,687)
Net assets -100.00% $ 15,212,805
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<TABLE>
<CAPTION>
STATEMENT OF OPERATIONS -- YEAR ENDED JUNE 30, 1998
INVESTMENT INCOME
<S> <C> <C>
Dividends $ 140,626
Interest 86,653
Total income 227,279
Operating expenses
Investment advisory fees $ 116,367
Administrative fees 16,000
Custodian fees 7,768
Transfer agent fees 9,502
Legal fees 11,683
Accounting fees 14,200
Registration fees, licenses and other 3,012
Reports and notices to shareholders 7,950
Directors' fees and expenses 6,787
Insurance expense 1,547 194,816
Net investment income 32,463
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Realized gains
Proceeds from sales 2,536,839
Cost of securities sold 1,440,415
Net realized gains 1,096,424
Unrealized appreciation
Beginning of year 6,450,182
End of year 7,176,478
Increase in unrealized appreciation 726,296
Net realized and unrealized gains on investments 1,822,720
Net increase in net assets from operations $1,855,183
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
STATEMENT OF ASSETS AND LIABILITIES -- JUNE 30, 1998
ASSETS:
Investments in securities, at market value
(identified cost $8,611,014) $15,787,492
Cash 64,286
Receivable from sales of securities 489,558
Dividends receivable 10,850
Interest receivable 5,209
Prepaid expenses and other assets 2,473
16,359,868
LIABILITIES:
Payable for purchase of securities 1,129,027
Accrued expenses and other liabilities 18,036
1,147,063
Net assets $15,212,805
Net assets consist of
Paid in capital $ 7,442,861
Undistributed net investment income 49,023
Accumulated undistributed net
realized gains on investments 544,443
Net unrealized appreciation on investments 7,176,478
Net assets applicable to 1,253,019 shares outstanding $15,212,805
Net asset value per share $ 12.14
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<PAGE>
<TABLE>
<CAPTION>
STATEMENTS OF CHANGES IN NET ASSETS -- YEARS ENDED JUNE 30, 1998
1998 1997
Operations:
<S> <C> <C>
Net investment income $ 32,463 $ 68,884
Net realized gains on investments 1,096,424 441,872
Increase in unrealized appreciation of investments 726,296 1,593,707
Net increase in net assets resulting from operations 1,855,183 2,104,463
Distributions to shareholders:
Dividends paid from net investment income (59,092) (85,666)
Distributions from net realized gains (980,946) (575,189)
Net decrease in net assets resulting from distributions (1,040,038) (660,855)
Capital share transactions:
Net proceeds from sale of capital stock 708,014 210,399
Net asset value of shares issued as reinvestment
of dividends 988,680 619,796
1,696,694 830,195
Less cost of shares repurchased (1,566,042) (1,106,595)
Net increase (decrease) in net assets resulting from
capital share transactions 130,652 (276,400)
Total increase in net assets 945,797 1,167,208
NET ASSETS:
Beginning of year 14,267,008 13,099,800
End of year (note) $ 15,212,805 $ 14,267,008
</TABLE>
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS.
<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
Development Company
R.H. STEWART MITCHELL
Director
Private Investor
CRUGER S. RAGLAND
Director
President
Ragland Insurance
Agency, Inc.
ANN D. REED
Director
Private Investor
CUSTODIAN
The Union Bank of California, N.A.
San Francisco, California
TRANSFER AGENT
Portfolios, Inc.
Dallas, Texas
AUDITORS
Grant Thornton LLP
Dallas, Texas
INVESTMENT ADVISER
Portfolios, Inc.
Dallas, Texas
This report is prepared for the information of the shareholders of Armstrong
Associates, Inc. It is not authorized for distribution to prospective investors
in the Fund unless preceded or accompanied by an effective prospectus.
ARMSTRONG ASSOCIATES INC.
750 N. St. Paul, Suite 1300, L.B. 13
Dallas, Texas 75201-3250
(214) 720-9101 Fax: (214) 871-8948
<PAGE>
<TABLE>
<CAPTION>
CONDENSED FINANCIAL INFORMATION
Selected Per Share Data and Ratios
Per share income and capital changes for a share outstanding throughout the year ended June 30 (a)
1998 1997 1996 1995 1994 1993 1992
Net asset value
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $ 11.61 $ 10.45 $ 9.70 $ 8.19 $ 8.26 $ 7.08 $ 6.87
Income (loss) from
investment operations
Net investment income 03 .06 .05 .02 -- .02 06
Net realized and unrealized
gains (losses) on investments 1.38 1.64 1.10 2.12 .10 1.19 33
Total from investment operations 1.41 1.70 1.15 2.14 .10 1.21 39
Less distributions
Dividends from net
investment income 05 .07 .02 .04 -- .02 .15
Distributions from net
realized gains 83 .47 .38 .59 .17 .01 .03
Net asset value, end of period $ 12.14 $ 11.61 $ 10.45 $ 9.70 $ 8.19 $ 8.26 $ 7.08
Total return 13.31% 17.19 12.09 27.32 1.13 17.12 5.79
Ratios/supplemental data
Net assets, end of period (000's) $ 15,213 14,300 13,100 11,961 9,255 9,680 9,366
Ratio of expenses to average
net assets 1.3 1.4 1.4 1.8 1.8 1.8 1.9
Ratio of net investment income
to average net assets 2 .5 .5 .2 -- .2 .8
Average brokerage commission rate(c) .1880 .1503 .1442
Portfolio turnover rate 7% 7 19 12 15 17 35
<CAPTION>
CONDENSED FINANCIAL INFORMATION (Continued)
Selected Per Share Data and Ratios
Per share income and capital changes for a share outstanding throughout the year ended June 30 (a)
1991 1990 1989 1988 1987 1986 1985
Net asset value
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $ 7.38 $ 7.74 $ 7.17 $ 9.66 $ 8.72 $ 7.65 $ 7.29
Income (loss) from
investment operations
Net investment income .16 .23 .24 .09 .10 .14 .24
Net realized and unrealized
gains (losses) on investments (27) .19 .67 (.53) 1.51 1.17 1.02
Total from investment operations (.11) .42 .91 (.44) 1.61 1.31 1.26
Less distributions
Dividends from net
investment income .23 .24 .11 .14 .16 .24 .14
Distributions from net
realized gains .17 .54 .23 1.91 .51 -- .76
Net asset value, end of period $ 6.87 $ 7.38 $ 7.74 $ 7.17 $ 9.66 $ 8.72 $ 7.65
Total return (.92) 5.93 13.23 (6.27) 20.00 17.80 19.10
Ratios/supplemental data
Net assets, end of period (000's) 9,228 9,770 9,887 10,435 12,294 11,714 10,957
Ratio of expenses to average
net assets 1.9 1.8 1.9 2.0 1.7 1.6 1.7
Ratio of net investment income
to average net assets 2.3 2.9 3.0 1.3 1.0 1.6 3.1
Average brokerage commission rate(c)
Portfolio turnover rate 24 44 46 20 51 54 53
<CAPTION>
CONDENSED FINANCIAL INFORMATION (Continued)
Selected Per Share Data and Ratios
Per share income and capital changes for a share outstanding throughout the year ended June 30 (a)
1984 1983 1982 1981 1980 1979 1978
Net asset value
<S> <C> <C> <C> <C> <C> <C> <C>
Beginning of period $ 10.22 $ 7.10 $ 9.37 $ 7.74 $ 7.06 $ 6.50 $ 5.68
Income (loss) from
investment operations
Net investment income .16 .21 .41 .24 .23 .16 .08
Net realized and unrealized
gains (losses) on investments (2.51) 3.72 (1.28) 2.62 1.40 .84 .78
Total from investment operations (2.35) 3.93 (.87) 2.86 1.63 1.00 .86
Less distributions
Dividends from net
investment income .20 .43 .19 .23 .13 .11 .04
Distributions from net
realized gains .38 .38 1.21 1.00 .82 .33 --
Net asset value, end of period $ 7.29 $ 10.22 $ 7.10 $ 9.37 $ 7.74 $ 7.06 $ 6.50
Total return (24.01) 61.27 (9.87) 38.04 24.08 15.17 15.31
Ratios/supplemental data
Net assets, end of period (000's) 9,788 12,869 7,669 8,277 5,777 4,538 3,886
Ratio of expenses to average
net assets 1.6 1.6 1.7 1.5 1.6 1.5 1.5
Ratio of net investment income
to average net assets 1.9 2.4 5.6 2.7 3.2 2.3 1.6
Average brokerage commission rate(c)
Portfolio turnover rate 96 59 34 60 131 97 151
<CAPTION>
CONDENSED FINANCIAL INFORMATION (Continued)
Selected Per Share Data and Ratios
Per share income and capital changes for a share outstanding throughout the year ended June 30 (a)
1977 1976 1975
Net asset value
Beginning of period $ 5.30 $ 3.81 $ 2.74
Income (loss) from
investment operations
Net investment income .04 .03 .07
Net realized and unrealized
gains (losses) on investments .38 1.53 1.04
Total from investment operations .42 1.56 1.11
Less distributions
Dividends from net
investment income .04 .07 .04
Distributions from net
realized gains -- -- --
Net asset value, end of period $ 5.68 $ 5.30 $ 3.81
Total return 8.05 42.06 41.46%
Ratios/supplemental data
Net assets, end of period (000's) 3,649 3,785 $ 2,892
Ratio of expenses to average
net assets 1.5 1.5 1.5
Ratio of net investment income
to average net assets 1.9 .8 2.7
Average brokerage commission rate(c)
Portfolio turnover rate 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-four-year period ended June 30,
1998. (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.
