TO OUR SHAREHOLDERS:
On December 31, 1997, Armstrong Associates, Inc. had total net assets of
$13,652,448, a per share price of $10.66 and a total investment return for the
calendar year of +14.15%. In December 1997, Armstrong distributed a total of
$0.88 in ordinary income and capital gains dividends to shareholders of record
December 12, 1997. These distributions are not included in Armstrong's year-end
price.
Overall, financial assets recorded a positive year for 1997 and stocks with
large market capitalizations and capitalization weighted market indices
generally continued to lead in investment results. Within this constructive
background, there was wide divergence in results between individual stock
issues, industry categories and market capitalization sizes. The economic
problems of the Pacific Rim countries, such as South Korea, Thailand and
Indonesia, surfaced in the second half of 1997 and negatively impacted the
market prices of many issues that were perceived to have exposure to the
problems of that area. Many technology issues were particularly hard hit as well
as those with possible financial exposure to the so called "Asian flu".
Looking ahead, the inflation outlook continues to appear quite favorable and we
expect long-term interest rates to stay relatively low. While economic growth in
the United States may be moderately restrained by international economic
weakness, the investment environment of the U.S. should compare quite favorably
to most other countries. While the market can be expected to continue to show a
high level of volatility, we believe equity investments offer attractive
investment return prospects from current levels. In the Armstrong portfolio, we
plan to continue to concentrate our investments in areas offering the potential
for strong, long-term growth. We are currently emphasizing technology, medical
and consumer related investments.
Please call or write if you have any questions concerning your Armstrong
investment.
Sincerely,
C.K. Lawson
February 15, 1998
<PAGE>
INVESTMENT PORTFOLIO AS OF DECEMBER 31, 1997
<TABLE>
<CAPTION>
No. of % of
shares Industry & Issue Cost Market value assets
AEROSPACE (1.4%)
<S> <C> <C> <C>
4,000 Boeing Co. $ 236,300 $ 197,000 1.4%
BROADCASTING & RELATED (6.9%)
6,000 A.H. Belo Corp. 171,285 $ 318,000 2.3
10,000 Time Warner, Inc. 208,193 617,500 4.5
CHEMICALS & RELATED (6.9%)
15,000 Avery Dennison Corp. 211,200 675,000 4.9
6,000 Praxair, Inc. 212,890 270,750 2.0
COMPUTER, SOFTWARE & RELATED (9.8%)
5,500 ADAPTEC, Inc. 240,000 207,625 1.5
10,000 Cadence Design 180,800 245,000 1.8
2,500 IBM Corp. 249,675 262,188 1.9
4,000 Lernout & Hauspie 189,060 186,000 1.4
6,000 MRV Communications 217,313 146,250 1.1
13,000 Oracle Systems Corp. 122,330 289,250 2.1
CONSUMER PRODUCTS (10.0%)
10,000 Black & Decker Corp. 216,760 393,750 2.9
3,616 The Gillette Co. 166,636 365,668 2.7
6,000 Kimberly Clark Corp. 230,820 293,250 2.1
8,000 Wal-Mart Stores 196,800 317,000 2.3
DIVERSIFIED OPERATIONS (5.1%)
12,000 Corning, Inc. 196,566 445,500 3.3
8,000 ITT Industries, Inc. 74,753 250,500 1.8
ELECTRONICS, SEMICONDUCTORS & RELATED (4.8%)
6,000 AMP, Inc. 240,948 252,750 1.9
7,000 Motorola, Inc. 98,385 400,750 2.9
FINANCIAL & RELATED (7.3%)
8,000 Hartford Financial Services 160,875 749,000 5.5
4,000 NationsBank Corp. 240,365 243,000 1.8
FOOD, BEVERAGES & RELATED (13.6%)
5,000 CPC International, Inc. 214,287 534,375 3.9
5,000 Crown Cork & Seal Co. 239,438 250,625 1.8
6,000 Dole Food Co. 209,775 274,500 2.0
20,000 Pepsico, Inc. 116,802 735,000 5.4
2,000 Tricon Global Restaurants 9,598 58,125 .4
MEDICAL & RELATED (13.9%)
15,000 Abbott Laboratories 182,381 990,000 7.3
4,000 Biogen, Inc. 158,625 145,500 1.1
5,000 Boston Scientific Corp. 234,785 230,625 1.7
10,000 Medtronics, Inc. 190,438 526,250 3.9
NATURAL GAS & RELATED (1.4%)
5,000 Tenneco, Inc. 192,511 196,875 1.4
OFFICE SUPPLIES (1.6%)
3,000 Xerox Corp. 253,065 221,250 1.6
TRANSPORTATION (1.9%)
8,000 Ryder Systems, Inc. 196,960 265,000 1.9
WATER TREATMENT/POLLUTION CONTROL (2.3%)
8,000 Ionics, Inc. 186,800 314,000 2.3
CASH, SHORT-TERM DEBT AND RECEIVABLES
LESS LIABILITIES 1,683,473 1,784,593 13.1
Total Net Assets $8,130,892 $13,652,448 100.0%
</TABLE>
<PAGE>
STATEMENT OF NET ASSETS FOR DECEMBER 31, 1997
ASSETS
Investment in securities at market value $13,551,329
Cash held by custodian 75,808
Prepaid expenses 1,747
Interest receivable 4,948
Dividends receivable 11,674
Receivable for fund shares purchased 35,100
Total Assets $13,680,606
LIABILITIES
Accounts payable and accrued expenses 16,340
Payable for fund shares redeemed 11,818
Total Liabilities $ 28,158
Net Assets--equivalent to $10.66 per share with
1,281,122.111 shares outstanding $13,652,448
STATEMENT OF CHANGES IN NET ASSETS--6 MONTHS ENDED DECEMBER 31, 1997
OPERATIONS:
Net investment income $ 12,229
Net realized gains from security transactions 960,766
Decrease in unrealized appreciation of investments (1,030,780)
Net decrease in net assets resulting from operations $ (57,785)
Distributions to shareholders
Dividends paid from net investment income 59,093
Distributions from net realized gains 980,946
1,040,039
Capital share transactions
Net proceeds from sale of capital stock 281,559
Net asset value of shares issued to shareholders
in reinvestment of net investment income and net
realized gains on security transactions 988,681
1,270,240
Less cost of shares repurchased 786,976
483,264
Net decrease in net assets (614,560)
Net assets:
Beginning of period 14,267,008
End of period $ 13,652,448
<PAGE>
STATEMENT OF OPERATIONS--6 MONTHS ENDED DECEMBER 31, 1997
INVESTMENT INCOME
Income:
Dividends $ 64,712
Interest 50,898
Total income 115,610
Operating expenses:
Advisory and management fees 55,500
Administrative fees 9,500
Custodian fees 3,790
Transfer agent fees 4,393
Registration fees, licenses and other 2,064
Legal fees 7,446
Accounting fees 6,927
Director's fees 4,850
Reports and notices to shareholders 8,077
Insurance 834 103,381
Net investment income 12,229
REALIZED AND UNREALIZED GAINS AND LOSSES ON INVESTMENTS
Realized gains from security transactions
(excluding short-term obligations)
Proceeds from sales 2,048,046
Cost of securities sold 1,087,280
Net realized gains from security transactions 960,766
Unrealized appreciation (depreciation) of investments
Beginning of period 6,450,182
End of period 5,419,402
Increase/decrease in unrealized appreciation (1,030,780)
Net realized and unrealized loss on investments $ (70,014)
<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
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 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.
