FILE NO. 2-27539
AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 27, 1999
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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. 44 [ x ]
and/or
REGISTRATION STATEMENT UNDER THE INVESTMENT COMPANY ACT OF 1940
Amendment No. 30 [ 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, 1999
It is proposed that this filing will become effective (check appropriate box)
[ ] immediately upon filing [ ] on (date) pursuant
pursuant to paragraph (b) to paragraph (a)(i)
[ ] on (date) pursuant to [ ] 75 days after filing
paragraph (b) pursuant to paragraph (a)(ii)
[ ] 60 days after filing pursuant [ x ] on October 28, 1999 pursuant to
to paragraph (a)(i) paragraph (a)(ii) of Rule 485.
If appropriate, check the following box:
[ ] this post-effective admendment designates a new effective date for a
previously filed post-effective amendment
Title of Securities Being Registered..............Common Stock ($1.00 Par Value)
<PAGE>
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 Pages.......................... Front and Back Cover Pages
2. Risk/Return Summary : Investments, .. Summary Information on Armstrong
Risks and Performance
3. Risk/Return Summary : Fee Table...... Fees and Expenses
4. Investment Objectives, Principal..... Investment Objective and Policies of
Investment Strategies, and........... Armstrong, Discussion of Primary
Related Risks Risks
5. Management's Discussion of........... Management's Discussion of Fund
Fund Performance Performance For the 1999 Fiscal
Year, Graphs of Historical
Performance and Related Comments
6. Management, Organization, and........ Investment Management
Capital Structure
7. Shareholder Information.............. Pricing of Fund Shares, Information
on the Purchase and Redemption of
Armstrong Shares, Dividends and
Capital Gains, Shareholders Services
8. Distribution Arrangements............ *
9. Financial Highlights Information..... Condensed Financial Information
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 and Table of Contents..... Cover Page
11. Fund History......................... Armstrong's History and
Classification
12. Description of the Fund and its ..... Armstrong's History and
Investments and Risks Classification, Certain Fundamental
Restrictions on Investment Policy
13. Management of the Fund............... Management of Armstrong
14. Control Persons and Principal........ Management of Armstrong
Holders of Securities
15. Investment Advisory and ............. Investment Adviser
Other Services
16. Brokerage Allocation and ............ Brokerage Allocation
Other Practices
<PAGE>
17. Capital Stock and Other Securities... Description of Capital Stock
18. Purchase, Redemption and Pricing .... Pricing of Shares, Purchase of
of Shares Shares, and Redemption of Shares
19. Taxation of the Fund................. Dividends and Federal Income Tax
Information
20. Underwriters......................... *
21. Calculation of Performance Data...... Calculation of Performance Data
22. Financial Statements................. Financial Statements
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* Inapplicable or negative
<PAGE>
FRONT COVER
ARMSTRONG ASSOCIATES, INC.
PROSPECTUS
OCTOBER 28, 1999
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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 this
objective through 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 contains information an investor should know about the Fund
before investing. Please retain it for future reference.
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THE SECURITIES AND EXCHANGE COMMISSION HAS NOT APPROVED OR DISAPPROVED THESE
SECURITIES NOR PASSED UPON THE ADEQUACY OF THIS PROSPECTUS. ANY REPRESENTATION
TO THE CONTRARY IS A CRIMINAL OFFENSE.
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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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<PAGE>
Inside Front Cover or
Back Cover
ARMSTRONG ASSOCIATES, INC
Prospectus
October 28, 1999
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TABLE OF CONTENTS PAGE NUMBER
Summary Information on Armstrong
Fees and Expenses
What is a Mutual Fund
Introduction to Armstrong Associates, Inc.
Who Should Invest
Investment Objective and Policies of Armstrong
Discussion of Primary Risks
Management Discussion of Fund Performance
for the 1999 Fiscal Year
Graphs of Historical Performanc
and Related Comments
Investment Management
Pricing of Fund Shares
Information on Purchase and Redemption
of Armstrong Shares
Dividends, Capital Gains Distributions
and Federal Tax Information
Shareholder Services
Condensed Financial Information
Purchase Application
Instructions for Purchase Application
<PAGE>
BACK COVER
ARMSTRONG ASSOCIATES, INC.
Additional Information about the Fund's investments and operations is available
in the Fund's annual and semi-annual shareowner reports. A Statement of
Additional Information contains more details, and is incorporated in this
Prospectus by reference.
These documents and other information are available upon request, without
charge, by writing or calling collect:
Armstrong Associates, Inc.
750 N. St. Paul, LB 13
Suite 1300
Dallas, Texas 75201-3250
(214)720-9101
(214)871-8948 FAX
Information about the Fund, including the Statement of Addition Information, can
be reviewed and copied at the SEC's Public Reference Room in Washington DC (call
800-SEC-0330). Reports and other information about the Fund are also available
at the SEC's website (http://www.sec.gov) and copies may be obtained, upon
payment of a duplicating fee, by writing the Public Reference Section of the
SEC, Washington DC 20549-6009. Armstrong's Investment Company Act file number is
811-1548.
<PAGE>
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SUMMARY INFORMATION ON ARMSTRONG
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INVESTMENT OBJECTIVE
The investment objective of the Fund is capital growth.
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PRINCIPAL INVESTMENT STRATEGIES
Armstrong invests in common stocks which offer the prospect of growth in
earnings and market value over a one to three year period. The Fund's portfolio
can include investments in large market capitalization companies as well as
mid-cap and small-cap companies. High quality short-term debt investments, such
as U.S. Treasury Bills, are used to provide portfolio liquidity and to reduce
the Fund's exposure to equities to moderate market risk.
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PRIMARY RISK OF INVESTING
The Fund's share price changes daily based on the value of its holdings.
You can lose money by investing in the Fund because:
- Equity markets and individual stocks are inherently volatile and
prices fluctuate widely which results in MARKET RISK.
- Selection of portfolio investments that are unsuccessful due to market
timing or fundamental business reasons can result in STOCK SELECTION
RISK.
- Varying the investment balance of the portfolio between equities and
short term debt can result in reduced portfolio equity exposure during
up market cycles and excessive exposure during down markets resulting
in PORTFOLIO BALANCE RISK.
Any and all of the above factors could result in Armstrong failing to
achieve its objective of capital growth. The Fund's total return can be
expected to fluctuate within a wide range, and stock value declines can
continue for an extended period of time.
<PAGE>
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INFORMATION ON RISK/RETURN
The bar chart and table below provide an indication of the risk of investing in
the Fund. The bar chart shows the Fund's performance in each calendar year over
a ten-year period. The table shows how the Fund's average annual returns for
one, five, and ten calendar years compare with those of a broad-based securities
market index. Keep in mind that the Fund's past performance does not indicate
how it will perform in the future.
CALENDAR YEAR TOTAL RETURNS
1989 14.35%
1990 6.69%
1991 18.73%
1992 6.77%
1993 12.73%
1994 5.52%
1995 19.06%
1996 9.48%
1997 14.15%
1998 19.29%
Note: 1999 year-to-date return is +11.0% (December 31, 1998 through quarter
ending June 30, 1999) Highest return for a quarter was +23.3% (quarter
ending December 31, 1998) Lowest return for a quarter was -15.1%
(quarter ending September 30, 1998)
AVERAGE ANNUAL TOTAL RETURN
(FOR YEAR ENDING 12/31/1998)
1 Year 5 Years 10 Years
Armstrong Associates, Inc 19.29% 13.37% 11.06%
Standard & Poor's 500 26.67% 22.10% 15.68%
Value Line Composite* -4.06% 8.80% 3.68%
*Price only
<PAGE>
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FEES AND EXPENSES
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The following table describes the fees and expenses you would pay if you buy and
hold shares of the Fund. The expenses shown under Annual Fund Operating Expenses
are based upon those incurred in the fiscal year ended June 30, 1999.
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SHAREHOLDER FEES (fees paid directly from your investment)
Sales Charge (Load) Imposed on Purchases: None
Deferred Sales Charge (Load): None
Sales Charge (Load) Imposed on Reinvested Dividends: None
Redemption Fee: None
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ANNUAL FUND OPERATING EXPENSES (expenses deducted from
the Fund's assets)
Management Expenses 0.80%
12b-1 Distribution Fees: None
Other Expenses: 0.44%
TOTAL ANNUAL OPERATING EXPENSES: 1.24%
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The following example is intended to help you compare the cost of investing in
Armstrong with the cost of investing in other mutual funds. It illustrates the
hypothetical expenses that you would incur over various periods if you invest
$10,000 in the Fund. This example assumes that the Fund provides a return of 5%
a year, and that the operating expenses remain the same. The results apply
whether or not you redeem your investment at the end of each period.
1 Year 3 Years 5 Years 10 Years
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$124 $391 $686 $1,560
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THIS EXAMPLE SHOULD NOT BE CONSIDERED TO REPRESENT ACTUAL EXPENSES OR
PERFORMANCE FROM THE PAST OR FOR THE FUTURE. ACTUAL FUTURE EXPENSES MAY BE
HIGHER OR LOWER THAN THOSE SHOWN.
<PAGE>
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WHAT IS A MUTUAL FUND
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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 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 record keeping, brokerage commission negotiation and arranges for
the safekeeping of securities, and the responsibilities involved with the
day-to-day operation of a securities portfolio.
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WHO SHOULD INVEST
================================================================================
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.
<PAGE>
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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 strong growth potential
over a one to three year period and that are judged to be attractively valued
relative to the market and to their prospects. Investments are selected through
fundamental research on individual companies that take into consideration
industry, economic, political and marketplace factors that are expected to play
a role in the success of the investment. After purchase, investments are
monitored closely to gauge actual developments verses expectations.
This fundamental approach to growth investments is not short term oriented and,
as a result, the Fund's portfolio turnover ratio is usually relatively low. The
Fund may sell a security within a relatively short period of time if
developments with the investment indicate a change would be advisable.
The general market environment and level of perceived valuation risk in the
market as well as the availability of reasonably valued investment opportunities
all play a role in decisions to adjust the Fund's exposure to common stocks.
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. Over the past five years, as of the June 30 fiscal year end, the
portion of the portfolio invested in common stock ranged from a high of 97.1% to
a low of 82.3%. The percentage of the Fund's portfolio invested in common stocks
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.
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. The policies and
techniques used in seeking to attain the objective of the Fund may be changed
without shareholder approval.
<PAGE>
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DISCUSSION OF PRIMARY RISKS
================================================================================
MARKET RISK
Armstrong is managed with the objective of capital growth. Dividend income
is incidental to the primary objective. Common stocks, the primary
investment vehicle of the Fund, have a high level of price volatility that
results in broad swings in the price level of individual stocks and equity
markets. Stock values fluctuate in response to the activities of individual
companies and general market and economic conditions. These fluctuations
have a direct impact on Armstrong's per share price and the total return to
shareholders.
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STOCK SELECTION RISK
The Fund's portfolio at any time will hold a relatively limited number of
stock issues when compared to the market overall. In addition, most broad
market indices are market- value weighted, giving large-cap stocks included
in an index a disproportionate impact on the overall performance of the
index. Importantly, Fund portfolio investments are selected based on the
investment prospects seen over a time horizon of from one to three years
resulting in a timing risk between year-to-year market results and the
timing of the investments returns expected to be seen for individual stocks
investments . These factors can result in the Fund underperforming specific
broad market indices as well as other funds with similar investment
objectives.
- --------------------------------------------------------------------------------
PORTFOLIO BALANCE RISK
The Fund invests in high quality short term debt in varying amounts when a
reduced level of exposure to equity investments is desired to lower market
risk and to enhanced portfolio liquidity for market timing purposes. The
use of short term debt in the Fund portfolio can restrain asset growth in
periods of rising markets and cushion asset declines in negative markets.
Any of the above factors could result in Armstrong failing to achieve its
objective of capital growth. The Fund's total return can be expected to
fluctuate within a wide range, so an investor could lose money with an
investment in Armstrong.
<PAGE>
================================================================================
MANAGEMENT'S DISCUSSION OF FUND
PERFORMANCE FOR THE 1999 FISCAL YEAR
================================================================================
Armstrong's fiscal year ending June 30, 1999 was a period characterized by a
high level of day-to-day volatility in individual stocks and wide performance
divergence between industry stock groups and market sectors. Overall, large-cap
stocks generally outperformed mid-cap and small- cap issues and technology
related issues tended, on balance, to lead the market.
Reversing a declining trend that had been in place since calender 1997, interest
rates increased sharply during the second half of Armstrong's fiscal year with
the effect that the market performance of financial and interest sensitive
issues were generally held back. Energy prices also increased significantly
during the same period. Nevertheless, despite these reasons for investor
concern, inflation stayed low through the end of Armstrong's fiscal year. On a
more positive note, economic concerns relating to Pacific Rim countries that had
transfixed investors during Armstrong's prior fiscal year moderated during the
twelve months under review.
Large-cap media, technology, medical related and retail issues added the bulk of
positive results to Armstrong's investment return for the year. Mid-cap and
smaller-cap issues included in Armstrong's portfolio along with consumer
nondurable holdings acted as the primary drag on Armstrong's results.
Overall for the fiscal year, Armstrong achieved a total investment return of
+16.26%. During the same period, the Standard and Poor's (S & P) 500 Index, a
market capitalization weighted index which is dominated large-cap issues, had a
total investment return of +22.76%. Highlighting the disparity between results
for large-cap issues and mid and small-cap performance for the year, the S & P
400 MidCap Index had a price increase of +15.72% while the S & P 600 SmallCap
Index declined -3.14% in price. Reflective, we believe, of the general market
environment that investors dealt with for the twelve months is the -2.29% price
decline recorded by the Value Line Composite Index, which covers approximately
1,700 equally-weighted issues. As a baseline to equity results, long term bonds,
as represented by the Lehman Brothers U.S. Treasury Composite Index, had a total
return, interest and price change, of +2.95%.
<PAGE>
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GRAPHS OF HISTORICAL PERFORMANCE AND RELATED COMMENTS
================================================================================
The following graphs compare the change in value over the past ten and
twenty-five 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, which has never been managed to
emulate any particular market index, was made at the Fund's net asset value at
the beginning of the 10 and 25 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. The S&P 500 is adjusted to
reflect reinvestment of dividends paid by securities in the index. The Value
Line Index reflects only changes in the prices of the securities included in the
index and does not include dividend reinvestments.
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. Stocks included in the Value Line Index are
equally-weighted to reflect the average price change in the stocks included in
the index.
<PAGE>
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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 30,1999
FISCAL YEAR ENDED JUNE 30
Armstrong Associates $28,949.85
S&P 500 (Composite) $55,797.12
Value Line Composite $14,009.36
Past performance is not predictive of future performance.
Data Source: Micropal, Inc.
<PAGE>
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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 25 YEARS ENDING JUNE 30,1999
FISCAL YEAR ENDED JUNE 30
Armstrong Associates $282,181.19
S&P 500 (Composite) $406,279.24
Value Line Composite $ 37,315.65
Past performance is not predictive of future performance.
Data Source: Micropal, Inc.
<PAGE>
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INVESTMENT MANAGEMENT
================================================================================
INVESTMENT ADVISER
The investments of the Fund are managed by Portfolios, Inc. Portfolios 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, Portfolios
is paid monthly a fee at the annual rate of 0.8% of the Fund's average
daily net assets. Portfolios 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.
Portfolios also performs certain accounting services for the Fund under an
administrative services agreement for which the Fund compensates Portfolios
at a rate of $16,000 per year. In addition, Portfolios is the Fund's
transfer agent. As the transfer agent Portfolios receives a fee of $8,400
per year from the Fund.
Portfolios 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 whose business relates primarily to
Portfolios.
PORTFOLIO MANAGER
C. K. Lawson is the individual employed by Portfolios 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. Mr. Lawson has been the
President, Treasurer and a director of the Fund and Portfolios since 1971.
<PAGE>
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PRICING OF FUND SHARES
================================================================================
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.
The Fund shares will not be priced on any days that the New York Stock Exchange
does not open (weekends and national holidays).
================================================================================
INFORMATION ON THE PURCHASE AND REDEMPTION OF ARMSTRONG SHARES
================================================================================
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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.
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 and check have 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 will incur an
expense to replace it.
<PAGE>
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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. Redemption proceeds
will not be mailed, however, until sufficient time has passed to provide
reasonable assurance that checks or drafts (including certified or
cashier's checks) associated with share purchases 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 may require 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.
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.
<PAGE>
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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. Information 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 the net income and net capital gains distributed to
shareholders which results in a higher level of net income and net capital gains
available for distribution.
Unless you elect otherwise, dividends and capital gains distributions will be
reinvested. They will be paid to you in the form of additional shares of the
Fund which will be credited to your account.
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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).
Additional information regarding the Systematic Cash Withdrawal Plan may be
obtained from the Fund.
INDIVIDUAL RETIREMENT ACCOUNT ("IRA"):
The Fund offers a prototype tax-sheltered IRA retirement plan for
investments in shares of the Fund. Anyone interested in establishing an IRA
should request further information, including copies of the plan documents
and more detailed descriptions of the plan, from the Fund.
<PAGE>
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CONDENSED FINANCIAL INFORMATION
================================================================================
Selected per Share Data and Ratios
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 12.14 $ 11.61 $ 10.45 $ 9.70 $ 8.19 $ 8.26 $ 7.08
Income (loss) from investment operations
Net investment income (loss) (.01) .03 .06 .05 .02 -- .02
Net realized and unrealized gains
(losses) on investments 1.89 1.38 1.64 1.10 2.12 .10 1.19
------- ------- ------- ------- ------- ------- -------
Total from investment operations 1.88 1.41 1.70 1.15 2.14 .10 1.21
Less distributions
Dividends from net investment income .04 .05 .07 .02 .04 -- .02
Distributions from net realized gains .45 .83 .47 .38 .59 .17 .01
------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $ 13.53 $ 12.14 $ 11.61 $ 10.45 $ 9.70 $ 8.19 $ 8.26
======= ======= ======= ======= ======= ======= =======
Total return 16.26% 13.31% 17.19% 12.09% 27.32% 1.13% 17.12%
Ratios/supplemental data
Net assets, end of period (000's) 17,214 15,213 14,300 13,100 11,961 9,255 9,680
Ratio of expenses to average net assets 1.2 1.3 1.4 1.4 1.8 1.8 1.8
Ratio of net investment income
to average net assets (.1) .2 .5 .5 .2 -- .2
Portfolio turnover rate 2% 7% 7% 19% 12% 15% 17%
<CAPTION>
1992 1991 1990 1989 1988 1987 1986
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 6.87 $ 7.38 $ 7.74 $ 7.17 $ 9.66 $ 8.72 $ 7.65
Income (loss) from investment operations
Net investment income (loss) .06 .16 .23 .24 .09 .10 .14
Net realized and unrealized gains
(losses) on investments .33 (.27) .19 .67 (.53) 1.51 1.17
------- ------- ------- ------- ------- ------- -------
Total from investment operations .39 (.11) .42 .91 (.44) 1.61 1.31
Less distributions
Dividends from net investment income .15 .23 .24 .11 .14 .16 .24
Distributions from net realized gains .03 .17 .54 .23 1.91 .51 --
------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $ 7.08 $ 6.87 $ 7.38 $ 7.74 $ 7.17 $ 9.66 $ 8.72
======= ======= ======= ======= ======= ======= =======
Total return 5.79% (.92)% 5.93% 13.23% (6.27)% 20.00% 17.80%
Ratios/supplemental data
Net assets, end of period (000's) 9,366 9,228 9,770 9,887 10,435 12,294 11,714
Ratio of expenses to average net assets 1.9 1.9 1.8 1.9 2.0 1.7 1.6
Ratio of net investment income
to average net assets .8 2.3 2.9 3.0 1.3 1.0 1.6
Portfolio turnover rate 35% 24% 44% 46% 20% 51% 54%
<CAPTION>
1985 1984 1983 1982 1981 1980 1979
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 7.29 $ 10.22 $ 7.10 $ 9.37 $ 7.74 $ 7.06 $ 6.50
Income (loss) from investment operations
Net investment income (loss) .24 .16 .21 .41 .24 .23 .16
Net realized and unrealized gains
(losses) on investments 1.02 (2.51) 3.72 (1.28) 2.62 1.40 .84
------- ------- ------- ------- ------- ------- -------
Total from investment operations 1.26 (2.35) 3.93 (.87) 2.86 1.63 1.00
Less distributions
Dividends from net investment income .14 .20 .43 .19 .23 .13 .11
Distributions from net realized gains .76 .38 .38 1.21 1.00 .82 .33
------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $ 7.65 $ 7.29 $ 10.22 $ 7.10 $ 9.37 $ 7.74 $ 7.06
======= ======= ======= ======= ======= ======= =======
Total return 19.10% (24.01)% 61.27% (9.87)% 38.04% 24.08% 15.17%
Ratios/supplemental data
Net assets, end of period (000's) 10,957 9,788 12,869 7,669 8,277 5,777 4,538
Ratio of expenses to average net assets 1.7 1.6 1.6 1.7 1.5 1.6 1.5
Ratio of net investment income
to average net assets 3.1 1.9 2.4 5.6 2.7 3.2 2.3
Portfolio turnover rate 53% 96% 59% 34% 60% 131% 97%
<CAPTION>
1978 1977 1976 1975
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 5.68 $ 5.30 $ 3.81 $ 2.74
Income (loss) from investment operations
Net investment income (loss) .08 .04 .03 .07
Net realized and unrealized gains
(losses) on investments .78 .38 1.53 1.04
------- ------- ------- -------
Total from investment operations .86 .42 1.56 1.11
Less distributions
Dividends from net investment income .04 .04 .07 .04
Distributions from net realized gains -- -- -- --
------- ------- ------- -------
Net asset value, end of year $ 6.50 $ 5.68 $ 5.30 $ 3.81
======= ======= ======= =======
Total return 15.31% 8.05% 42.06% 41.46%
Ratios/supplemental data
Net assets, end of period (000's) 3,886 3,649 3,785 2,892
Ratio of expenses to average net assets 1.5 1.5 1.5 1.5
Ratio of net investment income
to average net assets 1.6 1.9 .8 2.7
Portfolio turnover rate 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-five-year period ended June 30, 1999.
(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.
<PAGE>
================================================================================
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)
================================================================================
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)
<PAGE>
================================================================================
SIGNATURE INFORMATION
Your signature should correspond to the name used in registration. If there
are co-owners, both must sign.
================================================================================
CERTIFICATION AND ACKNOWLEDGMENT
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
<PAGE>
================================================================================
INSTRUCTIONS FOR PURCHASE APPLICATION
================================================================================
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 75201-3250
Call Armstrong at (214) 720-9101 if you have any questions on completing the
Purchase Application.
DO NOT USE THE PURCHASE APPLICATION ON PAGES 13 AND 14 TO OPEN AN IRA ACCOUNT.
APPROPRIATE FORMS FOR AN IRA 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: 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.
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
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.
<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
This Statement of Additional Information of the Fund is not a prospectus
and should be read in conjunction with the Prospectus of the Fund which has been
filed with the Securities and Exchange Commission. The Prospectus can be
obtained by writing or calling collect the Fund at the above telephone number or
address.
TABLE OF CONTENTS
Page
----
Armstrong's History and Classification........................... 2
Certain Fundamental Restrictions on Investment Policy............ 2
Management of Armstrong.......................................... 3
Investment Adviser............................................... 5
Brokerage Allocation............................................. 6
Description of Capital Stock..................................... 7
Pricing of Shares................................................ 7
Purchase of Shares............................................... 7
Redemption of Shares............................................. 8
Calculation of Performance Data.................................. 9
Dividends and Federal Income Tax Information..................... 9
Other Information................................................ 10
Custodian................................................. 10
Transfer Agent............................................ 10
Independent Auditors...................................... 10
Legal Counsel............................................. 10
Financial Statements............................................. 11
--------------------
The date of this Statement of Additional Information and the Prospectus is
October 28, 1999.
<PAGE>
ARMSTRONG'S HISTORY AND CLASSIFICATION
The Fund was incorporated under Texas law in 1967. Since that time the Fund
has been a diversified, open-end investment management company with the
investment objective of capital growth
CERTAIN FUNDAMENTAL RESTRICTIONS ON INVESTMENT POLICY
The Fund operates under certain restrictions on investment policy which are
fundamental 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>
MANAGEMENT OF ARMSTRONG
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 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. The directors and officers of the Fund are:
EUGENE P. FRENKEL, M.D. - Director of the Fund, age 70, - 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 63, - is
President, Treasurer and a director of the Adviser and its parent, Lawson
Investments, Inc. 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 71, - has been President of
Maclay Properties 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 69, - 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 66, - 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 D. REED - Director of the Fund, age 66, - is a private investor whose
address is 3514 Milton, Dallas, Texas.
CANDACE L. KING - Vice President and Secretary of the Fund, age 51, - 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 routinely 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 received fees for retainers and for attending Board of Directors
meetings aggregating $6,900 during the fiscal year ended June 30, 1999. The
compensation paid by the Fund to the Fund's directors for the fiscal year ended
June 30, 1999 was as follows:
COMPENSATION TABLE*
- --------------------------------------------------------------------------------
AGGREGATE
COMPENSATION
NAME POSITION FROM FUND
- ------------------------------ ----------------- -----------------------
Eugene P. Frenkel, M.D. Director $1,200
Douglas W. Maclay Director $1,500
R. H. Stewart Mitchell, Jr. Director $1,200
Cruger S. Ragland Director $1,500
Ann D. Reed Director $1,500
*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.
On August 1, 1999 the officers and directors named above, as a group,
beneficially owned approximately 22.2% of the outstanding shares of the Fund,
including approximately 8.7% beneficially owned by Mr. Mitchell and
approximately 5.2% beneficially owned by Mr. Ragland. To the knowledge of the
Fund, no other person beneficially owned 5% or more of its outstanding shares.
-4-
<PAGE>
INVESTMENT ADVISER
Since its organization in 1971, Portfolios, Inc. ("the Advisor") has been
the investment adviser of the Fund. Pursuant to an investment advisory agreement
dated October 30, 1981 (the "Advisory Agreement"), Portfolios 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 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 Portfolios.
Portfolios also performs for the Fund certain accounting services pursuant to an
administrative services agreement dated October 25, 1985, for which the Fund
compensates Portfolios at the rate of $16,000 per annum.
The Advisory Agreement provides that Portfolios 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, 1997, 1998 and 1999, the Fund
paid investment advisory fees of $104,831 and $116,387 and $122,851
respectively.
Effective January 1, 1995, Portfolios 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. Portfolios is a subagent with respect to certain record
keeping and administrative services for certain individual retirement accounts,
pursuant to an arrangement with The Union Bank of California, N. A. 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.
Portfolios 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.
-5-
<PAGE>
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 Portfolios,
Inc.. 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.
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 1999 all of the Fund's brokerage
commissions were paid to brokers that supplied Research to the Adviser. 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,
1999. 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, 1997, 1998 and 1999 the Fund paid
aggregate brokerage commissions of $7,183, $15,694 and $7,700 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.
-6-
<PAGE>
DESCRIPTION OF CAPITAL STOCK
Armstrong has authorized capital of 6,000,000 shares of common stock, par
value of $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.
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 Fund's net asset value will not be computed on weekends
and national holidays when the New York Stock Exchange is closed. 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 which are not traded or did not trade on an
exchange or for which over-the-counter last sale market quotations are not
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 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 the Fund should have other assets, they would be valued at fair value
as determined in good faith by the Board of Directors.
PURCHASE OF SHARES
The Fund continuously offers its shares directly to the public at the net
asset value next computed after receipt of a check made payable to Armstrong
Associates, Inc., or receipt of funds wired to the Funds custodian bank (See
"Information on Purchase and Redemption of Fund Shares" in prospectus).
-7-
<PAGE>
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 Fund may require the signature of the appropriate persons
signing or endorsing any redemption request or stock certificate to 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 four 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.
-8-
<PAGE>
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 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 without
annualizing the total return.
Quotations of average annual total return are expressed in terms of the
average annual compounded rate of return of a hypothetical $10,000 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 $10,000
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.
Distributions to shareholders ordinarily will be taxable, although shareholders
not subject to federal income tax will not be required to pay taxes on
distributions from the Fund. If the Fund failed to qualify under Subchapter M,
the Fund would be taxable on its net ordinary income and net capital gains,
thereby reducing the net ordinary income and net capital gains available for
distribution to shareholders.
-9-
<PAGE>
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., 1717 Main Street, Suite 500,
Dallas, Texas 75201, are independent auditors for the Fund. The statements of
assets and liabilities and portfolio of investments in securities as of June 30,
1999 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
five years in the period then ended, included in this Statement of Additional
Information have been so included in 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.
-10-
<PAGE>
FINANCIAL STATEMENTS AND REPORT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
(WITH SUPPLEMENTAL INFORMATION)
ARMSTRONG ASSOCIATES, INC.
JUNE 30, 1999
<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, 1999, 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 eight 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, 1999, 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, 1999, 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 eight years in the period then ended, in conformity with
generally accepted accounting principles.
GRANT THORNTON LLP
Dallas, Texas
July 14, 1999
<PAGE>
ARMSTRONG ASSOCIATES, INC.
STATEMENT OF ASSETS AND LIABILITIES
June 30, 1999
ASSETS
Investments in securities, at market value
(identified cost, $6,650,183) $ 15,663,292
Cash 142,902
Receivable from sales of securities 1,412,585
Dividends receivable 10,890
Interest receivable 241
Prepaid expenses and other assets 2,125
------------
17,232,035
LIABILITIES
Accrued expenses and other liabilities 17,680
------------
NET ASSETS $ 17,214,355
============
NET ASSETS CONSIST OF
Paid in capital $ 7,620,677
Distributions in excess of net investment income (19,405)
Accumulated undistributed net realized gains on investments 599,974
Net unrealized appreciation on investments 9,013,109
------------
NET ASSETS APPLICABLE TO 1,272,327 SHARES OUTSTANDING $ 17,214,355
============
NET ASSET VALUE PER SHARE $ 13.53
============
The accompanying notes were an integral part of this statement.
3
<PAGE>
ARMSTRONG ASSOCIATES, INC.
PORTFOLIO OF INVESTMENTS IN SECURITIES
June 30, 1999
<TABLE>
<CAPTION>
Shares or
principal Market
amount Cost value (a)
--------- ---------- -----------
COMMON STOCK (88.68%)
Industry and issue
Aerospace (1.0%)
<S> <C> <C> <C>
The Boeing Company 4,000 $ 236,300 $ 177,000
---------- -----------
Broadcasting and Media (10.9%)
A.H. Belo Corporation 12,000 171,285 236,250
New York Times Company 5,000 197,188 184,375
Time Warner, Inc. 20,000 208,192 1,470,000
---------- -----------
576,665 1,890,625
---------- -----------
Chemicals and Related (6.9%)
Avery Dennison Corp. 15,000 211,200 905,625
Praxair, Inc. 6,000 212,890 294,750
---------- -----------
424,090 1,200,375
---------- -----------
Computer, Software, and Related (8.0%)
International Business Machines Corp. 5,000 249,675 650,000
Oracle Systems Corporation* 19,500 122,330 723,937
---------- -----------
372,005 1,373,937
---------- -----------
Consumer Products (12.9%)
Black & Decker Corporation 10,000 216,760 630,000
The Gillette Company 7,232 166,636 297,416
Kimberly Clark Corporation 6,000 230,820 342,000
Sherwin Williams Company 6,000 198,150 167,250
Wal-Mart Stores, Inc. 16,000 196,800 772,000
---------- -----------
1,009,166 2,208,666
---------- -----------
Diversified Operations (7.0%)
Corning, Inc. 12,000 196,566 841,500
Tyco International Limited 3,929 211,614 371,290
---------- -----------
408,180 1,212,790
---------- -----------
Educational Services (1.6%)
DeVRY Inc.* 6,000 132,660 137,250
Sylvan Learning Systems, Inc.* 5,000 163,750 135,938
---------- -----------
296,410 273,188
---------- -----------
</TABLE>
4
<PAGE>
ARMSTRONG ASSOCIATES, INC.
PORTFOLIO OF INVESTMENTS IN SECURITIES - CONTINUED
June 30, 1999
<TABLE>
<CAPTION>
Shares or
principal Market
amount Cost value (a)
--------- ---------- -----------
Financial and Related (3.8%)
<S> <C> <C> <C>
Associates First Capital Corporation 8,000 $ 246,800 $ 353,000
Bank of America Corporation 4,000 240,350 293,500
---------- -----------
487,150 646,500
---------- -----------
Food, Beverages and Related (10.1%)
Bestfoods 10,000 199,538 495,000
Crown Cork & Seal Company, Inc. 5,000 239,438 142,813
Pepsico, Inc. 20,000 116,802 775,000
Tricon Global Restaurants, Inc.* 6,000 137,198 324,750
---------- -----------
692,976 1,737,563
---------- -----------
Medical and Related (19.8%)
Abbott Laboratories 30,000 182,381 1,365,000
Biogen, Inc.* 4,000 158,625 515,000
Boston Scientific Corporation* 10,000 234,785 440,000
Medtronics, Inc. 10,000 190,438 776,250
Warner Lambert Company 4,467 170,000 309,898
---------- -----------
936,229 3,406,148
---------- -----------
Office Supplies and Equipment (3.7%)
Xerox Corporation 6,000 253,065 356,250
Staples, Inc.* 9,000 175,875 278,438
---------- -----------
428,940 634,688
---------- -----------
Transportation (1.3%)
Ryder System, Inc. 8,000 196,960 215,500
---------- -----------
Water Treatment and Pollution Control (1.7%)
Ionics, Inc.* 8,000 186,800 288,000
---------- -----------
Total common stocks 6,251,871 15,264,980
</TABLE>
5
<PAGE>
ARMSTRONG ASSOCIATES, INC.
PORTFOLIO OF INVESTMENTS IN SECURITIES - CONTINUED
June 30, 1999
<TABLE>
<CAPTION>
Shares or
principal Market
amount Cost value (a)
--------- ---------- -----------
SHORT-TERM DEBT (2.31%)
<S> <C> <C> <C>
U.S. Treasury bills, due August 1999 $ 400,000 $ 398,312 $ 398,312
---------- -----------
Total investment securities - 90 99% $6,650,183 15,663,292
==========
Other assets less liabilities - 9.01% 1,551,063
-----------
Net assets - 100.00% $17,214,355
===========
</TABLE>
NOTES
(a) All common stocks are listed on a national securities exchange or
reported on the NASDAQ national market and are valued at the closing
price. Short-term debt is carried at cost, which approximates market
value.
(b) Aggregate cost for Federal income tax purposes is $6,650,183.
* Nonincome-producing security
The accompanying notes were an integral part of this statement.
6
<PAGE>
ARMSTRONG ASSOCIATES, INC.
STATEMENT OF OPERATIONS
Year ended June 30, 1999
INVESTMENT INCOME
Dividends $ 150,813
Interest 21,338
-----------
172,151
Operating expenses
Investment advisory fees $ 122,851
Administrative fees 16,000
Custodian fees 7,798
Transfer agent fees 9,517
Legal fees 1,728
Accounting fees 12,219
Registration fees, licenses and other 2,601
Reports and notices to shareholders 7,645
Directors' fees and expenses 8,696
Insurance expense 1,628 190,683
----------- -----------
NET INVESTMENT LOSS (18,532)
-----------
REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Realized gains
Proceeds from sales 2,426,986
Cost of securities sold 1,810,125
-----------
NET REALIZED GAINS 616,861
-----------
Unrealized appreciation
Beginning of year 7,176,478
End of year 9,013,109
-----------
INCREASE IN UNREALIZED APPRECIATION 1,836,631
-----------
NET REALIZED AND UNREALIZED GAINS ON INVESTMENTS 2,453,492
-----------
NET INCREASE IN NET ASSETS FROM OPERATIONS $ 2,434,960
===========
The accompanying notes were an integral part of this statement.
7
<PAGE>
ARMSTRONG ASSOCIATES, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Years ended June 30,
<TABLE>
<CAPTION>
1999 1998
------------ ------------
OPERATIONS
<S> <C> <C>
Net investment income (loss) $ (18,532) $ 32,463
Net realized gains on investments 616,861 1,096,424
Increase in unrealized appreciation of investments 1,836,631 726,296
------------ ------------
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS 2,434,960 1,855,183
DISTRIBUTIONS TO SHAREHOLDERS
Dividends paid from net investment income (49,896) (59,092)
Distributions paid from net realized gains (561,330) (980,946)
------------ ------------
NET DECREASE IN NET ASSETS RESULTING FROM DISTRIBUTIONS (611,226) (1,040,038)
CAPITAL SHARE TRANSACTIONS
Net proceeds from sale of capital stock 404,587 708,014
Net asset value of shares issued as reinvestment of dividends 587,448 988,680
------------ ------------
992,035 1,696,694
Less cost of shares repurchased (814,219) (1,566,042)
------------ ------------
NET INCREASE IN NET ASSETS RESULTING
FROM CAPITAL SHARE TRANSACTIONS 177,816 130,652
------------ ------------
TOTAL INCREASE IN NET ASSETS 2,001,550 945,797
NET ASSETS
Beginning of year 15,212,805 14,267,008
------------ ------------
End of year (Note) $ 17,214,355 $ 15,212,805
============ ============
</TABLE>
Note: At June 30, 1999 and 1998, undistributed net realized investment gains
were $599,974 and $544,443, respectively. At June 30, 1999, distributions
in excess of net investment income were $19,405. At June 30, 1998,
undistributed net investment income was $49,023.
The accompanying notes are an integral part of these statements.
8
<PAGE>
ARMSTRONG ASSOCIATES, INC.
NOTES TO FINANCIAL STATEMENTS
June 30, 1999
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, 1999, 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, 1999, purchases and sales of securities,
excluding short-term debt securities, aggregated $461,520 and $2,426,986
respectively.
The Company paid total brokerage commissions aggregating $7,700 in 1999 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, 1999
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, 1999, investment advisory fees to
Portfolios amounted to $122,851. 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 1999.
Portfolios is the transfer agent for the Company. Applicable fees of $8,400
were incurred by the Company for the year ended June 30, 1999. 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, 1999, the Company owed Portfolios $10,997 in accrued fees.
NOTE E - CAPITAL STOCK
On June 30, 1999, there were 6,000,000 shares of $1 par value capital stock
authorized, and capital paid in was $7,620,675. Transactions in capital
stock for the years ended June 30, 1999 and 1998 were as follows:
1999 1998
-------- --------
Shares sold 34,015 63,588
Shares issued as reinvestment of dividends 51,758 93,981
-------- --------
85,773 157,569
Shares redeemed (66,465) (133,173)
-------- --------
Net increase in shares outstanding 19,308 24,396
======== ========
NOTE F - DIVIDENDS
Dividends from net investment income paid during the year ended June 30,
1999 and 1998 amounted to $.04 and $.05 per share, respectively.
Distributions from net realized gains paid during the years ended June 30,
1999 and 1998 amounted to $.45 and $.83 per share, respectively.
10
<PAGE>
ARMSTRONG ASSOCIATES, INC.
CONDENSED FINANCIAL INFORMATION
Selected per Share Data and Ratios
<TABLE>
<CAPTION>
1999 1998 1997 1996 1995 1994 1993
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 12.14 $ 11.61 $ 10.45 $ 9.70 $ 8.19 $ 8.26 $ 7.08
Income (loss) from investment operations
Net investment income (loss) (.01) .03 .06 .05 .02 -- .02
Net realized and unrealized gains
(losses) on investments 1.89 1.38 1.64 1.10 2.12 .10 1.19
------- ------- ------- ------- ------- ------- -------
Total from investment operations 1.88 1.41 1.70 1.15 2.14 .10 1.21
Less distributions
Dividends from net investment income .04 .05 .07 .02 .04 -- .02
Distributions from net realized gains .45 .83 .47 .38 .59 .17 .01
------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $ 13.53 $ 12.14 $ 11.61 $ 10.45 $ 9.70 $ 8.19 $ 8.26
======= ======= ======= ======= ======= ======= =======
Total return 16.26% 13.31% 17.19% 12.09% 27.32% 1.13% 17.12%
Ratios/supplemental data
Net assets, end of period (000's) 17,214 15,213 14,300 13,100 11,961 9,255 9,680
Ratio of expenses to average net assets 1.2 1.3 1.4 1.4 1.8 1.8 1.8
Ratio of net investment income
to average net assets (.1) .2 .5 .5 .2 -- .2
Portfolio turnover rate 2% 7% 7% 19% 12% 15% 17%
<CAPTION>
1992 1991 1990 1989 1988 1987 1986
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 6.87 $ 7.38 $ 7.74 $ 7.17 $ 9.66 $ 8.72 $ 7.65
Income (loss) from investment operations
Net investment income (loss) .06 .16 .23 .24 .09 .10 .14
Net realized and unrealized gains
(losses) on investments .33 (.27) .19 .67 (.53) 1.51 1.17
------- ------- ------- ------- ------- ------- -------
Total from investment operations .39 (.11) .42 .91 (.44) 1.61 1.31
Less distributions
Dividends from net investment income .15 .23 .24 .11 .14 .16 .24
Distributions from net realized gains .03 .17 .54 .23 1.91 .51 --
------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $ 7.08 $ 6.87 $ 7.38 $ 7.74 $ 7.17 $ 9.66 $ 8.72
======= ======= ======= ======= ======= ======= =======
Total return 5.79% (.92)% 5.93% 13.23% (6.27)% 20.00% 17.80%
Ratios/supplemental data
Net assets, end of period (000's) 9,366 9,228 9,770 9,887 10,435 12,294 11,714
Ratio of expenses to average net assets 1.9 1.9 1.8 1.9 2.0 1.7 1.6
Ratio of net investment income
to average net assets .8 2.3 2.9 3.0 1.3 1.0 1.6
Portfolio turnover rate 35% 24% 44% 46% 20% 51% 54%
<CAPTION>
1985 1984 1983 1982 1981 1980 1979
------- ------- ------- ------- ------- ------- -------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 7.29 $ 10.22 $ 7.10 $ 9.37 $ 7.74 $ 7.06 $ 6.50
Income (loss) from investment operations
Net investment income (loss) .24 .16 .21 .41 .24 .23 .16
Net realized and unrealized gains
(losses) on investments 1.02 (2.51) 3.72 (1.28) 2.62 1.40 .84
------- ------- ------- ------- ------- ------- -------
Total from investment operations 1.26 (2.35) 3.93 (.87) 2.86 1.63 1.00
Less distributions
Dividends from net investment income .14 .20 .43 .19 .23 .13 .11
Distributions from net realized gains .76 .38 .38 1.21 1.00 .82 .33
------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $ 7.65 $ 7.29 $ 10.22 $ 7.10 $ 9.37 $ 7.74 $ 7.06
======= ======= ======= ======= ======= ======= =======
Total return 19.10% (24.01)% 61.27% (9.87)% 38.04% 24.08% 15.17%
Ratios/supplemental data
Net assets, end of period (000's) 10,957 9,788 12,869 7,669 8,277 5,777 4,538
Ratio of expenses to average net assets 1.7 1.6 1.6 1.7 1.5 1.6 1.5
Ratio of net investment income
to average net assets 3.1 1.9 2.4 5.6 2.7 3.2 2.3
Portfolio turnover rate 53% 96% 59% 34% 60% 131% 97%
<CAPTION>
1978 1977 1976 1975
------- ------- ------- -------
<S> <C> <C> <C> <C>
Net asset value, beginning of year $ 5.68 $ 5.30 $ 3.81 $ 2.74
Income (loss) from investment operations
Net investment income (loss) .08 .04 .03 .07
Net realized and unrealized gains
(losses) on investments .78 .38 1.53 1.04
------- ------- ------- -------
Total from investment operations .86 .42 1.56 1.11
Less distributions
Dividends from net investment income .04 .04 .07 .04
Distributions from net realized gains -- -- -- --
------- ------- ------- -------
Net asset value, end of year $ 6.50 $ 5.68 $ 5.30 $ 3.81
======= ======= ======= =======
Total return 15.31% 8.05% 42.06% 41.46%
Ratios/supplemental data
Net assets, end of period (000's) 3,886 3,649 3,785 2,892
Ratio of expenses to average net assets 1.5 1.5 1.5 1.5
Ratio of net investment income
to average net assets 1.6 1.9 .8 2.7
Portfolio turnover rate 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-five-year period ended June 30, 1999.
(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.
11
<PAGE>
TO OUR SHAREHOLDERS:
The fiscal year of Armstrong Associates, Inc., ended June 30, 1999. At that time
Armstrong had total net assets of $17,214,355 and a per share price of $13.53.
Not reflected in the fiscal year end price were December 1998 distributions of
income and capital gains totaling $0.49 per share. For the twelve months
Armstrong recorded a total investment return of +16.26%.
Reversing a declining trend that had been in place since calendar 1997, interest
rates increased sharply during the first half of calendar 1999. Inflation, on
the other hand, stayed low despite increases in energy prices and interest
rates. For the year large-cap stocks generally continued to outperform mid and
small-cap issues. The Standard and Poor's 500 Index, a market capitalization
weighted index, increased +21.07% in price for the twelve months under review
while the Standard and Poor's 400 MidCap and 600 SmallCap Indexes had price
returns of +15.72% and -3.14%, respectively. More reflective of the general
market, the Value Line Composite Index, which covers approximately 1,700
equally-weighted issues, showed a price loss of -2.29%. For comparison purposes,
long term bonds, as represented by the Lehman Brothers U.S. Treasury Composite
Index, had a total return, interest and price change, of +2.95%.
Looking ahead, we see continued market volatility as well as wide performance
divergence between individual stocks and stock groups. While large-cap stocks
should continue to play a key role in investment portfolios, we would expect
mid-cap and small-cap issues to reflect a higher level of market interest as
investors look for less exploited investment opportunities. We believe the long
term outlook for equity investments continues to be strong, helped by a
developing demographic trend that favors increased investment savings as a large
portion of the population prepares for retirement over the next 10 to 15 years
and the preeminent position of the United States in the world economy which we
expect to continue.
Please call or write if you have any questions concerning your Armstrong
investment.
Sincerely,
C.K. Lawson
August 6, 1999
<PAGE>
PART C: OTHER INFORMATION
(a) Restated Articles of Incorporation of the Fund filed October 28, 1983
[Exhibit 1.1, Form N-1A Post-Effective Amendment No. 27]
(b)(1) Bylaws of the Fund as amended through August 27, 1987 [Exhibit 2.1,
Form N-1A Post-Effective Amendment No. 31]
(b)(2) Amendment to Bylaws of the Fund, effective August 25, 1993 [Exhibit
2.2, Form N-1A Post-Effective Amendment No. 37]
(c) See Exhibit (a)
(d) Investment Advisory Agreement dated October 30, 1981 between the Fund
and Portfolios, Inc. [Exhibit 5.1, Form N-1A Post-Effective Amendment
No. 28]
(e) None
(f) None
(g) 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]
(h)(1) Amended and Restated Transfer Agent Agreement dated May 17, 1995
[Exhibit 8.5, Form N-1A Post Effective Amendment No. 40]
(h)(2) Administrative Services Agreement dated October 24, 1985 between the
Fund and Portfolios, Inc. [Exhibit 9.1, Form N-1A Post-Effective
Amendment No. 30]
(i) Opinion of Jackson & Walker, L.L.P. as to legality of securities being
registered and related consent [Exhibit 10.1, Form N-1A Post-Effective
Amendment No. 43]
(j) Consent of Grant Thornton L.L.P [Filed Herewith]
(k) Financial Data Schedule
(l) None
(m) None
(n) None
1
<PAGE>
Item 24. Persons Controlled by or Under Common Control with Registrant
-------------------------------------------------------------
None
Item 25. 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 26. Business and Other Connections of Investment Adviser
----------------------------------------------------
In addition to serving as investment adviser to the Fund,
Portfolios, Inc. 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 Portfolios, Inc. with the Fund
---- --------------------- -------------
C. K. Lawson(a) President, Treasurer President, Treasurer
and Director and Director
Candace L. King(b) Secretary Vice President
and Secretary
(a) Mr. Lawson is President, Treasurer and a director of Lawson
Investments, Inc. ("LII"), a corporation which owns all of the
outstanding stock of Portfolios, Inc. 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.
2
<PAGE>
Item 27. Principal Underwriters
----------------------
Not Applicable.
Item 28. 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
ss.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 29. Management Services
--------------------
Not applicable.
Item 30. Undertakings
------------
Not applicable.
3
<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 August 27, 1999.
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 August 27, 1999.
Signature Title
--------- -----
President, Treasurer and Director
C.K. LAWSON* (Principal Executive Officer and
Principal Financial and Accounting
Officer)
EUGENE P. FRENKEL* Director
Director
DOUGLAS W. MACLAY*
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
4
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INDEX TO ATTACHED EXHIBITS
Exhibit Page
- ------- ----
(j) Consent of Grant Thornton LLP E-1
5
<PAGE>
EXHIBIT 11.1
Consent of Independent Certified Public Accountants
We have issued our report dated July 14, 1999, 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
August 24, 1999
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