SHAREHOLDERS REPORT June 30, 2000
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ARMSTRONG
ASSOCIATES
INC.
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OFFICERS AND DIRECTORS
------------------------------------------------
C.K. Lawson Douglas W. Maclay
President, Treasurer Director
and Director President, Maclay
Properties Company
Candace L. King
Vice President and R.H. Stewart Mitchell
Secretary Director
Private Investor
Eugene P. Frenkel, M.D.
Director Cruger S. Ragland
Professor of Internal Director
Medicine and Radiology Retired President,
Southwestern Medical Ragland Insurance
School Agency, Inc.
Ann Reed Dittmar
Director
Private Investor
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Custodian
Union Bank of California, N.A.
San Francisco, California
Transfer Agent
Portfolios, Inc.
Dallas, Texas
Auditors
Grant Thornton LLP
Dallas, Texas
Investment Advisor
Portfolios, Inc.
Dallas, Texas
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This report is prepared for the information of
the shareholders of Armstrong Associates, Inc.
It is not authorized for distribution to
prospective investors in the Fund unless
preceded or accompanied by an effective
prospectus.
------------------------------------------------
AAI
ARMSTRONG ASSOCIATES INC.
750 N. St. Paus, Suite 1300, L.B. 13
Dallas, Texas 75201
(214) 720-9101
FAX: (214) 871-8948
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<PAGE>
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TO OUR SHAREHOLDERS
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At the end of its fiscal year on June 30, 2000, Armstrong Associates, Inc. had
total net assets of $20,126,261 and a per share price of $15.70. Not included in
the year end price was a capital gains distribution of $0.48 per share made in
December 1999. Armstrong's investment return for the twelve months, assuming the
reinvestment of the distribution to shareholders, was +20.38%.
Looking at results for various segments of the market during the year, the
capitalization-weighted Standard and Poor's (S&P) 500, which tends to reflect
results for large-cap stocks, showed a +5.97% price increase. The S&P 400 MidCap
and 600 SmallCap Indexes had price gains of +15.62% and +13.57%, respectively,
for the same period. These comparisons reflect a significant change from the
pattern seen for the prior fiscal year, when big-cap issues generally
outperformed mid-cap and small-cap stocks. We believe this change reflects a
broadening of investor interest into less exploited areas of the market.
Nevertheless, there continued to be sharp performance divergence and a
relatively narrow base of issues leading the market, as reflected by the -12.43%
decline in the Value Line Composite Index, which reflects the price changes of
approximately 1,700 stocks on an equally-weighted basis.
There were a variety of cross currents impacting the market during Armstrong's
fiscal year resulting in a significant degree of market volatility. Strong
corporate profits, a high level of consumer spending and rising energy costs
helped fuel inflation fears. Fortunately, the effects of measured monetary
tightening by the Federal Reserve and continued increases in worker
productivity, thanks largely to the tangible benefits of technology, relieved
investor concerns to some degree. We believe it is likely that the United States
economy will continue to expand at a sustainable, although possibly slower, rate
over the next year. While presidential campaign rhetoric and related media
hyperbole can be expected to jar the stock market from time-to-time over the
next few months, we believe that equities should continue to be productive
investments.
Please call or write if you have any questions concerning your Armstrong
investment.
Sincerely
/s/ C. K. Lawson
C. K. Lawson
August 15, 2000
<PAGE>
<TABLE>
<CAPTION>
--------------------------------------------------------------------------------------------------
PORTFOLIO OF INVESTMENTS IN SECURITIES -- JUNE 30, 2000
--------------------------------------------------------------------------------------------------
Shares or
principal amount Cost Market value (a)
--------------------------------------------------------------------------------------------------
Common stock (85.87%)
Industry and issue
Aerospace (2.0%)
<S> <C> <C> <C>
The Boeing Company 4,000 $ 236,300 $ 167,250
United Technologies 4,000 254,750 231,250
----------------------------------------------- ----------- -----------
491,050 398,500
----------------------------------------------- ----------- -----------
Broadcasting and Media (10.4%)
A.H. Belo Corporation 12,000 171,285 207,750
New York Times Company 5,000 197,188 197,500
Time Warner, Inc. 20,000 208,192 1,520,000
True North Communications 4,000 177,310 170,249
----------------------------------------------- ----------- -----------
753,975 2,095,499
----------------------------------------------- ----------- -----------
Chemicals and Related (6.1%)
Avery Dennison Corporation 15,000 211,200 1,006,875
Praxair, Inc. 6,000 212,890 224,625
----------------------------------------------- ----------- -----------
424,090 1,231,500
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Communications and Related (10.7%)
Corning, Inc. 8,000 131,044 2,148,000
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Computer, Software, and Related (12.8%)
International Business Machines Corp. 5,000 249,675 547,813
Oracle Systems Corporation* 24,000 75,280 2,017,500
----------------------------------------------- ----------- -----------
324,955 2,565,313
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Consumer Products (10.1%)
Black & Decker Corporation 10,000 216,760 392,500
The Gillette Company 7,232 166,636 252,668
Kimberly Clark Corporation 6,000 230,820 344,250
Sherwin Williams Company 6,000 198,150 129,000
Wal-Mart Stores, Inc. 16,000 196,800 907,000
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1,009,166 2,025,418
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Diversified Operations (1.9%)
Tyco International Limited 7,858 211,614 372,273
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Educational Services (0.8%)
DeVRY Inc.* 6,000 132,660 159,750
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Financial and Related (1.7%)
Associates First Capital Corporation 8,000 246,800 178,500
Bank of America Corporation 4,000 240,350 172,000
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487,150 350,500
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Food, Beverages and Related (7.8%)
Bestfoods 10,000 199,538 692,500
Pepsico, Inc. 20,000 116,802 888,750
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316,340 1,581,250
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Medical and Related (17.0%)
Abbott Laboratories 30,000 182,381 1,323,750
Biogen, Inc.* 8,000 158,625 516,000
Medtronics, Inc. 20,000 190,438 996,250
Pfizer, Inc. 12,284 170,000 583,490
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701,444 3,419,490
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Office Supplies and Equipment (0.7%)
Staples, Inc.* 9,000 175,875 138,375
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Restaurants (2.0%)
Brinker International, Inc. 8,000 209,661 234,000
Tricon Global Restaurants, Inc.* 6,000 137,198 169,875
----------------------------------------------- ----------- -----------
346,859 403,875
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Transportation (0.7%)
Ryder System, Inc. 8,000 196,960 151,500
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Water Treatment and Pollution Control (1.2%)
Ionics, Inc.* 8,000 186,800 241,500
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Total common stocks $ 5,889,982 $17,282,743
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<PAGE>
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PORTFILIO OF INVESTMENTS IN SECURITIES -- JUNE 30, 2000 (continued)
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Short-term debt (14.0%)
U.S. Treasury bills, due July and August 2000 $2,841,000 $ 2,818,062 $ 2,818,062
----------------------------------------------- ----------- -----------
Total investment securities -- 99.87% $ 8,708,044 $20,100,805
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Other assets less liabilities -- 0.13% 25,456
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Net assets -- 100.00% $20,126,261
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</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.
* Non-income producing
See accompanying notes to financial statements.
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STATEMENT OF OPERATIONS -- YEAR ENDED JUNE 30, 2000
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INVESTMENT INCOME
Dividends $ 137,367
Interest 95,251
-------------------------------------------------- -----------
232,618
-------------------------------------------------- -----------
Operating expenses
Investment advisory fees $ 141,472
Administrative fees 16,000
Custodian fees 8,695
Transfer agent fees 8,815
Legal fees 6,403
Accounting fees 15,270
Registration fees, licenses and other 2,764
Reports and notices to shareholders 9,931
Directors' fees and expenses 6,709
Insurance expense 1,463 217,522
-------------------------------------------------- ----------- -----------
Net investment income 15,096
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REALIZED AND UNREALIZED GAINS ON INVESTMENTS
Realized gains
Proceeds from sales 2,304,407
Cost of securities sold 1,239,247
-------------------------------------------------- -----------
Net realized gains 1,065,160
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Unrealized appreciation
Beginning of year 9,013,109
End of year 11,392,761
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Increase in unrealized appreciation 2,379,652
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Net realized and unrealized gains on investments 3,444,812
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Increase in net assets from operations $ 3,459,908
-------------------------------------------------- -----------
See accompanying notes to financial statements.
<PAGE>
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STATEMENT OF ASSETS AND LIABILITIES -- JUNE 30, 2000
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ASSETS:
Investments in securities, at market value
(identified cost, $8,708,044) $ 20,100,805
Cash 37,103
Dividends receivable 5,928
Interest receivable 7,269
Prepaid expenses and other assets 1,858
--------------------------------------------------------------- ------------
20,152,963
LIABILITIES:
Accrued expenses and other liabilities 16,702
Payable for fund shares redeemed 10,000
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26,702
--------------------------------------------------------------- ------------
NET ASSETS $ 20,126,261
--------------------------------------------------------------- ------------
NET ASSETS CONSIST OF:
Paid in capital $ 7,688,211
Distributions in excess of net investment income (4,309)
Accumulated undistributed net realized gains on investments 1,049,599
Net unrealized appreciation on investments 11,392,760
--------------------------------------------------------------- ------------
Net assets applicable to 1,282,114 shares outstanding $ 20,126,261
--------------------------------------------------------------- ------------
Net asset value per share $ 15.70
--------------------------------------------------------------- ------------
See accompanying notes to financial statements.
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STATEMENT OF CHANGES IN NET ASSETS -- YEARS ENDED JUNE 30
2000 1999
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OPERATIONS:
Net investment income (loss) $ 15,096 $ (18,532)
Net realized gains on investments 1,065,160 616,861
Increase in unrealized appreciation
of investments 2,379,652 1,836,631
---------------------------------------------- ------------ ------------
Net increase in net assets
resulting from operations 3,459,908 2,434,960
DISTRIBUTIONS TO SHAREHOLDERS:
Dividends paid from net investment income -- (49,896)
Distributions paid from net realized gains (615,506) (561,330)
---------------------------------------------- ------------ ------------
Net decrease in net assets
resulting from distributions (615,506) (611,226)
CAPITAL SHARE TRANSACTIONS:
Net proceeds from sale of capital stock 624,661 404,587
Net asset value of shares issued
as reinvestment of dividends 593,207 587,448
---------------------------------------------- ------------ ------------
1,217,868 992,035
LESS COST OF SHARES REPURCHASED (1,150,364) (814,219)
---------------------------------------------- ------------ ------------
Net increase in net assets resulting
from capital share transactions 67,504 177,816)
---------------------------------------------- ------------ ------------
Total increase in net assets 2,911,906 2,001,550
NET ASSETS:
Beginning of year 17,214,355 15,212,805
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End of year (Note) $ 20,126,261 $ 17,214,355
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Note: At June 30, 2000 and 1999, undistributed net realized investment gains
were $1,049,599 and $599,974, respectively. At June 30, 2000 and 1999,
distributions in excess of net investment income were $4,309 and $19,405,
respectively.
See accompanying notes to financial statements.
<PAGE>
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NOTES TO FINANCIAL STATEMENTS -- JUNE 30, 2000
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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 traded on a national securities
exchange are carried at market value, which is determined by the last reported
sales price on the day of valuation. 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, 2000, 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, 2000, purchases and sales of securities, excluding
short-term debt securities, aggregated $877,360 and $2,304,407, respectively.
The Company paid total brokerage commissions aggregating $6,500 in 2000 on
purchases and sales of investment securities. All commissions were paid to
unaffiliated broker-dealers.
Note D -- Investment Advisory, Transfer Agent and Administrative Fees
The Company has agreed to pay its investment adviser, Portfolios, Inc.
(Portfolios), a fee of .80% per annum of the average net asset value of the
Company. For the year ended June 30, 2000, investment advisory fees to
Portfolios amounted to $141,472. 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 2000.
Portfolios is the transfer agent for the Company. Applicable fees and expenses
of $8,815 were incurred by the Company for the year ended June 30, 2000. 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, 2000, the Company owed Portfolios $13,145 in accrued fees.
Note E -- Capital Stock
On June 30, 2000, there were 6,000,000 shares of $1 par value capital stock
authorized, and capital paid in was $7,688,211. Transactions in capital stock
for the years ended June 30, 2000 and 1999 were as follows:
2000 1999
--------------------------------------------------------------------------------
Shares sold 45,567 34,015
Shares issued as reinvestment of dividends 46,243 51,758
-------------------------------------------------- ---------- ----------
91,810 85,773
Shares redeemed (82,023) (66,465)
-------------------------------------------------- ---------- ----------
Net increase in shares outstanding 9,787 19,308
-------------------------------------------------- ---------- ----------
Note F -- Dividends
Dividends from net investment income paid during the year ended June 30, 2000
and 1999 amounted to $.00 and $.04 per share, respectively. Distributions from
net realized gains paid during the years ended June 30, 2000 and 1999 amounted
to $.48 and $.45 per share, respectively.
--------------------------------------------------------------------------------
CONDENSED FINANCIAL INFORMATION
Selected per Share Data and Ratios
<TABLE>
<CAPTION>
Per share income and capital changes for a share outstanding throughout the year ended June 30 (a)
---------------------------------------------------------------------------------------------------------------------------
2000 1999 1998 1997 1996 1995 1994
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 13.53 $ 12.14 $ 11.61 $ 10.45 $ 9.70 $ 8.19 $ 8.26
Income (loss) from investment operations
Net investment income (loss) .01 (.01) .03 .06 .05 .02 --
Net realized and unrealized gains
(losses) on investments 2.64 1.89 1.38 1.64 1.10 2.12 .10
---------------------------------------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations 2.65 1.88 1.41 1.70 1.15 2.14 .10
Less distributions
Dividends from net investment income -- .04 .05 .07 .02 .04 --
Distributions from net realized gains .48 .45 .83 .47 .38 .59 .17
---------------------------------------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $ 15.70 $ 13.53 $ 12.14 $ 11.61 $ 10.45 $ 9.70 $ 8.19
---------------------------------------- ------- ------- ------- ------- ------- ------- -------
Total return 20.38% 16.26 13.31 17.19 12.09 27.32 1.13
Ratios/supplemental data
Net assets, end of period (000's) $20,126 17,214 15,213 14,300 13,100 11,961 9,255
Ratio of expenses to average
net assets 1.2 1.2 1.3 1.4 1.4 1.8 1.8
Ratio of net investment income
to average net assets .1 (.1) .2 .5 .5 .2 --
Portfolio turnover rate 3% 2 7 7 19 12 15
<CAPTION>
Per share income and capital changes for a share outstanding throughout the year ended June 30 (a)
---------------------------------------------------------------------------------------------------------------------------
1993 1992 1991 1990 1989 1988 1987
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 7.08 $ 6.87 $ 7.38 $ 7.74 $ 7.17 $ 9.66 $ 8.72
Income (loss) from investment operations
Net investment income (loss) .02 .06 .16 .23 .24 .09 .10
Net realized and unrealized gains
(losses) on investments 1.19 .33 (.27) .19 .67 (.53) 1.51
---------------------------------------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations 1.21 .39 (.11) .42 .91 (.44) 1.61
Less distributions
Dividends from net investment income .02 .15 .23 .24 .11 .14 .16
Distributions from net realized gains .01 .03 .17 .54 .23 1.91 .51
---------------------------------------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $ 8.26 $ 7.08 $ 6.87 $ 7.38 $ 7.74 $ 7.17 $ 9.66
---------------------------------------- ------- ------- ------- ------- ------- ------- -------
Total return 17.12 5.79 (.92) 5.93 13.23 (6.27) 20.00
Ratios/supplemental data
Net assets, end of period (000's) 9,680 9,366 9,228 9,770 9,887 10,435 12,294
Ratio of expenses to average
net assets 1.8 1.9 1.9 1.8 1.9 2.0 1.7
Ratio of net investment income
to average net assets .2 .8 2.3 2.9 3.0 1.3 1.0
Portfolio turnover rate 17 35 24 44 46 20 51
<CAPTION>
Per share income and capital changes for a share outstanding throughout the year ended June 30 (a)
---------------------------------------------------------------------------------------------------------------------------
1986 1985 1984 1983 1982 1981 1980
---------------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 7.65 $ 7.29 $ 10.22 $ 7.10 $ 9.37 $ 7.74 $ 7.06
Income (loss) from investment operations
Net investment income (loss) .14 .24 .16 .21 .41 .24 .23
Net realized and unrealized gains
(losses) on investments 1.17 1.02 (2.51) 3.72 (1.28) 2.62 1.40
---------------------------------------- ------- ------- ------- ------- ------- ------- -------
Total from investment operations 1.31 1.26 (2.35) 3.93 (.87) 2.86 1.63
Less distributions
Dividends from net investment income .24 .14 .20 .43 .19 .23 .13
Distributions from net realized gains -- .76 .38 .38 1.21 1.00 .82
---------------------------------------- ------- ------- ------- ------- ------- ------- -------
Net asset value, end of year $ 8.72 $ 7.65 $ 7.29 $ 10.22 $ 7.10 $ 9.37 $ 7.74
---------------------------------------- ------- ------- ------- ------- ------- ------- -------
Total return 17.80 19.10 (24.01) 61.27 (9.87) 38.04 24.08
Ratios/supplemental data
Net assets, end of period (000's) 11,714 10,957 9,788 12,869 7,669 8,277 5,777
Ratio of expenses to average
net assets 1.6 1.7 1.6 1.6 1.7 1.5 1.6
Ratio of net investment income
to average net assets 1.6 3.1 1.9 2.4 5.6 2.7 3.2
Portfolio turnover rate 54 53 96 59 34 60 131
<CAPTION>
Per share income and capital changes for a share outstanding throughout the year ended June 30 (a)
---------------------------------------------------------------------------------------------------
1979 1978 1977 1976 1975
---------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Net asset value, beginning of year $ 6.50 $ 5.68 $ 5.30 $ 3.81 $ 2.74
Income (loss) from investment operations
Net investment income (loss) .16 .08 .04 .03 .07
Net realized and unrealized gains
(losses) on investments .84 .78 .38 1.53 1.04
---------------------------------------- ------- ------- ------- ------- -------
Total from investment operations 1.00 .86 .42 1.56 1.11
Less distributions
Dividends from net investment income .11 .04 .04 .07 .04
Distributions from net realized gains .33 -- -- -- --
---------------------------------------- ------- ------- ------- ------- -------
Net asset value, end of year $ 7.06 $ 6.50 $ 5.68 $ 5.30 $ 3.81
---------------------------------------- ------- ------- ------- ------- -------
Total return 15.17 15.31 8.05 42.06 41.46%
Ratios/supplemental data
Net assets, end of period (000's) 4,538 3,886 3,649 3,785 $ 2,892
Ratio of expenses to average
net assets 1.5 1.5 1.5 1.5 1.5
Ratio of net investment income
to average net assets 2.3 1.6 1.9 .8 2.7
Portfolio turnover rate 97 151 113 113 210%
</TABLE>
(a) For a share outstanding throughout the year. Per share data has been
rounded to nearest cent and adjusted to give effect to a 2-for-1 stock
split, effective October 16, 1978, by means of a stock distribution.
(b) The Fund had no senior securities or outstanding debt during the
twenty-six-year period ended June 30, 2000.
See accompanying independent auditor's report.
--------------------------------------------------------------------------------
INDEPENDENT AUDITORS' REPORT
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, 2000, the statement of operations for the year then
ended, the statements of changes in net assets for each of the two years in the
period ended June 30, 2000, and the selected per share data and ratios for each
of the nine years in the period ended June 30, 2000. 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 auditing standards generally accepted
in the United States of America. 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, 2000, 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, 2000, 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 ended June 30, 2000, and the selected per share data
and ratios for each of the nine years in the period ended June 30, 2000, in
conformity with accounting principles generally accepted in the United States of
America.
GRANT THORNTON LLP
Dallas, Texas
July 14, 2000
