AAI
ARMSTRONG ASSOCIATES INC. SHAREHOLDERS REPORT December 31, 1999
750 N. St. Paus, Suite 1300, L.B. 13
Dallas, Texas 75201 --------------------------------------
(214) 720-9101 ARMSTRONG
FAX: (214) 871-8948 ASSOCIATES
INC.
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CUSTODIAN
Union Bank of California, N.A.
San Francisco, California
TRANSFER AGENT
Portfolios, Inc.
Dallas, Texas
AUDITORS
Grant Thornton
Dallas, Texas
INVESTMENT ADVISOR
Portfolios, Inc.
Dallas, Texas
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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.
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<CAPTION>
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INVESTMENT PORTFOLIO AS OF DECEMBER 31, 1999
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No. of shares Industry and issue Cost Market value % of assets
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AEROSPACE (2.3%)
<S> <C> <C> <C> <C>
4,000 Boeing Co. $ 236,300 $ 165,750 0.9%
4,000 United Technologies 254,750 260,000 1.4%
BROADCASTING & RELATED (11.5%)
12,000 A.H. Belo Corp. 171,285 228,750 1.3%
5,000 New York Times 197,188 245,625 1.3%
20,000 Time Warner, Inc. 208,193 1,448,750 7.9%
4,000 True North Communications 177,311 178,750 1.0%
CHEMICALS & RELATED (7.6%)
15,000 Avery Dennison Corp. 211,200 1,093,125 6.0%
6,000 Praxair, Inc. 212,890 301,875 1.6%
COMPUTER, SOFTWARE & RELATED (15.0%)
5,000 IBM Corp. 249,675 540,000 3.0%
19,500 Oracle Systems Corp. 122,330 2,185,219 12.0%
CONSUMER PRODUCTS (13.4%)
10,000 Black & Decker Corp. 216,760 522,500 2.9%
7,232 The Gillette Co. 166,636 297,868 1.6%
6,000 Kimberly Clark Corp. 230,820 391,500 2.1%
6,000 Sherwin Williams Paint 198,150 126,000 0.7%
16,000 Wal-Mart Stores 196,800 1,106,000 6.1%
DIVERSIFIED OPERATIONS (10.2%)
12,000 Corning, Inc. 196,566 1,547,250 8.5%
7,858 Tyco International 211,614 306,953 1.7%
EDUCATIONAL SERVICES (0.6%)
6,000 Devry, Inc. 132,660 111,750 0.6%
FINANCIAL & RELATED (2.3%)
8,000 Associates First Capital 246,800 219,500 1.2%
4,000 Bank of America 240,350 200,750 1.1%
FOOD, BEVERAGES & RELATED (8.0%)
10,000 Best Foods 199,538 525,625 2.9%
20,000 Pepsico, Inc. 116,802 705,000 3.8%
6,000 Tricon Global Restaurants 137,198 231,750 1.3%
LEISURE TIME & TRAVEL (1.4%)
5,000 Royal Caribbean 235,638 246,563 1.4%
MEDICAL & RELATED (15.7%)
30,000 Abbott Laboratories 182,381 1,089,375 6.0%
8,000 Biogen, Inc. 158,625 676,000 3.7%
20,000 Medtronics, Inc. 190,438 728,750 4.0%
4,467 Warner Lambert 170,000 366,015 2.0%
OFFICE SUPPLIES (1.0%)
9,000 Staples, Inc. 175,875 186,750 1.0%
TRANSPORTATION (1.1%)
8,000 Ryder Systems, Inc. 196,960 195,500 1.1%
WATER TREATMENT/POLLUTION CONTROL (1.2%)
8,000 Ionics, Inc. 186,800 225,000 1.2%
CASH, SHORT-TERM DEBT AND RECEIVABLES
LESS LIABILITIES 1,892,611 1,596,627 8.7%
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Total Net Assets $7,822,703 $18,250,870 100.0%
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STATEMENT OF NET ASSETS FOR DECEMBER 31, 1999
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ASSETS
Investment in securities at market value $18,546,853
Cash held by custodian 47,326
Prepaid expenses 1,551
Interest receivable 8,236
Dividends receivable 8,208
Receivable for fund shares purchased 989
Receivable for sale of portfolio 311,732
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Total Assets $18,924,895
LIABILITIES
Accounts payable and accrued expenses 5,368
Payable for fund shares redeemed 958
Payable for purchase of securities 667,699
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Total Liabilities $ 674,025
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Total net assets-- equivalent to $14.00 per share
with 1,303,709 shares outstanding $18,250,870
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STATEMENT OF CHANGES IN NET ASSETS--6 MONTHS ENDED DECEMBER 31, 1999
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OPERATIONS:
Net investment income $ 14,090
Net realized gains (losses) from security transactions (372,712)
Decrease in unrealized appreciation of investments 1,612,964
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Net increase in net assets resulting from operations $ 1,254,342
Distributions to shareholders
Dividends paid from net investment income --
Distributions from net realized gains 615,506
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615,506
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Capital share transactions
Net proceeds from sale of capital stock 240,222
Net asset value of shares issued to shareholders in
reinvestment of net investment income and net
realized gains on security transactions 593,300
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833,522
Less cost of shares repurchased 435,843
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397,679
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Net increase in net assets 1,036,515
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Net assets:
Beginning of period 17,214,355
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End of period $ 18,250,870
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<TABLE>
<CAPTION>
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STATEMENT OF OPERATIONS--6 MONTHS ENDED DECEMBER 31, 1999
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INVESTMENT INCOME
Income:
<S> <C>
Dividends $ 67,035
Interest 49,365
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Total income 116,400
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Operating expenses:
Advisory and management fees 64,840
Administrative fees 8,000
Custodian fees 4,178
Transfer agent fees 4,559
Registration fees, licenses and other 1,492
Legal fees 4,260
Accounting fees 7,064
Director's fees 3,373
Reports and notices to shareholders 3,969
Insurance 575 102,310
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Net investment income (14,090)
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REALIZED AND UNREALIZED GAINS AND LOSSES ON INVESTMENTS
Realized gains (losses) from security transactions
(excluding short-term obligations)
Proceeds from sales 518,325
Cost of securities sold 891,037
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Net realized gains (losses) from security transactions (372,712)
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Unrealized appreciation (depreciation) of investments
Beginning of period 9,013,109
End of period 10,626,073
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Increase/decrease in unrealized appreciation 1,612,964
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Net realized and unrealized gain on investments $ 1,240,252
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Net increase in net assets from operations $ 1,254,342
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TO OUR SHAREHOLDERS
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On December 31, 1999, Armstrong Associates had total net assets of $18,250,870
and a per share price of $14.00. Not reflected in the year end price was a
capital gain distribution to shareholders during the month of December, 1999, of
$0.48 per share. Armstrong's investment results for the 1999 calendar year,
including the assumed reinvestment of the distribution to shareholders, was
+19.14%.
Calendar 1999 was a period characterized by sharp day-to-day market volatility
and wide divergence in investment results between stock groups. While broad
based capitalization-weighted market indices, such as the Standard and Poor's
(S&P) 500, showed positive returns for the year, results primarily reflected the
strong performance of a relatively narrow list of stocks, largely concentrated
in technology areas, with particularly strong results shown for internet related
issues, biotechnology stocks and communications issues. Stocks outside those
particular areas showing strong upward market price momentum generally received
weak investor support.
In terms of specific market results, the capitalization-weighted S&P 500
recorded a +19.53% price gain while the S&P 400 Midcap Index rose +13.35% and
the S&P 600 Smallcap Index increased +11.51%. As a broader reflection of market
results, the Value Line Composite Index, which reflects the price changes of
approximately 1,700 stocks on an equally-weighted basis, declined -1.40% in
price in 1999.
Looking ahead, we anticipate that long term investment results should continue
to be positive. Despite generally reasonable earnings results, a large number of
companies significantly lagged the market performance of top performing issues
during 1999. We expect to see a broadening in the number of companies attracting
investment interest as investors look for new, less exploited, opportunities. In
addition, interest rates and energy prices should turn down from current levels
as economic growth, responding to Federal Reserve pressure, slows to a more
sustainable rate.
Bottom line, we believe that the general strength and prosperity of the United
States, its demographic composition which strongly supports the expectation of
positive cash flow into investments and the prospect of expanded investment
opportunities resulting from further technology and productivity advances
should, in combination, support a constructive and optimistic approach to equity
investments.
Please call or write if you have any questions concerning your Armstrong
investment.
Sincerely,
/s/ C.K. Lawson
C.K. Lawson
President
February 20, 2000
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OFFICERS AND DIRECTORS
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C.K. Lawson
President, Treasurer and Director
Candace L. King
Vice President and Secretary
Eugene P. Frenkel, M.D.
Director
Professor of Internal Medicine and Radiology
Southwestern Medical School
Douglas W. Maclay
Director
President, Maclay Properties Company
R.H. Stewart Mitchell
Director
Private Investor
Cruger S. Ragland
Director
President, Ragland Insurance Agency, Inc.
Ann Reed Dittmar
Director
Private Investor
